Handicrafts Services

GST Sectoral Series : Handicrafts

By Directorate General of Taxpayer Services
Central Board of Excise & Customs

FAQ: Handicrafts

Question 1: How will imports be taxed under GST?

Answer: All imports will be deemed as inter-State supplies for the purposes of levy of GST. IGST is leviable on imports in addition to other duties of customs. Full set-off will be available as ITC of the IGST paid on import on goods and services.

Question 2: How will exports be treated under GST?

Answer: All exports will be deemed as inter-State supplies. Exports of goods and services will be treated as zero rated supplies. The exporter has the option either to export under bond/Letter of Undertaking without payment of tax and claim refund of ITC or pay IGST by utilizing ITC or in cash at the time of export and claim refund of IGST paid.

Question 3: How can IGST be paid?

Answer: The IGST can be paid by utilizing ITC to the extent available and balance by cash. The use of ITC for payment of IGST will be done in the following order:

  • ITC of IGST shall be used for payment of IGST first;
  • Once ITC of IGST is exhausted, the ITC of CGST shall be used;
  • If ITC of both IGST and CGST are exhausted, ITC of SGST shall be used.

– Remaining IGST liability shall be discharged in cash. GST System will ensure maintenance of this hierarchy for payment of IGST using the credit.

  • However, IGST on imports has to be paid in cash only.

Question 4: What are the provisions for refund of taxes for exporters in GST

Answer: Provisions relating to refund are contained in section 54 of the CGST Act, 2017. It provides for refund of tax paid on zero-rated supplies of goods or services or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit. Identical provisions exist under the IGST Act, 2017 and relevant SGST/UTGST Acts.

Question 5: Can unutilized input tax credit be allowed as refund to exporters?

Answer: Yes. Section 54(3) of the CGST Act, 2017 provides for refund of any unutilised input tax credit of inputs and input services at the end of any tax period except where

(i) the goods exported out of India are subjected to export duty; or

(ii) the exporter claims drawback of CGST or refund of IGST paid on such export.

Question 6: What is the procedure for claiming refund by exporters?

Answer: Refund can be claimed by filing an application electronically in prescribed form along with required documents through the Common Portal, either directly or through a Facilitation Centre notified by the Commissioner. The refundable amount shall be electronically credited to any of the bank accounts of the applicant mentioned in his registration particulars and as specified in the application for refund.For details Chapter X of the CGST Rules, 2017 relating to refund may be referred to.

In case of refund of IGST, the shipping bill filed with the Customs is treated as an application for refund if the exporter has filed a valid return in Form GSTR-3/3B and the person in-charge of the conveyance carrying the goods to be exported has furnished an export manifest/report. Upon receipt of information regarding furnishing of a valid return in FORM GSTR-3 or FORM GSTR-3B by the exporter from the Common Portal, the Customs authorities at the port of export shall process the claim for refund and an amount equal to the integrated tax paid in respect of each shipping bill shall be electronically credited to the bank account of the exporter.

Question 7: What is the time limit for grant of refund?

Answer: Refundable amount shall be sanctioned within 60 days from the date of receipt of application complete in all respects. However, as a measure of facilitation to exporters, except for certain notified categories, ninety per cent of the amount excluding the amount of input tax credit provisionally accepted will be refunded provisionally within seven days from the date of acknowledgement.

Question 8: Will the principle of unjust enrichment apply to exports?

Answer: The principle of unjust enrichment is not applicable in case of exports of goods or services as the recipient is located outside the taxable

Question 9: Today under VAT/CST merchant exporters can purchase goods without payment of tax on furnishing of a declaration form. Will this system be there in GST?

Answer: No, there is no such provision in GST. Tax will be payable on their inward supplies and they can claim refund of the accumulated ITC.

Question 10: Whether goods sent by a taxable person to a job worker be treated as supply and will they be liable to GST?

Answer: No, the goods sent by a registered person to a job worker is not a supply, as there is no transfer of title and no consideration for the goods is involved. In terms of section 143 of the CGST Act, 2017 a registered taxable person (the principal), after following the prescribed procedure,may send any inputs or capital goods, without payment of GST, to a job worker for job work and the principal shall either

(i) bring back such inputs or capital goods after completion of job work or otherwise within the prescribed period i.e. 1 year in case of inputs and 3years in case of capital goods, or

(ii) supply such inputs or capital goods, within such prescribed period, on payment of tax within India, or with or without payment of tax for export, as the case may be.

If the goods or, capital goods, as the case may be, are not returned to the principal within the time specified above, the same shall be deemed to have been supplied by the principal to the job worker on the date the goods were sent out to the job worker and the principal shall be required to pay tax accordingly on such supplies.

Question 11: Is a job worker required to take registration?

Answer: As job work is a service, it would be considered a supply and the job worker would be required to obtain registration if his aggregate turnover exceeds the prescribed threshold of Rs.20 lakhs or, as the case may be, Rs.10 Lakhs.

Question 12: Whether exemption from all duties of Customs be available on imports under exemption schemes such as EPCG, Advance licence etc under GST regime?

