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

QUESTION 1

Janya : The applicant is engaged in IT training programmes to Government aided Secondary and Higher Secondary Schools across the State of Delhi to implement the training projects for Government-aided Schools. Whether the applicant is liable to pay GST?

Tanishi

Applicable Section :

Notification No 12/2017 dated 28th June 2017 Entry No 72

Entry No 72 Heading 9992

Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration.

Rate Nil ————–Condition Nil

Interpretation

It will depend on the terms of the Contract read with “who makes the payment.” If the conditions of Notification No. 12/2017 of 29.6.17 (Entry 72) are strictly complied with, GST shall be Nil. You have to keep in mind that Entry 72 gives exemption for “Services”

QUESTION 2

Janya : If in the above question no 1, there is supply of goods and construction of infrastructure along with services for IT program, then also Gst would be exempt as per above interpretation.

Tanishi

Applicable Section :

Notification No 12/2017 dated 28th June 2017 Entry No 72

Interpretation :

You have to keep in mind that Entry 72 gives exemption for “Services” and not for composite supplies. In your question, you have framed a Contract based on Build-Own-Operate-Transfer (BOOT) and such Contracts, as per my understanding, include supply of goods, construction of infrastructure and services. Legally such Contracts cannot mean that they provide only services without any supply of goods. Therefore, if there is a composite supply, then, it is not covered by the above Notification and must pay GST and there is no escape to it.

QUESTION 3

Janya: We are engaged in road construction. Please advise us on input tax credit for construction of roads including O&M services

Tanishi

Applicable Section

Sec 17(5)(c) and (d) of CGST act

 

 

(c)

Works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;  

 

 

The term “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Further the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes— (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises

 

 

(d)

Goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.  

 

 

Section 16 allows every registered person subject to other provisions to claim full ITC for all the goods or services or both used by him or intended to be used by him in the course of furtherance of his business. Section 17 gives a complete list of activities where the registered person is not entitled to ITC.

Interpretation :

The interpretation of section 17(5)(c) or (d) is that section 17 does not restrict the ITC if the applicant is a supplier of works contract services for construction of an immoveable property and goods & services received by the applicant for such construction are not owned or capitalized by them. Therefore, in my view, full input tax credit is available and there is no doubt about it. Similarly, for all the goods received by you for repairs etc. should form part of the package and ITC should be available to you.

QUESTION 4

Janya : In case of supply of lime stone @ Rs.450 per tonne, Gst @ 5% is applicable. Now, transportation for the same is Rs.1000 per tonne, whether Gst is applicable at 12/18%; the principal supply is of limestone.

Tanishi

Applicable Section

HSN Code Description Rate (%)
2521 Limestone flux; limestone and other calcareous stone, of a kind used for the manufacture of lime or cement. 5
2522 Quicklime, slaked lime and hydraulic lime, other than calcium oxide and hydroxide of heading 2825. 5

Goods are packed and transported with insurance. The supply of goods, packing materials, transport and insurance is a composite supply. Insurance, transport cannot be done separately if there are no goods to supply. Thus, the supply of goods is the principal supply.

Tax liability will be the tax on the principal supply i.e., GST rate on the goods.

If the second condition is not fulfilled, it is a mixed supply

Interpretation :

The price of transportation being higher than the price of principal supply of goods does not change or alter the principal supply of goods. Without the limestone supply, there is no meaning or importance of a separate transportation, which is useless. The Gst rate as applicable on the supply of limestone shall be the applicable Gst rate.

QUESTION 5

Janya : Whether warehouse structure constructed with pre-fabricated walls or technology will qualify for input tax credit

Tanishi

Applicable Section :

Section 17(5) (c)/ (d)

 

 

(c)

Works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;  

 

 

The term “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;

Further the expression “plant and machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes— (i) land, building or any other civil structures; (ii) telecommunication towers; and (iii) pipelines laid outside the factory premises

 

 

(d)

Goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.  

 

 

Interpretation :

You are constructing a warehouse that is intended to be used as a permanent structure, and associated with beneficial enjoyment of the land on which it is being built. The technology used for the construction of the warehouse involves the application of pre-fabricated structures and also civil work for supporting the pre-fabricated structure and developing the floor of the warehouse. The warehouse cannot be conceived without beneficial enjoyment of the civil structure embedded on earth. The warehouse being constructed is, therefore, an immovable property, and the input tax credit is not admissible on the inward supplies for its construction, as the credit of such tax is blocked under section 17(5) (d) of the GST Act.

QUESTION 6

Janya : What is the GST implication for latest roof top solar power plants installation Including designing, engineering and installation? Whether this is a composite supply

Tanishi

Applicable Section :

Notification No 24/2018 dated 31st December 2018

(b) in Schedule I – 2.5%, –

(vii) against S. No. 234, in the entry in column (3), the following Explanation shall be inserted in the end, namely: – “Explanation: If the goods specified in this entry are supplied, by a supplier, along with supplies of other goods and services, one of which being a taxable service specified in the entry at S. No. 38 of the Table mentioned in the notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 [G.S.R. 690(E)], the value of supply of goods for the purposes of this entry shall be deemed as seventy per cent. of the gross consideration charged for all such supplies, and the remaining thirty per cent. of the gross consideration charged shall be deemed as value of the said taxable service.”;

Interpretation :

In my view Notification No. 24/2018 dated 31.12.2018 will apply to the above question. The supply shall be a composite supply. 70 percent of value of invoice raised shall be subjected to 5 percent and balance 30 percent shall be subject to 18 percent.

QUESTION 7

Janya : If invoice is received in January and goods are received in February, when will ITC be

Available to the receipient and when the tax need to be paid by the supplier

Tanishi

Applicable Section :

Section 2(82) “output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis; (83) “outward supply” in relation to a taxable person,

Section 16

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,–– (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(b) he has received the goods or services or both.

Explanation.—For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

Section 12

(1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this section. (2) The time of supply of goods shall be the earlier of the following dates, namely:—

(a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or

(b) the date on which the supplier receives the payment with respect to the supply

Interpretation :

ITC would be available in the month of February as there is a pre-condition that ITC will not be available unless the goods have been received by the recipient.

Also, as per time of supply provisions, the supplier shall pay the output tax, being earlier of issue of tax invoice or receipt of payment

Disclaimer: 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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