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OM HARE GURVEY NAMAH _
GOODS & SERVICES TAX
A DISCUSSIONBY CA. SHASHANK SHEKHAR
GUPTA
JUNE 2017
BACKGROUND
WHAT IS GST ?
WHY GST ?
(c) Copyright of CA Shashank Gupta
VAT CONCEPT
Inputs = INR 100
Tax = INR 20
Output = INR 200
Tax = INR 40
Net Tax Burden =
[Tax on output – Credit availed on Input]
i.e. 40 – 20 = 20
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LEVIES TO BE SUBSUMED
Excise Duties including the
additional excise duties
Excise duty under MTPA
Additional duties of customs
(ie CVD and ACD)
CST to be abolished
Service tax
Cesses and surcharges
levied by Union ie education
cess etc
VAT/ Sales tax
Entry tax (Octroi?)
Entertainment tax (unless
levied by the local bodies)
Luxury tax
Taxes on lottery, betting and
gambling
Cesses and surcharges
levied by States, related to
supply of goods and services
Central Levies State Levies
Subsumation
of taxes
Central GST State GST
Purchase tax to
be subsumed
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Levies under GST Regime
IGSTSGSTCGST
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Practical application of taxes
X Ltd.
B Ltd. C Ltd.
Within the same state Outside the state
A Ltd.
Outside India
Price = 100BCD = 10IGST = 20
Price = 150CGST= 15SGST = 15 Price = 200
IGST = 40
IGST rate presumed to be 20 percentWith CGST and SGST each being 10 percent(c) Copyright of CA Shashank Gupta
CREDIT MECHANISM UNDER GST
GST credit mechanism
CGST
CGST
IGST
SGST
SGST
IGST
IGST
IGST
SGST
CGST
Taxes paid at input stage are available as credit against the output tax liability of each transaction
(c) Copyright of CA Shashank Gupta
NEW CONCEPTS UNDER GST
Would change significantly
Taxable
eventNo differentiation between central & state levies for credit availment
Credit
eligibilityExemptionsWould either be
withdrawn or
converted into
refund mechanism
Valuation
Mix of Excise,
Customs and Service
tax
To be applicable for goods as well as services
Place of
supply rules
To be applicable for goods as well as services
Comprehensive
Taxation
Comprehensive service tax regime
introduced – step towards GST
States would levy tax on services and
central government can now tax sale
of goods
Point of
supply
(c) Copyright of CA Shashank Gupta
Scope of supply
Meaning & Scope of supply - Section 7(1)(a)
• Supply includes:
All forms of supply of goods and/ or services
made or agreed to be made
for a consideration
in the course or furtherance of business
Presently, can an assessee be made liable to pay excise duty on the basis of an agreement
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Types of transactions covered under supply
Sale
Transfer
Barter
Rental
License
Lease
Disposal
Exchange
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Meaning & Scope of supply - Section 7(1)(b)
• Supply includes:
Import of service
for a consideration
whether or not in the course of business
Under the present indirect tax regime, services received by government or an individual or a trust (registered under section 12AA of the Income Tax Act) were exempted from the liability to pay service tax
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Transactions to be treated as supply without consideration - Section 7(1)(c) read with Schedule I
• Supply includes:
Permanent transfer/ disposal of business assets where ITC has been availed on such assets
Supply of goods or services or both between related persons or between distinct persons (as specified in section 25), when made in the course or furtherance of business
Provided that gifts < INR 50,000 in a FY by an employer to an employee shall not be treated as supply of goods or services or both
Supply of goods by a principal to his agent and vice versa (where the agent undertakes to supply/ receive such goods on behalf of the principal).