Answer: No. Exemption will be available only from Basic Customs Duty. IGST will be payable on such imports. However, the importer can avail ITC of IGST paid and utilise the same or claim refund in accordance with the provisions of the CGST Act, 2017 and rules made thereunder.

Question 13: Can duty credit scrips received as incentive by exporters such as MEIS, SEIS etc be utilised for payment of all duties at the time of import?

Answer: No, these scrips can be utilised only for payment of Basic Customs duty. IGST cannot be paid by utilising these scrips.

Question 14: Will drawback at higher rate be available to handicraft exporters who do not avail Input Tax Credit (ITC) like presently available to those who do not avail CENVAT credit?

Answer: No. There will be no difference in rate of Drawback for exporters not availing ITC in GST regime. In GST regime, drawback will be admissible only at lower rate determined on the basis of customs duties paid on imported materials used in the manufacture of export goods. However, as an export facilitation measure, for the transition period of 3 months from July to September, 2017, drawback at higher composite rates will continue to be granted subject to the condition that no input tax credit of CGST/IGST is claimed, no refund of IGST paid on export goods is claimed and no CENVAT credit is carried forward.

Question 15: Is GST payable on consideration received for sale of scrips?

Answer: Yes. Scrips are goods and sale of scrips has to be treated as supply of goods. GST at applicable rate will therefore be payable.

Question 16: Would GST be payable on goods not intended to be sold, taken out for participation in overseas exhibitions and trade fairs and brought back into India as these goods are meant for exhibition only?

Answer: GST is not payable in such cases. Exporters will need exhibition participation letter and no foreign exchange involved letter from the concerned bank for the purpose of exchange control requirements. At the time of re-import, identity of goods imported with export goods needs to be established to seek exemption from import duty in accordance with Customs provisions. IGST will be exempted at the time of re-import in view of exemptions granted under Customs.

Question 17: Will an exporter be required to pay GST in case of goods procured from unregistered persons?

Answer: In case of supply by an unregistered person, the registered person i.e., exporter shall be liable to pay GST under reverse charge mechanismfor purchases above five thousand rupees in a day. However the exporter can avail ITC of such GST paid and either utilise the ITC or claim refund of the same.

Question 17: Will credit of duties be available on inputs and inputs contained in semi-finished goods/finished goods lying in stock of an exporter who was not registered under existing laws, as on appointed day of GST?

Answer: Yes, provided the exporter was not liable to be registered under the existing law.

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

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Mining Services

GST Sectoral Series : Mining

By Directorate General of Taxpayer Services
Central Board of Excise & Customs

FAQ: Mining

 

Question 1: Can small mining leaseholders with a turnover less than Rs.75 lacs operate under composition scheme?

Answer: As per Sec. 10(1) of the CGST Act, 2017, a registered person whose aggregate turnover in the preceding FY did not exceed Rs.75 lakhs, would be eligible for paying GST under the composition scheme.

Question 2: What is the GST rate for minerals and ores in Composition Scheme?

Answer: In a case where the process amounts to manufacture, the rate of tax will be 1% (CGST) and 1% (SGST/UTGST). In any other case, the rate will be ½% (CGST) and ½% (SGST/UTGST).

Question 3: Will they have to deposit GST under SGST/ CGST heads separately?

Answer: Yes. GST has to be paid separately under CGST and SGST/UTGST by generating a single challan through the common portal under a single return.

Question 4: Can a small Mine Lease holder undertake inter-State supply if it avails composition scheme?

Answer: No. If a supplier chooses to avail of composition scheme, he shall not undertake inter-State supply.

Question 5: What is the IGST rate for minerals and ores in case of inter – State supply?

Answer: At present, the IGST rate is the sum of CGST and SGST/ UTGST rate. These rates have been notified and are available in public domain.

Question 6: Can the buyer get input credit on the supply of minerals from a mine owner in composition scheme?

Answer: No,the buyer cannot avail of the credit of tax paid by the supplier who is under the composition scheme as the person paying tax under composition scheme cannot issue a tax invoice and collect taxes on his supplies.

Question 7: Will the recipient have to pay tax under reverse charge?

Answer: GST on reverse charge mechanism is payable under section 9(4) of the CGST Act, 2017 only in case of purchases from unregistered suppliers. As the mine owner who is paying tax under composition scheme is registered, the recipients need not pay GST on reverse charge mechanism.

Question 8: What is the threshold limit and conditions when a small mine owner/lease holder under Composition Scheme has to migrate into full GST System?

Answer: As per section 10(3) of the CGST Act, 2017, the option availed of by the small mine owner/lease holder shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds Rs. 75 lakhs. For details regarding other conditions, section 10 of the CGST Act, 2017 and the rules framed there under may be referred to.

Question 9: Is the Return filing and compliance simpler under composition scheme?

Answer: Yes, Return filing and compliance is simpler under the composition scheme. The registered person has to file only one return on a quarterly basis in Form GSTR-4.

Question 10: Will the basic exemption limit from GST be applicable to the tiny & micro segment in mining?

Answer: Yes, the basic exemption limit of Rs. 20 lakhs (Rs.10 lakhs in the case of special category States) is applicable to the tiny and micro segment even in mining. However, a person engaged in making taxable supply and having aggregate annual turnover (more than Rs.20 lakhs in any State other than the special category States) would be liable to obtain registration under GST. The return has to be filed on monthly basis by regular taxable persons and on quarterly basis by the taxable persons registered under the composition scheme.

