CA Rockey

CA RockeyIn this article I have pen down the provisions related to levy of GST on supplies of goods and/or services, Time of supply of Goods and Services and Place of supply of Goods and Services as proposed in report of Sub-Committee-II on Model GST Law.

A. Levy of Central GST (CGST)/State GST (SGST):-

Section 7 of Model GST Act, 2016 talks about levy & collection of CGST/SGST as follows:

(1) There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST) on all intra-State supplies of goods and/or services at the rate specified in the Schedule . . . to this Act and collected in such manner as may be prescribed.

(2) The CGST/SGST shall be paid by every taxable person in accordance with the provisions of this Act.

(3) The Central/State Government may, by notification, specify categories of supply of services the tax on which is payable on reverse charge basis and all the provisions of this Act shall apply mutatis mutandis for collection of such tax.

Analysis:-

1. CGST/SGST shall be applicable on all intra-state supplies. Inter-state supply shall be govern by the Integrated GST Act.

2. Meaning of supply:-As per sec. 3, supply of goods and/or services refer to sale, transfer, barter, exchange, license, rental, lease or disposal and importation of service and also includes supplies specified in Schedule-I, made or agreed to be made without a consideration.

3. To determine whether a supply is Intra-state or inter-state, one need to refer provisions stipulated in section 14, Nature of Supply (Sec. 14 is subject to the provision of sec. 15 & 16 which deal with place of supply of goods and Place of supply of services, respectively. These provisions has been discussed herein after).

4. To know the date/time of levy one need to refer to Time of Supply of Goods/Services (Sec. 11 and 12 deal with Time of Supply of goods and Service. These provisions has been discussed herein after).

5. Taxable person is liable to discharge the CGST/SGST. Taxable person mean a person who is registered or required to be registered under GST Act.

6. Reverse Charge mechanism is applicable only on supply of services as may be notified by Central/State Government.

Following person is required to be registered under GST Act:-

1. Every person who already registered under any law (indirect tax law) on the date of commencement of this act.

2. Every other person who is not already registered under any law (indirect tax law) on the date of commencement of this act and whose turnover exceeds the taxable threshold limits in a Financial Year as may be notified.

3. Person making inter-state supply.

4. Casual Taxable person (“casual taxable person” means a person who occasionally undertakes transactions involving supply or acquisition of goods and/or services in the course or furtherance of business whether as principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business)

5. Person liable to pay tax under reverse change mechanism.

B. Time of supply of Goods/Services:-

1. Why we need to know time of supply of goods/services?

We need to know the time of supply to determine the exact date of levy as liability to pay CGST/SCGT shall arise at the time of supply.

2. Time of Supply of goods:-

Sec. 11 deals with time of supply of Goods. As per provisions of this section time of supply of goods shall be the earliest of followings dates:

a. removal of goods by the supplier,

b. date on which invoice issues,

c. date of which payment received or

d. date on which buyer shows the receipt of goods in his books.

If the goods (being sent or taken on approval or sale or return or similar terms) are removed before it is known whether a supply will take place, the time of supply shall be at the time when it becomes known that the supply has taken place or twelve months from the date of removal, whichever is earlier.

3. Time of Supply of Services:-

Sec. 12 deals with time of supply of services as follows:

a. If Invoice is issued within the prescribed time: date of issue of invoice or date or receipt of payment, whichever is earlier.

b. If Invoice is not issued within the prescribed time: date of completion of provision of service or date of receipt of payment, whichever is earlier.

c. If recipient of service shows the receipt of service in his books of accounts before above a or b: such date of showing receipt of service in the books.

d. Continuous supply of services-where due date of payment is ascertainable from contract: such due date, whether or not invoice is issued or payment is received.

e. Continuous supply of services-where due date of payment is not ascertainable from contract: payment of issue of invoice, whichever is earlier.

f. Continuous supply of services-where payment is linked to completion of an event: date of such completion of event.

