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CA indirect

Indirect Tax Laws

 

          CH-1 (GST in India - An Introduction)

 

Q1. Why was the Constitution of India amended recently in the context of GST?

ANS: The Constitutional provisions hitherto had delineated separate powers for the Centre and the States to impose various taxes. Whereas the Centre levied excise duty on all goods produced or manufactured in India, the States levied Value Added Tax once the goods entered the stream of trade upon completion of manufacture.

With respect to goods imported from outside the country into India, Centre levied basic customs duty and additional duties of customs together with applicable cesses, if any

In case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that was empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (101*) Act, 2016 for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

Q2. Explain the significant amendments which were made by Constitution (101st Amendment) Act, 2016.

ANS: The Constitution (101st Amendment) Act, 2016 (‘Amendment Act') received presidential assent on 8th September 2016. This Act paves the way for introduction of Goods and Services Tax (GST) by making special provisions with respect to goods and services tax. The Amendment Act contains a total of 20 sections. Out of the same, one section, 1.e., Section 12 pertaining to GST Council came into effect from 12th September, 2016.

The remaining 19 sections came into effect from 16th September, 2016. The Constitution was amended to introduce the GST for conferring concurrent taxing powers on the Centre as well as the States (includes Union Territory with Legislature) to make laws for levying goods and services tax on every transaction of supply of goods or services or both.

The significant amendments made by the Constitution (101stAmendment) Act, 2016 are as follows:

Parliament and State Legislatures have been given concurrent powers to make laws governing taxes on goods and services.

Integrated goods and services tax is to be levied on Inter-State transactions of goods and services. The same is collected by the Central Government and apportioned between the Union and the States in the manner provided by Parliament by Law as per the recommendation of the GST Council.

Principles for determining the place of supply and when a supply takes place in the course of inter-State trade or commerce shall be formulated by the Parliament, by law.

GST will be levied on all supply of goods and services except alcoholic liquor for human consumption.

GST shall not be levied on the following products, till a date to be notified on the recommendations of the GST Council

  1. Petroleum Crude
  2. High Speed Diesel
  3. Motor Spirit (commonly known as Petrol)
  4. Natural Gas
  5. Aviation Turbine Fuel

The Union Government shall retain the power to levy duties of excise on the aforesaid products besides tobacco and tobacco products manufactured or produced in India.

Article 279A of the Constitution empowers the President to constitute a joint forum of the Centre and States namely, Goods & Services Tax Council (GST Council).

The provisions relating to GST Council came into force on 12th September, 2016. President constituted the GST Council on 15th September, 2016.

The Union Finance Minister is the Chairman of this Council and Ministers in charge of Finance/Taxation or any other Minister nominated by each of the States & UTs with Legislatures are its members. Besides, the Union Minister of State in charge of Revenue or Finance is also its member. The function of the Council is to make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution etc.

Q3. What is GST Council? What would be the role of GST Council?

ANS: Goods and Services Tax Council [Article 279A]

1.

Constitution      of                               GST

Council

Article 279A of the Constitution empowers the President of

India to constitute a Joint forum of the Centre and States

 

 

namely, Goods & Services Tax Council (GST Council). The provisions relating to GST Council came into force on 12-09- 2016.The President constituted the GST Council on 15-09-

2016.

2.

Members    of    the                       GST Council

The GST Council shall consist of the following members, namely:

  1. the Union Finance Minister                                                              Chairperson;
  2. the Union Minister of State in charge of Revenue or Finance      Member;
  3. the Minister in charge of Finance or Taxation or any other    Minister    nominated    by    each    State Government            Member;

3.

Vice-Chairperson

The State Finance Minister's shall choose one amongst

themselves as Vice-Chairperson of the Council for such period as they may decide.

4.

Role of GST Council

The GST Council shall make recommendations to the Union and the States on-

  1. the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the goods and services tax;
  2. the goods and services that may be subjected to, or exempted from the goods and services tax;
  3. model Goods and Services Tax Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-State trade or commerce under Article 269A and the principles that govern the place of supply;
  4. the threshold limit of turnover below which goods and services may exempted from goods and services tax;

 

 

 

 

5. the rates including floor rates with bands of goods and services tax

6. any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster;

7. special provision with respect to the States of Arunachal Pradesh, Assam Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim Tripura, Himachal Pradesh and Uttarakhand; and

8. Any other matter relating to the GST, as the Council maydecide.

5.

Effective date of levy of GST on petroleum products

The GST Council shall recommend the date on which the goods and services to be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.

6.

Guiding     principles                    for GST Council

While discharging the functions conferred by this article, the Goods and Services Tax Council shall be guided by the need-

  1. for a harmonized structure of goods and services tax, and
  2. For the development of a harmonized national market for goods and services.

7.

Quorum

One-half of the total number of Members of the Goods and Services Tax Count shall constitute the quorum at its meetings.

8.

Procedure

The Goods and Services Tax Council shall determine the procedure in the performance of its functions.

9.

Decisions to be taken by GST Council

Every decision of the Goods and Services Tax Council shall be taken at meeting, by a majority of not less than 3/4th of the weighted votes of the members present and voting, in accordance with the following principles namely:-

(a) the vote of the Central Government shall have a weight

 

 

                     

 

age of 1/3rd of the total votes cast, and

(b) The votes of all the State Governments taken together shall have a weight age of 2/3rd of the total votes cast, in

that meeting.

10.

Vacancy     etc.     not                     to invalidate proceedings

No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of-

  1. any vacancy in, or any defect in, the constitution of the Council; or
  2. Any defect in the appointment of a person as a Member of the Council; or
  3. Any procedural irregularity of the Council not affecting the merits of the case.

11.

Settlement of disputes

The Goods and Services Tax Council shall establish a mechanism to adjudicate any dispute

  1. between the Government of India and one or more States; or
  2. between the Government of India and any State or States on one side and one or more other States on the other side; or
  3. Between two or more States,

Arising out of the recommendations of the Council or implementation thereof.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                                                                                                                                                                                                                                                                           

 

           CH-2 (Supply under GST)

Q 4 - Examine whether the following activities would amount to supply under section 7 of the CGST Act:

  1. Hitkari Charitable Trust a trust engaged in providing medical relief free of cost, donates books and stationery to children living in slum area.
  2. Karishma Manufacturers have a factory in Jaipur and a depot in Delhi. Both these establishments are registered in respective States. Finished goods are sent from the factory to the depot without consideration so that the same can be sold.
  3. Manan is an Electronic Commerce Operator in Delhi. His son who is settled in London is a well-known lawyer. Manan has taken legal consultancy from him free of cost with regard to his family dispute.

Would your answer be different if in the above case, Manan has taken advice in respect of his business unit in Delhi?

ANS  1) Section 7 of the CGST Act, provides that supply must be made for a consideration except the activities Specified in Schedule I and in course or furtherance of business. Since, both these elements are missing, donation of books and stationery to children living in slum area would not amount to supply under Section 7 of the CGST Act.

2)Schedule I of CGST Act, provides that supply of goods or services or both between related persons or between distinct persons as specified in Section 25, is supply even without consideration provided it is made in the course or furtherance of business.

According to Section 25(5) of the CGST Act, 2017, where a person who has obtained or is required to obtain registration in a State in respect of an establishment, has an establishment in another State, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act. In view of the same, factory and depot of Karishma Manufacturers are establishments of two distinct persons. Therefore, supply of goods from factory to depot without consideration, but in course of or in furtherance of business, is supply under Section 7 of the CGST Act.

3) Schedule I of CGST Act, provides that import of services by person from a related person located outside India, without consideration is treated as supply if it is provided in the course or furtherance of business. In the given case, Manan has received legal consultancy from his son free of cost in a personal matter and not in course or furtherance of business. Hence, services provided by Manan's son to him would not be treated as supply under Section 7 of the CGST Act.

In the above case, if Manan has taken advice with regard to his business unit, services provided by Manan's son to him would be treated as supply under Section 7 of the CGST Act as the same are provided in course or furtherance of business though received from a related person.

Q5. Taxability of mixed supply: From the following information determine the nature of supply and tax liability.

XYZ Ltd. a manufacturer of cosmetic products supplied a package consisting of hair oil (GST Rate- 18%), Sun screen cream (GST Rate - 28%), shampoo (GST Rate -28%) and hair comb (GST Rate -12%) The price per package is Rs. 500 (exclusive of taxes). 10,000 packages were supplied by the company to its dealers. Determine the nature of supply and its tax liability.

ANS: This supply would be regarded as mixed supply, since in this case each of the goods in the package have identical identity and can be supplied separately, but are deliberately supplied conjointly for a single consolidated price. The tax rates applicable in case of mixed supply would be the rate of tax attributable to that one supply (goods, or services) which suffers the highest rate of tax from amongst the supplies forming part of the mixed supply.

Therefore, the package will be chargeable to 28% GST.

The tax liability will be arrived as under:

Value of taxable supply per package

Rs. 500

No. of packages

10,000

Total Taxable Value of supply

Rs. 50,00,000

Applicable GST Rate

28%

Total Tax liability

Rs. 14,00,000

 

        CH-3 (Charge of GST)

 

Q 6. Person liable to pay GST: State with reason, person liable to pay GST in each of following independent cases. Assume recipient is located in taxable territory.

  1. Rental income received by Tamil Nadu State Government  from renting an immovable property to Mannappa Pvt. Ltd. (Turnover of the company was 42 lakhs in the preceding F.Y.)
  2. Legal Fees received by Mr. Sushrut, a senior advocate, from M/s. Tatva Trading Company having turnover of Rs. 50 lakhs in preceding F.Y.
  3. XYZ & Co, a partnership firm provides security services to ABC Ltd. registered under GST.

ANS: 1.  As per Entry 5A of Notification No. 13/2017-CT (Rate), in case of Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the CGST Act, 2017, the recipient registered under the CGST Act, 2017 will be liable to pay GST, Hence, Mannappa Pvt. Ltd. will be liable to pay GST under reverse charge mechanism.

2. Services provided by a senior advocate by way of legal services, directly or indirectly to any business entity located in the taxable territory, reverse charge mechanism is applicable and business entity is liable to pay GST. In this case M/s. Tatva Trading Company will be liable to pay GST.

3. Security services (services provided by way of supply of security personnel) provided by any person other than a body corporate to a registered person is liable to be taxed under reverse charge basis. Hence, ABC Ltd. registered under GST shall be liable to pay tax on the same.

 

CH-4 (Exemptions from GST)

Q7. Health care services: Well-Being Nursing Home has received the following amounts in the month of November in lieu of various services rendered by it in the same month. You are required to determine its GST liability for November from the details furnished below:

 

 

Particulars

Rs. In

lakhs

(1)

Palliative care for terminally ill patients at patient's home (Palliative care is given to improve the quality of life of patients who have a serious or life-

threatening disease but the goal of such care is not to cure the disease)

30

(2)

Services provided by cord blood bank unit of the nursing home by way of

preservation of stem cells

24

(3)

Hair transplant services

100

(4)

Ambulance services to transport critically ill patients from various locations

to nursing home

12

(5)

Naturopathy treatments. Such treatment is a recognized system of medicine

80

 

in terms of Section 2(h) of the Clinical Establishments Act, 2010

 

(6)

Plastic surgery to restore anatomy of a child affected due to an accident

30

(7)

Pranic healing treatments. Such treatment is not a recognized system of

medicine in terms of Section 2(h) of the Clinical Establishments Act, 2010

120

(8)

Mortuary services

10

 

Note: All the amounts given above are exclusive of GST. Rate of GST-18%.

Solution:

Computation of Value of taxable supply and GST liability in lakhs)-

(1)

Palliative care for terminally ill patients at patient's home                                                                                                             [WN-1 (a)]

-

(2)

Services provided by cord blood bank by way of preservation of stem cells

[WN-2]

-

(3)

Hair transplant services

[WN-1(b)]

100.00

(4)

Ambulance services to transport critically ill patients from various locations

to nursing home                                                                                                             [WN-1 (c)]

-

(5)

Naturopathy treatments

[WN-1(d)]

-

(6)

Plastic surgery to restore anatomy of a child affected due to an accident

[WN-1 (e)]

-

(7)

Pranic healing treatments

[WN-1 (f)]

120.00

(8)

Mortuary services

[WN-3]

-

 

Value of Taxable Supply

220.00

 

GST payable 18%

39.60

Working Notes:

i) Health care services provided by, inter alia, a clinical establishment in any recognized system of medicines in India is exempt from GST vide Entry 74 of Notification No. 12/2017-CT (Rate).

  1. It is immaterial whether health care service is provided at the clinical establishment or at the home of the patient or at any other place. Thus, palliative care for terminally ill patients at patient's home is eligible for exemption.
  2. Hair transplant services are specifically excluded from the health care services, and thus are not eligible for exemption.
  3. Ambulance services to transport critically ill patients from various locations to nursing home are eligible for exemption.
  4. Since naturopathy is a recognized system of medicine in terms of Section 2(h) of the Clinical Establishments Act, 2010, it would be eligible for exemption.
  5. Plastic surgery to restore anatomy of a child affected due to an accident will be eligible for exemption.
  6. Since pranic healing treatment is not a recognized system of medicine in terms of Section 2(h) of the Clinical Establishments Act, 2010, it would not be eligible for exemption.

ii) Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation are also exempt from GST vide Entry 73 of Notification No. 12/2017-CT (R).

iii) Mortuary services are covered under negative list under Schedule III of CGST Act, 2017. Hence, the same are not liable to GST.

 

Q8. Discuss whether GST is payable in respect of transportation services provided by Vaibhav Goods Transport Agency in each of the following independent cases:

 

Customer

Nature of services provided

Amount Charged (Rs.)

A

Transportation of milk

55,000

B

Transportation of books on a consignment transported

in a single goods carriage

3,000

C

Transportation of furniture for a single consignee in the

600

 

goods carriage

 

 

ANS: Determination of GST liability-

Customer

Nature of services provided

Amount

Charged (Rs.)

Taxability

A

Transportation of milk

55,000

Exempt

[Transportation of milk by goods transport agency is exempt.]

B

Transportation of books on a consignment transported in a single goods carriage

3,000

GST is payable [Exemption       is       available                            for transportation of goods only where the                      consideration                               for transportation        of                             goods                on                       a consignment                              transported             in                        a single goods carriage does not

exceed Rs. 1,500.]

C

Transportation of furniture for a single consignee in the goods carriage

600

Exempt Transportation    of    goods                                 where consideration for transportation of all goods for a single consignee single does not exceed Rs. 750 is

exempt.]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q9. Examine whether GST is exempted on the following independent supply of services-

(a)Teja & Co., a tour operator, provides services to a foreign tourist for tour conducted to Jammu Kashmir and receives a sum of Rs. 3,00,000.

(b)Ms. Poorva acts as a Team Manager for Indian Sports League (ISL), a recognized sports body, for a Tennis tournament organized by Multi brand retail company and received a remuneration of Rs. 2,00,000.

ANS: (a) Liable to GST: Yes, Tejas and Co. will be liable to pay GST. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India are exempt vide Entry 54 of Notification No. 9/2017-IT (Rate)]. In this case tour is conducted in Jammu and Kashmir and the IGST Act applies to whole of India including Jammu and Kashmir, hence exemption will not operate.

(b) Liable to GST: Services provided to a recognized sports body by an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body are exempt vide Entry 68 of Notification No. 12/2017-CT (Rate)]. Since multi brand Retail Company is not a recognized sports body hence exemption will not be available. Thus, the said services will be liable to GST.

