B. S. Seethapathi Rao

B. S. Seethapathi Rao

Introduction : The Government of India introduced ‘THE GOODS AND SERVICES TAX’  (GST) from 01.07.2017. Under Goods and Services tax law the Central and State Governments have right to impose and collect taxes on goods and services at specified rate of tax as per schedules mentioned in the Goods and Services Tax Law.

Up to 30th June, 2017, Central  Government  has right to impose tax on goods under Central Excise Law,  Additional Excise Law , Central Sales tax Law (CST) etc., Finally on 30’th June’2017 mid night Indian Parliament approved The Goods and Services Tax Law and Prime Minister announced in the Parliament and said GST is the tax for twenty first century .

The Goods and services Tax is the biggest tax reform India has seen post-independence. Amalgamation of large number of Central and State taxes into a single tax, will help in mitigating cascading effect or double taxation in a major way.

At present there are four key indirect taxes in India, they are :-

(1) Excise Duty: Tax on the manufacture of goods,

(2) Service Tax: Tax on provision of services

(3) Value Added tax (VAT) or Central State Tax (CST ) : Tax on sale of goods,

(4) Customs Duty : Duty on Import or Export of Goods.

Currently , fiscal powers between the Central and State are clearly stated in the Constitution . The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium narcotic etc.,) while the States have the powers to levy tax on sale of gods. In case of inter-State sales, the Central has the power to levy a tax (CST ) but, the tax is collected and retained entirely by the originating States. As for services, it is the Centre alone that is empowered to levy service tax.

Key features of Goods and Services Tax (GST ):-

(1) Goods and Services Tax is based on the principle of value added tax and either  ‘input tax method’ or “subtraction“ method, with emphasis on voluntary compliance and accounts based system.

(2) It is a comprehensive levy and collection on both goods and services at the same rate with benefit of input tax credit or subtraction of value of penultimate transaction value.

(3) No scope for multiple levy of tax on goods and services, such as sales tax, entry tax, octroi, entertainment tax and Luxury tax etc.,

(4) A common law and procedures throughout the country under a single administration,

(5) GST is a destination based tax and levied at single point at the time of consumption of goods or services by the ultimate consumer,

(6) Only taxable event under GST will be supply of Goods or Services,

(7) Both Central and State Government will simultaneously levy tax on Intra State supply,

(8) GST framework in India is technology driven ad will act as a self-policing mechanism.

Goods and Services Tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply. It is levied at all stages right from manufacturer up to final consumption with credit of taxes paid at preview stages available as setoff. In a nutshell , only value addition will be taxed and burden of tax is to be bore by the final consumer.

In India “ Dual GST “ is implemented wherein both Central and State government will levy GST on Intra-State Supply of Goods or Services as under:-

(i) State GST (SGST ) and Central GST (CGST ) :- For supply of goods and services or both, within a State,

(ii) Union Territory GST (UT-GST ) and Central GST (CGST ) :- For supply of goods and services or both  within a Union Territory.

For any Inter State Supply Integrated Goods and Service Tax  (IGST ) will be levied. This would be collected by the Centre so that he credit chain s not disturbed. Import of goods or services will be treated as inter-State supplies ad would be subject to IGS in addition to the applicable customs duties. IGST rate will be same all over India and will not difference from State to State. Revenue from IGST rate will be  apportioned among Union and States by Parliament based on the recommendation of GST Council.

These following taxes not subsumed under GST:-

Goods and Services Tax would be subsume most Indirect Taxes, However certain taxes have (both at State and Central level ) been kept outside the scope of GST.

At Central Level:

(i) Customs Duty,

(ii) Research and development Cess,

At State Level:

(i) State Excise Duty,

(ii) Stamp duty,

(iii) Professional Tax,

(iv) Motor Vehicle Tax,

(v) Electricity Duty,

(vi) Vat on five specified petroleum products for a specific period of time.

The following  Cess to be continued even after GST implemented :-

(1) Education Cess on Imported Goods,

(2) Secondary and Higher Education Cess  on Imported Goods,

(3) Cess on Crude Petroleum Oil under the Oil Industry Development Act,1974.

(4) Additional Duty of Excise on Motor Spirit (Road Cess),

(5) Additional Duty of Excise on High Speed Diesel Oil (Road Cess ),

(6) Special Additional Duty of Excise on Motor Spirit,

(7) NCCD on Tobacco and Tobacco Products and Crude Petroleum Oil.

Central Excise Duty will continue on petroleum products and tobacco products (Entry 84 of List 1 (Union List ) of Seventh Schedule to Constitution of India).

Tax on Entertainment only by Municipalities, Panchayat,  Regional Council and District Council will have power to impose tax on entertainment and amusement (Entry 62 of List II (State List ) of Seventh Schedule to Constitution of India.

Steps for charging Goods and Services Tax:-

Step Action Significance
1 Determine whether the activity is a supply within the meaning f section 7 (1) of CGST Act, 2017 Goods and Services Tax is a tax on supply of goods and services or both. Hence whether GST will be applicable or not will depend whether or not there is a supply.
2 Determine whether the said supply is a Supply of goods or supply of services. The distinction between supply of goods and supply of services is significant in order to determine:-

i) Place of provision,

ii) Point of taxation,

iii) Rates of taxes.

3 Determine the Place of Supply. Goods and Services Tax is destination based tax and hence determination of place of supply is significant.
4 Determine whether the supply is an intra- State  Supply or Inter State supply . Based on the place of supply the supply shall be classified into:-

i) Intra-State Supply on which CGST and SGST or UTGST  is applicable or

ii) Inter –State Supply on which IGST is applicable.

5 Determine Tie of Supply Time of Supply fixes the point when the liability to charge GST arises. It also helps in determining which rate of tax will be applicable in case there is any change in GST rates of a particular goods or services.
6 Identify the rate of tax and applicable GST Compensation Cess based on Goods and Services. GST rates are broadly categorized into 5%,12%,18% and 28% based on the goods and services . Hence , the exact rate of the goods or Services in question needs to be determined as given in the GST rates schedule.
 

7

 

Determine the Value of Supply as per the Valuation principles.

 

Transaction Value of the goods or services shall be the value in normal circumstances, However, if the conditions associated with using Transaction Value is not possible to use transaction value then Valuation rules shall  be used to determine the value of supply.

8 Charge tax at the arte determined in step 6 on the value determined in step 7. Tax shall be charged based on value of supply and tax charged.

Meaning of Important words in GST Law.

1. Services : As per Sec.2(102) of the CGST Act,2017 “ Services” means anything other than goods, money ad securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency r denomination to another form, currency or denomination for which a separate consideration is charged.

2. Taxable Supply: As per Sec.2(108) of CGST Act,2017 “ taxable supply” means a supply of goods or services or both which is leviable to tax under this Act.

3. Exempted Supply: As per Sec.2(47) of the CGST Act,2017 “ Exempted Supply “ means supply of ay goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non- taxable supply.

4. Non-Taxable Supply: As per Sec.2(78) of the CGST Act,2017 “ Non-Taxable Supply “ means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act, The following points needs to be noted:-

> In order to be classified as Non-Taxable Supply the transaction must be a Supply with in the meaning of Section 7 of the CGST Act,2017,

> Following will be covered under  the scope of Non-Taxable Supply:-

i) Supplies which are exclude form the scope of supply ex. Alcoholic liquor for human consumption,

ii) Transaction specified under Schedule III of the CGST Act,2017 which are neither a supply of goods nor Supply of Services,

iii) Activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government.

5. Nil Rated Supply: These are taxable supplies on which tax is charged at@0%.

6. Zero Rated Supply: As per Section 16 (1) of the IGST Act,2017, “ Zero Rated Supply” means any of the following supplies of goods or services or both , namely (i) export of goods or services or both or (b) supply of goods or services  or both to a Special Economic Zone developer or a Special Economic Zone unit.

Important Definitions under Goods and Services Tax Act,2017 on Services:

1. Aggregate Turnover:  As per Sec.2(6) of GST Act,2017 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, export of goods or services or both and inter-State supplies of persons having the same permanent account number  (PAN ) , to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

2. Composite Supply: As per Sec.2(30) of Goods and Services Tax Act,2017, “Composite Supply “ means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are actually bundled  and supplied in conjunction with each other in the ordinary course of business, one of which is a principle supply.

Example: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principle supply.

3. Continuous Supply of Services: As per Sec.2(33) of Goods and Services Tax Act,2017 “ Continuous Supply of Services “ means  a supply of services which is provided , or agreed provided , continuously or on recurrent basis, under a contract , for a period exceeding three months with periodic payment obligation and includes supply of such services as the Government may, subject to such conditions, as it may , by notification, specify.

