Part 4 - Indirect Taxes - PDF Flipbook
Part 4 - Indirect Taxes
420 Views
69 Downloads
PDF 60,686,941 Bytes
INDIRECT 59th year of continuous publication
TAXES
PART-4 BCAS
Referencer
2021-22
Yoga
7 Chakra Yoga Yoga Sutras of Patanjali
Maharishi Patanjali
International Yoga Day
Yoga योग
Yoga has been thought to date back to pre-vedic Indian traditions, possibly 3000 BCE. The earliest recorded
mention of the word ‘yoga’ is in the ancient Indian text, the Rig Veda. In the 3rd Century BCE, the word
“yoga” became common in other Indian religions as well.
In the 5th century, yoga was meant for meditation and religious use, but not as a form of workout. At around
the same time, the concept became even more established among the Jains, Buddhists, and Hindus. The first
versions of yoga were meant for spiritual practices and revolved around several core values.
Patanjali’s sutras compiled sometime between 500 BCE and 400 CE actually organized the ancient knowledge
of yoga into a systematic format. Today, Yoga is practised with a variety of methods not only in India but
globally and the United Nations General Assembly has even announced 21st June as the International Day of
Yoga.
Indirect Taxes Indirect Taxes
Contents Page
4.1
Subject 4.1
Goods and Services Tax (GST) 4.7
1. Supply With Schedules 4.15
2. Classification of Goods and Services 4.27
3. Reverse Charge Mechanism Under Goods and Services Tax (GST) 4.29
4. Time of Supply 4.34
5. Valuation of Supplies in GST 4.47
6. Place of Supply 4.54
7. Input Tax Credit (ITC) 4.58
8. Transitional Provisions 4.65
9. Registration Under GST 4.74
10. Returns 4.78
11. Accounts and Records 4.82
12. E-Way Bill 4.84
13. Refund 4.85
14. Interest 4.86
15. Assessments and Audits 4.91
16. Penalties & Prosecution 4.91
Customs 4.91
1. Background 4.91
2. Some Important Definitions 4.92
3. Levy of Customs Duty 4.94
4. Types of Duties 4.95
5. Classification of Goods under The Customs Tariff Act, 1975 4.96
6. Date For Determining Rate of Duty and Valuation 4.102
7. Valuation of Goods 4.104
8. Procedure of Import 4.105
9. Warehousing 4.105
10. Audit 4.106
11. Advance Rulings 4.108
12. Demand, Recovery and Refund of Duty 4.108
13. Interest 4.110
14. Penalties 4.111
15. Prosecution 4.112
16. Settlement of Cases 4.114
17. Customs Duty Drawbacks 4.123
Maharashtra Profession Tax 4.136
Maharashtra Value Added Tax 4.iii
Service Tax
Indirect Taxes
Goods and Services Tax (GST)
Goods and Services Tax (GST)
1. Supply with Schedules recommendations of the GST Council
has notified specific categories of supply
A. Charging section – Forward Charge of goods and services vide Notifications
1. Section 9(1) of Central Goods and Services 04/2017 – Central Tax (Rate) and 13/ 2017
- Central Tax (Rate) dated 28.06.2017 (as
Tax Act, 2017 (CGST Act) governs levy of amended from time to time) where the tax
GST on all intra-state supplies of goods or would be required to be paid by the recipient
services or both other than on the supply under reverse charge mechanism.
of alcoholic liquor for human consumption.
Similarly, Section 5(1) of Integrated Goods 2. Section 9 (4) provides that in case of
and Services Tax Act, 2017 (IGST Act) supplies received from unregistered persons,
governs the levy of GST on all inter-state the person receiving the goods and/ or
supplies of goods or services. Proviso to services shall be liable to pay tax on reverse
section 5 (1) provides for IGST to be levied charge. The levy has been exempted
on import of goods and to be collected in w.e.f. 13.10.2017 vide notification dated
accordance with the provisions of Section 3 38/2017 – Central Tax (Rate). Further,
of Customs Tariff Act, 1975. w.e.f. 01.02.2019, this section has been
amended and it now provides for levy of
2. The GST on all intra-state and inter- GST only on notified registered persons in
state supplies would be levied on the respect of notified supplies received from
value determined under Section 15 of the unregistered persons under the reverse
CGST Act as per the rates notified by the charge mechanism. Refer the Reverse
Government, on the recommendation of the Charge Mechanism Chapter for the notified
GST Council. Further, Proviso to Section class u/s. 9(4).
5 (1) of IGST Act provides for valuing the
goods imported as per the Customs Tariff 3. It is important to note that the tax liability
Act, 1975 and the GST to be levied at the under RCM is mandatorily to be paid in
point when custom duties are levied on the cash and the person receiving supplies
said goods at the time of clearance. liable to RCM is required to self – generate
an invoice as well as payment voucher
3. GST on supply of following items has not and disclose the particulars in the returns
been levied as of now. It shall be levied with / statements to be filed. Persons who
effect from such date as may be notified by are required to pay tax under RCM are
the Government on the recommendation of required to mandatorily register under GST
the GST council: to discharge the liability thereof.
• Petroleum crude
• High speed diesel C. Supply and its Scope
Since GST is levied on ‘supply of goods or
• Motor spirit (commonly known as petrol)
services or both’ it is necessary to analyse
• Natural gas the meaning of the word ‘supply’. Supply is
defined under section 7 of the CGST Act,
• Aviation turbine fuel. 2017.
B. Charging section – Reverse Charge 1. Supply includes:
Mechanism (RCM)
• all forms of supply of goods or
1. Pursuant to powers granted under services such as sale, transfer,
Section 9(3), the Government, on the
BCAS 4.1
Referencer
2021-2022
Indirect Taxes in the course or furtherance
of business
barter, exchange, licence, rental,
lease or disposal made or agreed The following terms may be
to be made for a consideration relevant :
in the course or furtherance of
business o Persons (including legal
persons) shall be deemed to
• import of services for a be related if such persons
consideration, whether or not are - officers or directors
in the course or furtherance of of one another’s business;
business legally recognised partners
in business; employer and
• activities or transactions involving employee; directly or indirectly
supply of goods or services by any owning, controlling or holding
person, other than an individual, 25% or more shares or
to its members or constituents stock; directly or indirectly
or vice-versa, for cash, deferred controlling the another; are
payment or other valuable directly or indirectly controlled
consideration by a third person or control a
third person; or are members
• activities specified in Schedule of the same family; Further,
I made or agreed to be made persons associated in the
without consideration. These are : business of another in which
one is a sole agent/ sole
o permanent transfer or distributor/sole concessionaire
disposal of business assets of the other are ‘related’
on which ITC has been persons.
availed
o Any person who has obtained
o supply of goods or services or is required to obtain more
or both between related than one registration in the
persons or distinct persons same State or Union Territory
in the course or furtherance or in different States or Union
of business (excluding gifts Territories shall be treated as
up to ` 50,000 given by an ‘distinct persons’ in respect
employer to employee in a of each registration. Similarly,
financial year). establishment in India and
those outside India are
o supply of goods between treated as ‘distinct persons’.
a principal and an agent
where the agent undertakes • Relevant Circulars in the context
to supply/receive such goods of Schedule I: Clarifications
on behalf of the principal issued w.r.t principal – agent
relationship in the context of entry
o import of services from a 3 of Schedule I:
related person or from any
establishments outside India BCAS
Referencer
4.2 2021-2022
Goods and Services Tax (GST)
Circular Gist
57/31/2018-GST This circular clarifies that in order to determine whether a
of F. No. CBEC- principal – agent relationship exists or not, one needs to
20/16/4/2018-GST determine whether the agent is wearing the representative hat
dated 04.09.2018 and is supplying or receiving goods on behalf of the principal.
[AS corrected The circular further clarifies that if the invoice is issued or
by Circular NO. received by the agent in his own name, it would fall under the
CBEC/20/16/04/2018- ambit of entry 3 of Schedule I. The crucial point is whether or
GST, DATED 5-11-2018] not the agent has the authority to pass or receive the title of the
goods on behalf of the principal.
73/47/2018-GST of F. This circular clarifies the scope and ambit of principal – agent
No. 20/16/04/2018-GST relationship in the context of del-credere agent (DCA) as follows
dated 05.11.2018 :
• Whether a transaction with DCA falls under the ambit of
entry 3 of Schedule I will be decided as per clarification
issued in Circular No. 57/31/2018 dated 04.09.2018
• In respect of short term loan extended by DCA to the buyer
to enable him to make the payment to the supplier for
procurement of goods and services, the interest charged
by the DCA to the recipient would not form part of value
of supply by the principal to recipient as the transaction of
extending loan is on a principal to principal basis. Further,
service by way of extending deposits, loans and advances
where consideration is represented by way of interest or
discount is exempted vide notification 12/2017 – Central
Tax (Rate) dated 28.06.2017.
• If DCA is an agent covered under entry 3 of Schedule I,
interest charged by DCA to the buyer will form part of value
of supply by the DCA to buyer as the transaction would no
more be an independent supply but a part of the supply by
DCA to the recipient. The value of interest therefore, would
be required to be included in the value of supply as per
section 15 (2) (d) of CGST Act.
• As would be seen from the above, the definition of ‘supply’ is very wide. It is an inclusive
definition and takes within its fold certain supplies which are without consideration.
Supplies between related and distinct persons (branches and offices), within and outside
India, between principal and agents and with employees, are of particular significance.
2. Schedule II – Classification of goods and services
• Schedule II classifies activities and transactions as either supply of goods or supply of
services for the purpose levy of GST
BCAS 4.3
Referencer
2021-2022
Indirect Taxes
Particulars Deemed to Deemed
be supply to be
of Goods
supply of
Para 1 : Transfer Services
• Transfer of title in goods
• Transfer of title in goods under an agreement stipulating
that the property in goods shall pass at a future date upon
payment of full consideration
• Transfer of right in goods, or of undivided share in goods
without the transfer of title thereof
Para 2 : Land & Building
• Lease, tenancy, easement, license to occupy land
• Lease or letting out of building including commercial,
industrial or residential complex for business / commerce,
either wholly or partly
Para 3 : Treatment or Process
• Any treatment or process applied to another person’s
goods is a supply of service
Para 4 : Transfer of business assets
Transfer of business assets –
• Where goods forming part of business assets are
transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form
part of those assets, @
Transfer of business assets –
• Where by or under the direction of a person carrying on a
business, goods held or used for the purpose of business
are put to any private use or are used or made available
to any person for use for the purpose other than for
business, @
• Supply of any goods forming part of the assets of any
business on a person ceasing to be a taxable person
shall be deemed to be supply of goods in the course or
furtherance of business, except in following cases:
a) Business is transferred as a going concern to another
person
b) Business is carried on by a personal representative
who is deemed to be a taxable person
@ the phrase “whether or not for consideration” is removed
w.r.e.f. 01-7-2020
Para 5 : Supply of Services
• Renting of immovable property
4.4 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Particulars Deemed to Deemed
be supply to be
of Goods supply of
Services
• Construction of complex, building, civil structure or part
thereof, including a complex or building intended for sale
to a buyer (wholly or partly) unless the entire consideration
is received after issuance of completion certificate, where
required, by the competent authority or after its’ first
occupation, whichever is earlier
• Temporary transfer or permitting the use or enjoyment of
any IPR
• Development, design, programming, customisation,
adaptation, upgradation, enhancement, implementation of
information technology software
• Agreeing to the obligation to refrain from an act, or to
tolerate an act or situation, or to do an act
• Transfer of right to use any goods for any purpose
Para 6 : Composite supply
• Works contract as defined u/s 2 (119) of CGST Act
• Supply, by way of or as part of any service or in any
manner whatsoever, of goods being food or any other
article for human consumption or any drink (other than
alcoholic liquor for human consumption)
• Relevant Circulars in the context of Schedule II
44/18/2018- This circular deals with issue relating to taxability of tenancy rights (‘pagadi
CGST system’) under GST. The circular clarifies that grant of tenancy rights to a
of F. No. new tenant against payment of tenancy premium / periodic rent shall be
341/28/2017- taxable, unless the same is for a residential dwelling for use as residence,
TRU dated in which case the same shall be exempt. The circular also clarifies that an
02.05.2018 outgoing tenant surrendering the tenancy rights for a consideration in the
form of a portion of tenancy premium shall be liable to GST.
