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Whether educational institutions are also liable to get registered under GST?

Whether educational institutions are also liable to get registered under GST? Whether educational institutions are also liable to get registered under GST?

Jul 262017

Whether educational institutions are also liable to get registered under GST?

Are education institute are liable to be pay GST:

Rate of GST on services as prescribed by government under Sr. No. 69 is given below: of Services Rate

Sr. No. 69

Services provided –

a)   by an educational institution to its students, faculty and staff;
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; upto higher secondary:

Provided that nothing contained in entry (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.

Nil

Thus, as per above entry educational institution are not required to pay GST on their services provided to students.

Are educational institutions are required to obtained registration under GST?

As per section 22(1) of the act – Every supplier shall be liable to be registered under this Act in the State or Union territory, 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.

For ascertaining the liability to obtained registration two major conditions needs to be fulfilled:

(i) For ascertaining place of registration – from where taxable supplies are being made.
(ii) When liable to obtained registration – when aggregate turnover in a financial year exceeds Rs 20,00,000/-.

Section 23(1)(1) states that – The following persons shall not be liable to registration, namely:-

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 or under the Integrated Goods and Services Tax Act;

Taxable supplies:

Section 2(108)

Taxable Supply

means a supply of goods or services or both which is leviable to tax under this act;

As per section 9 services provided by educational institutions are leviable to tax and hence GST shall be levied on services are provided by educational institute at the rate notified by government which is NIL as mentioned above.

Aggregate turnover:

Section 2(6)

AGGREGATE TURNOVER

means the aggregate value of:(i) Taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis),(ii) Exempt supplies,

(iii) Exports of goods or services or both and

(iv) 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;

Section 2(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;

Section 2(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;

Since, services provided by educational institutions are exempted supply which are to be included in the included turnover for ascertaining the liability to obtained registration.

Conclusion:

In view of the above discussion the position of educational institutions may be summarized as below:

In case educational institution is providing only educations services than such fees are chargeable at NIL rate and such educational institutions are not liable to get themselves registered.
In case educational institutions are also providing other supplies, i.e., providing books to students, providing shoes and dress etc to students then in such cases such institutions are liable to get themselves registered.

Effect of registration:

Fee receipts shall be issued to students in the format prescribed under GST.
All expenses incurred by educational institutions needs to be scrutinized to see whether any liability to pay GST exist under section 9(4) as reverse charge mechanism taxpayer.
Monthly returns shall be filled all such educational institutions.
Input tax credit may be claimed for eligible expenses
Refund may be claimed for unutilized input tax credit.

Common mistake occurred in transition to GST regime

Common mistake occurred in transition to GST regime Common mistake occurred in transition to GST regime

Jul 252017

Common mistake occurred in transition to GST regime

I have personally identified some mistakes which business man are doing in the transition process from existing acts to GST regime. If the data is not properly synchronize properly from the very beginning of transition process it is obvious that difficulty may arise subsequently at the time of filing of return or validation of return or claiming refund.

Here it should be noted that under GST there is a online process of matching date and cross validation and hence any mistake you incurred at the time of making sale invoice it cant be hidden and get noticed at the time of filling return or matching of return. Further, non filing of data or wrong filing of data is auto penalized under GST and hence it is important file correct data to avoid future difficulties.

Here an attempt is being done to identify such common mistakes that are doing viral in transition process which needs to be avoided:

Place of supply in case of providing services is not known or not known properly. In case of provider of services place of supply is specifically mentioned under section 12 & 13 of the act.
a.   In case any service is not specifically covered under section 12 or as the case be section 13 then place of supply will be registered address of recipient of services in case supply of services to registered person.
b.   In case supply of services to unregistered person place of supply will be the address of recipient known to the service provider.
c.   In case address is not known than supplier address will the address of recipient. In such cases supplier will charge CGST and SCGST in all cases.
d.   In few cases act have made it compulsory to mention the address in that cases service bill can be provided only after recipient address is mentioned on invoice.
The next common mistake is to mentioning GST against tax charge. This is technically wrong under that act. Mentioning GST over the invoice and charging tax combining CGST and SGST means you are charging IGST.
a.   In case of inter-state sale: If you are selling goods / services to registered person where IGST is applicable then clearly mention IGST over the invoice. As IGST, CGST and SGST needs to be transferred under different account heads of the government.
b.   In case of local sale: If you are selling to local registered person than mentioned both CGST and SGST and corresponding amount of tax under different column of the invoice.
c.   Avoid: Never mix the CGST, SGST and IGST.
How to apply for composition levy (CMP – 01) – Still there is confusion among trades that how can they avail benefit of composition scheme. Now new CMP forms for applying for composition scheme are now available on website.
a.   It should be noted that while applying for composition scheme every trade or restaurant service provider shall give details of his stock as on 30th June 2017.
b.   Further, if you have any stock of inter state purchase than you will not be allowed to avail the benefit of composition scheme at the time of migration.
c.   In the above case you shall register first as normal trader under GST and then apply of composition scheme under GST subsequently.
d.   Option of paying tax under composition levy shall be chosen at the start of the year and the same needs to be carry forward of the rest of the year.
Problem in identifying correct tax Rate – Clarity over tax rates on items dealing with is required and best way to avoid future disputes is to sit with your supplier and get clear over the HSN code of the items you are dealing with. Once your HSN code is clear tax rate corresponding to that HSN code is your tax rates.
a. Here it’s the worth to note that HSN code is required to mention only in those cases where your turnover is more than 150 lacs rupees.
b. But clarity over HSN code is required to all suppliers as in all cases return are cross matched and in case return are not matched mis-match report will be generated by GSTRN. This will cause unnecessary difficulties at the time of validation of return.

GST and TDS calculation under Income Tax Act

GST and TDS calculation under Income Tax Act GST and TDS calculation under Income Tax Act

Jul 242017

GST and TDS calculation under Income Tax Act

Circular no 23/2017 of CBDT:

The Central Board of Direct Taxes (the Board) had earlier issued Circular No. 112014 dated 13.01.2014 clarifying that wherever in terms of the agreement or contract between the payer and the payee, the Service Tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Income tax Act, 1961 (the Act) on the amount paid or payable without including such Service Tax component.

Now, the Government has brought in force a new Goods and Services Tax regime with effect from 01.07.2017 replacing, amongst others, the Service Tax which was being charged prior to this date as per the provisions of Finance Act, 1994. Therefore, there is a need to harmonize; the Circular No. 01/20 14 of the Board with the new system for taxation of services under the GST regime.

Hence therefore, wherever in terms of the agreement or contract between the payer and the payee, the component of ‘GST on services’ comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XV II-B of the Act on the amount paid or payable without including such ‘GST on services’ component.

Conclusion:

The amount of TDS shall be computed without grossing up for the goods and service tax (GST) component, which is also part of the bill.

What is included in GST for the purpose of deduction of TDS at source?

GST for these purposes shall include:

Integrated Goods and Services Tax (IGST),
Central Goods and Services Tax (CGST),
State Goods and Services Tax (SGST)and
Union Territory Goods and Services Tax (UTGST).

For the purpose of above circular, GST does not included cess chargeable under GST (Compensation to the States) Act which is also a part of GST chargeable under the above acts. Matter needs to be further clarified as to whether TDS shall also be deducted on the cess component or not. Practically cess shall also be excluded for the purposes of deduction of TDS.

What is the impact of above circular on the existing contract as on 01.07.2017?

Any reference to ‘service tax’ in an existing agreement or contract which was entered prior to 01.07 .2017 shall be treated as ‘GST on services’ with respect to the period from 01.07.20 17 onward till the expiry of such agreement or contract.

Example: There are several payments, such as works contracts which attract GST (at 18%) and which also attract TDS (at 10% on fees for technical services, 2%/1% on work contract) under the Income Tax (I-T) Act.

Whether TDS under GST and TDS under income tax shall be deducted separately?

As the purpose of deduction of TDS under GST and TDS under income tax act is different and hence in cases where as per terms of contract TDS under income tax and TDS under GST is deductible at the same time than both are deducted separately and accounted for in the different accounts and further deposited under separate account.

Place of supply under GST

Place of supply under GST Place of supply under GST

Jul 182017

Legal provision:

Legal provisions as to determination of place of supply of goods and / or services are provided under section 10 of the The Integrated Goods and Services Tax Act. The legal provision is reproduced as below:

Place of supply of goods other than supply of goods imported into, or exported from India.
(1) The place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under,––

where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient;
where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;
where the supply does not involve movement of goods, whether by the supplier or the recipient, the place of supply shall be the location of such goods at the time of the delivery to the recipient;
where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;
where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such goods are taken on board.

(2) Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.

