Chapter I – Preliminary:
Yes. CGST and IGST act were made applicable in J&K from 8th July, 2017 through respective ordinances. J&K GST Act was also passed and made applicable from this date (Act is on same lines as other State GST Acts).
As per section 4A of General clauses act, definitions can be applied if these are not defined in CGST Act, IGST Act, UTGST Act, SGST Acts, GST (Compensation to States) Act, 2017 unless it is repugnant to the subject or context to which it is to be applied.
Chapter II – Definitions:
Dairy farming, poultry farming and stock breeding does not seem to be covered. The mere cutting of wood or grass, gathering of fruit and raising of man-made forest or rearing of seedlings or plants also does not seems to be covered by this.
In the case of State of Punjab & Ors vs. Nokia India Pvt. Ltd., 2014-TIOL-100-SV-VAT Supreme Court held that mobile phone charger is an ‘accessory to’ and not ‘a part of’ of mobile phone. Further it was held that charger cannot be said to be a composite part of mobile phone but is a independent product which can be sold separately also. However, how much relevance this judgment hold is a debatable question because even in the example as given in definition in section 2(30), transportation, insurance can be taken separately also but even then they have been classified as composite supply.
Donation, Gifts, Charities are without any consideration. Conditions in a grant stipulating merely proper usage of funds and furnishing of account would not be a supply involving consideration. However, if charity is obligated to provide something in return for ex: display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor would be a supply involving consideration and taxable.
Electricity energy is exempt supply (Refer notification no. 2 – CT (Rate) dated 28.06.2017). State governments have power to levy tax on sale or consumption of electricity (Entry 53 in list 2nd, 7th schedule of constitution). There is no credit available.
Even, intellectual property can be goods since these are also ‘property’. For ex: Copyrights, Patents, Brand Name, etc. ‘Goods’ does not always mean tangible property.
Job-work must not be confused with repair or maintenance. Job-work creates the functionality of an article but repair or maintenance restores or improves the functionality already created and possessed by that article or thing.
9. What is relevance of ‘manufacture’ in GST law?
It is relevant in case of:
10. What is the relevance of Market Value in GST law?
Market Value is relevant in confiscation provisions contained in section 130. This provision provides that owner of goods or conveyance has option to pay amount equal to its market value so as to avoid confiscation resulting from breach of the provisions of law (for ex: supplying goods without e-way bill).
Other territory means territory not claimed by state or UT (territory claimed by state/UT is 12 nautical miles). As we know India extends upto 200 nautical miles. Therefore, other territory can be (200 less 12 nautical miles i.e. form part of state/UT) i.e. 188 nautical miles beyond 12 nautical miles of base line.
Partner is not treated as employee of the firm since he shares in profit/losses. Firm and Partners in strict sense of law is ‘single person’. The salary given to partner is the profit of firm only and they are one and the same person. Supply requires 2 persons which is not so in case of salary to partners. It is basically supply of money only. As per CBEC Tweet FAQ no. 58 and 71, salary paid to partners as per income tax act is not taxable.
Where a supplier issues a voucher to recipient on his making a purchase from supplier, it is not to be treated as outward supply but a mode of consideration which shall be used as consideration for making future purchase.
Term Immovable property is not defined in this act. Reference can be taken from section 3(26) of General Clauses Act which states “Immovable Property” shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth”. Refer transfer pricing law, Central Excise law and Case laws (Quality Steel Tubes Pvt. Ltd. vs. CCE 1995 SCC (2) 372 Supreme Court, Municipal Corporation of Greater Bombay vs. Indian Oil Corporation AIR SC 686 Supreme Court, Shree Acree Steel P Ltd. vs. Bharat Overseas Bank Ltd., AIR Kant 287).
Word ‘property’ is also not defined. It is understood to mean every kind of interest or right which has an economic content and can be movable or immovable.
As per Article 366(29A)(b) of Constitution, ‘tax on sale or purchase of goods’ includes ‘a tax on transfer of property in goods (whether as goods or in the same form) involved in the execution of a works contract’. Therefore, constitution states it is ‘goods’ but GST law classify it as services.