Example: The determination of stage of completion of services is an abstract one, unless specifically defined by contract, unlike in the case of goods where the volume of goods supplied can be easily tracked / identified . Hence, a contractor for supply of service spanning over a definite period has been treated as a continuous supply, so that the tax dues are collected periodically.

4. Fixed Establishment: As per Sec.2(50) of the Goods and Services Tax Act,2017 “ Fixed Establishment “ means a place ( other than the registered place of business ) which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.

Example:  The following  three elements are critical to determine whether a place is a “ fixed establishment”

(i) ____ Having a sufficient degree of permanence,

(ii) _____ Having a structure of human and technical resource , and

(iii) ____ Other than a registered place of business.

Fixed establishment is relevant to determine the location of supplier for the purpose of determining whether  Supply is an Intra-State Supply  or  Inter-State Supply.

5. India : As per Sec.2(56) of Goods and Services Tax Act,2017 “ India “ means the territory of India as referred to in article 1 of the Constitution, its territory waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive  Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters.

Article 1 of the Constitution of India: India, that is Bharat, shall be a Union of States, The States and the territories thereof shall be as  specified in the First Schedule.

The territory of India shall comprise:-

(a) The territories of the States,

(b) The Union territories specified in the First Schedule and

(c) Such other territories as may be acquired.

Meaning of Territorial Water: As per Sec.3 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zone Act,1976 specifies that territorial water extends upto 12 nautical miles from the base line on the coast of India and include any bay, gulf , harbor, creek or tidal river. 1 nautical miles  = 1.1515 miles = 1.853 kms.

Meaning of Exclusive Economic Zone: As per Sec.7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone other Maritime Zone Act,1976 states that exclusive economic zone of India is an area beyond and adjacent to the territorial Waters, and the limit of such zone is 200 nautical miles from the baseline.

In this zone, the costal state has exclusive rights to exploit it for economic purpose like constructing artificial islands ( for oil exploration, power generation, etc., ) fishing , mineral resources and scientific research, Area beyond 200 nautical miles is called “ High Seas “where all country have equal rights.

Meaning of Continental Shelf: Continental Shelf is an area of relatively shallow seabed between the shore of a continent and the deeper ocean.

6. Input Service: As per Sec.2(60)of  The Goods and Services Tax Act,2017, “ Input Service “ means any service used or intended to be used by a supplier in the course  or furtherance of business.

7. Job Work: As per Sec.2(68) of The Goods and Services tax Act,2017, “ Job Work “ means any treatment or process undertaken by a person on goods belonging to other registered person and the expression “ job worker” shall be constructed accordingly.

Example: The Job work undertaken may be an initial process, intermediate process , assembly of parts, packaging or a complete manufacturing process. In order to complete the job work, raw material, components, semi-finished materials can either be sent by the principal manufacture or may be procured directly by the job worker as per the direction of the principal.

The output of job work can either be t=returned back to the principal manufacturer or can be supplied directly to a third party on the direction of the principle manufacturing.

It is to be noted that if the job work is carried out on the goods belonging to a unregistered person, I cannot be termed as “ job work” and such activity will be covered under the normal supply provisions.

8. Location of the Recipient of the Services: As per Sec.2(70) of the Goods and Services Tax Act,2017, “ Location of the Recipient of the Services” means :-

(i) Where a supply is received at a place of business for which the registration has been obtained, the location of such place of business,

(ii) Where a supply is received at a place other than the place of business for which registration has been obtained ( a fixed establishment elsewhere ), the location of such fixed establishment.

(iii) Where a supply is received at more than one establishment , whether the place of business or fixed establishment , the location of the establishment most directly concerned with the receipt of the supply , and

(iv) In absence of such places, the location of the usual place of residence of the recipient.

9. Location of the Supplier of Services: As per Sec.2(71) of the Goods and Services Tax Act,2017, “ Location of the Supplier of Services” means :-

(i) Where a supply is made from a place of business for which the registration has been obtained, the location of such place of business,

(ii) Where a supply is made from a place other than the place of business for which registration has been obtained ( a fixed establishment elsewhere ), the location of such fixed establishment,

(iii) Where a supply is made from more than one establishment , whether the place of business or fixed establishment , the location of the establishment most directly concerned with the provisions of the supply, and

(iv) In absence of such places, the location of the usual place of residence of the supplier.

Examples:

a) XYZ company Ltd has appointed BCD & Company Ltd to carry out the physical verification of the company’s inventory in Rajasthan, M.P, Maharashtra, West Bengal and Chandigarh. BCD & Company Ltd has its office only in the State of Rajasthan. In this case as BCD & Company Ltd does not have any place of business or fixed establishment in any of the states where it needs to carry out the physical verification, its usual place of residence (Rajasthan) will be considered as the Location of supplier of services.

b) A Company incorporated in Chennai is engaged in the business of investment in immovable property and letting them out on rent. The company has its properties in different cities of the country (Rajasthan, West Bengal, etc.,) . By the definition of location of supplier of services being the “ place of business “ , the company has its place of business where its “ seat of management” is located i.e. Chennai.

Accordingly , the location of service provider in relation to the transaction involving renting of immovable property is not where the property let out is situated but the registered office of the company where the management has its seat for decision making.

c) B Limited Company is incorporated in West Bengal , but provides its services entirely from Mumbai. In this case location of supplier will be Mumbai ad not West Bengal.

d) BBR Charted Accountants ( based out of Mumbai ) has got the statutory audit of MSK Steels Ltd, having it’s registered office in Mumbai, Marketing and Sales office in Kolkatta and manufacturing plant at in Jharkhand. BBR Charted Accountants has taken small offices in Kolkata and Jharkhand to carry out the statutory of  MSK steels Ltd. In the case the location of supplier of services  will be Mumbai in view of the provision of Section 2(71) ( c) .

Import of Services shall be treated as Inter-State supply:- Import of Services shall be treated as Inter-State supply: Sec.7(4) of the IGST Act,2017 states that supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.

Other cases which shall be treated as Inter-State supply:-  sec.7(5) of IGST  Act,2017, states that supply of goods or services or both:-

(i) ____ When the supplier is located in India and the place of supply is outside India ,

(ii) ____ To or by a Special Economic Zone developer or a Special Economic Zone unit; or

(iii) ___ In the taxable territory , not being an intra –State supply and not covered elsewhere in this section,

Shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.

Export of services: As per Sec.2(6) of IGST Act,2017, “ Export of Services “means the supply of any service when:-

(a) The supplier of services is located in India,

(b) The recipient of services is located outside India,

(c) The place of supply of services is outside India,

(d) The payment for such services has been received by the supplier of service in convertible foreign exchange, and

(e) The supplier of services and the recipient f service are not merely establishments of a distinct person in accordance with Explanation 1 in Section 8.

Examples:

1. SEZ unit in Gopalpur, Odisha  supplying services to another SEZ unit in Gopalpur, Odisha is a supply in the course of inter-State trade or commerce.

2. Lease of premises by SEZ developer in Chennai to SEZ unit in that same zone in Chennai will be a supply in the course of inter-State trade or commerce,

3. Disposal of scrap by an SEZ developer in Mumbai to a scrap dealer in Mumbai (outside the zone) is a supply in the course of inter-State trade or commerce.

Schedule-II , S.No.5 . Supply of services as per GST Act,2017:-

The following shall be treated as supply of service, namely:-

(a) Renting of immovable property ,

(b) Construction of a complex , building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier.

Explanation:- For the purpose of this clause:-

1) The expression “ competent authority “ means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate for such authority , from  any of the following , namely:-

(a) An architect registered with the Council of Architecture constituted under the Architects Act,1972; or

(b) A Charted engineer registered with the Institution of Engineers (India) ; or

(c) A licensed surveyor of the respective local body of the city or town or village or development or planning authority,,

2) The expressions “ construction “ includes additions, alterations, replacements or remodeling of any existing civil structure,

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right .

(d) development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software,

(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and

(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.

Schedule II, S.No.6 of the CGST Act,2017, Composite Supply:-

The following composite supplies shall be treated as a supply of services namely:-

(a) Works contract as defined in clause (119) of section 2; and

(b) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink ( other than alcoholic  liquor for human consumption ), where such supply or service is for cash, deferred payment or other valuable consideration.

Examples – 1.

Determination of Time of Supply of Services: Determination of time of supply in each of the following situation in accordance with Section 13 of CGST Act.

