CA NOTES ON GOODS AND SERVICES TAX

First fully amended book of Goods & Services Tax AMENDED ON THE BASIS OF ICAI STATUTORY AMENDMENTS FOR NOVEMBER 2019 EXAM

Complete Syllabus in 378 pages 238 EXAMPLES & 404 QUESTIONS & ANSWERS CA Amit Jain's

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final idt Part I

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CA Amit Jain is renowned faculty of Narayan Commerce Academy.

He is rank holder CA and 2nd Global Rank Holder in Professional Gateway Exam of CIMA, UK. He is also qualified Diploma in IFRS (ACCA, UK), Diploma in Business Finance, Certificate in Derivatives.

He is ex Top Management personnel of Multinational and Indian companies with practical experience of GST implementation in Big Corporate. He is ex-member of IMA CFO forum.

GST Bare Act Pages 120 V/s Direct Tax Bare Act Pages 1065 Direct Tax Faculty coaching hours ~ 200 hours then How can IDT coaching takes ~220 hours?

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Theme Door of GST

Core of GST

Compliances, Procedures Aspects & Miscellan eous

S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Particulars GST in India - An Introduction Supply under GST Charge of GST Exemptions from GST Place of Supply Time of Supply Value of Supply Input Tax Credit Registration Tax Invoice, Credit & Debit Notes Accounts & Records; E-way Bill Payment of Tax Returns Import & Export under GST Refunds Job Work Assessment & Audit Inspection, Search, Seizure and Arrest Demands & Recovery Liability to pay tax in certain cases Offences & Penalties Appeals & Revisions Advance Ruling Miscellaneous Provisions Total

ABC Analysis A A A B A A A A A B B B B A A B A B A B A A A C

Example

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Page No.

0 30 2 0 68 8 25 47 11 7 3 8 0 4 3 0 2 1 6 2 7 3 1 0 238

10 18 32 22 11 20 26 38 19 10 26 6 10 10 15 13 17 10 33 7 8 32 7 4 404

1 22 38 61 93 113 126 147 192 211 225 243 258 270 280 296 300 309 315 330 334 344 363 367 378

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Best rated & unbelievable doubt clearance support (feedbacks by students & feel yourself in 2 days) Feedbacks of Classes & doubt clearance available openly in telegram group All the sections & rules mentioned in this study notes, are CGST Act 2017 & CGST Rules 2017 until specified as IGST Act or IGST Rules.

For sub-section ‘( )’ is being used. In some of the sections, sub-sections had not been mentioned since it will be difficult for students to memorize all the sub-sections. ❖ Students who has enrolled for live classes, it is advisable that you spend “2 to 2 and half-hours” daily to complete your study for that particular day lecture. ❖ Students enrolled for recorded lecture, please ensure that on daily basis, you listen to lecture and send your doubts immediately at amit@narayancommerceacademy.com. We are also going to add you in “Telegram/WhatsApp group” for doubt clearance. If we think that you may need live classes for doubts clearance then we are going to take virtual live classes to clear your doubts (which you can attend from anywhere). ❖ Students who bought this study notes, please maintain discipline and read on daily basis. It is advisable that you don’t spend more than 4 hours daily on IDT otherwise you are going to lose focus. Please mail us in case you have any doubt at amit@narayancommerceacademy.com. We are also going to add you in “Telegram/WhatsApp group” for doubt clearance. Please register yourself by sending SMS on 9324933998.

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Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that none of the parties (including the authors) will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. It is suggested that to avoid any doubt the reader should cross-check all the facts, law and contents of the publication with original Government publication or notifications.

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Study Notes Overall Structure of GST Deficiency in the earlier Indirect Tax Regime Benefits of GST Framework of GST in India Constitutional Provision Selected Definitions Under Section 2 of CGST Act, 2017 Selected Definitions Under Section 2 of IGST Act, 2017 The implementation of Goods & Services Tax (GST) in India was historical move, as it marked a significant indirect tax reform in the country.

World has moved towards Goods & Services Tax long ago. After 16 years of its opposition, India has moved into GST on 1st July 2017 (in J & K, it was made applicable from 8th July 2017).

Earlier in India, with its federal structure, there were parallel systems of indirect taxation at the central and state levels. The assignment in the Constitution, of power to tax, provided the framework for evolution of the taxation system in India.

GST is a consumption-based tax. Origin based tax is one which is levied where goods/services are produced.

Conversely, a consumption-based tax is one which is levied where goods/services are consumed. Tax will accrue to State where goods/services are ultimately consumed.

GST is based on value added tax concepts of allowing input tax credit of tax paid on inputs, inputs services and capital goods, for payment of output tax. This will avoid cascading effect of taxes.

CA Amit Jain {CA, CIMA (UK), DIFRS (ACCA, UK), DBF, Cert. in Der.} Ex-Top Management (CFO/FC) of Multi National & Indian Companies

1

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Overall structure of GST •

Broadly there is 2 forms of GST in India: ➢

CA Final Syllabus CGST & IGST Act

For supplies within the State or Union Territory – a) Central Tax (Central GST i.e. CGST) is payable to Central Government and b) State Tax (State GST i.e. SGST) or Union Territory Tax (Union Territory GST i.e. UTGST) is payable to State Government or Union Territory. Area upto 12 nautical miles inside sea is part of State or Union Territory which is nearest. Delhi & Puducherry have their own legislatures and they have passed their own SGST Act. CGST Act, 2017 is the main Act which covers all important provisions relating to GST, like tax liability, input tax credit, valuation for payment of tax, procedures, appeals penalties, offences, transitory provisions etc.

SGST ACT of each State is mainly copy of CGST Act passed by Central Government, except changing reference from Central Tax to State Tax, Central Authorities to State Authorities etc.

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For inter-State supplies (supply from one State or Union Territory to another State or Union Territory), Integrated Tax (Integrated GST i.e. IGST) is payable to Central Government. IGST is to basically ensure seamless movement of goods across the country as taxes will move along with goods.

IGST is imposed under IGST Act. IGST is intermediary tax and revenue from IGST will be apportioned among Union and States by Parliament on basis of recommendation of Goods & Service Tax Council.

IGST is unique concept nowhere else been tried in the world.

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In addition, GST compensation Cess will be payable on pan masala, tobacco products, coal, aerated waters, motor cars etc.

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The rates of IGST – NIL, 0.1%, 0.25%, 3%, 5%, 12%, 18% & 28%. In case of supply within State, CGST will be 50% of IGST Rates and SGST/UTGST for supply within the State or Union Territory will be 50% of IGST rates.

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Though tax is payable to both Central Government and State Government/Union Territory Administration, control will be exercised either by State Government/Union Territory Authorities or Central Government Authorities. This will avoid dual control.

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Central Excise duty will continue on petroleum products i.e. petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel. These products are out of GST at present and may be brought under GST later.

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Alcoholic liquor for human consumption is subject to State duty. This product is outside the GST.

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Tobacco products will be subject to excise duty plus GST.

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Distinction between goods and services will be considerably reduced except in cases relating to place of supply and time of supply. This will considerably reduce ambiguities and litigations.

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Check posts at State borders have been abolished, however road checks to check e-way bills have been introduced.

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Under GST, a taxable person can establish hub and spoke approach for distribution of his final products.

He can maintain depots at few strategic locations in country and from those locations, he can distribute goods to nearby States. This will be very cost-effective distribution network.

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2

Study Notes

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Deficiency in the earlier Indirect tax regime 1. Non-inclusion of several levies in state VAT such as luxury tax, entertainment tax etc.; 2. Cascading effect of taxes on account of (i)

levy of Non-Vatable CST and

(ii) inclusion of CENVAT in the value for imposing VAT; 3. No Cenvat available after manufacturing stage; 4. Non-integration of VAT & Service Tax; 5. Certain items were subject to double taxation i.e. both goods & services.

Benefits of GST 1. Creation of Unified National Market; 2. Mitigating Cascading Effects; 3. Elimination of multiple taxes & double taxation; 4. Boost to Make in India initiative; 5. Increase in Revenue.

How GST Works (‘No Tax on Tax’ in GST) Particulars Purchase Profit Consideration Add CGST@ 9% SGST@ 9% Invoice Value Output Tax Payable {A} Input Tax {B} Net Tax Payable {A-B}

Manufacturer

Wholesaler

Retailer

100.00 10.00 110.00

110.00 10.00 120.00

120.00 10.00 130.00

9.90 (110*9%) 9.90 (110*9%) 129.80 19.80 0.00 19.80

10.80 (120*9%) 10.80 (120*9%) 141.60 21.60 19.80 1.80

11.70 (130*9%) 11.70 (130*9%) 153.40 23.40 21.60 1.80

Net Tax Payable = Value Addition * Tax Rate For Wholesaler = 10 {Profit/Value Addition} * 18% = 1.80 For Retailer = 10 {Profit/Value Addition} * 18% = 1.80

Framework of GST in India ➢

Dual GST: - India has adopted a Dual GST model in view of the federal structure of the country. Centre & States will simultaneously levy GST on taxable supply of goods or services or both, which takes place within a State or Union Territory.

CA Amit Jain {CA, CIMA (UK), DIFRS (ACCA, UK), DBF, Cert. in Der.} Ex-Top Management (CFO/FC) of Multi National & Indian Companies

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain ➢

CGST/SGST/UTGST/IGST:Central Goods & Service Tax Act, 2017

State Goods & Service Tax Act, 2017

CGST

SGST

Union Territory Goods & Service Tax Act, 2017** UTGST

Integrated Goods & Service Tax Act, 2017

IGST Levied on Inter-State Supply Levied on Intra-State Supply **Andaman & Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli, Daman & Diu and Chandigarh are Governed by UTGST. Delhi & Puducherry have their own legislative so had passed respective SGST Act. Though there are multiple SGST legislations, the basic features of law, such as chargeability, definition of taxable event and taxable person, classification & valuation of goods & services, procedure for collection and valuation of goods and services, procedure for collection & levy of tax and the like are uniform in all the SGST legislations, as far as feasible. This is necessary to preserve the essence of dual GST. ➢

HSN (Harmonized system of nomenclature) code is used for classifying the goods, under the GST. New Service Accounting codes has been devised to take care of services.

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Registration: - Threshold limit of aggregate turnover for exemption from registration and payment of GST for suppliers of services would be Rs. 20 lakhs and Rs. 10 lakhs (for States of Manipur, Mizoram, Nagaland and Tripura). Threshold limits of aggregate turnover for exemption from registration and payment of GST for the suppliers of goods (exclusive) is increased to Rs. 40 lakhs (not applicable on all States) with effect from 01.04.2019. Please refer to registration chapter for details.

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Composition Scheme: -To provide relief to small businesses, composition scheme had been prescribed.

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Seamless flow of credit: - Since GST is destination-based consumption tax, revenue of SGST ordinarily accrues to the consuming states. The revenue of inter-State sales doesn’t accrue to the exporting State.

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GST Common Portal (www.gst.gov.in managed by GSTN) Facilitating Registration

Forwarding the returns to Central & State Authorities

Computation & settlement of GST

Matching of tax payment details with banking network

Providing various MIS reports to the Central & the State Government based on the taxpayer return information

Providing analysis of taxpayers’ profile; and running the matching engine for matching, reversal and reclaim of input tax credit

There is separate portal for generating e-way bill.

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4

Study Notes

➢

Compensation Cess: - A GST Compensation Cess at specified rate has been imposed under the Goods & Services Tax (Compensation to States) Cess Act, 2017 on the specified luxury items or demerit goods, like pan masala, tobacco, aerated waters, motor cars etc., computed on value of taxable supply.

Compensation Cess is leviable on intra-State & inter-State supplies

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GST-A Tax on goods & Services: - GST will be levied on all supply of goods & services except: -

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Taxes subsumed in GST: • • • • • •

Central levies to be subsumed Central Excise Duty & Additional Excise Duties Service Tax Excise Duty under Medicinal & Toilet Preparation Act CVD & Special CVD Central Sales Tax Central surcharges and Cesses in so far as they relate to supply of goods & services

• • • • • • •

State levies to subsumed State surcharges and cesses in so far as they relate to supply of goods & services Entertainment Tax (except those levied by local bodies) Tax on lottery, betting and gambling Entry Tax (All Forms) & Purchase Tax VAT/ Sales tax Luxury Tax Taxes on advertisements

CA Amit Jain {CA, CIMA (UK), DIFRS (ACCA, UK), DBF, Cert. in Der.} Ex-Top Management (CFO/FC) of Multi National & Indian Companies

5

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Article 246A – Newly Inserted Special provision w.r.t GST ► Grants power to Parliament and State Legislatures to make laws w.r.t GST. ► Exclusive power conferred on Parliament for making laws w.r.t GST, where the supply of goods, or of services, or both takes place in the course of inter-State trade or commerce. ► Provisions of this Article shall apply with respect to GST on petroleum crude, high speed diesel (‘HSD’), motor spirit, natural gas and aviation turbine fuel (‘ATF’) from the date recommended by GST Council. ► Parliament’s exclusive power to make laws on any matter not enumerated in Concurrent / State List shall be subject to Article 246A. Article 246 – It gives the respective authority to Union & State Governments for levying tax. Whereas Parliament may make laws for the whole of India or any part of the territory of India, the State Legislature may make laws for whole or part of State. Seventh Schedule to Article 246 contain 3 lists which enumerate the matters under which the Union and the State Governments have the authority to make laws.

List I Union List It contains the matters in respect of which the Parliament (Central Government) has the exclusive right to make laws.

Entries 82 to 91 of List I enumerate the subjects where the Central Government has power to levy taxes.

Income tax is levied by virtue of Entry 82 - Taxes on income other than agricultural income and Customs duty vide Entry 83 Duties of customs including export duties of the Union List.

List II State List It contains the matters in respect of which the State Government has the exclusive right to make laws.

List III Concurrent List It contains the matters in respect of which both the Central & State Governments have power to make laws.

Entries 45 to 63 of List II enumerate the subjects where the State Governments have the power to levy taxes. Parliament has a further power to make any law for any part of India not comprised in a State even if such matter is included in the State List.

Article 249 – Power of Parliament to legislate with respect to a matter in the State List in the national interest.

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Study Notes Article 250 – Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of Emergency is in operation.

Article 269A – Newly Inserted Levy and collection of GST in course of inter-State trade or commerce ► GST on supplies in the course of inter-State trade or commerce shall be levied and collected by the Government of India and apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the GST Council. ► Supply of goods and/or services in the course of import shall be deemed to be supply in the course of inter-State trade or commerce. ► Amount apportioned to a State shall not form part of Consolidated Fund of India. ► Where an amount collected as tax under this Article has been used for payment of the tax levied by a State, such amount shall not form part of the Consolidated Fund of India. ► Where an amount collected as tax levied by a State has been used for payment of the tax levied under this Article, such amount shall not form part of the Consolidated Fund of the State. ► Parliament may, by law, formulate the principles for determining the place of supply, and when a supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

Article 270 – Amendment ► Article 270 is amended to provide for distribution of the goods and service tax between the Centre and the States, by order of the President after considering recommendations of the Finance Commission.

Article 271 – Amendment ► Surcharge can be levied on certain duties and taxes for purposes of the Union except on GST under Article 246A. Article 279A – Newly Inserted Goods and Service Tax Council ► President shall, within 60 days from the date of commencement of the Constitution (101st Amendment) Act, 2016, by order, constitute a Council to be called the GST Council. ► GST Council shall consist of the following members: Union Finance Minister (Chairperson); Union Minister of State in charge of Revenue or Finance (Member); Minister in charge of Finance or Taxation or any other Minister nominated by each State Government (Members) Members of the GST Council shall, as soon as may be, choose one amongst themselves to be the Vice-Chairperson of the Council.

GST Council shall make recommendations to the Union and the States on the following: ✓ Taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in GST; ✓ Goods and services that may be subjected to, or exempted from GST; ✓ Model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of interState trade or commerce under article 269A and the principles that govern the place of supply; ✓ Threshold limit of turnover below which goods and services may be exempted from GST; ✓ Rates including floor rates with bands of GST; ✓ Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster; ✓ Special provision with respect to the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand and Jammu and Kashmir; and ✓ Any other matter relating to GST, as the Council may decide; GST Council shall recommend the date on which GST be levied on petroleum crude, HSD, motor spirit (commonly known as petrol), natural gas and ATF. While discharging the functions conferred by this Article, GST Council shall be guided by the need

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1/2 of the total number of members of GST Council shall constitute the quorum at its meetings.

GST Council shall determine the procedure in the performance of its functions.

Every decision of GST Council shall be taken at a meeting, by a majority of not less than 3/4th of the weighted votes of the members present and voting, in accordance with the following principles, namely: ✓ Vote of the Central Government shall have a weightage of 1/3rd (33.33%) of the total votes cast, ✓ Votes of all the State Governments taken together shall have a weightage of 2/3rd (66.67%) of the total votes cast, in that meeting.

Thus, practically, Central Government has veto powers. Any decision in GST council cannot be taken without consent of Central Government.

No act or proceedings of GST Council shall be invalid merely by reason of— ✓ Any vacancy in, or any defect in, the constitution of the Council; or ✓ Any defect in the appointment of a person as a member of the Council; or ✓ Any procedural irregularity of the Council not affecting the merits of the case.

GST Council shall establish a mechanism to adjudicate any dispute— ✓ Between the Government of India and one or more States; or ✓ Between the Government and any State or States on one side and one or more other States on the other side; or ✓ Between two or more States, arising out of the recommendations of the Council or implementation thereof.

Article 286 – Amendment Restrictions as to imposition of tax on the sale or purchase of goods ► The words “sale or purchase of goods where such sale or purchase takes place” are substituted with “supply of goods or of services or both, where such supply takes place” Article 366 – Amendment Following new clauses to be inserted: ► Clause 12A – “goods and service tax” defined to mean any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption; ► Clause 26A – “Services” to mean anything other goods; ► Clause 26B – “State” with reference to Articles 246A, 268, 269, 269A and Article 279A includes a Union territory with Legislature.

Article 368 – Amendment Powers of Parliament to amend the Constitution and procedure thereof ► If amendment (2/3rd of majority in each house) seeks to make any change in Article 279A (relates to GST Council) then it shall also require ratification by the Legislatures of not less than one-half of the States by resolutions to that effect passed by those Legislatures before the Bill making provision for such amendment is presented to the President for assent.

Seventh Schedule [Article 246] – Amendment List I – Union List ► Entry No 84 to be substituted as under: Duties of excise on the following goods manufactured or produced in India, namely ✓ Petroleum crude; ✓ High Speed Diesel;

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Study Notes ✓ Motor Spirit (Commonly known as petrol) ✓ Natural Gas ✓ Aviation Turbine Fuel; and ✓ Tobacco and tobacco products ► Earlier entry no 84 included duties of excise on tobacco and other goods manufactured or produced in India excluding alcoholic liquor for human consumption, opium, Indian hemp and other narcotic drugs and narcotics but including medicinal and toilet preparations containing alcohol or opium. ► Following entries shall be deleted: Entry No 92 – Taxes on the sale or purchase of newspapers and on advertisements published therein Entry No 92C – Taxes on services List II – State List ► Entry No 54 to be substituted as under: Taxes on the sale of petroleum crude, HSD, motor spirit (commonly known as petrol), natural gas, ATF and alcoholic liquor for human consumption, but not including sale in the course of inter-State trade or commerce or sale in the course of international trade or commerce of such goods.

Earlier it included taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. ► Entry No 62 to be substituted as under: Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a Municipality or a Regional Council or a District Council.

Earlier it included taxes on luxuries, including taxes on entertainments, amusements, betting and gambling. ► Following entries shall be deleted: Entry No 52 – Taxes on the entry of goods into a local area for consumption, use or sale therein.

Entry No 55 – Taxes on advertisements other than advertisements published in the newspapers and advertisements broadcast by radio or television.

Clause 18 - Compensation to States for loss of revenue on account of implementation of GST Parliament shall, by law, on the recommendation of GST Council, provide for compensation to the States for loss of revenue arising on account of implementation of GST for a period of 5 years.

Clause 20 - Power of President to remove difficulties If any difficulty arises in giving effect to the provisions of the Constitution, the President may make such amendments, as necessary or expedient for the purpose of removing the difficulty. However, no such order shall be made after the expiry of 3 years from the date of such assent.

Section 2 of CGST Act, 2017 – Definitions under GST (below number in ‘( )’ are sub-section of Section 2) (1) “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882; It must be noted that ‘Actionable claims’ is specifically included in the definition of goods. Transactions of actionable claims, other than lottery, betting & gambling shall be treated neither as a supply of goods nor a supply of services as per Para 6 of Schedule III of CGST Act, 2017.

(2) “address of delivery” means the address of the recipient of goods or services or both indicated on the tax invoice issued by a registered person for delivery of such goods or services or both; “address of delivery’ is relevant to determine place of supply of goods (other than imports/exports).

(3) “address on record” means the address of the recipient as available in the records of the supplier; This is relevant to determine place of supply. In case of supplies made by a registered person to an unregistered person (except in relation to those services where the place of supply has been specifically provided under the law) shall be the address on record available in the records of the supplier.

(4) “adjudicating authority” means any authority, appointed or authorised to pass any order or decision

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain under this Act, but does not include the Central Board of Excise Indirect Taxes and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal and the Authority referred to in sub section (2) of section 171; (5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; Agent can work purely on commission basis. Even e-commerce companies like Flipkart, Amazon and Uber may be covered in some situations. But the relevance of being an agent is more pronounced while examining whether a transaction between a principal and agent is itself a supply under para 3, schedule I (Chapter 2 of this book). Very often, the word agent or agency is used without necessarily implying that the transaction is one of agency as understood under Indian Contract Act such as, recruitment agency, travel agency etc. Care must be taken to identify whether the parties intended to constitute an agency as understood in law and nothing less.

(6) “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; The phrase “aggregate turnover” is widely used under the GST laws. Aggregate Turnover is an allencompassing term covering all the supplies effected by a person having the same PAN. It specifically excludes: • Inward supplies effected by a person which are liable to tax under reverse charge mechanism; and • Various taxes under the GST law, Compensation cess.

(7) “agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of land— (a) by own labour, or (b) by the labour of family, or (c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family; An individual/HUF undertaking cultivation of land which is not owned by him would be regarded as an agriculturist. Agriculturist providing taxable supplies need to confirm that the aggregate turnover is not exceeded when taking a decision not to register. Everyone who owns agricultural property will not ipso facto be eligible for exemption from registration because other taxable supplies may necessitate registration.

(8) “Appellate Authority” means an authority appointed or authorised to hear appeals as referred to in section 107; (9) “Appellate Tribunal” means the Goods and Services Tax Appellate Tribunal constituted under section 109; (11) “assessment” means determination of tax liability under this Act and includes self-assessment, reassessment, provisional assessment, summary assessment and best judgment assessment; (12) “associated enterprises” shall have the same meaning as assigned to it in section 92A of the Income-tax Act, 1961; ‘Associated enterprise’ is referred to only in the context of time of supply of services where the supplier is an associated enterprise (located outside India) of the recipient ( reverse charge attracted under sec 9(3)).

It may be noted that in addition to associated enterprise, the Act also defines ‘related person’, the reference to which is made in the context of deemed supply (Schedule I) and valuation.

(16) “Board” means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963; (17) “Business” includes–– (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

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Study Notes (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club; activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; The term business has been defined in an inclusive manner. This definition is very wide and covers all the transactions that were previously subjected to various taxes that are being subsumed in the GST Laws.

This definition of business is important since levy is on supplies undertaken in the course or furtherance of business.

Profit motive is irrelevant. Thus, occasional transactions are subject to GST. Incidental or ancillary activities taxable i.e. sale of used car, sale of scrap, sale of old machinery, sale of old furniture etc. is subject to GST, though normally the taxable person may not be in business of selling cars, furniture or machinery.

‘Wager’ is also included in the definition of business to impose GST on betting transactions; Government activities excluding sovereign functions are also subject to GST. Clause (g) deals with services supplied by a holder of an office. Hence, if a practicing CA is appointed as an independent director of a company, it means that he accepts this office of directorship in the course or furtherance of his professional practice. Any service provided by him as an independent director to the company appointing him shall be regarded as business.

(18) “business vertical” means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals.

Explanation. –For the purposes of this clause, factors that should be considered in determining whether goods or services are related include–– (a) the nature of the goods or services; (b) the nature of the production processes; (c) the type or class of customers for the goods or services; (d) the methods used to distribute the goods or supply of services; and (e) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities; (19) “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business; An attempt has been made to align the meaning of capital goods to the generally accepted standards of accounting of what is considered as revenue and what as capital.

(20) “casual taxable person” means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business; Example, Mumbai registered taxable person participate in exhibition in ‘Delhi’.

The threshold limits for registration would not apply to casual taxable person and he would be required to obtain registration irrespective of his turnover.

(31) “consideration” in relation to the supply of goods or services or both includes–– (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; Non-refundable deposit will be part of consideration. Consideration is not the amount that the recipient pays but the amount that the supplier collects whether from the recipient or third Party.

Clause (b) example:- (a) An amount paid as contractual penalty for non-supply of goods on timely basis could be treated as “monetary value of forbearance” and therefore, may be considered as consideration for applicability of GST. (b) Penalty charges on early termination of an agreement could be treated as “monetary value of any act” and therefore, may be considered as consideration.

(32) “continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify; Example: Open purchase orders with daily delivery schedule (Just In Time Approach) subject to acceptance tests only at the time of issue-for-production and understanding of fortnightly billing.

(33) “continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify; Example: Licensing of software or brand names, renting of immovable property etc.

(34) “conveyance” includes a vessel, an aircraft and a vehicle; (39) “deemed exports” means such supplies of goods as may be notified under section 147; (42) “drawback” in relation to any goods manufactured in India and exported, means the rebate of duty, tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in the manufacture of such goods; The definition of Drawback is relevant when refund of Input Tax Credit is claimed. The law provides that refund of unutilized input tax credit will not be allowed if the supplier has availed drawback of such tax. .

(44) “electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network; (45) “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; (47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply; (48) “existing law” means any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services or both passed or made before the commencement of this Act by Parliament or any Authority or person having the power to make such law, notification, order, rule or regulation; This covers all the existing Central & State Laws, relating to levy of tax on goods or services like Central Excise Law, Service tax law, State VAT Laws etc. Therefore, laws that don’t levy tax or duty on goods or services i.e. the Indian Stamp Act, 1899 would not be covered here.

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Study Notes (49) “family” means, –– (i) the spouse and children of the person, and (ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on the said person; (50) “fixed establishment” means a place (other than the registered place of business) which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs; Temporary presence of staff in a place by way of a short visit to a place or so doesn’t make that place a fixed establishment. The definition is relevant to determine where the taxable person should obtain GST registration in particular State.

(52) “goods” means 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; Actionable claims are goods under GST. Intangibles like copyright and carbon credit would continue to be covered under ‘goods.

The item must be such that it is capable of being bought or sold. This is the test of ‘Marketability’. The goods must be known in the market. Unless this test of marketability is satisfied, these will not be goods.

This view, expressed in judgements. It was held that to become ‘goods’ an article must be something which can ordinarily come to market to be bought and sold.

(56) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters; (59) “input” means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; (60) “input service” means any service used or intended to be used by a supplier in the course or furtherance of business; (61) “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office; The law doesn’t provide any limit of offices to be registered as ISD. (62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes— (a) the integrated goods and services tax charged on import of goods; (b) the tax payable under the provisions of sub-sections (3) and (4) of section 9; (c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act; (d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act; or (e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy; Input tax also includes reverse charge.

Input credit of cess can only be utilised for discharging the liability on such cess.

(63) “input tax credit” means the credit of input tax; (67) “inward supply” in relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any other means with or without consideration; (68) “job work” means any treatment or process undertaken by a person on goods belonging to another

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain registered person and the expression “job worker” shall be construed accordingly; (69) “local authority” means–– (a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution; (b) a “Municipality” as defined in clause (e) of article 243P of the Constitution; (c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund; (d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006; (e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution; (f) a Development Board constituted under article 371 and article 371J of the Constitution; or (g) a Regional Council constituted under article 371A of the Constitution; (70) “location of the recipient of services” means, (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; & (d) in absence of such places, the location of the usual place of residence of the recipient; (71) “location of the supplier of services” means, (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and (d) in absence of such places, the location of the usual place of residence of the supplier; (72) “manufacture” means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly; It is important for composition levy and maintenance of accounts. For deemed exports, one precondition is that the goods in question must be manufactured in India.

(73) “market value” shall mean the full amount which a recipient of a supply is required to pay in order to obtain the goods or services or both of like kind and quality at or about the same time and at the same commercial level where the recipient and the supplier are not related; (75) “money” means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value; Money is out of the scope of taxation under GST. Supply of currency held for its numismatic values will be liable to GST. (77) “non-resident taxable person” means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India; The law had not defined the word ‘occasionally’.

(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act; It includes petroleum products, alcoholic liquor for human consumptions.

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Study Notes (79) “non-taxable territory” means the territory which is outside the taxable territory; (80) “notification” means a notification published in the Official Gazette and the expressions “notify” and “notified” shall be construed accordingly; (81) “other territory” includes territories other than those comprising in a State and those referred to in sub-clauses (a) to (e) of clause (114); (82) “output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis; (83) “outward supply” in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business; The phrase ‘outward supply’ can be applied to a supply only when such supply is made in the course or furtherance of business i.e. business assets are put to personal use. In such a case, even the transaction is deemed to be a supply (made without consideration), it can’t be treated as an ‘outward supply’, since the application of the business asset for personal use was neither in the course nor furtherance of business.

Supplies not qualifying as outward supplies would also be included for the purpose of computing the ‘aggregate turnover’.

Details of supplies on which tax is payable, but which do not amount to ‘outward supplier’ would also have to be declared in the return for outward supplies (GSTR-1) (84) “person” includes— (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013; (h) anybody corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above; (85) “place of business” includes–– (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, supplies or receives goods or services or both; or (b) a place where a taxable person maintains his books of account; or (c) a place where a taxable person is engaged in business through an agent, by whatever name called; (86) “place of supply” means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act; (88) “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both; (89) “principal place of business” means the place of business specified as the principal place of business in the certificate of registration;

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (92) “Quarter” shall mean a period comprising three consecutive calendar months, ending on the last day of March, June, September and December of a calendar year.

(93) “recipient” of supply of goods or services or both, means— (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; (94) “registered person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number; (96) “removal’’ in relation to goods, means— (a) despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or (b) collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient; (98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act; (101) “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956; Securities such as shares, scrips, stocks, bonds, debentures, debenture stock are neither treated as goods nor as services, by way of a specific exclusion in the respective definitions. ITC is not available for transactions in securities.

(102) “services” means anything other than goods, money & securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; Explanation.––For the removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging transactions in securities; Though definition of ‘service’ can cover even immovable property, sale of land and sale of completed building has been excluded from definition of goods or services.

The definition of ‘service’ is so broad that practically sky is the limit for imposing any tax by Union or State Governments.

Securities were excluded from the definition of both goods and services. But it is to clarify that though securities are excluded from definition of services but transaction in securities will be included.

Although industry is already charging GST on these transaction.

Particulars Every kind of movable property Growing crops, grass & things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply Anything other than goods Money Transaction in money {for conversion separate consideration is charged} Actionable Claim {lottery, betting & gambling} Securities Facilitating or arranging transaction in securities

Whether Goods? ✓ ✓

Whether Services?  

   ✓  

✓  ✓   ✓

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Study Notes (103) “State” includes a Union territory with Legislature; Delhi & Puducherry are states since they have legislature although they are Union Territory.

(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied; (107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24; (108) “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act; (109) “taxable territory” means the territory to which the provisions of this Act apply; (112) “turnover in State” or “turnover in Union territory” 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) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess; The ‘turnover in state’ (including UT) is a reproduction of the expression ‘aggregate turnover’, but for the fact that ‘turnover in state’ is restricted to the turnover of a taxable person, whereas aggregate turnover is PAN-based (i.e., turnover of all taxable persons having the same PAN, across States). It is important term for ‘composition scheme’ & for ‘ISD’.

(113) “usual place of residence” means–– (a) in case of an individual, the place where he ordinarily resides; (b) in other cases, the place where the person is incorporated or otherwise legally constituted; (114) “Union territory” means the territory of— (a) the Andaman and Nicobar Islands; (b) Lakshadweep; (c) Dadra and Nagar Haveli; (d) Daman and Diu; (e) Chandigarh; and (f) other territory.

Explanation. -For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be considered to be a separate Union territory; (117) “valid return” means a return furnished under sub-section (1) of section 39 on which self- assessed tax has been paid in full; (118) “voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument; Loyalty points credited to digital wallet is not supply of vouchers as no consideration is paid for the same.

It is only a form of discount which can be availed in future transaction. It is the form of actionable claim.

(119) “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfers of property in goods (whether as goods or in some other form) is involved in the execution of such contract; This is limited to immovable property but contract must include transfer of property. A contract in relation to movable property, however would be treated as a ‘composite supply’ of goods or services depending on the principal supply.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 2 of IGST Act, 2017 – Definitions under GST (below number in ‘( )’ are sub section of Section 2) (3) “continuous journey” means a journey for which a single or more than one ticket or invoice is issued at the same time, either by a single supplier of service or through an agent acting on behalf of more than one supplier of service, and which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued.

Explanation. - For the purposes of this clause, the term “stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time; (5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India; Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India.

(6) “export of services” means the supply of any service when, (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct Person in accordance with Explanation 1 in section 8; This amendment allows receipt of payment in Indian Rupees in case of export of services wherever permitted by the RBI. This is obviously a taxpayer-friendly measure.

(7) “fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services or to receive and use services for its own needs; (10) ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India; (11) ‘‘import of services” means the supply of any service, where–– (i) the supplier of service is located outside India; (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India; (13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account; (14) “location of the recipient of services” means, –– (a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and (d) in absence of such places, the location of the usual place of residence of the recipient; (15) “location of the supplier of services” means, –– (a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business; (b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment; (c) where a supply is made from more than one establishment, whether the place of business or

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Study Notes fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and (d) in absence of such places, the location of the usual place of residence of the supplier; (16) “non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Explanation. –For the purposes of this clause, the expression “governmental authority” means an authority or a board or any other body, – (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with ninety per cent. or more participation by way of equity or control, to carry out any function entrusted to a Panchayat under article 243 G or a municipality under article 243W of the Constitution; (17) “online information and database access or retrieval services” means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as, – (i) advertising on the internet; (ii) providing cloud services; (iii) provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet; (iv) providing data or information, retrievable or otherwise, to any person in electronic form through a computer network; (v) online supplies of digital content (movies, television shows, music and the like); (vi) digital data storage; and (vii) online gaming;

Question & Answer Q1. Enumerate the places that may be covered or included under the scope of ‘place of business’?

A. Place of business would include the following places: a. b. c. d.

place from where business is ordinarily carried on, warehouse, godown, any other place used for storing goods or place to provide or receive goods or services by taxable person, e. place where books of accounts are maintained by taxable person (it may be place of business of agency or professional) f. place from where a taxable person is engaged in business through agent by whatever name called (like commission agent, C & F agent, consignment agent etc.)

It will include any one or more or all of the aforementioned place.

Q2. Whether ‘securities’ are goods or services?

A. It may be noted that in terms of Section 2(52) of CGST Act, 2017, securities are not considered as goods.

According to Section 2(102), they are also not covered under services.

Q3. What is agricultural produce?

A. As per Notification No. 12/2017 – Central Tax (Rate), ‘agricultural produce’ means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market.

Q4. Discuss how GST resolved the double taxation dichotomy under previous indirect tax laws.

A. • A comprehensive tax structure covering both goods and services viz. Goods and Service Tax (GST) addresses these problems. Simultaneous introduction of GST at both Centre and State levels has integrated taxes on goods and services for the purpose of set-off relief and ensures that both the cascading effects of CENVAT and service tax are removed and a continuous chain of set-off from the original producer’s point/ service provider’s point upto the retailer’s level/ consumer’s level is established.

• In the GST regime, the major indirect taxes have been subsumed in the ambit of GST. The erstwhile concepts of manufacture or sale of goods or rendering of services are no longer applicable since the tax is now levied on “Supply of Goods and/or services”.

Q5. What is the difference in between ‘Nil rated’, ‘Zero rated’ supply of goods and services?

Ans. There exist a difference between a ‘Nil rated” and a ‘Zero rated’ supply as per GST law.

‘Nil rated supply’ means a supply of goods or services which has Nil rate in tariff or exempt by notification.

‘Zero rated supply’ means a supply of goods or services for export or to SEZ units {Section 16 of IGST}.

Q6. List the class of officers that the Government can appoint, by notification, under the CGST Act, 2017.

Ans. The Government shall, by notification, appoint the following classes of officers for the purposes of this Act, namely:– (a) Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax, (b) Chief Commissioners of Central Tax or Directors General of Central Tax, (c) Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax, (d) Commissioners of Central Tax or Additional Directors General of Central Tax, (d) Additional Commissioners of Central Tax or Additional Directors of Central Tax, (e) Joint Commissioners of Central Tax or Joint Directors of Central Tax, (f) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax, (g) Assistant Commissioners of Central Tax or Assistant Directors of Central Tax, and (h) any other class of officers as it may deem fit: Provided that the officers appointed under the Central Excise Act, 1944 shall be deemed to be the officers appointed under the provisions of this Act In this regard, Government has issued following notificationsi.

Notification No. 2/2017-Central Tax, Dated 19-Jun-2017 to appoint Central Tax officers and assign

ii.

their jurisdiction.

Notification No. 14/ 2017-Central Tax, Dated 1-Jul-2017 to appoint the officers in the Directorate General of Goods and Services Tax Intelligence, Directorate General of Goods and Services Tax and Directorate General of Audit.

Q7. Is there any provision for cross empowerment of officers of State and Central Government under GST? Ans. Yes. As per Section 6 (1) of CGST Act, 2017, the officers appointed under the SGST / UTGST Act are authorised to be the proper officers for the purposes of CGST/IGST Act, subject to such conditions as the Government shall, on the recommendations of the Council, by notification, specify. Similar provisions in the SGST/UTGST Act empower the central government officials to be the proper officers under the SGST/UTGST Act.

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Study Notes Q8. ABC Furnisher, registered under GST, has been served a demand order under GST by Central GST Officer. Does ABC Furnishers need to approach both the Central and State Appellate Authorities for exercising its right of appeal?

Ans. GST law makes provisions for cross empowerment between CGST and SGST/UTGST officers so as to ensure that if a proper officer of one Act (say CGST) passes an order with respect to a transaction, he will also act as the proper officer of SGST for the same transaction and issue the order with respect to the CGST as well as the SGST/UTGST component of the same transaction. The law further provides that where a proper officer under one Act (say CGST) has passed an order, any appeal/review/ revision/rectification against the said order will lie only with the proper officers of that Act only (CGST Act). Similarly, if any order is passed by the proper officer of SGST, any appeal/review/revision/rectification will lie with the proper officer of SGST only. Thus, ABC Furnishers is required to file an appeal only with the Central Tax Appellate Authority [Section 6 of CGST Act].

Q9. What is GSTN and its role in the GST regime? Discuss functions of GSTN. A. GSTN stands for Goods and Services Tax Network (GSTN). It is not-for profit company incorporated under provisions of Sec 8 of Companies Act, 2013. GSTN has been set up to cater to the needs of GST. GSTN has made up site/ portal which has been notified as common GST electronic portal (U/s 146 of CGST Act) Thus, GSTN has provided IT infrastructure under GST law. GST portal developed by it is used by Central Government as well as by the State Governments. GST portal is referred as ‘common portal’. This portal is the taxpayer interface with the Government.

GSTN is providing facilities to taxpayers as well as Government. Following are some important functions which are performed by GSTN :i. Facilitation of registration; ii. Payment of GST; iii. Returns filing; iv. Maintenance of ledgers of taxpayers; v. Running the matching engine for matching, reversal and reclaim of input tax credit; vi. Providing analysis of tax payers’ profile; vii. Sharing of information in taxpayers returns with Centre and State Governments / tax authorities; viii. Providing various MIS reports to the Central and the State Governments based on the tax payer return information; ix. Computation and settlement of IGST (transfer of funds in between Central Tax Account, State Tax Accounts and Integrated Tax Account); Q10. Which are the commodities proposed to be kept outside the purview of GST? A. Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So, alcoholic liquor for human consumption is kept out of GST by way of definition of GST in constitution.

Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST.

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Section 7 Schedule I Schedule II Schedule III

Scope of Supply Activities to be treated as supply even if made without consideration Activities or Transactions to be treated as supply of goods or services Activities or Transactions which shall be treated neither supply of goods nor a supply of services Tax Liability on Composite [Sec. 2 (30)] & Mixed Supply [Sec. 2 (74)]

Section 8

Section 7: Scope of supply Broad Category Normal Supply of goods & services Import of Service Supply without consideration Supply of goods v/s Supply of services Activities or transactions treated neither as supply of goods nor supply of services

Power(s) of the Government

Section 7 (1) 7 (1) (a)

7 (1) (b) 7 (1) (c) 7 (1A) 7 (2) 7 (2) (a) 7 (2) (b)

7 (3)

Particulars For the purposes of this Act, the expression “supply” includes – all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; import of services, for a consideration whether or not in the course or furtherance of business, and the activities specified in Schedule I, made or agreed to be made without a consideration. where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II. Notwithstanding anything contained in sub-section (1),activities or transactions specified in Schedule III; or such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services.

Subject to the provisions of sub-sections (1), (1A) & (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as —

(a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.

In exercise of the powers conferred U/s 7 (2), the Central Government, on the recommendations of the Council hereby notifies that the following activities or transactions undertaken by the Central Government or State Government or Union Territories or any local authority in which they are engaged as public authority, shall be treated neither as a supply of goods nor a supply of service, namely:“Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243W of the Constitution.”

First check sub-section (1) to see whether particular transaction is supply or not then Schedule II to finalize classification between goods or services When word ‘includes’ or ‘such as’ is being used, it implies that the term doesn’t restrict itself to those items that are being mentioned in there, and that those items mentioned, are just indicative to much broader concepts of similar standing.

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Study Notes Sales Transfer Barter Exchange

License Rental Lease

Disposal

Transferring the property in goods from one to another, upon valuable consideration i.e. buying laptop.

Any transfer of goods or right in goods or undivided share in goods without transfer of title thereof i.e. Head office sends the goods to its branch. It may be noticed that title is not transferred by Head Office.

To exchange one commodity/service for another without use of money i.e. CA provides tax consultancy service in exchange of saloon services.

To swap, to part with, give or transfer for an equivalent with the use of money i.e. Mobile worth Rs. 25,000 in exchange of an old mobile Rs. 10,000. Balance paid in cash.

Permission granted by competent authority to exercise certain privileges, without such authorization the activity would have constituted as an illegal act i.e. license of software.

Periodical payment for the use of another’s property i.e. office on rent.

Contractual agreement by which one party conveys an estate in property to another party, for a limited period, subject to various conditions, in exchange for something of value, but still remain owner i.e. Government agency lease of industrial plot.

To pass or into the control of someone else; to alienate, bestow, or part with i.e.

ABC Ltd., a company engaged in manufacturing furniture, removes wooden scrap generated in process of manufacturing furniture to another company where it is used for feeding the furnace, for a very nominal value. It shall be treated as supply by XYZ Ltd., to attract GST.

Example 1: Mr. A buy a car for his personal use and after a year sells it to a car dealer. Sale of car by Mr. A to car dealer is not a supply under CGST Act because supply is not made by Mr. A in the course or furtherance of business.

Example 2: Mrs. A sold her old gold bangles and earrings to ‘ABC Jewellers’. Sale of old gold jewellery by an individual to a jeweller will not constitute supply as the same cannot be said to be in the course or furtherance of business of the individual.

Example 3: Salman, a famous actor, paints some paintings and sells them. The consideration from such sale is to be donated to a Charitable Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as supply even though it is a one-time occurrence.

Example 4: ABC Ltd. Is engaged in the business of transmission of power across the Maharashtra.

Transmission of power is carried out through the networks of transmission lines and sub-stations constructed by ABC Ltd. It has a market share of 50% transmission network in India. This is example of ‘in course of business’.

ABC Ltd. appointed consultants to increase market share from 50% to 60%. It can be organic or un-organic route. This is example of ‘in furtherance of business’.

Example 5: . Import of free services from Google and Facebook, without any consideration, are not considered as supply. It is important to note that downloading ‘Hollywood Movie’ from foreign website for consideration for personal use would be a supply of service, even though same is not in the course or furtherance of business.

Schedule I:- Activities to be treated as supply even if made without consideration 1. Permanent transfer or disposal of business assets where ITC has been availed on such assets. (transfer of entire business as going concern is not subject to GST).

Example 6: A Ltd. (retail stores dealing in food items), gives food items to the poor children on the festival

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain of Diwali. In this case, transfer of business stock would amount to ‘supply’ if it had claimed input tax credit on its purchase of the business assets.

Example 7: A laptop dealer permanently transfers furniture from his stock in trade, at his house. The transactions will constitute a supply as it is a permanent transfer/disposal of business assets. If input tax credit is availed for such assets, then only such transfer amounts to supply.

2. Supply between related persons or distinct persons, when made in the course or furtherance of business.

Gifts not exceeding Rs. 50,000 in value in a financial year by an employer to employee shall not be treated as supply of goods or services or both. However reversal of ITC will be required.

Section 25 (4) & (5) of CGST Act categorize following as distinct person in GST:(a) Each registration of a person in one or more State/UT (b) Each registration of a person in respect of establishments in or more State/UT.

Scenario

Stock transfer under GST Relevant Document

Applicability of GST on intra-State branch/stock transfers Branches/Units with Single registration for separate registration all branches/units in a State/UT

Applicability of GST on inter-State branch/stock transfers

✓



✓

Tax Invoice

Delivery Challan

Tax Invoice

Example 8: A Ltd. transfers 100 ACs & 100 Televisions from his factory located at Maharashtra to his retail showroom in Delhi so that the same can be sold there. The factory and retail showroom are registered in the states where they are located. Although no consideration is charged, supply of goods from factory at Maharashtra to retail showroom at Delhi constitutes supply.

3. Supply of goods between principal & agents (whether principal supply to agents or agents supply to principal).

Example 9: A Ltd. appoints B Ltd. as an agent. B Ltd. receives spare parts supplied by A Ltd. as and when an order is received by A Ltd. from it dealers, an instruction will be sent to B Ltd. to supply the parts. Supply of spare parts by A Ltd. to B Ltd. will qualify as supply even though B Ltd. has not paid any consideration.

Invoice in the name of agent:- Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of Para. 3 above.

Invoice in the name of principal:- However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Para 3. above.

Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by Para. 3 above.

[Circular No. 57/31/2018 GST Dated 04.09.2018].

Example 10: Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send the goods and issue the invoice directly to Mr. A.

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Study Notes In this scenario, Mr. B is only acting as the procurement agent, and has in no way involved himself in the supply or receipt of the goods. Hence, in accordance with the provisions of this Act, Mr. B is not an agent of Mr. A for supply of goods in terms of Para 3 of Schedule I. Example 11: M/s XYZ, a banking company, appoints Mr. B (auctioneer) to auction certain goods. The auctioneer arranges for the auction and identifies the potential bidders.

The highest bid is accepted and the goods are sold to the highest bidder by M/s XYZ. The invoice for the supply of the goods is issued by M/s XYZ to the successful bidder. In this scenario, the auctioneer is merely providing the auctioneering services with no role played in the supply of the goods. Even in this scenario, Mr. B is not an agent of M/s XYZ for the supply of goods in terms of Para 3 of Schedule I. Example 12: Mr. A, an artist, appoints M/s B (auctioneer) to auction his painting. M/s B arranges for the auction and identifies the potential bidders. The highest bid is accepted and the painting is sold to the highest bidder. The invoice for the supply of the painting is issued by M/s B on the behalf of Mr. A but in his own name and the painting is delivered to the successful bidder.

In this scenario, M/s B is not merely providing auctioneering services, but is also supplying the painting on behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. A. This scenario is covered under Para 3 of Schedule I. Example 13: A C&F agent or commission agent takes possession of the goods from the principal and issues the invoice in his own name. In such cases, the C&F commission agent is an agent of the principal for the supply of goods in terms of Para 3 of Schedule I. The disclosure or non-disclosure of the name of the principal is immaterial in such situations.

Example 14: Mr. A sells agricultural produce by utilizing the services of Mr. B who is a commission agent as per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr. B identifies the buyers and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A. As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf of his principal, or facilitates buying and selling of agricultural produce on behalf of his principal and receives, by way of remuneration, a commission or percentage upon the amount involved in such transaction.

In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under Para 3 of Schedule I. However, in cases where the invoice is issued directly by Mr. A to the buyer, the commission agent (Mr. B) doesn’t fall under the category of agent covered under Para 3.

Circular No. 73/47/2018-GST Dated 5-11-2018 Whether a DCA falls under the ambit of agent under Para 3 of Schedule I of the CGST Act?

Whether the temporary short-term transaction based loan extended by the DCA to the recipient (buyer), for which interest is charged by the DCA, is to be included in the value of goods being supplied by the supplier

As already clarified vide circular No. 57/31/2018-GST Dated 4th September, 2018, whether or not the DCA will fall under the ambit of agent under Para 3 of Schedule I of the CGST Act depends on the following possible scenarios: • In case where the invoice for supply of goods is issued by the supplier to the customer, either himself or through DCA, the DCA does not fall under the ambit of agent.

• In case where the invoice for supply of goods is issued by the DCA in his own name, the DCA would fall under the ambit of agent.

In such a scenario following activities are taking place: 1. Supply of goods from supplier (principal) to recipient; 2. Supply of agency services from DCA to the supplier or the recipient or both;

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Where DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the value of goods being supplied, whether the interest will form a part of the value of supply of goods also or not?

3. Supply of extension of loan services by the DCA to the recipient.

It is clarified that in cases where the DCA is not an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based loan being provided by DCA to the buyer is a supply of service by the DCA to the recipient on Principal to Principal basis and is an independent supply.

Therefore, the interest being charged by the DCA would not form part of the value of supply of goods supplied (to the buyer) by the supplier. It may be noted that vide notification No. 12/2017-Central Tax (Rate) Dated 28th June, 2017 (S. No. 27), services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) has been exempted.

In such a scenario following activities are taking place: 1. Supply of goods by the supplier (principal) to the DCA; 2. Further supply of goods by the DCA to the recipient; 3. Supply of agency services by the DCA to the supplier or the recipient or both; 4. Extension of credit by the DCA to the recipient.

It is clarified that in cases where the DCA is an agent under Para 3 of Schedule I of the CGST Act, the temporary short-term transaction based credit being provided by DCA to the buyer no longer retains its character of an independent supply and is subsumed in the supply of the goods by the DCA to the recipient. It is emphasized that the activity of extension of credit by the DCA to the recipient would not be considered as a separate supply as it is in the context of the supply of goods made by the DCA to the recipient.

It is further clarified that the value of the interest charged for such credit would be required to be included in the value of supply of goods by DCA to the recipient as per clause (d) of sub-section (2) of section 15 of the CGST Act.

4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Now, because of above amendment, import of services by entities which are not registered under GST (let take example, say they are only making exempted supplies) but are otherwise engaged in business activities shall be liable to tax when received from a related person or from any of their establishments outside India.

Services supplied by establishment of person in India to own establishments out of India is exempt, if place of supply is out of India. {Sr. No. 10E of Notification No. 9/2017-IT (Rate) both Dated 28-6-2017 as inserted w.e.f. 27-7-2018.}

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Study Notes

27

Taxability of import of services in GST – Snapshot {considering Section 7 (1) (b) & Schedule I Para 4} Particulars

From Related Person/Establishment outside India

From any other person

Consideration

✓



✓

Purpose

Personal or Business

Business

Personal or Business

Example 15: A Ltd. received software services from Holding company located in USA. The Holding Company rendered the software services without any charge to its subsidiary. Since A Ltd. and its holding company are related persons, software services received by A Ltd. will be considered as supply even though the holding has not charged anything from it.

Example 16: A has taken legal advice with regard to his family dispute for free, from his brother who is settled in USA. This would not constitute supply since this is not for furtherance of business. If suppose A has taken this advice for his business dispute then it would constitute supply since this would be for furtherance of business.

Schedule II :- Activities or transactions to be treated as supply of goods or services

Transaction 1

2

3 4

Transfer

Land & Building

Treatment or process Transfer of Business Assets

Particulars

(a) Transfer of the title of goods (b) Transfer of right in goods or of undivided share in goods without transfer of title thereof This covers renting or operating lease of goods.

‘Undivided share’ means that exclusive possession is not required to be transferred e.g. renting of locker by bank, share taxi. (c) Transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed This covers financial lease and hire purchase. (a) Lease, tenancy, easement, license to occupy land Let say, a company, giving its vacant land for specified period to set up an IT park. (b) Lease or letting out, either wholly or partly, of the building including a commercial, industrial or residential complex for business or commerce This covers renting or leasing of building. Even renting of part of residential complex for business or commerce will be subject to GST. Treatment or process which is applied to another person’s goods e.g. job work, testing etc. (a) Business assets are transferred/disposed of by the owner whether or not for consideration This clause need to be co-related with clause 1 of Schedule I. Such transfer will be subject to GST if ITC was availed on such goods. This clause also has to be read with clause 4 (c) of Schedule II. Further, services by way of transfer of a going concern as a whole or an independent part thereof is exempt from GST – Notification No. 12/2017-CT Rate & 9/2017-IT (Rate) both Dated 28-6-2017.

To be treated as goods ✓

To be treated as service ✓

✓

✓ ✓

✓ ✓

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6

(b) The owner (person carrying on business) uses or allows to use business assets for personal use, whether or not for consideration This covers use of property of taxable person like motor vehicles, residential premises, guest house, telephone, laptop etc. for private use of Director, Employees, Partners etc. (c) Where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless – i.

The business is transferred as a going concern to another person; or ii.

The business is carried on by a personal representative who is deemed to be a taxable person Transfer of entire business is not subject to GST. Only goods transferred are subject to GST. (a) Renting of immovable property Since lease of building and land is already covered in clause 2 (a) and (b) above, this can cover other immovable property i.e. plant and machinery etc. (b) Construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its final occupation, whichever is earlier This covers sale of flat in a residential complex before it is occupied.

If builder is selling, he will be exempt from GST only If he sales after completion certificate is obtained (Schedule III). If first occupancy of immovable property is proved before receiving any consideration, then it would not be considered as supply of services and GST would not be payable even if CC is not yet received. But, determining first occupancy is a contentious issue. (c) Temporary transfer or permitting the use or enjoyment of any intellectual property right This covers allowing use of trade mark, copyright, design, patents. (d) Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software This covers development of software but not software itself in physical forms. CBIC in their sectoral FAQs on IT/ITES has clarified if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods. (e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act Penalty on early termination of agreement, late delivery charges, prepayment charges on early payment of loan installment, demurrage charges paid to the port authorities etc. (f) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration This is renting, where possession and control of goods is transferred to recipient.

Following composite supplies – (a) Works contract as defined in Section 2 (119) (b) Supply, by way of or as part of any service or in any other manner whatsoever of goods, being good or any other article for human consumption or any drink (other than alcoholic liquor for human

✓

✓

✓

✓

✓ ✓

✓

✓

✓ ✓

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Study Notes

7

consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

This clause doesn’t say ‘in restaurant’. So, even home delivery of cooked food will be covered, as it includes service. However, sale of tinned food items is sale of goods as no ‘service’ element is involved.

Sale of packed farsan or pre-prepared sweets or samosa/pakoda across the counter is not ‘supply of service’. However, same item supplied in restaurant or eating joint is ‘supply of service’.

Supply of goods by any unincorporated AOP or body of persons to a member there for cash, deferred payment or other valuable consideration Interestingly, this doesn’t cover supply of services.

29

✓

Schedule III :- Activities or transactions which shall be treated neither as a supply of goods nor a supply of services 1.Services by an employee to the employer in the course of or in relation to his employment.

(If it is part of employment letter. Fringe benefits are not subject to GST, clarified by the Government in press release) 2. Services by any court (District/High/Supreme Court) or Tribunal established under any law for the time being in force.

Fee paid by litigants in the Consumer Disputes Redressal Commission (National/ State/ District) are not leviable to GST. Any penalty in cash imposed by or amount paid to these Commissions will also not attract GST. {Circular No. 32/06/2018 GST Dated 12.02.2018} 3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; (b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Remember, construction of a new building is subject to GST before completion certificate. Please also refer to below Q & A for more clarity. Also note that sale of TDR (Transferable Development Right) is not sale of land.

It allows its owner additional construction area (FSI). Such sale of TDR shall be subject to GST. 6. Actionable claims other than lottery, betting and gambling Example 17: Lottery ticket, Insurance policy, Claim for arrears of rent, Unsecured loans, Reward points earned by customer on purchases made by him under loyalty programme.

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. Merchant trading.

Example 18: Mr. A purchased goods from China and sold it to Mr. John in Canada without bringing the goods in India. This transaction is neither supply of goods nor supply of services.

8. (a) Supply of warehoused goods to any person before clearance for home consumption; In-bond sale.

Example 19: Mr. X imported some goods in India, but kept the goods in custom bonded warehouse without clearing it for home consumption. In the meantime, Mr. X sold these goods to Mr. Y while they were in warehouse. This transaction between Mr. X and Mr. Y is neither supply of goods nor supply of services.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. High Seas Sales.

For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962.

Example 20: Mr. P of India imported some goods from Japan. While the goods were in high seas, Mr. P sold the goods to Mr. Q in India by way of endorsement of documents of title of goods. This transaction between Mr. P and Mr. Q is neither supply of goods nor supply of services.

Section 8: Composite & Mixed supply Composite Supply [Sec. 2 (30)] Consist of 2 or more supplies Naturally Bundled In conjunction with each other One is principal supply Tax liability shall be rate of principal supply Example: 21. Meals free with Rajdhani ticket.

22. Charger & Warranty with mobile.

23. A 5-star hotel booked for conference & includes accommodation, breakfast, access to business centre, tea & coffee during conference, access to fitness room.

24. Goods are packed and transported with insurance, packing materials etc. .

Mixed Supply [Sec. 2 (74)] Consist of 2 or more supplies Not Naturally Bundled Independent of each other Single Price Tax liability will be the rate applicable to the supply attracts highest rate of tax Example: 25. Bucket free with detergent.

26. Gift pack of dry fruits, sweets etc.

27. Car check-up camps organized by Car Workshop wherein along with standard check-up, oil and filter are being charged at a single price.

28. A house is given on rent, one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purposes is not naturally bundled in the ordinary course of business.

Particulars Naturally bundled Supplied together One is predominant supply for recipient Other supply(ies) are ancillary or they are received because of predominant supply Each supply priced separately All supplies can be goods All supplies can be services Some supplies can be goods and others can be services

Composite Supply Yes Yes Yes Yes

Mixed Supply No Yes No No

No Yes Yes Yes

No Yes Yes Yes

Some important circulars Trade practice is also relevant. A vehicle repair shop also supplies spare parts. However, the long practice is to treat these two supplies separately. Hence, such activity is not ‘composite supply’. It is also not ‘mixed supply’ as single price is not charged.

[Circular No. 47/21/2018 GST Dated 08.06.2018] Artists give their work of art to galleries where it is exhibited for supply. However, no consideration flows from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not

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Study Notes a supply. It is only when a buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply.

[Circular No. 22/22/2017 GST Dated 21.12.2017] As per the Production Sharing Contract (PSC) between the Government and the oil exploration & production contractors, in case of a commercial discovery of petroleum, the contractors are entitled to recover from the sale proceeds all expenses incurred in exploration, development, production and payment of royalty. Portion of the value of petroleum which the contractor is entitled to take in a year for recovery of these contract costs is called “Cost Petroleum”. Cost petroleum is not a consideration for services to Government and is not taxable.

[Circular No. 32/06/2018 GST Dated 12.02.2018] Moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manufacturer (the two not being related persons or distinct persons) does not constitute a supply as there is no consideration involved.

[Circular No. 47/21/2018 GST Dated 08.06.2018] Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable.

Further, services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST. Grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt.

[Circular No.44/18/2018 CGST Dated 02.05.2018] JV being an unincorporated temporary association constituted for the limited purpose of carrying out a specified project within a time frame, a comprehensive examination of the various JV agreements (at times, there could be number of inter se agreements between members of the JV) holds the key to understanding of the taxation of transactions involving taxable services between the JV and its members or inter-se between the members of a JV. Thus, whether a cash call is merely a transaction in money and hence not in the nature of consideration for taxable service, would depend on the terms of the Joint Venture Agreement, which may vary from case to case. ‘Cash calls’ are raised by an operating member of the joint venture on other members in proportion to their participating interests in the joint venture (unincorporated) to meet the expenditure on the operations to be carried out as per the approved work programmes and budget. Let us understand the taxability of cash calls with the help of following examples: Example 29: There are 4 members in the JV including the operating member and each one contributes Rs. 100 as part of their share. A total amount of Rs. 400 is collected. The operating member purchases machinery for Rs. 400 for the JV to be used in oil production.

In above case, cash calls will not be subject to GST since the operating member is not carrying out an activity for another for consideration. Here, the money paid for purchase of machinery is merely in the nature of capital contribution and is therefore a transaction in money.

Example 30: There are 4 members in the JV including the operating member and each one contributes Rs. 100 as part of their share. A total amount of Rs. 400 is collected. The operating member thereafter uses its own machine and performs exploration and production activities on behalf of the JV. In above case, the operating member uses its own machinery and is therefore providing ‘service’ within the scope of ‘supply’ because here operating member is recovering the cost appropriated towards machinery & services from other JV members in their participating interest ratio.

[Circular No. 35/9/2018 GST Dated 05.03.2018] Priority Sector Lending Certificates (PSLCs) are taxable as goods. GST payable on the certificates would be available as ITC to the bank buying the certificates. It is further clarified that nature of supply of PSLC between banks may be treated as a supply of goods in the course of inter-State trade or commerce. Accordingly, IGST shall be payable on the supply of PSLC traded over e-Kuber portal of RBI. [Circular No. 93/12/2019 GST Dated 08.03.2019]

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Renewable Energy Certificates (RECs) and Priority Sector Lending Certificates (PSLCs) and other similar documents are classifiable under heading 4907 and attract 12% GST. The duty credit scrips attract Nil GST under S. No. 122A of Notification No. 2/2017- Central Tax (Rate).

[Circular No. 46/20/2018 GST Dated 06.06.2018] Inter-State movement of various modes of conveyance, between distinct persons as specified in section 25(4) of the CGST Act, including Trains, Buses, Trucks, Tankers, Trailers, Vessels, Containers, Aircrafts, (a) carrying goods or passengers or both; or (b) for repairs and maintenance, [except in cases where such movement is for further supply of the same conveyance] was discussed in GST Council’s meeting held on 11th June, 2017 and the Council recommended that such inter-State movement shall be treated ‘neither as a supply of goods or supply of service’ and therefore not be leviable to IGST. Thus, above activity may not be treated as supply and consequently IGST will not be payable on such supply. However, applicable CGST/SGST/IGST, as the case may be, shall be leviable on repairs and maintenance done for such conveyance.

[Circular No. 1/1/2017 IGST Dated 07.07.2017**] **Above circular shall mutatis mutandis apply to inter-State movement of rigs, tools and spares, and all goods on wheels [like cranes], [except in cases where movement of such goods is for further supply of the same goods], such inter-State movement shall be treated ‘neither as a supply of goods or supply of service,’ and consequently no IGST would be applicable on such movements. In this context, it is also reiterated that applicable CGST/SGST/IGST, as the case may be, is leviable on repairs and maintenance done for such goods.

[Circular No. 21/21/2017-GST Dated 22.11.2017] In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.

In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods. Supply of printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff. [Circular No. 11/11/2017-GST Dated 20.10.2017] The supply of books shall be treated as supply of goods as long as the supplier owns the books and has the legal rights to sell those books on his own account. [Circular No. 27/01/2018-GST Dated 04.01.2018] In the case of bus body building there is supply of goods and services. Thus, classification of this composite supply, as goods or service would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case. [Circular No. 34/8/2018-GST Dated 01.03.2018 In retreading of tyres, which is a composite supply, the pre-dominant element is the process of retreading which is a supply of service. Rubber used for retreading is an ancillary supply. Supply of retreaded tyres, where the old tyres belong to the supplier of retreaded tyres, is a supply of goods.

[Circular No. 34/8/2018-GST Dated 01.03.2018] Mere cutting and packing of fabrics into pieces of different lengths from bundles or than, will not change the nature of these goods and such pieces of fabrics would continue to be classifiable under the heading as the fabric.

[Circular No. 13/13/2017-GST Dated 27.10.2017]

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Study Notes

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Question & Answer Q1. What is meant by Taxable event in a Law? A. A taxable event in the law is the event, happening of which triggers applicability of provisions of the law. For e.g. under Income Tax Act, taxable event is earning of income. Thus, earning of income is the triggering point and once a person earns any income, he is covered by the provisions of Income-tax Act, unless otherwise excluded from the purview of the law or exempted from the levy of tax.

Take another example, under VAT Act, taxable event was sales. Sales was the triggering point and once a transaction was covered under sale, provision of VAT used to apply unless the transaction was excluded from the purview of the law or exempted from the levy of tax.

Similarly, under GST, supply is the triggering point and once any activity is covered under supply, all provisions of the law are applicable unless the activity is excluded from purview of law i.e. alcohol for human consumption or activity is exempted from levy of GST. Q2. Mr. A buys a laptop for his personal use and after a year sells it to a laptop dealer. Will it constitute supply?

Ans. As per section 7 (1) (a), when any sale, transfer, barter etc. is made for a consideration in the course or furtherance of business then it would be treated as supply & liable to GST. In the given case, sale of laptop by Mr. A to a laptop dealer shall not be considered as supply, as such sale is not in course or furtherance of business of Mr. A. Thus it is not supply & not subject to GST. Q3. State whether the following activities will be considered as a supply in relation to ‘Money’ in accordance with GST Act. i.

Mr. A borrows an amount of Rs. 1 Lakh from one of his relative and agrees to repay the entire amount after a year. ii.

Mr. A applied for loan from ICICI Bank against which a processing fees and interest is charged by the bank.

iii.

iii. Mr. A exchanged Indian Rupees against purchase of US $ for which authorized dealer charged commission.

A. i.

No, the activity of borrowing from a relative is without any charge of interest and hence it will be considered as merely a transaction in money.

ii.

Yes, the activity of borrowing loan amount for which a consideration in form of processing fee has been charged by ICICI Bank shall be considered as a supply of service, as consideration in relation to use of money. Interest is also supply but it is exempt (refer to Chapter 4 exemption list).

iii.

Yes, the activity of exchange of currency for which a commission is charge will be considered as supply of service.

Q4. A bank takes charge of the property of the borrower as per loan agreement. It then goes on to sell the movable goods so taken over (inventory), How will this transaction be dealt in GST? A. The transactions of sale of movable goods taken over by bank would be considered as taxable supply. The loan taker must pay GST on such transaction treating it as supply of goods.

Q5. Whether stipend paid to article will be covered as supply?

A. No, Government has clarified through FAQ that stipend paid to article/interns will be considered as salary, so it will be employer-employee transaction and thus will not be subject to GST.

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Study Notes Q6. Give example of distinct person as per the GST Act? A. ABC Limited has 2 factories in Rajasthan, 1 in Delhi & 1 in Maharashtra. As per GST Act, ABC may have 1 registration for 2 factories in Rajasthan (ABC discretion), 1 for Delhi & 1 for Maharashtra. The factories at Rajasthan, Delhi & Maharashtra will be treated as distinct person for any transactions since they have separate registration but 2 factories in Rajasthan will not be treated as distinct person since they have 1 registration.

Q7. How to treat transaction of sale of land & building under the GST Act? A. Sale of land and, subject to para 5 (b) of Schedule II, sale of building is neither supply of goods nor a supply service as per para 5 of Schedule III of CGST Act. Para 5 (b) of Schedule II of CGST Act covers supply of building before completion or before occupancy. Thus, sale of completed building after completion certificate will not be subject to GST. Q8. What will be tax treatment of salary to partners under the GST Act? A. Working partners are entitled to draw salary from the firm. On the basis of provisions of Partnership Act, it is settled that a partner is not ‘employee’ of the firm and salary is only share of profit. It has been clarified vide S. Nos. 58 & 71 of Tweet FAQ released by CBIC on 26th June 2017 that GST is not payable on salary to partners.

Q9. ABC Ltd. was amalgamated with DEF Ltd. On account of amalgamation Mr. A, shareholder received 10,000 shares of DEF Ltd. in exchange of 5000 shares of ABC Ltd. Can it be considered as supply?

A. Shares (Securities) are excluded from the definition of both goods as well as services. Hence, this transaction can’t be considered as supply.

Q10. ABC Ltd. a banking company transfers bad loan (unsecured) to ARC Ltd. Can it be considered as supply?

A. Actionable claims are covered in definition of goods. However, schedule III excludes claims other than lottery, gambling and betting from the scope of supply. So, above transfer can’t be considered as supply.

Q11. A Charitable trust, engaged in providing medical relief free of cost, donates books and stationary to children living in slum area? Can it be considered as supply?

A. Section 7 of the CGST Act, provides that supply must be made for a consideration except the activities specified in Schedule I and in course or furtherance of business. Since, both these elements are missing, donation of books and stationary to children living in slum are would not amount to supply.

Q12. A Taxable person, ceases to be a taxable person. What will be treatment for any goods forming part of the assets?

A. Where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless – (a) the business is transferred as going concern to another person; or (b) the business is carried on by a personal representative who is deemed to be a taxable person {Transfer of entire business is not subject to GST. Only goods transferred are subject to GST}.

Q13. Decide whether following activities are supply or not: i.

Free seminar to educate people for mutual fund. ii.

An individual buy a car for personal purpose and after a year, sells it to a car dealer. iii.

ABC Ltd. donated old office furniture to Charitable Hospital. ABC Ltd. has taken ITC on such office furniture. iv.

Mr. A gift Rs. 75,000 to his son on his birthday. v.

Mr. A gave his flat on leave & license agreement to Mr. B.

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Employer has paid notice period amount to employee on termination.

A local club supplies snacks to its members during AGM for a nominal amount.

Mr. A gives computer (claimed ITC) brought for office use, to his friend on his birthday.

ABC Ltd. give gift voucher of Rs. 1,00,000 to it employee Mr. A. If let say amount is Rs. 45,000 then what will be your answer.

Mr. A has taken voluntarily registration. He sells computers.

A. i.

ii. iii.

iv.

v.

vi.

vii.

viii.

ix.

x.

No, as per Section 7 (1) (a) of CGST Act, 2017, supply includes supply of goods and services for a consideration in the course or furtherance of business. In this case, there is no consideration, so it cannot constitute a supply.

No, as per Section 7 (1) (a) of CGST Act, 2017, this is not in the course or furtherance of business. So, it cannot constitute a supply.

Yes, as per Section 7 (1) (c) read with Schedule I of CGST Act, 2017 permanent transfer or disposal of business assets where ITC has been availed shall be treated as supply even if made without consideration. So, in current case even though ABC Ltd. donated old furniture to Charitable Hospital, it shall be treated as supply.

No, as per Section 7 (1) (c) read with Schedule I of CGST Act, 2017 supply of goods or services between related person is treated as supply even it is without consideration when made in course or furtherance of business. Gift to son Rs. 75,000 will not qualify as supply since it is not made in course or furtherance of business.

Yes, as per Section 7 (1) (a) of CGST Act, 2017, leasing or renting out building including commercial, industrial or residential complex for business or commerce would be treated as supply. In given case Mr. A gave his residential house on leave & license agreement so it would constitute supply of service.

But, leasing for residential purpose is exempt under Entry 12 of Notification No. 12/2017- CT (Rate).

No, as per Section 7 (2) read with Schedule III of CGST Act 2017, services by an employee to employer during his employment would not be regarded as supply. So, notice period amount are treated as amount paid during the employment, so would not constitute supply.

Yes, as per para 7 of Schedule II of CGST Act, 2017 supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated a supply of goods. So, if a local club supplies snacks during AGM to its members for a nominal payment would constitute supply of goods.

Yes, as per section 7 (1) (c) read with Schedule I, permanent transfer or disposal of business assets where ITC credit has been availed on such assets qualifies as a supply even though made without consideration. Such transaction will be treated as supply as ITC has been availed on computer.

Yes, as per Section 7 (1) (c) read with Schedule I if CGST Act, 2017, supply of goods or services between related person is treated as supply even it its without consideration. Employer & employee are related person as per Section 15 of CGST Act, 2017. Thus, gift voucher of Rs. 1,00,000 will qualify as supply.

Gifts not exceeding Rs. 50,000 in value in a financial year by an employer to employee shall not be treated as supply so if amount is Rs. 45,000 then it will not be treated as supply.

Yes, a taxable person is a person who is registered or liable to be registered U/s 22 or 24. Therefore, even a person not liable to be registered but has taken voluntary registration, is also a taxable person.

Thus, selling of computer would be liable to GST.

Q14. ABC Ltd. is an authorized dealer of motor vehicles and is having registered office in Delhi. It is also running authorized service station of motor vehicles registered in UP. Certain motor vehicles are taken from Delhi (showroom) to UP (service-station) for repairs. Whether this inter-state movement of vehicles would amount to supply of goods under GST? A. As per given facts, registered supplier of motor vehicle has taken his motor vehicle for repairs at its other registered premises (authorized service station in UP). Post-repair, he will bring back goods to his registered

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Study Notes show-room in Delhi. This transaction of inter-state movement of vehicles for repairs will not amount to supply within the meaning of Section 7 of CGST Act. [Circular No. 1/1/2017-IGST Dated 7-7-2017.]

Q15. State whether the following activities will be considered as a ‘Consideration’ in accordance with GST Act. i.

Reliance Jio offers free mobile handset on payment of security deposit of Rs. 5,000. It is refundable after

ii.

3 years.

ABC football club gift worth Rs. 3 Lakhs to Mr. A for joining ABC football club.

iii.

ABC ltd. is manufacturing fertilizers used for agriculture purpose. State Government has given 30% subsidy on sale of such fertilizer. iv. ABC ltd. a trading concern, has supplied the product to Mr. A at subsidize rate of Rs. 1,00,000 (open market value Rs. 1,25,000). Subsidy is given by XYZ organization.

A. i.

No, as the amount of deposit in the given case is not applied by the supplier towards the mobile handset provided. It is not subject to GST.

ii.

Yes, such gift is in response to an offer to join the football club, is subject to GST.

iii.

As per section 2 (31) of CGST Act, pertaining to ‘consideration’ clearly excludes the value of subsidy received from the Central or State Government. Thus in the given case the amount of subsidy shall be excluded from the value of consideration. iv. As per section 2 (31) of CGST Act, pertaining to ‘consideration’ clearly excludes the value of subsidy received from the Central or State Government. But in given case subsidy is given by person other than the Central or State Government. Thus subsidy is treated as consideration.

Q16. Tips music company charged a late fee as a penalty for late return of a DVD to its customer. Will the late fee charged to its customer be considered as a part of consideration?

Ans. As per Section 2 (102), service means anything other than goods, money & securities. Thus, late, fee, fine, penalty charged by the supplier for any reason would be treated as supply for consideration & liable to GST. Q17. Mr. A is the owner of a truck valued at Rs. 10,00,000. He transfers the right to operate the truck to Mr. B for a consideration but the ownership of the truck is not transferred. Determine whether it will be considered as a supply?

Ans. It is supply as per Section 7 (1) as it is a transfer which involve consideration. It is transfer of rights in goods without transfer of title, so it will be classified as supply of service according to Schedule II of CGST Act, 2017.

Q18. In respect of exchange of goods, let say gold chain for restaurant services, will the transaction be taxable as two different supplies or will it be taxable only in the hands of the main supplier?

Ans. Yes, the transaction of exchange is specifically included in the scope of supply U/s 7. So, exchange could be taxable both ways. (A different view can also be possible depending upon the facts of the case)

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Section 7 of IGST Section 8 of IGST Section 9 of IGST Section 9 of the CGST Section 5 of IGST Section 10 of CGST

Inter State supply Intra State supply Supplies in Territorial Water Levy & Collection of CGST Levy & Collection of IGST Composition Scheme Notification No. 2/2019-Central Tax (Rate) Dated 7th May 2019

Section 7 Inter-State supply (IGST Act)

7 (1) – Goods 7 (3) Services

7 (5)

7 (2) – Goods 7 (4) Services

Supply of Goods is subject to Section 10 & Services is subject to 12 of IGST Act

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Study Notes Other Points: ✓

As per section 7(2), supply of goods imported into the territory of till they cross the customs frontiers of India, shall be treated as supply of goods in the course of inter-State trade or commerce,

✓

In case of import of services, keep in mind that as per section 2 (11) of the IGST Act: •

the supplier of service is located outside India;

•

the recipient of service is location in India;

•

the place of supply of service is in India.

Section 8 Intra-State supply (IGST Act)

These supply of goods or services are not Intra-State

These supply of goods are not IntraState

Other Points: ✓

Where a person has, 1. an establishment in India & any other establishment outside India; 2. an establishment in a State/UT and any other establishment outside that State/UT; or 3. an establishment in a State/UT and any other establishment being a business vertical registered within that State/UT then such establishments shall be treated as establishments of distinct person.

A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 9 Supplies in Territorial Waters (IGST Act) Notwithstanding anything contained in this Act(a) where the location of the supplier is in the territorial waters, the location of such supplier; or (b) where the place of supply is in the territorial waters, the place of supply, shall, for the purposes of this Act, be deemed to be in the coastal State or Union Territory where the nearest point of the appropriate baseline is located.

Section 9 Levy & Collection of CGST

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Study Notes Section 5 Levy & Collection of IGST (IGST Act)

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Categories of goods subject to Reverse Charge {U/s 9 (3)} Goods like cashew nuts [not shelled/peeled], bidi wrapper leaves, tobacco leaves, supply of lottery, silk yarn, used vehicles, seized and confiscated goods, old and used goods, waste and scrap, raw cotton, etc. are taxable under reverse charge, i.e. recipient is liable to pay tax.

CBIC Circular No. 76/50/2018-GST Dated 31.12.2018 The circular clarifies GST position in respect of supply of used vehicles, seized and confiscated goods, old and used goods, and waste and scrap by Government departments.

The above supplies, when provided to a registered person, is covered under reverse charge mechanism (RCM) and the tax is payable by the registered recipient.

However, if the supplies are made to an unregistered recipient, the government department shall be liable to register and pay GST.

Categories of Services subject to Reverse Charge {U/s 9 (3)} Sr. No.

Category of supply of services

Recipient of services

Reverse Charge applicable under CGST / IGST 1

Goods Transport Agency (GTA) If GTA charges GST in his invoice and pays 6% CGST & 6% SGST/UTGST (12% IGST), the recipient is not liable to pay GST under reverse charge. There is no restriction on availing ITC on goods and services used in supplying GTA service by GTA. If GTA is unregistered or doesn’t charge GST in invoice, recipient is liable to pay reverse charge.

Provided that nothing contained in this entry shall apply to services provided by a goods transport agency, by way of transport of goods in a goods carriage by road, to, (a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.

2

Services supplied by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly.

“Legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes

Factory, society, co-operative society, taxable person, body corporate {defined under 2(11) of the Companies Act and includes a company incorporated outside India}, partnership firm whether registered or not under any law including AOP, casual taxable person located in taxable territory.

The person who pays or is liable to pay freight for the transportation of goods, shall pay reverse charge.

Reverse Charge @ CGST 2.5%+ SGST 2.5% = IGST 5% Reverse charge not applicable:• Supply of services to non-specified person (see specified person above) or unregistered person • When GTA opts to pay tax under forward charge • When GTA services supplied to Government department or agencies or local authority, which has taken registration only for the purpose of deducting TDS Any business entity located in the taxable territory.

The business entity located in the taxable territory who is litigant, applicant or petitioner, as the case may be, shall be treated as the person who receives the legal services.

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Study Notes representational services before any court, tribunal or authority.

3 4 5

5A

5B

5C

• • • • •

Services by an Arbitral tribunal

Any business entity located in the taxable territory.

Any body corporate or partnership located in taxable territory Any business entity located in the taxable territory.

Services of Sponsorship (Note that it is not the advertisement, it is sponsorship) Services supplied by the Central Government, State Government, UT or local authority to a business entity excluding: 1. Renting of immovable property 2. (i) services by the Departments of posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central, State, Union or Local authority (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport (iii) transport of goods or passengers Services supplied by the Central, State, Union or Any person registered under the CGST Act, local authority by way of renting of immovable 2017 property to a person registered under the CGST Act, 2017 “renting of immovable property” means allowing, permitting or granting access, entry, occupation, In case of unregistered person, then use or any such facility, wholly or partly, in an CG,SG, UT or local authority have to pay immovable property, with or without the transfer of GST as forward charge possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.

Services supplied by any person by way of Promoter transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter.

Long term lease of land (30 years or more) by any Promoter person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter.

The term “apartment” shall have the same meaning as assigned to it in clause (e) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2017). the term “promoter” shall have the same meaning as assigned to it in clause (zk) under section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2017). the term “project” shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP); “the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in in clause (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).

The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in the REP.

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“floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the size of the piece of land upon which it is built.

6 Services supplied by a director of a company or a The company or a body Corporate, located in body corporate to the said company or the the taxable territory body corporate.

7 Services supplied by an insurance agent to any Any person carrying on insurance business, person carrying on insurance business located in the taxable territory 8 Services supplied by a recovery agent to a A banking company or a FI or a NBFC, banking company or FI or NBFC located in the taxable territory 9 Supply of services by an author, music composer, Publisher, music company, producer or the photographer, artist or the like by way of transfer like, located in the taxable territory or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

10 Supply of Services by the members of overseeing RBI committee to RBI 11 Supply of services by individual Direct Selling Banking company or NBFC located in the Agent (DSAs) other than a body corporate taxable territory [inserted w.e.f. 27-7-2018] partnership or LLP to bank or NBFC 12 Services provided by business facilitator (BF) to a A banking company, located in the taxable banking company territory 13 Services provided by an agent of business A business correspondent, located in the correspondent (BC) to business correspondent taxable territory (BC) 14 Security services (services provided by way of A registered person located in the taxable supply of security personnel) provided to a territory registered person: Provided that nothing contained in this entry shall A registered person receiving security apply to, services from any person other than a (i)(a) a Department or Establishment of the body corporate (like individual, firm, Central Government or State Government or AOP etc.) is required to pay GST on Union territory; or reverse charge basis (b) local authority; or (c) Governmental agencies; which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for the purpose of deducting tax under section 51 of the said Act and not for making a taxable supply of goods or services; or (ii) a registered person paying tax under section 10 (composition scheme) of the said Act. Provision of reverse charge notification, in so far as they apply to Central & State Governments, shall also apply to the Parliament and State Legislatures.

Reverse Charge applicable under IGST Act 12 Any service supplied by any person who is Any person located in the taxable territory located in a non-taxable territory to any person other than non-taxable online recipient other than non-taxable online recipient.

13 Services supplied by a person located in nonImporter, in relation to any goods at any time taxable territory by way of transportation of goods between their importation and the time when by a vessel from a place outside India up to the they are cleared for home consumption, customs station of clearance in India includes any owner, beneficial owner or any

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Study Notes

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person holding himself out to be the importer [Section 2(26) of the Customs Act, 1962].

If the value of ocean freight not available, it shall be 10% of CIF Value.

IGST is payable by importer under reverse charge even if customs duty and IGST paid on CIF value {Bahi Paper Mills Ltd. – AAR (Uttarakhand}

Amendments in GST in real estate sector including RCM U/s 9 (4) Earlier, the effective rate of GST on real estate sector was 8%/12% with ITC. With effect from 01.04.2019, the effective rates of GST for the new projects have been brought down to a large extent.

However, the promoters/builders have been given a one-time option to continue to pay tax at the old rates on ongoing projects (buildings where construction and actual booking both have started before 01.04.2019) which have not been completed by 31.03.2019.

New effective rates of GST for the new projects by promoters are as follows:

Highlighted in grey, is out of syllabus

(i) New rate of 1% without ITC on construction of affordable houses (area 60 sqm in metros/ 90 sqm in non-metros and value upto Rs. 45 lakh). (ii) New rate of 5% without ITC shall be applicable on construction of: (a) all houses other than affordable houses, and (b) commercial apartments such as shops, offices etc. in a residential real estate project (RREP) in which the carpet area of commercial apartments is not more than 15% of total carpet area of all apartments.

Conditions: Above tax rates shall be available subject to following conditions: (a) Input tax credit shall not be available. (b) 80% of inputs and input services [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used in supplying the service shall be purchased from registered persons.

However, if value of inputs and input services purchased from registered supplier is less than 80%, promoter has to pay GST on reverse charge basis, under section 9(4) of the CGST Act, at the rate of 18% on all such inward supplies** (to the extent short of 80% of the inward supplies from registered supplier).

Further, where cement is received from an unregistered person, the promoter shall pay tax on supply of such cement on reverse charge basis, under section 9(4) of the CGST Act, at the applicable rate which is 28% (CGST 14% + SGST 14%) at present.

Moreover, GST on capital goods shall be paid by the promoter on reverse charge basis, under section 9(4) of the CGST Act at the applicable rates.

[Notification No. 07/2019 CT (R) Dated 29.03.2019/ Notification No. 07/2019 IT (R) Dated 29.03.2019]

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer exempt from GST Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer have been exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them.

Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. This will achieve a fair degree of taxation parity between under construction and ready to move property.

The liability to pay tax on TDR, FSI, long term lease (premium) has been shifted from land owner to builder under the reverse charge mechanism {U/s 9 (3) prescribed services).

Provision related to E-Commerce Operator Proviso to Section 9 (5) of CGST Act/ 5 (5) of IGST Act

For e-commerce aggregators providing services which are notified under section 9(5) under CGST Act, 2017 & section 5 (5) IGST Act, 2017 Such persons are required to pay GST as if such services are supplied through it. As the e-commerce operator himself is liable for collection and deposit of GST, there is no question of TCS U/s 52.

Services notified in section 9(5) under CGST Act & Section 5(5) IGST Act, 2017 are:(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle for example – Ola, Uber; (ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration under section 22 (1) of CGST Act, 2017 {it includes homestay or guest house services}; (iii) services by way of house-keeping, such as plumbing, carpentering etc., except where the person supplying such service through ECO is liable for registration under section 22 (1) of the said CGST Act, 2017.

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It means that except above (i), if person is liable to register then he/she is responsible for payment of tax otherwise ECO is responsible for payment of tax.

Section 10 Composition Scheme (CGST Act) Topic Entry -Qualification -Disqualification -Conditions & Restrictions Life Zone Validity period of composition Scheme No collection of tax + No ITC Wrongly availed the scheme

CGST Act Section

CGST Rules

10 (1) 10 (2) Rule 5

Rule 6 (1) 10 (4) 10 (5)

Rule 6 (7)

Exit Door -Crossing the limit of Turnover 10 (3) -Violation of eligibilities of Sec. 10 (1) Rule 6 (2), 6 (5), 6 (6), 6 (7) -Self Exit Rule 6 (3), 6 (7) 1. Objective of Scheme: To bring Simplicity and reduce the compliance cost for the small tax payers 2. Eligibility:- As per Section 10(1), A registered person whose aggregate turnover in the previous financial year did not exceed 1.5 crore (as amended by the Notification Notification No. 14/2019 – Central Tax, Dated 07.03.2019) The limits for special category states (i) Arunachal Pradesh (ii) Uttarakhand (iii) Manipur (iv) Meghalaya (v) Mizoram (vi) Nagaland (vii) Sikkim (viii) Tripura, remains 75 lakhs.

As per second proviso of Section 10, a person who opts to pay tax as a Manufacturers, Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II [e.g.

Restaurant service], in case of Other Suppliers (e.g. Traders) may supply services (other than those referred to in clause (b) of paragraph 6 of Schedule II), of value not exceeding ten percent of turnover in a State or Union territory in the preceding financial year or five lakh rupees, whichever is higher.

Intro duction

Example 1:- Mr. A has opted for composition scheme in the financial year 2019-2020.

His aggregate turnover in FY 2018-19 is Rs. 60 lakh. In FY 2019-2020, he can supply services [other than restaurant services] upto a value of not exceeding: (a) 10% of Rs. 60 lakh, i.e. Rs. 6 lakh. or (b) Rs. 5 lakh, whichever is higher.

Thus, he can supply services upto a value of Rs. 6 lakh in FY 2019-2020.

3. Rates of Tax: Person Manufacturers, other than manufacturers of such goods as may be notified by the Government, i.e. ice cream, pan masala and tobacco Suppliers making supplies referred to in clause (b) of paragraph 6 of Schedule II [e.g. Restaurant service]

% of the turnover State/UT CGST 0.50% + SGST/UTGST 0.50% {Tax is payable even on exempted supply} CGST 2.50% + SGST/UTGST 2.50%

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain {Tax is payable even on exempted supply} In case of other suppliers (e.g. Traders) CGST 0.50% + SGST/UTGST 0.50% (on turnover of taxable supplies of goods and services) Note: Along with CGST, equivalent amount of SGST/UTGST is also payable by the taxable person.

Eligibility to opt for composition scheme {As per Section 10 (2)}

Other conditions

Conditions and restrictions for Composition levy

Intimation for Composition

4. Aggregate Turnover (a) “Aggregate Turnover” means, the aggregate value of – • All taxable supplies, having the same • Exempt supplies, PAN, to be • Exports of goods or services or both & computed on all • Inter-State supplies India basis (b) It excludes – • Central tax, State tax, Union Territory tax, Integrated Tax & cess, • The value of inward supplies which is subject to tax on reverse charge basis, • The value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.

The registered person shall be eligible to opt under sub-section (1), if:— (a) save as provided in sub-section (1), he is not engaged in the supply of services; (b) he is not engaged in making any supply of goods which are not leviable to tax under this Act; (c) he is not engaged in making any inter-State outward supplies of goods; (d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and (e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council: Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

• As per Section 10 (3), the option availed of by a registered person under subsection (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified U/s 10 (1); • As per Section 10 (4), A taxable person to whom the provisions of Section 10 (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

Supplier opting for composition scheme, shall1. Not to be engaged in manufacturer of Specified goods {Ice cream, pan Masala and Tobacco} 2. Not to be a casual taxable person/non-resident taxable person 3. Not eligible for Input Tax Credit 4. Not to issue a Tax Invoice & collect GST (Bill of Supply need to be issued) 5. Mention the details and status of Composition Dealer on Bills & Boards 1. Option to pay composite tax along with application for registration – Intimation for composition scheme [Rule 3 (2)]: - Any person who applies for

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Study Notes Levy (Rule 3 & 4)

Conditions and restrictions form composition levy (Rule 5)

Validity of Composition levy (Rule 6)

registration may give an option to pay tax under composition scheme in Part B of Form GST REG – 01, which shall be considered as an intimation to pay tax under this scheme.

Effective Date: -From the date of Registration as per Rule 4 of CGST Rules, 2017 2. Filing of intimation before the beginning of financial year [Rule 3(3)]: Registered person shall electronically file an intimation in Form GST CMP – 02. Duly signed or verified through EVC, on the common portal, prior to commencement of the FY. He shall furnish the statement in prescribed form within a period of 60 days from the commencement of the relevant FY. Effective Date: -From the beginning of FY as per Rule 4 of CGST Rules, 2017 3. One intimation applicable for all places in case of same PAN [Rule 3 (5)] 1. The person opting for the scheme must neither be a casual taxable person nor a nonresident taxable person.

2. The goods held in stock by him have not been purchased from an unregistered supplier and where purchased, he pays the tax under section 9 (4).

3. He shall pay tax U/s 9 (3)/(9 (4) on inward supply of goods or services or both.

4. He shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him.

5. Mandatory display of the words “Composition Taxable Person” on every notice and signboard displayed at a prominent place.

6. Not to be engaged in manufacturer of specified goods during the preceding FY {Ice cream and other edible ice whether or not containing cocoa, Pan Masala, Tobacco and manufactured tobacco substitutes} The registered person paying tax under section 10 may not file a fresh intimation every year and he may continue to pay tax under the said section subject to the provisions of the Act and these rules.

1. Validity of Scheme: As long as the prescribed conditions are met, the option exercised by a Registered Person to pay tax U/s 10 shall remain valid.

2. Duties of the Person when Scheme becomes invalid or mandatory cessation of composition levy on violation of conditions: (a) Liable to pay tax under normal scheme (b) Shall issue tax invoice for every taxable supply (c) within 7 days of occurrence of such even, shall file an intimation for withdrawal in Form GST CMP – 04 3. The registered person who intends to withdraw from the composition scheme shall, before the date of such withdrawal, file an application in Form GST CMP-04.

4. Show Cause Notice shall be given by the Proper office if he believes that the registered person was not eligible to pay tax u/s 10 or has contravened the provisions of the Act. Response to this notice should be furnished by taxable person within 15 days.

5. Acceptance/Refusal by the Proper Officer: Upon receipt of reply to the show cause notice from the registered person, the Proper Officer shall issue an order within 30 days of receipt of such reply, either accepting the reply, or denying the option to pay tax u/s 10.

6. Details of Stocks to be furnished by: Person who has furnished an intimation, or filed an application for withdrawal, or order of withdrawal of option has been passed by the proper officer shall file a statement containing details of stock within 30 days, from the date from which the option is withdrawn or from the date of order passed. He shall be entitled to avail input tax credit in respect of the stock of inputs and inputs contained in semi-finished or finished goods held in stock by him and on capital goods held by him on the date of withdrawal.

7. In case of wrongly availing the composition scheme, taxable person shall, in addition to

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Central Goods and Services Tax (Removal of Difficulties) Order, 2019 No. 01/2019-CT 01-02-2019 Other Points

Circular No. 77/51/2018 Dated 31.12.2018

any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74, shall, mutatis mutandis, apply for determination of tax and penalty.

8. Withdrawal applies to all units.

For the removal of difficulties, it is hereby clarified that the value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account – (i) for determining the eligibility for composition scheme under second proviso to sub-section (1) of section 10; (ii) in computing aggregate turnover in order to determine eligibility for composition scheme. ➢ Composition taxable person can import goods or services. ➢ Composition taxable person is not entitled to export goods.

It is clarified that in a case where the taxpayer has sought withdrawal from the composition scheme, the effective date shall be the date indicated by him in his intimation/application filed in FORM GST CMP-04 but such date may not be prior to the commencement of the financial year in which such intimation/application for withdrawal is being filed. If at any stage it is found that he has contravened any of the provisions of the CGST Act or the CGST Rules, action may be initiated for recovery of tax, interest and penalty.

In case of denial of option by the tax authorities, the effective date of such denial shall be from a date, including any retrospective date as may be determined by tax authorities, but shall not be prior to the date of contravention of the provisions of the CGST Act or the CGST Rules. In such cases, as provided under sub-section (5) of section 10 of the CGST Act, the proceedings would have to be initiated under the provisions of section 73 or section 74 of the CGST Act for determination of tax, interest and penalty for the period starting from the date of contravention of provisions till the date of issue of order in FORM GST CMP-07. It is also clarified that the registered person shall be liable to pay tax under section 9 of the CGST Act from the date of issue of the order in FORM GST CMP-07.

Provisions of section 18(1)(c) of the CGST Act shall apply for claiming credit on inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the date immediately preceding the date of issue of the order.

Notification No. 2/2019-Central Tax (Rate) Dated 7th March 2019 {w.e.f. 1st April 2019} Description of Supply:- First supplies of goods or services or both upto an aggregate turnover of fifty lakh rupees made on or after the 1st day of April in any financial year, by a registered person.

Explanation.-For the purposes of this notification, the expression “first supplies of goods or services or both” shall, for the purposes of determining eligibility of a person to pay tax under this notification, include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the said Act but for the purpose of determination of tax payable under this notification shall not include the supplies from the first day of April of a financial year to the date from which he becomes liable for registration under the Act. In computing aggregate turnover in order to determine eligibility of a registered person to pay central tax at the rate of three percent under this notification, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall not be taken into account.

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Study Notes Tax Rate:- CGST 3% + SGST/UTGST 3% Conditions:1. Supplies are made by a registered person,(i) whose aggregate turnover in the preceding financial year was fifty lakh rupees or below; (ii) who is not eligible to pay tax under sub-section (1) of section 10 of the said Act; (iii) who is not engaged in making any supply which is not leviable to tax under the said Act; (iv) who is not engaged in making any inter-State outward supply; (v) who is neither a casual taxable person nor a non-resident taxable person; (vi) who is not engaged in making any supply through an electronic commerce operator who is required to collect tax at source under section 52; and (vii) who is not engaged in making supplies of the goods, {Ice cream and other edible ice whether or not containing cocoa, Pan Masala, Tobacco and manufactured tobacco substitutes} 2. Where more than one registered persons are having the same Permanent Account Number, central tax on supplies by all such registered persons is paid at the rate specified above.

3. The registered person shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

4. The registered person shall issue, instead of tax invoice, a bill of supply as referred to in clause (c) of subsection (3) of section 31 of the said Act with particulars as prescribed in rule 49 of Central Goods and Services Tax Rules.

5. The registered person shall mention the following words at the top of the bill of supply, namely: - ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) Dated 07.03.2019, not eligible to collect tax on supplies’.

6. The registered person opting to pay central tax at the rate of three percent under this notification shall be liable to pay central tax at the rate of three percent on all outward supplies specified in above topic “Description of supply” notwithstanding any other notification issued under sub-section (1) of section 9 or under section 11 of said Act. 7. The registered person opting to pay central tax at the rate of three percent under this notification shall be liable to pay central tax on inward supplies on which he is liable to pay tax under sub-section (3) or, as the case may be, under sub-section (4) of section 9 of said Act at the applicable rates.

8. Where any registered person who has availed of input tax credit opts to pay tax under this notification, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods as if the supply made under this notification attracts the provisions of section 18(4) of the said Act and the rules made there-under and after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

Notification No.21 /2019 – Central Tax Dated 23rd April, 2019 Registered persons paying tax under the provisions of section 10 of the CGST Act or by availing the benefit of notification No. 02/2019– Central Tax (Rate), Dated 07.03.2019 as the class of registered persons who shall follow the special procedure as mentioned below for furnishing of return and payment of tax:•

The said persons shall furnish a statement, every quarter or, as the case may be, part thereof containing the details of payment of self-assessed tax in FORM GST CMP-08 of the Central Goods and Services Tax Rules, 2017, till the 18th day of the month succeeding such quarter.

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The said persons shall furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4 of the Central Goods and Services Tax Rules, 2017, on or before the 30th day of April following the end of such financial year.

•

The registered persons paying tax by availing the benefit of the said notification, in respect of the period for which he has availed the said benefit, shall be deemed to have complied with the provisions of section 37 and section 39 of the said Act if they have furnished FORM GST CMP-08 and FORM GSTR4 as provided in para 1 and para 2 above.

Circular No. 97/16/2019-GST Dated the 5th April 2019 (i) a registered person who wants to opt for payment of central tax @ 3% by availing the benefit of the said notification, may do so by filing intimation in the manner specified in sub-rule 3 of rule 3 of the said rules in FORM GST CMP-02 by selecting the category of registered person as “Any other supplier eligible for composition levy” as listed at Sl. No. 5(iii) of the said form, latest by 30th April, 2019. Such person shall also furnish a statement in FORM GST ITC 03 in accordance with the provisions of sub-rule (3) of rule 3 of the said rules. (ii) any person who applies for registration and who wants to opt for payment of central tax @ 3% by availing the benefit of the said notification, if eligible, may do so by indicating the option at serial no. 5 and 6.1(iii) of FORM GST REG-01 at the time of filing of application for registration. (iii) the option of payment of tax by availing the benefit of the said notification in respect of any place of business in any State or Union territory shall be deemed to be applicable in respect of all other places of business registered on the same Permanent Account Number. (iv) the option to pay tax by availing the benefit of the said notification would be effective from the beginning of the financial year or from the date of registration in cases where new registration has been obtained during the financial year.

It may be noted that the provisions contained in Chapter II Composition Rules (CGST) shall mutatis mutandis apply to persons paying tax by availing the benefit of the said notification, except to the extent specified in para above.

Example 2:- Mr. A is not a registered person during Financial Year 2018-19. From 1st April 2019, new financial year commences. Upto September 2019, he achieves the aggregate turnover of Rs. 20 Lakhs and is liable for registration under GST Laws w.e.f. 1st October 2019. From October 2019 to December 2019, he made outward supply of Rs. 30 Lakhs. And, from Jan 2020 to March 2020, he made outward supply of Rs. 15 lakh.

His turnover of Rs 50. Lakh for recognising his benefit under this scheme {Notification No. 2/2019-Central Tax (Rate) Dated 7th March 2019} will be counted from 1st April 2019. However, tax under this scheme shall be payable only for the supplies made during October 2019 to December 2019 (i.e. on Rs. 30 lakhs).

As the limit of Rs. 50 Lakhs under this scheme exhausted till 31st December 2019 (i.e. Rs. 20 Lakhs before registration and Rs. 30 Lakhs after registration), hence, from 1st January 2019 onwards, tax shall be payable under normal provisions of GST as applicable for regular dealers.

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Study Notes

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Question & Answer Q1. XYZ Ltd. is a manufacturing concern in Mumbai. In FY 19-20 total value of supplies including inward supplies taxed under reverse charge basis are Rs. 1,55,00,000, please see below break up?

Particulars Amount Intra State Supplies 60,00,000 Intra State Supplies made which are subject to 0% CGST 60,00,000 Intra State Supplies which are wholly exempt 30,00,000 Value of inward supplies which is payable under RCM 5,00,000 Explain whether XYZ Ltd. is eligible to opt for composition scheme in FY 18-19?

