May 192017
 

The Indirect Tax department released the rate schedule for 1,211 goods on Thursday Evening (18th May 2017). The list, approved by the GST Council. All the Goods have been covered by the GST Council on Thursday Meeting (18th May 2017).

Here are complete summary of the list issued by the Council which is divided into four slabs of the GST Rates, viz 5%, 12%, 18% & 28% and the Zero Percent Tax Rate Goods.

Click here to Download PDF File

May 122017
 

Place of supply of services in case of IGST

Significance of place of supply in IGST

According to section 4 of the act there shall be levied a tax called the Integrated Goods and Services Tax on all supplies of goods and/or services made in the course of inter-State trade or commerce at the rate specified in the Schedule to this Act and collected in such manner as may be prescribed. As per section 3(1) of the act supply of goods / services in the course of inter-state trade or commerce means any supplies where location of supplier and place of supply are in different state. Hence, IGST would be levied and payable only when place of supplier and place of supply are in different state.

Problem in identification of place of supply in case supply of services

Services being intangible pose problems w.r.t determination of place of supply mainly due to following factors:

  1. The manner of delivery of service could be altered easily. For example telecom service could change from mostly post-paid to mostly pre-paid; billing address could be changed, billers address could be changed, repair or maintenance of software could be changed from onsite to online; banking services were earlier required customer to go to the bank, now the customer could avail service from anywhere;
  2. Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be a trail;
  3. For supplying a service, a fixed location of service provider is not mandatory and even the service recipient may receive service while on the move. The location of billing could be changed overnight;
  4. Sometime the same element may flow to more than one location, for example, construction or other services in respect of a railway line, a national highway or a bridge on a river which originate in one state and end in the other state.
  5. Similarly a copy right for distribution and exhibition of film could be assigned for many states in single transaction or an advertisement or a programme is broadcasted across the country at the same time.
  6. An airline may issue seasonal tickets, containing say 10 leafs which could be used for travel between any two location in the country.
  7. The card issued by Delhi metro could be used by a person located in Noida (State Uttar Pradesh), or Delhi or Faridabad (State Haryana), without the Delhi metro being able to distinguish the location or journeys at the time of receipt of payment.
  8. Services are continuously evolving and would thus continue to pose newer challenges. For example 15-20 years back no one could have thought of DTH, online information, online banking, online booking of tickets, internet, mobile telecommunication etc.

The following provisions of shall apply to determine the place of supply of services 

General Provisions 1 – Supplied to registered person:

The place of supply of services, except the services specified in sub-sections (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14) and (15), made to a registered person shall be the location of such person.

General Provisions 1 – Supplied to un-registered person:

The place of supply of services, except the services specified in sub-sections (4), (5), (6), (7), (8), (9), (10), (11), (12), (13), (14) and (15), made to any person other than a registered person shall be

  • the location of the recipient where the address on record exists, and
  • the location of the supplier of services in other cases.

Thus, if no specific provision in law exists, the place of supply of services shall be the location of recipient or location of supplier. However, some specific legal fictions are provided in law with respect to some services as summarized below:

Case study:

The place of supply in relation to immovable property is the location of immovable property.  Suppose a road is constructed from Delhi to Mumbai covering multiple states. What will be the place of supply?

Where the immovable property is located in more than one State, the supply of service shall be treated as made in each of the States in 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 reasonable basis as may be prescribed in this behalf. (The Explanation clause to section 6(5) of the IGST Act)

What would be the place of supply of services provided for organizing an event, say, IPL cricket series which is held in multiple states?

In case of an event, if the recipient of service is registered, the place of supply of services for organizing the event shall be the location of such person.

If the recipient is not registered, the place of supply shall be the place where event is held.

Since the event is being held in multiple states and a consolidated amount is charges for such services, the place of supply shall be taken as being in each state in proportion to the value of services so provided in each state. (The Explanation clause to section 6(8) of the IGST Act)

What will be the place of supply of goods in respect of transport of goods by courier?

In case the recipient is registered, the location of such person shall be the place of supply.

However, if the recipient is not registered, the place of supply shall be the place where the goods are handed over for transportation.

What will be the place of supply if a person travels from Mumbai to Delhi and back to Mumbai?

If the person is registered, the place of supply shall be the location of recipient.

If the person is not registered, the place of supply for the forward journey from Mumbai to Delhi shall be Mumbai, the place where he embarks. However, for the return journey, the place of supply shall be Delhi as the return journey has to be treated as separate journey. (The Explanation clause to section 6(11) of the IGST Act)

Suppose a ticket/ pass for anywhere travel in India is issued by M/s Air India to a person. What will be the place of supply?