Case Provision of Service Due Date for issue of Invoice Issue of Invoice Receipt of Payment
Case. A 10th Sept’2017 10th Oct’2017 10th Oct’2017 20th Oct’2017
Case. B 10th Sept’2017 10th Oct’2017 15th Oct’2017 20th Oct’2017
Case. C 10th Sept’2017 10th Oct’2017 5th Oct’2017 20th Oct’2017
Case. D 10th Sept’2017 10th Oct’2017 5th Oct’2017 5th Oct’2017

Determination of time of supply of services:

Case Provision of Service Due date for issue of Invoice Issue of Invoice Receipt of Payment Time of Supply  Reason
Case. A 10th Sep’17 10th Oct’17 10th Oct’17 20th Oct’17 10th Oct’17 In this case, Invoice was issued within due date and hence time of supply will earlier of following :-

a. Date of issue of invoice.10th Oct’17

b. Date of receipt of payment 20th Oct’17

c. Time of supply 10th Oct’17.

Case. B 10th Sep’17 10th Oct’17 15th Oct’17 20th Oct’17 10th Sep’17 In this case , Invoice was not issued within due date and hence time of supply will earlier of following:-

a. Date of provision of service is 10th Sep’17,

b. Date of receipt of payment is 20th Oct17

c. Time of Supply is 10th Sep’17

Case. C 10th Sep’17 10th Oct’17 5th Oct’17 20thOct’17 5th Oct’17 In this case , Invoice was issued within due date and hence time of supply will earlier of following:-

a. Date of issue of Invoice is 5th Oct’17,

b. Date of receipt of payment 20th Oct’17,

c. Time of supply is 5th Oct’17.

Case. D 10th Sep’17 10th Oct’17 5th Oct’17 5th Sep’17 5th Sep’17 In this case , Invoice as issued within due date and hence time of supply will earlier of following:-

a. Date of issue of Invoice is 5th Oct’17,

b. Date of receipt of payment is 5th Sep’17,

c. Time of supply is 5th Sep’17.

Example – 2.

Determination of Time of Supply of Services:  Determine the time of supply in each of the following situation in accordance with Section 13.

Case Provision of Service Date of Invoice Date of receipt of payment Amount Received
Case. A 10th Nov’17 30th Nov’17 15th Dec’7 Rs.20,00,000/-
Case. B 10th Nov’17 30th Nov’17 15th Dec’17 Rs.15,00,000/-
Case. C 10th Nov’17 30th Nov’17 15th Nov’17, 10th Dec’17 Rs.  5,00,000/-, Rs.10,00,000/-
Case. D 10th Nov’17 30th Nov’17 6th Nov’17, 9th Nov’17 Rs.  2,00,000/-, Rs.  4,00,000/-
Case. E 10th Nov’17 30th Nov’17 30th Apr’18 Rs.  2,00,000/-

Determinations of time of supply of services in each of the cases are as follows:-

Case Provision of Service Date of Invoice Date of receipt of Payment Amount Received Time of Supply  Reason
Case. A 10th Nov’ 17 30th Nov’ 17 15th Dec. 17 Rs. 20,00,000/- 30thNov ’17 As the invoice is issued within the due date, the time of supply will be earlier of issue of invoice or receipt of payment.
Case. B 10th Nov’ 17 30th Nov’ 17 15th Nov 17 Rs. 15,00,000/- 15thNov’ 17 As the invoice is issued within the due date , the time of supply will be earlier of issue of invoice or receipt of payment.
Case. C 10th Nov’ 17 15th Dec’ 17 15th Nov’ 17 Rs. 5,00,000/- 15thNov’ 17 As the invoice is issued within the due date, the time of supply will be earlier of issue of invoice or receipt of payment. Further as, per Explanation 1 the time of supply will be to the extent covered in the invoice or advance received.
10th Dec’ 17 Rs. 10,00,000/- 30thNov’ 17 As the invoice is issued within the due date, the time of supply will be earlier of issue of invoice or receipt of payment.
Case. D 10th Nov’ 17 30th Nov’ 17 6th Nov’ 17

9th Nov’ 17

Rs. 2,00,000/- Rs. 4,00,000/- 6th Nov’ 17 9th Nov’ 17 As the invoice is issued within due dat , the time of supply will be earlier of issue of invoice or receipt of payment. Further , as per Explanation 1 the time of supply will be to the extent covered in the invoice or advance received.
Case. E 10th Nov’ 17 15th Dec’ 17 30th Apr’ 18 Rs. 2,00,000/- 10thNov’ 17 As the invoice is not issued within the due date the time of supply will be the date of provision of service or receipt of money whichever is earlier.

Time of Supply of Services in case of Reverse Charge: As per Section 13 (3) of CGST Act,2017 “ In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:-

(i) The date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account , whichever is earlier; or

(ii) The date immediately following sixty days from the date of issue of invoice or any other document , by whatever name called, in lieu thereof by the supplier;

PROVIDED that where it is not possible to determine the time of supply under clause (i) or clause (ii) , the time of supply shall be the date of entry in the books of account of the recipient of supply;

PROVIDED FURTHER that in the case of supply by “ associated enterprises” where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

In order to determine the time of supply of services in case of reverse charge , earlier of the following shall be considered:-

(i) Date of making payment,

(ii) 60 days from date of invoice.

It is to be noted that date of “ receipt of services” is not relevant for the purpose of determining the time of supply of services under reverse charge basis. Further 60 days from the date of invoice has been granted in case of supply of services unlike goods where only 30 days from the date of invoice is granted to determine time of supply.

Example: Time of Supply in case of Reverse Charge:

Determine time of supply in each of the following independent situation where tax is payable under Reverse Charge:-

Case Date of receipt of service          Date of invoice   Date of Payment
Case. A 12th Dec’17       15th  Dec’17     15th Dec’17
Case. B 12th Dec’17       15th Dec’17     10th Jan’18
Case. C 12th Dec’17      15th Dec’17     20th Feb’18

Determine time of supply in each of the following independent situation where tax is payable under Reverse Charge in the situations:-

Case Date of receipt of Service  Date of Invoice 60 days from date of invoice Date of payment Time of Supply  Reason
Case. A 12th Dec’17 15th Dec’17 13th Feb’18 15th Dec’17 15th Dec’17 Time of supply will be earlier of the following:-

1.Date of making payment 15th Dec’17,

2. 60 days from date of invoice 13th Feb’17,

3. Time of supply is 15th Dec’17.

Case. B 12th Dec’17 15th Dec’17 13th Feb’18 10th Jan’18 10th Jan’18 Time of supply will be earlier of the following : 1. Date of making payment 10th Jan’18,

2. 60 days from the date of invoice 13th Feb’18

3. Time of supply is 10th Jan’18.

Case. C 12th Dec’17 15th Dec’17 13th Feb’18 20th Feb’18 13th Feb’18 Time of supply will be earlier of the following:-

1.Date of making payment 20th Feb’18,

2. 60 days from date of invoice 13th Feb’18,

Time of supply is 13th Feb’18.

Time of supply in case of “ associated enterprises” where the supplier is located outside India:-

Proviso of Section 13(3)  states that the in case of the “ associated enterprises “ where the supplier of services is located outside India the time of supply shall be the earlier of the following:-

(i) Date of entry in the books of recipient,

(ii) Date of payment.

Time of Supply in case of supply of Vouchers:

As per Sec.2(118) of CGST Act,2017, “ Voucher  means an instrument where there is an obligation to accept it as consideration  or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation including the terms and conditions of us of such instrument.

Time of supply in case of services:

As per Section 12(4) of the CGST Act,2017, In case of supply of vouchers, by whatever name called, by a supplier , the time of supply shall be –

(i) The date of issue of voucher , if the supply is identifiable at that point; or

(ii) The date of redemption of voucher, in all other cases.

The use of vouchers has increased many folds in recent time and in different forms. They included for instance prepaid telecom cards, gift cards and price discount coupons for the purchase of goods or services. Vouchers can be two types. 1. Single Purpose Vouchers (SPV) and Multi -Purpose Vouchers ( MVP ).

1. Single Purpose Voucher (SPV ) is a voucher carrying a right to receive a specific supply of goods or services , i.e. the supply is identifiable at the time of issue of the voucher. Consequently, time of supply for such voucher shall be date of issue of the voucher. For example, where  an online retailer supplying digital services sells a voucher to a consumer which can only be redeemed for digital services, then that supply is taxed at the time  the voucher is issued as if it were a supply of digital services.

Example:

Single Purpose Voucher: ABC Ltd purchased for its customers 100 vouchers on 20th Dec’2017 worth Rs. 1000 each from P Ltd., a footwear manufacturing company. The vouchers were issued by P Ltd., on 21st Dec’2017.The vouchers can be encashed at retail outlets of ABC Ltd. The employees of XYZ Ltd. Encashed the sae on 1st Jan’2018. Determine time fo supply.

Ans:   In case of supply of vouchers by a supplier, the time of supply  shall be the date of issue of Voucher , If the supply is identifiable at that point. In this case the supply of goods., footwear Identified with the voucher, hence the time of supply shall be the date of issue of such vouchers by P ltd i.e. 21st Dec’17.

