It will take 6 months for GST to settle in, says Tata Chemicals MD Mukundan

There are pluses and minuses from the GST regime for the chemicals and fertilisers industry, says Tata Chemicals Managing Director R Mukundan. Excerpts from an interview:

How has GST impacted Tata Chemicals?
The rollout has been smooth for us. There has been a marginal reduction in output tax rates on soda ash, cement and fertilisers. We have cut prices of soda ash, bicarb and cement from July 1 to pass on the benefit of lower tax. Also, input tax credit was not available in the earlier regime.

However, there will be some adverse impact on working capital for the fertiliser industry due to IGST (Integrated Goods and Service Tax) on stock transfer and IGST of 18 per cent on imported raw materials, which earlier attracted very low CVD (countervailing duty) due to concession notifications.

Are fertiliser dealers in villages finding the transition to GST difficult?
It may be a bit premature to comment on this as the first set of full returns is being filed just now. We understand that most of the dealers avail of the services of accountants to manage their books. Initially, the dealers are likely to consult them for GST-related queries, too, and take their guidance.

Is the clause making buyers responsible for sellers’ GST payment worrisome?
While all our raw material suppliers have GST registration, there are a few minor service providers who don’t. We have set up a mechanism to meet the compliance requirements for these service providers. For our Mithapur-based soda ash operations, we have worked with our suppliers to ensure that all our raw materials, fuel, stores and spares and service purchases are from GST-registered entities.

What are the challenges in the soda ash business?
We do not foresee any major challenges in the adoption of GST in the soda ash business. We have seen significant GST registration in the unorganised sector, which even otherwise makes up only a small segment of the market. Currently, our entire soda ash sales are to GST-registered customers.

How long will it take for the GST regime to settle down?
The rollout has been smooth for us, with GST-compliant customer invoices being generated through ERP systems on July 3. The first test of the GSTN system and the process of filing tax return will be in August-September. Overall, we feel it will take about 5-6 months for the new system to settle down.

Source : http://www.thehindubusinessline.com/economy/it-will-take-6-months-for-gst-to-settle-down-says-tata-chemicals-md-mukundan/article9837121.ece

How software technology can be leveraged to deliver sustainable GST solutions

The Goods and Services tax (GST) was rolled out by the Government of India on July 1 and ever since, it’s compliance has become a debatable topic for the corporates of all sizes.

The switchover to this new tax regime, along with its compliance, thereafter have been particularly under the microscope, rushing businesses to take support from technology and tax software providers.

With expertise in their field of work, software companies have already started rolling out GST specific products. The offered tools are being put in action by the firms for better conformity of the newly amended tax regime.

On the corporate front, companies are facing a problem of rapid reaction to GST but their lack of knowledge and experience is making it a tedious task for them, to make a choice of which among the many to exercise, resulting in chaos and confusion within uninitiated firms. Many may not even be acquainted with what tax-solution providing software can do.

These software products are complete business management software and help a company keep track of all departments and maintains an account of everything in the business.

Here are some tips by Pavan Peechara, director at Udyog Software on how software technology can be leveraged to deliver sustainable GST solutions.

  1. HSN look up an interesting feature:
    A tool to provide a sustainable GST solution must possesses the HSN look up feature. Such feature allows you to search products with HSN code through HSN lookup which further helps in easy identification and categorizing of companies and their goods or services.
  1. Cost Effectiveness for better Efficiency:
    Like most of the software, GST software should facilitate cost effectiveness by providing the users with an affordable cost quotation which furthermore takes care of the overall cost effectiveness of rolling out and meeting compliances.
  1. Easy billing through automated filing:
    Software providing the HSN look up makes it easy to calculate tax category and percentage of it that has to be levied automatically. Features like this make it easy to process billing and minimizing human errors.
  1. User friendly software ensures optimum adaptation:
    One of the most important aspects of employing software in a business is the level of user friendliness it offers its simplified operations. It results in quick learning and operational ease. Therefore software must be user friendly for easy adaptation.
  1. Filling complicated tax forms in one click:
    Automation features should be provided by these software. It eliminates the hassle of paperwork and filing as it is taken care of by direct uploading of tax filing formalities online itself.
  1. Innovation and technology as major facilitators:
    Technology has always been a sector where innovation is its bread and butter to remain on the top as most preferable. Technology goes through tremendous R&D to outpace the outdating. A firm must be aware to adapt to the software that best meets the corporate requirements and itself. In short it should be future proofed to meet new tax slab incorporation or changing of slabs.
  1. Accessibility of Location increases efficiency:
    The most important feature of such software should be the ability to work beyond your 9 to 5 premises to access the required data. It should have the ability to be operated from anywhere and at any time to ensure effectiveness as efficiently online as it should do offline.
    souce:http://www.business-standard.com/article/news-ani/how-software-technology-can-be-leveraged-to-deliver-sustainable-gst-solutions-117083100105_1.html

GST to weaken automobile sectors Q2 earnings

The report said that overall the aggregate earnings for companies under coverage, excluding Tata Motors, fell by 6% year on year.

It said that the growth was robust for companies such as Eicher Motors, but the underperformers were more such as Ashok Leyland, Bajaj Auto, Mahindra & Mahindra and Tata Motors. These underperformers witnessed a fall in earnings during the months following rollout of GST.

“Revenue performance was mixed, with positive growth seen in companies with higher exposure to domestic tractors, two-wheelers and passenger vehicles, while companies with a high exposure towards MHCVs witnessed de-growth. Revenue growth for Tata Motors was affected by foreign exchange translation losses in Jaguar Land Rover (The British Pound’s depreciation of 14% YoY versus the Indian Rupee) and lower sales volumes (-3% YoY in JLR, -11% in standalone),” said the analysts.

Even commercial vehicle companies saw weak revenues during the July and August months in Q2. This is as volumes had contracted steeply due to the BS-IV transition. Revenue of Tata Motors on a standalone basis, Ashok Leyland, Eicher Motors’ VEVC and Suzuki Motors Isuzu declined by 12% YoY, 1% YoY, 16 % YoY and 31% YoY, respectively.

However, the companies in the tractor segment saw a strong growth and there was a positive growth in the passenger vehicle segment.

“Aggregate EBITDA margin (excluding Tata Motors) contracted by 350 basis points YoY to 12.7% (Emkay Estimated: 13.4%). The fall was largely due to GST transition costs, higher commodity prices and lower scale. Companies such as Bajaj Auto, Hero MotoCorp, Maruti Suzuki, Mahindra & Mahindra, and TVS incurred GST transition expenses of Rs 32 crore (0.6% of sales), Rs50 crore (0.6%),  about Rs 90 crore (0.5%), Rs 140 crore (1.3%) and Rs 22 crore (0.6%), respectively,” said the report.