Analysis:

Part A: Where the supply involves movement of goods:

S. No.	Circumstances	Place of supply
1	Movement of goods by:· Whether by the supplier or· The recipient or· Any other person	The location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
2	Delivery of goods by supplier to recipient or any third person:· On the direction of third person	The principal place of business of such person
3	Goods are assembled or installed at site	Place of such installation or assembly
	Goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle	Location at which such goods are taken on board

The movements of goods would cover stock transfer to branches also. In the case of inter state branch transfer, though the goods are being transferred within the same legal entity, yet these are transferred from one GSTIN to another GSTIN and hence would be deemed to be supply between distinct person as per provisions of section 25(4) of the CGST act.

Examples:

S. No.	Circumstances	Important point LOS = Location of supplier POS = Place of supply	IGST / CGST
1	M/s P Ltd of Delhi ask M/s A Ltd of Delhi to supply goods at its Delhi office.	Supply start point (LOS): Delhi Supply termination point (POS): Delhi	CGST + Delhi SGST
2	M/s P Ltd of Maharashtra ask M/s A Ltd of Delhi to supply goods at its Maharashtra office.	Supply start point (LOS): Delhi Supply termination point (POS): Maharashtra	IGST
3	M/s P Ltd of Maharashtra ask M/s A Ltd of Delhi to supply goods to M/s X Ltd in Gujarat(M/s P Ltd is selling goods directly to M/s X Ltd)	For M/s P Ltd (Deemed receiver):Supply start point (LOS): Delhi Supply termination point (POS): Maharashtra For X Ltd (Actual Receiver):Supply start point (LOS): MaharashtraSupply termination point (POS): Gujarat	IGST IGST
4	M/s P Ltd of Maharashtra ask M/s A Ltd of Delhi to supply goods to M/s K Ltd in Delhi(M/s P Ltd is selling goods directly to M/s K Ltd)	For M/s P Ltd (Deemed receiver):Supply start point (LOS): Delhi Supply termination point (POS): Maharashtra For X Ltd (Actual Receiver):Supply start point (LOS): MaharashtraSupply termination point (POS): Delhi	IGST IGST
5	M/s P Ltd of Maharashtra ask M/s A Ltd of Maharashtra to supply goods to M/s K Ltd in Gujarat(M/s P Ltd is selling goods directly to M/s K Ltd)	For M/s P Ltd (Deemed receiver):Supply start point (LOS): Maharashtra Supply termination point (POS): Maharashtra For X Ltd (Actual Receiver):Supply start point (LOS): MaharashtraSupply termination point (POS): Gujarat	CGST + Maharashtra SGSTIGST
6	Over the counter sale:Delhi registered buyer comes in Maharashtra and goods and take them back to Delhi	Supply start point (LOS): Maharashtra Supply termination point (POS): Delhi	IGST
7	Mr. A having fixed place of business in Delhi comes to Maharashtra – purchase goods in Maharashtra and sells within Maharashtra to M/s P Ltd	Supply start point (LOS): Maharashtra Supply termination point (POS): Maharashtra	CGST + Maharashtra SGST

Part B: Where the supply involves movement of goods:

A trader in Maharashtra hires a computer from a company in Gujarat and at the later date decides to buy the computer at the time of supply in Maharashtra.

At the time of hire purchase (Actual movement of goods at the time of hire purchase of computer):
Supply start point (LOS): Gujarat
Supply termination point (POS): Maharashtra
At the time of purchase at later stage:
Supply start point (LOS): MaharashtraSupply termination point (POS is deemed POS): Maharashtra

IGST

CGST + Maharashtra SGST

Zero rated supply

Zero rated supply Zero rated supply

Jul 142017

Zero rated supply

Meaning [section 16]:

“zero rated supply” means any of the following supplies of goods or services or both, namely:––

Export of goods or services or both; or
Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Whether registration is required for making zero rated supply

As per section 23 following persons are not liable to obtain registration:

Any person engaged exclusively in the business of supplying goods or services or both that are:
1. not liable to tax or
2. wholly exempt from tax under CGST / SGST;
An agriculturist, to the extent of supply of produce out of cultivation of land.

Since, in the above definition zero rated suppliers are not specifically included and hence such suppliers are required to take registration.

Outward supplies:

Since GST is destination based consumption tax hence tax is payable at the state where goods and / or services are actually consumed. Applying this logic on the above supplies, tax shall be attributable outside India.

Input tax credit:

ITC is specifically allowed: credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
General disallowance of ITC: input tax credit shall not be available for the items mentioned under section 17(5)

Manner of claiming refund of accumulated ITC:

Zero rated without payment of tax: He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
Zero rated with payment of tax: He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made there under.