2. Multi-Purpose Voucher (MPV ) is any voucher which is not  single – purpose voucher. These vouchers cannot be identified for redemption against a specific goods or services and the person holding such voucher can redeem it against range of goods or services. The time of supply in case of such vouchers shall be the date of redemption.

Example: 1.

Mr. A has purchased an Amazon gift voucher worth Rs.5,000/- on 5th Jan’2018. He has gifted the voucher in the marriage ceremony of Mr. X on 21st Jan’2018. Mr. X encashed the voucher  by making part payment of a Handy Cam which he purchased on 1st Feb’2018 worth Rs.30,000/- . Determine time of supply.

Ans: In this case supply is not identifiable at the time of issue of voucher as the holder of the voucher can redeem such voucher against any product listed on the portal of Amazon. Thus, time of supply in this will be 1st Feb’2018 i.e. date of redemption of voucher.

Exmple:2.

Will the time of supply differ if the voucher itself is not electronically supplied in an online transaction, but takes the form if a physical voucher containing information of the amount of credit available to the user, or an access code on a plastic card that can be used to purchase and download electronically supplied music r games?

Ans: The time of supply in case of voucher will not change whether or not the vouchers are in electronic form or take the form of physical voucher. What matter here is the underlying supply.

Time of supply in other cases:

As per Section 13(5) of the Central Goods and Services Tax Act, 2017 states that: Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or sub-section (4) , the time of supply shall be:

(i) In a case where a periodical return has to be filed, be the date on which such return is to be filed; or

(ii) In any other case, be the date on which the tax is paid.

 Time of supply for addition in value of supply by way of Interest, Late Fee or Penalty:

As per Section 13 (6) of the CGST Act,2017 state that” The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value”.

Example:

Q.M/s. S B Company, A.P a registered supplier supplied certain services to M/s. XYZ company on 6 months credit with a penalty clause of 5% of invoice value for delayed payment. The invoice was dated 1st November. M/s. XYZ company could not make payment on the due date due to unavoidable circumstances. M/s. XYZ Company however made the payment on the invoice value on 5th May’2018. M/s. SB Company raised a debit note for the penalty amount. This however went into dispute which was finally settled with XYZ company to pay half the penalty. The amount was paid on 12th Dec’2018.

Ans: (i)  Time of supply for invoice value: Time of supply will be the invoice date . i.e. 1st Nov’2017,

(ii). Time of supply for penalty: Time of supply will be date of payment i.e. 12th Dec’2018.

Time of supply in case of Change in Rate of Tax: Section 14 of the CGST Act,2017, state that “Notwithstanding anything contained in section 12  or section 13 , the time of supply , in cases where there is a change in the rate of tax in respect of goods and services, shall be determined in the following manner:

Sec.14(a) In case of the goods or services or both have been supplied  before the change in rate of tax ,

(i) Where the invoice for the same has been issued and the payment is also received after the change in rate of tax , the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or

(ii) Where the invoice has been issued prior to change in rate of tax , but the payment is received after the change in rate of tax , the time of supply shall be the date of issue of invoice; or

(iii) Where the payment is received before the change in rate of tax, but the invoice for the same is issued after the change in rate of tax, the time of supply shall be the date of receipt of payment.

(b). In case the goods or services have been supplied after the change in rate of tax:

(i) Where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment, or

(ii) Where the invoice has been issued and the payment is received before the change in rate of tax , the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or

(iii) Where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax , the time of supply shall be the date of issue of invoice.

Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax.

Explanation: For the purpose of this section , “ the date of receipt of payment “ shall be the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

Example-1.

(i) Where the goods or services are supplied before the change in rate of tax:

                                  Condition  Time of Supply Applicable Rate
Where :- Invoice and

:- Payment

Is also received after the change in rate of tax

Earlier of :- Date of receipt of payment, Date of issue of invoice New Rate
Invoice is issued prior to change in rate:

Payment is received after the change in rate of tax.

Date of issue of issue of Invoice  Old Rate
Payment is received prior the change in rate of tax:

Invoice is issued after change in rate.

Date of receipt of payment  Old Rate

(ii) Where the goods or services are supplied after the change in rate of tax:

                                  Condition  Time of Supply Applicable Rate
Payment received after change in rate:

Invoice is issued prior to change in rate

Date of receipt of payment New Rate
Invoice is issued and

Payment is received: Prior to the change in rate of tax

 Earlier of :- Date of receipt of payment, Date of issue of Invoice Old Rate
Invoice is issued after change in rate:

Payment is received before the change in rate of tax.

Date of issue of invoice  New Rate

In order to explain the above provision let us assume that the rate of tax has changed with effect from 1st may ‘2018.

Sec. Ref. Date of supply of goods / services Date of invoice Date of receipt of payment Time of supply as per sec.14
14(a)(i) 15th April’2018 (Before Change ) 10t May’2018 (After Change) 16th May’2018 (After Change) 10th May’2018
14(a)(ii) 15th April’2018 (Before Change ) 25th April’2018 (Before Change) 16th May’2018 (After change) 25th April’2018
14(a)(iii) 15th April’2018 5th May’ 2018 (After Change ) 10th April’2018 (Before Change) 10th April’2018
14(b)(i) 15th May’2018 (After Change ) 25th April’2018 (Before Change) 6th My’2018 (After Change ) 6th May’2018
14(b)(ii) 15th May’2018 (After Change) 25th April’2018 (Before Change) 27th April’2018 (Before Change) 25th April’2018
14(b)(iii) 15th May’2018 (After Change ) 20th May’2018 (After Change) 25th April’2018 (Before Change ) 20th May’2018

It is to be noted here that the “Time of Supply under Section 14 gives relevance to the two out of the three events (i.e. Date of supply of goods / services , Date of Invoice and Date of Payment ) which happens before or after the date of change in rate of tax.

Supply of exempt services shall not make the taxpayer ineligible for Composition Scheme:

Central Government through Order No. 01/2017 –Central Tax has issued The CGS ( Removal of Difficulties ) Order ,2017 dated 13th October 2017 clarifying that if a person supplies goods and /or services referred to in clause (b) of paragraph 6 of Schedule II of the said Act and also supplies ay exempt services including services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount , the said person shall not be ineligible for the composition scheme under section 10 subject to the fulfillment of all other conditions specified therein.

Reverse Charge in case of Supply of specified goods or services:

As per sec.9(3) of the CGST Act,2017, The Government may, on the recommendations of the Council, by notification, specifies categories of supply of goods and services or both  , the tax on which shall be paid on reverse charge  basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

The essential ingredients for levy of tax on reverse charge basis are:

(1) The goods and services on which tax will be collected under reverse charge basis shall be recommended by the GST council formed under the Constitution of India,

(2) Tax shall be payable by the recipient of goods or services,

(3) All the other provisions of this act shall apply to such person s if he is the person liable for paying the tax.

Specified services , tax on supply of which will be paid under Reverse Charge Mechanism:

Central Government through Notification No. 13/2007-Central Tax (Rate) has specified the following services that will be covered under the Reverse Charge Mechanism.

Category                      Service Supplier of service          Recipient of Service
Goods Transport Agency Services Supply of Services by a goods transport agency (GTA ) who has not paid central tax at the rate of 12% in respect of transportation of goods by road Goods transport Agency (GTA) (a) Any factory registered under or government by the Factories Act,1948 or

(b) Any  society registered under the Societies Registration Act,1860 (21 0f 1860) or any other law for the time being in force in any part of India or

(c) Any co-operative society established by or under any law; or

(d) Any person registered under the CGST Act and SGST Act, UTGST Act or;

(e) Anybody corporate established , by or under any law ; or

(f) any partnership firm whether registered or not under any law including association of persons; or

(g) any casual taxable person, located in the taxable territory.

Legal Services Services supplied by an individual advocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly , to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates or by a firm of advocates, by way of legal services, to a business entity An individual advocate  including a senior advocate or firm of advocates. Any business entity located in the taxable territory
Services by Arbitral tribunal Services supplied by an arbitral tribunal An arbitral tribunal Any business entity located in the taxable territory.
Sponsorship services Sponsorship services Any person Anybody corporate or partnership firm located in the taxable territory
Services by Government or Local Authority Services supplied by the Central Government, State Government, Union Territory or Local authority to a business entity excluding,:-

(a) renting of immovable property and

(b) services by the Department of Posts by way of speed post, excluding parcel post, life insurance and agency services provided to a person other than Central Government, State Government or Union Government or Local Authority,

(c) services in relation to an aircraft or a vessel , inside or outside the precincts of a port or an airport

(d) transport of goods or passengers

Central Government, State Government , Union territory or local authority Any business entity located in the taxable territory
Director Services Services supplied by a director of a company or a body corporate to the said company or the body corporate. A Director of a company or a body corporate. The Company or a body corporate located in the taxable territory.
Insurance Agent Services. Services supplied by an insurance agent to any person carrying on insurance business. An insurance Agent. Any person carrying on insurance business, located in the taxable territory.
Recovery Agent Services Services supplied by a recovery agent to a banking company or a finance institution or a non-banking financial company A Recovery Agent A banking company or a financial institution or a non-banking financial company, located in the taxable territory.
Transfer or permitting the use or enjoyment of a copy right Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copy right covered under clause (a) of sub-section (1)  of Section 13 of the cop right Act,1957 relating t original literary, dramatic , musical or artistic works to a publisher, music company, producer or the likes. Author or music composer, photographer, artist, etc., Publisher, music company, producer, or other like , located in the taxable territory.

