Q.1 What is the scope of the term ‘supply’ as defined in the CGST Act, 2017?
Ans. As per Section 7(1) of the CGST Act, 2017, Supply includes:
Ø All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Ø Import of services for a consideration whether or not in the course or furtherance of business
Ø The activities specified in Schedule I, made or agreed to be made without a consideration and
Ø The activities to be treated as supply of goods or supply of services as referred to in Schedule II.
Q.2 Is it required to distinguish whether a particular supply involves supply of goods or services or both?
Ans. Yes, the CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of services viz., Section 12 and Section 13 thereof provides for ascertaining time of supply of goods and time of supply of services respectively; similarly, separate provisions have been specified for ascertaining place of supply of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and supply of services are different. Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of services.
Q.3 How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to the CGST Act, 2017 enlists the activities which are to be treated as supply of goods or supply of services. One may refer Schedule II with reference to Section 7 to classify whether the transaction involves supply of goods or supply of services.
Q.4 Whether supply of goods or services without consideration is liable to tax?
Ans. The activities specified in Schedule I will qualify as supply even if made without consideration. Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will qualify as supply in the absence of consideration and eventually would be liable to tax.
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts 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.
3. Supply of goods— (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
Q 5. Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person who is required to obtain separate registration for every branch located in different state or union territory shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply, liable to tax in terms of clause 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, supply of goods to a branch / unit located within the same State having separate registration would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).
Q.6 Whether gifts given by employer to employee will also qualify as supply?
Ans. As per the provisions of the Act an employer and employee will be deemed to be related persons. If an employer gives gift exceeding ` 50,000/- to employee than the same will be a supply, when the gift made in the course or furtherance of business and will be liable to tax. But any gifts for a value not exceeding ` 50,000/- in a financial year will not qualify as supply and as such will not be liable to tax
Q.7 Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of consideration?
Ans. The following would qualify as supply when the goods are supplied by principal to his agent or vice-versa:-
1. Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
2. Supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
Q.8 Whether GST leviable on inter-state transfer of aircraft engines, parts and accessories for use by their own airlines?
Ans. Yes. In terms of Schedule I of the CGST Act, supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business, even if, without consideration, attracts GST. Hence, GST will be levied on inter-state transfer of aircraft engines, parts and accessories for use by their own airlines.
Q.9 Whether supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc., printed with design, logo, name, address or other contents supplied by the recipient of such supplies, would constitute supply of goods or supply of services?
Ans. Printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, supply of printing is the principal supply. While, supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods.
Q.10 What are the taxes that are levied on an intra-State supply?
Ans. In terms of Section 9 of the CGST Act, 2017, intra-State supplies are liable to CGST. In terms of Section 7 of UTGST Act, 2017, intra-State supplies affected by a taxable person located in Union Territory (within the Union Territory) will be liable to UTGST. Therefore, in case of intra-State supplies in case of State or Union Territory, CGST and SGST or CGST and UTGST will be applicable respectively.
Q.11 How to ascertain the taxable value for levy of CGST & SGST/UTGST?
Ans. Section 15 of the CGST Act, 2017 specifies that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related, and the price is the sole consideration for the supply. Further, Section 15 provides for certain inclusions which will form part of the value viz., incidental expenses, commission, interest, penalty etc. In cases where the supplier and recipient are related persons or where the price is not the sole consideration, the provisions and method for ascertaining the value of taxable supply as prescribed in the Central Goods and Services Tax Rules
Q.12 What is the threshold limit for opting Composition scheme?
Ans. Notwithstanding anything to the contrary contained in the CGST Act but subject to the provisions of sections 9(3) and 9(4), a registered person, whose aggregate turnover in the preceding financial year did not exceed one crore rupees, may opt to pay, in lieu of the tax payable by him. However, this limit, is rupees seventy-five lakhs in the case of an eligible registered person, registered under section 25 of the CGST Act, in any following States, namely:
(i) Arunachal Pradesh, (ii) Assam, (iii) Manipur, (iv) Meghalaya, (v) Mizoram, (vi) Nagaland, (vii) Sikkim, (viii) Tripura, (ix) Himachal Pradesh
Q.13 What is the rate of tax applicable to a taxable person opting to pay tax under composition scheme?