11/11/2017 – This circular clarifies the classification issue revolving around printing
GST of F. No. contracts, viz., whether they shall be classifiable as supply of goods or
354/263/2017- services, as under:
TRU dated • Supply of Printing of books, pamphlets, brochures, annual reports,
20.10.2017 and the like, where only content is supplied by the publisher or the
person who owns the usage rights to the intangible inputs while the
physical inputs including paper used for printing belong to the printer,
shall constitute supply of service
• Supply of printed envelopes, letter cards, printed boxes, tissues, napkins,
wall paper etc. falling under Chapter 48 or 49, printed with design, logo
etc. supplied by the recipient of goods but made using physical inputs
including paper belonging to the printer, predominant supply is that of
goods and shall therefore constitute as supply of goods
BCAS 4.5
Referencer
2021-2022
Indirect Taxes
3. Schedule III – Exclusions from the • Following additional activities
4.6 meaning of ‘Supply’ / transactions have been
specified in Schedule III w.e.f
• Schedule III specifies activities 01.02.2019
which shall be neither supply of
goods nor supply of services, for o Supply of goods from a place
the purpose of levy of GST in non-taxable territory to
another place in non-taxable
o Services by an employee territory without such goods
to the employer in the entering into India
course of or in relation to his
employment o Supply of warehoused
goods to any person
o Services by any Court or before clearance for home
Tribunal established under consumption
any law for the time being
in force. The term “Court” o Supply of goods by
includes District Court, High consignee to any other
Court and Supreme Court person, by endorsement
of documents of title to the
o Functions performed by goods, after the goods have
been dispatched from the
Members of Parliament, port of origin located outside
India but before clearance for
State Legislature, home consumption.
Panchayats, Municipalities or D. Types of Supply
1. Taxable supply – supply of goods or
other local authorities services or both leviable to GST
o Duties performed by any 2. Exempt supply – supply of goods or
person who holds any post services or both taxable at nil rate,
in pursuance of provisions of supplies wholly exempt from tax, non-
Constitution in that capacity taxable supplies
o Duties performed by any 3. Non-taxable supply – supply of goods
person as Chairperson or a or services or both not leviable to GST
Member or a Director in a
body established by Central 4. Composite supply – two or more
/ State Government or local taxable supplies of goods or services
authority and who is not or both, in any combination, where one
deemed an employee before supply is a pre-dominant / principal
the commencement of this supply and are naturally bundled and
clause supplied in conjunction with each other
in the ordinary course of business;
o Services of funeral, burial,
crematorium or mortuary 5. Mixed Supply – Two or more individual
including transportation of supplies of goods or services in any
the deceased combination made in conjunction with
each other for a single price
o Sale of land, subject to
clause (b) of para 5 of BCAS
Schedule II, sale of building Referencer
2021-2022
o Actionable claims, other than
lottery, betting and gambling
Goods and Services Tax (GST)
6. Continuous supply – Supply of goods for the interpretation of the First Schedule to the
or services on a continuous or recurrent Customs Tariff Act, 1975, including the Section
basis. Continuous supply may be of and Chapter Notes and the General Explanatory
goods or services. Notes of the First Schedule, for the purposes of
interpretation. Hence, it would be pertinent to refer
• Continuous supply of goods the various principles of classification under the
means a supply of goods which Customs law, which has been summarised below:
is provided, continuously or on
recurrent basis, under a contract • Total 98 Chapters of Customs – All are
(whether or not by means of a adopted in GST as is for classification of
wire, cable, pipeline or other goods
conduit), for which the supplier
invoices the recipient on a regular • Chapter 99 introduced to adopt the Services
or periodic basis. Accounting Code (SAC) for exclusive
classification of services
• Continuous supply of services
means a supply of services which • All of the 98 chapters grouped under 21
is provided, continuously or on sections
recurrent basis, under a contract,
for a period exceeding three – Section is a group of Chapter
months with periodic payment representing a particular class of goods
obligations.
– Chapter – Each section is divided into
The above are important for the various chapters and sub chapters
purpose of classification, determination
of the rate of tax, the time of supply, – Each chapter contains goods of one
the place of supply as well as for the class
purpose of computation of the input tax
credit and reversal thereof. – Chapter Notes – Mentioned at the
beginning of chapter. They are a part
2. Classification of Goods and Services of statute thus have legal authority in
determining classification of goods
PRINCIPLES OF CLASSIFICATION
The notification prescribing GST rate for – Each Chapter and Sub Chapter is
goods makes reference to the tariff item, sub- further divided into various heading
heading, heading and chapter as specified in
the First Schedule to the Customs Tariff Act, – Each heading is further divided into sub
1975. Also, the notification refers to the rules heading
w.e.f. 01-04-2021 vide Notfn No 78/2020 dt 15-
10-2020
1234 5678
Chapter Number Heading Number Sub Heading Tariff Item
Mandatory for turnover upto 5 crore Mandatory for turnover Not Mandatory under
[Not Mandatory for B2C for turnover upto 5 above 5 crore GST Law
crores]
BCAS 4.7
Referencer
2021-2022
Indirect Taxes
Rules of Interpretation Propositions
Rule Rule Name
No The titles of sections, chapters and sub-chapters do not have any legal
force.
1 General Rule •
of Classification Terms of headings read with relative section and chapter notes are
• legally relevant for the purpose of classification.
• The rules of interpretation need not be resorted to when classification
is possible on the basis of description in heading, sub-heading, chapter
• notes and section notes.
2(a) Classification • Notes of one chapter or section cannot be applied for interpreting entries
of Incomplete/ • in other chapters or sections
Unfinished
Article Any reference in a heading to an article shall be taken to include
a reference to that article incomplete or unfinished, provided that,
• as presented; the incomplete or unfinished article has the essential
character of the complete or finished article.
•
It shall also be taken to include a reference to that article complete or
Classification • finished (or falling to be classified as complete or finished by virtue of
of Mixtures/ • this rule), presented unassembled or dis-assembled
Combinations •
of a Material/ If any particular heading refers to a finished/complete article, the
Substance with unassembled/dis-assembled form of that article shall also be classified
other Material/ under the same heading provided the unassembled/dis-assembled
Substance goods have the essential characteristics of the finished goods
• Only goods requiring minor adjustments would be construed as having
the essential character. Those requiring major processes like turning,
• grinding, broaching, groove cutting, heat treatment, surface treatment
etc., cannot be construed as having the essential character of complete
4.8 and finished articles and cannot fall within the scope of rule 2(a) of the
General Interpretative Rules
Any reference in a heading to a material or substance shall be taken
to include a reference to mixtures or combinations of that material or
substance with other materials or substances.
Any reference to goods of a given material or substance shall be taken
to include a reference to goods consisting wholly or partly of such
material or substance.
The classification of goods consisting of more than one material or
substance shall be according to the principles of rule 3
Any reference to a material or substance would refer to mixture or
combination of that material or substance.
Any reference to goods containing a particular material or substance
would include a reference to goods consisting wholly or partly of such
specified material or substance.
BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Rule Rule Name • Propositions
No •
The application of this rule arises when the goods consists of more than
3 Classification one material or substance
in case goods
are classifiable When by application of rule 2(b) or for any other reason, goods are,
under 2 or prima facie, classifiable under two or more headings, classification shall
more headings be effected as follows
3(a) Specific over • Further Sub divided into 2 more Rules
General • Comes from Maxim – Generelia Specilibus non Derrogent
•
The heading which provides the most specific description shall be
• preferred to headings providing a more general description.
3(b) Essential • However, when two or more headings each refer to part only of the
Character materials or substances contained in mixed or composite goods or to
Principle part only of the items in a set up for retail sale, those headings are to
be regarded as equally specific in relation to those goods, even if one
• of them gives a more complete or precise description of the goods.
3(c) Latter the • Mixtures, composite goods consisting of different materials or made up
Better • of different components, and goods put up in sets for retail sale, which
cannot be classified with reference to (a), shall be classified as if they
4 Akin Rule • consisted of material which gives them their essential character, in so
far as this criterion is applicable.
•
Sub-rule (b) would apply only if the goods cannot be classified under
sub- rule (a). This sub-rule provides that composite goods should be
classified on the basis of that material or substance that gives it its
essential character. In order to find out whether the incomplete article as
imported has the essential character of the completed article, the tests
to be applied would be whether the imported article has attained the
approximate shape or outline of the finished article or part and whether
it can only be used for completion into the particular finished article
When goods cannot be classified by reference to (a) or (b), they shall
be classified under the heading which occurs last in numerical order
among those which equally merit consideration
If both sub-rules (a) and (b) fails to classify the goods in question,
then resort may be had to sub-rule (c), which provides that composite
goods shall be classified on the basis of the heading that occurs last in
numerical order
Goods which cannot be classified in accordance with the above rules
shall be classified under the heading appropriate to the goods to which
they are most akin
Dictionary Meaning of Akin – Similar Character
BCAS 4.9
Referencer
2021-2022
Indirect Taxes
Rule Rule Name • Propositions
No •
Conditions to be fulfilled:-
5 (a) Classification •
of cases / These cases/containers are specially shaped or fitted to contain a
containers • specific article or a set of articles.
used for
packaging of These cases/containers are suitable for long term use and presented
goods with the articles for which they are intended.
5 (b) Classification • This rule does not, however, apply to containers which give the whole
of packing its essential character.
materials •
and packing • Subject to the provisions of (a) above, packing materials and packing
containers containers presented with the goods therein shall be classified with the
goods, if they are of a kind normally used for packing such goods.
•
However this provision does not apply when such packing material or
5 Exceptions to • packing containers are clearly suitable for repetitive use
Rule 5
Cases which are specially designed or fitted to contain a specific article
• and given with the articles for which they are intended shall follow the
classification of the items which are packed.
6 Only sub •
The packing materials and containers cleared along with the goods are
heading at the classifiable with the goods
same level are Durable containers capable of repetitive use should be classified
separately
comparable
When packing material itself gives the essential character as a whole
•
For legal purposes, the classification of goods in the sub-headings of
• a heading shall be determined according to the terms of those sub-
headings and any related sub-heading notes and, mutatis mutandis,
to the above rules, on the understanding that only sub-headings at the
same level are comparable.
For the purposes of this rule the relative section and chapter notes also
apply, unless the context otherwise requires.
The main proposition laid down by this rule is that sub-heading at the
same level are comparable. This implies that a sub-heading can be
compared only with another sub-heading within the same heading.
4.10 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sr. Principle of Notes Judicial
No. Classification Pronouncements
for reference
a) Commercial/ If meaning of goods/service is not defined in relevant Dunlop India vs.
places in GST Act, then, meaning of the goods/service UOI 1983 (13) ELT
Trade has to be judged in the manner understood by the 1566 (SC)
Parlance
people dealing with it, i.e., the goods/service should Indian Aluminium
be understood in the commercial sense. This rule has Cables Ltd. vs. UOI
been consistently applied by various courts to decide the 1985 (37) ELT (SC)
classification of the product. For example, whether the
product should be classified as cosmetic or medicament Collector of Central
shall be judged by the manner in which the people dealing Excise, Kanpur vs.
Krishna Carbon
the product understand. Paper Co. 1988 (37)
ELT 480 (SC)
This is the basic principle to determine the classification of
goods or service. Affidavits from persons like customers,
distributors, dealers along with purchase orders from Commissioner vs.
customer, description of product in invoice raised by Pio Food Pack 1980
supplier, normally substantiate the manner in which the (6) ELT 353 (SC)
product is understood in the commercial parlance Reliance Cellulose
Products Ltd.,
Hyderabad vs.