The report says that going forward robust growth is expected in passenger vehicles, two-wheelers and tractors, driven by strong rural demand, new product launches and reducing cost of ownership.

Meanwhile, a gradual pick-up is anticipated in MHCVs, led by government’s thrust on infrastructure development, low interest rates and the proposed implementation of the scrappage policy. On the margins side, price hikes and lower discounts in the domestic market are expected to support margins going ahead.

Source:http://www.zeebiz.com/companies/news-gst-to-weaken-automobile-sectors-q2-earnings-22853

High debt to negate impact of high GST registrations in West Bengal

West Bengal has seen a surge in new Goods and Services Tax (GST) registration after its roll out. The state has topped the list of new registrations at around 200,000 new registrations since the roll out of GST on July 1. According to senior tax officials, one of the reasons behind the surge was the fact that traders involved in businesses like medicine shops, textiles, jewellery and wood work, among others, who were not in the tax net earlier, are now under GST network.

The total number of assesses under the value added tax (VAT) regime in West Bengal was close to 98,000, according to rough estimates. Thus, post-GST, an addition of two lakh new tax payers is expected to add significantly to the tax kitty of West Bengal.

However, much of the positive impact of anticipated higher tax collection is expected to be negated by the high debt burden of the state. West Bengal is likely to gain from GST, as it is consumption driven state.

Over the last few years, the West Bengal government itself has successfully increased its own tax collection through better compliance. In the year 2017-18, the West Bengal government has projected its own tax collection at around Rs 55,787 crore, against Rs 48,927 crore last year, a rise of about 14 per cent. In fact, in the last five years, West Bengal has seen nearly 50 per cent increase in its own tax revenue collection. In 2012-13, West Bengal’s own tax revenue was around Rs 32,808 crore.

Notably, against the projected own tax collection of around Rs 55,787 crore, the state’s loan repayment burden (principal plus interest) for 2017-18 is about Rs 45,350. In fact, West Bengal’s debt servicing burden itself (counted as revenue expenditure) is about Rs 26,243 crore, or little less than half of its own revenue collection.

“West Bengal has been in a vicious debt trap and has been using market borrowing for loan repayments. “We are borrowing Rs 40,000 crore within which we have to refund Rs 28,000 crore as interest,” according to Amit Mitra, finance minister West Bengal, in an interview in 2015 posted on the website of All India Trinamool Congress. This year, West Bengal’s market loans is pegged at around Rs 44,484 crore, and its outstanding debt is expected to be around Rs 36,6085 crore, one of the highest among all states.

“Compared to earlier years, West Bengal is much better in aspects like improving revenue deficit to GSPD. However, the problem with West Bengal is its huge debt burden. Apart from improving tax efficiency, it needs to go for pinpointed subsidy, and not across the board,” says Devendra Kumar Pant, chief economist at India Ratings.

What is more worrying for West Bengal is the upcoming high-interest debt repayment schedule. The state’s repayment burden on account of market loan alone would increase from Rs 3,200 crore in 2016-17 to about Rs 11,610 crore in 2017-18. In fact, on an average, the share of market loans or state development loans for West Bengal in its total debt burden has been close to Rs 3,000 crore every year. Also, West Bengal’s market loan repayment obligation would be the highest among all states in 2017-18.

It may be recalled, in 2003, the central government had announced a debt-swap scheme, which allowed state governments to replace high-cost borrowing with lost cost ones from small savings pool and market borrowing. However, that time West Bengal did not participate in the scheme. Moreover, Starting 2007, states have been borrowing heavily through market loans. The borrowings were mostly through state development loans, which were of ten-year maturity, and mostly subscribed by public sector banks and other government undertakings.

“Normally in case of IGST consuming states gain, and West Bengal is likely to be a gainer with GST,” according to Dipankar Dasgupta, a former professor at Indian Statistical Institute.

West Bengal’s revenue deficit as a percentage of GSDP has been coming down due to tax collection efficiency. From around 2.1 per cent in 2014-15, it is expected to be zero this financial year, according to Reserve Bank of India data.
Source:http://www.business-standard.com/article/economy-policy/high-debt-to-negate-impact-of-high-gst-registrations-in-west-bengal-117083000791_1.html

Fiscal consolidation may be derailed due to GST, loan waivers and pay revisions

Fiscal consolidation may come under threat at the central and state level due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix, the Reserve Bank of India said in its annual report.

While a normal monsoon and the lowering of bank lending rates should support investment demand, RBI warned that an offsetting impact on aggregate demand could emerge if state governments rein in capital spending, keeping in view the objective of fiscal consolidation. GST was rolled out across the country on July 1.

The central government has already shifted its deadline for achieving a fiscal deficit target of 3% of GDP to FY19 from FY18, a deviation from the roadmap proposed by the Fiscal Responsibility and Budget Management (FRBM) Review Committee.

RBI said that near-term uncertainties with regard to revenue mobilisation, following the implementation of the single tax structure along with rising committed liabilities of states could led to the breach of fiscal deficit targets.

“In the fiscal sphere, while the gains to growth, efficiency and tax buoyancy over the medium term from the recent implementation of GST are unequivocally recognised, near-term uncertainties with regard to revenue mobilization therefrom – which could impact fiscal consolidation at both centre and state levels – cannot be ruled out as this fundamental reform gains pan-India traction,” RBI said in its annual report for FY17 that was released on Wednesday.

State finances have also deteriorated on account of the UDAY (Ujwal Discom Assurance Yojana) scheme aimed at reviving ailing power distribution companies (discoms) and revenue falling short despite cutbacks in capital outlays. Additionally, four state governments – Uttar Pradesh, Maharashtra, Punjab and Karnataka — are likely to face several challenges in FY18 due to farm loan waivers derailing fiscal discipline, RBI said.
The committed liabilities of states may rise in case they decide to implement the recommendations of their own pay commissions in FY18. The existing high level of state government guarantees constitutes a major fiscal risk while their interest liabilities due to financial restructuring of discoms (through UDAY) will increase in the years ahead, RBI said. Thus, even as the central government makes significant efforts toward fiscal consolidation, the higher debt burden of the states could push up overall government debt, RBI said.

At the corporate level, rising input costs may prove a drag on profitability, pulling down the overall growth in general value added (GVA). A bigger threat is the so-called twin balance sheet problem—over-leveraged companies and stressed banks—which may delay any revival in private investment demand.