Import of service from a related person or any of his other establishments outside India, in the course or furtherance of business
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Specified Transactions to be treated as supply of goods or services - Schedule II
Supply of goods Supply of services
Relating to transfer of goods
Transfer of goods with title
Transfer of right/ undivided share in goods without title
Transfer of title in goods with property in goods being passed at a future date after receipt of consideration
Relating to Land and Building
Lease, tenancy, easement, license to occupy land
Lease or letting out of the building (including residential for business or commerce)
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Specified Transactions to be treated as supply of goods or services - Schedule II
Supply of goods Supply of services
Relating to transfer of business assets
Goods forming part of assets of a business are disposed off (whether or not for a consideration)
Goods held or used for the purpose of business are put to private use; or are made available to any other person for non-business use (whether or not for a consideration)
Where any person ceases to be a taxable person, any goods forming part of the assets shall be deemed to be supplied by him unless:(a) Business is transferred as a going concern(b) Business is carried on by a taxable person
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Specified Transactions to be treated as supply of services - Schedule II
• Renting of immovable property
• Construction of a complex, building, civil structure except where consideration received after completion of construction activity or after its first occupation (whichever is earlier)
• Temporary transfer or permitting the use or enjoyment of IPR
• Various activities relating to Information Technology Software
• Agreeing to the obligation to tolerate or to refrain from an act
• Transfer of right to use
SUPPLIES TO BE TREATED AS SUPPLY OF SERVICES
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Specified Transactions to be treated as supply of services - Schedule II
• Composite Supplies
Works Contract (Immovable property + Transfer of property in goods)
Supply of services and food in a restaurant (other than alcohol)
SUPPLIES TO BE TREATED AS SUPPLY OF SERVICES
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Specified Transactions to be treated as supply of services - Schedule II
• Supply of goods by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration
SUPPLIES TO BE TREATED AS SUPPLY OF GOODS
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Specified Transactions to be treated as supply of services - Schedule III
• Activities or transactions undertaken by CG, SG or any local authority in which they are engaged as public authorities (as may be notified)
SUPPLIES TO BE TREATED NEITHER AS SUPPLY OF GOODS NOR SERVICES
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• Schedule III
Services by an employee to his employer in the course or in relation to his employment
Services by any Court or Tribunal
Services of funeral, burial or cremation
Sale of land and building (completed)
Actionable Claims (other than lottery betting and gambling)
Functions performed by MP, MLA, Member of Panchayat, Municipality & Members of other local authorities in which they are engaged as public authorities, person who holds any post in pursuance of the provisions of the Constitution
Meaning & scope of supply – Section 7(2) & (3)
• Powers of Central/ State Government, upon the recommendation of the council may specify the transactions that are to be treated as:
Supply of goods and not services
Vice-versa
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Composite Supply & Mixed Supply
Composite Supply
• A supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
• Shall be treated as a supply of such principal supply
COMPOSITE SUPPLY
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• Example:
• Where goods are packed and transported with insurance, packing materials, transport and insurance
• Warranty and maintenance Contract with purchase of a TV
Mixed Supply
• Two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply
• Shall be treated as a supply of that particular supply which attracts highest rate of tax
MIXED SUPPLY
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• Example:
• Ellora Bakery – Basket with various packed goodies
• Purchase of refrigerator with storage water bottles
Industry wise implication of GST
Traders Invoice – Intra-state
Particulars Amount
Price 100
VAT + Surcharge 15
Total Amount 115
Under the present indirect tax regime
Particulars Amount
Price 100
CGST 10
SGST 10
Total Amount 120
Under the GST regime
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Traders Invoice – Inter-state
Particulars Amount
Price 100
CST (form C/ without form C) 2/15
Total Amount 102/ 115
Under the present indirect tax regime
Particulars Amount
Price 100
IGST 20
Total Amount 120
Under the GST regime
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TRADING INDUSTRY INDIRECT TAX IMPLICATIONS - CURRENT REGIME
VAT
Non-Creditable taxes
Creditable taxes
Outside India
India
Retailer
RetailerCFA
State A
State B
CFA
Business
Vendor
Distributor
Distributor
Key
Customer
BCD
CVD
ACD – refund available
Excise duty
VAT
VAT
VAT
VAT VAT
Key Customer
CST
Entry Tax Entry Tax /
VAT
retention?