Collector of Central
Excise, Hyderabad
1997 (93) ELT 646
(S.C)
b) Definition The principle of classification of product as per trade Akbar Baharuddin
parlance is not absolute principle. The statute making vs. Collector of
given in authority has the power to define the product in a Central Excise,
statute or
chapter note/ particular manner. The said doctrine of commercial 1990 (47) ELT 161
section note understanding should be departed where the statute either (SC)
etc. in the Act or chapter note or in Schedule or anywhere else
defines the product in a particular manner. The definition
in the statute will take precedence over the commercial
understanding of the product in the trade.
c) Description The Customs Co-ordination Council (CCCN) working under Wood Crafts
in HSN has
persuasive WTO has published Harmonized System Nomenclature Products Ltd., 1995
value
(HSN) which is normally adopted by all countries who (77) ELT 23 (SC)
have signed the GATT Agreement for the purpose of Business Forms
classification of the products for Customs. In India, Ltd., 2002 142-
classification under Central Excise and in various State ELT-18 (SC)
VAT law is also based on HSN. The classification made
in GST is also based on HSN. Harmonized System
Nomenclature published by CCCN gives a detailed
description of various products which are covered under a
particular heading or sub-heading. The description in HSN
is very helpful in deciding the classification of the product.
BCAS 4.11
Referencer
2021-2022
Indirect Taxes
Sr. Principle of Notes Judicial
No. Classification Pronouncements
for reference
d) Most specific It is a general principle of classification that most specific Dunlop India Ltd.
description to description shall be preferred over a more general vs. Union of India
1983 (13) ELT
be preferred description. 1566 (SC)
over general
description Moorco (India) Ltd.
vs. CCE (SC)
e) Functional Functional use of the product can certainly be one of the Atul Glass
use of the factors in determining the classification, but cannot be the Industries vs.
product sole criteria for determining the classification. Normally use Collector of Central
of the product is not relevant as the product is required Excise, 1986 (25)
to be classified in the condition in which it is supplied. ELT 473 (SC)
However, sometimes, tariff heading itself provides the use
of the product. In such a case, the ultimate use of the
product is very important for classifying the product. The
goods are to be classified on the basis of their primary
function.
f) Essential The product is purchased and sold due to its essential Xerox India Ltd.
characteristics characteristics. The principles for determining the essential vs. CENVAT Credit
2010 (260) ELT
of goods or characteristics are — 161 (SC) CCE,
service (a) Cost of components of the product
(b) Functionality of the product Hyderabad vs.
Bakelite Hylam Ltd.
1997 (91) ELT 13
(SC)
g) Importance of It has been consistently held that expert opinion is to be Guest Keen
expert opinion taken to understand the nature of product but cannot Williams Ltd. vs.
decide the classification of the goods. It has no binding Collector - 1997
and other
evidentiary effect, but only guiding effect on the authorities because (95) ELT A144
ultimately, decision of proper classification of the product (SC)
value
is to be decided by the jurisdictional authority.
h) Importance Sometimes, the taxable person also affixes ISI mark on —
of ISI the product. The ISI specification certifies the quality
specification of the product and not the name or character. View of
the ISI shall be looked at some amount of credibility for
deciding the classification. It can be used as specialised
material in expert opinion, but other tangible consideration
should also weigh while determining the classification.
Therefore, description of product in ISI has limited value
in determining the classification of goods.
4.12 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sr. Principle of Notes Judicial
No. Classification Pronouncements
for reference
i) Importance Finance Minister in the Finance Bill may make certain ECHJAY Industries
of Finance reference while introducing the changes. Speech of the vs. UOI 1988 (34)
Minister's Finance Minister represents the manner in which the ELT 42 (Guj)
speech authorities have understood the change. Therefore, the
speech of the Finance Minister can be helpful in deciding
the classification.
j) Importance of Section 168 of GST Act empowers the Board or the —
trade notice, Competent Authority of the State wherever it considers
circulars etc. necessary for the purpose of uniformity in implementation
of the Act to issue such orders, instructions or directions
to GST Officers as may deem fit. Similar provisions are
contained in section 37B of Central Excise Act. It has
been consistently held that trade notices, tariff advices,
circulars, press notes etc. issued by the authorities are
hardly relevant for the purpose of classification of the
product under Central Excise Act as it cannot override
the true meaning or interpretation of underlined statutory
provisions. The classification has to be decided by the
authorities based on the description of relevant tariff entry
and not on the basis of tariff advice or instructions or
circulars etc.
k) Chemical Very often, the authorities insist upon testing of the product Stadfast Paper
examination in order to determine the true composition of product Mills vs. Dr. Kohli,
only provides and nature of the product. Section 154 of GST Act also Former Collector
provides taking of samples. It has been consistently held of Central Excise,
content that the role of Chemical Examiner is only to provide the Baroda and Others
and not
classification content of the product or the nature of the product, but 1983 (12) ELTb
not to decide classification of the product. Mention of 744 (Guj.)
classification in the test report shall be ignored.
l) Provision of Sometimes, the tariff description of the entry may be --
relevant time amended over a period of time. While classifying the
product, the tariff description of relevant period should
only be used for classification. For example, say, goods
are supplied in the month of August, 2017. Further
assume there is amendment in the tariff entry in April,
2018. The classification of the product based on tariff
description in August, 2017 should only be considered
while classification for supplies made in August, 2017.
Subsequent amendment will not be relevant for the
purpose of deciding the classification.
BCAS 4.13
Referencer
2021-2022
Indirect Taxes
Sr. Principle of Notes Judicial
No. Classification Pronouncements
for reference
m) Burden It has been held under Central Excise Act that burden to --
to prove prove is primarily on the excise authorities to establish
classification whether particular products falls under one tariff heading or
on another when the manufacturer has classified the product
department in a particular tariff heading and the department intends
to classify it in a different heading. The department must
produce enough evidence to substantiate that the product
must classify differently. In other words, the burden of
proof of particular classification is on the department.
This burden can be shifted to the assessee when the
classification adopted by him is not totally correct.
n) Exemption Sometimes, the department provides exemption to a M e c h a n i c a l
notification particular product and specifies the tariff entry for that Packing Industries
product. In such cases, the department has been taking vs. UOI 1987 (32)
cannot
interpret tariff plea that the product should be classified under the ELT 35 (Bom.)
heading or heading mentioned in the exemption notification. It has
sub-heading been consistently held that exemption notification cannot
interpret the tariff entry nor it can provide norms for the
purpose of classification. The classification of product must
be decided based on description of tariff entry.
o) Beneficial It is a well-established principle that when the goods Garware Nylons
classification are classified under two different items or said items Ltd. vs. UOI 1980
or ambiguous sentences leave reasonable doubt (6) ELT 249 (Bom.)
about its meaning, then benefit of doubt is given to the
manufacturer and the classification should be adopted
which is beneficial to the manufacturer. This is based on
the principle that when the legislature has not clearly laid
down the provisions of law benefit of doubt is given to the
manufacturer.
p) Jurisdiction The jurisdiction to decide the classification is on the S a r v e s h
jurisdictional officers of the supplier of goods/service. The Refractories, 2007
to decide
classification classification cannot be decided by the jurisdictional officer (218) ELT 488
of recipient of goods/service. They have no authority to (SC)
change the classification adopted by supplier of goods/
service
Classification of composite supply
In trade parlance when both the goods and services are supplied, it is considered as a ‘works contract’.
However, under GST the ‘works contract’ has been defined in Section 2(119) as follows:
“119. “works contract” means a contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfer of property in goods (whether as
goods or in some other form) is involved in the execution of such contract.”
4.14 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
The definition of ‘works contract’ can be divided the essential character of the product. These
into following two parts: principles can be helpful in determining the
principal supply of a product. These principles
a) It should be contract for building, are:
construction, fabrication, completion,
erection, installation, fitting out, improvement, a. Cost of components of the product
modification, repair, maintenance, renovation,
alteration or commission; b. Functionality of the product – e.g.
Comprehensive AMCs
b) It should result in an immovable property
wherein transfer of goods is also involved. The functionality test or the test of cost of product
can be applied for the purpose of determining the
Thus, as a result of provision of supply, the principal supply.
contract shall result in immovable property. If it
does not result in immovable property, the supply 3. REVERSE CHARGE MECHANISM UNDER
cannot be considered as a supply of ‘works GOODS AND SERVICES TAX (GST)
contract’.
Preamble
If the contract of supply involves both supply Usually a supplier of goods or service is a
of goods or services and does not result in taxable person liable to discharge tax liability
immovable property, the supply can be considered under Goods and Services Tax Act (‘GST Act’).
either as a mixed supply or composite supply However, in exceptional cases, GST legislation
or individual supplies. The ‘mixed supply’ and stipulates that the liability under the GST Act shall
‘composite supply’ has been defined in sections be discharged by recipient instead of supplier of
2(30) and 2(74) of the GST Act which reads as goods or services. This is popularly known as
follows: Reverse Charge Mechanism (‘RCM’).
2(30) “composite supply” means a supply made Basics of RCM
by a taxable person to a recipient consisting Reverse charge applies only when there is a
of two or more taxable supplies of goods charge on supply. If supply is exempted, nil rated
or services or both, or any combination or non-taxable, RCM does not apply in such a
thereof, which are naturally bundled and case.
supplied in conjunction with each other in the
ordinary course of business, one of which is Recipient of goods or services discharges GST
a principal supply”. under RCM as if he is the person liable for paying
the tax on supply procured by him. All provisions
2(74) “mixed supply” means two or more of the Act including the collection, recoveries and
individual supplies of goods or services, or penal provisions apply to the recipient and he
any combination thereof, made in conjunction is required to pay applicable tax i.e., CGST and
with each other by a taxable person for a SGST/ UTGST, or IGST depending on location
single price where such supply does not of supplier and place of supply. The tax liability
constitute a composite supply. needs to be discharged under RCM at applicable
rate of tax.
Thus, the composite supply will be classified as
a supply of goods or service based on principal Recipient makes payment on his own account
supply. Hence in any composite supply, the under the recipient’s GSTIN number and is
principal supply is required to be determined. declared in his GST Returns as taxable supplies
However, in many cases, it becomes very difficult on which tax liability is discharged.
to determine the principal supply in composite
supply. The Hon‘able Supreme Court has Once the tax is paid under RCM by the recipient,
laid down certain principles for determining it becomes an input tax and the recipient (payer
BCAS 4.15
Referencer
2021-2022
Indirect Taxes
of tax under RCM) is entitled to avail Input Tax Credit (‘ITC’) thereof, subject to other provisions
contained in Chapter V of CGST Act and Input Tax Credit Rules.
RCM on notified goods or services
Recipient of notified goods or services or both is liable to pay CGST under RCM on supply of notified
goods or services u/s. 9(3) of CGST Act.
Recipient is liable to discharge GST liability under RCM irrespective of:
• Recipient being registered person or unregistered person; or
• Supplier of notified goods or services is registered person or unregistered person.