 

Q10. M/s. POR Properties registered under GST as taxable person is engaged in the business of renting various immovable properties owned by it. During the month ending 31-03-2022, it collected a rent of Rs. 5,00,000. The said sum includes rent from:

  1.  Vacant land used for agriculture: Rs. 50,000
  2. Land used for Appu Circus: Rs. 80,000
  3. Houses let to individuals for residential purposes: Rs.70,000
  4. Building let to M/s. Elegant Hotel: Rs.60,000
  5. Vacant land, given on lease to M/s. ABC Ltd. for construction of building at a later stage to be used for furtherance of business or commerce: Rs.40,000 ;
  6. Premises let to a temple trust: Rs. 40,000
  7. Premises let to a coaching centre: 80,000
  8. Building let to a theatre: Rs. 80,000.

Compute the amount of GST payable by the firm, assuming that the rent is exclusive of GST, if any, applicable in each case. Rate of GST-18% Make suitable assumptions.

ANS: Computation of GST payable (amount in Rs.)-

Total Rent

 

5,00,000

Less:

 

 

(1)

Rent from vacant land used for agriculture [Exempt vide Entry No.

54 of Exemption Notification No. 12/2017-CT (R)]

50,000

(2)

Rent from land used for Appu Circus (Liable to GST]

Taxable

(3)

Properties let for residential purposes [Exempt vide Entry No. 12

of Exemption Notification No. 12/2017-CT (R)]

70,000

(4)

Building let to hotel (Liable to GST]

Taxable

(5)

Vacant land, given on lease to M/s. ABC Ltd, for construction of building at a later Taxable stage to be used for furtherance of

business or commerce [Liable to GST]

Taxable

(6)

Premises let to a religious body being temple trust [Liable to GST]

Taxable

(7)

Premises let to a coaching centre [Liable to GST]

Taxable

(8)

Building let to a threatre [Liable to GST]

Taxable

 

Total Taxable Value of Supply

3,80,000

 

GST payable @ 18%

68,400

 

      CH-5 (Place of Supply)

 

Q11. Kailash Traders, a dealer in furniture, located in Maharashtra, receives an order from Ghanshyam Traders, also located in Maharashtra. The order is for the supply of 250 Chairs, with an instruction to ship the Chairs to Prime Hardwares, located in Tamil Nadu. Prime Hardwares is a customer of Ghanshyam Traders. What will be the place of supply of goods?

ANS: Where three parties are involved i.e. to say a supplier, a buyer who is not the recipient of goods referred as third person) and the recipient who actually receives the goods on the directions of the buyer, a fiction is introduced by Section 10(1)(b) of IGST Act, 2017, whereby the third person on whose direction the goods are delivered will be considered the recipient of the goods and the place of supply is deemed to be the principal place of business of the said third person (being the first buyer).

There are two parts to this transaction:

  1. First part of the transaction - between Kailash Traders and Ghanshyam Traders: Kailash Traders is the supplier of Chairs, and Ghanshyam Traders is the buyer. Accordingly, Kailash Traders bills the transaction to Ghanshyam Traders, and as per the instruction, ships the goods to Prime Hardwares in Tamil Nadu.    Over here, on the instruction from Ghanshyam Traders, Kailash Traders ships the chairs to Prime Hardwares located in Tamil Nadu. Here, Ghanshyam Traders is deemed as the third person. Therefore, the place of supply will be the principal place of business of the third person, i.e., Maharashtra. Accordingly, Kailash Traders charges CGST and SGST on billing to Ghanshyam Traders.
  2. The second part of the transaction- between Ghanshyam Traders and Prime Hardwares: Ghanshyam Traders is the supplier, and Prime Hardwares is the buyer. Ghansnyam Traders bills the transaction to Prime Hardwares, and endorses the lorry receipt (goods shipped in a lorry by Kailash Traders) in favour of Prime Hardwares. This lorry receipt (LR) will enable Prime Hardwares to take the delivery of the goods. The second part of the transaction between Ghanshyam Traders and Prime Hardwares will also be interstate and IGST will be charged.

 

Q12. Determine place of Supply in independent cases as under:

  1. A company in Pune contracts with a Pune based architect to design a structure for their new office to be located in Bangalore.
  2. Mr. A of Jaipur entered into a lease agreement with Mr. B of Jaipur whereby he leased out his farm in Nagpur to Mr. B.
  3. Mr. A an employee of ABC Ltd. Kolkata, goes on an official tour to Hyderabad and stays in a hotel there, booked in the name of his company.
  4. Mr. X of Mumbai arranged for destination wedding of his son at Pushkar (Rajasthan) he booked a resort at Pushkar for the accommodation of his guests and also for performing the marriage ceremony. Apart from providing the resort for the marriage purpose, decoration was also provided.
  5. The contractor M/s. ABC of Pune sub-contracted the work of construction of the building at Delhi to M/s. XYZ of Mumbai, to complete the work as per the drawing and design of the Architect.
  6. ABC Ltd. of Mumbai, hires a professional firm of Delhi to design its office in Canada.

ANS: The place of supply of services shall be determined as under-

 

 

Case

Place of

supply

Reasons

1.

A company in Pune contracts with a

Bangalore

Though the supplier of service and

 

Pune based architect to design a structure for their new office in Bangalore.

 

the recipient are both located in Pune, place of supply would be the place where the immovable property

is located i.e. Bangalore.

2.

Mr. A of Jaipur entered into a lease agreement with Mr. B of Jaipur whereby he leased out his farm in Nagpur to Mr. B

Nagpur

Though the supplier and the recipient are both in Jaipur, Rajasthan but any service provided by way of grant of rights to use immovable property is covered under Section 12(3) of the IGST Act, 2017, therefore, the place of supply shall be the location of the immovable property, here being

Nagpur.

3.

Mr. A an employee of ABC Ltd. Kolkata, goes on an official tour to Hyderabad and stays in a hotel there, booked in the name of his company.

Hyderabad

This being the accommodation service, is covered under Section 12(3) of the IGST Act, 2017, accordingly, the place of supply shall be the location of the immovable property (here Hotel). The location of the supplier and the receiver is

irrelevant.

4.

Mr. X of Mumbai arranged for destination wedding of his Son at Pushkar (Rajasthan). He booked a resort at Pushkar for the accommodation of his guests and also performing the marriage ceremony.

Apart from providing the resort for

Pushkar (Rajasthan)

The place of supply of service for accommodation                                         provided                                  for organizing the marriage is governed by Section 12(3) (c) of the IGST Act, 2017, hence, the place of supply shall be the place of location of the resort. The provision of service of decorator,

being   ancillary   to   the   services   of

 

 

 

the marriage purpose decoration was also provided.

 

organizing the marriage is covered by Section 12(3)(d) or the 1GST Act 2017, hence, the place of supply shall be the place of location of the

immovable property

5.

The contractor M/s. ABC of Pune sub-contracted the work of construction of the building at Delhi to M/s. XYZ of Mumbai, to complete the work as per the drawing and design of the Architect.

Delhi

Here, the main contractor, M/s. ABC merely co-ordinates with the sub- contractor M/s. XYZ to ensure completion of construction work. Hence, both these services of construction activity undertaken by M/s. XYZ and the co-ordination of construction work undertaken by M/s. ABC are covered under Section 12(3) (a) of the IGST Act, 2017, hence, the place of supply shall be the place where the immovable property is

located.

6.

ABC Ltd. of Mumbai, hires a professional firm of interior decorators of Delhi to design its office in Canada.

Mumbai

Since the immovable property is intended to be located outside India, therefore, as per proviso to Section 12(3) of the IGST Act, 2017, the place of supply shall be the location of the recipient of service, here Mumbai,

being the location of ABC Ltd.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q13. ABC Pvt. Ltd, New Delhi, provides support services to foreign customers in relation to procuring goods from India. The company identifies the prospective vendor, reviews product quality and pricing and then shares the vendor details with the foreign customer.

The foreign customer then directly places purchase order on the Indian vendor for Purchase of the specified goods, ABC Pvt. Ltd. charges its foreign customer cost plus 10% mark up for services provided by it.

For the month of December, 2021, the company has charged US $ 1,00,000 (exclusive of GST) to its foreign customer, With reference to the provisions of GST law, examine whether the company is liable to pay IGST or CGST and SGST.

Note: GST @18% is applicable on supply of the support services provided by ABC Pvt. Ltd. Rate of exchange is Rs. 65 per US $

ANS: Service Supplier is an intermediary: Section 2(13) of the IGST Act, 2017 defines "intermediary" to mean a Broker, an agent or any other person, by whatever name called, who arranges or facilitates the 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 account.

In this case, since ABC Pvt. Ltd. is arranging or facilitating supply of goods between the foreign customer and the Indian vendor, the said services can be classified as intermediary services.

Place of Supply is location of intermediary: lf the location of the supplier of services or the location of the recipient of service is outside India, the place of supply is determined in terms of Section 13 of the IGST Act, 2017. Since, in the given case, the recipient of supply is located outside India, the provisions of supply of intermediary services will be determined in terms of Section 13 of the IGST Act, 2017.

Supply is intra-stare supply: As per Section 13(8)(b), the place of supply in case of intermediary services is the location of the Supplier i.e., the location of ABC Pvt. Ltd. which is New Delhi. Further, as per Section 8(2) of the IGST Act, 2017, Supply of services where the location of the supplier and the place of supply or services are in the same state is treated as intra-State supply.

Therefore, since in the given case, both the location of ABC Pvt. Ltd. and the place of supply of the service provided by it are in New Delhi, the supply of service will be an intra-State supply leviable to CGST & SGST.

Computation of GST payable: Assuming that the given rate of exchange is prevailing on the date of time of supply of services, the CGST and SGST liability will be worked out as under:

Particulars

 

Amount

Value of taxable Supply

$

1,00,000

Exchange rate

Rs.

65

Value of taxable Supply in India Rupees

Rs.

65,00,000

CGST @ 9%

Rs.

5,85,000

SGST @ 9%

Rs.

5,85,000

Total GST Payable

Rs.

11,70,000

 

Q14. Mr. A, partner of M/s. ABC Chartered Accountants, a firm registered in Delhi, went to Mumbai for audit purposes. He purchased from Jaipur Airlines (registered in Rajasthan) air ticket from Jaipur to Mumbai disclosing the name of the organization and its GST Registration number. Determine the place of supply of service. What would your answer be in case Mr. A does not disclose the particulars of organization?

ANS: As per Section 12(9) of IGST Act, 2017, the place of supply of passenger transportation service to,-

  1. A registered person, shall be the location of such person;
  2. A person other than a registered person, shall be the place where the passenger embarks on the conveyance for a continuous journey.

Here, since the organization is registered in Delhi, therefore as per Section 12(9) (a), the place of supply shall be the place where the recipient is located i.e. Delhi in this case. The airlines shall charge IGST as the location of supplier is in Jaipur.

In case Mr. A does not disclose the particulars of the organization, the place of supply of service will be Jaipur i.e. the place where Mr. A embarks the aircraft for his journey. Here, the airlines shall charge CGST/SGST.

 

          CH-6 (Time of Supply)

 

Q15. From the following information determine the time of supply if goods are supplied on approval basis:

S. No.

Removal of

goods

Issue of invoice

Accepted by recipient

Receipt of payment

1.

01-12-2021

15-12-2021

05-12-2021

25-12-2021

2.

01-12-2021

25-07-2022

25-07-2022

20-07-2022

 

ANS: Time of supply of goods in each of the above cases has been given in following table-

S.

No.

Removal of goods

Issue of invoice

Accepted

by recipient

Receipt of payment

Time of supply

Reason

1.

01-12-2021

15-12-2021

05-12-2021

25-12-2021

05-12-2021

TOS shall be the date of

acceptance                    by                    the

 

 

 

 

 

 

recipient as invoice was

issued after that date

2.

01-12-2021

25-07-2022

25-07-2022

20-07-2022

02-06-2022

TOS shall be date after expiry of 6 months from the date of removal, since invoice is not issued within 6 months from the date of removal and payment is also received

after such date.

 

Q16. Determine the time of supply in the following cases. The rate of GST has been increased to 12% w.e.f. 01-10-2021, before the said date, the rate of tax was 5%.

S. No

Date of supply of service

Date of Invoice

Date of Payment

Value of Service

(Rs.)

1.

25-09-2021

05-10-2021

08-10-2021

20,00,000

2.

25-09-2021

25-09-2021

08-10-2021

10,00,000

3.

25-09-2021

08-10-2021

30-09-2021

15,00,000

4.

04-10-2021

28-09-2021

30-09-2021

20,00,000

5.

04-10-2021

04-10-2021

30-09-2021

10,00,000

6.

04-10-2021

30-09-2021

08-10-2021

15,00,000

ANS: The time of supply shall be determined as under-

S.

No.

Value of service

(Rs)

Reason/ Remarks

Time of  supply          

Rate of tax

GST (Rs.)

1.

20,00,000

Service is supplied before change in rate of tax, invoice issued after change in rate of tax, the payment has been received after change in rate of tax, TOS shall be earlier of date of issue of invoice or date

of receipt payment.

05-10-2021

12%

2,40,000

2.

10,00,000

Service is supplied before change in rate of tax, invoice issued prior to such change in rate of tax, the payment is received after change in rate of tax, TOS shall be

date of issue of invoice.

25-09-2021

5%

50,000

3.

15,00,000

Service is supplied before change in rate of tax, the payment is received before change in rate of tax, invoice issued after change in rate of tax, TOS shall be date of

receipt of payment.

30-09-2021

5%

75,000

4.

20,00,000

Service is supplied after change in rate of tax, invoice is issued before change in rate of tax, the payment is received before change in rate of tax, TOS shall be earlier of date of issue of invoice or date

of receipt of payment

28-09-2021

5%

1,00,000

5.

10,00,000

Service is supplied after change in rate of tax, invoice is issued after change in rate of tax, the payment is received before change in rate of tax, TOS shall be the

date of issue of invoice.

04-10-2021

12%

1,20,000

6.

15,00,000

Service is supplied after change in rate of

tax, the payment is received after change

08-10-2021

12%

1,80,000

 

 

 

in rate of tax, invoice is issued before

change in rate of tax, TOS shall be date of receipt of payment.

 

 

 

 

 

Total GST

 

 

7,65,000

 

Q17. Determine the time of supply from the following particulars:

25-07-2021

Booking of convention hall, sum agreed Rs.15,00,000, advance of Rs 1,01,000

received

10-11-2021

Event held in convention hall

20-12-2021

Invoice issued for Rs 15,00,000, indicating balance of 13,99,000 payable

25-12-2021

Balance payment of Rs 13,99,000 received

 

ANS: As per Section 31 read with Rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of supply of service. In the given case, the invoice is not issued within the prescribed time limit. As per Section 13(2)(b), in a case where the invoice is not issued within the prescribed time, the time of supply of service is the date of provision of service or receipt of payment, whichever is earlier.

Therefore, the time of supply of service to the extent of Rs. 1,01,000 is 25-07-2021 as the date of payment of Rs. 1,01,000 is earlier than the date of provision of service. The time of supply of service to the extent of the balance 13,99,000 is 10-11-2021 which is the date of provision of service.

 

        CH-7 (Value of Supply)

 

Q 18. From the following information determine the value of taxable supply as per provisions of Section 15 of the CGST Act, 2017?

