Janya (a fictional character is very inquisitive and wants to question each and everything)
Tanishi (a fictional character finds answers from nowhere and everywhere and wants to give solutions for everything)
Janya: I have seven transactional questions in my mind. I am stating them one by one to you- Tanishi
Also Read- Some GST Aspects & Transactions Explained Through Q&A- Series I
QUESTION 1
Janya Where the applicant is providing services to the Government and Government aided schools by building his own infrastructure under a particular project, will there be a GST exemption?
Tanishi
Applicable Section:
It is in the nature of composite supply transaction.
Any kind of services provided to CG, SG, UTs under any training programme for which CG or SG bears the total expenditure are covered by Entry No. 72, Notification No. 12/2017 and the tax rate is Nil. However, it depends from facts to facts. The key law point is that the total expenditure MUST BE borne by CG or SG and not by any other person.
Interpretation:
The principle of law is clear that in a taxing statute one must look merely at what is clearly stated by the lawmakers. Especially for exemption notifications, no inference or analogy or equity can be invoked. If the total expenditure is not borne by CG or SG and if the payment responsibility is vested on some other agency may be of the Government, in my view exemption not available.
QUESTION 2
Janya What is a “Turnkey EPC Contract” and what is the implication under GST?
Tanishi
Applicable Section:
This could be any kind of contract and if it relates to or is in relation to or is consequential to a works contract transaction covered by section 2(119) then, in my view, it will remain a works contract service and shall be covered by Notification No. 11/2017 of 28.6.17 attracting a tax of 18%.
Interpretation:
A “Turnkey EPC Contract” includes engineering, procurement, installation and commissioning i.e. it can include engineering services, civil works, procurement of goods and erection & commissioning services. On a further question, the “Turnkey EPC Contract” of air-conditioning, in my view, will also fall under this category.
QUESTION 3
Janya Services of maintenance of Common Effluent Treatment plant are provided to Government Agency DSIIDC by contractor/sub contractor is exempt or not.
Tanishi
Applicable Section:
Notification No. 12/2017- Central Tax (Rate)
(zf) ‘Governmental Authority’ means an authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with 90 percent. or more participation by way of equity or control, to carry out any function entrusted to a Municipality under article 243 W of the Constitution or to a Panchayat under article 243 G of the Constitution.
(zfa) ‘Government Entity’ means an authority or a board or any other body including a society, trust, corporation,
(i) set up by an Act of Parliament or State Legislature; or
(ii) established by any Government, with 90 percent. or more participation by way of equity or control, to carry out a function entrusted by the Central Government, State Government, Union Territory or a local authority.’
| 3 | Chapter 99 | Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. | Nil | Nil |
| 3A | Chapter 99 | Composite supply of goods and services in which the value of supply of goods constitutes not more than 25 per cent. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority or a Governmental authority or a Government Entity by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. | Nil | Nil |
Interpretation:
If DSIIDC is covered under the definition of Government Authority or Government Entity as defined above then the same service is exempt otherwise taxable.
Further there is no restriction regarding the supplier, therefore if the supply provided by contractor/sub contractor to Government and falls under s.no. 3/3A of Notification No. 12/2017 Central tax (Rate), then it is exempt irrespective of supplier of service.
Conclusion:
In your case if your services falls under any of above situation then it is exempt otherwise it will be taxable.
QUESTION 4
JANYA : GTA providing services of providing vehicles (after hiring from the market) to another GTA.
TANISHI :
Applicable Section : Notification No. 11/2017-Central Tax (Rate)
| 10. Heading 9966 (Rental services of transport vehicles with operators) | ||
| (i) Renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient. | 2.5 | Provided that credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle) has not been taken. [Please refer to Explanation no. (iv)] |
| or | ||
| 6 | – ] | |
| (ii) Time charter of vessels for transport of goods. |
2.5 | Provided that credit of input tax charged on goods (other than on ships, vessels including bulk carriers and tankers) has not been taken [Please refer to Explanation no. (iv)]. |
| (iii) Rental services of transport vehicles with operators, other than (i) and (ii) above.] | ||
Interpretation:
Providing of vehicles is not a GTA service and is covered under the service of renting of motor vehicles. The rate of tax on such services is as mentioned above.