Notified goods under RCM u/s 9(3) of CGST & u/s 5(3) of IGST
Entry Tariff Description Supplier of goods Recipient of Tariff
No item, sub- of supply of supply Notification
heading, & Effective
heading or Goods
Chapter Date
(1) (2) (3) (4) (5) (6)
1. 0801 Cashew nuts, not Agriculturist Any registered 4/2017 – 01
shelled or peeled
person Jul 2017
2. 1404 90 10 Bidi wrapper Agriculturist Any registered 4/2017 – 01
leaves (tendu)
person Jul 2017
3. 2401 Tobacco leaves Agriculturist Any registered 4/2017 – 01
person Jul 2017
4. 5004 to Silk yarn Any person who Any registered 4/2017 – 01
5006
manufactures silk person Jul 2017
yam from raw silk or
silk worm cocoons for
supply of silk yarn
4A. 5201 Raw cotton Agriculturist Any registered 43/2017 – 15
person Nov 2017
5. Supply of lottery State Government, Lottery distributor 4/2017 – 01
Union Territory or any or selling agent. Jul 2017
local authority
Refer
Explanation. (3)
6. Any Chapter Used vehicles, Central Government, Any registered 36/2017 – 13
seized and State Government, person Oct 2017
c o n f i s c a t e d Union territory or a
goods, old and local authority
used goods,
waste and scrap
7. Any Chapter Priority Sector Any registered person Any registered 11/2018 – 28
Lending person May 2018
Certificate
4.16 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
For the purposes of entry No 5, lottery distributor or selling agent has the same meaning as assigned
to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010, made under the provisions of
sub-section (1) of section 11 of the Lotteries (Regulation) Act, 1998 (17 of 1998)
Notified services under RCM u/s 9(3) of CGST
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
(1) (2) (3) (4) (5)
1 Supply of Services by a Goods Transport • Any factory 13/2017 – 01 Jul
goods transport agency Agency (GTA) registered under 2017 &
(GTA) 1ED, [who has or governed by 22/2017 – 22 Aug
not paid central tax the Factories 2017 (1ED) &
at the rate of 6%,] in Act, 1948 (63 of
respect of transportation 1948); or 29/2018 – 01 Jan
of goods by road • any society 2019
registered under
the Societies
Registration
Act, 1860 (21 of
1860) or under
any other law for
the time being in
force in any part
of India; or
• any co-
operative society
established by or
under any law; or
• any person
registered under
the Central
Goods and
Services Tax Act
or the Integrated
Goods and
Services Tax
Act or the State
Goods and
Services Tax
Act or the Union
Territory Goods
and Services Tax
Act; or
BCAS 4.17
Referencer
2021-2022
Indirect Taxes
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
• any body
corporate
established, by or
under any law; or
• any partnership
firm whether
registered or
not under any
law including
association of
persons; or
• any casual
taxable person;
located in the
taxable territory
wef 1-1-2019 Provided that nothing contained in this entry shall apply to services provided by
a goods transport agency, by way of transport of goods in a goods carriage by road, to,—
a. a Department or Establishment of the Central Government or State Government or Union
territory; or
b. local authority; or
c. Governmental agencies
which has taken registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)
only for the purpose of deducting tax under section 51 and not for making a taxable supply of
goods or services.
2 [Services provided An individual advocate Any business entity 13/2017 – 01 Jul
by an individual including a senior located in the taxable 2017
advocate including advocate or firm of territory. As corrected by
a senior advocate or advocates. Corrigendum
firm of advocates by GSR 1199(E), dated
way of legal services, 25-9-2017
directly or indirectly.
[Explanation f]
3 Services supplied by An arbitral tribunal. Any business entity 13/2017 – 01 Jul
an arbitral tribunal to a located in the taxable 2017
business entity. territory.
4 Services provided by Any person Any body corporate 13/2017 – 01 Jul
way of sponsorship to or partnership firm 2017
any body corporate or located in the taxable
partnership firm. territory.
4.18 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
5 Services supplied by the Central Government, Any business entity 13/2017 – 01 Jul
Central Government, State Government, located in the taxable 2017
State Government, Union territory or local territory.
Union territory or local authority
authority to a business
entity excluding,—
(1) renting of
immovable property
[Explanation g],
and
(2) services specified
below—
(i) services by
the Depart-
ment of Posts
by way of
speed post,
express par-
cel post, life
insurance,
and agency
services pro-
vided to a
person other
than Central
Government,
State Govern-
ment or Union
territory or lo-
cal authority;
(ii) services in
relation to an
aircraft or a
vessel, inside
or outside the
precincts of
a port or an
airport;
(iii) transport of
goods or
passengers.
BCAS 4.19
Referencer
2021-2022
Indirect Taxes
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
5A Services supplied by the Central Government, Any person registered 3/2018 – 25 Jan
Central Government, State Government, under the Central 2018
State Government, Union territory or local Goods and Services
Union territory or local authority Tax Act, 2017.
authority by way of
renting of immovable
property to a person
registered under the
Central Goods and
Services Tax Act, 2017
(12 of 2017)
5B Services supplied by Any person Promoter. 5/2019 – 01 Apr
any person by way of 2019
transfer of development
rights or Floor Space
Index (FSI) (including
additional FSI) for
construction of a project
by a promoter.
5C Long term lease of land Any person Promoter. 5/2019 – 01 Apr
(30 years or more) by 2019
any person against
consideration in the
form of upfront amount
(called as premium,
salami, cost, price,
development charges
or by any other name)
and/or periodic rent for
construction of a project
by a promoter
6 Services supplied by a A director of a The company or a 13/2017 – 01 Jul
director of a company company or a body body corporate located 2017
or a body corporate to corporate in the taxable territory.
the said company or the
body corporate.
7 Services supplied by An insurance agent Any person carrying 13/2017 – 01 Jul
an insurance agent to on insurance business, 2017
any person carrying on located in the taxable
insurance business. territory.
[Explanation h]
4.20 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
8 Services supplied by A recovery agent A banking company or 13/2017 – 01 Jul
a recovery agent to a a financial institution 2017
banking company or a or a non-banking
financial institution or a financial company,
non-banking financial located in the taxable
company. territory.
9 Supply of services by Music composer, Music company, 13/2017 – 01 Jul
a music composer, photographer, artist,
photographer, artist or the like producer or the like, 2017
or the like by way of
transfer or permitting located in the taxable Substituted
the use or enjoyment territory. by Notification
of a copyright covered
under clause (a) of sub- 22/2019-01 Oct
section (1) of section
13 of the Copyright Act, 2019
1957 relating to original
dramatic, musical or Publisher located in 13/2017 – 01 Jul
artistic works to a music
company, producer or the taxable territory: 2017 Substituted
the like.
Provided that nothing by Notification No.
9A Supply of services by Author contained in this entry 22/2019-01 Oct 2019
an author by way of
transfer or permitting shall apply where,—
the use or enjoyment
of a copyright covered (i) the author has
under clause (a) of sub- taken registration
section (1) of section under the Central
13 of the Copyright Goods and Services
Act, 1957 relating to Tax Act, 2017 (12
original literary works to of 2017), and filed
a publisher. a declaration, in the
form at Annexure I,
within the time limit
prescribed therein,
with the jurisdictional
CGST or SGST
Commissioner, as the
case may be, that he
exercises the option to
pay central tax on
BCAS 4.21
Referencer
2021-2022
Indirect Taxes
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
the service specified
in column (2), under
forward charge in
accordance with
section 9(1) of the
Central Goods and
Services Tax Act,
2017, and to comply
with all the provisions
of Central Goods and
Services Tax Act, 2017
(12 of 2017) as they
apply to a person
liable for paying the
tax in relation to the
supply of any goods
or services or both
and that he shall not
withdraw the said
option within a period
of 1 year from the date
of exercising such
option.
(ii) the author
makes a declaration,
as prescribed in
Annexure II on the
invoice issued by him
in Form GST Inv-I to
the publisher.
10. Supply of services Members of Over- Reserve Bank of India. 33/2017 – 13 Oct
by the members of seeing Committee 2017
Overseeing Committee constituted by the
to Reserve Bank of Reserve Bank of India
India
11. Services supplied by Individual Direct A banking company 15/2018 - 27 Jul
individual Direct Selling Selling Agents (DSAs) or a non-banking 2018
Agents (DSAs) other other than a body financial company,
than a body corporate, corporate, partnership located in the taxable
partnership or limited or limited liability territory.
liability partnership firm partnership firm.
to bank or non-banking
financial company
(NBFCs).
4.22 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
12. Services provided by Business facilitator A banking company, 29/2018 – 01 Jan
business facilitator (BF) (BF) located in the taxable 2019
to a banking company territory
13. Services provided by An agent of business A business 29/2018 – 01 Jan
an agent of business correspondent (BC) correspondent, located 2019
correspondent (BC) to in the taxable territory
business correspondent
(BC)
14. Security services Any person other than A registered person, 29/2018 – 01 Jan
(services provided a body corporate located in the taxable 2019
by way of supply of territory.
security personnel)
provided to a registered
person:
Provided that nothing
contained in this entry
shall apply to,—
(i) (a) a Department
or
Establishment
of the Central
Government
or State
Government
or Union
territory; or
(b) local authority;
or
(c) Governmental
agencies;
which has taken
registration under the
Central Goods and
Services Tax Act, 2017
(12 of 2017) only for the
purpose of deducting
tax under section 51 of
the said Act and not for
making a taxable supply
of goods or services; or
(ii) a registered person
paying tax under
section 10 of the
said Act.
BCAS 4.23
Referencer
2021-2022
Indirect Taxes
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
15 Services provided by Any person, other than Any body corporate 22/2019-01 Oct
way of renting of any a body corporate who located in the taxable 2019 Substituted by
motor vehicle designed supplies the service territory Notification 29/2019-
to carry passengers to a body corporate 31 Dec 2019
where the cost of and does not issue
fuel is included in the an invoice charging
consideration charged central tax at the rate
from the service of 6 per cent. to the
recipient, provided to a service recipient
body corporate
16 Services of lending Lender i.e. a person Borrower i.e. a person 22/2019-01 Oct 2019
of securities under who deposits the who borrows the
Securities Lending securities registered securities under the
Scheme, 1997 in his name or in the Scheme through an
("Scheme") of Securities name of any other approved intermediary
and Exchange Board person duly authorised of SEBI
of India ("SEBI"), as on his behalf with an
amended. approved intermediary
for the purpose of
lending under the
Scheme of SEBI
Explanation.—For purpose of this notification Tax Act shall have the same meanings as
assigned to them in those Acts
(a) the person who pays or is liable to pay
freight for the transportation of goods by (e) a "Limited Liability Partnership" formed and
road in goods carriage, located in the taxable registered under the provisions of the Limited
territory shall be treated as the person who Liability Partnership Act, 2008 (6 of 2009)
receives the service for the purpose of this shall also be considered as a partnership
notification firm or a firm w.e.f. 22-08-2017 Inserted by
Notification No. 22/2017-Central Tax (Rate),
(b) "Body Corporate" has the same meaning as dated 22-8-2017
assigned to it in clause (11) of section 2 of
the Companies Act, 2013 (f) “Legal service" means any service provided
in relation to advice, consultancy or
(c) the business entity located in the taxable assistance in any branch of law, in any
territory who is litigant, applicant or petitioner, manner and includes representational
as the case may be, shall be treated as the services before any court, tribunal or
person who receives the legal services for authority.
the purpose of this notification
(g) "renting of immovable property" means
(d) the words and expressions used and not allowing, permitting or granting access, entry,
defined in this notification but defined in occupation, use or any such facility, wholly
the Central Goods and Services Tax Act, or partly, in an immovable property, with or
the Integrated Goods and Services Tax Act, without the transfer of possession or control
and the Union Territory Goods and Services of the said immovable property and includes
4.24 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
letting, leasing, licensing or other similar (i) provisions of this notification, in so far as
arrangements in respect of immovable they apply to the Central Government and
property w.e.f. 27-07-2018 Inserted by State Governments, shall also apply to the
Notification No. 15/2018-Central Tax (Rate), Parliament and State Legislatures w.e.f
dated 26-7-2018, w.e.f. 27-7-2018. 01-01-2019 Inserted by Notification No.
29/2018-Central Tax (Rate), dated 31-12-
(h) "insurance agent" shall have the same 2018, w.e.f. 1-1-2019
meaning as assigned to it in clause (10) of
section 2 of the Insurance Act, 1938 (4 of
1938)
Notified services under RCM u/s 5(3) of IGST
Services under RCM u/s 5(3) of IGST in addition to services notified u/s 9(3) of CGST for intra state
supply
Sl. Category of Supply of Supplier of service Recipient of Service Tariff Notification
No. Services & Effective Date
(1) (2) (3) (4) (5)
1 Any service supplied Any person located in Any person located 10/2017 – 01 Jul
by any person who is a non-taxable territory in the taxable territory 2017
located in a non-taxable other than non-taxable
territory to any person online recipient.
other than non-taxable
online recipient.
2 Services supplied by a A person located in Importer, as defined in 10/2017 – 01 Jul
person located in non- non-taxable territory clause (26) of section 2017
taxable territory by way 2 of the Customs Act,
of transportation of 1962 (52 of 1962),
goods by a vessel from located in the taxable
a place outside India up territory.
to the customs station of
clearance in India.