A. As per Section 2(6) of the CGST Act, 2017, “aggregate turnover” doesn’t include value of inward supplies on which reverse charge is applicable so aggregate turnover is computed as under: Particulars Amount Intra State Supplies 60,00,000 Intra State Supplies made which are subject to 0% CGST 60,00,000 Intra State Supplies which are wholly exempt 30,00,000 Value of inward supplies which is payable under RCM NIL Total 1,50,00,000 Since, aggregate turnover doesn’t exceed Rs. 1,50,00,000 during the FY 19-20, so XYZ Ltd. is entitled for composition scheme.

Q2. XYZ Ltd. is a manufacturing concern in Mumbai. It opted for composition in FY 18-19. Total value of supplies including inward supplies taxed under reverse charge basis are Rs. 90,00,000, please see below break up?

Particulars Intra State Supplies @ 5% Intra State Supplies @ 12% Intra State Supplies made which are subject to 0% CGST Intra State Supplies which are wholly exempt Value of inward supplies which is payable under RCM @ 5% Compute composition tax liability and total tax liability?

A.

Amount 40,00,000 10,00,000 20,00,000 10,00,000 10,00,000

Particulars

Amount Intra State Supplies @ 5% 40,00,000 Intra State Supplies @ 12% 10,00,000 Intra State Supplies made which are subject to 0% CGST 20,00,000 Intra State Supplies which are wholly exempt 10,00,000 Value of inward supplies which is payable under RCM @ 5% NIL Aggregate Turnover 80,00,000 Rate of Tax @ 1% (CGST+SGST) 80,000 XYZ Ltd. has to pay tax under reverse charge section 9 (3) of CGST Act, 2017 Rs. 50,000 (10,00,000*5%).

Total Tax Liability is Rs. 80,000+Rs. 50,000 = Rs. 1,30,000 Q3. XYZ Ltd. had opted for payment of tax under composition scheme during 2017-18. Its turnover during 1718 was as follows: (a) Supply of manufactured goods Rs. 20 Lacs (b) Supply of traded goods Rs. 10 Lacs (c) Supply of service Rs. 10 Lacs (d) Export of goods Rs. 15 Lacs

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain On all these supplies SGST @ 6% & CGST rate is 6%. Calculate the tax liability.

A. Composition Scheme is not available if a taxable person is exporting goods. Hence, he is liable to pay tax on Rs. 40 Lacs (20+10+10) as follows – SGST @ 6% = Rs. 2,40,000 and CGST @ 6% = Rs. 2,40,000.

He can make export of goods without payment of tax.

Q4. Please discuss provision related to alcoholic liquor for human consumption & for industrial consumptions.

A. The constitutional amendment put alcoholic liquor for human consumption out of the purview of GST i.e. this product will continue to fall under the ambit of State Excise Duty. It should be noted that alcoholic liquor for industrial consumption and non-alcoholic beverages are covered within the gamut of GST. Q5. What happens if a taxable person who has opted to pay taxes under the composition scheme crosses the threshold limit of Rs. 75 lakhs/1.5 crore during the year?

A. In such case, from the day the taxable person crosses the threshold, the permission granted earlier is deemed to stand withdrawn, and he shall be liable to pay taxes under the regular scheme i.e. section 9, from such day.

Q6. A hotel provided accommodation in Himachal Pradesh, through an electronic commerce operator – Makemyyatra.com. The hotel is not liable to get registered as per the provisions of Section 22 (1) of the CGST Act. Who is the person liable to pay GST in this case? Will your answer be different if the Electronic Commerce operator Makemyyatra.com does not have a physical presence in India?

A. As per Section 9 (5) of the CGST Act, 2017, person liable to pay GST in this case is the Electronic Commerce Operator (ECO) i.e. Makemyyatra.com. All the provisions of the GST Law shall apply to such ECO as if he is the supplier liable for paying the tax in relation to the supply of such services. If Makemyyatra.com does not have a physical presence in India, person liable to pay tax is the person representing Makemyyatra.com.

Q7. Who is responsible to pay taxes?

A. The persons responsible for payment of taxes are as under – 1. Supplier: The person effecting taxable supplies is liable to pay taxes.

2. Recipient – Reverse Charge: Section 9 (3) of the CGST Act, 2017 inter alia provides that, the Government may, on the recommendations of the council, by notification specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both.

In terms of Section 9 (4), all registered recipient of goods or services or both is liable to pay tax under reverse charge in the event supplier of goods is not registered. It must be noted that Central Government vide Notification No. 22/2018-CT (Rate) Dated 06-08-2018 & No. 23/2018 – IT (Rate) Dated 06-08-2018, has exempted intra-State & inter-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under Section 9 (4) of the CGST Act 2017/ under Section 5(4) of the IGST Act, 2017 till 30-09-2019.

3. E-Commerce Operator: U/s 9 (5) of CGST Act, 2017, categories of services have been notified by the Government on the recommendation of the Council, the tax on which is paid by the electronic commerce operator as if such services are supplied through it.

Q8. ABC Ltd., a manufacturing concern is affecting intra-State taxable supply and inter-State supply. The company wants to opt for composition scheme. Please advise ABC Ltd. whether they can opt for composition scheme or not?

A. As per provisions of Section 10 of CGST Act, 2017, a manufacturer can opt for composition scheme if he is not engaged in making any inter-State outward supplies of goods. In this case, since ABC Ltd. has affected interstate taxable supply of goods, hence it cannot opt for composition scheme.

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Study Notes Q9. What are the consequences, if a taxable person violates the conditions prescribed for composition scheme?

A. Following are the consequences for non-compliance with the conditions specified for composition scheme: a. Shall be liable to pay additional taxes at the rates applicable to regular taxable person; b. Shall be liable to pay penalty; and c. The amount of tax and penalty shall be recovered in terms of Section 73 or 74 of the CGST Act, 2017.

Q10. ABC Ltd. a trading concern in Rajasthan has opted for composition scheme furnishes you with the following information for Financial Year 2019-20. It required you to determine its tax liability. The details are: Particulars Amount Intra State Supplies of Goods ‘A’ (Tax Rate @ 5%) 10,00,000 Intra State Supplies of Goods ‘B’ (Tax Rate @ 12%) 35,00,000 Intra State Supplies which are wholly exempt 20,00,000 Intra State Supplies of Services ‘A’ (Tax Rate @ 18%) 10,00,000 Value of inward supplies on which tax payable under RCM (Tax Rate 18%) 10,00,000 A. Particulars Amount Intra State Supplies of Goods ‘A’ (Tax Rate @ 5%) 10,00,000 Intra State Supplies of Goods ‘B’ (Tax Rate @ 12%) 35,00,000 Intra State Supplies which are wholly exempt (No tax for composition trader) NIL Intra State Supplies of Services ‘A’ (Tax Rate @ 18%) 10,00,000 Aggregate Turnover 55,00,000 CGST @ 0.5% & SGST @ 0.5% = 1% [A] 55,000 Tax payable as reverse Charge (Rs. 10,00,000*18%) [B] 1,80,000 Total Tax Liability [A+B] 2,35,000 Q11. Comment on chargeability of following transaction: i.

ABC Ltd. availed service of XYZ Ltd. (Goods Transport Agency) for transportation of goods by road ii.

from Pune to Mumbai.

ABC Ltd. paid Rs. 1,00,000 towards legal services provided by partnership advocate firm AZB.

iii.

ABC Ltd. paid Rs. 1,00,000 to independent director.

iv. v.

Government has provided Business support services to ABC Ltd. for Rs. 1,00,000.

ABC Ltd. paid Rs. 1,00,000 towards sponsorship of exhibition. If Mr. A has paid Rs. 1,00,000 towards sponsorship of exhibition then whether your comment will differ.

vi. vii.

Government has given commercial property on monthly rent for Rs. 1,00,000.

ABC Insurance company pay Rs. 1,00,000 commission to Mr. A whose turnover is lesser than threshold limit for registration.

viii. ix. x. xi.

A. i.

ABC Ltd. has availed Manpower services from XYZ Ltd. Will your answer differ if service provider is Mr. A. Works contract services provided by ABC Ltd. to XYZ Ltd. Security services by Mr. A to ABC Ltd (registered in GST).

Insurance company selling insurance policies through an ECO and paying commission to ECO. In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9 (3) since it is liable to pay freight for transportation of goods so ABC Ltd. shall be treated as recipient of service. If GTA has paid GST under forward charge @ 12% then it is not subject to reverse charge.

ii.

In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9 (3). Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly

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In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9 (3). Services supplied by a director of a company or a body corporate to the said company or the body corporate, are subject to reverse charge.

iv.

In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9 (3). Services supplied by the Central Government, State Government, Union Territory or local authority to a business entity, are subject to reverse charge.

v.

In this case sponsorship is received by ABC Ltd. so they are subject to reverse charge U/s 9 (3). If it is provided to Mr. A then GST will be payable by supplier of service. Service provided by way of sponsorship to anybody corporate or partnership firm are subject to reverse charge.

vi. vii.

It is subject to reverse charge U/s 9 (3).

In this case ABC Insurance company will be liable to pay GST under reverse charge basis U/s 9 (3). It cannot claim exemption since it is recipient of service.

viii.

XYZ Ltd. is liable to pay GST. Even if it is provided by Mr. A, treatment remain same i.e. service provider Mr. A, is liable to pay GST.

ix. x.

ABC Ltd. is liable to pay GST as service provider.

ABC Ltd. is liable to pay GST as a reverse charge.

xi.

‘ECO’ shall not be termed as ‘insurance agent’ unless such ‘ECO’ is licensed under Section 42 of Insurance Act. Unless ‘ECO’ can be termed as ‘insurance agent’, RCM shall not be applicable.

Q12. Whether a Restaurant is supplying liquor/alcohol is eligible for Composition Scheme?

A. A Restaurant is supplying liquor/alcohol is not eligible for Composition Scheme because according to the provisions of the Act, composition scheme cannot be availed on those goods and services on which GST is not levied and liquor/alcohol are out of the scope of GST. Person has no choice to go to Composition Scheme; rather he has an only window of regular scheme which is mandatory if he falls under the criteria of aggregate turnover.

Q13. Mr. A, a retailer who keeps on inventories, presents the following expected information for the year – Purchase of goods: Rs. 60 Lacs (GST @ 5%) Sales (at fixed selling price inclusive of all taxes): Rs. 72 Lacs (GST @ 5%) Discuss whether he should opt for composition scheme if composite tax is 1% of turnover.

Expenses of keeping detailed statutory records required under the GST Laws will be Rs. 1,44,000 p.a., which shall get reduced to Rs. 60,000 if composition scheme is opted for. Other expenses are Rs. 3,60,000 p.a.

A: The cost to the ultimate consumer under two schemes is as under –

Cost of goods sold (*No credit under compositions scheme, hence, cost of goods sold will be higher) Add: Costs of Maintaining records Add Normal Expenses Total Costs Sales (inclusive of taxes) Less Tax (GST = 72,00,000* 5/105); Composition Tax = (72,00,000*1%) Sales (Net of Taxes)

Normal GST Scheme 60,00,000

Composition Scheme* 63,00,000

1,44,000 3,60,000 65,04,000 72,00,000 3,42,857

60,000 3,60,000 67,20,000 72,00,000 72,000

68,57,143

71,28,000

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Study Notes Profit 3,53,143 Since profit under composition scheme is higher so dealer should opt for composition scheme.

57

4,08,000

Q14. Will a taxable person be eligible to opt for composition scheme only for one out of 3 business verticals?

A. No. Composition scheme would become applicable for all the business verticals / registrations which are separately held by the person with same PAN. Q15. Can composition scheme be availed if the taxable person has inter-State inward supplies?

A. Yes. Composition scheme is applicable subject to the condition that the taxable person does not engage in making inter-state outward supplies, while there is no restriction on making any inter-State inward supplies.

Q16. How to compute ‘aggregate turnover’ to determine eligibility for composition scheme?

A. The methodology to compute aggregate turnover is given in Section 2(6). However, since composition scheme is applicable only to suppliers making intra-state supplies, ‘aggregate turnover’ means ‘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 (except interest income as discussed above), exports of goods or services or both or inter-state supplies of a person having the same PAN (i.e., across India) excluding CGST, IGST, SGST, UGST and cess.

Q17. Can a person paying tax under composition scheme make supplies of goods to SEZ? A. No. Supplies to SEZ from domestic tariff area (DTA) will be treated as inter-State supply. A person paying tax under composition scheme cannot make inter-State outward supply of goods. Thus, for making supplies to an SEZ unit, a person needs to take registration as a regular taxpayer. The supplies to SEZ will be zero rated and the supplier will be entitled to make supplies without payment of tax or if he pays tax, he will be entitled to refund of tax so paid.

Q18. Mr. A is a whole-time director of ABC Ltd. Salary is Rs. 5,00,000 per month. Besides he gets sitting fees for Board’s meetings. During Dec’17 and Mar’18, sitting fees is Rs. 1,00,000 for five meetings. Find out GST liability if any.

A. Mr. A being whole time director is an employee of company. The remuneration received by him (including sitting fees for Board’s meeting) is in the course of employment contract. Supply of such services is out of scope of supply in view of provisions laid down in Sec 7(2) of CGST Act read with Schedule III of CGST Act. Thus, GST is not applicable to the transaction.

Q19. Mr. A has written a book which is published by ABC Ltd. of Mumbai. You are required to find the following: (a) who is liable to pay GST? (b) Rework, if publisher is located in Paris, then who is liable to pay GST? A. (a) ABC Ltd. of Mumbai being recipient of service is liable to pay GST under RCM. (b) RCM shall not be applicable in this case as recipient is not located in taxable territory. Thus, Mr. A shall be liable to pay GST. However, such supply will qualify as ‘export of service’ provided payment received in convertible foreign currency. Such supply of service shall be zero-rated (as per provisions of Sec 16 of IGST Act, 2017). In that event, Mr. A shall be entitled to supply such service without payment of IGST.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q20. A tourist from USA visits India and purchases a handicraft wooden item in Mumbai. How it is going to be taxed under GST? A. In terms of proviso to section 8(1), supplies made to a foreign tourist shall not be treated as intra-state supply even when location of the supplier and the place of supply of goods are in the same State or same Union territory.

In terms of sec 7(5)(c) of IGST Act, 2017, where supply of goods or services or both is in the taxable territory, not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

In this case, even though the place of supply and location of supplier are in the same State, it will be treated as inter-State transaction and will be liable to IGST. Q21. What happens if the receiver of goods and/or services is required to pay tax under Reverse Charge but is not a registered dealer?

A. All taxpayers required to pay tax under reverse charge have to register for GST and the threshold of Rs 20 Lakhs is not applicable to them.

Q22. Is Input Tax Credit allowed under Reverse Charge?

A. Tax paid on reverse charge basis will be available for input tax credit if such goods and/or services are used, or will be used, for business. The recipient (i.e., who pays reverse tax) can avail input tax credit.

Q23. AB & Co. is a firm of advocates (partners are A and B), having equal profit sharing ratio. Find out the GST liability a) Legal professional services provided to X, an advocate of Bombay High Court (gross receipts of X is always more than Rs. 50,00,000 per annum): Rs. 8,00,000 b) Legal professional services provided to B & Co. (a firm of 10 advocates) : Rs. 32,00,000. c) Legal professional services provided to C (an Employee) (this service is provided to C in a personal legal matter) : Rs. 6,00,000. d) Legal professional services provided to D Ltd., Delhi based company (turnover of D Ltd. of the preceding financial year is Rs. 6,00,000) : Rs. 11,00,000. e) Legal professional services provided to E Ltd., Delhi based company (turnover of E Ltd. of the preceding financial year is Rs. 50,00,000) : Rs. 5,00,000.

Above figures are exclusive of GST. Please analyze each case and give your answer mentioning forward charge or reverse charge.

A. a) Services provided to X, shall be exempt as provided to individual advocate via entry no. 45. b) Services provided to B & Co., shall be exempt via entry no. 45 c) Services provided to C, shall be exempt since provided to non-business entity d) Services provided to D Ltd., shall be exempt as provided to business entity having turnover not exceeding Rs 20,00,000 e) This will be subject to reverse charge & E Ltd. has to pay reverse charge @ 18% i.e. Rs. 90,000.

Q24. Would GST be payable on goods not intended to be sold, taken out for participation in overseas exhibitions and trade fairs and brought back into India as these goods are meant for exhibition only ?

A. GST is not payable in such cases. Exporters will need exhibition participation letter and no foreign exchange involved letter from the concerned bank for the purpose of exchange control requirements. At the time of reimport, identity of goods imported with export goods needs to be established to seek exemption from import

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Study Notes duty in accordance with Customs provisions. IGST will be exempted at the time of re-import in view of exemptions granted under Customs.

Q25. Whether IGST on import of goods would be levied under IGST Act or under Customs Act? A. As per Section 7(2) of IGST Act, import of goods is Inter-State Supply. Thus, IGST will be levied on import of goods also. However as per Section 5: ✓

IGST on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act

✓

Value shall be ‘Value determined as per Sec 14 of Customs Act, 1962 (please refer Valuation chapter in Custom Book)

Q26. Exploration site is at 150 nautical miles from base line. Some minerals explored (not petroleum etc.) and sent to refinery in Maharashtra, the nearest State. Whether this will attract IGST or CGST and SGST? A. Exploration site is location of supplier. Location of site in 150 NM is beyond territorial waters but still within Indian territory (as for purposes of GST law, definition of India covers area upto exclusive economic zone). Such site shall be treated as located in ‘other territory’ which is also ‘a union territory’ as defined under Sec 2(114) of CGST Act. Exploration Site is supplying goods to refinery in Maharashtra. Thus, place of supply of goods is falling into Maharashtra State.

Since location of supplier is union territory and place of supply is Maharashtra, it is inter-state supply in terms of Sec 7(1) of IGST Act. Thus, aforesaid supply shall attract charge of IGST under section 5 of IGST Act. Q27. Whether CGST & SGST/UTGST is applicable on import of goods or service or both?

A. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both is shall be treated to be a supply in the course of inter-State trade or commerce. Accordingly, tax under the provisions of IGST Act, 2017 (i.e. IGST) shall apply on import of goods or services or both.

•

Import of Goods: IGST leviable U/s 5 of IGST Act. However, it is collected in the manner specified under Customs Tariff Act, 1975. Valuation of such transaction is also as per provisions of Customs Tariff Act.

•

Import of Services: IGST leviable U/s 5 of IGST Act. However, it is collected as per provisions of GST law (i.e. as per time of supply of such transaction). Valuation of such transaction is also as per provisions of GST law.

Q28. Will withdrawal intimation in any one place be applicable to all places of business?

A. Yes. Any intimation or application for withdrawal in respect of any place of business in any State or Union territory, shall be deemed to be an intimation in respect of all other places of business registered on the same Permanent Account Number.

Q29. ABC Associates a recovery agent taken on board by XYZ Bank, Mumbai. The following service supplied

by ABC Associates in the month of January 2018: i.

Fee of Rs 10,00,000 for supply of services in relation to recovery of dues from the defaulting

ii.

Borrowers.

Supply of services with regard to demand for recovery or taking possession of the security from defaulting Borrowers, for which separate fee charged from the bank Rs. 5,00,000.

Answer the following: (a) Is it supply of service? (b) If so, who is liable to pay GST? (c) What is the GST liability if tax rate is 18%?

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Ans. (a) Yes. It is taxable supply of service. (b) XYZ Bank being recipient of service is liable to pay GST under RCM. (c) GST liability = Rs. 2,70,000 [(Rs. 10,00,000 + 5,00,000) x 18%] Q30. Salim Khan a renowned writer and author of novels transferred the copyright of his one published novel to Yashraj Films for a consideration. Examine the tax implications as per GST Act? Ans. As per section 9(3) of CGST Act read with relevant notifications, services supplied by an author by way of transfer or permitting the use or enjoyment of copyright covered under sec. 13(1)(a) of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like reverse charge shall be applicable. Thus in the given case the liability to pay GST shall be upon Yashraj Films as it is the recipient of service.

Q31. A hotel owner is providing following services: i.

Room renting for lodging purposes; ii.

Banquet renting for business seminars;

iii.

Restaurant services; His aggregate turnover from all the above services is 90 lakhs. Hotel owner has now started providing above services through makemyyatra.com (Australia based website). Whether in such case in respect of any of service provided through ECO, ECO shall be liable to pay GST in terms of Sec 9(5) of CGST Act? Ans. As per section 9(5) of CGST Act, ECO is liable to pay GST only in respect of notified services supplied through ECO. One of the notified service is service by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such service through electronic commerce operator is liable for registration U/s 22(1) of the CGST Act. So, in above mentioned cases:i.

ECO shall not be liable to pay GST. Since aggregate turnover of hotel is more than threshold exemption and it is liable to take GST registration U/s 22 (1) of CGST Act. Thus, GST shall be payable by hotel ii.

under forward charge.

Banquet renting service has not been notified, thus ECO shall not be liable to pay GST. Thus, GST

iii.

shall be payable by hotel under forward charge.

Restaurant service has not been notified, thus ECO shall not be liable to pay GST. Thus, GST shall be payable by hotel under forward charge.

Q32. Mr. A is a senior advocate in Calcutta High Court. During October 2018, he provides legal service to ABC associates (a firm of advocates in Mumbai) for a fee of Rs. 5,00,000. Turnover of ABC associates for preceding financial year is Rs. 36 lakh.

Ans. Legal services provided by senior advocate to a business entity is exempt if aggregate turnover in previous year of such business entity is upto Rs. 20 lakhs. In aforementioned case, the recipient advocate firm is a business entity with aggregate turnover exceeding Rs. 20 lakhs. Thus, services to such advocate firm is not exempt. GST shall be payable in given situation.

However, such service are subject to reverse charge where client of advocate firm shall be deemed to be the recipient of such service (he being the actual litigant/applicant/ petitioner) and hence, shall be liable to pay GST on services of senior advocate.

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Study Notes Sec. 11 of CGST/Sec. 6 of IGST Notification No. 12/2017 – CT/ Notification No. 9/2017-IT

Power to Grant Exemption from Tax List of Services Exempt Under CGST & IGST

Section 11 Power to Grant Exemption from Tax (Section 6 of IGST Act)

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https://telegram.me/cafinalidtqueryamitjain List of services exempt from CGST (Notification No. 12/2017 – CT (R) Dated 28-06-2017 / Notification No. 9/2017-IT (R) Dated 28-062017 {Sr. No. is of CGST Notification} Sr. No. 1

Description of Services

Important points

Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) by way of charitable activities.

If such entity provides any other services other than charitable activity then it is subject to GST i.e. renting of commercial property owned by such entity/trust.

The term ‘charitable activities’ mean activities relating to 1) Public health e.g. care or counselling of terminally ill, people afflicted with HIV or AIDS etc., public awareness of preventive health etc. 2) Advance of Religion, spirituality or yoga 3) Advancement of Educational Programmes/Skill, relating to abandoned/orphaned children, prisoners, physically or mentally abused and traumatized persons, persons over the age of 65 years residing in a rural area 4) Preservation of environment including watershed, forests & wildlife.

1. Any services provided by entity registered under Section 12AA of the Income Tax Act, 1961 by way of advancement of religion, spirituality or yoga are exempt.

2. Any fee or consideration charged in any other form from the participants for participating in a religious, Yoga or meditation programme or camp meant for advancement of religion, spirituality or yoga shall be exempt.

3. Any Residential programmes or camps where the fee charged includes cost of lodging and boarding shall also be exempt. However, if charitable or religious trusts merely or primarily provide accommodation or serve food and drinks against consideration in any form including donation, such activities will be taxable.

4. Similarly, activities such as holding of fitness camps or classes such as those in aerobics, dance, music etc. will be taxable. {Circular No. 66/40/2018 Dated 26th October 2018} Hostel accommodation services provided by trusts to students do not fall within the ambit of charitable activities. However, accommodation service in hostels including such services provided by trusts having value of supply below Rs. 1,000 per day is exempt under Entry 14 of the Notification. {Circular No. 32/06/2018-GST Dated 12.02.2018]

2 3

3A

Services by way of transfer of a going concern, as a whole or an independent part thereof.

Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government entity by way of any activity in relation to any function entrusted to a panchayat under article 243G of the Constitution or in relation to any function entrusted to a municipality under article 243W of the Constitution.

Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a panchayat under article 243G of the Constitution or in relation to any function entrusted to a municipality under article 243W of the Constitution.

Important term is Municipality/ Panchayat

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Study Notes 4

5

6

7

8

9

Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution.

Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a panchayat under article 243 G of the Constitution.

Services by the Central Government, State Government, Union territory or local authority excluding the following services— (a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (c) transport of goods or passengers; or (d) any service, other than services covered under entries (a) to (c) above, provided to business entities.

Services provided by State Government by way of general insurance (managed by government) to employees of the State government/Police personnel, employees of Electricity Department or students of colleges/private schools etc. wherein the total premium for insurance policy is paid by employees, students etc. are exempt.

[Circular No. 16/16/2017 GST Dated 15.11.2017] Services provided by the Central Government, State Government, Union territory or local authority to a business entity with an aggregate turnover of up to twenty lakh rupees (ten lakh rupees in case of a special category state) in the preceding financial year.

Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to(a) services,(i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers; and (b) services by way of renting of immovable property.

Services provided by the Central Government, State Government, Union territory or local authority to another Central Government, State Government, Union territory or local authority: Provided that nothing contained in this entry shall apply to services(i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) of transport of goods or passengers.

Services provided by Central Government, State Government, Union territory or a local authority where the consideration for such services does not exceed five thousand rupees: Provided that nothing contained in this entry shall apply to(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, State Government, Union territory; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers:

63

Let take example of post office services which are subject to GST: 1. Rural postal life insurance services 2. Speed post & Express post parcel 3. Collection of telephone and electricity bill 4. Distribution of mutual funds, bonds and passport application etc.

Co-relate with reverse charge specified U/s 9 (3)

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9A

9B 9C

9D

10

10A

11

11A

12

13

Provided further that in case where continuous supply of service, as defined in sub-section (33) of section 2 of the Central Goods and Services Tax Act, 2017, is provided by the Central Government, State Government, Union territory or a local authority, the exemption shall apply only where the consideration charged for such service does not exceed five thousand rupees in a financial year.

Services provided by and to FIFA and its subsidiaries directly or indirectly related to any of the events under FIFA U 17 World Cup 2017 to be hosted in India are exempt.

Director (Sports), Ministry of Youth Affairs and Sports certifies that the services are directly/indirectly related to any of the events under FIFA U-17 world cup 2017.

Supply of services associated with transit cargo to Nepal and Bhutan (landlocked countries) are exempt Supply of service by Government Entity to Central Government, State Government, Union Territory, local authority or any person specified by Central Government, State Government, Union Territory or local authority against consideration received from Central Government, State Government, Union Territory or local authority, in the form of grants is exempt Services by an old age home run by Central Government, State Government or by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) to its residents (aged 60 years or more) against consideration upto twenty five thousand rupees per month per member, provided that the consideration charged is inclusive of charges for boarding, lodging and maintenance.

Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana.

Services supplied by electricity distribution utilities by way of construction, erection, commissioning, or installation of infrastructure for extending electricity distribution network upto the tube well of the farmer or agriculturalist for agricultural use.

Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex.

Service provided by Fair Price Shops to Central Government, State Government or Union territory by way of sale of food grains, kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in the form of commission or margin.

Services by way of renting of residential dwelling for use as residence.

Grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt [Circular No.44/18/2018 CGST Dated 02.05.2018] Services by a person by way of(a) conduct of any religious ceremony; (b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act:

Giving for entertainment, hotel, religious body or any other commercial activity etc. is subject to GST.

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Study Notes 14

15

16

17

18

19 19A

Provided that nothing contained in entry (b) of this exemption shall apply to,(i) renting of rooms where charges are one thousand rupees or more per day; (ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are Rs. 10,000 or more per day; (iii) renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month.

Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below one thousand rupees per day or equivalent.

Transport of passengers, with or without accompanied belongings, by – (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air- conditioned stage carriage.

Elephant/camel joy rides are not classified as transportation services and will attract GST @ 18% with threshold exemption being available to small service providers. (Circular No. 32/06/2018-GST dt. 12-2-2018) Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding: Provided that nothing contained in this entry shall apply on or after the expiry of a period of three years from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.

Service of transportation of passengers, with or without accompanied belongings, by— (a) railways in a class other than— (i) first class; or (ii) an air-conditioned coach; (b) metro, monorail or tramway; (c) inland waterways; (d) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (e) metered cabs or auto rickshaws (including e-rickshaws).

Services by way of transportation of goods(a) by road except the services of— (i) a goods transportation agency; (ii) a courier agency; (b) by inland waterways.

Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in India.

Services by way of transportation of goods by an aircraft from customs station of clearance in India to a place outside India.

19B

Services by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India.

20

Services by way of transportation by rail or a vessel from one place in India to another of the following goods – (a) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; (b) defence or military equipments; (c) newspaper or magazines registered with the Registrar of Newspapers; (d) railway equipments or materials; (e) agricultural produce; (f) milk, salt and food grain including flours, pulses and rice; and

65

AC carriage is taxable

Nothing contained in this serial number shall apply after the 30th day of September, 2018 2019 Nothing contained in this serial number shall apply after the 30th day of September, 2018 2019 All the transportation are not exempt i.e. transport of postal mails and bags, household items, petroleum product, alcoholic beverages etc.

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21A

21B

22

23 23A 24 24A 25

26

(g) organic manure.

Services provided by a goods transport agency, by way of transport in a goods carriage of – (a) agricultural produce; (b) goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees; (c) goods, where consideration charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred and fifty; (d) milk, salt and food grain including flour, pulses and rice; (e) organic manure; (f) newspaper or magazines registered with the Registrar of Newspapers; (g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or (h) defence or military equipments.

Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person, other than the following recipients, namely:(a) any factory registered under or governed by the Factories Act, 1948; or (b) any Society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India; or (c) any Cooperative Society established by or under any law for the time being in force; or (d) anybody corporate established, by or under any law for the time being in force; or (e) any partnership firm whether registered or not under any law including association of persons; (f) any casual taxable person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act. Services provided by a goods transport agency, by way of transport of goods in a goods carriage, to, (a) a Department or Establishment of the Central Government or State Government or Union territory; or (b) local authority; or (c) Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under Section 51 and not for making a taxable supply of goods or services.

Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods. (c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an educational institution providing services by way of pre-school education and education upto higher secondary school or equivalent.

Service by way of access to a road or a bridge on payment of toll charges.

Entry No. 20 & 21 are identical.

In case of Entry No. 21 – GTA, (b) & (c) are extra exempt.

In case of Entry No. 20 – Rail or Vessel, (d) is extra exempt.

Co-relate with reverse charge specified U/s 9(3).

Key word is “unregistered person & unregistered casual taxable person”.

Co-relate with Reverse Charge list

Commission earned on toll receipt is taxable

Service by way of access to a road or a bridge on payment of annuity is exempt.

Services by way of loading, unloading, packing, storage or warehousing of rice.

Services by way of warehousing of minor forest produce.

Transmission or distribution of electricity by an electricity transmission or distribution utility.

The services provided by DISCOMS against recovery of charges from consumers are taxable in GST e.g. application fee for releasing connection of electricity, rental charges against metering equipment, testing fee for meters/transformers, capacitors etc., labour charges from customers for shifting of meters or shifting of service lines, charges for duplicate bill etc.

[Circular No. 34/8/2018-GST Dated 01.03.2018] Services by the Reserve Bank of India.

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Study Notes 27

27A 28

29

29A

30 31

31A

31B 32

33

34

34A

35

Services by way of— (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services); (b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.

The service provided by CG/SG to any business entity by way of guaranteeing the loans taken by them from financial institutions against consideration in any form including Guarantee Commission is taxable.

[Circular No. 34/8/2018-GST Dated 01.03.2018] The services provided by Asian Development Bank (ADB) and International Finance Corporation (IFC) are exempt from GST. The exemption will be available only to the services provided by ADB and IFC and not to any entity appointed by or working on behalf of ADB or IFC. [Circular No. 83/02/2019- GST Dated 01.03.2019] Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) Services of life insurance business provided by way of annuity under the National Pension System regulated by the Pension Fund Regulatory and Development Authority of India under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of2013).

Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government.

Services of life insurance provided or agreed to be provided by the Naval Group Insurance Fund to the personnel of Coast Guard under the Group Insurance Schemes of the Central Government.

Services by the Employees’ State Insurance Corporation to persons governed under the Employees’ State Insurance Act, 1948 (34 of 1948).

Services provided by the Employees Provident Fund Organisation to the persons governed under the Employees Provident Funds and the Miscellaneous Provisions Act, 1952 (19 of 1952).

Services by Coal Mines Provident Fund Organisation to persons governed by the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948).

Services by National Pension System (NPS) Trust to its members against consideration in the form of administrative fee.

Services provided by the Insurance Regulatory and Development Authority of India to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999).

Services provided by the Securities and Exchange Board of India set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market.

Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other payment card service.

Explanation.— For the purposes of this entry, “acquiring bank” means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card.

Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings(PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.

Services of general insurance business provided under following schemes – (a) Hut Insurance Scheme;

67

Since going by “Service” definition sky is limit.

Government has exempted interest in this clause.

Any processing fees or service fees will be subject to GST

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36

36A 37 38 39

39A

(b) Cattle Insurance under Swaranjayanti Gram Swarozgar Yojana (earlier known as Integrated Rural Development Programme); (c) Scheme for Insurance of Tribals; (d) Janata Personal Accident Policy and Gramin Accident Policy; (e) Group Personal Accident Policy for Self-Employed Women; (f) Agricultural Pumpset and Failed Well Insurance; (g) premia collected on export credit insurance; (h) Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme, approved by the Government of India and implemented by the Ministry of Agriculture; (i) Jan Arogya Bima Policy; (j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana); (k) Pilot Scheme on Seed Crop Insurance; (l) Central Sector Scheme on Cattle Insurance; (m) Universal Health Insurance Scheme; (n) Rashtriya Swasthya Bima Yojana; (o) Coconut Palm Insurance Scheme; (p) Pradhan Mantri Suraksha Bima Yojna; (q) Niramaya Health Insurance Scheme implemented by the Trust constituted under the provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).

Services of life insurance business provided under following schemes(a) Janashree Bima Yojana; (b) Aam Aadmi Bima Yojana; (c) Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum amount of cover of two lakhs rupees; (d) Varishtha Pension BimaYojana; (e) Pradhan Mantri Jeevan Jyoti Bima Yojana; (f) Pradhan Mantri Jan Dhan Yogana; (g) Pradhan Mantri Vaya Vandan Yojana.

Services by way of reinsurance of the insurance schemes specified in serial number 35 or 36 or 40.

Services by way of collection of contribution under the Atal Pension Yojana.

Services by way of collection of contribution under any pension scheme of the State Governments.

Services by the following persons in respective capacities – (a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch; (b) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in entry (a); or (c) business facilitator or a business correspondent to an insurance company in a rural area.

As per CBIC Circular No. 86/05/2019- GST, Dated 1st January, 2019, the services provided by a BF/BC to a banking company in their respective individual capacities should fall under the Heading 9971 (Financial and related services) and such services should be with respect to accounts in a branch located in the rural area of the banking company.

The criteria for classification of branch of a bank as located in rural area and the services which can be provided by BF/BC, is governed by the RBI guidelines.

Therefore, classification adopted by the bank in terms of RBI guidelines in this regard should be accepted.

Services by an intermediary of financial services located in a multi services SEZ with International Financial Services Centre (IFSC) status to a customer located outside India for international financial services in currencies other than Indian rupees (INR).

The Key is Social welfare.

“Business facilitator or Business Correspondent” means an intermediary appointed under the business facilitator model or the business correspondent model by a company or an insurance company under the guidelines issued by the RBI. Rural area is normally village which is not notified as urban area and also doesn’t come under any municipality.

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Study Notes

40

41

41A & 41B

42

43 44

Explanation.- For the purposes of this entry, the intermediary of financial services in IFSC is a person,(i) who is permitted or recognised as such by the Government of India or any Regulator appointed for regulation of IFSC; or (ii) who is treated as a person resident outside India under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015; or (iii) who is registered under the Insurance Regulatory and Development Authority of India (International Financial Service Centre) Guidelines, 2015 as IFSC Insurance Office; or (iv) who is permitted as such by Securities and Exchange Board of India (SEBI) under the Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015.

Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government, Union territory.

General Insurance policies provided to employees of the State Government/ Police personnel, employees of Electricity Department or students of colleges/private schools etc. wherein the total premium for insurance policy is paid by the Central Government, State Government, Union territory are exempt [Circular No. 16/16/2017-GST Dated 15.11.2017] Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of service by way of granting of long term lease of 30 years, or more of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area.

Explanation.- For the purpose of this exemption, the Central Government, State Government or Union territory shall have 50% or more ownership in the entity directly or through an entity which is wholly owned by the Central Government, State Government or Union territory.

It is hereby clarified that GST exemption on the upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for long term lease (of thirty years, or more) of industrial plots or plots for development of infrastructure for financial business, is admissible irrespective of whether such upfront amount is payable or paid in one or more installments, provided the amount is determined upfront. {Circular No. 101/20/2019-GST Dated 30-04-2019} Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer have been exempted subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is paid on them.

Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5% of value in case of other than affordable houses. This will achieve a fair degree of taxation parity between under construction and ready to move property Services provided by the Central Government, State Government, Union territory or local authority by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum during the period prior to the 1st April, 2016, on payment of licence fee or spectrum user charges, as the case may be.

Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by the Indian Railways Finance Corporation to Indian Railways.

Services provided by an incubatee up to a total turnover of fifty lakh

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45

rupees in a financial year subject to the following conditions, namely:(a) the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and (b) a period of three years has not elapsed from the date of entering into an agreement as an incubatee.

Services provided by(a) an arbitral tribunal to – (i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year; (iii) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity; (b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to(i) an advocate or partnership firm of advocates providing legal services; (ii) any person other than a business entity; or (iii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year; (iv) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity;

46 47

“Legal Services” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

This need to be co-related with services notified under Reverse Charge under section 9 (3) of CGST Act, 2017. Please refer to Chapter 3 for this.

(c) a senior advocate by way of legal services to(i) any person other than a business entity; or (ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh rupees in the case of special category states) in the preceding financial year. (iii) the Central Government, State Government, Union territory, local authority, Governmental Authority or Government Entity.

Services by a veterinary clinic in relation to health care of animals or birds.

Services provided by the Central Government, State Government, Union territory or local authority by way of(a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force.

Seed testing and certification is a multi-stage process, the charges for which are collected from the seed producers at different stages. Supply of seed tags to the seed producer is nothing but an element of the one integrated supply of seed testing and certification. All the above charges, including those for issue of seed certificates/tags by the Seed Certification Agency of Tamil Nadu and Uttarakhand to the seed producing organization/ companies are collected for the composite supply of seed testing and certification, which is exempt under Notification No. 12/2017-Central Tax (Rate) Sl. No. 47 (services by Central/State Governments by way of testing/certification relating to safety of consumers and public at large, required under any law). This clarification would apply to supply of seed tags by seed testing and certification agencies of other states also following similar seed testing and certification procedure.

However, the State Governments/Seed Certification Agencies may get the tags used in seed certification printed from other departments/ manufacturers outside. Supply of seed tags by the other departments/manufacturers to the State Government/Seed Certification Agencies is a supply of goods liable to tax.

Whether such tags would be classified under Chapter 49 as tags made of paper or in Textile chapters as tags made of textile would depend upon the predominant material used in the tags. { Circular No. 100/19/2019-GST Dated 30-04-2019}

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Study Notes 47A

48

49 50 51

52 53

53A 54

71

Services by way of licensing, registration and analysis or testing of food samples supplied by the Food Safety and Standards Authority of India (FSSAI) to Food Business Operators.

Taxable services, provided or to be provided, by a Technology Business Incubator or a Science and Technology Entrepreneurship Park recognised by the National Science and Technology Entrepreneurship Development Board of the Department of Science and Technology, Government of India or bio- incubators recognised by the Biotechnology Industry Research Assistance Council, under the Department of Biotechnology, Government of India.

Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India.

Services of public libraries by way of lending of books, publications or any other knowledge-enhancing content or material.

Services provided by the Goods and Services Tax Network to the Central Government or State Governments or Union territories for implementation of Goods and Services Tax. Services by an organiser to any person in respect of a business exhibition held outside India.

Services by way of sponsorship of sporting events organised – (a) by a national sports federation, or its affiliated federations, where the participating teams or individuals represent any district, State, zone or Country; (b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat; (c) by the Central Civil Services Cultural and Sports Board; (d) as part of national games, by the Indian Olympic Association; or (e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.

Services by way of fumigation in a warehouse of agricultural produce.

Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of— (a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; (b) supply of farm labour; (c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market; (d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use; (e) loading, unloading, packing, storage or warehousing of agricultural produce; (f) agricultural extension services; (g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce. (h) services by way of fumigation in a warehouse of agricultural produce.

GST rate on loading, unloading, packing, storage or warehousing of agricultural produce is Nil. So, processed products such as tea (i.e. black tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split), jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall outside the definition of agricultural produce and thus exemption from GST is not available to their loading, packing, warehousing etc.

(Circular No. 16/16/2017-GST Dated 15-11-2017)

“Agricultural extension” means application of scientific research and knowledge to agricultural practices through farmer education or training “Agricultural produce marketing committee or Board” means any committee or board constituted under a state law for regulating the marketing of agricultural produce “Agricultural produce” means any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Fertilizers supplied for direct use as fertilizers or supplied for use in the manufacturing of other complex fertilizers for agricultural use will attract GST. (Circular No. 54/28/2018-GST Dated 09-08-2018)

55

55A 56 57

58

59 60 61

62

63

64

65

65A 65B

which does not alter its essential characteristics but makes it marketable for primary market.

Remember warehousing other than agriculture produce is subject to tax i.e. Cadbury chocolate, cotton fabrics etc.

Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce.

Milling of paddy into rice is not eligible for exemption (Circular No. 19/19/2017-GST Dated 20-11-2017) Services by way of artificial insemination of livestock (other than horses).

Services by way of slaughtering of animals.

Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables.

Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination.

Services by a foreign diplomatic mission located in India.

Services by a specified organisation in respect of a religious pilgrimage facilitated by the Government of India, under bilateral arrangement.

Services provided by the Central Government, State Government, Union territory or local authority by way of issuance of passport, visa, driving licence, birth certificate or death certificate.

Services provided by the Central Government, State Government, Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union territory or local authority under such contract.

Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of right to use natural resources to an individual farmer for cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products.

Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Central Government, State Government, Union territory or local authority before the 1st April, 2016: Provided that the exemption shall apply only to tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource.

Services provided by the Central Government, State Government, Union territory by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges.

Services by way of providing information under the Right to Information Act, 2005 (22 of 2005).

Services supplied by a State Government to Excess Royalty Collection Contractor (ERCC) by way of assigning the right to collect royalty on behalf of the State Government on the mineral dispatched by the mining lease holders.

However, at the end of the contract period, ERCC shall submit an account to the State Government and certify that amount of GST deposited by mining

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Study Notes

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lease holders on royalty is more than GST exempted on the service provided by State Government to the ERCC of assignment of right to collect royalty and where such amount of GST paid by mining lease holders is less than the amount of GST exempted, the exemption shall be restricted to such amount as is equal to the amount of GST paid by the mining lease holders and the ERCC shall pay the difference between GST exempted on the service provided by State Government to the ERCC of assignment of right to collect royalty and GST paid by the mining lease holders on royalty.

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Explanation- Mining lease holder means a person who has been granted mining lease, quarry lease or license or other mineral concession under the Mines and Minerals (Development and Regulation) Act, 1957, the rules made thereunder or the rules made by a State Government under section 15(1) of the Act. Services provided – (a) by an educational institution to its students, faculty and staff; (aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee; (b) to an educational institution, by way of,(i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; (iii) security or cleaning or house- keeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; (v) supply of online educational journals or periodicals (this service is exempt from IGST on import also): Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

Provided further that nothing contained in sub-item (v) of item (b) shall apply to an institution providing services by way of,- (i) pre-school education and education up to higher secondary school or equivalent; or (ii) education as a part of an approved vocational education course.

“Educational Institution” means an institution providing services by way of,(i) Pre-school education and education up to higher secondary school or equivalent; (ii) Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force; (iii) Education as a part of an approved vocational education course (a course run by an industrial training institute or an industrial training centre affiliated to the National/State Council for Vocational Training; or a modular employable skill course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment & Training, Ministry of Skill Development and Entrepreneurship).

The Central and State Educational Boards shall be treated as Educational Institution for the limited purpose of providing services by way of conduct of examination to the students.

Vocational training provided by private ITIs in designated trades (notified under Apprenticeship Act, 1961) are exempt from GST whereas vocational training provided by private ITIs in respect of other than designated trade would be liable to pay GST. Services provided by a private ITI by way of conduct of entrance examination against consideration in the form of entrance fee in case of designated trades will be exempt from GST whereas in case of other than designated trades in private ITIs, GST shall be payable.

College Hostel Mess Services If Catering services are provided by an eligible educational institution to its students, faculty and staff then the same is exempt.

If the catering services, i.e., supply of food or drink in a mess or canteen, is provided by anyone other than the educational institution, i.e. the institution outsources the activity to an outside contractor, then it is a supply of service to the concerned educational institution and attracts GST**. **Note: It may be noted that said services when provided to an educational institution providing pre-school education or education up to higher secondary school or equivalent are exempt from tax.

Educational Institute includes conduct of degree courses by colleges, universities or institutions which lead grant of qualifications recognized by law would be covered.

Boarding Schools (entire lodging, boarding, food etc.) are exempt considering composite supply U/s 8.

Since principal supply is education & renting for residence (which are not taxable), hence entire package would be exempt.

GST is payable on:➢ Private tuition ➢ Obtaining a qualification recognized by law of a foreign country

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https://telegram.me/cafinalidtqueryamitjain Vocational training and examinations conducted by Government ITIs is exempt as these are in the nature of services provided by the Central Government or State Government to individuals {Entry 6}. Such exemption in relation to services provided by Government ITI would cover both - vocational training and examinations conducted by these Government ITls. (Circular No. 55/29/2018-GST Dated 10-8-2018)

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Fees form prospective employers for campus interview Renting of flats for temporary stay to different persons

As per CBIC Circular No. 82/01/2019-GST Dated 1 January 2019, With effect from 31 January 2018 i.e., the date from which the IIM Act, 2018 came into effect, all the Indian Institutes of Management (IIMs) will qualify as ‘educational institutions’ as defined under Notification No. 12/2017-Central Tax (Rate).

With effect from 31 January 2018, all IIMs are eligible for exemption benefit under GST. Thus, the courses which are offered on or after 31 January 2018 are eligible for exemption under Sl. No. 66 of the said notification.

However, so far as short duration courses are concerned, where IIMs issue participation certificate to executives/ professionals (participants), the same are not exempt and attract GST @ 18%.

All long duration programs (one year or more) conferring degree/ diploma as recommended by Board of Governors as per the power vested in them under the IIM Act, 2017 including one- year Post Graduate Programs for Executives – Exempt All short duration executive development programs or need based specially designed programs (less than one year) which are not a qualification recognized by law - Not exempt from GST 67 Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme: – (a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management; (b) fellow programme in Management; (c) five year integrated programme in Management.

68 Services provided to a recognised sport body byReceipts from IPL are (a) an individual as a player, referee, umpire, coach or team manager for subject to GST. participation in a sporting event organised by a recognized sports body; Receipts from acting as (b) another recognised sports body. brand ambassador for corporate client, is subject to GST. 69 Any services provided by, _ (a) the National Skill Development Corporation set up by the Government of India; (b) a Sector Skill Council approved by the National Skill Development Corporation; (c) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation; (d) a training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to(i) the National Skill Development Programme implemented by the National Skill Development Corporation; or (ii) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (iii) any other Scheme implemented by the National Skill Development Corporation.

70 Services of assessing bodies empanelled centrally by the Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under the Skill Development Initiative Scheme.

71 Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana implemented by the Ministry of Rural Development, Government of India by way of offering skill or vocational training courses certified by the National Council for Vocational Training.

72 Services provided to the Central Government, State Government, Union territory administration under any training programme for which total

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Study Notes 73 74

expenditure is borne by the Central Government, State Government, Union territory administration.

Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation.

Services by way of(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics; (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.

Room rent in hospitals provided to in-patients is exempt.

(Circular No. 27/01/2018-GST dt 4-1-2018) Healthcare services provided by senior doctors/consultants/technicians hired by the hospitals, whether employees or not are exempt. The entire amount charged by hospitals from patients including the retention money and the fees/payments made to the doctors are exempt. Food supplied to the patients is a part of composite supply and not separately taxable whereas other supplies of food by a hospital to patients (not admitted) or their visitors are taxable. ITC not available to Hospital since it is exempt.

(Circular No. 32/06/2018-GST dt 12-2-2018)

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Services provided by PSPs to the State Governments by way of transportation of patients on behalf of the State Governments against consideration in the form of fee or otherwise charged from the State Government would be exempt under Notification No. 12/2017- Central Tax (Rate) Dated 28.06.2017 SI No.3 if it is a pure service and not a composite supply involving supply of any goods SI No. 3A if it is a composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent of the value of the said composite supply.

(Circular No. 51/25/2018-GST dt 31-7-2018) Services provided by rehabilitation professionals recognised under the Rehabilitation Council of India Act, 1992 (34 of 1992) by way of rehabilitation, therapy or counselling and such other activity as covered by the said Act at medical establishments, educational institutions, rehabilitation centers established by Central Government, State Government or Union territory or an entity registered under section 12AA of the Income tax Act, 1961.

Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto.

Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets.

Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution – (a) as a trade union; (b) for the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or (c) up to an amount of seven thousand five hundred rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex.

Services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in,(i) activities relating to the welfare of industrial or agricultural labour or farmers; or (ii) promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports, education, social welfare, charitable activities and protection of environment,

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Healthcare services doesn’t include hair transplant or cosmetic or plastic surgery except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects,, developmental abnormalities, injury or trauma. Healthcare services can be provided at patient’s home.

Naturopathy, ayurvedic treatment is allowable.

Pranic healing services is not recognized service so subject to GST.

Please refer to Q & A for this.

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to its own members against consideration in the form of membership fee upto an amount of one thousand rupees (Rs 1,000/-) per member per year.

Services by an artist by way of a performance in folk or classical art forms of(a) music, or (b) dance, or (c) theatre, if the consideration charged for such performance is not more than one lakh and fifty thousand rupees: Provided that the exemption shall not apply to service provided by such artist as a brand ambassador.

Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo.

Services by way of admission to a protected monument so declared under the Ancient Monuments and Archaeological Sites and Remains Act 1958 (24 of 1958) or any of the State Acts, for the time being in force.

Services by way of training or coaching in recreational activities relating to(a) arts or culture, or (b) sports by charitable entities registered under section 12AA of the Income-tax Act. Services by way of right to admission to(a) circus, dance, or theatrical performance including drama or ballet; (b) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event; (c) recognised sporting event; (d) planetarium, where the consideration for right to admission to the events or places as referred to in items (a), (b), (c) or (d) above is not more than Rs. 500 per person.

Services by way of right to admission to the events organized under FIFA U-17 World Cup 2017 are exempt.

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Study Notes 1

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Exemption under IGST Services received from a provider of service located in a non-taxable territory by (a) the Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in relation to any purpose other than commerce, industry or any other business or profession (b) an entity registered under section 12 AA of the Income-Tax Act, 1961 for the purpose of providing charitable activities (ba) way of supply of online educational journals or periodicals to an educational institution other than an institution providing services by way of(i) pre-school education and education up to higher secondary school or equivalent; or (ii) education as a part of an approved vocational education course; (c) a person located in a non-taxable territory are exempt.

However the exemption shall not apply to:(i) online information and database access or retrieval services received by persons specified in entry (a) or entry (b); or (ii) Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry.

Services received by RBI from outside India in relation to management of Foreign Exchange Reserves.

Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India are exempt.

Supply of Services having place of supply in Nepal or Bhutan, against payment in Indian rupees.

Services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with Explanation 1 in section 8 of the Integrated Goods and Services Tax Act, 2017.

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Co-relate with provisions of reverse charge U/s 5 (3) of IGST Act, 2017.

Provided the place of supply of the service is outside India in accordance with section 13 of Integrated Goods and Services Tax Act, 2017.

Import of services by United Nations or a specified international organisation for official use of the United Nations or the specified international organisation.

Explanation. - For the purposes of this entry, unless the context otherwise requires, “specified international organisation” means an international organisation declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities Act) 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply.

Import of services by Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein shall be exempt from IGST, subject to the conditions, (i) that the foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein, are entitled to exemption from integrated tax, as stipulated in the certificate issued by the Protocol Division of the Ministry of External Affairs, based on the principle of reciprocity; (ii) that the services imported are for official purpose of the said foreign diplomatic mission or consular post; or for personal use of the said diplomatic agent or career consular officer or members of his or her family. (iii) that in case the Protocol Division of the Ministry of External Affairs, after having issued a certificate to any foreign diplomatic mission or consular post in India, decides to withdraw the same subsequently, it shall communicate the withdrawal of such certificate to the foreign diplomatic mission or consular post; (iv) that the exemption from the whole of the integrated tax granted to the foreign diplomatic mission or consular post in India for official purpose or for the personal use or use of their family members shall not be available from the date of withdrawal of such certificate.

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Other Exemptions Intra-State supplies of goods or services or both received by a deductor under section 51, from any unregistered supplier, is exempt from the whole of the central tax leviable thereon under Section 9 (4), subject to the condition that the deductor is not liable to be registered otherwise than under section 24 (vi) All services imported by a unit/developer in the SEZ for authorized operations are exempt from the whole of the integrated tax leviable thereon U/S 3 (7) of the Customs Tariff Act, 1975 read with section 5 of the IGST Act, 2017 Central Government’s share of profit petroleum exempted from CGST Intra-State supply of services by way of grant of license or lease to explore or mine petroleum crude or natural gas or both, has been exempted from so much of CGST as is leviable on the consideration paid to the Central Government in the form of Central Government’s share of profit petroleum as defined in the contract entered into by the Central Government in this behalf.

[Notification No. 5/2018 CT (R) Dated 25.01.2018] Parallel exemption from IGST has been extended to inter-State supply of such services vide Notification No. 5/2018 IT (R) Dated 25.01.2018.

IGST exempted to the extent it is paid on the consideration attributable to royalty and license fee included in transaction value under rule 10(1)(c) of Customs Valuation (Determination of value of imported Goods) Rules, 2007 IGST leviable on import of services in relation to temporary transfer or permitting the use or enjoyment of any intellectual property right has been exempted to the extent of the aggregate of the duties of customs leviable under section 3(7) of the Customs Tariff Act, 1975, on the consideration declared under section 14(1) of the Customs Act, 1962 towards royalties and license fees included in the transaction value as specified under rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on which the appropriate duties of customs have been paid [Notification No. 6/2018 IT (R) Dated 25.01.2018].

Question & Answer Q1. With reference to the CGST Act, 2017, discuss the following activities relating to a bank? a. Bank Extended housing loan of Rs. 50 Lacs to Mr. Namit. b. Bank received processing fees of Rs. 50,000 from Mr. Namit. c. Bank received Rs. 2 Lacs interest from Mr. Namit.

A. In accordance with the provisions of CGST Act, 2017 the taxability of activities is: a. The same is transaction in money, therefore not regarded as service as per Sec 2(102) of CGST Act, 2017. b. The loan processing fees received by bank will be liable for GST. c. Rs. 2 Lacs received as interest on loan won’t be liable for GST as the same is exempt vide Sr. No. 27 of Notification No. 12/2017- CT (Rate).

Q2. State with reasons whether the following are liable to GST? a. Services by way of training or coaching in recreational activities relating to arts, culture or sports. b. Services provided by a player to a franchisee which is not a recognized sports body. c. Pre-school education and education up to higher secondary school or equivalent. d. Services by a veterinary clinic in relation to health care of animals or birds. e. Services by way of public conveniences such as provision of facilities of washrooms.

A. The liability as well as reason: a. Services by way of training or coaching in recreational activities relating to arts, culture or sports are exempt as it is specifically exempt vide Sr. No. 80 of Notification No. 12/2017-CT (Rate)..

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Study Notes b. Service of a player to a franchisee which is not a recognized sports body is taxable as it doesn’t get covered under Sr. No. 68 of Notification No. 12/2017-CT (Rate). c. Pre-School education and education up to higher secondary school or equivalent is not liable to GST as it is specifically exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate). d. Services by a veterinary clinic in relation to health care of animals or birds is not liable to GST as it is specifically exempt vide Sr. No. 46 of Notification No. 12/2017- CT (Rate). e. Services by way of public conveniences such as provision of facilities of washrooms are not liable to GST as it is specifically exempt vide Sr. No. 76 of Notification No. 12/2017-CT (Rate).

Q3. Please comment whether below instances are subject to tax or no? a. Services of transportation of passenger by vessels in National waterways. b. Services of transportation of passenger by AC Stage carrier. c. Services of transportation of non AC Stage carrier. d. Services of transportation of passengers by contract carriage for tourism. e. Services of transportation of passenger Kolkata to Chennai in a vessel and such service is not for tourism purpose. f. Services of transportation of passengers in Non-AC contract carriages. g. Services of transportation of passengers in AC contract Carriages.

A. Our comments: a. This is exempt under Sr. No. 17 of Notification No. 12/2017-CT (Rate). b. This is liable to GST. c. This is exempt under Sr. No. 15 of Notification No. 12/2017-CT (Rate). d. This is liable to GST. e. This is exempt under Sr. No. 17 of Notification No. 12/2017-CT (Rate). f. This is exempt under Sr. No. 15 of Notification No. 12/2017-CT (Rate). g. This is liable to GST. Q4. Please comment whether below instances are subject to tax or no? a. Transportation of postal mails and postal bags via rail. b. Transportation of household effects via rail. c. Transportation of petroleum products via rail. d. Transportation of relief material to flood affected areas, transport of defense & military equipment & transport of organic manure via rail. e. Transportation of newspapers and milk via rail. f. Transportation of tea & sugar via rail. g. Transportation of fruits via Goods Transport Agency. i. Freight charges collected for transporting small consignment for persons who paid less than Rs. 750 for each consignment. j. Freight charges collected for transporting goods in small vehicle for persons who paid less than Rs. 1500 for each trip.

A. Our comments: a. This is liable to GST. b. This is liable to GST. c. This is liable to GST. d. This is exempt under Sr. No. 20 of Notification No. 12/2017-CT (Rate). e. This is exempt under Sr. No. 20 of Notification No. 12/2017-CT (Rate). f. This is liable to GST. g. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate). i. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate).

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain j. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate).

Q5. Please comment whether below instances are subject to tax or no? a. Renting of immovable property to higher secondary school. b. Transportation services provided to students of higher secondary school. c. Outdoor catering services provided to educational institutions running approved vocational courses. d. Security services provided to Pre-Nursery School. e. Housekeeping and cleaning services in college providing recognized graduation degree. f. Conducting of examination of ICAI. g. Development of course content of ICAI. h. Training of Staff of Higher Secondary School.

A. Our comments: a. This is liable to GST. b. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate). c. This is liable to GST. d. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate). e. This is liable to GST. f. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate). g. This is liable to GST. h. This is liable to GST. Q6. Please comment whether below instances are subject to tax or no? a. Monthly subscription Rs. 7,501 collected by Resident Welfare Association from member families. b. Electricity charges levied by State Electricity Board collected by Resident Welfare Association and deposited with Electricity Board. c. Common area electricity charges collected by Resident Welfare Association.. d. Rs. 100 collected for entertainment program organized by Resident Welfare Association e. Other Services to non-members.

A. Our comments: a. If per month per member contribution of any or some members of Resident Welfare Associations is higher than Rs. 7,500, then such excess amount is subject to GST (>7,500, paying members). b. This is pure agency services so not subject to GST. c. This isn’t pure agency contract since common are charges would be in the name of Resident Welfare Association so it is subject to tax. d. This is exempt under Sr. No. 81 of Notification No. 12/2017-CT (Rate) -Lesser then Rs. 500. e. This is liable to GST. Q7. With reference to the provisions of CGST Act, 2017 examine whether GST is leviable in the following situations? a. Government of Rajasthan has provided services to ABC Ltd. of Rajasthan in the month of Nov’17 for a consideration of Rs. 1,00,000. The Turnover of ABC Ltd. in FY 16-17 is 11 Lacs. b. Government of Rajasthan has provided services to ABC Ltd. in the month of Oct’17 for a consideration of Rs. 5,000. The turnover of ABC Ltd in FY 16-17 was Rs. 25 Lacs. c. Jaipur Municipal corporation has awarded a contract for construction of road to ABC Ltd. failed to perform the contract and paid liquidated damages amounting Rs. 50 Lacs in accordance with the terms of contract. d. ABC Ltd. has applied for registration under Companies Act, 2013 to ROC, Rajasthan and has

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Study Notes paid registration charge of Rs. 10 Lacs. e. Delhi Government has charged Rs. 40 Lacs from ABC Ltd. for allocation of natural resources for agricultural purposes in the month of Nov’17. f. ABC Ltd. has paid to customs department Rs. 1 Lac on account Merchant Overtime Charges for deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo. g. ABC Ltd. has made an upfront payment of Rs. 1 crore to Rajasthan Government on account of assignment of right to use minerals in the State of Bihar.

A. Our comments: a. Services provided by the Central Government, State Government, Union Territory or local authority to a business entity with an aggregate turnover of upto Rs. 20 Lacs in the preceding financial year are exempt vide Sr. No. 7 Notification No. 12/2017-CT (Rate). b. Services provided by Central Government, State Government, Union Territory or a local authority where the consideration for such services doesn’t exceed Rs. 5,000 are exempt vide Sr. No. 9 of Notification No. 12/2017 CT (Rate). c. Services provided by the Central Government, State Government, Union Territory or local authority of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union Territory or local authority under such contract are exempt vide Sr. No. 62 of Notification No. 12/2017-CT (Rate). d. It is exempt vide Sr. No. 47 of Notification No. 12/2017. e. Services by way of allocation of natural resources to an individual farmer for the purposes of agriculture have been exempted vide Sr. No. 63 of Notification No. 12/2017-CT (Rate). Such allocations/auctions to categories of persons other than individual farmers would be leviable to GST. Hence, ABC Ltd. will be liable to pay GST. f. Services provided by the Central Government, State Government, Union Territory by way of deputing officers after office hours or on holiday for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges are exempt from GST vide Sr. No. 65 of Notification No.. 12/2017 CT (Rate). g. ABC Ltd. will be liable to pay GST on assignment of rights to use minerals in the State of Bihar.

Q8. State the difference between General & Special Exemption.

A.

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General Exemption It is given by Government in public interest by notification in official gazette It is applicable to all members of a particular section It is generally in public interest

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Covered U/s 11 (1)

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Special Exemption It is given by Government in public interest by special order It is applicable in each case i.e. applicable to that person to whom the order is given It is given in exceptional nature i.e. charitable purpose, goods of strategic nature etc. It is also generally in public interest.

Covered U/s 11 (2)

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q9. Jain hostel trust registered U/s 12 AA of Income Tax Act 1961, provides hostel accommodation facility to students and charges Rs. 900 per day. Determine whether such service of accommodation is covered under the ambit of charitable activity and also its taxability in GST Act? A. This is exempt. As per Circular No. 32/06/2018-GST, the aforesaid service doesn’t fall within the ambit of charitable activities (Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017). However, accommodation service in hostels including such services provided by trusts having “Value of Supply” below Rs. 1,000 per day is exempt under Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-2017.

Q10. Siddhivinayak Charitable trust is a registered religious trust U/s 12 AA of Income Tax Act 1961. Discuss the treatment of following transaction under GST law:i.

Deluxe room rent Rs. 900 per day & Super Deluxe room rent Rs. 1,000;

ii.

Renting of small community hall for Rs. 9,000 per day & Renting of large community hall for Rs. 12,000

iii.

Trust has rented shop for Rs. 15,000 p.m. to sell goods required for performing various religious ceremonies.

iv.

Meditation Hall provided on rent for Rs. 100 per day.

v. vi.

Amount received for yoga camps organized for elderly people - Rs. 1,00,000.

Amount received for activities relating to preservation of forests and wildlife – Rs. 50,000

vii.

Payment made for services received from a service provider located in USA, for the purposes of

viii.

providing ‘charitable activities’ – Rs. 5,00,000 Amount received for advancement of educational programmes relating to abandoned, orphaned or homeless children – Rs. 1,00,000

ix. x.

Renting of residential dwelling for use as a residence – Rent Rs. 25,000 p.m.

Renting of residential dwelling for commercial activity – Rent Rs. 50,000 p.m.

xi.

Grant of tenancy rights in a residential dwelling for use as residential dwelling against tenancy premium of Rs. 10,00,000. What will be your answer if it is commercial dwelling?

A. i.

Deluxe room rent is exempt. Exemption is available for renting of rooms wherein the rent charged is less than Rs. 1,000 per day (Sr. No. 13 of Notification No. 12-2017-CT (R) Dated 28-06-2017).

Since Super Deluxe room rent is Rs. 1,000 per day, it is not exempt.

ii.

Renting of small community hall for Rs. 9,000 per day is exempt. Exemption is available for renting of community halls wherein the rent charged is less than Rs. 10,000 per day (Sr. No. 13 of Notification No. 12-2017-CT (R) Dated 28-06-2017).

iii.

Since Renting of large community hall is more than Rs. 10,000 per day, it is not exempt.

It is not exempt. Exemption is available to renting of shops wherein the rent charged is less than Rs. 10,000 p.m. (Sr. No. 13 of Notification No. 12-2017-CT (R) Dated 28-06-2017).

iv. v.

It is exempt. Meditation hall falls under the purview of precincts of the religious place.

It is exempt vide Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017

vi. vii.

It is exempt Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017 This is exempt. Service recipient is liable to pay GST in case of a taxable service provided by any person located in a non-taxable territory and received by any person located in the taxable territory.

However, services received from a provider of service located in a non-taxable territory by an entity registered U/s 12 AA of the Income-Tax Act, 1961 for the purposes of providing charitable activities are exempt from vide Sr. No. 10 of Notification No. 9/2017-IT (R) Dated 28-06-2017.

viii.

It is exempt Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017

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Study Notes

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ix.

It is exempt. Exemption is available for renting of residential dwelling for use as a residence vide Sr.

x.

No. 12 of Notification No. 12-2017-CT (R) Dated 28-06-2017).

It is not exempt since it is used for commercial activity. Only residential use is exempt.

xi.

It is exempt vide Circular No. 44/18/2018 CGST Dated 02.05.2018. If it is commercial dwelling then it is not exempt.

Q11. Orchid Hotel provides the following information relating to their services for the month of January 2019: The hotel has 50 rooms, out of which 30 rooms are Super Deluxe rooms with a declared tariff of Rs. 2,000 per day, 10 rooms are Deluxe rooms with a declared tariff of Rs. 1,200 per day, rest is Semi Deluxe with a declared tariff of Rs. 800 per day.

The hotel has practice of giving 25% discount on Super Deluxe & Deluxe room.

In January 2019 occupancy was 80%.

Please calculate value of taxable supply.

A. Particulars Renting of Super Deluxe rooms {30 rooms * 31 days * Rs. 1,500 (after considering discount of 25% on Rs. 2,000)*80%} Renting of Deluxe rooms. After discount room rent per day is Rs. 900.

This is exempt vide Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-2017.

Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having value of supply of a unit of accommodation below one thousand rupees per day or equivalent Renting of Semi Deluxe rooms. The per day Room rent is Rs. 800 per day so it is exempt vide Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-2017 Value of Taxable Supply for the month of January 2019

Amount (in INR) 11,16,000 NIL

NIL 11,16,000

Q12. Discuss the treatment of following transaction under GST law:i.

Mr. A, a sole proprietor has transferred all assets and liabilities of his business carried on under the

ii.

name and style of ABC Interiors as a going concern to XYZ Limited.

Mr. A, has provided labour services for construction of a community park to a Panchayat.

iii.

The State Government has built a burial ground in a village from the funds received by Government

iv.

from public.

ABC Enterprise had turnover of Rs. 15 lakhs during FY 2017-2018. ABC enterprise has taken testing

v.

service from Central Government department.

ABC transit provides services of loading, unloading and transporting cargo which is imported by M/s XYZ Enterprises of Kathmandu to be shipped to Nepal.

vi.

ABC Ltd. provides training for improvement of procedures in government companies and government bodies for which it receives grants for its functioning.

vii.

ABC Enterprises provided labour services for construction of housing flats, under the Housing for All

viii.

(Urban) Mission or Pradhan Mantri Awas Yojana.

Mr. A gets his house constructed on a vacant land & Mr. Y gets modifications in a house.

ix.

Amit runs a fair price shop and earns Rs. 1,00,000 as consideration received from government for

x.

sale of food grains during the month of January 2019.

Mr. A, a priest, charged Rs. 11,000 for services provided to Mr. B for conducting his marriage ceremony at Temple.

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ABC Pvt. Ltd. providing services of air transportation has received Rs. 1 crore as viability funding

xii.

under regional connectivity scheme from Central government for operation of air travel services.

Amit has transported wheat to APMC by road to another city.

xiii.

George has a business in Germany and sent goods by aircraft to India. Goods are being cleared at

xiv.

customs stations in India. What is your view on transportation of goods by aircraft.

Vandana an owner of a motor vehicle gives his vehicle to a goods transport agency for hiring and

xv.

transportation of goods.

NHAI pays annuity to ABC Ltd, a concessionaire who constructed the road.

xvi.

IRDA Charged Rs. 1,00,000/- from ICICI General Insurance (Insurer) in lieu of grant of registration

xvii.

certificate.

SEBI Charged Rs. 5,00,000/- as a regulatory fee from ABC Co. (Stock Exchange).

xviii.

Rohit an organizer has provided services related to business exhibition in Australia.

xix. xx.

Krishna a farmer provides services relating to cultivation of seeds.

Vijay deals in services by way of pre-conditioning and pre-cooling of fruits and vegetables for refrigerated transport.

xxi.

Government of India recovers Rs. 25 Crores as damages for not completing construction of a flyover within the time specified in the contract from the Jaguar Limited.

xxii.

Central Government has provided services in relation to import export cargo on payment of Merchant Overtime charges.

xxiii.

PVR cinemas charges Rs. 200. per person as admission charges for exhibition of cinematographic films. What will be your answer if ABC circus charges Rs. 200 per person as admission charges for circus show.

xxiv.

Columbia Hospital charged Mr. A who availed in-patients service Rs. 1,00,000 towards treatment including room rent and in patient food. They paid Rs. 40,000 to Doctor towards his professional fees.

Whether both are subject to GST?

xxv.

Columbia Hospital has outsourced catering to Sodexo. Sodexo provides catering service to patient who admitted in Columbia Hospital according to Dietician suggestion and also serve food to visitor and patient’s relative. Sodexo bill Columbia Hospital for in-patient food services & collect directly from others.

A. i.

This sale is exempt vide S. No. 2 of Exemption Notification No. 12/2017-Central Tax (Rate).

ii. iii.

This service is exempt vide S. No. 3 of Exemption Notification No. 12/2017-Central Tax (Rate).

This service is exempt vide S. No. 4 of Exemption Notification No. 12/2017-Central Tax (Rate).

iv.

The supply of services by government are exempt vide S. No. 7 of Exemption Notification No. 12/2017-Central Tax (Rate) and no GST is payable on such services by ABC Enterprise on reverse charge.

v.

This is exempt vide S. No. 9B of Exemption Notification No. 12/2017-Central Tax (Rate).

vi. vii.

This is exempt vide S. No. 9C of Exemption Notification No. 12/2017-Central Tax (Rate).

It is exempt vide S. No. 10 of Exemption Notification No. 12/2017-Central Tax (Rate).

viii.

This is exempt. Mr. A gets his house constructed on a vacant land, such construction would qualify as Original work vide S. No. 11 of Exemption Notification No. 12/2017-Central Tax (Rate).

However, Mr. Y modifications would not qualify as Original works. So it is taxable.

ix.

Such consideration is exempt from GST vide S. No. 11A of Exemption Notification No. 12/2017Central Tax (Rate) as amended by Notification No. 21/2017-Central Tax (Rate) and 47/2017-Central Tax (Rate).

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Study Notes x.

Service by any person by way of conduct of any religious ceremony would be exempt from GST vide

xi.

S. No. 13 of Exemption Notification No. 12/2017-Central Tax (Rate).

This is exempt vide S. No. 16 of Exemption Notification No. 12/2017-Central Tax (Rate).

xii.

It is exempt from tax vide S. No. 18 of Exemption Notification No. 12/2017-Central Tax (Rate).

xiii.

Such transportation services shall be exempt vide S. No. 19 of Exemption Notification No. 12/2017Central Tax (Rate).

xiv.

Such services shall be considered as exempt services vide S. No. 22 of Exemption Notification No. 12/2017-Central Tax (Rate).

xv.

This would be exempt from GST vide S. No. 23A of Exemption Notification No. 12/2017-Central Tax

xvi.

(Rate), amended by Notification No. 32/2017-Central Tax (Rate) Dated 13.10.2017.

This would be exempt from GST vide S. No. 32 of Exemption Notification No. 12/2017-Central Tax (Rate).

xvii.

This would be exempt from GST vide S. No. 33 of Exemption Notification No. 12/2017-Central Tax (Rate).

xviii.

Such services shall be exempt vide S. No. 52 of Exemption Notification No. 12/2017-Central Tax

xix.

(Rate).

This is exempt vide S. No. 54 of Exemption Notification No. 12/2017-Central Tax (Rate).

xx.

This would be exempt from tax vide S. No. 57 of Exemption Notification No. 12/2017-Central Tax (Rate).

xxi.

In this case as the tolerating of a non-performance of an act is specifically covered under the S. No. 62 of Exemption Notification No. 12/2017-Central Tax (Rate), no GST would be leviable on such damage recovered from the erring party.

xxii.

These services would be exempt from GST vide S. No. 65 of Exemption Notification No. 12/2017-

xxiii.

Central Tax (Rate).

GST would be leviable on the same even though admission charges are less than Rs. 500 since exhibition of cinematographic films is not covered in the exemptions under GST Act. In case of Circus, it is exempt vide S. No. 81 of Exemption Notification No. 12/2017-Central Tax (Rate).

xxiv.

Columbia charges to Mr. A is exempt vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate). Even services provided by Doctor to Hospital is also exempt. It is immaterial whether Doctor work as employees of hospital or not. It is clarified by Circular No. 32/06/2018-GST.

xxv.

Sodexo catering services to in-patients is taxable since Sodexo is billing Columbia Hospital. Columbia Hospital billing to in-patients is although exempt.

Sodexo catering services to visitor & patient’s relative is also subject to GST.

Q13. Mr. A, the owner of a residential building in a commercial locality, furnishes the following information relating to his residential building for the month of January 2019:Floor No. Ground Floor

Usage 5 Shops & 1 godown for goods storage for monthly rent of INR 5,00,000 1st Floor Residential dwelling for monthly rent of INR 50,000 2nd Floor Self-Occupied by Mr. A for residential purpose Vacant land in the backyard Given to nearby restaurant for parking for monthly rent of INR 1,00,000 Terrace Given to XYZ mobile company for maintaining tower for monthly rent of INR 1,00,000 Compute the value of taxable supply.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. Particulars Rent received for 5 Shops & 1 godown for goods storage Residential dwelling for monthly rent of INR 50,000 is exempt vide Sr. No. 12 of Notification No. 12-2017-CT (R) Dated 28-06-2017) Self-Occupied property. Firstly no consideration and it is also used for residence Given to nearby restaurant for parking Given to XYZ mobile company for maintaining tower Value of Taxable Supply for the month January 2019

Amount (in INR) 5,00,000 NIL

NIL 1,00,000 1,00,000 7,00,000

Q14. Columbia Hospital has received the following amounts in the month of January 2019 in lieu of various services rendered by it in the same month. You are required to determine its taxable value for January 2019 from the details furnished below:Particulars Services provided by cord blood bank unit of the nursing home by way of preservation of stem cells Hair transplant services Naturopathy treatments Plastic surgery to restore anatomy of a child affected due to an accident Pranic healing treatments Mortuary Services Compute the value of taxable supply.

A. Particulars Services provided by cord blood bank unit of the nursing home by way of preservation of stem cells is exempt vide S. No. 73 of Exemption Notification No. 12/2017-Central Tax (Rate) Hair transplant services. It is excluded from exemption vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate) Naturopathy treatment is exempt vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate) Plastic surgery to restore anatomy of a child affected due to an accident is exempt vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate) Pranic healing treatments. It is excluded from exemption vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate) Mortuary Services is neither supply of goods nor supply of services under Schedule III Value of Taxable Supply for the month January 2019

Amount (in INR) 30,00,000 15,00,000 20,00,000 30,00,000 15,00,000 10,00,000

Amount (in INR) NIL

15,00,000 NIL NIL 15,00,000 NIL 30,00,000

Q15. ‘ABC Farmers Association’ is engaged in providing services relating to agriculture. You are required to determine its taxable value for January 2019 from the details furnished below:Particulars

Amount (in INR)

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Study Notes Cultivation of ornamental flowers Packing of tomato & chili ketchup Warehousing of potato chips Sale of tea on commission basis Packaging of pulses in 1 KG retail packing Training of farmers on use of scientific tools and agro machinery Leasing of vacant land to a stud farm (rearing of horses) Grading of wheat according to its quality Testing of samples from plants for pest detection Rearing of silk worms Breeding of fish Supply of farm labour Leasing of vacant land to a poultry farm Renting of Agro-machinery Compute the value of taxable supply.

A. Particulars Cultivation of ornamental flowers is exempt vide S. No. 54 of Exemption Notification No. 12/2017-Central Tax (Rate) Packing of tomato & chili ketchup (Not an agriculture produce) Warehousing of potato chips (Not an agriculture produce) Sale of tea on commission basis Packaging of pulses in 1 KG packing (it is not necessary to pack pulses for making it marketable) Training of farmers on use of scientific tools and agro machinery is exempt. Agriculture extension services are exempt vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Leasing of vacant land to a stud farm (rearing of horses) – Rearing of horses is specifically kept out from exemption Grading of wheat according to its quality is exempt. Grading which doesn’t alter the essential characteristics of the agriculture produce but makes it only marketable for the primary market is exempt vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Testing of samples from plants for pest detection is exempt. Agricultural operations directly related to production of any agriculture produce is exempt vide S. No. 54 of Exemption Notification No. 12/2017-Central Tax (Rate) Rearing of silk worms is exempt vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Breeding of fish is exempt vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Supply of farm labour is exempt vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Leasing of vacant land to a poultry farm is exempt. Agriculture means the rearing of all forms of animals other than rearing of horses. Renting of vacant land is exempt when used for agriculture purpose vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Renting of Agro-machinery vide S. No. 54 of Exemption Notification No. 12/2017Central Tax (Rate) Value of Taxable Supply for the month January 2019

87

30,00,000 15,00,000 20,00,000 30,00,000 15,00,000 10,00,000 30,00,000 15,00,000 20,00,000 30,00,000 15,00,000 10,00,000 5,00,000 4,00,000

Amount (in INR) NIL 15,00,000 20,00,000 30,00,000 15,00,000 NIL

30,00,000 NIL

NIL

NIL NIL NIL NIL

NIL 1,10,00,000

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q16. You are required to determine value of taxable supply for January 2019 from the details furnished below:Particulars Transportation of passengers by inland waterways Transportation of goods by in inland waterways Transportation of passengers by air terminating in Mizoram and Meghalaya Passenger travelling by air from Assam to Kolkata Passenger travelling by air from Kolkata to Pune Air Freight related to goods imported into India Freight relating to domestic transport of goods in India by Air Vessels Freight relating to goods imported into India GTA Freight charges for transport of food grain and pulses GTA Freight charges for transporting small consignment for persons who paid less than Rs. 750 for each consignment GTA Freight charges for transporting goods in small vehicles for person who paid less than Rs. 1,500 per trip Charges for Elephant/camel joy rides Compute the value of taxable supply.

A. Particulars Transportation of passengers by inland waterways is exempt vide S. No. 17 of Exemption Notification No. 12/2017-Central Tax (Rate) Transportation of goods by in inland waterways is exempt vide S. No. 18 of Exemption Notification No. 12/2017-Central Tax (Rate) Transportation of passengers by air terminating in Mizoram and Meghalaya is exempt vide S. No. 15 of Exemption Notification No. 12/2017-Central Tax (Rate) Passenger travelling by air from Assam to Kolkata is exempt vide S. No. 15 of Exemption Notification No. 12/2017-Central Tax (Rate) Passenger travelling by air from Kolkata to Pune Air Freight related to goods imported into India is exempt vide S. No. 19 of Exemption Notification No. 12/2017-Central Tax (Rate) Freight relating to domestic transport of goods in India by Air Vessels Freight relating to goods imported into India GTA Freight charges for transport of food grain and pulses is exempt vide S. No. 21 of Exemption Notification No. 12/2017-Central Tax (Rate) GTA Freight charges for transporting small consignment for persons who paid less than Rs. 750 for each consignment is exempt vide S. No. 21 of Exemption Notification No. 12/2017-Central Tax (Rate) GTA Freight charges for transporting goods in small vehicles for person who paid less than Rs. 1,500 per trip is exempt vide S. No. 21 of Exemption Notification No. 12/2017Central Tax (Rate) Charges for Elephant/camel joy rides (Elephant/camel joy rides are not classified as transportation services and will attract GST @ 18% -Circular No. 32/06/2018-GST) Value of Taxable Supply for the month January 2019

Amount (in INR) 15,00,000 20,00,000 30,00,000 15,00,000 10,00,000 16,00,000 45,00,000 20,00,000 30,00,000 15,00,000 10,00,000 25,00,000

Amount (in INR) NIL NIL NIL NIL 10,00,000 NIL 45,00,000 20,00,000 NIL NIL

NIL

25,00,000

1,00,00,000

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Study Notes

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Q17. ABC Ltd. Is engage in providing various service to educational institutional and furnishes you with the following information for the month of January 2019. You are required to determine the value of taxable supply and GST payable thereon if all charges are exclusive of GST. Particulars Renting of immovable property to higher secondary school Renting of immovable property to commercial coaching center Transportation service provided to students of higher secondary school Outdoor catering service provided to educational institutions running approved vocational courses Security services provided to pre-nursery school Housekeeping and cleaning service in college providing recognized graduation degree Conduct of examination of ICSI Placement service provided to ICAI Development of course contain of ICMA Training of staff of higher Secondary School Compute the value of taxable supply.

A. Particulars Renting of immovable property to higher secondary school Renting of immovable property to commercial coaching center Transportation service provided to students of higher secondary school is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Outdoor catering service provided to educational institutions running approved vocational courses Security services provided to pre-nursery school is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Housekeeping and cleaning service in college providing recognized graduation degree Conduct of examination of ICSI is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Placement service provided to ICAI Development of course contain of ICMA Training of staff of higher Secondary School Value of Taxable Supply for the month January 2019

Amount (in INR) 12,00,000 2,00,000 30,00,000 5,00,000 10,00,000 6,00,000 5,00,000 12,00,000 2,00,000 1,50,000

Amount (in INR) 12,00,000 2,00,000 NIL 5,00,000 NIL 6,00,000 NIL 12,00,000 2,00,000 1,50,000 40,50,000

Q18. XYZ Ltd., providing educational services, furnishes you with the following information for the various service provided by it. It has collected an aggregate sum of Rs. 30 lakhs during the month January 2019 as under: Particulars Receipts of ‘Gyan Vijay’ an industrial training institute (ITI) affiliated to the National council for vocational Training (NCVT) Receipts for running a Boarding School Receipts of ‘GE Educare’ a vocational educational provider affiliated to sector Skill Council formed under National Skill Development Corporation (NSDC)

Amount (in INR) 1,20,000 1,00,000 1,80,000

CA Amit Jain {CA, CIMA (UK), DIFRS (ACCA, UK), DBF, Cert. in Der.} Ex-Top Management (CFO/FC) of Multi National & Indian Companies

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Receipts of ‘Kalyan Skill Centre’ an industrial training centre (ITC) affiliated to the state Council for vocational Training, Rajasthan Receipts of ‘Scintech a Commercial Coaching institute providing commercial coaching in the field of arts and science (no certificate was issued on completion of the training)

2,00,000

Receipts of ‘Commerce concepts’ a Commercial coaching institute providing coaching in the field of commerce (a certificate was awarded to each trainee after completion of the training) Receipts of Gurukul school providing education upto higher secondary Receipts of ‘Play Kids’ school providing educational upto primary level (such receipts includes receipts from renting of premises to commercial coaching centre: Rs. 3 lakhs)

1,20,000

80,000

6,00,000 11,00,000

Compute the value of taxable supply.

A. Particulars Total Receipt Less:Receipts of ‘Gyan Vijay’ an industrial training institute (ITI) affiliated to the National council for vocational Training (NCVT) is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Receipts for running a Boarding School is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Receipts of ‘GE Educare’ a vocational educational provider affiliated to sector Skill Council formed under National Skill Development Corporation (NSDC) is exempt vide S. No. 69 of Exemption Notification No. 12/2017-Central Tax (Rate) Receipts of ‘Kalyan Skill Centre’ an industrial training centre (ITC) affiliated to the state Council for vocational Training, Rajasthan is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Receipts of Gurukul school providing education upto higher secondary is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate) Receipts of ‘Play Kids’ school providing educational upto primary level is exempt vide S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate). However, receipts from renting of premises by the school to commercial coaching center shall be liable for GST Value of Taxable Supply for the month January 2019

Amount (in INR) 30,00,000 (-) 1,20,000

(-) 1,00,000 (-) 1,80,000

(-) 2,00,000

(-) 6,00,000 (-) 8,00,000

10,00,000

Q19. Axis IDFC Bank Ltd. furnishes following information relating to services provided during the month of January 2019. Compute the value of taxable supply from following information : Particulars Amount of commission received for debt collection service Discount earned on LC discounted Dealing in sale and purchase of forward contract Charges received on credit card and debit card facilities extended Penal interest recovered from the customers for the delay in repayment of loan Commission received for service rendered to Government for GST collection Margin earned on reverse repo transactions Interest on credit card Administrative charges & Folio charges collected

Amount (in INR) 10,00,000 7,00,000 20,00,000 4,00,000 11,00,000 7,00,000 4,00,000 1,00,000 10,000

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Study Notes Charges for ATM card transactions Commission received for DD, pay order and cheque collection A. Particulars Amount of commission received for debt collection service Banking services are provided by way of extending deposits, loans or advances in so far as represented by interest are exempt. Commission received in not covered in exemption Discount earned on LC discounted is exempt vide S. No. 27 of Exemption Notification No. 12/2017-Central Tax (Rate) Dealing in sale and purchase of forward contract. Forward contract comes under the purview of “Securities” as per Section 2 (101) of CGST Act, 2017. Securities is excluded from the definition of Goods U/s 2 (52) & Services U/s 2 (102) respectively. Thus, the same would not be liable to GST Charges received on credit card and debit card facilities extended Penal interest recovered from the customers for the delay in repayment of loan Commission received for service rendered to Government for GST collection Margin earned on reverse repo transactions. These are financial instruments of short term call money market that are normally used by banks to borrow from or lend money to RBI. The margins, called the repo rate or reverse repo rate in such transactions are nothing but interest charged for lending or borrowing money. Also interest earned on reverse repo transactions are exempt from GST Interest on credit card Administrative charges & Folio charges collected Charges for ATM card transactions Commission received for DD, pay order and cheque collection Value of Taxable Supply for the month January 2019

91

5,00,000 4,00,000

Amount (in INR) 10,00,000

NIL NIL

4,00,000 11,00,000 7,00,000 NIL

1,00,000 10,000 5,00,000 4,00,000 42,10,000

Q20. Please comment, whether the following services are exempt under GST or not: Particulars Services provided to a recognized sports body by an individual as a player Services provided to a recognized sports body by an individual as a referee Services provided to a recognized sports body by an individual as a umpire Services provided to a recognized sports body by an individual as a coach Services of a player to IPL Franchisee Services by a recognized sports body to another recognized sports body Services provided to a recognized sports body by an individual as a selector Services provided to a recognized sports body by an individual as a commentators Services provided to a charitable body by an individual as a player in subsidized fees A. Particulars

Services provided to a recognized sports body by an individual as a player is exempt vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate) Services provided to a recognized sports body by an individual as a referee is exempt vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)

Amount (in INR) 10,00,000 5,00,000 2,00,000 1,00,000 7,00,000 5,00,000 2,00,000 1,00,000 50,000

Taxable Amount (in INR) NIL NIL

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Services provided to a recognized sports body by an individual as a umpire is exempt vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate) Services provided to a recognized sports body by an individual as a coach is exempt vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate) Services of a player to IPL Franchisee. It is not recognized sports body Services by a recognized sports body to another recognized sports body is exempt vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate) Services provided to a recognized sports body by an individual as a selector Services provided to a recognized sports body by an individual as a commentators Services provided to a charitable body by an individual as a player in subsidized fees. It is not recognized sports body

NIL NIL 7,00,000 NIL 2,00,000 1,00,000 50,000

Q21. An individual acts as a referee in a football match organized by Sports Authority of India. He has also acted as a referee in another charity football match organized by a local sports club, in lieu of a lump sum payment. Discuss whether he is required to pay any GST? (ICAI Module) Ans. Services provided to a recognized sports body by an individual inter alia as a referee in a sporting event organized by a recognized sports body is exempt from GST. Since in the first case, the football match is organized by Sports Authority of India, which is a recognized sports body, services provided by the individual as a referee in such football match will be exempt.

However, when he acts as a referee in a charity football match organized by a local sports club, he would not be entitled to afore-mentioned exemption as a local sports club is not a recognized sports body and thus, GST will be payable in this case.

Q22. RXL Pvt. Ltd. manufactures beauty soap with the brand name ‘Forever Young’. RXL Pvt. Ltd. has organized a concert to promote its brand. Ms. Ahana Kapoor, its brand ambassador, who is a leading film actress, has given a classical dance performance in the said concert. The proceeds of the concert worth Rs. 1,20,000 will be donated to a charitable organization.

GST?

Whether Ms. Ahana Kapoor will be required to pay any (ICAI Module)

Ans. Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii) dance, or (iii) theatre are exempt from GST, if the consideration charged for such performance is not more than Rs. 1,50,000.

However, such exemption is not available in respect of service provided by such artist as a brand ambassador.

Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap manufactured by RXL Pvt. Ltd., the services rendered by her by way of a classical dance performance in the concert organized by RXL Pvt. Ltd. to promote its brand will not be eligible for the above-mentioned exemption and thus, be liable to GST. The fact that the proceeds of the concert will be donated to a charitable organization will not have any bearing on the eligibility or otherwise to the above-mentioned exemption.

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Study Notes Section 10 of IGST Act, 2017 Section 11 of IGST Act, 2017 Section 12 of IGST Act, 2017 Section 13 of IGST Act, 2017

Place of Supply of Goods other than Supply of Goods Imported into, or Exported from India Place of Supply of Goods Imported into, or Exported from India Place of Supply of Services where location of supplier of service and the location of the recipient of service is in India Place of Supply of Services where location of supplier or location of recipient is outside India

Section 10 (IGST Act, 2017) Place of Supply of Goods other than Supply of Goods Imported into, or Exported from India Provision of Section 10 override provision of Section 7 (1) of IGST Act, 2017 {supply of goods}.

Provision Sec. 10 (1) (a) Movement of goods is involved Whether by – - Supplier - Recipient - Any other person

Place of Supply Location of goods where delivery terminates to the recipient

Remarks The location of the goods is a question of fact to be ascertained by observing the journey which the goods supplied make from their origin from supplier and terminate with recipient.

Example 1: A Ltd., Mumbai (supplier) supply to B Ltd, Delhi (recipient). The place of supply will be Delhi whether supplier supply to recipient or recipient take delivery from supplier’s place or recipient engaged transporter to take delivery on his behalf.

Example 2: Mr. A working in Mumbai, while his official visit to Delhi purchased a laptop from electronic showroom in Delhi. He immediately took delivery of laptop in showroom. The POS may be considered as ‘Delhi’ (CGST & SGST) where supplier mention address for delivery in his invoice as ‘Delhi’. The POS may be also considered as ‘Mumbai’ (IGST) where supplier mention address for delivery in his invoice as ‘Mumbai’.

In terms of clause (e) of rule 46 of CGST Rules, a tax invoice issued by registered person is required to contain, name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is unregistered and where the value of the taxable supply is Rs. 50,000 or more.

Sec. 10 (1) (b) Principal place of It is important to identify the two supplies If the goods are delivered to – business of such – by supplier to third party and by third - Any person, on the direction of a third person party to recipient third person, before or during This provision deals only with the first movement of goods, it shall be limb of supply (Second limb defined in deemed that the said person ‘c’), that is, supply by supplier to third has received the goods. party.

Irrespective of: This is also called “Bill to Ship to” model.

- Whether such person acting as an agent or otherwise, **Let say supplier raise invoice on 15.05.2019 on third person and remove

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Whether transfer made by way of transfer of documents of title of the goods or otherwise

the goods for delivery. The third person also need to raise invoice on same day according to provisions of Section 31 (1) (a).

Supplier & his Buyer & his Recipient & his Place of supply Place of supply Location Location location (first limb) (second limb) A Ltd., Mumbai B Ltd. Mumbai C Ltd. Delhi Mumbai Delhi A Ltd., Mumbai B Ltd. Chennai B Ltd. Mumbai Chennai Mumbai A Ltd., Mumbai B Ltd. Kolkata C Ltd. Delhi Kolkata Delhi A Ltd., Mumbai B Ltd. Chennai C Ltd. Delhi Chennai Delhi Sec. 10 (1) (c) Location of goods It is not a case where there is difficulty in Movement of goods is not involved at the time of the movement of the goods, but this is goods delivery to the ought not to move and when their recipient delivery to the recipient will stand complete Example 4: A Ltd., Mumbai bought office in Delhi with pre-installed office furniture & fixtures. The purchase of office is outside the purview of GST (Schedule III) but office furniture & fixtures will be liable to GST. Since there is no movement of furniture & fixtures, the place of supply is their location i.e. Delhi.

Sec. 10 (1) (d) Place of such Please note that in the case of assembly Goods are assembled or installed installation or or installation, it is a supply that is not assembly ‘works contract’. This is because works contracts, in GST, are treated as supply of service and that too only if the resultant is an immovable property. The provisions of this section does not apply to works contracts.

Supplier & his Recipient & his Place of Place of Supply Tax Leviable location location installation/assembly A Ltd., Mumbai B Ltd. Mumbai Delhi Delhi IGST A Ltd., Mumbai B Ltd. Chennai Indore Indore IGST A Ltd., Mumbai B Ltd. Kolkata Guwahati Guwahati IGST A Ltd., Mumbai B Ltd. Chennai Mumbai Mumbai CGST/SGST Sec. 10 (1) (e) Location as which The place of supply appointed under this Goods supplies on board a conveyance such goods are sub-section is the supply by the operator i.e. vessel, an aircraft, a train or a motor taken on board of the conveyance during its journey to vehicle the passenger Example 6: A Ltd. Mumbai entered into contract with the ABC airlines for the supply of food to the passenger on Mumbai – Delhi route. The goods were loaded in Kolkata (previous journey leg), so in this case place of supply is Kolkata.

Example 7: A boarded Rajdhani train from Mumbai along with food items. He sold all the food items between Mumbai to Delhi journey. The place of supply is Mumbai where food items loaded.

Example 8: A is travelling from Delhi to Guwahati via train. He ordered dinner to pantry person. Food items were loaded in Kanpur and delivered to him in Allahabad. The place of supply is Kanpur.

Sec. 10 (2) As determined in However, as of now no such peculiar Where place of supply cannot be the manner circumstances has come for which determined prescribed separate provisions for POS has been prescribed.

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Study Notes Section 11 (IGST Act, 2017) Place of Supply of Goods Imported into, or Exported from India Type Sec. 11 (a) Goods imported in India Sec. 11 (b) Goods exported from India

Place of Supply Location of the importer Location outside India

IGST will be payable, at the time of import of goods from custom.

IGST will be payable on value determined under section 3 of Customs Tariff Act on value determined under said Act at the point where duties of customs are levied on the said goods under section 12 of Customs Act, 1962 – proviso to section 5 (1) of IGST Act. CBE&C vide circular No. 50/2017-Cus Dated 18-12-2017 has clarified as follows – a. Price of goods in duty free shops should be displayed in rupees only b. In case of incoming passenger, the limit is Rs. 25,000 and payment can be made in rupees by debit/credit card in duty free shop in arrival hall c.

There is no restriction on amount in case of outgoing passenger and he can pay any amount in rupees by debit/credit card in departure hall.

Example 9: A Ltd., Delhi imported goods from B Ltd., China. Location of supplier is China. Place of supply is Delhi (taxable territory). It will be subject to IGST. Example 10: A Ltd., Delhi exported goods to B Ltd., China. Location of supplier is Delhi (taxable territory).

Place of supply is China (outside India). It will be treated as exported.

Example 11: A Ltd., Delhi received order from B Ltd., to deliver goods in USA. A Ltd. sourced this goods from UK & delivered this in USA. The transactions will not be considered as import as the goods being sold have not been brought into India (not crossed custom barrier) even though both the supplier & recipient are in India (Para 7 of Schedule III).

Example 12: A Ltd., Delhi received order from B Ltd., China to deliver goods at Maharashtra. As per section 2 (5), export of goods means taking goods out of India to a place outside India. A Ltd., Delhi is in India & delivering goods in India i.e. Maharashtra. This will be considered as Inter-State supply and will be subject to IGST. Goods has not been taken out as per section 2 (5), so will not be considered as export.

Example 13: ABC Ltd. of Madhya Pradesh imported 100 kg of goods from XYZ Pte. ltd. of Singapore. The goods are received at JNPT, Mumbai. If ✓

Goods are cleared from customs and brought back to place of business at Madhya Pradesh of ABC Ltd., POS shall be the location of importer i.e. Madhya Pradesh;

✓

Goods are cleared from customs and directly supplied to customer in Maharashtra. This transaction for supply of goods of ABC Ltd. of Madhya Pradesh to customer in Maharashtra will be treated as inter-State supply of goods & IGST shall be levied.

✓

Good are cleared from customs but are stored in ABC Ltd.’s warehouse in Maharashtra for supply to made later. According to definition of ‘place of business’ U/s 2 (85) of the CGST Act, includes ‘a

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain warehouse’. Thus ABC Ltd. will be required to take registration in Maharashtra. Later while supplying goods from Maharashtra warehouse to customer in Maharashtra, the transaction will be treated as intra-State supply of goods. ✓

Goods are cleared from customs and sent to job-worker in Tamil Nadu. This is not supply so will be delivered with delivery challan and e-way bill.

Section 12 (IGST Act, 2017) Place of Supply of Services where location of supplier & recipient is in India Provision of Section 12 override provision of Section 7 (3) of IGST Act, 2017 {supply of services}.

Provision Sec. 12 (1) This section deals with the situation where supplier of services and location of the recipient of service, both are in India.

Sec. 12 (2) This sub-section applies except the services specified in Sec. 12 (3) to Sec. 12 (14).

Place of Supply

Remarks It looks like sub-section (2) is a residual sub-section. Sub Section (3) to sub section (14) is a specific section which determines place of supply on specific transactions. Hence, it may be concluded that, to determine Place of Supply, we need to first refer to sub-section (3) to sub section (14) first, then if the transaction doesn’t fall in any of sub-section, then place of supply shall be decided by sub-section (2)

If person is registered then Place of supply will be location of such person.

Person is other than a registered person then if address on record exists then location of recipient otherwise location of supplier Example 14: ABC & Co., a tax professional firm based in Ahmedabad rendering professional services to XYZ Ltd. a company registered in GST for their office in Mumbai. The POS shall be Mumbai.

Let say in above example, if tax manager of XYZ Ltd., visit Ahmedabad to discuss tax matter, still POS shall be Mumbai.

Sec. 12 (3) (a) Directly in relation to an immovable ➢ General – Location property, including services provided by at which it is located architects, interior decorators, or intended to be surveyors, engineers and other related located experts or estate agents, any service ➢ If located outside provided by way of grant of rights to use India, Place of immovable property or for carrying out supply = Location of or co-ordination of construction work. recipient This includes any services ancillary as ➢ If located in more *Proportion to the value for per section 12 (3) (d). than one services separately collected or State/Union determined in terms of the Sec. 12 (3) (b) Territory then place contract or agreement entered By way of lodging accommodation by a of supply will be into in this regard or, in the hotel, inn, guest house, home stay, club proportionate* absence of such contract or or campsite, by whatever name called, agreement, on such other basis an including a house boat or any other as may be prescribed. vessel. This includes any services ancillary as per section 12 (3) (d).

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Study Notes Provision Sec. 12 (3) (c) By way of accommodation in any immovable property for organizing any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property. This includes any services ancillary as per section 12 (3) (d).

Place of Supply

Remarks As per Section 7 (5) (b) of IGST Act, supply of goods or services or both to SEZ unit or SEZ developer is inter-State supply.

This is specific provision and hence will prevail over general provision as contained in section 12 (3) (c) of IGST Act. Hence, in case of supply of such services, IGST will be payable and not CGST and SGST/UTGST. If such supply is for authorized operations, IGST will be refunded if paid or ITC refund can be obtained if supplied under LUT/Bond subject to endorsement of specified officer of SEZ. [Circular No. 48/22/2018 Dated 14.06.2018] Example 15: A company in Kolkata contracts with a Delhi based architect to design a structure in Mumbai.

POS is place of immovable property i.e. Mumbai.

Example 16: A from Mumbai, goes on official trip to Bangalore and stay in hotel for one night. POS is Bangalore.

Example 17: A from Jaipur, arranged his son wedding in Resort at Ooty, Tamil Nadu. The POS is Ooty, Tamil Nadu.

Example 18: A Mumbai based builder provides construction services to Chennai based company in respect of construction of its factory in South Africa. POS will be Chennai.