Customer
VAT
Customer
VAT
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TRADING INDUSTRYINDIRECT TAX IMPLICATIONS - UNDER GST
Central GST
State GST
Central GST
State GST
Non-Creditable taxes
Creditable taxes
Outside India
India
Retailer
Retailer
CFA
State A
State B
CFA
Business
Vendor
Distributor
Distributor
Key
Customer
BCD
IGST
Central GST
State GST
Key Customer
IGST IGST
Central GST
State GST
Central GST
State GST
Customer
Central GST
State GST
Customer
Central GST
State GST
Central GST
State GST
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Manufacturers Invoice – Intra-state
Particulars Amount
Price 100
Excise Duty 12.5
Taxable value for VAT 112.5
VAT @ 15% 16.875
Total Amount 129.375
Under the present indirect tax regime
Particulars Amount
Price 100
CGST 10
SGST 10
Total Amount 120
Under the GST regime
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Manufacturers Invoice – Inter-state
Particulars Amount
Price 100
Excise Duty 12.5
Taxable value for CST 112.5
CST @ 2% /15% 2.25/ 16.875
Total Amount 114.75/ 129.375
Under the present indirect tax regime
Particulars Amount
Price 100
IGST 20
Total Amount 120
Under the GST regime
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MANUFACTURING INDUSTRYINDIRECT TAX IMPLICATIONS – CURRENT REGIME
Non-Creditable taxes
Creditable taxes
*input excise/ service tax
credit shall not be available
Outside India
India
Retailer
State A
State B
CFA
Business
Vendor
Service provider
VendorService
provider
Distributor
Key
customer
BCD
CVD
ACDExcise duty
VAT
Excise duty
CST Service tax
Excise dutyVAT VAT
Excise duty /
VAT
Excise duty
Entry Tax
VAT
retention?
CFA DistributorRetailer
VAT VAT
Customer
VAT
VAT
Customer
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MANUFACTURING INDUSTRYINDIRECT TAX IMPLICATIONS – GST REGIME
Non-Creditable taxes
Creditable taxes
Outside India
India
Retailer
State A
State B
CFA
Business
Vendor
Vendor
Distributor
Key
customer
CFA Distributor Retailer
Central GST
State GST
BCD
IGST
IGST
Central GST
State GST
Central GST
State GST
Central GST
State GST
Central GST
State GST
Central GST
State GST
Central GST
State GST
Customer
Central GST
State GST
Customer
Central GST
State GST
IGST
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Service providers invoice – Intra-state
Particulars Amount
Price 100
Service tax 14
SBC 0.5
KKC 0.5
Total Amount 115
Under the present indirect tax regime
Particulars Amount
Price 100
CGST 10
SGST 10
Total Amount 120
Under the GST regime
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Service providers invoice – Inter-state
Particulars Amount
Price 100
Service tax 14
SBC 0.5
KKC 0.5
Total Amount 115
Under the present indirect tax regime
Particulars Amount
Price 100
IGST 20
Total Amount 120
Under the GST regime
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SERVICE INDUSTRY INDIRECT TAX IMPLICATIONS – CURRENT REGIME
Non-Creditable taxes
Creditable taxes
Outside India
India
Customer
B2B
Customer
B2C
State A
State B
Business
Vendor
Service provider
VendorService
provider
Excise duty
VAT
Service
tax
Excise duty
CST Service tax
BCD
CVD
ACD
Service tax
Service tax
Customer
B2C
Service tax
Customer
B2B
Service tax
Service
tax
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SERVICE INDUSTRY INDIRECT TAX IMPLICATIONS – GST REGIME
Non-Creditable taxes
Creditable taxes
Outside India
India
Customer
B2B
State A
State B
Business
Vendor
Service provider
VendorService
provider
BCD
Central GST
State GST
Central GST
State GST
Central GST
State GST
IGSTIGST
Customer
B2C
Central GST
State GST
Customer
B2C
Customer
B2B
Integrated
GST
Integrated
GST
IGST
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Value of a Taxable Supply
Section 15
• TRANSACTION VALUE i.e. price actually paid/ payable
• Essentials: Supplier & Recipient are not related
Price is the sole consideration
Inclusions: Tax, duty, cess, fee & charges levied under any other law
FOC supplies
Incidental expenses (commission and packing)
Interest, late fee or penalty for delayed payment
Subsidies (excluding subsidies provided by the Government)
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Case Studies
• CA SKG buys a laptop online for INR 37,000 and also incurs INR 1000 as delivery charge and INR 1000 as gift packing charge .