RCM on procurement of goods or services The Government may, on the recommendations
from unregistered persons of the Council, by notification, specify a class of
Registered (taxable) person is liable to pay tax registered persons who shall, in respect of supply
under RCM on any goods or services or both of specified categories of goods or services or
procured by him from an unregistered person. both received from an unregistered supplier, pay
URD RCM was suspended for a long while now the tax on reverse charge basis as the recipient
w.e.f 13-10-2017, although the relief could have of such supply of goods or services or both, and
been given by a Removal of Difficulties order u/s all the provisions of this Act shall apply to such
172, nonetheless a simple suspension of URD recipient as if he is the person liable for paying
Mechanism. The URD RCM is being brought back the tax in relation to such supply of goods or
through the amended version of the famous sec services or both.
9(4) of the CGST Act, w.e.f. 01-02-2019. The new
subsection reads as ibid;
BCAS 4.25
Referencer
2021-2022
Indirect Taxes
Sl. Category of Supply of Services Recipient Tariff
No. of Service Notification
& Effective
(1) (2) (4)
Date
1 Supply of such goods and services or both [other than services by Promoter (5)
way of grant of development rights, long term lease of land (against 07/2019 –
upfront payment in the form of premium, salami, development 01 Apr
charges etc.) or FSI (including additional FSI)] which constitute 2019
the shortfall from the minimum value of goods or services or
both required to be purchased by a promoter for construction of 07/2019 –
project, in a financial year (or part of the financial year till the date 01 Apr
of issuance of completion certificate or first occupation, whichever 2019
is earlier) as prescribed in notification No. 11/ 2017- Central Tax
(Rate), dated 28th June, 2017, at items (i), (ia), (ib), (ic) and (id) Amended
against serial number 3 in the Table, published in Gazette of India by
vide G.S.R. No. 690, dated 28th June, 2017, as amended
Notification
2 Cement falling in Chapter Heading 2523 in the First Schedule to the Promoter 24/2019-30
Customs Tariff Act, 1975 (51 of 1975). Sep 2019
07/2019 –
3 Capital goods falling under any chapter in the first schedule to the Promoter
Customs Tariff Act, 1975 (51 of 1975) supplied to a promoter for 01 Apr
construction of a project on which tax is payable or paid at the rate 2019
prescribed for items (i), (ia), (ib), (ic) and (id) against serial number
3 in the Table, in notification No. 11/ 2017- Central Tax (Rate), dated
28th June, 2017, published in Gazette of India vide G.S.R. No. 690,
dated 28th June, 2017, as amended.
(i) the term "promoter" shall have the same meaning as assigned to it in in clause (zk) of section 2
of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);
(ii) "project" shall mean a Real Estate Project (REP) or a Residential Real Estate Project (RREP);
(iii) the term "Real Estate Project (REP)" shall have the same meaning as assigned to it in in clause
(zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016);
(iv) "Residential Real Estate Project (RREP)" shall mean a REP in which the carpet area of the
commercial apartments is not more than 15 per cent of the total carpet area of all the apartments
in the REP.
(v) the term "floor space index (FSI)" shall mean the ratio of a building's total floor area (gross floor
area) to the size of the piece of land upon which it is built.
4.26 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Time of supply for RCM contain all particulars as prescribed u/s. 31(1) and
Due date of payment of tax under RCM is linked 31(2) read with GST Invoice Rules to the extent
to the time of supply as prescribed u/s. 12 and 13 applicable. This would mean registered person
of CGST Act. procuring goods and services and paying tax
under RCM is obliged to mention HSN Codes and
Time of Supply for goods Service Accounting Codes of goods or services
It shall be earliest of following: procured by him.
• Date of receipt of goods; or However, in terms of proviso to Rule 46 of
CGST Rules, a registered person may issue a
• Date of payment entered in books of account consolidated invoice at the end of a month in
or date of debit in bank, whichever is earlier; respect of purchases from unregistered suppliers
or exceeding ` 5,000 per day.
• Date immediately after 30 days from date of Rule 36 of Input Tax Credit Rules provides that
invoice a registered person shall avail input tax credit on
the basis of an invoice raised in accordance with
Where it is not possible to determine time of provisions of section 31(3)(f).
supply as above, time of supply shall be date of
entry in books of account of recipient of supply. Further, registered person liable to pay GST
under RCM shall issue a payment voucher at the
Time of Supply for services time of making payment to supplier.
It shall be earliest of following:
4. Time of Supply
• Date of payment entered in books of account
or date of debit in bank, whichever is earlier; A. Time of Supply for Goods and Services:
or 1. Goods liable under forward charge
• Date immediately after 60 days from date of • The time of supply shall be earlier of
invoice the following :
Where it is not possible to determine time of o Date of issue of invoice,;
supply as above, time of supply shall be date of
entry in books of account of recipient of supply. o Last date on which invoice is to be
issued by the supplier, i.e., either
Mandatory registration for person liable to pay before or at the time of removal
GST under RCM of goods for supply or delivery
Section 24(iii) of CGST Act mandates compulsory of goods or making the goods
registration for persons liable to pay tax under available to the recipient;
RCM. Threshold limit is not applicable to persons
liable to pay under RCM. Person having less o Date on which the payment is
than ` 20 lakh turnover or supplier of exclusively received by the supplier (recorded
exempt or non-taxable goods /services will also in the books of account or credited
be liable for GST registration if he is obliged to in the bank account, whichever is
discharge tax under RCM. earlier)
Documentation • Receipt of advances has been
Section 31(3)(f) mandates registered person liable exempted to taxable person having
to pay GST under RCM to issue an invoice in aggregate turnover not exceeding `
respect of goods and services received by him 1.5 crores vide notification 40/2017 –
from unregistered supplier. Such invoices should CT dated 13.10.2017. The same has
been extended to all taxable persons
BCAS
Referencer 4.27
2021-2022
Indirect Taxes
vide notification 66/2017 – CT dated or debited in the bank account,
15.11.2017. whichever is earlier)
2. Goods / liable under reverse charge o Date immediately following 60
days from the date of invoice or
• The time of supply shall be earlier of any other document issued by the
the following : supplier;
o Date of receipt of goods ; o Date of entry in books of account
of the recipient, where the above
o Date of payment to the supplier clauses do not apply
(recorded in the books of account
or debited in the bank account, In case of associated enterprises, where
whichever is earlier); the supplier of service is located outside
India, the time of supply shall be the date
o Date immediately following 30 of entry in the books of accounts or date of
days from the date of invoice or payment, whichever is earlier. ‘Associated
any other document issued by the enterprises’ shall have the same meaning as
supplier assigned to it in Section 92A of the Income
Tax Act, 1961.
o Date of entry in books of account
of recipient, where the above B. Time of supply for Continuous Supply
clauses do not apply In the case of continuous supply, the time of
3. Services liable under forward charge supply is linked to the invoicing requirements
under section 31.
• The time of supply shall be earlier of
the following: 1. Continuous supply of goods:
In case of continuous supply of goods,
o Date of issue of invoice, if the
invoice is issued before or at the where successive statements of accounts
time of supply of service or within or successive payments are involved, the
the time prescribed under Rule 47; invoice shall be issued before or at the time
when such successive statements are issued
o Date of provision of service, if the or each such payment is received
invoice is not issued within the
time prescribed; 2. Continuous supply of services:
In case of continuous supply of services,
o Date of receipt of payment (
recorded in the books of account Invoice shall be issued:
or credited in the bank account,
whichever is earlier) ; • Where due date of payment is
ascertainable from the contract – on or
o Where the above clauses do not before the due date of payment
apply, date on which the recipient
shows receipt of the service in his • Where due date of payment is not
books of account. ascertainable from the contract –
before or at the time when the supplier
4. Services liable under reverse charge receives the payment
• The time of supply shall be earlier of • Where payment is linked to completion
the following : of an event – on or before the date of
completion of event
o Date of payment to the supplier
(recorded in the books of account BCAS
Referencer
4.28 2021-2022
Goods and Services Tax (GST)
C. Others the provisions, the same shall be
• In respect of vouchers where the supply determined as under:
is identifiable, the time of supply would
be the date of issuance of voucher. In o If periodical return is to be filed,
other cases, it would be the date of the date on which such return is to
redemption of voucher. be filed
• The time of supply for addition in the o In any other case, the date on
value of supply by way of interest, late which tax is paid
fee or penalty for delayed payment of
any consideration shall be the date on D. Change in rate of tax
which the supplier receives the said • Section 14 deals with the provisions
amount. relating to determination of tax rate in
cases where there is a change in the
• If the time of supply of goods/ services rate of tax in respect of goods/services/
is not determinable under any of both based on the following:
When Issuance of Receipt of Effective tax rate as applicable on
the Invoice Payment
the date of invoice or payment, whichever is earlier
supply is After the date of invoice
made? After the date of receipt of payment
Before the date of receipt of payment
After After the date of invoice or payment, whichever is earlier
Before the date of invoice
Before Before Before
After
Before
After Before
After
(Note: Point of Time for Change in tax rate is denoted as Before or After)
• The date of receipt of payment shall be the date on which the payment is entered in the
books of account of the supplier or the date, on which the payment is credited to his bank
account, whichever is earlier.
E. Circular in the context of Time of Supply
Circular Gist of the Circular
10/10/2017 This circular clarifies on the taxability in relation to movement of goods on
– GST dated approval or return basis in cases where supplier carries goods from one state to
18.10.2017 another and supplies them in a different state. It is clarified that the movement
should be done under the cover of a Delivery Challan and the invoice may be
issued at the time of delivery of goods. The Circular further clarifies that this will
be treated as inter-state supplies and hence IGST would be payable.
5. Valuation of Supplies in GST
Legend
Unless otherwise stated, Section in the chapter refers to relevant Section of Central Goods and
Services Tax Act, 2017 and Rule refers to Central Goods and Services Tax, Rules 2017.
BCAS 4.29
Referencer
2021-2022
Indirect Taxes
Background Amounts to be Amounts to be
Section 15 of Central Goods and Services Tax
Act read with Central Goods and Services Tax Included [Section Excluded [Section
Rules, 2017 lays down the principles of valuation,
for goods and services. Similar provisions are 15(2)] 15(3) and Rule 33]
adopted by Integrated Goods and Services
Tax Act, 2017, Union Territory Act, 2017 and • Any taxes, duties, Any ‘Discount’ which is
Respective Acts and Rules of various States.
cesses, fees and given—
Value of Supply charges levied under Before or at the time of
laws except GST, if supply, duly recorded
charged separately in the invoice issued
by the supplier (e.g. for such supply; and
basic customs duty,
NO property tax, etc.
Whether buyer & Seller are NOT Related separately charged
YES by supplier to
NO
recipient);
Whether price is Sole Consideration ? Fiat India (SC)
YES • Amount incurred After supply, subject to
Transaction Value (TV)=Price Actually Paid/Payable
Refer by the Recipient following conditions —
Not possible to determine Rules
on behalf of
the Supplier i. If such discount
is established
Essentially, following principles of valuation are (e.g. salaries in terms of an
to be applied in three buckets, depending on the agreement
nature of supply: of suppliers’ entered into at
or before the
employees, time of supply
and specifically
Sr. Nature of supply Applicable electricity bill of
No. Section
supplier etc. paid by
1 Supply: 15(1) recipient);
(a) to a recipient who is not • Incidental expenses linked to relevant
related to the supplier;
and like commission & invoice; and
packing incurred by ii. Input Tax Credit
the supplier (e.g. (ITC) attributable
to the discount is
(b) where price is the sole outward freight, reversed by the
consideration Recipient.
fumigation charges
2 Supply: 15(4) etc.);
(a) to a recipient who is • Interest or late
related to the supplier; or fees or penalty for
delayed payment
(b) where price is not the sole and
consideration
• Direct subsidies
3 Supplies notified by 15(5) (except
Government Government
subsidies) (e.g.