The expected normal monsoon and the resultant replenishment of reservoirs, policy initiatives of the government such as a hike in minimum support prices (MSP) and rising crop insurance coverage are likely to help in boosting agricultural production and supporting rural demand. The implementation of increases in the house rent allowance (HRA) as per the recommendation of the seventh pay commission for central government employees starting July and the possibility of this being effected at the state level as well should however strengthen urban consumption demand, RBI said.

Source:http://economictimes.indiatimes.com/news/economy/finance/fiscal-consolidation-may-be-derailed-due-to-gst-loan-waivers-and-pay-revisions/articleshow/60294821.cms

A webinar on the topic “Filing of GSTR 1

A webinar has been scheduled on 30th August 2017 at 04:00 PM IST on  he topic “Filing of GSTR 1”, in Marathi Language.

29/08/2017

Dear Sir/Madam,

Webinar Topic: “Filing of GSTR 1”, in Marathi Language

Webinar Coverage:

  1. Relevant legal provisions for GSTR1
  2. Filing of GSTR 1
  3. Question and Answer

Click here for the webinar (in Marathi) Registration Link for the Webinar: https://zoom.us/webinar/register/dd0cf88f27f9e3fbcde7dc3c8da9331e

Speaker for the webinar: Mr. Bhagwan Patil, Vice President (Services), GSTN

Thanks
Team GSTN

Source : https://www.gst.gov.in/newsandupdates/read/132

Cabinet clears hike in GST cess to 25 per cent on mid, large size cars

Mid and large sized cars, luxury vehicles, hybrids as well as SUVs are likely to cost more as the Cabinet cleared the issuing of Ordinance to raise the GST cess on them to a maximum of 25 per cent, from 15 per cent at present. Car prices had dropped by up to Rs 3 lakh following the implementation of the Goods and Services Tax (GST) from July 1 and the ordinance is being seen as an attempt to rectify the anomaly where rates of certain common use items had gone up but luxury cars were costing less under the new regime.

Finance Minister Arun Jaitley aid the ordinance, or an executive order, will amend the GST (Compensation to States) Act, 2017 to raise the maximum rate of cess. However, he added, the actual cess on different classes of vehicles and as to when it will be implemented is to be decided by the GST Council.

Headed by Jaitley and comprising representatives of all states, the Council is to meet in Hyderabad on September 9. The Ordinance, which is issued to enact a law or amend an existing legislation during times when Parliament is not insession, will now be sent to the President for promulgation.

The amendment would have to be approved by the Parliament within six months. The next session of Parliament is likely in November/December. Jaitley said the objective of a taxation policy cannot be to make luxury items cheaper, and essentials costlier. “If at all relief is to be given, it has to be given to a common man’s item rather than a luxury item. So a person who can afford Rs 1 crore for a vehicle can also afford Rs 1.20 crore,” he said.

Under GST, which replaced over a dozen central and state levies in the biggest tax reform since independence, cars attract the top tax rate of 28 per cent. On top of this, a cess of 1 to 15 per cent is levied for the creation of a corpus to compensate states for any loss of revenue from implementation of GST.

After the introduction of GST, the total tax incidence on motor vehicles (GST plus compensation cess) has come down when compared with the total tax incidence in the pre-GST regime. The highest pre-GST tax incidence on motor vehicles worked out to about 52-54.72 per cent, to which 2.5 per cent was added on account of Central Sales Tax, octroi etc.

Against this, post-GST the total tax incidence came to 43 per cent. Presently, large motor vehicles, SUVs, mid-segment cars, large cars, hybrid cars and hybrid motor vehicles attract a cess of 15 per cent on top of 28 per cent GST. Small petrol cars of less than 4 meters and 1,200 cc attract a cess of 1 per cent, while small diesel cars of less than 4 meters and 1,500 cc engine attract a cess of 3 per cent.

An official said automobiles that currently attract 15 per cent cess would see the rate going up to 25 per cent. The GST Council had in its August 5 meet recommended that the central government move legislative amendments required for increasing the maximum ceiling of cess leviable on motor vehicles to 25 per cent from present 15 per cent. Jaitley said pursuant to GST implementation price of vehicles had “substantially come down”, whereas the smaller vehicles remained untouched.

Raising the cess requires an amendment to the Schedule of section 8 of the GST (Compensation to a State) Act, 2017. There are 12 different categories of automobiles and two categories are impacted by this decision to hike cess. “These hikes are not across the board,” Jaitley said. Revenue Secretary Hasmukh Adhia said the categorisation of cars has not changed. Cars on which there was a excise duty of 27 or 30 per cent, those were luxury cars.

Source:http://indianexpress.com/article/business/economy/cabinet-clears-hike-in-gst-cess-to-25-per-cent-on-mid-large-size-cars-4820966/

Government Services


FAQ : Government Services


Question 1: Are all services provided by the Government or local authority exempted from payment of tax ?

Answer: No, all services provided by the Government or a local authority are not exempt from tax. As for instance, services, namely, (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of an airport or a port; (iii) transport of goods or passengers; or (iv) any service, other than services covered under (i) to (iii) above, provided to business entities are not exempt and that these services are liable to tax.

That said, most of the services provided by the Central Government, State Government, Union Territory or local authority are exempt from tax. These include services provided by government or a local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243W of the Constitution and services by a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution.


Question 2: Are Government or local authority or governmental authority liable to pay tax?

Answer: Yes. The Government or a local authority or a governmental authority is liable to pay tax on supply of services other than the services notified as exempt or notified as neither a supply of goods nor a supply of services under clause (b) of sub-section (2) of section 7 of the CGST Act, 2017. In respect of services other than – (i) renting of immovable property; (ii) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; and (iii) services in relation to an aircraft or a vessel, inside or outside the precincts of anairport or a port, the service recipients are required to pay the tax under reverse charge mechanism.


Question 3: What is the meaning of ‘Government’ ?

Answer: As per section 2(53) of the CGST Act, 2017, ‘Government’ means the Central Government. As per clause (23) of section 3 of the General Clauses Act, 1897 the ‘Government’ includes both the Central Government and any State Government. As per clause (8) of section 3 of the said Act, the ‘Central Government’, in relation to anything done or to be done after the commencement of the Constitution, means the President. As per Article 53 of the Constitution, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or indirectly through officers subordinate to him in accordance with the Constitution. Further, in terms of Article 77 of the Constitution, all executive actions of the Government of India shall be expressed to be taken in the name of the President. Therefore, the Central Government means the President and the officers subordinate to him while exercising the executive powers of the Union vested in the President and in the name of the President. Similarly, as per clause (60) of section 3 of the General Clauses Act,1897, the ‘State Government’, as respects anything done after the commencement of the Constitution, shall be in a State the Governor, and in an Union Territory the Central Government. As per Article 154 of the Constitution, the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or indirectly through officers subordinate to him in accordance with the Constitution. Further, as per article 166 of the Constitution, all executive actions of the Government of State shall be expressed to be taken in the name of Governor. Therefore, State Government means the Governor or the officers subordinate to him who exercise the executive powers of the State vested in the Governor and in the name of the Governor.