• Value for tax purposes?
• CA SKG pays royalty to X Ltd in Ireland. Amount to be paid is INR 10 lakhs. TDS to be deducted and deposited over & above (i.e. borne by payee).
• Value for tax purposes?
• CA SKG supplies services with a credit period of 60 days. Any delay in payment beyond the said period attracts interest @ 18 percent p.a.
• Whether taxable?
• POS?
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Section 15
• Discounts
Before or at the time of supply – duly recorded in the invoice
After supply – agreement + specifically linked to relevant invoices + ITC reversed
• Reference to rules – Where value cannot be determined under (1)
• Specific valuation method may be notified for some supplies
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Valuation Rules
• Rule 1 - Where the consideration is not wholly in money:
a) Open Market Value of such supply
b) If (a) not available then:
Consideration in money + Amount equivalent to consideration not in money
c) If (a) and (b) not applicable then:
Value of supplies of like kind & quality
d) If (a), (b) and (c) not applicable then:
Consideration in money + Amount equivalent to consideration not in money to be determined by sequentially following rule (4) or rule (5)
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Relevant Definitions
• (a) “open market value” of a supply of goods or services or both means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and price is the sole consideration, to obtain such supply at the same time when the supply being valued is made.
• (b) “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 that, in respect of the characteristics, quality, quantity, functional components, materials, and 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.
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Case Studies
A. CA SKG exchanges an old car for a new one.
• Agreed price of old car is INR 10 Lakhs
• Amount to be paid in cash is INR 25 Lakhs
• Open market value of new car is INR 37 Lakhs
B. CA SKG exchanges old furniture against purchase of customised (one of a kind) new furniture
• Amount paid for like kind of furniture INR 7 Lakhs (separate transaction)
• Agreed price of old furniture INR 1 Lakhs
• Amount to be paid in case is INR 5 Lakhs
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Section 15
• Related Party:
Officers or directors in one another’s business
Legally recognised partners in business
Employer & employee
One person holds 25 percent or more stocks of both of them
One of them directly/ indirectly controls the other
Both of them directly or indirectly controlled by a third person
Together they directly or indirectly control a third person
They are members of the same family
Persons who are associated in the business of one another where one person is the sole agent of the other (howsoever described)
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Valuation Rules – Related Party – P2P
• Rule 2 – Value of supply between related or distinct persons other than through an agent
• Case 1 [Pre–Conditions] –
• Principal to principal supplies (though related)
• Where recipient entitled to avail credit
• Applicable provision for valuation -
• Value declared in the invoice shall be deemed to be the open market value of goods
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Valuation Rules – Related Party – P2P [Contd.]
• Case 2 – Pre Conditions -
• Principal to principal supplies (though related)
• May be made applicable wherein recipient not entitled to avail credit
• B2B supplies i.e. intended for further supplies
• Applicable provision for valuation -
• 90 percent of the price charged by the recipient to his customer (not related)
• Where the goods are intended for further supply as such by the recipient
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Valuation Rules – Related Party – P2P [Contd.]
• Case 3 – Pre Conditions -
• Principal to principal supplies (though related)
• May be made applicable wherein recipient not entitled to avail credit
• B2C supplies i.e. not intended for further supply
• Applicable provision for valuation -
a) Open market value of such supply
b) If (a), then value of supplies of like kind & quality
c) If (a) & (b), value to be determined by application of rule 4 or rule 5 in that order
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Valuation Rules
• Rule 3 – Value of supply of goods made or received through an agent
a) Open market value of such supply; or
b) At the option of the supplier be 90% of the price charged by the recipient to customer (unrelated party)
c) If (a) & (b), value to be determined by application of rule 4 or rule 5 in that order
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Valuation Rules
• Where value is not determinable under any of the preceding rules
• Rule 4: Value = 110% of Cost of manufacture, production, provision or Cost of Acquisition
• Rule 5: Value to be determined using reasonable means consistent with the principles and general provisions. (Service provider can opt for this rule disregarding rule 4).