1. Inclusions and Exclusions in the Value of subsidy received by
Supply canteen contractor
from recipient for
For each of the above buckets, while subsidised meals
determining the value of supply, following given to recipient’s
amounts are to be included/excluded in/ from employees).
transaction value:
4.30 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Further, as per Rule 33 expenditure/costs b. Consideration in money equivalent
incurred by a Supplier as a ‘Pure Agent’ of amount of consideration not in
the Recipient shall be excluded, if following money
conditions are specified—
c. Value of supply of like kind and
A. Supplier acts as a “Pure Agent” of quality
Recipient, while making payment to
Third Party; d. Sum total of consideration in
money and such further amount
B. Payment made by a Pure Agent, in money that is equivalent to
separately indicated in the Invoice; consideration not in money
C. Supplies procured by the Pure Agent 3. Value of Supply to Agents, Related
from third party are in addition to the Persons or between Distinct Persons
services supplied on his own account.
Valuation for supply between a person
Meaning of “Pure Agent” as explained (being a principal) and his agent (other
in the explanation of the rule is the than sole agent), is prescribed in Rule 29,
person who: while valuation of supply between related
persons (including sole agent) or between
(a) enters into a contractual distinct persons is prescribed in Rule 28 –
agreement with the recipient of both of which Rules require determination of
supply to act as his pure agent value as per Rule 30 or Rule 31 in specified
to incur expenditure or costs in situations.
the course of supply of goods or
services or both; Explanation to Section 15 of the CGST Act,
explains the term ‘Related Person’, which
(b) neither intends to hold nor holds states that person shall be related persons
any title to the goods or services if—
or both so procured or supplied
as pure agent of the recipient of a) persons are officers or directors of one
supply another’s businesses;
(c) does not use for his own interest b) are legally recognised partners in
such goods and/or services so business;
procured; and
c) are employer and employee;
(d) receives only the actual amount
incurred to procure such goods d) any person directly or indirectly owns,
and/or services in addition to the controls or holds twenty five per cent or
amount received for supply he more of the outstanding voting stock or
provides on his own account. shares of both of them;
2. Value of Supply to Non-related Persons e) one of them directly or indirectly
A. Where the price is the sole controls the other;
consideration – the Transaction value
f) both of them are directly or indirectly
B. Where the price is not the sole controlled by a third person;
consideration: Rule 27 prescribes the
following in sequential order: g) together they directly or indirectly
control a third person or they are
a. Open market value of such supply members of the same family
BCAS 4.31
Referencer
2021-2022
Indirect Taxes
The term “related parties” also includes legal persons and persons who are associated
in the business of one another in that one is the sole agent or sole distributor or sole
concessionaire, of the other.
Rules 28 to 31 also provide for ‘sequential’ method of arriving at valuation summarised in
the table below:
Sr. Method of valuation (in sequential order) Supply between Supply between
No. principal and distinct persons
agent (other and related persons
than sole agent) (including sole
agent)*
1 Open Market Value of supply (OMV) Rule 29 clause Rule 28 clause (a)]
(a)
2 Value of supply of goods/ services of like kind and N.A. Rule 28 clause (b)
quality
3 110%_____ of____ cost____ of production/ Rule 30 Rule 30
manufacture/acquisition of goods or cost of provision
of services
4 Value using reasonable means consistent with the Rule 31 Rule 31
principles and general provisions of section 15 and
Rules
Option available to supplier – 90% of price charged for This option is in This option is in place
goods of like kind and quality by recipient to his unrelated place of OMV of all above methods
customer method only
Second proviso to Rule 28 provides that 4. Option to determine Value of Notified
“If the Recipient is eligible for Full Input Supplies Section 15(5) states cases where
Tax Credit — the value declared in invoice Recipient may or may not be related
shall be deemed to be the Open Market or price may or may not be the sole
Value of goods or services”. Inclusion of consideration, supplier has option to
this provision shall avoid possible valuation determine the taxable value as per the
disputes with Department in above situations. method prescribed in Rule 32 for such
notified supply.
Sr. Nature/type of supply Relevant criteria / optional deemed valuation method
No. prescribed in Rule 32 – depending on specified situations
i. Value of supply of services For a currency, when exchanged from, or to, Indian Rupees
in relation to purchase or (INR)—
sale of foreign currency a) Difference between RBI buying and selling rates of specified
including money changing currency or
b) 1% of gross amount of INR/derived in INR
Option: Value in relation to supply of foreign currency, including
money changing—
4.32 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sr. Nature/type of supply Relevant criteria / optional deemed valuation method
No. prescribed in Rule 32 – depending on specified situations
a) Up to ` 1 lakh – 1% of gross amount of currency exchanged
(subject to minimum of ` 250)
b) > ` 1 lakh but < ` 10 lakh – ` 1,000 plus 0.5% of gross
amount of currency exchanged
c) > ` 10 lakh – ` 5,500 plus 0.01% of gross amount of currency
exchanged (subject to maximum of ` 60,000)
ii. Value of supply of services Domestic
in relation to booking of air International
travel tickets by air travel
agent 5% of Basic Fare
10% of Basic Fare
iii. Value of supply of services A. Gross premium less amount allocated for investment/savings
in relation to Life Insurance B. Single premium annuity policy (other than (a) above) – 10%
Business (other than pure of premium
risk cover policies
C. Any other policy – 25% of premium in first year and 12.5% of
premium in subsequent years
iv. Dealer engaged in Buying Taxable Value of supply would be the difference between Selling
and selling of second hand Price and Purchase Price subject to the following Conditions—
goods a) Goods supplied as such
b) Goods supplied after minor processing, not changing the
nature of the goods
c) No input tax credit has been availed on purchase of such
goods
Note: Where the value is negative, it shall be ignored
v. Goods purchased from The purchase price of such borrower reduced by 5% for every
defaulting unregistered quarter/ part thereof between date of purchase and date of
borrower, for recovery of disposal by such person making repossession.
loan/debt
vi. Token voucher, coupon or Taxable Value shall be the money value of the goods or services
stamp (other than postage or both redeemable against such token, voucher, coupon, or
stamp) redeemable against stamp.
supply of goods/ services
vii. Taxable services provided Taxable Value of Supply will be ‘Nil’ in such a case.
by notified class of service Note: Circular No. 1/1/2017- IGST dated 7th July, 2017 provides
providers from out of that in case of Trains, Buses, Trucks, Tankers, Trailers, Vessels,
persons having more than Containers, Aircraft carrying goods or passengers or both; or for
one registrations under repairs and maintenance, [except in cases where such movement
different GST Acts but is for further supply of the same conveyance] will not be regarded
treated as distinct persons as either supply of goods or supply of services
(referred to in Para 2 of
Schedule I of CGST Act),
where ITC is available
BCAS 4.33
Referencer
2021-2022
Indirect Taxes
5. Rate of Exchange and Value Inclusive of 7. Value of supply which is inclusive of
GST Integrated Tax, Central Tax, State Tax,
Union Territory Tax
Rule 34 provides Rate of exchange of
currency, other than Indian rupees, for Rule 35, provides that where value of supply
determination of value of taxable goods and is inclusive of GST,
services shall be—
Tax amount would be = Value inclusive of
Taxable amount - Rate of exchange as per taxes X tax rate in % of IGST or as the case
may be CGST, SGST or UTGST/(100+ sum
for Goods Section 14 of the Customs of tax rates, as applicable, in %)
Act, 1962 in accordance 6. Place of Supply
with the date of time of Types of Supply
Intra-State supply will be the case where the
supply as per Section 12 LS and POS are in the same State. Inter-State
Supply would be a case where LS is in one state
of CGST Act and POS is in another State. Since there are
other kinds of Inter-State supply as well, for ease
Taxable amount - Applicable rate of of reference we refer to this Inter-State supply as
Domestic Inter-State supply.
for Services exchange determined as
There are four types of Inter-State supplies as
per the generally accepted envisaged by section 7 of the Integrated Goods
and Services Tax Act, 2017 [“IGST Act”]:
accounting principles for
(i) Domestic Inter-State supply i.e. supply
the date of time of supply between two states.
of service in accordance (ii) Cross border supply.
with Section 13. (iii) Supply to or by a
6. Value of supply in case of lottery, betting, a. SEZ Developer; or
gambling and horse racing w.e.f 23-01-
2018 b. SEZ Unit.
the value of supply of Deemed to be Higher (iv) Non Intra-State supply not covered above.
lottery RUN by State of 100/112 of the face Domestic Inter-State supply is a case where the
LS and POS are:
Governments value of ticket or of the
(i) In two different States; or
price as notified in the
(ii) In two different Union Territories; or
Official Gazette by the
(iii) One in a State and another in a Union
organising State, Territory.
The value of supply of Deemed to be Higher N.B.: For ease of reference, while referring to
lottery AUTHORISED of 100/128 of the face Domestic POSoS in this article, the elucidation
by State Governments value of ticket or of the of the provisions will be in respect of (i) above
though it would be the same for (ii) and (iii).
price as notified in the
Official Gazette by the
organising State
The value of supply of 100% of the face
actionable claim in the value of the bet or the
form of chance to win amount paid into the
in betting, gambling or totalizator
horse racing in a race
club
4.34 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Cross Border supply of service will cover the Sec Situation Place of Supply
following supply of services: 10
(1)
(i) Import of Services.
(a) Supply INVOLVES Location of Goods
(ii) Export of Services.
movement of at the time at
N.B.:
(i) Import of services and export of services is Goods, either by which Movement
separately explained in Annexure 1 attached. supplier or recipient terminates
(ii) On a perusal of the said Annexure 1, it will
(b) Goods delivered Location of
be noted that in respect of export of services
under GST scenario, the condition of receipt by Supplier to Principal place of
of foreign convertible exchange is a must
as against the current Place of Provision Recipient/ other business of such
of Services Rules, 2012, where the said
condition of receipt of foreign currency is on direction of 3rd 3rd person
relevant only to the extent of allowance of
input credit in respect of services used for person, before/
exports but service tax would not be payable
even in the event of non-receipt of foreign during movement,
convertible exchange.
transfer of title
Place of Supply of Goods under GST
• 5 categories of specific guidelines have been documents/
enacted under Section 10 of IGST Act for otherwise
determining the place of supply rules:
(c) Supply does Location of Goods
o Supplies involving movement of goods
NOT INVOLVE at the time of
o Supplies not involving movement of
goods movement of delivery to recipient
o Supplies made on direction of third Goods, either by
parties
supplier or recipient
o Goods assembled or installed at site
(d) Goods are Location of place of
o Supplies made on board a conveyance
A s s e m b l e d / such installation or
• Government is empowered to prescribe
method for determination of place of supply Installed at site assembly
if a particular situation is not adequately
covered by the afore-mentioned 5 categories. (e) Supply on Board Location at which
However, assessing officers have no a Conveyance viz, goods are taken on
authority to deviate from the provisions vessel/aircraft/train/ board
contained in Section 10 and apply their own motor vehicle
methods unless Government prescribes a
particular method. Sec 10 (2) Where the place of supply of goods
cannot be determined, the place of supply
shall be determined in such manner as may be
prescribed
Place of Supply of Goods – Import / Export –
IGST sec 11
Sec Situation Place of Supply
11
(a) Goods imported Location of
into India Importer
(b) Goods exported Location outside
from India India
BCAS 4.35
Referencer
2021-2022
Indirect Taxes
Place of Supply of Services under GST The ‘Location of Supplier of Service’ and ‘Location
of Recipient of Service’ are defined separately
Introduction in GST based on certain tests. Of course, these
The Goods and Services Tax [“GST”] is a tests will really test the legal acumen of assessee,
destination based tax on consumption of goods department and the judiciary in the years to come.
and services i.e., the tax should accrue to the In fact, to locate the LS or LR would be in many
taxing authority which has jurisdiction over the cases a Big Challenge. It is separately being dealt
place of consumption. For this purpose, one in Annexure 2 attached.
needs to determine what is popularly known as
Place of Supply [“POS”] i.e. the place where Once the LS and LR both are determined, it
goods or services have been supplied so as to would be necessary to determine the POSoS in
decide the taxing jurisdiction. ‘Place of Supply order to determine whether the supply is inter-
of Services’ [“POSoS”] along with the ‘Location State or intra-State.
of Supplier of Service’ [“LS”] would determine
whether the supply is intra-State or inter-State, Determining the POSoS has always been a
that are the two types of supplies in GST but challenging task world over. However,
having different GST implications. internationally, the POSoS is generally determined
in a cross border transaction i.e. where either
PLACE OF SUPPLY OF SERVICES [“POSOS”] the Service provider or the Service recipient is
The POSoS is the Heart of GST which is very abroad and the other is in home country. The
likely to be subjected to “Attacks” post GST GST in India is different due to its dual structure
implementation. A proper study of POSoS may [i.e. Central Tax (“CT”) & State Tax (“ST”)]. Thus,
ensure “Bypass” ensuring no need of a “Stent” or the study of POSoS would involve:
a “Stunt”.