Example 19: Let say an interior decorator is engaged by a retail chain to design a common décor for all its store in India, this service would not be land-related. The default provision i.e. Section 12 (2) of the IGST Act will apply in this case.

Rule 4 of IGST Rules Where such immovable property or boat or vessel is located in more than one State or Union territory, shall be taken as being in each of the respective States or Union territories, and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner namely:(i) in case of services provided by way of lodging accommodation by a hotel, inn, guest house, club or campsite, by whatever name called (except cases where such property is a single property located in two or more contiguous States or Union territories or both) and services ancillary to such services, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of nights stayed in such property; (ii) in case of all other services in relation to immovable property including services by way of accommodation in any immovable property for organising any marriage or reception etc., and in cases of supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called where such property is a single property located in two or more contiguous States or Union territories or both, and services ancillary to such services, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the area of the immovable property lying in each State or Union territory; (iii) in case of services provided by way of lodging accommodation by a house boat or any other vessel and services ancillary to such services, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the time spent by the boat or vessel in

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Provision Place of Supply Remarks each such State or Union territory, which shall be determined on the basis of a declaration made to the effect by the service provider.

Example 20: A hotel chain X charges a consolidated sum of Rs. 30,000/- for stay in its two establishments in Delhi and Agra, where the stay in Delhi is for 2 nights and the stay in Agra is for 1 night. The place of supply in this case is both in the Union territory of Delhi and in the State of Uttar Pradesh and the service shall be deemed to have been provided in the Union territory of Delhi and in the State of Uttar Pradesh in the ratio 2:1 respectively. The value of services provided will thus be apportioned as Rs. 20,000/- in the Union territory of Delhi and Rs. 10,000/- in the State of Uttar Pradesh .

Example 21: There is a piece of land of area 20,000 square feet which is partly in State S1 say 12,000 square feet and partly in State S2, say 8000 square feet. Site preparation work has been entrusted to T. The ratio of land in the two states works out to 12:8 or 3:2 (simplified). The place of supply is in both S1 and S2. The service shall be deemed to have been provided in the ratio of 12:8 or 3:2 (simplified) in the States S1 and S2 respectively. The value of the service shall be accordingly apportioned between the States.

Example 22: A company C provides the service of 24 hours accommodation in a houseboat, which is situated both in Kerala and Karnataka in as much as the guests board the house boat in Kerala and stay there for 22 hours but it also moves into Karnataka for 2 hours (as declared by the service provider). The place of supply of this service is in the States of Kerala and Karnataka. The service shall be deemed to have been provided in the ratio of 22:2 or 11:1 (simplified) in the states of Kerala and Karnataka, respectively. The value of the service shall be accordingly apportioned between the States.

Sec. 12 (4) Restaurant & catering services, Location where the services Only listed are covered here. Let personal grooming, fitness, beauty are actually performed say if photography services, then treatment, health service including it is not covered here. cosmetic and plastic surgery Example 23: Mrs. A from Mumbai, went to Udaipur and availed Beauty Parlour services. The POS is Udaipur.

Sec. 12 (5) Services in relation to Training and performance appraisal to – ➢ A registered person ➢ Location of such person ➢ A person other than registered ➢ Location where the person services are actually performed Example 24: ABC Ltd., Delhi has entered into a contract with XYZ Ltd., Chennai for training and performance appraisal of their employees. Training was conducted at Pune, Maharashtra. In case ABC Ltd. is registered then POS will be Delhi. In case ABC Ltd. is not registered then services where it is actually performed i.e. Pune, Maharashtra.

Sec. 12 (6) Services provided by way of admission Place where the event is to a cultural, artistic, sporting, scientific, actually held or where the educational, entertainment event or park or such other place is amusement park or any other place and located services ancillary thereto Example 25: Mr. A from Mumbai, did online booking for Kaziranga National Park, Assam and hired a cab to be taken around. The place of supply is Kaziranga National Park, Assam and hiring a cab is ancillary service since it is being taken to make trip more convenient. The POS remain same.

Sec. 12 (7) Services provided by way of, -

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Study Notes Provision (a) organization of a cultural, artistic, sporting, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events; or (b) services ancillary to organization of any of the events or services referred to in clause (a), or assigning of sponsorship to such events, ➢ A registered person

➢

A person other than registered person -If event is held in India

Place of Supply

➢

Location of such person

➢

Place where event is actually held

99

Remarks

*Proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed Example 26: ABC Ltd., Mumbai held exhibition event in USA. ABC Ltd. hires these services from XYZ Ltd., Delhi. The POS is Mumbai assuming that ABC Ltd. is registered. If ABC Ltd. is unregistered then POS is again Mumbai. If let say this exhibition had been held at Ahmedabad, Gujarat then POS is place of exhibition i.e. Ahmedabad (considering ABC Ltd. unregistered).

Rule 5 of IGST Rules Where the services are supplied to a person other than a registered person, the event is held in India in more than one State or Union territory and a consolidated amount is charged for supply of such services, shall be taken as being in each of the respective States or Union territories, and in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by application of the generally accepted accounting principles.

Example 27: An event management company E has to organise some promotional events in States S1 and S2 for a recipient R. 3 events are to be organised i.e. one in S1 and 2 events in S2. They charge a consolidated amount of Rs.10,00,000 from R. The place of supply of this service is in both the States S1 and S2. Say the proportion arrived at by the application of generally accepted accounting principles is 3:2.

The service shall be deemed to have been provided in the ratio 3:2 in S1 and S2 respectively. The value of services provided will thus be apportioned as Rs. 6,00,000/- in S1 and Rs. 4,00,000/- in S2 .

Sec. 12 (8) Services by way of transportation of POS shall be decided on the goods, including by mail or courier to, basis of who is paying freight i.e. ➢ A registered person ➢ Location of such supplier or recipient. person ➢ A person other than registered ➢ Location at which person such goods are Provided that where the transportation handed over for of goods is to a place outside India, the their transportation -If event is held outside India

➢

Location of the recipient If located in more than one State/Union Territory then place of supply will be proportionate*

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Provision Place of Supply Remarks place of supply shall be the place of destination of such goods.

Example 28: ABC Ltd., Mumbai is a registered company. It sends courier to Delhi through XYZ courier company. Since ABC Ltd. is registered the place of supply is Mumbai. If suppose ABC Ltd. is unregistered and his representative sends courier from Bangalore to Chennai then POS is Bangalore.

Example 29: The registered person (‘XYZ’) in India has to export certain goods to China. The contract to transport goods by road (‘GTA service’) has been entered with the goods transport agency (‘supplier’) located in India. In light of the amended provision, the place of supply of service provided by the supplier shall be the destination of goods i.e. China. The place of supply shall neither be the location of XYZ nor the location of the supplier in India.

Sec. 12 (9) Passenger transportation service to, ➢ A registered person ➢ Location of such The return journey shall be person treated as a separate journey, ➢ A person other than registered ➢ Place where the even if the right to passage for person passenger embarks onward and return journey is on the conveyance issued at the same time. for a continuous journey Where the right to passage is given for future use and the point of embarkation is not known at the time of issue of right to passage, the POS of such service shall be determined in the manner specified in sub-section (2), i.e. the default provision.

Example 30: Mr. A, Mumbai (registered person) travels from Bangalore to Chennai by Jet Airways. He bought this ticket from Jet Airways, Kolkata. The POS is Mumbai.

Example 31: Mr. A, Mumbai (unregistered person) travels from Bangalore to Chennai to Kochi (continuous journey) by Jet Airways. He bought this ticket from Jet Airways, Bangalore. The POS is Bangalore (CGST).

If suppose, Mr. A also booked return flight along with this then this will be separate journey & the POS is Kochi & it will be subject to IGST. Sec. 12 (10) Services on board a conveyance, Location of the first including a vessel, an aircraft, a train or scheduled point of a motor vehicle, departure of that conveyance for the journey Example 32: Mr. A, Mumbai travels from Nepal-Kolkata-Mumbai. During Kolkata-Mumbai leg, he has ordered movie on demand. Since his first scheduled point of departure is Nepal which is outside the taxable territory, so it is not liable to tax.

Sec. 12 (11) Telecommunication services including Where the leased circuit is data transfer, broadcasting, cable and installed in more than one State direct to home television services to any or UT and a consolidated amount person shallis charged for supply of services (a) Fixed telecommunication line, ➢ Place of installation relating to such circuit, the POS leased circuits, internet leased circuit, of such services shall be taken as cable or dish antenna, being in each of the respective (b) Mobile connection and Internet on ➢ Billing Address on States or UT in proportion to the post-paid basis the record of value for services separately supplier of services collected or determined in terms of the contract or agreement

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Study Notes Provision (c) Mobile connection, Internet connection, DTH provided on prepayment basis through a voucher or any other means – (i) through a selling agent or a re-seller or a distributor of subscriber identity module card or re-charge voucher

(ii) by any person to the final subscriber,

If such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment

Place of Supply

➢

➢

Remarks entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.

Address of the selling agent/reseller/distributor as per the record of the supplier at the time of supply Location where prepayment received or such vouchers are sold

➢

Location of the recipient of services on the record of the supplier of services

(d) in other cases, (i) if address of the recipient as per the records of the supplier of services is available

➢

Address of the recipient as per the records of the supplier of services

(ii) where such address is not available

➢

Location of supplier of services Example 33: Mr. A, Mumbai has connection of fixed line in Mumbai with billing address Kolkata. The POS is Mumbai.

Example 34: Mr. A, Mumbai has postpaid mobile connection with billing address Kolkata. The POS is Kolkata.

Example 35: Mr. A, Mumbai has prepaid mobile connection and he has bought prepaid voucher online. His address in mobile company is Kolkata. The POS is Kolkata.

Example 36: Mr. A, Mumbai has bought prepaid card from seller in Delhi. The POS is Delhi.

Rule 6 of IGST Rules In the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner, namely:(a)

The number of points in a circuit shall be determined in the following manner: (i) in the case of a circuit between two points or places, the starting point or place of the circuit and the end point or place of the circuit will invariably constitute two points; (ii) any intermediate point or place in the circuit will also constitute a point provided that the benefit of the leased circuit is also available at that intermediate point; (b) the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the number of points lying in the State or Union territory.

Example 37: A company T installs a leased circuit between the Delhi and Mumbai offices of a company C. The starting point of this circuit is in Delhi and the end point of the circuit is in Mumbai. Hence one point of this circuit is in Delhi and another in Maharashtra. The place of supply of this service is in the Union territory of Delhi and the State of Maharashtra. The service shall be deemed to have been provided in the ratio of 1:1 in the Union territory of Delhi and the State of Maharashtra, respectively.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Provision Place of Supply Remarks Example 38: A company T installs a leased circuit between the Chennai, Bengaluru and Mysuru offices of a company C. The starting point of this circuit is in Chennai and the end point of the circuit is in Mysuru.

The circuit also connects Bengaluru. Hence one point of this circuit is in Tamil Nadu and two points in Karnataka. The place of supply of this service is in the States of Tamil Nadu and Karnataka. The service shall be deemed to have been provided in the ratio of 1:2 in the States of Tamil Nadu and Karnataka, respectively.

Example 39:: A company T installs a leased circuit between the Kolkata, Patna and Guwahati offices of a company C. There are 3 points in this circuit in Kolkata, Patna and Guwahati. One point each of this circuit is, therefore, in West Bengal, Bihar and Assam. The place of supply of this service is in the States of West Bengal, Bihar and Assam. The service shall be deemed to have been provided in the ratio of 1:1:1 in the States of West Bengal, Bihar and Assam, respectively.

Sec. 12 (12) Banking and other financial services, ➢ Location of the including stock broking services to any recipient of services person as per the records of the supplier If the location of recipient of services is ➢ Location of the not on the records of the supplier supplier of services Example 40: Mr. A, Mumbai registered person buys shares from a broker in Delhi on NSE (Mumbai). The POS is Mumbai (location of recipient of services as per record of supplier of services).

Example 41: Mr. A, Mumbai avail some services from SBI, Chennai. If the service is linked with account then the POS is location of recipient of supplier i.e. Mumbai. If it is not available in record then Chennai.

Sec. 12 (13) Insurance services, (a) to a registered person ➢ Location of such person (b) to a person other than a registered ➢ Location of the person recipient of services on the records of the supplier of services.

Example 42: Mr. A, Mumbai is an unregistered person, take travel insurance policy from Delhi to Kolkata flight. The POS is Mumbai.

Sec. 12 (14) Advertisement services to the Central Place of supply shall be Value of such supplies specific to Government, a State Government, a taken as being in each of each State or UT shall be in statutory body or a local authority meant such States or Union proportion to : for the States or Union territories Territories • Amount attributable to identified in the contract or agreement services provided by way of dissemination in the respective States or UT as may be determined in terms of the contract or agreement entered into in this regard or, • In the absence of such contract or agreement, on such other basis as may be prescribed.

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Study Notes Provision Place of Supply Remarks Example 43: Gujarat Government gives an advertisement contract to an advertising agency (registered in Ahmedabad) to promote Gujarat tourism throughout the country. The place of supply is in all the States and Union Territories of India.

Example 44: Delhi Government gives an advertisement contract to an advertising agency registered in Delhi to promote its ‘Every Child Can Read’ campaign in Delhi. The place of supply is Delhi.

If both supplier & recipient of service are in India, GST may be payable even if service is provided outside India, if the services falls under residual category i.e. tour operator in India providing service to Indian tourist outside India will be liable to pay GST {Para 5.8-2 of CBE&C ‘Taxation of Services : An Education Guide’ published on 20-6-2012 had given this illustration} Rule 3 (IGST Rules 2017) Supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority (Notification No. 12/2017 Integrated (Rate) Dated 1511-2017) Under section 12 (14) of the IGST Act, 2017 in the absence of any contract between the supplier of service and recipient of services, valuation shall be determined in following manner:-

Rule 3 (a)

In case of Value of supply will be Newspaper and On the basis of number of editions in each State/UT publications Example 45: ABC Government agency, release order to a DEF newspaper (Head office is in Delhi) for an advertisement ‘Beti Bachao Beti Padhao’ to be published in the edition of Delhi, Pune, Mumbai, Lucknow and Jaipur. So place of supply will be Delhi, Maharashtra, UP & Rajasthan and invoice needs to be raised on the basis of ratio of editions in above State.

3 (b) Printed material like On the basis of number of such material in each State/UT pamphlets, leaflets, diaries, calendars, TShirts etc.

3 (c) (i) Hoardings other than Hoardings located in each State/UT those on trains 3 (c) (ii) Advertisements placed on Ratio of the length of the railway track in each State/UT for that trains train Example 46: ABC places an order on KL for advertisements to be placed on a train with regard to the ‘Janani Suraksha Yojana’. The length of a track in a State will vary from train to train. Thus, for advertisements to be placed on the Hazrat Nizamuddin Vasco Da Gama Goa Express which runs through Delhi, Haryana, Uttar Pradesh, Madhya Pradesh, Maharashtra, Karnataka and Goa, KL may ascertain the total length of the track from Hazrat Nizamuddin to Vasco Da Gama as well as the length of the track in each of these States and Union territory from the website www.indianrail.gov.in.

The place of supply of this service is in the Union territory of Delhi and States of Haryana, Uttar Pradesh, Madhya Pradesh, Maharashtra Karnataka and Goa. The value of the supply in each of these States and Union territory attributable to the dissemination in these States will be in the ratio of the length of the track in each of these States and Union territory. If this ratio works out to say 0.5:0.5:2:2:3:3:1, and the amount to be paid to KL is Rs. 1,20,000, then KL will have to calculate the State-wise and Union territory-wise breakup of the value of the service, which will be in the ratio of the length of the track in each State and Union territory.

In the given example, the State-wise and Union territory-wise breakup works out to Delhi (Rs. 5,000), Haryana (Rs. 5,000), Uttar Pradesh (Rs. 20,000), Madhya Pradesh (Rs. 20,000), Maharashtra (Rs. 30,000), Karnataka (Rs. 30,000) and Goa (Rs. 10,000). Separate invoices will have to be issued State-wise and Union territory-wise by KL to ABC indicating the value pertaining to that State or Union territory.

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Advertisements on the Bills pertaining to consumers having billing addresses in each back of utility bills of oil State/UT and gas companies etc.

3 (d) (ii) Advertisements on railway Ratio of the number of railway stations in each State/UT tickets Example 47: ABC has issued a Purchase order to MN for display of advertisements relating to the “Ujjwala scheme” on the railway tickets that are sold from all the stations in the States of MP & Chhattisgarh.

• The place of this service is in MP and Chhattisgarh.

• The value of advertisement service attributable to these 2 States will be in the ratio of the number of railway stations in each State as ascertained from the Railways or from the website www.indianrail.gov.in.

• Let us assume that this ratio is 713:251 and the total bill is Rs. 9,640. The breakup of amount between MP and Chhattisgarh in this ratio works out to Rs. 7130 and 2510 respectively.

• Separate invoice will have to be issued State wise by MN to ABC indicating the value pertaining to that State.

3 (e) Advertisements over radio The amount payable to such radio station, which by virtue of its stations name is part of a State/UT Example 48: For an advertisement on ‘Pradhan Mantri Ujjwala Yojana’, to be broadcast on a FM radio station OP, for the radio stations of OP Kolkata, OP Bhubaneswar, OP Patna, OP Ranchi and OP Delhi, the release order issued by ABC will show the breakup of the amount which is to be paid to each of these radio stations.

The place of supply of this service is in West Bengal, Odisha, Bihar, Jharkhand and Delhi. The place of supply of OP Delhi is in Delhi even though the studio may be physically located in another State. Separate invoices will have to be issued State-wise and Union territory-wise by MN to ABC based on the value pertaining to each State or Union territory.

3 (f) Advertisements on TV Value of service in each State/UT = Total Amount payable for Channels such service * Ratio of viewership of such channel in concerned State/UT. Viewership shall be calculated in the following manner:i.

State/UT-wise figure for that channel published by Broadcast Audience Research Council; ii.

Figures published in last week of preceding quarter shall be used for succeeding quarter; iii.

If channel viewership figures relate to a region comprising of more than one State/UT, then, viewership figures for a State/UT = Viewership figure for region * Ratio of populations of that State/UT, as determined in the latest census.

Example 49: ABC issues a release order with QR channel for telecasting an advertisement relating to the ‘Pradhan Mantri Kaushal Vikas Yojana’ in the month of November, 2017. In the first phase, this will be telecast in the Union territory of Delhi, States of Uttar Pradesh, Uttarakhand, Bihar and Jharkhand.

The place of supply of this service is in Delhi, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand. In order to calculate the value of supply attributable to Delhi, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand, QR has to proceed as under — I. QR will ascertain the viewership figures for their channel in the last week of September 2017 from the Broadcast Audience Research Council. Let us assume it is 1,00,000 for Delhi and 2,00,000 for the region comprising of Uttar Pradesh and Uttarakhand and 1,00,000 for the region comprising of Bihar and Jharkhand.

II. Since the Broadcast Audience Research Council clubs Uttar Pradesh and Uttarakhand into one region and Bihar and Jharkhand into another region, QR will ascertain the population figures for Uttar Pradesh, Uttarakhand, Bihar and Jharkhand from the latest census.

III. By applying the ratio of the populations of Uttar Pradesh and Uttarakhand, as so ascertained, to the Broadcast Audience Research Council viewership figures for their channel for this region, the

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Study Notes viewership figures for Uttar Pradesh and Uttarakhand can be calculated. Let us assume that the ratio of the populations of Uttar Pradesh and Uttarakhand works out to 9:1. When this ratio is applied to the viewership figures of 2,00,000 for this region, the viewership figures for Uttar Pradesh and Uttarakhand work out to 1,80,000 and 20,000 respectively.

IV. In a similar manner, the breakup of the viewership figures for Bihar and Jharkhand can be calculated. Let us assume that the ratio of populations is 4:1 and when this is applied to the viewership figure of 1,00,000 for this region, the viewership figure for Bihar and Jharkhand works out to 80,000 and 20,000 respectively.

V. The viewership figure for each State works out to Delhi (1,00,000), Uttar Pradesh (1,80,000), Uttarakhand (20,000), Bihar (80,000) and Jharkhand (20,000). The ratio is thus 10:18:2:8:2 or 5:9:1:4:1 (simplification).

VI. This ratio has to be applied when indicating the breakup of the amount pertaining to each State.

Thus, if the total amount payable to QR by ABC is Rs. 20,00,000, the State-wise breakup is Rs. 5,00,000 (Delhi), Rs. 9,00,000 (Uttar Pradesh), Rs. 1,00,000 (Uttarakhand), Rs. 4,00,000 (Bihar) and Rs. 1,00,000 (Jharkhand). Separate invoices will have to be issued State-wise and Union territory-wise by QR to ABC indicating the value pertaining to that State or Union territory.

3 (g) Advertisements at cinema The amount payable to a cinema hall or screens in a multiplex, in halls a State/UT 3 (h) Advertisements over Value of service in each State/UT = Total amount payable for internet the service shall such service * Ratio of No. of internet subscribers in concerned be deemed to have been State/UT. provided all over India.

No. of internet subscribers shall be calculated in the following Thus, the value of such manner:service will be apportioned i.

State/UT-wise figures published by TRAI; amongst all States and ii.

Figures published for last quarter of preceding FY shall be UTs, of India in the used for succeeding FY; manner prescribed. iii.

If figure of No. of internet subscribers relates to a region comprising of more than one State or UT, then, No. of internet subscribers in a State or UT = No. of subscribers for region * Ratio of populations of that State or UT, as determined in the latest Census; Example 50: ABC issues a Purchase order to WX for a campaign over internet regarding linking Aadhar with one’s bank account and mobile number. WX runs this campaign over certain websites.

• In order to ascertain the State wise breakup of the value of this service which is to be reflected in the invoice issued by WX to ABC, WX has to first refer to the TRAI figures for quarter ending March 2017, as indicated on their website www.trai.gov.in. These figures show the service area wise internet subscribers. There are twenty two service areas. Some relate to individual States some to 2 or more States and some to part of one State and another complete State. Some of these areas are metropolitan areas.

• In order to calculate the State wise breakup, first the State wise breakup of the number of internet subscribers is arrived at. (In case figures of internet subscribers of one or more States are clubbed, the subscribers in each State is to be arrived at by applying the ratio of the respective populations of these States as per the latest census). Once the actual number of subscribers for each State has been determined.

• The second step for WX involves calculating the State wise ratio of internet subscribers. Let us assume that this works out to 8:1:2…and so on for Andhra Pradesh, Arunachal Pradesh, Assam…and so on.

• The third step for WX will be to apply these ratio to the total amount payable to WX so as to arrive at the value attributable to each State.

• Separate invoices will have to be issued State wise and Union territory wise by WX to ABC indicating the value pertaining to that State or Union territory.

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Advertisements through SMS

Value of service in each State/UT = Total amount payable for such service * Ratio of No. of telecom subscribers in concerned States or UTs. No. of telecom subscribers shall be calculated in the following manner, namely:i.

State/UT-wise figures published by TRAI; ii.

Figures published for preceding quarter shall be used for succeeding quarter; iii.

If figure of No. of telecom subscribers relates to a telecom circle comprising of more than one State or UT, then, No. of telecom subscribers in a State or UT = No. of subscribers for telecom circle * Ratio of populations of State or UT, as determined in the latest Census;

Section 13 (IGST Act, 2017) Place of Supply of Services where location of supplier or location of recipient is outside India The place of supply of services provisions do not make any mention about receipt or payment in foreign exchange or in Rupees. Thus, payment or receipt in foreign exchange or rupees is not at all relevant to determine, place of supply of services. That is relevant to determine whether the service is ‘export of service’ or ‘export of goods’. Often, provisions of place of supply of service and export of service provisions are mixed up, which causes confusion.

Provision

Place of Supply

Remarks

Sec. 13 (1) This section deals with the situation where supplier of services or location of the recipient of services, is outside India.

Sec. 13 (2) Sub-section 13 (2) applies except the services specified in Sec. 13 (3) to Sec. 13 (13) Location of the recipient available in the ordinary course of business

Location of the recipient

Location of the recipient is not available in the ordinary course of business

Location of the supplier of services

Sec. 13 (3) (a) Services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services.

Location where the services are actually performed

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Study Notes Provision From remote location through electronic means.

Goods temporarily imported into India for repairs or for any other treatment or process and are exported back after such repairs or treatment or process without being put to any other use in India, other than that which is required for such repairs or treatment or process.

Place of Supply Location where goods are situated at the time of supply of services.

Provisions of section 13 (3) (a) will not be applicable and place of supply shall be determined as per section 13 (2)

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Remarks

(b) Services supplied to an individual Location where the services either as recipient or acting on behalf of are actually performed. others, where his physical presence is required with supplier Example 51: ABC Ltd., Mumbai imports a machine from China for being installed in its factory at Pune. To install such machine, respective engineer came from China. The POS is Pune.

Example 52: ABC Ltd., Mumbai provide service to XYZ Ltd., USA through electronic means i.e. fixing bugs in software. The POS is USA. Example 53: ABC Ltd., Mumbai exported a machine to China. It came back for repairing. ABC Ltd., fixed the issue under warranty terms and sent machine back to China. The POS is China.

Example 54: Mr. A singer, Mumbai singer travel to Singapore for Music concert. The POS is Singapore.

Example 55: ABC Ltd., got gold & diamond from XYZ, USA for certain treatment and it exported back after such treatment. The POS shall be USA. Example 56: A modelling agency (Chennai) contracts with a beauty parlor from USA for beauty treatment of 20 models. Here is a situation where the modelling agency is the receiver of the service, but the service is rendered to the models. This transaction will also quality to be covered U/s 13 (3) (b) of the IGST Act and POS shall be the location where the services are actually performed.

Sec. 13 (4) Services relating to immovable property Place where the immovable Includes, hotel, right to use property is location or intended immovable property, to be located construction work including architects or interior decorations, estate agents etc.

Example 57: Mr. A, Mumbai provides services to Mr. Z, Singapore for the property located in Chennai. The POS is Chennai.

Example 58: A US based company has been awarded mineral exploration contract in respect of specific sites in South Africa by Mumbai based company. The POS will be South Africa.

Example 59: A company in Singapore contracts with a Delhi based tax professional to provide his general opinion with respect to capital gains tax liability arising from the commercial property in Delhi. Here, the service of tax professional is basically an advice on taxation in general even though it is related to immovable property. Thus, POS is Singapore according to default provision i.e. Section 13 (2) of the IGST Act. Sec. 13 (5) Services relating to events Place where the event is Conference, sporting, cultural, actually held fair, exhibition etc.

Example 60: ABC pte., Singapore organizes circus in Mumbai. The POS is Mumbai.

Sec. 13 (6) Services provided at more than one Location in the taxable territory location including location in taxable

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Place of Supply

Remarks

Example 61: ABC Ltd., Mumbai organizes a training event for XYZ pte., Singapore in Sri Lanka, Singapore & Mumbai India. The POS is Mumbai.

Sec. 13 (7) Services provided at more than one Place of supply shall be taken Value of such supplies State/UT for services referred in Sec. 13 as being in each of such specific to each State or Union (3), 13 (4) & 13 (5) States or Union territories territory shall be in proportion to: ➢ Value of services separately collected or determined in terms of the contract or agreement entered into in this regard ➢ In the absence of such contract or agreement, on such other basis as may be prescribed Rule 7 of IGST Rules The supply of services attributable to different States or Union territories, under subsection (7) of section 13 of the said Act, in the case of services supplied in respect of goods which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services, or in the case of services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, where the location of the supplier of services or the location of the recipient of services is outside India, and where such services are supplied in more than one State or Union territory, shall be taken as being in each of the respective States or Union territories, and the proportion of value attributable to each such State and Union territory in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined in the following manner, namely:(i) in the case of services supplied on the same goods, by equally dividing the value of the service in each of the States and Union territories where the service is performed; (ii) in the case of services supplied on different goods, by taking the ratio of the invoice value of goods in each of the States and Union territories, on which service is performed, as the ratio of the value of the service performed in each State or Union territory; (iii) in the case of services supplied to individuals, by applying the generally accepted accounting principles.

Example 62: A company C which is located in Kolkata is providing the services of testing of a dredging machine and the testing service on the machine is carried out in Orissa and Andhra Pradesh. The place of supply is in Orissa and Andhra Pradesh and the value of the service in Orissa and Andhra Pradesh will be ascertained by dividing the value of the service equally between these two States.

Example 63: A company C which is located in Delhi is providing the service of servicing of two cars belonging to Mr. X. One car is of manufacturer J and is located in Delhi and is serviced by its Delhi workshop. The other car is of manufacturer A and is located in Gurugram and is serviced by its Gurugram workshop . The value of service attributable to the Union Territory of Delhi and the State of Haryana

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Study Notes Provision Place of Supply Remarks respectively shall be calculated by applying the ratio of the invoice value of car J and the invoice value of car A, to the total value of the service.

Example 64: A makeup artist M has to provide make up services to an actor A. A is shooting some scenes in Mumbai and some scenes in Goa. M provides the makeup services in Mumbai and Goa. The services are provided in Maharashtra and Goa and the value of the service in Maharashtra and Goa will be ascertained by applying the generally accepted accounting principles.

Rule 8 of IGST Rules The proportion of value attributable to different States or Union territories, under sub-section (7) of section 13 of the said Act, in the case of supply of services directly in relation to an immovable property, including services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators, where the location of the supplier of services or the location of the recipient of services is outside India, and where such services are supplied in more than one State or Union territory, in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by applying the provisions of rule 4, mutatis mutandis.

Rule 9 of IGST Rules The proportion of value attributable to different States or Union territories, under subsection (7) of section 13 of the said Act, in the case of supply of services by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, where the location of the supplier of services or the location of the recipient of services is outside India, and where such services are provided in more than one State or Union territory, in the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, shall be determined by applying the provisions of rule 5, mutatis mutandis.

Sec. 13 (8) (a) Services supplied by a banking Location of the supplier of company, or a financial institution or a services NBFC, to account holders (b) Intermediary services

Location of the supplier of services

(c) Services consisting of hiring of means of transport, including yachts but Location of the supplier of excluding aircrafts and vessels, up to a services period of one month Example 65: Mr. A, Mumbai books a tour of famous cultural cities in India for a Singapore resident. The POS is Mumbai.

Example 66: ABC contractors provide a service of hiring of a fleet of cars to a company on an annual contract. If suppose fixed establishments of ABC contractors is located in New Delhi & the company is located in Singapore, then Section 13 (8) of the IGST Act, covers situations where the hiring is for a period of upto one month. Then in this case, POS shall be determined in terms of Section 13 (2) of the IGST Act i.e. receiver’s location which in this case is Singapore.

Sec. 13 (9) Services of transportation of goods, Place of destination of goods other than by way of mail or courier

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Provision Place of Supply Remarks Example 67: A shipping line, Mumbai, Maharashtra transports a shipment of flowers from Mumbai to Paris, for an event management company based in Paris. The POS is Paris.

Sec. 13 (10) Passenger transportation services Place where the passenger embarks on the conveyance for a continuous journey Example 68: Mr. A, a foreign tourist, has booked a ticket for New Delhi-Sri Lanka flight from an airline registered in New Delhi for a continuous journey without any stopover. The POS is New Delhi.

Sec. 13 (11) Services provided on board a First scheduled point of conveyance during the course of a departure of that conveyance passenger transport operation, including for the journey services intended to be wholly or substantially consumed while on board Sec. 13 (12) The place of supply of online information Location of the recipient of It is difficult to determine the and database access or retrieval services location of the recipient in services case of OIDAR as such recipients normally access the services online and not required to disclose the location. On satisfying any two (2) non-contradictory conditions out of such seven (7) conditions, the service recipient is deemed to be located in the taxable territory i.e. India: 1. the recipient gives an Indian address through internet.

2. the payment is settled by an Indian credit card/debit card/other card.

3. the recipient has an Indian billing address.

4. the computer used by the recipient has an Indian IP address.

5. the recipient uses an Indian bank account for payment.

6. the country code of the subscriber identity module card used by the recipient of services is of India 7. the recipient receives the service through an Indian fixed line.

Sec. 13 (13) In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.

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Study Notes •

No GST on transhipment of goods at customs station in India for further transport out of India {clarification in respect of service tax law but applies to GST also}

•

Agency fees paid to foreign banks for arranging finance is liable to GST – according to judgement under service tax law Tata Steel v. CST (2015)

Clarification on supply of satellite launch services by Antrix Corporation Ltd. [Circular No. 2/1/2017 IGST Dated 27.09.2017] Place of supply of satellite launch services supplied by ANTRIX Corporation Limited to international customers would be outside India in terms of section 13(9) of IGST Act, 2017 and such supply which meets the requirements of section 2(6) of IGST Act, thus constitutes export of service and shall be zero rated in accordance with section 16 of the IGST Act. Where satellite launch service is provided by ANTRIX Corporation Limited to a person located in India, the place of supply of satellite launch service would be governed by section 12 (8) of the IGST Act and would be taxable under CGST Act, UTGST Act or IGST Act, as the case may be.

Question & Answer Q1. A person in Agra buys shares from a broker in Delhi on NSE (in Mumbai). What will be the POS? A. The POS shall be the location of recipient of services on the records of the supplier of services i.e. Agra.

Q2. A person from Kolkata travels by Air India flight from Mumbai to Delhi and gets his travel insurance done in Mumbai. What will be the place of supply?

A. The location of the recipient of services on the records of the supplier of insurance service shall be the place of supply. So, Kolkata shall be the place of supply.

Q3. Software Ltd., a company based out of Pune, awards online maintenance contract of its servers located in Hyderabad office to ABC, a company based out of France, and as per the terms of the online maintenance ABC shall be required to perform regular maintenance from France using Internet. What will be POS? A. The place of supply of maintenance services shall be Hyderabad.

Q4. Software Ltd., gets an order from a French Bank, based out of Paris, to monitor transactions on the servers located in Paris using internet facilities. What will be POS? A. The place of supply of such monitoring services shall be at Paris.

Q5. Bookmyticket.com, a company based out at Pune providing online ticketing services for admission to various events, sells online tickets for IPL tournament to be held across India. What will be POS? A. The place of supply of services for admission to each cricket match shall be the location where the match is actually played.

Q6. Mr. A of Mumbai, orders a mobile from Flipkart to be delivered to his mother in Kolkata. ABC Ltd. (registered online seller in Indore) processes the order and Mr. A is billed by Flipkart. What will be POS? A. It will be assumed that the buyer in Mumbai has received the goods & IGST will be charged.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q7. In case of ambiguity, how is place of supply of goods determined U/s 10?

A. In case of any ambiguity where place of supply cannot be determined as provided in Section 10(1) (a) to 10(1) (e) of the IGST Act, 2017, the place of supply of goods will be determined in the manner as will be prescribed.

Q8. In case of import of goods into India what is the place of supply of goods?

A. The location of the importer is the place of supply of goods in case of import of goods into India. It may be noted that importer has not been defined in the IGST Act, 2017. Therefore, the meaning given under Customs Act, 1962 will have to be taken. As per Section 2(26) of the Customs Act, 1962 "importer", in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer.

Q9. In case of export of goods from India, what is the location of supply of goods?

A. The location of supply of goods exported from India shall be the location outside India.

Q10. What is the place of supply of services by way of transportation of goods (Section 12 & 13)?

A. Section 12(8) of the IGST Act, 207 provides that services by way of transportation of goods provided to a registered person shall be the location of registered person. Such services if provided to a person other than a registered person, shall have place of supply and the location at which such goods are handed over for their transportation. Example, if Express limited, a goods transport company based out of Chennai, provides transportation services to Cars Limited, an automobile company based out of Bangalore, for movement of their cars from the warehouse of Cars Limited at Silvassa to Delhi, then the place of supply of transportation services shall be Bangalore if Cars Limited is a registered person. If Cars Limited is not a registered person, then the place of supply of transportation services shall be Silvassa (location at which such goods are handed over).

As per Section 13(9) of the IGST Act, 2017 the place of supply of services of transportation of goods, other than by way of mail or courier will be the place of destination of the goods. Example: If PQ shipping Co. located in India charges ocean freight charges for transport of goods to Germany for a customer located in India, the place of supply of service will be Germany.

Q11. XZ Ltd. (Mumbai, Maharashtra) opens a new branch office at Gurugram, Haryana. It purchases a building for office from KTS Builders (Gurugram). It also enters into a separate contract with KTS Builders for purchase of pre-installed office furniture and fixtures in the building. Determine Place of Supply. (ICAI Example).

Ans. As per Section 10 (1) (c), If the supply does not involve movement of goods, the place of supply is the location of goods at the time of delivery to the recipient. Though there will be no GST liability on purchase of building, office furniture and fixtures will be liable to GST. Since there is no movement of office furniture and fixtures, the place of supply of such goods is their location at the time of delivery to the recipient (XZ Ltd.) i.e., Gurugram.

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Study Notes Section 31 Section 12 Section 13 Section 14

Issue of Tax invoice under GST (Extract) Time of Supply of Goods Time of Supply of Services Change in rate of tax in respect of supply of goods or services

Section 31 Extract of Issue of Tax Invoice under GST Goods

Services

Section 31 (1) A registered taxable person shall issue a tax invoice showing descriptions, quantity and value of goods, tax charged thereon and other prescribed particulars, before or at the time of a. Removal of goods for supply to the recipient, where supply involves movement of goods or b. Delivery of goods or making available thereof to the recipient in other cases.

Section 31 (2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed.

In case of Insurance, Banks or Financial Institution & NBFC’s the above limit is extended to 45 days.

An insurer or a banking company or a financial institution, including a NBFC, or a telecom operator, making taxable supplies of services between distinct persons as specified in section 25, may issue the invoice before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply was made.

Section 31 (4) In case of continuous supply of goods, where successive statements of accounts or successive payment are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Section 31 (5) In case of continuous supply of services (a) if due date is ascertainable from the contract, invoice shall be issued on or before such due date of payment; (b) where the due date is not ascertainable, the invoice shall be issued before or at the time of receiving payment (c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

Section 31 (7) The goods being sent or taken on approval for sale or return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six months from the date of removal, whichever is earlier.

Section 31 (6) In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 12 must be read with section 31, which prescribes in detail the date on which tax invoice must be issued in various situations.

Section 13 must be read with section 31 and rule 47, which prescribes in detail the date on which tax invoice must be issued in various situations.

Section 12 Time of Supply of Goods & Section 13 Time of Supply of Services Time of supply of Goods (Sec. 12) Time of supply of goods [Sec. 12 (2)] The time of supply of goods shall be the earlier of the following – (a) Date of issue of invoice by the supplier or the last date of which he is required U/s 31 (1) to issue the Invoice with respect to the supply, Or (b) Date of receipt of payment by the supplier with respect to the supply**

Time of supply of Services (Sec.13) Time of supply of services [Sec. 13 (2)] The time of supply of services shall be the earlier of(a) Invoice issued U/s 31 (2) (within 30 days): Date of issue of invoice by the supplier, or the date of receipt of payment, whichever is earlier, or (b) Invoice not issued U/s 31 (2) (not within 30 days): Date of provision of service or the date of receipt or payment, whichever is earlier, or (c) Date of which recipient shows the receipt of services in his books of account, in case where the provision of (a) or (b) as above do not apply.

** Notification No. 66/2017-Central Tax, Dated 15/11/2017 (a supplier of goods needs not to pay tax on advances). So time of supply of goods shall be earlier of Date of issue of invoice or last date of issue of invoice.

This notification is not applicable on registered person who opted for composition levy U/s 10 of CGST Act, 2017. A composition supplier has to pay, in lieu of tax payable by him, an amount calculated at the prescribed rate applied on his ‘turnover in the State/Union Territory’ for a quarter. Therefore, the composition supplier is not required to pay any tax on advance received as the same does not form part of taxable supplies and, in turn, also does not form part of the ‘turnover in a State/Union Territory’ at the end of the quarter (tax period).

Example 1: Normal supply of goods: Last date to invoice Date of Invoice Date of receipt of payment 12.06.2018

12.06.2018

12.06.2018

30.05.2018

12.06.2018

02.07.2018

Example 2: Continuous Supply of goods: Date of issue of Last date to issue statement of invoice accounts (As per contract 2nd of successive month) 02.02.0219 02.02.0219 02.02.0219 02.02.0219 02.02.0219 02.02.0219

Time of Supply (TOS)

50% advance on 30.05.2018 & balance on 01.07.2018 50% advance on 30.05.2018 & balance on 01.07.2018 50% advance on 30.05.2018 & balance on 01.07.2018

Date of Invoice

02.02.0219 31.01.2019 01.03.2019

Date of receipt of payment (As per contract 5th of successive month) 05.02.0219 05.02.0219 05.02.0219

12.06.2018 30.05.2018 12.06.2018

Time of Supply (TOS)

02.02.0219 31.01.2019 02.02.2019

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Study Notes 02.02.0219 02.02.0219 02.02.0219 31.01.2019 02.02.0219 Date of receipt of payment shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier Where amount received is in excess of invoice with amount upto Rs. 1,000, supplier has option to choose time of supply as date of issue of fresh invoice for the said excess amount.

Example 3: ABC enterprises, raised Rs. 49,500 invoice on 14.02.2018. Recipient made round off payment of Rs. 50,000 on 02.03.2018. In this case, time of supply for Rs. 49.500 will be 14.02.2018. But for balance Rs. 500, time of supply shall at the option of supplier.

Reverse Charge [Sec. 12 (3)] Reverse Charge [Sec. 13 (3)] The time of supply in case of reverse charge, shall be The time of supply shall be the earlier of the the earliest of the following dates: following dates: (a) the date of receipt of the goods, or (a) the date of payment, or (b) the date of payment, or (b) the date immediately following sixty days (61st st (c) the date immediately following thirty days (31 day) from the date of issue of invoice or any day) from the date of issue of invoice or any other document, by whatever name called, other document, by whatever name called, in lieu thereof by the supplier. in lieu thereof by the supplier.

If it is not possible to determine the time of supply under clause (a), (b) or (c) above, the time of supply shall be the date of entry in the books of account of the recipient of supply.

If it is not possible to determine the time of supply under clause (a), or (b) above, the time of supply shall be the date of entry in the books of account of the recipient of supply.

In case of supply by ‘associated enterprises’, where the supplier of service is located outside India, the time of supply shall be the date of entry in books of account of the recipient of supply or the date of payment, whichever is earlier.

Date of self-invoicing by the recipient will not hold any importance in arriving at the TOS for reverse charge cases. For determining TOS under reverse charge, date of invoice of supplier or any other document issued by the supplier, by any name whatsoever (whether registered or unregistered) will be relevant.

Supply of Voucher [Sec. 12 (4)] Supply of Voucher [Sec. 13 (4)] In case of supply of vouchers by a supplier, the time In case of supply of vouchers by a supplier, the of supply shall be: time of supply shall be: (a) the date of issue of voucher, if supply is (a) the date of issue of voucher, if supply is Identifiable at that point; or Identifiable at that point; or (b) the date of redemption of voucher, in all the (b) the date of redemption of voucher, in all the other cases. other cases.

Residuary Supply [Sec. 12 (5)] Residuary Supply [Sec. 13 (5)] Where it is not possible to determine the time of Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub- supply under the provisions of sub-section (2) or section (3) or sub-section (4), the time of supply shall: sub-section (3) or sub-section (4), the time of (a) in a case where a periodical return has to supply shall: be filed, be the date on which such return is (a) in a case where a periodical return has to to be filed; or be filed, be the date on which such return is (b) in any other case, be the date on which the to be filed; or tax is paid. (b) in any other case, be the date on which the tax is paid.

This proviso will bear its impact on provisional entries passed on month end or year-end closing i.e. provision of expenses made for those vendors who do not submit their bills.

Example 4: Investigation reveals clandestine (secretively) removal of goods by a supplier who is not registered under GST. The evidence is in the form

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain of noting, often undated, and some corroborative material. The supplier voluntarily pays tax during the investigation, to close the case. The time of supply will be the date on which the tax is paid, as being unregistered, the supplier is not required to file periodical returns.

Additional consideration like interest, fee & penalty [Sec. 12 (6)] Date on which supplier receives such additional value.

Additional consideration like interest, fee & penalty [Sec. 13 (6)] Date on which supplier receives such additional value.

Section 14 Change in rate of Tax in respect of supply of goods or services Section 12 & 13 has been over-ruled by this section i.e. in case of change in rate of tax, time of supply of goods or service or both shall be determined under this section: Taxable goods or services or both has been Taxable goods or services or both has been supplied before the change in rate of Tax supplied after the change in rate of Tax Invoice issued – Before Change Invoice issued – Before Change Receipt of payment – After Change Receipt of payment – After Change Time of Supply – Date of Invoice Time of Supply – Date of payment Invoice issued – After Change Invoice issued – Before Change Receipt of payment – After Change Receipt of payment – Before Change Time of Supply – Date of Invoice or payment, Time of Supply – Date of Invoice or payment, Whichever is earlier Whichever is earlier Invoice issued – After Change Invoice issued – After Change Receipt of payment – Before Change Receipt of payment – Before Change Time of Supply – Date of payment Time of Supply – Date of invoice Date of receipt of payment shall be the date on which the payment is entered in his books of account or the date on which the payment is credited to his bank account, whichever is earlier. However, the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after 4 working days from the date of change in the rate of tax.

Example 5: Date of change in rate of tax is 15th June 2017. Earlier rate of tax was 15% and the same has been changed to 18% Invoice issued – 10th June 2017 Invoice issued – 10th June 2017 Receipt of payment – 20th June 2017 Receipt of payment – 20th June 2017 th Time of Supply – 10 June 2017 (15%) Time of Supply – 20th June 2017 (18%) th Invoice issued – 20 June 2017 Invoice issued – 5th June 2017 th Receipt of payment – 25 June 2017 Receipt of payment – 25th May 2017 Time of Supply – 20th June 2017 (18%) Time of Supply – 25th May 2017 (15%) th Invoice issued – 20 June 2017 Invoice issued – 20th June 2017 th Receipt of payment – 10 June 2017 Receipt of payment – 10th June 2017 Time of Supply – 10th June 2017 (15%) Time of Supply – 20th June 2017 (18%) Example 6: Mr. A buys a motor car from a car dealer. Mr. A has made payment and car dealer has issued an invoice on 25th December 2017. The car was to be delivered on new year i.e. 1st Jan’18. The applicable rate of car is changed upward on 26th December 2017. As per section 14 (b) (ii), the time of supply is earlier of the two events namely, issuance of invoice or receipt of payment, both of which are before the change in rate of tax, and thus, the old rate of tax remains applicable.

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Study Notes Example 7: Payment is credited in books of accounts on 29th April. Payment is credited in the bank account on 8th May. Date of change in tax rate is 1st May. In this scenario, date of payment shall be treated as 8th May as the actual credit in the bank account has occurred after more than 4 working days. If suppose payment is credited in bank account on 3rd May then date of payment shall be treated on 29th April (credited in books of accounts) Special procedure under section 148 for payment of tax in case of joint development agreements in real estate sector In a Joint Development Agreement (JDA), a landowner transfers the land/ development rights over the land to a developer to develop and construct a real estate project and in return gets a certain percentage of constructed area in the project, depending upon the terms and conditions agreed upon between them. The developer receives consideration for the construction service provided by him, from (i) landowner, in the form of land /development rights; and (ii) from other buyers (of the constructed area), normally in the form of money.

In exercise of the powers conferred by section 148, the Central Government, on the recommendations of the GST Council, has issued Notification Nos. 4/2018 CT (R) & 4/2018 IT (R) both Dated 25.01.2018 to defer the liability to pay GST in case of ➢ supply of development rights against consideration in the form of construction service of complex, building or civil structure; ➢ supply of construction service of complex, building or civil structure against consideration in the form of transfer of development rights to the time when the possession or right in the property is transferred to the land owner by entering into a conveyance deed or similar instrument (e.g. allotment letter).

Example 8 (ICAI): Mr. X enters into a joint development agreement with SM Constructions Ltd. on 12th January whereby the development right over the plot of land owned by Mr. X is transferred to SM Constructions to build a residential complex. SM Constructions agrees to transfer 3 flats out of 20 flats to be built in the residential complex to Mr. X as a consideration for transfer of development rights.

The other details are: Land development rights are transferred on 31st January Construction begins on 1st April Construction of 3 flats gets completed on 30th June Construction of entire complex gets completed on 30th November Allotment letter for 3 flats issued to Mr. X on 25th December By virtue of the special procedure notified under section 148, payment of GST on transfer of development rights by Mr. X and supply of construction service by SM Constructions to Mr. X is postponed to the date of allotment letter i.e., 25th December.

Notification No. 06/2019-CT (Rate) & 06/2019-IT (Rate) Dated 29th March 2019 With effect from 01.04.2019, supply of services by a landowner to a developer by way of – (i) transfer of transferable development rights (TDR) or floor space index (FSI); (ii) granting of long term lease, for construction of residential apartments have been exempted subject to the condition that the constructed flats are sold before issuance of completion certificate or first occupation of the project, whichever is earlier, and tax is paid on them.

Such exemption for TDR, FSI, long term lease (premium) shall not be available in case of flats which remain un-booked on the date of issuance of completion certificate or first occupation of the project, whichever is earlier. The promoter (developer) shall be liable to pay tax at the applicable rate, on reverse charge basis, on such proportion of (i) value of development rights and/or FSI, or (ii) upfront amount paid for long term lease, as is attributable to such un-booked residential apartments.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain In view of the above change, with effect from 01.04.2019, a special procedure for payment of tax has been laid down for following classes of registered persons, namely:(i) a promoter who receives development rights or Floor Space Index (FSI) (including additional FSI) on or after 1st April, 2019 for construction of a project against consideration payable or paid by him, wholly or partly, in the form of construction service of commercial or residential apartments in the project or in any other form including in cash; (ii) a promoter, who receives long term lease of land on or after 1st April, 2019 for construction of residential apartments in a project against consideration payable or paid by him, in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name), as the registered persons in whose case the liability to pay central tax on, (a) the consideration paid by him in the form of construction service of commercial or residential apartments in the project, for supply of development rights or FSI (including additional FSI); (b) the monetary consideration paid by him, for supply of development rights or FSI (including additional FSI) relatable to construction of residential apartments in project; (c) the upfront amount (called as premium, salami, cost, price, development charges or by any other name) paid by him for long term lease of land relatable to construction of residential apartments in the project; and (d) the supply of construction service by him against consideration in the form of development rights or FSI(including additional FSI), shall arise on the date of issuance of completion certificate for the project, where required, by the competent authority or on its first occupation, whichever is earlier.

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Study Notes Question & Answer Q1. A Machine has to be supplied at site. It is done by sourcing various components from vendors and assembling the machine at site. The details of the various events are: 17th September

Purchase order with advance of Rs. 50,000 is received for goods worth Rs. 12 Lacs and entry duly made in the seller’s books of account 20th October The machine is assembled, tested at site, accepted by buyer rd 23 October Invoice raised 4th November Balance payment of Rs. 11.50 Lacs received Determine the time of supply(ies) in the above scenario?

A. The time of supply of goods is 20th October 2017 which is the date on which the goods were made available to the recipient as per section 12 (2) (a) and the invoice should have been issued on this date [Section 31 (1) (b)].

Q2. Determine the time of supply from the given information.

May 4

Supplier invoices goods taxable on reverse charge basis to Bridge & Co. (30 days from the date of issuance of invoice elapse on June 3) May 12 Bridge & Co receives the goods May 30 Bridge & Co makes the payment A. Here, May 12 will be the time of supply, being the earliest of the three stipulated dates namely, receipt of goods, date of payment and date immediately following 30 days of issuance of invoice [Section 12(3)]. (Here, date of invoice is relevant only for calculating thirty days from that date.)

Q3. Determine the time of supply from the given information.

May 4

Supplier invoices goods taxable on reverse charge basis to Pillar & Co. (30 days from the date of issuance of invoice elapse on June 3) June 12 Pillar & Co receives the goods, which were held up in transit July 3 Payment made for the goods A. Here, June 4 will be the time of supply, being the earliest of the three stipulated dates namely, receipt of goods, date of payment and date immediately following 30 days of issuance of invoice [Section 12(3)].

Q4. ABC Ltd. sells food coupons to a company, which gives these to its employees as part of the agreed perquisites. The coupons can be redeemed for purchase of any item of food/provisions in the outlets that are part of the program.

A. As the supply against which the coupon will be redeemed is not known on the date of the sale of the coupon, the time of supply of the coupon will be on the date on which the employee redeems it against food/provision items of his choice.

Q5. With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a voucher for Rs. 20 which will be redeemable till 5 Jan for a small pizza.

A. As the supply against which the voucher will be redeemed is known on the date of the sale, the time of supply is the date of issue of the voucher.

Q6. Determine the time of supply from the given information.

6th May 15th September 27th October 3rd November

Booking of convention hall, sum agreed Rs. 15,000, advance of Rs. 3,000 received Function held in conventional hall Invoice issued for Rs. 15,000, indicating balance of Rs. 12,000 payable Balance payment of Rs. 12,000 received

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. As per Section 31 read with rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of supply of service. In the given case, the invoice is not issued within the prescribed time limit. As per section 13 (2) (b), in a case where the invoice is not issued within the prescribed time, the time of supply of service is the date of provision of service or receipt of payment, whichever is earlier.

Therefore, the time of supply of service to the extent of Rs. 3,000 is 6th May as the date of payment of Rs. 3,000 is earlier than the date of provision of service. The time of supply of service to the extent of the balance Rs. 12.000 is 15th September which is the date of provision of service.

Q7. Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an apartment complex, for which the Apartment Owners’ Association showed a payment in cash on 4th April to them against work of this description. The dates of the work are not clear from the records of ABC & Co. ABC & Co have not issued invoice or entered the payment in their books of account.

A. The time of supply cannot be determined vide the provisions of clauses (a) and (b) of section 13 (2) as neither the invoice has been issued nor the date of provision of service is available as also the date of receipt of payment in the books of supplier is also not available. Therefore, the time of supply will be determined vide clause (c) of section 13 (2) i.e., the date on which the recipient of service shows receipt of the service in his books of account.

Thus, time of supply will be 4th April, the date on which the Apartment Owner’s Association records the receipt of service in its books of account.

Q8. Determine the time of supply from the given information (assuming that service being supplied is taxable under reverse charge).

May 4

The supplier of service issues invoice for service provided. There is as dispute about amount payable, and payment is delayed.

August 21 Payment made to the supplier of service.

A. Here, July 4 will be the time of supply, being the earliest of the two stipulated dates namely, date of payment and date immediately following 60 days since issue of invoice.

Q9. Determine the time of supply from the given information May 4

A Germany company issues email informing its associated company ABC Ltd., of the cost of technical services provided to it.

July 2 ABC Ltd. transfers the amount to the account of the German company.

A. As there is no prior entry of the amount in the books of account of ABC Ltd, July 2 will be the time of supply, being the date of payment in terms of second proviso to section 13 (3).

Q10. A supplier of services received an advance when rate of tax on services was 18%. However, while raising the invoice, tax rate on service was reduced to 5%. How will the invoice be raised?

A. As per provision of section 14 of CGST Act, 2017, in case wherein service has been supplied after change in rate of tax and invoice has also been issued after change in rate of tax but payment is received before change in rate of tax, time of supply shall be date of issue of invoice.

Therefore, in the instant cases assuming as service has been supplied after change in rate of tax and invoice has also been issued after change in rate of tax, therefore tax rate applicable at the time of raising of invoice for supply of service would be 5%. Excess tax collected at the time of receipt of advance can be adjusted against future liabilities.

Q11. What is the time of supply in case of addition in value by way of Interest, late fees or penalty for delayed payment of any consideration?

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Study Notes A. The time of supply in case of addition in value by way of Interest, late fees or penalty for delayed payment of any consideration would be the date on which the supplier receives such addition in value.

Example: Mr. A had supplied services to Mr. B for Rs.1,00,000 on 1st March. Mr. B had to make the payment to Mr. A within one month of the supply otherwise interest was chargeable at the rate of 15%. Mr. B fails to make the payment within one month and makes the payment after a delay of one month i.e. by 30th April. Mr. A raises a debit note against Mr. B for the interest on delayed payment of Rs. 1,250 on 10th May. Mr. B makes the payment of the Interest of Rs. 1,250 on 15th June.

The time of supply in such case would not be the date of raising of debit note i.e. 10th May but it would be the date when Mr. B makes the payment of the interest to Mr. A i.e. 15th June.

Q12. Time of supply of services under reverse charge mechanism where the supplier of service is associated enterprises?

A. In case of associated enterprises located within India, the time of supply in terms of Section 13(3) shall be the earliest of the following:

(a) Date of payment as per books of accounts of the recipient; or (b) Date on which payment is debited in the bank account of the recipient; or (c) Sixty days from the date of issuing invoice or any other document, by whatever name called, in lieu thereof by the supplier; or If it is not possible to determine the time of supply under the aforesaid clauses, the time of supply shall be the date of entry in the books of account of the recipient of supply. Thus, the same provisions as applicable to a supplier who is not associated enterprise will apply for services provided by associated enterprises located in India.

Where associated enterprises is located outside India, the time of supply shall be the earliest of the following dates:

(a) Date of entry in the books of accounts of the recipient; or (b) Date of payment.

Particulars

Non-associated

Associated

enterprises

Enterprises

Date on which payment is entered in September 14, 2018

September 14, 2018

books of accounts Date on which payment is debited to September 17, 2018

September 17, 2018

bank account Date of issuance of invoice

September 10, 2018

September 10, 2018

Sixty days from the date of issuing

November 10, 2018

November 10, 2018

September 10, 2018

September 10, 2018

September 14, 2018

September 10, 2018

invoice Date of entry in the books of accounts of the recipient Time of supply

Q13. Time of supply where services are supplied online?

A. The CGST Act, 2017 does not provide separate provisions for ascertaining the time of supply of service where such services are supplied online and hence the same provisions for services will apply for services supplied online.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q14. From the following information determine the time of supply of goods where supply involves movement of goods: Invoice Date 16-11-2018 01-12-2018

Removal of goods 10-11-2018 01-12-2018

Delivery of goods 16-11-2018 04-12-2018

Receipt of payment 16-11-2018 20-11-2018 10-12-2017

Remarks Rs. 5,00,000 is received as advance and balance payment Rs. 6,20,000 received on 10-122017

A. Invoice Date 16-11-2018 01-12-2018

Removal of goods 10-11-2018 01-12-2018

Delivery of goods 16-11-2018 04-12-2018

Receipt of payment 16-11-2018 20-11-2018 10-12-2017

Time of Supply 10-11-2018 01-12-2018

Remarks

Time of supply is date of issue of invoice.

Advance received is not liable to be taxed at the time of receipt vide notification no. 66-2017 Dated 15-112017

Q15. From the following information determine the time of supply if goods are supplied on approval basis: Removal of goods Issue of Invoice Accepted by recipient Receipt of payment 01-12-2017 15-12-2017 05-12-2017 25-12-2017 01-12-2017 25-07-2018 25-07-2018 20-07-2018 A. Removal of goods 01-12-2017

01-12-2017

Issue of invoice 15-12-2017

Accepted by recipient 05-12-2017

Receipt of payment 25-12-2017

Time of Supply 05-12-2017

25-07-2018

25-07-2018

20-07-2018

02-06-2018

Remarks Time of supply shall be the date of acceptance by the recipient as invoice was issued after that date.

Time of supply shall be date after expiry of 6 months from the date of removal.

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Study Notes

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Q16. Determine the time of supply in each of the following independent cases in accordance with provisions of CGST Act, 2017: Date of Actual provision of Date of Invoice Date on which payment services received 10-11-2017 30-11-2017 15-12-2017 10-11-2017

30-11-2017

15-11-2017

10-11-2017 10-11-2017 10-11-2017 10-11-2017 10-11-2017 10-11-2017

30-11-2017 30-11-2017 30-11-2017 12-12-2017 12-12-2017 22-12-2017

15-11-2017 and 10-12-2017 06-11-2017 and 09-11-2017 06-11-2017 and 16-11-2017 30-04-2018 05-11-2017 and 25-12-2017 12-12-2017

A. Date of Actual provision of services

Date of Invoice

Date on which payment received

Time of Supply

10-11-2017

30-11-2017

15-12-2017

30-11-2017

10-11-2017

30-11-2017

15-11-2017

15-11-2017

10-11-2017

30-11-2017

15-11-2017 and 10-122017

15-11-2017 and 30-112017 for the respective amounts

10-11-2017

30-11-2017

06-11-2017 and 09-112017

06-11-2017 and 09-112017 for the respective amounts

10-11-2017

30-11-2017

06-11-2017 and 16-112017

06-11-2017 and 16-112017 for the respective amounts

10-11-2017

12-12-2017

30-04-2018

10-11-2017

10-11-2017

12-12-2017

05-11-2017 and 25-122017

10-11-2017

22-12-2017

12-12-2017

05-11-2017 and 10-112017 for the respective amounts 10-11-2017

Q17. Determine the time of supply in each of the following independent cases in accordance with provisions of CGST Act, 2017: Date of Actual Date of Invoice Payment entry in Credit in bank Remarks provision of supplier’s book account services 20-10-2017 21-10-2017 26-10-2017 30-10-2017 20-10-2017

30-10-2017

24-10-2017

22-10-2017

16-11-2017 01-12-2017

26-12-2017 30-10-2017 30-10-2017

28-01-2018 30-10-2017 06-12-2017

29-01-2018 30-10-2017 08-12-2017

Rs, 5,00,000 is received in advance on 3010-2017 and balance amount Rs. 6,80,000 is

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Date of Invoice

Time of Supply

21-10-2017

DOP- earlier of the date of payment is entered in books or credited in bank account 26-10-2017

20-10-2017 20-10-2017

30-10-2017

22-10-2017

22-10-2017

16-11-2017 01-12-2017

26-12-2017 30-10-2017 30-10-2017

28-01-2018 30-10-2017 06-12-2017

16-11-2017 30-10-2017 30-10-2017

Remarks

21-10-2017

Rs, 5,00,000 is received in advance on 3010-2017 and balance amount Rs. 6,80,000 is date of invoice

Q18. Determine the time of supply in each of the following independent cases in accordance with provisions of CGST Act, 2017 if recipient is liable to pay tax on reverse charge basis: Date of Invoice

Date of receipt of goods 05-10-2017

Date of payment in Books 10-10-2017

Date when payment debited in bank account 12-10-2017

01-10-2017 01-10-2017

15-10-2017

10-10-2017

12-10-2017

01-10-2017 01-10-2017

15-10-2017 15-11-2017

12-10-2017 18-11-2017

10-10-2017 20-11-2017

A. Date of Invoice

Date of receipt of goods

Date of payment in Books

Date when payment debited in bank account

Time of Supply

01-10-2017 01-10-2017 01-10-2017 01-10-2017

05-10-2017 15-10-2017 15-10-2017 15-11-2017

10-10-2017 10-10-2017 12-10-2017 18-11-2017

12-10-2017 12-10-2017 10-10-2017 20-11-2017

05-10-2017 10-10-2017 10-10-2017 01-11-2017

Q19. Determine the time of supply in the following cases assuming that GST is payable under reverse charge: Date of payment by recipient of services 10-10-2017 10-10-2017 Part payment made on 30-08-2017 and balance amount paid on 01-112017 Payment is entered in the books of account on 28-08-2017 and debited in recipient’s bank account on 30-08-2017 Payment is entered in the books of account on 30-08-2017 and debited in recipient’s bank account on 26-08-2017

Date of issue of invoice by supplier of services 29-08-2017 01-08-2017 29-08-2017 01-08-2017 29-08-2017

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Study Notes

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A. Date of Invoice issued by supplier of services

Date immediately following 60 days from invoices

Date of payment by recipient of services

29-08-2017 01-08-2017 29-08-2017

29-10-2017 01-10-2017 29-10-2017

01-08-2017

01-10-2017

29-08-2017

29-10-2017

10-10-2017 10-10-2017 Part payment made on 30-08-2017 and balance amount paid on 01-112017 Payment is entered in the books of account on 2808-2017 and debited in recipient’s bank account on 30-08-2017 Payment is entered in the books of account on 3008-2017 and debited in recipient’s bank account on 26-08-2017

Time of supply of services (earlier of Date immediately following 60 days from invoice or Date of payment by recipient of services) 10-10-2017 01-10-2017 30-08-2017 for part payment and 29-10-2017 for balance amount

28-08-2017 (i.e. when payment is entered in the books of account of the recipient)

26-08-2017 (i.e. when payment is debited in the recipient’s bank account)

Q20. Mehra Sons, a registered supplier, is a wholesale supplier of ready-made garments located in Bandra, Mumbai. On 5th September, 20XX, Subhadra, owner of Aura Boutique located in Dadar, Mumbai, approached Mehra Sons for supply of a consignment of customised dresses for ladies and kids.

Mehra Sons gets the consignment ready by 2nd December, 20XX and informs Subhadra about the same. The invoice for the consignment was issued the next day, 3rd December, 20XX. Due to some reasons, Subhadra could not collect the consignment immediately. So, she collects the consignment from the premises of Mehra Sons on 18th December, 20XX and hands over the cheque for payment on the same date. The said payment is entered in the accounts on 20th December, 20XX and amount is credited in the bank account on 21st December, 20XX.

You are required to determine the time of supply of the readymade garments supplied by

Mehra Sons to Subhadra elaborating the relevant provisions under the GST law.

(CA Inter – MTP- May 2018) Ans. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to issue invoice upto the time of removal of goods which includes even collection of goods by the recipient. In given case, date of removal (collection by buyer) is 18.12.XX while invoicing has been done on 03.12.XX. Thus, given case is one where the supplier has issued invoice upto time of removal of goods. For purposes of determination of time of supply, the date of payment is considered to be earlier of the date of receipt of payment in bank account (21.12.XX) or date of entry in books of accounts (20.12.XX). Thus, in instance case, the date of receipt of payment is 20.12.XX. As per Sec 12 read with Notification No. 66/2017 CT Dated 15.11.2017, Time of Supply for the supplier of the goods shall be the date of invoice (03.12.XX) or the last date on which invoice is required to be issued (18.12.XX). Thus, Time of Supply for the given supply transaction shall be 03.12.XX.

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Section 15 Rule 27 Rule 28 Rule 29 Rule 30 Rule 31 Rule 31A Rule 32 Rule 33 Rule 34 Rule 35

Value of Taxable Supply Value of supply of goods or services where the consideration is not wholly in money Value of supply of goods or services or both between distinct or related persons, other than through an agent Value of supply of goods made or received through an agent Value of supply of goods or services or both based on cost Residual method for determination of value of supply of goods or services or both Value of supply in case of lottery, betting, gambling and horse racing Determination of value in respect of certain supplies Value of supply of services in case of pure agent Rate of exchange of currency, other than INR, for determination of value Value of supply inclusive of IGST, CGST, SGST & UTGST

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Study Notes Section 15 Value of Taxable Supply Meaning [Sec. 15 (1)] 1. The value of a supply of goods and/or services shall be the Transaction Value.

2. Transaction value applicable: •

Where the supplier and the recipient of the supply

The price actually paid or payable

are not related and

for the said supply of goods and/or

• Price is sole consideration for the supply services.

3. Free Supply: - No GST: When no consideration is received (either in monetary or non-monetary form) for a taxable supply, then there is no value, consequently no GST as well (except Schedule I activities) 4. Power of Government to notify manner of valuation [Sec. 15 (4) & (5)]: When the value of the supply of goods or services or both cannot be determined U/S 15 (1), Government on the recommendation of the GST Council, notify the manner of determination of value of such supplies.

Inclusions [Sec. 15 (2)]: The value of supply includes – (a) Any Taxes, Duties, Cesses, Fees and Charges separately charged by the supplier other than GST Tax (CGST, IGST, SGST/UTGST, Cess).

The CBIC vide circular No. 76/50/2018-GST Dated 31.12.2018, has clarified that for the purpose of determination of value of supply under GST, Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.

Central excise duty continues to be levied on tobacco along with GST, then Central excise duty will be included in the transaction value for supply of tobacco for the chargeability of GST. (b) Any amount that the supplier is liable to pay in relation to such supply, but which has been actually, incurred by the recipient and which is not included in the price.

Example 1: ABC contractor got supply contract at Rs. 10 Lacs + GST for constructing shed. However, recipient supplied cement and paint (amounting to Rs. 1 Lac) on “Free of cost – FOC” basis to ABC contractor. ABC Ltd. will raise invoice of Rs. 9 lacs + GST on Rs. 10 Lacs (Value of supply Rs. 9 Lacs + Rs. 1 Lacs), so total invoice value shall be Rs. 9 Lacs + Rs. 1.80 Lacs (Rs. 10 Lacs * 18%) = Rs. 10.80 Lacs. (c) Incidental expenses i.e. commission, packing etc. charged by the supplier. Thus expenses like weighment, loading in factory, inspection, testing before supply will be includible in ‘value’. Design charges incurred before supply will be also included. Any amount charged for anything done by the supplier in respect of the supply of goods or services, at the time of, or before delivery of goods or supply of services. (d) Interest or late fee or penalty for delayed payment of any consideration for supply. (e) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Government.

Exclusions [Sec. 15 (3)]: (a) Before or at the time of the supply: Such discount has been duly recorded in the invoice issued in respect of such supply. (b) After the supply has been effected: (i) Such discount is established in terms of an agreement entered into at or before the supply and specifically linked to relevant invoices, and (ii) Input tax credit has been reversed by the recipient of the supply as it is attributable to the discount on the basis of document issued by the supplier.

Thus, discount after supply is permissible as deduction only if it was known before or at the time of supply.

In some cases, goods are packed in returnable packing, like gas cylinder, drums etc. In such case, tax is payable only on consideration received for the supply. {S No. 61 of Tweet FAQ released by CBE&C on 26-6-2017}.

Thus, it is not required to add amortized cost of durable and returnable packing.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Where the Value of Supply cannot be determined by the u/s 15 (1), then the Value shall be determined as per the CGST Rules. Such valuation may be required in following situations:• The consideration, whether paid or payable, is not in money, wholly or partly.

• The supplier and the recipient of the supply are related.

Circular No. 47/21/2018 GST Dated 08.06.2018 has clarified that while calculating the value of the supply made by the component manufacturer using moulds and dies owned by Original Equipment Manufacturers (OEM) sent free of cost (FOC) to him, the value of such moulds and dies shall not be added to the value of supply made by him because the cost

of moulds/dies was not to be incurred by the component

manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b).

However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components.

Related Person, shall be: 1. They are officers or directors of one another's businesses; 2. Legally recognized partners in business; 3. Employer and employee; 4. Any person directly or indirectly owns, controls or holds twenty five per cent or more of the outstanding voting stock or shares of both of them; 5. One of them directly or indirectly controls the other; 6. Both of them are directly or indirectly controlled by a third person;

The term “person” includes legal persons

7. Together they directly or indirectly control a third person; or 8. Members of the same family 9. Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, however described, of the other, shall be deemed to be related.

This has been copied from Rule 2 (2) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and Rule 2 (2) of Customs Valuation (Determination of Value of Export Goods) Rules, 2007, except that in clause (4) mentioned above, the percentage shareholding has been increased from 5% to 25%.

In case of FOR basis contracts, the supplier arranges transport. In that case, he pays GST under reverse charge on outward freight. He then charges outward freight in the tax invoice. In such case, the outward freight charged is part of value of goods and GST is payable on value including outward freight. Similarly, packing charges, weighment charges and other charges are includible in value of levy of GST. The GST rate is same as applicable to goods, as this is a composite supply as per section 2 (30) of CGST Act. It is not correct to charge freight separately and charge GST @ 5% as the service of supplier of goods is not GTA services at all.

Example 2: The selling price of a notebook is Rs. 50. For notebooks sold to students in Government Schools, a company uses its CSR funds to pay the seller Rs. 30, so that the students pay only Rs. 20 per notebook. The taxable value of the notebook will be Rs. 50, as this is a non-government subsidy. If the same subsidy is paid by the Central Government or State Government, the taxable value of the notebook would be Rs. 20.

Example of discount deductible from value of supply Example 3: ABC gives a discount of 30% on the list price to its distributors. Thus, for a carton of Krack bisk, in the invoice in the list price is mentioned as Rs. 200, on which a discount of 30% is given to arrive at the final

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Study Notes price of Rs. 140. The taxable value is Rs. 140, as the discount is allowed at the time of supply and shown in the invoice.

Example 4: The agreement of ABC with its dealers is that sale of rice cookers over 100 pieces in the Diwali month will entitle them to discount of 5% per cooker sold in the next month. The next month’s stock has already been dispatched when the sales figures for the Diwali month are worked out. However, as the agreement was in existence at the time of supply, and the discount can be worked out for each invoice, the taxable value will be billed price minus 5%. The dealer must reverse the proportionate input tax credit on the relevant stock to bring it in line with the reduced tax.

Example of non- deductible discount Example 5: A company announces turnover discounts after reviewing dealer performance during the year. The discounts are based on performance slabs and are given as cash-back. As these discounts were not known at the time of supply of the goods, they will not be deducted from taxable value of those goods.

Example of Related Parties Example 6: (i) Mr. A is holding shares having voting rights of 25% or more in ABC Ltd. and XYZ Ltd., then both ABC Ltd. and XYZ Ltd. shall be deemed to be related persons in GST. (ii) Mr. B is a major shareholder of ABC Ltd. and Mr. A is a major shareholder of XYZ Ltd. If Mr. A is appointed as an officer/director in ABC Ltd., and Mr. B is appointed as officer/director in XYZ Ltd., then ABC Ltd. & XYZ Ltd. will be treated as related persons in GST. (iii) ABC Ltd. plays significant role in policy decisions, quality control, HR planning of XYZ Ltd. it may be said that ABC Ltd. controls XYZ Ltd., and hence to be treated as related persons in GST. (iv) If ABC Ltd. and MNO Ltd. together controls XYZ Ltd., then ABC Ltd. and MNO Ltd., shall be treated as related persons in GST. (v) If ABC enterprises is sole distributor of goods manufactured by XYZ Ltd., then ABC enterprises and XYZ Ltd., shall be treated as related persons in GST.

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https://telegram.me/cafinalidtqueryamitjain Rule 27 Value of supply of goods or services where the consideration is not wholly in money: -

Rule 27 (a)

•Open Market Value of such supply

•If Open Market Value is not available then sum of total consideration in money & money equivalent to consideration not in money (if such amount is known at the time Rule 27 (b) of supply)

A P P L Y I N

•If the value of supply is not determinable under clause (a) & (b) above then the value of supply of goods or services or both of like kind and quality

T H I S

•Residuary option if value not determinable under clause (a), (b) & (c) above then the sum of total of consideration in money and such further amount in money that is equiavalent to consideration not in money as determined by the applicable of rule 30 Rule 27 (d) or rule 31 in that order.

O R D E R

Rule 27 (c)

Open Market Value, is the full value in money (excluding taxes) payable by an unrelated party as sole consideration of such supply at the same time when supply being valued, is made.

“Supply of goods or services or both of like kind and quality” means:• Any other supply of goods or services or both; • Made under similar circumstances i.e. value of a product in Delhi may be higher than the value of the product in Salem (Tamilnadu) due to different circumstances prevailing. Therefore, it is provided that supply under similar circumstances shall be prevailed; • That, in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both i.e. hotel prices differ hugely due to their reputation.

Example 7: Where a new phone is supplied for Rs. 20,000 along with exchange of an old phone and if the price of the new phone without exchange is Rs. 24,000, the open market value of the new phone is Rs. 24,000.

Example 8: ABC Ltd. supplies a customised laptop for Rs. 1,00,000 along with exchange of old laptop to Mr. A. Similar type of customised laptop in terms of configuration, quality, functional components etc., was supplied to another customer Mr. B few days back (without exchange) for Rs. 1,25,000. Thus value of customized laptop supplied to Mr. A shall also be Rs. 1,25,000.

Example 9: Where a laptop is supplied for Rs. 40,000 along with the barter of a printer that is manufactured by the recipient and the value of the printer known at the time of supply is Rs. 4,000 but the open market value of the laptop is not known, the value of the supply of the laptop is Rs. 44,000.

Example 10: Mr. A supplied goods to Mr. B for consideration of Rs. 5,00,000 (excluding taxes). Mr. B also gave some material to Mr. A as consideration for supply whose value was Rs. 20,000 (excluding taxes). Mr. A has supplied the same goods to another person at price of Rs. 5,10,000.

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131

In this case it will be open market value i.e. 5,10,000 as per Rule 27 (a) If suppose above open market is not available then as per Rule 27 (b), it is Rs. 5,00,000+Rs. 20,000 = Rs. 5,20,000 If suppose even open market value is also not available but at the time of supply of goods, identical goods have been supplied at value of Rs. 5,25,000 then as per Rule 27 (c), it is Rs. 5,25,000.

Rule 28 Value of supply of goods or services or both between distinct or related persons, other than through an agent: -

•Open Market Value of such supply Rule 28(a)

A P P L Y I N

•If Open Market Value is not available then the value of supply of goods or services Rule 28 (b) or both of like kind and quality

Rule 28 (c)

•If the value of supply is not determinable under clause (a) & (b) above then the value as determined by the application of rule 30 or rule 31, in that order

Note: • If goods are intended for further supply as such by the recipient, value shall, at the option of supplier be equivalent to 90% of price charged for LIKE KIND AND QUALITY by the recipient to his customer (they should not be related) • Where recipient is eligible for ITC, value declared in invoice shall be deemed to be open market value. This is very sensible provision as when the recipient can take entire ITC, there cannot be any intention to evade tax.

Example 11: ABC Ltd. manufactures a customized product in Maharashtra and supplies it to its another establishment, located in West Bengal (distinct person). The contracted sale price is Rs. 10,00,000. The cost of production is Rs. 12,00,000. ABC Ltd. is the sole manufacturer of this product.

The value of supply is to be determined as per Rule 28 (c) read with Rule 30 or CGST Rules, 2017 i.e. 110% of the cost of production (12,00,000*110%) = Rs. 13,20,000.

If suppose West Bengal unit is eligible for full ITC, then value declared in invoice i.e. Rs. 10,00,000, will be taken as per Rule 28.

Example 12: ABC Ltd. was the only Indian company making and selling a customize product to companies.

However, the international prices of this product dropped and the companies began to import rather than buying from ABC Ltd. The promoters of ABC Ltd. then set up another company, which had a manufacturing unit that could use ‘A’ with common directors and senior management for better integration of functionality. ABC Ltd. started suppling to this unit at low margins. This unit is not eligible for full ITC. As per provision of Rule 28, the invoice value could not be the basis of valuation for a supply made to a related person if the recipient is not eligible for full ITC. Under rule 28 (a), the open market value of this product should be value of taxable supply i.e. imported price plus custom duties should be adopted for valuation after excluding the component of IGST on import.

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T H I S O R D E R

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Rule 29 Value of supply of goods made or received through an agent (this rule is applicable only for supply of goods): -

`

Rule 29 (a)

•Open Market Value of such supply, or •At the option of the supplier, be 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient.

•If the value of supply is not determinable under clause (a) above then the value as determined by the application of rule 30 or rule 31, in that order

Rule 29 (b)

Rule 28 is applicable wherever there is supply of goods or services or both between distinct or related persons.

But this rule is not applicable when such supplies are made through an agent. Meaning thereby reference to Rule 29 has to be made for all cases of supply of goods made or received between principal & agent and vice versa even if they are related person.

Example 13: P (principal) supplies groundnuts to A (agent). A in turn sells groundnuts at Rs. 5,000 per quintal. Another independent supplier sells groundnuts at Rs. 4,550 per quintal.

Thus, the open market value of groundnut is Rs. 4,550 per quintal. 90% of A’s selling price in the normal course of trade is Rs. 4,500 per quintal.

P has the option to adopt the open market price (Rs. 4,550) or 90% of A’s onward selling price (Rs. 4,500) as the taxable value of the groundnuts supplied by him to A. Rule 30 Value of supply of goods or services or both based on cost: Where the value of supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be 110% of the • cost of production or manufacture; or • cost of acquisition of such goods; or • cost of provision of such services.

Service providers have the option to directly move to rule 31 bypassing rule 30.

Rule 31 Residual method for determination of value of supply of goods or services or both: Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this Chapter.

Service providers have the option to directly move to rule 31 bypassing rule 30.

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Study Notes Rule 31A Value of supply in case of lottery, betting, gambling and horse racing: -

•Lottery run by State Governments: 100/112 of the face value of ticket or of the price notified in official gazette by organizing State, whichever is higher. "lottery run by State Governments" means a lottery not allowed to be sold in any State other than the organizing State.

Rule 31A (2)(a)

Rules 31A (2) (b)

Rules 31A (3)

•Lottery authorized by State Governments: 100/128 of the face value of ticket or of the price notified in official gazette by organizing State, whichever is higher. "lottery authorized by State Governments" means a lottery which is authorized to be sold in State(s) other than the organizing State also.

•the value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator.

Example 14: Government of Manipur has organized a lottery: • The face value of the tickets issued in Manipur is Rs. 336 Lacs. Price notified in official gazette is Rs. 310 lacs. So higher of Face Value or Notified Price i.e. Rs. 336 Lacs. Value 100/112 of 336 Lacs = Rs. 300 Lacs • The face value of the tickets authorized to be issued in other states is Rs. 250 Lacs. Prices notified in official gazette is Rs. 256 Lacs. So higher of Face Value or Notified Price i.e. Rs. 256 Lacs. Value 100/128 of 256 Lacs = Rs. 200 Lacs Example 15: Mr. A has placed an amount of Rs. 100 lacs into the totalisator on Horse No. 9. If he wins, he gets 10 times the amount. The value of such supply = 100% of the amount paid into the totalisator = Rs. 100 Lacs.

Rule 32 Determination of value in respect of certain supplies: Rule Provision • This rule provides the valuation methods for five specific supplies.

• This rule overrides other rules of valuation. Thus, the supplies prescribed in this rule need not be valued by sequentially following rule 27 to 31.

• The valuation methods prescribed under this rule are optional; the supplier can use them if he so desires. He can also opt to value his supplies in accordance with other valuation rules.

32 (2) Value of Supply of services in relation to the purchase or sale of foreign currency, including money changing, is determined by either of two methods: (a) Case 1: Transaction where one of the currencies exchanged is INR Where Currency exchanged from/to INR The value of supply, shall be computed by the following method : Value= {Difference between Buying or Selling Rate and RBI Reference rate} * Total units of currency Where RBI reference rate is not available, value shall be 1% of Gross amount of INR provided/received by the person changing the money.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Example 16: On 10th May, Mr. Doshi converted US $ 100 into Rs. 6,400 @ Rs. 64 per US $ through Eastern Money Changers. RBI reference rate on 10th May for US $ is 63. The value of supply in this case is (Rs. 63-Rs. 64) * US $ 100 = Rs. 100 and GST will be levied on this amount.

If the RBI reference rate is not available, then 1% of Rs. 6,400 i.e. Rs. 64 will be the value of supply of service.

Case 2: Transaction where neither of the currencies exchanged is INR The value of supply is 1% of the lesser of the two amounts the person changing the money would have received by converting (at RBI reference rate) any of the 2 currencies in INR Example 17: US $ 9,000 are converted into UK pound 4,500. RBI reference rate at that time for US $ is Rs. 63 per US $ and for UK pound is Rs. 82 per UK pound. In this case, neither of the currencies exchanged is INR. Hence in the given case, value of taxable service would be 1% of the lower of the following: (a) US dollar converted into INR = US $ 9,000* Rs. 63 = Rs. 5,67,000 (b) UK pound converted into INR = UK Pound 4,500 * Rs. 82 = Rs. 3,69,000 Value of taxable service = 1% of Rs. 3,69,000 = Rs. 3,690

32 (3)

32 (4)

(b) The person supplying the service may also exercise the following option (based on slab rates) to ascertain the value of service, however, once opted he cannot withdraw it during the remaining part of the financial year: Currency Exchanged Value of Supply Upto Rs 1 lacs 1% of Gross Amount of currency exchanged, min Rs 250/Above 1 lacs and upto 10 Lacs Rs. 1,000 + 0.50% of the gross amount of currency exchanged for an amount exceeding 1 Lacs & upto 10 Lacs Above 10 Lacs Rs 5,500 +0.1% of amount exceeding Rs 10 lac, subject to maximum amount or Rs. 60,000 Example 18: Mr. X, a money changer, has exchanged US $ 10,000 to INR @ Rs. 65 per US $.

Mr. X wants to value the supply in accordance with rule 32 (2) (b) of CGST Rules.

Determine the value of supply made by Mr. X. Value of currency exchanged in INR [Rs. 65 * US $ 10,000] = Rs. 6,50,000 Upto 1,00,000 = Rs. 1,000 For Rs. 5,50,000 = Rs. 2,750 Value of Supply = Rs. 3,750 Value of service provided by the air travel agent, in case of booking of air ticket shall be calculate as follow: Nature of Travel Value Domestic Travel 5% of Basic Fare International Travel 10% of Basic Fare Basic fare means that part of air fare on which commission is normally paid to air travel agent by the airlines.

Example 19: Particulars Basic Fare Other Charges & Taxes Total Value of Fee tickets Domestic Booking 1,00,900 10,000 5,000 1,15,900 International Booking 3,16,880 20,000 16,000 3,52,880 Value of Supply: Domestic Booking Rs. 1,00,900*5% = Rs. 5,045 International Booking Rs. 3,16,880*10%= Rs. 31,688 Value of supply in relation to life insurance business shall be: (a) The gross premium charged from a policy holder reduced by the amount allocated

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Study Notes

32 (5)

for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy holder at the time of supply of service (b) In case of single premium annuity policies, value shall be 10% of single premium charged from the policy holder [other than covered in (a)] (c) In all other case, 25% of premium charged from the policy holder for 1st year and 12.5% from subsequent year.

If policy with only risk cover then entire premium charged from the policy will be taxable value.

Example 20: ABC Life Insurance Company Ltd. (ALICL) has charged gross premium of Rs. 180 Lacs from policy holders with respect to life insurance policies in the 2017-18, out of which Rs. 100 Lacs have been allocated for investment on behalf of the policy holders.

Amount allocated for investment intimated to policy holder at the time of supply of service then value of service = Rs. 180 Lacs – Rs. 100 Lacs = Rs. 80 Lacs If it is Single Premium Annuity policy then taxable value Rs. 180 * 10% = Rs. 18 Lacs.

Amount allocated for investment not intimated to policy holder at the time of supply of service then value of service = 25% of Rs. 180 Lacs = Rs. 45 Lacs.

If premium is only towards risk cover then value of service Rs. 180 Lacs.

Value of supply in case of second hand goods shall be the difference in selling price and purchase price, subject to ITC is not availed. If the value so arrived is negative, then it shall be ignored (Intra- State supplies of second hand goods by an unregistered supplier to registered second hand goods dealer exempt from GST) Further, purchase value of goods repossessed from defaulting borrower (who is not registered), shall be the purchase value as reduced by 5% points per quarter or part thereof, between the date of purchase and date of disposal.

The provision applies to all taxable persons dealing in second hand goods, including old and used empty bottles. {PIB press release, Dated 15-7-2017 15:35 IST – CBE&C press release No. 79/2017, Dated 15-7-2017}

Example 21: A company X Ltd, which deals in buying and selling of second hand cars, purchases a second hand Maruti Alto Car of March, 2014 for Rs. 3 Lacs from an unregistered person and sells the same after minor furbishing for Rs. 3.5 Lacs. The supply of the car to the company for Rs. 3 Lacs shall be exempted and the supply of the same by the company to its customer shall be taxed at (Rs. 3.5 Lacs – Rs. 3 Lacs) = Rs. 50,000 shall be taxed.

If margin scheme is opted for a transaction of second hand goods, the person selling the car to the company shall not issue any taxable invoice and the company purchasing the car shall not claim any ITC.

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32 (6)

32 (7)

Example 22: Mr. A purchased a motor car on 1st October 2017 for Rs. 20,00,000. 80% of the purchase price of car was finance by ABC Finance Ltd. The loan was payable in 60 monthly installments beginning with 1st November 2017. Mr. X defaulted in repayment of loan and ABC Finance Ltd. repossessed the car on 15th May 2018. The car was disposed on 10 th December 2018 for Rs. 15,50,000. So, number of quarter is 5 (total percentage 25%). So, purchase value of car is Rs. 15,00,000. Sale price of car is Rs. 15,50,000 and Purchase value of car is Rs. 15,00,000 so value of taxable supply is Rs. 50,000.

Value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon or stamp.

Example 23: ABC Coupons Ltd. sells coupons that are redeemable against specified luxury food products at retail outlets. Each coupon has a face value of Rs. 900 but it redeemable for supplies worth Rs. 1,000. In terms of rule 32 (6) of the CGST rules relating to valuation, the value of a coupon is the money value of goods redeemable against it. Therefore, though the coupon is sold for Rs. 900, its value is Rs. 1,000.

The value of taxable services provided by such class of service providers as may be notified by the Government, on the recommendations of the Council, as referred to in paragraph 2 of Schedule I of the said Act between distinct persons as referred to in Section 25, where ITC is available, shall be deemed to be NIL.

Rule 33 Value of supply of services in case of pure agent: Value of supply in case of services provided by the pure agent shall exclude the expenditure or cost incurred by the him, if: (i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient. (ii) Payment made by pure agent and the same has been shown separately on his invoice. (iii) Supplies procured by the pure agent from the third party are in addition to the supplies on his own account.

Who is a pure Agent?

A person who 1. Enters into a contract to act as a pure agent to incur expenditure or cost in course of supply of goods or services or both 2. Neither intends nor hold any title of goods or services or both 3. Doesn’t use his own interest on goods/service procured 4. Receives only the actual amount incurred (100% reimbursement) Example 24: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value of supply made by A to B. Example given in Service Tax Law Example 25: X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent on behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his services as an estate agent.

This illustration clearly shows distinction between payments made as ‘pure agent’ and payment made as ‘Principal’.

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Study Notes Rule 34 Rate of exchange of currency, other than Indian rupees, for determination of value: Applicable rate shall be: Rate of Exchange For Taxable Goods Taxable Services

Applicable Rate Rate notified by Board under Sec 14 of Customs Act, 1962 for the date of time of supply of such goods in terms of section 12 of the Act. Rate as per generally accepted accounting principles for the date of supply of such services in terms of section 13 of the Act.

Rule 35 Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax: Where value of supply includes tax amount, i.e. Integrated tax, central tax, State tax or union territory tax, then tax amount shall be calculated by following method :Tax Amount = (Value inclusive of Tax * Tax Rate in %) / (100+ sum of tax rate in %) Note that the provision applies only the value of supply included GST. The rule doesn’t say that the value is deemed to be inclusive of GST.

Circular No. 86/05/2019 GST Dated 01.01.2019 Issue: What is the value to be adopted for the purpose of computing GST on services provided by BF/BC to a banking company?

Clarification: As per RBI’s Circular and subsequent instructions on the issue (referred to as ‘guidelines’ hereinafter), banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be reviewed periodically. The agreement of banks with the BC specifically prohibits them from directly charging any fee to the customers for services rendered by them on behalf of the bank. On the other hand, banks (and not BCs) are permitted to collect reasonable service charges from the customers for such service in a transparent manner. The arrangements of banks with the BCs specify the requirement that the transactions are accounted for and reflected in the bank's books by end of the day or the next working day, and all agreements/contracts with the customer shall clearly specify that the bank is responsible to the customer for acts of omission and commission of the BF/BC. Hence, banking company is the service provider in the BF model or the BC model operated by a banking company as per RBI guidelines. The banking company is liable to pay GST on the entire value of service charge or fee charged to customers whether or not received via BF or BC.

Circular No. 92/11/2019-GST Dated 07/03/2019 Free samples and gifts •

It is a common practice among certain sections of trade and industry, to provide free samples and gifts.

For example, pharmaceutical companies often provide drug samples to their stockists, dealers, medical practitioners, etc., without charging any consideration.

•

Samples which are supplied free of cost, without any consideration, do not qualify as ‘supply’ under GST (except where the activity falls within the ambit of Schedule I of the CGST Act).

•

ITC shall not be available on the inputs, input services and capital goods to the extent they are used in relation to the gifts or free samples distributed without any consideration.

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However, where the activity of distribution of gifts or free samples falls within the scope of supply in terms of the provisions contained in Schedule I of the CGST Act, the supplier of gifts/ free samples would be eligible to avail ITC.

Buy one, get one free offer (BOGO) •

Sometimes, companies announce offers like ‘Buy One, Get One free’. It may appear at first glance that in case of offers like ‘Buy One, Get One Free’, one item is being supplied free of cost without any consideration. Let say, “buy one soap and get one soap free”.

•

In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply.

•

Taxability of such supply will depend upon whether it is a composite or a mixed supply and the rate of tax shall be determined accordingly.

•

ITC shall be available with respect to inputs, input services and capital goods used in relation to supply of goods or services as a part of such offers.

Discounts including ‘Buy more, save more’ offers •

Sometimes, the supplier offers staggered discount to the customers (i.e. increase in discount rate with increase in purchase volume). Such discounts are shown on the invoice itself.

•

Some suppliers also offer periodic/ year ending discounts to their stockists, etc. Such discounts are not shown on the invoice as the actual quantum of such discount gets determined after the supply has been effected, generally at the year end. However, such discounts are established in terms of an agreement entered into at or before the time of supply. Further, the discount is passed on by supplier through credit

•

notes.

Such discounts offered by the suppliers to customers (including staggered and post supply discounts) shall be excluded to determine the value of supply provided they satisfy the parameters laid down in Section 15(3) of the CGST Act.4

•

Further, the supplier shall be entitled to avail the ITC on inputs, input services and capital goods used in relation to such supply of goods or services at discount.

Get 10 % discount for purchases above Rs. 5,000/-, 20% discount for purchases above Rs. 10,000/- and 30% discount for purchases above Rs. 20,000/-.

Secondary Discounts •

These are the discounts which are not known at the time of supply or are offered after the supply is already over.

•

In such cases, financial / commercial credit notes can be issued by the supplier for passing of discount, even if the conditions mentioned in Section 15(3)(b) of the CGST Act are not satisfied.

•

However, such discounts shall not be excluded while determining the value of supply as such discounts are not known at the time of supply and the conditions laid down in Section 15(3)(b) of the CGST Act are

•

not satisfied.

In this case, there will be no impact on availability of ITC in the hands of supplier.

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Study Notes Question & Answer Q1. ABC suppliers Ltd. Mumbai has issued following invoices on 22th July 2017: (a) XYZ Ltd. Ahmedabad, Value of goods Rs. 20,000. Packing charges Rs. 800, Outward Freight Charges Rs. 1,200. (b) CDE Ltd. Pune, Value of goods Rs. 50,000, weighment charges Rs. 1,600, discount for prompt payment Rs. 1,200. (c) Brain cert, USA – FOB value Rs. 40,000.

The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.

A. (a) Tax is payable on value plus packing plus outward freight i.e. Rs. 22,000. Since customer is from out of state, IGST is payable @ 18%. Hence IGST payable is Rs. 3,960. (b) Tax is payable on 50,000+1,600-1,200 = Rs. 50,400. The supply is within the State. Hence, tax payable is as follows, SGST @ 9% = Rs. 4,536 & CGST @ 9% = Rs. 4,536 (c) Since the goods are exported, IGST is not payable assuming ABC has LUT. Q2. A taxable person engaged in trading of second hand cars has given following information for Sept’17: (a) Purchased second hand car at Rs. 4,00,000 and sold at Rs. 5,00,000. (b) Purchased second hand car at Rs. 3,00,000 and sold at Rs. 2,90,000. (c) Purchased second hand car at Rs. 7,00,000. He could not sale in that month.

The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%, Compensation Cess 3%.

A. The taxable person can pay under margin scheme as follows: (a) Value Rs. 1,00,000 [5,00,000-4,00,000], CGST @ 14% Rs. 14,000, SGST @ 14% Rs. 14,000 & Compensation Cess @ 3% 3,000. Total Rs. 31,000. (b) No tax payable as value of supply is negative. (c) No tax as the car is not sold.

Q3. A CA in Mumbai supplied service relating to incorporation of a company to Mr. Amit in Kolkata. He charged fees as follows: (a) Professional fees for incorporate of company Rs. 1,00,000. (b) Filing fees and registration charges paid to ROC Rs. 90,000. (c) Reimbursement of Travelling and out of pocket expenses Rs. 10,000.

The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.

A. Rs. 90,000 are received as pure agent. So, this is not includible in value. The travelling & out of pocket expenses are part of value of supply and includible in value. Hence tax is payable on Rs. 1,10,000. Since the recipient is out of State, IGST is payable @ 18% = Rs. 1,10,000*18% = Rs. 19,800.

Q4. A in Kolkata supplied machinery of Rs. 2,00,000 to B in Kolkata in July 2017. He charged Rs. 24,000 as charges for erection and commissioning of the machinery and Rs. 20,000 as machine design charges. As per payment terms, the payment was to be made within 30 days. However, B did not pay within 30 days. Hence A recovered Rs. 6,000 as interest for late payment in Sept’17.

The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.

A. Tax is payable on Rs. 2,00,000+ Rs. 24,000+ Rs. 20,000 + Rs. 6,000 = Rs. 2,50,000. Tax payable CGST @ 9% of Rs. 2,50,000 = Rs. 22,500. SGST @ 9% = Rs. 22,500.

Q5. A manufacturer of drugs from Ahmedabad sales the product @ Rs. 5,000 for a box of medicines to wholesalers in Gujarat in Oct’17. He is sending to same goods to his consignment agent in Delhi in Oct’17.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain The consignment agent is selling the box of medicines @ Rs. 5,300 per box. Calculate the GST payable.

The tax rates were as follows: - CGST 2.5%, SGST 2.5%, IGST 5%. Calculate the tax liability in each case.

A. (a) for sale to wholesales in Gujarat the tax is as follows – CGST @ 2.5% of Rs 5,000 = Rs. 125. SGST @ 2.5% = Rs. 125. (b) for supplies to consignment agent in Delhi he can charge tax on 90% of the sale price in Delhi i.e. 90% of 5,300 = Rs. 4,770. IGST @ 5% of Rs. 4,770 = Rs. 238.50 Q6. A manufacturer of refrigerators from Punjab sales the refrigerator Rs. 50,000 to wholesalers in Punjab. He is sending to same refrigerators to his depot in Karnataka. He is selling the refrigerators in Karnataka Rs. 46,000 due to heavy competition. The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%.

Calculate the tax liability for supply to Karnataka.

A. Since the entire tax paid in Punjab will be available as ITC in Karnataka, the tax can be paid on any value while sending goods from Punjab.

Q7. An AC manufacturer in Chennai has made an exchange offer. As per terms of offer, if you return your old AC of any make, you will get new AC of specified high capacity for Rs. 56,000, excluding taxes. The normal price of the new air conditioner of that capacity is Rs. 68,000, excluding taxes. You made enquiry with dealers of second hand AC and they are willing to purchase your AC for Rs. 7,000. You are staying at Chennai.

The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%. Calculate the tax payable.

A. Tax is payable on Rs. 68,000. Tax payable – CGST @ 14% - Rs. 9,520, SGST @ 14% Rs. 9,520.

Q8. How value of supply to be arrived at in case of supply of goods or services between related persons?

A. Let’s understand it with an example wherein Mr. A who is brother of Mr. B, comes to the shop of Mr. B. He selects goods worth Rs. 50,000 from the shop. The following would be the steps to find out the value of supply between Mr. A and Mr. B: (a) If the open market value of the goods or services supplied by the supplier is known then open market value of the goods or services supplied would be the value of supply.

Example: Mr. A who is brother of Mr. B, comes to the shop of Mr. B. He selects goods worth Rs 50,000 on the shop and asks how much he has to pay for it. Mr. B asks Mr. A to pay Rs 40,000. In this transaction, as Mr. B is brother of Mr. A, Mr. B has charged lesser price from Mr. A. Thus, the open market price in the given case would be Rs. 50,000. (b) If open market value is not available, it will be the value of supply of goods or services of like kind and quality.

Example: Mr. A who is brother of Mr. B, comes to the shop of Mr. B. Supposedly, goods selected by him have been imported for the first time from outside the country and no price has been specified on such goods. Mr. B asks Mr. A to pay Rs. 40,000. In this transaction, as Mr. B is brother of Mr. A and the open market value is not available, price of goods with similar features would be the value of supply of the goods. Supposedly, similar goods are available for Rs. 45,000 in the market, therefore value of supply would be Rs. 45,000. (c) If value is not determinable under either of the two methods above, value of supply would be the value as determined by application of Rule 30 or Rule 31 of Central Goods and Services Tax Rules, 2017, in that order. (d) Where the goods are intended for further supply as such by the recipient, the value at the option of the supplier, be an amount equivalent to ninety per cent of the price charged for the supply of goods of like kind and quality by the recipient to his customers not being his related person.

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(e) If the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be open market value of the goods or services.

Q9. Is GST Leviable on Securities Transaction Tax and Stamp Duty?

A. The liability to pay STT and Stamp Duty on purchase or sale of share is that of either purchaser or seller and not of stock broker. The stock broker collects and deposits the same on behalf of the purchaser or seller and in the capacity of the pure agent. Thus, GST is not payable on STT and Stamp Duty as long as the sub – broker satisfies the conditions of pure agent as specified in Rule 33 of the CGST Rules, 2017.

Q10. Admission to ABC Theater is Rs. 100 per ticket for a Kannada Movie as well as for a Hindi Movie plus entertainment tax Rs. 10% on Kannada Movie and 20% on other languages. In the month of November, ABC Theater sold 2000 tickets of Tamil Movie and 2000 tickets of Hindi Movie. Find the value of taxable supply of service. Applicable rate of GST 18%. Find the GST liability if any?

A. For GST law add all other taxes (other than part of GST family i.e. CGST, SGST, IGST etc.) in value of supply. So, entertainment tax shall be part of assessable value.