Chapter III – Levy and Collection of Tax:
In order to apply a particular rate of tax, a taxable person need to determine the classification of his supply as to whether supply constitute a supply of goods or services. Once the same is determined, further classification in terms of HSN in case of goods and services is to be made by the person so as to arrive at the rate of tax at which he is required to pay tax. At the outset, it is important to note that HSN for goods are contained in Chapters from 1 to 98 and HSN for Services are contained in Chapter 99.
Refer Circular No. 11/11/2017-GST dated 20.10.2017.
Supply is defined as per this section in inclusive manner and accordingly it can be beyond this also. Obviously supply will always mean some positive act. As per Oxford dictionary supply means “to make available for use or to provide something to someone”. This position is also prevailing in foreign jurisprudence.
No since tax does not result any performance on the part of public authorities nor it results any performance on the part of person paying tax to be qualified as consideration. However, clause 1st of schedule 1st covers transactions of permanent transfer of business assets without consideration which shall be considered to be supply. Accordingly tax can be levied on goods recovered/confiscated.
Corporations, Authority, Statutory Body, etc created by the parliament or state legislature are neither government nor local authority nor government authority. 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).
Government Company, PSU, etc also are neither government nor local authority nor government authority.
It would be 2 crores (increased from 1 to 2 Crores after GST council November meeting).
Yes. For ex: As per notification no. 11 – CT (Rate) dated 28.06.2017, Rent a cab operator is given an option to pay tax at 5% with no ITC on input goods, capital goods and services shall be taken. Further, we have section 17(5), which states that Credit of rent a cab shall be available if outward supply is of same category. Therefore in this case a person has an option to opt for 5% with no ITC or pay tax at 18% with ITC.
Chapter IV – Time and Value of Supply:
While in case of domestic sourcing of goods, GST is required to be paid in advance, however where the goods are imported time of supply for payment of GST shall be at the time of actual imports and not required at the time of receipt of advance.
This is very critical issue. For ex: If advance for goods for both domestic sourcing and imports is paid on 01.01.2018 for Rs. 10 Crores. Goods are actually received on 20.03.2018. In this case domestic supplier has to be pay tax on or before 20th of February. While for imports it is required to be paid on 20.03.2018. Assuming interest rate to be 1% per month and tax rate of 18%, domestic transaction is on back foot by Rs.1.8 lacs.
Liability is only of Consignment Agent and not of commission agents. The agent will be liable for GST on value goods or services only if he ‘undertakes to supply’ any goods on behalf of any principal (like consignment agent/C&F agent i.e. storing and selling). However, if the agent does not undertake to ‘supply’ goods, he is not liable for GST on value of goods. For ex, in case of commission agent, he does not undertake supply of goods or services. He will be liable for GST only on his commission (Refer Section 2(5)).
No. One can refer CAS-4 titled ‘Cost of Production for Captive Consumption’ issued by ICAI.
X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y billed X including charges for television advertisement and paid service tax on the total consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent on behalf of X when obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his services as an estate agent. Therefore, this is taxable supply under GST law.
Chapter V – Input Tax Credit:
Pure agents like a customs broker or CHA claiming reimbursement from SEZ shall not be charging tax. However for various charges for which reimbursements are claimed like port fees, port charges, dock dues on which GST is already paid, there is no provision to claim refund or ITC by SEZ.
Taking a cue from explanation (i) as given in section 13(2), Services shall be deemed to have been made to the extent it is covered by the invoice or payment. However, that explanation is applicable for that section only. Moreover section 12(2) contains similar explanation for goods and that also cannot be equated with actual receipt of goods as required by this section. Accordingly actual receipt of services cannot be equated with ‘services to the extent covered by invoice’. However since services are intangible, there is another view that this explanation can be applied.
