om hare gurvey namah goods & services tax a ......meaning & scope of supply - section...

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


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


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


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


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withdrawn or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


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

(C) Copyright of CA Shashank Gupta

Meaning & Scope of supply - Section 7(1)(b)


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


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)


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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• 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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• 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


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


Particulars Amount

Price 100

IGST 20

Total Amount 120



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


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


Particulars Amount

Price 100

CGST 10

SGST 10

Total Amount 120


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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


Particulars Amount

Price 100

IGST 20

Total Amount 120


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MANUFACTURING INDUSTRYINDIRECT TAX IMPLICATIONS – CURRENT REGIME


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


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


Particulars Amount

Price 100

CGST 10

SGST 10

Total Amount 120


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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


Particulars Amount

Price 100

IGST 20

Total Amount 120


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SERVICE INDUSTRY INDIRECT TAX IMPLICATIONS – CURRENT REGIME


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


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)

Copyright of CA. Shashank Gupta

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?


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


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)


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.


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


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)


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


Valuation Rules – Related Party – P2P [Contd.]

• Case 2 – Pre Conditions -


• May be made applicable wherein recipient not entitled to avail credit

• B2B supplies i.e. intended for further supplies


• 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


Valuation Rules – Related Party – P2P [Contd.]

• Case 3 – Pre Conditions -


• May be made applicable wherein recipient not entitled to avail credit

• B2C supplies i.e. not intended for further supply


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


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


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).


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


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


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


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


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


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


• 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


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


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.


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.


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


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)


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


Earliest of the following:

Time limit for issuance of invoice in case of goods


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


Date of entry in books of accounts

Date of credit to Bank A/c


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


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



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


Section 12 of CGST – Supply of Voucher


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:


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


Time of Supply of Services

Section 13 of CGST

Date of issue of invoice if issued

within 30/45 days

Or


Date of provision of service (if invoice not

issued within the prescribed time limit)

Or


Date on which recipient shows

receipt



Continous Supply of Service


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


Date of entry in books of accounts

Date of credit to Bank A/c


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


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


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:


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


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


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


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


• 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


• 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


• 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*


• This article empowers the CG to levy surcharge on certain duties and taxes

• GST specifically excluded from the article

Article 271


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


• 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)*


• 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


• 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


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’



• ‘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



• ‘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


THANK YOU !

CA. Shashank Shekhar Gupta

PARTNER - INDIRECT TAX

Girish Ahuja & Associates

For any queries please feel free to contact

[email protected]

[email protected]

+91 9711012424

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