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Valuation Rules
• Rule 6(2): Money Changer
a) When exchanged from or to INR & RBI reference rate is available:
• Difference in buying & selling rate * Total units of that currency
b) When exchanged from or to INR & RBI reference rate is not available:
• 1% * Gross amount of INR received or provided
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Valuation Rules
• Rule 6(2): Money Changer [Contd.]
c) Where neither of the currencies exchanged is INR:
• 1% * Value to be lesser of the two amounts the person would have received by converting into INR
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Valuation Rules
Rule 6(2)(b) Money Changer (Another option):
i. Currency amount exchanged upto INR 1 Lakhs:
• Value = 1% of Gross amount of currency exchanged
• Subject to a minimum of INR 250
ii. Currency amount exchanged between INR 1 Lakh upto 10 Lakh:
• Value = 0.5% of Currency amount exchanged + INR 1,000
ii. Currency amount exchanged above INR 10 Lakhs
• Value = 0.1% of Currency amount exchanged
• Subject to a max of INR 60,000
(c) Copyright of CA Shashank Gupta
Valuation Rules
3) Value of supply of services i.r.t air travel agent:
a) Domestic Bookings:
• Value = 5% of Basic Fare
b) International Bookings:
• Value = 10% of Basic Fare
• Basic Fare = Amount on which commission is normally paid by airline
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Valuation Rules
4) Value of supply of services i.r.t life insurance business:
a) Default Rule:
• Value = Gross Amount – Investment Amount (if intimated to the policy holder at the time of supply of service)
b) In case of single premium annuity policies other than above:
• Value = 10% of single premium charged from the policy holder
c) In all other cases:
• Value = 25% of the premium charged in the first year
12.5% of the premium charged in the subsequent years
Not to be applicable wherein entire policy is for risk cover
(c) Copyright of CA Shashank Gupta
Valuation Rules
• Rule 6: Determination of value in respect of certain supplies
5) Person dealing & buying of second hand goods:
Pre-Conditions:
Used goods sold as such or after minor processing (no change in nature of product)
No ITC availed on purchase of such goods
Valuation* = Selling Price – Purchase Price
*Where the said value is in negative the same shall be ignored
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• In case of bank recovery from non-registered defaulter
• Value = Purchase Price – 5% for every quarter (Purchase Date to Disposal Date)
Valuation Rules
• Rule 6: Determination of value in respect of certain supplies
6) Value of a token, stamp (other than postage), voucher, coupon: Equivalent to money value of goods or services or both redeemable against the same
7) Value in case of supply of services between distinct service providers: Government to notify such class of service providers wherein Value of taxable services between distinct person where ITC is available shall be deemed to be NIL
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Pure Agent
Rule 7: Pure Agent
Notwithstanding anything contained in these rules, the expenditure or costs incurred by the supplier as a pure agent of the recipient of supply of services shall be excluded from the value of supply, if all the following conditions are satisfied, namely:-
(i) the recipient of supply is liable to make payment to the third party;
(ii) the recipient of supply authorises the supplier to make payment on his behalf;
(iii) At the time of payment acts as a pure agent of the recipient of the supply
(ii) Services are procured/used in the capacity of pure agent only
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Pure Agent [Contd.]
(v) The recipient is informed that such services would be provided by the third party ;
(vi) Amount to be separately indicated in the invoice;
(vii) Only such amount is recovered as has been paid ; and
(viii) Such services are in addition to the services on his own account.
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Pure Agent [Contd.]
“Pure agent” means a person who -
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent
(b) neither intends to hold nor holds any title to the goods or services or both so procured or provided as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services.