Time of supply in case of reverse charge shall be earliest of the followings:-

1. Date of receipt of service,

2. Date of on which payment is made,

3. Date of receipt of invoice or

4. Date of debit in the books of accounts

Time of supply is similar to the Point of taxation Rule, 2011 (POT) to a great extent. However, rule-7 of POT links the payment of tax liability under reverse charge with the payment to service provider, whereas sec. 12 of Model GST Act, 2016 does not provides such linkage and just make it simple similar to general provision of time of supply.

Time of supply when there is change in rate of tax:-Sec. 13 deals with the provisions related to determine the time of supply when there is change in the rate of tax. Sec. 13 stipulates the provisions similar to the rule-4 of POT.

C. Place of Supply of Goods/Services:-

a. Why we need place of supply provision?

GST is the based on the destination principal, in which goods/services are taxed in the state in which they are consumed/used. CGST/SCGT is to be levied only on intra-state supply. To know whether a supply is intra-state or not we need set of rules/guidelines known as Place of Supply provisions/rules.

Sec. 14 stipulates the broad criteria to determine which supply of goods/services are intra-states. To determine the exact place of supply, sec. 14 further refer to the provisions of sec. 15 & 16.

First of all we need to get the understanding of broad criteria set out by sec. 14 to determine Intra-state supply then we need to have understanding of the provision of sec. 15 (Place of supply of Goods) and sec. 16 (Place of supply of Services) to know the exact place of supply.

Broad criteria are as follows:-

b. Supply of Goods:-Sec. 14 states that in case of supply of goods a supply of goods shall be intra state if goods are remain in the same state (i.e. movement of the goods commence and terminate in the same state). E.g. Mr. X is the supplier in the state of Haryana and he sold the goods to Mr. Y in the same state i.e. Haryana, this is an intra-state supply of goods.

c. Supply of Services:-Sec. 14 states that in case of supply of Service a supply shall be called intra-state supply where service provider and service recipient are located in the same state.

Sec. 15, Place of Supply of Goods:-

1. Where a supply involves movement of goods:-In case of such supply, place of supply shall be the “Location at which the goods are delivered” to the receiver.

2. Where a supply does not involves movement of goods:-In such case, place of supply shall be the “Location of such goods at the time of the delivery” to the receiver.

3. Where goods are assembled or installed at site:-Place of supply shall be the “Place of such installation or assembly”.

4. Where goods are supplied on board of a conveyance (like on vessel, aircraft, train or motor vehicle):-Place of supply shall be the “Location at which such goods are taken on board”.

5. Where place of supply cannot be determined in terms of above (1 to 4), then it shall be determined in accordance with the law made by Parliament on the recommendation of Council.

Sec. 16, Place of Supply of Services:-

This section deals with the provisions to determine the place of supply in case of services. This section provides the provisions similar to the Place of Provision of Service Rule, 2012. Before going ahead to discuss the provisions of this section, we must have the understanding of “Location of Service Provider” and “Location of Service Receiver”.

Location of Service Provider:-Location of service Provider means:

1. Location of Business Establishment: (where a supply is made from a business establishment for which registration has been obtained);

E.g. ABC Ltd. is providing service from its office located at Gurgaon and also get same office registered under GST law. In this case Location of Business Establishment is Gurgaon.

2. Location of Fixed Establishment: (where a supply is made from a place other than the business establishment for which registration has been obtained);

E.g. ABC Ltd. is also providing service from its office located at Rohtak (for this office registration is not taken). In this case Location of Fixed Establishment is Rohtak.

3. where a supply is made from more than one establishment, whether business or fixed, the location of the establishment most directly concerned with the provision of the supply;

4. in absence of such places (1 to 3 above), the location of the usual place of residence of the person;

Location of Service Receiver:-Location of service Receiver means:

1. Location of Business Establishment: (where a supply is received at a business establishment for which registration has been obtained);

E.g. XYZ Ltd. received service at its office located at Gurgaon and also get same office registered under GST law. In this case Location of Business Establishment is Gurgaon.