Kannada Movie total collection = 2000*110 {100+(100*10%)}= Rs. 2,20,000 Hindi Movie total collection GST Tax Liability

= 2000*120 {100+(100*20%)}= Rs. 2,40,000

CGST = Rs. 4,60,000*9%= Rs. 41,400 SGST = Rs. 4,60,000*9%= Rs. 41,400 Q11. ABC Gas sells cooking gas cylinders. Subsidy directly transferred to the account of the customer whose account are linked with Aadhar card. Selling price per cylinder is Rs. 900. Customer received subsidy Rs. 300 directly from Government to his bank account. Net outflow of the buyer is Rs. 600. Find the value of supply of goods (per cylinder) in the hands of ABC Gas. Calculate assessable value to levy tax.

A. Supplier is liable to pay GST on transaction value which shall be exclusive of subsidy received from government. However, exclusion of subsidy is applicable if Government is paying that to the supplier for making the supply.

In this case, Government has not paid subsidy to the supplier, rather it has been paid to the buyer directly.

Supplier is not impacted by such subsidy. He shall be liable to pay whatever transaction value he has charged to buyer.

Hence, transaction value is Rs. 900 per cylinder.

Q12. ABC owns a coaching institute in Pune. The institute charges Rs. 18,000 per student for giving training in international taxation. However, this training programmes is subsidized by different institutions as follows – State Government of Maharashtra : Rs. 500 per student, XYZ Charitable Trust : Rs. 200 per student and Government of USA: Rs. 200 per student. Calculate tax liability assuming CGST & SGST @ 9% each.

A. In this case, subsidies given by different institutions are directly linked to the price charged by ABC. State Government subsidy can be excluded but subsidy paid by others will be included in taxable value.

Value of taxable supply = Rs. 18,000 – Rs. 500 (subsidy from Government of Maharashtra) = Rs. 17,500 GST Tax Liability CGST = Rs. 17,500*9%= Rs. 1,575 SGST = Rs. 17,500*9%= Rs. 1,575 Q13. ABC has provided the following details relating to goods sold:Particulars List price of the goods (excluding of taxes, subsidy and discounts)

Amount 50,000

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5,000 2,000 2,500

5,000

A. Statement showing calculation of value of taxable supply Particulars List price of the goods (excluding of taxes and discounts) Add:Tax levied by Municipal Authority {included in the value as per section 15 (2) (a)} Packing Charges {included in the value as per section 15 (2) (c)} Subsidy received from NGO {since subsidy is received from a non-government body, the same is included in the value of terms of section 15 (2) (e)} Recipient pay 10% brokerage on the request of supplier {included in the value as per section 15 (2) (b)} Recipient pay freight & insurance charges on behalf of supplier {included in the value as per section 15 (2) (b)} Total Less: Trade discount {since discount is known at the time of supply, it is deductible from the value of terms of section 15 (3) (a)} Value of Taxable Supply

Amount 50,000 5,000 2,000 2,500 5,000 5,000 69,500 1,000 68,500

Q14. ABC buys the ‘Super Motor’ in Rajasthan from XYZ. Both agreed for the below conditions: Value of Motor (including GST @ 5%) Rs. 3,00,000 Taxes (other than GST) paid - Not included in above value

Rs.

5,000

Freight Expenses

Rs.

3,500

Consultancy charges for erection Testing Charges

Rs. Rs

2,000 500

Insurance Charges Other details:-

Rs

4,500

Subsidy received from Rajasthan Government (deducted from value)

Rs. 10,000

Subsidy received from manufacturer for supply of power generator (deducted from value)

Rs. 25,000

Trade discount shown in Invoice

Rs.

Cash discount due to instant payment If such supply is inter-State supply, calculate the value of taxable supply and GST.

Rs. 5,500

Below items are being paid by recipient though supplier is liable to pay

2,000

A. Sr. No. 1 2

Action

Particulars

Amount

Add

Value of Motor Taxes (other than GST) paid

3,00,000 5,000

Remarks

Section 15 (2) (a) – Value of supply shall include any taxes, duties, cesses, fees

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Study Notes 3 4 5 6

Add Add Add Add

Freight Expenses Consultancy charges for erection Testing Charges Insurance Charges

3,500 2,000 500 4,500

7

Add

Subsidy received from manufacturer

25,000

8

Less

Trade Discount

- 2,000

9

Less

Cash Discount

-5,500

10 11 12

Total Less Net

Value (including GST Value) IGST @ 5% {Rs. 3,33,000*5/105) Taxable Value

3,33,000 15,857 3,17,143

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and charges levied under any law other than GST Section 15 (2) (b) – Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of supply.

Section 15 (2) (e) – Value shall include subsidies directly linked to the price excluding subsidies provided by the CG/SG. Section 15 (3) (a) – Value of the supply shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply.

Section 15 (3) (b) – Value of the supply shall not include any discount which is given after the supply has been effected, if such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices.

Inter-State supply

Q15. ABC footwear, a registered supplier of Kanpur, has a non-moving stock worth Rs. 10,00,000 of a particular variety of shoes that are out of fashion. It has not been able to find market inspite of huge discount offered. It was able to sell this stock at a very low price of Rs. 2,00,000 to a retailer in Maharashtra with a condition that the retailer would display hoardings of ABC footwear in all their retail outlets in the State.

Determine the taxable value of supply.

A. In this case the supplier and recipient are not related persons. Although a condition is imposed on the recipient on effecting the sale, such a condition has no bearing on contract price. This is a case of distress sale, and in such a case, it cannot be said that the supply is lacking ‘sole consideration’. Therefore, the price of Rs. 2,00,000 will be accepted as value of supply.

Q16. ABC is facing serious liquidity problems and requests XYZ to pay within 2 days. It offers additional 1% cash discount. XYZ agrees and pays.

A. As per section 15 (3) (b), this discount was not known at the time of supply, and so it cannot be claimed as a deduction from the transaction value for GST calculation.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q17. ABC Ltd. is a registered manufacturer of pendrive. It sells its pendrive exclusively through distributors appointed across the country. The MRP printed on package of a pendrive is Rs. 1,000. ABC Ltd. sells the pendrives to distributors at Rs. 700 per pendrive (exclusive of GST). The applicable rate of GST is 18%.

The stock is dispatched to the distributors on quarterly basis – stock for a quarter being dispatched in the second week of the month preceding the relevant quarter. However, additional stock is dispatched at any point of the year if the company receives a requisition of that effect from any of its distributors. The company charges Rs. 100 per pendrive from distributors (excluding all charges and taxes).

The company has a policy of offer a discount of 10% on pendrive supplied to the distributors for a quarter, if the distributors sell 500 pendrives in the preceding quarter. The discount is offered on the price at which the pendrive are sold to the distributors (excluding all charges and taxes).

The company appoints XYZ Ltd. as a distributor on 1st April and dispatches 750 pendrives on 8th April as stock for the quarter April-June. XYZ Ltd. places a purchase order of 1000 pendrives with the company for the quarter July-September. The order is dispatched by the company on 10th June and the same is received by the distributor. The distributor reports sale of 700 pendrives for the quarter April-June and 850 pendrives for the quarter July-September.

Compute the taxable value for the quarter July-September in respect of transaction between ABC & XYZ Ltd. A. As per section 15 (3) (b), the value of supply shall not include any discount which is after the supply has been affected, if i. such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices, and ii.

ITC as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

XYZ Ltd. is entitled to 10% discount on pendrives supplied by ABC Ltd. for the quarter July-September as it has sold more than 500 pendrives in the preceding quarter. However, since the entire stock for the quarter JulySeptember has already been dispatched by ABC Ltd. in the month of June, the discount on the pendrives supplied to XYZ Ltd. for the quarter July-September will be post-supply discount. This discount shall be allowable since the discount policy was known before the time of such supply and the discount can be specifically linked to relevant invoices provided XYZ Ltd. reverses the ITC attributable to the discount on the basis of credit note issued by ABC Ltd. Value of Taxable Supply (Amount in INR):Price at which the pendrives are supplied to XYZ Ltd. Add: Packing Charges {incidental expenses need to be added as per section 15 (2) (c)} Less: Discount {As explained above all the conditions specified in section 15 (3) (b) have been satisfied, so the post-supply discount will be allowed, subject to reversal of ITC by XYZ Ltd.} Value of Taxable supply of one unit of pendrive Value of Taxable supply of 1000 units supplied for the quarter July-September (Rs. 730*1000)

700 100 -70

730 7,30,000

Note:-XYZ Ltd. need to reverse ITC = Rs. 70 discount * 1000 * 18% = Rs. 12,600.

Q18. ABC provides management consultancy to a group of companies for annual retainership fees of Rs. 22 Lakhs. It is given an office cabin in head office of the group for its exclusive use. ABC pays GST on the amount of Rs. 22 Lakhs. Is the value for the service provided by ABC, correct under GST laws? Please explain.

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Study Notes A. The value of Rs. 22 Lakhs for the service provided by ABC, is not correct under GST laws. ABC gets an office cabin free of cost, which is an additional non-monetary consideration for its services. The market value of the rent of the room must be added to the fees (Rs. 22 Lakhs) in order to arrive at the value of the taxable service provided by ABC, as per Rule 27 of CGST Rules 2017.

Q19. Mr. A located in Pune purchases 2,000 parker pen for Rs. 2,00,000 from ABC Ltd. (wholesaler) located in Indore. Mr. A’s son is an employee in ABC Ltd. The price of each parker pen in the open market is Rs. 120. The supplier additionally charges Rs. 5,000 for delivering the goods to the recipient’s place of business.

A. Mr. A and ABC Ltd. would not be treated as related persons merely because the son of the recipient is an employee of the supplier, although such son and the supplier would be treated as related persons (employer and employee relationship).

Therefore, the transaction value will be accepted as the value of the supply. Transaction value will be Rs. 2,00,000+Rs. 5,000 = Rs. 2,05,000. IGST will be leviable since it is inter-State transaction.

Q20. ABC Ltd. owned by XYZ Ltd. is popularly known for assembly of large machines. PQR Ltd. (also owned

by XYZ Ltd.) is engaged in fabrication of small machines. A factory contracts ABC Ltd. of its machinery, for a fee of Rs. 6,00,000. ABC Ltd. sub-contracts the work to PQR Ltd. for Rs. 4,00,000 and ensures supervision of the work performed by them. Generally, PQR Ltd. charges a fixed sum of Rs. 1,200 per man hour to its clients; its spends 400 hours on this project. Determine taxable value of supply.

A. Since ABC Ltd. & PQR Ltd. is controlled by XYZ Ltd., the two companies will be treated as related persons.

Therefore, Rs. 4,00,000 being the sub-contract price will not be accepted as transaction value. The value of the service shall be open market value being Rs. 4,80,000 (Rs. 1,200*400).

Q21. ABC Ltd. (Mumbai) has 10 agents located across Maharashtra (except Mumbai). The stock of water purifier is dispatched on Just in time basis from ABC Ltd., to the location of the agents, based on receipt of orders from various dealers, on a fortnightly basis. ABC Ltd. is also engaged in wholesale supply of water purifier in Mumbai. An agent places an order for dispatch of 20 water purifier on 10-12-2017. ABC Ltd. had sold 20 water purifier to a retailer in Mumbai on 8-12-2017 for Rs. 1,30,000. The agent effects the sale of the 20 units to a dealer who would affect the sale on MRP basis i.e. Rs. 7,000- per unit. Calculate taxable value of supply.

A. The law deems these supplies between the principal and agent to be supplies for the purpose of GST. Therefore, the transfer of goods by the principal (ABC Ltd.) to its agent for him to effect sales on behalf of the principal would be deemed to be a supply although made without consideration. The value would be either the open market value, or 90% of the price charged by the recipient of the intended supply to its customers, at the option of the supplier. Thus, the value of the supply by ABC Ltd. to its agent would be either Rs. 1,30,000 or Rs. 1,26,000 (i.e. 90% * 7,000 * 20), based on the option chosen by ABC Ltd. Q22. ABC Insurance provides you the following information for the month of September, 2018. You are required to compute value of taxable supply of services under Rule 32 (4) of Determination of value of supply Rules, 2017.

1. General policies: Total premiums collected Rs. 12,000 Lakhs (out of which 1st year premium is Rs. 5,000 Lakhs) 2. Single premium annuity policies : Premium collected Rs. 850 Lakhs 3. Only risk cover policies : Premium collected Rs. 500 Lakhs 4. Life micro-insurance policies where insured amount does not exceed Rs. 2,00,000 : Premium collected Rs. 10 Lakhs.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 5. Variable Insurance Policies : Premium collected Rs. 8,000 Lakhs. (80% of the amount is allocated for investments on behalf of policy holder for which policy holder is given separate break up in premium receipts).

A. Computation of value of taxable supply of services (Rs. In Lakhs): Particulars General policies: (i) First year premium (ii) Subsequent years i.e. policies issued in earlier years Single premium annuity policies Only Risk cover policies since the entire premium is for risk cover, hence, the option under Rule 32 (4) is not available.

Life micro-insurance policies {Exempt vide Entry 36 of Notification no. 12/2017-Ct (Rate)} Variable Insurance Policies [Gross Premium – Amount allocated towards investment] Total Taxable Value

Amount

Rate

5,000 7,000 850 500

25% 12.5% 10% 100%

10

Exempt

8,000

-

Taxable Value 1,250 875 85 500 1,600

4,310

Q23. Will the Section 15 read with Chapter IV of the CGST Rules, 2017 apply to IGST payable on import of goods? How valuation will be done in case of import of services?

A. No. As per Proviso to Sec. 5(1) of IGST Act, Customs Law will be applicable for valuation of imported goods. U/s 15 read with Chapter IV of the CGST Rules, 2017 will apply for valuation of import of services.

Q24. Is reference to the CGST Rules required in all cases?

A. No. Reference to the CGST Rules, 2017 is required only when the supply is between related persons (including different registrations of the same PAN and principal-agent supplies), or where the consideration payable is not wholly in money. However, in specific cases where the categories of goods and services are notified in this regard (such as money-changing), the CGST Rules,2017 must be referred to, irrespective of the fact that the supplier and recipient are unrelated, and price is the sole consideration.

Q25. If related persons transact at arm’s length price, can the valuation still be questioned?

A. The law mandates a reference to the CGST Rules where the supply is between related persons. However, since the supply is at “arm’s length price”, the fact that the price assigned to the transaction is an ‘open market value’ should be established.

Q26. What is the meaning of the term “Price is not the sole consideration”?

A. Under the GST law, consideration can be in “money or otherwise”, and includes the monetary value of an act or forbearance, in relation to a supply. Consideration may also flow from any person other than the recipient.

In cases, where the money received in respect of the supply is not the sole consideration, the “price is not the sole consideration”. E.g. Buyer of capital goods discharges the loan of seller, goods purchased on exchange offer, etc.

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Study Notes Section 16 Rule 36 Rule 37 Section 17 Rule 38 Rule 42 Rule 43 Rule 88A Section 18 Rule 40 Rule 41 Rules 41A Rule 44 Section 19 Rule 45 Section 20 Section 21 Rule 39

Eligibility and conditions for taking input tax credit Documentary requirements and conditions for claiming input tax credit Reversal of input tax credit in the case of non-payment of consideration Apportionment of credit and blocked credits Claim of credit by a banking company or a financial institution Manner of determination of ITC in respect of inputs or input services and reversal thereof Manner of determination of ITC in respect of capital goods and reversal thereof in certain cases Order of utilization of ITC Availability of credit in special circumstances Manner of claiming credit in special circumstances Transfer of credit on sale, merger, amalgamated, lease or transfer of a business Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory Manner of reversal of credit under special circumstances Taking ITC in respect of inputs & capital goods sent for job work Conditions and restrictions in respect of inputs and capital goods sent to the job worker Manner of distribution of credit by input service distributor Manner of recovery of credit distributed in excess Procedure for distribution of ITC by Input Service Distributor

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Study Notes

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 16 Eligibility and conditions for taking input tax credit Section 16(1) Eligible Person: Every registered person shall be entitled to take credit of ITC, subject to section 49 (Section 49 prescribes provisions relating to payment of tax, interest, penalty & other amounts), on any supply of goods or services or both to him.

Conditions: Goods or Services are used or intended to be used in the course or furtherance of his business.

Credited to Electronic Ledger: The said amount shall be credited to the electronic credit ledger of such person.

Note: Electronic Credit Ledger shall be maintained for each registered person eligible for ITC under the Act on the Common Portal and every claim of ITC under the Act shall be credited to the said Ledger.

Section 16(2) Registered person shall be entitled to the ITC, in respect of any supply of goods or services or both to him unless: (a) He is in possession of a tax invoice or debit note or such other tax paying documents as may be prescribed; (b) He has received the goods or services or both (i)

it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of title to goods or otherwise;

(ii)

where the services are provided by the supplier to any person on the direction of and on account of such registered person.

(c) subject to the provision of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of ITC admissible in respect of the said supply; and (d) He has furnished the return under section 39: •

If goods against an invoice are received in lots or installments, the registered person shall be entitled to take ITC upon receipt of the last lot of installment;

•

If the recipient fails to make payment to the supplier against the invoice within a period of 180 days from the date of issuance of invoice, then the recipient shall add back the amount of ITC claimed to the output tax liability along with interest, in the manner as may be prescribed. This provision shall not apply on tax paid on reverse charge basis {Section 9 (3) & 9 (4)}. If partial payment is made, the reversal will be proportionate to the amount not paid to the supplier.

•

If the recipient later makes payment to supplier, he can take ITC – third proviso to section 16 (2) of CGST Act.

At present, ITC to be taken in GSTR 3B by taxable person on his own. Of course, supplier has to upload his supplies in his GSTR-1. The recipient has to make sure that he can take ITC only on basis of details of invoices as uploaded by supplier.

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Study Notes Section 16(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-Tax Act, 1961, the ITC on the said tax component shall not be allowed.

Section 16(4) A registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Rule 36 Documentary requirements and conditions for claiming ITC Rule 36 (1): ITC shall be availed by registered person including the Input service distributor on the basis of any of the following documents, namely: •

An invoice;

•

An invoice for reverse charge, subject to payment of tax (reverse charge);

•

A debit note;

•

A bill of entry or any similar document prescribed under the Custom Act, 1962 or rules made thereunder for the assessment of integrated tax on imports;

•

An Input service distributor invoice or input service distributor credit note or any document issued by an input service distributor in accordance with the provisions of sub-rule (1) of rule 54.

Rule 36 (2): ITC shall be availed by a registered person only if all the applicable particulars as specified in the provisions of Chapter VI are contained in the said document, and the relevant information, as contained in the said document, is furnished in Form GSTR-2 by such person.

Now, it is provided that if the said document doesn’t contain all the specified particulars but contains the details of the amount of tax charged, description of goods or services, total value of supply of goods or services or both, GSTN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be availed by such registered person. {Proviso inserted vide notification No. 39/2018-CT, Dated 04.09.2018}

Rule 36 (3): No ITC shall be availed by a registered person in respect of any tax that has been paid in pursuance of any order where any demand has been confirmed on account of any fraud, willful misstatement or suppression of facts.

As per CBIC tweet, ITC of RCM can be claimed in same month in which it is paid. Let say ITC of RCM of July paid in August can be used for payment of liability of July

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Rule 37 Reversal of ITC in the case of non-payment of consideration Rule 37 (1): After availing ITC, recipient fails to pay to the supplier the amount towards the value of supply along with tax payable within 180 days from the date of issue of invoice. The amount of value not paid and the amount of ITC availed or proportionate to such amount not paid to the supplier in Form GSTR-2 for the month immediately following the period of 180 days from the date of the issue of the invoice.

Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall be deemed to have been paid for the purpose of the second proviso to sub-section (2) of section 16.

Provided further that the value of supplies on account of any amount added in accordance with the provisions of clause (b) of sub-section (2) of section 15 shall be deemed to have been paid for the purposes of the second proviso to sub-section (2) of section 16. {Inserted vide notification No. 26/2018-Central Tax, Dated 13.06.2018} Any amount that the supplier is liable to pay in relation to supply but which has been incurred by the recipient of the supply and not included in price actually paid or payable for the goods or services or both.

In case the supplier has issued invoice after the due date on which invoice should have been issued in terms of Section 31 of the CGST Act, calculation of 180 days will commence from the date of issue of invoice by the supplier and not from the due date by which invoice should have been issued.

Rule 37 (2): The amount of ITC referred in sub-section (1) will be added to output tax liability for the month in which the details are furnished.

Rule 37 (3): The registered person shall be liable to pay interest [Sec. 50 (1)] from the date of availment of credit till the date when the amount is added to the output tax liability.

Rule 37 (4): The time limit specified in Sec. 16 (4) shall not apply to a claim for re-availing of any credit, in accordance with the provisions of the Act or the provisions of this chapter, that had been reversed earlier.

Example1: A is a trader who places order on B and instruct to deliver goods at C and in turn he raised invoice on C. Though the goods are not physically received at the premises of A, the condition of section 16 (2) (b) is satisfied and A is entitled to take ITC. Example 2: XYZ makes an advance payment along with GST in August. The supplier raises a bill in the month of August but delivered goods in installment till November. XYZ can take ITC only in November.

Example 3: Due to a quality dispute, ABC withheld payment on a machine supplied by a vendor till it could be rectified. Over 180 days went by in this dispute. The credit taken by ABC and thus, it had to pay back the credit.

Only after the vendor rectified the machine and ABC released the payment, could ABC take the credit again.

Example 4: Hercules Machinery delivered a machine to XYZ in January 2018 under Invoice No. 49 Dated 28th January 2018 for Rs. 4,15,000 plus GST and undertook trial runs and calibration of the machine as per the requirements of XYZ. The amount chargeable for post-delivery activities was covered in a debit note raised in April 2018 for Rs. 50,000 plus GST. XYZ did not file its annual return till October 2018. Though the debit note was received in the next financial year, it relates to an invoice received in the financial year ending March 2018.

Therefore, the time limit for taking ITC available on Rs. 50,000 as well as on Rs. 4,15,000 is 20th October 2018; earlier of the date of filing the annual return for 2017-18 or the return for September 2018.

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Study Notes Example 5: XYZ received goods from ABC Ltd. on 21.09.2018 worth Rs. 1 Lac for which invoice was issued on 21.09.2018 along with GST of Rs. 18,000. XYZ claimed credit for the month of the same in form GSTR-3B of September month, but, failed to pay the invoice amount to the supplier till April, 2019. In this case, 180 days calculated from 21.09.2018, will expire on 20.03.2019. Thus, XYZ will reverse credit of Rs. 18,000 in its GSTR3B for the month of March 2019 and interest computation to start from date of availing of credit and not from the date of invoice.

Section 17 Apportionment of credit & blocked credits Section 17(1): If goods or services or both are used partly for the purpose of business & partly for other purposes, the ITC shall be restricted for the purpose of business.

Section 17(2): If goods or services or both are used for taxable supplies, zero rated supply & exempt supply, the ITC shall be restricted to taxable supplies & zero rated supply.

Section 17(3): Value of exempt supply shall include supply as may be prescribed, and – a. Supply where GST is payable on reverse charge basis b. Transactions in securities c. Sale of land d. Sale of building (except construction of complex where supply is made before obtaining certificate).

This exception has been made as in fact, GST is payable and hence it is not ‘exempted supply’.

Explanation.—For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall not include the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said Schedule {Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building}.

For determining the value of exempt supply as per section 17 (3) – (a) the value of land and building shall be taken as same as adopted for the purpose of paying stamp duty, and (b) the value of security shall be taken as one percent of the sale value of such security – Explanation below Rule 45 of CGST Rules, 2017.

Section 17(4): A banking company or Financial Institution including NBFC; a. as per provision of section 17 (2) i.e. proportionate credit; or b. avail an amount equal to 50% of the eligible input tax credit on inputs, capital goods and input services in that month and the balance 50% shall lapse.

Provided that option once exercise shall not be withdrawn during the remaining part of financial year.

Provided further that the restriction of fifty percent, shall not apply to the tax paid on supplied made by one registered person to another registered person having the same PAN. Rule 38 Claim of credit by Banking company or a financial institution (condition on choosing above option (b): (a) The said company or institution shall not avail the credit of – (i) tax paid on Inputs & Input Services that are used for non-business purposes, and (ii) the credit attributable (blocked credits) to supplies specified U/s 17 (5), in Form GSTR-2 (b) 50% of the input tax shall be the ITC admissible to the company or the institution and shall be furnished in Form GSTR -2

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 17(5): Notwithstanding anything contained in Sec. 16 (1) and Sec. 18 (1), ITC shall not be available: 17 (5)(a), (aa), (ab)

(a) motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:— (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving, such motor vehicles; (aa) vessels and aircraft except when they are used–– (i) for making the following taxable supplies, namely:— (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods (ab) services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa): Provided that the input tax credit in respect of such services shall be available— (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged— (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him; As per section 2(28) of the Motor Vehicles Act, 1988, “motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five cubic centimetres.

Noticeable, for first three exceptions viz., further supply of such vehicles or conveyance, transportation of passengers and imparting training on driving, flying, navigating such vehicles or conveyance, the supply must be an outward taxable supply of the registered person. While, in case of transportation of goods, there is no such requirement of making taxable supply.

The confusion regarding ITC availability on special purpose vehicles such as dumpers, worktrucks, fork-lift trucks, etc. also gets settled with this amendment, since this clause restricts ITC of only such motor vehicles which are used for transportation of passengers. Therefore, all types of vehicles used for transportation of goods are allowed to avail ITC without any restrictions under this sub-section.

Example 6: Dealer ‘A’ procures cars from Hyundai for further supply to various customers from its showroom. ITC available for this.

Example 7: ABC Ltd., purchased cars for employees’ official use. ITC not available for this.

Example 8: A cab operator/transport agencies procures car for transportation of passengers.

ITC available for this.

Example 9: XYZ Ltd., purchased buses for daily commuting of employees. ITC available since credit not restricted on motor vehicles for transportation of passengers with capacity > 13 person.

Example 10: ABC Ltd. bought truck for transportation of tiles manufactured by it. ITC available for this.

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Study Notes 17 (5)(b)

17 (5)(c)

Example 11 : A driving school purchases car for imparting training to trainees. ITC available for this.

Example 12: ABC Ltd. purchased a trailor which is used inside the factory for movement of semifinished goods to main plant. ITC available since it is not motor vehicle.

The following supply of goods or services or both— (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness centre; and (iii) travel benefits extended to employees on vacation such as leave or home travel concession: Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force.

Example 13: ABC Ltd., organized a dealer meet in a hotel and was charged GST on food bills of that hotel. ITC not available.

Example 14: ABC Ltd., pays GST on monthly purchase of mineral water bottles for its employees. ITC not available.

Example 15: Director of ABC Ltd., has taken membership of club for which the fee is paid by the company. ITC not available.

Example 16: ABC Ltd. pays monthly subscription fee for FICCI etc. for their employees to attend their various programmes for knowledge enrichment. ITC available.

Example 17: ABC Ltd., pays GST on cab services availed for onsite visit of its employees. ITC not available.

Example 18: A hotel pays GST on cab services availed for airport pick up and drop facilities for its guests. In turn, the hotel recovers the same from its guests as part of composite supply of hotel stay services and cab. ITC available.

Example 19: ABC caterers received a big contract for providing catering services to its client on occasion of marriage. They availed services of another caterer to render quality services and paid GST to the other caterer for his services. ITC available.

Example 20: ABC Ltd., avails services of a caterer for running canteen for its employees which is mandatory as per Factories Act, 1948. ITC available.

Example 21: ITC on aircraft purchased by a manufacturing company for official use of its CEO is blocked.

Example 22: ITC on aircraft purchased by an Aviation School providing training on flying aircrafts, is allowed.

Example 23: ITC on general insurance taken on a car used by employees of a manufacturing company for official purposes, is blocked.

Example 24: ITC on maintenance & repair services availed by a company for a truck used for transporting its finished goods, is allowed.

Example 25: ITC on outdoor catering services availed by a company, for a team development event organised for its employees, is blocked.

Example 26: ITC on outdoor catering service availed by a company to run a canteen in its factory.

The Factories Act, 1948 requires the company to set up a canteen in its factory. ITC on such outdoor catering is allowed.

Work contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;

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17 (5)(d)

17 (5)(e) 17 (5)(f) 17 (5)(g)

17 (5)(h) 17 (5)(i)

Example 27: ABC Ltd., availed services of a builder for construction of its factory which will be used for manufacturing taxable goods. The builder charged GST on invoice raised to ABC Ltd. ITC not available to ABC Ltd. Example 28: ABC Ltd., availed services of a building for renovating his office. If this is capitalized then ITC not available. But let say it is minor expenses and expensed out in Profit & Loss account then ITC available.

Example 29: ABC Ltd., availed works contract services for constructing foundation of pillars supporting the machinery and paid GST charged thereupon. ITC available. goods or services or both received by a taxable person for construction of immovable property (other than plant & machinery) on his own account including when such goods or services or both are used in the course or furtherance of business .

Goods or services or both on which tax has been paid under composition scheme.

Goods or services or both received by a Non-resident taxable person except goods imported by him.

Goods or services or both used for personal consumption.

Example 30: ABC Ltd., is engaged in manufacturing tiles. 50 packs of tiles were taken by the MD of the company for its newly constructed home. ITC not available.

Example 31: ABC & Co. is a CA Firm and provide advice on taxation matters. Two ACs were purchased for installing in the office. ITC available.

Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Any tax paid in accordance with the provisions of sections, 74, 129 and 130.

Subject to the provisions of section 17(5) of the CGST Act, if event management services, hotel, accommodation services, consumables etc. are received by a SEZ developer or a SEZ unit for authorised operations, as endorsed by the specified officer of the Zone, the benefit of zero rated supply shall be available in such cases to the supplier. [Circular No. 48/22/2018 Dated 14.06.2018] Section 17(6): The Government may prescribe the manner in which the credit referred to in Sec 17(1) & Sec. 17 (2) may be attributed.

Note: Sec 17 (5) (c) & (d), expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property.

“Plant & Machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes: (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises.

Rule 42 Manner of determination of ITC in respect of inputs or input services and reversal thereof The ITC in respect of Inputs or Input Services U/s 17 (1)/(2), being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely , -

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Study Notes Particulars Total Input tax involved on inputs and input services in a tax period Amount of Input Tax, out of ‘T’, attributable to Inputs and Input Services intended to be used exclusively for purposes other than business T2 Amount of Input Tax, out of ‘T’, attributable to Inputs and Input Services intended to be used exclusively for effecting Exempt Supplies T3 Amount of Input Tax, out of ‘T’, in respect of Input and Input Services on which credit is not available u/s 17 (5) C1 Amount of ITC credited to the Electronic credit ledger of Registered person C1 = T – (T1+T2+T3) T4 Amount of ITC attributable to Input & Input Services intended to be used exclusively for effecting supplies other than exempted but including zero rated supplies C2 Input Tax Credit left after attribution of ITC under T4 shall be called common credit, and calculated as: C2 = C1-T4 Note: ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the invoice level in Form GSTR-2 and at summary level in FORM GSTR-3B D1 Amount of ITC attributable towards Exempt Supplies is calculated as follows – D1 = (E/F) * C2 Where ‘E’ is the aggregate value of exempt supplies during the tax period, and ‘F’ is the total turnover in the State of the registered person during the tax period.

Note: Where the registered person doesn’t have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the last tax period for which details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to calculated.

For the purposes of this clause, the aggregate value of exempt supplies and total turnover shall exclude the amount of any duty or tax levied under entry 84 and entry 92A of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule D2 Amount of credit attributable to non-business purposes if common inputs and inputs services are used partly for business and partly for non-business purposes and shall be equal to 5% of C2 C3 Remainder of the common credit shall be the eligible ITC attributed to the purposes of business and for effecting supplies other than exempted supplies but including zero rated supplies – C3 = C2 – (D1+D2) Note: • the amount ‘C3’,’D1‘ and ‘D2‘ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax and declared in FORM GSTR-3B or through FORM GST DRC-03 • The amount equal to aggregate of ‘D1’ & ‘D2’ shall be reversed by the registered person in FORM GSTR-3B or through FORM GST DRC-03 • Where the amount of Input Tax relating to Inputs or Input Services used partly for purposes other than business and partly for effecting exempt supplies has been identified and segregated at invoice level by the registered person, the same shall be included in ‘T1’ and ‘T2’ respectively, and the remaining amount of credit on such inputs or input services shall be included in ‘T4’ The ITC determined shall be calculated finally for the financial year before the due date for furnishing of the return for the month of September following the end of the financial year to which such credit related.

T T1

Where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts determined in respect of ‘D1’ and ‘D2’, such excess shall be reversed by the registered person in FORM GSTR-3B or through FORM GST DRC-03 in the month not later than the month of September following the end of the financial year to which such credit related.

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158

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain The said person shall be liable to pay interest on the said excess amount at the rate specified u/s 50 (1) for the period starting from first day of April of the succeeding financial year till the date of payment.

Or Where the aggregate of the amounts determined in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’, such excess amount shall be claimed as credit by the registered person in his return for a month not later than the month of September following the end of the financial year to which such credit relates.

Example 32: Out of 10 containers purchased by a registered person engaged in taxable supply of goods, 5 are used for storing non-taxable goods (exempt supply) such as petroleum. ITC on 5 containers used for nontaxable goods cannot be availed.

Example 33: A registered person (partnership firm) purchases 5 laptops but one of the laptop is being used by the son of one of the partners of the firm. ITC will not be available on such laptop as it is used for personal purposes.

Example 34: ABC Ltd. provides taxable as well as exempted services. Turnover of ABC Ltd. during the month of Nov’17 is as under: Particulars

Amount 30,00,000 64,00,000 16,00,000 10,00,000 1,20,00,000

Value of exempted supply of services Value of taxable supply of services Value of Zero rated taxable supply of services Supply of services made for personal use Total Details of ITC for the month of Nov’17 are as under: Particulars Total ITC available The above ITC on input services includes the following: (i) Credit on input services exclusively used for supplying exempted services (ii) Credit on input services exclusively used for supplying taxable services (including zero rated supplies) (iii) Credit availed on inputs which are not eligible u/s 17(5) (iv) Credit on input services exclusively used for supplying services for personal use Please calculate entitlement of ITC for the month of Nov’17.

Particulars Total ITC available Less: (i) Credit on input services exclusively used for supplying services for personal use [T1] (ii) Credit on input services exclusively used for supplying exempted services [T2] (iii) Credit availed on inputs which are not eligible u/s 17(5) [T3] Amount of ITC to the electronic credit ledger C1 = T – [T1+T2+T3]

CGST

SGST

IGST

1,08,000

1,08,000

54,000

18,000

18,000

7,200

54,000

54,000

3,600

18,000 10,800

18,000 10,800

6,300 5,400

CGST

SGST

IGST

1,08,000

1,08,000

54,000

10,800

10,800

5,400

18,000

18,000

7,200

18,000 61,200

18,000 61,200

6,300 35,100

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Study Notes

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Less: Credit on input services exclusively used for supplying taxable 54,000 services including zero rated supplies [T4] Common Credit of input & input services used for providing 7,200 supply of services [C2 = C1-T4] Total inadmissible common ITC [D1+D2]** 2,160 Net eligible common credit [C3 = C2 – (D1+D2)] 5,040 Total credit eligible [T4+C3] 59,040 Amount to be reversed by registered person [D1+D2] 2,160 ** Calculation of amount of ITC exempt supplies and supply made for non-business use : Particulars Aggregate Value of Exempted supply of services [E] Total turnover for Nov’17 [F] Credit attributable towards exempt supplies [D1 = (E/F)*C2] Credit attributable for supplies made for non-business purpose [D2 = 5% *C2] Total inadmissible common credit [D1+D2]

54,000

3,600

7,200

31,500

2,160 5,040 59,040 2,160

9,450 22,050 25,650 9,450

CGST

SGST

IGST

30,00,000 1,20,00,000 1,800 360

30,00,000 1,20,00,000 1,800 360

30,00,000 1,20,00,000 7,875 1,575

2,160

2,160

9,450

Rule 43 Manner of determination of ITC in respect of capital goods and reversal thereof in certain cases (1) Subject to the provisions of sub-section (3) of section 16, the ITC in respect of capital goods, which attract the provisions of sub-sections (1) and (2) of section 17, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely, (a) the amount of input tax in respect of capital goods used or intended to be used exclusively for non-business purposes or used or intended to be used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and FORM GSTR-3B and shall not be credited to his electronic credit ledger; (b) the amount of input tax in respect of capital goods used or intended to be used exclusively for effecting supplies other than exempted supplies but including zero rated supplies shall be indicated in FORM GSTR-2 and FORM GSTR-3B and shall be credited to the electronic credit ledger; (c) the amount of input tax in respect of capital goods not covered under clauses (a) and (b), denoted as ‘A’, shall be credited to the electronic credit ledger and the useful life of such goods shall be taken as five years from the date of the invoice for such goods: Provided that where any capital goods earlier covered under clause (a) is subsequently covered under this clause, the value of ‘A’ shall be arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof and the amount ‘A’ shall be credited to the electronic credit ledger; Explanation. - An item of capital goods declared under clause (a) on its receipt shall not attract the provisions of sub-section (4) of section 18, if it is subsequently covered under this clause. (d) the aggregate of the amounts of ‘A’ credited to the electronic credit ledger under clause (c), to be denoted as ‘Tc’, shall be the common credit in respect of capital goods for a tax period: Provided that where any capital goods earlier covered under clause (b) is subsequently covered under clause (c), the value of ‘A’ arrived at by reducing the input tax at the rate of five percentage points for every quarter or part thereof shall be added to the aggregate value ‘Tc’; (e) the amount of input tax credit attributable to a tax period on common capital goods during their useful life, be denoted as ‘Tm’ and calculated as Tm= Tc÷60 (f) the amount of input tax credit, at the beginning of a tax period, on all common capital goods

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tax

period,

and

Provided that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and ‘F’ of the last tax period for which the details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to be calculated; Explanation:- For the purposes of this clause, it is hereby clarified that the aggregate value of exempt supplies and the total turnover shall exclude the amount of any duty or tax levied under entry 84 and entry 92A of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule [excluding Central & State excise duty , CST & VAT on non-GST supplies, being petroleum products and alcoholic liquor}; (h) the amount ‘Te’ along with the applicable interest shall, during every tax period of the useful Life of the concerned capital goods, be added to the output tax liability of the person making such claim of credit. (i) The amount Te shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax and declared in FORM GSTR3B. There is no provision to make final calculations at end of every financial year.

Notes for rule 42 & 43: i.

If the registered person does not have any turnover during the said tax period, or the above information is not available, the values for the last tax period may be used. ii.

Here, exempt supplies include supplies charged to tax under reverse charge, transactions in securities, sale of land and sale of building when entire consideration is received either after issuance of completion certificate by the competent authority or its first occupation, whichever is earlier. Thus, ITC attributable to such supplies will need to be reversed. iii.

Here, exempt supplies excludea. supply of services having place of supply in Nepal or Bhutan, against payment in Indian rupees as specified in Notification No. 42/2017 IT (R) Dated 27.10.2017. b. supply of services by way of accepting deposits, extending loans or advances where the consideration is either interest or discount. However, value of such services is included in the exempt supply when the same are provided by a banking company or a financial institution including a NBFC. c. transportation of goods by a vessel from the customs station of clearance in India to a place outside India.

Thus, ITC attributable to such supplies need not be reversed. iv.

Aggregate value of exempt supplies and total turnover excludes the central excise duty, State excise duty. CST and VAT. v.

The value of exempt supply in respect of land and building is the value adopted for paying stamp duty and for security is 1% of the sale value of such security.

Example 35: ABC Ltd., purchased following capital goods in the month of April 2018 Capital Goods

Value of Capital Goods (in INR)

A B

15,00,000 14,00,000

Amount of GST paid (in INR) @ 18% 2,70,000 2,52,000

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Study Notes C

161

50,00,000

9,00,000

Out of these capital goods, capital good ‘A’ is meant exclusively for making exempt supplies, whereas, capital good ‘B’ is meant exclusively for making taxable supplies. Capital good ‘C’ is meant to be used commonly for making taxable as well as exempt supplies.

In the month of April 2018, ABC Ltd. has made exempted supplies of Rs.60,00,000, whereas total taxable supplies were Rs. 2,50,00,000.

Reversal of common credit for different months shall be made as underITC Reversal for the month of April 2018 Particulars Amount in INR Computation Step 1: Segregation of ITC in various heads ITC for capital goods used exclusively for 2,70,000 exempt supplies ITC for capital goods used exclusively for 2,52,000 taxable supplies ITC for capital goods used commonly [T c] 9,00,000 Step 2: Computing common ITC for a month Common ITC for a month 15,000 Tm = Tc / 60 = 9,00,000 / 60 Step 3: Computing common ITC at the beginning of a tax period Common ITC at beginning of tax period [T r] 15,000 Tr=Tm+Tm+Tm……..

Step 4: Computing Credit pertaining to exempt supplies Aggregate value of exempt supplies during 60,00,000 the tax period [E] Total turnover in the State of the registered 3,10,00,000 60,00,000+2,50,00,000 person during the tax period [F] ITC towards exempt supply 2,903 Te=E/F * Tr [This has to be added to =60,00,000/3,10,00,000 * 15,000 the output tax liability for the month of April 2018] In the above example, suppose in the month of May 2018, following more capital goods were purchased:Capital goods D E

Value of capital goods ( in INR) 10,00,000 9,00,000

GST (in INR @ 18%) 1,80,000 1,62,000

Out of these capital goods, capital good ‘D’ is meant exclusively for making taxable supplies, while capital goods ‘E’ is meant to be used commonly for making taxable as well as exempt supplies.

Further, the capital good ‘B’ purchased in April 2018, which was meant exclusively for making taxable supplies is decided to be used commonly from the month of May 2018 for effecting both taxable as well as exempt supplies.

In the month of May 2018, ABC Ltd. has made exempted supplies of Rs. 30,00,000, whereas total taxable supplies was Rs. 2,00,00,000.

Now, calculation of ITC reversal for the month of May 2018 shall be done as under:

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain ITC Reversal for the month of May 2018 Amount in INR Computation Step 1: Segregation of ITC in various heads ITC for capital goods used exclusively for NIL exempt supplies ITC for capital goods used exclusively for 1,80,000 taxable supplies ITC for capital goods used commonly [A] 1,62,000 Addition to ‘A’ 2,39,400 =2,52,000-5% for one quarter Total common ITC [Tc] 4.01.400 =1,62,000+2,39,400 Step 2: Computing common ITC for a month Common ITC for a month 6,690 Tm = Tc / 60 = 4,01,400 / 60 Step 3: Computing common ITC at the beginning of a tax period Common ITC at beginning of tax period [T r] 21,690 Tr=Tm+Tm+Tm…….. =15,000+6,690 Step 4: Computing Credit pertaining to exempt supplies Aggregate value of exempt supplies during 30,00,000 the tax period [E] Total turnover in the State of the registered 2,30,00,000 30,00,000+2,00,00,000 person during the tax period [F] ITC towards exempt supply 2,829 Te=E/F * Tr [This has to be added to =30,00,000/2,30,00,000*21,690 the output tax liability for the month of May 2018] Particulars

Note: It may be noted that common credit of Rs. 9,00,000 availed in April, 2018, shall form part of the common credit and will be subject to proportionate reversal for the next 60 months, i.e. upto March 2023.

From April 2023 onwards Rs. 9,00,000 shall not form part of the common credit. Similarly, will happen for common credit availed in subsequent months.

Rule 88A Order of utilization of ITC Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory tax, as the case may be, in any order: Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully.

Use IGST ITC to pay IGST liability then exhaust IGST ITC balance to pay CGST or SGST liability in any order & proportion before using CGST/SGST ITC.

Original set-off provision was applicable for tax period July 2017 to January 2019 Section 49A was made effective from 1 February 2019 and accordingly was applicable for tax period Provisions of Rule 88A shall be applicable for tax period March 2019 onwards

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162

Study Notes

163

Example 36:

Head

Tax Liability

IGST

NIL

Original set-off provision

After introduction section 49A

availabl e

Discharge of liability

ITC balance

Discharge of liability

800

NIL

NIL

ITC

CGST – 500

800

SGST

800

500

NIL

ITC balance

Discharge of liability

ITC balan ce

NIL

NIL

NIL

IGST – 300

IGST - 800

IGST – 300 CGST

Rule 88A

CGST – NIL

CGST – 500 500

NIL

NIL

Cash - NIL

Cash - NIL

Cash - NIL

SGST – 200

IGST – NIL

IGST – 500

IGST – 500

SGST – 200

SGST – 200

200

NIL Cash - 100

NIL Cash - 600

NIL Cash - 100

Example 37:

Head

Tax liability

ITC available

Original set-off provision Discharge of liability

ITC balance

IGST - 400 IGST

400

800

Cash - NIL

SGST

800

800

500

200

IGST – 300

Discharge of liability

ITC balance

IGST - 400 NIL

CGST – 500 CGST

After introduction section 49A

Cash - NIL

CGST – 400

Discharge of liability

NIL

Cash - NIL

100

CGST – 500

Cash - NIL

Cash - NIL

SGST – 200

IGST – NIL

IGST – 100

Cash – 500

NIL

SGST – 200 Cash – 600

NIL

IGST – 300

Cash - NIL

IGST – 100

ITC balance

IGST - 400

IGST - 400 NIL

Rule 88A

NIL

SGST – 200 Cash – 500

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NIL

NIL

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 18 Credit in Special Circumstances Section 18(1): (a) Person who has applied for registration within 30 days from the date on which he becomes liable for registration and has been granted registration, shall be entitled to take ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax. (b) Person who takes registration under Sec. 25 (3) [voluntarily registration], shall be entitled to take ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration. (c) where any registered person ceases to pay tax under section 10 (composition dealer), shall be entitled to take ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods (credit on capital goods shall be reduced by such percentage points as prescribed) on the day immediately preceding the date from which he becomes liable to pay tax under Section 9. (d) where an exempt supply of goods or services or both by a registered person becomes a taxable supply, such person shall be entitled to take ITC in inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods exclusively used for such exempt supply (credit on capital goods shall be reduced by such percentage points as prescribed) on the day immediately preceding the date from which he becomes liable to pay tax under Sec. 9.

Example 38: Mr. A whose liability arises, say, on 1st April, may have paid GST on his purchases, say from 1st January, is required to take registration within 30 days form 1st April i.e. upto 30th April. Supposedly, the dealer applies for registration for 29th April, ITC shall be allowed in respect of inputs held in stock, inputs contained in semi-finished goods or finished goods held in stock as on 31st March.

Example 39: Suppose in the above example, if the supplier whose liability arises, say, on 1st April, applies for registration on 6th May, when he was required to take registration within 30 days i.e. upto 30 th April. Now, supposedly, registration is granted on 9th May. In such case, ITC would be allowed only from 9th May. It would lead to loss of ITC for the period prior to 9th May. Section 18(2): A registered person shall not be entitled to take ITC U/s 18 (1) in respect of any supply of goods or services or both to him after 1 year from the date of issue of tax invoice relating to such supply.

Section 18(3): There is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the ITC which remains unutilized in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business.

Clarification in respect of transfer of ITC in case of death of sole proprietor Issue: Whether section 18(3) of the CGST Act provides for transfer of ITC which remains unutilized to the transferee in case of death of the sole proprietor?

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Study Notes Clarification: For the purpose of section 18(3) of the CGST Act and rule 41(1) of the CGST Rules, transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor. [Circular No. 96/15/2019 GST Dated 28.03.2019] Section 18(4): Where any registered person who has availed of ITC opts to pay tax under section 10 or, where the goods or services or both supplied by him become wholly exempt, he shall pay an amount by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced by such percentage as may be prescribed, on the day immediately preceding the date of exercising of such option or, as the case be, the date of such exemption.

Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit ledger shall lapse.

This section will be also applicable to registered person who is opting for Notification No. 02/2019- Central Tax (Rate) Dated 7th March 2019.

Section 18(5): The amount of credit under sub-section (1) & the amount payable under sub-section (4) shall be calculated in such manner as may be prescribed.

Section 18(6): In case of supply of capital goods or plant and machinery, on which ITC has been taken, the registered person shall pay an amount equal to the ITC taken on the said capital goods or plant and machinery reduced by such percentage points as may be prescribed or the tax on the transactions value of such capital goods or plant and machinery determined U/S 15, whichever is higher.

The amount of credit shall be calculated by reducing the ITC @ 5% for every quarter or part thereof, from the date of issue of invoice for the capital goods – Rule 40 (2) of CGST & SGST Rules, 2017.

Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person may pay tax on the transaction value of such goods determined U/s 15.

Rule 40 Manner of claiming ITC in special circumstances (1) The input tax credit claimed in accordance with the provisions of sub-section (1) of section 18 on the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or the credit claimed on capital goods in accordance with the provisions of clauses (c) and (d) of the said sub-section, shall be subject to the following conditions, namely,(a) the input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of section 18, shall be claimed after reducing the tax paid on such capital goods by five percentage points per quarter of a year or part thereof from the date of the invoice or such other documents on which the capital goods were received by the taxable person. (b) the registered person shall within a period of thirty days from the date of becoming eligible to avail the input tax credit under sub-section (1) of section 18, or within such further period as may be extended by the Commissioner by a notification in this behalf, shall make a declaration, electronically, on the common portal in FORM GST ITC-01 to the effect that he is eligible to avail the input tax credit as aforesaid: Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (c) the declaration under clause (b) shall clearly specify the details relating to the inputs held in stock or inputs contained in semi-finished or finished goods held in stock, or as the case may be, capital goods– (i) on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of the Act, in the case of a claim under clause (a) of sub-section (1) of section 18; (ii) on the day immediately preceding the date of the grant of registration, in the case of a claim under clause (b) of sub-section (1) of section 18; (iii) on the day immediately preceding the date from which he becomes liable to pay tax under section 9, in the case of a claim under clause (c) of sub-section (1) of section 18; (iv) on the day immediately preceding the date from which the supplies made by the registered person becomes taxable, in the case of a claim under clause (d) of sub-section (1) of section 18; (d) the details furnished in the declaration under clause (b) shall be duly certified by a practicing chartered accountant or a cost accountant if the aggregate value of the claim on account of central tax, State tax, Union territory tax and integrated tax exceeds two lakh rupees; (e) the input tax credit claimed in accordance with the provisions of clauses (c) and (d) of sub-section (1) of section 18 shall be verified with the corresponding details furnished by the corresponding supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 4, on the common portal.

(2) The amount of credit in the case of supply of capital goods or plant and machinery, for the purposes of sub-section (6) of section 18, shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter or part thereof from the date of the issue of the invoice for such goods.

Rule 41 Transfer of credit on sale, merger, amalgamation, lease or transfer of business (1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer or change in the ownership of business for any reason, furnish the details of sale, merger, demerger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee: Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the new units as specified in the demerger scheme.

Explanation:- For the purpose of this sub-rule, it is hereby clarified that the “value of assets” means the value of the entire assets of the business, whether or not input tax credit has been availed thereon.

(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business has been done with a specific provision for the transfer of liabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC- 02 shall be credited to his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his books of account.

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Study Notes Rule 41A Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory (1) A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner: Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration.

Explanation.- For the purposes of this sub-rule, it is hereby clarified that the value of assets‘ means the value of the entire assets of the business whether or not input tax credit has been availed thereon.

(2) The newly registered person (transferee) shall, on the common portal, accept the details so furnished by the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his electronic credit ledger.

Rule 44 Manner of reversal of credit under Special Circumstances (1) The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and finished goods held in stock, and capital goods held in stock shall, for the purposes of subsection (4) of section 18 or sub-section (5) of section 29, be determined in the following manner, namely,(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had been availed by the registered taxable person on such inputs; (b) for capital goods held in stock, the input tax credit involved in the remaining useful life in months shall be computed on pro-rata basis, taking the useful life as five years.

(2) The amount, as specified in sub-rule (1) shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax.

(3) Where the tax invoices related to the inputs held in stock are not available, the registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the effective date of the occurrence of any of the events specified in sub-section (4) of section 18 or, as the case may be, sub-section (5) of section 29.

(4) The amount determined under sub-rule (1) shall form part of the output tax liability of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to the cancellation of registration.

(5) The details furnished in accordance with sub-rule (3) shall be duly certified by a practicing chartered accountant or cost accountant.

(6) The amount of input tax credit for the purposes of sub-section (6) of section 18 relating to capital goods shall be determined in the same manner as specified in clause (b) of sub rule (1) and the amount shall be determined separately for input tax credit of central tax, State tax, Union territory tax and integrated tax: {please refer to rule 40 (2). Look like that is more relevant for Section 18 (6)} Provided that where the amount so determined is more than the tax determined on the transaction value of the capital goods, the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR-1.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Circular No. 96/15/2019-GST Dated 28th March 2019 • • • • •

Section 18(3) of the CGST Act provides for transfer of ITC under specified circumstances like sale, merger, demerger, transfer of business.

Section 29(1) of CGST Act deals with cancellation of registration and as per sub-clause (a), reason for transfer of business includes “death of the proprietor”.

Doubts have been raised whether section 18(3) provides for transfer of ITC which remains unutilized, to the transferee in case of death of the sole proprietor.

The circular clarifies that transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor.

Thus, in case of death of sole proprietor if the business is continued by any person being transferee or successor, the ITC which remains unutilized in the electronic credit ledger is allowed to be transferred to the transferee as per the provisions of CGST Act and in the manner prescribed in the circular.

Example 40: Mr. Z becomes liable to pay tax on 1st August and has obtained registration on 15th August. Mr. Z is eligible for ITC on inputs held in stock and as part of semi-finished goods or finished goods held in stock as on 31st July 2017. Mr. Z cannot take ITC on capital goods.

Example 41: Mr. A applies for voluntarily registration on 5th June and obtain registration on 22 nd June. Mr. A is eligible for ITC on inputs held in stock and as part of semi-finished goods or finished goods held in stock as on 21st June. Mr. A cannot take ITC on capital goods.

Example 42: Mr. B, a registered taxable person, was paying tax at composition rate upto 30th July. However, w.e.f. 31st July, Mr. B becomes liable to pay tax under regular scheme. Mr. B will be eligible for ITC on inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods as on 30th July. ITC on capital goods will be reduced by 5% per quarter from the date of the invoice.

Example 43: Capital goods have been in use for 4 years, 6 month and 15 days.

The useful remaining life in months = 5 months ignoring a part of the month.

ITC taken on such capital goods = C ITC attributable to remaining useful life = C * 5/60

Section 19 ITC in respect of goods & capital goods sent to job worker Principal is entitled to take ITC of inputs sent for job worker. If it is directly sent to job worker from supplier premises then principal can avail ITC when these inputs received by job worker. Same rule apply in case of capital goods.

The most important condition is that ‘inputs’ must be received within 1 year (from the date of dispatch by principal or if it is directly sent through supplier then from the date when job worker receive) or supplied from the place of business of job worker & ‘capital goods’ must be received back in 3 years. No time period in case of moulds & dies, jogs, fixtures or tools.

In case inputs/capital goods are not received back within a period of 1/3 years, it shall be a deemed supply from the principal to job worker on the date of inputs/capital goods sent for job work & interest need to be paid.

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Study Notes Rule 45 Conditions and restrictions in respect of inputs and capital goods sent to the job worker (1) The inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a challan issued by the principal, including where such goods are sent directly to a job-worker, and where the goods are sent from one job worker to another job worker, the challan may be issued either by the principal or the job worker sending the goods to another job worker: Provided that the challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal: Provided further that the challan endorsed by the job worker may be further endorsed by another job worker, indicating therein the quantity and description of goods where the goods are sent by one job worker to another or are returned to the principal.

(2) The challan issued by the principal to the job worker shall contain the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another during a quarter shall be included in FORM GST ITC-04 furnished for that period on or before the twenty-fifth day of the month succeeding the said quarter or within such further period as may be extended by the Commissioner by a notification in this behalf: Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

(4) Where the inputs or capital goods are not returned to the principal within the time stipulated in section 143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the day when the said inputs or capital goods were sent out and the said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

Explanation.- For the purposes of this Chapter {Chapter means rules related to ITC i.e. Chapter V of CGST Rules. It means this rules applicable to entire Input Tax Credit Chapter},(1) the expressions ―”capital goods” shall include ― “plant and machinery” as defined in the Explanation to section 17; (2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17(a) the value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and (b )the value of security shall be taken as one per cent of the sale value of such security.

Example 44: A supplier of notebooks for schools sends the paper of required dimensions and GSM to a job worker for making the notebooks as per the design given by him.

However, the Government changes the specifications of notebooks for supply to its schools. The supplier sends a fresh stock of paper with fresh instructions to the job worker and instructs him to hold the earlier consignment in stock till a buyer is found. The new notebooks are easily sold, but the paper and semi-finished notebooks of the old design lie in the godown of the job worker for over a year. Here, sending of paper by the notebook supplier to the job worker in the first lot will be deemed as a supply and thus, tax would be payable on the same.

Section 20 Manner of distribution of credit by input service distributor Section 20(1): The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 20(2): The Input Service Distributor may distribute the credit subject to the following conditions, namely:– (a) the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed; (b) the amount of the credit distributed shall not exceed the amount of credit available for distribution; (c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient; (d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period; (e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.

Explanation. – For the purposes of this section,– (a) the “relevant period” shall be– (i) if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or (ii) if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed; (b) the expression “recipient of credit” means the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor; (c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.

Section 21 Manner of recovery of credit distributed in excess Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipients along with interest, and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of amount to be recovered.

Rule 39 Procedure for distribution of ITC by Input Service Distributor (1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the following conditions, namely,(a) the input tax credit available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR- 6 in accordance with the provisions of Chapter VIII of these rules; (b) the Input Service Distributor shall, in accordance with the provisions of clause (d), separately distribute the amount of ineligible input tax credit (ineligible under the provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible input tax credit; (c) the input tax credit on account of central tax, State tax, Union territory tax and integrated tax

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Study Notes shall be distributed separately in accordance with the provisions of clause (d); (d) the input tax credit that is required to be distributed in accordance with the provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients ‘R1’, whether registered or not, from amongst the total of all the recipients to whom input tax credit is attributable, including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any reason, shall be the amount, “C1”, to be calculated by applying the following formula – C1 = (t1÷T) × C where, “C” is the amount of credit to be distributed, “t1” is the turnover, as referred to in section 20, of person R1 during the relevant period, and “T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable in accordance with the provisions of section 20; (e) the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated tax to every recipient; (f) the input tax credit on account of central tax and State tax or Union territory tax shall(i) in respect of a recipient located in the same State or Union territory in which the Input Service Distributor is located, be distributed as input tax credit of central tax and State tax or Union territory tax respectively; (ii) in respect of a recipient located in a State or Union territory other than that of the Input Service Distributor, be distributed as integrated tax and the amount to be so distributed shall be equal to the aggregate of the amount of input tax credit of central tax and State tax or Union territory tax that qualifies for distribution to such recipient in accordance with clause (d); (g) the Input Service Distributor shall issue an Input Service Distributor invoice, as prescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of input tax credit; (h) the Input Service Distributor shall issue an Input Service Distributor credit note, as prescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit already distributed gets reduced for any reason; (i) any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor by the supplier shall be distributed in the manner and subject to the conditions specified in clauses (a) to (f) and the amount attributable to any recipient shall be calculated in the manner provided in clause (d) and such credit shall be distributed in the month in which the debit note is included in the return in FORM GSTR-6; (j) any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in which the input tax credit contained in the original invoice was distributed in terms of clause (d), and the amount so apportioned shall be(i) reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR-6; or (ii) added to the output tax liability of the recipient where the amount so apportioned is in the negative by virtue of the amount of credit under distribution being less than the amount to be adjusted.

(2) If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for any other reason for any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process specified in clause (j) of sub rule (1) shall apply, mutatis mutandis, for reduction of credit.

(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the Input Service Distributor credit note specified in clause (h) of sub-rule (1), issue an Input Service Distributor invoice to the recipient entitled to such credit and include the Input Service Distributor credit note and the Input Service Distributor invoice in the return in FORM GSTR-6 for the month in which such credit note and invoice was issued.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Example 45: ABC Ltd. a confectionary manufacturer, has paid bills of an advertising company amounting to Rs. 24 Lacs for advertising campaigns for two varieties of cakes, which are manufactured at separate locations in Pune and Bangalore. The company had a total turnover of Rs. 112 crores in the previous financial year. The turnover of the Pune unit was Rs. 5 crores, and the turnover of the Bangalore unit was Rs. 10 crores. The aggregate turnover here is taken as Rs. 15 crores, as advertising was for cakes, which are manufactured at these two units only.

The ITC is to be distributed Pune and Bangalore units in the ratio 1:2. Therefore, Pune unit will be given ITC of Rs. 8 Lacs, and the Bangalore unit will be given ITC of Rs. 16 Lacs for the advertising bills.

Example 46: XYZ Ltd., having its head office at Mumbai, is registered as ISD. It has three units in different cities situated in different States namely Mumbai, Jabalpur and Delhi which are operational in the current year.

M/s XYZ Ltd. furnishes the following information for the month of July 20XX (i) CGST paid on services used only for Mumbai Unit Rs. 3,00,000 (ii) IGST, CGST & SGST paid on services used for all units Rs. 12,00,000 Total Turnover of the units for the previous financial year are as follows – Total Turnover Rs. 10,00,00,000 Turnover Mumbai Rs. 5,00,00,000 Turnover Jabalpur Rs. 3,00,00,000 Determine the credit to be distributed by XYZ Ltd. to each of its three units.

Particulars

Total

Mumbai

Jabalpur

Delhi

CGST paid on services used only for Mumbai IGST, CGST & SGST paid on services used for all units Distribution on pro rata basis to all the units which are operational in the current year

3,00,000 12,00,000

3,00,000 6,00,000

3,60,000

2,40,000

15,00,000

9,00,000

3,60,000

2,40,000

Note 1:Credit distributed pro rata on the basis of the turnover of all the units is as under :1. Unit Mumbai (5,00,00,000/10,00,00,000) * 12,00,000 = Rs. 6,00,000 2. Unit Jabalpur (3,00,00,000/10,00,00,000) * 12,00,000 = Rs. 3,60,000 3. Unit Delhi (2,00,00,000/10,00,00,000) * 12,00,000 = Rs. 2,40,000 Example 47: ABC Ltd., a registered supplier of goods having Head Office at Delhi, also registered as ISD, furnishes the following information for month of July 2018 and asks you to distribute the credit to various unites: Input Particulars CGST SGST IGST Total Service Alfa Used exclusively in Unit – III 27,000 27,000 54,000 Beta Used in Unit – I, II and III 36,000 36,000 Cancer Used in Unit – I, II, III and IV 12,600 12,600 25,200 Drama Used in Unit – I (Input service “D” is availed for 1,080 1,080 2,160 employee on vacation during the month to its Unit I) Total 40,680 40,680 36,000 Total Turnover for the units for the year ending 31st March, 2018 is Rs. 3,30,00,000 with details are as under : Unit I Rs. 50,00,000 Unit II Rs. 30,00,000 Unit III (not registered as exclusively engaged in exempt goods) Rs. 1,50,00,000 Unit IV Rs. 1,00,00,000 All units are operational during the current year. Unit I is located in Delhi whereas Unit II is in Mumbai, Unit III is in Rajasthan and Unit IV is in Gujarat. Compute credit attributable to each of the units.

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Study Notes Particulars Alfa Beta Cancer Drama

Total Credit Available CGST SGST IGST Total 27,000 27,000 54,000 36,000 36,000 12,600 12,600 25,200 1,080 1,080 2,160

CGST

Unit I SGST

IGST 7,826

1,909 1,080 2,989

1,909 1,080 2,989

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Unit II IGST 4,696 2,291

Unit III IGST 54,000 23,478 11,455

Unit IV IGST

7,636

7,826 6,987 88,933 7,636 Working Notes:1. The credit of input tax attributable as input service to a particular unit shall be distributed only to that unit. Since Unit III is exclusively engaged in supply of exempted goods, the total credit of Rs. 54,000 is distributable to it. Further as per rule 39 (1)(d), no differentiation is to be made whether the unit is registered or not, and therefore, credit attributable to Unit III is distributed to that unit although it is not registered, which implies, it is a loss of credit.

2. As per section 20 (2)(b), the credit of tax attributable as input service to more than one unit but not at all the units shall be distributed only amongst such units to which the input service is attributable and such distribution shall be pro rata on the basis of the turnover of such units, to the total turnover of all such units during the relevant period. Hence, the credit of input service “Beta” is distributed to Unit – I, II & III. 3. Given that the service availed for employee on vacation during the month would not be eligible input services under section 17 (5), the taxes relating to Invoice “Drama” should be distributed as ineligible input tax (Rs. 1080 + Rs. 1080), and the distribution must be done separately for CGST and SGST. Since the service is wholly attributable to Unit I, hence distributed to only to such unit.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Excess ITC distributed by an input service distributor (ISD) would be recovered from the recipients along with interest and penalty, if any. Further, the ISD would also be liable to a general penalty under section 122(1)(ix) of CGST Act, 2017 .

(Circular No. 71/45/2018-GST Dated 26-10-2018) ITC on moulds and dies provided by the original equipment manufacturer (OEM) to component manufacturer on FOC basis Moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on free on cost (FOC) basis does not constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed on such moulds and dies by the OEM. However, where the contract between OEM and component manufacturer is for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the OEM will be required to reverse the credit availed on such moulds/ dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former’s business [Circular No. 47/21/2018 GST Dated 08.06.2018].

Return of time expired medicines/drugs Where the time expired medicines/drugs (goods) returned by the retailer/wholesaler as a fresh supply, are destroyed by the manufacturer, he/she is required to reverse the ITC availed on the return supply in terms of section 17(5)(h) of the CGST Act. It is pertinent to mention here that the ITC which is required to be reversed in such scenario is the ITC availed on the return supply and not the ITC that is attributable to the manufacture of such time expired goods. Illustration: Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of manufacture of medicines valued at Rs. 100/-. At the time of return of such medicine on the account of expiry, the ITC available to the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when the time expired goods are destroyed by the manufacturer, he would be required to reverse ITC of Rs. 15/- and not of Rs. 10/.

The clarification may also be applicable to return of goods for reasons other than being time expired. [Circular No. 72/46/2018 GST Dated 26.10.2018].

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Study Notes

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Question & Answer Q1. ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the following items during the month of July.

S. No. Items GST paid (i) Electrical transformers to be used in the manufacturing process 5,20,000 (ii) Trucks used for the transport of raw material 1,00,000 (iii) Raw material 2,00,000 (iv) Confectionery items for consumption of employees working in the factory 25,000 Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving necessary explanations for treatment of various items.

Note: All the conditions necessary for availing the ITC have been fulfilled.

A. Computation of ITC available with ABC Co. Ltd. for the month of July:S. No. (i)

(ii)

(iii)

(iv)

Items Electrical transformers [Being goods used in the course or furtherance of business, ITC thereon is available in terms of section 16(1)] Trucks used for the transport of raw material [After amendment in Section 17 (5) (a), the blockage is only for the motor vehicle for transportation of passengers. Motor vehicles for transportation of goods are not in the list of blockage. No condition is required to be fulfilled to avail the ITC for vehicles meant for carriage of goods.]

Raw material [Being goods used in the course or furtherance of business, ITC thereon is available in terms of section 16(1)] Confectionery items for consumption of employees working in the factory [ITC on food or beverages is specifically disallowed unless the same is used for making outward taxable supply of the same category or as an element of the taxable composite or mixed supply-Section 17(5)(b)(i)] Total ITC

ITC 5,20,000

1,00,000

2,00,000

Nil

8,20,000

Q2. XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available with XYZ Ltd. for the month of October, 2018 from the following particulars: S. No. (i)

Inward supplies

GST

Inputs ‘A’

1,00,000

(ii)

Inputs ‘B’

50,000

(iii)

Capital goods

1,20,000

(iv)

Input services

2,25,000

Remarks One invoice on which GST payable was Rs. 10,000 is missing Inputs are to be received in two installments. First instalment has been received in October, 2018.

XYZ Ltd. has capitalized the capital goods at full invoice value inclusive of GST as it will avail depreciation on the full invoice value.

One invoice Dated 20.01.2018 on which GST payable was 50,000 has been received in October, 2018.

Note: All the conditions necessary for availing the ITC have been fulfilled.

ABC Co. Ltd. is not eligible for any threshold exemption.

The annual return for the financial year 2017-18 was filed on 15th September, 2018.

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176

Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. S. No. (i)

(ii)

(iii)

(iv)

Inward supplies Inputs ‘A’ [ITC cannot be taken on missing invoice. The registered person should have the invoice in its possession to claim ITC-Section 16(2)(a)] Inputs ‘B’ [When inputs are received in installments, ITC can be availed only on receipt of last installment-First proviso to section 16(2)] Capital goods [Input tax paid on capital goods cannot be availed as ITC, if depreciation has been claimed on such tax component – Section 16(3)] Input services

ITC

[As per section 16(4), ITC on an invoice cannot be availed after the due date of furnishing of the return for the month of September following the end of financial year to which such invoice pertains or the date of filing annual return, whichever is earlier.

Since the annual return for the FY 2017-18 has been filed on 15th September, 2018 (prior to due date of filing the return for September, 2018 i.e., 20th October, 2018), ITC on the invoice pertaining to FY 2017-18 cannot be availed after 15th September, 2018.

1,75,000

90,000

Nil

Nil

2,65,000

Total

Q3. ABC Ltd. supplied goods Rs. 11,500. ABC Ltd. received goods valued at Rs. 10,000. The supplier has charged GST in his invoice. SGST and CGST rate of supply of goods is 9% each. Calculate the tax payable.

A. Details Tax payable on supply of goods by ABC Ltd. on Rs. 11,500 @ 9% ITC of taxes paid by supplier available in Electronic credit ledger Net Tax Payable

SGST 1,035 900 135

CGST 1,035 900 135

Q4. ABC Ltd. supplied goods Rs. 15,000. ABC Ltd. received goods valued at Rs. 20,000. The supplier has charged GST in his invoice. They sold 60% of inputs procured and balance 40% were in stock. State Tax (SGST) and Central Tax (CGST) rate on supply and purchase of goods is 9% each. Calculate the tax payable.

A. Details Tax payable on supply of goods by ABC Ltd. on Rs. 15,000 @ 9% ITC of taxes paid by supplier available in Electronic credit ledger Net Tax Payable Credit carried forward in Electronic Credit Ledger

SGST 1,350 1,800 NIL 450

CGST 1,350 1,800 NIL 450

Q5. ABC Ltd. are manufacture of drugs. SGST and CGST rate on supply of goods is 2.5% each. They sold the goods at Rs. 20,000. They purchased inputs at Rs. 13,000. The SGST and CGST on inputs is 6% each. All these inputs were used in Manufacture of final products. There was no opening or closing stock of inputs or final products. Calculate the tax payable.

A. Details Tax payable on supply of goods by ABC Ltd. on Rs. 20,000 @ 2.5% ITC of taxes paid by supplier available in Electronic credit ledger Net Tax Payable

SGST 500 780 NIL

CGST 500 780 NIL

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Credit carried forward in Electronic Credit Ledger 280 280 This excess credit is due to inverted tax structure i.e. tax on inputs is more than tax payable on outputs. In that case, Deepak Manufacturers can claim refund of this excess ITC. Q6. ABC Ltd. procures input goods and services within State Rs. 1,000. SGST and CGST rate on receipt is 9% each. He manufactured 2 products out of inputs. One product of value of Rs. 800 was subject to SGST and CGST @ 9% each. Other product of value of Rs. 800 was exempt from SGST & SGST. Calculate the tax payable.

A. Details Tax payable on supply of goods and services ITC of taxes paid on input goods and services available Reversal of 50% ITC is ineligible (to be reversed in Electronic Credit Ledger) Eligible ITC Net tax payable by cash through Electronic cash ledger

SGST 72 90 45 45 27

CGST 72 90 45 45 27

Q7. When the ISD is one State say at Delhi and the Recipients of credits (Suppliers or Locations) are in different States say in Chennai, Tamil Nadu and Bangalore, Karnataka. Assume the turnovers for the relevant period (previous financial year) of Chennai unit are Rs. 10 crores and that of Bangalore unit is at Rs. 30 crores.

Credit Available with ISD at Delhi

SGST CGST IGST Amount in Lacs

Credit directly attributable to Chennai Bangalore Common Credits Total A. Credit Available with ISD at Delhi

5 3 5 13 Chennai

5 2 7 14

10 5 8 23

Bangalore

Amount in Lacs Directly Attributable SGST as IGST CGST as IGST IGST as IGST Total (a) Common Credit SGST as IGST (5*10/40) or (5*30/40) CGST as IGST (7*10/40) or (7*30/40) IGST as IGST (8*10/40) or (8*30/40) Total (b) Total (a+b)

5 5 10 20

3 2 5 10

1.25

3.75

1,75

5.25

2

6

5 25

15 25

Q8. ABC Ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on composition scheme under Section 10 with effect from 28-02-2018. It provides following information relating to balance of ITC lying as on 27th Feb 2018: 1. Inputs lying in stock as valued at Rs. 3,36,000 (inclusive of CGST & SGST @12%)

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 2. Inputs contained in finished goods where tax invoice is not available relating to such inputs but it is known that market price of such inputs (inclusive of CGST & SGST @ 12%) on 28th February 2018 is Rs. 1,79,200 3. ITC on capital goods purchased on 25th October 2017 is Rs. 1,44,000 4. Balance in Electronic credit ledger is Rs. 2,20,000.

Decide whether ABC Ltd. is eligible for ITC lying on 27th February 2018, A. As per Section 18 (4), where any registered taxable person who has availed of ITC opts to pay tax under section 10 i.e. composition scheme, he shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, taking useful life of capital goods 5 years, on the day immediately preceding the date of exercising such option. Therefore in given case ABC Ltd. is required to pay following amounts: Particulars Amount Inputs lying in stock (Rs. 3,36,000*12/112) 36,000 Inputs contained in finished goods lying in stock (Rs. 1,79,200*12/112) 19,200 Input Tax on Capital goods used for 4 months and 2 days, taking residual life as 5 years 1,32,000 (1,44,000*55/60) (55 months being remaining residual life of capital goods) Amount to be paid by ABC Ltd. (CGST+SGST) 1,87,200 Working Note: As per Rule 44(3) of CGST Rules, 2017, where the tax invoices related to the inputs lying in stock are not available, the registered person shall estimate the amount under Rule 44 (1) based on the prevailing market price of goods on the date of opting for composition scheme.

The aforesaid amount can be paid by utilizing the balance in Electronic Credit Ledger. The balance credit in Electronic Credit Ledger = Rs. 2,20,000 – Rs. 1,87,200 = Rs. 32,800 lapse.

Q9. ABC Ltd. a supplier of goods has purchased capital goods invoice Dated 1st October 2017 for Rs. 4,13,000 (inclusive of CGST and SGST @ 9%). After taking it for business use, the said capital goods were supplied for Rs. 2,85,000 on 26th April 2018.

A. Particulars Date of Invoice of purchase of capital goods Date of supply of capital goods after taking into use No. of Quarter for which it is used CGST & SGST paid on purchase of capital goods [4,13,000 * (18/118)] Reduced by Rs. 63,000*5%*3 Amount of CGST and SGST Transaction value on supply of capital goods u/s 15 CGST & SGST payable on supply of Capital Goods @ 18% Amount to be payable higher of

Amount 1st Oct’17 26th Apr’18 3 63,000 9,450 53,550 2,85,000 51,300 53,550

Q10. What would be your answer if capital goods being Refractory Bricks are removed as scrap at a transaction value of Rs. 25000 on 29th March 2018?

A. As per section 18 (6), where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, there shall be no requirement for reversal of ITC, taxable person may pay tax on the transaction value i.e. if tax rate is 9% each then CGST Rs. 2,250 & SGST Rs. 2,250.

Q11. ABC Ltd. a registered manufacturer demerged its entity into AB cement Ltd. and BC Steel Ltd. the total value of assets of ABC Ltd. is Rs. 25,00,000 and unutilized credit on account of CGST, SGST and IGST

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179

amounted to Rs. 60,000, Rs. 45,000 and Rs. 84,600 respectively. The value of assets of AB cement Ltd. and BC Steel Ltd. is Rs. 12,00,000 and Rs. 13,00,000 respectively obtained as per the scheme. Discuss the eligibility of credit transferred to new units on account of Demerger?

A. As per Rule 41 of CGST Rules, 2017, in case of Demerger, input tax credit shall be apportioned in the ratio of Value of assets of new unit as specified in Demerger scheme. In the given case, credit transferred to both the new units would be – Particulars Value of Assets Unutilized credit relating to CGST (to be apportioned in ratio of value of assets of AB Cement and BC Steel Ltd.) SGST IGST Total Apportioned Credit

ABC Ltd. 25,00,000

AB Cement Ltd. 12,00,000

60,000 45,000 84,600 1,89,600

28,800 21,600 40,608 91,008

BC Steel Ltd. 13,00,000

31,200 23,400 43,992 98,592

Q12. What would be scenario of Input Tax Credit in respect of Immovable Property?

A. Law divides claim of Input Credit in respect of construction of Immovable Property in two parts: (a) Works contract services when supplied for construction of immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service; Example: Mr. A wants to start a Hotel. He engages Mr. B as contractor for construction of the hotel building and allots him the contract with entire material and labour to be procured by C. CGST Act, 2017 provides that any person who has paid taxes under a contract which has resulted in construction of immovable property, he would not be able to claim Input Tax Credit of such taxes paid unless such services are used as Input Services for further supply of Work contract service.

Thus, in the given scenario, Mr. A would not be eligible to claim input tax credit of taxes paid to Mr. B, as work contract services of Mr. B have not been used by Mr. A for further supply of works contract service. (b) Goods or services or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business Example: Mr. A wants to start a Hotel land he engages Mr. B as contractor for construction of Hotel Building.

He allots him the contract with part of the material being provided by Mr. A and balance material and labour to be procured by Mr. B. In the above cases, Mr. A has provided part of the material to Mr. B, ownership of the material to the extent provided by Mr. A remains with Mr. A and Mr. B uses the material for the construction of building for Mr. A only.

Mr. A would not be entitled to credit of any taxes paid on purchase of such material for construction of Immovable property.

Impact of the two provisions: With the insertion of the two provisions, both the scenarios wherein: (a) A person awards contract of construction of the immovable property to a contractor or (b) Constructs the immovable property himself by purchasing material and hiring labour, he would not be able to claim credit of the taxes paid for the construction of the immovable property.

Q13. Mr. Amit, a supplier of goods, pays GST under regular scheme. He is not eligible for any threshold exemption. He has made the following outward taxable supplies in the month of August, 2019 – Intra-State supplier of goods 6,00,000, Inter-State supplies of goods 2,00,000. He has also furnished following information in respect of purchases made by him from registered dealers during August, 2019 – Intra-State purchase of goods 4,00,000, Inter-State purchase of goods 50,000. Balance of ITC available at the beginning of the August

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 2019 – CGST 15,000, SGST 35,000, IGST 20,000. Compute the net GST payable by Mr. Amit for the month of August, 2019.

Note : (i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively, on both inward and outward supplies (ii) Both inward and outward supplies given above are exclusive of taxes, wherever applicable (iii) All the conditions necessary for availing the ITC has been fulfilled.

A. (A) Tax payable Description CGST (Rs.) Inter-State taxable supply of goods – Rs. 2,00,000 – IGST @ 18% Intra-State taxable supply of goods – Rs. 54,000 6,00,000 – CGST @ 9% and SGST @ 9% Total Tax Payable 54,000

SGST (Rs.)

IGST (Rs.) 36,000

54,000 54,000

36,000

SGST (Rs.) 35,000 36,000

IGST (Rs.) 20,000

(B) ITC Available Description Opening Balance Intra-State Purchases {Rs. 4,00,000 - CGST 9% & SGST @ 9%} Inter-State Purchases {Rs. 50,000 – IGST @ 18%} Total ITC available (B) Net Tax Payable Description Total Tax Payable Less ITC available Net Payable Less Cross Utilization Net Tax Payable Excess ITC carried forward

CGST (Rs.) 15,000 36,000

9,000 51,000

71,000

29,000

CGST (Rs.) 54,000 51,000 3,000 NIL 3,000 NIL

SGST (Rs.) 54,000 71,000 NIL NIL NIL 10,000

IGST (Rs.) 36,000 29,000 7,000 -7,000 NIL NIL

Q14. M Ltd. Mumbai procured goods 10,000 Kgs @ Rs. 100 per Kg. from K Ltd. of Kolkata. These goods came to M Ltd. of Mumbai in the following manner: Date of Dispatch

No. of Kgs dispatched

Date of receipt 15th November 2017 20th November 2017

Transit Losses NIL NIL

No. Kgs received 3,000 4,000

10th October 2017 2nd November 2017

3,000 4,000

3rd December 2017

3,000

1st January 2018

20

2,980

Invoice shows 10,000 Kgs and IGST @ 18%.

You are required to answer: (a) M Ltd. can avail the proportionate credit on 15th Nov 2017 and 20th Nov 2017. (b) When can M Ltd. is eligible for input tax credit? (c) How much credit is allowed to M Ltd. A. (a) M Ltd. cannot take proportionate credit on the quantity received on 15th November 2017 and 20th November 2017. (b) M Ltd. is eligible to avail the input tax credit on 1st January 2018. (c) Input tax credit allowed = Rs. 1,79,640/- (10,000 Kgs x Rs. 100) x 18% x 9980 kgs/10,000 kgs.

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Study Notes Note: (i) Goods received in lots ITC available only on receipt of last lot/installment [1st proviso to Sec 16(2)] (ii) ITC is admissible only upon receipt of goods. Thus, ITC not admissible in respect of goods not received.

Q15. M/s X Ltd. has establishment in Chennai, and establishment in Hyderabad. Supply of goods (open market value of Rs. 5,00,000) made by M/s X Ltd. Chennai to M/s X Ltd. Hyderabad. M/s X Ltd. Chennai paid IGST of Rs. 60,000. Accordingly M/s X Ltd. Hyderabad availed the input tax credit of Rs. 60,000. 2nd Proviso to Section 16(2) of CGST Act, 2017 is applicable in the given case (i.e. to reverse the credit where payment is not made within 180 days from the date of invoice). Discuss.

A. As per proviso to rule 37(1) of the CGST Rules, 2017, the value of supplies made without consideration as specified in Schedule I of the said Act shall be deemed to have been paid for the purposes of the second proviso to sub- section (2) of section 16. In the given case M/s X Ltd. Hyderabad is not required to reverse the input tax credit. Since, as per Section 25(4) of the CGST Act, 2017 two establishments are considered as establishment of distinct person and accordingly, supply made by one establishment to another establishment will be covered under Schedule I without consideration.

Q16. XYZ Ltd. is engaged in supply of passenger transportation services. In the month of September, 2017, it has purchased two motor vehicles for Rs. 18,00,000 plus GST @28%. You are required to advice XYZ Ltd. if it can avail Input tax credit of the GST paid by it on motor vehicles.

A. As per Section 17(5) (a), input tax credit shall not be available in respect of motor vehicles having approved seating capacity of not more than thirteen person (including the driver). However, credit will be available when they are used for making the supplies of transportation of passengers. In this case XYZ Ltd. is engaged in transportation of passengers it will be entitled to take credit of GST amounting Rs. 5,04,000 i.e. [Rs. 18,00,000 × 28%].

Q17. ABC Bank has purchased a van for transportation of cash (money). Whether ITC of such motor van is admissible?

A. The blockage is only for the motor vehicle for transportation of passengers. Motor vehicles for transportation of goods are not in the list of blockage. No condition is required to be fulfilled to avail the ITC for vehicles meant for carriage of goods.. Under GST law, Cash/money is neither goods nor services (Sec 2(52) and Sec 2(102) of CGST Act). Since cash/money cannot be considered as ‘goods’, ABC Bank is not eligible for ITC of motor vans purchased by it for transportation of cash.

Q18. ABC Ltd. is engaged in supply of transport of passengers by air services. The company avails outdoor catering services of XYZ Caterers in order to provide food and beverages to the passengers. XYZ Caterers raises an invoice on ABC Ltd charging GST. ABC Ltd. wants to avail the ITC on outdoor catering services supplied by XYZ Caterers. Advise.

A. ITC shall be available where an inward supply of goods or services or both of a particular category is used by a registered person as an element of a taxable composite or mixed supply.

In the given case, ABC Ltd will be entitled to avail the ITC of the GST paid to XYZ Caterers since outdoor catering services forms part of taxable composite supply of passengers by air services.

Q19. ABC Ltd is a BPO which works on night shift basis. As per the Government Guidelines for BPO Sector, it has to provide rent a cab facilities to its employees who work on night shifts. Whether, ABC Ltd. is eligible to avail ITC on rent a cab services.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. No, ABC Ltd cannot claim ITC on the GST paid on such rent-a-cab services. The reason being that such credit is not admissible unless it is obligatory for an employer to provide the same to its employees under any law for time being in force.

Q20. Mr. A of USA being technician came to India to assemble parts of machinery. He also imported goods worth Rs. 10,00,000 and paid following customs duties: (i) Basic customs duty is Rs. 1,00,000. (ii) Integrated Goods and Services Tax (IGST) of Rs. 1,98,540.

In India Mr. A wants to register as non-resident taxable person and his estimated liability is Rs. 2,50,000. How much Mr. A is liable to pay as advance tax?

A. Mr A is Non-resident taxable person. NRTP needs to pay tax in advance before he is granted registration certificate. NRTP is entitled to book credit of goods imported by him. However, only IGST paid on imported goods is eligible ‘input tax’. Thus, ITC admissible to him is Rs 1,98,540.

Considering the admissible amount of ITC, Mr. A of USA is liable to pay advance tax of Rs. 51,460. (i.e. Rs. 2,50,000 – 1,98,540) Q21. ABC Bank, having a branch in Jaipur engaged in supply of services by way of accepting deposits and extending loans opted for Section 17(4). Its head office is in Mumbai and branch in Jaipur. ITC (CGST & SGST) available for the month August, 2017 is Rs 90,000. Determine the amount of admissible ITC for ABC Bank, Jaipur Branch. Total ITC of 90,000 includes credit relating to : Particulars 1. Services availed from from Mumbai Head Office (deemed distinct person under GST law) 2. Outdoor catering services received for its employees 3. Auditing Services 4. Goods which are used for personal use of employees

Input Tax (CGST & SGST) 18,000 16,900 22,500 6,500

A. Statement showing ITC eligibility for ABC Bank (Jaipur Branch) which has opted for Section 17 (4) Particulars Services availed from from Mumbai Head Office (deemed distinct person under GST law) – Deemed supply between distinct person - Full ITC available Outdoor catering services received for its employees {Blocked Credit U/s 17 (5)} Auditing Services Goods which are used for personal use of employees {Blocked Credit U/s 17 (5)}

Input Tax (CGST & SGST) 18,000 Not Allowed (Allowed @ 50%) Not Allowed

ITC available (90,000 – 16,900 – 6,500 – 18,000) = 48,600 @ 50% Total Admissible ITC (available for utilization for August Month GST liability)

24,300 42,300

Q22. X is a chartered accountant by profession. He gives the following information pertaining to October 20XX 1. Consultancy given to different clients during October 20XX (but not including the transactions given below) (invoice value : Rs. 35,70,000).

2. Consultancy given to A Ltd. (invoice value : Rs. 8,000, market value of supply : Rs. 50,000, X holds 40 percent shares in A Ltd.) 3. Consultancy given to B (invoice value : nil, market value of supply : Rs. 48,000, B is not a relative of X).

4. Consultancy given to Mrs. X (invoice value : nil, market value of supply : Rs. 75,000, Mrs. X is not dependent upon X).

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5. Consultancy given to C, younger brother of X (invoice value : nil, market value of supply : Rs. 60,000, C is not dependent upon X).

6. Consultancy given to D, elder brother of X (invoice value : nil, market value of supply : Rs. 70,000, D is dependent upon X).

7. Consultancy given to E, an employee of X (invoice value : nil, market value of supply : Rs. 80,000).

Above figures are exclusive of GST. GST is 18%. Calculate the amount of GST payable by X for October 20XX. He want to avail input tax credit — − Balance available in electronic credit ledger on October 1, 20XX : Rs. 22,000 − Fees paid to a chartered accountant pertaining to tax audit of X (taxable value : Rs. 20,000, GST : Rs. 3,600). − GST paid on food and beverages for employees / clients (amount of GST being Rs. 8,000). − Motor car purchased for official use of employees (amount of GST being Rs. 2,80,000). − Motor car purchased for private use of X and his family (amount of GST being Rs. 7,00,000). − Membership of a club taken by X for entertaining official guests (amount of GST being Rs. 18,000). − Fees paid to a consultant pertaining to transfer pricing matter of a client (amount of GST being Rs. 20,000).

A. Particulars Consultancy given to different clients Consultancy given to A Ltd. (A Ltd. is related to X, price is not sole consideration, market value to be considered) Consultancy given to B (B is not a relative of X, price is sole consideration, transaction value to be considered) Consultancy given to Mrs. X (Mrs. X is “related person”, open market value to be considered) Consultancy given to C, younger brother not dependent upon X (C does not come in the list of “related persons”, GST applicable on transaction value on the assumption that price is sole consideration) Consultancy given to D, elder brother dependent upon X (related person, GST on open market value) Consultancy given to E, an employee of X (employer and employee are related persons, gift to employees which is not covered by employment agreement is chargeable to GST on the basis of market value. Exemption of Rs. 50,000 is available) invoice value : nil, market value of supply : Rs. 80,000).

Total Outward Supply GST @ 18% Less:- Input Tax Credit Balance available in electronic credit ledger on October 1, 20XX 22,000 Fees paid to a chartered accountant pertaining to tax audit of X 3,600 GST paid on food and beverages for employees / clients (not eligible) Nil Motor car purchased for official use of employees (not eligible) Nil Motor car purchased for private use of X and his family (not eligible) Nil Membership of a club taken by X for entertaining official guests (not eligible) Nil Fees paid to a consultant 20,000 Balance to be paid through electronic cash ledger

Amount (Rs.) 35,70,000 50,000 Nil 75,000 Nil

70,000 80,000

38,45,000 6,92,100 45,600

6,46,500

Q23. X Ltd. provides services pertaining to retail packing of goods. This service is provided in Punjab to manufacturing units and plantation units. It gives the following information pertaining to January 2018 — 1. Service by bay of waxing, retail packing, labelling of apples provided to A Plantation (P.) Ltd., Ludhiana(invoice value : Rs. 17,10,000).

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 2. Service by way of packing and labelling of chemical goods provided to B Ltd. (invoice value : Rs. 28,00,000).

3. Service by way of packing of leather goods provided to C Ltd. (invoice value : Rs. 3,00,000, market value of similar service to unrelated persons : Rs. 6,50,000).

4. Service by way of waxing and packing of wooden toys provided to D Ltd. (invoice value : Rs. 5,00,000).

X owns 60 per cent shares in X Ltd. and Mrs. X owns 40 per cent shares in C Ltd. Above figures are exclusive of GST. GST rate is 18 per cent. The above invoices are issued during January 2018. Payment is received from A Plantation (P.) Ltd. on January 27, 2018. Payment from B Ltd. and C Ltd. is received on February 12, 2018. Nothing is received from D Ltd. so far. On January 31, 2018, X Ltd. gets an advance payment of Rs. 50,000 from E Ltd. for packing of goods which will be manufactured during 2018-19 (GST rate is 18 per cent, Rs. 50,000 is for providing services in future, nothing is received on account of GST).

Calculate the amount of GST payable by X Ltd. for January 2018. X Ltd. wants to avail input tax credit — − Balance available in electronic credit ledger on January 1, 2018 : Rs. 61,000. − Fees paid to an interior decorator for canteen of X Ltd. (taxable value : Rs. 10,000, GST : Rs. 1,800). − Membership of health club for employees (amount of GST being Rs. 17,000).

A. Particulars Service by way of waxing, retail packing, labelling of apples provided to A Plantation (P.) Ltd. [it is exempt from GST vide Exemption Notification (Entry 57)] Service by way of packing and labelling of chemical goods provided to B Ltd. Service by way of packing of leather goods provided to C Ltd. (X Ltd. and C Ltd. are related, GST applicable on market value) Service by way of waxing and packing of wooden toys provided to D Ltd. Advance payment from E Ltd. (Rs. 50,000 × 100 ÷ 118) Total Outward Supply GST @ 18% Less:- Input Tax Credit Balance available in electronic credit ledger on January 1, 2018 61,000 Fees paid to an interior decorator for canteen 1,800 Membership of health club for employees (not eligible) NIL Balance to be paid through electronic cash ledger

Amount (Rs.) Nil 28,00,000 6,50,000 5,00,000 42,373 39,92,373 7,18,627 62,800

6,55,827

Q24. ABC Ltd. purchased goods valuing Rs. 10,00,000 (excluding CGST @ 2.5% & SGST @ 2.5%) under the cover of invoice Dated 25th December 2017. The company made the payment to the supplier as per due date.

The company has not taken ITC at the time of receipt of input since there was a doubt regarding admissibility of tax credit. It legal consultant has opined that it can very much avail ITC on such inputs. The opinion was received on 5th May 2018. ABC Ltd. now would like to avail ITC. Can it do so? ABC Ltd. has filed its annual return for the year 2017-18 on 12th August 2018.

A. As per Section 16 (4), a registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods or services or both after

(a) The due date of furnishing of the return U/s 39 for the month of September following the end of financial year to which such invoice pertains; or

(b) Furnishing of the relevant annual return, Whichever is earlier.

In this case the inputs were purchased by invoice Dated 25th December 2017, hence ITC in respect of such inputs can be taken on earlier of the following dates•

20th Oct’18 being due date of furnishing return of month of Sept’18;

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Study Notes •

185

12th Aug’18 being the date of furnishing of annual return.

ABC Ltd. can avail ITC till 12th Aug’18. Therefore, it can avail credit of CGST Rs. 25,000 & SGST Rs. 25,000.

Q25. A registered supplier of taxable goods supplied goods valued Rs. 1,12,000 (inclusive of CGST Rs. 6,000 and SGST Rs. 6,000) to ABC Ltd. under the forward charge on 12-11-2017 for which tax invoice was also issued on the same date. But ABC Ltd. did not make any payment towards such supply along with tax thereon to the supplier and availed input tax credit of CGST and SGST of Rs. 12,000 on 15-12-2017. Is ABC Ltd. eligible to avail input tax credit on such supply?

Discuss ITC implications if ABC Ltd. makes the payment of Rs. 1,12,000 to the supplier on 15-09-2018.

A. Yes, ABC Ltd. can avail input tax credit on receipt of taxable supply of goods. But it is required to pay the consideration along with tax within 180 days from the date of issue of invoice.

I. If ABC Ltd. does not make payment within 180 days from the date of invoice: As per Rule 37 of CGST Rules, 2017, a registered person, who has availed of input tax credit on any inward supply of goods or services or both, but fails to make payment to the supplier within 180 days from the date of issue of invoice shall furnish the details of such supply and the amount of input tax credit proportionate to such unpaid amount, availed of, in FORM GSTR-2 in succeeding month after expiry of 180 days (will be added to Output Tax Liability alongwith interest) In this case since ABC Ltd. does not make any payment within 180 days from the date of invoice i.e. upto 11th May 2018, therefore amount equal to input tax credit availed by ABC Ltd. shall be added towards its output tax liability along with interest for the month of June, 2018 in which details of such supplies are required to be furnished.

Interest shall be calculated @18% [as given u/s 50(1) for the period starting from date of availing credit till the date when input tax credit added to the output tax liability is paid]

II.

Particulars Amount (Rs.) Amount of Input tax 12,000 Date of availing credit (Date of taking credit shall be construed as date of 15-12-2017 taking credit in electronic credit ledger) Date of payment of ITC added to Output Tax Liability 15-06-2018 No. of Days for which interest needs to be paid 182 Interest @ 18% {12000*18%*182/365} 1,077 Re-credit of Input tax if payment made after 180 days: If ABC Ltd. makes payment on 15-09-2018 that is after 180 days from date of issue of invoice, then, it shall be entitled to avail the credit of input tax.

Q26. Determine the amount of ITC admissible to ABC Ltd. in respect of following items procured by them in the month of December 2017 (below amount is GST amount):1. Goods supplied for Captive consumption in a factory

Rs. 10,000

2. Goods used in constructing an additional floor of office building

Rs. 20,000

3. Packing material used in a factory 4. Goods destroyed due to natural calamities

Rs. 5,000 Rs. 20,000

5. Goods used for repairing the office building and cost of such repairs is debited to P & L

Rs. 25,000

6. Paper for photocopying machine used in Administrative Office 7. Goods given as gifts

Rs. 1,000 Rs. 25,000

8. Inputs used for tests or quality control check

Rs.15,000

9. Goods purchased for being used in repairing the factory shed and same has been Capitalized in books

Rs.18,000

10. Cement used for making foundation and structural support to Plant & Machinery 11. Inputs used in trial runs

Rs.14,000 Rs.15,000

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. Statement showing ITC admissible to ABC Ltd. for the month of December 2017 Particulars Goods supplied for Captive consumption in a factory (since, used in course of business, hence, ITC on same will be available) Goods used in constructing an additional floor of office building {As per section 17 (5) (d), ITC shall not be available in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant & machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Hence, ITC shall not be available} Packing material used in a factory (since, used in course of business, hence, ITC on same will be available) Goods destroyed due to natural calamities {As per section 17 (5) (h), ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. Hence, no ITC shall be available in respect of goods destroyed due to natural calamities} Goods used for repairing the office building and cost of such repairs is debited to P & L {As per explanation, the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the immovable property. Goods used for revenue repairs are considered as an eligible input and credit shall be allowed on the same} Paper for photocopying machine used in Administrative Office (since, used in course of business, hence, ITC on same will be available) Goods given as gifts {As per section 17 (5) (h), ITC shall not be available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Hence, no ITC shall be available in respect of goods given as gift} Inputs used for tests or quality control check (since, used in course of business, hence, ITC on same will be available) Goods purchased for being used in repairing the factory shed and same has been Capitalized in books {As per section 17 (5) (d), ITC shall not be available in respect of goods or services or both received by a taxable person for construction of an immovable property (other than plant & machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.

Hence, ITC shall not be available} Cement used for making foundation and structural support to Plant & Machinery {As per explanation to Section 17, “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for marking outward supply of goods or services or both and includes such foundation and structural supports. ITC is admissible in respect of goods or services or both received by a taxable person for construction of plant and machinery} Inputs used in trial runs (since, used in course of business, hence, ITC on same will be available) Total Input Tax credit available

Amount (Rs.) 10,000 NIL

5,000 NIL

25,000

1,000 NIL

15,000 NIL

14,000

15,000 85,000

Q27. ABC Ltd. is engaged in supply of works contract services for construction of immovable property. It gives a part of the construction work to a sub-contractor. The sub-contractor charges GST in his invoice to ABC Ltd. Whether ABC Ltd. can avail ITC on this?

A. As per section 17 (5) (c), ITC shall not be available in respect of works contract services when supplied for construction of an immovable property. However, credit is allowed where it is an input service for further supply of works contract service. In given case, the services supplied by the sub-contractor have been used by the ABC Ltd. for supply of works contract service. Hence, ABC Ltd. can avail the ITC of the GST charged on the input service provided by the sub-contractor.

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Study Notes

187

Q28. ABC Ltd., a manufacturer, which is engaged in supply of taxable goods has purchased 10,000 kg of Product ‘A’ for Rs.. 10,00,000 (exclusive of CGST @ 14% and SGST @ 14%) on which input tax credit has been taken. Due to changes in fashion process, the said product became obsolete and their value has been written off in the books of accounts. Explain Input tax credit treatment in above case.

A. As per Section 17 (5) (h) of the CGST Act, 2017, if the value of any goods is written off in the books of account, then no input tax credit shall be allowed in respect of the said input. Where input tax credit has been taken in respect of the said goods, the same has to be paid by recipient. Since in the given case, ABC Ltd. has availed input tax credit, thus it has to pay Rs. 1,40,000 (Rs. 10,00,000 @ 14%) towards CGST and Rs. 1,40,000 (Rs. 10,00,000 @ 14%) towards SGST liability.

Q29. ABC Ltd. paying tax under composition scheme becomes liable to pay tax under regular scheme from 01/04/2018. Can it avail Input tax credit and if so determine the amount of ITC available?

Break-up of credit available with ABC Ltd. as on 31/03/2018: Particulars CGST SGST Inputs lying in stock (Invoice Dated 11/03/2018) 4,500 4,500 Capital goods procured on 25/09/2017 Invoice Dated 6,000 6,000 27/09/2017 Inputs lying in semi-finished goods in stock (Invoice Dated 1,500 1,500 21/12/2017) A. As per Section 18(1)(c), where any registered person ceases to pay tax under Section 10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the date from which he become liable to pay tax under Section 9.

Therefore, in given case, ABC Ltd. shall be entitled from 01/04/2018 to avail credit available as on 31/03/2018.

The credit of capital goods is to be claimed after reducing the tax paid on such capital goods by 5% points per quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods were received by the taxable person. (Rule 40 of CGST Rules) Statement showing ITC available to ABC Ltd. in respect of inputs Particulars

ITC (CGST +

Eligible

SGST)

Credit

Inputs lying in stock (4500+4500)

9,000

9,000

Inputs lying in semi-finished goods in stock (Invoice Dated 21/12/2017) (1500+1500)

3,000

3,000

12,000

12,000

Total Input tax credit available

Statement showing ITC available to ABC Ltd. in respect of capital goods Particulars

Amount in Rs.

Date of invoice of capital goods

27/09/2017

Date from which ABC Ltd. are liable to pay tax under Section 9

01/04/2018 3

No. of quarters from date of invoice CGST and SGST paid on capital goods procured on 27/09/2017

12,000 1,800

ITC to be reduced by Rs.. 12,000 x 5% × 3 quarters Credit (CGST and SGST) available on capital goods

10,200

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Note: As per Section 2(92), “quarter” shall mean a period comprising three consecutive calendar months, ending on the last day of March, June, September and December of a calendar year.