Illustration - Statutory fees paid at the time of incorporation of a company.
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Valuation Rules
• Rule 8: Rate of exchange of currency (other than INR)
Applicable reference rate as determined by RBI
On the date of time of supply
In terms of section 12 or 13
(c) Copyright of CA Shashank Gupta
Valuation Rules
• Rule 9: Value of supply inclusive of IGST, CGST, SGST or UTGST
Where the value is inclusive of tax the same shall be determined in the following manner:
Tax Amount = Value inclusive of tax * Tax Rate (as applicable)
100 + Tax Rate (as applicable)
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Time of Supply of Goods
Section 12 of CGST
Date of issue of invoice by the
supplier
Last date on which he is required to
issue invoice under sec 31(1)
Date of receipt of payment
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Earliest of the following:
Time limit for issuance of invoice in case of goods
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Section 31(1): Time limit for issuance of invoice in case of supply of goods:
A registered person supplying taxable goods shall, before or at the time of,—
a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or
b) delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged
thereon and such other particulars as may be prescribed:
Section 31(4): Continuous supply of goods, where successive statements or payments are
involved, invoice shall be issued before or at the time of:
- Each statement
- Such payment
Section 12 of CGST
Invoice amount 10,000 actual receipt 11,000
Total supply value INR 10 crores, invoice value INR 1 crores
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Date of entry in books of accounts
Date of credit to Bank A/c
Date of receipt of payment
Date of
issue of invoice
Date of
payment
Last date of
issue of invoice
(*removal)
Time of supply
15.08.2017 20.07.2017 30.07.2017 20.07.2017
10.08.2017 25.07.2017 15.07.2017 15.07.2017
10.07.2017 01.08.2017 30.07.2017 10.07.2017
04.07.2017 25.07.2017 30.07.2017 04.07.2017
Illustration of Time of Supply of Goods
Time of Supply of Goods
Section 12 of CGST – Reverse Charge
Date of receipt of goods
Date of payment in the BOA;
orDate of DEBIT in Bank a/c
30 days from the date of issue of invoice/ or any other document by the supplier
Copyright of CA. Shashank Gupta
Earliest of the following:
If not determinable
under either of these, then date
of entry in books of accounts of the
recipient of the supply
Date of
Receipt of
Goods
Date of Payment
Immediate Date
after 30 days of
issue of Invoice
Time of
Supply
25.07.2017 20.08.2017 08.07.2017 08.07.2017*
10.08.2017 15.07.2017 16.08.2017 15.07.2017
30.07.2017 10.08.2017 07.08.2017 30.07.2017
Illustration of Time of Supply of Goods under Reverse Charge
Time of Supply of Goods
Section 12 of CGST – Supply of Voucher
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Example:
1. Dominos voucher supplied for pizza (a specific commodity)
2. Shoppers Stop voucher against which multiple items can be procured (e.g. shirts, trousers etc)
Date of issue of voucher, if supply is identifiable at that point; or
Date of redemption of voucher
Section 12 of CGST – Residuary
• In case, where the point of supply cannot be determined in accordance with either of the above:
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Where a periodical return is to be filed, the date on which such return is to be filed; OR
Date on which tax is paid
Section 12 of CGST – Payment Basis
• Applicable in case of receipt of any of the following:
Interest
Late fee
Penalty
• On account of delayed payment of consideration
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Time of Supply of Services
Section 13 of CGST
Date of issue of invoice if issued
within 30/45 days
Or
Date of receipt of payment
Date of provision of service (if invoice not
issued within the prescribed time limit)
Or
Date of receipt of payment
Date on which recipient shows
receipt
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Earliest of the following:
Continous Supply of Service
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Section 31(5): Continuous supply of services:
- Where due date is ascertainable from the contract:
– On; or
- before such due date
- Where due date not ascertainable from the contract:
- Before; or
- At the time of receipt of payment
- Where payment is linked to completion of an event:
- On; or
- Before completion of that event
Section 31(3) (d): Receipt
of advance:
- Liability to issue a
receipt voucher