As per Sec.13 (3) of CGST Act,2017 , states that “In case of supplier in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:-

(1) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank  account, whichever is earlier,

(2) the date of immediately following sixty days from the date of issue of invoice or any other document , by whatever name called , in lieu thereof by the supplier;

Provided that where it is not possible to determine the time of supply under clause (1) or clause (2) , the tie of supply shall be the date of entry in the books of account of the recipient of supply;

Provided  further that in case of supply by “associated enterprises” where the supplier of service is located outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply or the date of payment whichever is earlier.

It is noted that date of “ recipient of service “is not relevant for the purpose of determining the time of supply of services under reverse charge basis. Further 60 days from the date of invoice has been granted in case of supply of services unlike goods where only 30 days from the date of invoice granted to determined time of supply.

Example:

Time of supply of Services in case of Reverse Charge:

Determine time of supply in each of the following independent situation where tax is payable under Reverse Charge :

Case Date of receipt of service Date of Invoice Date of Payment
Case A 12th Dec’2017 15th Dec’2017 15th Dec’2017
Case B 12th Dec’2017 15th Dec’2017 10th Jan’2017
Case C 12th Dec’2017 15th Dec’2017 20th Feb’2017

Case Date of receipt of service Date of Invoice 60 days from date of Invoice Date of Payment Time of Supply         Reason
Case-A 12th Dec’ 2017 15th Dec’ 2017 13th Feb’2017 15th Dec’2017 15th Dec’2017 Time of supply will be earlier of the following:-

1. Date of making payment-15th Dec’ 2017,

2. 60 days from date of invoice-13th Feb’ 2017

Time of supply: 15th Dec’ 2017

Case-B 12th Dec’ 2017 15th Dec’ 2017 13th Feb’ 2018 10th Jan’ 2018 10th Jan’ 2018 Time of supply will be earlier of the following :-

1. Date of making payment -10th Jan’ 2018

2. 60 days from the date of invoice-13th Feb’ 2018.

Time of supply 10th Jan’18

Case-C 12th Dec’ 2017 15th Dec’ 2017 13th Feb’ 2018 20th Feb’ 2018 13th Feb’ 2018 Time of supply will be earlier of the following:-

1. Date of making payment-20th Feb’ 2018

2. 60 days from date of invoice-13th Feb’2018,

Time of supply-13th Feb 2018.

Determination of Place of Supply of Services where location of supplier and recipient of service is in India :Sec.12 of IGST Act,2017, deals with the identification of place of supply of services where the location of supplier of service and the location of the recipient of service is in India. In case either the location of supplier of services or the location of the recipient of services is outside India. i.e. Import or Export of services, the place of supply shall be determined as per the Sec.13.

Section 12 of IGST Act,2017, defines the place of supply f services in the following manner:-

(i) General Principle: As per Section 12 (2) of IGST Act, 2017,Where supply is made to registered person or any other person,

(ii) Specific Situations:  As per Section 12(3) to 12(14).

A. As per section 12(2)(a) of IGST Act, 2017,”General Principle where supply is made to registered person “. As a general principle if the supply is made to a registered person then the place of supply shall be the location of such person.

Example: 1.

(a) A Ltd, based in A.P provides certain services to B Ltd based in Maharashtra who is registered under GST Law in such case the place of supply will be Maharashtra.

(b) In the above case if B Ltd is not required to get himself registered under the provisions of GST Law, however it chooses to get himself registered voluntary. In such situation also the place of supply will be the locations of recipient of supply. i. e. Maharashtra.

B. As per section 12(2)(b) of IGST Act,2017,”General Principle where supply is made to a person other than a registered person.

Where the supply of service is made to a person other than a registered person , the place of supply shall be:-

(i) The location of the recipient where the address on record exits, and

(ii) The location of the supplier of services in other cases.

Addresses on record means the addresses of the recipient as available in the records of the supplier.

Example.2.

(a) A Ltd, based in Vijayawada provides certain services to Y Ltd, based in Orissa who is not required to het registered under the GST Law. The place of supply in such situation will be Orissa.

(b) B Ltd, based in Telangana provides certain services to X Ltd, who is not required to get registered under GST Law. The place of supply in such situation will be Telangana as the address of the recipient does not exist on record.

C. Specific Situations:

1. As per Section 12 (3) of IGST Act,2017, Supply of services in relation to Immovable Property or Boat or Vessels.

Following services are covered under this:

1) Services provided by architects, interior decorators, surveyors, engineers and other related experts or estates agents directly in relation to immovable property.

2) Services provided by way of grant of rights to use immovable property or for carrying out co-ordination of construction work.

3) Lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called and including a house boat or any other vessel,

4) By way of accommodation in any immovable property for organizing nay marriage, reception , etc.,

5) Any services ancillary to the above.

The place of supply in above cases shall be the location of immovable property or boat or vessel.

However, if the immovable property or board or vessel for which services are provided is located outside India or is intended to be located outside India in such case the place of supply shall be the location of recipient.

Further , if the immovable property or board or vessel is located in more than one state then the supply shall be treated as made to each state in proportion to the value of services collected or determined.

Examples.3.

(1) X Ltd . have multiple hotels in different states and provides hotel accommodation services from each of such hotels. Thus , place of supply of services in each such case will be the place where the hotel is located. This means that place of supply for hotel located in Tamil Nadu will be Tamil Nadu.

(2) In the above case if X Ltd .hires an expert to determine the standard room rent for each f its hotel located in Kolkata, Mumbai and Chennai. The expert will charge Rs.1,50,000/-. The place of supply in this case will be Kolkata, Mumbai and Chennai and the value of services will be Rs.50,000/- each.

(3) Y Ltd. Based in Chennai plans to open a hotel in Dubai and appoints an architect from Chennai to develop a design. The place of supply for the services provided by the architect will be Chennai.

(4) X Ltd. Based in Mumbai hired Y ltd. to organize an official function in Dubai for all its Finance Executives. The place of supply in this case will be Mumbai.

(5) X ltd , invest in properties across the country with an aim to let out for commercial purpose. It has entered into a lease agreement for letting out its property in West Bengal to a company which is registered in Maharashtra. In this case place of supply will be West Bengal and location of supplier of service will be Chennai.

(6) X Ltd, of Jodhpur entered into a lease agreement with Mr. Y of Jaipur whereby he leased out his shop in Nagpur to Mr. Y. In this case although the supplier and recipient of service is in Rajasthan the place of supply shall be location of shop. i.e .Nagapur.

(7) A. an executive of XYZ Ltd., goes on a site visit to Noida (Uttar Pradesh).  In view of the close proximity with airport, he chooses to stay in a hotel situated in New Delhi. The place of supply of services by Hotel will be New Delhi.

2.Section .12(4) of IGST Act,2017,Restaurant and Catering Services, Personal Grooming, Fitness etc:

Section .12(4) of IGST Act,2017, states that the following services are covered:

(1) Restaurant and Catering Services,

(2) Personal Grooming,

(3) Fitness,

(4) Beauty  Treatment,

(5) Health Services ( including cosmetic and plastic surgery),

In the above cases the place of supply will be the place where the service is actually performed.

Example .VII.

1. Y is a freelancer and provides personal grooming services to different people across the country. The place of supply in such case will be the state in which service is provided.

2. A operates out of Patna and provides catering services in various parties and marriage ceremony. Mr. B, resident of Patna , has appointed Mr. A to provide catering services in its destination wedding organized at Puri, Odisha. In this case place of supply will be Puri although the both Mr. A and Mr. B are from Patna.

3. Section 12(5) of IGST Act,2017, Training and Performance Appraisal services: This provision covers “ training and performance appraisal services. If the aforesaid services are provided to registered person, place of supply will be the location of such person i.e. Location of registered person.

In any other case the place of supply hall be the location where the services are actually performed.

Example. VIII.

Mr. D is a freelancer and provides training to corporates across the country. He provides training on GST readiness to XYZ Ltd, place of business in Kolkata. However, the training sessions were conducted in Chennai. In this case although the training sessions were conducted in Chennai the pace of supply will be Kolkata ( Assuming XYZ Ltd is a registered person). However, if XYZ Ltd. is not registered the place of supply will be Chennai.