Contracted value of supply of goods (including GST @ 18%) Rs. 11,00,000 The contracted value of supply includes the following:

  1. Cost of primary packing Rs.25,000
  2. Cost of protective packing at recipient's request for safe transportation Rs.15,000
  3. Design and engineering charge Rs. 85,000

Other information:

i) Commission paid to agent by recipient on instruction of supplier Rs.5,000

ii) Freight and insurance charges paid by recipient on behalf of supplier Rs.75,000 Give reasons with suitable assumptions where necessary.

ANS: Computation of value of taxable supply of goods (amount in Rs.)

Contracted value of supply of goods

 

11,00,000

(1) Cost of primary packing

[WN-1]

-

 

(2) Cost   of   protective   packing   at

transportation

recipient's request   for   safe

[WN-1]

-

 

(3) Design and engineering charge

[WN-2]

-

 

Add: Commission paid to agent by recipient on instruction of supplier

[WN-3]

5,000

 

Freight and insurance charges paid by recipient on behalf of supplier

[WN-3]

75,000

80,000

 

 

 

Cum tax value

 

11,80,000

Less: GST @ 18% [Rs. 11,80,000 × 18 ÷ 118]                                                                                                               [WN-4]

 

1,80,000

Value of taxable supply

 

10,00,000

 

Working Notes: For the purpose of determining the value of taxable supply, the following adjustments shall be made-

  1. As per Section 15(2)(c) of CGST Act, 2017, cost of primary packing and protective packing at recipient's request for safe transportation charged by supplier from the recipient shall be included for determining the value of taxable supply. Since it is already included in the value, no treatment is required.
  2. As per Section 15(2)(C) of CGST Act, 2017, any amount charged for anything done by the supplier in respect of the supply of goods at the time of, or before delivery of goods shall be included in the value of taxable supply. Hence, design and engineering charges shall also be included in the value of taxable supply. Since it is already included in the value, no treatment is required.
  3. As per Section 15(2)(b) of the CGST Act, 2017, any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods shall be included in the value of supply. Thus, commission paid to agent or recipient on instruction of supplier and freight and insurance charges incurred by recipient on behalf of supplier shall form part of value of taxable supply.
  4. As per Section 15(2)(a) of the CGST Act, 2017, value of supply shall not include any taxes or cesses levied under CGST Act, SGST Act, UTGST Act and the GST (Compensation to States) Act, if charged separately the supplier.

 

Q 19. Mr. S supplied goods 'X’ to Mr. R for consideration of Rs. 5,00,000 (excluding taxes). Mr. R also gave some material to Mr. S as consideration for such supply whose value was Rs. 20,000 (excluding taxes). Mr. S has supplied the same goods to another person at price of Rs. 5,71,200 (including GST @ 12%). Determine the value of supply.

What would your answer be if price of Rs.5,71,200 is not available at the time of supply of goods to Mr. R.

What would your answer be in above case if open market value of supply is also not available but at the time of supply of goods by Mr. S, identical goods have been supplied at value of Rs. 5,25,000 (excluding taxes).

ANS: As per Rule 27 of CGST Rules, 2017, where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,-

a) Be the open market value of such supply;

b) if open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money if such amount is known at the time supply;

c) If the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality;

"Open market value" of a supply of goods or services or both means-

The full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction,

  • Where the supplier and the recipient of the supply are not related and
  • Price is the sole consideration
  • To obtain such supply at the same time when the supply being valued is made.

Determination of value of taxable supply in different situations:

  1. The value of taxable supply shall be the open market value. The open market value shall be determined as under: (Amount in Rs)

Price charged from independent recipient

5,71,200

Less: GST included in the above price [Rs. 5,71,200 x 12÷ 112]

61,200

Open market value of supply of goods under consideration

5,10,000

Thus, the value of taxable supply shall be Rs. 5,10,000.

2. If open market value is not available, the value of taxable supply shall be determined as under: (amount in Rs.)

Consideration in Money

5,00,000

Value of Non monetary Consideration- Value of Goods known at time of supply

20,000

Value of taxable supply

5,20,000

3. In such case, the value of supply shall be the value of supply of goods of like kind and quality

i.e. Rs. 5,25,000 will be the value of supply of goods under consideration.

 

Q20. Explain the provisions relating to value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent.

ANS: Value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent [Rule 32(3)]: The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall be deemed to be an amount calculated-

  1. @5% of the basic fare in the case of domestic bookings, and
  2. @10% of the basic fare in the case of international bookings of passage for travel by air.

“Basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by the airline.

 

Q21. ABC Ltd., Noida (Uttar Pradesh) is a supplier of machinery used for making bottle caps. The supply of machinery is effected as under:

  1. The wholesale price of the machinery (excluding all taxes and other expenses) at which it is supplied in the ordinary course of the business to various customers is Rs. 42,00,000. However, the actual price at which the machinery is supplied to an individual customer varies within a range of ±10% depending upon the terms of contract of supply with the particulars customer.
  2. Apart from the price of the machinery, ABC Ltd. charges from the customer the following incidental expenses:

 

  • Associated handling and loading charges of Rs. 10,000

 

  • Installation and commissioning charges of Rs. 1,00,000

 

The machinery can be dismantled and erected at another site, if required. The above charges are compulsorily levied in every case of supply of machinery.

 

3. Transportation of machinery to the customer’s premises is arranged by ABC Ltd. through a third party service provider [Goods Transport Agency (GTA)]. The customer enters into a separate service contract with the GTA and pays the freight directly to it.

4. The company provides one year free warranty for the machinery. However, the company also provides an extended two-years warranty on payment of additional charges of Rs. 3,00,000.

5. A cash discount of 2% on the price of the machinery is offered at the time of supply, if the customer agrees to make the payment within 15 days of the receipt of the machinery at his premises. In the event of failure to make the payment within the stipulated time, the company-

  • Recover the discount given; and
  • Charges interest @ 1% per month or part of the month on the total amount due from the customer (towards the machinery supplied) from the date of making the supply till the date of payment. However, no interest is charged on the tax dues.

 

6. For every machinery supplied, ABC Ltd. receives a grant of a Rs. 2,00,000 from its holding company DEF Ltd.

ABS Ltd. has supplied a machinery to D Pvt. Ltd. on August 1, 2021 at a price of Rs. 40,00,000 (excluding all taxes). D Pvt. Ltd. has its corporate office in New Delhi. However, the machinery has been installed at its manufacturing unit located in Gurugram (Haryana). D Pvt. Ltd. has paid the freight directly to the GTA and opted for two years warranty. Discount @ 2% was given to D Pvt. Ltd. as it agreed to make the payment within 15 days. However, D Pvt. Ltd. paid the consideration on 31st October, 2021.

Assume the rates of taxes to be as under:

Goods/ Services supplied

CGST

SGST

IGST

(i)Bottle cap making machine

6%

6%

12%

(ii)Services of transportation of goods

2.5%

2.5%

5%

(iii)Other services involved in the above supply

9%

9%

18%

You are required to make suitable assumptions, wherever necessary.

Calculate the GST payable [CGST & SGST or IGST, as the case may be] on the machinery and support your conclusions with legal provisions in the form of explanatory notes.

Make suitable assumptions, wherever needed.

ANS: Computation of GST liability of ABC Ltd. (amount in Rs.)

Price of machine

[WN 1]

40,00,000

Handling and loading charges

[WN 2(a)]

10,000

Installation and commissioning charges

[WN 2(b)]

1,00,000

Transportation cost

[WN 3]

NIL

Additional warranty cost

[WN 4]

3,00,000

Grant from DEF Ltd.

[WN 5]

2,00,000

Total price of the machine

46,10,000

Less: 2% cash discount on price of machinery= Rs. 40,00,000 × 2% (Note 6]

80,000

Taxable value of supply

45,30,000

Tax liability for the month of August 2021

[WN-7]

 

IGST @ 12%

[WN 8 and WN 9]

5,43,600

Tax liability for the month of October 2021

[WN 11]

 

Interest collected @ 3% on Rs. 44,10,000

[WN 10]

1,32,300

Cash discount recovered

[WN 10]

80,000

Cum-tax value of interest and cash discount

2,12,300

IGST = (Rs. 2,12,300/ 112) × 12%

22,746

Total IGST payable on the machinery

5,66,346

Working Notes:

  1. Value - Transaction value: The value or a supply is the transaction value i.e., the price actually paid or payable assuming ABC Ltd. and D Pvt. Ltd. are not related and the price is the sole consideration for the supply.
  2. Handling, Installation and Commissioning charges [Section 15(2)(c)]:

a) All incidental expenses charged by the supplier to the recipient of a supply are includible in the value of supply.

b) Any amount charged for anything done by the supplier in respect of the supply of goods at the time of or before delivery of goods is includible in the value of supply.

3. Transportation cost: Transportation cost shall not form part of value of supply of the machinery as there is a separate service contract between the customer and the third-party service provider in relation to such transportation. The customer pays the freight directly to the service provider.

The supplier (ABC Ltd.), in this case, merely arranges for the transport and does not provide the transport service on its own account. Tax will be separately levied on the supply of service of transportation of goods under reverse charge.

4. Warranty cost: Warranty cost is includible in the value of the supply since transaction value includes all elements of the price excluding those that can be specifically excluded as per Section 15 of the CGST Act.

5. Grants: As per Section 15(2)(e), Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Government are includible in the value of supply.

6. Cash discount: It was deducted by ABC Ltd. upfront at the time of supply on 1st August, 2021 and hence, the same is excluded from the value of supply as it did not form part of the transaction value.

7. Month for which tax payable: It has been assumed that the invoice for the supply has been issued on 1st August, 2021, the date on which the supply is made. Thus, the time of supply of goods is 1st August, 2021 in terms of Section 12(1)(a) of the CGST Act, 2017.

8.Place of supply and nature of tax: In the given case-

a) The location of the supplier is in Noida (UP); and

b)the place of supply of machinery is the place of installation of the machinery i.e., Gurugram (Haryana) in terms of Section 10(1)(d) of the IGST Act, 2017

Therefore, the given supply is an inter-State supply as the location of the supplier and the place of supply are in two different States [Section 7(1)(a) of IGST Act, 2017].

Thus, the supply will be leviable to IGST in terms of Section 5(1) of the IGST Act, 2017.

9) Rate of tax: The given supply is a composite supply involving supply of goods (machinery) and services (handling and loading and installation and commissioning) where the principal supply is the supply of goods.

 

As per Section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of the principal supply involved therein and charged to tax accordingly. Thus, tax rate applicable to the goods (machinery) has been considered.

 

10) Interest and cash discount: Interest for the delayed payment of any consideration for any supply is includible in the value of supply in terms of Section 15(2)(d) of the CGST Act, 2017. Interest is charged for 3 months @ 1% p.m. as the consideration was paid on 31-10-2021. Interest is charged on the amount to be recovered from the recipient i.e. Rs. [40,00,000+ 10,000 +1,00,000+3,00,000].

Further, cash discount recovered will also be includible in the value of supply as now the transaction value i.e., the price actually paid for the machinery is devoid of any discount.

Cum Tax value of interest and Cash Discount: The cash discount not allowed and interest have to considered as cum tax value and tax payable thereon has to be computed by making back calculations terms of Rule 35 of CGST Rules, 2017

11. Month for which tax liability arises: As per Section 12(6) of the CGST Act, 2017, the time of supply in case of addition in value by way of interest, late fee, penalty etc. for delayed payment of consideration for goods is the date on which the supplier receives such addition in value. Thus, the time of supply of interest received and cash discount  recovered on account  of delayed payment of consideration is 31stOctober, 2021, the date when the full payment was made. The supplier may issue a debit note for such interest and cash discount recovered.

 

     CH-8 (Input Tax Credit)

Q22. A registered supplier of taxable goods supplied goods valued at Rs. 2,24,000 (inclusive of CGST Rs. 12,000 and SGST Rs. 12,000) to Mohan Ltd. under the forward charge on 15-08-2021 for which tax invoice was also issued on the same date. The inputs were received by Mohan Ltd. on 15-08-2021. Mohan Ltd. availed credit of Rs. 24,000 on 18-08-2021. But Mohan Ltd. did not make any payment towards such supply along with tax thereon to the supplier. Is Mohan Ltd. eligible to avail input tax credit on such supply? What are the consequences of such non- payment by Mohan Ltd.?

Discuss input tax credit provisions if Mohan Ltd. makes the payment of Rs. 2,24,000 to the supplier on 18-03-2022.

ANS: As per section 16 of the CGST Act, 2017, Mohan Ltd. is eligible to avail input tax credit (ITC) of the tax paid on inputs received by it on the basis of the invoice issued by the supplier provided other conditions for availing ITC are fulfilled.

Payment of value of the goods along with the tax to the supplier is not a pre-requisite at the time of availing credit, but Mohan Ltd. has to pay the said amount within 180 days from the date of issue of invoice.

If Mohan Ltd. does not make payment within 180 days from the date of invoice: If Mohan Ltd. did not make any payment towards such supply along with tax thereon to the supplier, it has to report the fact of non-payment in the ITC return (GSTR-2) for the month immediately following the period of 180 days from the date of the issue of the invoice. When such report is made, ITC of Rs. 24,000 will be added to his output tax liability. Mohan Ltd. will be required discharge this liability with interest @ 18% p.a. from the date of availing credit till the date when the amount added to the output tax liability [Second proviso to section 16(2) of the CGST Act, 2017 read with rule 37 of the CGST Rules, 2017].

Mohan Ltd. liable to general penalty not exceeding Rs. 25,000: If Mohan Ltd. does not pay the supplier as mentioned above, subject to the provisions of section 126 of the CGST Act, 2017, a general penalty which may extend to Rs. 25,000 may also be levied for such contravention by Mohan Ltd. u/s 125 of the CGST Act, 2017.

Re-credit of input tax if payment made after 180 days: If Mohan Ltd. makes the payment of Rs. 2,24,000 [value + tax] to the supplier on 18-03-2022 i.e., after the expiry of 180 days from date of issue of invoice. Mohan Ltd. will have to report the default in the monthly report, add the amount of ITC to his output tax liability and when the payment is made to the supplier, take the credit of Rs. 24,000. The output tax liability added will have to pay with interest @ 18% for the period from the date of availment of credit till the date of addition of the amount to the output tax liability.

Q23: Determine the amount of Input tax credit admissible to P Ltd. in respect of the following items procured by them in the month of March:

 

 

Inward supplies

GST

1

Goods supplied for captive consumption in a factory

9,800

2

Goods purchased for being used in repairing the factory shed and same has

been capitalized in books

18,000

3

Cement used for making foundation and structural support to Plant and

Machinery

14,000

4

Inputs used in trail runs

14,560

5

Food and beverages purchased for the employees during office hours not

under statutory obligation

8,400

Note: (i) All the conditions necessary for availing the ITC have been fulfilled.

(ii) Registered person is not eligible for any threshold exemption.

ANS: Computation of Input tax credit available with P Ltd. (amount in Rs.):

Goods used for captive consumption (since, used in course of Business hence,

input tax credit on same shall be admissible)

9,800

Goods purchased for being used in repairing the factory shed and same has been

capitalized to the cost of factory shed [WN-1]

Nil

Cement used for making foundation and structural support to Plant and

Machinery [WN-2]

14,000

Inputs used in trial runs (since used in course of Business hence, input tax credit

shall be available)

14,560

Food and beverages purchased for the employees during office hours not under

statutory obligation [WN-3]

Nil

Total input tax credit available

38,360

Working Notes:

  1. As per Section 17(5) (d), input tax credit shall not be available in respect of goods or service or both received by a taxable person for construction of an immovable property (other than plant and machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Construction includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the said immovable property. Since the cost of repairs is capitalized in books, no credit of input tax paid on goods used shall be allowed.
  2. As per Explanation to Section 17, “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. Input tax credit is admissible in respect of goods or services or both received by a taxable person for construction of plant or machinery. Hence, tax paid on cement shall e available for input tax credit.
  3. As per Section 17(5) (b), No input tax credit is available in respect of food and beverages except where an inward supply of goods or services or both of a particular category is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply or where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. Hence, no input tax credit is available on food and beverages for use of employees during office hours.