In the above case, the place of embarkation will not be available at the time of issue of invoice as the right to passage is for future use. Accordingly, place of supply cannot be the place of embarkation. In such cases, the default rule shall apply. (The proviso clause to section 6(10) (b) of the IGST Act)

What will be the place of supply for mobile connection? Can it be the location of supplier?

The location of supplier of mobile services cannot be the place of supply as the mobile companies are providing services in multiple states and many of these services are inter-state. The consumption principle will be broken if the location of supplier is taken as place of supply and all the revenue may go to a few states where the suppliers are located.

The place of supply for mobile connection would depend on whether the connection is on postpaid or prepaid basis.

  • In case of postpaid connections, the place of supply shall be the location of billing address of the recipient of service.
  • In case of pre-paid connections, the place of supply shall be the place where payment for such connection is received or such pre-paid vouchers are sold.
  • However if the recharge is done through internet/e-payment, the location of recipient of service on record shall be the taken as the place of service.

A person in Goa buys shares from a broker in Delhi on NSE (in Mumbai). What will be the place of supply?

The place of supply shall be the location of the recipient of services on the records of the supplier of services. So Goa shall be the place of supply.

A person from Mumbai goes to Kullu-Manali and takes some services from ICICI Bank in Manali. What will be the place of supply?

  • If the service is not linked to the account of person, place of supply shall be Kullu i.e. the location of the supplier of services.
  • However if the service is linked to the account of the person, the place of supply shall be Mumbai, the location of recipient on the records of the supplier.

A person from Gurgaon travels by Air India flight from Mumbai to Delhi and gets his travel insurance done in Mumbai. What will be the place of supply?

The location of the recipient of services on the records of the supplier of insurance services shall be the place of supply. So Gurgaon shall be the place of supply. (proviso clause to section 6(14) of the IGST Act)

May 102017
 

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May 092017
 

Returns of outward supplies under the GST Regime

The purpose of this article is to create awareness about the soon to be implemented Goods and Service Tax in India. This article deals with various aspects of return of outward supplies but does not deal with matching which is dealt in a separate article on the subject.

Who are required to file

As per section 37(1) of the CGST Act read with Returns Rules, every registered person except the following:-

i. An Input Service Distributor.

ii. A non-resident taxable person.

iii. A person paying tax under the composition scheme.

iv. A person paying tax under section 51 (TDS related provisions).

v. A person paying tax under section 52 (TCS related provisions).

are required to furnish electronically through the Common Portal either directly or through a Facilitation Centre notified by Commissioner, in FORM GSTR-1, the details of outward supplies of goods or services or both effected during a tax period on or before the tenth day of the month succeeding the said tax period.

The registered person shall not be allowed to furnish the details of outward supplies during the period from the eleventh day to the fifteenth day of the month succeeding the tax period.

The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing such details for such class of taxable persons as may be specified therein. Any extension of time limit notified by the Commissioner of State tax or Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.

Contents of details of outward supplies

The details of outward supplies of goods or services or both furnished in FORM GSTR-1 shall include the following details:-

1) Invoice wise details of all

i) Inter-State and intra-State supplies made to registered persons.

ii) Inter-State supplies with invoice value more than two and a half lakh rupees made to unregistered persons.

2) Consolidated details of all

i) Intra-State supplies made to unregistered persons for each rate of tax.

ii) State wise inter-State supplies with invoice value less than two and a half lakh rupees made to unregistered persons for each rate of tax.

3) Debit and credit notes, if any issued during the month for invoices issued previously.

Communication of details of outward supplies with the recipient

The details of outward supplies furnished by the supplier shall be made available electronically to the concerned registered recipient in Part A of FORM GSTR- 2A, in FORM GSTR-4A (Composition Scheme) and in FORM GSTR-6A (Input Service Distributor) through the Common Portal after the due date of filing of FORM GSTR-1.

The author is a fellow member of the Institute of Chartered Accountants of India and also a qualified Company Secretary. The author has also done DISA (ICAI), certificate on IFRS (ICAI), Certificate on Forex and Treasury Management (ICAI), Certificate on Forensic Accounting and Fraud Prevention (ICAI). The author practices as a Chartered Accountant under the name and style of Rishabh Kumar Barmecha and Associates and is an expert in auditing, financial investigation, direct and indirect taxation.

The author can be reached at rishabhkumarbarmecha@gmail.com or 91 9007909221 or Twitter @CARKBarmecha.