Q30. ABC Ltd. a registered dealer engaged in supplying exempted goods to its customers. On 12/09/2018, exemption notification was rescinded and goods were liable for tax. ABC Ltd. has to make e-payment of tax on the due date i.e., on 20/10/2018. Determine the eligible credit for the month of September, 2018 if the following information is provided:

Particulars

Value of Inputs lying in stock as on 11/09/2018.

Value of inputs contained in semi-finished goods lying in

Value (exclusive of CGST/SGST /IGST) (Rs.)

CGST @ 9% (Rs.)

SGST @ 9% (Rs.)

IGST @ 5% (Rs.)

1,25,000

6,250

87,000

7,830

7,830

1,15,000

10,350

10,350

stock as on 11/09/2018 but only inputs worth 28,000 in semi-finished goods were procured after 11/09/2017 Inputs received on 30/04/2018 lying in finished goods in stock on 11/09/2018 Capital goods procured in 10/10/2017 which is exclusively

6,55,000

32,750

used in supplying exempted goods A. As per Section 18(1)(d), where an exempt supply of goods or services or both by a registered person become a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable.

As per CGST Rules, 2017, the input tax credit on capital goods, shall be claimed after reducing the tax paid on such capital goods by 5% points per quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods were received by the taxable person.

Computation of Input tax credit relating to CGST/SGST/IGST available to ABC Ltd. in respect of inputs and capital goods will be as follows: Particulars

ITC on the value of inputs lying in stock. (In absence of

CGST (Rs.)

SGST (Rs.)

IGST (Rs.)

Total Eligible Credit (Rs.)

--

--

6,250

6,250

2,520

2,520

--

5,040

any information, it is assumed that all stocks are purchased within one year and hence are eligible) Input tax credit on the value of inputs contained in semi-finished goods [Working Notes 1]

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Study Notes Input tax credit on value of inputs lying in stock of

189

10,350

10,350

--

20,700

--

--

26,200

26,200

12,870

12,870

32,450

58,190

finished goods stock [Inputs received on 30/04/2018 lying in finished goods in stock on 11/09/2018 as all inputs were acquired within 1 year prior to the effective date on which the goods become taxable, therefore, entire ITC would be allowed] Capital goods [Working Notes 2] Total Input tax credit available Working Notes:

1. ITC on the value of inputs contained in semi-finished goods – Out of the total stock of Rs.. 87,000, inputs totaling to Rs.. 59,000 are ineligible as period of 1 year has elapsed form the effective date of purchase. ITC on inputs contained in stock of Rs.28,000 would be eligible. [Eligible Credit = Rs.. 7,830 x Rs.. 28,000 ÷ Rs.. 87,000 each in respect of CGST and SGST]

2. Credit available in respect of capital goods: Particulars

Rs.

Date of invoice

10/10/2017

Date from which the goods become taxable

17/09/2018

No. of quarters or part thereof from date of invoice

4

Percentage points to be reduced (5% per quarter)

20%

IGST paid on the capital goods used exclusively in relation to goods exempted upto 11/09/2018

32,750 6,550

ITC to be reduced by 20% Amount of Input tax credit available in respect of capital goods

26,200

Q31. ABC Ltd. a supplier of goods has purchased capital goods on 01/04/2018 for Rs. 11,20,000 (inclusive of CGST @ 6% and SGST @ 6%). After taking it for business use, the said capital goods were supplied for Rs. 9,50,000 on 01/12/2018. Explain Input tax credit treatment in this case.

A. As per Section 18(6) of the CGST Act read with Rule 40(2) of CGST Rule, 2017, in case of supply of capital goods, on which input tax credit has been taken, the registered person shall pay an amount – Equal to the input tax credit taken on the said capital goods reduced by an amount calculated @ 5% for every quarter or part thereof from the date of issue of invoice for such goods; or The tax on the transaction value of such capital goods or plant and machinery determined under Section 15, whichever is higher.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Computation of amount of tax payable by ABC Ltd. Particulars

Rs.

Date of Invoice of purchase of capital goods

01/04/2018

Date of Supply of capital goods after taking into use

01/12/2018

No. of Quarters from the date of issue of invoice for such goods

3

CGST and SGST paid on purchase of Capital Goods [Rs. 11,20,000 x 12 ÷ 112]

1,20,000

Reduced by Rs. 1,20,000 x 5% × 3 quarters

(18,000) Amount of CGST and SGST

(A)

1,02,000 9,50,000

Transaction Value on supply of Capital Goods u/s 15

1,14,000 CGST and SGST payable on supply of Capital Goods @ 12%

(B)

1,14,000

Amount to be payable (higher of A or B)

Q32. What would be your answer if capital goods being Jig are removed as scrap at a transaction value of Rs..

1,25,000 on 01/12/2018?

A. As per proviso to Section 18(6), where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, there shall be no requirement for reversal of Input tax credit, taxable person may tax on the transaction value determined under Section 15.

In the given case, since, jig are cleared as scrap, the manufacturer shall pay an amount equal to the tax leviable on transaction value i.e. CGST Rs. 1,25,000 x 6% = Rs. 7,500 and SGST Rs. 1,25,000 x 6% = Rs. 7,500.

Q33. A garment factory received a government order for making uniforms for a defense personnel. This supply is exempt from tax under a special notification. The fabrics is separately procured for the supply, but thread, buttons and lining material for the collars are the once which are used for other taxable products of the factory.

The turnover of the other garments of the factory and exempted uniforms in July 2018 is Rs. 8 crore and Rs. 2 crore respectively, the ITC on thread, button and lining material procured in July 2018 is Rs. 5,000; Rs. 25,000 and Rs. 15,000 respectively. Calculate the eligible ITC on thread and lining material.

A. Thread, buttons and lining material are inputs which are used for making taxable as well as exempt supplies.

Therefore, credit on such items will be apportioned and credit attributable to exempt supplies will be added to the output tax liability in items of rule 43 of the CGST rules, 2017.

Credit attributable to exempt supplies = Common credit x (Exempt turnover / Total turnover) Common credit = Rs. 5,000 + Rs. 25,000 + Rs. 15,000 = Rs. 45,000 Exempt turnover = Rs. 2 Crore Total turnover = Rs. 10 Crore [Rs. 2 Crore + Rs. 8 Crore] Credit attributable to exempt supply = (Rs. 2 crore / 10 Crore) x Rs. 45,000 = Rs. 9,000 Ineligible credit of Rs. 9,000 will be added to the output tax liability for the month of July. Credit of Rs. 36,000 will be eligible credit for the month of July.

Q34. Total Credit Available to ISD is Rs. 20,00,000/- & the credit distributed to all the units is Rs. 24,00,000/(i.e. Delhi Rs. 10,00,000, unit Jaipur Rs. 6,00,000 & unit Ahmedabad Rs. 8,00,000). What will be the consequences?

A. The excess credit of Rs. 4,00,000 (Rs. 24,00,000- Rs. 15,00,000) distributed would be recovered from the recipient along with interest and the provisions of section 73 or 74 shall apply mutatis mutandis for effecting such recovery.

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Study Notes Q35. Total Credit Available to ISD is Rs. 15,00,000/- & the credit should have been distributed equal to all the units as all units had equal turnover, however credit distributed in violation of Section 21, as under: Delhi Rs. 7,00,000, Jaipur Rs. 6,00,000, Ahmedabad Rs. 2,00,000. What will be the consequences?

A. The excess credit of Rs. 2,00,000 (Rs. 7,00,000- Rs. 5,00,000) shall be recovered from Delhi and Rs. 1,00,000 (Rs. 600,000 – Rs. 5,00,000) shall be recovered from Jaipur along with interest and the provisions of section 73 or 74 shall apply mutatis mutandis for effecting such recovery.

Q36. Whether benefit of input tax credit would be available if the company procures health insurance services for benefit of its employees. Please assume that the procurement of such services is mandatory under Factories Act? A. Yes. Section 17(5)(b) of the CGST Act provides that tax paid w.r.t health insurance services will be eligible as input tax credit where the Government notifies that such services are obligatory for an employer to provide to its employees under any law for the time being in force. If not notifies by the Government then it is not available.

Q37. Whether taxes paid on change of interiors of service apartment is eligible for input tax credit?

A. Input tax credit is not available on goods or services received by a taxable person for construction of an immovable property on his own account other than plant and machinery even when used in course or furtherance of business. The word “construction” includes reconstruction, renovation, additions or alterations or repairs to the extent of capitalization to the said immovable property. If the cost of interiors is capitalized towards the cost of immovable property, then it forms part of the cost of immovable property (Service apartment) and accordingly taxes paid on change of interiors of service apartment will not be eligible as input tax credit.

Q38. In case the amount is paid partly to the supplier of service, whether full taxes can be adjusted first? If no, then, whether it has to be calculated proportionately?

A. No, there is no provision under the GST law to allocate part payment of the invoice towards the taxes first so that the input tax credit can be allowed. Second proviso to Section 16(2) of the CGST Act clearly provides that the entire value of supply (with tax) is to be paid within 180 days from the date of issue of invoice. Therefore, as long as the entire payment is made within 180 days, the recipient would be entitled to claim the credit in full.

Assuming that only part payment is made within 180 days, availing of proportionate credit based on such part payment is not provided for under the CGST Act. However, Rule 37(1) of the CGST Rules provides for availability of the amount of input tax credit availed of proportionate to the amount paid to the supplier.

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Section 22 Section 24 Section 23 Section 25 Section 26 Section 27 Section 28 Section 29 Section 30

Persons liable for registration Compulsory Registration in Certain Cases Persons not liable for Registration Procedure for Registration Deemed Registration Special provisions relating to CTP and non-resident taxable person Amendment of Registration Cancellation of Registration Revocation of cancellation of registration

Section 22 Persons liable for registration • Every supplier shall be liable to be registered in the State or UT, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds, twenty lakh rupees; • Provided that where such person belongs to special category States, then he shall be Sec. 22 (1) liable to registered if his turnover in a financial year exceeds ten lakh rupees.

• Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified.

• Every person who, on the day immediately preceding the appointed day, is registered or holds a license under an existing law, shall be liable to be registered under this Act with Sec. 22 (2) effect from the appointed day.

• When a business carried on by a taxable person registered under this Act is transferred on account of succession or otherwise, as a going concern, the transferee or successor, Sec. 22 (3) shall be liable to be registered with effect from the date of such transfer or succession.

• Nothwithstanding anything contained in sub-sections (1) & (3), in a case of transfer pursuant to sanction of a scheme or an arrangment for amalgmation or, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the ROC Sec. 22 (4) issues a certification of incorporation giving effect to such order of High court or Tribunal.

Explanation:• Aggregate turnover includes own supplies or made on behalf of all principals.

• The supply of goods by job worker to principal after completion of job work, shall not be included in the aggregate turnover of the registered job worker.

• Special category States (as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution) for GST are Jammu & Kashmir, Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himanchal Pradesh & Uttarakhand.

• If a person having place of business in different States across India and one branch is in Specified Category State then threshold limit for GST registration will be reduced to Rs. 10 Lakh.

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192

Study Notes

193

Threshold Limit for Registration for Exclusive supply of goods Aggregate turnover Rs. 10 lakhs 1. Manipur 2. Mizoram 3. Nagaland 4. Tripura

Rs. 20 Lacs 1.

2.

3.

4.

5.

6.

Arunachal Pradesh Meghalaya Puducherry Sikkim Telangana Uttarakhand

Rs. 40 Lacs All other states/union territories (not applicable if compulsory registration U/s 24 & persons exercising option under the provisions of sub-section (3) of section 25, or such registered persons who intend to continue with their registration under the said Act)

Threshold Limit for Registration for others including Suppliers of Ice cream and other edible ice, whether or not containing cocoa; Pan masala; Tobacco and manufactured tobacco substitutes Rs. 10 Lacs 1. Manipur 2. Mizoram 3. Nagaland 4. Tripura

Rs. 20 Lacs All other states/union territories

Threshold Limit for Registration under Composition Rs. 75 Lacs 1. Arunachal Pradesh 2. Manipur 3. Meghalaya 4. Mizoram 5. Nagaland 6. Sikkim 7. Tripura 8. Uttarakhand

Rs. 1.5 crore All other states/union territories

Section 24 Compulsory Registration in Certain cases

Section 24 is not subject to Section 23

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, –– (i) (ii) (iii) (iv) (v) (vi)

Sec. 51: TDS in GST persons making any inter-State taxable supply; casual taxable persons making taxable supply; Sec. 52: TCS by epersons who are required to pay tax under reverse charge; commerce operator person who are required to pay tax under sub-section (5) of section 9; non-resident taxable persons making taxable supply; persons who are required to deduct tax under section 51, whether or not separately registered under this Act;

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persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise {now it has been clarified that such registration is required only by C & F agents who stock and sale goods on behalf of Principal and not by ordinarily commission agents who do not deal in goods or services themselves -CBIC circular No. 57/31/2018-GST Dated 4-9-2018} Input Service Distributor, whether or not separately registered under this Act; persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52; every electronic commerce operator who is required to collect tax at source U/s 52 every person supplying online information and data base access or retrieval services from a place outside India to a person in India, other than a registered person; and such other person or class of persons as may be notified by the Government on the recommendations of the Council.

(viii) (ix)

(x) (xi) (xii)

• •

In case a person already registered under GST is required to deduct tax under section 51, he is required to take separate registration for the purpose of deducting tax under section 51.

An ISD is required to obtain a separate registration even though it may be separately registered.

Section 23 Persons not liable for registration Person engaged exclusively in supplying goods/services/both not liable to tax or wholly exempt from tax

Agriculturist to the extent of supply of produce out of cultivation of land

Specified category of persons notified by the Government

Notification No. 10/2017-IT Dated 13-10-2017 w.e.f. 1310-2017

Notification No. 05/2017-CT Dated 19-06-2017 w.e.f. 2206-2017 Notification No. 7/2017-IT Dated 14-09-2017 Notification No. 65/2017-CT Dated 15-11-2017

Government has specified the person making inter-State supplies of taxable services and having an aggregate turnover, to be computed on all India basis, not exceeding Rs. 20 Lakh in a financial year, is exempt from obtaining registration. If such person aggregate value of such supplies includes Special Category State (according to Section 22 explanation) where threshold is 10 Lacs, then should not exceed Rs. 10 Lakh.

Persons only engaged in making taxable supplies, total tax on which is liable to be paid on reverse charge basis – Exempt from obtaining registration. [(U/s 9 (3)].

Job worker engaged in making inter-state supply of services – exempt from obtaining registration except engaged in jewelers business. The limit of 20 Lakhs/10 Lakhs will be applicable.

Persons making supplies of services, other than supplies specified U/s 9(5) through an ECO who is required to collect TCS U/s 52, and having

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Study Notes Notification No. 56/2018 – CT Dated 23.10.2018 Casual Taxable Persons making inter-State taxable supplies of notified goods up to Rs. 20,00,000

Notification No. 03/2018 – IT Dated 22.10.2018 Persons making inter-State taxable supplies of notified goods up to Rs. 20,00,000

Circular No. 71/45/2018 Dated 26th October 2018

aggregate turnover, not exceeding an amount of Rs. 20 Lakhs in a financial year, as the category of persons exempted from obtaining registration under the said Act. If such person aggregate value of such supplies includes Special Category State (according to Section 22 explanation) where threshold is 10 Lacs, then should not exceed Rs. 10 Lakh.

As we have seen earlier that as per section 24, a CTP is liable to be registered compulsorily under GST irrespective of the threshold limit.

However, following categories of CTPs have been exempted from obtaining registration: a. CTPs making inter-State taxable supplies of handicraft goods notified under Notification No. 21/2018 CT (R) Dated 26.07.2018. b. CTPs making inter-State taxable supplies of notified products, when made by the craftsmen predominantly by hand even though some machinery may also be used in the process.

Conditions to be fulfilled: 1. CTPs are availing benefit of Notification No. 03/2018 IT Dated 22.10.2018 2. The aggregate value of such supplies, to be computed on all India basis, does not exceed an amount of Rs. 20 lakh [Rs. 10 lakh in case of Special Category States] in a FY. 3. Such persons have obtained a PAN and have generated an eway bill.

As we have seen earlier that as per section 24 read with Notification No. 10/2017 IT Dated 13.10.2017, a person making inter-State supplies of goods is liable to be registered compulsorily under GST irrespective of the threshold limit.

However, following categories of persons have been exempted from obtaining registration: a. Persons making inter-State taxable supplies of handicraft goods notified under Notification No. 21/2018 CT (R) Dated 26.07.2018. b. Persons making inter-State taxable supplies of notified products, when made by the craftsmen predominantly by hand even though some machinery may also be used in the process.

Conditions to be fulfilled: 1. The aggregate value of such supplies, to be computed on all India basis, does not exceed an amount of Rs. 20 lakh [Rs. 10 lakh in case of Special Category States] in a FY. 2. Such persons have obtained a PAN and have generated an eway bill • Amount of advance tax which a casual taxable person (CTP) is required to deposit while obtaining registration should be calculated as the net tax liability after considering the estimated input tax credit (ITC).

• In cases of long running exhibitions (for a period more than 180 days), the taxable person cannot be treated as a CTP and would need to obtain registration as a normal taxable person. While applying for normal registration, the said person should upload a copy of the allotment letter granting him permission to use the premises for the exhibition and the allotment letter/consent letter shall be treated as the proper document as a proof for his place of business.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain PIB press release Dated 28-52018

Circular No. 57/31/2018 GST Dated 04.09.2018 Services provided by the commission agent for sale/ purchase of agricultural produce - Registration requirements

Support services to agriculture, forestry, fishing or animal husbandry are exempt from GST. Such exempted support services include renting or leasing of vacant land with or without a structure incidental to its use.

Agriculturist are also exempt from taking GST registration.

Generally, a commission agent under APMC Act makes supplies on behalf of an agriculturist. As per provisions of section 23(1)(b), an agriculturist who supplies produce out of cultivation of land is not liable for registration and therefore does not fall within the ambit of the term ‘taxable person’.

Thus, a commission agent who is making supplies on behalf of such an agriculturist - not a taxable person - is not liable for compulsory registration under section 24(vii). However, where a commission agent is liable to pay tax under reverse charge, such an agent will be required to get registered compulsorily under section 24(iii)of the CGST Act. (Please refer examples in Chapter 2)

Example 1: A dealer ‘X’ has two offices – one in Delhi and another in Haryana. ‘X’ supply goods & services both. In order to determine whether ‘X’ is liable to registration, turnover of both the offices would be taken into account and only if the same exceeds Rs. 20 Lakh, X is liable for registration.

Example 2: XYZ Oils, Punjab, is engaged in supplying machine oil. In order to determine whether, XYZ Oils is liable for registration, aggregate turnover shall be calculated and if the same exceeds Rs. 40 Lakh, XYZ Oils is liable to registration.

Example 3: Mohini Enterprises has appointed ABC as its agent. All the supplies of goods made by ABC as agent of Mohini Enterprises will also be included in the aggregate turnover of ABC (Recollect discussion of Chapter 2).

Example 4: Mr. A Nasik, has Intra State supply of agricultural produce (own effort) Rs. 15 Lacs, Intra State supply of exempt goods Rs. 10 Lacs & taxable supplies Rs. 25 Lacs. He is supposed to take registration since his aggregate turnover is Rs. 15 Lacs + Rs. 10 Lacs + Rs. 25 Lacs = Rs. 50 Lacs.

Example 5: Mr. A Nasik, has Intra State supply of services chargeable at 0% Rs. 20 Lacs, Intra State supply of exempt services Rs. 20 Lacs & taxable supplies Rs. 1 Lacs. He is supposed to take registration since his aggregate turnover is Rs. 20 Lacs + Rs. 20 Lacs +Rs. 1 Lacs = Rs. 21 Lacs.

Example 6: ABC is running an electronics shop in Mumbai. His turnover in a financial year is Rs. 9 Lakhs which includes an inter-State supply of some items to Ahmedabad worth Rs. 10,000. Even though aggregate turnover of ABC is only Rs. 9 Lakhs, but compulsory registration shall be required for making taxable inter-State supply of goods to Ahmedabad.

Example 7: ABC is running a toy shop in Delhi. His turnover in a financial year is Rs. 9 lakhs which includes a consignment for supply of children’s picture & colouring books to Noida, UP worth Rs. 10,000. Here even though inter-State supply is involved but the items involved are exempt from GST. Thus, provisions of compulsory registration shall not apply and accordingly no registration shall be required as aggregate turnover of ABC is only Rs. 9 lakhs.

Example 8: Mr. A is a professional in Gurgaon, Haryana giving consultancy services to various clients in Gurgaon, Noida & Delhi. His turnover in a financial year is Rs. 19 lakhs. Even though inter-State supply is involved but same is exempted vide notification no. 10/2017 – integrated tax Dated 13.10.2017 from application of Section 24. Accordingly, no registration shall be required as aggregate turnover of Mr. A is only Rs. 19 lakhs.

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Study Notes

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Example 9: Mr. A has business in 3 States i.e. Maharashtra, Gujarat, MP. Total turnover of supplies of goods in different state taken together is below threshold. But from Maharashtra, Mr. A has supplied goods to its units in MP. In GST, different registrations of a person are considered as distinct persons and stock transfers are taxable. Further, compulsory registration is required in case of inter-State taxable supply. Thus, benefit of threshold limit shall not be available in this case. Further when liability to register has arisen in one State then registration shall be required for all other place of businesses as well.

Example 10 (ICAI): Supplier

Prithiviraj of Assam

Shivaji of Telangana

Ashoka of Manipur

Engaged exclusively in supply of shoes exclusively in supply of pan masala exclusively in supply of taxable services in supply of both taxable goods and services exclusively in supply of toys exclusively in supply of ice cream exclusively in supply of taxable services in supply of both taxable goods and services exclusively in supply of paper exclusively in supply of tobacco exclusively in supply of taxable services in supply of both taxable goods and services

Aggregate turnover Rs. 22 lakh Rs. 22 lakh

Applicable threshold limit for registration Rs. 40 lakh Rs. 20 lakh

Whether liable to obtain registration?  ✓

Rs. 22 lakh

Rs. 20 lakh

✓

Rs. 22 lakh

Rs. 20 lakh

✓

Rs. 22 lakh Rs. 22 lakh

Rs. 20 lakh Rs. 20 lakh

✓ ✓

Rs. 22 lakh

Rs. 20 lakh

✓

Rs. 22 lakh

Rs. 20 lakh

✓

Rs. 12 lakh Rs. 12 lakh

Rs. 10 lakh Rs. 10 lakh

✓ ✓

Rs. 12 lakh

Rs. 10 lakh

✓

Rs. 12 lakh

Rs. 10 lakh

✓

Section 25 Procedure for Registrations (1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed: Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five days prior to the commencement of business.

Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a SEZ or being a SEZ developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.

Explanation.—Every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located.

(2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Provided that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.

(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.

(4) A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. (5) Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act. (6) Every person shall have a Permanent Account Number issued under the Income- tax Act, 1961 in order to be eligible for grant of registration: Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent Account Number, a Tax Deduction and Collection Account Number issued under the said Act in order to be eligible for grant of registration.

(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable person may be granted registration under sub-section (1) on the basis of such other documents as may be prescribed.

(8) Where a person who is liable to be registered under this Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken under this Act or under any other law for the time being in force, proceed to register such person in such manner as may be prescribed.

(9) Notwithstanding anything contained in sub-section (1),–– (a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries; and (b) any other person or class of persons, as may be notified by the Commissioner, shall be granted a Unique Identity Number in such manner and for such purposes, including refund of taxes on the notified supplies of goods or services or both received by them, as may be prescribed.

(10) The registration or the Unique Identity Number shall be granted or rejected after due verification in such manner and within such period as may be prescribed.

(11) A certificate of registration shall be issued in such form and with effect from such date as may be prescribed.

(12) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry of the period prescribed under sub-section (10), if no deficiency has been communicated to the applicant within that period.

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Study Notes Section 26 Deemed Registration As per Sec. 26 (1), the grant of registration or the Unique Identity Number under SGST/UTGST shall be deemed to be granted under CGST Act if it is not rejected as per Sec. 25 (10)

As per Sec. 26 (2), Any rejection of application for registration or the Unique Identity Number under the SGST/UTGST shall be deemed to be a rejection of application for registration under CGST.

Section 27 Special provisions relating to casual taxable person and non-resident taxable person As per Sec. 27 (1), Certificate of Registration issued to a casual taxable person or a nonresident taxable person shall be valid for the period specified in application for registration or 90 days from the effective date of registration, whichever is earlier.

Commissioner can further extend this period by maximum 90 days. Any supply can be done only after the issuance of certificate of registration (Rule 15).

As per Sec. 27 (2), An advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought. In case of extension, additional amount need to be deposited.

As per Sec. 27 (3), Amount deposited shall be credited to electronic cash ledger of such person.

Key Rules related to registration: Around 30 forms/formats have been prescribed in the CGST Rules, 2017. For every process in the registration chain such as application for registration, acknowledgement, query, rejection, registration certificate, show cause notice for cancellation, reply, cancellation, amendment, field visit report etc., there are standard formats.

This makes the process uniform across country. The decision-making process will also be fast. Strict time lines have been stipulated for completion of different stages of registration process.

Rule 8 (Application for Registration except TDS U/s 51 TCS U/s 52, non-resident taxable person or OIDAR)

Every person seeking registration shall, before applying for registration, declare his PAN, mobile number, email address, State or UT in Part A of Form GST REG-01.

After proper validation reference number will be generated, the applicant shall use this reference number and file application of registration in Part B of Form GST REG-01.

ISD shall make a separate application for registration.

A casual taxable person shall be given a temporary reference number by the common portal for making advance deposit of tax.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Rule 9 Verification of the application and approval

Rule 10 Issue of Registration Certificate

Rule 11 Separate registration for multiple places of business within a State or a Union territory

Rule 12 Grant of Registration to persons required to deduct or collect tax at source

Proper office need to verify within 3 working days of application. If he needs clarification, will issue notice within a period of 3 working days and person needs to reply within a period of 7 working days. If proper officer is satisfied with reply then he will issue registration within 7 working days or reject the application. If proper officer fails to take any action within a period of 3 working days from the date of submission of the application or within 7 working days from the date of receipt of reply, the application of registration shall be deemed to have been approve.

For the purposes of this sub-rule, the expression ‘clarification’ includes modification or correction of particulars declared in the application for registration, other than Permanent Account Number, State, mobile number and e-mail address declared in Part A of FORM GST REG-01.

A certificate of registration in Form GST REG-06 shall be issued. The registration shall be effective from the date on which the person becomes liable to registration where the application for registration has been submitted within a period of 30 days from such date. Otherwise, effective date of registration shall be the date of the grant of registration. It will include principal place of business and additional place of business.

Example 11: Sugam Services Ltd. is engaged in taxable supply of services in MP. The turnover of Sugam Services Ltd. exceeded Rs. 20 Lakh on 1st November. It is liable to get registered by 1st December [30 days] in MP. It applies to registration on 28th November and is granted registration certificate on 5th December. The effective date of registration is 1st November. If it applies on 3rd December and granted registration on 10th December then effective registration is 10th December.

(1) Any person having multiple places of business within a State or a Union territory, requiring a separate registration for any such place of business under sub-section (2) of section 25 shall be granted separate registration in respect of each such place of business subject to the following conditions, namely:(a) such person has more than one place of business as defined in clause (85) of section 2; (b) such person shall not pay tax under section 10 for any of his places of business if he is paying tax under section 9 for any other place of business; (c) all separately registered places of business of such person shall pay tax under the Act on supply of goods or services or both made to another registered place of business of such person and issue a tax invoice or a bill of supply, as the case may be, for such supply.

Explanation. - For the purposes of clause (b), it is hereby clarified that where any place of business of a registered person that has been granted a separate registration becomes ineligible to pay tax under section 10, all other registered places of business of the said person shall become ineligible to pay tax under the said section.

(2) A registered person opting to obtain separate registration for a place of business shall submit a separate application in FORM GST REG-01 in respect of such place of business.

(3) The provisions of rule 9 and rule 10 relating to the verification and the grant of registration shall, mutatis mutandis, apply to an application submitted under this rule.

A person required to deduct tax as per Sec. 51 or required to collect tax as per Sec. 52, shall apply in Form GST REG-07. Registration shall be granted in Form GST REG-06.

A person applying for registration to collect tax in accordance with the provisions of section 52, in a State or Union territory where he does not have a physical

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Study Notes Rule 13 Grant of Registration to nonresident taxable person

Rule 14 Registration for a OIDAR Rule 15 Extension in period of operation by CTP/NRTP

Rule 16 Suo motu Registration

Rule 17 Assignment of Unique Identity Number to certain Special entities Rule 18 Display of registration certificate and GST Identification Number on the name board Rule 25 Physical verification of business premises in certain cases

presence, shall mention the name of the State or Union territory in PART A of the application in FORM GST REG-07 and mention the name of the State or Union territory in PART B thereof in which the principal place of business is located which may be different from the State or Union territory mentioned in PART A. A non-resident taxable person shall file application in Form GST REG-09 along with a self-attested copy of his valid passport, at least 5 days prior to commencement of business. If business entity incorporated or established outside India, the application or registration shall be submitted along with its tax identification number or unique number on the basis of which the entity is identified by the Government of that country or its PAN. A non-resident taxable person shall be given a temporary reference number by the common portal for making advance deposit of tax.

OIDAR supplying services to non-taxable person, shall file application in Form GST REG-10 and registration shall be granted in GST REG-06.

(1) Where a registered casual taxable person or a non-resident taxable person intends to extend the period of registration indicated in his application of registration, an application in FORM GST REG-11 shall be submitted electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner, by such person before the end of the validity of registration granted to him.

(2) The application under sub-rule (1) shall be acknowledged only on payment of the amount specified in sub-section (2) of section 27.

The proper officer finds that a person liable to registration under the Act, has failed to apply for such registration, such officer may register the said person on temporary basis and issue and order in Form GST REG-12. Such person, shall apply for the registration within 90 days. He has right to appeal against such temporary registration. Once appeal is finalized then he needs to submit the application within 30 days.

The proper officer may, upon submission of an application in Form GST REG-13, assign a UIN to the eligible entities.

The Unique Identity Number granted under sub-rule (1) to a person under clause (a) of sub-section (9) of section 25 shall be applicable to the territory of India.

Every registered person shall display his certificate of registration in a prominent location at his principal place of business and at every additional place of business.

He also needs to display his GSTIN on the name board exhibited at the entry of his principal place of business and at every additional place or places of business.

Where the proper office is satisfied that the physical verification of the place of business of a registered person is required after the grant of registration, he may get such verification done and the verification report along with the other documents, including photographs, shall be uploaded in Form GST REG-30.

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Study Notes Section 28 Amendment of Registration (Read with Rule 19) •

Every registered person and a person to whom a UIN has been assigned shall inform the proper officer of any changes in the information furnished at the time of registration or subsequent thereto. Such person shall submit an application in prescribed manner, within 15 days of such change.

•

In case of amendment of core fields of information (Rule 19) (i) legal name of business, (ii) address of the principal place of business or any additional place(s) of business, (iii) addition, deletion or retirement of partners or directors, Karta, Managing Committee, Board of Trustees, CEO or equivalent, responsible for the day to day affairs of the business, The proper officer may, on the basis of information furnished or ascertained by him, approve or reject amendments in the registration particulars in the prescribed manner.

•

If it is non-core filed of information registration certificate shall stand amended upon submission of the application.

•

If there is change in PAN of registration person, then said person shall apply for fresh registration.

•

If proper office fails to take any action, within a period of 15 working days from the date of submission of application or within 7 working days from the date of the receipt of the reply to show cause notice, the certificate of registration shall stand amended.

•

Any particular of the application for registration shall not stand amended with effect from a date earlier than date of submission of application for amendment on common portal except with order of Commissioner for reasons to be recorded in writing and subject to conditions specified by Commissioner in the said order.

Section 29 Cancellation or Suspension of Registration Section 29 (1) The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death such person, cancel the registration: (a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other entity, demerged or otherwise disposed of; (b) there is any change in the constitution of business; (c) the taxable person, other than the person registered U/s 25 (3), is no longer liable to be registered U/s 22 or 24.

Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

Section 29 (2) The proper officer may cancel the registration of a person from such date, including any retrospective date, as he may deem fit, where – (a) A registered person contravened Act or rules; (b) A person paying tax U/s 10 (composition dealer) not furnished returns for 3 consecutive tax periods; (c) Any registered person other than composition dealer has not furnished return for a continuous 6 months; Provided that where the person instead of replying to the notice served under sub rule (1) of Rule 22 for contravention of the provisions contained in clause (b) or clause (c) of sub-section (2) of section 29, furnishes

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer shall drop the proceedings and pass an order in FORM GST-REG 20. {Proviso inserted vide Notification No. 39/2018-CT Dated 04.09.2018} (d) Any person who has taken voluntarily registration but has not commenced business within 6 months from the date of registration; (e) registration has been obtained by means of fraud, willful misstatement or suppression of facts.

Provided that the Proper officer shall not cancel the registration without giving the person an opportunity being heard.

Provided further that during pendency of the proceedings relating to cancellation of registration, the proper officer may suspend the registration for such period and in such manner as may be prescribed.

Section 29 (3): The cancellation of registration under this section shall not affect the liability of the person to pay tax and other dues for any period prior to the date of cancellation.

Section 29 (4): the cancellation of registration under the SGST or UTGST, shall be deemed to be a cancellation of registration under this Act. Section 29 (5): Every registered person shall pay an amount by way of debit in the electronic credit ledger or cash ledger, equivalent to the ITC in respects of inputs held in stock and inputs contained in semi-finished or finished goods or capital goods or plant the machinery on the day immediately preceding the date of such cancellation or the output tax payable on such goods, whichever is higher. In case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the ITC taken, which shall be reduced by such percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and machinery U/s 15, whichever is higher.

A registered person, other than tax deductor or tax collector to whom a registration has been granted or a person to whom a UIN has been granted, seeking cancellation of registration, shall apply electronically in prescribed form.

Further in terms of rule 21 of CGST Rules, the registration granted to a person is liable to be cancelled, if the said person,(a) does not conduct any business from the declared place of business; or (b) issues invoice or bill without supply of goods or services in violation of the provisions of this Act, or the rules made thereunder; or (c) violates the provisions of section 171 of the Act or the rules made thereunder.

Rule 21A Suspension of registration (1) Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be suspended from the date of submission of the application or the date from which the cancellation is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being heard, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.

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Study Notes (3) A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2), shall not make any taxable supply during the period of suspension and shall not be required to furnish any return under section 39.

(4) The suspension of registration under sub-rule (1) or sub-rule (2) shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect.

Section 30 Revocation of cancellation of registration Any registered person, whose registration is cancelled by the proper officer on his own motion, may apply to such officer for revocation of cancellation of the registration within 30 days from the date of service of the cancellation order. However, in case registration was cancelled for failure of registered person to furnish returns, before applying for revocation the person has to make good the defaults (by filing all pending returns, making payment of all dues in terms of such returns alongwith interest, penalty, late fee, etc.) for which the registration was cancelled by the officer. The proper officer may either revoke cancellation of the registration or reject the application, after giving proper opportunity of being heard.

The revocation of cancellation of registration under SGST or UTGST, shall be deemed to be a revocation of cancellation of registration under this Act.

Amendment in Rule 23 - Pending returns to be filed before revocation of cancellation of registration Provided further that all returns due for the period from the date of the order of cancellation of registration till the date of the order of revocation of cancellation of registration shall be furnished by the said person within a period of thirty days from the date of order of revocation of cancellation of registration: Provided also that where the registration has been cancelled with retrospective effect, the registered person shall furnish all returns relating to period from the effective date of cancellation of registration till the date of order of revocation of cancellation of registration within a period of thirty days from the date of order of revocation of cancellation of registration From the combined reading of aforesaid provisions, it can be inferred that where the registration has been cancelled with effect from the date of order of cancellation of registration, (i) all returns due till the date of such cancellation are required to be furnished before the application for revocation can be filed and (ii) all returns required to be furnished in respect of the period from the date of order of cancellation till the date of order of revocation of cancellation of registration have to be furnished within a period of 30 days from the date of the order of revocation.

However, where the registration has been cancelled with retrospective effect, the application for revocation of cancellation of registration can be filed, subject to the condition that all returns relating to the period from the effective date of cancellation of registration till the date of order of revocation of cancellation of registration shall be filed within a period of 30 days from the date of order of such revocation of cancellation of registration.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Circular No. 95/13/2019 Central Tax Dated 28th Mar 2019 Subject: Verification of applications for grant of new registration Issue: Recently, the departmental officers has cancelled many registrations due to their non-compliance Such persons should discharge all the pending liabilities and apply for the revocation of registration.

It is observed that many such tax payers are applying for fresh registration, instead of applying for revocation.

Clarification: This circular has been issued to guide the departmental officers to cross check the registration applications properly, to ensure that no such tax payers are provided with a new GSTIN. Circular No. 96/14/2019-Central Tax Dated 28th March 2019 Subject: Clarification in respect of transfer of input tax credit in case of death of sole proprietor – Reg Issue: Clarifications have been sought w.r.t.

• Eligibility to transfer the credit and • The procedure in case of death of a sole proprietor Clarification: The credit transfer shall be eligible. The transferee / successor shall be liable to pay any tax, interest or any penalty due from the transferor in cases of transfer of business due to death of sole proprietor.

Transfer/change in ownership referred in Sec 18(3), 22(3), 29(1)(a) and 85(1) of the CGST act, includes the transfer or change in the ownership of business due to death of the sole proprietor.

Process: • New registration – Transferee / successor should get registered w.e.f. date of transfer • Cancellation of old registration – Legal heirs should apply for the cancellation in Form Reg-16 • In both the cases, mention the reason as “death of sole proprietor”.

• File ITC-02 in the registration required to be cancelled, before cancellation • Accept the ITC-02 in the new GSTIN.

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Study Notes Question & Answer Q1. There is an assessee located in New Delhi and registered under GST at Delhi. He wishes to participate in a 15 days trade exhibition in the State of Tamil Nadu where he does not have a permanent place of business.

Would such assessee be liable for registration in the state of Tamil Nadu? In case yes, what would be the procedure for his registration?

A. A person who occasionally undertakes business transactions in goods and/or services in the State where he doesn’t have a fixed place of business is considered as a casual taxable person. In the given example, such person would be considered as a casual taxable person for the State of Tamil Nadu.

The casual taxable person is required to make an application for registration in the state where he doesn’t have a permanent place of business. Such person is required to deposit a sum called advance deposit which is equal to the estimated liability of tax for the period he wishes to operate in the respective state. For making advance deposit of money, such casual taxable person will be allotted a temporary identification number by GSTN. Q2. In case a person liable for registration on 1 st July makes an application for registration on 10th August, what substantive benefits will not be available to the assessee for making late application of registration?

A. Since the application for registration is required to be made within 30 days period of being liable for it and late applications of registration would result in registration to be effective from the date of grant of registration i.e. 10th August in case of our example. For the period of non-registration 1st July to 10th August, the assessee will not be able to claim ITC. The customers of the supplier would not be able to claim ITC of material supplied to them during the period of non-registration.

Q3. Whether the UN bodies, Consulate and Foreign embassies will be liable for registration under the GST Law? A. Under the GST Law, tax is required to be charged on taxable supplies made to UN bodies, Consulates or foreign embassies, At the same time, these bodies have been made entitled to seek refund of any tax paid under GST Law. To enable them to seek such refund, they are required to seek registration under the GST Law. Q4. Can there be multiple ISD of a single registered person?

A. Yes, a business entity can have multiple ISD in different States or even in one state. No such restriction has been provided under the GST Act. Q5. Gaurav is having a rental income from residential house given on rent of Rs.12 Lakhs and he is also having a kirana shop which has a turnover of Rs. 10 Lakhs. Is he required to be registered under GST. A. In the given case the aggregate turnover of Gaurav would consist of Rs. 12 Lakhs from exempt supply of rent from residential property and Rs. 10 Lakh from taxable supply of Kirana Store. Therefore, Gaurav would be liable to be registered in GST as his aggregate turnover is more than Rs. 20 Lakhs.

Q6. Kuldeep is a trader and he is trading 100% in alcohol for human consumption. His turnover from supply of alcohol for human is Rs. 2 Crore. Whether he is liable to be registered under GST? A. As per section 2(47) of the CGST Act, 2017, exempt supply includes non – taxable supply. Alcohol for human consumption is a non – taxable supply as it is not leviable to tax under the law. Further, as per Section 23 of the CGST Act, 2017, any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act would not be required to be registered.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Therefore, as Kuldeep is exclusively supplying Alcohol for human consumption, which is not liable to tax, he would not be liable to be registered under CGST Act, 2017.

Q7. In the above question, supposedly Kuldeep has also made supply of Soft Drinks of Rs. 10 Lakh. Whether he would be liable to be registered under CGST Act, 2017?

A. If Kuldeep has also made supply of soft drinks of Rs. 10 Lakh along with turnover of Alcohol for human consumption of Rs. 2 crores then in such case, exemption given from registration under section 23 of the CGST Act, 2017 would not be applicable as he is not engaged exclusively in supplying goods not liable to tax under the Law. Threshold limit for registration would be counted by taking aggregate of both taxable and non – taxable and non – taxable supply and as his aggregate turnover would be more than Rs. 40 Lakh (dealing exclusively in goods), therefore he would be liable for registration under the law.

Q8. Mr. A is a salaried employee (salary income being Rs. 1 crore). Besides, he owns a residential property which is let out for residential purposes for annual rent being Rs. 30 lakh.

A. In this case, aggregate turnover is Rs. 30 lakh, rent received from residential property renting. Since service of renting of residential property for residential purpose is exempt supply, Mr. A shall be exempt from registration requirement as Sec 23 of CGST Act provides for exemption from registration where a person is exclusively engaged in making exempt supplies.

Since Mr. A is not making supply of any taxable services, he is not liable for registration.

Q9. Pure Oils, Delhi has started the supply of machine oils and high speed diesel in the month of April, 20XX. The following details have been furnished by it for the said month: Particulars Amount* Supply of machine oils in Delhi 2,00,000 Supply of high speed diesel in Delhi 4,00,000 Supply made through Fortis Lubricants - an agent of Pure Oils in Delhi 3,75,000 Supply made by Pure Oils from its branch located in Punjab 1,80,000 *excluding GST Determine whether Pure Oils is liable for registration.

Will your answer change, if Pure Oils has a branch in Nagaland from where he supplies machine oils amounting to Rs. 2,50,000?

A. Computation of Aggregate turnover Particulars Amount Supply of machine oils in Delhi {Supply of machine oil in Delhi is intra-state supply of 2,00,000 goods which is taxable under GST law. It shall be includible in ‘aggregate turnover’} Supply of high speed diesel in Delhi {Supply of HSD in Delhi is intra-state supply of 4,00,000 goods which is non-taxable under GST law. Though non-taxable, it shall be includible in ‘aggregate turnover’} Supply made through Fortis Lubricants - an agent of Pure Oils in Delhi {Transfer of 3,75,000 goods to agent for further supply (sale) is also treated as ‘supply’ though such transfer does not include any consideration. Sec 7(1)(c) read with Schedule I (Entry 3) covers transfer of goods to agent. Further, since goods have been transferred to Agent in Delhi, such transfer is an intra-state supply of goods which is taxable under GST. It shall be includible in ‘aggregate turnover’} Supply made by Pure Oils from its branch located in Punjab {Supply is made from 1,80,000 branch office in Punjab. Under GST law, such branch office is treated as establishment of a different person. Thus, Head Office (Delhi) and Branch Office (Punjab) are treated as ‘deemed distinct persons (establishment of different persons)’ under GST law. In absence of specific information, it is presumed that Punjab branch is also making ‘intra-state’

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Study Notes supply. Since ATO is computed on all India basis (establishments operating with same PAN), it shall be includible in ‘aggregate turnover’} Aggregate Turnover

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11,55,000

Registration Requirement of Pure Oils, Delhi All the supplies made by Pure Oils are intra-state supplies and thus, his liability for registration shall be governed

by Sec 22 of the CGST Act which provides that every supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs. 20 lakh (Rs. 40 Lacs for exclusive supplier of goods).

Since the aggregate turnover is not exceeding threshold limit, Pure Oils is not liable to be registered.

In case where Pure Oils has a branch in Nagaland from where he supplies machine oils amounting to Rs. 2,50,000, then aggregate turnover in that case will be 14,05,000 (11,55,000 + 2,50,000). Further, in this situation, the applicable threshold for registration will be Rs. 10 lakh as Nagaland is one of the specified Special Category States. Thus, in such situation Pure Oils, Delhi shall be liable to be registered.

Q10. Mr. A, a dealer (situated in Mumbai) dealing with Intra State supply of goods and services has place of business in India furnished the following information in the financial year 20XX-X1: 1. Sale of taxable goods by Head Office located in Chennai for Rs. 2,00,000 2. Supply of taxable services by Branch office at Delhi for Rs. 1,00,000 3. Supply of goods exempted from GST Rs. 10,000 4. Export of goods for Rs. 2,00,000 A. Computation of Aggregate turnover Particulars Sale of taxable goods by Head Office located in Chennai Supply of taxable services by Branch office at Delhi Supply of goods exempted from GST Export of goods and services Aggregate Turnover

Amount 2,00,000 1,00,000 10,000 2,00,000 5,10,000

Though aggregate turnover is not exceeding Rs. 20 lakhs, but since he is engaged in exports which are interstate supplies, his registration falls under section 24 which provides for compulsory registration (i.e., no threshold limit of 20 Lakhs).

Note: Export (inter-state supplies), Export supplies are zero-rated in terms of Sec 16 of IGST Act. For availing benefit of zero-rating provided by Sec 16, registration is mandatory. [Sec 16(3) of IGST Act gives benefit to ‘registered person’] Q11. Mr. A has aggregate turnover of Rs 15 lakhs in a FY from the State of Maharashtra, through its sole proprietorship firm. He has a property located in Chennai, which is currently in dispute and has engaged lawyer for representing his case in dispute. Will Mr. A be required to register himself U/s 24 of the CGST Act, considering persons required to pay under RCM? A. Mr. A is a business entity making intra-state supplies in State of Maharashtra only. It is unregistered, as his aggregate turnover is not exceeding Rs 20 lakhs in a FY. Now, it has received services legal services which attracts reverse charge and thus, making recipient liable to pay GST. Presuming that legal services have been sought in relation to business, such service is exempt from payment of GST as Mr. A is a business entity with aggregate turnover not exceeding Rs 20 lakhs. Such service being exempt, the recipient, Mr. A, is actually not required to pay GST. Thus, he is not required to take compulsory registration U/s 24 of CGST Act.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q12. Whether the Department through the proper officer, can suo-moto proceed with registration of a person under the Act? A. Yes. In terms of sub-section (8) of Section 25, where a person who is liable to be registered under the CGST Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken under the CGST Act, or under any other law for the time being in force, proceed to register such person in the manner as may be prescribed.

Q13. Whether the proper Officer can reject an Application for Registration?

A. Yes. The Proper officer can reject the Application for registration in Form GST REG 05,

if after filling the

Application of registration in Form GST REG 01 the proper officer issued notice in Form GST REG 03 for further clarification and no response or no satisfactory response is given by the applicant.

Q14. What will be the effective date of registration?

A. Where the application for registration has been submitted within thirty days from the date on which the person becomes liable to registration, the effective date of registration shall be date on which he become liable for registration.

Where an application for registration has been submitted by the applicant after thirty days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration.

In case of suo moto registration, i.e. registration pursuant to any survey, enquiry, inspection, search or any other proceedings, the effective date of registration shall be the date of order of registration.

Q15. At the time of registration will the assessee have to declare all his places of business?

Ans. Yes. The principal place of business and place of business have been separately defined under section 2(85) & 2(89) of the CGST Act respectively. The taxpayer will have to declare the principal place of business as well as the details of additional places of business in the registration form.

Q16. Should a casual taxable person or non-resident taxable person apply for registration in every State from which that person is operating or is the registration common for all the States?

Ans. In terms of section 22(1) read with Section 25(1) such persons need to obtain a separate registration in every such States.

Q17. From which State the taxable person should obtain registration?

Ans. As per Section 22(1) a taxable person should obtain registration in every State from where he makes taxable supply of goods or services or both.

Q18. Whether licensed Tour Guides having registered office in one state but providing services Pan India will have to register in each State?

Ans. If the presence of tour guide is in each State and he is supplying services from those States then registration requirement in each State would be there.

Q19. When a person engaged in the provision of services having registration in the Maharashtra goes to Kolkata to provide services to its client and stays therefore a period of 3 months and also take a residence in that State is required to take separate registration in that State.

Ans. No, mere residence is not a business establishment, and therefore he need not take a registration in the State of West Bengal.

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Study Notes

Section 31 Section 34 Section 32 Section 33

Tax Invoice Credit & Debit Note Prohibition of Unauthorized collection of tax Amount of tax to be indicated in tax invoice and other documents

Types of invoices/Other Documents: A snapshot Document Type Tax invoice – for supply of taxable goods and services Revised tax invoice – in case of grant of registration w.e.f. a date earlier than the date of issuance of certificate of registration Bill of Supply – for supply of exempted goods or services or by composition dealer or Supplier under Notification 02/2019 Dated 07.03.2019 Invoice cum Bill of Supply – for supplying taxable as well as exempted goods or services Delivery Challan – to be issued in cases other than supply Receipt Voucher – for receipt of advance money Refund Voucher – for refund of advance money Self-invoice for reverse charge from unregistered suppliers Payment voucher – for payment of supplies under reverse charge Credit note – for reduction of taxable value and/or tax amount, sales return etc.

Debit note- for increase in taxable value and/or tax amount Consolidated tax invoice in specified B2C supplies

When to Issue Section 31 (1), (2), (4), (5), (6), and (7) read with rule 46 & rule 48 Section 31 (3) (a) read with rule 53

Section 31 (3) (c) read with rule 49

Rule 46A

Rule 55 Section 31 (3) (d) read with rule 50 Section 31 (3) (e) read with rule 51 Section 31 (3) (f) Section 31 (3) (g) read with rule 52 Section 34 (1) & (2) read with rule 53

Section 34 (3) & (4) read with rule 53 Section 31 (3) (b) read with rule 46

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 31 Tax Invoice Goods

Services

Section 31 (1) A registered taxable person shall issue a tax invoice showing descriptions, quantity and value of goods, tax charged thereon and other prescribed particulars, before or at the time of a. Removal of goods for supply to the recipient, where supply involves movement of goods or b. Delivery of goods or making available thereof to the recipient in other cases.

Section 31 (2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed.

Note: As per Rule 47 of CGST Rules, Invoice should be issued within 30 days from the date of provision of Services.

In case of Insurance, Banks or Financial Institution & NBFC’s the above limit is extended to 45 days.

An insurer or a banking company or a financial institution, including a NBFC, or a telecom operator, making taxable supplies of services between distinct persons as specified in section 25, may issue the invoice before or at the time such supplier records the same in his books of account or before the expiry of the quarter during which the supply was made.

Example 1: Amit Manufacturers, Delhi supplies goods to Kavita Electronics Mumbai. The goods were removed from its factory in Delhi on 30th September. Amit Manufacturers needs to issue a tax invoice on or before 30th September.

Example 2: Gagan Ltd. provides security services to ABC Ltd. for exhibition to be organized on 5 th November 2017. Gagan Ltd. needs to issue a tax invoice within 30 days of supply of services i.e. 5th December 2017.

Example 3: ABC Ltd. entered into an AMC contract for pest control with XYZ Ltd. for one financial year. As per the contract for AMC contract payment had to be made by 7 th April. However XYZ Ltd. paid payment by 15th April 2017. ABC Ltd. has to issue invoice by 7th April.

Example 4: ABC Bank rendered banking services to XYZ Ltd. a company registered in GST for their office in Mumbai on 10.11.2018. ABC bank can raise the invoice anytime before or after the provision of services, but within 45 days from the date of supply of services i.e. till 25.12.2018.

Example 5: Mumbai branch of ABC bank rendered banking services to its Chennai branch on 10.11.2018.

The transaction was recorded in books of account of Mumbai branch of ABC bank on 12.11.2018. Mumbai branch of ABC bank can raise invoice either: • On or before 12.11.2018 i.e. when entry was made in books of account; or • Before 31.12.2018 i.e. before the close of quarter during which the supply was made.

Section 31 (3) Notwithstanding anything contained in sub-sections (1) and (2)– (a) a registered person may, within one month from the date of issuance of certificate of registration and in such manner as may be prescribed, issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him; (b) a registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than two hundred rupees subject to such conditions and in such manner as may be prescribed; (c) a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply

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Study Notes containing such particulars and, in such manner, as may be prescribed: It is hereby clarified that provisions of clause (c) of subsection (3) of section 31 of the said Act shall apply to a person paying tax under Notification No. 2/2019- Central Tax (Rate) Dated 07.03.2019 {Removal of Difficulty Order No. 3/2019-Central Tax Dated 8th March, 2019} (d) a registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars as may be prescribed, evidencing receipt of such payment; (e) where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who had made the payment, a refund voucher against such payment; (f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 (reverse charge) shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both; (g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue a payment voucher at the time of making payment to the supplier.

Example 6: XYZ is running a consumer durables shop in Pune. He takes services of an advocate for Rs. 50,000 to litigate a department’s notice. Such advocate is not registered under GST. Here XYZ will issue a self-invoice for advocate services and accordingly discharge GST liability under reverse charge and take ITC of the same.

Section 31 (4) Section 31 (5) In case of continuous supply of goods, where In case of continuous supply of services successive statements of accounts or successive (a) if due date is ascertainable from the payment are involved, the invoice shall be issued contract, invoice shall be issued on or before or at the time each such statement is issued before such due date of payment; or, as the case may be, each such payment is (b) where the due date is not ascertainable, received. the invoice shall be issued before or at the time of receiving payment (c) where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of completion of that event.

Section 31 (7) Section 31 (6) The goods being sent or taken on approval for sale In a case where the supply of services ceases under or return are removed before the supply takes place, a contract before the completion of the supply, the the invoice shall be issued before or at the time of invoice shall be issued at the time when the supply supply or six months from the date of removal, ceases and such invoice shall be issued to the extent whichever is earlier. of the supply made before such cessation.

Key Points for Tax Invoice U/s 31 & Rule 46 •

There is no format prescribed for Tax Invoice. Invoices may be issued manually or electronically.

•

The signature or digital signature of the supplier or his authorised representative shall not be required in the case of issuance of an electronic invoice in accordance with the provisions of the Information Technology Act, 2000 This is also applicable to Bill of supply (Rule 49), consolidated tax invoice in case of Insurance/Banking companies, financial institutions including NBFCs {Rule 54 (2)}, ticket issued for passenger transportation service {Rule 54 (4)}.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain •

•

A Tax invoice shall be issued by: ➢

Supplying Taxable goods or services

➢

Receiving Taxable goods or services from unregistered supplier

Export of Invoice shall carry an endorsement “SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT/SEZ DEVELOPER FOR AUTHORIZED OPERATIONS ON PAYMENT OF INTEGRATED TAX” or “SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT/SEZ DEVELOPER FOR AUTHORIZED OPEATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF INTEGRATED TAX”.

•

A consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters-hyphen or dash and slash symbolized as “-“ and “/” respectively, and any combination thereof, unique for financial year; {This is same in case of:- Bill of Supply, Receipt Voucher, Refund Voucher, Payment Voucher, Revised tax invoice and credit and debit notes etc.}

•

Invoice and Payment Vouchers to be issued by recipient of supply liable to pay tax under reverse change [Section 31 (3) (f) & (g) read with second proviso to rule 46 & rule 52].

•

CBIC has issued Circular No. 90/09/2019-GST Dated 18th February, 2019, instructing that all registered persons making supply of goods or services or both in the course of inter-State trade or commerce shall specify the place of supply along with the name of the State in the tax invoice. The provisions of sections 10 and 12 of the Integrated Goods and Services Tax Act, 2017 may be referred to in order to determine the place of supply in case of supply of goods and services respectively. Contravention of any of the provisions of the Act or the rules made there under attracts penal action under the provisions of sections 122 or 125 of the CGST Act.

•

As per Rule 46A, notwithstanding anything contained in rule 46 or rule 49 or rule 54, where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single “invoice-cum-bill of supply” may be issued for all such supplies.

•

Important content of Tax Invoice

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Study Notes If recipient is unregistered and value of supply is more than Rs. 50,000 then name and address of the recipient and the address of delivery, along with the name of State & its code. Please recollect discussion of POS.

Disclosure of HSN/SAC AT is equal or less than 1.5 crores AT is more than 1.5 & Upto 5 cores crores AT is more than 5 crores

Digit NIL 2 4

Need to mention on each copy of invoice that this is pertaining to Recipient/Transporter/Supplier

Revised Tax Invoice [Sec. 31 (3) (a) read with rule 53] Every registered person who has been granted registration with effect from a date earlier than the date of issuance of certificate of registration to him, may issue Revised Tax Invoices. Such invoices shall be issued against the invoices already issued during said period. Revised Tax Invoice shall be issued within 1 month from the date of issuance of certificate of registration. For supplies made by such person during this intervening period, the law enables the issuance of a revised invoice, so that ITC can be availed by the recipient on such supplies.

A registered person may issue a consolidated Revised Tax Invoice in respect of all taxable supplies made to an unregistered recipient (B2C) during such period. In the case of inter-State supplies, where the value of a supply does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice may be issued separately in respect of all the recipients located in a State, who are not registered under the Act. Particulars of Debit & Credit Notes are also same as revised tax invoices.

Consolidated Revised Tax Invoice – B2C supply (Intra-State) :- No limit prescribed Consolidated Revised Tax Invoice – B2C supply (Inter-State) :- State wise consolidated revised tax invoice.

In case of inter-State supplies, where the value of a supply doesn’t exceed INR 2,50,000, a consolidated revised invoice may be issued separately in respect of all the recipients located in a State, who are not registered under GST. Government amended Rule 53 to distinguish the mandatory requirements in the issue of Revised invoice and in the issue of debit note or credit note.

Revised invoice can be issued in one month of registration for all supplies done from the date on which registration was applied till the date registration was granted.

By separating the requirements for revised invoice and debit or credit note the requirement for nature of document in case of Revised invoice remains of no use and hence deleted. Also, the requirement for stating the taxable value, rate of tax, amount of tax credited or debited in case of Revised invoice remains of no use and hence deleted in amendment. {Notification No. 03/2019-Central Tax Dated 29.01.2019} Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of Section 74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppressions of facts), Section 129 (Detention, seizure and release of goods and conveyances in transit), Section 130 (Confiscation of goods

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain or conveyances and levy of penalty), shall prominently contain the words, ‘INPUT TAX CREDIT NOT ADMISSIBLE”.

Consolidated Tax Invoice [Section 31 (3) (b) read with rule 46] A registered person may not issue a tax invoice if the value of goods or services or both supplied is less than INR 200 and in lieu thereof, shall issue a consolidated tax invoice for such supplies at the close of each day in respect of all such supplies, but subject to the following conditions, namely,(a) the recipient is not a registered person; and (b) the recipient does not require such invoice, and

Bill Of Supply [Section 31 (3) (c) read with rule 49] A registered person supplying exempted goods or services or both or paying tax under composition levy shall issue a bill of supply instead of a tax invoice.

As per second proviso to Rule 49 of the CGST Rules, any tax invoice or any other similar document issued under any other Act for the time being in force in respect of any non-taxable supply shall be treated as a bill of supply for the purposes of GST Act.

Receipt Voucher [Section 31 (3) (d) read with rule 50] A registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue a receipt voucher evidencing receipt of such payment.

If rate of tax is not determinable, tax shall be paid at the rate of 18%. If nature of supply is not determinable then same shall be paid as inter-State supply.

Refund Voucher [Section 31 (3) (e) read with rule 51] Where, on receipt of advance payment with respect to any supply of goods or services or both the registered person issues a Receipt Voucher, but subsequently no supply is made and no tax invoice is issued in pursuance thereof, the said registered person may issue to the person who made the payment, a Refund Voucher against such payment.

Supplier permitted to issue any document other than tax invoices [Section 31 (2) and proviso to section 31(1) read with rules 54 and 55] Supplier of taxable service Insurer/Banking company/Financial institution/NBFC

Document in lieu of the tax invoice Optional information Mandatory information Other information as prescribed • Serial Number • Address of the recipient for a Tax invoice, under rule 46 Such document may be of taxable service issued/made available, physically/electronically

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Study Notes Where the supplier of taxable service is an insurer or a banking company or a financial institution, including a non-banking financial company, the said supplier may issue a consolidated tax invoice or any other document in lieu thereof, by whatever name called for the supply of services made during a month at the end of the month, whether issued or made available, physically or electronically whether or not serially numbered, and whether or not containing the address of the recipient of taxable service but containing other information as mentioned under rule 46.

Goods Transport Agency (GTA) • Gross weight of the supplying services in relation to consignment transportation of goods by road • Name of the consignor in a goods carriage and the consignee • Registration number of goods carriage in which the goods are transported • Details of goods transported • Details of place of origin and destination • GSTIN of the person liable for paying tax whether as consignor, consignee or GTA • Other information as prescribed for a tax invoice Supplier of passenger Other information as prescribed • Serial number transportation service • Address of the recipient for a tax invoice, under rule 46 Tax invoice shall include ticket of taxable service in any form, by whatever name called It is important to note here that keeping in view the large number of transactions in banking, insurance and passenger transportation sector, taxpayers need not mention the address of the customer and the serial number in their invoices.

Delivery Challan (Rule 55) (1) For the purposes of(a) supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known, (b) transportation of goods for job work, (c) transportation of goods for reasons other than by way of supply, or (d) such other supplies as may be notified by the Board, the consignor may issue a delivery challan, serially numbered not exceeding sixteen characters, in one or multiple series, in lieu of invoice at the time of removal of goods for transportation, containing the following details, namely: (i) date and number of the delivery challan; (ii) name, address and Goods and Services Tax Identification Number of the consignor, if registered; (iii) name, address and Goods and Services Tax Identification Number or Unique Identity number of the consignee, if registered;

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (iv) Harmonized System of Nomenclature code and description of goods; (v) quantity (provisional, where the exact quantity being supplied is not known); (vi) taxable value; (vii) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess, where the transportation is for supply to the consignee; (viii) place of supply, in case of inter-State movement; and (ix) signature.

(2) The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner, namely: – (a) the original copy being marked as ORIGINAL FOR CONSIGNEE; (b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and (c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNOR. (3) Where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared as specified in rule 138 (E-way Bill).

(4) Where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods.

(5) Where the goods are being transported in a semi knocked down or completely knocked down condition or in batches or lots {Inserted vide Notification No. 39/2018-CT, Dated 04.09.2018} – (a) the supplier shall issue the complete invoice before dispatch of the first consignment; (b) the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice; (c) each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice; and (d) the original copy of the invoice shall be sent along with the last consignment.

Really, this procedure is possible and practical when machinery is dispatched in span of few day. In case of large machinery, if supply is likely to be spread over months or even years, separate invoice for each consignment is the only practical solution.

Tax Invoice or Bill of Supply to accompany transport of goods (Rule 55A) The person-in-charge of the conveyance shall carry a copy of the tax invoice or the bill of supply issued in accordance with the provisions of rule 46 (tax invoice), 46A (invoice cum Bill of supply) or 49 (Bill of supply) in a case where such person is not required to carry an e-way bill under these rules.

Tax Invoice by ISD [Rule 54 (1) & 54 (1A) This Rule 54 (1) is applicable when ISD has to distribute the ITC to the various units.

(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor credit note issued by an Input Service Distributor shall contain the following details:(a) name, address and Goods and Services Tax Identification Number of the Input Service Distributor; (b) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolized as- “-”, “/” respectively, and any combination thereof, unique for a financial year; (c) date of its issue; (d) name, address and Goods and Services Tax Identification Number of the recipient to whom the credit is distributed; (e) amount of the credit distributed; and (f) signature or digital signature of the Input Service Distributor or his authorized representative:

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Study Notes Provided that where the Input Service Distributor is an office of a banking company or a financial institution, including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as mentioned above.

This Rule 54 (1A) is applicable when registered person in its own GSTIN gets the invoice from supplier (i.e.

If supplier doesn’t raise the invoice on GSTIN of ISD), then registered person may issue this document to ISD so as to further allocate the ITC to the units.

(1A) (a) A registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the Input Service Distributor, which shall contain the following details:i. name, address and Goods and Services Tax Identification Number of the registered person having the same PAN and same State code as the Input Service Distributor; ii. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as ―-‖ and ―/‖ respectively, and any combination thereof, unique for a financial year; iii. date of its issue; iv. Goods and Services Tax Identification Number of supplier of common service and original invoice number whose credit is sought to be transferred to the Input Service Distributor; v. name, address and Goods and Services Tax Identification Number of the Input Service Distributor; vi. taxable value, rate and amount of the credit to be transferred; and vii. signature or digital signature of the registered person or his authorised representative. (b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common services.

Section 34 Credit & Debit Notes (1) Where a tax invoice has one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed: Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(3) Where a tax invoice has where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note one or more debit notes for supplies made in a financial year containing such particulars as may be prescribed.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Explanation.––For the purposes of this Act, the expression “debit note” shall include a supplementary invoice.

It has to be strictly borne in mind that a credit or a debit note, for the purpose of the GST Law, can be issued by the registered person who has issued a tax invoice, i.e. the supplier.

One need to bear in mind that mechanism of credit note must not be used to offset the liability of GST on account of bad debts, which is not permissible under specified purposes of credit note U/s 34 (1).

In Section 34 amendment is made to enable the registered person to issue a single or multiple credit notes or debit notes against multiple invoices.

Rule 53 sub-Rule (1A) is inserted to provide the mandatory requirements for the issue of credit note or debit note. The content remain more or less same. In debit or credit note, “serial number(s) and date(s) of the corresponding tax invoice(s) or, as the case may be, bill(s) of supply”, need to be mentioned.

Example 7: ABC supplied 10 televisions to XYZ for Rs. 6,00,000 on 25.02.2018. Accordingly, GST on the same was discharged in the month of February, paid on 20.03.2018. Later it was realized that out of 10 sets of television, one television was of lower grade model and hence Rs. 10,000 has been billed extra to XYZ. But such credit note can be issued till 30.09.2018 so as to adjust the tax liability paid extra on Rs. 10,000. Based on the credit note of ABC, XYZ will reduce the amount of ITC availed on Rs. 10,000.

Circular No. 72/46/2018 Dated 26th October 2018 The circular provides two options which can be followed for return of expired drugs or medicine: The retailer or the wholesaler can issue tax invoice/bill of supply/commercial invoice, as the case may be, by treating return of expired goods as fresh supply, or The manufacturer/wholesaler can issue a credit note against the supply made earlier to the wholesaler/ retailer.

Return of time expired goods to be treated as fresh supply If the wholesaler/retailer is a registered person, it can return the goods by treating it as a fresh supply and thereby issuing an invoice for the same. The value of the said goods as shown in the invoice on the basis of which the goods were supplied earlier may be taken as the value of such return supply. The recipient i.e. the manufacturer or wholesaler as the case may be, will be eligible to take credit of tax paid.

Further, if the person returning the goods, is a composition taxpayer, then he may return goods by issuing a bill of supply and pay applicable tax. In such case, credit will not be available to the person to whom goods are returned.

If the expired goods are returned by an unregistered person, then he may return the goods under the cover of any commercial document.

Where the returned expired goods are destroyed by the manufacturer, it is required to reverse the credit availed in respect of such returned goods in view of provisions of section 17(5)(h) of the Central Goods and Services Tax Act and not the credit attributable to the manufacture of such time expired goods.

Illustration: Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of manufacture of medicines valued at Rs. 100/-. At the time of return of such medicine on the account of expiry, the ITC available to

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Study Notes the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when the time expired goods are destroyed by the manufacturer he would be required to reverse ITC of Rs. 15/- & not of Rs. 10/-.

Return of time expired goods by issuing the credit note As an alternative to the above procedure, the supplier can issue a credit note to the person returning the goods. The person returning such expired medicines can return it by issuing a delivery challan.

If the credit note is issued within the time limit specified in section 34(2) of the CGST Act, the supplier can adjust his tax liability, if the person returning the medicine has either not availed ITC or reversed the ITC, if availed.

A credit note can still be issued if the time limit specified in section 34(2) of the CGST Act has lapsed.

However, the supplier cannot adjust the tax liability. It is also clarified that in such cases, there is no requirement to declare such credit note on GSTN by the supplier.

The manufacturer will be required to reverse the ITC attributable to the manufacture of such goods at the time of destruction of such time expired medicines Further, this circular is applicable to such other scenarios where the goods are returned on account of other reasons.

Section 32 Prohibition of Unauthorized collection of Tax A person who is not a registered person shall not collect in respect of any supply of goods or services or both any amount by way of tax under this Act. No registered person shall collect tax except in accordance with the provisions of this Act or the rules made thereunder.

Section 33 Amount of tax to be indicated in tax invoice and other documents Notwithstanding anything contained in this Act or any other law for the time being in force, where any supply is made for a consideration, every person who is liable to pay tax for such supply shall prominently indicate in all documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made.

Goods moved within the State or from the State of registration to another State for supply on approval basis and art works sent by artists to galleries for exhibition Suppliers of jewellery etc. who are registered in one State may have to visit other States (other than their State of registration) and need to carry the goods (such as jewellery) along for approval. In such cases if jewellery etc. is approved by the buyer, then the supplier issues a tax invoice only at the time of supply. Since the suppliers are not able to ascertain their actual supplies beforehand and while ascertainment of tax liability in advance is a mandatory requirement for registration as a casual taxable person, the supplier is not able to

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In view of relevant provisions of rule 55, it is clarified that the goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of delivery of goods. For this purpose, the person carrying the goods for such supply can carry the invoice book with him so that he can issue the invoice once the supply is fructified. [Circular No. 10/10/2017 GST Dated 18.10.2017].

Likewise, in case where artists supply art works in different States - other than the State in which they are registered as a taxable person and if the art work is selected by the buyer, then the supplier issues a tax invoice only at the time of supply, it is clarified that the art work for supply on approval basis can be moved from the place of business of the registered person (artist) to another place within the same State or to a place outside the State on a delivery challan along with the eway bill wherever applicable and the invoice may be issued at the time of actual supply of art work.

[Circular No. 22/22/2017 GST Dated 21.12.2017].

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Study Notes Question & Answer Q1. ABC Ltd. entered into a contract with XYZ Ltd., for supply of goods on 15 th August 2017. The goods were to be delivered on 30th August 2017. ABC Ltd. removed goods on 28th August 2017. When should ABC Ltd. issue the tax invoice?

A. 28th August 2017 according to section 31.

Q2. The aggregate turnover of ABC Ltd. exceeded Rs. 20 Lacs on 15th August 2017. It applied for registration on 5th September 2017 and was granted registration on 7th September 2017. Please give your commentary for this.

A. As per Section 25 of CGST Act, ABC Ltd. has applied within 30 days of becoming liable for registration. So, effective date of registration is date on which it becomes liable to registration i.e. 15 th August 2017.

As per Section 31, ABC Ltd. has to issue the revised tax invoices in respect of taxable supplies effected during the period starting from the effective date of registration i.e. 15th August 2017, till date of issuance certificate of registration i.e. 7th September 2017 within 1 month from the date of issuance of certificate of registration i.e. on or before 7th October 2017.

Q3. ABC Ltd. is a trader dealing in provisions items. It is registered under GST and has undertaken following sales during the day: Sr. No. Recipient of Supply Amount 1 A – a registered retail dealer under composition levy 190 2 B – an unregistered dealer 500 3 C – an unregistered buyer 900 4 D Charitable Trust – an unregistered entity 175 5 E – a senior citizen – an unregistered 150 None of the recipients require a tax invoice.

A. In the given question, ABC Ltd. can issue a consolidated tax invoices to supplies made to D Charitable trust & E as the value of goods supplied to these recipients is less than Rs. 200 (unregistered & don’t require a tax invoice).

Although A sales is less than Rs. 200 but A is registered retail dealer. So consolidated invoice cannot be issued. Other sales are anyway more than Rs. 200, so consolidated invoice cannot be issued.

Q4. When can a taxable person not issue credit note?

A. According to proviso to Sec 34 (2) of the CGST Act, 2017, no credit note shall be issued by the taxable person if the incidence of tax and interest on such supply has been passed by the supplier to the recipient. No reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

Q5. What is the time limit for issuance of credit note?

A. A supplier cannot issue a credit note pertaining to a supply of goods or services or both of a particular financial year later than the (i) Month of September following the end of the financial year in which such supply was made, or (ii) Date of furnishing of the relevant annual return.

Whichever is earlier.

Example: Suppose, Mr. A has supplied goods to Mr. B in the month of Sept’17. Mr. B sends a complaint to Mr. A about deficient quality of goods. Mr. A can issue a credit note to Mr. B in respect of such supply of goods

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain and declare details of such credit note in the return till the month of Sept’18 or till the date of furnishing of annual return of 2017-18, whichever is earlier.

Q6. When can a debit note be issued? Is there any time limit for issue of debit note?

A. Debit note can be issued by the supplier of the goods or services or both, to the recipient, when subsequent to the issue of tax invoice he comes to know that taxable value or tax charged in that tax invoice is less than the taxable value or tax payable with respect to such supply Example: Mr. A has provided services of dry cleaning to Mr. B and charges Rs. 500 and tax at the rate of 12% i.e. Rs. 60. Afterwards, Mr. A comes to know that he has undercharged Mr. B by Rs. 200. He communicates to Mr. B that he has charged Mr. B less by Rs. 200 and issues debit note and charges additional tax of Rs. 24.

In such a case, tax liability of Mr. A would be on Rs. 700 only and he would have to pay tax of Rs. 84.

There is no time limit for issuance of debit note.

Q7. I am constructing a building for my client. The client is required to pay me on completion of plinth, 1st floor and 2nd floor. When should the invoice be raised?

Ans. The above instance is a case of continuous supply of services. Here, since the payment is linked to completion of an event (i.e., milestones set in the contract), an invoice should be raised on or before the due date of completion of event as per section 31(5)(c) of the CGST Act, 2017. Therefore, an invoice be raised on or before completion of the 1st floor and the second time on or before the completion of 2nd floor.

Q8. I had a contract for supplying manpower for 28 days for Rs. 28,000/-. However, after 10 days, the service has stopped. Should I raise an invoice?

Ans. Yes. Where a supply of service ceases before its completion, an invoice has to be issued at the time the supply ceases, i.e., on the 10th day. The invoice shall be issued to the extent of the service provided before its cessation. (Section 31(6) of the CGST Act,2017).

Q9. ABC Ltd., located in Pune (Maharashtra), received the advance to supply the training. As per the agreement, the supplier may have to impart the training to Jaipur branch or Mumbai branch (both are registered place of recipient) as per the need. What should be the treatment?

Ans. At the time of receiving the advance, supplier is known that where he has impart the training.

Nevertheless, he has to issue the receipt voucher at the time of receipt of advance. As far as, nature of supply is concerned, he will have to treat it as inter-State supply and will have to pay IGST on it. If later on it is supplied that it was imparted in Mumbai Branch (intra-State supply), then as per Section 19 of IGST Act, it says that person will pay correct tax (here, it is CGST+SGST, being found as intra-State supply) without interest and claim the refund of IGST paid.

Q10. How can I supply goods without movement?

Ans. In cases where the ownership, or the risks and rewards are transferred without requiring the movement of goods, the goods would be treated as supplied although no movement is involved in effecting such supply.

E.g. when an Agent who is in possession of certain goods decides to buy the goods from the principal, or in case where there is an on-site installation of machinery, or in case of sale and lease back transactions, etc.

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Study Notes Section 35 Section 36 Section 68 Rule 138

Accounts & Records Period of retention of accounts Inspection of goods in movement E-way Bill

Section 35 Accounts & Records & Section 36 Period of retention of accounts Applicability [Sec. 35 (1)] Location [Sec. 35 (1)]

Records to be kept [Sec. 35 (1)]

Electronic Form

Persons covered for mandatory Maintenance of records [Sec. 35 (2) read with rule 58]

Every Registered person At the principal place of business, as mentioned in the certificate of registration.

In case of more than one place of business, the accounts relating to each place of business shall be kept at such places of business.

Registered Person shall keep and maintain, a true and correct account of – a) Production or Manufacture of goods; b) Inward & outward supply of goods or services or both; c) Stock of goods; d) Input Tax credit availed; e) Output tax payable and paid; and f) Such other prescribed particulars.

The registered person may keep and maintain such accounts and other particulars in electronic form stored on any electronic device and record so maintained shall be authenticated by means of a digital signature. Back up of records shall be maintained. Whenever demanded, provide authenticated hard copy or in any electronically readable format, relevant passwords, codes etc. No entry to be erased/overwritten.

1. Following persons shall mandatorily maintain records of the Consignor, Consignee and other prescribed details: a) Every owner or operator of warehouse or godown or any other place used for storage of goods and b) Every transporter 2. If such persons are not already registered, they shall obtain a unique enrollment number by applying electronically at the GST common portal.

3. Records to be maintained: a) Persons engaged in the business of Transporting Goods: Records of goods transported, delivered and goods stored in transit by him along with GSTIN of the registered consignor and consignee for each of his branches. b) Owner or Operator of warehouse or Godown: Books of Accounts, with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods.

For the purposes of Chapter XVI of these rules, a transporter who is registered in more than one State or Union Territory having the same Permanent Account Number, he may apply for a unique common enrolment number by submitting the details in FORM GST ENR-02 using any one of his Goods and Services Tax Identification Numbers, and upon validation of the details furnished, a unique

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Power of Commissioner [Sec. 35 (3) & 35 (4)] Requirement for Audit [Sec. 35 (5)]

Failure to Account for Goods or Services [Sec. 35 (6)] Records prescribes by rules [Rule 56 (1), (3), (5) & (6)]

Records which are not to be maintained by a supplier opting for composition levy [Rule 56 (2) & (4)]

Records to be maintained

by Agent [Rule 56 (11)]

common enrolment number shall be generated and communicated to the said transporter: Provided that where the said transporter has obtained a unique common enrolment number, he shall not be eligible to use any of the Goods and Services Tax Identification Numbers for the purposes of the said Chapter XVI. Rule 58 (1A) - Inserted vide notification No. 28/2018-CT, Dated 19.06.2018 Chapter XVI is related to e-way rules. Transporter may apply for a unique common enrollment number for all his registration under GST. After obtaining unique common enrolment number, he shall not be eligible to use any of GSTIN for the purpose of e-way rules. a) May also notify a person to maintain additional accounts or documents b) May permit to maintain in prescribed manner.

Every registered person whose turnover during a financial year exceeds the Rs. 2 crores, must get his accounts audited by a Chartered Accountant or Cost Accountant. He shall submit a copy of the • Audited Annual accounts, and • A reconciliation statement u/s 44 (2) [to reconcile the value of supplies declared in the returns with the audited annual financial statements] & • Such other documents as may be prescribed Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.

Proper officer shall determine the of tax payable on the goods or services or both that are not accounted for. Also, provisions regarding determination of tax not paid or short paid due to Fraud or other reasons shall be equally apply for determination of such tax.

Every registered person shall keep and maintain a True and Correct Account of the following – a) The goods/services imported/exported b) Supplies attracting payment of tax on reverse charge along with relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers c) Separate account of advances received, paid and adjustments made thereto Registered person also required to keep complete address of suppliers from he has received goods or services, to whom he has supplies goods or services. He is also required to keep the particulars of the complete address of premises where goods are stored by him. If any taxable goods found to be stored at any place other than those so declared without proper documents then proper officer shall determine the amount of tax payable on such goods. a) Stock of goods: No need to keep records of goods received, supplied, opening balance, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and balance stock. b) Details of Tax: Account, containing the details of tax payable (including tax payable under reverse charge), tax collected and paid, input tax, ITC claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period. a) Particulars of authorization received by him from each principal to receive or supply goods or services on behalf of such principal separately;

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Study Notes

Records to be maintained by manufacturer [Rule 56 (12)] Records to be maintained by a supplier of services [Rule 56 (13)] Separate Accounts to be maintained by a registered person executing works contracts [Rule 56 (14)]

Records to be maintained by a custodian/clearing and forwarding agent [Rule 56 (17)] Period of Retention of Accounts [Section 36] Extended time limit

Requirement of maintaining the books of accounts in case of auction of tea, coffee, rubber etc.

[Circular No. 47/21/2018 GST Dated 08.06.2018]

b) Particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal; c) Particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal; d) Details of accounts furnished to every principal; and e) Tax paid on receipts or on supply of goods or services effected on behalf of every principal; Monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods or manufactured including the waste and by products thereof.

Account showing quantitative details of goods used in the provision of services, details of input services utilized and the services supplied. a) The names and addresses of the person on whose behalf the works contract is executed b) Description, value and quantity of goods or services received for the execution of works contract c) Description, value and quantity of goods or services utilized in the execution of works contracts d) The details of payment received in respect of each works contract and e) The names and addresses of suppliers from whom he received goods or services Any person having custody over the goods in the capacity of a carrier or a clearing and forwarding agent for delivery or dispatch thereof to a recipient on behalf of any registered person shall maintain true and correct records in respect of such goods handled by him on behalf of such registered person and shall produce the details thereof as and when required by the proper officer Till expiry of 72 months from the due date of furnishing of annual return If a registered person, is a party to a) An appeal or b) Revision or c) Any other proceedings before any Appellate Authority or Revisional Authority or Appellate Tribunal or Court, or d) Is under investigation for an offence

shall retain the accounts & other records pertaining to the subject matter - for a period of 1 year after final disposal of such matter or for 72 months whichever is later In case of auction of tea, coffee, rubber etc., the requirement of maintaining the books of accounts at the Principal Place of Business (PPoB) and Additional Place(s) of Business (APoB) is as below: a. For the purpose of auction of tea, coffee, rubber, etc, the principal and the auctioneer may declare the warehouses, where such goods are stored, as their APoB. The buyer is also required to disclose such warehouse as his APoB if he wants to store the goods purchased through auction in such warehouses. For the purpose of supply of tea through a private treaty, the principal and an auctioneer may also comply with the said provisions. b. The principal and the auctioneer for the purpose of auction of tea, coffee, rubber etc., or the principal and the auctioneer for the purpose of supply

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain of tea through a private treaty, are required to maintain the books of accounts relating to each and every place of business in that place itself in terms of the first proviso to section 35(1) of the CGST Act [discussed earlier]. However, in case difficulties are faced in maintaining the books of accounts, it is clarified that they may maintain the books of accounts relating to the APoB at their PPoB instead of such additional place(s). c. The principal and the auctioneer for the purpose of auction of tea, coffee, rubber etc., or the principal and the auctioneer for the purpose of supply of tea through a private treaty, shall intimate their jurisdictional officer in writing about the maintenance of books of accounts relating to the APoB at their PPoB. ITC availment: It is further clarified that the principal and the auctioneer for the purpose of auction of tea, coffee, rubber etc., or the principal and the auctioneer for the purpose of supply of tea through a private treaty, shall be eligible to avail ITC subject to the fulfilment of other provisions of the CGST Act read with the rules made thereunder.

Section 68 Inspection of goods in movement Sec. 68 (1) Carrying of documents For the movement of goods, the person in charge of a conveyance may require to carry such documents as may be specified by the government and such devices as may be prescribed. The documents may be required to carry by the person in charge only in case if they are exceeding the value specified in this respect.

Sec. 68 (2) Validation of documents The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed.

Sec. 68 (3) Inspection of documents Proper officer may intercept any person in charge carrying goods in conveyance to produce such documents and devices as prescribed in sub-section (1) to check the validity of the movement of goods, and such person in charge of goods will be required to produce the same for verification.

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Study Notes

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Rule 138 Information to be furnished prior to commencement of movement of goods and generation of e-way bill E-way bill is of three parts: Part A is description of goods, which is normally expected to be filled by consignor, but can be filled by others also.

Part B is description of mode of transport, which is normally expected to be filled in by transporter but in many cases, by other also.

The third part is unique eway bill number and date, which is generated on common portal once both parts get filled up.

(1) Every registered person who causes movement of goods of consignment value exceeding Rs. 50,000: (i) In relation to a supply; or (ii) For reasons other than supply; or (iii) Due to inward supply from an unregistered person, shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of Form GST EWB-01, electronically, on the common portal and a unique number will be generated on the said portal.

Transporter, may furnish such information on authorization from the registered person.

ECO or courier agency, may furnish such information on authorization from the consigner.

In case of job work, principal/job worker (if registered) can furnish information if it is inter-State, irrespective of value of consignment.

In case of interstate supply of handicraft goods, even if person has been exempted from the requirement of obtaining registration, e-way bill shall be generated irrespective of value of consignment.

Consignment value of goods would be value, determined in accordance with Section 15 and would be declared in an invoice, bill of supply or a delivery challan and include central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods.

(2) Where the goods are transported by registered person as a consignor or the recipient of supply as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the said person shall generate the e-way bill in Form GST EWB-01 on the common portal after furnishing information in Part B of Form GST EWB-01.

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Study Notes (2A)Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated by registered supplier or registered recipient. He shall generate before or after the commencement of movement, the information in Part B of Form GST EWB-01. Where the goods are transported by railways, the railways shall not deliver the goods unless the e-way bill is produced for delivery.

(3) Where the e-way bill is not generated under sub-rule (2) and the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A of FORM GST EWB-01: Provided that the registered person or, the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees: Provided further that where the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner specified in this rule: Provided also that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01.

Explanation 1.– For the purposes of this sub-rule, where the goods are supplied by an unregistered supplier to a recipient who is registered, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of the movement of goods.

Explanation 2.- The e-way bill shall not be valid for movement of goods by road unless the information in Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-rule (3) and the proviso to sub rule (5).

(4) Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.

(5) Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A of the FORM GST EWB-01, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01: Provided that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the transporter finally to the place of business of the consignee, the details of the conveyance may not be updated in the e-way bill.

(5A)The consignor or the recipient, who has furnished the information in Part A of FORM GST EWB-01, or the transporter, may assign the e-way bill number to another registered or enrolled transporter for updating the information in Part B of FORM GST EWB-01 for further movement of the consignment: Provided that after the details of the conveyance have been updated by the transporter in Part B of FORM GST EWB-01, the consignor or recipient, as the case may be, who has furnished the information in Part A of FORM GST EWB-01 shall not be allowed to assign the e-way bill number to another transporter.

(6) After e-way bill has been generated in accordance with the provisions of sub-rule (1), where multiple consignments are intended to be transported in one conveyance, the transporter may indicate the serial number of e-way bills generated in respect of each such consignment electronically on the common portal and a consolidated e-way bill in FORM GST EWB-02 maybe generated by him on the said common portal prior to the movement of goods.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Example 1: ABC transport in Kashmir, has to transport 3 different type of goods to 3 different traders in New Delhi. All 3 consignments are being transported against 3 different invoices issued by 3 different traders but, will be transported in a single truck. ABC transport may generate a consolidated e-way bill.

(7) Where the consignor or the consignee has not generated the e-way bill in FORM GST EWB-01 and the aggregate of the consignment value of goods carried in the conveyance is more than fifty thousand rupees, the transporter, except in case of transportation of goods by railways, air and vessel, shall, in respect of inter-State supply, generate the e-way bill in FORM GST EWB-01 on the basis of invoice or bill of supply or delivery challan, as the case may be, and may also generate a consolidated e-way bill in FORM GST EWB02 on the common portal prior to the movement of goods: Provided that where the goods to be transported are supplied through an e-commerce operator or a courier agency, the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce operator or courier agency.

(8) The information furnished in Part A of FORM GST EWB-01 shall be made available to the registered supplier on the common portal who may utilize the same for furnishing the details in FORM GSTR-1: Provided that when the information has been furnished by an unregistered supplier or an unregistered recipient in FORM GST EWB-01, he shall be informed electronically, if the mobile number or the e-mail is available.

(9) Where an e-way bill has been generated under this rule, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal within twenty four hours of generation of the e-way bill: Provided that an e-way bill cannot be cancelled if it has been verified in transit in accordance with the provisions of rule 138B: Provided further that the unique number generated under sub-rule (1) shall be valid for a period of fifteen days for updation of Part B of FORM GST EWB-01.

(10) An e-way bill or a consolidated e-way bill generated under this rule shall be valid for the period as mentioned in column (3) of the Table below from the relevant date, for the distance, within the country, the goods have to be transported, as mentioned in column (2) of the said Table:Sr. No. 1.

2.

3.

Distance Upto 100 KM For every 100 KM, or part thereof thereafter Upto 20 KM

4.

For every 20 KM or part thereof thereafter

Validity Period One day One additional day One day in case of over Dimensional Cargo One additional day in case of over Dimensional cargo

Example 2: Suppose eway bill generated on April 1, 2018 at 5 p.m. for transport of cargo which will cover a distance of 90 kms. This eway bill will be valid for one day (till mid night of April 2, 2018); Suppose eway bill generated on April 1, 2018 at 5 p.m. for transport of cargo which will cover a distance of 190 kms. This eway bill will be valid for two days (till mid night of April 3, 2018).

Provided that the Commissioner may, on the recommendations of the Council, by notification, extend the validity period of an e-way bill for certain categories of goods as may be specified therein: Provided further that where, under circumstances of an exceptional nature, including trans-shipment, the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period after updating the details in Part B of FORM GST EWB-01, if required.

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Study Notes Explanation 1.—For the purposes of this rule, the ―”relevant date” shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as the period expiring at midnight of the day immediately following the date of generation of eway bill.

Explanation 2.— For the purposes of this rule, the expression ―”Over Dimensional Cargo” shall mean a cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989, made under the Motor Vehicles Act, 1988 (59 of 1988).

(11) The details of the e-way bill generated under this rule shall be made available to the(a) supplier, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by the recipient or the transporter; or (b) recipient, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by the supplier or the transporter, on the common portal, and the supplier or the recipient, as the case may be, shall communicate his acceptance or rejection of the consignment covered by the e-way bill.

(12) Where the person to whom the information specified in sub-rule (11) has been made available does not communicate his acceptance or rejection within seventy two hours of the details being made available to him on the common portal, or the time of delivery of goods whichever is earlier, it shall be deemed that he has accepted the said details.

(13) The e-way bill generated under this rule or under rule 138 of the Goods and Services Tax Rules of any State or Union territory shall be valid in every State and Union territory.

(14) Specific goods that are exempt from eway bill rules are: 1. Transportation of those goods laid down in the annexure to rules as specified below: ▪ Liquefied petroleum gas for supply to household and non-domestic exempted category customers ▪ Kerosene oil sold under PDS ▪ Postal baggage transported by Department of Posts ▪ Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal ▪ Jewellery, goldsmiths’ and silversmiths’ wares and other articles ▪ Currency ▪ Used personal and household effects ▪ Unworked and worked coral 2. Goods being transported are alcoholic liquor for human consumption, petroleum crude, high-speed diesel, petrol, natural gas or aviation turbine fuel.

3. Goods being transported are not treated as supply under Schedule III of the Act (Schedule III consists of activities that would neither be supply of goods nor service like service of an employee to an employer in the course of his employment, functions performed by MP, MLA etc.)

4. Goods transported are empty cargo containers 5. Goods, other than de-oiled cake, being transported are specified in notification No. 2/2017– Central tax (Rate) Dated the 28th June, 2017. Few of the goods that are included in the above notification are as follows: ▪ Curd, lassi, buttermilk ▪ Fresh milk and pasteurized milk not containing added sugar or other sweetening matter ▪ Vegetables ▪ Fruits ▪ Unprocessed tea leaves and unroasted coffee beans ▪ Live animals, plants and trees ▪ Meat ▪ Cereals ▪ Unbranded rice and wheat flour

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain ▪ Salt ▪ Items of educational importance (books, maps, periodicals) 6. Goods exempted under notification No. 7/2017– Central Tax (Rate) Dated 28th June 2017 (supply

by CSD to unit run canteens and authorized customers) and notification No. 26/2017– Central Tax (Rate) Dated 21st September 2017 (consists of heavy water and nuclear fuels) 7. Where empty cylinders for packing of liquefied petroleum gas are being moved for reasons other than supply.

Other transactional cases where eway bill is not required are: 1. Eway bill is optional for Goods of value less than Rs. 50,000 (except in cases of mandatory Eway bill provisions like the movement of Handicraft goods and movement of goods for Interstate Job work ) 2. If goods are being transported by a non- motorized conveyance (Ex. Horse carts or manual carts) 3. If goods are being transported: ▪ From the port, airport, air cargo complex and land customs station to an inland container depot (ICD) or a container freight station (CFS) for clearance by Customs ▪ From ICD or CFS to a customs port, airport, air cargo etc. under customs bond ▪ From one customs port/station to another one under customs bond ▪ Goods transported under the customs supervision or customs seal 4. Goods transported within the notified area 5. Goods transported are transit from/to Nepal/ Bhutan 6. If goods are transported to a weighbridge within 20kms and back to the place of business by being covered under a Delivery Challan 7. Where Government or local authorities transport goods by rail as a consignor 8. Goods transported are to/from the Ministry of Defense

Rule 138A Documents and devices to be carried by a person-incharge of a conveyance (1) The person-in-charge of conveyance shall carry(a)

The invoice or bill of supply or delivery challan, and

(b)

A copy of e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner:

Provided the nothing contained in clause (b) of this sub-rule shall apply in case of movement of goods by rail or by air or vessel.

Provided further that in case of imported goods, the person in charge of a conveyance shall also carry a copy of the bill of entry filed by the importer of such goods and shall indicate the number and date of the bill of entry in Part A of FORM GST EWB-01 (2) A registered person may obtain an Invoice Reference Number from the common portal by uploading, on the said portal, a tax invoice issued by him in Form GST INV-1 and produce the same for verification by the proper officer in lieu of the tax invoice and such number shall be valid for a period of thirty days from the date of uploading.

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Study Notes Rule 138B Verification of documents and conveyances (1) The Commissioner or an officer empowered by him in this behalf may authorize the proper officer to intercept any conveyance to verify the e-way bill in physical or electronic form for all inter-State and intra-State movement of goods.

(2) The Commissioner shall get Radio Frequency Identification Device readers installed at places where the verification of movement of goods is required to be carried out and verification of movement of vehicles shall be done through such device readers where the e-way bill has been mapped with the said device.

(3) The physical verification of conveyances shall be carried out by the proper officer as authorized by the Commissioner or an officer empowered by him in this behalf.

Provided that on receipt of specified information on evasion of tax, physical verification of a specific conveyance can also be carried out by any other officer after obtaining necessary approval of the Commissioner or an officer authorized by him in this behalf.

Rule 138C Inspection and verification of goods (1) A summary report of every inspection of goods in transit shall be recorded online by the proper officer in Part A of Form GST EWB-03 within 24 hours of inspection and the final report in Part B of Form GST EWB-03 shall be recorded within 3 days of such inspection.

Provided that where the circumstances so warrant, the Commissioner, or any other officer authorised by him, may, on sufficient cause being shown, extend the time for recording of the final report in Part B of FORM EWB-03, for a further period not exceeding three days.

Explanation.- The period of twenty four hours or, as the case may be, three days shall be counted from the midnight of the date on which the vehicle was intercepted.

(2) Where the physical verification of goods being transported on any conveyance has been done during transit at one place within the State or UT or in any other State or UT, no further physical verification of the said conveyance shall be carried out again in the State or UT, unless a specific information relating to evasion of tax is made available subsequently.

Example 3: Where a conveyance carrying 25 consignments is intercepted and the person-in-charge of such conveyance produces valid e-way bills and/or other relevant documents in respect of 20 consignments, but is unable to produce the same with respect to the remaining 5 consignments, detention/ confiscation can be made only with respect to the 5 consignments and the conveyance in respect of which the violation of the Act or the rules made thereunder has been established by the proper officer.

Rule 138D Facility for uploading information regarding detention of vehicle Where a vehicle has been intercepted and detained for a period exceeding 30 minutes, the transporter may upload the said information in Form GST EWB-04 on the common portal.

Explanation. - For the purposes of this Chapter (E-way Bill), the expressions ‘transported by railways‘, ‘transportation of goods by railways‘, ‘transport of goods by rail‘ and ‘movement of goods by rail‘ does not include cases where leasing of parcel space by Railways takes place.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Circular No. 64/38/2018-GST Dated 14.09.2018 It is clarified that in case a consignment of goods is accompanied by an invoice or any other specified document and not an e-way bill, proceedings under section 129 of the CGST Act may be initiated.

Further, in case a consignment of goods is accompanied with an invoice or any other specified document and also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated, inter alia, in the following situations: a. Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is correct; b. Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject to the condition that the error in the PIN code should not have the effect of increasing the validity period of the e-way bill; c. Error in the address of the consignee to the extent that the locality and other details of the consignee are correct; d. Error in one or two digits of the document number mentioned in the e-way bill; e. Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned is correct; f. Error in one or two digits/characters of the vehicle number.

In case of the above situations, penalty to the tune of Rs. 500/- each under section 125 of the CGST Act and the respective State GST Act should be imposed (Rs.1000/- under the IGST Act) in FORM GST DRC-07 for every consignment. A record of all such consignments where proceedings under section 129 of the CGST Act have not been invoked in view of the situations listed in paragraph 5 above shall be sent by the proper officer to his controlling officer on a weekly basis.

Circular No. 61/35 /2018 GST Dated 04.09.2018 {Consignee/ recipient taxpayer storing goods in the transporter’s godown} Textile traders use transporters’ godown for storage of their goods due to their weak financial conditions. The transporters providing such warehousing facility will have to get themselves registered under GST and maintain detailed records in cases where the transporter takes delivery of the goods and temporarily stores them in his warehouse for further transportation of the goods till the consignee/recipient taxpayer’s premises.

In this regard, it is clarified that since e-way bill is a document which is required for the movement of goods from the supplier’s place of business to the recipient taxpayer’s place of business, the goods in movement including when they are stored in the transporter's godown (even if the godown is located in the recipient taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.

Further, section 2(85) defines the “place of business” [see definitions] to include “a place from where the business is ordinarily carried out, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both”. An additional place of business (APoB) is the place of business from where taxpayer carries out business related activities within the State, in addition to the principal place of business.

Declaring the transporter’s godown as APoB In case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, the transporter’s godown has to be declared as an APoB by the recipient taxpayer. Mere declaration by the recipient taxpayer to this effect with the concurrence of the transporter in the said declaration will suffice.

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Study Notes In such cases, the transportation under the e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’ APoB). Hence, e-way bill validity in such cases will not be required to be extended.

Whenever the goods move from the transporter’s godown (recipient taxpayer’s APoB) to the recipient taxpayer’s any other place of business, relevant provisions of the e-way bill rules shall apply. Consequently, a valid e-way bill shall be required, as per the extant State-specific e-way bill rules.

Requirement of maintaining accounts and records 1. Transporter, being a warehouse keeper, has to maintain accounts and records as specified in section 35 read with rule 58 [discussed earlier in this chapter].

2. Recipient taxpayer shall also maintain accounts and records as required under rules 56 and 57 [discussed earlier]. Furthermore, as per rule 56(7), books of accounts in relation to goods stored at the transporter’s godown (i.e., the recipient taxpayer’s APoB) by the recipient taxpayer may be maintained by him at his principal place of business

Question & Answer Q1. Who all can generate E-way bill (EWB)?

A. Every registered person who causes movement of goods of consignment value exceeding Rs. 50,000 or the threshold prescribed (in each State/Union Territory) in relation to supply; or reasons other than supply; or inward supply from unregistered person shall generate EWB. It means, the consignor or consignee, as a registered person or a transporter of the goods can generate the EWB. The unregistered transporter can enroll on the common portal and generate the EWB for movement of goods for his clients.

Q2. Whether EWB may be generated if the consignment value is less than Rs. 50,000?

A. Yes, the registered person or the transporter, as the case may be, may generate EWB voluntarily, even if the value of consignment is less than Rs. 50,000.

However, Proviso 3 and 4 to Rule 138(1) of the CGST Rules 2017 mandatorily requires a registered person to generate an EWB irrespective of the value of consignment where: •

the goods are to be sent by the principal located in one State or Union Territory to a job worker in other State or Union Territory.

•

handicraft goods are transported from one State or Union territory to another State or Union territory by a person who has been exempted from the requirement of obtaining registration under clauses (i) and (ii) of section 24 of the CGST Act.

Q3. Who has been casted with the ultimate responsibility of generating EWBs? Consignor, consignee or the transporter?

A. The primary responsibility to generate EWB shall be of the registered person who causes the movement of goods, i.e. the consignor or the consignee, as the case may be. However, if such consignor or consignee doesn’t generate the EWB, it may be generated by transporter as well, if authorized by the registered person.

Also, in case of supply of goods by an unregistered person to registered person, the liability to generate EWB is on the recipient.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q4. Whether EWB would be required, if transportation is done in one's own vehicle or through a public transport?

A. Yes, as per Rule 138 (2), it has been provided that EWB shall be required to be generated, in case the goods are transported by consignor or consignee in his own vehicle or in a hired one or a public conveyance, by road. In such case, the registered person causing the movement of goods may raise the EWB after furnishing the vehicle no. in Part B of FORM GST EWB – 01 if the value of goods being transported is more than Rs. 50,000.

Q5. How shall one calculate the distance and validity of goods in case of supply through multi-modal transport?

A. The distance and the validity of EWB shall remain the same even if the goods are supplied through a multimodal transport. In order to calculate the validity of the EWB, the distance to be covered by all the modes combined together must be taken into consideration. The validity provided in the CGST Rules is as under:

The “relevant date” shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as the period expiring at midnight of the day immediately following the date of generation of e-way bill. For example: •

Suppose eway bill generated on April 1, 2018 at 5 p.m. for transport of cargo which will cover a distance of 90 kms. This eway bill will be valid for one day (till mid night of April 2, 2018);

•

Suppose eway bill generated on April 1, 2018 at 5 p.m. for transport of cargo which will cover a distance of 190 kms. This eway bill will be valid for two days (till mid night of April 3, 2018).