Ans. Section 10(1) of the CGST Act, 2017 the rate of tax, shall be:
Ø Half per cent of the turnover in State or turnover in Union territory in case of a manufacturer
Ø Two and a half per cent, of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in Schedule II;
Ø Half per cent, of the turnover of taxable supplies of goods in State or turnover in Union territory in case of other suppliers
Q.14 What is aggregate turnover?
Ans. In terms of 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 cess.
Q.15 Does exemption from CGST automatically operate as exemption from SGST?
Ans. Yes, notification issued under section 11(1) or 11(2) of the CGST Act will be deemed to be issued under the SGST Act / UTGST Act, reference can be taken from section 11(4) of SGST Act and section 8(4) of UTGST Act.
Q.16 What is the time of supply where services are supplied online?
Ans. The CGST Act, 2017 does not provide separate provisions for ascertaining the time of supply of service where such services are supplied online and hence the same provisions for services as discussed above will apply for services supplied online.
Q.17 What is time of supply of services in case of import of services?
Ans. The CGST Act, 2017 does not provide separate provisions for ascertaining the time of supply in case of import of services
Q.18 When will the recipient and supplier be treated as related?
Ans. The relationship will be examined based on the explanation appended to Section 15 of the CGST Act, 2017 which defines the term “related persons”.
Accordingly, the following persons shall be deemed to “related persons” for the purpose of GST, if:
Ø such persons are officers or directors of one another’s businesses;
Ø such persons are legally recognized partners in business;
Ø such persons are employer and employee;
Ø any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
Ø one of them directly or indirectly controls the other;
Ø both of them are directly or indirectly controlled by a third person;
Ø together they directly or indirectly control a third person; or
Ø they are members of the same family
Further, persons who are associated in the business of one another where one is the sole agent/ sole distributor/ sole concessionaire of the other, shall be deemed to be related.
Q.19 If related persons transact at arm’s length price, can the valuation still be questioned?
Ans. The law mandates a reference to the CGST Rules where the supply is between related persons. However, since the supply is at “arm’s length price”, the fact that the price assigned to the transaction is an ‘open market value’ should be established.
Q.20 Can any additions be made to the contracted price when ‘Transaction Value’ is acceptable?
Ans. Yes. Section 15 of the CGST Act, 2017 provides for inclusions to the transaction value (on which GST will be payable). The below are broadly, the inclusions prescribed:
Ø Any taxes, duties, cess, fees and charges levied under any law for the time being in force ,if charged separately by the supplier
Ø Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient, but not included in the price.
Ø Incidental expenses, including commission and packing, charged by the supplier to the recipient, and any amount charged for anything done by the supplier in respect of the supply until delivery of goods or supply of services.
Ø Interest or late fee or penalty for delayed payment of any consideration for any supply. And
Ø Subsidies directly linked to the price excluding subsidies provided by the Government.
Q.21 State the supplies with value, where value has to determine which Rule 32 of the CGST Rules at option of supplier?
Ans. Value in respect of supplies specified below shall, at the option of the supplier, be determined in the manner provided in Rule 32 of the CGST Rules:
Ø Supply of services in relation to the purchase or sale of foreign currency, including money changing- the value of supply will be:
(a) Option a – difference between buying-selling rate and the reference rate published by RBI. Where reference rate is not available, 1% of gross Indian Rupee value of the transaction. And where the conversion is not into Indian Rupees, then 1% of the lesser of the Indian Rupee equivalent of each currency exchanged
(b) option b – 1% of gross amount upto `1 lac, 1/2% after `1 lac upto `10 lacs and 1/10% after `10 lacs. This option (b) once exercised cannot be withdrawn during the financial year
Ø Supply of services in relation to booking of tickets for travel by air provided by an air travel agent- the value of supply will be 5% of basic domestic fare or 10% of basic international fare.
Ø Supply of services in relation to life insurance business-the value of supply will be gross premium reduced by investment allocation, in the case of single premium policy will be 10% of premium and in all other cases will be 5% of first year’s premium and 12.5% for other year’s premia.
Ø Supply of goods of person dealing in second-hand goods- the value of supply will be difference between purchase price and selling price, if no ITC has been availed.
Ø Supply of a voucher, the value will be the redemption value of the voucher.