Question 4: Who is a local authority?

Answer: Local authority is defined in clause (69) of section 2 of the CGST Act, 2017 and means the following:
• a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
• a “Municipality” as defined in clause (e) of article 243P of the Constitution;
• a Municipal Committee, a ZillaParishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Government or any State Government with the control or management of a municipal or local fund;
• a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
• a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
• a Development Board constituted under article 371 of the Constitution; or
• a Regional Council constituted under article 371A of the Constitution;


Question 5: Are all local bodies constituted by a State or Central Law regarded as local authorities for the purposes of the GST Acts?

Answer: No. The definition of ‘local authority’ is very specific and means only those bodies which are mentioned as ‘local authorities’ in clause (69) of section 2 of the CGST Act, 2017. It would not include other bodies which are merely described as a ‘local body’ by virtue of a local law.
For example, State Governments have setup local developmental authorities to undertake developmental works like infrastructure, housing, residential & commercial development, construction of houses, etc. The Governments setup these authorities under the Town and Planning Act. Examples of such developmental authorities are Delhi Development Authority, Ahmedabad Development Authority, Bangalore Development Authority, Chennai Metropolitan Development Authority, Bihar Industrial Area Development Authority, etc. Such developmental authorities formed under the Town and Planning Act are not qualified as local authorities for the purposes of the GST Acts.


Question 6: Would a statutory body, corporation or an authority constituted under an Act passed by the Parliament or any of the State Legislatures be regarded as ‘Government’ or “local authority” for the purposes of the GST Acts?

Answer: A statutory body, corporation or an authority created by the Parliament or a State Legislature is neither ‘Government’ nor a ‘local authority’. Such statutory bodies, corporations or authorities are normally created by the Parliament or a State Legislature in exercise of the powers conferred under article 53(3)(b) and article 154(2)(b) of the Constitution respectively. It is a settled position of law (Agarwal Vs. Hindustan Steel AIR 1970 Supreme Court 1150) that the manpower of such statutory authorities or bodies do not become officers subordinate to the President under article 53(1) of the Constitution and similarly to the Governor under article 154(1). Such a statutory body, corporation or an authority as a juridical entity is separate from the State and cannot be regarded as the Central or a State Government and also do not fall in the definition of ‘local authority’. Thus, regulatory bodies and other autonomous entities would not be regarded as the government or local authorities for the purposes of the GST Acts.


Question 7: Would services provided by one department of the Government to another Department of the Government be taxable?

Answer: Services provided by one department of the Central Government/StateGovernment to another department of the Central Government/ State Government are exempt under notification No. 12/2017-Central Tax (Rate), dated28.06.2017 [S No 8 of the Table].
However, this exemption is not applicable to:
(a) services provided by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central Government, the State Government and Union Territory;
(b) services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport;
(c) services of transport of goods and/or passengers.


Question 8: What are the transport services provided by the Government or local authorities exempt from tax?

Answer: Transport services provided by the Government to passengers by — (i) railways in a class other than— (a) first class; or (b) an air-conditioned coach; (ii) metro, monorail or tramway; (iii) inland waterways; (iv) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (v) metered cabs or auto rickshaws (including E-rickshaws) are exempt from tax.


Question 9: Are various corporations formed under the Central Acts or State Acts or various government companies registered under the Companies Act, 1956/2013 or autonomous institutions set up by special Acts covered under the definition of ‘Government’?

Answer: No. The corporations formed under the Central or a State Act or various companies registered under the Companies Act, 1956/2013 or autonomous institutions set up by the State Acts will not be covered under the definition of ‘Government’ and therefore, services provided by them will be taxable unless exempted by a notification.


Question 10: Are various regulatory bodies formed by the Government covered under the definition of ‘Government’?

Answer: No. A regulatory body, also called regulatory agency, is a public authority or a governmental body which exercises functions assigned to them in a regulatory or supervisory capacity. These bodies do not fall under the definition of Government.

Examples of regulatory bodies are – Competition Commission of India, Press Council of India, Directorate General of Civil Aviation, Forward Market Commission, Inland Water Supply Authority of India, Central Pollution Control Board, Securities and Exchange Board of India.


Question 11: Will the services provided by Police or security agencies of Government to PSUs or corporate entities or sports events held by private entities be taxable?

Answer: Yes. Services provided by Police or security agencies of Government to PSU/private business entities are not exempt from GST. Such services are taxable supplies and the recipients are required to pay the tax under reverse charge mechanism on the amount of consideration paid to Government for such supply of services.

Illustration: The Karnataka Cricket Association, Bangalore requests the Commissioner of Police, Bangalore to provide security in and around the Cricket Stadium for the purpose of conducting the cricket match. The Commissioner of Police arranges the required security for a consideration. In this case, services of providing security by the police personnel are not exempt. As the services are provided by Government, Karnataka Cricket Association is liable to pay the tax on the amount of consideration paid under reverse charge mechanism.

GST question and answers on government services


Question 12: The Department of Posts provides a number of services. What is the status of those services for the purpose of levy of tax?

Answer: The services by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Government or Union territory are not exempt. In respect of these services the Department of Posts is liable to pay tax without application of reverse charge.
However, the following services provided by the Department of Posts are not liable to tax.
(a) Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations.
(b) Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services.


Question 13: What is the scope of agency services provided by the Department of Posts mentioned in the Notification No. 12/2017-Central Tax(Rate) dated 28.06.2017?

Answer: The Department of Posts also provides services like distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills on commission basis. These services are in the nature of intermediary and generally called agency services. In these cases, the Department of Posts is liable to pay tax without application of reverse charge.


Question 14: Would services received by Government, a local authority, a governmental authority from a provider of service located outside India be taxable?

Answer: No tax is payable on the services received by the Government / local authority/ governmental authority from a provider of service located outside India. However, the exemption is applicable to only those services which are received for the purpose other than commerce, industry or any other business or profession. In other words, if the Government receives such services for the purpose of business or commerce, then tax would apply on the same.


Question 15: Whether the exemption is applicable to online information and database access or retrieval services received by Government or local authorities from provider of service located in non taxable territory?