Date of Issue of
Invoice
Date of receipt of
payment
Date of Provision
of Service
Time of supply of
Service
15.08.2017 10.08.2017 02.07.2017 02.07.2017
30.08.2017 23.07.2017 15.07.2017 15.07.2017
15.07.2017 25.07.2017 20.08.2017 15.07.2017
Illustration of Time of Supply of Services
Time of Supply of Service
Section 13 of CGST
Invoice amount 10,000 actual receipt 11,000
Total supply value INR 10 crores, invoice value INR 1 crores
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Date of entry in books of accounts
Date of credit to Bank A/c
Date of receipt of payment
Section 13 of CGST – Reverse Charge
Date of payment in the BOA;
orDate of DEBIT in Bank a/c
60 days from the date of issue of invoice/ or any other document by the supplier
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Earliest of the following: If not determinable under either of these, then date of entry in books of accounts of the recipient of the
supply
In case of Associated Enterprises, where the
supplier is outside India – Date of Entry
in BOA or Date of payment (whichever
is earlier)
Date of Payment
entered
in recipient books
Date of
Debit
Immediate Date after
60 days of issue of
Invoice
Time of Supply
18.08.2017 15.08.2017 05.07.2017 05.07.2017
22.07.2017 21.07.2017 16.08.2017 21.07.2017
10.08.2017 09.08.2017 07.08.2017 07.08.2017
Illustration of Time of Supply of Service under Reverse Charge
Time of Supply of Service
Section 13 of CGST – Supply of Voucher
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Example:
1. Airtel voucher supplied for spa services (a specific commodity)
2. Make my trip voucher against which multiple services can be procured
Date of issue of voucher, if supply is identifiable at that point; or
Date of redemption of voucher
Section 13 of CGST – Residuary
• In case, where the point of supply cannot be determined in accordance with either of the above:
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Where a periodical return is to be filed, the date on which such return is to be filed; OR
Date on which tax is paid
Section 13 of CGST – Payment Basis
• Applicable in case of receipt of any of the following:
Interest
Late fee
Penalty
• On account of delayed payment of consideration
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Provisions of the Constitutional Amendment
Act
LEVIES TO BE SUBSUMED
Excise Duties including the
additional excise duties
Excise duty under MTPA
Additional duties of customs
(ie CVD and ACD)
CST to be abolished
Service tax
Cesses and surcharges
levied by Union ie education
cess etc
VAT/ Sales tax
Entry tax (Octroi?)
Entertainment tax (unless
levied by the local bodies)
Luxury tax
Taxes on lottery, betting and
gambling
Cesses and surcharges
levied by States, related to
supply of goods and services
Central Levies State Levies
Subsumation
of taxes
Central GST State GST
Purchase tax to
be subsumed
Article 243 X
Features of the Constitution (One Hundred First) Amendment Act
• Central Govt. to make laws w.r.t CGST
• State Govt. to make laws w.r.t SGST
• Central Govt. to make laws w.r.t. IGST
Article 246 A*
• Residuary power of the Central Govt. for making laws w.r.t matters not contained in the Concurrent/ State list
• made subject to Article 246A (above)
Article 248
Features of the Constitution (One Hundred First) Amendment Act
• This article empowers CG to formulate laws even for a matter covered under the state list
• Subject to majority of 2/3rd states
• Now SGST also covered
Article 249
• In case of proclamation of national emergency
• This article empowers CG to formulate laws for matters covered in the state list
• Now SGST also covered
Article 250
Features of the Constitution (One Hundred First) Amendment Act
• Empowers CG to levy stamp duty and excise on M&TP but proceeds collected by SG
• Excise duty on M&TP to be omittedArticle
268
• Was to provide for levy of service tax by Union and appropriation between Union and States
• Inserted vide the 88th Amendment Act in 2003
• To be omitted
Article 268A
Features of the Constitution (One Hundred First) Amendment Act
• Provides for levy, collection & distribution of IGST
• Apportionment of proceeds to be provided by CG on recommendation of GST council
• CG to have exclusive power to formulate place of supply rules so as to determine when a supply takes place in the course of inter-state trade and commerce
Article 269A*
Features of the Constitution (One Hundred First) Amendment Act
• This article empowers the CG to levy surcharge on certain duties and taxes
• GST specifically excluded from the article
Article 271