(i) Study of Domestic POSoS i.e. where LS and
As explained in the earlier paragraphs, two LR both are in India. [Section 12 of IGST Act]
factors are relevant to determine whether the
supply is inter-State or intra-State viz. LS and (ii) Study of Cross Border POSoS i.e. where
POSoS. Further, as per the POSoS provisions, either LS or LR is outside India. [Section 13
the basic principle is that the place of supply of IGST Act]
of service shall be the ‘Location of Recipient of
service’ [“LR”]. However, exceptions have been Keeping in mind the constraints of space in this
provided in case of performance based services, article, this part deals with the Domestic POSoS
immovable property based services, certain which is unique and has raised various challenges
specified services and transportation service etc. and issues. As regards the Cross border POSoS;
where other criteria such as location of supplier they are similar to the existing Place of Provision
of service, location of performance of service, of Service Rules, 2012 under the Service tax law,
location of immovable property etc. are relevant. and hence are dealt with very briefly.
Thus in effect, there would be three factors which
are relevant in determining whether the supply is DOMESTIC PLACE OF SUPPLY OF SERVICE
intra-State or inter-State viz. [SECTION 12 OF THE IGST ACT]
While the catchword is “One Nation, One Tax”,
(i) LS; The Central Goods and Services Tax Act,
2017 [“CGST Act”] and The State Goods and
(ii) LR; and Services Tax Act, 2017 [“SGST Act”] have been
so designed that each State is an independent
(iii) POSoS. taxing jurisdiction. Each state has been ring
4.36 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
fenced i.e. a tax paid in one State cannot be Sec Particulars Place of
adjusted against tax liability of another State. 12 Supply
Further, Inter-unit supply between a unit in
one State to an unit in another State though 3(a) Directly in relation to Location of
belonging to the same entity is considered as immovable property I m m o v a b l e
supply. The LS and POS will also have far including architects, Property
reaching impact on ultimate cost of goods and interior decorators,
services based on the credit availability. Thus, surveyors, engineers
the study of Domestic POSoS is most crucial to and other related
the business. experts or estate agents,
grant of right to use
Section 12(1) of the IGST Act provides for such property, carrying
determination of the Domestic POSoS i.e. where out coordination of
the LS and LR both are in India. The provisions construction work
dealing with Domestic POSoS for different
situations are explained below. 3(b) Lodging by hotel, inn, Location of
guest house, homestay, I m m o v a b l e
General principle – POSoS is Location of service club or campsite, Property/ boat
recipient [Section 12(2)] including house boat / / vessel
vessel
The general or default principle is that the POSoS
is the – 3(c) Accommodation in Location of
immovable property for I m m o v a b l e
(i) ‘LR’ if the supply is made to a recipient occasion or marriage Property
registered for GST (i.e. B2B transactions); / receptions / social /
cultural / religious /
However in case of supply to an unregistered official matter
person (i.e. B2C transactions), the POSoS
will be – 3(d) Services ancillary to (a) Location of
(a) ‘LR’ where the recipient’s address is to (c) above Immovable
available in the records of the supplier;
and Property / boat
(b) ‘LS’ in other cases. / vessel
The above general principle would apply unless (i) Services provided directly in relation to
the transaction falls within any of the other sub- an immovable property e.g. construction,
sections of Section 12. repair, renovation of a building, etc. Services
remotely connected to immovable property
PoSoS relating to immovable property would be would not be covered u/s. 12(3) e.g. real
the location of immovable property [Section 12(3)] estate feasibility studies or advice on capital
gains, etc;
The POSoS of the following services shall be the
place where the immovable property is located or (ii) Services provided by experts e.g. architects,
intended to be located [i.e. property to come into interior decorators, surveyors, engineers, and
existence]: other related experts or estate agents;
(iii) Grant of rights to use immovable property.
(iv) Carrying out or co-ordination of construction
work;
(v) Provision of accommodation in immovable
property for organising marriage or reception
or matters related thereto, official, social,
BCAS 4.37
Referencer
2021-2022
Indirect Taxes
cultural, religious or business function Circular in the context of Time of Supply
including services in relation to such function
at such property; Circular Gist of the Circular
(vi) Ancillary services to above 5 services 48/22/2018– GST This circular clarifies
dated 14.06.2018 on the place of supply
Comments: When a company’s employee based
in Mumbai goes to Delhi for office work, the and levy of IGST.
supply for hotel accommodation would be an Section 7(5)(b) of the IGST
intra-State supply [LS and POSoS fall in Delhi] Act is a specific provision
but the Delhi CT+ST charged by hotel may not be relating to supplies of goods
available as credit to the Mumbai-based company or services or both made to
due to the ring fencing. a SEZ developer or a SEZ
unit, which states that such
N.B. supplies shall be treated as
inter-State supplies.
(i) Where the location of immovable property or
boat or vessel is located or intended to be It is therefore, clarified that
located outside India, the POSoS shall be services u/s 12(3)(c) of
the ‘LR’ in India. [Proviso to Section 12(3)] short term accommodation,
conferencing, banqueting
Comments: This is akin to the existing rule etc., provided to a SEZ
8 read with rule 5 of the Place of Provision developer or a SEZ unit
of Services Rules, 2012 where the place shall be treated as an inter-
of provision of service is where the ‘LR’ State supply u/s 7(5)(b)
is situated and not where the immovable being more specific..
property is situated.
Performance Based Services [Sections 12(4)
(ii) Where the immovable property or house and 12(5)]
boat or vessel is in more than one State/
Union Territory [“UT”], the supply would be Sec Particulars Place of Supply
considered to be made in each of respective
State or UT in proportion to value for service 12
separately collected or determined as
per contract/agreement and if there is no 4 Restaurant / Location
contract/agreement then on such other basis
in the manner prescribed. Catering/ Personal where actually
Comments: It would involve a laborious Grooming / Fitness/ performed
exercise to determine the POSoS when the
boat wherein the accommodation services Beauty Treatment/
are provided, moves from one State to
another State. Perhaps it would have been Health Service
better to provide that the POSoS be the
place of commencement of journey by the including Cosmetic
house boat or vessel.
and Plastic Surgery
5 (a) Training and Location of such
P e r f o r m a n c e person
appraisal to a
registered taxable
person
5 (b) Training and L o c a t i o n
P e r f o r m a n c e where actually
appraisal to person performed
OTHER THAN a
registered taxable
person
4.38 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Event Based Services [Sections 12(6) and Goods Transportation Services [Section 12(8)]
12(7)] Supply of POSoS
Sec Particulars Place of Supply Goods transportation
12 service (including by
6 Supply BY WAY OF Location where mail/courier) to —
ADMISSION to a event is actually • Location of such
cultural/artistic / sporting/ held / located • Registered person person
scientific/educational/ (B2B) • Location where
entertainment event/ • Unregistered person goods are handed
amusement park & (B2C) over for their
ancillary services thereto transportation
7 (i) Organisation of • L o c a t i o n
specified event of such w.e.f. 1-2-2019 Provided that where the
transportation of goods is to a place outside
including conference, person if India, the place of supply shall be the place of
destination of such goods.
fair, exhibition, provided to
celebration or similar registered
event person
(ii) services ancillary Comments: This rule would apply to transport by
road, rail, air and sea whether locally or outside
to organisation of India provided the supplier and recipient both are
in India.
above events; &
(iii) assigning of
sponsorship to
above events Passenger Transportation Service [Section
12(9)]
provided :
• To registered Supply of POSoS
person (B2B) Passenger
Transportation Service
• To unregistered • For ser- to
person (B2C) – vices to un-
(a) For event registered
held in persons, • Registered person • Location of such
India (a) L o c a t i o n (i.e. B2B) person
(b) For event where • U n r e g i s t e r e d • Place where
held event is
outside held person (point of passenger embarks
India Location of
(b) recipient of embarkation known) on conveyance for
continuous journey*
service • Point of embarkation • Refer Para 4.3 [i.e.
unknown in respect General Rule]
N.B. Supply in each of right to passage
for future use
Events held in State/UT in
more than 1 State proportion to *Return journey to be treated as separate journey
for a consolidated value of service
amount separately
collected or
determined
from terms
of contract/
agreement or
on other basis
prescribed
BCAS 4.39
Referencer
2021-2022
Indirect Taxes
SERVICES PROVIDED ON BOARD A Supply of service by POSoS
CONVEYANCE [SECTION 12(10)] way of
Sec Particulars Place of Supply • Prepaid mobile
12 connection for
telecommunication/
10 Supply of service Location of first internet services/
on board a schedule point of DTH services on
conveyance such departure pre- payment—
as vessel / aircraft
/ train /motor – Through sale Address of selling
vehicle of SIM card agent, distributor,
or voucher by reseller as per
Comments: Issues – Can it be said that supply of selling agent, supplier’s record at
packaged Drinking water/packed Biscuit is ‘Supply D i s t r i b u t o r , time of supply
of goods’ and Supply of Sandwich/ Samosa is reseller
‘Supply of Service’. While POS of Service is first
scheduled point of departure irrespective of where – Provided to final Location where
the food/eatables is taken on the board, the POS
of goods is the location at which the goods are subscriber prepayment received/
taken on board. Thus it is imperative to decide
whether the said supply is supply of goods or voucher sold
supply of services.
– Through internet Location of service
b a n k i n g / receiver as available in
electronic mode record of supplier
TELECOMMUNICATION/DATA TRANSFER/ • M o b i l e Address of recipient as
BROADCASTING / CABLE / DTH SERVICES connection for per supplier’s record
telecommunication/ & if such address not
[SECTION 12(11)] internet services available location of
other than postpaid/ supplier
Supply of service by POSoS pre-payment basis
way of
• Telecom line, Location of installation BANKING & OTHER FINANCIAL SERVICES
(INCLUDING STOCK BROKING SERVICES)
leased circuits, for receipt of such [SECTION 12(12)]
internet circuit, services
cable/dish antenna Supply of POSoS
• Lease circuit Supply in each State/ Banking and Other
Financial Services:
installed in more UT in proportion
than 1 State/UT to value of service
and consolidated collected or determined • Where Location of • Location of such
recipient available person
amount charged from contract and in in supplier’s record
absence, on other
basis as may be • Where Location
prescribed of recipient not • Location of supplier
• Post paid mobile Location of billing available in of service
connection for address of service
telecommunication/ receiver in supplier’s supplier’s record
internet services records and if such
address not available N.B.: The CGST law does not define what is
location of supplier Banking and Other Financial Services. Does it
cover only services provided by banks or NBFC?