2. Location of Fixed Establishment: (where a supply is received at a place other than the business establishment for which registration has been obtained);

E.g. XYZ Ltd. also received service at its office located at Rohtak (for this office registration is not taken). In this case Location of Fixed Establishment is Rohtak.

3. where a supply is received at more than one establishment, whether business or fixed, the location of the establishment most directly concerned with the receipt of the supply;

4. in absence of such places (1 to 3 above), the location of the usual place of residence of the person;

How to determine Place of supply of a Service:-

General Provision: Where a service is provide to a registered person, then place of supply shall be the “Location of such service receiver”. Where a service is provided to an unregistered person then place of supply shall be the “Location of service provider”

Specific Provisions: in case of followings services Place of supply shall be as follows:-

1. Service related to immovable property: Place of supply is the location where such immovable property is located or intended to be located.

2. The place of supply of restaurant and catering services and services in relation to training, performance appraisal, personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgery shall be the location where the services are actually performed.

3. Place of supply of the service provided by way of

a. Admission to;

b. Organization of;

c. Service ancillary to such admission to or organization of; a cultural, artistic, sporting, scientific, educational, or entertainment event or amusement park or any other place.

d. assigning of sponsorship of any of the above events

Shall be the place where the event is actually held.

4. The place of supply of services by way of transportation of goods, including by mail or courier to,

(a) a registered person, shall be the location of such service receiver;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.

5. The place of supply of passenger transportation service shall be the place where the passenger embarks on the conveyance for a continuous journey.

6. The place of supply of services on board a conveyance such as vessel, aircraft, train or motor vehicle, shall be the location of the first scheduled point of departure of that conveyance for the journey.

7. The place of supply of telecommunication services including data transfer, broadcasting, cable and direct to home television services to any person shall—

(a) in case of services by way of fixed telecommunication line, leased circuits, internet leased circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit or cable connection or dish antenna is installed for receipt of services;

(b) in case of mobile connection for telecommunication and internet services provided on post-paid basis, be the location of billing address of the service receiver on record of the service provider;

(c) in cases where mobile connection for telecommunication and internet service are provided on pre-payment through a voucher or any other means, be the location where such pre-payment is received or such vouchers are sold:

Provided that if such pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the service receiver on record of the service provider shall be the place of supply of such service.

8. The place of supply of banking and other financial services including stock broking services to any person shall be the location of the service receiver on the records of the service provider.

Provided that if the service is not linked to the account of the receiver, the place of supply shall be location of the service provider.

9. The place of supply of insurance services shall:

(a) to a registered person, be the location of the service receiver; and

(b) to a person other than a registered person, be the location of the service receiver on the records of the service provider.

Provided that for all general insurance services related to an immovable property, the place of supply of services shall be the location of the property.

10. The place of supply of advertisement services to the Central Government, a State Government, a statutory body or a local authority meant for identifiable States, shall be taken as located in each of such States and the value of such supplies specific to each State shall be in proportion to amount attributable to service provided by way of dissemination in the respective States as may be determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other reasonable basis as may be prescribed in this behalf.

(Author can be contacted at M- 08287392720 or on Email: carockey99@gmail.com)

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0 responses to “Decoding GST Act, 2016: Levy and Time & Place of Supply”

  1. shaikh zaheer says:

    I think cgst and sgst same like vat and service tax so what please give me answer why govt.do not impose single tax provision?

    • Parth says:

      Because it will take away autonomy of states to charge tax. Selfish states don’t want to loose revenue. Moreover we have dual democracy stated in constitution which gives autonomy to states to charge tax seperatly in their state

    • Jatin Grover says:

      Dear Shaikh Zaheer,

      CGST and SGST are not like VAT and Service tax.

      In GST Regime CGST and SGST will be applicable on all supplies irrespective of the fact whether it is supply of good or supply of service.

      For eg: Suppose GST Rate is 20% then an invoice of service provider shall contain following:

      Value of servics- Rs.100
      SGST: Rs.10
      CGST: Rs.10
      Total Invoice: Rs.120

      And same in the case of Supplier of goods.

      The reason for having dual rate is the administration perspective of government.

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