Answer: No. Online information and database access or retrieval services received by Government or local authorities from non taxable territory for any purpose including furtherance of business or commerce are liable to tax.


Question 16: What are the functions entrusted to a municipality under Article 243W of the Constitution.

Answer: The functions entrusted to a municipality under the Twelfth Schedule to Article 243W of the Constitution are as under:
(a) Urban planning including town planning.
(b) Regulation of land-use and construction of buildings.
(c) Planning for economic and social development.
(d) Roads and bridges.
(e) Water supply for domestic, industrial and commercial purposes.
(f) Public health, sanitation conservancy and solid waste management.
(g) Fire services.
(h) Urban forestry, protection of the environment and promotion of ecological aspects.
(i) Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
(j) Slum improvement and upgradation.
(k) Urban poverty alleviation.
(l) Provision of urban amenities and facilities such as parks, gardens, playgrounds.
(m) Promotion of cultural, educational and aesthetic aspects.
(n) Burials and burial grounds; cremations, cremation grounds; and electric crematoriums.
(o) Cattle pounds; prevention of cruelty to animals.
(p) Vital statistics including registration of births and deaths.
(q) Public amenities including street lighting, parking lots, bus stops and public conveniences.
(r) Regulation of slaughter houses and tanneries.


Question 17: What are the functions entrusted to a Panchayat under Article 243G of the Constitution?

Answer: The functions entrusted to a Panchayat under the Eleventh Schedule to Article 243G of the Constitution are as under:
(i) Agriculture, including agricultural extension. (ii) Land improvement, implementation of land reforms, land consolidation and soil conservation. (iii) Minor irrigation, water management and watershed development. (iv) Animal husbandry, dairying and poultry. (v) Fisheries. (vi) Social forestry and farm forestry. (vii) Minor forest produce. (viii) Small scale industries, including food processing industries. (ix)Khadi, village and cottage industries. (x) Rural housing. (xi) Drinking water. (xii) Fuel and fodder. (xiii) Roads, culverts, bridges, ferries, waterways and other means of communication. (xiv) Rural electrification, including distribution of electricity. (xv) Non-conventional energy sources. (xvi) Poverty alleviation programme. (xvii) Education, including primary and secondary schools. (xviii) Technical training and vocational education. (xix) Adult and non-formal education. (xx) Libraries. (xxi) Cultural activities. (xxii) Markets and fairs. (xxiii) Health and sanitation, including hospitals, primary health centres and dispensaries. (xxiv) Family welfare. (xxv) Women and child development. (xxvi) Social welfare, including welfare of the handicapped and mentally retarded. (xxvii) Welfare of the weaker sections, and in particular, of the Scheduled Castes and the Scheduled Tribes. (xxviii) Public distribution system. (xxix) Maintenance of community assets.


Question 18: What is the significance of services provided by Government or a local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority ?

Answer: Non-performance of a contract or breach of contract is one of the conditions normally stipulated in the Government contracts for supply of goods or services. The agreement entered into between the parties stipulates that both the service provider and service recipient abide by the terms and conditions of the contract. In case any of the parties breach the contract for any reason including non-performance of the contract, then such person is liable to pay damages in the form of fines or penalty to the other party. Non-performance of a contract is an activity or transaction which is treated as a supply of service and the person is deemed to have received the consideration in the form of fines or penalty and is, accordingly, required to pay tax on such amount.
However non performance of contract by the supplier of service in case of supplies to Government is covered under the exemption from payment of tax. Thus any consideration received by the Government from any person or supplier for non performance of contract is exempted from tax.
Illustration: Public Works Department of Karnataka entered into an agreement with M/s. ABC, a construction company for construction of office complex for certain amount of consideration. In the agreement dated 10.7.2017, it was agreed by both the parties that M/s. ABC shall complete the construction work and handover the project on or before 31.12.2017. It was further agreed that any breach of the terms of contract by either party would give right to the other party to claim for damages or penalty. Assuming that M/s. ABC does not complete the construction and handover the project by the specified date i.e., on or before 31.12.2017. As per the contract, the department asks for damages/penalty from M/s. ABC and threatened to go to the court if not paid. Assuming that M/s ABC has paid an amount of Rs. 10,00,000/- to the department for non performance of contract. Such amount paid to department is exempted from payment of tax.


Question 19: Whether services in the nature of change of land use, commercial building approval, utility services provided by a governmental authority are taxable?

Answer: Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are exempt from payment of tax.


Question 20: Whether fines and penalty imposed by Government or a local authority for violation of a statute, bye-laws, rules or regulations liable to tax?

Answer: No. This gets covered under the exemption by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority.


Question 21: Whether services provided by Government or a local authority to a business entity located in a special category State are subject to tax?

Answer: The expression “special category States” provided in Explanation (iii) to section 22 of the CGST Act, shall mean the States as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution. As per the said clause, the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand have been given the status of special category States for the purpose of GST Acts. Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017 (Sl. No. 7 of the Table) provides for exemption from payment of tax in respect of services provided to a business entity located in a special category State with a turnover up to Rs. 10 lakh rupees. However, this exemption is not be applicable to (a) services – (i) by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) in relation to an aircraft or a vessel, inside or outside the precincts of anairport or a port; (iii) of transport of goods or passengers and (iv) services by way of renting of immovable property.


Question 22: A small business entity is carrying on a business relating to consulting engineer services in Delhi. Does it need to pay tax on the services received from Government or a local authority?

Answer: If turnover of the entity is less than the limit of Rs. 20 lakhs in a financial year, no tax would be payable. The exemption from payment of tax is applicable to services provided to a business entity having a turnover up to Rs. 20 lakh rupees. However, this exemption is not applicable to (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of anairport or a port; (iii) services of transport of goods or passengers and (iv) services by way of renting of immovable property.


Question 23: What is reverse charge in GST?

Answer: As per 2(98) of the CGST Act, 2017, ‘’reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9 of the CGST Act, 2017, or under sub-section (3) or subsection (4) of section 5 of the IGST Act, 2017.


Question 24: Whether reverse charge is applicable to services provided by Government or local authorities?

Answer: Yes, reverse charge is applicable in respect of services provided by Government or local authorities to any person whose turnover exceeds Rs.20 lakhs (Rs.10 lakhs for Special Category States) excluding the following services:
(i) renting of immovable property;
(ii) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
(iii) services in relation to an aircraft or a vessel, inside or outside the precincts of anairport or a port;
(iv) transport of goods or passengers.
Thus, the recipient of supply of goods or services is liable to pay the entire amount of tax involved in such supply of services or goods or both.