Note:- Supplier handed over the goods to the transporter on April 1, 2018. Part A of the eway bill was submitted by the supplier on April 1, 2018 after updating the GSTIN of the transporter. Transporter loaded the goods on the truck on April 3, 2018 and completed Part B of the eway bill by updating the vehicle number. In this case, the validity of the eway bill commences from April 3, 2018.

Q6. What is the liability of generation of EWB in case of transportation of goods through e-commerce?

A. Generally, in case of an E-Commerce business model, the logistics is handled by an independent third party logistic service provider. So, in such a case 4 parties are involved in the transaction (seller, buyer, logistic service provider and E-Commerce operator). Therefore, in such cases where the goods are to be transported through an e-commerce operator, on an authorization from consignor, Part A of the EWB may be furnished by the ECommerce operator and Part B of the EWB may be furnished either by the E-Commerce operator or by the third party logistic service provider.

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Study Notes Q7. Whether any other document needs to be provided to the transporter in addition to EWB, for movement of goods?

A. In accordance with Rule 55A read with Rule 138A of the CGST Rules, the person in-charge of conveyance shall carry ➢ ➢

Tax Invoice or Delivery Challan or Bill of Supply, as the case may be; and a copy of the EWB in physical form or the EWB number in electronic form or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner:

EWB is an additional document and not a substitute for Tax Invoice, delivery challan or any other prescribed document for the said transaction.

Q8. Can the EWB be deleted?

A. The EWB once generated cannot be deleted. However, it can be cancelled by the generator within 24 hours of its generation. If it has been verified by any proper officer within 24 hours, then it cannot be cancelled. Further, EWB can be cancelled if, either goods are not transported or are not transported as per the details furnished in the EWB. A recipient has right to cancel/ reject the EWB within 72 hours of its generation or actual receipt of goods, whichever is earlier.

Q9. In case of High Sea Sale Transactions – Whether EWB is required?

A. EWB is required for movement of goods within the country. In case of High Sea Sales as the supply is affected before the goods cross the custom frontiers of India, EWB is not required to be generated. When the ultimate buyer files bill of entry, he is required to generate EWB for movement of goods from port to his place of business.

Q10. Whether EWB is required to be generated for the movement of goods between CFS /ICD to port in the course of importation and exportation of goods?

A. Rule 138(14) of the CGST Rules 2018, provides that no EWB is required to be generated in respect of: ➢ Movement of goods from the port, airport, air cargo complex and land customs station to an ICD or a CFS for clearance by Customs in the course of importation. ➢

where the goods are being transported— 1. under customs bond from an ICD or a CFS to a customs port, airport, air cargo complex and land customs station, or from one customs station or customs port to another customs station or customs port, or 2. under customs supervision or under customs seal

Therefore, EWB is not required for movement of goods between CFS/ICD to port or vice versa in the course of importation and exportation of goods.

Q11. How to handle “Bill to” - “Ship to” invoice in e-way bill system?

A. Sometimes, the tax payer raises the bill to somebody and sends the consignment to somebody else as per the business requirements. There is a provision in the e-way bill system to handle this situation, called as ‘Bill to’ and ‘Ship to’.

In the e-way bill form, there are two portions under ‘TO’ section. In the left hand side - ‘Billing To’ GSTIN and trade name is entered and in the right hand side - ‘Ship to’ address of the destination of the movement is entered.

The other details are entered as per the invoice.

In case ship to state is different from Bill to State, the tax components are entered as per the billing state party.

That is, if the Bill to location is inter-state for the supplier, IGST is entered and if the Bill to Party location is intra-

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain state for the supplier, the SGST and CGST are entered irrespective of movement of goods whether movement happened within state or outside the state.

Q12. Whether multiple invoices can be clubbed in one E way bill? If yes, then to what extent?

A. The value of goods determined in the invoice shall be regarded as the value of consignment, on the basis of which it is decided whether the consignor or consignee is required to generate EWB or not. Therefore, a separate EWB is required to be generated for every individual invoice where value of corresponding consignment exceeds Rs.50,000.

Q13. If the goods are taken from one State to another for the purpose of display in exhibition, whether EWB is required to be generated?

A. EWB would be required to be generated, where the value of the consignment exceeds Rs. 50,000.

Q14. How to generate the EWB in case goods are to be moved to a weighbridge situated outside the factory and invoice cannot be issued unless goods are weighed?

A. EWB is not required to be generated where the goods are to be transported up to a distance of 20 kms for the purpose of weighment from the place of business of consignor to a weighbridge, or, from the weighbridge back to place of consignor. However, such movement should be along with delivery challan to be covered under relaxation of EWB generation.

Q15. What if the vehicle is stuck at a particular point in the journey due to calamity or traffic jam?

A. The goods are required to be transported within the validity period of the EWB. However, it is provided that under circumstances of exceptional nature, the transporter may generate another EWB after updating the details in Part-B of FORM GST EWB-01. These circumstances could be said to be in the nature of exceptional nature. However, in the absence of specific meaning of the term “exceptional nature”, further clarification is required.

Q16. What if the same invoice contains both categories of goods i.e. ones exempted for the purpose of EWBs and taxable, then whether EWB needs to be generated?

A. It is to be noted that the explanation to the Rule 138(1) provides that consignment value for the purpose of EWB shall be the value, determined in accordance with the provisions of Section 15, declared in invoice or delivery challan or bill of supply as the case may be. However, it shall exclude the value of exempt supply where the invoice is issued in respect of both exempted and taxable supply of goods. Therefore, the value of taxable goods only shall be considered for the purpose of consignment value.

Q17. A registered person has purchased a new mobile phone for Rs. 75,000 and carrying with him on motorized vehicle. Whether EWB is required to be generated?

A. Yes. It appears that if the movement is caused by a registered person, EWB is required to be generated for goods exceeding value of Rs. 50,000. .

Q18. A person has been shifting his households from one State to another on account of job change. Whether EWB is required to be generated?

A. Used personal and household effects have been covered in the Annexure to the Rule 138 in respect of which EWB is not required to be generated. Hence, such person is not required to generate EWB in such cases.

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Study Notes Q19. How to consider consignment value in case goods is being moved for renting purpose. Do we need to take the value of goods or value of the rent charged on goods?

A. The consignment value is the value of goods to be determined under section 15 of the CGST Act including applicable tax thereon. The rent charged represents the value of service portion whereas EWB is to be generated for the value of goods for which movement is to be undertaken. Hence, in such cases, the value to be considered should be of the goods not the rental charges charged by the supplier of services. The movement could be based on delivery challan based on which EWB may be generated.

Q20. Supply of goods through pipeline, whether oil, petroleum, gases, water, electricity etc. whether EWB is required to be generated?

A. EWB is required to be generated when movement of goods is through motorized conveyance. Further, the EWB portal has 4 modes of transportation i.e. road, air, rail and ship. As the transportation of goods through pipeline may not involve movement of goods through motorized vehicle, there may not be need to generate EWB for such movement of goods.

Q21. An outdoor catering company is transporting utensils and other accessories for catering outside the kitchen, interstate or intra state. Whether EWB is necessary? If yes what are the documents to be attached with the EWB? If not under which document, it has to be dispatched?

A. The EWB is required for every movement of goods, even if it is for the purpose other than supply. When the goods are transported by caterer for use by him in the course of making supply of catering services, it could be said to be movement of goods by him for himself/ self-use. Though there is no supply of utensils and other materials to the customer, yet there is movement of goods and hence EWB is required to be generated.

Such EWB may be generated against delivery challan, by providing “Outward” movement and “For own use” under the reason for transportation.

Q22. A farmer carries the goods from his farm to Mandi for the purpose of sale therein. Whether there is requirement to generate EWB? A. Many of the agricultural produces have been exempted from the levy of GST. Wherever items to be transported is exempted from GST, there is no need to generate EWB. However, if the goods being transported by farmer are in the nature of taxable goods, EWB has to be generated.

Q23. Where goods are supplied on “as is-where is” basis, whether EWB is required to be generated?

A. EWB is not required to be generated for supply of goods unless it involves movement of goods through motorized conveyance. In case of sale of goods on “as is – where is” basis, there is no movement of goods.

Hence, there is no need to generate EWB in case of such instances.

Q24. In many cases where manufacturer or wholesaler is supplying to retailers, or where a consolidated shipment is shipped out, and then distributed to multiple consignees, the recipient is unknown at the time the goods are dispatched from shipper’s premises. A very common example is when FMCG companies send a truck out to supply kirana stores in a particular area. What needs to be done in such cases?

A. In such cases, EWB shall be generated for outward movement of goods. No supply is being made, movement is caused on behalf of self. In such cases, delivery challan may be used for generation of EWBs. All the provisions for delivery challan need to be followed along with the rules for EWBs.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q25. Where an invoice is in respect of both goods and services, whether the consignment value should be based on the invoice value (inclusive of value of services) or only on the value of goods. Further, whether HSN wise details of service is also required to be captured in Part A of the EWB in such case.

A. Consignment value and HSN needs to be determined for goods only not for services as only the goods are in movement and EWB needs to be generated accordingly.

Q26. What shall be the consequence if any document, register, or books of accounts belonging to a registered person are found at any premises other than those mentioned in the certificate of registration?

A. As per Rule 56(10) of the CGST Rules, 2017, unless it is proved otherwise, if any document, register, or books of accounts belonging to a registered person are found at any premises other than those mentioned in the certificate of registration, they shall be presumed to be maintained by the said registered person.

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Study Notes Section 49 Rule 85 Rule 86 Rule 87 Rule 88 Section 50 Section 51 Section 52 Section 53

Payment of tax, interest and other amounts Electronic Liability Register Electronic Credit Ledger Electronic Cash Ledger Unique Identification number Interest on delayed payment of tax Tax deduction at Source Collection of Tax at Source Transfer of ITC

Section 49 Payment of tax, interest and other amounts Payments Payments (a) Every deposit made towards Tax, Interest, Penalty, Fee or any other amount by a Person [Sec. 49 (1)] (b) ITC as self-assessed in the Return of a Registered Person [Sec. 49 (2)]

Deposited in Electronic Cash Ledger

Electronic Credit Ledger

Utilized for Payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules [Sec. 49 (3)] Any payment towards output tax under this Act or under the IGST Act [Sec. 49(4)]

When GST is payable under reverse charge, it should be paid by cash i.e. through Electronic Cash Ledger, the GST under reverse charge cannot be paid by utilizing ITC – Section 49 (4) read with section 2 (82).

Date of Payment Payment of taxes by the normal tax payer is to be done on monthly basis by the 20 th of the succeeding month.

Cash payment will be first deposited in the Cash Ledger and the tax payer shall debit the ledger while making payment in the monthly returns and shall reflect the relevant debit entry number in his return. Payment can also be debited from the Credit Ledger. Payment of taxes for the month of March shall be paid by the 20th April.

Composition tax payers will need to pay tax on quarterly basis. [The Date of Credit to the account of the Government in the authorized Bank shall be deemed to be the date of deposit in the Electronic Cash Register].

Mode of Payment i. ii. iii. iv.

Internet Banking, or By using Credit or Debit cards, or NEFT/RTGS By such other mode prescribed by the Government

Rounding off Tax [Sec. 170] The amount of duty, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under CGST shall be rounded off to the nearest rupee.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Utilization of Credit available in Electronic Credit Ledger [Sec. 49 (5)] The amount of input tax credit available in the electronic credit ledger of the registered person on account of– (a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any, may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order; (b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any, may be utilised towards the payment of integrated tax; (c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may be utilised towards payment of integrated tax; Provided that the input tax credit on account of State tax shall be utilised towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax. (d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount remaining, if any, may be utilised towards payment of integrated tax; Provided that the input tax credit on account of Union territory tax shall be utilized towards payment of integrated tax only where the balance of the input tax credit on account of central tax is not available for payment of integrated tax. (e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and (f) the State tax or Union territory tax shall not be utilised towards payment of central tax.

Please refer Rule 88A in Chapter 8 ITC

Discharge of Tax Liability [Sec. 49 (7), (8) & (9)] 1. All liabilities of a taxable person under this Act shall be recorded and maintained in an Electronic Liability Register.

2. Every taxable person shall discharge his tax and other dues under this Act in the following order – a. Self-assessed tax, and other dues related to Returns of Previous Tax Periods, b. Self-assessed tax, and other dues related to the Return of the Current Tax Period, c. Any other amount payable under this Act or the Rules made thereunder including the demand for recovery of tax determined U/s 73 or U/s 74.

3. Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both.

Note ➢

Tax period means the period for which the tax return is required to be furnished.

➢

Tax dues means the tax payable under this Act and does not include interest, fee and penalty, and

➢

Other dues mean interest, penalty, fee or any other amount payable under this Act or the rules made thereunder.

Section 49A Notwithstanding anything contained in section 49, the input tax credit on account of central tax, State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has first been utilised fully towards such payment.

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Study Notes Section 49B Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council, prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax, State tax or Union territory tax, as the case may be, towards payment of any such tax Please see example in Chapter 8 :- Input tax credit to understand utilisation of ITC {Rule 88A} Sec

Tax wrongfully collected and paid to Central Government or State Government [Sec. 77] ➢

If a registered person has paid the Central tax and State tax/UT tax on a transaction considered by him to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the amount of taxes so paid.

➢ If a registered person who has paid Integrated tax on a transaction considered by him to be an interState supply, but which is subsequently held to be an intra-State supply, shall not be required to pay any interest on the amount of central tax and State tax/UT tax payable.

There is identical provision in Section 19 of IGST Act, 2017 for wrongly transactions considered as inter-State instead of intra-State.

Rule 85 Electronic Liability Register 1. Form: The Electronic Liability Register Specified U/s 49 (7) shall be maintained in FORM GST PMT-01 for each person liable to pay tax, interest, penalty, late fee or any other amount on the Common Portal and all amounts payable by him shall be debited to the said register.

2. Amounts debited: The electronic liability register of the person shall be debited by: a. Amount payable towards Tax, Interest, Late fee or any other amount payable as per the return furnished by the said person, b. Amount of tax, interest, penalty or any other amount payable as determined by a Proper Officer in pursuance of any proceedings under the Act or as ascertained by the said person; c.

Amount of tax and interest payable as a result of mismatch u/s 42 or u/s 43 or u/s 50, or

d. Amount of interest that may accrue from time to time.

3. Corresponding Debits in Electronic Credit/Cash Ledger: Payment of every liability by a Registered Person as per his Return shall be made by debiting the Electronic Credit Ledger maintained or the Electronic Cash Ledger maintained and the Electronic Liability Register shall be credited accordingly.

4. Credit Entries in the Electronic Liability Register: The following amounts shall be paid by debiting the Electronic Cash Ledger and crediting the Electronic Liability Register – a. Amount deducted u/s 51, or b. Amount collected u/s 52, or c. Amount payable or Reverse charge basis, or d. Amount payable u/s 10, e. Amount payable towards interest, penalty, fee or any other amount under this Act, 5. Electronic Tax Liability Register: The Electronic Liability Register shall be credited with – a. Any amount of demand debited in the Electronic Liability Register which stands reduced to the extent of relief given by the Appellate Authority or Appellate Tribunal or Court.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain b. Amount of Penalty imposed or liable to be imposed which stands reduced partly or fully, as the case may be, if the taxable person makes the payment of tax, interest and penalty specified in the show cause notice or demand order.

6. Discrepancy: A Registered person shall, upon noticing any discrepancy in his Electronic Liability Ledger, communicate the same to the officer exercising jurisdiction in the matter, through the Common Portal in FORM GST PMT-04.

Rule 86 Electronic Credit Ledger ➢

Form: The Electronic Credit Ledger shall be maintained in FORM GST PMT-02 for each registered person eligible for ITC under the Act on the Common Portal and every claim of ITC under the Act shall be credited to the said ledger.

➢

Discharge of liability: The Electronic Credit Ledger shall be debited to the extent of discharge of any liability in accordance with the provisions of U/s 49 or U/s 49A or U/s 49B.

➢

Refund of Unutilized amount: a. Where a Registered Person has claimed refund of any unutilized amount from the Electronic Credit Ledger u/s 54, the amount to the extent of the claim shall be debited in the said ledger. b. If the refund so filed is rejected, either fully or partly, the amount debited to the extent of rejection, shall be re-credited to the Electronic Credit Ledger by the Proper Officer by an order made in FORM GST PMT-03.

➢

Discrepancy: A registered person shall, upon noticing any discrepancy in his Electronic Credit Ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT – 04.

Please note: ➢ No entry shall be made directly in the Electronic Credit Ledger under any circumstance. ➢

A refund shall be deemed to be rejected, if the appeal is finally rejected or if the claimant gives an undertaking to the proper officer that he shall not file an appeal.

Rule 87 Electronic Cash Ledger 1. Form: The Electronic cash ledger u/s 49 (1) shall be maintained in FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the Common Portal for crediting the amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any other amount.

2. Major Heads & Minor Heads: Major Head IGST CGST SGST/UTGST Cess

Minor Head for each Major Head Tax Interest Penalty Fee Others 3. A registered taxpayer can make cash deposits in the recognized Banks through the prescribed modes to the Electronic Cash Ledger using any of the Online or Offline modes permitted by the GST Portal.

The Cash deposits can be used for making payments like tax liability, interest, penalties, fee and others.

4. Restriction in cross utilization of Major Heads: The amount available in Electronic Cash Ledger can be utilized for payment of any liability for the respective major or minor heads. For example, liability for the

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Study Notes tax under SGST/UTGST can be settled only from the available amount of cash under SGST/UTGST Major head.

Example 1: An amount of Rs. 1,000 available under minor head ‘tax’ of major head ‘SGST/UTGST’ and the taxpayer has a liability of Rs. 200 for minor head ‘interest’ under the same major head ‘SGST/UTGST’. Since, there is no amount available under minor head ‘interest’ under major head ‘SGST/UTGST’, therefore, interest payment cannot be made from the amount available under ‘tax’ of the same major head.

Amount available under one Major head cannot be utilized for discharging the liability under any other major head. For example, amount available in SGST/UTGST cannot be utilized for discharging liabilities under CGST, IGST or Cess and vice versa.

Example 2: A taxpayer made a cash deposit of Rs. 1,000 to IGST – Tax, through net banking. The tax payer can utilize this cash deposit of Rs. 1,000 in the cash ledger to make payment only of the IGST – ➢

tax liability by debiting the cash ledger.

Challan: a. Any person, or a person on his behalf, shall generate a challan in FORM GST PMT – 06 on the common portal and enter the details of the amount to be deposited by him towards tax, interest, penalty fees or any other amount. b. It shall be valid for a period of 15 days. c. For making payment of any amount indicated in the challan, the commission, if any, payable in respect of such payment shall be borne by the person making such payment.

➢

Mode of Deposit: a. Internet Banking through authorized banks, b. Credit Card or Debit Card through the authorized bank, c. NEFT/RTGS d. Over the counter (OTC) payment through authorized banks for deposits up to Rs. 10,000 per challan per tax period, by cash, cheque or demand draft.

➢

OTC limit not applicable: a. Government Departments or any other deposit to be made by notified persons, b. Proper Officer or any other officer authorized to recover outstanding dues from any person, including recovery made through attachment or sale of movable or immovable properties, c.

➢

Proper Officer or any other officer authorized for the amounts collected by way of cash, cheque or

demand draft during any investigation or enforcement activity or any ad hoc deposit.

Temporary Identification Number: Any payment required to be made by a person who is not registered under the Act, shall be made on the basis of a Temporary Identification Number generated through the

➢

Common Portal.

Payment through NEFT/RTGS: a. Where the payment is made by way of NEFT/RTGS mode from any bank, the mandate form shall be generated along with the challan on the Common Portal and the same shall be submitted to the bank from where the payment is to be made. b. The mandate form shall be valid for a period of 15 days from the date of generation of Challan.

➢

Generation of Challan Identification Number (CIN): a. On successful credit of the amount to the concerned government account maintained in the authorized bank, a CIN will be generated by the collecting Bank and the same shall be indicated in the challan.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain b. On receipt of CIN from the Collecting Bank, the said amount shall be credited to the Electronic Cash Ledger of the person on whose behalf the deposit has been made and the Common Portal shall make available a receipt of this effect. c.

Where the bank account of the person concerned, or the person making the deposit on his behalf, is debited but no CIN is generated or generated but not communicated to the Common Portal, the said person may represent electronically in FORM GST PMT-07 through the Common Portal to the

➢

Bank or electronic gateway through which the deposit was initiated.

Tax deduction/collection: Any amount deducted u/s 51 or collected u/s 52 and claimed in FORM GSTR02 by the Registered Taxable Person from whom the said amount was deducted or, as the case may be, collected shall be credited to his Electronic Cash Ledger in accordance with the provisions of Rule 87.

➢

Refund from Electronic Cash Ledger: a. Where a person has claimed refund of any amount from Electronic Cash ledger, the amount shall be debited to the Electronic Cash Ledger. b. If the refund so claimed is rejected, either fully or partly, the amount debited to the extent of rejection,

➢

shall be credited back to Electronic cash ledger by an order made in FORM GST PMT-03.

Discrepancy: A registered person shall, upon noticing any discrepancy in his electronic cash ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT-04.

Note: A refund shall be deemed to be rejected, if the appeal is finally rejected or it the claimant gives an undertaking to the proper officer that he shall not file an appeal.

Rule 88 Unique Identification Number 1. A unique identification number shall be generated at the common portal for each debit or credit to the electronic cash or credit ledger, as the case may be.

2. The unique identification number relating to discharge of any liability shall be indicated in the corresponding entry in the electronic liability register.

3. A unique identification number shall be generated at the common portal for each credit in the electronic liability register for reasons other than those covered under sub-rule (2).

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Study Notes

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Example 3: ABC has deposited the following amounts in its Electronic Cash Ledger under its major heads.

The position of Electronic Cash Ledger for the month of May 2019 is as follows:-

Balance

IGST 9.000

CGST 10,000

Cess -

SGST 12,000

CGST 12,000

Cess -

SGST 12,000

For the month of May 2019 Tax Liability:Net Tax Liability Tax

IGST 8,000

It is to be determined as to how ABC can utilize the balance in Electronic Cash Ledger for payment of net tax liability?

Description IGST CGST SGST Cess

Total Tax Payable 8,000 12,000 12,000

IGST 8,000

Taxes paid through Electronic Cash Ledger CGST SGST Cess 10,000 12,000

In this case, ABC need to deposit INR 2,000 more for payment of CGST.

Section 50 Interest on delayed payment of tax (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen percent, as may be notified by the Government on the recommendations of the Council.

(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four percent, as may be notified by the Government on the recommendations of the Council.

Example 4: Mr. A has provided following information with respect to filing of return for the period of June 2018:Particulars Amount (INR) Amount of IGST to be deposited 2,00,000 Due Date of filing GSTR 3B for the month of June 2018 is 20.07.2018 Actual Deposit is made on 30.07.2018 In this case, interest to be deposited is Rs. 986 {Rs. 2,00,000 * 18%* 10 days/365 days}

Section 51 Tax deduction at source (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,– (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) such persons or category of persons as may be notified by the Government on the

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain recommendations of the Council Notified under notification No. 50/2018 – CT Dated 13.09.2018 & 57/2018 – CT Dated 23.10.2018} The following persons have been notified under clause (d) of sub-section (1) of section 51 of the CGST Act by the Central Government: (a) an authority or a board or any other body, i. set up by an Act of Parliament or a State Legislature; or ii. established by any Government, with 51% or more participation by way of equity or control, to carry out any function; (b) society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860; (c) public sector undertakings With respect to deductor under section 51(1)(a), provisions of TDS are applicable only on the certain prescribed authorities of Ministry of Defence, remaining authorities under the Ministry of Defence are exempt. ✓ No TDS in case of supply of goods or services or both from a public sector undertaking to another public sector undertaking, whether or not a distinct person, with effect from the 1st day of October, 2018. {Notification No. 61/2018 – Central Tax Dated 5th November, 2018}. ✓ Nothing in this notification shall apply to the supply of goods or services or both which takes place between one person to another person specified under clauses (a), (b), (c) and (d) or sub-section (1) of Section 51 of said Act. Notification No.73/2018 – Central Tax Dated 31st December, 2018} ✓ The CBIC vide circular no. 76/50/2018 – GST Dated 31.12.2018 has clarified that the provisions of TDS are applicable only to such authority or a board or any other body, set up by an Act of Parliament or a State Legislature or established by any government in which fifty one percent or more participation by way of equity or control is with the Government. (hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one percent under CGST Act, 2017, (also need to consider deduction under SGST Act, 2017 i.e. 1% CGST & 1% SGST = Total 2%) from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees: Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or Union territory which is different from the State or as the case may be, Union territory of registration of the recipient.

Example 5: Registered dealer of Bhubaneswar has placed supply order to a registered dealer of Bihar for delivery of material to a party in Patna. The supply would be intra-State supply and Central tax and State tax would be levied. In such case, transfer of TDS (Central tax + State tax of Orissa) to the cash ledger of the supplier (Central tax + State tax of Bihar) would be difficult. So in such cases, TDS would not be deducted.

• • • •

• •

Value of supply shall exclude GST taxes & Cess.

The amount of tax deducted at source should be deposited to the Government account by deductor by 10th of the succeeding month.

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in prescribed form to the deductee (the supplier from whose payment TDS is deducted).

If the deductor does not furnish the certificate of deduction-cum- remittance within 5 days of the remittance, the deductor has to pay a late fee of Rs. 100 per day from the expiry of the 5th day until the day he furnishes the certificate. This late fee would not be more than Rs. 5000/-.

If the deductor has not remitted the amount deducted as TDS to the Government within the prescribed time limit, he is liable to pay penal interest under Section 50 in addition to the amount of tax deducted.

The amount of tax deducted is reflected in ➢ Electronic Cash Ledger of deductee. ➢ Return filed by deductor under section 39(3).

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Study Notes •

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The deductee can claim credit of the tax deducted, in his electronic cash ledger. This provision enables the Government to cross check whether the amount deducted by the deductor is correct and that there is no mis-match between the amount reflected in the electronic cash ledger and the amount shown in the return filed by deductor.

The deductor or the deductee can claim refund of excess deduction or erroneous deduction. The provisions of section 54 relating to refunds would apply in such cases. However, if the deducted amount is already credited to the electronic cash ledger of the supplier, the same shall not be refunded.

FAQ released by CBIC

Situations / Contracts Finance Department is making a payment of Rs.3 Lakh to a supplier of ‘printing & stationery’.

Education Department is making payment of Rs.5 Lakh to a supplier of ‘printed books and printed or illustrated post cards’ where payment for books is Rs.2 Lakh and Rs.3 Lakh is for other printed or illustrated post cards.

Finance Department, is making payment of Rs.1.5 Lakh to a supplier of ‘car rental service’.

Deduction required YES / NO Yes

Yes, deduction is required in respect of payment of Rs. 3 Lakh only i.e. for payment in respect of taxable supply.

See Remarks

Health Department executed a contract with a local supplier to supply “medical grade oxygen” of Rs.2.6 Lakh (including GST) and is making full payment.

No

Municipal Corporation of Kolkata purchases a heavy generator from a supplier in Delhi. Now, it is making payment of Rs.5 Lakh and IGST @18% on Rs.5 Lakh for such purchase.

Yes, deduction is required @ 2%

Fisheries Department is making a payment of Rs.10 Lakh to a contractor for supplying labour for digging a pond for the purpose of Fisheries.

No

Remarks Where the total contract value of taxable supply is more than Rs.2.5 Lakh deduction is mandatory.

Books are exempted goods; no deduction is required in respect of supply of books.

However, payment involving ‘printed or illustrated post cards’ is for supply of taxable goods and value of such supply is > Rs.2.5 Lakh; so deduction is required.

Deduction is mandatory in case the total value of taxable supply under the contract > Rs.2.5 Lakh irrespective of the amount paid.

However, if the total value of supply under a contract is < Rs.2.5 Lakh, deduction is not required.

Total value of supply as per the contract is Rs.2.6 Lakh (including GST). Tax rate is 12%. So, taxable value of supply (excluding GST) stands at Rs.2.6L x 100/112 = Rs.2.32 L < Rs.2.5 Lakh Hence, deduction is not required.

Deduction is required in case of inter-State supply and if the value of taxable supply under a contract exceeds Rs.2.5 Lakh.

This supply of service is exempt in terms of Sl. No. 3 of notification No.12/2017 – Central Tax (Rate) Dated 28.06.2017 and hence deduction is not required.

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No

Government school is making a payment of Rs.3 Lakh to a supplier for supply of cooked food as mid-day meal under a scheme sponsored by Central/State Government.

Health Department is making payment of Rs.10 Lakh to a supplier for supply of Hearing Aids.

No

This supply of service is exempt in terms of Sl. No. 3A of notification No.12/2017 – Central Tax (Rate) Dated 28.06.2017 as amended by notification no.

2/2018- Central Tax (Rate) Dated 25.01.2018 and hence deduction is not required.

This supply of service is exempt in terms of Sl. No. 66 of notification No. 12/2017 – Central Tax (Rate) Dated 28.06.2017 as amended and hence deduction is not required.

This supply of goods is exempt in terms of Sl. No.142 of notification No. 2/2017 – Central Tax (Rate) Dated 28.06.2017 as amended and hence deduction is not required.

No

Example 6 (ICAI): Suppose a supplier makes a supply worth Rs. 1000/- to a recipient and the GST at the rate of 18% is required to be paid. The recipient, while making the payment of Rs. 1000/- to the supplier, shall deduct 1% viz Rs. 10/- as TDS. The value for TDS purpose shall not include 18% GST. The TDS, so deducted, shall be deposited in the account of Government by 10th of the succeeding month.

The TDS so deposited in the Government account shall be reflected in the electronic cash ledger of the supplier (i.e. deductee) who would be able to use the same for payment of tax or any other amount. The purpose of TDS is just to enable the Government to have a trail of transactions and to monitor and verify the compliances.

Example 7: Particulars (in all cases taxable contract value is over Rs.2.5 Lakh) State Government of Rajasthan purchases taxable goods from a local supplier State Government of Punjab purchases taxable goods from a supplier in Mumbai State Government of Haryana engages a contractor of Delhi for repairing of Haryana Bhawan in Delhi

Location of Supplier

Place of Supply

State of Registration of recipient

Type of Supply

Tax

TDS deductio n

Jaipur

Jaipur

Rajasthan

IntraState

CGST & SGST

Yes

Mumbai

Punjab

Punjab

InterState

IGST

Yes

Delhi

Delhi

Haryana

Intra State

CGST & SGST

No

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Study Notes Section 52 Collection of Tax at Source (1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator (hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated at such rate not exceeding one per cent., as may be notified by the Government on the recommendations of the Council, of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Explanation.––For the purposes of this sub-section, the expression “net value of taxable supplies” shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.

(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode of recovery from the operator.

(3) The amount collected under sub-section (1) shall be paid to the Government by the operator within ten days after the end of the month in which such collection is made, in such manner as may be prescribed.

(4) Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) during a month, in such form and manner as may be prescribed, within ten days after the end of such month.

(5) Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement, electronically, containing the details of outward supplies of goods or services or both effected through it, including the supplies of goods or services or both returned through it, and the amount collected under the said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty first day of December following the end of such financial year.

(6) If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the month during which such omission or incorrect particulars are noticed, subject to payment of interest, as specified in sub-section (1) of section 50: Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for furnishing of statement for the month of September following the end of the financial year or the actual date of furnishing of the relevant annual statement, whichever is earlier.

(7) The supplier who has supplied the goods or services or both through the operator shall claim credit, in his electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished under sub-section (4), in such manner as may be prescribed.

(8) The details of supplies furnished by every operator under sub-section (4) shall be matched with the corresponding details of outward supplies furnished by the concerned supplier registered under this Act in such manner and within such time as may be prescribed.

(9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with the corresponding details furnished by the supplier under section 37 or Section 39, the discrepancy shall be communicated to both persons in such manner and within such time as may be prescribed.

(10) The amount in respect of which any discrepancy is communicated under sub-section (9) and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated, shall be added to the output tax liability of the said supplier, where the value of outward supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in

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(11) The concerned supplier, in whose output tax liability any amount has been added under sub-section (10), shall pay the tax payable in respect of such supply along with interest, at the rate specified under subsection (1) of section 50 on the amount so added from the date such tax was due till the date of its payment.

(12) Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the course of any proceedings under this Act, requiring the operator to furnish such details relating to— (a) supplies of goods or services or both effected through such operator during any period; or (b)

stock of goods held by the suppliers making supplies through such operator in the godown or warehouses, by whatever name called, managed by such operator and declared as additional places of business by such suppliers, as may be specified in the notice.

(13) Every operator on whom a notice has been served under sub-section (12) shall furnish the required information within fifteen working days of the date of service of such notice.

(14) Any person who fails to furnish the information required by the notice served under sub-section (12) shall, without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend to twenty-five thousand rupees.

Explanation.—For the purposes of this section, the expression “concerned supplier” shall mean the supplier of goods or services or both making supplies through the operator.

•

•

•

•

•

•

•

•

In cases where someone is selling their own products through a website, there is no requirement to collect tax at source as per the provisions of this Section. These transactions will be liable to GST at the prevailing rates.

If we purchase goods from different vendors and are selling them on our website under our own billing. In this case, there are two transactions - where we purchase the goods from the vendors, and where we sell it through our website. For the first transaction, GST is leviable, and will need to be paid to our vendor, on which ITC is available to us. The second transaction is a supply on our own account, and not by other suppliers and there is no requirement to collect tax at source. The transaction will attract GST at the prevailing rates.

If electronic commerce operator has suppliers in different States, he is required to obtain GST registration in each State. However, he can indicate his head office as place of business, if he doesn’t have place of business in that State. Thus, all returns can be filed through HO. {Sr. Nos. 5 to 7 of FAQ released by Law Committee of GST Council on 28-9-2018} The supplier cannot supply under composition scheme. He must supply goods or services through normal scheme only. {Sr. Nos. 6 & 16 of FAQ released by Law Committee of GST Council on 28-9-2018} The net value of taxable supplies will be calculated at GSTIN level and not at gross level. In other words, net suppliers are to be calculated for each supplier separately. {Sr. Nos. 10 & 11 of FAQ released by Law Committee of GST Council on 28-9-2018} If in a particular month, the sale returns are more than supplies made, there will be no TCS for that month. However, such negative figure will not be carried forward. Hence, such shortage cannot be adjusted in next month. {Sr. Nos. 20 of FAQ released by Law Committee of GST Council on 28-9-2018} The TCS by electronic commerce operator shall be on billing basis and not on collection basis {Sr. Nos. 11 of FAQ released by Law Committee of GST Council on 28-9-2018} TCS provision is not applicable when GST is payable on reverse charge. TCS provisions also do not apply in case of exempt supply. {Sr. Nos. 14 & 15 of FAQ released by Law Committee of GST Council on 28-9-2018} TCS provision don’t apply on import of goods or services.

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Study Notes •

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•

•

•

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{Sr. Nos. 17 of FAQ released by Law Committee of GST Council on 28-9-2018} The rate of TCS are as follows(a) For supplies within the State – 0.5% CGST plus 0.5% SGST/UTGST (b) For inter-State supplies – 1% IGST of the net value of supplies made through it by other suppliers where consideration with respect to such supplies is to be collected by the said operator. {Sr. Nos. 4 of FAQ released by Law Committee of GST Council on 28-9-2018} {Notification Nos. 52/2018-CT and 02/2018-IT both Dated 20-9-2018} The payment of TCS is to be made through electronic cash ledger only within 10 days from close of month. Payment of TCS amount cannot be made through electronic credit ledger. {Sr. Nos. 19 of FAQ released by Law Committee of GST Council on 28-9-2018} As per Section 24 (ix) every person supplying goods or services through an e-commerce operator who is required to collect TCS under Section 52, is required to be mandatorily register in GST irrespective of the value of supply made by him. However, vide notification No. 65/2017-central tax Dated 15.11.2017, such supplier is going to get threshold limit. It means e-commerce operator is not liable to collect TCS on supply of services being by such supplier through their portal.

The Government vide circular no. 74/48/2018 – GST Dated 05.11.2018 has clarified on applicability of TCS provisions on operator of electronic auction system for trading tea, in view of the representation received from the Tea Board of India.

The CBIC vide above circular has clarified that the Tea Board admittedly falls under the category of e-commerce operator liable to collect TCS at notified rate in accordance with the provisions of Section 52 of the CGST Act, respectively from the: ✓ Sellers (i.e. tea producers) on the net value of supply of goods i.e. tea; and ✓ Auctioneers on the net value of supply of services (i.e. brokerage) The CBIC vide circular no. 76/50/2018 – GST Dated 31.12.2018 has clarified that for the purpose of determination of value of supply under GST, Tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.

E-commerce Operator liable to collect TCS Amazon is liable to collect TCS, because they are facilitating actual supply of goods through their platform (popularly called market place model)

E-commerce Operator not liable to collect TCS Amazon will not be treated as ecommerce operators liable to collect TCS, in relation to those supplies which they make on their own account (popularly called inventory model)

E-commerce Operator not liable to collect TCS Titan supplying watches and jewels through its own website would not be considered as an ecommerce operator for the purpose of Section 52. Thus, TCS provisions are not applicable.

Example 8: ABC Ltd. is an e-commerce operator. For the month of May 2019, following information was provided by ABC Ltd. Particulars Aggregate Value of all taxable supplies made through ABC Ltd. by all taxable persons Supplies returned out of above taxable supplies Value of supply of notified services made by unregistered suppliers through ABC Ltd., falling under Section 9 (5) of the CGST Act

Amount in INR 50,00,000 10,00,000 15,00,000

In this case net value of taxable supplies for the purpose of collecting TCS @ 1% shall be Rs. 40,00,000 (Rs. 50,00,000-Rs. 10,00,000). Accordingly TCS amount is Rs. 40,000. ABC Ltd. would be considered deemed supplier of service in terms of Section 9 (5) of the CGST Act for Rs. 15,00,000 and TCS won’t be applicable on this. If suppose suppliers are registered & responsible for GST payment then TCS will be also applicable on Rs. 15,00,000. So total TCS amount will become Rs. 55,000.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 53 Transfer of ITC On utilization of input tax credit availed under this Act for payment of tax dues under the Integrated Goods and Services Tax Act in accordance with the provisions of sub-section (5) of section 49, as reflected in the valid return furnished under sub-section (1) of section 39, the amount collected as central tax shall stand reduced by an amount equal to such credit so utilized and the Central Government shall transfer an amount equal to the amount so reduced from the central tax account to the integrated tax account in such manner and within such time as may be prescribed.

CPIN stands for Common Portal Identification Number given at the time of generation of challan. It is a 14 digit unique number to identify the challan. The CPIN remains valid for a period of 15 days.

CIN or Challan Identification number is generated by banks, once payment in lieu of a generated challan is successful. It is a 17-digit number that is 14-digit CPN plus 3-digit bank code. CIN is generated by the authorized banks/Reserve Bank of India (RBI) when payment is actually received by such authorized banks or RBI and credited in the relevant government account held with them. It is an indication that the payment has been realized and credited to the appropriate government account. CIN is communicated by the authorized bank to taxpayer as well as to GSTN. BRN or Bank reference number is the transaction number given by the bank for a payment against a challan.

E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are authorized to collect payment of GST. Each authorized bank will nominate only one branch as its E-FPB for pan India Transactions. The E-FPB will have to open accounts under each major head for all governments.

Total 38 accounts (one each for CGST, IGST and one each for SGST for each State/UT Government) will have to be opened. Any amount received by such E-FPB towards GST will be credited to the appropriate account held by such E-FPB. For NEFT/RTGS transactions, RBI will act as E-FPB.

Question & Answer Q1. How to determine the value limit of Rs. 2,50,000 to decide on the applicability of TDS? A. As per Section 51, tax to be deducted "where the total value of such supply, under a contract, exceeds Rs 2,50,000”. If there is a Purchase order for supply of goods or services or both, for a value exceeding Rs. 2,50,000 then TDS provisions would be attracted. Against the Purchase Order, if several supplies are made under several invoices, even if the value of any particular invoice is less than Rs. 2,50,000 TDS would apply i.e.

Public Sector Unit issues ‘Purchase order’ for a total value of Rs. 10,00,000 on 01.10.2018. Supplier is supplying goods through various invoices & one invoice value is Rs. 50,000. Even then TDS is applicable for this invoice, as the contract value is more than Rs. 2,50,000.

Further, while determining the value, the CGST, SGST, UTGST and IGST shall not be included. For example, if the value of the goods or services being supplied is Rs. 2,40,000/- plus 5% GST, total invoice value Rs. 2,52,000, TDS provisions will not apply, as the value, excluding GST is less than Rs.2,50,000/-.

Q2. State TDS applicability in following cases: (a) Supply under RCM (b) Supply by unregistered supplier (c) Supply by composition Supplier A. (a) No TDS, where the tax is to be paid on reverse charge by the recipient i.e. the deductee; (b) No TDS, where the payment is made to an unregistered supplier; (c) TDS is required in case of supply received from Composition Supplier i.e. Supplier ZA is a person registered under the composition scheme in Jharkhand who makes taxable supply worth Rs. 10,000 to a Local Authority of Jharkhand where value of taxable supply under the contract is for Rs. 2,55,000 which is more than Rs. 2.5 Lakh and hence deduction of tax is required.

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Study Notes Q3. Mr. X has deducted Rs 1 lakh of TDS in Nov’18. He deposits Rs 70,000 on 10.12.2018 & the rest of Rs 30,000 on 30.01.2019. He submits the return in FORM GSTR 7 on 28.02.2019. Has he incurred any liability to pay late fee or interest? Is he liable to pay any penalty? {FAQ released by CBIC} A. Electronic Cash Ledger of the DDO is credited on 10.12.2018 and 30.01.2019 with Rs. 70,000 and Rs. 30, 000 respectively on account of deposit of TDS of Rs 70,000/- on 10.12.2018 & Rs 30,000 on 30.01.2019. Since return in FORM GSTR 7 for the month of November, 2018 is filed on 28.02.2019 and he discharges his payment liability of tax so deducted by debiting his electronic cash ledger as well on this date only, therefore, late fee of 80 days (11.12.2018 to 28.02.2019) have to be paid under CGST and SGST. The amount of late fee will be restricted to Rs. 5000 (upper limit provided in the Act). Interest has also to be paid for the delay. Penalty is also payable by a DDO if he fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the Government under sub-section (2) of section 51 [section 122 (v) refers]. He is liable to penalty of Rs.1,00,000/-.

Q4. Whether a supplier of goods or services supplying through ecommerce operator would be entitled to threshold exemption? {FAQ released by CBIC} A. As per Section 24 (ix) of the CGST Act, 2017, every person supplying goods through an ecommerce operator shall be mandatorily required to register irrespective of the value of supply made by him. However, a person supplying services, other than supplier of services under section 9 (5) of the CGST Act, 2017, through an ecommerce platform are exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category States) in a financial year.

Government has issued the notification No. 65/2017 – Central Tax Dated 15th November, 2017 in this regard.

Q5. Whether e-Commerce operator is required to obtain registration in every State/UT in which suppliers listed on their e-commerce platform are located to undertake the necessary compliance as mandated under the law? {FAQ released by CBIC} A. As per the CGST law, registration for TCS would be required in each State / UT as the obligation for collecting TCS would be there for every intra-State or inter-State supply. In order to facilitate the obtaining of registration in each State / UT, the e-commerce operator may declare the Head Office as its place of business for obtaining registration in that State / UT where it does not have physical presence. It may be noted that each State/UT has indicated one administrative jurisdiction where all e-commerce operators having business (but not having physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified by each State/UT. Q6. Foreign e-commerce operator do not have place of business in India since they operate from outside. But their supplier and customers are located in India. So, in this scenario will the TCS provision be applicable to such ecommerce operator and if yes, how will foreign e-commerce operator obtain registration? {FAQ released by CBIC} A. Where registered supplier is supplying goods or services through a foreign e-commerce operator to a customer in India, such foreign ecommerce operator would be liable to collect TCS on such supply and would be required to obtain registration in each State / UT. It may be noted that each State/UT has indicated one administrative jurisdiction where all ecommerce operators having business (but not having physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified by each State/UT. If the foreign e-commerce operator does not have physical presence in a particular State / UT, he may appoint an agent on his behalf.

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Section 37 Section 39 Section 40 Section 44 Section 45 Section 46 Section 47 Section 48 Section 150 Section 123

Return Form GSTR -1

GSTR – 3B FORM GST CMP-08 ITC – 04 GSTR – 4

GSTR – 5

GSTR – 5A GSTR – 6 GSTR – 9 GSTR – 9A

Furnishing details of outward supplies Furnishing Returns First Return Annual Return Final Return Notice to Return defaulters Levy of Late Fee Goods & Service Tax Practitioners Information Return Penalty for failure to furnish Information Return

Details of Return Details of Outward Supplies i.e. invoices, debit notes and credit notes issued by taxable person (including casual taxable person). Not applicable to ISD, NRTP, Composition Dealer, TDS & TCS. Summary return (including casual taxable person) Composition Dealer or person paying tax by availing the benefit of Notification 02/2019 - Central Tax (Rate), Dated the 7th March, 2019 Details of inputs sent for job work Annual return for Composition Dealer or person paying tax by availing the benefit of Notification 02/2019 Central Tax (Rate), Dated the 7th March, 2019 Return for NRTP

Return for OIDAR Return for ISD Annual Return (Not applicable to ISD, NRTP, Casual Taxable Person, Government, TDS & TCS) Annual Return for Composition taxable person

GSTR – 9C GSTR – 10

GST Reconciliation Statement Final Return (Every registered person whose registration has been cancelled)

GSTR – 11

Details of inward supplies to be furnished by a person having UIN and claiming refund

Please download offline utility to understand Returns, to make it simple & interesting. Please memorize below chart (important for MCQ)

Due Date 10th of Succeeding Month/Quarter (Quarterly filing if aggregate turnover upto Rs. 1.50 crores) 20th of Succeeding Month 18th day of the month succeeding quarter Quarterly within 25 days from end of quarter Thirtieth day of April following the end of such financial year 20th Day from end of month or within 7 days after the last day of validity of registration whichever is earlier 20th of Succeeding Month 13th Day of Succeeding Month 31st December of Next Financial Year 31st December of Next Financial Year With annual return Within 3 months of the date of cancellation of registration or order of cancellation whichever is later.

28th Day of Succeeding Month

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Study Notes Section 37 Furnishing Details of Outward Supplies Details of outward supplies [Section 37 (1] read with rule 59 (1)] Every registered person including casual registered person excluding: • • • • • •

Input Service Distributor Non-resident taxable person Person paying tax under composition scheme Person deducting TDS Person collecting tax at source i.e. ECO, not being an agent OIDAR

Form & Due Date: FORM GSTR 1 & due date is on or before 10th of succeeding month. GSTR-1 cannot be filed between 11th & 15th of the succeeding month. GSTR-1 can be filed on or after 16th of month., if due date of 10th of the month is missed.

The due date of filing GSTR-1 may be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST for a class of taxable persons by way of notification.

A taxpayer cannot file GSTR-1 before the end of current tax month period except • •

Casual taxpayers, after the closure of their business Cancellation of GSTIN of a normal taxpayer

Details of outward supplies are required to be furnished in GSTR-1 [Explanation to section 37 read with rule 59(2) of CGST Rules]

• • •

Invoices can be modified/deleted any number of times till the final submission.

If there is no consideration as per Schedule I, the taxable value needs to be worked out HSN details Upto 1.5 crores (NIL), more than 1.5 crores and upto Rs. 5 crores (2 digits) & More than Rs. 5 crores (4 digits)

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Prior periods amended [Section 37 (3)] A. Scope of amendment/correction entries The supplier can make amendments in the particulars furnished in GSTR-1 filed by him for the prior periods if he agrees to the mismatch report communicated to him by the system every month, after the processing of the return.

The details of original debit notes/credit notes/refund vouchers issued by the tax-payer in the current tax period as also the revision in the debit notes/credit notes/refund vouchers issued in the earlier tax periods are required to be shown in Table 9 of GSTR-1.

Ordinarily in Amendment Table the supplier is required to give details of original invoice (No. and Date), the particulars of which have been wrongly entered in GSTR-1 of the earlier months and are now sought to be amended. However, it may happen that, a supplier altogether forgets to include the entire original invoice while furnishing the GSTR-1 for a particulars month. In such cases also, he would be required to show the details of the said missing invoice which was issued in earlier month in the Amendment Table only, as such type of errors would also be regarded as data entry error.

B. Time limit for rectification Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 then he can make correction in the subsequent periods but maximum time limit permissible: • •

Date of filing of monthly return u/s 39 for the month of September following the end of financial year to which such details pertain or Date of filing of the relevant annual return.

Key Points to remember: • GSTR 1 needs to be filed even if there is no business activity in the tax period.

• All values like invoice value, taxable value and tax amounts in GSTR 1 are to be declared up to 2 decimal digits.

The rounding off of the self-declared tax liability to the nearest rupee will be done in GSTR 3B. • As a measure of easing the compliance requirement for small tax payers, GSTR-1 has been allowed to be filed quarterly by small tax payers with aggregate annual turnover up to Rs. 1.5 crore in the preceding financial year or the current financial year. Tax payers with annual aggregate turnover above Rs. 1.5 crore will however continue to file GSTR- 1 on a monthly basis.

• Taxpayer opting for voluntary cancellation of GSTIN will have to file GSTR 1 for active period.

• In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR 1 will be available for filing only for the period during which the taxpayer was registered as normal taxpayer. The GSTR 1 for the said period, even if filed with delay would accept invoices for the period prior to conversion.

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Study Notes Section 39 Furnishing of Returns Persons liable to file returns, forms, periodicity and due dates of furnishing returns [Section 39 read with rules 61, 62, 63, 65 & 82] Extension of due date The due-date of filing of the returns under section 39 may be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST for a class of taxable persons by way of a notification.

Due date for payment of tax [Section 39 (7)] Due dates for payment of tax in respect of the persons required to file GSTR-3B, GSTR-4 & GSTR 5 are linked with due dates for filing of such returns i.e. the last dates of filing such returns are also the due dates for payment of tax in respect of persons required to file such returns.

However, NRTPs or casual taxable persons are required to make advance deposit of tax of an amount equivalent to the estimated tax liability of such person for a period for which registration is sought or extension of registered is sought in terms of section 27 (2).

GSTR 3B filed without payment of self-assessed tax disclosed therein, is not be regarded as a valid return in terms of section 2 (117).

Time limit for rectification Omission or incorrect particulars discovered in the returns filed u/s 39 can be rectified in the return to be filed for the month/quarter during which such omission or incorrect particulars are noticed.

Any tax payable as a result of such error or omission will be required to be paid along with interest.

Exceptions: It is important to note that section 39 (9) does not permit rectification of error or omission discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities.

Maximum time limit for amendment: • •

Date of filing of monthly return u/s 39 for the month of September following the end of financial year to which such details pertain or Date of filing of the relevant annual return.

Content of GSTR-3B

GSTR-3B is required to be furnished on or before 20th day of the next month. This is the summary return. This return mainly covered details with respect to Outward Supply: • •

•

Consolidated monthly details of the outward supply along GST is required to be recorded.

Further, the details of Non-GST outward Supply is also required to be reported. This supply could include Free Sample, Supply as per Schedule III, etc. Accordingly, the taxpayer should keep the separate record of such transactions.

In addition to aforesaid taxpayer is required to submit separate details for sale to customer who has opted Composition scheme and also who are unregistered under GST regime.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Inward Supply: Hereinunder, the taxpayer has to provide the details of input tax credit availed, ineligible input tax credit, reversal of input tax credit if any. Further, the taxpayer has to bifurcate the procurement details in to • • • • • •

Supplier where ITC available Supplier where ITC not available Supplier under Composition Scheme Supply covered under Exempt Supply Supply covered under Nil rate Non - GST Supply

Composition Dealer or person paying tax by availing the benefit of Notification 02/2019 - Central Tax (Rate), Dated the 7th March, 2019 [Section 39 (2) read with rule 62] •

furnish a statement, every quarter or, as the case may be, part thereof, containing the details of payment of self-assessed tax in FORM GST CMP-08, till the 18th day of the month succeeding such quarter; and

•

furnish a return for every financial year or, as the case may be, part thereof in FORM GSTR-4, till the thirtieth day of April following the end of such financial year, electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner.

•

Every registered person furnishing the statement shall discharge his liability towards tax or interest payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger.

•

The return furnished shall include the- (a) invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and (b) consolidated details of outward supplies made.

•

From the beginning of a financial year shall, where required, furnish the details of outward and inward supplies and return under rules 59, 60 and 61 (GSTR 1,2 & 3B) relating to the period during which the person was liable to furnish such details and returns till the due date of furnishing the return for the month of September of the succeeding financial year or furnishing of annual return of the preceding financial year, whichever is earlier.

For the purposes of this sub-rule, it is hereby declared that the person shall not be eligible to avail input tax credit on receipt of invoices or debit notes from the supplier for the period prior to his opting for the composition scheme

•

A registered person opting to withdraw from the composition scheme at his own motion or where option is withdrawn at the instance of the proper officer shall, where required, furnish a statement in FORM GST CMP-08 for the period for which he has paid tax under the composition scheme till the 18th day of the month succeeding the quarter in which the date of withdrawal falls and furnish a return in FORM GSTR-4 for the said period till the thirtieth day of April following the end of the financial year during which such withdrawal falls.

•

A registered person who ceases to avail the benefit of notification No. 02/2019, shall, where required, furnish a statement in FORM GST CMP-08 for the period for which he has paid tax by availing the benefit under the said notification till the 18th day of the month succeeding the quarter in which the date of cessation takes place and furnish a return in FORM GSTR - 4 for the said period till the thirtieth day of April following the end of the financial year during which such cessation happens.

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Study Notes GSTR 5 (NRTP) [Section 39 (5) read with rule 63] A registered NRTP is not required to file separately the Statement of Outward, Inward supplies. A simplified monthly tax return has been prescribed in Form GSTR 5 which they need to file 20 days after the end of the calendar month or within 7 days after the last day of validity period of the registration, whichever is earlier.

GSTR 11 (UIN) [Rule 82] Such person shall furnish the details of those inward supplies of taxable goods and/or services on which refund of taxes has been claimed in Form GSTR-11, along with application for such refund claim.

GSTR 6 (ISD) [Section 39 (4) read with rule 60 (5) & rule 65] An ISD is required to distribute both eligible as well as ineligible credit as per rule 39.

ISD is not required to file separate statements of outward and inward supplies with its return.

Form GSTR 6 contains the details of input tax credit received for distribution, total ITC/eligible/ineligible ITC to be distributed for the tax period, distribution of ITC, details of debit/credit notes etc. Return needs to be filed after 10th of the month and before 13th of the month succeeding the tax period.

The details of ITC received for distribution by an ISD will be auto populated in Form GSTR-6A. Such details are auto-populated in Form GSTR-6A when the registered suppliers file their GSTR-1.

ISD can view the auto-populated details of ITC received for distribution in GSTR-6A and, where required, after adding, correcting or deleting the details, furnish GSTR-6.

ISD will not have reverse charge supplies. If ISD wants to take reverse charge supplies, in that case it has to separately register as a Normal taxpayer.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 40 First Return Every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration.

Section 44 Annual Return (1) Every registered person, other than an • Input Service Distributor, • a person paying tax under section 51 or section 52, • a casual taxable person, and • a non-resident taxable person, • other than those referred to in the proviso to sub-section (5) of section 35 (CAG or auditor of local authorities) shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or before the thirty-first day of December following the end of such financial year.

(2) Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under subsection (1) along with a copy of the audited annual accounts and a reconciliation statement, reconciling the value of supplies declared in the return furnished for the financial year with the audited annual financial statement, and such other particulars as may be prescribed.

• •

Annual Return is to be filed electronically in Form GSTR 9 through common portal. Composition Scheme supplier is required to file in Form GSTR 9A. Aggregate Turnover exceeding INR 2 crores is subject to audit. Reconciliation Statement will reconcile the value of supplies declared in the return furnished for the financial year with the audited annual financial statement and such other particulars, as may be prescribed.

Section 45 Final Return Every registered person who is required to furnish a return U/s 39 (1) and whose registration has been cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever is later, in such form and manner as may be prescribed. (Form GSTR 10)

Section 46 Notice to Return Defaulters Where a registered person fails to furnish a return under section 39 (Normal Return) or section 44 (Annual Return) or section 45 (Final Return), a notice shall be issued requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.

Section 47 Levy of late fee (1) Any registered person who fails to furnish the details of outward or inward supplies required under section 37 (Statement of Outward Supplies) or section 38 (Statement of Inward Supplies) or returns required under section 39 (Returns) or section 45 (Final Return) by the due date shall pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum amount of five thousand rupees.

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Study Notes (2) Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount calculated at a quarter per cent (0.25%) of his turnover in the State or Union territory.

Section 48 Goods & Services Tax Practitioners (Read with Rule 83) (1) The manner of approval of goods and services tax practitioners, their eligibility conditions, duties and obligations, manner of removal and other conditions relevant for their functioning shall be such as may be prescribed.

(2) A registered person may authorize an approved goods and services tax practitioner to furnish the details of outward supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section 44 or section 45, and to perform such other functions in such manner as may be prescribed.

(3) Notwithstanding anything contained in sub-section (2), the responsibility for correctness of any particulars furnished in the return or other details filed by the goods and services tax practitioners shall continue to rest with the registered person on whose behalf such return and details are furnished.

GST Practitioner – Eligibility Criteria Any person who is a citizen of India having necessary qualification, of sound mind and not convicted or adjudicated as insolvent can become a GST Practitioner. To be qualified as a GST Practitioner, the person must be: •

• •

A retired officer of the Commercial Tax Department of any State Government or of the Central Board of Excise and Customs, Department of Revenue, Government of India, who, during his service under the Government, had worked in a post not lower in rank than that of a Group-B gazetted officer for a period of not less than two years; or Has been enrolled as a sales tax practitioner or tax return preparer under the existing law for a period of not less than five years; Has the following degree or qualification: o A graduate or postgraduate degree or its equivalent examination having a degree in Commerce, Law, Banking including Higher Auditing, or Business Administration or Business Management from any Indian University established by any law for the time being in force; or o A degree examination of any Foreign University recognized by any Indian University as equivalent to the degree examination having a degree in Commerce, Law, Banking including Higher Auditing, or Business Administration or Business Management; or o Any other examination notified by the Government, on the recommendation of the Council, for this purpose; or o Has passed any of the following examinations, namely: ▪ Final examination of the Institute of Chartered Accountants of India; ▪ Final examination of the Institute of Cost Accountants of India; ▪ Final examination of the Institute of Company Secretaries of India.

Duties of a GST Practitioner {Rule 83 (8)} A goods and services tax practitioner can undertake any or all of the following activities on behalf of a registered person, if so authorised by him to(a) furnish the details of outward and inward supplies; (b) furnish monthly, quarterly, annual or final return; (c) make deposit for credit into the electronic cash ledger; (d) file a claim for refund;

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (e) file an application for amendment or cancellation of registration; (f) furnish information for generation of e-way bill; (g) furnish details of challan in FORM GST ITC-04; (h) file an application for amendment or cancellation of enrolment under rule 58; and (i) file an intimation to pay tax under the composition scheme or withdraw from the said scheme: Provided that where any application relating to a claim for refund or an application for amendment or cancellation of registration or where an intimation to pay tax under composition scheme or to withdraw from such scheme has been submitted by the goods and services tax practitioner authorised by the registered person, a confirmation shall be sought from the registered person and the application submitted by the said practitioner shall be made available to the registered person on the common portal and such application shall not be further proceeded with until the registered person gives his consent to the same.

GST Practitioner – Application Procedure Any person who is eligible to become a GST Practitioner as per the criteria above can apply using FORM GST PCT-01 through the GST Common Portal or through a GST Facilitation Centre notified by the Commissioner for GST Practitioner enrolment. On receiving the application, the GST officer would process the application and make enquires as considered necessary for enrolment. If the Officer is satisfied, a GST Practitioner certificate would be issued in GST PCT 02.

Rule 83A inserted vide notification No. 60/2018 – CT Dated 30.10.2018, which is related to Examination of Goods and Services Tax Practitioners. The National Academy of Customs, Indirect Taxes and Narcotics (hereinafter referred to as “NACIN”) shall conduct the examination. The rules contains syllabus, frequency of examination, examination centers, period for passing the examination and number of attempts allowed, nature of examination, qualifying marks, guidelines for the candidates etc.

Validity of License GST Practitioner license would valid until its cancelled by the relevant authority. However, any person holding a GST Practitioner license would be required to pass examinations held by the GST Authority and notified by the Commissioner from time to time. Further, all persons applying to become a GST Practitioner through the sales tax practitioner or tax return preparer route are required to pass an exam conducted by the GST Authority within thirty months from the implementation of GST. Further, a goods and services tax practitioner enrolled in any State or Union Territory shall be treated as enrolled in the State/Union territory for the purposes.

Filing GST Returns as GST Practitioner Once a person is enrolled as a GST Practitioner, his/her client can authorise the Practitioner to file GST returns on the taxpayers behalf by filing Form GST PCT-05 on the GST Common Portal. The GST Practitioner can then prepare GST return on behalf of taxpayer with diligence and affix his/her digital signature on the GST return prepared by him/her or electronically verify the credentials.

When a GST return is prepared by a GST Practitioner, the GST return will be held for filing and the filing must be approved by the registered person. Confirmation for filing the return prepared by the GST Practitioner will be requested from the registered person through email and SMS. If the registered person fails to respond to the request for confirmation till the last date of furnishing of such statement, then the return prepared by the GST practitioner will be automatically filed.

In case a GST taxpayer is not satisfied with the services of a GST Practitioner, the taxpayer can withdraw a Practitioner’s authorisation at any time through the GST Common Portal. If any GST Practitioner is found guilty

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Study Notes of misconduct, then a GST Officer can provide a reasonable opportunity for being heard and then if required, disqualify him/her from practising as a GST Practitioner.

Section 150 Information Return (1) Any person, being— (a) a taxable person; or (b) a local authority or other public body or association; or (c) any authority of the State Government responsible for the collection of value added tax or sales tax or State excise duty or an authority of the Central Government responsible for the collection of excise duty or customs duty; or (d) an income tax authority; or (e) a banking company; or (f) a State Electricity Board or an electricity distribution or transmission licensee under the Electricity Act, 2003, or any other entity entrusted with such functions by the Central Government or the State Government; or (g) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or (h) a Registrar within the meaning of the Companies Act, 2013; or (i) the registering authority empowered to register motor vehicles; or (j) the Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or (k) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; or (l) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996; or (m) an officer of the Reserve Bank of India as constituted under section 3 of the Reserve Bank of India Act, 1934; or (n) the Goods and Services Tax Network, a company registered under the Companies Act, 2013; or (o) a person to whom a Unique Identity Number has been granted under sub-section (9) of section 25; or (p) any other person as may be specified, on the recommendations of the Council, by the Government, who is responsible for maintaining record of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods or services or both or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force, shall furnish an information return of the same in respect of such periods, within such time, in such form and manner and to such authority or agency as may be prescribed.

(2) Where the Commissioner, or an officer authorised by him in this behalf, considers that the information furnished in the information return is defective, he may intimate the defect to the person who has furnished such information return and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such further period which, on an application made in this behalf, the said authority may allow and if the defect is not rectified within the said period of thirty days or, the further period so allowed, then, notwithstanding anything contained in any other provisions of this Act, such information return shall be treated as not furnished and the provisions of this Act shall apply.

(3) Where a person who is required to furnish information return has not furnished the same within the time specified in sub-section (1) or sub-section (2), the said authority may serve upon him a notice requiring furnishing of such information return within a period not exceeding ninety days from the date of service of the notice and such person shall furnish the information return.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 123 Penalty for failure to furnish Information Return If a person who is required to furnish an information return under section 150 fails to do so within the period specified in the notice issued under sub-section (3) thereof, the proper officer may direct that such person shall be liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such return continues: Provided that the penalty imposed under this section shall not exceed five thousand rupees.

Question & Answer Q1. ABC Ltd. furnished annual returns for the year 2017-18 on September 15, 2018. An error is discovered in respect of a transaction pertaining to outward supplies of January 2018. Determine the time limit to rectify the mistake in case return of Sept’18 furnished on October 15 ,2018.

A. Annual return has been furnished by September 15,2018 and return for the month of Sept’18 filed on October 15, 2018. The rectification of error pertaining to January 2018 cannot be done beyond September 15, 2018 as per provision of Section 37 (3).

Q2. In some period of the year, there may not be any business activity like in case of seasonal business.

Whether a taxable person will be required to file return in such case also?

A. Every registered taxable person is required to file returns. Without filing the return of the period, next return cannot be filed. Therefore, even if there is no taxable supplies made or received during any period, such person is required to file a NIL return but not filing the return is not an option in GST. Q3. A compounding taxpayer, who has opted for composition scheme U/s 10 is required to file quarterly returns.

Whether he is required to file Annual Return also?

A. According to Sec. 39 (2), every registered taxable person who has opted for composition scheme under the provisions of Section 10 of the GST Act besides filing the quarterly return is also required to file an annual return.

Q4. What are the different means available to taxpayer for filing the returns?

A. The taxpayer can file the return on GSTN by using one of the followings: 1) By taxpayer himself by using the user id and password issued to such taxpayer 2) By the authorized representative using the login and password issued to such authorized representative. Such authorized representative should have been selected by the taxpayer before such filing and such authorized representative should be linked to such taxpayer account.

3) Through the Facilitation Centre (FC) by using the login and password of such FC. Post filing by FC, system generates a message for taxpayer by mail and SMS. Facilitation Centre is a facility for digitization and uploading of returns on the GSTN data base. This facility is created with the approval of Central Board of Indirect Taxes or by respective State Governments. Small taxpayers who don’t have facility for digitization of their data and/or uploading their returns can use this facility of facilitation centers for doing this function.

Q5. How would a supplier who has taken a new registration, file his first return under GST? A. There might be cases wherein a person is liable to be registered under the law from a particular date and there is time gap between the date from when he was liable to be registered under the law and the date on which registration is granted to such person. He would have made outward supplies in this period between the date when he was liable to be registered under the law and the date from which is granted registration.

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Study Notes In such case the registered person who has made outward supplies in the period between the dates on which he became liable to registration till the date on which registration has been granted shall declare the details of such outward supplies in the first return filed by him after the date of grant of registration.

Q6. Whether credit of Input Tax can be used for making payment of Interest, Fees, Penalty and any other Amount?

A. No, Input Tax Credit can only be utilized for making payment towards output tax liability. It can’t be used for making payment towards Interest, Fees, Penalty or any other amount payable under this Act. Q7. Whether GSTR 3B can be revised after filing? Whether there is any column in GSTR 3B for reporting any discrepancies which have taken place while filing returns for previous months?

A. No, GSTR 3B filed, can’t be revised. Form GSTR 3B doesn’t contain any column for reporting of differential figures for past month(s).

Q8. If a return has been filed, how can it be revised if some changes are required to be made?

A. In GST since the returns are built from details of individual transactions, there is no requirement for having a revised return. Any need to revise a return may arise due to the need to change a set of invoices or debit/ credit notes. Instead of revising the return already submitted, the system will allow changing the details of those transactions (invoices or debit/credit notes) that are required to be amended. They can be amended in any of the future GSTR- 1 in the tables specifically provided for the purposes of amending previously declared details.

Q9. What will be the legal position in regard to the reversed input tax credit if the supplier later realizes the mistake and feeds the information?

A. At any stage, but before September of the next financial year, supplier can upload the invoice and pay duty and interest on such missing invoices in his GSTR-3B of the month in which he had earlier failed to upload the invoice. The recipient shall be eligible to reduce his output tax liability to the extent of the amount in respect of which the supplier has rectified the mis-match. The interest paid by the recipient at the time of reversal will also be refunded to the recipient by crediting the amount in corresponding head of his electronic cash ledger.

Q10. During the course of inspection/audit/scrutiny/enforcement activity, the department has pointed out certain omissions or incorrect particulars in the returns. Whether the assessee can rectify the returns to correct the omissions or incorrect particulars in its returns?

A. As per Section 39(9), provides for correction in the returns on account of Omission of wrong particulars filed other than as a result of audit/inspection/scrutiny/enforcement, the assessee can rectify such omissions/incorrect particulars in the returns. In the month/quarter in which such omission/ incorrect particulars are noticed, the due tax and interest shall be payable thereon.

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Section 14 (IGST) Section 2 (10) & 2 (11) (IGST) Section 2 (5) & 2 (6) (IGST) Section 16 (IGST) Section 15 (IGST)

OIDAR Import of Goods/Services Export of Goods/Services Zero Rated Supply Refund of Integrated Tax Paid on Supply of Goods to Tourist Leaving India

Section 14 OIDAR (IGST Act) Both the following conditions must be satisfied to be a OIDAR service. If one is not satisfied, the service is not OIDAR {Section 2 (17) of IGST}.

• •

Delivery is mediated through internet.

The supply is essentially automated involving minimal human intervention and impossible without information technology.

Examples of OIDAR services: • Advertising on internet • Providing cloud services (Google Drive) • Provision of e-books, movie, music, software and other intangibles via internet (Hotstar, Amazon Prime Video) • Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network; • Online gaming Non-OIDAR services • Supplies of goods, where the order and processing is done electronically • Supplies of physical books, newsletters, newspapers or journals • Services of lawyers and financial consultants who advise clients through email • Booking services or tickets to entertainment events, hotel accommodation or car hire • Educational or professional courses, where the content is delivered by a teacher over the internet • Offline physical repair services of computer equipment • Advertising services in newspapers, on posters and on television Applicability of GST for OIDAR Services Location of Supplier of service

Location of recipient of service

Taxabil ity

India

India

Yes

Forward Charge/ Reverse Charge

Examples

Forward Charge

Hotstar (registered in India)

(GST payable by the service provider)

allows Indian users to register and watch movies.

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Study Notes Outside India

India

Yes

Recipient:

(GST payable by the recipient)

Yes

Non-Taxable Person

Outside India

Forward Charge

Outside India

services. GST is payable by the Indian Co. under RCM.

A student in India registers in Netflix (US) for watching

(GST payable by the service provider)

No

NA

(Export of service) Outside India

An Indian Co.(registered) asks Blue Host (US) for web hosting

Recipient: Registered

India

Reverse Charge

No (Not covered under GST)

movies. Netflix has to pay IGST.

Hotstar allows foreigners to register and watch movies.

GST is not applicable as it is an export of service.

NA

Netflix (US) provides online movie streaming services to people in US. This is not covered in Indian GST.

Who will register and pay GST for OIDAR services when the service provider is located outside India?

In respect of import of online information and database access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the supplier located outside India will be responsible for payment of taxes.

The service provider (or intermediary as the case may be) will be required to take a single registration for paying IGST under the Simplified Registration Scheme to be notified by the Government.

Either he will have to take registration or he will have to appoint a person in India to pay GST. The person receiving any such services i.e. OIDAR should pay the IGST to the government only if he is registered under GST as a taxable person.

The peculiarity of OIDAR service is that it can be provided online from a remote location outside India.

• If a similar service is provided by an Indian Service Provider, from India to recipients in India then such service would be taxable.

• If such services are received by a registered entity in India then GST will be payable under reverse charge.

This gives the overseas suppliers of such services an unfair tax advantage if their services are left out of the tax net.

Again, as the service provider is located overseas and might not have a presence in India, the compliance becomes difficult. So, the government has a simplified scheme of registration for such service providers located outside India.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Other important points: •

Where the supplier of OIDAR service is located outside India and the recipient is located in India, the place of supply would be the location of the recipient of service,

•

Intermediary located outside India arranges or facilitates supply of such service to a non-taxable online recipient in India, the intermediary would be deemed to be the supplier of the said service, except when the intermediary satisfies the following conditions: ❖ The invoice or customer’s bill or receipt issued by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory ❖ If intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services ❖ The intermediary involved in the supply doesn’t authorize delivery ❖ The general terms & conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.

Section 2 (10) & 2 (11) Import of Goods/Services (IGST Act) Import of Goods Import of Goods {Section 2 (10) of IGST Act} ‘‘Import of goods”, means bringing goods into India from a place outside India;

➢

Supply of goods into India till they cross the customs frontiers of India is deemed to be an inter-State supply and thus, attracts levy of IGST. IGST on goods imported into India is levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975. Thus, though goods imported into India are leviable to IGST under IGST Act, the machinery of customs law is used to collect IGST. The place of supply of goods, imported into India is the location of the importer [Section 11]. Thus, if an importer say is located in Karnataka, the state tax component of the IGST accrues to the State of

➢

Karnataka.

IGST on goods imported into India is levied and collected at the point when duties of customs are levied on the said goods under the Customs Act, 1962. Customs duty is leviable when importation of goods gets complete, i.e. when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and bill of entry for home consumption is filed. Thus, the point of levy and collection of IGST will also be the point when the bill of entry for home consumption is filed.

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In addition, GST Compensation Cess, may also be leviable on certain luxury and de-merit goods under

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the Goods and Services Tax (Compensation to States) Cess Act, 2017.

Value of the goods for the purpose of levying IGST shall be, assessable value plus basic custom duty & any other duty chargeable on the said goods under any law for the time being in force as an addition

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to, and in same manner as, a duty of customs.

Value of the goods for the purpose of levying Cess shall be, assessable value plus basic custom duty & any other duty chargeable on the said goods under any law for the time being in force as an addition to, and in same manner as, a duty of customs.

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Study Notes ➢

In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation

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of IGST as well as GST Compensation Cess also includes Anti-Dumping Duty and Safeguard duty There is no GST liability on high sea sales. GST is payable only when goods are cleared from customs.

Circular No. 33/2017 Cus Dated 01.08.2017 has also clarified that IGST on high sea sale(s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation, i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time. Further, value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance. The importer (last buyer in the chain) would be required to furnish the entire chain of documents, such as original invoice, high seas sales contract, details of service charges/commission paid etc. to establish a link between the first contracted price of the goods and the last transaction.

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Goods imported by a unit or a developer in the Special Economic Zone (SEZ) for authorised operations are exempted from the whole of IGST leviable under section 3(7) of the Customs Tariff Act, 1975 vide Notification No. 64/2017 Customs Dated 05-07-2017.

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Goods imported by Export Oriented Undertaking (EOU) attract liability to customs duty. Import of goods by 100% EOU’s are governed by Notification No. 52/2003 Cus as amended by Notification No. 65/2018 Cus Dated 24.09.2018. EOUs are allowed duty free import of goods (exempt from Customs duties, IGST & GST Compensation Cess) under the said notifications. However, exemption from IGST is available only till 31.03.2019.

Import of Services Import of Services {Section 2 (11) of IGST Act} ‘‘Import of services” means the supply of any service, where–– (i) the supplier of service is located outside India; (ii) the recipient of service is located in India; and (iii) the place of supply of service is in India; ➢

Services imported by a unit or a developer in the SEZ for authorized operations, are exempt from the whole of the IGST {Notification No. 18/2017-IT (R) Dated 05-07-2017}

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Import of service (please recollect Schedule I): Nature of Service Import of services Import of services by a taxable person from a related person or from a distinct person

Consideration Necessarily Required Not required

Business Test Not Required Necessarily Required

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 2 (5) & 2 (6) Export of Goods/Services (IGST Act) Export of goods and services are important for any nation. Goods and services are to be exported, taxes are not to be exported. Supplies to SEZ Unit & SEZ Developer are treated at par with physical exports.

Export of Goods {Section 2 (5) of IGST Act} “Export of goods” , means taking goods out of India to a place outside India.

Example 1: ABC Ltd. having place of business in Delhi receives an order for supply of goods worth Rs. 1,00,000 from XYZ Ltd., Sri Lanka. ABC Ltd. supplied goods to XYZ Ltd., Sri Lanka. This is export of goods by ABC Ltd. to XYZ Ltd. If suppose ABC Ltd. received order for supply of goods worth Rs. 1,00,000 from XYZ Ltd., Sri Lanka, but it is mentioned that goods may directly be supplied to the XYZ Ltd.’s client site in Hyderabad. In this case, such supply of goods will not qualify as export of goods since, goods are not taken out of India.

Export of Services {Section 2 (6) of IGST Act} “Export of services” means the supply of any service when, (i) the supplier of service is located in India; (ii) the recipient of service is located outside India; (iii) the place of supply of service is outside India; (iv) the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India; and (v) the supplier of service and the recipient of service are not merely establishments of a distinct Person in accordance with Explanation 1 in section 8; Example 2: Indian branch office of ABC Ltd., supplies consultancy services to Head Office of UK. Supply of services in this case will not be treated as export of services since Head Office & Branch Office are treated as establishment of distinct persons.

Example 3: ABC Ltd. is wholly owned subsidiary of XYZ Ltd. (a UK based company). ABC Ltd. supplies consultancy services to its parent company in UK. Supply of services in this case will be treated as export of services since holding and subsidiary company under different PAN cannot be treated as establishment of distinct persons. Thus, benefit of export of services will be available.

Section 16 Zero Rated Supply (IGST Act) “Zero-rated supply” means a supply of any goods or services or both in terms of section 16 of IGST Act – Section 2(23) of IGST Act. Section 16 (1) of IGST Act: Export of goods or services or both and supplies of goods or services or both to SEZ unit or SEZ developer will be zero rated supply.

Section 16 (2) of IGST Act: ITC may be availed for making zero-rated supplies, even if such supply is exempted supply.

Section 16 (3) of IGST Act: The registered person making zero rated supply can claim refund under either of two options – a. supply of goods under bond or LUT without payment of IGST and claim refund of unutilized ITC. The facility of export under LUT has been now extended to all registered persons who intend to supply goods or services for export without payment of IGST except those who have been prosecuted for any

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Study Notes offence under the CGST Act or the IGST Act or any of the existing laws and the amount of tax evaded in such cases exceeds Rs. 2,50,00,000. A bond in all cases, shall be accompanied by a bank guarantee of 15% of the bond amount. b. supply goods on payment of IGST and claim refund of IGST paid on goods and services.

The refund will be in accordance with section 54 of CGST Act. “Manufacturer exporter” means a person who exports goods manufactured by him or intends to export such goods – para 9.32 of FTP 2015-2020 “Merchant exporter” means a person engaged in trading activity and exporting or intending to export goods – para 9.33 of FTP 2015-2020

Special Provisions for Export It may be noted that Export may be seen for any of the two aspects:1. First way (Refund): Export without paying IGST, so need of LUT arises and assessee may get refund of ITC. Generally LUT is furnished before export but by way of Circular No. 37/11/2018-GST issues on 15th March 2018, it is clarified that the delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on for previous cases also taking into account the facts and circumstances of each case.

It need to be borne in mind that in terms of Rule 89 (4) of the CGST Rules, which prescribes the formula for computing eligible amount of refund of untilized ITC in the case of zero-rated supply of goods or services or both made without payment of tax under bond/LUT, meaning of “Net ITC” is defined as ITC availed on inputs and input services during the relevant period. Thus under this , there will be no refund of credit paid on capital goods.

2. Second way (Rebate): Export by paying IGST, so no need of LUT arises and refund of IGST can be availed.

It is worthwhile here to note that rebate model of zero-rated supply is beneficial for faster processing of refund and under this option, there will not be any bar on refund of credit of capital goods, as the same can be utilized along with credit of inputs and input services for discharging IGST liability on outward supply and then claiming full refund of IGST so paid.

If one is not paying the tax (i.e. IGST being inter-State supply) on exports then he will have to file LUT and he may get refund of ITC and if one exports by way of paying IGST then no need of LUT arises and so, the need of refund arises in second case.

Submission of LUT to be made in form GST RFD-11 online and no physical documentation is to be submitted to department as specified by Circular No. 40/14/2018-GST issued on 6-4-2018.

Though the theme behind GST was to keep refund based on online working but due to non-availability of online module, circular was issued stating that refund process will be handled manually which will go on till online module is operationalised. (Circular No. 17/17/2017 Dated 15-11-2017 and Circular No. 24/24/2017-GST Dated 21-12-2017). This is the reason, new rule 97A inserted w.e.f. 15th November 2017 allowing manual filing & processing, in respect of refund process.

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Exporter will be eligible for refund of Compensation Cess paid on goods exported by him {on similar lines as refund of IGST}. No compensation Cess if export is under bond or LUT and he can claim refund of accumulated ITC on Compensation Cess like IGST.

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Exporter need to only file shipping bill with the customs. The shipping bill filed with the custom is treated as an application for refund of IGST (if he opt for “rebate” explained above).

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Export will be under self-sealing & self-certification.

Duty credit scrip under the export incentive schemes of FTP (MEIS and SEIS) can be utilized only for payment for BCD or additional duties of customs.

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Benefits of exemption under Advance Authorization scheme, EPCG scheme and duty credit scrips such as MEIS and SEIS shall be restricted only to BCD, safeguard duty, transitional product specific safeguard duty and Anti-dumping duty in respect of goods leviable to IGST.

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It has been clarified vide CBE&C circular no. 37/11/2018-GST Dated 15-3-2018 that BRC (Bank Remittance Certificate) or FIRC (Foreign Inward Remittance Certificate) is required only in case of export of services and not in case of export of goods.

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Services supplied by establishment of person in India to own establishment out of India is exempt, if place of supply is out of India (it is not zero-rated).

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All exporters registered under GST can export goods or services without payment of IGST, on execution of LUT, except those who have been prosecuted for offence under any law where tax evade exceeds Rs. 250 Lakhs. The LUT is valid for whole financial year. However, if payment is not received within prescribed period, facility of LUT is deemed to have been withdrawn. If payment is received later, the facility to export under LUT is restored. Export can be done under bond while LUT is not allowed.

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Where date of filing GSTR-1 has been extended by Commissioner, the supplier shall furnish information

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relating to export invoices in Table 6A of form GSTR-1 after return in form GSTR-3B has been furnished.

LUT not required in case of export of exempted or non GST goods. The exporter may follow procedure under Central Excise or State Vat Laws or Customs Act – CBI&C circular No. 45/19/2018-GST Dated 30-5-2018.

Circular no. 78/52/2018-GST Dated 31 December 2018 The circular clarifies the GST implications where the Indian exporter of services outsources part of the activities to a person outside India and the consideration relating to such outsourced services is not received by the exporter in India. In such case, the Indian exporter would be liable to pay IGST on reverse charge basis on import of services on such portion which has been provided by the supplier located outside India to the recipient of services located outside India. Furthermore, the Indian exporter would be eligible for taking input tax credit (ITC) of the integrated tax so paid.

Even if the full consideration for the services exported is not received in convertible foreign exchange in India due to the fact that the recipient of services located outside India has directly paid to the supplier of services located outside India, such portion of the consideration shall also be treated as consideration received for export in terms of section 2(6)(iv) of the IGST Act. This is subject to the conditions that: ✓ ✓

IGST has been paid by the Indian exporter for import of services; and RBI, by general instruction or by specific approval, has allowed part of the consideration for such exports to be retained outside India.

Example 4: ABC Ltd. India has received an order for supply of services amounting to $ 5,00,000/- to a US based client. ABC Ltd. India is unable to supply the entire services from India and asks XYZ Ltd. Mexico (who is not

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Study Notes merely an establishment of a distinct person viz. ABC Ltd. India, in accordance with the Explanation 1 in Section 8 of the IGST Act) to supply a part of the services (say 40% of the total contract value).

ABC Ltd. India shall be the exporter of services for the entire value if the invoice for the entire amount is raised

by ABC Ltd. India. The services provided by XYZ Ltd. Mexico to the US based client shall be import of services

by ABC Ltd. India and it would be liable to pay integrated tax on the same under reverse charge and also be eligible to take input tax credit of the integrated tax so paid.

Further, if the provisions contained in section 2(6) of the IGST Act are not fulfilled with respect to the realization of convertible foreign exchange, say only 60% of the consideration is received in India and the remaining amount is directly paid by the US based client to XYZ Ltd. Mexico, even in such a scenario, 100% of the total contract value shall be taken as consideration for the export of services by ABC Ltd. India provided integrated tax on import of services has been paid on the part of the services provided by XYZ Ltd Mexico directly to the US based client and RBI (by general instruction or by specific approval) has allowed that a part of the consideration for such exports can be retained outside India. In other words, in such cases, the export benefit will be available for the total realization of convertible foreign exchange by ABC Ltd. India and XYZ Ltd. Mexico.

Refund claim in case of Deemed Export Supplies to EOU units, supplies against annual advance authorization etc. are deemed export. These don’t leave the country at the time of supply and payment is in Indian rupees. EOU units have to procure goods on payment of GST as applicable. Supplies to EOU are like any other supplies. Zero rating is applicable to EOU only in case of goods or services exported by them. EOU units clearing goods in Domestic Tariff Area or to other EOU unit will be required to pay IGST/CGST/SGST/UTGST as applicable.

In respect of supplies regarded as deemed exports, the application may be filed by a. The recipient of deemed export supplies; or b. The supplier of deemed export supplies in cases where the recipient doesn’t avail of ITC on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund – third proviso to Rule 89 (1) of CGST & SGST Rules 2017 as amended w.e.f. 18-10-2017.

If supplier has claimed benefit of deemed export under Notification No. 48/2017-CT Dated 18-10-2017, refund of ITC, availed in respect of other inputs or input services is available if the recipient makes a zero rated supply – 89 (4A) of CGST Rules.

If the supplier is claiming deemed export benefits, export by recipient of goods on payment of IGST not permissible. If still IGST is paid on export of goods or services, its ITC is not available – Rule 96 (10) of CGST Rules.

Merchant Export Merchant exporter means a person engaged in trading activities and exporting or intending to export such goods. Notification No. 41/2017 – IT (R) Dated 23rd Oct’17, states that inter-State supply made to Merchant exporters will be charged at rate of 0.1% {0.05% CGST(equivalent SGST) in case of intra-State as per Notification No. 40/2017 – CT (R) Dated 23rd Oct’17}. If regular rate of goods is 12% then a registered supplier supplying to merchant exporter (registered recipient) will charge GST only 0.1% which means tax 11.9% will be exempted in such a case, if conditions prescribed in Notification No. 41-2017-IT (R) are satisfied (within 90 days

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If goods were procured on payment of 0.1% GST, the merchant exporter can export the goods only under LUT/Bond and cannot export on payment of IGST – Rule 96 (10).

Section 15 Refund of Integrated Tax Paid on Supply of Goods to Tourist Leaving India The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed.

Explanation: For the purposes of this section, the term “tourist” means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

Question & Answer Q1. Who shall be liable to collect and discharge the Integrated tax liability in cases of provision of cross border B2C OIDAR services?

A. Service providers providing OIDAR services to a non-taxable online recipient in taxable territory would be responsible for collection and discharge of integrated tax.

Q2. Under what circumstances an intermediary, who arranges or facilitates the supply of OIDAR services would not be liable to collect tax from non-taxable online recipient?

A. If the intermediary satisfies the following conditions, he shall not be liable to collect tax from non-taxable online recipient;

(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;

(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its charge which is that the intermediary neither collects

or processes payment in any manner nor is

responsible for the payment between the non-taxable online recipient and the supplier of such services;

(c) the intermediary involved in the supply does not authorise delivery; and (d) the general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.

Q3. Who is non-taxable online recipient?

A. “Non-taxable online recipient” means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.

Q4. Would a supplier of OIDAR required to take registration in all states in India in GST Act? A. No. The CBIC has notified the Principal Commissioner of Central Tax, Bengaluru West and all the officers subordinate to him as the officers empowered to grant registration in case of online information and database

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Study Notes access or retrieval services provided or agreed to be provided by a person located in non-taxable territory and received by a non-taxable online recipient.

Q5. Mr. A is supplying goods to SEZ Unit. Whether he has to charge IGST on supply of goods.

A. As per the provision of section 16 of IGST Act, 2017, Supply to SEZ Unit are Zero Rated Supplies. Therefore, in such case Mr. A can either supply goods against payment of IGST (which can be claimed as refund) or he can supply goods without payment of IGST (against LUT /Bond).

Q6. A person had submitted Bank Guarantee for Issue of Bond for export of goods without payment of tax. He was granted Bond with a validity period upto 31st March 2018. However, in view of Notification No. 37/2017 – Central Tax Dated 4th October 2017, he wants to submit Letter of Undertaking and get the bond released which was submitted earlier. Can he do so.

A. Yes, he can submit a Letter of Undertaking as per the guidelines issued vide Notification No. 37/2017 – Central Tax Dated 4th October 2017 and get the bond submitted earlier released.

Q7. What is the meaning of the term “Zero Rated Supply”?

A. “Zero Rated Supply” refers to supplies made to SEZ units / developers or exports of goods or services or both. Zero rated supply doesn't necessarily mean that the above supplies are not leviable to IGST or will taxed at "0" (Zero) Rate or will be exempt from IGST unconditionally.

Q8. Are exports and supplies to SEZ units/Developers out of the ambit of GST? A. No. They are treated as IGST supplies under the IGST Act, 2017. However, the tax burden on the same will be neutralized by granting refunds to persons making such supplies.

Q9. Can SEZ unit / Developers claim refund of IGST charged by his supplier?

A. No. The IGST Act, 2017 allows the supplier of SEZ unit / developer to claim refund of IGST paid by him on supplies to SEZ unit / Developers.

Q10. Are supplies made by SEZ units/Developer are Zero rated supplies?

A. No. only the supplies made TO SEZ units/Developer are zero rates supplies. However, exports made by SEZ units/Developer will be zero rated supplies.

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Section 54 Section 55 Section 56 Section 57 Section 58 Section 15 [IGST]

Refund of Tax Refund to UN Bodies, Embassies, etc.

Interest on Delayed Refunds Consumer Welfare Fund Utilization of Fund Refund of Integrated tax paid on supply of goods to Tourist leaving India

Section 54 Refund of Tax A. Situation leading to refund claims Refund may be due to situations discussed U/s 54 or U/s 77 of CGST Act and the requirement of submission of prescribed relevant documents as is an indicator of the various situations that may necessitate a refund claim. A claim for refund may arise on account of any one of the following: 1. Export of goods or services (Unjust enrichment – No) 2. Supplies to SEZs units and developers (Unjust enrichment – Yes) 3. Deemed exports (Unjust enrichment – Yes) 4. Casual Taxable Person (CTP)/Resident Taxable Person (NRTP) (Unjust enrichment – Yes) 5. Refund of taxes on purchase made by UN or Embassies etc. (Unjust enrichment – No) 6. Refund arising on account of judgement, decree, order or direction of the Appellate Authority, Appellate Tribunal or any court (Unjust enrichment – Yes) 7. Refund of accumulated ITC on account of inverted duty structure (Unjust enrichment – No) 8. Finalisation of provisional assessment (Unjust enrichment – No) 9. Refund of pre-deposit (Unjust enrichment – No) 10. Excess payment due to mistake (Unjust enrichment – Yes) 11. Refunds to International Tourists of GST paid on goods in India and carried abroad at the time of their departure from India (Unjust enrichment – No) 12. Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods or services have not been supplied (Unjust enrichment – No) 13. Refund of CGST and SGST paid by treating the supply as intra-State supply which is subsequently held as inter-State supply and vice-versa (Unjust enrichment – No) However, refund of unutilized ITC shall not be allowed if • The goods exported out of India are subjected to export duty; • The supplier of goods or services or both avails of drawback in respect of CGST or claims refund of the IGST paid on such supplies. While claiming refund of accumulated ITC in case of zero rated supplies without payment of tax, a supplier can avail drawback of only basic customs duty and cannot claim drawback of any of the taxes under GST (Central Tax, Integrated Tax, State/Union Territory Tax). In other words, a supplier availing drawback of only basic customs duty shall be eligible for refund of unutilized ITC of central tax/ State tax/ Union territory tax/ integrated tax/ compensation cess under the said provision. It is further clarified that refund of eligible credit on account of State tax shall be available even if the supplier has availed of drawback in respect of central tax [Circular No.24/24/2017 GST Dated 21.12.2017 and Circular No. 37/11/2018 GST Dated 15.03.2018].

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Study Notes B. Time limit within which refund claim can be filed ❖ Any person claiming refund of any tax, interest, if any paid on such tax or any other amount paid by him, may make an application before the expiry of 2 years from the ‘Relevant Date’ in such form and manner as may be prescribed [Section 54 (1)] ❖ A registered person may claim refund of any unutilized ITC in case of zero rated supplies {clause (i) U/s 54 (3)} or accumulated ITC on account of inverted duty structure {clause (ii) U/s 54 (3)} at the end of any tax period. Government may, on the recommendations of the Council, notify supplies of certain goods or services or both where no refund of unutilized ITC on account of inverted duty structure is allowed. [Section 54 (3)]

C. Meaning of ‘Relevant Date’ [Explanation 2 to section 54] Case Relevant Date 1. Taxable goods are exported by Sea or Air Date on which the Ship or Aircraft in which such goods are loaded, leaves India 2. Taxable goods are exported by Land Date on which such goods pass the Frontier 3. Taxable goods are exported by Post Date of Despatch of goods by the Post Office, to a place outside India 4. Supply of goods regarded as Deemed Date on which return relating to such deemed Export exports is furnished 5. Export of Services out of India [where the Date of receipt of payment in convertible foreign supply of services had been completed prior exchange or in Indian rupees wherever permitted by to the receipt of such payment] the Reserve Bank of India 6. Export of Services out of India [where Date of issue of invoice payment for the services had been received in advance prior to the date of issue of the invoice] 7. Refund of tax as a consequence of Date of communication of judgement, decree, order judgement, decree, order or direction of or direction Appellate Authority, Tribunal or Court 8. In the case of refund of unutilised input tax End of the financial year in which such claim for credit under clause (ii) of the first proviso to refund arises the due date for furnishing of return sub-section (3) – Inverted duty structure under section 39 for the period in which such claim for refund arises 9. Tax paid on Provisional Assessment Date of adjustment of tax after final assessment 10. Refund to a person, other than the supplier Date of receipt of goods or services by such person 11. Any other case Date of payment of tax D. Application for refund of tax, interest, penalty, fees or any other amount [Rule 89] ❖ Any person, except the persons covered by notification issued under section 55, claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application in Form GST RFD-01 electronically through GST common portal. [Rule 89 (1)] ❖ Any claim for refund relating to balance in the Electronic Cash Ledger in as per Section 49 (6) may also be made through the return furnished for the relevant tax period in Form GSTR 3 or 4 or 7. ❖ Casual Taxable person/NRTP, shall get the refund only when they furnished all the returns related to period specify in the certificate of registration. [Section 54 (13)] Refund amount, shall be claimed in the last return required to be furnished by him. ❖ In respect of supplies regarded as deemed export, the application shall be filed by the recipient of deemed export supplies. The supplier of deemed export can also file the application if recipient give undertaking that he has not availed ITC and supplier can claim refund. [Third proviso to rule 89 (1)] ❖ In respect of supplies to a SEZ unit/developer, the application shall be filed by the-

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain a) Supplier of goods after such goods have been admitted in full in the SEZ for authorized operations, as endorsed by the specified officer of the Zone. b) Supplier of services along with such evidence regarding receipt of services for authorized operations as endorsed by the specified officer of SEZ. [Second proviso to rule 89 (1)] E. Documents for filing refund claim [Sec. 54 (4)] 1. The application for refund shall be accompanied by – a) Such documentary evidence as may be prescribed to establish that a refund is due to the applicant, and b) Such documentary or other evidence (including the documents referred u/s 33) as the applicant may furnish to establish that the amount of tax and interest or any other amount paid in relation to which refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not been passed on to any other person.

2. Self-Declaration: If the claimed refund amount doesn’t exceed Rs. 2,00,000, it is not necessary for the applicant to furnish any documentary and other evidences. Instead, he may file a selfdeclaration, based on the documentary or other evidences available with him, certifying that the incidence of such tax and interest had not been passed on to any other person.

The application shall be accompanied by any of the following documentary evidences, in Annexure I in Form GST RFD-01 as applicable, to establish that a refund is due to the applicant namely:

Situation Pre-Deposit of Tax U/s 107 (6) or 112 (8)

Refund on account of Exports of Goods

Refund on account of Export of Services

Refund on account of supply of goods to SEZ unit or SEZ developer

Refund on account of supply of services to SEZ unit or SEZ developer

Refund on account of supply of goods or services or both to SEZ unit or SEZ developer Refund is on account of deemed exports

Documents treated as Evidence Reference number of the order and a copy of the order passed by the proper officer/appellate authority/appellate tribunal/court resulting in refund or reference number of the payment of the predeposit of tax A statement containing the number and date of shipping bills or bills of export and the number and date of relevant export invoices Statement containing the number and date of invoices and the relevant Bank Realization Certificates or Foreign Inward Remittance Certificates Statement containing the number and date of invoices as provided in Rule 46 along with the evidence regarding goods admitted in full for authorized operations as endorsed by the specified officer of SEZ Statement containing the number and date of invoices, along with the evidence regarding receipt of services for authorized operations as endorsed by the specified officer of SEZ., and the details of payment A declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer Statement containing the number and date of invoices along with such other evidence as may be notified

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Study Notes Refund on account of unutilised ITC due to Inverted Duty Structure (other than nil rated or fully exempt supplies) Refund on account of finalization of Provisional assessment Refund u/s 77 for wrong collection and payment of tax to Central and State Government Refund on account of excess payment of tax In case where the amount of refund i) doesn’t exceed Rs. 2 Lacs/or ii) exceeds Rs. 2 Lacs (tax paid but incidence has not been passed to the other person)

A statement containing the number and the date of the invoices received and issued during a tax period Reference number of the final assessment order and a copy of the said order A statement showing the details of transactions considered as intra-State supply but which is subsequently held to be inter-State supply Statement showing the details of the amount of claim i) Declaration for the claim. ii)) If it exceeds Rs. 2 Lacs then Certificate in Annex 2 of FORM GST RFD-01 issued by a Chartered Accountant or a Cost Accountant to the effect of claim.

Note: If the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.

Further, neither a declaration by the applicant nor a certificate by a Chartered Accountant/Cost Accountant is not required to be furnished in the following cases:(a) refund of tax paid on export of goods or services or both or on inputs or input services used in making such exports; (b) refund of unutilised input tax credit under sub-section (3); (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued; (d) refund of tax in pursuance of section 77; (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

F. Amount to be claimed as refund in case of zero rated supply of goods or services and on account of inverted duty structure (Rule 89) As per Rule 89 (4), in the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), refund of input tax credit shall be granted as per the following formula – Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover Where,(A) “Refund amount” means the maximum refund that is admissible; (B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period other than the ITC availed for which refund is claimed under Deemed export {Rule 89 (4A)} or Merchant export {Rule 89 (4B)} or both.

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under Deemed export {Rule 89 (4A)} or Merchant export {Rule 89 (4B)} or both.

(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services

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284

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(F) “Relevant period” means the period for which the claim has been filed.

As per Rule 89 (5), In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula – Maximum Refund Amount = {(Turnover of inverted rated supply of goods & Services) x Net ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods & Services Explanation:- For the purposes of this sub-rule, the expressions – (a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the

No refund on input services & capital goods

input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and (b) “Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to them in sub-rule (4).

Circular 79/53/2018-GST:Refund of Accumulated ITC on A/c of Inverted Duty StructureInput A – GST @ 5% Input B – GST @ 12% Input C – GST @ 18%

Output Product @ 12%

The above-mentioned case belongs to the Inverted Duty Structure. Department officers were denying the refund of Accumulated ITC of Input A & B, since GST rate of Tax for these inputs is less than or equal to the GST rate of output supply.

Clarification: – The accumulated ITC on Input A & B will also be included for the calculation of maximum refund amount. Since, the definition of “Net ITC” includes the same as per rule 89(5) of the CGST Rules.

Refund of ITC of GST paid on invoices of earlier tax period but availed in the subsequent tax periodGoods purchased against a Tax invoice which is issued in Aug 2017. But ITC on that invoice was availed in the GST return of Sept 2017, that ITC cannot be excluded from the calculation of the refund amount for the month of Sept 2017.

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Study Notes

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Net ITC means input availed during the relevant period but only till the due date of GST return of Sept month of the next FY. Relevant period means the period for which the refund claim has been filed.

In the above case, the relevant period would be Sept 2017. Input will be deemed to have been availed when it is shown in GSTR-3B, and was reflected in the Electronic Credit Ledger. Hence, that ITC would be included in the refund calculation for the month of Sept 2017.

Duration for the GST Refund by department-

If Deficiency Memo is issued, 60 days will be counted from the date of submission of fresh refund application.

If GST refund is not credited to the bank A/c of the taxpayer within 60 days as mentioned above, interest @ 6% p.a. on the refund amount will be paid.

Interpretation of the term “Inputs”On certain occasions, departmental officers do not consider ITC on stores and spares, packing materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC on the grounds that these are not directly consumed in the manufacturing process and therefore, do not qualify as input.

The circular clarifies that ITC of the GST paid on inputs shall be available to a registered person as long as he uses or intends to use such inputs for the purposes of his business and there is no specific restriction on the availment of such ITC anywhere else in the GST Act. Thus, the GST paid on inward supplies of stores and spares, packing materials etc. shall be available as ITC as long as these inputs are used for the purpose of business and/or for effecting taxable supplies, including zero rated supplies, and the ITC for such inputs is not restricted under section 17(5) of the CGST Act. Further, capital goods have been clearly defined in section 2(19) of the CGST Act as goods whose value has been capitalized in the books of account and which are used or intended to be used in the course or furtherance of business. Stores and spares, which has been charged as a revenue expense in the books of account, cannot be held to be capital goods.