Apportionment of credit and blocked credits

Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Cases where refund of ITC claimed will not be credited to fund but paid to registered claimant:

Refund of ITC claimed to be refunded shall be allowed in the following cases:

zero rated supplies made without payment of tax;
where the 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 fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Place of supply of services in case of IGST

Place of supply of services in case of IGST Place of supply of services in case of IGST

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:

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;
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;
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;
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.
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.
An airline may issue seasonal tickets, containing say 10 leafs which could be used for travel between any two location in the country.
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.
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)

Returns of outward supplies under the GST Regime

Returns of outward supplies under the GST Regime Returns of outward supplies under the GST Regime

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

Goods and Services under GST

Goods and Services under GST Goods and Services under GST

Mar 202017

Why there is a need to differentiate between goods and services?

Different rate of tax and classification rule for goods and services: The goods are to be classified as per HSN codes and services are to be classified as per SAC terminology. These codes are to be mentioned over invoices also. Moreover the rate of taxing goods and/ or services are different and hence, difference in amount of liability to pay tax. Hence, there is a requirement to classify a supply between goods or services as per rules mentioned in sch. II of the revised model GST law.
Different place of supply provisions as to goods / services: GST being destination based tax on consumption and hence tax revenue shall go to the state where goods / services are consumed and hence difference provisions are made under law for place of supply as to goods on one hand and place of supply on the other.
All transaction including composite transactions has been considered either as goods or as services under schedule II of the Revised Model GST Law.

Meaning of terms Goods and Services:

Meaning of Goods

Meaning of Services

Art. 366(12) of the constitution:

Good includes all materials, commodities and articles.

Sec 2(49) of Revised Model GST Law:

Goods means every kind of movable property and

Includes

o    Actionable claim
o    Growing crops
o    Grass

o Things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply

Sec 2(92) of the revised Model GST law

Services means anything other than goods and

Does not include

o Securities
o Money

Does not include

o Money
o Securities

Case Study:

Trading in securities: Trading in securities is specifically excluded from the definitions of goods (Sec 2(49) and services (Sec 2(92) and hence securities are neither goods not services and hence GST is not payable on trading in securities.

Actionable claims: Actionable claims under revised law are considered to be goods. As per section 2(1) of the Revised Model GST Law – actionable claims shall have the meaning assigned to it under section 3 of the Transfer of property act 1882 (TPA). As per section 3 of TPA, actionable claims comprises two types of claims –

A claim to unsecured debts and
A claim to beneficial interest in movable property which is not in possession, actual or constructive – whether present or future, conditional or contingent

Immovable properties: Goods and service tax can not be levy on sale or purchase of immovable goods. However, transfer of immovable property by way of lease or right of usages therefore would be within the preview of GST law as supply of services.

Intangible goods: As per Article 366(12) of the constitution goods includes all materials, commodities and articles. This definition does not make any distinction between tangible goods and intangible goods. The term good, as observed in TCS v State of AP (2004), used in constitution is very wide. The term all materials, articles and commodities includes both tangibles and intangibles which is capable of abstraction consumption and use and which can be transmitted transferred delivered stored possessed. Thus, intangible goods shall be treated as good and supply of intangible goods shall be supply of goods.

Canned software: To minimize the litigation schedule II is inserted in Revised Model GST law to define the matters to be treated as supply of good or service As per entry no 5(d) of the same development, design programming customization adaption up-gradation enhancement implementation of software shall be treated as supply of services. However, canned software are pre fabricated software and are generally sold through a medium. Hence, such canned services shall be considered as goods and supply of the same may be treated as supply of goods.

High Seas Sale of goods under GST

High Seas Sale of goods under GST High Seas Sale of goods under GST

Mar 132017

High Seas Sale of goods under GST

Meaning of term High Seas Sale

High Sea Sales (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are yet on high seas. Goods on high seas means:

After their dispatch from the port / airport of origin, AND
Before their arrival at the port / airport of destination.

Consequences of HSS:

As mentioned above HSS contract / agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. On concluding the HSS agreement, the bill of lading (B/L) should be endorsed in favour of the HSS buyer.

There is no bar on same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for the purpose of levying of duty.

The tile of goods transfers to the HSS buyer prior to entry of goods in territorial jurisdiction of India.

The delivery from customs is, therefore, on account of last HSS buyer. Bill of entry (B/E) is also filed in the name of last HSS buyer.

Imposition of GST on HSS

As per section 3(3) of the IGST Act, supply of goods in the course of import into the territory of India till they cross the customs frontiers of India shall be deemed to be a supply of goods in the course of inter state trade or commerce.