Question 25: What is the scope of ‘pure services’ mentioned in the exemption notification No. 12/2017-Central Tax (Rate), dated 28.06.2017?

Answer: In the context of the language used in the notification, supply of services without involving any supply of goods would be treated as supply of ‘pure services’. For example, supply of man power for cleanliness of roads, public places, architect services, consulting engineer services, advisory services, and like services provided by business entities not involving any supply of goods would be treated as supply of pure services. On the other hand, let us take the example of a governmental authority awarding the work of maintenance of street lights in a Municipal area to an agency which involves apart from maintenance, replacement of defunct lights and other spares. In this case, the scope of the service involves maintenance work and supply of goods, which falls under the works contract services. The exemption is provided to services involves only supply of services and not for works contract services.


Question 26: Would services in relation to supply of motor vehicles to Government be taxable?

Answer: Supply of a motor vehicle meant to carry more than twelve passengers by way of giving on hire to a state transport undertaking is exempted from tax. The exemption is applicable to services provided to state transport undertaking and not to other departments of Government or local authority. Generally, such State transport undertakings/corporations are established by law with a view to providing public transport facility to the commuters. In some cases, transport undertakings hire the buses on lease basis from private persons on payment of consideration. The services by way of supply of motor vehicles to such state transport undertaking are exempt from payment of tax. However, supplies of motor vehicles to Government Departments other than the state transport undertakings are taxable.


Question 27: Can the supplier of services claim the tax paid under reverse charger mechanism as input tax credit?

Answer: Yes. The supplier of services may claim the input tax credit on the amount of tax paid under reverse charge mechanism subject to the provisions of Chapter V of CGST Act, 2017 read with Chapter V of the CGST Rules, 2017.


Question 28: What is the concept called ‘tax deduction at source’?

Answer: As per section 51 of the CGST Act, 2017, the Government may mandate (a) a department or establishment of the Central Government or State Government; or (b) local authority; or (c) Governmental agencies; or (d) such persons or category of persons as may be notified by the Government on the recommendations of the Council, to deduct tax at the rate of one per cent on account of CGST and one percent on account of SGST from the payment made or credited to the supplier where the total value of the supply under a contract exceeds two lakh and fifty thousand rupees (excluding tax payable under the GST Acts). The deductor shall remit the deducted amount to the Government and is also required to furnish a certificate to the deductee by mentioning the details of the amount deducted and payment of such deducted amount.
Illustration: ABC Ltd supplies the service valued at Rs. 3,00,000/- excluding tax to Government department. The department while making the payment of Rs. 3,00,000/- should deduct Rs. 3000/- on account of CGST and Rs. 3000/- on account of SGST and make a net payment of Rs. 2,94, 000/- to ABC Ltd. Thereafter, the department shall pay the amount of Rs. 3,000/- to the Central Government andRs. 3,000/- to the State Government and furnish a certificate to the deductee, containing the details of such deduction including the details of such deductee.


Question 29: Whether the deductee can claim the input tax credit on the deduction of tax at source amount?

Answer: No. The tax deducted at source is not input tax credit. However, the amount deducted shall be credited to the electronic cash ledger (upon being accepted by the deducteein his Form GSTR-2A) of the deductee and can be utilized for payment of output tax.


Question 30: Whether an amount in the form of royalty or any other form paid/payable to the Government for assigning the rights to use of natural resources is taxable?

Answer: The Government provides license to various companies including Public Sector Undertakings for exploration of natural resources like oil, hydrocarbons, iron ore, manganese, etc. For having assigned the rights to use the natural resources, the licensee companies are required to pay consideration in the form of annual license fee, lease charges, royalty, etc to the Government. The activity of assignment of rights to use natural resources is treated as supply of services and the licensee is required to pay tax on the amount of consideration paid in the form of royalty or any other form under reverse charge mechanism.


Question 31: Whether a Government Department, required to deduct tax at source, is liable to take registration as a normal taxpayer?

Answer: The Government Departmentis required to take registration as a normal taxpayer only if it makes a taxable supply of goods and/or services and in such cases, theregistration shall be obtained on the basis of PAN but Bank account is not mandatory. However, if it is not making any taxable supply of goods and/or services, it is required to register only as a deductorof tax at source on the basis of TAN/PAN.


Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.


Source : Know gst india questions and answers

FAQ: Gems & Jewelery


FAQ : Gems & Jewellery


Question 1: Whether advertising and communication material banners/hoardings/posters) provided to distributors would be treated as supply in the course of business by the company thereby not requiring any reversal of ITC?

Answer:
(a) Where the material is provided free of cost:
This would not amount to a supply and hence no tax ispayable on such transaction and in such a case credit availed by the company would need to be reversed in accordance with section 17(5) of the CGST Act, 2017.
(b) Where the material is provided for a consideration:
This would amount to a normal supply.


Question 2: Currently Banks do not pay any VAT on import of precious metals. Banks/nominated agencies pay only customs duty on imports. In the new regime of GST, will the Banks have to pay IGST while importing?

Answer: Yes, 3% IGST is payable on all imports of precious metals in addition to the basic customs duty. IGST paid can be taken as input tax credit by the banks.


Question 3: Banks import gold / silver on consignment basis wherein the ownership of the metal is with the supplier of the bullion which maybe an overseas entity. Is the overseas entity required to have GST registration because currently they do not file returns and are governed by multi-nation treaties?

Answer: This amounts to an import in accordance with the definition of the word “import” in the IGST Act, 2017 which provides that “bringing into India of any goods from any place outside India” is an import of the goods. What is material in this definition is the mere act of bringing into
India; the ownership is not material for determining whether an import has taken place. Banks, being registered entities, would be liable to pay IGST on such imports but not the overseas entities since they are not effecting the import.


Question 4: Gold and silver imported by banks/nominated agencies on consignment basis are lying in stock as on 1st July. Clarification is required on how to charge the customers in transition phase from VAT to GST. Will customers be liable to pay GST rates?

Answer: GST is payable @ 3% with effect from 01.07.2017.


Question 5: Banks lend gold in physical form for a period not exceeding 6 months. Banks receive interest on the gold ounces disbursed and the same is converted into Rupees after calculation of interest on the ounces and the USD/INR conversion. Will the same methodology continue in case of  GST as well wherein Banks shall pay a provisional GST (i.e. IGST/SGST/CGST) on ongoing market prices and pay the final
GST as and when the prices are fixed?

Answer: Yes, Banks may avail of the benefit of provisional assessment provided under section 60 of the CGST Act, 2017.