 

Q24: M Ltd., a registered supplier, supplying taxable as well as exempted goods, provides following Turnover details during the month of August, 2022:

Particulars

Rs.

Value of Taxable Supply of Goods

12,00,000

Value of Zero rated taxable supply of goods

5,50,000

Value of Exempted supply of goods

5,00,000

Supply of goods made for non-business use

50,000

Total

23,00,000

 

Details of Input tax paid on Capital goods for the month of August, 2022 are as under:

 

Particulars

CGST @ 9%

SGST @ 9%

Total (Rs.)

 

The input tax on capital goods is as follows:

 

 

 

(i) Input tax on capital goods exclusively used for

supplying exempted goods

10,800

18,800

21,600

(ii) Input tax on capital goods exclusively used for

supplying taxable goods (including Zero rated supplies)

45,000

45,000

90,000

(iii) Input tax on capital goods exclusively used for

supplying goods for non business use.

11,700

11,700

23,400

Capital goods used for both supply of taxable as well as exempt goods:

Capital goods

Value         of                     inward supplies (exclusive of

CGST & SGST)

CGST @ 9%

SGST @ 9%

Date of inward supplies

A

5,60,000

50,400

50,400

12-01-2022

B

2,56,000

23,040

23,040

21-04-2022

C

4,56,000

41,040

41,040

01-08-2022

 

Total

1,14,480

1,14,480

 

Determine the credit on capital goods attributable for tax period of August, 2022

ANS: Computation of credit on capital goods attributable for tax period of August, 2022 (amount in Rs.)

Particulars

CGST

SGST

Total input tax on Capital goods

 

 

Tax on capital goods exclusively used for supplying exempted goods (The amount of input tax in respect of capital goods used exclusively for effecting exempt supplies shall be indicated in FORM GSTR-2 and

GSTR-3B and shall not be credited to his electronic credit ledger)

 

-

 

-

Tax on capital goods exclusively used for supplying taxable supplies

(including Zero rated supplies) (Le amount of input tax in respect of

 

45,000

 

45,00

capital goods used exclusively for effecting taxable Supplies including

zero-rated supplies shall be indicated in FORM GSTR-2 and GSTR- 3B and shall be credited to the electronic credit ledger)

 

 

Tax on capital goods exclusively used for supplying goods for non business use (The amount of input tax m respect of capital goods used exclusively for non-business purposes shall be indicated in FORM GSTR-2 and GSTR-3B and shall not be credited to his electronic credit

ledger)

 

-

 

-

Tax on capital goods C used for supplying taxable as well as exempted supplies (shall be credited to Electronic credit ledger and the useful

life of such goods shall be taken as 5 years.) [A] Tc

 

41,040

 

41,040

ITC credited to Electronic Credit ledger for the month of August 2022

86,040

86,040

Computation of common credit for the month of August, 2022:

 

 

Value of "A' for Machinery A, B and C whose useful life remains during

the tax period (Te)

1,14,480

1,14,480

ITC attributable to a month on common capital goods during their useful life - Tm {ITC attributable to a month on common capital goods during their useful life (Tm) shall be computed in accordance with rule 43(1)(e) of CGST Rules, 2017 as under:

Te ÷ 60 = 1,14,480 ÷ 60 (for CGST and SGST respectively)

1,908

1,908

Amount of common credit attributable towards exempted supplies to be added to output tax liability (Te)

 

Te = Tm × (Value of Exempted supply and supply made for non business used during tax period/ Total Value of supply during tax period) (Rs.

1,908 ÷ Rs. 23,00,000) × (Rs. 5,00,000 + Rs. 50,000)

456

456

 

 

 

 

 

 

 

 

Q25: PQR Ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on composition scheme u/s 10 with effect from 28-02-2022. It provides following information relating to balance of input tax credit lying as on 27-02-2022:

(1) Inputs lying in stock as such valued at 1,68,000 (inclusive of CGST &SGST @ 12%)

2) Inputs contained in finished goods where tax invoice is not available relating to such inputs but it is known that market price of such inputs (inclusive of CGST & SGST @ 12%) on 28-02- 2022 is 89,600.

3) Input tax on capital goods purchased on 25-10-2021 is Rs. 72,000

4) Balance in Electronic credit Ledger is Rs. 1,10,000

Decide whether POR Ltd. is eligible for input tax credit lying on 27-02-2022.

ANS: As per Section 18(4), where any registered taxable person who has availed of input tax credit opts to pay tax under Section 10 i.e. composition scheme, he shall pay an amount, by way of debit in the electronic credit edger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, taking useful life of capital goods years, on the day immediately preceding the date of exercising such option.

Therefore, in given case POR Ltd. is required to pay following amounts (amount in Rs.):

Inputs lying in stock (R 1,68,000 x 12 +112)

18,000

Inputs contained in finished goods lying in stock (Rs. 89,600 x 12+112) [WN]

9,600

Input tax on Capital goods used for 4 months and 2 days, taking residual life as 5 years (Rs. 72,000 x 55 * 60) (55 months being remaining residual life of capital

goods)

66,000

Amount to be paid by POR Ltd. (CGST+ SGST)

93,600

Working Note: As per Rule 44(3) of CGST Rules, 2017, where the tax invoices related to the inputs lying in stock are not available, the registered person shall estimate the amount under Rule 44(1) based on the prevailing market price of goods on the date of opting for composition scheme.

The aforesaid amount can be paid by utilizing the balance in Electronic credit Ledger. The balance credit in Electronic credit ledger = Rs. 1,10,000 – Rs. 93,600 = Rs. 16,400 shall lapse.

       Chapter-9 (Registration)

Q 26 Rishabh Enterprises sole proprietorship firm started an air-conditioned restaurant in Virar, Maharashtra in the month of February wherein the customers are served cooked food as well as cold drinks/non-alcoholic beverages. In March, the firm opened a liquor shop in Kohima Nagaland for trading of alcoholic liquor for human consumption. Determine whether Rishabh Enterprises is liable to be registered under GST law with the help of the following information:

Particulars

February (Rs.)*

March (Rs.)*

Serving of   cooked   food   and   cold   drinks/non-alcoholic

beverages in restaurant in Maharashtra

5,50,000

6,50,000

Sale of alcoholic liquor for human consumption in Nagaland

 

5,00,000

Supply of wholly exempt services

1,00,000

1,00,000

Export of packed food items from restaurant in Maharashtra

1,50,000

2,00,000

You are required to provide reasons for treatment of various items given above.

Answer: Registration provisions: As per Section 22 of the CGST Act, 2017, a supplier is liable to be registered in the State/Union territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs. 20 lakh.

However, if such taxable supplies are made from any of the specified special category States, namely, State of Manipur, Mizoram, Nagaland, and Tripura, he shall be liable to be registered if his aggregate turnover in a financial year exceeds Rs.10 lakh.

In the given question, since Rishabh Enterprises is engaged in making taxable supplies of goods and services from Maharashtra which is not a specified Special Category State, the threshold limit for obtaining registration is Rs. 20 lakh. It will not get the benefit of higher threshold limit of Rs. 40 lakhs since it is not engaged in exclusive supply of goods as it is also providing exempt services.

The threshold limit is not reduced to Rs. 10 lakh in this case, as sale of alcoholic liquor for human consumption from Nagaland (one of the specified Special Category States) are non- taxable supplies in terms of Section 9(1) of CGST Act, 2017.

In the given question, since Rishabh Enterprises is engaged in making taxable supplies of goods and services from Maharashtra which is not a specified Special Category State, the threshold limit for obtaining registration is Rs. 20 lakh. It will not get the benefit of higher threshold limit of Rs. 40 lakhs since it is not engaged in exclusive supply of goods as it is also providing exempt services.

The threshold limit is not reduced to Rs. 10 lakh in this case, as sale of alcoholic liquor tor human consumption from Nagaland (one of the specified Special Category States) are non- taxable supplies in terms of Section 9(1) of CGST Act, 2017.

As per Section 2(6) of the CGST Act, 2017, aggregate turnover includes the aggregate value of-

  1. all taxable supplies,
  2. all exempt supplies,
  3. exports of goods and/or services and
  4. all inter-State supplies of persons having the same PAN.

The above is computed on all India basis. Further, the ag8regate turnover excludes central tax, State tax, Union territory tax, integrated tax and cess. Moreover, the value of inward supplies on which tax is payable under reverse charge is not taken into account for calculation of ‘aggregate turnover’.

In the light of the aforementioned proviS1os, the aggregate turnover of Rishabh Enterprises is computed as under:

Computation of aggregate turnover of Rishabh Enterprises (amount in Rs.)

Particulars

Turnover of

February

Cumulative turnover

of February & March

Serving of cooked food and cold drinks/non-

alcoholic beverages in Maharashtra

5,50,000

12,00,000

[Rs. 5,50,000 + Rs. 6,50,000]

Add:     Sale     of     alcoholic    liquor     for     human

consumption in Nagaland   [WN-1]

 

5,00,000

Add: Supply of wholly exempt services [WN-2]

1,00,000

2,00,000

[Rs. 1,00,000 + Rs. 1,00,000]

Add: Export of packed food items from restaurant

in Maharashtra

1,50,000

3,50,000

[Rs. 1,50,000 + Rs.2,00,000]

Aggregate Turnover

8,00,000

22,50,000

 

Working Notes:

  1. As per Section 2(47) of the CGST Act, 2017, exempt supply includes non-taxable supply. Thus, Supply of alcoholic liquor for human consumption in Nagaland, being a non-taxable supply, is an exempt supply and is, therefore, includible while computing the aggregate turnover.
  2. Supply of wholly exempt services is includible while computing the aggregate turnover.

Conclusion: Rishabh Enterprises was not liable to be registered in the month of February since its aggregate Turnover did not exceed Rs. 20 lakh in that month. However, since its aggregate turnover exceeds Rs. 20 lakh in the month of March, it should apply for registration within 30 days from the date on which it becomes liable to registration.

 

Q 27 Explain the procedure to be followed by Proper Officer for Suspension of registration.

Ans: Suspension of registration [Rule 21A] :

  1. Deemed suspension on application for cancellation of registration [Rule 21A(1)]: Where a registered person has applied for cancellation of registration under rule 20, the registration shall be deemed to be Suspended from-
  • the date of submission of the application; or
  • the date from which the cancellation is soughtwhichever is later, pending the completion of proceedings for cancellation of registration under rule 22.

2. Suspension of registration by Proper Officer [Rule 21A(2)]: Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled under section 29 or under rule 21, he may, suspend the registration of such person with effect from a date to be determined by him, pending the completion of the proceedings for cancellation of registration under rule 22.

3. Suspension of registration on account significant differences or anomalies in returns and statement of outward inward supplies [Rule 21(2A)]: Where, a comparison of the returns furnished by a registered person under section 39 with

a) the details of outward supplies furnished in FORM GSTR-1; or

b) the details of inward supplies derived based on the details of outward supplies furnished by his Suppliers in their FORM GSTR-1,

or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of 30 days, as to why his registration shall not be cancelled.

4. Taxable supplies not to be effected/ return not to be filed during suspension [Rule 21A(3)]: A registered person, whose registration has been suspended under rule 21A(1)/(2)/(2A), shall not make any taxable Supply during the period of suspension and shall not be required to furnish any return under section 39.

Meaning of expression "shall not make any taxable supply" [Explanation]: The expression "shall not make any taxable supply" shall mean that the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the period of suspension.

5. No refund during suspension period [Rule 21(3A)]: A registered person, whose registration has been suspended by proper officer under Rule 21(2)/(2A), shall not be granted any refund under section 54, during the period of suspension of his registration.

6. Revocation of suspension [Rule 21A(4)] : The suspension of registration under 21A(1)/(2/(2A) shall be deemed to be revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be effective from the date on which the suspension had come into effect

However, the suspension of registration under this rule may be revoked by the proper officer, anytime during the pendency of the proceedings for cancellation, if he deems fit.

Revised tax invoice and First return provisions applicable [Rule 21A(5)]: Where any order having the effect of revocation of suspension of registration has been passed, the provisions of Section 31(3)(a) i.e. Revised tax Invoice and section 40 i.e. First Return in respect of the supplies made during the period of suspension and the procedure specified therein shall apply.

Q 28 From the following information you are required to determine whether XYZ Ltd incorporated in Rajasthan is liable to be registered under GST Law if the company has effected following supplies within the state of Rajasthan.

Particulars

Rs.

(1) Intra-State supply of goods chargeable to 5% GST

15,51,000

(2) Intra-State supply of goods which are wholly exempt from GST u/s 11 of

CGST Act, 2017

5,00,000

(3) interest received from fixed deposits made with Bank of Rajasthan

1,00,000

(4) Intra-State supply of goods chargeable to 18% GST

50,000

(5) Intra-State supply of goods chargeable with Nil rate

18,50,000

 

Answer: Section 22(1) of the CGST Act, 2017 read with Notification No. 10/2019-CT dated 07- 03-2019 inter alia provides that every supplier who is engaged in intra-State exclusive supply of goods is liable to be registered under GST in the State/ Union territory from where he makes the taxable supply of goods only when aggregate turnover in a financial year exceeds Rs. 40,00,000.

Since XYZ Ltd. is exclusively engaged in making intra-state taxable supplies of goods from Rajasthan, the applicable threshold limit for obtaining registration is Rs. 40 lakh as specified in Notification No. 10/2019-CT dated 07-03-2019.

XYZ Ltd. shall be considered to be engaged exclusively in the supply of goods even if it is engaged in exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. Hence, the threshold limit of registration shall not be reduced to Rs. 20

According to Section 2(6) of CGST Act, 2017 “Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all lndia basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Computation of Aggregate turnover (amount in Rs.):

Particulars

Rs.

(1) Intra-State supply of goods chargeable to 5% GST [WN-1]

15,51,000

(2) Intra-State supply of goods which are wholly exempt from GST u/s 11 of

CGST Act, 2017     [WN-2]

5,00,000

(3) interest received from fixed deposits made with Bank of Rajasthan[WN-5]

1,00,000

(4) Intra-State supply of goods chargeable to 18% GST[WN-3]

50,000

(5) Intra-State supply of goods chargeable with Nil rate[WN-4]

18,50,000

Total value supplies

40,51,000

Thus, in this case since aggregate turnover of the company exceeds Rs. 40 lakhs, it is liable to get itself registered under GST Law.

Working Note:

  1. Intra-State supply of goods chargeable with GST @5% is specifically included for determination of aggregate turnover.
  2. Intra-State supply of goods which are wholly exempt from GST under Section 11 of CGST Act, 2017 is to be included for determination of aggregate turnover.
  3. Intra-State supply of goods chargeable with GST 18% is specifically included for determination of aggregate turnover.
  4. Intra-State supply of goods chargeable with Nil rate of GST is covered under exempt supplies, hence it is to be included in computation of aggregate turnover
  5. Services by way of extending deposits, loans or advances in so far as the consideration is represented he way of interest or discount (other than interest involved in credit card services) is exempt vide Notification 12/2017-CT (R) dated 28-06-2017, Since aggregate turnover includes exempt supply, interest received from banks on the fixed deposits, being exempt supply, is included in the aggregate turnover.