Further, as per proviso to section 4(1) of IGST Act, intra state supply of goods shall not include supply of goods brought into India in the course of import till they cross the customs frontiers of India.

Thus, to conclude, sale in the course of import before customs frontier (i.e. HSS) would be subject to IGST.

Collection of GST on HSS

As per proviso to section 5(1) of IGST, the IGST on the goods imported into India shall be levied and collected in accordance with:

The provisions of section 3 of the customs tariff act 1975
At the point when duties of customs are levied on the said goods under section 12 of the customs act 1962
On the value as determined under the Customs Tariff act.

Conclusion

Thus, the first importer will not charge IGST on sale made by him to the HSS buyer and the later / last HSS buyer (as the case may be) would pay IGST at the time clearing of goods from the customs as per customs act.

Last HSS buyer would be eligible to claim such IGST paid to the customs authorities subject to other provisions of the act. GST paid is this case shall be in addition to Basic Custom Duty paid to custom authorities.

GST Valuation (Determination of value of supply of Goods and services) Rules 2016

GST Valuation (Determination of value of supply of Goods and services) Rules 2016 GST Valuation (Determination of value of supply of Goods and services) Rules 2016

Mar 022017

GST Valuation (Determination of value of supply of Goods and services) Rules 2016

Valuation norms under GST under normal circumstances:

The value taken for calculation of GST is the price actually paid by recipient of goods / service to the supplier. This shall be taken if and only if:

The supplier and the recipient of the supply are not related
The price is the sole consideration for the supply

The value thus identified with above formula is popularly known as transaction value under section 15(1) of the model GST law. There are specific inclusions to be made in calculating transaction value as provided under section 15(2) and some exclusions provided under section 15(3) of the act. Section 15(4) provides that where the value of the supply of goods or services cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

Hence, GST valuation rules 2016 are come on the way to provide when valuation under 15(1) shall be disregarded and how value shall be calculated under such circumstances.

When value under section 15(1) shall be disregarded

When the proper officer has reason to doubt the truth or accuracy of the value declared in relation to any goods and/or services, he may ask the supplier to furnish further information, including documents or other evidence and if, after receiving such further information, or in the absence of any response from such supplier, the proper officer still has reasonable doubt about the truth or accuracy of the value so declared, it shall be deemed that the transaction value of such goods and/or services cannot be determined under the provisions of sub-rule (1) of rule 3. [Rule 7(1)]

Thus, only reasons to doubt on truth or accuracy of the value are sufficient to reject the transaction value. The existence of following ingredients is sufficient to arouse existence of reasons of doubt on proper officer to reject transaction value and consider the valuation rules:

The significantly higher value at which goods and/or service of the like kind or quantity are supplied
The significantly lower or higher value of the supply of goods and/or services compared to the marker value
Mis-declaration of parameters such as description, quantity, quality, year of manufacture or production

Goods or services of like kind and quantity

Goods of like kind and quantity means :-	Services of like kind and quantity means
Goods which are identical or similar in1. Physical characteristics,2. Quality and3. Reputation as the goods being valued, and4. perform the same functions or5. Are commercially interchangeable with the goods being valued6. And supplied by the same person or by a different person	services which are:1. Identical or similar in nature,2. Quality and3. Reputation as the services being valued and4. supplied by the same person or by a different person

If value can not be determine and/or in case value is determine but proper officer rejected the value, then, value shall be determine by proceeding sequentially through rules 4 to 6.

Step 1: Determination of value by comparison:

Rule 4 : Where transaction value of supply of goods or services can not be determine, value shall be determine in following manner:

Transaction value of goods and/or services of like kind and quality
Supplied at or about the same time to other customers,
Adjusted in accordance with the provisions of sub-rule (2) which are given below:
1. Difference in dates of supply
2. Difference in commercial level
3. Difference in quantity levels
4. Difference in composition
5. Difference in quality and design
6. Difference in freight and insurance charges depending on the place of supply

When value can not be determine under rule 4:

Goods and/or services of like kind and value are not available
If they are available, but adjustments as required in point no 3 above can not be made

Step 2: Computed value method

If value can not be determined under rule 4 value shall be calculated under computed value method which shall be determined as below:

The cost of production, manufacture or processing of the goods or, the cost of provision of the services;
Charges, if any, for the design or brand;
An amount towards profit and general expenses equal to that usually reflected in supply of goods and/or services of the same class or kind as the goods and/or services being valued which are made by other suppliers.

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