Example 1: ABC Ltd. is a registered taxable company having registered office at Hyderabad, engaged in providing consultancy service to its client in India and outside India. It is exporting services without payment of IGST under LUT. The company after adjusting all the taxable liability for the period September 2017 to March 2018, claim excess ITC as refund from the department. The following are the information provided by the company, for calculating amount of ITC eligible for refund (all amount in INR)

Sr. No. 1.

2.

Particular Domestic Outward Supply Export (Zero rated supply)

Turnover 1000 500

Taxable @ 18% on outward supply 180

Inward Supply 1250

Tax @ 18% on inward supply 225

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Exempt Supply Total Additional information:Sr. No. 1.

2.

3.

4.

250 1750

Other Inward Supplies

Consultancy Services Rent Food Items (assume 18%) Cleaning Services Total Note: Impact of Rules 42 & 43 is ignored for simplicity.

A. Particular Turnover for zero rated supply Adjusted total turnover Total Turnover Less: Exempt Supply Input Tax Credit Inward input tax credit Add: Total common input tax credit Less: Blocked credit [U/s 17 (5)] Less: Outward Tax

1250

180

225

Tax @ 18% on inward supply 18 45 36 9 108

Value 100 250 200 50 600

Amount 500

Total 500

1750 250

1500

225 108 36 180

117

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷Adjusted Total Turnover Refund Amount = 500/1500*117 = 39 i.e. Rs. 39 Example 2: XYZ Ltd. is a registered manufacturing company at Kochi, indulged in the business of processing of woven fabrics which is taxable @ 5%. The inputs used for making such product are taxable @ 12%. The company wants to determine the ITC eligible for refund.

Following are the information provided by the company during the period January to March 2019: Sr. No. 1.

2.

3.

A. Maximum

Particular Raw materials used (inward supply) @ 12% Woven fabrics (outward supply) @ 5% Consultancy service @ 18% (other inward supply)

Amount 100 150 10

Tax Amount 12 7.5 1.8

Refund Amount = {(Turnover of inverted rated supply of goods & Services) x Net ITC ÷ Adjusted

Total Turnover} – tax payable on such inverted rated supply of goods & services Maximum Refund Amount= {150*12/150)/150}-7.5 = Rs. 4.5 Note:- No refund permissible for accumulated credit on input services i.e. Rs. 10 Example 3: My smart Ltd. furnishes following information. Please compute maximum refund eligible on account of inverted duty structure: ITC availed on inputs ITC availed on inputs services ITC availed on capital goods Turnover of inverted rated supply of goods (taxable @ 5%)

3,60,000 36,000 2,00,000 30,00,000

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Study Notes Turnover of inverted rated supply of services (taxable @ 5%) Note:- included in turnover of other supplies of goods & services i.e. Rs. 15,00,000 Turnover of other supplies of goods and services (including exempt supplies Rs. 5,00,000) A. Net ITC i.e. ITC availed on Inputs Turnover of inverted rated supply of goods & services (30,00,000+3,00,000) Total Adjusted Turnover {30,00,000+15,00,000-5,00,000} Tax paid on inverted rated supply of goods & services (33,00,000*5%) Maximum Refund {33,00,000 x 3,60,000÷ 40,00,000} – 1,65,000

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3,00,000 15,00,000

3,60,000 33,00,000 40,00,000 1,65,000 1,32,000

G. Acknowledgement of refund claim [Rule 90] I. II.

III.

The application relates to a claim for refund from the electronic cash ledger, shall get acknowledgement (specifying date of filing) through the Common Portal electronically.

The application relates to a claim other than claim for refund from the electronic cash ledger, shall be forwarded to proper officer, who will within a period of 15 days, shall issue acknowledgement through the Common Portal electronically (specifying date of filing) if the application is found to be complete in terms of rule 89.

If any deficiencies are noticed, the proper officer shall communicate the deficiencies through the common portal, requiring him to file a fresh refund application.

H. Order of Refund [Section 54 (5), (7) read with rule 92] ❖ If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount claimed as refund is refundable, he may make an order in FORM GST RFD – 06 and the amount so determined shall be credited to the Fund referred to in section 57. [Sec. 54 (5)] ❖ The proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt of application complete in all respects. [Sec. 54 (7)] Extract of CGST Rule 92 ➢ The proper officer shall issue the order of sanctioning the amount in Form GST RFD-06 stating: • The amount of refund due to the applicant, • The amount provisionally refunded to the applicant (if any), • The amount adjusted against any outstanding demand, • The balance amount refundable to the applicant.

In case the whole amount of refund is adjusted against any outstanding demand under this Act or under any of the existing law an order mentioning the details of such adjustment shall be issued in Part A of Form GST RFD-07 {Rule 92 (1)} ➢ Where the proper officer is satisfied that the amount refundable under sub-rule (1) or sub-rule (2) is payable to the applicant under sub-section (8) of section 54, he shall make an order in FORM GST RFD-06 and issue a payment advice in FORM GST RFD-05 for the amount of refund and the same shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund: Provided that the order issued in FORM GST RFD-06 shall not be required to be revalidated by the proper officer: Provided further that the payment advice in FORM GST RFD-05 shall be required to be revalidated where the refund has not been disbursed within the same financial year in which the said payment advice was issued {Rule 92 (4)}

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain I. Grant of Provisional refund [Section 54 (6) read with rule 91] Irrespective of Sec. 54 (5), 90% of refund may be sanctioned on provisional basis in such manner and subject to such conditions, limitations and safeguard as may be prescribed (paid to the claimant) without verification of documents if following conditions are satisfied: ➢ Claim for refund on account of zero-rated supply ➢ Made by registered persons ➢ Other than such category of registered person as may be notified by the government Remaining 10% may be refunded after due verification of documents furnished by the applicant.

Extract of CGST Rule 91 (1) The provisional refund of 90% shall be granted to the applicant if the person claiming the refund has not been prosecuted for any offence under the act or under an existing law where the amount of tax evaded exceeds two hundred and fifty lakh rupees during any period of five years immediately preceding the tax period to which the claim for refund relates.

(2) The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on being prima facie satisfied that the amount claimed as refund under sub-rule (1) is due to the applicant in accordance with the provisions of subsection (6) of section 54, will sanction such refund in Form GST RFD-04 within seven days from the issue of acknowledgement of application of refund in Form GST RFD-02. Provided that the order issued in FORM GST RFD-04 shall not be required to be revalidated by the proper officer.

(3) The payment advice of the refund sanctioned shall be issued by the proper officer in Form GST RFD05 and the same shall be credited in his bank account. Provided that the payment advice in FORM GST RFD-05 shall be required to be revalidated where the refund has not been disbursed within the same financial year in which the said payment advice was issued.

With combined reading of Rule 91 & 92, it can be concluded that Government inserted the proviso to Rule 91(2) and Rule 91(3) to provide that in the case where refund is not disbursed, the order issued by officer in GST RFD-04 form for grant of provisional refund shall not be revalidated and only payment advice issued in FORM GST RFD 05 shall be revalidated if refund is not disbursed within same financial year in which said payment advice was issued.

J. Principal of Unjust Enrichment [Section 54 (8) & (9)] The person who has not passed the incidence of tax will be eligible to claim the refund. Under unjust enrichment, a presumption is always drawn that the businessman will shift the incidence of tax to the final consumer. This is because GST is an indirect tax whose incidence is to be borne by the consumer. It is for this reason that every refund claim if sanctioned is first transferred to the “consumer welfare fund”.

The GST Law makes this test inapplicable in case of refund of accumulated ITC, refund on account of exports, refund of payment of wrong tax (IGST instead of CGST + SGST & vice versa), refund of tax paid on a supply, which is not provided or when refund voucher is issued or if the applicant shows that he has not passed on the incidence of tax to any other person.

If refund claim doesn’t exceed Rs. 2 Lacs, then a self-declaration of the applicant and in case of more than Rs. 2 Lacs, a certificate from Chartered Accountant/Cost Accountant will have to be given.

Cases where refundable amount shall be paid to the applicant [Sec. 54 (8): The refund shall be sanctioned directly to the claimant, in the following cases – ➢ Refund of tax paid on zero-rated supply export of goods or services or both or on inputs or input services used in making such zero-rated supply exports; ➢ Refund of unutilised input tax credit under sub-section (3); ➢ The tax/interest/other amounts paid by the applicant, where the incidence had not passed on to any other person;

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Study Notes ➢ ➢

➢

Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued or where a refund voucher has been issued; Refund of tax in pursuance of section 77 which means a registered person who has paid CGST/SGST/UTGST on a transaction considered by him as intra-state supply but held as inter-state supply.

The tax or interest borne by notified class of applicant.

In all cases other than the one listed above, where the application is found to be in order, the refund amount, shall be credited to consumer welfare fund within 60 days of receipt of the application.

K. Issue of SCN and rejection of refund claim [Rule 92 (3)] ➢ ➢ ➢

The Proper Office is satisfied that the whole or any part of the refund amount claimed, is not admissible, he shall issue “Show Cause Notice”.

Applicant will be required to furnish a reply within 15 days of the receipt of notice.

The proper officer shall, after considering reply and giving him an opportunity of being heard, make an order in Form GST RFD-06, sanctioning the amount of refund in whole or part, or rejecting the said refund claim.

L. Withholding of refund claim & other provisions [Sec. 54 (10) to Sec. 54 (15)] Sec. 54 (10) Proper officer may withhold the refund due in case on non-filing of return or non-payment of tax, interest and penalty which is not stayed by any court, tribunal or appellate authority by specified date (in case no appeal has been filed – the last date for filing an appeal under this act) until he files return or pay the amount due. Proper officer may also adjust the amount payable from refund amount.

Sec. 54 (11) The commissioner/board may, after giving the tax payer an opportunity of being heard, withhold the refund till such time as he may determine in case where he is of the opinion that such refund is – ➢ Likely to have an adverse effect on the revenue and ➢ An order giving rise to a refund is the subject matter of an appeal or further proceeding or where any other proceeding under this act is pending on account of malfeasance or fraud committed. (order need to be passed in Part B of Form GST RFD-07) Sec. 54 (12) If refund has been withheld by commissioner/board U/s 54 (11) above and later he becomes entitled to the refund, he shall be entitled to interest @ 6%, irrespective of Section 56.

Sec. 54 (13) The amount of advance tax deposited by a casual taxable person or a non-resident taxable person at the time of taking registration would be refunded only after completion of entire period for which the certificate of registration granted and all the returns required to be furnished U/s 39 are furnished.

Sec. 54 (14) No refund shall be granted or paid to an applicant, if the amount is less than Rs. 1000. The limit of Rs. 1,000 shall apply for each tax head separately and not cumulatively. Further, the limit would not apply in cases of refund of excess balance in the electronic cash ledger. {Circular No. 59/ 33/ 2018 GST Dated 04.09.2018} M. Any refund claim rejected shall be re-credited to the Electronic Credit Ledger [Rule 93]

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain N. Refund of Integrated tax paid on goods or services exported out of India [Rule 96] A taxable person has option to pay IGST on goods exported out of India and claim refund. Shipping bill filed by exporter of goods shall be deemed to application for refund of IGST. A Departure Manifest or Export Manifest or Export report covering the number and date of shipping bill should have been filed. The applicant should have filed valid return in Form GSTR 3 or GSTR 3B as the case may be.

Details of export invoices in respect of goods contained in valid return in Form GSTR 3 or GSTR 3B as the case may be, shall be transmitted to system in respect of designated by customs. The system shall confirm that the goods have been exporters out of India.

Where date of filing of GSTR 1 has been extended by Commissioner the supplier shall furnish information relating to export invoices in table 6A of form GSTR 1 after return in form GSTR 3B has been furnished.

The system designated by the Customs or the proper officer of Customs, as the case may be, shall process the claim of refund in respect of export of goods and an amount equal to the integrated tax paid in respect of each shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in his registration particulars and as intimated to the Customs authorities.

Refund of IGST paid on services exported shall be filed in form GST RFD – 01 and shall be dealt with in accordance with provisions of rule 89 of CGST Rules – Rule 96 (9) of CGST Rules, 2017.

The Central Government may pay refund of the IGST to the Government of Bhutan on the exports to Bhutan for such class as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the exporter shall not be paid any refund of the integrated tax.

The claim for Refund shall be withheld wherea. A request has been received from jurisdictional Commissioner of Central tax, State tax & Union Territory Tax; b. The proper officer of customs determined that the goods were exported in violation of the provisions of the Customs Act, 1962.

Rule 96(10) of the CGST Rules, 2017 restricted the refund of IGST paid on exports if the exporter had claimed the benefit under certain specified notifications. The rule has been amended and the net effect of the amendment is that any exporter who imported goods by claiming benefit under customs notification nos.

78/2017 and 79/2017 can claim refund of IGST paid on exports till 9 October, 2018 when rule 96(10) of the CGST Rules, 2017 was amended by notification no. 54/2018 Central Tax. After the amendment, such exporters will not be able to claim refund of IGST paid on exports, except for the exporters receiving capital goods under the EPCG scheme.

[Circular No. 70/44/2018 Dated 26.10.2018]

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Study Notes O. Export of goods or service under bond or LUT [Rule 96A]

291

Or such further period as may be allowed by the Commissioner

Filing of invoices is similar to Rule 96

Pay within 15 days after expiry of 1 year from Date of Invoice if not received payment in convertible foreign exchange or in Indian rupees, wherever permitted by the RBI

If fails to pay the amount mentioned in specified time, the export as allowed under bond/LUT shall be withdrawn. It shall be restored immediately when the registered person pays the amount due.

Section 55 Refund of UN Bodies, Embassies etc. [Sec. 55 read with Rule 95 (2)] 1. Applicability: ➢ ➢

Specialised Agency of the United Nations Organization or Consulate or Embassy of foreign countries

➢

Any Multilateral Financial Institution and Organization notified under the United Nations (Privileges and Immunities) Act, 1947

➢

Any other notified person

2. Application for refund shall be made in Form GST RFD-10 once in every quarter. Also to file a statement of inward supplies of goods or services or both in Form GSTR 11. (Entities covered U/s 55, shall make an application for refund of tax paid by it on inward supplies, to the jurisdictional tax authority, in such form and manner as specified, before the expiry of 18 months from the last date of the quarter in which such supply was received) 3. Acknowledgement for Application of refund shall be given in Form GST RFD-02.

4. Condition for Refund: a. The inward supplies of goods or services or both were received from a registered person against a tax invoice. b. Name and GSTIN or UIN of the applicant is mentioned on the tax invoice and 5. In case of inconsistent provisions, International Treaty will prevail over rules.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain In exercise of above power, following persons have been notified, subject to fulfilment of specified conditions: i.

United Nations or a specified international organization**; and ii.

Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein. **Specified international organisation means an international organisation declared by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities Act) 1947, to which the provisions of the Schedule to the said Act apply.

Further, in exercise of said power, Canteen Stores Department (CSD), under the Ministry of Defence, has been notified as a person who shall be entitled to claim a refund of 50% of the applicable CGST/IGST paid by it on all inward supplies of goods received by it for the purposes of subsequent supply of such goods to the Unit Run Canteens of the CSD or to the authorized customers of the CSD.

Section 56 Interest on Delayed Refunds In case of refund arising from an order passed by the adjudicating authority, appellate authority or appellate tribunal Other Cases

Government shall pay an interest of 9% from the date immediately after the expiry of 60 days from the date of receipt of application of refund.

The Government shall pay an interest of 6% from the date immediately after the expiry of 60 days from the date of receipt of application of refund.

Section 57 Consumer Welfare Fund The Government shall constitute a Fund, to be called the Consumer Welfare Fund and there shall be credited to the Fund,— (a) the amount referred to in sub-section (5) of section 54; (b) any income from investment of the amount credited to the Fund; and (c) such other monies received by it, in such manner as may be prescribed.

Amounts to be credited to/paid from Consumer Welfare Fund [Rule 97 of the CGST Rules, 2017] ✓

✓ ✓

✓

All amounts of duty CGST/ SGST/ IGST/ UTGST/ cess and income from investment along with other monies specified in section 12C(2) of the erstwhile Central Excise Act, 1944, section 57 of the CGST Act, 2017 read with section 20 of the IGST Act, 2017, section 21 of the UTGST Act, 2017 and section 12 of the GST (Compensation to States) Act, 2017 shall be credited to the Fund [discussed earlier in this chapter] [Rule 97(1)].

An amount equivalent to 50% of the amount of IGST determined under section 54(5) of the CGST Act, read with section 20 of the IGST Act, shall be deposited in the Fund [Proviso to rule 97(1)].

An amount equivalent to 50% of the amount of compensation cess determined under section 54(5) of the CGST Act, read with section 11 of the GST (Compensation to States) Act, shall be deposited in the Fund. [Second Proviso to rule 97(1)]] Any amount, having been credited to the Consumer Welfare Fund, ordered or directed as payable to any claimant by orders of the proper officer, Appellate Authority or Appellate Tribunal or Court, shall be paid from the Fund [Rule 97(2)].

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Study Notes Section 58 Utilization of Fund (1) All sums credited to the Fund shall be utilised by the Government for the welfare of the consumers in such manner as may be prescribed.

(2) The Government or the authority specified by it shall maintain proper and separate account and other relevant records in relation to the Fund and prepare an annual statement of accounts in such form as may be prescribed in consultation with the Comptroller and Auditor-General of India.

Section 15 (IGST) Refund of Integrated Tax paid on supply of goods to tourist leaving India The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed.

Explanation: For the purposes of this section, the term “tourist” means a person not normally resident in India, who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

Question & Answer Q1. What are the cases under which refund of unutilized input tax credit shall not be allowed?

A. As per first proviso to Sec. 54 (3), no refund of unutilized ITC shall be allowed except in following cases: (i) Zero rated supplies made without payment of tax, or (ii) Credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than Nil rated or exempt supplies). However, such refund should not relate to supply of goods or services or both as may be notified by the government on recommendation of GST council.

Thus, except the above two exceptions, refund of unutilized credit will not be allowed.

Q2. Whether refund of unutilized ITC can be allowed in case where export of goods is subject to export duty?

A. As per second proviso to Sec. 54 (3), no such refund will be allowed in case goods exported out of India are subject to levy of export duty.

Q3. Whether refund of unutilized ITC can be allowed in case where exporter of goods or services claims drawback or refund of taxes paid on such supplies?

A. The export of goods has to be free from the effect of any taxes. It is important to note that refund of unutilized credit is only one of the methods to free export transactions from the burden of taxes. The other 2 methods are drawback of taxes or refund of taxes paid on such supplies. As per second proviso to sec. 54 (3), refund of input taxes shall not have allowed in case supplier of goods or services avail drawback of central taxes or claims refund of IGST paid on such supplies.

Q4. Whether the principle of unjust enrichment be applicable to export?

A. The principle of unjust enrichment will not be applicable in case of export of goods and services.

Q5. In case of rejection of refund application, what would happen to the amount debited from Input Tax Ledger?

A. As provided in rule 93 (2), in case of rejection of refund application wholly or partly, the amount of claim rejected will be re-credited in the electronic ledger of the applicant.

Example: A Ltd. made an application of refund of unutilized ITC amounting to Rs. 7 Lacs. A Ltd. reduced the balance of Rs. 7 lacs from their electronic credit ledger. The proper officer was not satisfied with claim of Rs. 2

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A. Interest is payable after 60 days which is completing on 31 st Dec’17 (60 days from 1st Nov’17). So, interest is payable for 25 days @ 6% i.e. Rs. 9,00,000 * 6% * 25/365 = Rs. 3,698 Q7. Mr. A has opted for Export against LUT / Bond without payment of taxes. LUT/ Bond issued by the Jurisdictional Officer is valid till 31st March 2018. He has exported goods against such LUT / Bond till December 2017. Can he start to export goods against payment of IGST from January 2018?

A. Yes, even though validity of LUT / Bonds is till 31st March 2018, Mr. A can start exporting goods against payment of IGST from January, 2018.

Q8. Mr. A is supplying goods to SEZ Unit. Whether he has to charge IGST on supply of goods?

A. As per the provision of section 16 of IGST Act, 2017, Supply to SEZ Unit are Zero Rated Supplies. Therefore, in such case Mr. A can either supply goods against payment of IGST (which can be claimed as refund) or he can supply goods without payment of IGST (against LUT /Bond).

Q9. A person had submitted Bank Guarantee for Issue of Bond for export of goods without payment of tax. He was granted Bond with a validity period upto 31st March 2018. However, in view of Notification No. 37/2017 – Central Tax Dated 4th October 2017, he wants to submit Letter of Undertaking and get the bond released which was submitted earlier. Can he do so.

A. Yes, he can submit a Letter of Undertaking as per the guidelines issued vide Notification No. 37/2017 – Central Tax Dated 4th October 2017 and get the bond submitted earlier released.

Q10. Can goods be sold to EOU without payment of GST as was being done prior to implementation of GST? A. No, goods cannot be supplied to EOU without payment of taxes, however, as per Notification No. 48/2017 – Central Tax Dated 18th October 2017, domestic supplies to holder of Advance Authorization / EPCG and EOUs would be treated as deemed exports under section 147 of CGST / SGST Act and refund of tax paid on such supplies can be claimed by the supplier.

Following supplies have been treated as deemed exports under section 147 of the CGST Act: Sr. No. i.

ii. iii. iv.

Description of supply Supply of goods by a registered person against Advance Authorisation Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply,; Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods.

Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization.

Supply of goods by a registered person to Export Oriented Unit Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017 – Customs, Dated the 30th June, 2017, (as amended) against Advance Authorization.

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Study Notes Explanation – For the purposes of this notification, “Advance Authorization” means an authorization issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015 – 20 for import or domestic procurement of inputs on pre – import basis for physical exports.

Export Promotion Capital Goods Authorization means an authorization issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015 – 20 for import of capital goods for physical exports.

“Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Par Unit or Bio – Technology Par Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015 – 20.

Q11. Will unutilized ITC at the end of the financial year (after introduction of GST) be refunded?

A. There is no such provision to allow refund of such unutilized ITC at the end of the financial year in the GST Law. It shall be carried forward to the next financial year.

Q12. Are SEZ Units liable to pay taxes on their inward supplies? Who will be eligible for refund of taxes paid on supplies to SEZ? A. No. SEZ units shall not be charged with taxes for supplies made to them.

In respect of supplies to a SEZ unit or a SEZ developer, the application for refund shall be filed by the –

(a) supplier of goods after such goods have been admitted in full in the SEZ for authorised operations, (b) supplier of services along with such evidence regarding receipt of services for authorised operations; as endorsed by the specified officer of the Zone.

Q13. Can the refund of balance in cash or credit ledger be claimed?

A. Yes, as per provisions of Section 49 (6), the balance of cash or credit after payment of tax, interest, penalty, fee or any other amount payment refund can be claimed as per provisions of Section 54. Once the refund is claimed, the amount of credit of CGST/SGST/ IGST (as the case may be) would be reduced to that extent.

Q14. Whether separate applications need to be filed for refund in case of export of goods and export of services?

A. Yes, there shall be separate application and different procedure for refund of export of goods and export of services.

Q15. Who can file an application for refund in case of deemed export?

A. In terms of third proviso to Rule 89 inserted vide Notification No. 47/2017 – Central Tax Dated 10.10.2017, application for refund in case of deemed export can be filed by: •

the recipient of deemed export supplies; or

•

the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund

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Section 2 (68) Section 19 Section 141 Section 143

Job Work definition ITC in respect of goods & capital goods sent to job worker Transition provision Job Work Procedures

Section 2 (68) Job Work Definition It means any treatment or process undertaken by a person by goods belonging to another registered person and the expression “job worker” shall be construed accordingly.

The characteristics of job work, 1. Process or treatment carried out by “Job worker: as per instructions of “Principal” 2. Ownership remain with “Principal”. 3. “Principal” shall be registered.

Section 19 ITC in respect of goods & capital goods sent to job worker Principal is entitled to take ITC of inputs sent for job worker. If it is directly sent to job worker from supplier premises then principal can avail ITC when these inputs received by job worker. Same rule apply in case of capital goods.

The most important condition is that ‘inputs’ must be received within 1 year (from the date of dispatch by principal or if it is directly sent through supplier then from the date when job worker receive) or supplied from the place of business of job worker & ‘capital goods’ must be received back in 3 years. No time period in case of moulds & dies, jogs, fixtures or tools.

If the inputs or capital goods are not returned within time limit specified, the principal is liable to pay tax along with interest @18% from the day goods sent out by deeming the activity as an outward supply. In case Principal, directly deliver to Job worker from supplier then date of receipt at Job worker’s premises.

Section 143 Job Work Procedures: -

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Study Notes Job worker can clear waste/scrap on payment of GST. If unregistered then, principal has to discharge GST Liability as per section 143 (5).

Section 143 (1) is amended to give power to commissioner: The period of one year and three years may, on sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year and two years respectively.

Other key points: •

Supply under job work will be considered as principal’s turnover.

•

Job worker can use his own goods for providing the services of job work (Circular 38/12/2018 Dated 26th March 2018).

•

As per valuation Rule 27, “Value of supply of goods or services where the consideration is not wholly in money”. So, what will be treatment of wastage/scrap generated during the process (CCE, Jaipur V/s General Engineering Works, SC, 2007)? It may be an issue of litigation if job worker is retaining the scrap and selling it to scrap dealer without adding that amount in assessable value charge to principal.

•

The principal shall prepare in triplicate, the challan, for sending goods to job worker. Two copies of challan may be sent to the job worker along with goods. The job worker should send one copy of the said challan along with goods, while returning them to the principal.

•

Where goods are sent from one job worker to another job worker, the goods may move under the cover of a challan issued either by the principal or the job worker. Alternatively, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent. The same process may be repeated for subsequent movement of the goods to other job workers, indicating therein the quantity and description of goods.

•

Where the goods are sent directly by the supplier to the job worker, the goods may move from the place of business of the supplier to the place of business/premises of the job worker with a copy of the invoice issued by the supplier in the name of the buyer (i.e., the principal) wherein the job worker’s name and address should also be mentioned as the consignee in such invoice. Further, the buyer (i.e., the principal) shall issue the challan [required to be issued under rule 45] and send the same to the job worker directly.

In case of import of goods by the principal which are then supplied directly from the customs station of import, the goods may move from the customs station of import to the place of business/premises of the job worker with a copy of the Bill of Entry and the principal shall issue the challan under rule 45 and send the same to the job worker directly.

•

In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker.

•

It is clarified that it is the responsibility of the principal to include the details of all the challans relating to goods sent by him to job worker or from one job worker to another and its return therefrom during a quarter in Form GST ITC-04 by the 25th day of the month succeeding the relevant quarter. This period can be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST. The Form GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act.

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Question & Answer Q1. Are transactions of repair included in job work?

A. The activity of carrying out repairs on goods will get covered on job work and thus would be covered by provisions of section 143.

Q2. Whether job worker has to be a different person or can some other unit of principal can also become job worker?

A. Job worker has been defined to mean undertaking of treatment or process by a person on the goods belonging to another registered taxable person. In view of the fact that another unit of the same person has been categorized as a distinct person. As a distinct person, it has got all the obligations as are applicable to separately registered person, it can be concluded that even if the job worker happens to be another unit of the same person, it would be covered by provisions of sec 143 of the GST Act. Q3. What would happen in case job worked goods are not received back by the principal within a period of one year?

A. In case job worked goods are not received back by the principal within one year of their being sent for job work, it shall be deemed that such goods were supplied by the job worker on the day when these goods were sent out and the principal is required to pay GST on the goods so sent for job work along with interest at the appropriate rate.

Q4. Can goods be sent by the principal for further job work from one job to another job worker?

A. Yes, inputs/capital goods can be sent for further job work from one job worker to another job worker. However, time limit of one year/three year to bring back inputs/capital goods after completion of job work, would be counted from the date when they were first sent for job work.

Q5. If job worker purchased additional material and incorporate the same in the goods received from the principal amount to supply?

A. Yes, it amounts to supply in the hands of the job worker as composite supply or otherwise.

Q6. Can a job worker take input credit on the inputs used in the process of job work?

A. Yes, the job worker is eligible to claim input tax credit since the processing charges received in respect of labour charges and the supply of additional goods added is taxable in the hands of the job worker.

Q7. If the job-worker subsequently registers, should the principal amend his registration by cancelling the jobworkers premises as his additional place of business?

A. Yes. Q8. Whether intermediate goods can also be sent for job work?

A. Yes. The term inputs, for the purpose of job work, includes intermediate goods arising from any treatment or process carried out on the inputs by the principal or job worker.

Q9. Whether the goods of principal directly supplied from the job worker’s premises will be included in the aggregate turnover of the job worker?

A. No, it will be included in the aggregate turnover of principal. However, the value of goods or services used by the job worker for carrying out the job work will be included in the value of services supplied by the job worker.

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Study Notes Q10. ABC Ltd. sends the goods to XYZ & Co. for making finished goods on 30-08-2017. What are the tax implications, in the following cases if GST @ 18% is levied: i.

XYZ & Co. sends the goods back to ABC Ltd. within one year of being sent. ii.

XYZ & Co. sells the goods directly to the customer on behalf of ABC Ltd.

A. As per Section 143 of CGST Act 2017, supply of goods to a job worker without payment of tax is permissible upon an intimation. In the given example, the implications are as follows: ➢

On supply of goods to XYZ & Co., as per the section 143 of CGST Act 2017, no tax shall be payable on supply of goods to XYZ & Co., However, the tax will be payable if finished goods is not returned before one year from 30-08-2017.

➢

XYZ & Co. sends the finished goods back to ABC Ltd.: As per the act, there is no tax liability on returning of goods back to the principal i.e. ABC Ltd. within a period of one year. Hence, post completion of Job work, no tax is leviable on finished goods returned to ABC Ltd.

➢

XYZ & Co. sells the finished goods on behalf of ABC Ltd.: Section 143 also allows the job worker to directly sell the goods on behalf of principal, wherein the liability to pay tax is of the principal and not the job worker. ABC Ltd. is liable to pay GST on sale of finished goods to customer by XYZ & Co. However, ABC Ltd. must declare the premises of XYZ & Co., as ‘additional place of business’ and the sale of finished goods will form part of aggregate turnover of ABC Ltd. Such a declaration is not required in case where: i.

Job worker is registered under section 25; or ii.

Principal is engaged in supply of notified goods.

Q11. ABC Ltd. sends the goods (inputs) to XYZ & Co. for further processing on 30-08-2017. The value of goods sent for Job work is Rs. 2,00,000. What are the tax implications, in following cases, if GST @ 18% is levied: (i) XYZ & Co. sends the processed goods back to ABC Ltd on 30-11-2017 (ii)

XYZ & Co. sends the processed goods back to ABC Ltd on 30-10-2018.

A. XYZ & Co. sends the processed goods back to ABC Ltd. on 30-11-2017: As per Section 143 of the Act, Principal can remove the goods without payment of tax and take input tax credit provided inputs sent for job work are returned back within one year of removal. Otherwise, it shall be treated as supply from principal to Job worker as on 30-08-2017 and subject to tax along with interest. (i) In the present case, as the inputs are received back on 30-11-2017 i.e. before completion of one year, and hence no tax is payable. (ii) XYZ & Co. sends the processed goods back to ABC Ltd. on 30-10-2018: In the present case, the goods are received after the period of one year and hence, ABC Ltd. needs to pay the tax along with the interest on the supply made by him to XYZ & Co. Hence, ABC Ltd. need to pay Rs. 18,000 (CGST) and Rs. 18,000 (SGST) along with specified interest.

Q12. Under what circumstances can the principal directly supply goods from the premises of job worker without declaring the premises of job worker as his additional place of business?

A. The goods can be supplied directly from the place of business of job worker without declaring it as additional place of business in two circumstances namely where the job worker is a registered taxable person or where the principal is engaged in supply of such goods as may be notified by the Commissioner.

Q13. Who is responsible for the maintenance of proper accounts related to job work?

A. It is completely the responsibility of the principal to maintain proper accounts of job work related inputs and capital goods.

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Section 59 Section 60 Section 61 Section 62 Section 63 Section 64 Section 65 Section 66

Self-Assessment Provisional Assessment Scrutiny of Returns Assessment of Non-Filers of Returns Assessment of Unregistered Persons Summary Assessment in Certain Cases Audit by Tax Authorities Special Audit

Assessment means determination of tax liability under GST law and also the tax payable thereon, which is paid/payable by the taxable person, ‘audit’ refers to a systematic & independent examination of books, accounts, statutory records, etc., of an organization to ascertain how far the financial statements as well as non-financial statements discloses a true and fair view of the concern. Below are the various types of assessment under GST. Types of Assessment under GST: • Self-assessment • Provisional assessment • Scrutiny assessment • Assessment of non-filers of returns • Assessment of unregistered persons • Summary assessment Only self-assessment is done by the taxpayer himself. All the other assessments are by tax authorities.

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Study Notes Section 59 Self-Assessment Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax period as specified under section 39.

Self-Assessment is the first stage for all the assessments now. The registered person is required to compute his output, take the available input credit and pay the balance amount and file the returns in the prescribed forms. Prima- Facie the department shall accept such self-assessed returns and declarations, subject to scrutiny and other modes of assessment in the selected cases and in the prescribed manner.

Section 60 Provisional Assessment (1) The taxable person is • unable to determine the value of goods or services or both or • unable to determine the rate of tax he may request the proper officer in writing giving reasons for payment of tax on a provisional basis.

The proper officer may request additional information by issuing notice and request person to appear in person. The proper officer shall pass an order, within a period not later than ninety days from the date of receipt of such request, allowing payment of tax on provisional basis at such rate or on such value as may be specified by him.

Normally, provisional assessment is done in the case of imports and in a case of foreign ships doing business through Indian ports. Provisional assessment also opts in certain cases of manufacturing and processing which may attract litigation as to taxability and valuation.

(2) The payment of tax on provisional basis may be allowed, if the taxable person executes a bond in such form as may be prescribed, and with such surety or security as the proper officer may deem fit, binding the taxable person for payment of the difference between the amount of tax as may be finally assessed and the amount of tax provisionally assessed. Rule 98 (3) in this regard provides that proper officer will decide the amount of security to be furnished, the amount of which will not exceed 25% of the amount covered under bond. Rule 98 (4) provides that the security will be in the form of bank guarantee of the amount as determined in rule 98 (3). For the purposes of this rule, the expression “amount” shall include the amount of integrated tax, central tax, State tax or Union territory tax and cess payable in respect of the transaction.

These kind of surety clauses exist along with the provisional assessment clauses, so as to ensure that the revenue is not at loss post such provisional assessment, which is normally done in haste.

(3) The proper officer shall, within a period not exceeding six months from the date of the communication of the order issued under sub-section (1), pass the final assessment order after taking into account such information as may be required for finalising the assessment: Provided that the period specified in this subsection may, on sufficient cause being shown and for reasons to be recorded in writing, be extended by the • Joint Commissioner or Additional Commissioner for a further period not exceeding six months and • Commissioner for such further period not exceeding four years.

(4) The registered person shall be liable to pay interest on any tax payable on the supply of goods or services or both under provisional assessment. In simple words, in case any tax amount becomes payable subsequent to finalization of the provisional assessment, then interest at the specified rate will also be payable by the supplier from the first day after the due date of payment of the tax till the date of actual payment, whether such amount is paid before or after the issuance of order for final assessment.

(5) Where the registered person is entitled to a refund consequent to the order of final assessment under sub-section (3), subject to the provisions of sub-section (8) of section 54, interest shall be paid on such refund as provided in section 56. In simple words, in case any tax amount becomes refundable

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The applicant may file an application for release of security furnished after issue of final assessment order. The proper officer shall release the security furnished after ensuring that the applicant has paid the amount, within a period of seven working days from the date of the receipt of the application.

Example 1: ABC Ltd. is in business of manufacturing various components and caters to various industries. In the course of its business, ABC Ltd. receives order for manufacturing some specialized components for which the required moulds are provided free of cost (FOC) by recipient. ABC Ltd. was unsure as to whether amortized cost of tools was to be added to arrive at the value of the components supplied for the purpose of GST. Accordingly, ABC Ltd. made an application to proper officer, for assessment on provisional basis on 01.10.2018.

Time period for passing provisional order, 90 days to be calculated from 01.10.2018 i.e. 30.12.2018.

Suppose, in this case the provisional assessment order was passed and communicated to ABC Ltd. on 30.11.2018. Now, the final order shall be passed by the proper officer within 6 months from 30.11.2018 i.e. by 29.05.2019. For sufficient reasons, the time limit of 6 months can be extended upto:•

By Joint/Additional Commissioner – 28.11.2019 (i.e. 6 months from 29.05.2019)

•

Order by Commissioner – 28.05.2023 (4 years from 29.05.2019)

Section 61 Scrutiny of Returns (1) The proper officer may scrutinise the return and related particulars furnished by the registered person to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner as may be prescribed and seek his explanation thereto.

As per Rule 99, proper officer shall issue a notice to the said person, informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding thirty days from the date of service of the notice or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy.

(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and no further action shall be taken in this regard.

(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the proper officer or such further period as may be permitted by him or where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may initiate appropriate action including those under section 65 (audit by tax authorities) or section 66 (special audit) or section 67 (inspection, search & seizure) , or proceed to determine the tax and other dues under section 73 or section 74.

Section 61, deals with discretionary power to a proper officer to scrutinize returns filed by registered persons to verify the correctness of the return. It is a pre-adjudication process. The process of adjudication is provided in Section 73 to Section 75. The return’s scrutiny process is entirely automated in GST regime as compared to earlier regime.

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Study Notes Section 62 Assessment of Non-Filers of Returns

303 Section 62(1) & Section 63 will have an overriding effect over the provisions of Section 73 & 74

(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered person fails to furnish the return under section 39 or section 45, even after the service of a notice under section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

(2) Where the registered person furnishes a valid return within thirty days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under subsection (1) of section 50 or for payment of late fee under section 47 shall continue.

This is a provision similar to “Best Judgement Assessment (BJA)” under the Income Tax Act, 1961. Noticeably, issuing notice U/s 46 to return defaulter appears to be a pre-condition for initiating proceedings of best judgement assessment U/s 62. Therefore, it can be seen that non-compliance with the notice U/s 46, paves the way for initiating the proceedings under this section. If the assessee fails to furnish the return within 15 days of issue of notice U/s 46, then the proper officer may assess the tax liability based on his judgement. It may be noted that consequences of late fee U/s 47 and interest U/s 50 of the CGST Act will both be applicable in case of best judgement assessment made under this section.

Example 2: if a person defaults in filing of return for any tax period falling in FY 2017-18, period of 5 years shall be reckoned from the due date of filing of Annual Return for FY 2017-18 i.e. 31st December 2018. Accordingly, the best judgement assessment can be made by Proper Officer on or before 31st December 2023.

Section 63 Assessment of Unregistered Persons Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a period of five years from the date specified under section 44 for furnishing of the annual return for the financial year to which the tax not paid relates: Provided that no such assessment order shall be passed without giving the person an opportunity of being heard.

As per Rule 100 (2), the proper officer shall issue a notice to a taxable person containing the grounds on which the assessment is proposed to be made on best judgment basis and shall also serve a summary thereof electronically in FORM GST DRC-01, and after allowing a time of fifteen days to such person to furnish his reply, if any, pass an order in FORM GST ASMT-15 and summary thereof shall be uploaded electronically in FORM GST DRC07.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 64 Summary Assessment in Certain Special Cases (1) The proper officer may, on any evidence showing a tax liability of a person coming to his notice, with the previous permission of Additional Commissioner or Joint Commissioner, proceed to assess the tax liability of such person to protect the interest of revenue and issue an assessment order, if he has sufficient grounds to believe that any delay in doing so may adversely affect the interest of revenue: Provided that where the taxable person to whom the liability pertains is not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this section.

(2) On an application made by the taxable person within thirty days from the date of receipt of order passed under sub-section (1) or on his own motion, if the Additional Commissioner or Joint Commissioner considers that such order is erroneous, he may withdraw such order and follow the procedure laid down in section 73 or section 74.

This provision gives a right to the proper officer to carry out assessment and pass orders in case of special cases, where the department has ‘sufficient grounds’ to believe adverse effect to the revenue. In this case, the liability can be raised either by the taxable person or if the taxable person is not known (E.g. – In the case of confiscation of goods), the person-in-charge of the goods can be deemed as ‘taxable person’ and liability can be raised on him accordingly.

Within 30 days of such an order, either on application and representation made by a taxable person or on its own motion, an order under this section can be withdrawn if found to be erroneous.

Though section does not specifically say so, principles of natural justice like issue of SCN, opportunity of hearing, order with reasons etc. have to be followed.

Summary of various assessment orders to be uploaded on portal The summary of assessment orders under section 62, 63 and 64 of the CGST Act is required to be uploaded electronically in the prescribed forms.

[Notification No. 16/2019 CT Dated 29.03.2019]

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Study Notes Section 65 Audit by Tax authorities & Section 66 Special Audit Sec. 65 Audit by Tax authorities •

•

•

The Commissioner or a person authorised by him •

During any stage of any investigation, scrutiny,

may undertake an audit of a registered person for

assessment or any other proceedings under this

the period, frequency and manner prescribed

act, if the proper officer, not below the rank of

As per Rule 101 (1), the period of audit to be

Assistant Commissioner, with the prior approval

conducted, shall be a financial year or part

of Commissioner, may get the books of accounts

thereof or multiples thereof.

audited by a CA or Cost Accountant nominated

Audit can be carried out either in the premises of

by the Commissioner, if so required in interest of

the registered person or may also be done at the

revenue keeping in view of the complexity of

office of the proper officer, by calling for

transactions or business or claim of input credit

information and documents • •

•

•

Such CA or Cost Accountant is required to submit

15 days clear notice shall be provided to the

duly signed and certified report within 90 days to

person before initiation of such an audit

such Assistant Commissioner, extendable to

The audit proceedings have to be closed within 3

further period of 90 days in case of an application

months from the date of initiation of audit (where

in writing by such CA or Cost Accountant or for a

the date of commencement of audit shall be the

sufficient reason

date on which all the documents and information •

Such audit report is subject to principle of natural

called for are provided or audit actually initiated

justice, wherein, an opportunity to be heard shall

at the business premises, whichever is later)

also be provided to the registered person

Also, if the Commissioner is satisfied that the •

Remuneration or fee of such nominated person

audit cannot be completed in 3 months, he can

shall be decided by the commissioner and his

record the reasons in writing extend the time for

decision shall be final

a further period of maximum 6 more months •

Sec. 66 Special Audit

•

All other provisions of tax, interest, penalty and

The registered person is obliged to provide all

collection shall apply to audit under this section

necessary details, documents and information

too (Sec. 73 & Sec. 74)

required for completion of an audit •

On conclusion of an audit, the proper officer shall, within thirty days, inform the registered person, about the findings, his rights & obligations and the reasons for such findings

•

Once the above are done, the proper officer may determine tax payable and interest and penalty (Sec. 73 & Sec. 74), if any, thereon, and also initiation collection proceedings

Under GST, power has been given specifically to the department to conduct audit of any registered person. This matter was highly debated under pre GST service tax era.

However, still in the GST Law, there is no provision which prescribes that if any tax authority has conducted audit of an assessee for a particular period, then another tax authority would not conduct audit for the same period, otherwise it would create undue-hardship to the assessee.

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Question & Answer Q1. Can a person who has furnished a return on self-assessment basis make a request for provisional assessment?

A. For provisional assessment a request needs to be made to proper officer for filing return on provisional basis. In case the taxable person furnishes the return on self-assessment basis, he foregoes the right to make an application for permission to furnish return and pay tax on provisional basis.

Q2. Please provide brief summary on various assessments.

Section Type of Assessment Assessment by 59 Self-assessment Taxable Person 60

Provisional assessment

Proper Officer

61

Scrutiny assessment

Proper Officer

62

Assessment of non-fliers of return (Best Judgement Assessment) Assessment of unregistered person (Best judgment assessment) Summary Assessment

Proper Officer

63

64

Proper Officer

Proper Officer

Conditions precedent to assessment Where registered taxable person assesses his tax liability himself.

Where registered taxable person is unable to determine following: • Value of supply, and/or • Rate of applicable tax on supply Verifying the correctness of the return by scrutinizing the return and particulars furnished by taxable person.

Where the registered taxable person fails to furnish return U/s 39 or Sec. 45 even after service of notice U/s 46.

Where a taxable person fails to obtain registration, even though liable to do so.

To protect the interest of revenue with previous permission of Additional/Joint Commissioner.

Q3. Audit has to be completed within a stipulated period of three months (subject to extension) from the date of commencement. What is implied by date of commencement of audit?

A. ‘Commencement of audit’ shall imply that date on which the records and other documents, called for by the tax authorities, are made available by the taxable person or date of actual institution of audit at the place of business, whichever is later. The period of three months can be extended by six months for reasons to be recorded in writing.

Example: Date of which documents requested 1 st April 2017 Date of which documents/recorded made available 20th April 2017 Date of actual institution of audit at auditee’s placed 5th May 2017 The date of commencement of audit will be taken as 5th May 2017 Date by which audit should be completed in normal course 4th Aug 2017 Last date by which audit should be completed (including extended period) 4 th Feb 2018 Q4. What is the difference between the two audit Sec. 65 and Sec. 66?

Issue

Audit U/s 65

Trigger Point

General

audit;

audit

Audit U/s 66 of

business

Nature & complexity of case, interest of

transaction, no specific reason to be cited

revenue, incorrect value of supply or abnormal availment of credit

Nature of Audit

Departmental Audit

Special Audit

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Study Notes Conducted by

Officers of department authorized by

Chartered Accountant/Cost Accountant

commissioner

appointed by Commissioner

Discretionary

Discretionary

Yes, 15 days’ notice is required

No such notice/intimation envisaged

Time for conclusion

3 months, further extension of 6 months

90 days, further extension of 90 days

of audit

allowed

allowed

Audit findings report

To be intimated soon on completion of

Report to Deputy/Assistant Commissioner

Frequency Prior

notice

to

auditee

audit Audit expenses Opportunity

of

Borne by department

Borne by department

No specific provision

Yes, where material gathered during audit

being heard

is to be used in any proceedings against the auditee

Action report

based

on

If results in demand of tax, shall be

If results in demand of tax, shall be

recovered U/s 73 or 74

recovered U/s 73 or 74

Q5. What would be the process of Scrutiny of Returns?

A. The proper officer would inform registered person of the discrepancies noticed during the course of scrutiny of returns. The proceedings would be dropped if the explanation submitted by the registered person is found acceptable. However, if no explanation is furnished within the stipulated period by the registered person or no corrective action is taken by the registered person after accepting discrepancy, proper officer may initiate appropriate action against the registered person.

Q6. What are the consequences on conclusion of provisional assessment by way of passing final assessment order in so far as short/excess remittance of tax is concerned?

A. The consequences on concluding the provisional assessment by way of passing final assessment order would be as follows: • Additional tax liability: In case of short remittance of taxes in terms of final assessment order, the additional tax liability, if any should be remitted along with interest at the rate prescribed U/s 50 (1) for delay in remittance of taxes viz., from the 1st day after the due date of remittance of taxes as prescribed U/s 39 (7) till the date of actual payment.

• Excess remittance of tax on provisional basis: In case of excess remittance of taxes in terms of final assessment order, the registered person is entitled to refund of such excess remittance in the manner as provided in Section 54 (8) along with interest as provided under Section 56.

Q7. Whether any time limit has been specified to issue notice for scrutiny?

A. No, the provisions relating to scrutiny assessments do not specify time limit for issuing notice for scrutiny of assessments.

Q8. Whether any reason to believe or evidence is required for initiate audit U/s 65?

A. No, Section 65 doesn’t specify any such requirements. Commissioner can initiate audit on any taxable person for such period, at such frequency and in such manner as may be prescribed.

Q9. Is there any additional opportunity provided for taxable person to submit a return even after passing an assessment order under Section 62 (1)?

A. Yes, if the registered person furnishes a valid return within 30 days from the date of service of best judgement assessment order u/s 62 (1), the said assessment order shall be deemed to have been withdrawn.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Q10. Whether Self-Assessment and provisional assessment are mutually exclusive?

A. Yes, if the taxable person opts for self-assessment, he cannot opt for provisional assessment for the same period for same supply. However, he can opt for provisional assessment if he is unable to determine taxable value / tax liability/ (rate of tax) for any subsequent periods.

Q11. Whether audit by officer can be done for a person other than registered person U/s 65?

A. Audit by officer cannot be ordered for a person who is not registered even if he is required to be registered as per the provisions of the law. [S. 65(1)] Q12. What process of audit is required to be followed by the officer in case audit is conducted U/s 65?

A. Following process is to be followed for conduct of audit by officer: 1. Proper Officer shall verify the documents, correctness of turnover, exemptions and deductions claimed, the rate of tax applied, input tax credit availed and utilized and refund claimed. [R.101(3)] 2. Proper Officer shall record the observations in audit notes. [R. 101(3)] 3. Proper Officer may inform discrepancies noticed during audit to registered person [R.101(4)] 4. Registered Person shall reply to discrepancies [R. 101(4)] 5. Proper officer shall finalize findings of audit only after due consideration of reply [R. 101(4)] 6. On the conclusion of audit, Proper Officer shall inform the Registered Person whose records are audited about the: - findings -

reasons for findings,

- assessee’s rights and obligations. [S. 65(6)] 7. Information of findings, reasons, right and obligations shall be made within 30 days (in FORM GST ADT-02) [S. 65(6)] Q13. What action will be initiated when the audit conducted u/s 65(1) results in a demand?

A. Where the audit u/s 65(1) results in detection of tax not paid or short paid or erroneously refunded, or input tax credit wrongly availed or utilized, the proper officer may initiate action under Section 73 or Section 74.

Q14. At what stage the directions of special audit can be given?

A. At any stage of scrutiny, inquiry, investigation or any other proceedings, having regard to the nature and complexity of the case and interest of revenue, a direction to Registered Person to get its accounts examined and audited can be given [S.66(1)] Q15. Whether already audited accounts are also covered by special audit?

A. Special Audit may be directed even if accounts of the registered person have been audited under any other provisions of this Act or any other law for the time being in force.[S.66(3)] Q16. How to deal with detection of short paid taxes as a result of special audit?

A. Where audit results in detection of tax not paid/short paid /erroneous paid or ITC wrongly availed or utilized, Proper Officer may initiate action u/s 73 or 74 [S.66(6)] Q17. Whether the phrase “nature and complexity of the case” is defined in the Act? A. No, Section 66 does not define the phrase “nature and complexity of the case’. However, there is enough jurisprudence under the Income Tax Laws to determine what will constitute complexity of the case.

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Study Notes

Section 67 Section 68 Section 69 Section 70 Section 71 Section 72

Power of Inspection, search & seizure Inspection of goods in movement Power to arrest Power to summon persons to give evidence and produce documents Access to Business premises Officers to assist proper officers

Section 67 Power of Inspection, Search & Seizure Sec. 67 (1) Power of Inspection In case a proper officer holding the rank of joint commissioner or a higher rank has reason to believe that – a) Any transaction relating to supply of goods or services or both has been suppressed by the taxable person or any person has claimed any amount of tax as ITC in excess of credit available to him under the act or any person has contravened any provisions of the Act or rules made thereunder to evade tax; or b) Any goods which have escaped from the payment of tax or are kept in a manner to cause evasion of tax and are in the custody of any transporter of the goods or owner or operator of a warehouse or godown or any other place, Only upon a written authorization (Rule 139 Form GST INS-01) given by an officer of the rank of joint commissioner or above, the officer can conduct the inspection of the place of business of the taxable person or the place of transporter of goods or owner or operator of warehouse or godown or any other place.

Sec. 67 (2) Power to search and seize In case a proper officer holding the rank of joint commissioner or a higher rank has reason to believe, whether on the basis of inspection carried out or otherwise, that any goods are liable to confiscation U/s 130 or any document or books or things which shall be useful for or relevant to any of the proceedings, he may search and seize such goods, documents, books or things by himself or he may authorize any other officer to search and make order of seizure in Form GST INS-02.

As per sub-rule (5) of Rule 139 of CGST Rules, the proper officer or the officer authorized by him shall make the inventory of the goods or documents or things to seized containing description, quantity, make and model and shall get it signed by the custodian of the goods or documents.

In case where seizure of the goods is not possible, the proper officer or the officer authorized by him, may serve the notice in Form GST INS-03 to prohibit the owner or custodian of the goods to remove, part with, or otherwise deal with the goods without taking prior permission of the officer.

The officer may retain the documents or books or things so seized for a period as may be necessary for the examination of the facts of the proceeding under the Act. Example1: Jurisdiction officer of ABC Ltd. has reasons to believe that certain activities are being carried out by them in order to evade taxes. Accordingly, business premises of ABC Ltd. were visited by Revenue Authorities as directed under rule 139 (1) under form GST INS-01, for carrying out search proceedings, and production of books & accounts was demanded, on observing certain irregularities with the books and stock. As ABC Ltd. was not in possession of documents, it sought 24 hours for production of books and accounts. In such situation, even though ABC Ltd., sought time for production of books and accounts, the goods are liable to be seized, provided seizure order is passed in Form GST INS-02.

Let say, during the search in ABC Ltd.’s manufacturing unit, it comes to notice of the proper officer that the ABC Ltd. has installed new machinery, which nowhere has been accounted for in the books of accounts, thus, the machinery is liable to be seized, unless the ABC Ltd. proves that it has been accounted for into the books of

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain accounts. The proper officer may seize such machinery by way of making the ABC Ltd. as the custodian of the machinery and serve an order of prohibition in Form GST INS -03.

Sec. 67 (3) Releasing of non-related document Where the accounts or documents so seized or produced by the taxable person are not relevant for further proceeding or are not serving the solution of the purpose for which the notice was issued then such documents shall be returned to the person within a period of 30 days from the date of issue of notice.

Sec. 67 (4) Power to access premises In case where any person refuses to allow an officer to provide access of premises, almirah, locker, box, electronic device or safe or godown then the officer is authorized in sub-section (2) to seal or break down the door or premises or can break the almirah, electronic safe, box etc. in which any goods or relevant documents are suspected to be kept.

Sec. 67 (5) Grant to take extracts The custodian of the documents or books, which are seized in sub-section (2), shall be allowed to take the copies of the documents so seized in the presence of the officer at such place and time as provided by such officer. However, the officer may refuse the custodian to take copies of such documents in case he is of the opinion that taking such copies may adversely impact the investigation.

Sec. 67 (6) Execution of bond The goods so seize under sub-section (2) shall be released by the officer provisionally on receipt of bond (as per Rule 140, Form GST INS-04) equivalent to the amount of goods along with security in form of bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.

The “applicable tax” shall include central tax and State tax or central tax & the Union territory tax, as the case may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act. In case the custodian fails to produce such provisionally released goods, the proper officer may encash the bank guarantee & shall adjust the same against tax, interest and penalty or fine payable in respect of such goods.

Sec. 67 (7) Releasing of goods The goods so seized shall be returned to the custodian from whose custody the goods were seized where notice in respect thereof is not given within a period of six months or such period extended by the officer from the date of seizure.

The period of six months in sub-section (7) may be extended by proper officer, on sufficient cause, by a further period not exceeding six months.

Sec. 67 (8) Disposal of specified seized goods In case goods seized in sub-section (2) are perishable or hazardous in nature or goods are depreciated with the passage of time or in case of any issues in storage of such goods or any other issued arises, in that case the government may, by notification, allow proper officer to dispose such goods or class of goods.

The goods specified in sub-section (8) shall be release by the proper officer if the taxable persons pays an amount equivalent to the lower of : • Market price of the goods, or • The amount of tax, interest or penalty in respect to such goods is payable.

Proper officer, on the proof of payment, shall pass the order in Form GST INS-05 and shall release the goods.

The list of such goods has been given in Notification no. 27/2018 CT Dated 13-6-2018. The list covers salt, raw hides, newspapers, cell, batteries, fireworks, red sander, sandalwood, food articles, unclaimed goods which are depreciable on account of change in technology, change in model etc.

Sec. 67 (9) Inventory of specified seized goods The proper officer or the officer authorized by him, in prescribed manner, shall prepare the inventory of all the goods so seized as specified in sub-section (8).

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Study Notes Sec. 67 (10) Procedure of search and seizure The procedure of search and seizure will be the same as of the provisions of search and seizure prescribed in code of criminal procedure, 1973. However, documents or records so seized shall be given to the “Commissioner” instead of magistrate and the commissioner, on application of the custodian, shall provide the copies of the seized documents.

Sec. 67 (11) Retention of accounts, register or document The proper officer, for the reasons recorded, may seize the books of accounts, documents or registers produced before him by the registered person and shall retain it for so long as required for any proceeding under the act for prosecution. The proper officer shall retain such accounts or documents on in case he has reason to believe that the person has evaded or attempting to evade any payment of tax provide the receipt of the books or documents so seized.

Sec. 67 (12) Surprise check of invoicing The Commissioner or an officer authorized by him, to check whether a registered person is issuing proper invoice or not, may purchase any goods or services or both by themselves or by authorizing any person on their behalf. The taxable person or any other person authorized by him shall, on return of such goods by such officer shall refund the amount so paid at time of purchase and shall cancel such invoice or bill of supply issued earlier. [look like service is not included for refund]

Section 68 Inspection of goods in movement Sec. 68 (1) Carrying of documents For the movement of goods, the person in charge of a conveyance may require to carry such documents as may be specified by the government and such devices as may be prescribed. The documents may be required to carry by the person in charge only in case if they are exceeding the value specified in this respect.

Sec. 68 (2) Validation of documents The details of documents required to be carried under sub-section (1) shall be validated in such manner as may be prescribed.

Sec. 68 (3) Inspection of documents Proper officer may intercept any person in charge carrying goods in conveyance to produce such documents and devices as prescribed in sub-section (1) to check the validity of the movement of goods, and such person in charge of goods will be required to produce the same for verification.

Section 69 Power to arrest Sec. 69 (1) Order to Arrest In case where a commissioner has reason to believe that a person has committed any offence under clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable as imprisonment in clause (i) or (ii) of sub-section (1), or sub-section (2) of section 132, in that case the proper officer may authorize any officer to arrest such person.

Relevant extract of Section 132 (1): In case a person has committed the below mentioned offences, namely : (a) Supply of goods without issue of any invoices to evade tax, (b) Issues any invoices in violation of the act to avail any wrongful input tax credit or refund of tax, (c) Availed input tax credit on false invoices, (d) Collects the tax from customer but not paid the same to the Government within 3 months from the due date, As per Section 132 (1) (i), where such amount so evaded or wrongly claimed or refund taken exceeds five hundred lakh rupees will be punishable as imprisonment up to five years with fine.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain As per Section 132 (1) (ii), where such amount so evaded or wrongly claimed or refund taken exceeds two hundred lakh rupees but not exceeding five hundred lakh rupees will be punishable as imprisonment up to three years with fine.

As per Section 132 (2), where a person commits offence prescribed in section 132 for the second or subsequent time shall be punishable as imprisonment up to five years with fine.

Sec. 69 (2) Appearance before magistrate for non-bailable offences In case a person has committed an offence under sub-section (5) of section 132 i.e. the offences which are cognizable and non-bailable, the officer who has arrested the person shall inform that person the grounds for which he is arresting him and shall take him before the magistrate within twenty four hours from the arrest.

Sec. 69 (3) Arrest in case of bailable offences Subject to the provisions of the Code of Criminal Procedure, 1973, a) Where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132 i.e. bailable offences shall be released on bail or in default of bail shall be forwarded to the custody of the magistrate. b) The deputy commissioner or the assistant commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officerin-charge of a police station.

Section 70 Power to Summon Persons to give Evidence and Produce Documents (1) In case the proper officer requires the presence of any person in any inquiry to provide any document or thing which he seems is required in any proceeding then he may summon that person for his presence and the officer shall have the same powers as prescribed under the provisions of Code of Civil procedure, 1908 in this regard.

(2) The proceeding before the officer who has issued the summon shall deemed to be the “Judicial proceeding” within the meaning of section 193 and section 228 of the Indian Penal Code.

Section 71 Access to Business Premises Sec. 71 (1) Access to place of business The officer authorized by the proper officer shall have the access to any place of business of the registered person and he may inspect any books of account, documents, computers, computer programs, computer software and other things, available at such place, which seems to be required by him for carrying out any audit, scrutiny, verification and checks to safeguard the interest of the revenue.

Sec. 71 (2) Responsibility of person in charge The officer so authorized in sub-section (1) or the audit party deputed by the officer or a cost accountant or a chartered accountant nominated by the department to conduct special audit U/s 66 may demand any of the below mentioned documents to conduct any audit or scrutiny and it will be the responsibility of the person in charge of that place of business to provide the same to the concerned person within fifteen days from their demand or such further period allowed to him.

Documents that can be demanded by the officer or audit party or a cost accountant or a chartered accountant nominated U/s 66 – • Records that are prepared or maintained by the registered person and declared to the proper officer in such manner as may be prescribed, • Trial Balance, • Statements of annual financial accounts, duly audited, wherever required, • Report of cost audit, if applicable, prescribed in Section 148 of the Companies Act, 2013,

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Study Notes • •

Tax audit report where the person is required to get his books of accounts audited U/s 44 AB of the Income-Tax Act, 1961, and Any other document or record as may be required by him.

Section 72 Officers to Assist Proper Officer To safeguard the interest of revenue all the officers of police, railways, customs and those officers engaged in the collection of land revenue, including village officers, officers of state tax and officers of union territory tax shall assist the proper officers in the implementation of this Act. Further the Government may empower and require any class of officers other than specified above to assist the proper officers in the implementation of the act.

Question & Answer Q1. What is the distinction in law between ‘Seizure’ and ‘Detention’?

A. Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by the department. Detention order is issued when it is suspected that the goods are liable to confiscation. Seizure can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable to confiscation.

Q2. What is meant by the expression ‘reason to believe’?

A. The expression, ‘reason to believe’ is not defined anywhere but needs to be understood through judicial interpretation, some of which are as follows: In ITO v Lakhmani Mewal Das (1976) 103 ITR 437 (SC), it was held that the expression ‘reason to believe’ doesn’t mean a purely subjective satisfaction on the part of the income-tax officer. The reason must be held in good faith. It cannot be merely a pretence. In CIT v Kelvinator India Ltd. (2010) 320 ITR 562 (SC), it was held that there must be tangible material for the formation of the belief in the context of search.

As per Sec. 26 of IPC, a person is said to have reason to believe a thing, if he has sufficient cause to believe that thing, but not otherwise.

Q3. Will access to place of business premises U/s 71 also include unregistered premises?

A. Perhaps, yes. This provision facilitates access to a business premise which is not registered by a taxable person as a principal or additional place of business but has books of accounts, documents, computers etc. which are required for audit or verification of accounts of a taxable person.

Q4. Whether the list of documents/information is exhaustive and no other document can be inspected?

A. No, the list of documents is considered illustrative. Certain documents are specifically listed in this provision but if any other relevant records are maintained at the said premises, they may also be required to be produced.

Q5. Is it mandatory that such ‘reasons to believe’ has to be recorded in writing by the proper officer, before issuing authorization for Inspection or Search and Seizure?

A. Although the officer is not required to state the reasons for such belief before issuing an authorization for search, but he should disclose the material on which his belief was formed. ‘Reason to believe’ need not be recorded invariably in each case.

Q6. Can the proper officer access business premises of a registered taxable person?

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain A. Yes. An audit party of CGST, deputed by proper officer or a cost accountant or chartered accountant nominated under section 66 have access to any business premises without issuance of a search warrant for the purposes of revenue carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of. Further, in terms of Section 71(1), an officer authorised by a proper officer not below the rank of Joint Commissioner can also have access business premises of a registered person.

Q7. What is the meaning of ‘Inspection’, ‘Search’ & ‘Seizure’?

A. Inspection It is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.

Search The term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.

Seizure In Law Lexicon Dictionary, ‘seizure’, is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.

Q8. What is meant by term ‘Arrest’ and ‘Cognizable & Non Cognizable Offence’?

A. Arrest The term ‘arrest’ has not been defined in the CGST/SGST Act. However, as per judicial pronouncements, it denotes ‘the taking into custody of a person under some lawful command or authority’. In other words, a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful warrant.

Cognizable Offence Generally, cognizable offence means serious category of offences in respect of which a police officer has the authority to make an arrest without a warrant and to start an investigation with or without the permission of a Court.

Non Cognizable Offence Non-cognizable offence means an offence in respect of which a police officer does not have the authority to make an arrest without a warrant and an investigation cannot be initiated without the permission of a Court.

Q9. What are the safeguards provided for a person who is placed under arrest?

A. The following are the safeguards provided for a person who is placed under arrest: a) If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest and he must be produced before a Magistrate within 24 hours of his arrest; b) If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.

All arrest must be in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to arrest.

Q10. Which are the places of business / premises which can be inspected by the CGST officer?

A. CGST officer authorized by the proper officer not below the rank of Joint Commissioner shall have the powers to carry out inspection of any of the following places / premises: a) any place of business of a taxable person; b) any place of business of a person engaged in the business of transporting goods; c) any place of business of an owner or an operator of a warehouse or godown or any other place;

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Study Notes Section 73 Section 74 Section 75 Section 76 Section 77 Section 78 Section 79 Section 80 Section 81 Section 82 Section 83 Section 84

Determination of tax not paid or short paid or erroneously refunded Determination of tax not paid or short paid or erroneously refunded by reason of fraud or wilful misstatement or suppressions of facts General provisions relating to determination of tax Tax collected and not deposited with the Central Government or a State Governments Tax wrongfully collected and deposited with the Central Government or a State Government Initiation of Recovery Proceedings Recovery of tax Payment of tax and other amount in installments Transfer of property to be void in certain cases Tax to be first charge on property Provisional attachment to protect revenue in certain cases Continuation and validation of certain recovery proceedings

Section 73 Determination of tax not paid or short paid or erroneously refunded & Section 74 Determination of tax not paid or short paid or erroneously refunded by reason of fraud or wilful misstatement or suppression of facts Sub Section

(1) Issuance of Show Cause Notice (SCN)

(2) Time limit for SCN (3) Deemed Notice

(4) Status of statement issued on

Defaults made U/s 73 (for reason other than fraud etc.)

• • • •

Tax not paid, or Short paid, or Erroneously refunded, or ITC has been wrongly availed/utilized Proper Officer will issue SCN why taxable person should not pay the amount specified in notice along with interest U/s 50 & applicable penalty as per Act & Rules.

At least three months prior to time limit specified for issuance of order [Refer to sub-section (10)] Proper officer may serve a statement for such periods other than those covered in above sub-section (1), on the person chargeable to tax The above statement shall be deemed to be service of notice, if ground

Defaults made U/s 74 (For reasons of fraud, or any wilful-misstatement or suppressions of facts etc.)

• Tax not paid, or • Short paid, or • Erroneously refunded, or • ITC has been wrongly availed/utilized Proper Officer will issue SCN why taxable person should not pay the amount specified in notice along with interest U/s 50 & penalty equivalent to the tax specified in the notice.

At least Six months prior to time limit specified for issuance of order [Refer to sub-section (10)] Proper officer may serve a statement for such periods other than those covered in above sub-section (1), on the person chargeable to tax The above statement shall be deemed to be service of notice, if ground remain same as per above sub-section (1)

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain recurring SCN (5) Intimation by taxable person of deposit prior to issue of notice (6) Proper Officer not to issue SCN on receipt of information of deposit (7) Short receipt of tax under subsection (5) as per opinion of proper officer (8) Conclusion of proceedings within 30 days of issue of SCN (9) Considering representation and issue of order of SCN (10) Limitation period for issuance of an order (11) Miscellaneous

remain same as per above sub-section (1) The person chargeable with tax may, before service of notice under subsection (1) or (3), pay the amount along with interest U/s 50 on his own ascertainment or as ascertained by the proper officer and inform proper officer in writing of such payment.

Proper Officer, on receipt of deposit information, shall not service any notice Under sub section (1) or (3), in respect of tax so paid or any penalty payable under the provisions of this act or rules.

The person chargeable with tax may, before service of notice under subsection (1), pay the amount along with interest U/s 50 & penalty equivalent to 15% of such tax, on his own ascertainment or as ascertained by the proper officer and inform proper officer in writing of such payment.

Proper officer, on receipt of deposit information, shall not serve any notice under sub-section (1), in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made thereunder.

Issue SCN for the sum short paid under sub section (1).

Issue SCN for the sum short paid under sub section (1).

On deposit of sum of tax along with interest as per SCN within 30 days of SCN, no penalty shall be payable and all proceedings in respect of SCN, shall be deemed to be concluded.

On deposit of tax along with interest and a penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceeding in respect of SCN, shall be deemed to be concluded.

Order for payment of tax+interest+penalty not more than 10% of tax or Rs. 10,000 whichever is higher.

Within 3 years from due date of annual return or 3 years from the date of erroneous refund.

Order for payment of tax+interest+penalty.

Within 5 years from due date of annual return or 5 years from the date of erroneous refund.

Notwithstanding anything contained in On deposit of tax along with interest and sub-section (6) or (8), penalty under a penalty equivalent to 50% of such tax sub-section (9) shall be payable where within 30 days of issue of the order, all any amount of self-assessed tax or any proceeding in respect of notice, shall be amount collected as tax has not been deemed to be concluded. paid within a period of 30 days from the due date of payment of such tax.

For the purpose of section 73 & 74 – i.

The expression “all proceeding in respect of the said notice” shall not include proceedings under section 132 (prosecution/punishment for certain offences); ii.

Where the notice under the same proceedings is issued to the main person liable to pay tax and some other persons, and such proceedings against the main person have been

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Study Notes

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concluded under section 73 or section 74, the proceedings against all the person liable to pay penalty under sections 122, 125, 129 and 130 are deemed to be concluded.

“Suppression” shall mean non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing by the proper officer.

Penalty provisions (over and above interest amount U/s 73 & 74 at a glance: Situation Before issuance of SCN Within 30 days after the issuance of SCN Within 30 days of issuance of order After 30 days of issuance of order

Penalty U/s 73 No Penalty No Penalty

Penalty U/s 74 15% of the tax amount 25% of the tax amount

10% of the tax or INR 10,000 whichever is higher (INR 20000 – total of CGST & SGST or IGST) 10% of the tax or INR 10,000 whichever is higher (INR 20000 – total of CGST & SGST or IGST)

50% of the tax amount

100% of the tax amount

Circular No. 76/50/2018-GST Dated 31st March 2019 The circular clarifies that delayed filing of Form GSTR-3B will not attract penalty leviable u/s 73(11) of Central Goods and Services Tax (CGST) Act as the tax along with applicable interest has already been paid.

Further, as tax has been paid after the due date in contravention of the provisions of CGST Act, a general penalty under section 125 of the CGST Act may be imposed.

Table below, the functions as the proper officers in relation to issue of show cause notices and orders Circular No. 31/05/2018 – GST Dated 9th Feb’18 Designation of Officer

Monetary limit of the amount of CGST (including cess) for issuance of show cause notices & orders u/s 73 & 74 of CGST

Monetary limit of the amount of IGST (including cess) for issuance of show cause notices & orders u/s 73 and 74 of CGST Act made applicable to IGST

Monetary limit of the amount of CGST and IGST (including cess) for issuance of show cause notices & orders u/s 73 and 74 of CGST Act made applicable to IGST

Superintendent

Up to Rs. 10 lakhs

Up to Rs. 20 lakhs

Up to Rs. 20 lakhs

Deputy or Assistant Commissioner

Above Rs. 10 lakhs up to Rs. 1 crore

Above Rs. 20 lakhs up to Rs. 2 crore

Above Rs. 20 lakhs up to Rs. 2 crore

Additional or Joint Commissioner

Above Rs. 1 Crore

Above Rs. 2 Crore

Above Rs. 2 Crore

Example 1: ABC Ltd. sold 100 boxes of chocolates for Rs. 1,00,000 on which tax was payable @ 18%. However, ABC Ltd. did not show the transaction in it books and raised bogus invoices of supply. If ABC Ltd. decides to pay tax before issuance of SCN, then it is liable to pay penalty U/s 74 i.e. 1,00,000*18% = Rs. 18,000*15%= Rs. 2,700 penalty. If it pay within 30 days of issuance of SCN then penalty is Rs. 18,000*25%= Rs. 4.500 penalty. Apart from penalty, tax & interest thereon also need to be paid by ABC Ltd.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 75 General provisions relating to determination of tax Sec. 75 (1) Exclusion of stay period from time limit for demand order Where a court or Appellate Tribunal issues the order of stay in respect of serving of notice or issue of order of demand then such period of stay shall not be included while computing the time period specified the issue of notice and demand order.

Example 2: Let say if court has issued the stay order for 6 months then if annual return date is 31st December 2018 then order of demand within 5 years (in case of fraud) is 31st December 2023 and since order is stayed for 6 months then order can be issued by 30th June 2024.

Sec. 75 (2) Change in opinion Where any person has been served with a notice to show cause with charges of fraud or wilful misstatement or suppression of facts to evade tax and later any Appellate authority or appellate tribunal or Court opines that the charges of fraud has not been established then the proper officer shall proceed to determine the tax liability as if the tax has not paid or erroneously refund is for the reason other than fraud, deeming the notice has been served under sub-section (1) of section 73.

If we try to interpret then one argument can be : such change in opinion has been made in the fourth year from the last date of filing of annual return for such tax period then the proceeding shall not be continued as the time limit for the issue of demand of order has already been lapsed (3 years).

Sec. 75 (3) Order in case of direction of court In case the Appellate Authority or Appellate Tribunal or a court has directed the issue of any order then such order shall be issued within a period of two years from the date of issue of such direction by the Appellate Authority or Appellate Tribunal or a court.

Sec. 75 (4) Opportunity of being heard An opportunity of hearing shall be given to the aggrieved party if he makes the representation in writing or where any adverse decision has been contemplated against him.

Sec. 75 (5) Adjournment of hearing The proper officer on sufficient cause shown by the person chargeable to tax and for reasons recorded in writing shall grant the time to such person and shall adjourn the hearing. However such adjournment shall be allowed to the maximum of three times to a person.

Sec. 75 (6) Disclosure of facts in order The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

Sec. 75 (7) Basis of order The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice including deemed notice and no demand shall be confirmed on the grounds other than grounds specified in the notice.

A welcome change has been introduced under the GST Law by incorporating the provision which prescribes that the order cannot travel beyond the allegations or grounds raised in the SCN. In the pre-GST indirect tax regime, this principle has been established only through legal Jurisprudence.

Sec. 75 (8) Consequences of modification of order In case where the Appellate Authority or Appellate Tribunal or court has modified the amount of tax in any order then the amount of interest and penalty shall also stand modified proportionately computed on the basis of the amount of tax so modified.

Example 3: In case any order of demand has been served: Tax Rs. 1,00,000, Interest Rs. 36,000 (2 years @18%), Penalty Rs. 1,00,000 (100% of tax).

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Study Notes Appellate Authority/Tribunal or Court has modified tax amount to Rs. 50,000: Tax Rs. 50,000, Interest Rs. 18,000 (2 years @18%), Penalty Rs. 50,000 (100% of tax).

Sec. 75 (9) to Sec. 75 (13) Miscellaneous provisions Interest on tax short paid or not paid shall be payable at applicable rates whether or not specified in the order of demand.

In case any proper officer fails to issue the demand order within the time prescribed under sub-section (10) of section 73 or sub-section (10) of section 74 then such proceedings shall deemed to be concluded.

Where in some other proceeding on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of revenue and an appeal has been filed which is pending for decision in Appellate Tribunal or the High Court or the Supreme Court then for computing the time period for issue of order under sub-section (10) of section 73 or under sub-section (10) of section 73 shall not include the period spent between: Decision of Appellate Authority

Appellate Tribunal

High Court

Supreme Court

Therefore, an issue on which an Appellate Authority or Tribunal or High Court has given its decision against the revenue, against which an appeal to the Appellate Tribunal or High Court or Supreme Court is pending, then, the period spent between the two dates of decision shall be excluded in computing the period of 3 years (nonfraud cases) or 5 years (fraud cases) respectively, for issue of order.

Where a person has self-assessed the tax in accordance with a return furnished U/s 39 and fails to pay such tax, either wholly or partly, then such amount of tax remains unpaid shall be recovered from the person chargeable with tax in accordance with provisions U/s 79. Serving of notice to show cause or order of demand shall not be required for recovery of such taxes.

Where any penalty is imposed U/s 73 or 74 then no penalty shall impose under any other provisions of this act for the same omission or same act.

Section 76 Tax Collected but not paid to Government Sec. 76 (1) Amount collected as tax Where a person has collected any amount from any person as a tax under GST, whether the supply was taxable or not, shall pay the amount of tax to the Government irrespective of anything contrary contained in any order or the Appellate Authority or Appellate Tribunal or Court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force.

Example 4: In case A has sold goods chargeable @ 18% to B by charging 28% tax on such goods. A shall pay the whole of tax collected from B. Sec. 76 (2) SCN for tax collected but not paid to Government Where a person has collected tax under GST but fails to pay the same to the Government then the proper officer may issue SCN as to why the amount so collected by him as tax along with penalty equivalent to the tax should be paid by him to the Government.

Sec. 76 (3) to 76 (6) Determination of tax liability The proper officer shall determine the tax liability of the person, to whom notice has been served, under subsection (2) considering the representations made by him and such person shall pay the amount so determined along with the interest U/s 50 from the date of collection of such amount to the date of payment.

The proper officer shall issue the order of demand within a period of one year from the date of notice under subsection (2) and the opportunity of hearing shall be granted where the person to whom the notice was served has requested in writing.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Sec. 76 (7) Exclusion of stay period from time limit for demand order Where a court or Appellate Tribunal issues the order of stay in respect of serving order of demand then such period of stay shall not be included while computing the time period of one year for the issue of demand order.

Sec. 76 (8) Disclosure of facts in demand order The proper officer shall disclose the facts on the basis of which he has made the decision of the proceedings in the order.

Sec. 76 (9) to 76 (11) Adjustment of tax paid The amount paid to the Government which was collected in excess of tax or under the notice of payment of such excess deduction shall be adjusted against the tax payable and where the surplus is left after adjustment of tax it shall credited to the fund or shall be refunded to the person who borne the incidence of tax.

The person who borne the incidence of tax may apply for refund of the tax in accordance with the provisions of Section 54 in Form GST RFD-01, along with documentary evidence. [Rule 89 (2)]

Section 77 Adjustment of Tax paid In case where Central tax and State tax/Union Territory tax, as the case may be, has been paid on any supply considering it to be an intra-state supply and later it came to notice that it is to be an interstate supply and Integrated tax should have been paid then amount so paid earlier at the time of supply shall be refunded as per the provisions of section 54.

However, where Integrated tax has been paid on any supply considering it to be an interstate supply and later it came to notice that it is to be an intrastate supply and Central tax and State tax/Union territory tax, as the case may, then he shall not be required to pay any interest on the amount Central tax and State tax/Union territory tax, as the case may be payable. [the person may apply for refund according to Sec. 54 in Form GST RFD-01 along with documentary evidence (Rule 89 (2)]

Section 78 Initiation of Recovery Proceedings If tax demand is not paid within 3 months from the date of service of order, recovery proceedings shall be initiated. The proper officer may require payment of amount prior to expiry of 3 months to protect interest of revenue.

Section 79 Recovery of tax i.

Modes of recovery: The proper officer shall proceed to recover the amount by one or more of the following modes, namely – a) Recovery of deduction from any money owed to such person. b) Detention and sale of goods belonging to such person which are under the control of the department.

Rule 144: • The proper officer shall make the inventory of the goods so detained with estimated market value and shall proceed to sale only so much of goods which are required for recovering the amount due from him and administrative cost of detaining and selling such goods. The goods shall be sold through auction.

• The last date of submission of bid for an auction shall not be earlier then fifteen days from the date of issue of notice of auction. However, the proper officer may sell such goods immediately which are perishable or hazardous in nature or where the cost of keeping the goods are likely to exceed the value of goods.

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Study Notes c) Garnishee proceedings i.e. Recovery from debtors of the assessee: • Debtor bound to comply with the notice. Recovery can be made from post office, banking company or an insurer and it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made.

• In case of non-compliance of notice, the debtor shall be deemed to be defaulter and if he discharges the liability, he shall be personally liable. The officer issuing a notice may, at any time, amend or revoke such notice of extend the time for making any payment in pursuance of the notice.

• Debtor shall be discharged from assessee’s liability to extent of such payment made to the Government.

• However, such person is not personally liable as above, if he proves to the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or at the time of service of the notice he did not hold any money for or on account of the person in default, the money was not demanded from him; or any part of the money demanded is not likely to become due to such other person or any part of the money will not likely be held for or on account of such person.

Rule 147:• The proper officer shall make the inventory of the movable or immovable property so detained with estimated market value.

• The order of attachment of such property and notice of sale shall be issued in Form GST DRC-16 to prohibit any transaction with respect to such movable or immovable property.

• Where any immovable property has been attached then the notice of attachment shall be pasted on such immovable property and shall remain affixed till the confirmation of sale of such property.

• Where any movable property has been attached then such movable property shall be seized by the proper officer.

• The property so attached shall be sold by an auction, the notice of which shall be issued in Form GST DRC-17.

• The last date of submission of bid for an auction shall not be earlier fifteen days from the date of issue of notice by auction. However, the proper officer may sell such goods immediately which are perishable or hazardous in nature or where the cost of keeping the goods are likely to exceed the value of goods.

ii. iii.

iv.

d) Collection by detention and sale of any movable or immovable property [As per Rule 154:- First , be apportioned against the administrative cost of the recovery process.

Second, against the amount to be recovered. Next, be apportioned against any other amount due under the Act. Balance amount shall be rendered to the defaulter] e) Through the collector of the district in which such person owns any property or resides or carries on his business, as if it was an arrear of land revenue. f) The proper officer may file an application to the magistrate to recover the amount specified in the application and the magistrate shall recover such amount as it is a fine imposed on such person.

Recovery of amount specified in bond can be made as per the above provisions.

SGST/UTGST Officer may also recover CGST dues from defaulter and credit the same to Central Government Apportionment of amount collected to State/Central Government in proportion to the amount due to each such Government.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain For the purposes of this section, the word person shall include “distinct persons” as referred to in subsection (4) or, as the case may be, sub-section (5) of section 25.

Rule 142 Notice and order for demand of amounts payable under the Act (1) The proper officer shall serve, along with the (a) notice issued under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130, a summary thereof electronically in FORM GST DRC-01, (b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a summary thereof electronically in FORM GST DRC-02, specifying therein the details of the amount payable.

(2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC–04.

(3) Where the person chargeable with tax makes payment of tax and interest under subsection (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section (8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where the person concerned makes payment of the amount referred to in sub-section (1) of section 129 within fourteen days of detention or seizure of the goods and conveyance, he shall intimate the proper officer of such payment in FORM GST DRC03 and the proper officer shall issue an order in FORM GST DRC-05 concluding the proceedings in respect of the said notice.

(4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of section 74 or sub-section (3) of section 76 or the reply to any notice issued under any section whose summary has been uploaded electronically in FORM GST DRC-01 under sub-rule (1) shall be furnished in FORM GST DRC-06.

(5) A summary of the order issued under section 52 or section 62 or section 63 or section 64 or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax.

(6) The order referred to in sub-rule (5) shall be treated as the notice for recovery.

(7) Where a rectification of the order has been passed in accordance with the provisions of section 161 or where an order uploaded on the system has been withdrawn, a summary of the rectification order or of the withdrawal order shall be uploaded electronically by the proper officer in FORM GST DRC-08.

Rule 142A Procedure for recovery of dues under existing laws

(1) A summary of order issued under any of the existing laws creating demand of tax, interest, penalty, fee or any other dues which becomes recoverable consequent to proceedings launched under the existing law before, on or after the appointed day shall, unless recovered under that law, be recovered under the Act and may be uploaded in FORM GST DRC-07A electronically on the common portal for recovery under the

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Study Notes Act and the demand of the order shall be posted in Part II of Electronic Liability Register in FORM GST PMT-01.

(2) Where the demand of an order uploaded under sub-rule (1) is rectified or modified or quashed in any proceedings, including in appeal, review or revision, or the recovery is made under the existing laws, a summary thereof shall be uploaded on the common portal in FORM GST DRC-08A and Part II of Electronic Liability Register in FORM GST PMT-01 shall be updated accordingly.

Section 80 Payment of tax and other amount in installments ▪

▪

▪

On Application of the concerned person, the Commissioner may extend the time or allow making of payment in monthly installments not exceeding 24, subject to payment of interest U/s 50 and subject to such conditions and limitations as may be prescribed.

However, the extension and installments shall not be allowed for the amount due as per the liability selfassessed in any return.

In case of default in payment of installment, all outstanding installments shall become due and payable on date of such default and shall, without any further notice being served on the person, be liable for recovery.

The facility for deferred payment/payment in installments shall not be allowed where – ✓ The taxable person has already defaulted on the payment of any amount under CGST Act, 2017 or the IGST Act, 2017 or the UTGST Act, 2017 or any of the SGST Act, 2017 for which the recovery process is on; ✓ The taxable person has not been allowed to make payment in installments in the preceding financial year under the CGST Act, 2017 or the IGST Act, 2017 or any of the SGST Tax Act, 2017; ✓ The amount for which installment facility is sought is less than Rs. 25,000.

Section 81 Transfer of property to be void in certain cases Where a person after any amount has become due from him, creates a charge on or parts with the property belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the said person.

Such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without notice of the pendency of such proceedings under this Act or without notice of such tax or other sum payable by the said person, or with the previous permission of the proper officer.

Example 5: Mr. A was served with a notice of demand of Rs. 25 Lakhs on 05.05.2018. He filed a reply for the said notice on 15.05.2018, stating that he was unable to deposit tax dues as he was financially stressed. On 10.05.2018, Mr. A transferred all the property Rs. 40 Lakhs under his name to the name of his wife for consideration of Rs. 1,00,000. As per Section 81, this transfer would be void and the property worth Rs. 40 Lakhs would be considered still to be in hands of Mr. A. Example 6: On Mr. B, notice was issued on 05.05.2018. However, the same was received by Mr. B on 15.05.2018. Meanwhile the property of Mr. B was sold to Mr. X for INR 1 crore. The sale is valid since the date of sale there was no pending proceeding on Mr. B.

Section 82 Tax to be first charge on property Notwithstanding anything to the contrary contained in any law for the time being in force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, any amount payable by a taxable person or any other person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge on the property of such taxable person or such person .

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 83 Provisional attachment to protect revenue in certain cases I.

II. III.

During pendency of any proceedings, if the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary to do so, he may, by order in writing attach provisionally any property, including bank account, belonging to the taxable person in such manner as may be prescribed.

Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the date when provisional attachment order is made under this section.

Where the property attached is of perishable or hazardous nature, and if the taxable person pays an amount equivalent to the market price of such property or the amount that is or may become payable by the taxable person, whichever is lower, then such property shall be released forthwith.

Section 84 Continuation and validation of certain recovery proceedings Issuance of fresh notice is required when government dues are enhanced in appeal, revision or other proceedings and recovery proceedings of earlier demand will be continued as per earlier notice.

Issuance of fresh notice is not necessary when government dues are reduced in appeal, revision or other proceedings and any recovery proceedings initiated on the basis of the demand served upon him prior to the disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced from the stage at which such proceedings stood immediately before such disposal.

Question & Answer Q1. Will Omission on the part of the taxable person to provide correct information constitute ‘suppression of facts’ for the purpose of Section 74 of the CGST Act, 2017? Write a brief note with reasons.

A. Yes. As per explanation to Section 74 of CGST Act, 2017, the expression “suppression” shall mean nondeclaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information on being asked for, in writing, by the proper officer. Thus, omission on the part of the taxable person to provide correct information constitute “suppression of facts”.

Q2. A ltd. is entitled for exemption from tax under GST Act. It collected tax from its buyers in Nov’17. It has not deposited the said amount collected as GST with the Government. What are the consequences of not depositing the same with Government as provided U/s 76?

A. It is mandatory to pay amount, collected from other person representing tax under GST Act, to the Government [Sec. 76]. Every person who has collected from any other person any amount as representing the tax under GST Act, and has not the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not. Proper officer may issue SCN for recovery of such amount and penalty equivalent to amount specified in notice.

The proper officer shall, after considering the representation, if any, made by the person on whom SCN is served, determine the amount due from such person and thereupon such person shall pay the amount so determined along with interest at the rate specified under section 50 from the date such amount was collected by him to the date such amount is paid by him to the Government.

Q3. Can the person chargeable with the tax seek adjournment of hearings?

A. Yes, the person chargeable with tax can seek adjournment of hearing and he can be granted time in case sufficient cause is shown by person chargeable with tax. The hearing will be adjourned for reasons to be

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Study Notes recorded in writing. As provided in Sec. 75 (5) of the GST Act, no such adjournments shall be provided for more than 3 times.

Q4. Would taxable person would be liable for payment of interest besides paying the tax U/s 77?

A. No, Sec. 77 (2) provides that such taxable person would not be liable for payment of interest on the amount of central tax or state tax as the case may be.

Q5. Can the refund claim on account of Sec. 77 be subjected to provision of undue enrichment?

A. No, the claim of refund due to Sec. 77 will not be subjected to provision of undue enrichment. This has also been clarified by the Government in flier of refunds issued by CBIC. Q6. Can GST be collected, during a search operation, without an assessment order being passed by the concerned authority?

A. No. In case law Chitra Builder Pvt. Ltd. V Addl. Commi. Of CCex & ST [2013] [Mad], it was held that it is a well settled position in law that no tax can be collected from the assessee, without an appropriate assessment order being passed by the authority concerned and without following the procedures established by law.

Q7. When can extended period of limitation can be invoked?

A. U/s 74, extended period of limitation can be invoked if the GST has not been paid or has been short-paid or erroneously refunded by reason of fraud or wilful mis-statement or suppression of facts or contravention of any of the provision of CGST Act or of rules made thereunder with an intent to evade the payment of GST. Q8. M/s ABC Ltd., were granted a refund by the Appellate Authority under CGST Act, 2017. The jurisdictional Assistant Commissioner has issued a notice U/s 73 demanding the amount of refund on the ground that such a refund is erroneous. Briefly discuss whether the action taken by Assistance Commissioner of Central Excise is valid in law.

A. It is well settled law that if an order passed by statutory authority is not challenged by way of appeal/revision or otherwise and the same becomes final, the said order holds the field and the same has to be given full effect to. Nothing can be done and/or adjudicated, which is in contravention of what has been held in that order. In overseas Engineers V/s CCEx [2007] [Tri], it was held that where orders sanctioning refund were not appealed against or reviewed by Department, then, recovery from the appellant of refund paid to him, by issuance of show cause notice U/s 73 is not tenable/sustainable.

Q9. How to compute period of limitation referred to in Section 73 (10) or Section 74 (10) where an issue on which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is prejudicial to the interest of the revenue in some other proceedings and an appeal in the Appellate Tribunal or the High Court or the Supreme Court against such decision is pending?

A. While computing the period of limitation referred to in Section 73 (10) or Section 74 (10), the period spent between the date of the decision of the Appellate Authority/Appellate Tribunal/High Court and the date of the decision of the Appellate Tribunal/High Court/Supreme Court as the case may be, shall be excluded.

Q10. What will be the recourse available to the proper officer in case of default in payment of any installment on its due date by the taxable person?

A. Where there is default in payment of any one installment on its due date by the taxable person, the whole outstanding balance payable on such date shall become due and payable forthwith, without any further notice.

The proper officer can initiate recovery of dues.

Q11. In case the person does not deposit tax collected in contravention of Section 76, what is the course of action available to the proper officer?

A. The proper officer shall issue notice requiring him to show cause as to • Why the amount so collected as tax should not be paid by him to the Government; • Why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of the Act; and

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The proper officer shall adjudicate the matter and issue order within 1 year from the date of issue of the show cause notice.

Q12. Whether the amount of tax, interest and penalty demanded in the order can exceed the amount specified in the notice?

A. No. The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.

Q13. Please explain time limit for issue of notice U/s 73 & U/s 74 by giving example.

A. Under Section 73: Let say, in case Mr. A has not paid the tax on a transaction considering it to be exempt for the tax period of August 2017. The due date of filing annual return for which will be 31st December 2018. The proper officer may serve the notice at least three months prior to the last date of order of demand.

The order of demand shall be served within 3 years from 31st December 2018 i.e. 31st December 2021.

Therefore, show cause notice shall be required to be served by 30th September, 2021.

Under Section 74: Let say, in case Mr. A has not paid the tax on a transaction for the tax period of August 2017.

The due date of filing annual return for which will be 31st December 2018. The proper officer may serve the notice at least six months prior to the last date of order of demand The order of demand shall be served within 5 years from 31st December 2018 i.e. 31st December 2023.

Therefore, show cause notice shall be required to be served by 30th June, 2023.

Q14. Whether proper officer can issue similar show cause notice for any periods other than those covered under section 73(1)?

A. Yes, it can be issued for subsequent periods on same grounds raised in the show cause notice. The proper officer may serve a statement under section 73(3) along with a summary electronically in Form GST DRC-02 containing details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized where the grounds relied upon by the proper officer for such periods are the same as are mentioned in the earlier notice issued under section 73(1). The service of such statement shall be deemed to be service of show cause notice on the person chargeable with tax.

Q15. Whether notice for a period of 5 years is valid even if charge of suppression, fraud and misstatement are not sustained?

A. No, when the allegations of fraud, suppression or misstatement are not established, the notice issued under section 74 would get covered under section 73 and 3 years’ time would be applicable for date of issue of order.

Q16. What happens when the Notice issued under Section 74(1) is held not sustainable by any Appellate Authority or Tribunal or Court for the reason that the charges of fraud or any willful misstatement or suppression of facts to evade tax has not been established?

A. The proper officer shall determine the tax payable by such person deeming as if the Notice were issued under section 73(1).

Q17. What is the time limit for issue of order in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a Court?

A. The order shall be issued within 2 years from the date of communication of the said direction.

Q18. What happens in cases where Notice is issued but order has not been passed within 3 years (Section 73) or 5 years (Section 74)?

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Study Notes A. The adjudication proceedings shall be deemed to be concluded if the order is not issued within the limitation period of 3 years under section 73(10) or 5 years under section 74(10), as the case may be.

Q19. Is interest applicable in all cases, even if not specifically mentioned?

A. Yes, interest is applicable whenever the tax is payable whether or not it is specifically mentioned.

Q20. In case the person does not deposit tax collected in contravention of Section 76, is the same recoverable with interest?

A. Yes. In addition to the amount payable by him, the person is required to pay interest under Section 50 on the same from the date of collection of the amount till the date such amount is paid to the Government.

Q21. Is there any time limit for issue of notice under section 76 in cases where tax collected but not paid to Government?

A. No. Notice can be issued on detection of such cases without any time limit. Once show cause notice is issued, the proper officer shall pass the order within 1 year from the date of issue of such notice.

Q22. How is the amount of surplus left after adjustment with tax payable dealt with?

A. Where any surplus is left after the adjustment against the tax payable, the amount of such surplus shall either be credited to the Consumer Welfare Fund or, as the case may be, refunded to the person who has borne the incidence of such amount.

Q23. What happens if the tax demand is not paid within the time limit prescribed under section 78?

A. The proper officer shall initiate recovery proceedings if the tax demand is not paid within 3 months from the date of service of the order.

Q24. Whether the proper officer can require a taxable person to make payment of tax demand within shorter period lesser than 3 months?

A. Yes. If it is expedient in the interest of the revenue, the proper officer, after recording reasons in writing, may require taxable person to make such payment within shorter period as may be prescribed by him.

Q25. What are the methods of recovery as prescribed in Section 79?

A. — Deduction out of any money owing to defaulter.

— By detaining and selling the goods belonging to defaulter.

— Recovery from any other person who owes money to defaulter.

— Collection by detention of any movable or immovable property.

— Recovery through District Collector.

— Recovery through Magistrate.

Q26. Whether proper officer can allow payment of self-assessed tax in installments U/s 80?

A. No. The proper officer shall have the power to allow payment of any amount due under this Act in installments on tax other than the self-assessed tax.

Q27. Under which proceedings the property of a taxable person can be provisional attached?

A. Provisional attachment shall be applicable for the following pending proceedings of a taxable person: (a) Assessment of non-filers of returns. (Section 62) (b) Assessment of unregistered persons. (Section 63)

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (c) Summary assessment in certain special cases. (Section 64) (d) Inspection, search and seizure. (Section 67) (e) Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any wilful misstatement or suppression of facts. (Section 73) (f) Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful-misstatement or suppression of facts. (Section 74) During the pendency of any proceedings under section 62, 63, 64, 67, 73 or 74, the Commissioner may pass an order in Form GST DRC-22 to attach any property including bank account belonging to a taxable person provisionally for the purpose of protecting the interest of the Government revenue.

Q28. Whether any amount payable by the taxable person under this Act is a first charge on his property?

A. Yes. As per section 82 of CGST Act 2017, notwithstanding anything to the contrary contained in any law for the time being force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, first charge shall be on – a) the property of taxable person in respect of any amount payable by such taxable person, or b) the property of any other person on account of tax, interest or penalty which he is liable to pay to the Government.

Q29. In case of recovery of SGST/UTGST by CGST officer in the course of recovery of CGST, where the total amount recovered is Rs. 5 Crore whereas the amounts due were Rs. 5 Crores of CGST and Rs. 10 Crore of SGST/UTGST, to which account, the amount recovered would be allocated?

A. Rs. 5 Crores recovered will be allocated between Centre and State/Union Territory in the proportion of 1:2.

Q30. ‘A’ requested the Commissioner to provide the benefit to pay Rs. 5,00,000/- under installments.

Commissioner directs ‘A’ to make the payment in five monthly installments. How to pay the interest?

A. It is assumed that the actual date on which the tax was required to be paid as 06.06.2015. Benefit of installment was granted by Commissioner on 25.05.2016 to be paid w.e.f. 02.06.2016 onwards over 5 installments.

Payment date 1st Installment – 02.06.2016 2nd Installment – 02.07.2016 3rd Installment – 02.08.2016 4th Installment - 02.09.2016 5th Installment – 02.10.2016

Interest to be paid as per section 45 – No of days 06.06.2015 to 01.06.2016 = 361 days 06.06.2015 to 01.07.2016 = 391 days 06.06.2015 to 01.08.2016 = 422 days 06.06.2015 to 01.09.2016 = 453 days 06.06.2015 to 01.10.2016 = 483 days

Amount on which interest to be paid Rs. 100,000 Rs. 100,000 Rs. 100,000 Rs. 100,000 Rs. 100,000

Q31. Please provide comment for below with respect to provision U/s 81.

•

Mr. Defrauder was served with a notice of demand for Rs. 20 Lakhs on 10th June 2018. He filed a reply for the said notice on 20th June 2018, stating that he was unable to deposit tax dues as he was financially stressed. On 15th June 2018, Mr. Defrauder transferred all the property worth Rs. 35 Lakhs under his name to the name of his wife for a consideration of Rs. 10,000/-. Is this act of Mr. Defrauder valid?

•

In the above illustration, if transfer of property was for a consideration of Rs. 42 Lakhs to Mr. X who is unaware of the pending proceedings of Mr. Defrauder. The transfer took place on 15th June 2018. Is the act of Mr. Defrauder valid?

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Study Notes •

On Mr. Perfect, notice was issued on 10th June 2018. However, the same was received by Mr. Perfect on 20th June, 2018. Meanwhile the property of Mr. Perfect was sold to Mr. Perfectionist for Rs. 35 lakhs.

Is the sale void or valid?

A. •

As per section 81, the said transfer would be void and the property worth Rs. 35 Lakhs would be considered still to be in the hands of Mr. Defrauder.

•

In this case the transaction would be a valid act, since the transfer was made for adequate consideration and also without notice of the pendency of proceeding.

•

The sale is valid since on the date of sale there was no pending proceeding on Mr. Perfect.

Q32. How should the recovery proceedings of enhanced demand under an appeal, revision of application or other proceedings to be continued U/s 84?

A. In case of enhanced demand consequent to appeal, revision of application or other proceedings, then •

the Commissioner is required to issue fresh notice of demand only for enhance demand.

•

If already recovery proceedings of Govt. dues is served on taxable person before disposal of appeal, revision of application or other proceedings, then the enhanced demand would be merged with the first recovery proceedings.

Q33. Checkernot has self-assessed tax liability under IGST Act, 2017, as Rs. 80,000. He fails to pay the tax within 30 days from the due date of payment of such tax.

Determine the interest and penalty payable by him explaining the provisions of law, with the following particulars available from his records: Date of collection of tax 18th December, 2017 Date of payment of tax 26th February, 2018 No Show Cause Notice (SCN) has been issued to him so far, while he intends to discharge his liability, even before it is issued to him, on the assumption that no penalty is leviable on him as payment is made before issue of SCN. (CA Final May 2018 Old) A. Due date for payment of tax collected on 18.12.2017 is 20.01.2018. However, since tax is actually paid on 26.02.2018, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days] in terms of section 50 of CGST Act, 2017 read with Notification No. 13/2017 CT Dated 28.06.2017.

Amount of interest is: = Rs. 80,000 × 18% × 37/365 = Rs. 1,460 (rounded off) As per section 73(11) of CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of SCN to avoid penalty, is not available.

Consequently, penalty equivalent to (i) 10% of tax, viz., Rs. 8,000 or (ii) Rs. 10,000, whichever is higher, is payable in terms of section 73(9) of CGST Act, 2017. Therefore, penalty of Rs. 10,000 will have to be paid

by Checkernot.

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Section 85 Section 86 Section 87 Section 88 Section 89 Section 90 Section 91 Section 92 Section 93 Section 94

Liability to pay in case of transfer of business Liability of agent and principal Liability to pay in case of an amalgamation/merger Liability in case of company in liquidation Liability of directors of private company Liability of partners of firm to pay tax Liability of guardians, trustees etc.

Liability of Court of Wards etc.