4. Section 12(6) of IGST Act,2017, Services for admission to even: The following services are covered under this:

(i) Services for admission to a culture, artistic, sporting, scientific, educational or entertainment event or amusement park or any other place and

(ii) service ancillary thereto.

Place of supply in relation to the above shall be the place where the event is actually held or where the park or such other place is located.

Example. IX.

a. B ltd, based on Chennai operates an amusement park in Maharashtra. It provides services by way of admission to the said park. In such case the place of supply will be Maharashtra.

b. D of Kolkata , booked  an online Tiger safari at the Ranthambor National Park, Rajasthan and hired a jeep to be taken around for the safari. Determine the place of supply of services. In this case there are two services, admission to National Park and hiring of jeep. The place of supply in both these cases will be Rajasthan as the park is situated in Rajasthan.

5. Section 12(7) of IGST Act,2017, Services for organizing an even: The flowing services are covered under this clause:-

i) Organizing of a cultural, artistic, sporting, scientific , educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebrations or similar events,

ii) Services ancillary to organization of any of the above events or services,

iii) Assigning of sponsorship of any of the above events.

If the aforesaid services are provided to a registered person, place of supply will be the location of such person. i.e. Location of registered person.

In any other case the place of supply shall be the location where the event is held. However, if the event is held outside India the place of supply shall be the location of recipient.

Example. X.

(i) C ltd. based in West Bengal is an event management company and organizes conferences/event/programs across the country. ABC Ltd, is based in Karnataka hires C ltd to organize conference in Jaipur. If ABC Ltd, is a registered person then place of supply will be Karnataka irrespective of the fact that the conference was organized in Jaipur. However, if ABC ltd, is not registered, place of supply will be Jaipur ( Rajasthan).

(ii) In the above case if ABC Ltd. ask C Ltd.to organize an event in Singapore for all its employee, in such case the place of supply will be Karnataka.

6. As per Section 12(8) of IGST Act,2017, Services for Transportation of Goods: This covers services for transportation of goods including by mail or courier. If the aforesaid services are provided to a registered person, place of supply will be the location of such person i.e. Location of registered person. In any other case the place of supply shall be the location at which such goods are handed over for their transportation.

Example. XI.

S Ltd. is a transportation company and provide services for transportation of goods from one place to another . S Ltd. provide service to A Ltd. based in Chennai, Tamil Nadu for transportation certain materials from Uttar Pradesh to West Bengal. If A Ltd. is a registered person, place of supply will be Tamil Nadu and if he is not registered place of supply will be Uttar Pradesh.

7. Section 12(9) of IGST Act,2017 Passenger transport Services: This covers services for transportation of passenger. The place of supply in this case will be :-

(i). If the services is provided to a registered person it shall be the location of such person,

(ii). If the services is provided to a person other than the registered person, place of supply shall be the place where the person embarks on the conveyance for a continuous journey.

However, if the right to passage is given for future use and the point of embarkation is not known at the time of issue of right, place of the supply shall be:-

(1) If the supply is made to a registered person then the place of supply shall be the location of such person.

(2) Where the supply of service is made to a person other than registered person, the place of supply shall be:-

> The location of the recipient where the addresses on record exists, and

> The location of the supplier of services in other cases.

> Return journey shall be treated as a separate journey even if the right is issued along with the onward journey.

Examples. XII.

(i) A Ltd. based in Gujarat has fleet of business and provides passenger transportation services. XYZ Ltd. based in Mumbai hires A Ltd. for transfer of its office employees through its buses to Goa and bring back after 3 days. If XYZ Ltd is a registered person, the place of supply will be Mumbai ( Maharashtra).

(ii) In the above example ,If A ltd, runs a weekly bus from Mumbai  to Goa and issues tickets to various people (not a registered person), the place of supply will be Mumbai , Maharashtra as the passengers will embark on the journey from Mumbai.

(iii) In the above example , If A Ltd, runs a weekly bus from Mumbai to Goa and during a festive season, issues right to use the said service to anytime during the next 1 year to some of its frequent customers . If the said right is issued to unregistered persons and A ltd has kept address on record of such customer, place of  supply will be location as per address of record.

(iv) In the above example, if A ltd , runs a weekly bus from Mumbai to Goa and issues tickets to various people ( not a registered person), some of the people also purchases return tickets i.e. from Mumbai to Goa will be Mumbai and from Goa to Mumbai. In such situation the place of supply for Mumbai to Goa will be Mumbai and from Goa to Mumbai will be Goa even if the ticket was purchased in Mumbai.

8. As per Section,12(10) of IGST Act,2017: It covers the supply of services on board a conveyance such as vessel, aircraft, train or motor vehicle. The place of supply in such case will be the first schedule point of departure of that conveyance for the journey. This rule intends to cover the services like movie, music, video, software games, etc., provided on board against a specific charge which is not supplied as part of the fare.

Example. XIII.

A video game or movie on demand is provided as on-board entertainment curing the course of Hyderabad to Delhi Flight. The place of provision of service will be Hyderabad. However, of the flight is ultimately bound to Switzerland. (Out Side India), then it is not liable to GST.

9. As per Section 12(11) of IGST Act, 2017, Telecommunication Services:  It covers the supply of following services.

(i) Telecommunication Services,

(ii) Data Transfer,

(iii)Broadcasting,

(iv)Cable,

(v)Direct to home transfer (DTH),

The place of supply in this case will be:-

Service is provided by way of fixed telecommunication line, leased circuits, internet leased circuit , cable or dash antenna. Place where the telecommunication line, leased circuit or cable connection or dish antenna is installed.
Mobile connection for telecommunication and internet services provided on post-paid basis Location of billing address of the recipient of services on record of the supplier.
Where mobile connection for telecommunication, internet service and direct  to home television services are provided on prepayment through a voucher or any other means. 1.Through selling agent or a reseller or a distributor of SIM card or re-charge voucher, shall be address of the selling agent or re-seller or distributor as per the record of the supplier at the time of supply, or

2. By any person to the final subscriber shall be the location where such pre-payment is received or such vouchers are sold.

Any other case Address of the recipient as per records of the supplier.

However, if the address of the recipient is not available, the place of supply will be the location of supplier. Further, if the pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment, the location of the recipient of services on record of the supplier of services shall be the place of supply of such service.

10. As per Section 12(12) of IGST Act,2017,Banking and other Financial Services including Stock Broking Services: It covers the supply of following services:-

I). Financial Services,

ii). Baking Services,

iii). Stock Broking Services.

The place of supply will be location of recipient of the services on records of the supplies of services. If the Location is not on records it shall be the location of supplier.

Examples. XIV.

(i) If person in Andhra Pradesh buys shares from a broker in Delhi on NSE (in Maharashtra) . The place of supply shall be the location of the recipient of services on the records of the supplier of services. So, Andhra Pradesh shall be the place of supply.

(ii) If a person from Rajasthan goes to West Bengal and undertakes certain services from HDFC Bank then if the service is not linked to the account of person , place of supply shall be West Bengal , i.e. the Location of the supplier of services . However if the service is linked to the account of the account , the place of supply shall be Rajasthan, the location of recipient on the records of the supplier.

11. As per Section .12(13) of IGST Act,2017, Insurance Services: It covers the supply of Insurance service.  If the afore said services are provided to a registered person, place of supply will be the location of such person, i.e. Location of registered person. In any other case the place of supply shall be the location of recipient of services on the records of the supplier of services.

Example. XV.

If a person from Bihar takes a flight from Kolkata airport for Mumbai and takes travel insurance from Kolkata. Then the place of supply will be Bihar. i.e. the location of the recipient of services on records of the supplier of insurance services.

Section.13 of IGST Act 2017, Place of supply of services where the Location of supplier or the Location of recipient of services is outside India: Section 13 deals with the identification of place of supply of services where the location of supplier of service or the location of the recipient of service is outside India. The provision aims to identify the import and export of services.

Meaning of the term Import of Services:  The term “ Import of Services “ is defined under Section 2(11) of IGST Act,2017. It reads as:-

Import of service means the supply of any service, where:

(i) The supplier of service is located outside India,

(ii) The recipient of service is located in India, and

(iii) The place of supply of service is in India.

Meaning of the term “ Export of Service” : The term “ Export of Services” means the supply of any service when:

(i) The supplier of service is located in India,

(ii) The recipient of service is located outside India,

(iii) The place of supply of services is outside India,

(iv) The payment for such service has been received by the supplier of service in convertible foreign exchange and

(v) The supplier of service and recipient of service are not merely establishments of a distinct person in accordance with explanation 1 in section .8.