Question 11: What is aggregate turnover?

Answer: As per section 2(6) of the CGST Act, 2017, “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes Central tax, State tax, Union territory tax, integrated tax and compensation cess.

Question 12: Will the buyer of goods from unregistered person pay reverse tax?

Answer: A registered person receiving taxable goods or services from a supplier who is not registered, would be liable to pay GST under reverse charge mechanism. However, in terms of notification no. 8/2017-Central Tax (rate) dated 28th June, 2017, aggregate value of supplies of goods and/or service received by a registered person from any or all the suppliers, who is or are not registered, upto five thousand rupees in a day is exempt from tax under reverse charge mechanism. This exemption will not apply if the value exceeds Rs.5000/-.

Question 13: Can a buyer of goods and services pay the value of services / goods to the supplier and deposit the GST component of the invoice in the supplier’s account so that when the buyer claims input credit, he may get the same cross entry tallied from the supplier’s account?

Answer: No. This option is not available under GST Law.

Question 14: In case there are disputes regarding quality, weight, etc. between the buyer and the supplier and the goods are returned fully or partially, as found unfit for use, can the excess paid tax component be adjusted from future tax liability?

Answer: In such cases, the supplier may issue a credit note to the recipient in accordance with the provisions of section 34(1) of the CGSTAct, 2017.

Question 15: Whether deduction of Liquidity Damage (LD)/Penalty deduction from contractor’s bills and charging Penalty for non-lifting of coal till targeted minimum level to Annual Contractual Quantity (ACQ) will attract GST?

Answer: Yes, it is a service being “tolerating an act” as per Schedule II of the CGST Act,2017 thus GST shall apply.

Question 16: Will GST be payable at the time of raising an invoice for supply of goods from a mining lease holder or it will be applicable on the amount of advance received by the mining company for booking the order?

Answer: No. As per the provisions of section 12(2) of the CGST Act, 2017 the time of supply of goods shall be the date of issue of invoice or the date of receipt of payment, whichever is earlier. Accordingly, GST would be payable on advance payment received prior to issuance of the invoice.

Question 17: Will the supplier have to issue “receipt voucher” against each advance received?

Answer: Yes, as per section 31(3)(d) of the CGST Act, 2017 the supplier has to issue a “receipt voucher” for every advance received.

Question 18: How do I show the advance received in GSTR 1?

Answer: Where against an advance the invoice is issued in the same tax period, the advance need not be shown separately in Form GSTR-1 but the specified details of invoice itself can be directly uploaded on the system. Details of all advances against which the invoices have not been issued till the end of the tax period shall have to be reported on a consolidated basis in Table 11 of Form GSTR-1. As and when the invoices against these advances are issued, they have to be declared in Form GSTR-1 and the adjustment of the tax paid on advances against the tax payable on the invoices uploaded in Form GSTR-1 shall have to be done in Table 11 of Form GSTR-1.

Question 19: In case no supplies are made against an advance, will the dealer have to issue a “refund voucher” only for the advance or for advance including GST?

Answer: Refund voucher has to be made for the full value of advance, including the amount of GST.

Question 20: It will be difficult to link between “Advance Receipt Voucher” and invoices in case of sales billing on Cash Sale (Rail/Road)/e-Auction etc., especially in case of Rail Cash sale, where purchasers deposit money in advance to the tune of many crores for which lifting of coal has to be made from various loading point and time. In such situation how will the billing person at one point realize how much “balance advance” is available for adjustment while raising invoice at his end at a specific point of time?

Answer: Under GST gross amount of advance is to be reported and tax has to be paid. Advance can be adjusted in totality. While raising the invoice subsequent to receipt of advance, the tax payable will get reduced by the amount of tax paid on the advance and balance amount of advance may be adjusted against future supplies.

Question 21: Will GST charged on purchase of all earth moving machinery including JCB, tippers, dumpers by a mining company be allowed as input credit?

Answer: The provision of Sec. 17(5) (a) of the CGST Act, 2017 restricts credit on motor vehicle for specified purposes listed therein. Further, in terms of the provision of Section 2(76) of the CGST Act, 2017 the expression ‘motor vehicle’ shall have the same meaning as assigned to it in Clause (28) of Section 2 of the Motor Vehicle Act, 1988, which does not include the mining equipment, viz., tippers, dumpers. Thus, as per present provisions, the GST charged on purchase of earth moving machinery including tippers, dumpers used for transportation of goods by a mining company will be allowed as input credit.

Question 22: Whether GST is payable on royalty (to be paid to Government)for Mining Lease granted by State Govt.

Answer: Yes, on royalty GST will apply under reverse charge mechanism. Further, such payment of GST under reverse charge mechanism would be eligible as ITC in the hands of the recipient of supply for payment of GST.

Question 23: Is ITC available on hiring of immovable properties (land, office, warehouse, processing unit, stock yards) for facilitation of mining operations?