 

Q 29 ABC Ltd. of Jaipur, Rajasthan has effected intra-State supplies of taxable goods amounting Rs. 38,00,000 till 31-12-2021. On 01-01-2022 it has effected inter-State supply of taxable goods amounting Rs. 1,00,000. ABC Ltd. is of the opinion that it is not required to get registered under GST law since its aggregate turnover is not likely to exceed Rs. 40,00,000 during financial year 2021-22. As a consultant of the Company you are required to advise the company relating to registration requirements.

Answer: The opinion of ABC Ltd is not correct. As per provisions of Section 24 of CGST Act, 2017, person making inter-state taxable supply of goods are compulsorily required to obtain registration. Thus, Section 24 is an Overriding Section that makes it mandatory to obtain registration by certain prescribed persons even though the conditions prescribed u/s 22 are not met. Hence, ABCLtd. is mandatorily required to obtain registration.

As per provisions of Section 25 of CGST Act, 2017, every person who is liable to be registered under Section 22 or Section 24 shall apply for registration in every such State or Union territory in which he is so liable within 30 days from the date on which he becomes liable to registration, in such manner and subject to such conditions as may be prescribed. Thus, ABC Ltd. is required to obtain registration upto 31-01-2022.

Ch-10 (Tax Invoice, Credit and Debit Notes) &

Ch- 11 (Accounts and Records; E-way Bill)

 

Q30 The aggregate turnover of Kamlesh Enterprises Ltd, exceeded Rs.40 lakh on 10th October, 2021. It applied for registration on 27th October, 2021 and was granted the registration certificate on 1st November, 2021. You are required to advise Kamlesh Enterprises Ltd. As to what is the effective date of registration in its case. It has also sought your advice regarding period for issuance of Revised Tax Invoices.

Ans. As per Section 25 read with CGST Rules, 2017, where an applicant submits application for registration within 30 days from the date he becomes liable to registration, effective date of registration is the date on which he becomes liable to registration. Since, Kamlesh Enterprises Ltd.'s turnover exceeded Rs.40 lakh on 10th October 2021, it became liable to registration on same day. Further, it applied for registration within 30 days of so becoming liable to registration, the effective date of registration is the date on which it becomes liable to registration, i.e. 10th October, 2021.

Time period for issuance of revised tax invoice: As per Section 31 read with CGST Rules, 2017, every registered person who has been granted registration with effect from a date earlier than the date of issuance of certificate of registration to him, may issue Revised Tax Invoices.

Revised Tax Invoices shall be issued within 1 month from the date of issuance of registration certificate in respect of taxable supplies effected during the period starting from the effective date of registration till the date of issuance of certificate of registration.

Therefore, in the given case, Kamlesh Enterprises Ltd. has to issue the Revised Tax Invoices in respect of taxable supplies effected during the period starting from the effective date of registration (10 October, 2021) till the date of issuance of certificate of registration (1"November, 20211) within 1 month from the date of issuance of certificate of registration, i.e. on or before 1* December, 2021.

 

Q31 Sindhi Toys Manufacturers, registered in Punjab, sold electronic toys to a retail seller in Gujarat, at a value of 48,000 (excluding GST leviable @ 18%). Nov, it wants to send the consignment of such toys to the retail seller in Gujarat. You are required to advise Sindhi Toys Manufacturers on the following issues:

  1. Whether e-way bill is mandatorily required to be generated in respect of such movement of goods
  2. What will be the consequences for non-issuance of e-way bill?

Ans: 1) E-way bill to be mandatorily generated if value of consignment (including taxes) exceeds 50,000: Rule 138(1) of the CGST Rules, 2017 provides that e-way Bill is mandatorily required to be generated if the goods are moved, inter alia, in relation to supply and the consignment value exceeds 50,000. Further, explanation 2 to rule 138(1) stipulates that the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes CGST, SGST/UTGST, IGST and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods,

Accordingly, in the given case, the consignment value will be as follows:

= Rs. 48,000 x 118%= Rs. 56,640.

Since the movement of goods is in relation to supply of goods and the consignment value exceeds 50,000, e-way bill is mandatorily required to be issued in the given case

(2) Penalty –Rs.10,000/- or tax sought to be evaded whichever is greater: It is mandatory to generate e-way bill in all cases where the value of consignment of goods being transported is more than Rs,50,000/- and it is not otherwise exempted in terms of rule 138(14) of CGST Rules, 2017. If e-way bills, wherever required, are not issued in accordance with the provisions contained in rule 138, the same will be considered as contravention of rules. As per section 122(1)(xiv) of CGST Act, 2017, a taxable person who transports any taxable goods without the cover of specified documents e-way bill is one of the specified documents) shall be liable to a penalty of Rs.10,000/-or tax sought to be evaded (wherever applicable) whichever is greater. Moreover, as per section 129(1) of CGST Act, 2017, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the Rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure.

Q32 ABC Ltd., a registered supplier has made following taxable supplies to its customer Mr. P in the quarter ending 30th June, 2021.

Date

Bill No.

Particulars

Invoice Value

(including GST) (Rs.)

5th April, 2021

102

Notebooks[10 in numbers]

1,200

10th May, 2021

197

Chart Paper [4 in number]

600

20th May, 2021

230

Crayon colors[2 packets]

500

2nd June, 2021

254

Poster colors [5 packets]

900

22nd June, 2021

304

Pencil box [4 sets]

700

Goods in respect of bill no. 102, 230 and 254 have been returned by Mr. P. You are required to advise ABC Ltd whether it can issue consolidated credit note against all the three invoices?

Ans: Where one or more tax invoices have been issued for supply of any goods and/or services and

  1. The taxable value/ tax charged in that tax invoice is found to exceed the taxable value/tax payable in respect of such supply, or
  2. Where the goods supplied are returned by the recipient, or
  3. Where goods and/ or services supplied are found to be deficient,

The registered person, who has supplied such goods and/ or services, may issue to the recipient one or more credit notes for supplies made in a financial year containing prescribed particulars.

Thus, one (consolidated) or more credit notes can be issued in respect of multiple invoices issued in a financial year without linking the same to individual invoices.

Hence, in view of the above-mentioned provisions, M/s ABC Ltd. can issue a consolidated credit note for the goods returned in respect of all the three invoices.

Q 33 Whether the transporters, who are not registered under the GST, are required to maintain any records under the provisions of CGST Act, 20172 Also explain, if any other unregistered persons who are required to maintain records under GST.

Ans: The relevant provisions are discussed as under -

  1. Obligation of Owner/Operator of Warehouse and Transporter to Maintain Records [Section 35(2)]: Every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee and other relevant details of the goods in such manner as may be prescribed.
  2. Records to be maintained by owner or operator of godown or warehouse and transporters [Rule 58]:

 

a) Enrolment, if not already registered in GST- Business details to be submitted: Every person required to maintain records and accounts in accordance with the provisions of section 35(2), if not already registered under the Act, shall submit the details regarding his business electronically on the common portal.

Generation and communication of unique enrollment number: Upon validation of the details furnished, a unique enrolment number shall be generated and communicated to the said person.

b)Application for unique common enrollment number: A transporter who is registered in more than is One State or Union Territory having the same Permanent Account Number, he may apply for a unique common enrolment number by submitting the details in FORM GST ENR-02 using any one of his GSTIN's, and upon validation of the details furnished, a unique common enrolment number shall be generated and communicated to the said transporter

However, where the said transporter has obtained a unique common enrolment number, he shall not be eligible to use any of the GS1lN for the purposes of E-Way Bills under Chapter XVI of these rules.

 

c) Deemed enrollment if already enrolled in other state or UT: The person enrolled in any other State or Union territory shall be deemed to be enrolled in the State or Union territory.

d)Amendment of details: Such person may also amend the details furnished in the prescribed form.

e)Type of Records: The following records are to be maintained

  1. Records to be maintained by a transporter: Records of goods transported, delivered and goods stored in transit by him along with GSTIN of the registered consignor and consignee for each of his branches.
  2. Records to be maintained by an owner/operator of a warehouse/godown: Books of accounts with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods.

f) Manner of storage of goods by warehouse owner/operator: The owner or the operator of the godown shall store the goods in such manner that they can be identified item-wise and owner-wise and shall facilitate any physical verification or inspection by the proper officer on demand.

        Ch-12 (Payment of Tax)

 

Q34 ABC Ltd., have filed their GSTR – 3B for the month of July, 2021 within the due date prescribed u/s 39 i.e. 20-08-2021. Post filing of the return, the registered person has noticed during September 2021 that tax dues for the month of July, 2021 have been short paid for Rs. 40,000. ABC Ltd., has paid the above shortfall of Rs. 40,000 through GSTR – 3B of September 2021, filed on 20-10-2021 [payment through Cash ledger Rs. 30,000 and Credit ledger Rs. 10,000]. Examine the Interest payable under the CGST Act, 2017.

What would be your answer if, GSTR 3B for the month of July 2021 has been filed belatedly on 20-10-2021 and the self – assessed tax of Rs. 40,000/- has been paid on 20-10-2021 [payment through electronic cash ledger – Rs. 30,000 and electronic credit ledger Rs. 10,000]

Notes:

∎ There exists adequate balance in Electronic Cash & Credit ledger as on 31-07-2021 for the above short fall

∎ No other supply has been made nor tax payable for the month of July, 2021 other than Rs. 40,000/- missed out to be paid on forward charge basis

∎ Ignore the effect of leap year, if applicable in this case.

Ans: Interest is payable under Section 50 of the CGST act, 2017 in case of delayed payment of tax@ 18% per annum from the date following the due date of payment to the actual date of payment of tax. As per proviso to Section 50(1), interest is payable on the tax liability paid in cash, only if the return to be filed for a tax period under Section 39, has been filed after the due date to furnish such return. In the above scenario, ABC Ltd., has defaulted in making the payment for Rs. 40,000 on self-assessment basis in the return for the month of July, 2021.

Accordingly, interest is payable on the gross liability and proviso of section 50(1) shall not be applicable.

Thus, the amount of interest payable by ABC Ltd., is as under:

Due date of payment of tax

20-08-2021

Actual date of payment of tax

20-10-2021

Period of delay in days

61 days

GST payable

40,000

Rate of interest

18% p.a.

Interest payable [Rs. 40,000 × 18% × 61/365] (Rounded off)

1,203

Alternatively, if ABC Ltd., have filed the return for the month of July, 2021 on 20-10-2021, beyond the stipulated due date of 20-08-2021 and if the self-assessed tax for July, 2021 has been paid on 20-10-2021, Interest under proviso en to Section 50(1) shall be payable on the tax paid through Electronic Cash Ledger only.

Thus, the amount of interest payable by ABC Ltd., is as under:-

Due date of payment of tax

20-8-2021

Actual date of payment of tax

20-102021

Period of delay in days

61 days

GST Payable

30,000

Rate of interest

18% p.a.

Interest Payable [Rs. 30,000 × 18% × 61/365] (Round off)

902

 

Q35 Vivitha & Co., a registered dealer in Ludhiana, furnishes the following details of purchases and sales pertaining to the month of July:

Goods ‘A’ purchased from local market (including GST @ 12%)

50,400

Goods ‘B’ purchased from Jaipur (including IGST @ 18%)

82,600

Sales made during the month to dealer of Kolkata of product:

 

→Goods ‘A’

80,000

→Goods ‘B’

45,000

Sales made within the state of Goods ‘B’

35,000

Above sales amount given is exclusive of tax, compute the net CGST, SGST and IGST liability and input tax credit, if any for the month of July.

Ans:- Computation of GST liability (amount in Rs.):

Particulars

CGST

SGST

IGST

Inter-State Sale:

 

 

 

Goods ‘A’ sold to Kolkata (IGST @ 12%)

-

-

9,600

Goods ‘B’ sold to Kolkata (IGST @ 18%)

-

-

8,100

Intra-State Sale:

 

 

 

Goods ‘B’ sold within state (CGST/SGST @ 9%

each)

3,150

3,150

-

Less: Eligible ITC [(Rs. 50,400 x 100/112) x 12%]

[(Rs. 82,600 x 100/118) x 18%]

2,700

2,700

12,600

Net amount of CGST/SGST/IGST payable

450

450

5,100

 

Q 36 XYZ Ltd. a registered supplier of goods is affecting supplies through E-Comm Ltd (an Electronic Commerce operator). It has made taxable supplies of goods amounting 25,00,000 of December 2021 through E-Comm Ltd. E-Comm Ltd. has returned goods amounting 2,50,000 to XYZ Ltd during the month of December 2021. Determine the amount of tax to be collected at source by E-Comm Ltd.

Ans: As per provisions of Section 52 of CGST Act, 2017, every electronic commerce operator, not being an agent, shall collect an amount calculated @ 1% of the net value of taxable supplies made through it by other Suppliers where the consideration with respect to such supplies is to be collected by the operator.

Thus, the amount of tax to be collected at source by E-Comm Ltd. is as under (amount in Rs.):

Value of Taxable supplies of goods made by XYZ Ltd.

25,00,000

Less: Value of taxable supplies of goods Returned to XYZ Ltd.

2,50,000

Amount on Which tax is to be collected at source

22,50,000

Rate of TCS

1%

Amount of TCS

22,500

 

Q 37 XYZ Ltd. has supplied goods to local authority for Rs.11,80,000 (inclusive of GST @ 18%). Determine the amount of tax to be deducted at source. Also determine the interest liability if the tax deducted at source on 25-12-2021 is deposited 28-03-2022.

Ans: As per provisions Section 50(1) of the Act, the local authority has to deduct tax @ 2% from the payment made or credited to the supplier of taxable goods or services or both, where the total value of such supply, under a contract, exceeds 2,50,000. Such tax has to be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made, in such manner as may be prescribed otherwise interest shall be levied @ 18% p.a. for the period for which the tax or any part thereof remains unpaid.

Hence, the amount of tax to be deducted at source shall be 2% of Rs. 10,00,000 = Rs.20,000

Computation of Interest on delay in deposit of TDS (amount in Rs.):

Due date for deposit of TDS [A]

10-01-2022

Actual date of deposit of TDS [B]

28-03-2022

Period of delay (in days) [Since leap year] [C = B-A ]

77

Amount of TDS [D]

20,000

Interest payable @18% p.a. for delay in payment of days [D x 18% x C÷ 365 days]

759

 

        Chapter-13 (Returns)

 

Q 38 XYZ Ltd. furnished the annual return for the year 2021-22 on August 25, 2022. An error is discovered in respect of a transaction pertaining to outward supplies of November 2021. Determine the time limit to rectify the mistake in case return of September 2022 is furnished on 19th October 2022. Would your answer be different if annual return for F.Y.2021-22 is furnished on 25-12-2022.

Answer: As per provisions of Section 37(3) of the CGST Act, 2017, no rectification of error or omission in respect of the details furnished of outward supplies shall be allowed after-

  • Furnishing of the return under section 39 for the month of September following the end of the financial year to which such details pertain, or
  • furnishing of the relevant annual return whichever is earlier.

Thus, in this case the annual return for financial year 2021-22 has been furnished by XYZ Ltd. on August 25, 2022 and return for the month of September, 2022 is furnished on 19th October 2022, the rectification of the error pertaining to a transaction in November 2021 cannot be made beyond August 25th 2022 i.e. earlier of 25th August 2022 or 19th October 2022.