Question 6: Banks pay provisional VAT currently at the time of delivery of gold on the basis of ongoing market prices. When customer fixes the price of metal, Banks pay actual VAT on the maturity date of the Gold Loan. Banks must be allowed to set-off the excess provisional GST paid to the government against future fixation of prices. In case of excesspayment, the same should be refunded on Pan – India basis and not on he basis of States.

Answer: Banks may claim refund in accordance with the provisions of section 54 of the CGST Act, 2017. Interest is payable in such cases as provided in section 56 of the CGST Act, 2017. In this connection, section 60(5) of the CGST Act, 2017 may be referred to.


Question 7: When we are selling Gold, Diamond or Silver Jewellery to the end consumer (Customer) like a Gold Chain weighing10gm at a total value of Rs. 30,000/- (gold value is Rs. 28000/- and making charges on that gold chain is Rs 2000/-), can we charge GST @3% on the total value or @3% on the gold value and @5% on making charges?

Answer: GST is payable at the rate of 3% of the total transaction value of jewellery, whether the making charge is shown separately or not.

GST india questions and answers on jewellery


Question 8: When we issue gold as raw material to our Job Worker for Job Work and he returns that gold as finished goods,what GST treatment will be done and how to calculate the value?

Answer:
The job worker, if registered, would be required to pay GST at the rate of 5% on job charges only. The jewellery manufacturer would in turn take credit of GST paid on such job work and may utilize the same for payment of GST on his outward supply of manufactured jewellery. However, if the job worker is exempted from registration, the jewellery
manufacturer would be required to pay GST on his inputsupply from the  job worker [of jewellery made out of precious metal given by him] on reverse charge basis. Nonetheless, he would be eligible to avail input credit of the tax so paid under reverse charge mechanism.


Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.


Source : Jewelry under GST in india

IT/ITES Services


FAQ: IT/ITES


Question 1: Whether software is regarded as goods or services in GST?

Answer: In terms of Schedule II of the CGST Act 2017, development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software and temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services.

But, if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the-shelf) or made available through the use of encryption keys, the same is treated as a supply of goods classifiable under heading 8523.


Question 2: What are the implications of recognising the development, design, programming, customisation, adaptation, upgradation, enhancement, and implementation of information technology software as a service?

Answer: The primary implication is that the place of supply rules applicable to services would apply in determining taxability of the supply of software services. The same would be applicable in situations of supply of services involving a temporary transfer or permitting the use or enjoyment of any intellectual property right. The other implication is that the supplier of software services would not be eligible for the composition scheme.


Question 3: ‘A’ is a dealer in Computers and Computer parts having turnover of Rs. 8 lakh in a year; does‘A’ have to register under GST?

Answer: Every supplier located in a State or Union territory, whose “aggregate turnover” in a financial year exceeds twenty lakh rupees, is liable to be registered under GST. This limit of turnover for a special category State is ten lakh rupees. ‘A’, whose aggregate turnover is only Rs. 8 lakh in a year, is therefore not liable to registration.


Question 4: The registered person ‘B’ receives small portions of software code from individuals which he then integrates and supply as a package to clients. These individuals are having small turnover of Rs 5 to 10 lakh, and therefore are not registered in GST. Whether there is any liability on ‘B’ in respect of services provided by such individuals?

Answer: If the supplies are made by unregistered suppliers, GST is liable to be paid by the recipient, who is a registered person, undersection 9(4) of the CGST Act, 2017. Therefore, in this case ‘B’ is liable to pay GST on services provided by these individuals.‘B’ can claim credit of this tax paid by him on reverse charge.


Question 5: What is the rate of tax on IT services?

Answer: The rate of GST on IT services is 18%.


Question 6: Whether exports of software services attract GST?

Answer: Exports and supplies to SEZ units and SEZ developers are zero-rated in GST. Zero-rating effectively means that no tax is payable on exports but the exporter/supplier is entitled to the input tax credit on inputs/input services used in relation to exports. The exporters have two options for zero rating, which are as follows:
(1) To pay integrated tax on supplies meant to be exported and get refund of tax so paid after the supply is exported.
(2) To make export supplies under a bond or letter of undertaking and claim refund of taxes suffered on inputs and input services in relation to such exports.


Question 7: How do I determine whether IT services provided by me constitute export of service?

Answer: The supply of any service is considered an export of service, where the following conditions are met:
(1) the supplier of service is located in India;
(2) the recipient of service is located outside India;
(3) the place of supply of service is outside India;
(4) the payment for such service has been received by the supplier of service in convertible foreign exchange; and
(5) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with explanation 1 of section 8 of the IGST Act, 2017.


Question 8: How do I determine the place of supply of IT/ITES services?

Answer: Place of supply of IT/ITES services is the location of the recipient in terms of section 12 and 13 of the IGST Act, 2017. However, if the recipient is not registered and his address is not available on the records of the supplier, the place of supply would be the location of the supplier.


Question 9: How to determine the location of the recipient?

Answer: Location of the recipient of service is defined in section 2(14) of the IGST Act. A recipient of services is treated as located outside India if his place of business where he receives services is outside India or, if he does not have a place of business, his usual place of residence is outside India.


Question 10: Would I be liable to pay GST on reverse charge even if the foreign supplier of software from whom I buy for use in my firm registered under GST was to accept the payment in Indian Rupees?

Answer: Yes, you would be liable to pay GST. A supply is treated as an import of service if the following conditions are satisfied:
(1) the supplier of service is located outside India;
(2) the recipient of service is located in India; and
(3) the place of supply of service is in India.
The place of such supply would be taken to be the location where the firm is registered (in GST) and the supplies would attract integrated tax (IGST). The factum of which currency was used to pay the consideration is immaterial.gst question and answers on it services


Question 11: I am an Indian Company who makes software and sells it outside the country. I have hired a firm (not a related party) ‘C’ located abroad to facilitate the supply of software in Europe and the USA; would I be liable to pay GST on the payments that I make to this entity abroad?

Answer: No. In this case, ‘C’ is covered by the definition of ‘intermediary’ [section 2(13) of the IGST Act, 2017]. The place of supply of such intermediary service is location of the supplier in terms of section 13(8) of the IGST Act, 2017. As ‘C’ is located outside India, GST is not payable in this case.


Question 12: What factors determine the location of ‘C’ (in question 11) as being outside India?

Answer: In terms of section 2 (15) of the IGST Act, 2017, the location of a service provider is to be determined by applying the following steps sequentially:
(1) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
(2) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
(3) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and
(4) in absence of such places, the location of the usual place of residence of the supplier.
The location of ‘C’ is to be determined by applying the criterion from (2), or (3), or as the case may be, (4).