Answer: Yes. GST paid on hiring of land, office, warehouse, processing unit, stock yards when these are used in the course or furtherance of business, would be allowed as ITC.

Question 24: What is the time limit for availing input credit under GST?

Answer: As per provisions of Section 16(4) of the CGST Act, 2017 the ITC is not available after the due date of furnishing the return for the month of September of the next year or furnishing of the annual return, whichever is earlier.

Question 25. Would the net outstanding amount of unutilised input credit be refunded by the Government?

Answer: In terms of the provision of Section 54(3) of the CGST Act, 2017 subject to conditions, refund of unutilized input tax credit would be available in respect of zero rated supply or where ITC has accumulated on account of rate of tax on inputs being higher than the rate of taxon the output supply. However, such refund of ITC would not be available if export duty is payable on the goods so exported out of India.

Question 26. Will GST charged by tax consultants, advocates, Chartered Accountants, environmental consultants, canteen service providers and other service providers to mining companies be allowed as input credit?

Answer: ITC on any input service/ inputs used in the course or furtherance of business would be available subject to restrictions and other conditions as per the provisions of Chapter-V of the CGST Act, 2017. However, tax paid in respect of canteen service providers shall not be available as credit.

Question 27. Whether free issue of coal to employees paid in course of employment and on the basis of wage agreement with value below Rs.50, 000/- per employee will attract GST?

Answer: Gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both (as per Schedule 1 of the CGST Act, 2017). Free issue of coal based on the wage agreement is not a gift. Therefore, free issue of coal in this case will attract GST.

Question 28. Can GST charged as per transport bilti on movement of mineral from mine to the buyer be allowed as ITC to the buyer irrespective of the ownership of the transporting vehicle?

Answer: In case of an FOR contract for supply of mineral from the mine to the buyer, it is a composite supply where the consideration will be inclusive of the transportation cost. Therefore, GST on forward charge will be payable by the supplier of the mineral and credit will be available to the buyer if otherwise available. The supplier of the mineral will also pay tax on reverse charge basis on the freight charged by the GTA and the credit of the same will be available to the supplier of the mineral.

In case of an ex-works contract of supply, where the GTA service has been booked by the supplier at the instance of the buyer and the service is billed by the GTA to the buyer and the minerals are billed by the supplier of the mineral to the buyer, then GTA on reverse charge shall be paid by the buyer who shall be entitled to take credit of the same. The tax on the mineral will be paid on forward charge by the supplier of the mineral and credit will be available to the buyer if otherwise available.

Question 29. Will the situation as mentioned above be different if the value of mineral is less than the cost of freight in long distance consignments?

Answer: In the aforesaid example relating to FOR contract, the supply under the contract shall be classified as ‘composite supply’ where there is a principal supply and other supplies are naturally bundled and supplied in conjunction with each other in the ordinary course of business. The GST rate of principal supply shall be applicable in this case i.e. GST rate as applicable to the mineral.

Question 30. Exploration companies undertake exploration activities for preparing mining blocks for auction in different States in the country. They use rigs for exploration. CENVAT credit was available on rig operations under the existing law. Will the company be eligible to take ITC under GST?

Answer: Rigs, capitalized in the books of accounts as capital goods are used in the course or furtherance of business. Hence, it will be eligible as capital goods and ITC will be available under GST.

Question 31. Will ITC be available for holding Environmental Clearance (EC) and Forestry Clearance (FC) meetings and for obtaining ‘consent to operate’ the Mines?

Answer: Yes, ITC on expenses incurred in the course or furtherance of business shall be available.

Question 32. Will the mining companies be eligible to take ITC for construction of townships, hospitals and schools?

Answer: No. Mining companies will not be eligible for ITC on such activities even if used in course or furtherance of business. In this connection, the provisions contained in section 17(5) (c) of the CGST Act, 2017 refer.

Question 33. Are minerals sent for export in processed or raw form fully exempted from payment of GST or IGST?

Answer: In terms of the provision of Section 16(1) of the IGST Act, 2017 export of goods is considered as zero rated supply. Further, in terms of the provision of Section 16(3) of the IGST Act, 2017 a registered person may export goods (i) without payment of IGST against bond/letter of undertaking and claim refund of unutilised ITC, or (ii) on payment of IGST,utilising eligible ITC and claim refund of such IGST.

Question 34. What is the procedure for return of goods under GST?

Answer: In terms of Section 34(1) of the CGST Act, 2017 in case of return of goods on which GST was paid at the time of supply, the supplier of such goods may issue a credit note for the full value, including the amount of GST in favour of the recipient, and will be entitled to reduce his output tax liability subject to the condition that the recipient of such supply has not availed credit of such GST and if availed, has reversed his ITC on the same.

Question 35. How can we take support during filing of returns, as huge mines are located throughout the districts in the country, especially in rural and backward areas, and the problem will be aggravated as the huge number of mines are operating without any IT infrastructure?

Answer: Returns may be filed from the central office of the Company which are usually located in areas with infrastructure required for filing such returns.

Question 36. Whether GST TDS will be applicable on Works Contract Jobs (to be renamed as Supply of Services) in case of PSUs, since such GST TDS U/s 51 (1) of CGST Act. 2017 is applicable on: a) Dept. or establishment of the Central Govt. or State Govt.; or b) Local authority; or c) Govt. agencies; or d) Such persons or category of persons as may be notified by the Govt. on the recommendations of the Council.