What about merchant banking services, asset
4.40 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
management services etc., which under the Sl. Description of Place of supply of
existing definition are covered under Banking
and Other Financial Services. The only saving No. service services
grace is whether it is rule 12(2) or 12(12) it may
not make a significant difference. 1. Basic principle (All Location of service
services except if recipient. If location
specifically covered of recipient is not
INSURANCE SERVICES [SECTION 12(13)] below) available in the
Supply of POSoS ordinary course
Insurance Services to: of business, then
• Registered person • Location of such location of supplier
(B2B) person 2. Performance based Location of
• U n r e g i s t e r e d • Location of Service [See note (i) performance of
person (B2C) recipient as per below] service
records of supplier 3. Service relating to Location of the
of service Immovable Property immovable property
N.B.: The policy holder’s address will be there in 4. Service relating to Location of event
Insurance company’s records
Events [See Note
(ii)]
ADVERTISEMENT SERVICES TO CENTRAL/ 5. Services (2, 3, 4 Location in the
STATE GOVERNMENT/STATUTORY BODY/
LOCAL AUTHORITY/ UT FOR IDENTIFIABLE above) supplied Taxable Territory
STATES [SECTION 12(14)]
at more than one
location [including
Sec Particulars Place of Supply location in Taxable
12
Territory (‘TT’)]
6. Services (2, 3, 4 Respective State/
14 Advt to CG / Location of Such above) supplied in Union Territory.
SG / stat body / state
local authority for more than one State Value of supply
identifiable states
or Union Territory. — in proportion to
[See Note (iii)] value of service
The POSoS for the above services shall be separately collected
each State and the value of supply would be
proportionate to the amount attributable for or based on
dissemination in each State determined as per
contract/agreement or in absence of contract/ contract/ agreement;
agreement on any other basis as may be
prescribed. and in case no
contract – on
prescribed basis
7. Specified Services Location of service
CROSS-BORDER PLACE OF SUPPLY OF [See Note (iv)] provider
SERVICES [SECTION 13 OF IGST ACT]
Section 13 of IGST Act provides for determination 8. G o o d s Place of destination
of the Cross- border POSoS i.e. where the ‘LS’
or ‘LR’ are outside India [section 13 of IGST Act]. T r a n s p o r t a t i o n of goods
The Cross-border POSoS for different situations
envisaged by section 13 are summarised below: services (other than
mail or courier)
9. P a s s e n g e r Place of
t r a n s p o r t a t i o n embarkation for
service continuous journey
10. Service on board First scheduled
a conveyance point of departure of
during the course conveyance on the
of passenger journey
transportation
BCAS 4.41
Referencer
2021-2022
Indirect Taxes
Sl. Description of Place of supply of Sec 13 Particulars Place of Supply
No. service services 3(b) services supplied location where
to an individual, the services are
11. Online Information Location of recipient represented either actually performed
as the recipient of
Database Access or of service [See note service or a person
acting on behalf
Retrieval (OIDAR) (v)] of the recipient,
which require the
services physical presence
of the receiver or
DETAILED CROSS BORDERS (POSOS) the person acting
on behalf of the
Sec 13 Particulars Place of Supply recipient, with
the supplier for
3(a) services supplied location where the supply of the
in respect of goods the services are service
that are required to actually performed
be made physically 4 directly in relation Location of
available by the
recipient of service to an immovable i m m o v a b l e
to the supplier
of service, or to property, including property or
a person acting
on behalf of the services supplied intended to be
supplier of service
in order to provide in this regard located
the service
3 (a) when such services location where by experts and
1st are provided from a goods are situated
Proviso remote location by at the time of estate agents,
way of electronic supply of service supply of hotel
means
accommodation
by a hotel, inn,
3 (a) shall not apply guest house,
2nd in the case of a
Proviso service supplied in club or campsite,
respect of goods by whatever
that are temporarily
imported into India name called,
for repairs or for
any other treatment grant of rights to
or process and
are exported after use immovable
repairs or for any
other treatment or property, services
process without
being put to any for carrying out
use in India, other
than that which is or coordination of
required for such
repairs construction work,
including architects
or interior
decorators
5 supplied by way Location where
of admission to, event is actually
or organization of, held
a cultural, artistic,
sporting, scientific,
educational, or
4.42 BCAS
Referencer
2021-2022
Goods and Services Tax (GST)
Sec 13 Particulars Place of Supply Sec 13 Particulars Place of Supply
entertainment 8 (a) s e r v i c e s location of the
event, or a supplied by supplier of service
celebration, a banking
conference, fair, company, or
exhibition, or a financial
similar events, and institution, or
of services ancillary a nonbanking
to such admission financial
c o m p a n y,
6 any service location in to account
holders;
referred to in sub- the taxable
sections (3), (4), territory where
or (5) is supplied the greatest (b) intermediary
services;
at more than one proportion of
location, including the service is (c) s e r v i c e s
a location in the provided. consisting
taxable territory of hiring of
7 services referred to the place of means of
in sub-sections (3), supply of such
(4), (5) or (6) are services shall transport other
supplied in more be taken as
than one State, being in each than aircrafts
of the States in
proportion to the and vessels
value of services
so provided in except yachts,
each State as
ascertained upto a period
from the terms
of the contract of one month.
or agreement
entered into in 9 services of place of
this regard or,
in absence of transportation of destination of the
such contract
or agreement, goods, other than goods.
on such other
reasonable by way of mail or
basis as may be
prescribed in this courier
behalf
10 in respect of Place where
a passenger the passenger
t r a n s p o r t a t i o n embarks on the
service conveyance for
a continuous
journey
11 services provided first scheduled
on board a point of
c o n v e y a n c e departure of that
during the course conveyance for
of a passenger the journey
transport operation,
including services
intended to
be wholly or
substantially
consumed while on
board
BCAS 4.43
Referencer
2021-2022
Indirect Taxes
Sec 13 Particulars Place of Supply (ii) In this case, it would cover supply
of admission to an event as well as
12 online information location of organisation of event and services ancillary
thereto. Thus, in case of cross-border supply
and database recipient of of event based services, POSoS is location
of event but in case of Domestic POSoS, the
access or retrieval service location of event is relevant for the services
of admission but for organisation of the
services event, the POSoS is different as explained
above.
13 In order to prevent place of effective
(iii) Thus, on a reading of Sl. Nos. 5 & 6 above
double taxation or use and it appears that if an architect in India
provides services for his Indian client’s
non-taxation of the enjoyment of a immovable property abroad, the POSoS
would be outside India. But however, if he
supply of a service, service supplies services to the same person for 3
properties – one in UK, one in Karnataka,
or for the uniform and one in Kerala, the POSoS for the
entire consideration would be Kerala and
application of rules, Karnataka.
the Government (iv) Specified services are:
shall have the (a) Services supplied to Account holders by
banks, Financial Institutions, NBFCs;
power to notify
(b) Intermediaries;
any description
(c) Hiring means of transport [including
of services or yachts but excluding aircrafts &
vessels] up to a month.
circumstances
(v) Person receiving OIDAR services is deemed
Notes: to be located in Taxable Territory (TT) –
(i) Performance based services are of two If any 2 of the following non-contradictory
types: conditions are satisfied viz.:—
A. Work upon goods: Services supplied • Location of address presented by
in respect of goods made physically service recipient (SR) via internet is in
available by service recipient to the TT;
supplier or to any person acting on
behalf of the supplier in order to • Credit card/debit card/store value card/
provide the service e.g. charge card/smart card/any other card
by which SR settles payment has been
Repairs, Storage and Cargo handling. issued in TT;
There are two exceptions.
• SR's billing address is in TT;
(a) Remote access – POSoS is
Location of goods at the time of • Internet Protocol [IP] address of device
supply of service; used by SR is in TT;
(b) Goods temporarily imported into BCAS
India for repair or treatment or Referencer
process and re-exported subject 2021-2022
to the condition that goods not put
to use in India (except for such
repair). POSoS under Sl. No. 2
would not apply. Basic principle
(Sl. No. 1) would apply.
B. Work upon individuals: Services
supplied to individuals physically
present in their personal capacity or on
service recipient’s behalf e.g. beauty
treatment, plastic surgery, etc.
4.44
Goods and Services Tax (GST)
• SR's bank account used for payment convertible foreign exchange or in Indian
maintained in TT; rupees wherever permitted by the Reserve
Bank of India, and
• Country code of SIM card used by SR
is of TT; (e) the supplier of service and recipient of
service are not merely establishments
• Location of SR's fixed landline through of a distinct person in accordance with
which service is received by person, is Explanation 1 of section 8;
in TT.
N.B.: In respect of export of services under
CHALLENGES GST scenario, the condition of receipt of foreign
Some of the challenges in the implementation of currency is a must as against the current Place of
GST qua POS provisions have been dealt with Provision of Services Rules, 2012, where the said
while elucidating the provisions to determine condition of receipt of foreign currency is relevant
Location of supplier of service and Location of only to the extent of allowance of input credit in
recipient of service in Annexure 2. We have also respect of services used for exports, but service
given our comments on some of the significant tax would not be payable.
Domestic POSoS provisions.
ANNEXURE 2
However as explained in Annexure 2, the Location of supplier of service and
Biggest Challenge is WHO is providing service to
WHOM and from WHERE? This will be the most Location of recipient of services
crucial question to be answered. This will also [Sections 2(15) and 2(14) of the IGST Act]
involve examining whether LS and LR be – the
contracting office or actual performing/receiving A2. Provisions to determine Location of supplier
office. of service and Location of recipient of service
ANNEXURE 1 A2.1 The ‘location of supplier of services’ and
Relevant extract of section 2 of IGST Act ‘location of recipient of services’ are most
“2(11) “import of service” means the supply of any relevant to determine the nature of supply
service, where – whether intra-State or inter-State. The
provisions to determine the LS and LR are
(a) the supplier of service is located outside explained below.
India,
A2.2 The ‘location of the supplier of services’
(b) the recipient of service is located in India, [Section 2(15) of IGST Act] is to be
and determined by applying the following 4 rules
in seriatim.
(c) the place of supply of service is in India,
S. Supply made LS
“2(6) “export of service” means the supply of any 2(15) from
service when Registered PoB
(i) Registered Place (See Note 1)
(a) the supplier of service is located in India, of Business
(“PoB”) FE (See Note 2)
(b) the recipient of service is located outside
India, (ii) Fixed
Establishment
(c) the place of supply of service is outside (“FE”) other than
India, Registered PoB
(d) the payment for such service has been 4.45
received by the supplier of service in
BCAS
Referencer
2021-2022
Indirect Taxes
S. Supply made LS (b) In other cases, the place where the
2(15) from person is incorporated or otherwise
legally constituted. [Section 2(113) of
(iii) More than one Location of CGST Act].
establishment, establishment A2.3 The ‘location of the recipient of services’
[Section 2(14) of IGST Act] is to be
whether PoB or FE most directly determined by applying the following 4 rules
in seriatim.
concerned with the
provision of supply
(iv) In absence of PoB Usual Place of
or FE Residence [See S. Supply is LR
2(14) received at
Note 3]
Notes: (i) Registered Place of Registered PoB
1. Place of business includes Business [Refer Note 1 to
• Place from where business ordinarily Para A2.2]
carried on and includes warehouse,
godown, any other place where goods (ii) F i x e d FE [Refer Note 2 to
are stored or goods/services are E s t a b l i s h m e n t Para A2.2]
provided/ received (“FE”) other than
Registered PoB
• Place where Account books are (iii) More than one Location of
maintained
e s t a b l i s h m e n t , establishment most
• Place where taxable person engaged in whether PoB or FE directly concerned
business through agent
with the receipt of
supply
[Section 2(85) of CGST Act] (iv) In absence of PoB Usual Place of
2. “Fixed establishment” means a place (other or FE Residence [Refer
than the registered place of a business)
which is characterised by a sufficient degree Note 3 to Para
of permanence and suitable structure in
terms of human and technical resources A2.2]
to supply services or to receive and use
services for own needs. [Section 2(50) of A2.4 The following rules apply as to
CGST Act]. In a nutshell, three factors are establishments:
determinative of a ‘fixed establishment’: (i)
a place; (ii) people, (iii) with a degree of (i) Establishment outside India and
‘permanence’ [the three PPPs like a three Establishment in India are treated
piece suit!]. The definition has almost all the as separate persons [Clause (i) of
attributes of a PoB. In fact, all FEs would be Explanation 1 to Section 8 of IGST Act].
a PoB.
(ii) Establishment in a State/UT1 and
3. ‘usual place of residence’, means – Establishment outside that State/UT are
treated as separate persons [Clause (ii)
of Explanation 1 to Section 8 of IGST
Act]
(a) In case of an individual, the place (iii) A person carrying on business though
where he ordinarily resides; a branch, agency or representational
office in a territory shall be treated as
1. UT = Union Territory BCAS
Referencer
4.46 2021-2022
Data Loading...