Conclusion: Tax implications shall be as provided in the table above subject to the specific conditions.
QUESTION 5
JANYA : Whether the medicines, consumables, surgical and implants used in the course of providing health care services to patients admitted to the Hospital for diagnosis or treatment would be considered as “Composite Supply” of health care services under GST and consequently exempt under Notification No. 12/2017 read with section 8 (a) of GST?
2. Whether ITC is eligible for obligatory services provided to In-patients through outsourcing;-(a) Washing and Sewage Removal – 100%(b) House Keeping and Lease Rent on Machinery – On Proportionate basis.
TANISHI :
APPLICABLE SECTION
The Health care services provided by a clinical establishment or an authorized medical practitioner or para medics are exempted vide SI No 74 of Notification no 12/2017-C.T.(rate) dated 28.06.2017
“Clinical establishment” is defined in the said notification under 2(s), which states that,-
“Clinical Establishment” means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognized system of medicines in India or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases.
“health care services” is defined under 2(zg) as:-
“health care services” means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma;
INTERPRETATION
1.Medicines, consumables and implants used in the course of providing health care services to in-patients by the applicant is a composite supply, and Supply of health care services as defined in Para 2(zg) of Notification no 12/2017-C.T. (rate) dated 28.06.2017 is exempted from CGST and SGST as per SI No 74 of the notification.
2.The applicant is not eligible for the credit of tax paid on the Input services used exclusively for providing exempt services of health services to in patients such as laundry services used for in patients. For Input services such as housekeeping, leasing of equipment used for both exempt supply of health services to in patients and taxable supply of medicines etc. to outpatients , the appropriate ITC eligible is determined by Rule 42 of the CGST Rules 2017 and TNSGST Rules read with Section 17(2) of CGST/TNGST Act 2017.
QUESTION 6
JANYA : What is the appropriate HSN of cross charge invoicing.
TANISHI :
This is a question of fact and the HSN would differ from case to case basis depending on the nature of transaction. There is no specific HSN earmarked for cross charge.
Interpretation: There is no particular head specifically kept for cross charging. The applicable HSN would depend on the nature of the transaction and the same would be a question of fact. The HSN would differ from case to case basis.
For example, if the cross charging is of Backend Office Work then the HSN would be of business support service 9985 99
If the cross charging is of man power supply then the HSN would 9985 19
QUESTION 7
JANYA : Whether a hotel located in Non-processing Zone of SEZ will liable for GST on services
provided by it to the clients located in SEZ
TANISHI:
APPLICABLE SECTION
The applicable notification says that the non-processing area in special economic zones (SEZs) has been divided into two parts.
The social or commercial infrastructure in one part can be accessed by entities within SEZ as well as those outside these conclaves. The second part is exclusively for SEZ entities.
No exemption or concession would, however, be provided for creation of social or commercial infrastructure which would be used by entities within SEZ and outside.
The notification says “The customs duty, central excise duty, service tax, and such other central levies and tax benefits already availed of for creation of such infrastructure shall be refunded by the developer in full, without interest,”.
INTERPRETATION:
Read section 6(2) of IGST Act for understanding the meaning of SEZ etc. Section 7(5)(b) of IGST Act will treat supply of goods & services or both to or by a SEZ developer or SEZ unit as inter-State supply and, accordingly, IGST will be attracted. However, this is subject to section 16(1) of IGST Act which says, “Supply of goods or services to such units shall be zero-rated.” Zero rating here does not mean export of services and here your explanation in the question is misleading and is not correct in law. But section 16 does not make supplies from SEZ to Domestic Tariff Area (DTA) as zero rated.
CONCLUSION :
There is no exemption under GST law and you will have to pay tax under IGST Act.
While every care has been taken to ensure the accuracy/ authenticity of the above, the readers are advised to recheck/ reconfirm the same from the original sources/ relevant departments. The company shall in no way be responsible for any loss or damage suffered to any person on account of the same. The views expressed are personal opinion, compilation and is no way, to be used for any legal opinion, matters
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