Question 13: I am an agent in India of a foreign IT/ITES provider (principal located outside India). For agency services, I bill the principal in convertible foreign exchange. Whether GST liability arises in this case?

Answer: You are an intermediary and the place of supply of the service provided by you to the principal is in India irrespective of the mode of payment. Hence, GST is payable on the services provided by you as an intermediary to the principal.


Question 14: I have more than one SEZ unit in different States; do I need to take separate registrations? Also, I have two SEZ units in one State. Can I take a single registration?

Answer: (1) Yes. Under GST, every entity shall take GST registration in each State from which it makes taxable supplies. However, a single registration can be taken for all your SEZ units within a State, whether located in one SEZ or more than one SEZ.
(2) A person having unit(s) in a Special Economic Zone as well as outside the SEZ in a State shall make a separate application for registration for SEZ unit(s) as a business vertical distinct from his other units located outside the Special Economic Zone in that State (Refer Rule 8(1) of CGST Rules, 2017).


Question 15: I have a unit in the DTA and another in the SEZ; can I take a common registration?

Answer: No. A person having unit(s) in a Special Economic Zone as well as outside the SEZ in a State, shall make a separate application for registration for SEZ unit(s) as a business vertical distinct from his other units located outside the Special Economic Zone in that State (Refer Rule 8(1) of CGST Rules, 2017).


Question 16: If I supply a laptop bag along with the laptop to my customer, what would be the rate of tax leviable?

Answer: If the laptop bag is supplied along with the laptop in the ordinary course of business, the principal supply is that of the laptop and the bag is an ancillary. Therefore, it is a composite supply and the rate of tax would that as applicable to the laptop.


Question 17: I am obtaining online database access services from a company abroad over the net, would I have to pay tax on reverse charge?

Answer: The recipient, if registered, has to pay the applicable IGST on reverse charge basis. If the recipient is not registered, the matter is treated as an online information and database access or retrieval service (OIDAR) and the OIDAR service provider is liable to take registration and pay tax.


Question 18: When would it be construed that I have made a supply of services involving temporary transfer or permitting the use or enjoyment of any intellectual property right?

Answer: Generally, the End User Licence Agreement (EULA) is the legal contract between a software application author or publisher and the user of that application governing the usage. The agreement is renewable and/or could be amended from time to time. To find out as to whether there is an element of supply involved when software is delivered to its customer, the terms and conditions of EULA are material.
The contract for supply therefore assumes significance in this test to decide whether or not there has been ‘temporary transfer or permitting the use or enjoyment of any intellectual property right’.


Question 19: What special provisions are attracted in GST with regard to associated enterprises?

Answer: An enterprise which participates, either directly or indirectly, through one or more intermediaries, in the management, or control or capital of the other enterprise is an associated enterprise. In the context of GST, associated enterprise is particularly relevant in the case of supply of services, where the supplier is located outside India. In such cases, the time of supply will be the earlier of date of entry in the books of account of the recipient of supply or the date of payment – thus, within ‘associated enterprises’, the levy under GST is attracted once such book entries are made even if no actual payment takes place or no invoice
is issued.


Question 20: What would be the tax liability on replacement of parts (no consideration is charged from a customer) under a warranty and whether the supplier is required to reverse the input tax credit?

Answer: As parts are provided to the customer without a consideration under warranty, no GST is chargeable on such replacement. The value of supply made earlier includes the charges to be incurred during the warranty period. Therefore, the supplier who has undertaken the warranty replacement is not required to reverse the input tax credit on the parts/components replaced.


Question 21: An Original Equipment Manufacturer (OEM) has an obligation to provide repair services to their customers in the warranty period. This activity is outsourced by OEM to ‘D’, who bills the OEM for the services he provides to the customer. What is the tax liability of ‘D’?

Answer: ‘D’ is providing service to the OEM. GST is payable on the value of any supplies made by ‘D’ to OEM i.e. in respect of bills raised by ‘D’ on the OEM.


Question 22: How will the defective parts be sent to the mother warehouse/repairing centre for repair by the downstream repairing centres? What is the tax liability?

Answer: The defective parts shall be sent for repair on a delivery challan accompanied by such e-way bill as may be prescribed. GST shall be chargeable on the repair amount, including the cost of parts, charged by the repairing centre.


Question 23: What is the tax liability in a scenario where supplies are made from multiple locations (in different States) of the supplier to the recipient under a single contract?

Answer: Delivering services from various locations and integrated pricing for the contract as a whole is the norm in IT/ITES industry. Normally the contract or agreement with the recipient is entered into by one of the branches (let us say “Main Branch”). Therefore, in such cases of service delivery from multiple locations of the supplier to the recipient, the supply could be visualized as consisting of two distinct supplies. First supply- the different branches of the supplier located across different States are making the supply to the main branch which entered into a contact or an agreement with the recipient for the supply of such service. Second supply- main branch is making a supply to the customer. GST is to be levied accordingly. In such a scenario, the main branch would get input tax credit of GST paid by the other branches on supplies made by them to the main branch.


Question 24: In the scenario envisaged in previous question, the main branch is said to be entitled to ITC of the GST paid by the other branches. Thus, it is a revenue neutral situation. What are the valuation guidelines for such services?

Answer: The second proviso to rule 28 of the CGST Rules, 2017 provides that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of goods and services.


Question 25: Can payment of IGST on reverse charge basis on import of goods/services be done through book entry or ITC?

Answer: No. GST payable on reverse charge basis is to be discharged through cash only. Rule 85(4) of the CGST Rules, 2017 refers.


Question 26: Is the requirement of transferring of credit through ISD mechanism mandatory?

Answer: The ISD provision under the CGST Act, 2017 is not mandatory. It only provides the manner of distribution of ITC wherever the business entity wishes to distribute the ITC as an Input Service Distributor.


Question 27: What is the format for invoices to be issued in the case of reverse charge payment of GST?

Answer: No separate format for any type of invoicing including self-invoicing has been prescribed. The contents of the invoice have been prescribed in Rule 46 of the CGST Rules, 2017.


Question 28: I am a software provider, registered at Mumbai. I supply software to my clients in Bangalore – would I be required to take a registration in Karnataka?

Answer: No. The supplies would be treated as inter –State supplies and IGST is chargeable on the same.


Question 29: I am an exporter of services. Would I be entitled to refund after the 1st of July (appointed day)?

Answer: For exports upto 30th June, 2017 refund may be claimed under the provisions of the Chapter V of the Finance Act, 1994. Exports made on and after 1st July would be eligible for refund under the GST law.
Note: Reference to CGST Act, 2017 includes reference to SGST Act, 2017 and UTGST Act, 2017 also.


Source : it services under gst