Taking ‘credit/refund of taxes’ which are actually not reached government is not uncommon in earlier VAT/Service Tax system. For Ex: A sells to B (Tax amount Re.1, A goes missing and no tax paid to government), B sells to C (Tax amount Rs. 2, Paid to government Re. 1(after set off Rs.1), C sells to D (Tax amount Rs. 3, Paid to government Re. 1 (after set off Rs.2). Now D claims refund from government of Rs.3. While government has received only Rs. 2 i.e. Re.1 each from B & C. This is called hawala transactions/carousel fraud. By the time government can trace A, he went missing. Now under GST, since all these transactions shall be online and credit/refund shall be available only when tax has been received by government.
No. Credit in respect of inputs contained in semi-finished/WIP of works contract services is not covered.
Chapter VI – Registration
Rs. 20 lacs. Composition scheme limit is Rs. 2 Crores.
Though there is exemption (say GTA services) from registration if entire tax payable in reverse charge basis, however there are various ancillary supply of goods and services (say sale of old transport vehicles in case of GTA) for which there is no exemption from registration.
Yes. Name board is required for every registered person on which GSTIN shall be displayed. Refer rule 18.
No. Normal registration requires presence of fixed establishment while casual taxable person registration does not require fixed establishment. Both are mutually exclusive.
No. Fresh registration is required. Old registration needs to be cancelled.
Chapter VII – Tax Invoice, Credit and Debit Notes
Chapter XI – Refunds
Where zero rated supply is with payment of tax, then refund is allowed. Where it is under bond/LUT i.e. without payment of tax, refund is not allowed as per rule 89(4).
Chapter XIX – Offences and Penalties
Detention means goods are temporarily detained by officers to check whether there is any violation of law. If there is any violation, goods are seized. Otherwise, goods are released. There is no documentary formality involved.
‘Seizure’ means goods are taken in custody by the department when there is a belief (though no yet proved) that provisions of law are violated. There is no transfer of property to government.
‘Confiscation’ means the goods become property of Government and Government can deal with it as it wants (These can be taken back after payment of redemption money).
Offences for the purpose of this article mean criminal offences. Proceedings in GST laws are in the nature of administrative enquiries. These are different from the proceedings in a criminal court where the enquiry is on the basis of evidence tendered on oath. Since tax penalties and prosecution are not considered to be criminal offences, one can be prosecuted under both GST laws and SEZ laws for same offence (say for clearance of goods).
‘Compounding’ is essentially a compromise arrangement between authorities and person committing an offence. Compounding crime consists of receipt of some consideration (termed as compounding fees) in return for an agreement not to prosecute one who has committed an offence. Compounding results in acquittal.
Chapter XXI – Miscellaneous
No, since principal would be received goods back from job worker. Goods sent to job worker is not a taxable supply as there is no consideration involved. It is neither exempt supply nor non-taxable supply provided goods are received back within limitation period.
X, a category of goods is made by P,Q and R. P & Q are purchased by supplier and R is supplied by recipient to supplier. This is not job work since job work is on goods belonging to another person. Whereas in this case P and Q are purchased by supplier. Substantial part of inputs belongs to principal in case of job-work. Moreover where supplier is paying tax on whole value of supply i.e. on value of X, there can’t be any inference of job work. This can be covered as part exchange. Refer Case Prestige Engineering India Ltd. v. Collector of Central Excise – 1994 (9) TMI 66 Supreme Court.
Yes. While sending inputs, it shall not be treated as supply to related person without consideration. However, job worker charges and goods if not received back should be properly valued as per valuation rules treating them as related persons.
No. Nowhere it is mentioned that it is always inter-state supply.
Yes. No exemption limit available.
No. As per section 170, tax payable/refundable to/by government is only required to be rounded off.
No since it is also in relation to employment. Also supported by CBEC education guide dated 20.06.2012.
(Author Shivashish Karnani is a CA and can be reach out freely at email@example.com and on +91-9818472772)
No part of this article shall be reproduced, copied in any material form (including e-medium) without written permission of CA. Shivashish Kumar. The information provided is not a substitute for legal and other professional advice. This is only for academic discussions.