Special provisions regarding liability to pay tax, interest or penalty in certain cases Liability in other cases

Section 85 Liability to pay in case of transfer of business Prior to transfer of business In respect of liability of tax, interest or penalty arising prior to transfer of business, the transferor and transferee shall be jointly and severally liable.

Post transfer of business In respect of liability arising post transfer, the transferee liable for tax dues. Further, if he is a registered person under this Act, apply within the prescribed time for amendment of his certificate of registration.

Interestingly, even penal liability, which is quasi-criminal in nature, is sought to be fastened on transferee, although he would not have been responsible for the non-payment of tax, interest or penalty liability by the transferor prior to transfer of such business. Thus, a person to whom the business is transferred needs to be very cautious at the time of transfer.

Section 86 Liability of agent & principal Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall, jointly and severally, be liable to pay the tax payable on such goods under this Act.

Section 87 Liability in case of amalgamation or merger of companies If merger is effective from retrospective date, then, transactions between amalgamating/merging companies and amalgamated/merged company during the period from ‘effective date of merger’ to ‘date of order upholding merger’ shall be taxable and for this, companies are deemed to be separate.

Example 1: if merger order is passed on 1-9-2017 and merger takes effect from 1-5-2017, then, transactions during May 2017 to August 2017 between the said companies would be taxable.

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Study Notes Section 88 Liability in case of company in liquidation The liquidator of company is required to give intimation of his appointment to Commissioner within 30 days after his appointment. The Commissioner shall notify the liquidator within 3 months from the date on which he receives intimation the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or it likely thereafter to become, payable by the company.

When any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of such company at any time during the period for which the tax was due shall, jointly and severally, be liable for the payment of such tax, interest or penalty.

The director of a private company shall not be held liable if he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

Section 89 Liability of directors of private company Directors shall be jointly and severally liable in case tax dues cannot be recovered from company unless the director proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. In case of conversion of private company into public company, then, this section will not apply for dues arising prior to such conversion. However, any personal penalty imposed on such director will not be affected and can continue.

Section 90 Liability of partners of firm to pay tax Where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the firm shall, jointly and severally, be liable for such payment. Where any partner retires from the firm, he or the firm, has to intimate the date of retirement of partner to the Commissioner and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date.

If no such intimation is given within one month from the date of retirement, the liability of such partner under the first proviso shall continue until the date on which such intimation is received by Commissioner.

Section 91 Liability of guardians, trustees, etc.

If business is carried on for the benefit of a minor or incapacitated person, Guardian/Trustee/Agent will be liable to pay tax. Guardian, trustee or agent liable in like manner as minor or other incapacitated person is liable. The dues are recoverable from the guardian, trustee or agent in respect of business of the minor or other incapacitated person by treating them as major or capacitated person, who is conducting the business for himself.

Section 92 Liability of Court of wards, etc.

Where the estate or any portion of the estate of a taxable person owning a business in respect of which any tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator General, the Official Trustee or any receiver or manager (including any person, whatever be his designation,

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Example 2: Mr. A is appointed as manager of Mr. X, to manage the estate of Mr. X, who owns an automotive business. Mr. X is liable to pay Rs. 10,00,000 of CGST & Rs. 5,00,000 of SGST along with interest and penalty to the Government. The department can recover such dues from Mr. A who is managing the estates of Mr. X, by invoking this provision.

Section 93 Special provisions regarding liability to pay tax, interest or penalty in certain cases (1) Liability in case of death of individual: Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, where a person, liable to pay tax, interest or penalty under this Act, dies, then – a. In case of continuation of business: person who continues the business shall be liable to pay tax, interest or penalty due from such person under this Act; and b. In case of discontinuation of business before or after his death: Legal representative is liable to pay tax, interest or penalty and the liability shall be limited to the extent of estate of deceased.

(2) In case of partition of HUF or AOP: Members or group of members shall be jointly or severally liable to pay the tax, interest or penalty due from the taxable person.

(3) In case of dissolution of firm: Partners of the firm at the time of dissolution shall be jointly and severally liable to pay the tax, interest or penalty due from the firm.

(4) In case of termination of Guardianship or Trusteeship: The ward or the beneficiary shall be liable to pay the tax, interest or penalty due from the taxable person upto the time of the termination of the guardianship or trust, whether such tax, interest or penalty has been determined before the termination of guardianship or trust but has remained unpaid or is determined thereafter.

Section 94 Liability in other cases a. Where business is discontinued the tax, interest or penalty payable under this Act by firm, association or family up to the date of such discontinuance may be determined as if no such discontinuance had taken place; and every person who, at the time of such discontinuance, was a partner of such firm, or a member of such association or family, shall, notwithstanding such discontinuance, jointly and severally, be liable for the payment of tax and interest determined and penalty imposed and payable by such firm, association or family, whether such tax and interest has been determined or penalty imposed prior to or after such discontinuance and subject as aforesaid, the provisions of this Act shall, so far as may be, apply as if every such person or partner or member were himself a taxable person. [In short, erstwhile members/partners are liable to pay dues upto date of discontinuance/dissolution] b. There will be Joint & several liability of partners of firm or member of AOP in case of change in constitution of firm/AOP. Explanation: For the purpose of this chapter: I. II.

Wherever the word “Firm” is used in this chapter, it shall include the LLP registered under Limited Liability Partnership Act, 2008. “court” means the district court, high court or supreme court.

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Study Notes Question & Answer Q1. A person, liable to pay GST, interest and penalty under GST Act, dies. Who will be liable to pay his dues after his death if business carried on by such person legal representative or business carried on by such person who has dies, is discontinued after his death?

A. As per Section 93, if a business carried on by the person is continued after his death by his legal representative or any other person, such legal representative or other person, shall be liable to pay tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.

If a business carried on by the person is discontinued, whether before or after his death, his legal representative shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty has been determined before his death but has remained unpaid or is determined after his death.

Q2. ABC Ltd. engages XYZ Ltd. as an agent to sell goods on its behalf. XYZ Ltd. sells goods to DEF Ltd. on behalf of ABC Ltd. Who will be liable U/s 86?

A. Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal shall, jointly and severally, be liable to pay the tax payable on such goods under this Act. Thus, in the given case, ABC Ltd. and XYZ Ltd. shall, jointly and severally, be liable to pay GST payable on such goods.

Q3. Whether the minor for whom the business is carried out by Guardian can escape liability on the ground of minority of the beneficiary?

A. The minor is deemed to be a major for the purposes of collection of any tax/interest/penalties arising out of the business carried out for him. Hence the general principle of law has no application and the Guardian, Trustee or Agent cannot escape such liability.

Q4. Who is liable to pay tax dues if the estate of a taxable person is controlled by Court of Wards?

A. The dues are recoverable from the Court of Wards as if he is conducting the business for himself. Mr. Amit Roy is appointed as manager of Mr. Sumit, to manage the estate of Mr. Sumit, who owns the business of glasses. Mr. Sumit is liable to pay Rs. 10 Lakhs of GST, interest & penalty to the Government. The department can recover such dues from Mr. Amit Roy who is managing the estates of Mr. Sumit by invoking Section 92.

Q5. Whether the director of a Private Limited Company is liable for the payment of tax in respect of the supply made by or to such Private Company?

A. Yes. Every director of the private company during the period for which. tax, interest or penalty due in respect of any supply of goods or services or both, is not recovered shall jointly and severally be liable for the payment of such tax, interest or penalty, unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the Company.

Q6. Whether the liability of the director still exists if such Private Limited Company is converted into Public Limited Company?

A. No. If a Private Limited Company is converted into a Public Limited Company, then the provisions of this section do not apply. However, any other personal penalty could be imposed on the Director.

Q7. Whether the retiring partner is liable in respect of the transactions taken place after his retirement?

A. No. The Retiring partner is not liable for the transactions taken place after his retirement provided he or the firm intimates to the Commissioner by a notice in writing of his retirement within one month from the date of retirement.

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Section 122 Section 123 Section 124 Section 125 Section 126 Section 127 Section 128 Section 129 Section 130 Section 131 Section 132 Section 133 Section 134 Section 135 Section 136 Section 137 Section 138

Penalty for certain offences Penalty for failure to furnish information return Fine for failure to furnish information return General penalty General disciplines related to penalty Power to impose penalty in certain cases Power to waive penalty or fee or both Detention, seizure and release of goods and conveyances in transit Confiscation of goods or conveyances and levy of penalty Confiscation or penalty not to interfere with other punishments Punishments for certain offences Liability of officers and certain other person Cognizance of offences Presumption of culpable mental state Relevancy of statements under certain circumstances Offences by companies Compounding of offences

Section 122 Penalty for certain offences Sec. 122 (1) Where a taxable person who(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply; (ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder; (iii) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (v) fails to deduct the tax in accordance with the provisions of subsection (1) of section 51, or deducts an amount which is less than the amount required to be deducted under the said subsection, or where he fails to pay to the Government under subsection (2) thereof, the amount deducted as tax; (vi) fails to collect tax in accordance with the provisions of subsection (1) of section 52, or collects an amount which is less than the amount required to be collected under the said subsection or where he fails to pay to the Government the amount collected as tax under sub-section (3) of section 52;

he shall be liable to pay a penalty of • Rs. 10,000 (Rs. 20,000 CGST+SGST/IGST) or • Any of the following: a. Tax evaded b. ITC availed or passed on or distributed irregularly c. TDS not deducted/short deducted/not deposited to Government d. TCS not collected/short collected/not deposited to Government e. refund claimed fraudulently whichever is higher

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Study Notes (vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder; (viii) fraudulently obtains refund of tax under this Act; (ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; (x) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act; (xi) is liable to be registered under this Act but fails to obtain registration; (xii) furnishes any false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) obstructs or prevents any officer in discharge of his duties under this Act; (xiv) transports any taxable goods without the cover of documents as may be specified in this behalf; (xv) suppresses his turnover leading to evasion of tax under this Act; (xvi) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder; (xvii) fails to furnish information or documents called for by an officer in accordance with the provisions of this Act or the rules made thereunder or furnishes false information or documents during any proceedings under this Act; (xviii) supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under this Act; (xix) issues any invoice or document by using the registration number of another registered person; (xx) tampers with, or destroys any material evidence or document; (xxi) disposes off or tampers with any goods that have been detained, seized, or attached under this Act, Example: 1. ABC issues an invoice of 100 kg of chocolates for a consignment of 250 kg of chocolates. If such consignment is caught by the tax authorities and misdeclaration is verified, then ABC, shall be liable to pay penalty.

2. Mr. A supplied goods on 05.08.2018 and issued a tax invoice accordingly, for which payment was also received in the same month. In this case, the due date for payment of tax on such supply of goods will be 20.09.2018 (i.e. the due date for filing return for the month of August 2018). Mr. A is obligated to make the payment of tax by 20.12.2018 for refraining from payment of penalty. However, he shall continue to be liable to pay interest @ 18% p.a. for delayed payment of tax starting from the date following the due date of payment, till the date of payment.

3. Mr. B is engaged in trading of goods, collects tax at the rate of 28% from the buyer, whereas the actual tax rate is 18%. He deposited tax at 18% to the exchequer. Here, the differential tax of 10% collected by Mr. B, but not deposited to government, cannot be retained by it. Penalty U/s 122 (1) can be levied in such case. Further, interest @ 18% p.a. for delayed payment of tax starting from the date following the due date of payment, till the date of payment, shall also be leviable.

4. Mr. A engaged in inter-State supply of various taxable goods. In terms of Section 24 (i), Mr. A is mandatorily required to take registration in GST but fails to take registration under GST even after 30 days of conducting business. In such case, he shall be liable to penalty U/s 122 (1).

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 5. XYZ Ltd. has various warehouses through which they supply goods to their customers, but such warehouses have not been declared as additional place of business in their registration. XYZ Ltd. shall be liable to penalty under this clause.

Sec. 122 (2) • Penalty Rs. 10,000 or 10% Any registered person who supplies any goods or services or both on of tax involved, whichever which tax has not been paid or short-paid or erroneously refunded, or is higher where the ITC has been wrongly availed or utilized • In case of fraud/wilful misstatement/suppressions of facts to evade tax Penalty Rs. 10,000 or 100% of the tax amount, whichever is higher Sec. 122 (3) Any person whoa) Aids or abets offences specified U/s 122 (1) Amount which may extent b) Acquires possession of, or in any way concerns himself in to Rs. 25,000 transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; c) Receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; d) Fails to appear before the officer of central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry; e) Fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account,

Section 123 Penalty for failure to furnish information return Section 124 Fine for failure to furnish information return Section 125 General Penalty Sec. 123 Failure to furnish information return with the period as specified in notice Sec. 124 Fails to furnish statistics without reasonable cause/wilfully furnishes or causes to furnish false information Sec. 125 Contravention for which no penalty is provided separately

Rs. 100 for each day of the period during which the failure to furnish information return continues subject to maximum of Rs. 5,000 • •

Rs. 10,000 In continuing offence Rs. 100 per day subject to maximum of Rs. 25,000

Amount which may extent to Rs. 25,000

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Study Notes Section 126 General disciplines related to penalty I.

II.

Penalty shall not to be imposed for minor breaches or omission or mistake in documentation made without fraudulent intent or gross negligence. A breach shall be considered a ‘minor breach’ if the amount of tax involved is less than Rs. 5,000. An omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.

Penalty imposed shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach. No penalty shall be imposed on any person without giving him an opportunity of being heard. Penalty order must clearly specify the nature of breach.

Voluntary disclosure to be a mitigating factor when quantifying a penalty. The provision of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage.

Section 127 Power to impose penalty in certain cases Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person.

Section 128 Power to waive penalty or fee or both The Government may, by notification, waive in part or full, any penalty referred to in section 122 or section 123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such mitigating circumstances as may be specified therein on the recommendations of the Council.

Section 129 Detention, seizure and release of goods and conveyances in transit If a person contravenes any provision of the Act while transporting or storing goods, then such goods and the conveyance in which such goods are carried and all the documents relating to such goods and conveyance can be detained or seized. The proper officer detaining and seizing the goods and/or conveyance has to give proper opportunity to the transporter to explain his case by issuing a proper notice to him. After hearing the transporter, the officer shall pass an appropriate order. (a) In case of default, where the owner of the goods comes forward for the payment of tax, penalty will be levied equal to • 100% of the amount of tax and • in case of exempted goods 2% of the value of goods or Rs. 25,000/- whichever is less. (b) In case where owner of the goods does not come forward for payment of tax, then an order shall be passed for • payment of amount of tax and penalty equal to 50% of the value of goods reduced by tax amount paid (to be paid by any other person other than owner) and • in case of exempted goods 5% of the value of goods or Rs. 25,000/- whichever is less. (c) Upon furnishing a security equivalent to the amount payable under above clause (a) or (b) in such form and manner as may be prescribed.

The proper officer shall release the goods upon the payment of tax and amount of penalty in the above manner and all the proceedings under this particular section shall deemed to be concluded. However, if the person (either owner of the goods or any other person) fails to discharge the amount of tax and penalty under this section within 7 14 days, than the goods and/or conveyance shall be liable for confiscation (proceedings U/s

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain 130). The period of 7 14 days can be reduced by proper officer if goods are of perishable or hazardous nature.

Further, such goods can be released on provisional basis under bond as per the provisions of section 67.

Circular No. 76/50/2018 – Central Tax Dated 31.12.2018 clarifies that if the invoice or any other specified document is accompanying the consignment of goods, then either the consignor or the consignee should be deemed to be the owner. But if the invoice or any other specified document is not accompanying the consignment of goods, then in such cases, the proper officer should determine who should be declared as the owner of the goods.

Example 6: Mr. A (owner), a registered taxable person is getting its goods (taxable @ 18%) amounting to Rs. 10,00,000 (exclusive of GST) transported, without cover of an invoice and an e-way bill.

In this case, the said goods and the vehicle carrying such goods shall be liable to detention or seizure. If detained or seized, the goods of Mr. A would be released on payment of the following amounts:(a) Where Mr. A, comes forward for the payment of tax and penalty: Applicable tax (Rs. 10,00,000 * 18%) Penalty equal to 100% of the tax payable on the subjected goods Total

Rs. 1,80,000 Rs. 1,80,000 Rs. 3,60,000

(b) Where Mr. A, doesn’t come forward for the payment of tax and penalty: Applicable tax (Rs. 10,00,000 * 18%) Penalty equal to 50% of the value of the subjected goods reduced by the tax amount paid thereon (i.e. 50% of Rs. 10,00,000 less Rs. 1,80,000) Total

Rs. 1,80,000 Rs. 3,20,000 Rs. 5,00,000

Section 130 Confiscation of goods or conveyances and levy of penalty This section provides for specific causes leading to confiscation of goods/conveyances. The nature of authorization to confiscate and opportunity to release goods/conveyances liable for such confiscation are detailed in this section.

There are five precise causes for confiscation of goods and/or conveyances specified in this section and they are: Action Supply or receive goods in contravention of the Act or rules made thereunder Not accounting for goods Supply of goods liable to tax Contravention of the provisions of Act or rules made thereunder Use of conveyance as a means of transport/for carriage of taxable goods

Consequence Resulting in actual evasion of tax Carrying a liability to payment of tax Without applying registration With intent to evade payment of tax In contravention of the Act or rules made thereunder

In all the above cases, goods or conveyance shall be liable for confiscation. However, the conveyance shall not be confiscated where the owner of the conveyance proves that it is without the connivance of owner himself, his agent or person in charge of the conveyance. Further, the person shall be liable to pay penalty under section 122 of the Act.

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Study Notes If the goods or conveyance are liable to be confiscated under the provisions of this Act, the proper officer shall give the owner of the goods an option to pay fine in lieu of confiscation.

The amount of fine shall not exceed the market value of goods as reduced by the amount of tax payable thereon.

However, at the same time aggregate of fine and penalty leviable shall not be less than the amount of penalty as leviable under section 129(1). While section 129 is applicable on transporters, section 130 primarily covers the owner.

Where the conveyance is used for transportation of goods or passenger on hire, the owner of the conveyance shall be given an option to pay in lieu of confiscation of the conveyance a fine equal to amount of tax payable on the goods transported on his conveyance. It is worthwhile to note that the amount of fine payable is in addition to any tax, penalty and other charges payable on confiscated goods or conveyance.

The order for confiscation cannot be issued without giving the person an opportunity of being heard.

The title of the confiscated goods or conveyance shall be vested upon the Government.

The proper officer adjudging confiscation shall take and hold possession of the things confiscated on behalf of the Government and every officer of police shall assist in taking such hold and possession.

If the proper officer is satisfied that the confiscated goods/conveyance are not required for any proceedings under the Act, then he shall after giving reasonable time not exceeding 3 months to pay fine in lieu of confiscation, dispose the goods and deposit the sale proceeds with the Government.

Section 131 Confiscation or penalty not to interfere with other punishments Without prejudice to the provisions contained in the Code of Criminal Procedure, 1973, no confiscation made or penalty imposed under the provisions of this Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of this Act or under any other law for the time being in force.

Such other proceedings can be that of prosecution (commencement of criminal proceeding), arrest, cancellation of registration etc., as applicable and provided for the relevant non-compliances. Thus, confiscation made, or penalty imposed cannot relieve the person from other punishments, as may be applicable.

Section 132 Punishment for certain offences (1) Whoever commits any of the following offences, namely: (a) Supply of goods or services or both without the cover of invoice with an intent to evade tax; (b) If any person issues any invoice or bill without actual supply of goods or services or both leading to wrongful input tax credit or refund of tax; (c) Any person who avails input tax credit using invoice referred in point (b) above; (d) Collection of taxes without payment to the government for a period beyond 3 months of due date; (e) Evasion of tax, availment of credit or obtaining refund with intent of fraud where such offence is not covered in clause (a) to (d) above; (f) Falsifying financial records or production of false records/ accounts/ documents/ information with an intent to evade tax; (g) Obstructs or prevents any officer from doing his duties under the act; (h) Acquires or transports or in any manner or deals with any goods which he knows or has reasons to believe are liable for confiscation under this Act or rules made thereunder; (i) Receives or in any way, deals with any supply of services which he knows or has reason to believe are in contravention of any provisions of this law;

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Tampers with or destroys any material evidence or documents; Fails to supply any information which he is required to supply under this law or supply false information; Attempts or abets the commission of any of the offences mention above {clauses (a) to (k) of this section.

This section enables institution of prosecution proceedings against the offenders and the period of imprisonment and quantum of fine varies depending on the amount of tax evaded or seriousness of the offence listed below.

Amount of Tax evaded/ erroneous refund/ wrong ITC availed or utilized

Fine

Imprisonment

(i) Exceeding 5 Crores

Yes

Upto 5 years

(ii) Exceeding 2 Crores to 5 Crores

Yes

Upto 3 years

(iii) Exceeding 1 Crores to 2 Crores

Yes

Upto 1 year

If any person commits any offence specified in clause (f), (g) or (j) above, he shall be punishable with imprisonment for a term which may extend to six months or with fine or with both.

In case of repetitive offences without any specific/special reason which is recorded in the judgment of the Court will entail an imprisonment term of not less than 6 months and which could extend to 5 years plus with a fine.

The Imprisonment referred to in clauses (i), (ii) & (iii) and repetitive offences, in the absence of special and adequate reasons to the contrary to be recorded in the judgment of Court, be for a term not less than six months.

All offences mentioned in this section are non-cognizable and bailable except the following cases: • Where the amount exceeds 5 Crores and • Instances covered by (a) to (d) in sub section (1) above.

Every prosecution proceeding initiated requires prior sanction of the Commissioner.

Section 133 Liability of officers and certain other persons Where – • any person engaged in collection of statistics or compilation or computerisation thereof • if officer having access to Annual Information Return, or • if any person engaged in provision of service on common portal or agent of common portal, wilfully disclosed any information or the contents of any return furnished under this Act or rules made there under (otherwise than in execution of his duties or for prosecution for an offence), he shall be punishable with imprisonment for a term which may extend to 6 months or with fine which may extend to Rs. 25,000, or with both.

Section 134 Cognizance of offences No court shall take cognizance of any offence punishable under this Act or the rules made thereunder except with the previous sanction of the Commissioner, and no court inferior to that of a Magistrate of the First Class, shall try any such offence.

Section 135 Presumption of culpable mental state In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused

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Study Notes to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.

Explanation.—For the purposes of this section,– (i) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason to believe, a fact; (ii) a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.

Now, once the law has stated that in case of any prosecution which requires the existence of a culpable mental state, the Court would presume the existence of it.

Under the old revenue laws, the burden to prove was on the one who alleges it. The Hon’ble Supreme Court in the case of Uniworth Textiles Limited vs. Commissioner of Central Excise, Raipur [(2013) 31 taxmann.com 67 (SC)] stated that “Burden to prove invocation of extended period on Department. The assessee cannot be asked to bring evidence to prove his bona fide. Similarly it is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it.”

The accused can prove that he had no such mental state in respect of a particular act for which he is charged.

The expression “Culpable Mental State” is defined inclusively to cover “intent, motive, knowledge of fact, belief in or reason to believe”. It also covers facts which exist beyond a reasonable doubt and not based on probabilities.

Hence, a very landmark judgement of the Hon’ble Supreme Court would lose its relevance in the cases covered by this section.

Section 136 Relevancy of statements under certain circumstances Statement made and signed by a person on appearance in response to any summons issued U/s 70 shall be valid in prosecution proceedings when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or when the person who made the statement is examined as a witness in the case before the court and the court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.

Section 137 Offences by companies Where an offence committed by a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

Where it is proved that the offence has been committed with the consent or connivance of, or it attributable to any negligence on the part of, any director, manager, secretary, or other officer of the company, they shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Offences by LLP/Firm/HUF/Trust: Partner or Karta or managing trustee shall be liable to be proceeded against and punished accordingly.

Section 138 Compounding of offences (1) Compounding of offences by the Commissioner [Sec. 138 (1)]: Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed.

Cases, where compounding is not possible: Nothing contained in this section shall apply to

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain a. a person who has been allowed to compound once in respect of any of the offences specified in Sec. 132 (1) (a) to (f) and the offences specified in clause (I) which are relatable to offences specified in clauses (a) to (f) of the said sub-section; b. a person who has been allowed to compound once in respect of any offence, other than those in clause (a), under this Act or under the provisions of any SGST Act of the UTGST Act of the IGST Act in respect of supplies of value exceeding Rs. 1 crores; c. a person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force; d. a person who has been convicted for an offence under this Act by a court; e. a person who has been accused of committing an offence specified in Section 132 (1)(g)/(j)/(k); and f. any other class of persons or offences as may be prescribed.

Compounding not to affect proceedings instituted under other law: Any compounding allowed under the provisioning of this section shall not affect the proceedings, if any, instituted under any other law.

Tax/Interest/Penalty to be paid before compounding: Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences.

(2) Compounding amount [Section 138 (2)]: The amount for compounding of offences under this section shall be such as may be prescribed, subject to – a. The minimum limit for compounding amount is to be the higher of the following amounts: • 50% of tax involved, or • Rs. 10,000 (Rs. 20,000 CGST+SGST/IGST). b. The upper limit for compounding amount is to be higher of the following amount: • 150% of tax involved, or • Rs. 30,000 (Rs. 60,000 CGST+SGST/IGST).

(3) Abatement of proceedings and non-initiation of criminal proceedings [Section 138 (3)]: On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

Example 7: Suppose, the amount of tax involved is Rs. 90,000. In this case, the minimum and maximum amount to be paid for compounding for offence will be calculated as under:• Minimum amount: Higher of Rs. 20,000 or Rs. 45,000 (50% of Rs. 90,000) • Maximum amount: Higher of Rs. 60,000 or Rs. 1,35,000 (150% of Rs. 90,000)

Please remember penalty specified in CGST Act, is only for CGST Act. So, SGST/UTGST will be equivalent to CGST & IGST will be double.

Question & Answer Q1. Mr. A, an unregistered person under GST purchases the goods supplied by Mr. B who is a registered person without receiving a tax invoice from Mr. B and thus helps in tax evasion by Mr. B. What action may be taken by tax authorities to curb such type of cases and on whom?

A. Both Mr. A & Mr. B will be liable to penalty as: Mr. A, penalty U/s 122 (3) which may extend to Rs. 25,000 (under CGST Act); Mr. B, penalty U/s 122 (1), which will be higher of Rs. 10,000 (under CGST Act) or 100% of tax evaded.

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Study Notes

343

Q2. What is the difference between the penalty under sub-section (1) and (3) of sec. 122?

A. Apart from the amount of penalty & nature of offences, U/s 122 (1) penalty is imposed on a taxable person whereas in U/s 122 (3), penalty is imposed on any person who may or may not be a taxable person.

Q3. What is the general penalty which can be levied for any violation for which no specific penalty has been prescribed?

A. Section 125 of the GST Act prescribes penalty of rupees twenty-five thousand for all those violations of provisions of the Act or any rules for which no penalty is separately provided for under the Act. Q4. When breach of law will be considered as a minor breach and easily rectifiable mistakes?

A. As per explanation to sub-section (1) of section 126 of the GST Act, provides that a ‘minor breach’ shall be considered as minor breach if the amount of tax involved is less than Rs. 5,000. An omission or mistake in documentation will be considered to be ‘easily rectifiable’ if the same is an error apparent on record.

Q5. I am collecting tax on supply of goods & services and did not remit the same within 3 months to the Government. Does the same attract penalty? If yes, what is the amount of penalty?

A. Collection of tax and non-remittance of the same within 3 months to the Government from the due date for remittance is considered to be an offence under Section 122 (1) (iii) of the CGST Act, 2017 attracting penalty of (a) an amount equal to the tax so collected or (b) an Rs. 10,000 (whichever is higher).

Q6. Whether prosecution or other punishments could also be initiated along with confiscation or penalty?

A. In terms of section 131 confiscation made or penalty imposed under the provisions of this Act or the rules made thereunder shall not prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of this Act or under any other law.

Q7. Mr. A has collected tax on supply of exempted goods and did not remit the tax so collected

to the

Government account. Would Mr. A, be liable to penal and other consequences?

Ans. Yes, in terms of Section 122(1) (iv) of the CGST Act, 2017, collection of tax in contravention to the provisions of the CGST Act, 2017 and subsequent failure to remit the same to the credit of the Government beyond a period of 3 months from the date on which such payment becomes due is an offence attracting penalty of Rs. 10,000/- or amount equal to the amount of tax so collected, whichever is higher.

Further, in terms of Section 132(1) (d) read with Section 132(1) (I) of the CGST Act, 2017, the said offence attracts imprisonment which may extend from 1year to 5 years based on the quantum of tax evasion.

Q8. What is the penalty prescribed for a person who opts for composition scheme despite being ineligible for the said scheme?

Ans. Section 10(5) of the CGST Act provides that if a person who has paid under composition levy is found as not being eligible for compounding then such person shall be liable to penalty to an amount equivalent to the tax payable by him under the provisions of the Act i.e. as a normal taxable person and that this penalty shall be in addition to the tax payable by him.

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Section 107 Section 108 Section 109 Section 110 Section 111 Section 112 Section 113 Section 114 Section 115 Section 116 Section 117 Section 118 Section 119 Section 120 Section 121

Appeals to Appellate Authority Powers of Revisional Authority Constitution of Appellate Tribunal and Benches thereof President and Members of Appellate Tribunal, their qualification, appointment, conditions of service, etc.

Procedure before Appellate Tribunal Appeals to Appellate Tribunal Orders of Appellate Tribunal Financial and administrative powers of President Interest on refund of amount paid for admission of appeal Appearance by authorized representative Appeal to the High Court Appeal to the Supreme Court Sums due to be paid notwithstanding appeal etc.

Appeal not to be filed in certain case Non-appealable decisions and orders

Brief chart showing Appellate Mechanism under indirect taxes Description

Appellate Authority 107 Order of Adjudicating Authority

Revisional Authority 108 Suo Motu Revision

Appellate Tribunal 112 Against order of (a) Appellate Authority or (b) Revisional Authority

Departmental Appeal

Department can file appeal after review by Commissioner

NA

Department can file appeal on review of Commissioner

Order of state/Area bench of Tribunal (If case involves substantial question of law)

Place of supply matters

Appealable

Other Matters

Appealable

Revision power extends Revision power extends

National/Regional bench of Tribunal can hear State/Area Bench of Tribunal can hear

Section Appeal can be filed against

High Court

Supreme Court

117 Order of State/Area bench of Tribunal (If case involves substantial question of law)

No

118 Order of National/Region al bench of Tribunal and against orders of HC if HC certifies fit case for appeal to SC Order of National/Region al bench of Tribunal and against orders of HC if HC certifies fit case for appeal to SC Yes

Yes

Yes

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Study Notes Description

Appellate Authority 107

Section Appeal Fee

Nil

Time limit to appeal

3 months + 1 month extension

Pre-deposit {mandatory}

100% of admitted due (with interest/penalty)+ 10% of disputed tax (before interest/penalty) subject to a maximum of 25 crore rupees

If assessee wins

Deposit refunded with interest

Revisional Authority 108 NA

Power exercisable only after 6 months but within 3 years from date of order {if no appeal filed} NA

NA

Appellate Tribunal 112 Rs. 1,000 per lakh of tax or ITC subject to maximum of Rs. 25,000 3 months + 3 months extension

100% of admitted due (with interest/penalty) + Additional 20% of disputed tax (before interest/penalty) subject to a maximum of 50 crore rupees Pre-deposit refunded with interest

345

High Court

Supreme Court

117

118

-

-

Within 180 days + condonation of delay without time limit

As per Code of Civil Procedure, 1908

All tax dues are required to be deposited

All tax dues are required to be deposited

Sums to be refunded

Sums to be refunded

Section 107 Appeals to Appellate Authority This section pertains to appeals to appellate authority by any person who is aggrieved against decision or order passed by adjudicating authority. This section also provides for appeal by revenue against decision or order passed by adjudicating authority. i.

ii.

The appeal is to be filed by the assessee within a period of 3 months from the date of communication of decision or order in Form GST APL-01, along with relevant documents either electronically or otherwise as notified by the Commissioner against a provisional acknowledgement. The grounds of appeal and form of verification must be duly signed and a certified copy of the decision or order is to be filed before the Appellate Authority within 7 days of filing the appeal electronically. Thereafter, a final acknowledgement indicating the appeal number shall be issued in Form GST APL-02 by the said authority. In such a situation the appeal shall be deemed to be filed on the date on which the provisional acknowledgement stands issued.

In case the said certified copy is submitted after a period of 7 days, the date of filing of appeal shall be the date of submission of such copy.

The appeal shall be treated to be filed only when the final acknowledgement, indicating the appeal number is issued.

The Commissioner of Central / State or any Union territory with a view to satisfying himself about the legality or propriety of any order or decision direct a subordinate officer to file an application before the Appellate Authority within six months from the date of communication of decision or order in Form GST

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iii. iv.

v. vi. vii. viii. ix. x.

xi. xii. xiii. xiv.

APL-03, along with relevant documents either electronically or otherwise as notified against issue of an acknowledgement. A certified copy of the decision or order of the appeal is to be filed before the Appellate Authority within 7 days of filing the application electronically and an appeal number shall be generated accordingly.

The appellate authority in either of the above cases is empowered to condone the delay up to a period of 1 month.

Appeal to be filed in prescribed form duly verified in prescribed manner along with — Amount of tax, interest, fine, fee & penalty, as is admitted, in full; and — pre-deposit of sum equal to 10% of remaining amount of tax in dispute subject to a maximum of 25 crore rupees (50 crores CGST+SGST/IGST).

On payment of above amount, the recovery proceedings for balance amount are deemed to be stayed.

Maximum 3 adjournments shall be granted to a party on showing reasonable cause that is to be recorded in writing.

Appellate authority may allow any additional grounds not specified in the grounds of appeal on being satisfied that the omission was not wilful or unreasonable.

Appellate authority to pass the order confirming, modifying or annulling the decision or order appealed against but shall not remand the case back to the adjudicating authority.

Opportunity of being heard to be granted in case of order for enhancing fees or penalty or fine in lieu of confiscation of goods or reducing amount of refund/input tax credit after issuing show cause notice.

The appellate authority has power to issue show cause notice in case it is of the opinion that any tax has not been paid or short paid or erroneously refunded or input tax credit is wrongly availed or utilised.

The appellant is given notice to show cause against the proposed order and the order is passed within the time limit specified under section 73 or 74.

Appellate authority need to hear and decide the appeal, wherever possible, within a period of 1 year from the date of filing.

Where the issuance of order is stayed by an order of a court or Tribunal, the period of such stay shall be excluded in computing the period of one year.

Appellate authority to communicate the copy of order to the appellant, the respondent, the adjudicating authority, jurisdictional Commissioner of CGST, SGST and UTGST. The Appellate Authority shall, along with its order under sub-section (11) of section 107 of the Act, issue a summary of the order in FORM GST APL-04 clearly indicating the final amount of demand confirmed.

As per Rule 109 A, if order is passed by the Additional/Joint Commissioner then appeal will be filed with Commissioner (Appeals). If order is passed by the Deputy Commissioner/Assistant Commissioner /Superintendent then appeals will be filed with any officer not below the rank of Joint Commissioner (Appeals).

Example 1: Case Case I Case II

Date of filing of appeal in Form GST APL-01 and issuance of provisional acknowledgement 24.07.2018 24.07.2018

Submission of certified copy of decision or order appealed against 28.07.2018 03.08.2018

Date of filing of appeal shall be 24.07.2018 03.08.2018

Example 2: Mr. A, wants to file an appeal to appellate authority against the order passed by the adjudicating authority, which was received on 10.01.2018. In this case, the company can appeal against such order by 09.04.2018 in Form GST APL-01 i.e., within 3 months from the date of communication of adjudicating authority.

Now, suppose due to some unforeseen circumstances, the company could not file the appeal within given time period. The appellate authority, may, after being satisfied as to existence of sufficient cause, condone the delay upto 09.05.2018 (i.e. 1 month from expiry of 3 months), within which time aggrieved person must file the appeal.

Example 3: Mr. X has been served with an order wherein demand of Rs. 5,00,000 has been alleged by the adjudicating authority. Mr. X, admits liability of Rs. 1,00,000 but decides to litigate the demand of balance

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Study Notes amount, and hence file an appeal to the appellate authority. In this case, the amount of pre-deposit will be calculated as follows: (a) Demand admitted = Rs. 1,00,000 (b) Remaining Demand/Amount disputed = Rs. 4,00,000 10% of amount disputed i.e. (Rs. 4,00,000*10/100) = Rs. 40,000 Hence, the amounts of pre-deposit to be paid by Mr. X will be total of Rs. 1,40,000.

On amount of above amount of pre-deposit, the recovery proceedings for balance amount shall be deemed to be stayed.

Section 108 Power of Revisional Authority i.

Revision authority on his own motion or upon information received by him or on request from the commissioner of State tax/UT, after examining the record of any proceeding, the Revisional Authority may stay the operation of any decision or order if he considers that such decision or order passed by any officer subordinate to him is erroneous in so far as it is prejudicial to the interest of the revenue.

ii.

After giving the concerned person an opportunity of being heard and after making further necessary inquiry, the Revisional Authority may pass such order within 3 years of passing of the said order sought to be revised including enhancing or modifying or annulling the said decision or order.

iii.

The Revisional Authority shall not exercise such revisionary powers if (a) appeal is filed against the order to – a. Appellate Authority U/s.107 b. Appellate Tribunal U/s.112 c. High Court U/s.117 d. Supreme Court U/s.118 (b) period of 6 months as specified in section 107 (2) has not expired or more than 3 years have expired after passing the decision or order (c) the order has already been taken for revision at any earlier stage (d) revisionary order has already been passed once.

iv.

However, the Revisional Authority may pass an order on any point which has not been raised & decided in an appeal, referred to hereinabove, within 1 year from the date of order passed in such appeal or within 3 years from the date of such order sought to be revised, whichever is later.

v.

It may be noted that the said power of the revisional authority is subject to Section 121 of the CGST Act (i.e. non appealable decisions and orders). Thus, the revisional authority cannot revise the decision or order passed under the CGST Act/SGST Act/UTGST Act, by any officer subordinate to him, in the matters as prescribed in Section 121 of the CGST Act, which are non-appealable in GST.

vi.

Notification No. 74/2018 – Central tax Dated 31.12.2018 has inserted, new Rule 109B of the CGST Rules, which provides that where the Revisional Authority decides to pass an order in revision U/s 108, which is likely to affect the person adversely, the revisional authority shall serve on him a notice in Form GST RVN-01 and shall give him a reasonable opportunity of being heard. In addition, as per sub-rule (2) of rule 109B, a summary order is to be issued in Form GST Apl-04 clearly indicating the final amount of demand confirmed.

vii.

Every revision order shall be, subject to further appeal to the Tribunal, High Court or Supreme Court, be final and binding on the parties.

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If the said decision or order involves an issue which is appealed in higher forum, the period spent between the date of the decision of the lower authority and the date of the decision of the higher authority shall be excluded in computing the period of limitation.

ix.

Where the issuance of an order is stayed by the order of a court or Appellate Tribunal, the period of such stay shall be excluded in computing the period of limitation referred to in Section 108 (2) (b) i.e. 3 years.

Section 109 Constitution of Appellate Tribunal and Benches thereof A. Constitution and structure of Appellate Tribunal i.

The law envisages constitution of a two tier Tribunal i.e. National Bench/Regional Benches and the State Bench/ Area Benches. Jurisdiction of the two constituents of the GST Tribunal is also defined.

ii.

If place of supply is one of the issues in dispute, then the National Bench/ Regional benches of the Tribunal will have jurisdiction to hear the appeal.

If the dispute relates to issues other than the place of supply, then the State/Area Benches will have the jurisdiction to hear the appeal.

iii.

An appeal from the decision of the National Bench will lie directly to the Supreme Court and an appeal from the decision of the State Bench will lie to the jurisdictional High Court on substantial questions of law.

iv.

A diagrammatic representation of the structure of the Appellate Tribunal is shown below:

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Study Notes

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President Appellate Tribunal -State

State Bench

Technical

Area Bench

Technical

Judicial

Technical

Technical

Member

Member

Judicial Member

Member

Member

Member ( Centre )

( State )

( Centre )

( State )

The appointments to the Tribunal and functioning shall be in the manner prescribed under sections 110 and 111 of the CGST Act. On ceasing to hold office, the appointees to the Appellate Tribunal shall not be entitled to appear, act or plead before the Appellate Tribunal. v.

In the absence of a Member in any Bench due to vacancy or otherwise, any appeal may, with the approval of the President or, as the case may be, the State President, be heard by a Bench of two Members.

However, any appeal where the tax or ITC involved or the difference in tax or ITC involved or the amount of fine, fee or penalty determined in any order appealed against, does not exceed Rs. 5,00,000 and which does not involve any question of law may, with the approval of the President, be heard by a bench consisting of a single member.

Section 110 President and Members of Appellate Tribunal, their qualification, appointment, conditions of service, etc.

(1) A person shall not be qualified for appointment as— (a) the President, unless he has been a Judge of the Supreme Court or is or has been the Chief Justice of a High Court, or is or has been a Judge of a High Court for a period not less than five years; (b) a Judicial Member, unless he— i. has been a Judge of the High Court; or ii. is or has been a District Judge qualified to be appointed as a Judge of a High Court; or iii. is or has been a Member of Indian Legal Service and has held a post not less than Additional Secretary for three years; (c) a Technical Member (Centre) unless he is or has been a member of Indian Revenue (Customs and Central Excise) Service, Group A, and has completed at least fifteen years of service in Group A;

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain (d) a Technical Member (State) unless he is or has been an officer of the State Government not below the rank of Additional Commissioner of Value Added Tax or the State goods and services tax or such rank as may be notified by the concerned State Government on the recommendations of the Council with at least three years of experience in the administration of an existing law or the State Goods and Services Tax Act or in the field of finance and taxation.

(2) The President and the Judicial Members of the National Bench and the Regional Benches shall be appointed by the Government after consultation with the Chief Justice of India or his nominee: Provided that in the event of the occurrence of any vacancy in the office of the President by reason of his death, resignation or otherwise, the senior most Member of the National Bench shall act as the President until the date on which a new President, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office: Provided further that where the President is unable to discharge his functions owing to absence, illness or any other cause, the senior most Member of the National Bench shall discharge the functions of the President until the date on which the President resumes his duties.

(3) The Technical Member (Centre) and Technical Member (State) of the National Bench and Regional Benches shall be appointed by the Government on the recommendations of a Selection Committee consisting of such persons and in such manner as may be prescribed.

(4) The Judicial Member of the State Bench or Area Benches shall be appointed by the State Government after consultation with the Chief Justice of the High Court of the State or his nominee.

(5) The Technical Member (Centre) of the State Bench or Area Benches shall be appointed by the Central Government and Technical Member (State) of the State Bench or Area Benches shall be appointed by the State Government in such manner as may be prescribed.

(6) No appointment of the Members of the Appellate Tribunal shall be invalid merely by the reason of any vacancy or defect in the constitution of the Selection Committee.

(7) Before appointing any person as the President or Members of the Appellate Tribunal, the Central Government or, as the case may be, the State Government, shall satisfy itself that such person does not have any financial or other interests which are likely to prejudicially affect his functions as such President or Member.

(8) The salary, allowances and other terms and conditions of service of the President, State President and the Members of the Appellate Tribunal shall be such as may be prescribed: Provided that neither salary and allowances nor other terms and conditions of service of the President, State President or Members of the Appellate Tribunal shall be varied to their disadvantage after their appointment.

(9) The President of the Appellate Tribunal shall hold office for a term of three years from the date on which he enters upon his office, or until he attains the age of seventy years, whichever is earlier and shall be eligible for reappointment.

(10) The Judicial Member of the Appellate Tribunal and the State President shall hold office for a term of three years from the date on which he enters upon his office, or until he attains the age of sixty-five years, whichever is earlier and shall be eligible for reappointment.

(11) The Technical Member (Centre) or Technical Member (State) of the Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office, or until he attains the age of sixty-five years, whichever is earlier and shall be eligible for reappointment.

(12) The President, State President or any Member may, by notice in writing under his hand addressed to the Central Government or, as the case may be, the State Government resign from his office: Provided that the President, State President or Member shall continue to hold office until the expiry of three months from the date of receipt of such notice by the Central Government, or, as the case may be, the State Government or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.

(13) The Central Government may, after consultation with the Chief Justice of India, in case of the President, Judicial Members and Technical Members of the National Bench, Regional Benches or Technical Members (Centre) of the State Bench or Area Benches, and the State Government may, after consultation with the Chief Justice of High Court, in case of the State President, Judicial Members,

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Study Notes Technical Members (State) of the State Bench or Area Benches, may remove from the office such President or Member, who— (a) has been adjudged an insolvent; or (b) has been convicted of an offence which, in the opinion of such Government involves moral turpitude; or (c) has become physically or mentally incapable of acting as such President, State President or Member; or (d) has acquired such financial or other interest as is likely to affect prejudicially his functions as such President, State President or Member; or (e) has so abused his position as to render his continuance in office prejudicial to the public interest: Provided that the President, State President or the Member shall not be removed on any of the grounds specified in clauses (d) and (e), unless he has been informed of the charges against him and has been given an opportunity of being heard.

(14) Without prejudice to the provisions of sub-section (13),–– (a) the President or a Judicial and Technical Member of the National Bench or Regional Benches, Technical Member (Centre) of the State Bench or Area Benches shall not be removed from their office except by an order made by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court nominated by the Chief Justice of India on a reference made to him by the Central Government and of which the President or the said Member had been given an opportunity of being heard; (b) the Judicial Member or Technical Member (State) of the State Bench or Area Benches shall not be removed from their office except by an order made by the State Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the concerned High Court nominated by the Chief Justice of the concerned High Court on a reference made to him by the State Government and of which the said Member had been given an opportunity of being heard.

(15) The Central Government, with the concurrence of the Chief Justice of India, may suspend from office, the President or a Judicial or Technical Members of the National Bench or the Regional Benches or the Technical Member (Centre) of the State Bench or Area Benches in respect of whom a reference has been made to the Judge of the Supreme Court under sub-section (14).

(16) The State Government, with the concurrence of the Chief Justice of the High Court, may suspend from office, a Judicial Member or Technical Member (State) of the State Bench or Area Benches in respect of whom a reference has been made to the Judge of the High Court under sub-section (14).

(17) Subject to the provisions of article 220 of the Constitution, the President, State President or other Members, on ceasing to hold their office, shall not be eligible to appear, act or plead before the National Bench and the Regional Benches or the State Bench and the Area Benches thereof where he was the President or, as the case may be, a Member.

Section 111 Procedure before Appellate Tribunal (1) The Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908. However, it shall be guided by the principles of natural justice and shall have power to regulate its own procedure.

(2) The Appellate Tribunal shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit in respect of the following matters, namely: (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits;

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(3) Order of the Appellate Tribunal may be enforced in the same manner as if it were a decree made by a court in a suit pending therein. The Appellate Tribunal can send for execution of its orders to the court within the local limits of whose jurisdiction, — (a) in the case of an order against a company, the registered office of the company is situated; or (b) in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain.

(4) All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code. The Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973.

Section 112 Appeals to Appellate Tribunal a. Appeal by the Assessee: i.

Any person aggrieved by an order of Appellate Authority or Revisional Authority may appeal to the Appellate Tribunal against such order within 3 months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal. The tribunal can condone the delay of up to 3 months beyond the specified time period of 3 months, if it is satisfied that there was sufficient cause for the delay. ii.

Fees of filing and restoration of appeal: The fees for filing of appeal or its restoration shall be Rs. 1,000 for every Rs. 1 Lac of tax or ITC involved or the difference in tax or ITC involved or the amount of fine, fee or penalty determined in the order appealed against, subject to maximum of Rs. 25,000. iii.

Discretionary Power: The Appellate Tribunal may, in its discretion, refuse to admit any such appeal where the tax or ITC involved, or the difference in tax or ITC involved, or the amount of fine, fee or penalty determined by such order, does not exceed Rs. 50,000. iv.

Conditions for Pre-deposit - 20% of the disputed tax: No appeal shall be filed unless the appellant has paid – • In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and • A sum equal to 20% of the remaining amount of tax in dispute, in addition to the amount paid U/s 107 (6), arising from the said order subject to a maximum of fifty crore rupees (100 crores CGST+SGST/IGST), in relation to which the appeal has been filed.

On pre-deposit of tax, the recovery proceedings shall be stayed till the disposal of the appeal. b. Departmental appeal: i.

Orders appealable to Appellate Tribunal [Section 112 (3)] : The commissioner may, on his own motion, or upon request from the State/UT Commissioner call for and examine the record of any order passed by Appellate Authority or Revisional Authority for the purpose of satisfying himself as to the legality or propriety of the said order and may, by order, direct any officer subordinate to him to apply to the Appellate Tribunal within 6 months from the date on which the said order has been passed for determination of such points arising out of the said order as may be specified by him.

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Study Notes ii.

c.

The Application so filed shall be dealt by the Appellate Tribunal as it were an appeal made against the order of Appellate Authority or Revisional Authority and all the provisions of the Act shall apply accordingly. iii.

There is no requirement of making a pre-deposit in case of departmental appeal.

Other aspects: Memorandum of cross objection to be filed within 45 days [Section 112 (5)]: On receipt of notice that an appeal has been preferred, the other party may, within 45 days of the receipt of notice from tribunal, file a memorandum of cross-objections against any part of the order appealed against and such memorandum shall be disposed or by the Appellate Tribunal, as if it were an appeal presented within the specified time limit.

Production of additional evidence before the Appellate Authority or the Appellate Tribunal [Rule 112]: i.

General bar on production of additional evidences [Rule 112 (1)]: The appellant shall not be allowed to produce before the Appellate Authority or the Appellate Tribunal any evidences, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the Appellate Authority except in the following circumstances namely: • where the adjudicating authority or, as the case may be, the Appellate Authority has refused to admit evidence which ought to have been admitted, or • where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the adjudicating authority or, as the case may be, the Appellate Authority, or • where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal, or • where the adjudicating authority or, as the case may be, the Appellate authority has made the order appealed against without giving sufficient opportunity to the appellant to produce evidence relevant to any ground of appeal. ii.

No evidence shall be admitted unless the Appellate Authority or the Appellate Tribunal records in writing the reasons for its admission. iii.

The Appellate Authority or the Appellate Tribunal shall not make any evidence produced unless the adjudicating authority or an officer authorised in this behalf by the said authority has been allowed a reasonable opportunity – • to examine the evidence or document or to cross-examine any witness produced by the appellant; or • to produce any evidence or any witness in rebuttal of the evidence produced by the appellant.

Section 113 Orders of Appellate Tribunal i. ii. iii. iv.

Appellate Tribunal to pass the order confirming, modifying or annulling the decision or order appealed against.

The Appellate Tribunal also has power to remand the case back to the appellate authority or the Revisional authority or the original adjudicating authority.

Maximum 3 adjournments shall be granted to a party on showing reasonable cause to be recorded in writing.

The Appellate Tribunal is empowered to amend its order to rectify any mistake apparent from record, However, tribunal may rectify its order if the mistake is brought to its notice by Commissioner or other party to appeal within period of 3 months of date of such order. Opportunity of being heard to be granted

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v. vi.

vii.

in case such rectification results into enhancing an assessment or reducing a refund or input tax credit or otherwise increasing the liability.

The Appellate Tribunal to hear and decide the appeal, as far as possible, within a period of 1 year from the date of filing.

The Appellate Tribunal to communicate the copy of order to appellate authority / Revisional authority / original adjudicating authority, the appellant, the jurisdictional Commissioner, Commissioner of State Tax or Union Territory Tax. The jurisdictional officer shall issue a statement in FORM GST APL-04 clearly indicating the final amount of demand confirmed by the Appellate Tribunal.

Section 114 Financial and administrative powers of President The President is empowered to delegate his financial and administrative powers to any other Member or any officer of the National Bench and Regional Benches, on a condition that such Member or officer shall continue to act under the direction, control and supervision of the President while exercising such delegated powers.

Section 115 Interest on refund of amount paid for admission of appeal Where an amount paid by the appellant under sub-section (6) of section 107 or sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

Section 116 Appearance by authorised representative This section provides for appearance by authorised representative in proceedings or appeals except in circumstances where personal appearance is required for examination on oath or affirmation. i.

ii.

iii.

iv. v.

“Authorised representative” means – — relative or regular employee — Practising Advocate — Practising CA, CWA or CS — A retired government officer who had worked for not less than 2 years in a post not lower in rank than Group-B gazetted officer — Goods and Services Tax Practitioner Any person, who has retired or resigned after serving more than 2 years in the indirect tax departments of Government of India or any State Government as a gazetted officer, shall not be entitled to appear as authorised representative for a period of 1 year from the date of retirement or resignation.

Any person, — who has been dismissed or removed from government service; or — who is convicted of an offence under CGST Act, SGST Act, IGST Act, UTGST Act or under erstwhile laws; or — who is found guilty of misconduct by the prescribed authority; shall not be qualified as authorised representative Any person, who has become insolvent, shall not be qualified as authorised representative during the period of insolvency.

Any disqualification under SGST Act or UTGST Act shall be construed as disqualification under CGST Act.

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Study Notes Section 117 Appeal to High Court i. ii. iii. iv. v. vi. vii. viii. ix. x.

xi. xii.

High Court may admit an appeal if it is satisfied that the case involves a substantial question of law.

No appeal shall lie to High Court if such order is passed by National Bench or Regional Benches.

Appeal to be filed in the form GST APL 08, precisely stating the substantial question of law involved, within 180 days from the date of receipt of order appealed against accompanied by prescribed fee.

High Court is empowered to condone the delay in filing appeal.

On being satisfied, High Court shall formulate a substantial question of law.

Appeal to be heard only on the question so formulated and the respondent shall be allowed to argue that the case does not involve such question.

The High Court may hear the appeal on any other substantial question of law not formulated by it after satisfying, for reasons to be recorded, of involvement of such question in the case.

The High Court may determine any issue which has not been determined or has been wrongly determined by the State Bench or Area Benches.

Appeal to be heard by a Bench of not less than 2 Judges of High Court and shall be decided in accordance with the majority of opinion of such Judges.

Difference of opinion on any point shall be referred to one or more of the other Judges of High Court and such point shall be decided according to the opinion of majority of Judges who have heard the case including those who first heard it.

The effect of judgment of High Court shall be given on the basis of a certified copy of the judgment.

The provisions of Code of Civil Procedure relating to appeals to High Court shall apply to appeals under this section.

Section 118 Appeal to Supreme Court (1) An appeal shall lie to the Supreme Court— (a) from any order passed by the National Bench or Regional Benches of the Appellate Tribunal; or (b) from any judgment or order passed by the High Court in an appeal made under section 117 in any case which, on its own motion or on an application made by or on behalf of the party aggrieved, immediately after passing of the judgment or order, the High Court certifies to be a fit one for appeal to the Supreme Court.

(2) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the Supreme Court shall, so far as may be, apply in the case of appeals under this section as they apply in the case of appeals from decrees of a High Court.

(3) Where the judgment of the High Court is varied or reversed in the appeal, effect shall be given to the order of the Supreme Court in the manner provided in section 117 in the case of a judgment of the High Court.

Section 119 Sums due to be paid notwithstanding appeal, etc.

The sums due to the Government as a result of an order passed by the Appellate Tribunal or High Court shall be paid notwithstanding that an appeal has been preferred to High Court or Supreme Court, as the case may be.

Section 120 Appeal not to be filed in certain cases The board may fix monetary limits for regulating the filing of appeal etc. The Central tax officer may file appeal etc. in any other case involving the same or similar issues or questions of law if monetary amount is more. No person, being a party in appeal or application shall content that the officer of the central tax has acquiesced in the decision on the disputed issue by not filing an appeal or application. The Appellate Tribunal or court hearing

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Section 121 Non-appealable decisions & orders No appeal shall lie against any decision taken or order passed by an officer of central tax if such decision taken or order passed relates to any one or more of the following matters, namely:a. An order of the Commissioner or other authority empowered to direct transfer of proceedings from one officer to another officer; or b. An order pertaining to the seizure or retention of books of account, register and other documents; or c. An order sanctioning prosecution under this act; or d. An order passed U/s 80 (Payment of tax & other amount in installment).

Question & Answer Q1. What is the time limit for filing appeal to the Appellate authority by a person aggrieved by any decision or order passed by an adjudicating authority? Whether this time limit can be extended?

A. A person aggrieved by any decision or order passed by an adjudicating authority may file an appeal to the Appellate Authority within 3 months from the date of communication of decision/order of adjudicating authority.

The Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that there was sufficient cause for such delay.

Q2. Section 113 (3) of the CGST Act, 2017 provides that the Appellate Tribunal, may at any time within 3 months of the date of order, with a view to rectifying any mistake apparent from the record, amend any order passed by it. What would constitute “mistake apparent from record” for the purpose of this provision?

A. Failure to make into consideration the material evidence, which is present on record, would amount to a “mistake apparent on the face of the record”. [CCEx V. Bharat Bijlee Ltd. 2006 (SC)] When a decision rendered by the Apex Court is not considered, non-consideration of such binding precedent constitutes an error apparent on the face of the record. The binding decision of the Apex Court would cover even the period prior to the inception of such law during which the orders contrary to such ratio of the subsequent decision were passed [HLL V. CCEx, 2006 (Tri. LB)] Other mistakes apparent on the face of the record, which can be rectified by the Tribunal in terms of section 113 (3), can be typographical error, calculation mistakes, point raised in appeal but not considered, retrospective amendments in the statute, etc.

Q3. An assessee moved an application on 15th December 2018 under section 113 (3) for rectification of mistake in order passed on 30th September 2018. The Tribunal took up the application on 15th May 2019 and dismissed the same on the ground that the Tribunal cannot entertain an application for rectification beyond a period of 3 months. Is this correct?

A. Section 113 (3) states that the Appellate Tribunal may at any time within 3 months from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it. Since, in the present case, the application has been made within 3 months from the date of the order, it is not relevant for the purpose of limitation as to when the Tribunal takes up the same for hearing and disposal. Therefore, in this case, the Tribunal cannot reject the application for rectification of mistake on the ground of limitation if application is made with in time limit.

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Study Notes Q4. Discuss with the help of decided case, whether the re-appreciation of evidence on a debatable point by the GST Appellate Tribunal can be considered as rectification of mistake apparent on record U/s 113 (3)?

A. No, re-appreciation of evidence by GST Appellate Tribunal on a debatable point cannot be considered to be rectification of mistake apparent on record U/s 113 (3) of the CGST Act, 2017.

Supreme Court, in case of CCE V RDE Concrete India Pvt. Ltd. [2011] observed that a mistake apparent on record must be an obvious and patent mistake. It need not be established by a long-drawn process of reasoning.

Arguments not accepted earlier during disposal of appeal cannot be accepted while hearing rectification of mistake application.

The Supreme Court held that CESTAT had reconsidered its legal view as it concluded differently by accepting the arguments which it had rejected earlier. Hence, the court opined that in pursuance of a rectification application, CESTAT cannot reappreciate the evidence and reconsider its legal view taken earlier.

Q5. Can department file appeal in respect of same assessee, if in respect of some years, no appeal was filed involving identical dispute?

A. It was held in C.K. Gangadharan V. CIT [2008] (SC) that if the revenue has not filed an appeal against any order/judgement in one case, it would not be allowed to file an appeal in another case when the same issue is involved due to the reasons that it cannot pick and choose and certainty in law should be ensured.

However, the revenue can file an appeal in another case involving same/similar issue – •

Where there is just cause in doing so i.e. where appeal was not preferred earlier in view of small amount involved; or

•

Where it is in public interest to do so; or

•

For a pronouncement by higher court when divergent views are expressed by Tribunals/High Courts.

Section 120 provides that the Board may issue orders or instructions or directions fixing monetary limits for the purposes of regulating the filing of appeal, etc. by the Department. If Department has not filed an appeal, etc. as per circular fixing monetary limits, the Department may file any appeal, application or revision in any other case involving the same or similar issues or questions of law and the assessee cannot contend that the Department has accepted the decision on the disputed issue by not filing the appeal.

Q6. Where Commissioner of CGST feels that the order passed is not legal or proper, whether he can revise the order on his own?

A. The Commissioner cannot revise the order U/s 107. For CGST, as per Sec. 107 (2), if the commissioner finds an order or decision (passed by an adjudication authority) to be not legal or proper, he can pass an order setting out the points for determination where he is of the view that the order is not legal and proper and directing a GST officer sub-ordinate to him to file an application to appellate authority. Such application is then treated by the appellate authority as if it were an appeal.

Q7. Does the AA have the power to remand the case back to the adjudicating authority for whatever reasons?

A. No. Section 107(11) specifically states that the AA shall, after making such inquiry as may be necessary, pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against, but shall not refer the case back to the authority that passed the decision or order.

Q8. When the Tribunal is having powers to refuse to admit the appeal?

A. In cases where the appeal involves – •

tax amount or input tax credit or

•

the difference in tax or the difference in input tax credit involved or

•

amount of fine, fees or amount of penalty determined by such order,

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A. Yes. As per Section 115 of the Act, where an amount deposited by the appellant under sub-section (6) of section 107 or under sub-section (8) of section 112 is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, as the case may be, interest at the rate specified under section 56 not exceeding 9% shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

Q10. Compute the quantum of pre-deposit required to be made on U/s 107 of the CGST Act 2017 in each of the following independent case:

(a) In an order Dated 18-10-2018 issued to ABC Ltd., the Joint Commissioner of central tax has confirmed a tax demand of Rs. 50,00,000. ABC Ltd. has admitted Rs. 5,00,000 as tax liability and intends to file an appeal with the Commissioner (Appeals) against tax demand of Rs. 45,00,000.

(b) In an order Dated 18-10-2018 issued to XYZ Ltd., the Joint Commissioner of central tax has confirmed a tax demand of Rs. 50,00,000 and imposed a penalty of Rs. 5,00,000. XYZ Ltd. intends to file an appeal with the Commissioner (Appeals) against the said order.

A.

(a) Section 107 (6) of the CGST Act 2017, require an appellant before Appellate Authority to pre-deposit full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order.

Thus, ABC Ltd. has to pre-deposit Rs. 5,00,000 (admitted tax) and 10% of Rs. 45,00,000 (tax in dispute) = Rs. 9,50,000.

(b) Section 107 (6) of the CGST Act 2017, require an appellant before Appellate Authority to pre-deposit full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order. In this case since entire amount of tax demanded is in dispute, hence XYZ Ltd. has to pre-deposit 10% of Rs. 50,00,000 = Rs. 5,00,000.

Q11. Whether other party could file cross objections against the appeal preferred by the assessee or by the department?

A. On receipt of notice that an appeal has been preferred under section 112, other party against whom an appeal is preferred, could file a cross objection to the appeal even though he has not preferred an appeal. A Memorandum of Cross-Objections have to be filed within 45 days from the date of receipt of the notice of appeal in FORM GST APL-06. The Tribunal shall dispose of the cross objections as if it is an appeal.

Q12. Whether appeal / application / cross objections filed beyond the time limit would be entertained?

A. Tribunal has been conferred with powers to condone the delay upto 3 months, beyond the period of 3 months or 6 months in case of filing of appeals, where sufficient cause for the delay is shown. Similarly, delay upto 45 days could be condoned by the Tribunal in filing the memorandum of cross objections where sufficient cause for the delay is shown.

Q13. Whether interest becomes payable on refund of pre-deposit amount?

A. Yes. As per sec 115 of the Act, where an amount deposited by the appellant under section 107(6) or under section 112(8) is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal, as the case may be. Interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment of the amount till the date of refund of such amount.

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Study Notes Q14. Whether the Tribunal has power to rectify / amend the orders passed by it?

A. Yes, the Tribunal may amend any order passed by it under in terms of Section 113(1) so as to rectify any mistake apparent from the record. The Hon’ble Tribunal could undertake rectification on its own or on application by either of the parties to the appeal (by the Commissioner or the Commissioner of State tax or the Commissioner of the Union territory tax or the other party to the appeal). The application for rectification shall be made within a period of three months from the date of the Order sought to be rectified.

However, no amendment which has the effect of enhancing an assessment or reducing a refund or input tax credit or otherwise increasing the liability of the other party, shall be made under section 113(3), unless the Tribunal has given notice to him of its intention to do so and has allowed him a reasonable opportunity of being heard.

Q15. What are the orders against which appeal could be preferred before the Supreme Court?

A. Following orders could be challenged before the Supreme Court: a) Order passed by the National Bench or Regional Benches of the Appellate Tribunal; or (no appeal in High Court) b) Judgment or order passed by the High Court in an appeal made under section 117 in any case which, on its own motion or on an application made by or on behalf of the party aggrieved, immediately after passing of the judgment or order, the High Court certifies to be a fit one for appeal to the Supreme Court.

Q16. Who is an Appellate Authority?

A. “Appellate Authority” means an authority appointed or authorised to hear appeals as referred to in section 107. Section 107 provides that appeal shall be preferred before such Appellate Authority as may be prescribed.

Rule 109A provides that for the purpose of appeal, an Appellate Authority shall be:

(a) the Commissioner (Appeals) where such decision or order is passed by the Additional or Joint Commissioner;

(b) Any officer not the below the rank of Joint Commissioner (Appeals) where such decision or order is passed by the Deputy or Assistant Commissioner or Superintendent.

Q17. Under what circumstances Commissioner could direct the Officer to prefer an appeal against the order of the adjudicating authority?

A. The Commissioner may, on his own motion, or upon request from the Commissioner of State tax Commissioner of Union Territory tax, call for and examine the records of any proceeding in which an adjudicating authority has passed any decision or order under the CGST Act or the SGST Act or the UTGST Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order. The Commissioner may by an order, direct any Officer subordinate to him to apply to the Appellate Authority within six months from the date of communication of the said decision or order for the determination of such points arising out of the said decision or order as may be specified by the Commissioner in his order.

Q18. What type of order could the Appellate Authority pass? Whether Appellate Authority could refer the case back to Adjudicating Authority?

A. The Appellate Authority may pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed against. The order shall be in writing giving details as to determination. The Appellate Authority shall, along with its order under section 107(11), issue a statement in FORM GST APL-04

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Q19. Whether Order of the Appellate Authority could also be stayed by Revisional Authority?

A. The Order which has been subject to an appeal before the Appellate Authority (section 107) as well as orders of the Appellate Authority which are appealed before the Tribunal cannot be stayed by the Revisional Authority.

However, the Revisional Authority could pass an order under revisionary power on any point which has not been raised and decided in an appeal before Appellate Authority. Such, revision order could be passed within 1 year from the date of the order of the Appellate Authority or 3 years from the date of the original order, whichever is later.

Q20. When a Revisional Authority cannot exercise its powers?

A. Revisional authority shall not exercise its powers, in case of following:

(a) When the order has been subject to an appeal before the adjudicating authority (under section 107) or the Tribunal (under section 112) or the High Court (under section 117) or the Supreme Court (under section 118); or

(b) If the period of 6 months as specified under 107(2) for preferring an appeal by department before Appellate Authority has not yet expired or where more than three years have expired after the passing of the decision or order sought to be revised; or

(c) where the order has already been taken for revision under section 108 at any earlier stage; or (d) revisionary order passed under section 108(1).

Q21. What is the Constitution of National Appellate Tribunal and how the same is constituted? Where the National Bench and Regional Bench shall be located?

A. The Central Government shall on the recommendation of the GST Council by Notification constitute Goods and Services Tax Appellate Tribunal (hereinafter referred to as the Appellate Tribunal) for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority.

National bench shall be located at New Delhi. The Central Government on the recommendations of the Council, by notification, constitute such number of Regional Benches as may be required.

Q22. What is the composition of National Bench and Regional Benches?

A. National Bench shall be headed by the National president along with one Technical member (Centre) and one Technical Member (State). Regional Benches shall consist of a Judicial Member, one Technical Member (Centre) and one Technical Member (State).

Q23. What is jurisdiction of National or Regional Benches of the Appellate Tribunal?

A. National or Regional Benches of the Appellate Tribunal shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in the cases where one of the issues involved relates to the place of supply.

Q24. What is State Bench or Area Bench?

A. The Government, by notification, specify for each State or Union territory, a Bench of the Appellate Tribunal, for exercising the powers of the Appellate Tribunal within the concerned State or Union territory. Government shall, on receipt of a request from any State Government, constitute such number of Area Benches in that State, as may be recommended by the Council.

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Study Notes Q25. What is jurisdiction of State Bench or Area Bench?

A. State Bench or Area Benches shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in all cases other than those involving matters where one of the issues involved relates to the place of supply.

Q26. What is the composition of State Bench and Area Benches?

A. Each State Bench and Area Benches shall consist of a Judicial Member, one Technical Member (Centre) and one Technical Member (State) and the State Government may designate the senior most Judicial Member in a State as the State President.

Q27. Whether any matter could be heard by bench consisting of members less than 3 as set out above?

A. Yes, in the absence of a Member in any Bench due to vacancy or otherwise, any appeal may, with the approval of the President or, as the case may be, the State President, be heard by a Bench of two Members.

Further, where the tax or input tax credit involved or the difference in tax or input tax credit involved or the amount of fine, fee or penalty determined in any order appealed against, does not exceed Rs. 5 Lakhs and which does not involve any question of law may, with the approval of the President and subject to such conditions as may be prescribed on the recommendations of the Council, be heard by a bench consisting of a single member.

Q28. What would be consequence where there is a difference of opinion on any issue among the members of the bench?

A. If the Members of the Bench (National/Regional/State/Area) differ in opinion on any point or points, it shall be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President or as the case may be, State President for hearing on such point or points to one or more of the other Members of the National Bench, Regional Benches, State Bench or Area Benches and such point or points shall be decided according to the opinion of the majority of Members who have heard the case, including those who first heard it.

Q29. Can the Tribunal reject to entertain an appeal based on the monetary limits?

A. Yes. The Tribunal has been conferred with discretion to refuse to admit an appeal where: • the tax or input tax credit involved or •

the difference in tax or input tax credit involved or

• the amount of fine, fee or penalty determined by such order, does not exceed Rs. 50,000/Q30. Which are the matters on which the appeal against order of the Tribunal could be preferred before the High Court?

A. Appeal shall lie to the High Court against an Order passed by the State Bench or Area Benches of the Tribunal.

Q31. Whether all decisions and orders can be appealed?

A. No. in terms of Section 121, orders listed below cannot be appeal against:

(a) An order of the Commissioner or other competent authority for transfer of proceeding from one officer to another officer; or

(b) An order pertaining to the seizure or retention of books of account, register and other documents; or

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Q32. XY Company received an adjudication order passed by the Assistant Commissioner of Central Tax on 0111-2017 under section 73 of the CGST Act, 2017 wherein it was decided as follows: Particulars CGST and SGST due (Total) Rs. 6,00,000 Interest @ 18% p.a. for number of delayed days Penalty

Rs. 60,000

The assessee filed an appeal before the Appellate Authority on 26-11- 2017.

Case I How much the company has to pay as pre-deposit of duty under section 107(6) of the CGST Act, 2017?

Case II Whether your answer would be different if the assessee appeals only against part of the demanded amount say Rs. 4,00,000 and admits the balance liability of tax amounting to Rs. 2,00,000 arising from the said order.

(CA Final May 2018 New)

A. Section 107(6) of the CGST Act, 2017 provides that no appeal shall be filed before Appellate Authority, unless the appellant pays:(a) in full, tax, interest, fine, fee and penalty arising from impugned order, as is admitted by him; and (b) 10% of remaining tax in dispute arising from the impugned order.

Thus, in Case-I, XY Company has to make a pre-deposit of 10% of Rs. 6,00,000, which is Rs. 60,000 assuming that XY Company disagrees with the entire tax demanded.

However, in Case-II, since XY Company admits the tax liability of Rs. 2,00,000 and disputes the tax demanded of only Rs. 4,00,000, it has to make a pre-deposit of: (i) Rs. 2,00,000 + Rs. 20,000 [proportionate penalty on tax admitted] + interest @ 18% p.a. payable on the tax admitted for the period of delay, and (ii) 10% of Rs. 4,00,000 which is Rs. 40,000.

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Study Notes Section 97 Section 96 & 99 Section 98 Section 100 & 101 Section 102 Section 103 Section 104 Section 105 & 106

Questions for which advance ruling can be sought Authority for Advance Ruling (AAR) and Appellate Authority for Advance Ruling (AAAR) Procedure for obtaining advance ruling Appeals against order of AAR to the Appellate Authority Rectification of Mistakes Applicability of Advance Ruling Advance Ruling to be void in certain circumstances Powers and Procedure of AAR and AAAR

Section 97 Questions for which advance ruling can be sought a. Classification of any goods or services or both; b. Applicability of a notification issued under the provisions of this Act; c.

Determination of time and value of supply of goods or services or both;

d. Admissibility of input tax credit of tax paid or deemed to have been paid; e. Determination of the liability to pay tax on any goods or services or both; f.

Whether applicant is required to be registered;

g. Whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Section 96 Authority for Advance Ruling (AAR) The Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect of that State or Union territory.

The Government shall appoint an officer not below the rank of Joint Commissioner as member of the Authority for Advance Ruling. The authority shall consist of 1) one member from amongst the officers of CGST; and 2) one member from amongst the officers of SGST/UTGST.

Section 99 Appellate Authority for Advance Ruling (AAAR) The Appellate Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act or a Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in respect of that State or Union territory.

The Appellate Authority shall consist of 1) Chief Commissioner of CGST as designated by the Board; and 2) the Commissioner of SGST/UTGST having jurisdiction over the applicant.

This would mean that the ruling given by the AAR & AAAR will be applicable only within the jurisdiction of the concerned state or union territory. It is also for this reason that questions on determination of place of supply cannot be raised with the AAR or AAAR.

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Join India’s largest IDT doubt solving telegram group https://telegram.me/cafinalidtqueryamitjain Section 98 Procedure for obtaining advance ruling i.

The applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form

ii.

and manner.

Upon receipt of an application, the Authority shall send a copy of application to the concerned officer in whose jurisdiction the applicant falls and call for relevant records.

iii.

iv.

The Authority may, after examining the application and the records called for and after hearing the applicant or his authorized representative and the concerned officer or his authorized representative, by order, either admit or reject the application.

Application for advance ruling will not be admitted in cases where the question raised in the application is already pending or decided in any proceedings in the case of an application under any of the

v.

provisions of this Act. If the application is rejected, it should be by way of speaking order giving the reasons for rejection.

vi.

If the application is admitted, the AAR shall pronounce its ruling within 90 days of receipt of application.

Before giving its ruling, it shall examine the application and any further material furnished by the applicant or by the concerned department officer.

vii.

Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the

viii.

jurisdictional officers of CGST /SGST. If there is a difference of opinion between the two members of AAR, they shall refer the point or points on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that no advance ruling can be given in respect of the question on which difference persists at the level of AAAR.

ix.

A copy of the advance ruling pronounced by the Authority duly signed by the members and certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer and the jurisdictional officer.

Section 100 & 101 Appeals against order of AAR to the Appellate Authority i.

If the applicant is aggrieved with the ruling of the AAR, he can file an appeal with AAAR. Similarly, if the jurisdictional officer of CGST / SGST does not agree with the finding of AAR, he can also file an appeal with AAAR.

ii.

Any appeal must be filed within 30 days from the receipt of the advance ruling. AAAR has the power to condone the delay of 30 days on being shown the sufficient cause for the delay.

iii.

The Appellate Authority must pass an order after hearing the parties to the appeal within a period of 90 days of the filing of an appeal.

iv.

If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling is issued in respect of the question under appeal.

v.

A copy of the advance ruling pronounced by the Appellate Authority duly signed by the members and certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer, the jurisdictional officer & to the Authority.

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Study Notes Section 102 Rectification of mistakes The law gives power to AAR and AAAR to amend their order to amend any order passed by them under section 98 or section 101 of the CGST / SGST Act,2017, so as to rectify any error apparent on the face of the record, if such error is noticed by the Authority or the Appellate Authority on its own accord or is brought to its notice by the concerned officer, the jurisdictional officer, the applicant or the appellant within a period of six months from the date of the order. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.

Section 103 Applicability of Advance Ruling An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant and on the concerned officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not applicable to similarly placed other taxable persons in that State. It is only limited to the person who has applied for an advance ruling. There is no specific fixed time period for advance ruling validity; it has been provided that advance ruling shall be binding till the period when the law, facts or circumstances supporting the original advance ruling have not changed.

Section 104 Advance Ruling to be void in certain circumstances However, an advance ruling shall be held to be ab initio void if the AAR or AAAR finds that the advance ruling was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. An order declaring advance ruling to be void can be passed only after hearing the applicant.

Example 1: ABC Ltd. sought an advance ruling regarding the taxability of “Kumkum” manufactured by them & used for pooja & other religious purposes as claimed by them. The authority ruled in favour of ABC Ltd. and exempted their product “Kumkum” from the levy of GST as a pooja material. Later, it brought into the notice of the Authority that the said product is actually used as a colorant in the cloth industry as a dying agent. After giving opportunity, the authority can now pass an order U/s 104, declaring the advance ruling as void ab initio.

Section 105 & 106 Powers & Procedure of AAR and AAAR i.

Both the Authority and the Appellate Authority are vested with the powers of a civil court under the Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and

ii.

examining him on oath, and compelling production of books of account and other records.

Both the Authority and the Appellate Authority shall be deemed to be a civil court for the purposes of

iii.

section 195 of the Code of Criminal Procedure, 1973.

Any proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code. 1860. The both authorities have the power to regulate their own procedure.

A new rule 107A has been inserted vide N/N 55/2017-CT, Dated 15.11.2017, which states that in respect of any process or procedure prescribed in Chapter XII, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include the manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to the CGST Rules.

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Question & Answer Q1. What is the objective of having a mechanism of Advance Ruling?

A. The broad objective for setting up such an authority is to: •

provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the applicant;

•

attract Foreign Direct Investment (FDI);

•

reduce litigation;

•

pronounce ruling expeditiously in transparent and inexpensive manner.

Q2. Whether Appeal can be filed before High Court or Supreme Court against the ruling of Appellate Authority for Advance Rulings?

A. The CGST /SGST Act do not provide for any appeal against the ruling of Appellate Authority for Advance Rulings. Thus, no further appeals lie and the ruling shall be binding on the applicant as well as the jurisdictional officer in respect of applicant. However, writ petition may lie before Hon’ble High Court or the Supreme Court.

Q3. Can advance ruling be applied for after supply of goods and/or services?

A. Yes, as per section 95 (a) of the Act, application can be made for advance ruling in relation to the supply of goods and/or services, being undertaken by applicant.

Q4. When AAR shall not admit the application for advance ruling?

A. AAR shall not admit the application where the issue raised is already pending or decided in any proceedings in the case of an applicant under any of the provisions of this Act. Q5. Are the tax authorities bound by the advance ruling?

A. Only the jurisdictional officer/concerned officer, in respect of applicant who has sought advance ruling is bound by such rulings pronounced.

Q6. What are the powers vested with the authority and the appellate authority?

A. The authority or the appellate authority shall have all the powers of a civil court to exercise the following powers: (i) discovery and inspection; (ii) enforcing attendance of any person and examining him on oath; (iii) issuing commissions and compelling production of books of account and other records.

Q7. Can the Ruling issued by the AAR or order passed by the AAAR be rectified?

A. In case there is any error apparent on the face of the records, the AAR or AAAR as the case may be, can amend the original order passed by it, if such error is noticed by the AAAR or AAAR on its own record or is brought to its notice by the concerned officer, the jurisdictional officer, the applicant or the appellant, within a period of 6 months from the date of said order. However, no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made unless the applicant or the appellant has been given an opportunity of being heard.

Example: In case AAR or AAAR has decided the advance ruling and issued the order on 31st July 2018 and later on 28th September 2018, it has been noticed by the authority itself (or any concerned officer or any jurisdictional officer or applicant) that there is some mistake apparent on record then the authority may rectify such order. The tax rate decided in earlier order was taken as 18% instead of 28%, then before rectifying such order the Authority shall provide the opportunity of hearing to the applicant.

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Section 144 Presumption as to documents in certain cases

Where any document– i. is produced by any person under this Act or any other law for the time being in force; or ii. has been seized from the custody or control of any person under this Act or any other law for the time being in force; or iii. has been received from any place outside India in the course of any proceedings under this Act or any other law for the time being in force, and such document is tendered by the prosecution in evidence against him or any other person who is tried jointly with him, the court shall— (a) unless the contrary is proved by such person, presume— i. the truth of the contents of such document; ii. that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that person’s handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; (b) admit the document in evidence notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence.

The Micro films, facsimile copies and computer printouts shall be deemed to be document and is admissible as evidence.

In any proceedings, where it is desired to give a statement in evidence, a certificate identifying the document containing the statement and describing the manner in which it was produced and giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer, shall be evidence of any matter stated in the certificate and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.

The common portal (www.gst.gov.in) would facilitate registration, tax payment, filing of returns, computation and settlement of integrated tax and other prescribed purposes. www.ewaybillgst.gov.in would facilitate furnishing electronic way bill (e-way bill).

The Government may, on the recommendations of the Council, notify certain supplies of goods as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange if such goods are manufactured in India. The Central Government vide Notification No. 48/2017 Dated 18th Oct’17 has notified the following supplies as deemed exports: 1. Supply of goods by a registered person against Advance Authorisation Provided that goods so supplied, when exports have already been made after availing input tax credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer authorised by him within 6 months of such supply,; Provided further that no such certificate shall be required if input tax credit has not been availed on inputs used in manufacture of export goods.

Section 145 Admissibility of Micro Films, Facsimile copies of Documents and Computer Printouts as documents and as evidence Section 146 Common Portal Section 147 Deemed exports

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Section 148 Special procedure for certain processes Section 149 Goods & Service Tax Compliance Rating

Section 150 Information Return Section 151 Power to collect statistics

Section 152 Bar on disclosure of information

Section 153 Taking assistance from an expert Section 154 Power to take samples Section 155 Burden of proof Section 156 Persons deemed to be public servants Section 157 Protection of

Particulars 2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation.

3. Supply of goods by a registered person to EOU. 4. Supply of gold by a bank or PSU specified in the Notification No. 50/2017Customs, Dated the 30th June 2017 (as amended) against Advance Authorisation.

The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed, notify certain classes of registered persons, and the special procedures to be followed by such persons including those with regard to registration, furnishing of return, payment of tax and administration of such persons.

(1) Every registered person may be assigned a goods and services tax compliance rating score by the Government based on his record of compliance with the provisions of this Act. (2) The goods and services tax compliance rating score may be determined on the basis of such parameters as may be prescribed.

(3) The goods and services tax compliance rating score may be updated at periodic intervals and intimated to the registered person and also placed in the public domain in such manner as may be prescribed.

Covered in Chapter 13 Returns

The Commissioner may, by way of a notification, direct collection of statistics for the purpose of better administration of the Act. After issuance of such notification, the Commissioner or any person authorized by Commissioner in this regard may call all concerned persons to furnish such information or return relating to any matter in respect of which statistics is being collected.

There is bar on publication and use of information of any individual return furnished U/s 150/151 relating to a particular person and no such information shall be used for the purpose of any proceedings under this Act. Similarly, there is bar on access to any information or any individual return referred to in Sec. 151. However, this bar is not applicable to the publication of any information relating to a class of taxable persons or class of transactions, if in the opinion of the Commissioner, it is desirable in the public interest to publish such information.

Any officer not below the rank of Assistant Commissioner may, having regard to the nature and complexity of the case and the interest of revenue, take assistance of any expert at any stage of scrutiny, inquiry, investigation or any other proceedings before him.

The Commissioner or an officer authorized by him may take samples of goods form the possession of any taxable person, where he considers it necessary, and provide a receipt for any samples so taken.

Where any person claims that he is eligible for input tax credit under this Act, the burden of proving such claim shall lie on such person.

All persons discharging functions under this Act shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.

Immunity from any legal or departmental proceedings is provided to the GST officers and officers of the Tribunal for the acts done in good faith under the provisions of this Act. Actions taken in exercise of official functions cannot result in liability devolving on the

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action taken under this Act Section 158 Disclosure of information by a public servant

officers. It is this protection that officers enjoy while exercising authority vested in the law without fear or favour.

(1) All particulars contained in any statement made, return furnished or accounts or documents produced in accordance with this Act, or in any record of evidence given in the course of any proceedings under this Act (other than proceedings before a criminal court) or in any record of any proceedings under this Act, save as provided in Section 158 (3), shall not be disclosed.

(2) No court shall require any officer appointed or authorized under this Act to produce before it or to give evidence before it is respect of particulars referred to in Section 158 (1).

(3) Nothing contained in this section shall apply to the disclosure of information – a. For prosecution. b. For carrying out the objects of the Act. c. For service of notice or recovery of demand. d. For furnishing to Court in a proceeding where Government is a party. e. For audit of tax receipts or refunds. f. For inquiry into the conduct of GST officer. g. For enabling levy/realization of any tax or duty. h. By lawful exercise of powers. i. For inquiry into a charge of misconduct by any professional. j. For data entry on automated system. k. For any other law. l. In public interest.

If the commissioner or any authorized officer, is of the opinion that it is necessary or expedient in the public interest to publish the name of any person and any other particulars relating to any proceedings or prosecution under this Act in respect of such person, it may cause to be published such name and particulars in such manner as it think fit.

No publication shall be made in respect of penalty till disposal of appeal if the same has been filed or time limit for filing appeal has not expired. In this case of firm, company or other association of persons, the names of the partners of the firm, directors, managing agents, secretaries and treasurers or managers of the company, or the members of the association, as the case may be, may also be published if, in the opinion of the Commissioner, or any other officer authorized by him in this behalf, circumstances of the case justify it.

Assessment, re-assessment, etc. shall not to be invalid merely on grounds of procedural infractions. The service of any notice, order or communication shall not be called in question, if the notice, order or communication, as the case may be, has already been acted upon by the person to whom it is issued or where such service has not been called in question at or in the earlier proceedings commenced, continued or finalized pursuant to such notice, order or communication.

Without prejudice to the provisions of section 160, and notwithstanding anything contained in any other provisions of this Act, any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document, either on its own motion or where such error is brought to its notice by any officer appointed under this Act or an officer appointed under the State Goods and Services Tax Act or an officer appointed under the Union Territory Goods and Services Tax Act or by the affected person within a period of three months from the date of issue of such decision or order or notice or certificate or any other document, as the case may be:

Section 159 Publication of information in respect of persons in certain cases

Section 160 Assessment proceedings, etc., not to be invalid on certain grounds Section 161 Rectification of errors apparent on the face of record

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Section 162 Bar on jurisdiction of civil courts Section 163 Levy of fee Section 164 Power of Government to make rules

Section 165 Power to make regulations Section 166 Laying of rules, regulations & notifications

Section 167 Delegation of powers Section 168 Power to issue instructions or directions

Particulars Provided that no such rectification shall be done after a period of six months from the date of issue of such decision or order or notice or certificate or any other document: Provided further that the said period of six months shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or arithmetical error, arising from any accidental slip or omission: Provided also that where such rectification adversely affects any person, the principles of natural justice shall be followed by the authority carrying out such rectification.

Save as provided in sections 117 and 118, no civil court shall have jurisdiction to deal with or decide any question arising from or relating to anything done or purported to be done under this Act. Wherever a copy of any order or document is to be provided to any person on an application made by him for that purpose, there shall be paid such fee as may be prescribed.

(1) The Government may, on the recommendations of the Council, by notification, make rules for carrying out the provisions of this Act. (2) Without prejudice to the generality of the provisions of sub-section (1), the Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provisions are to be or may be made by rules.

(3) The power to make rules conferred by this section shall include the power to give retrospective effect to the rules or any of them from a date not earlier than the date on which the provisions of this Act come into force.

(4) Any rules made under sub-section (1) or sub-section (2) may provide that a contravention thereof shall be liable to a penalty not exceeding ten thousand rupees.

The Board may, by notification, make regulations consistent with this Act and the rules made thereunder to carry out the provisions of this Act. a. The Act permits making of rules by Government, issuance of regulation by Board and issuance of notification by the Government. b. Such rule, regulation and notification, which is a part of delegated legislation is placed before the Parliament. c. It is laid before the Parliament, as soon as may be after it is made or issued, when the Parliament is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions. d. Before the expiry of the session or successive sessions both Houses may make suitable modifications and would have effect in such modified form. e. However, any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation or notification, as the case may be.

The Commissioner may, by notification, direct that subject to such conditions, if any, as may be specified in the notification, any power exercisable by any authority or officer under this Act may be exercisable also by another authority or officer as may be specified in such notification.

There are three aspects to the provision, namely: • • •

authority issuing the instruction; persons whom it binds, and its efficacy.

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Section 169 Service of notice in certain circumstances

Section 170 Rounding off of tax, etc.

Particulars It is the Competent Authority who is empowered to issue the orders, instruction or directions. The purpose is to bring in uniformity in the implementation of the Act; and it is binding on all GST officers.

Thus, any circular which is general or administrative in nature is binding on the assessing officer and other officers at basic level. Once the circular is cited they cannot ignore it and decide the matter independently. The circular or instruction is not binding on the assessee.

As regards contrary views regarding binding force of a circular which is against the legal provisions on the assessee or the Authorities is not expressly addressed in this Section.

However, officers are not liable for passing orders contrary to law involving interpretation by higher judiciary if it can be shown that such orders are in conformity with orders, instruction or directions issued under this Section.

Sub-section (2) of section 168 designates the Commissioner or Joint Secretary posted in the Board for exercising certain powers conferred under specific provisions. Such powers would be exercised with the approval of the Board.

(1) Manner of Service: Any decision, order, summons, notice or other communication under this Act or the rules made thereunder shall be served by any of the following methods, namely:(a) by giving or tendering it directly or by a messenger including a courier to the addressee or the taxable person or to his manager or authorised representative or an advocate or a tax practitioner holding authority to appear in the proceedings on behalf of the taxable person or to a person regularly employed by him in connection with the business, or to any adult member of family residing with the taxable person; or (b) by registered post or speed post or courier with acknowledgement due, to the person for whom it is intended or his authorised representative, if any, at his last known place of business or residence; or (c) by sending a communication to his e-mail address provided at the time of registration or as amended from time to time; or (d) by making it available on the common portal; or (e) by publication in a newspaper circulating in the locality in which the taxable person or the person to whom it is issued is last known to have resided, carried on business or personally worked for gain; or (f) if none of the modes aforesaid is practicable, by affixing it in some conspicuous place at his last known place of business or residence and if such mode is not practicable for any reason, then by affixing a copy thereof on the notice board of the office of the concerned officer or authority who or which passed such decision or order or issued such summons or notice.

(2) Deemed Service: Every decision, order, summons, notice or any communication shall be deemed to have been served on the date on which it is tendered or published or a copy thereof is affixed in the manner provide in section 169 (1).

(3) Deemed service in case of registered post or speed post: When such decision, order summons, notice or any communication is sent by registered post or speed post, it shall be deemed to have been received by the addressee at the expiry of the period normally taken by such post in transit unless the contrary is proved.

The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund or any other sum due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is 50 paise or more, it shall be increased to Rs. 1 and if such part is less than 50 paise it shall be ignored.

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Section 171 Anti-profiteering measure

It mandatory that any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed to the recipient by way of commensurate reduction in prices.

National Anti-Profiteering Authority is therefore being constituted by the Central Government to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods and/or services supplied by him.

The National Anti-Profiteering Authority shall be a five member committee consisting of a Chairman who holds or has held a post equivalent in rank to a Secretary to the Government of India; and four Technical Members who are or have been Commissioners of State tax or central tax for at least one year or have held an equivalent post under earlier laws.

The Authority shall cease to exist after the expiry of two years from the date on which the Chairman enters upon his office unless the GST Council recommends otherwise.

Duties of Authority: It shall be the duty of the authorityI.

to determine whether the reduction in tax rate or the benefit of input tax credit has been passed on by the seller to the buyer (hereinafter collectively referred to as ‘benefit’) by reducing the prices

II.

to identify the taxpayer who has not passed on the benefit

III.

to order a. reduction in prices b. return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be. If the eligible person does not claim return of the amount or is not identifiable, the amount must be deposited in the Consumer Welfare Fund; c. imposition of penalty d. cancellation of registration

IV.

to furnish a performance report to the GST Council by the 10th of the month succeeding each quarter

Process followed by the Authority Application to the Authority: All applications from interested parties on issues of local nature shall first be examined by the State Level Screening Committee. On being satisfied that the supplier has not passed on the benefit, the Screening Committee will forward the application with its recommendations to the Standing Committee on Antiprofiteering.

If the Standing Committee is satisfied that there is a prima facie evidence to show that the supplier has not passed on the benefit, it shall refer the matter to the Director General of Anti-profiteering for a detailed investigation.

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Particulars Investigation: Directorate General of Anti-profiteering shall conduct investigation and collect evidence necessary to determine undue profiteering and before initiation of the investigation, issue a notice to the interested parties (and to such other persons as deemed fit for a fair enquiry into the matter).

The evidence or information presented to Directorate General of Antiprofiteering by one interested party can be made available to the other interested parties, participating in the proceedings. The evidence provided will be kept confidential and the provisions of section 11 of the Right to Information Act, 2005, shall apply mutatis mutandis to the disclosure of any information which is provided on a confidential basis.

Directorate General of Anti-profiteering can seek opinion of any other agency or statutory authorities in the discharge of his duties. The Director General of Anti-profiteering, or an officer authorized by him will have the power to summon any person either to give evidence or to produce a document or any other thing. He will also have same powers as that of a civil court and every such inquiry will be deemed to be a judicial proceeding.

Directorate General of Anti-profiteering will complete the investigation within a period of 3 months or within such extended period not exceeding a further period of 3 months for reasons to be recorded in writing as allowed by the Standing Committee. Upon completion of the investigation, Directorate General of Anti-profiteering will furnish to the Authority, a report of its findings along with the relevant records.

Order of the Authority Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order(a) reduction in prices; (b) return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen per cent, from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be; (c) the deposit of an amount equivalent to fifty per cent. of the amount determined under the above clause in the Fund constituted under section 57 and the remaining fifty per cent. of the amount in the Fund constituted under section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable; (d) imposition of penalty as specified under the Act; and (e) cancellation of registration under the Act. Explanation: For the purpose of this sub-rule, the expression, “concerned State” means the State in respect of which the Authority passes an order. {Rule 133 (3)- Substituted vide Notification No. 26/2018-CT Dated 13.06.2018}

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The following are noteworthy in this regard: •

• •

• • •

Section 172 Removal of difficulties

Section 173 Amendment of Act 32 of 1994 Section 174 Repeal & Saving

Any order passed by the Authority shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount.

The Authority will pass order within 3 months from the date of the receipt of the report from the Directorate General of Anti-profiteering.

A minimum of three members of the Authority shall constitute quorum at its meeting. If opinion differ then decision will be taken by majority. If equal votes, the Chairman shall have the second or casting vote.

An opportunity of being heard will be given, if the interested parties request for it in writing.

Period of interest will be calculated from the date of collection of higher amount till the date of return of such amount.

If the eligible person (i.e., the buyer) does not claim the return or the person is unidentifiable then the amount must be deposited to the Consumer Welfare Fund along with applicable interest.

(1) If any difficulty arises in giving effect to any provisions of this Act, the Government may, on the recommendations of the Council, by a general or a special order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act or the rules or regulations made thereunder, as may be necessary or expedient for the purpose of removing the said difficulty: Provided that no such order shall be made after the expiry of a period of three years from the date of commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be, after it is made, before each House of Parliament.

Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be omitted.

(1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, the Additional Duties of Excise

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Particulars (Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter referred to as the repealed Acts) are hereby repealed.

(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not— a. revive anything not in force or existing at the time of such amendment or repeal; or b. affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or c. affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts: Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or d. affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or e. affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed; f. affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.

(3) The mention of the particular matters referred to in sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 with regard to the effect of repeal.

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Particulars Subject to the provisions of this Act and the rules made thereunder, the provisions of Central Goods and Services Tax Act relating to,— (i) scope of supply; (ii) composite supply and mixed supply; (iii) time and value of supply; (iv) input tax credit; (v) registration; (vi) tax invoice, credit and debit notes; (vii) accounts and records; (viii) returns, other than late fee; (ix) payment of tax; (x) tax deduction at source; (xi) collection of tax at source; (xii) assessment; (xiii) refunds; (xiv) audit; (xv) inspection, search, seizure and arrest; (xvi) demands and recovery; (xvii) liability to pay in certain cases; (xviii) advance ruling; (xix) appeals and revision; (xx) presumption as to documents; (xxi) offences and penalties; (xxii) job work; (xxiii) electronic commerce; (xxiv) transitional provisions; and (xxv) miscellaneous provisions including the provisions relating to the imposition of interest and penalty, shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act: Provided that in the case of tax deducted at source, the deductor shall deduct tax at the rate of two per cent from the payment made or credited to the supplier: Provided further that in the case of tax collected at source, the operator shall collect tax at such rate not exceeding two per cent, as may be notified on the recommendations of the Council, of the net value of taxable supplies: Provided also that for the purposes of this Act, the value of a supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier: Provided also that in cases where the penalty is leviable under the Central Goods and Services Tax Act and the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, the penalty leviable under this Act shall be the sum total of the said penalties.

Provided also that where the appeal is to be filed before the Appellate Authority or the Appellate Tribunal, the maximum amount payable shall be fifty crore rupees and one hundred crore rupees respectively.

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Study Notes Section of IGST Section 17 Apportionment of tax and settlement of funds

Particulars Supplies in respect of which the IGST shall be apportioned Sub-section (1) of section 17 lays down that in respect of the IGST paid on the following supplies of goods and/or services, the IGST shall be apportioned: a) inter-State supply to an unregistered person or to a registered person paying tax under composition scheme; b) inter-State supply where the registered person is not eligible for input tax credit; c) inter-State supply made in a financial year to a registered person, where he does not avail of the input tax credit within the specified period and thus the tax remains in the integrated tax account after expiry of the due date for furnishing of annual return for such year in which the supply was made; d) import by an unregistered person or by a registered person paying tax under composition scheme; e) import where the registered person is not eligible for input tax credit; f) import made in a financial year by a registered person, where he does not avail of the said credit within the specified period and thus the tax remains in the integrated tax account after expiry of the due date for furnishing of annual return for such year in which the supply was received.

Thus, fundamentally IGST shall be apportioned only in respect of those supplies where the input tax credit cannot be availed and thus, the tax revenue finally accrues to the exchequer.

Methodology of apportionment The IGST paid on the supplies mentioned above shall be apportioned as under:

I.

The amount of tax calculated at the rate equivalent to the CGST on similar intraState supply shall be apportioned to the Central Government.

II. The balance amount of IGST remaining in the integrated tax account shall be apportioned to the State where such supply takes place and to the Central Government if such supply takes place in a Union territory.

If the place of such supply made by any taxable person cannot be determined separately, the balance amount shall be apportioned to each of the States/Central Government (in relation to Union territories) in proportion to the total supplies made by such taxable person to each of such States/Union territories in a financial year.

If the taxable person making such supplies is not identifiable, the said balance amount shall be apportioned to all States and the Central Government in proportion to the amount collected as SGST/UTGST by the respective State/ the Central Government during the immediately preceding financial year.

The amount not apportioned under sub-section (1) and sub-section (2) may, for the time being, on the recommendations of the Council, be apportioned at the rate of fifty per cent. to the Central Government and fifty per cent. to the State Governments or the Union territories, as the case may be, on ad hoc basis and shall be adjusted against the amount apportioned under the said sub-sections.

Thus, essentially, the new sub-section (2A) provides for apportionment of IGST in respect of B2B supplies wherein input tax credit has been taken by the recipients.

CA Amit Jain {CA, CIMA (UK), DIFRS (ACCA, UK), DBF, Cert. in Der.} Ex-Top Management (CFO/FC) of Multi National & Indian Companies

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Particulars The interest, penalty and compounding amount realized in connection with the IGST shall also be apportioned in the similar manner.

Section 18 Transfer of ITC

The Central Government shall transfer the amount apportioned to it to the CGST account or UTGST account, as the case may be and the amount apportioned to the State Government(s) to the SGST account of the respective States.

Section 18 of the IGST Act provides as under: •

When IGST credit is utilized for payment of CGST, the amount collected as IGST shall stand reduced by the amount equal to such credit. The Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the CGST account.

•

When IGST credit is utilized for payment of UTGST, the amount collected as IGST shall stand reduced by the amount equal to such credit. The Central Government shall transfer an amount equal to the amount so reduced from the IGST account to the UTGST account.

•

When IGST credit is utilized for payment of SGST, the amount collected as IGST shall stand reduced by the amount equal to such credit and shall be apportioned to the appropriate State Government. The Central Government shall transfer the amount so apportioned to the account of the appropriate State Government.

•

Appropriate State means the State or Union territory where a taxable person is registered or is liable to be registered under CGST Act.

Question & Answer Q1. Is there any condition that consideration must be received in foreign currency for deemed export goods?

A. There is no condition that consideration for goods notified as deemed exports must be received in convertible foreign exchange. The consideration may be received in Indian Rupees also.

Q2. Whether imported goods, supplied ‘as such’ qualify for deemed exports?

A. Only goods manufactured in India, which are notified by Central Government qualify to be treated as deemed exports. Thus goods notified u/s 147, if imported do not qualify as deemed exports, if they are supplied ‘as such’.

Q3. Whether goods notified u/s 147, if manufactured in India from imported goods qualify for the benefit of deemed exports?

A. Provisions of Section 147 apply to ‘goods manufactured in India’. There is no restriction that raw materials required for manufacture of notified goods must also be manufactured in India. Hence notified goods, if manufactured from imported goods would qualify as deemed exports.

Q4. Who can rectify a mistake apparent on record U/s 161?

A. Any authority, who has passed or issued any decision or order or notice or certificate or any other document, may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or any other document.

GST Bare Act Pages 120 V/s Direct Tax Bare Act Pages 1065 Direct Tax Faculty coaching hours ~ 200 hours why IDT classes takes at least ~220 hours?

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