Answer: TDS, under section 51 (1) of the CGST Act, 2017 will apply to supplies made to such agencies as may be mandated by the Government for TDS. As of now, this section has not been notified and therefore TDS is not applicable on any supplies.

Question 37. What is the requirement for E-way bill for companies operating in the sector?

Answer: As per rule 138 of the CGST Rules, 2017, till such time as final rules are issued, the Government may, by notification, specify the documents that the person in-charge of a conveyance shall carry while the goods are in movement or in transit storage. As and when the new e-way bill rules are notified, the person transporting the goods shall carry the said e-way bill generated from the common portal along with the invoice (challan in the case of movement other than by way of supply).

Question 38. Whether an Input Service Distributer (ISD) will be eligible to distribute the ITC in respect of services received during April 17 to June 17 even if the invoices are raised and submitted by contractors after appointed date i.e. in July 17.

Answer: In terms of section 140(7) of the CGST Act, 2017 the ISD will be able to distribute the available credit even if the invoices are received after the appointed day.

Question 39. In Table 5(b) of GST-TRAN-1, the details of Form C, F and H/I are to be given for the period April 15 to June 17 (i.e. for 27 months) which would be a voluminous task. Reasons of furnishing the details for last 27 months may please be clarified?

Answer: In cases where sales were covered by Forms C, F,H and I, the input tax credit has remained in the account of the taxpayer because the taxpayer has availed of the benefit of concessional rate/nil rate of tax on the sale/stock transfer under CST Act. The benefit of concessional rate/nil rate is available conditional upon production of the statutory forms. Therefore,allowing migration of the credit that has accrued on account of sale/stock transfer having been made on concessional rate/nil rate should be given only on production of the statutory forms. Even otherwise, the taxpayer would have claimed refund of this ITC and such refund would have been given only on production of the statutory forms. It has been presumed that forms for periods before April ‘15 would have either been presented or the State would have recovered the additional tax payable on account of non-production of statutory forms. Production of these forms is a statutory liability and the taxpayers have already availed the benefit.

Question 40. Education Cess and S&H Education Cess carried forward in ER-1 – whether eligible for ITC under the CGST Act, 2017?

Answer: No. Credit of Education Cess and SH Education Cess cannot be carried forward.

Question 41. What will happen to the balance available in the current account (PLA) under Central excise, deposited in cash in advance by any assesse?

Answer: Balance in PLA will not be under transition to GST since that has not been appropriated to the Government account which will be determined post completion of the pending assessment. The same can be claimed as refund under the Central Excise Law.

Question 42. Whether credit of Green Cess (Clean Energy Cess) paid on coal and available at the time of transition be eligible for being carried over?

Answer: No.Credit of Clean Energy Cess cannot be carried forward on transition.

Question 43. Whether stock held by mining companies on which Clean Energy Cess has been paid be chargeable to compensation cess in GST regime?

Answer: Yes.Compensation cess will be charged on supply of such stock.

Question 44. Can supplies of coal under a particular order or under FSA (Fuel Supply Agreement) be eligible under the definition of ‘continuous supply of goods?

Answer: Such supplies are in the nature of continuous supply as the invoices are raised periodically. The individual dispatches may be covered under delivery challans and invoice may be issued for the supplies made during a period as per the contract.

Question 45. In case of coal, the applicable Compensation Cess is a Fixed Amount of Rs.400/- per MT. Under above situation, how such apportionment is possible since in case of FSA Sale, supply of different grade of coal as per availability of stock against single bulk receipt of “Advance” is to be adjusted?

Answer: If tax rate is not determinable, the tax rate may be determined and paid on the amount of advance at 18%.

Question 46. Whether Railway siding in mining industry exclusively utilized for effecting dispatch of taxable goodsvz.coal (i.e. directly used in the course or furtherance of business) will be treated as Plant and Machinery and ITC under GST will be allowed or treated as civil structure and ITC will be denied?

Answer: ITC will not be available as railway siding is not plant and machinery as defined in section 17 of the CGST Act, 2017.

Question 47. According to HSN Code 2516 calcareous building stone comes under 5% tax rate, but simultaneously under HSN Code 6802 it comes under 28% tax rate. Clarity on the same may be provided by the Government.

Answer: Chapter 68 covers value added articles of sandstone etc. which are further worked other than by way of roughly trimmed or merely cut into blocks or slabs.

Question 48. Whether supply of HSD free of cost for mining operation would attract GST and whether the input tax credit would be available for GST so charged by the Service provider?

Answer: HSD is outside GST and therefore, input tax credit would not be admissible.

Question 49: Will ITC be available on steel, timber and sometimes cement which are used in the underground mines to provide a protective device for security purpose?

Answer: Credit will not be available if these goods are supplied for construction of an immovable property. But if these are temporarily placed for protective purposes, credit will be available.

Question 50: As per Section 54 (3), it is clear that no refund of ITC will be available for export in the cases where product is subject to export duty. Iron Ore export is subjected to export duty. In the earlier regime, the exporters were allowed to take refund of service tax paid on exports. Will not ourexports become uncompetitive as no refund of ITC will be available?