Ø Supply of services between distinct persons, that are notified by Government and where no input tax credit is availed will be NIL
Q.22 What will be the value of supply of person dealing in second-hand goods?
Ans. In terms of Rule 32 (5) of the CGST Rules, where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored
Q.23 What is Removal?
Ans. Removal is defined u/s 2(96) of the CGST Act, 2017. Removal in relation to goods means,
Ø Dispatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or
Ø Collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient
Q.24 Does a person have to issue an invoice even if such person removes goods for ‘sale on approval basis?
Ans. In such cases, as per section 31(7) of the CGST Act, 2017, tax invoice need not be raised at the time of removal. This is because it is not certain (at the time of dispatch of goods) that the sending of goods will result in a ‘supply’. However, on or before the confirmation of the supply by the other party, the tax invoice has to be issued. The law provides a time limit of 6 months from the date of removal, during which the goods will not be treated as supplied. Where no confirmation is received within such period, a tax invoice should be issued on the day immediately succeeding the 6-month period
Q.25 Should every registered person required to maintain books of account?
Ans. Yes, as per Section 35 of the CGST Act, 2017 every registered person is required to keep and maintain books of account at his principal place of business, as mentioned in the certificate of registration. Further, where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business. However, in case of supply of tea, coffee, rubber, etc. where the auctioneer claims ITC in respect of the supply made to him by the principal before the auction of such goods and the said goods are supplied only through auction. Then, both the principal and the auctioneer has the option to maintain the books of accounts relating to the additional place(s) of business at their principal place of business instead of such additional place(s).
Q.28 What are the basic accounts required to be maintained by a person at the principal place of business?
Ans. As per Section 35 of the CGST Act, 2017 read with the CGST Rules, 2017, the following accounts need to be maintained on a true and correct basis: (a) Production or manufacture of goods; (b) Inward or outward supply of goods or services of both; (c) Stock of goods; (d) Input tax credit availed; (e) Output tax payable and paid; (f) Such other particulars as may be prescribed
Q.29 What are the additional accounts to be maintained by the registered person under the Chapter VII – Accounts and Records of the CGST Rules, 2017?
Ans. Every registered person, in addition to the records to be maintained under section 35 of the CGST Act, is required to maintain following additional accounts on a true and correct basis:
Ø Goods or services imported or exported.
Ø Supplies attracting reverse charge along with relevant documents (including invoices, bill of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers)
Ø Accounts of stock in respect of goods received and supplied – containing particulars of opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples and balance of stock including raw materials, finished goods, scrap and wastage thereof (these details need not be maintained by a composition dealer).
Ø Advances received, paid and adjustments made.
Ø Tax payable on reverse charge basis.
Ø Tax payable, tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit note, debit note, delivery challan issued or received during any tax period (Not applicable to composition dealer).
Ø Names and complete addresses of suppliers from whom he has received the goods or services.
Ø Names and complete addresses of the persons to whom he has supplied the goods or services and
Ø Complete addresses of the premises where the goods are stored.
Q.30 Is an agent required to maintain any set of books of accounts?
Ans. Yes as per Rule 56(11) of the CGST Rules, 2017, every agent referred in section 2(5) of the CGST Act, 2017 shall maintain accounts containing:
Ø Particulars of authorization received by him from each principal to receive or supply goods or services on behalf of such principal separately.
Ø Particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal.
Ø Particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal.
Ø Details of accounts furnished to every principal.
Ø Tax paid on receipts or on supply of goods or services effected on behalf of every principal
Q.31 Is there any specific set of records to be maintained by the provider of works contract service?
Ans. Yes as per Rule 56(14) of the CGST Rules, 2017, the registered person providing works contract service shall maintain the accounts showing-
Ø The names and addresses of the persons on whose behalf the works contract is executed.
Ø Description, value and quantity (wherever applicable) of goods or services received for the execution of works contract.
Ø Description, value and quantity (wherever applicable) of goods or services utilized in the execution of each works contract.
Ø The details of payment received in respect of each works contract.
Ø The names and addresses of suppliers from whom he has received goods or services.
DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE PREPARATION.IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.
THE AUTHOR CAN BE REACHED AT VINAYAK.CHARU@GMAIL.COM AND AT 6283643738