CA Rishabh Kumar Barmecha

May 082017
 

Due dates for the Month of May 2017
5th
Service Tax
- Service Tax payments by Companies for April
Central Excise#
- Duty Payment for all Assessees other than SSI Units for April
7th
Income Tax
- TDS Payment for April
10th
Central Excise
- Monthly Return in Form ER-1 (Ann-12) for other than units availing SSI exemption for April
– Monthly Return in Form ER-2 (Ann-13) by 100% EOUs for April
– Exports – Procurement of specified goods from EOU for use in manufacture of Export goods in Form Ann-17B for DTA units, procuring specified goods from EOU for manufacture of export goods.
– Proof of Exports in Form Ann.-19, once in a month for all exporters, exporting goods under Bond
– Export details in Form Ann.-20, for Manufacturing following simplified export procedure.
– Removal of excisable goods at concessional rate in Form Ann. -46 for Manufacturers receiving the excisable goods for specified use at concessional rate of duty in terms of Rules described in Col. 4.
15th
Providend Fund
- PF Payment for April
21st
ESIC
- ESIC Payment for April
MVAT
– MVAT Monthly Payment & Return for April
31st
Income Tax
- TDS / TCS Quarterly Statements (Other than Government Deductor) January to March
Profession Tax
- Monthly Return (covering salary paid for the preceding month) (Tax Rs. 50,000 or more)
Central Excise
– Particulars relating to clearances, electricity load etc., in Form Ann.-4 exceeding the limit of Rs. 90 lakhs of exempted clearances for small scale units availing exemption and whose turnover exceeds or has exceeded Rs. 90 lakhs in a financial year, as the case may be.
# If Excise duy / Service tax paid electronically through internet banking, the date is to be reconed as 6th instead of 5th
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May 052017
 

Meaning of profiteering:

It is a situation where a person seeks or exacts exorbitant profits without adding value to the supply or adding lesser value in the supply as compared to price charged. Under such situations profits are earned as a result of scarce supply of goods and/or services or any other reason.

Thus, this results in interfere by government to reduce the price forcefully in the economy so that customers are protected from being exploited. Under GST these measures are added so as to pass on the benefit of GST system to the ultimate customers.

Why anti-profiteering measures in GST:

The proposed GST regime is expected to reduce overall burden of indirect taxes in the economy. Under pre GST era, indirect taxes are indirectly paid by customers and hence post GST any reduction of taxes shall also go into the pockets of customers. However, past experience indicates that any such benefit never/lesser pass on to the customers. Hence, provisions as to anti profiteering are essential to pass on the benefit of taxes paid to customers.

Anti-profiteering measure in GST

Provision relating to anti-profiteering measure is given in section 171 under the chapter – XXI of the central goods and services tax act, 2017 (act no 12 of 2017) which is reproduced as below:

(1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to:

  • The recipient by way of commensurate reduction in prices.

 (2) The Central Government may, on recommendations of the Council, by notification,

  • constitute an Authority, or
  • empower an existing Authority constituted under any law for the time being in force,

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 or services or both supplied by him.

(3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.

Analysis:

The provision provides that the central government may by law constitute an authority or entrust an existing authority constituted under any law, to examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and /or services supplied by him.

Further, the authority shall exercise such function and have such powers, including those for imposition of penalty, as may be prescribed in cases where it finds that the price charged has not been reduced as aforesaid.

History:

It may also be noted that the above said concept is not new to India as in the state of Bengal, the West Bengal Anti-profiteering Act, 1985 was enacted to prevent profiteering in certain articles in daily use.

Implications:

This is an attempt to ensure that business do not take advantage of GST and should pass on the benefit of GST input tax credit available or reduction in the rates to the consumer.

Implementation:

The success of the scheme depends on:

  • Anti-profiteering measure that are used for identifying the profiteers.
  • The proper checks and balances that are deployed by government agency so that undue power given to designated authority is not misused and that results unnecessary harassment of traders.
  • Timing of implementation of these measures will also play an important role in ascertaining its success.

Proactive measures:

With detailed guidelines / rules regarding the above scheme is yet come, the business man and small trades will to be very conscious before setting their prices of supply after the implementation of GST. If trades are panning the increase the price of their price in next few month, it is batter to increase the price before GST implementation otherwise it will be very difficult to prove before authority that the benefit of tax save is actually been passed on the customers. Further, a back end working shall be done by every business man to ensure that tax save due to GST results in price reduction of supply.