In other words, once annual return for financial year 2021-22 is filed before the filing of return for the month of September, 2022, no amendments relating to financial year 2021-22 will be permitted thereafter and in such case, mismatch will become permanent and liability to that extent will be fastened on the receiver. Thus, even if annual return for financial year 2021-22 is furnished en 25 December, 2022, the rectification of the error pertaining to a transaction in November 2021 cannot be made beyond 19th October, 2022.

 

Q 39 Write a short note on First Return.

Answer: First return [Section 40]: Every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration.

A person has to apply for registration within 30 days when his turnover crosses the threshold limit of Rs. 20 lakh/ Rs. 40 lakhs (in case of suppliers engaged exclusively in supply of goods) (Rs. 10 lakh in case of notified Special Category States). Thus, there might be a time lag between a person becoming liable to registration and grant of registration certificate.

During the intervening period, such person might have made the outward supplies, i.e. after becoming liable to registration but before grant of the certificate registration.

Now, in order to enable such registered person to declare the taxable supplies made by him for the period between the date on which he became liable to registration till the date on which registration has been granted so that ITC can be availed by the recipient on such supplies, firstly, the registered person may issue Revised Tax Invoices against the invoices already issued during said period within 1 month from the date of issuance of certificate of registration [Section 31(3(a) read with rule 53 of CGST Rules, 2017]

Further, section 40 provides that registered person shall declare his outward supplies made during said period in the first return furnished by him alter grant of Registration. The format for this return is the same as that for regular return

Q 40 Mr. Gauri Shiva, a registered person in Punjab supplies goods taxable @12% [CCST @ 6%, SCST @ 6% & IGST@ 12%] in the States of Punjab & Haryana. He has furinshed the following details in relation to independent supplies made by him in the quarter ending June 2021:

Supply

Recipient

Nature of supply

Value (Rs.)

1

Mr. A, a registered person

Inter-State

2,20,000

2

Mr. B, a registered person

Inter-State

2,55,000

3

Mr. C, an unregistered person

Intra-State

1,80,000

4

Mr. D, an unregistered person

Intra-State

2,60,000

5

Mr. M, an unregistered person

Inter-State

3,00,000

6

Mr. N, an unregistered person

Inter-State

50,000

7

Mr. O, an unregistered person

Inter-State

2,50,000

8

Mr. P, an unregistered person

Inter-State

2,80,000

9

Mr. Q, a registered person

Intra-State

1,50,000

10

Mr. R, a registered person

Intra-State

4,10,000

The aggregate annual turnover of Mr. Gauri Shiva in the preceding financial year was Rs. 1.20 crore. With reference to rule 59 of the CGST Rules 2017, discuss the manner in which the details of above supplies are required to be furnished in GSTR- 1.

Answer: Rule 59 of the CGST Rules, 2017, inter alia stipulates that the details of outward supplies of goods and/or services furnished in form GSTR-1 shall include the-

a) invoice wise details of all -

  1. inter-State and intra-State supplies made to the registered persons: and
  2. inter-State supplies with invoice value more than Rs.2,50,000       ale to the unregistered persons;

b) consolidated details of all -

  1. intra-State supplies made to unregistered persons for each rate of tax; and
  2. Sate wise inter-State supplies with invoice value upto Rs. 2,50,000 made to unregistered persons for each rate of tax;

Thus, in view of the above-mentioned provisions Mr. Gauri Shiva should furnish the details of outward supplies of goods made by him during the quarter ending June 2021 in the following manner:-

Supply

Recipient

Nature of

supply

Value (Rs.)

Manner of furnishing details

1

Mr. A, a registered person

Inter-State

2,20,000

Invoice-wise details

2

Mr. B, a registered person

Inter-State

2,55,000

Invoice-wise details

3

Mr. C, an unregistered person

Intra-State

1,80,000

Consolidated details of supplies 3 and 4

4

Mr. D, an unregistered person

Intra-State

2,60,000

5

Mr. M, an unregistered person

Inter-State

3,00,000

Invoice-wise details

6

Mr. N, an unregistered person

Inter-State

50,000

Consolidated details of supplies 6 and 7

7

Mr. O, an unregistered person

Inter-State

2,50,000

8

Mr. P, an unregistered person

Inter-State

2,80,000

Invoice-wise details

9

Mr. Q, a registered person

Intra-State

1,50,000

Invoice-wise details

10

Mr. R, a registered person

Intra-State

4,10,000

Invoice-wise details

 

       Chapter-14 (Import & Export under GST)

 

Q 41 Synotex Pvt. Ltd. manufactures taxable goods, Q and exempt goods 'S’. Product 'S’ is sold in international markets without payment of tax under letter of undertaking. The company is registered under GST in the state of Maharashtra.

The company provides the following information in relation to various supplies made by it during a tax period

  1. Product ‘S has been exported to UK for £ 12,000
  2. Product ' has been supplied to Betty Enterprises within India for Rs. 20,00,000 Note: The above amounts are exclusive of taxes, wherever applicable.The company provides the following information in relation to tax paid on inward supplies received during the Said tax period.
  3. GST of Rs. 5,00,000 has been paid on inputs
  4. GST of Rs. 2,40,000 has been paid on capital goods
  5. GST of Rs. 2,00,000 has paid on input services
  6. All the above inputs, input services and capital goods ate used in the manufacturing process

Following additional information is also provided:

(i) Value of product ‘S’ exported to UK in lndian rupees is Rs. 12,00,000. However, value of such product when supplied domestically by the company in similar quantities is Rs. 10,00,000

ii) Betty Enterprises is a 100% export-oriented undertaking. It has claimed the ITC on goods supplied to it by  Synotex Pvt. Ltd.

iii) The balance in the electronic credit ledger of Synotex Pvt. Ld. at the end of the tax period for which the refund claim is being filed after GSTR-3B for the said period has been filed is Rs. 5,80,000.

iv) The balance in the electronic credit ledger of Synotex Pvt. Ltd. at the time of filing the refund application is Rs. 3,00,000.

Compute the amount refundable to Synotex Pvt. Ltd. for the tax period.

Answer: Export of goods 15 a zero rated supply in terms of section 16(1)(a) of the IGST Act, 2017. Section 16(2) of the IGST Act, 2017 stipulates that subject to the provisions of section 17(5) of the CGST Act, 2017, ITC may be availed for making zero-rated supplies even if such supply may be an exempt supply. As per section 54(3)(i) of the CGST Act, 2017, a registered person ay Claim refund, of any unutilized ITC at the end of any tax period in the case of zero rated supply made without payment of tax.

Therefore, in the given case, Synotex Pvt. Ltd. will be eligible to claim ITC for export of exempt product S’ in terms of section 16(2) of the IGST Act, 2017 and will thus, be able to claim refund of unutilized ITC in terms of section 54(3)(i) of the CGST Act, 2017.

As per rule 89(4) of the CGST Rules, 2017, refund of unutilized ITC in case of zero rated supply without payment of tax under letter of undertaking is granted in accordance with the following formula:

Refund Amount =

((Turnover of zero rated supply of goods + Turnover of zero rated supply of Services) / (adjusted total turnover)) × Net ITC

 

(i) Net ITC [i.e. ITC on inputs and input services but not ITC on capital goods

7,00,000

(ii) Turnover of zero-rated supply of goods (Product 'S') [Lower of the value of zero rated supply of goods (Rs. 12,00,000) or the value which is 1.5 times the value of like goods domestically supplied by the Same or, similarly placed, supplier (Rs.

15,00,000)

12,00,000

(iii) Adjusted total turnover

Turnover of Product Q’ = 20,00,000 Turnover of Product S’ = 12,00,000

 

 

 

32,00,000

(iv) Maximum refund = [(Item (ii) ÷ Item (iii)] × Item (i)]

2,62,500

 

Circular No. 125/44/2019-GST dated 18-11-2019 provides that amount refundable to the applicant is least of the following amounts:

  1. Maximum refund amount as per the formula in rule 89(4) of the CGST Rules [Rs. 2,62,500]
  2. Balance in the electronic credit ledger at the end of the tax period for which the refund claim is being filed after GSTR-3B for the said period has been filed [Rs. 5,80,000]
  3. Balance in the electronic credit ledger at the time of filing the refund application [Rs.3,00,000]

Thus, amount refundable to Synotex Pvt. Ltd. of unutilized ITC is Rs. 2,62,500.

Supply of product Q’ to Betty Enterprises, a 100% EOU: Supplies to EOU is notified as deemed export under section 147 vide Notification No. 48/2017-CT dated 18-10-2017. In respect or supplies regarded as deemed exports, the application of refund can be filed by the supplier of deemed export supplies only in cases where the recipient does not avail of ITC on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund [Third proviso to rule 89(1) of the CCST Rules 2017].Therefore, Since in the given case, Betty Enterprises (recipient) is claiming ITC, Synotex Pvt. Ltd. (supplier of deemed exports) cannot claim refund of ITC.

Therefore, amount refundable to Synotex Pvt. Ltd. is Rs. 2,62,500.

 

            Chapter-15 (Refunds)

 

Q 42 - M/s. RLL Ltd. filed an application for refund of tax amounting Rs. 5,00,000 on 1-10-2021. The refund was granted on 25-12-2021. Compute the amount of interest, if any payable to RLL Ltd. as per provisions of Section 56 of the CGST Act, 2017.

Ans. If any tax ordered to be refunded under Section 54(5) to any applicant and such tax is not refunded within 60 days from the date of receipt of application under Section 54(1), interest 6% p.a shall be payable in respect of such refund from the date immediately after the expiry of 60 days from the date of receipt of application till the date of refund of such tax.

The relevant computation is as follows (amounts in Rs.)-

Amount of refund

[A]

5,00,000

Date of making application

[B]

01-10-2021

60 days period from the date of application expires on -

[C]=[B]+60 days

30-11-2021

Date of making refund

[D]

25-12-2021

No of days for which interest to be granted

[E]=[D]-[C]

25

Interest on refund @ 6%

[A] ×[E] ×6% ÷ 365

2,055

 

Q 43 Explain the provisions relating to interest en delayed refunds.

Ans: Interest on delayed refunds Section 56

  1. Interest not exceeding if refund is not paid within 60 days from receipt of application: If
  • any tax ordered to be refunded under Section 54(5) to any applicant, and
  • such tax is not refunded within 60 days from the date of receipt of application under Section 54(1),
  • interest at such rate not exceeding as may be specified in the notification issued by the Government on the recommendations of the Council shall be payable in respect of such refund
  • from the date immediately after the expiry of 60 days from the date of receipt of application under the said sub-Section till the date of refund of such tax.
  • [Interest @6% p.a. has been notified vide Notification No. 13/2017-CT dated 28-6-217 w.e.f. 1-7-2017.]

(2)Refund as a consequence of adjudicating/ appellate authority order - Interest not exceeding 9%, if refund is not paid within 60 days from receipt of application: Where-

  • any claim of refund arises from an order passed by an adjudicating authority or Appellate Authority or Appellate Tribunal or court which has attained finality, and
  • the same is not refunded within 60 days from the  date of receipt  of application filed consequent to such order,
  • interest at such rate not exceeding 9% as may be notified by the Government on the recommendations of the Council shall be payable in respect of such refund,
  • from the date immediately after the expiry of 60 days from the date of receipt of application till the date of refund.
  • Interest @9% p.a. has been notified vide Notification No. 13/2017-CT dated 28-6-2017    w.e.f. 1-7-2017,

3) Refund an a consequence of appellate order-Appellate order deemed to be order passed u/s 54(5: Where any order of refund is made by an Appellate Authority, Appellate Tribunal or any against an order of the proper officer under Section 54(5), the order passed by the Appellate Authority, Appellate Tribunal or by the court shall be deemed to be an order passed under Section 54(5).

 

      Chapter-16 (Job work)

 

Q 44 Alok Pvt Ltd. a registered manufacturer sent steel cabinets worth RS. 50 lakh under a delivery challan to M/s. Prem Tools, a registered job worker, for work on 25-01-2022. The scope of job work included mounting the steel cabinets on a metal frame and sending the mounted panels back to Alok Pvt. Ltd. The metal frame is to be supplied by M/s. Prem Tools. M/s. Prem Tools has agreed to a consideration of Rs. 5 lakh for the entire mounting activity including the supply of metal frame. During the course of mounting activity, metal waste is generated which is sold by M/s. Prem Tools for Rs. 45,000. M/s. Prem Tools sent the steel cabinets mounted on the metal frame of Alok Pvt. Ltd. on 03-12-2022.

Assuming GST rate for metal frame as 28%, for metal waste as 12% and standard rate for services as 18%, you are required to compute the GST liability of M/s. Prem Tools. Also, give reasons(s) for inclusion or exclusion of the value of cabinets in the job charges for the purpose of payment of GST by M/s. Prem Tools.

Ans. As per para 3 of Schedule ll to the CGST Act, any treatment or process which is applied to another person's goods is a supply Or Services and accordingly is subject to GST rate applicable for services.

In the given case, M/s. Prem Tools (job worker) undertakes the process of mounting the steel cabinets Of Alok pvt. Ltd. (principal) on metal frames. In view of para 3 of Schedule II to the CGST Act, the mounting activity classifies as service even though metal frames are also supplied as a part of the mounting activity. Accordingly, the job charges will be chargeable to rate of 18%, which is the applicable rate for services.

Further, the value of steel cabinets will not be included in the value of taxable Supply made by M/s. Prem Tools as the supply of cabinets does not fall within the scope of supply to be made by M/s. Prem Tools. M/s. Prem Tools is only required to mount the steel cabinets, which are to be supplied by Alok Pvt. Ltd. on metal frames, which are to be supplied by it.

As regards sale of waste generated during the job work, since M/s. Prem Tools is registered, the tax leviable on the supply will have to be paid by it in terms of Section 143(5) of the CGST Act. Such supply will be treated as supply of goods and subject to GST rate applicable for metal waste.

Accordingly, the GST liability of /s. Prem Tools Will be computed as under (amount in Rs.):

 

job charges

5,00,000

GST@ 18% [A]

90,000

 

Sale of metal waste

45,000

GST@ 12% [B]

5,400

Total GST payable [A] + [B]

95,400

 

Q 45 Explain the provisions relating to rectification of error apparent on the face of record under section 161l of the CGST Act 2017.

Ans. Rectification of errors apparent on the face of record [Section 161]: This Section provides for rectification of mistakes/ errors apparent on the face of record by any authority. It may be noted that this section overrides the entire Act excerpt for the provisions of Section 160.

Documents covered u/s 161

  • Decision
  • Order
  • Any notice
  • Certificate
  • Any other document

Rectifying Authority

Any authority who has passed or issued any decision or order or notice or certificate or any other document may rectify any error which is apparent on the face of record in such

documents.

Type of mistakes or errors which can be rectified

 

Errors or mistakes which are apparent on the face of record may be rectified. Rectification can only be of error apparent from record. lt is a settled law that a decision on a debatable

point of law is not a mistake apparent from the record

 

When     does     the                 Authority rectify the mistakes/errors

 

The authority may rectify the mistake/error a

 

  • Suo moto

 

  • when such error or mistake is brought to its notice by a GST officer
  • when such error or mistake is brought to notice by the affected person within a period of 3 months from the date of issue of such decision or order or notice or

certificate or any other document as case may be.