Answer: The refund of ITC credit is not admissible in view of the second proviso to section 54(3) of the CGST Act, 2017.

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

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E-Commerce Services

GST Sectoral Series : E-Commerce

By Directorate General of Taxpayer Services
Central Board of Excise & Customs

FAQ: E-Commerce

Question 1: What is Electronic Commerce?

Answer : Electronic Commerce has been defined in Sec. 2(44) of the CGST Act, 2017 to mean the supply of goods or services or both, including digital  roducts over digital or electronic network.

Question 2: Who is an e-commerce operator?

Answer: Electronic Commerce Operator has been defined in Sec. 2(45) of the CGST Act, 2017 to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Question 3: Is it mandatory for e-commerce operator to obtain registration?

Answer: Yes. As per Section 24(x) of the CGST Act, 2017 the benefit of threshold exemption is not available to e-commerce operators and they are liable to be registered irrespective of the value of supply made by them.

Question 4: Whether a person supplying goods or services through e-commerce operator would be entitled to threshold exemption?

Answer: No. Section 24(ix) of the CGST Act, 2017 lays down that the threshold exemption is not available to such persons and they would be liable to be registered irrespective of the value of supply made by them. This requirement is, however, applicable only if the supply is made through such electronic commerce operator who is required to collect tax at source under section 52 of the CGST Act, 2017.However, where the e-commerce operators are liable to pay tax on behalf of the suppliers under a notification issued under section 9 (5) of the CGST Act, 2017, the suppliers of such services are entitled for threshold exemption.

Question 5: Will an e-commerce operator be liable to pay tax in respect of supply of goods or services made through it, instead of actual supplier?

Answer: Yes, but only in case of services notified under Sec. 9(5) of the CGST Act, 2017. In such cases tax shall be paid by the electronic commerce operator if such services are supplied through it and all the provisions of the Act shall apply to such electronic commerce operator as if he is the supplier liable to pay tax in relation to the supply of such services. A similar provision for inter-State supply is provided for in Sec. 5(5) of the IGST Act, 2017. (Refer to Notification No. 17/2017- Central Tax (Rate) and 14/2017- Integrated Tax (Rate) dated 28.06.2017).

Question 6: Will threshold exemption be available to electronic commerce operators liable to pay tax on notified services?

Answer: No. Threshold exemption is not available to e-commerce operators who are required to pay tax on notified services supplied through them.

Question 7: What is Tax Collection at Source (TCS)?

Answer: The e-commerce operator is required to collect an amount at the rate of one percent (0.5% CGST + 0.5% SGST) of the net value of taxable supplies made through it, where the consideration with respect to such supplies is to be collected by such operator. The amount so collected is called as Tax Collection at Source (TCS). (Refer to Section 52(1) of the CGST Act, 2017).

Question 8: It is very common that customers of e-commerce companies return goods. How these returns are going to be adjusted?

Answer: An e-commerce company is required to collect tax only on the net value of taxable supplies. In other words, the value of supplies which are returned are adjusted in the aggregate value of taxable supplies. (Refer to Explanation to Sec. 52(1) of the CGST Act, 2017).

Question 9: What is meant by “net value of taxable supplies”?

Answer: The “net value of taxable supplies” means the aggregate value of taxable supplies of goods or services or both, other than the services on which entire tax is payable by the e-commerce operator, made during any month by all registered persons through such operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month. (Refer to Explanation to Section 52(1) of the CGST Act, 2017).

Question 10: Is every e-commerce operator required to collect tax on behalf of actual supplier?

Answer: Yes, every e-commerce operator (other than an operator required to pay tax under section 9(5) of the CGST Act, 2017) is required to collect tax where consideration with respect to a taxable supply is collected by such e-commerce operator. (Refer to Section 52(1) of the CGST Act, 2017).

Question 11: What time should the e-commerce operator make such collection?

Answer: The e-commerce operator should make the collection during the month in which the consideration amount is collected from the recipient.

Question 12: What is the time within which such TCS is to be remitted by the e-commerce operator to Government?

Answer: The amount collected by the operator is to be paid to the government within 10 days after the end of the month in which amount was so collected. (Refer to Section 52(3) of the CGST Act, 2017).

Question 13: How can actual suppliers claim credit of this TCS?

Answer: The amount of TCS paid by the operator to the government will be reflected in the GSTR-2 of the actual registered supplier (on whose account such collection has been made) on the basis of the statement filed by the operator. The same can be used at the time of discharge of tax liability in respect of the supplies made by the actual supplier. (Refer to Section 52(7) of the CGST Act, 2017).

Question 14: Is the e-commerce operator required to submit any statement? What are the details that are required to be submitted in the statement?

Answer: Yes, every operator is required to furnish a statement, electronically, containing the details of outward supplies of goods or services effected through it, including the supplies of goods or services returned through it, and the amount collected by it as TCS during a month within ten days after the end of such month. The statement will be filed in
FORM GSTR-8. The operator is also required to file an annual statement by 31st day of December following the end of the financial year in which the tax was collected. (Refer to Section 52(4) and Section 52(5) of the CGST Act, 2017).