Section defines the place of supply of services in the following manner:

(A) General Principle as per section 13(2) of IGST Act,2017,

(B) Specific Situations as per section 13(3) to 13 (13) of IGST Act, 2017.

(A). General Principle: In general the place of supply of services shall be the location of the recipient of service. However, if the location of the recipient of service is not available in the ordinary course of business, the place of supply shall be the location of the supplier of service.

(B). Specific Situation:

1. As per Sec.13 ((3) (a) of CGST Act,2017, Services supplied in respect of goods that are required to be made physically available by the recipient . This aims to cover those situations where the services are performed by the supplier of services on the goods that are made available by the recipient of services or any person acting on his behalf .In such situation the place where the services are performed shall be the place of supply. However, if the services are performed from a remote location through electronics means, the place of supply shall be the place where the goods were situated.

This provision does not cover situations where the goods are imported temporarily into India for repair and are exported after repairs.

Where the service is provided in more than one location, including a location in taxable territory its place of supply shall be the location in the taxable territory (Sec.13 (6) of IGST Act,2017).

Example: XVI.

Mr. X .Ltd based out of Switzerland hires a service provider in India (BCD Ltd) to perform quality check on all its goods to India (Mumbai) after clearance from the custom authorities. The goods will be supplied by its custom clearing agent (C Ltd) to perform quality check. In this case, place of supply for services provided by both BCD Ltd, and C Ltd to X LTD will be Chennai.

2. As per sec.13(3) (b) of CGST Act,2017,Services  supplied to an individual which require physical presence: It covers situation where the services supplied to an individual, represented either as the recipient of service or a person acting on behalf of the recipient, which require the physical presence of the receiver or the person acting on behalf of the recipient, with the supplier for the supply of the service. Where the service is provided in more than one location, including a location in taxable territory its place of supply shall be the location in the taxable territory (Sec.13(6) of IGST Act,2017.

3. As per Sec.13(4) of IGST Act, ”Supply of service in relation to Immovable Property”:

The place of supply in the following cases will be the place of supply where the immovable property is located or is intended to be located:-

(i) Services supplied directly in relation to an immovable property , including services supplied in this regard by experts and estate agents,

(ii) Supply of hotel accommodation by a hotel, inn, guest house, club or camp site,

(iii) Grant of rights to use immovable property,

(iv) Services for carrying out or co-ordination of construction work, including architects or interior decorators.

Where the service is not provided in more than one location , including a location in taxable territory its place of supply shall be the location in the taxable territory as per section 13(6).

Examples. XVII.

A. B Ltd.  is a famous interior decorator from Mumbai who provides services across the world. Mr. P of Dubai hires B.Ltd for interior decoration of his hotel in Bangkok. The place of supply of service in this case will be Bangkok.

B. C is a Non Resident Indian (NRI) and has several properties in different parts of the country. He has appointed Mr. S to give the properties on lease on his behalf and also collect rent from the said properties. In this case, place of supply will be the location of such immovable properties.

4. As per section 13 (5) of IGST Act,2017 , “Services by way of admission to events”: The place of supply services by way of admission o , or organization of , a cultural, artistic, sporting, scientific, educational , or entertainment event, or a celebration, conference, fair, exhibition, or similar events, and of services ancillary to such admission, shall be the place where such event is actually held.

Where the service is provided in more than one location, including location in taxable territory its place of supply shall be the location in the taxable territory as per section 3(6).

Example. XVIII.

XYZ Ltd is of United states is organizing a World Dance Championship for which they have to identify the best dance teams from different countries. They have appointed B Ltd for  organizing the events  in all four metro cities of India to identify the dance troops which can represent India at World Dance Championship finals to be held in Dubai. The place of supply for service in this case will be each such metro cities.

5. As per Sec.13(8) of IGST Act,2017,Cases where place of supply is location of supplier of services:

i) Non-banking financial company, to account holders,

ii) Intermediary services.

iii) Services consisting of hiring of means of transport including yachts but excluding aircraft and vessels, up to one month.

As per Section 2(13) of IGST Act,2017, Meaning of Intermediary, “ Intermediary “means a broker an agent or any other person, by whatever  name called , who arranges or facilities he supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own.

6. Supply of services for transportation:

(A).  Section 13(9)of IGST Act,2017: Transportation of supply of goods, other than mail or courier : The place of supply of services shall be the place of destination of goods.

(B). Section.13(10) of IGST Act 2017: Passenger transportation : Place of supply shall be the place where the passenger embarks on the conveyance for a continuous journey.

As per Sec.2(3) of IGST Act,2017, Continuous Journey means:-

> A journey for which a single or more than one ticket or invoice is issued at the same time,

> Either by a single supplier of services or through an agent acting on behalf of more than one supplier of service , and

> Which involves no stopover between any of the legs of the journey for which one or more separate tickets or invoices are issued.

> Explanation:- the term “stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time.

7. As per Section 13(11) of IGST Act,2017, Services provided on board a conveyance:  Place of supply of services provided on board a conveyance during the curse of a passenger transport operation , including services intended to be wholly or substantially consumed while on board , shall be the first schedule point of departure of that conveyance for the journey.

8. As Section 13(12) of IGST Act,2017, Services for online information and database access or retrieval service:

The place of supply of service in this case shall be the location of recipient of services. For this purposes of this section , person receiving such services shall be deemed to be located in the taxable territory if any two of the following non-contradictory conditions are satisfied, namely:

(a) The location of address presented by the recipient of service via internet is in taxable territory,

(b) The credit card or debit card or store value card or charge card or smart card or any other card by which the recipient of service settles payment has been issued in the taxable territory,

(c) The bill addresses of recipient of service in which the account used for payment is maintained is in the taxable territory,

(d) The internet  protocol address of the device used by the recipient of service is in the taxable territory,

(e) The bank of recipient of service in which the  account used for payment is maintained is in the taxable territory,

(f) The country code of the subscriber identity module (SIM) card used by the recipient is in the taxable territory,

(g) The location of the fixed land line through which the services is received by the recipient is in taxable territory,

Meaning of Online information and database access or retrieval services : As per section 2(17) of IGST Act,2017, “ Online information and database access or retrieval services “ means services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology and includes electronic services such as;

1) Advertising on the internet,

2) Providing cloud services,

3) Provisions of e-books, movie, music, software and other intangibles via telecommunication networks or internet,

4) Providing data or information  retrieval or otherwise  to any person, in electronic form through a computer network,

5) Online supplies of digital content (movies, television shows, music etc.,),

6) Digital data storage, and

7) Online gaming.

9. Section 13(13) of IGST Act,2017, Power of Central Government: In order to prevent double taxation or non-taxation of the supply of a service , or for the uniform application of rules, the Government shall have power  to notify any description of service or circumstances in which place of supply shall be  the place of effective use and enjoyment of a service.

6. Section 14 of IGST Act,2017,Special provision for payment of tax by a supplier of online information and data base access or retrieval services:

1. Applicability: This provision applies on:

> Supply of online information and database  access or retrieval services,

> By any person located in a non-taxable territory and

> Received by a non-taxable online recipient.

2. Payment of Tax: In this case the supplier of services located in a non-taxable territory shall be the person liable for paying integrated tax on such supply of services.

3. Intermediary deemed to be recipient of services:  An intermediary located in the non-taxable territory , who arranges  or facilities the supply of such services, shall be deemed to the recipient of such services from the supplier of services in non-taxable territory and supplying such services to the non-taxable online recipient except when intermediary satisfies the following conditions, namely:-

(a) The invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory,

(b) The intermediary involved in the supply does not authorize the charge to the customer or take part in its charge which is that the intermediary neither collects or processes payment in any manner not is responsible for the payment between the non-taxable online recipient and the supplier of such services,

(c) The intermediary involved in the supply does not authorize delivery , and

(d) The general terms and conditions of the supplier are not set by the intermediary involved in the supply but by the supplier of services.

4. Simplified Registration:  The supplier of online information and database access or retrieval services shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government.

5. Evaluation of services whether or not OIDAR Service:

                           SERVICE WHETHER PROVISION OF SERVICE MEDIATED BY INFORMATION TECHNOLOGY OVER THE INTERNET R AN ELECTRONIC NETWORK WHETHER IT IS AUTOMATED AND IMPOSSIBLE TO ENSURE IN THE ABSENCE OF INFORMATION TECHNOLOGY OIDAR SERVICE

( YES OR NO)

Pdf document manually emailed by provider        YES          NO        NO
Pdf document automatically emailed by providers system        YES          NO        NO
PDF document automatically downloaded from site        YES          YES        YES
Stock photographs available for automatic download        YES           YES        YES
Online course consisting of pre-recorded videos and downloadable        YES           YES        YES
Online course consisting of pre-recorded videos and downloadable pdf  plus support from a live tutor         Yes            NO         NO
Individual commissioned content sent Indigitaal form like photographs, reports, etc.,           YES            NO         NO

Example .XIX.