 

Time limit for rectification

 

No rectification can be done after a period of 6 months from the date of issue of such decision/order/notice/certificate/ any other document. However, such time limit does not apply in cases where the rectification is purely in the nature of correction of a clerical or arithmetical error or mistake,

arising from any accidental slip or omission.

Hearing    if                   rectification                   goes adverse to assessee

Principles of natural justice should be followed by the authority carrying out such rectification, if such rectification

adversely affects any person.

 

Q 46 P Ltd. sends the goods/inputs to JB & Co. for further processing on 30-08-2021. The value of goods sent for Job work is Rs. 1,00,000. What are the tax implications, in following cases, if GST @ 18% is levied:

  1. JB & Co sends the processed goods back to P Ltd on 30-10-2021
  2. JB & Co sends the processed goods back to P Ltd on 30-10-2023 and extension of one year has been obtained from the Commissioner.

Make suitable assumptions as required.

Ans. As per Section 143 of the Ac. Principal can remove the goods without payment of tax and take input tax credit provided inputs sent for job work are returned back within one year of removal. Otherwise, it shall be treated as supply from principal to Job worker as on 30-08-2021 and subject to tax along with interest.

In the present case, as the inputs are received back on 30-10-2021 i.e. before completion of one year, and hence no tax is payable.

In the present case, the goods are received after the period of two years (one year original period and one year extension) and hence. P Ltd. needs to pay tax along with the interest on the supply made by him to JB & Ca. Hence, P Ltd needs to pay Rs. 9,000 (CGST) and Rs. 9,000 (SGST) along with specified interest thereon.

 

          Chapter-17 (Assessment & Audit)

 

Q 47 Explain the recourse that may be taken by the officer in case proper explanation is not furnished for the discrepancy detected in the return filed, while conducting scrutiny /s 61 of the CGST Act, 2017.

Ans: Scrutiny of returns [Section 61 read with Rule 99 of CGST Rules, 2017]

  1. Serutiny of returns- Discrepancies to be informed and explanations to be sought [Section 61(1]: The proper officer may-
  • Scrutinize the return and related particulars furnished by the registered person
  • to verify the correctness of the return, and
  • Inform him of the discrepancies noticed, if any, in such manner as may be prescribed, and
  • seek his explanation there to

2) Issue of notice [Rule 99]: In case any discrepancy is found during scrutiny of return, proper officer shall issue a notice to the said person informing him of such discrepancy and seeking his explanation thereto within such time, not exceeding 30 days from the date of service of the notice, or such further period as may be permitted by him and also, where possible, quantifying the amount of tax, interest and any other amount payable in relation to such discrepancy.

3) Reply to notice [Rule 99]: The registered person to whom notice is issued may-

  • accept the discrepancy as mentioned in the notice and pay the tax, interest and any other amount arising from such o discrepancy and inform the same or furnish an explanation for the discrepancy to the proper officer or.
  • submit his explanation regarding non-acceptance of discrepancy within a period of 30 days of being informed by the proper officer or such further period as may be permitted by him.

4) Explanations found acceptable- No further action [Sec. 61(2)]: In case the explanation is found acceptable the registered person shall be informed accordingly and no further action shall be taken in this regard.

(5) Explanations not found acceptable - Audit, Inspection or notice by proper officer [Section 61(3)]: in case-

  • no satisfactory explanation is furnished within a period of 30 days of being informed by the proper officer or such further period as may be permitted by him; or
  • where the registered person, after accepting the discrepancies, fails to take the corrective measure in his return for the month in which the discrepancy is accepted, the proper officer may take recourse to any of the following provisions, namely-
  1. proceed to conduct audit under Section 65 of the Act
  2. direct the conduct of a special audit under Section 66 which is to be conducted by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner; or
  3. undertake procedures of inspection, search and seizure under Section 67 of the Act; or
  4. initiate proceeding for determination of lax and other dues under Section 73 or 74 of the Act.

 

Q 48 Explain the provisions relating to assessment of non filers of return. OR

Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act, 2017?

Ans. Assessment of non-filers of returns [Section 62 read with Rule 100 of CGST Rules, 2017]

  1. Best judgment assessment of non filers [Section 62(1)]: Notwithstanding anything to the contrary contained in Section 73 or Section 74, where a registered person-
  • fails to furnish the return under Section 39 (monthly/quarterly) or under Section 45 (final return). and
  • a notice under Section 46 has been issued by proper officer to the defaulting taxable person requiring him given to time; furnish the return within a period of 15 days and taxable person fails to file return within the given time;

the proper officer may proceed to assess the tax liability of said person to the best of his judgment taking into account all the relevant material which is available or which he has gathered.

 

2) Time limit for Assessment Order-5 years from due date of annual return: The order of Best Judgment assessment shall be issued by Proper Officer in the FORM GST ASMT-13 and a summary thereof shall be uploaded electronically in FORM GST DRC-07.

The Assessment Order shall be issued by Proper Officer within a period of 5 years from the date specified under Section 44 for furnishing of the annual return for the financial year to which the tax not paid relates.

Example: lf a person defaults in filing of return for any tax period falling in F.Y. 2021-22, period of 5 years shall be reckoned from the due date of filing of Annual Return for F.Y. 2021-22 i.e. 31-12-2022. Accordingly, Best judgment Assessment can be made by Proper Officer on or before 31-12-2027.

3) Valid return furnished within 30 days of service of assessment order - Best judgment assessment shall stand withdrawn [Section 62(2)]: Where the registered person furnishes a valid return within 30 days of the service of the assessment order under Section 62(1), the said assessment order shall be deemed to have been withdrawn but the liability for payment of interest under Section 50(1) or for payment of late fee under Section 47 shall continue.

 

Q 49 Write a brief note on Summary Assessment in certain special cases as per section 64 of the CGST Act, 2017.

Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act, 2017?

Ans: Summary assessment in certain special cases [Section 64 read with Rule 100 of CGST Rules, 2017]

  1. When Summary Assessment/ Protective assessment can be made [Section 64(1)]: Summary Assessment can be initiated to protect the interest of revenue with the previous permission of Additional Commissioner/ Joint Commissioner when:
  • the proper officer has evidence that a taxable person has incurred a liability to pay tax under the Act and,
  • the proper officer has sufficient grounds to believe that delay in passing an assessment order may adversely affect the interest of revenue.

 

Taxable person not ascertainable- Person in charge of goods deemed to be the taxable person: Where the taxable person to whom the liability pertains is not ascertainable and such liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to be assessed and liable to pay tax and any other amount due under this Section.

The summary of the assessment order shall be uploaded electronically on the common portal in

Form GST DRC-07.

2) Withdrawal of summary assessment order if the same is found to be errorneous: The Summary Assessment Order may be withdrawn by Additional Commissioner/Joint Commissioner,-

  1. on an application filed by taxable person for withdrawal of the summary assessment order within 30 days from the date of receipt of order, or
  2. on his own motion, where he finds such order to be erroneous and may instead follow the procedures laid down in Section 73 or Section 74 to determine the Lax liability of such taxable person.[Section 64(2)]

 

        Ch- 18 (Inspection, Search, Seizure and Arrest)

 

Q 50 Explain the safeguards provided under section 69 of CGST Act, 2017, to a person who is placed under arrest?

Ans: The relevant provisions are discussed as under —

  1. Officer empowered by Commissioner has power to arrest: The Commissioner is vested with the power to authorise (by an order) any CGST Officer to arrest a person, where there is a reason to believe that such person has committed the specified alleged offences.
  2. Person committing specified offences is liable to be arrested [Section 69(1)]: The person committing an offence under section 132(1)(a)/(b)/(c)/(d) and punishable under Section 132(1)(i) and Section 132(1)(ii) or Section 132(2) can be arrested by a CGST officer upon authorization by the Commissioner.

This essentially means that a person can be arrested only where the tax evasion is more than 2 crore. However, the monetary limit shall not be applicable if the offences are committed again even after being convicted earlier i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount involved in the case.

3. Arrest of person in case of cognizable and non bailable offence [Section 69(2)]: Where a person is arrested under this Section for an offence specified under section 132(5) i.e. cognizable and non bailable offence, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within 24 hours.

4. Provisions relating to Bail in case of non-cognizable and bailable offence [Section 69(3)]:

Subject to the provisions of the Code of Criminal Procedure, 1973,-

  1. Where a person is arrested under section 69(1) for any offence specified under section 132(4) i.e. non-cognizable and bailable offence, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate.
  2. In the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.

 

             Ch- 19 (Demands and Recovery)

 

Q   51. Discuss provisions of CGST, Act, 2017, which provides for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful misstatement or suppression of facts.

Ans: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful-misstatement or suppression of facts (Section 74)

(1)Demands pertaining to fraud or any wilful-misstatement or suppression of facto [Section 74(1)1: In case --

  • If any tax has not been paid, or
  • If any tax has been short paid, or
  • If any tax erroneously refunded, or
  • Where input tax credit has been wrongly availed or utilised by reason of —
  • Fraud, or
  • Any wilful-misstatement, or
  • Suppression of facts to evade tax, by any person chargeable with tax the following provisions will apply—

Service of SCN: The proper officer shall serve notice on the person chargeable with tax which has not been so paid or which the has been so short paid or to whom e refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under Section 50 and a penalty equivalent to the tax specified in the notice.

The notice should state the grounds based on which such demand is raised, so that the person against whom the notice is served is made aware of the basis of the demand.

2. Time limit for issue of notice - At least 6 months prior to issue of order [Section 74(2)]: The proper officer shall issue the notice under Section 74(1) at least 6 months prior to the time limit for passing the order determining the amount of tax, interest and penalty payable by defaulter. The said order has to be passed within 5 years from the due date for furnishing the Annual Return for the Financial Year to which the tax not paid/short paid/ITC wrongly availed/utilised relates to or within 5 years from the date of erroneous refund.

Thus, the time limit for issuance of SCN is 4 years and 6 months from the due date of filing of Annual Return for the Financial Year to which the demand pertains or from the date of erroneous refund.

3. Service of a statement for subsequent period Section 74(3): Where a notice has been issued for any period under Section 74(1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for such periods other than those covered under Section 74(1), on the person chargeable with tax.

4. Service of a statement to be deemed to be service of SCN if grounds relied upon are same as mentioned in earlier SCN [Section 74(4)]: The service of such statement shall be deemed to be service of notice on such person subject to the condition that the grounds relied upon in the said statement, except the grounds of fraud or any wilful misstatement or suppression of facts to evade tax for such a periods (as covered in the statement) are the same as are mentioned in earlier notice.

5. Voluntary payment of tax and interest and penalty @15% of tax before issue of SCN/ Statement [Section 74/5]: The person chargeable with tax may, before service of notice u/s 74(1) pay the amount of tax along with interest payable under Section 50 and a penalty equivalent to 15% o of such tax on the basis of -

  • His own ascertainment of such tax, or
  • The tax as ascertained by the proper officer.

Written intimation to the proper officer of such voluntary payment: The person, who has so paid the tax voluntarily, shall inform the proper officer of such payment in writing

6. No SCN would be issued in respect of the amount so paid Section 74(6): The proper officer on receipt of such information shall not serve any notice, in respect of the tax so paid or any penalty payable under the provisions of this Act or the rules made there under. The matter closes at this stage itself.

7. SCN to be issued for recovery if amount is short paid Section 74(7): Where the proper officer is of the opinion that the amount voluntarily paid falls short of the amount actually payable, he shall proceed to issue the notice in respect of such amount which falls short of the amount actually payable.

8. It tax, interest and penalty @ 25% of tax is paid within 30 days of issue of notice - Deemed conclusion of proceedings (Section 74(8)]: Where any persists chargeable with tax pays the said tax along with interest payable under Section 50 and a penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings in respect of the said notice shall be deemed to be concluded.

In other words, where suds person pays the tax demanded along with interest payable under Section 50 and a penalty equivalent to 25% of such as within 30 days of issue of SCN, all proceedings in respect of the said notice shall be deemed to be concluded.

9. Adjudication Order [Section 74(9)]: The proper. officer shall, after considering the representation, if any, made be the person chargeable with determine the amount of tax, interest and penalty due from such an The summary of order shall be uploaded electronically in form GST DRC-7, specifying the amount of tax, interest and penalty payable.

10. Time limit for issue of adjudication order - 5 years from the due date for furnishing of annual return erroneous refund Section 74(10): The proper officer shall issue the adjudication order within a period of 5 years from the due date for furnishing of annual return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or utilised relates to or within 5 years from the date of erroneous refund.

Section 44(1) of the CGST Act stipulates that annual return for a financial year needs to be filed by 31" December of the next financial year.

11. If tax, interest and penalty @ 50% of tax is paid within 30 days of communication of adjudication order Deemed conclusion of proceedings Section 74(11)]: Where any person served with an adjudication order pays the tax along with interest payable thereon under Section 50 and a penalty equivalent to 50% of such tax within 30 days of communication of the order, all proceedings in respect of the said notice shall be deemed to be concluded.

 

      Ch – 20 (Liability to Pay in Certain Cases)

 

Q 52. Explain the provisions of Liability in case of company in liquidation.

Ans: Liability in case of company in liquidation [Section 88]:

  1. Intimation by liquidator of a company of his appointment to Commissioner [Section 87(1)]: When any company is being wound up whether under the orders of a court or Tribunal or otherwise, every person appointed as receiver of any assets of a company (hereafter in this section referred to as the "liquidator"), shall, within 30 days after his appointment, give intimation of his appointment to the Commissioner.
  2. Commissioner to notify the amount due from such company [Section 87(2)]: The Commissioner shall -
  • after making such inquiry or calling for such information as he may deem fit,
  • notify the liquidator within 3 months from the date on which he receives intimation of the appointment of the liquidator,
  • the amount which in the opinion of the Commissioner would be sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become, payable by the company.

3. Private company in liquidation Director liable [Section 88(3)]: When any private company is wound up and any tax, interest or penalty determined under this Act on the company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then every person who was a director of such company at any time during the period for which the tax was due shall, jointly and severally, be liable for the payment of such tax, interest or penalty.

Exceptions: The director of a private company shall not be held liable if he proves to the satisfaction of the Commissioner that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

 

Q 53. Discuss the liability of the retiring partner of a firm to pay any tax, interest or penalty, if any, leviable on the firm under CGST/IGST7SGST Act.

Ans: Liability of partners of firm to pay tax [Section 90]:

  1. Firm and all partners of firm jointly and severally liable: Notwithstanding any contract to the contrary and any other law for the time being in force, where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the firm shall, jointly and severally, be liable for such payment.
  2. Intimation of retirement of partner to the Commissioner: Where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date.
  3. Intimation not given within one month of retirement Liability of retiring partner continues: If no such intimation is given within one month from the date of retirement, the liability of such partner under the first proviso shall continue until the date on which such intimation is received by the Commissioner.

              Ch-21 (Offences and Penalties)

 

Q 54: From the following details, calculate the amount to be paid, for release of goods detained or seized under section 129 of the CGST Act, 2017, if owner of the goods does not come forward for payment of applicable tax and penalty. Details are as follows:

Particulars

Amount (Rs.)

Value of goods

30,00,000

Applicable GST on such goods

5,40,000

GST already paid on such goods

3,60,000

Would your answer be different, if goods were exempted from GST and value remains the same namely 30,00,000?