Question 15: What is the concept of matching in e-commerce provisions and how it is going to work?

Answer: The details of supplies furnished by every operator in his statement for the month will be matched with the corresponding details of outward supplies furnished by the concerned supplier in his valid return for the same month or any preceding month. Where the details of outward supplies declared by the operator in his statement do not match with the corresponding details declared by the supplier, the discrepancy shall be communicated to both persons. (Refer to Section 52(8) and Section 52(9) of the CGST Act, 2017).

Question 16: What will happen if the details remain mismatched?

Answer: The amount in respect of which any discrepancy is communicated and which is not rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy is communicated shall be added to the output liability of the said supplier in his return for the month succeeding the month in which the discrepancy is communicated. The concerned supplier in whose output tax liability any amount has been added, shall be liable to pay the tax payable in respect of such supply along with interest on the amount so added from the date such tax was due till the date of its payment. (Refer to Section 52(10) and Section 52(11) of the CGST Act, 2017).

Question 17: Are there any powers given to tax officials under the GST Act to seek information on supply/stock details from e-commerce operators?

Answer: Yes. Any officer not below the rank of Deputy Commissioner may issue a notice to the electronic commerce operator to furnish such details within a period of 15 working days from the date of service of such notice. (Refer to Section 52(12), (13) and (14) of the CGST Act, 2017).

Question 18: The sellers supplying goods through e-Commerce operators (ECO) may have common places of business, especially if their goods are stored in a shared facility operated by the ECO. This will result in the same additional place of business being registered by multiple suppliers. Is this allowed?

Answer: Yes, this is allowed. Any registered person can declare a premises as a place of business if he has requisite documents for use of the premises as his place of business (like ownership document, agreement with the owner etc.) and there is no restriction about use of a premises by multiple persons. The registered person shall have to comply with the requirements of maintaining records as per section 35 of the CGST Act, 2017 and Rules 56 to 58 of the CGST Rules, 2017.

Question 19: Do travel agents providing services through digital or electronic platform qualify as ECOs? Will they be required to collect tax at source as per the provisions of Section 52 of the GST Act?

Answer: Online travel agents providing services through digital or electronic platform will fall under the category of ECOs liable to deduct TCS under Section 52 of the CGST Act, 2017.

Question 20: There are transactions in which two or more ECOs are involved. In such cases who would deduct the TCS?

Answer: In such cases, each transaction needs to be treated separately and examined according to the provisions of Section 52 of the CGST Act, 2017. The TCS will be deducted accordingly.

Question 21: There are cases in which the ECO does not provide invoicing solution to the seller. In such cases, invoice is generated by the seller and received by the buyer without ECO getting to know about it. The payment flows through the ECO. In such cases, on what value is TCS to be collected? Can TCS be collected on the entire value of the transaction?

Answer: Section 52(1) of the CGST Act, 2017 mandates that TCS is to be collected on the net taxable value of such supplies in respect of which the ECO collects the consideration. The amount collected should be duly reported in GSTR-8 and remitted to the Government. Any such amount collected will be available to the concerned supplier as credit in his electronic cash ledger.

Question 22: GST requires a dealer to maintain a consecutive serial number for invoices. If we are supplying from multiple locations, do we need to centrally maintain the invoice numbers serially?

Answer: Section 46 of the CGST Rules, 2017 provides that invoice may have “a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year”. Therefore, a supplier can have multiple series for the same year, so long as the same series is not used across financial years. Therefore, you may have a different invoice series for each location having consecutive serial numbers running across that series.

Question 23: There are sellers who are selling exempted or zero-tax goods like books through ECOs. Will marketplaces be required to collect TCS on such supplies?

Answer: As per Section 52(1) of the CGST Act, 2017 TCS is to be collected on “the net value of taxable supplies” made through an ECO. When the supply itself is not taxable, the question of TCS does not arise.

Question 24: I am a supplier selling my own products through a web site hosted by me. Do I fall under the definition of an “electronic commerce operator”? Am I required to collect TCS on such supplies?

Answer: As per the definitions in Section 2 (44) and 2(45) of the CGST Act, 2017, you will come under the definition of an “electronic commerce operator”. However, according to Section 52 of the Act ibid, TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the ECO. In cases where someone is selling their own products through a website, there is no requirement to collect tax at source as per the provisions of this Section. These transactions will be liable to GST at the prevailing rates.

Question 25: We purchase goods from different vendors and are selling them on our website under our own billing. Is TCS required to be collected on such supplies?

Answer: No. According to Section 52 of the CGST Act, 2017, TCS is required to be collected on the net value of taxable supplies made through it by other suppliers where the consideration is to be collected by the ECO. In this case, there are two transactions – where you purchase the goods from the vendors, and where you sell it through your website. For the first transaction, GST is leviable, and will need to be paid to your vendor, on which credit is available for you. The second transaction is a supply on your own account, and not by other suppliers and there is no requirement to collect tax at source. The transaction will attract GST at the prevailing rates.