Features of the Constitution (One Hundred First) Amendment Act
Article 279A*
Provides for the Constitution of GST Council
Provides of the composition of members
Provides for selection of vice – chairperson
Provides for the areas where recommendations can be made by the council
Provides for the quorum for meeting – 50 percent of members
Every decision to be by a 75 percent majority (CG – 33.33 and SG – 66.66)
To adjudicate dispute arising between:
CG & SG
CG + SG & SG
SG & SG
out of recommendations made by the council
Features of the Constitution (One Hundred First) Amendment Act
• Currently Restricts state government from levying tax on inter state sale or purchase of goods or in case of imports
• Now being suitably amended to include supply and services
Article 286
• Provides for definition of GST
• Provides for definition of servicesArticle 366
(12A) and (26A)*
Features of the Constitution (One Hundred First) Amendment Act
• The article provides for procedure of amendment in the Constitution
• Amendment to Article 279Ai.e. GST Council to be subject to special procedure of receiving consent from 50 percent states
Article 368
Features of the Constitution (One Hundred First) Amendment Act
• Entry 84: provides for levy of excise to be substituted so as to restrict the applicability of excise on petroleum and tobacco products
• Entry 92 i.e. Tax on sale or purchase of newspaper and advtt therein and Entry 92C –For service tax – both to be deleted
Seventh Schedule
List I i.e.
Union List
Features of the Constitution (One Hundred First) Amendment Act
Seventh Schedule
List II i.e.
State List
Entry 52 - which provides for levy of entry tax to be deleted
Entry 54 – Which provides for VAT to be amended. VAT to remain applicable on intra-state transactions w.r.t. petroleum products and alcohol
Entry 55 – to be deleted - provides for levy of tax on advtt other than newspaper, television or radio
Entry 62 – to be modified – provides for taxes on luxury, entertainment and betting and gambling – to provide for entertainment tax to be levied by panchayat or a municipality or a district council
Other features of the Const. Amendment Act
• CG to provide for compensation to states for five years
• All the statutory provision of states for taxing any goods or services to stand repealed after one year
• President to provide order so as to do away with any anomaly arising in implementation of GST – such order to be laid before each house of parliament – such order not to be made after 3 years
Definitions
Why definitions
• Object of a definition is to avoid the necessity of frequent repetitions in describing all the subject matter to which the word or expression so defined is intended to apply
LIC of India v. Crown Life Insurance co.
AIR 1965 SC 1985
• In construing the definition of the term ‘agricultural income’, the Supreme Court has consistently taken a view that its meaning has to be considered not merely by looking into the Income Tax Act but also with reference to the rules made under these Acts
Tata Tea Ltd. v. State of Bombay
AIR 1988 SC 1435
Kinds of definition
RESTRICTIVE
• When a word/ term is defined to ‘mean’ such & such
EXTENSIVE
• Where a word/ term is declared to ‘include’ such & such
AMBIGUOUS
• If literal reading of a definition leads to absurdity a restricted meaning has to be given to it so as to avoid the absurdity*
* - S.R Batra v. Smt. Taruna Batra AIR 1939 PC 63
Some Important Definitions
• ‘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’
• ‘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’
• ‘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 UT where he has no fixed place of business’
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Some Important Definitions
• ‘Composite Supply’ –
• ‘means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both or any combination thereof, which are naturally bundled and supplied in conjunction with one each other in the ordinary course of business, one of which is a principal supply’
• Illustration – Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply
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Some Important Definitions
• ‘Mixed Supply’ –
• means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply
• Illustration : A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply.
• Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately
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CA. Shashank Shekhar Gupta
PARTNER - INDIRECT TAX
Girish Ahuja & Associates
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