Ans: Where owner does not come forward for payment of such tax and penalty, the goods shall be released:

  • On payment of the applicable tax and penalty equal to the 50% of the value of the goods reduced by the tax amount paid thereon,

= [Rs. 30,00,000 x 50%) – Rs. 3,60,000]

= Rs. 1,140,000

  • in case of exempted goods, on payment of-

a) an amount equal to 5% of the value of the goods,

(b) 25,000,

whichever is less.

= (Rs. 30,00,000 x 5%) i.e. Rs. 150,000 or Rs. 25,000 whichever is less.

= 25,000

Q 55: Where an offence under the GST law is committed by a taxable person being a trust, who are deemed to be guilty of the offence and under what circumstances? When do the relevant provisions become inapplicable in respect of individuals concerned with the trust?

Ans: Offences by companies [Section 137]

  1. Person in charge as well as Company liable for Offence [Section 137(1)]: Where an offence committed by a person under this Act is a company,-

a) every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company,

b) as well as the company,

shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

2. Liability of Director/ Manager/ Secretary/ Other Officer [Section 137(2)]: Where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of,-

  1. any director,
  2. manager,
  3. secretary, or
  4. other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

3. Offences by LLP/ Firm/ HUF/ Trust - Partner or Karta or Managing Trustee liable [Section 137(3)]: Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of Section 137(2) shall, mutatis mutandis, apply to such persons.

4. Person not liable in certain cases [Section 137(4)]: Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Explanation:

i) "Company" means a body corporate and includes a firm or other association of individuals; and

ii) "Director", in relation to a firm, means a partner in the firm.

 

Q 56: Department initiated prosecution proceedings against a taxable person who had evaded GST of Rs. 4.2 crores. He has approached the Commissioner with a request for compounding the offence. After considering the request, the Commissioner has directed him to pay an amount of 2.5 crores as compounding amount. Indicate the minimum and maximum limits for compounding amount. Is the amount fixed by the Commissioner in this case within the limits prescribed under the law? What is the consequence of the decision or the commissioner allowing the request for compounding the offence?

Ans: Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed. Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences.

The minimum limit for compounding amount is to be the higher of the following amounts:

(i) 50% of tax involved, or

(ii) Rs. 10,000.

The upper limit for compounding amount is to be higher of the following amounts:

(i) 150% of tax involved, or

(ii) Rs. 30,000.

Thus in this case the compounding amount can range from 50% of Rs. 4.2 crores i.e. Rs. 2.1 crores to 150% of Rs. 4.2 crores i.e. Rs. 6.3 crores. Thus, Rs. 2.5 crores compounding amount is within the permissible limit.

On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

         Ch-22 (Appeals and Revisions)

 

Q 57: Compute the quantum of pre-deposit required to be made under Section 107 of the CGST Act, 2017 in each of the following independent cases:

  1. In an order dated 18-10-2021 issued to M/s. RR Ltd., the Joint Commissioner of central tax has confirmed on a tax demand of Rs. 45,00,00,000. M/s. RR Ltd. has admitted Rs. 5,00,00,000 as tax liability and intends to file an appeal with the Commissioner (Appeals) against tax demand of Rs. 40,00,00,000.
  2. In an order dated 18-10-2021 issued to M/s. KK Ltd, the Joint Commissioner of central tax has confirmed a tax demand of T 45,00,000 and imposed a penalty of 5,00,000 M/s. KK Ltd. intends to file an appeal with the Commissioner (Appeals) against the said order

Ans:   (1) Section 107(6) of the CGST Act, 2017 require an appellant before Appellate authority to pre-deposit full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order subject to maximum of Rs. 25 crore. Thus, RR Ltd. has to pre- deposit Rs. 5,00,00,000 (admitted tax) and 10% of Rs. 40,00,00,000 (tax in dispute) = Rs. 9,00,00,000.

(2) Section 107(6) of the CGST Act, 2017 require an appellant before Appellate authority to pre- deposit full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order subject to maximum of Rs. 25 crore. In this case since entire amount of tax demanded is in dispute, hence KK Ltd. has to pre-deposit 10% of Rs. 45,00,000 = Rs. 4,50,000.

 

Q 58: Rule 112 of the CGST Rules lays down that the appellant shall not be allowed to produce before the Appellate authority (AA) or the Tribunal any evidence, whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the AA.

What are the exceptional circumstances specified in the rule where the production of additional evidence will be allowed? Can AA or the Tribunal direct production of any document or examination of any witness?

Ans: Production of additional evidence before the Appellate Authority or the Appellate Tribunal [Rule 112]

  1. General bar on production of additional evidences [Rule 112(1)]: The appellant shall not be allowed to produce before the Appellate Authority or the Appellate Tribunal any evidence whether oral or documentary, other than the evidence produced by him during the course of the proceedings before the adjudicating authority or, as the case may be, the Appellate Authority except in the following circumstances, namely:

a) Refusal by lower authority: where the adjudicating authority or, as the case may be, the Appellate Authority has refused to admit evidence which ought to have been admitted; or

b) Appellant could not furnish evidence due to sufficient cause despite demanded by lower authority where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the adjudicating authority or, as the case may be, the Appellate Authority; or

c) Appellant could not furnish evidence which is relevant to any ground of appeal where the appellant was prevented by sufficient cause from producing before the adjudicating authority or, as the case may be, the Appellate Authority any evidence which is relevant to any ground of appeal; or

d) Lower authority did not allow opportunity to appellant to adduce evidence where the adjudicating authority or, as the case may be, the Appellate Authority has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

2. Reasons for Admission to be Recorded in Writing Rule 112(2)]: No evidence shall be admitted unless the Appellate Authority or the Appellate Tribunal records in writing the reasons for its admission.

3. Opportunity to department to Cross Examine or to Rebut Evidence [Rule 112(3)]: The Appellate Authority or the Appellate Tribunal shall not take any evidence produced unless the adjudicating authority or an officer authorised in this behalf by the said authority has been allowed a reasonable opportunity

a) to examine the evidence or document or to cross-examine any witness produced by the appellant; or

b)to produce any evidence or any witness in rebuttal of the evidence produced by the appellant.

4. Appellate bodies can direct for production of Documents/ Examination of any Witness [Rule 1124)]: Nothing contained in this rule shall affect the power of the Appellate Authority or the Appellate Tribunal to direct the production of any document, or the examination of any witness, to enable it to dispose of the appeal.

 

         Ch- 23 (Advance Ruling)

 

Q 59: Discuss briefly provisions of CGST Act, 2017 regarding questions for which advance ruling can be sought.

Ans: Questions for which advance ruling can be sought [Section 97(2)]: Advance Ruling can be sought for the following questions-

  1. classification of any goods or services or both;
  2. applicability of a notification issued under provisions of this Act;
  3. determination of time and value of supply of goods or services or both
  4. admissibility of input tax credit of tax paid or deemed to have been paid;
  5. determination of the liability to pay tax on any goods or services under the Act;
  6. whether applicant is required to be registered under the Act;

(8) whether any particular thing done by the applicant with respect to any goods or services

amounts to or results in a supply of goods or services, within the meaning of that term.

Note:

  1. AAR can take issue relating to place of supply: The Kerala High Court in Sutherland Mortgage Services Inc. v. PCCC, CGST & CEx. [2020] 35 GSTL 40 (Ker.) has held that AAR can take question relating to place of supply. The issue relating to determination of place of supply, which is one of the crucial issues to be determined as to whether or not it fulfills the definition of place of service, would also come within the ambit of the larger of issue of "determination of liability to pay tax on any goods or services or both as env1sage in Section 97(2)(e) of the CGST Act. Thus, AAR has jurisdiction to address issue relating to place of supply
  2. Liability to deduct TDS cannot be decided by AAR: In Kandla Port Trust (Deendayal Port Trust), In re 2018] 98 taxmann.com 139 (AAR-Gujarat), it was held that Issue as to 'whether applicant-port trust is liable to deduct 1TDS under section 51' does not fall in category of section 97(2) of CGST Act, 2017.
  3. Recipient of g0ods or services cannot apply for advance ruling: Recipient of goods or services cannot apply for advance ruling where tax is payable by supplier and there is no reverse charge – Visvesvaraya National Institute of Technology, Nagpur, In re [2018] 69 GST 621 (AAR).

 

Q 60: Ranjan intends to start selling certain goods in Delhi. However, he is not able to determine (i) the classification of the goods proposed to be supplied by him [as the classification of said goods has been contentious]; and (ii) the place of supply if he supplies said goods from Delhi to buyers in U.S.

Ranjan's tax advisor has advised him to apply for the advance ruling in respect of these issues. He told Ranjan that the advance ruling would bring him certainty and transparency in respect of the said issues and would avoid litigation later. Ranjan agreed with his view, but has some apprehensions.

In view of the information given above, you are required to advise Ranjan with respect to following:

  1. The tax advisor asks Ranjan to get registered under GST law before applying for the advance ruling as only a registered person can apply for the same. Whether Ranjan needs to get registered?
  2. Can Ranjan seek advance ruling to determine (a) the classification of the goods proposed to be supplied by him and (b) the place of supply, if he supplies said goods from Delhi to buyers in U.S?
  3. Ranjan is apprehensive that if at all advance ruling is permitted to be sought, he has to seek it every year. Whether Ranjan's apprehension is correct?
  4. The tax advisor is of the view that the order of Authority for Advance Ruling (AAR) is final and is not appealable. Whether the tax advisor's view is correct?
  5. Sambhav - Ranjan's friend - is a supplier registered in Delhi. He is engaged in supply of the goods, which Ranjan proposes to supply at the same commercial level that Ranjan proposes to adopt. He intends to apply the classification of the goods as decided in the advance ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi. Whether Sambhav can do so?

Ans: (1) Registration not mandatory for Advance Ruling: As per provisions of Section 95(©) of the CGST Act, 2017, Advance ruling under GST can be sought by a registered person or a person desirous of obtaining registration under GST law. Therefore, it is not mandatory for a person seeking advance ruling to be registered.

2. Classification issue can be raised: Section 97(2) of the CGST Act, 2017 stipulates the questions/matters on which advance ruling can be sought. It provides that advance ruling can be sought for, inter alia, determining the classification of any goods or services or both. Therefore, Ranjan can seek the advance ruling for determining the classification of the goods proposed to be supplied by him.

Place of supply issue cannot be raised: Determination of place of supply is not one of the specified questions/matters on which advance ruling can be sought under Section 97(2). Further, Section 96 of the CGST Act, 2017 provides that AAR constituted under the provisions of an SGST Act/UTGST Act shall be deemed to be the AAR in respect of that State/Union territory under CGST Act also.

Thus, AAR is constituted under the respective State/Union Territory Act and not the central Act. This implies that ruling given by AAR will be applicable only within the jurisdiction of the concerned State/ Union territory.

It is also for this reason that the questions on determination of place of supply cannot be raised with the AAR. Hence, Ranjan cannot seek the advance ruling for determining the place of supply of the goods proposed to be supplied by him.

Alternative view relating to place of supply issue: However, the Kerala High Court in Sutherland Mortgage Services Inc. v. PCCC, CGST & CEx. 2020] 35 GSTL 40 (Ker.) has held that the question relating to determination of the liability to pay tax on goods and/or services as provided under section 96(2)(e) of the CGST Act 2017 encompasses within its ambit the question relating to place of Supply. This is so because place of supply is one of the factor to determine as to whether the supply is leviable to CGST & SGST or IGST.

3. Advance Ruling to be binding: Section 103(2) of the CGST Act, 2017 stipulates that the advance ruling shall be binding unless the law, facts or circumstances supporting the original advance ruling have changed. Therefore, once Ranjan has sought the advance ruling with respect to an eligible matter/question, it will be binding till the time the law, facts and circumstances supporting the original advance ruling remain same.

4. Appeal can be filed against such ruling: No, the tax advisor's view is not correct. As per Section 100 of the CGST Act, 2017, if the applicant is aggrieved with the finding of the AAR, he can file an appeal with Appellate Authority for Advance Ruling (AAAR). Similarly, if the concerned/jurisdictional officer of CGST/SGST does not agree with the findings of AAR, he can also file an appeal with AAAR. Such appeal must be filed within 30 days from the receipt of the advance ruling. The Appellate Authority may allow additional 30 days for filing the appeal, if it is satisfied that there was a sufficient cause for delay in presenting the appeal.

5. Applicability only for applicant and not to others: Section 103 of the CGST Act provides that an advance ruling pronounced by AAR is binding only on the applicant who had sought it and on the concerned officer or the jurisdictional officer in respect of the applicant. This implies that an advance ruling is not applicable to similarly placed other taxable persons in the State. It is only limited to the person who has applied for an advance ruling.

Thus, Sambhav will not be able to apply the classification of the goods that will be decided in the advance ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi.

 

         Ch-24 (Miscellaneous Provisions)

 

Q 61: What are the duties of National Anti-profiteering Authority enumerated in the CGST Act?

Ans: Duties of the Authority [Rule 127 of CGST Rules, 2017]: It shall be the duty of the Authority-

  1. Determination whether tax reduction benefits passed on to Recipients: Determine whether any reduction in the rate of tax on any supply of goods or services or the benefit of input tax credit has been passed on to the recipient by way of commensurate reduction in prices
  2. Identification of registered persons who has not passed the Benefits: To identify the registered person who has not passed on the benefit of reduction in the rate of tax on supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices.

3. Passing of Relevant Order: To order,-

  1. reduction in prices;
  2. return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest@ 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount not returned, as the case may be, in case the eligible person does not claim return of the amount or is not identifiable, and depositing the same in the Consumer Welfare Fund;
  3. imposition of penalty as specified in the Act; and
  4. cancellation of registration under the Act.

4. to furnish a performance report to the Council by the 10th day of the close of each quarter.

 

Q 62:. Write a note on orders of Anti profiteering authority.

Ans: The relevant provisions are discussed as under-

  1. Order of the Authority [Rule 133 of CGST Rules, 2017]

Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order-

  1. reduction in prices;
  2. return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest 18% from the date of collection of the higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be;
  3. the deposit of an amount equivalent to 50% of the amount determined under the above clause along with interest 18% from the date of collection of the higher amount till the date of deposit of such amount in the Fund constituted under section 57 and the remaining 50% of the amount in the Fund constituted under section 57 of the GST Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable;
  4. imposition of penalty as specified under the Act; and
  5. cancellation of registration under the Act.

"Concerned State" means the State in respect of which the Authority passes an order.

2. Other Aspects: The following are noteworthy in this regard-

  • Any order passed by the Authority shall be immediately complied with by the registered person failing which action shall be initiated to recover the amount.
  • The Authority will pass order within 6 months from the date of the receipt of the report from the Director General of Anti-profiteering.
  • The Authority may seek the clarification, if any, from the Director General of Anti Profiteering on the report submitted by him.
  • An opportunity of being heard will be given, if the interested parties request for it in writing.
  • Period of interest will be calculated from the date of collection of higher amount till the date of return of such amount.
  • If the eligible person (i.e, the buyer) does not claim the return or the person is unidentifiable then the amount must be deposited to the Consumer Welfare Fund along with applicable interest.
  • Where upon receipt of the report of the Director General of Anti-profiteering, the Authority has reasons to believe that there has been contravention of the provisions of section 171 in respect of goods or services or both other than those covered in the said report, it may, for reasons to be recorded in writing, within 6 months, direct the Director General of Anti- profiteering to cause investigation or inquiry with regard to such other goods or services or both, in accordance with the provisions of the Act and these rules. The investigation or enquiry shall be deemed to be a new investigation or enquiry and all the provisions of rule 129 shall mutatis mutandis apply to such investigation or enquiry.