List of OIDAR Services:

Website supply, web hosting, distance maintenance of programs and equipments. a. Website and webpage hosting,

b. Automated, online and distance maintenance of programs,

c. Remote systems administration,

d. Online data warehousing where specific data is stored and retrieved electronically,

e. Online supply of on demand disc space.

Supply of software and updating thereof a. Accessing or downloading software (including procurement/ accountancy programs and anti-virus software) plus updates,

b. Software to block banner adverts showing, otherwise known as banner blockers,

c. Download drivers, such as software that interfaces computers with peripheral equipment (such as printers),

d. Online automated installation of filters on websites,

e. Online automated installation of firewalls.

Supply of images, text and information and making available of database a. Accessing or downloading desktop themes,

b. Accessing or downloading photographic or pictorial images or screensaver,

c. The digitized content of books and other electronic publications,

d. Subscription to online newspaper and journals,

e. Weblogs and website statistics,

f. Online news, traffic information and weather reports,

g. Online information generated automatically by software from specific data (in particular such data as continually updated stock market, in real time),

h. The provision of advertising space including banner ads on a website/web page,

i. Use of search engines and internet directories.

Supply of music , films, and games including games of chance  and gambling games and of political, cultural, artistic , sporting, scientific and entertainment broadcasts and events. a. Accessing or downloading of music on to computers and mobile phones,

b. Accessing or downloading of jingles, excerpts, ringtones, or other sounds,

c. Accessing r downloading of films,

d. Downloading of games on to computers and mobile phones,

e. Accessing automated online games which are dependent on the internet or other similar electronic networks, where players are geographically remote from one another.

Supply of distance teaching a. Automated distance teaching dependent on the internet or similar electronic networks to function and the supply of which requires limited or no human interventions, including virtual classrooms except where the internet or similar electronic networks is used as a tool simply for communication between the teacher and the student,

b. Workbook completed by pupils online and marked automatically without human interventions.

Further, if due to some reason it is not possible to determine the time of supply based on the above principle then time of supply shall be determined based on the date of entry in the books of account of the recipient of supply.

As the above provision does not take into consideration the date of recipient of service, it leaves the scope of tax planning specially in case of related enterprises wherein the time of supply can be deferred, even if the services is already provided.

Service provided by a “ Foreman” under Chit Fund Act Act,1982, treated as Supply of services under ‘Financial Services “  is liable to pay GST Tax  under GST Act:

So, We have to discussed the following definitions before come to the conclusion for pay GST on Foreman commission.

The meaning of “ CHIT “ is  a transaction whether  chit, chit fund, chitty, kuri or by whatever name by or under which person enters into an agreement with a specified number of persons  that every one of them shall subscribe a certain sun of money by way of periodically installments over a define period and that each subscriber shall,

in is turn as determined by lot or by auction or by tender r in such other manner as may be specified in the chit agreement, entitled o a prize amount. Chit Fund Act,1982, regulated and control activities of the chit fund companies.

The below obligations are of Foreman as per CHIT FUND Act,1982.

(i) The Chit Fund Act, in pith an substance deals with special contract and consequently falls within entry 7 of list III of the 7 schedule of the Constitution of India,

(ii) A chit fund transaction is not a case of borrowing, not is it a loan transaction. If a subscriber advances any amount, he does so only to one of the members,

(iii) The funds of the chit fund belong to the entire lot of subscribers.

(vi) The amounts are in deposit which the stakeholder only holds a trust for the benefit of the members of the fund.

(v) The foremen acts only as a person to bring together the subscriber and he is subject to certain obligations with a view to protecting the subscriber from any mischief r fraud committed by him by using the position.

(vi) Commission is payable to the foremen for the services rendered by him as he does not lend money belonging to him.

So, as per notification no.11/2017-CT (rates) and notification no. 8/2017-IT (Rates) dated 28.6.2017 , from 01.07.2017 onwards foreman’s commission is liable to pay GST Tax @ 18% under IGST Act,2017 or @9% under CGST Act and 9% under SGST Act,2017.

“Transfer”  whether  supply of Goods or supply of services:
As per Section 7 read with Schedule II of Central Goods and Services tax Act,2017:-

(a) Any transfer of the title in goods is a supply of goods,

(b) Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services,

(c) Any transfer of title in goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, is a supply of goods.

Thus, if the title in goods is transferred it will treated as Supply of Goods whereas id only right to use the asset is transferred without transfer of title it shall be treated as supply of services. Hence, Operating Lease will be regarded as a Supply of service.

Leasing of Renting of Land and Building is Supply of Services:

As per section 7 read with Schedule II of CGST Act,2017, states that ;

(i) Any lease , tenancy, easement, license  to occupy land is a supply of services,

(ii) Any lease or letting out of the building including a commercial, industrial or residential complex for business, either wholly or partly, is a supply of services.

Renting of any other immovable property (apart from Landing and Building) is covered under Para 5(a) of Schedule II of CGST Act,2017.

Intellectual Property Related services to be treated as supply of services:

As per Para 5(c ) of Schedule II of the CGST Act,2017 states that following shall be treated as supply of service. Temporary transfer or permitting the use or enjoyment of any intellectual property right.

Brand Licensing Agreement:

In brand Licensing agreement the brand owner merely provides permission to use the brand name, property, risk and reward of product manufactured rest with the manufacturer/licensee and not with the brand owner. Hence, brand owner is providing intellectual property services and brand owner will be liable to pay GST Tax under GST Law.

Design, Programming, Customization, etc., of Information technology Software Service to be treated as supply of services:

As per Para 5(d) of Schedule II of CGST Act,2017 states that following shall be treated as supply of services i.e. development, design, programming, customization, adaptation, upgradation, enhancement of, implementation of information technology software. Thus, if any customization or upgradation is done on any software it will be treated as supply of Services.

For example: If SAP India is engaged to upgrade the version of SAP in a company or migrate to a higher platform it will treated as supply of services.

Refrain from an Act or to tolerate an Act to be treated as supply of services:

As peer Para 5(e) of Schedule II of CGST Act,2017 states that following shall be treated as supply of service. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do n act .

Example:

(i) Demurrage Charges,

(ii) Cancellation charges charged by Hotels, Airlines etc.,

(iii) Late Delivery Charges,

(iv) Non- Compete Fees.

Financing Lease:

As per Para 5(f ) of Schedule II of CGST Act,2017, states that following shall be treated as supply of service:

> Transfer of the right to use any goods for any purpose (whether or not for a specified period) for, cash, deferred payment or other valuable consideration.

> This would financial lease, i.e. lease with long term agreement covering the entire economic life of the asset. However, in my view financial lease where the contract stipulates that the goods will pass at a future date upon payment of full consideration should be treated as supply of goods under Para 1 (C) of Schedule II.

> Hire purchase agreement will also get covered under Para 5(g) and will be treated as supply of service.

Services provided to its members by Housing Societies or Residential Welfare Association :

As per GST Law, Any housing society or Residential Welfare Associations collected by way of reimbursement of charges or share of contribution of the member exceed  Rs.5,000/- from its own members and even the organization aggregate turnover ( total subscription received from their members per annum) below Rs.20 lakhs are liable to pay GST on such receipts.

If monthly subscription collected below Rs.5,000/- from each member and aggregate turnover is more than Rs.20 Lakhs GST is not applicable on such receipts.

Further the Housing Societies collecting fee as services charges for way of sinking fund, repairs and maintenance fund, car parking charges  non-occupancy charges or interest for late payment of taxes will be attract GST Tax. If such charges cumulatively exceed Rs.20 lakhs per annum , tax is payable even if monthly contribution per member is less than Rs.5,000/-.

Author – B.S.Seethapathi Rao, Chairman, AIFTP(Southern Zone), BSR Associates, Tax Consultants, Kakinada

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2 Comments

  1. RAJIV NIGAM says:

    Sir Thanks for sharing very exhaustive knowledge. Just clarify, House keeping services are being given at RMAX Noida mall by Facility company (sub-contractor) situated at Noida. But contract to company is given by Delhi based company who is Principal Contractor of RMAX Noida. Now Principal is saying to Noida Company to bill at Delhi address by IGST while services are being given at immovable property at Noida, but Principal Contractor has no office at Noida.
    Sir, language of IGST section 12(3)(a) starts “Directly in relation to immovable property, including ……….” so House keeping services are tantamount to services at Immovable property and covers u/s 12(3)(a).
    Suggest billing type IGST or CGST B2C.

    1. B S SEETHAPATHIRAO says:

      Sir, In my opinion Housekeeping services general immovable property. Noida is a separate State or UT, I have no idea.Pl check. Regarding your query any supply of services to immovable property attract CGST and SGST B2C.

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