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

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EPC Services

  • Impact on Output Pricing

  • GST on services in place of Service Tax and VAT
  • FOC impacts to be factored in supply
  • No more abatements forseen, rate at general level.
  • Exemption forseen for dams, canals, schools, UN, SEZ only

  • Impact on Supply Chain Management

  • Inter branch supply of goods / services made taxable
  • No more loss of CST in inter state transfers
  • Movement of goods for repair under annual contracts may pose problem

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of recipient.

  • Impact on Registrations

  • Separate registrations in each state
  • No more composition choice state wise
  • TDS deduction by customer may impact decision of registration

  • Impact on Cash Flow

  • Advances for goods also made taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • Impact on tax in case of provisioning by customers

  • Input Tax Credit

  • Credit availability subjected to online filing by supplier
  • Credit of State GST restricted in certain cases
  • Credit of your output GST of Catering not available to purchaser when purchased for employees

 

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Manufacturing Services

  • Impact on Output Pricing

  • FOC impacts to be factored in supply
  • Exemption forseen for schools, UN, SEZ only

  • Impact on Supply Chain Management

  • Branch transfers taxable
  • Salary of supervisors / seniors handling supply across different states may pose a problem

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of recipient.

  • Impact on Registrations

  • Separate registrations in each state
  • ISD registration in case of common input services
  • TDS deduction by customer may impact decision of registration

  • Impact on Cash Flow

  • Advances made taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • Impact on tax in case of provisioning by customers

  • Input Tax Credit

  • Input of Credit on consumables may reduce operational costs
  • Credit of State GST restricted in certain cases

 

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Housekeeping Services

  • Impact on Output Pricing

  • FOC impacts to be factored in supply
  • Exemption forseen for schools, UN, SEZ only

  • Impact on Supply Chain Management

  • Usually no supply chain impacts other than transfers of consumables
  • Salary of supervisors / seniors handling supply across different states may pose a problem

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of recipient.

 

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Maintenance Services

  • Impact on Registrations

  • Separate registrations in each state.
  • ISD registration in case of common input services.
  • TDS deduction by customer may impact decision of registration.

  • Impact on Cash Flow

  • Advances made taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • Impact on tax in case of provisioning by customers

  • Input Tax Credit

  • Input of Credit on consumables may reduce operational costs
  • Credit of State GST restricted in certain cases

 

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Repairing Services

  • Impact on Output Pricing

  • GST on services in place of Service Tax and VAT
  • FOC impacts to be factored in supply
  • No more abatements forseen, rate at general level.
  • Exemption forseen for dams, canals, schools, UN, SEZ only

  • Impact on Supply Chain Management

  • Inter branch supply of goods / services made taxable.
  • No more loss of CST in inter state transfers.
  • Movement of goods for repair under annual contracts may pose problem.

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of recipient.

  • Impact on Registrations

  • Separate registrations in each state
  • No more composition choice state wise
  • TDS deduction by customer may impact decision of registration

  • Impact on Cash Flow

  • Advances for goods also made taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • Impact on tax in case of provisioning by customers.

  • Input Tax Credit

  • Credit availability subjected to online filing by supplier.
  • Credit of State GST restricted in certain cases.
  • Credit of your output GST of Catering not available to purchaser when purchased for employees.

 

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Catering Services

  • Impact on Output Pricing

  • FOC impacts to be factored in supply
  • Inputs mostly (fruits/ vegetables/ basic food) may be exempt while output taxable. No more abatements
  • Exemption forseen for factory canteens, schools, UN, SEZ only.

  • Impact on Supply Chain Management

  • Inter branch supply of goods / services made taxable
  • No more loss of CST in inter state transfers
  • No more statutory forms

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of performance. Any back to back sub contracts shall have bearing on overall credit availability.

  • Impact on Registrations

  • Separate registrations in each state
  • No more composition choice state wise
  • Monthly compliance of payment and return in each state.

  • Impact on Cash Flow

  • Advances made taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • More caution in case of provisioning by customers

  • Input Tax Credit

  • Credit availability subjected to online filing by supplier
  • Credit of State GST restricted in certain cases
  • Credit of your output GST of Catering not available to purchaser when purchased for employees

 

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Travel Agency Services

  • Impact on Output Pricing

  • Inter state and Intra state supplies
  • Supply Valuation – a major challenge especially in case of associated enterprises / Branches
  • FOC impacts to be factored in supply
  • No specific Exemption expected

  • Impact on Supply Chain Management

  • Services amongst Branch taxable
  • ISD to play a major role
  • Debit / Credit notes may pose challenge
  • Salary of supervisors / senior management handling supply across different states may pose a problem

  • Impact On Place of Supply

  • Place of Supply shall usually be the location of recipient in case of B2B.
  • Location of supply in case of sub contractors shall also influence many business decisions

  • Impact on Registrations

  • Separate registrations in each state
  • E Commerce transaction – special provisions

  • Impact on Cash Flow

  • Advances are taxable
  • Vendor / Customer discounts to be examined for tax impacts
  • Impact on tax in case of provisioning by customers

  • Input Tax Credit

  • Credit availability subjected to online filing by supplier
  • Credit of State GST restricted in certain cases
  • Credit of your output GST of Catering not available to purchaser when purchased for employees

 

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