Chapter-1 GST - CA Study...As per section 9 of CGST Act & section 5 of IGST Act, Taxable event under...

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Chapter-1Introduction of GST

Table of Contents

S.N. Description Pg.No. No. Illus.

Goods and Services Tax

Goods and Services Tax

1

2

Total No. of Illustrations

2

4

12

7

19

StudentsNotes

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Question�1� � � � �

What is GST (Goods and Service Tax)?

Answer

GST is a destination based tax and levied at a single point at the time of consumption of goods or services by the ultimate consumer. GST is based on the principle of value added tax. GST law emphasizes on voluntary compliance and on accounts based reporting and monitoring system. It is a comprehensive levy and envisages tax collection on both goods and services at the same rate.

Internationally, GST was first introduced in France and now more than 160 countries have introduced GST. Most of the countries, depending on their own socio-economic formation, have introduced National level GST or Dual GST.

GOODS & SERVICES TAX

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List the taxes to be subsumed in GST? (MTP –ICAI)

Answer :


What are the taxes that will continue post GST?

Answer :

The taxes that will continue after GST are

a. Basic Customs Duty b. Export Duties

c. Stamp Duties d. Electricity Duties

e.Taxes on professions, trades, callings and employments


Explain the concept of 'Dual GST' (Nov 17 – CA final)

Answer :

India has adopted a dual GST which is imposed concurrently by the Centre and States, i.e. Centre and States simultaneously tax goods and services. Centre has the power to tax intra-State sales &States are empowered to tax services. GST extends to whole of India including the State of Jammu and Kashmir.


What does CGST/SGST/IGST mean?

Answer :

CGST : CGST stands for Central Goods & Service tax, it is levied & collected by the central government.

SGST : SGST stands for State Goods & Service tax, it is levied & collected by the state government.

IGST : IGST stands for Integrated Goods & Service tax, it is levied & collected both by the central government & state government of respective states. It is basically charged on inter-state supply of goods or services.

Central levies to be subsumed

• Central Excise Duty & Additional Excise Duties

• Service Tax

• Excise Duty under Medicinal & Toilet Preparation Act

• CVD & Special CVD

• Central Sales Tax

• Surcharges and Cesses in so far as they relate to supply of goods & services

State levies to subsumed

• State surcharges and cesses in so far as they relate to supply of goods & services

• Entertainment Tax (except those levied by local bodies)

• Tax on lottery, betting and gambling

• Entry Tax (All Forms) & Purchase Tax

• VAT/ Sales tax

• Luxury Tax

• Taxes on advertisements

StudentsNotes


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Is it required to distinguish whether a particular supply involves supply of goods or services or both?

Answer

Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of supply of services respectively; similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and supply of services may be different.


What exactly is the concept of destination based tax on consumption?

Answer

The tax would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.


Which are the commodities kept outside the purview of GST?

Answer

i) Supply of alcoholic liquor for human consumption

ii) Petroleum products: - petroleum crude, motor spirit (petrol), high speed diesel

iii) Natural gas

iv) Aviation turbine fuel & v) Electricity


Who will decide rates for levy of GST?

Answer

The CGST & SGST would be levied at rates to be jointly decided by the Centre & States. The rates would be notified on the recommendations of the GST Council.


Write a short note on Goods and Services Tax Council. (RTP – ICAI)

Answer

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

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

Ü The Union Finance Minister is the Chairman of this Council and

Ministers in charge of Finance/Taxation or any other Minister nominated by each of the States & UTs with Legislatures are its members.

Besides, the Union Minister of State in charge of Revenue or Finance is also its member.

Ü The function of the Council is to make recommendations to the Union and the States on important issues like tax rates, exemptions, threshold limits, dispute resolution etc. The GST Council has decided the threshold exemption, composition threshold, GST rates, GST legislations including rules and notifications.

StudentsNotes

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Mention the various components under GST act?

Answer

Ü Central Goods & Service Tax Act 2017

Ü State Goods & Service Tax Act 2017

Ü Integrated Goods & Service Tax Act 2017

Ü Union Territory Goods & Service Tax Act 2017


What is the guiding principle of GST council?

Answer

The mechanism of GST council would ensure the following:-

Ø Harmonization of different aspects of GST between Centre & the State as well as among states

Ø Discharge of various functions

Ø Make recommendations on various aspects of GST

Ø Development of harmonized national market for goods & services

Question�13

What would be the rate structure under GST?

Answer

The rate structure consists for goods & services will be 5, 12, 18, 28 and 28 per cent + cess besides goods which are taxed at nil rate (fully exempt). GST Tariff may be referred to, to know tax rate for respective goods and services.

GOODS & SERVICES TAX

Question�14

What is GSTN?

Answer

GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST.

Question�15

What are the functions performed by the GSTN?

Answer

Ü Facilitating registration

Ü Forwarding the returns to Central & State authorities

Ü Computation & settlement of IGST

Ü Matching of tax payment details with banking network

Ü Providing various MIS reports to the Central & the State Governments based on the taxpayer return information

Ü Providing analysis of taxpayers profile

Ü Running the matching engine for matching, reversal & reclaim of input tax credit

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What does Inward Supply mean in GST?

Answer

Inward Supply in relation to a person shall mean receipt of goods or services or both whether by purchase, acquisition or both whether by purchase, acquisition or any other means with or without consideration.


What does Outward Supply mean in GST?

Answer

Outward supply in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease, or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business.


Bring out the salient features of cross utilization of Input Tax Credit (ITC) under the GST law? (Nov 17 – CA final)

Answer

Input Tax Credit (ITC) of CGST and SGST/UTGST is available throughout the supply chain,

Ü but cross utilization of credit of CGST and SGST/UTGST is not possible, i.e. CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST.

Ü However, cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e. credit of IGST can be utilized for the payment of CGST/SGST/UTGST and viceversa.

Question�16

Which states have been categorized as special category states under GST?

Answer

Special provision in GST have been made with respect to states of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand.

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Chapter-2 Charge of Tax & Application of CGST & IGST Laws


Table of Contents

S.N. Description Pg.No. No. Illus.

Applicability of GST Law

Levy of GST - Sec 9(cgst) & Sec 5 (igst)

Sec 7 : Supply - Meaning

Person, Supplier & Recipient

Supply in the Course or Furtherance Business

Goods or Service Under GST

Works Contract Under GST

Consideration for Supply

Schedule - I : Deemed supply without consideration

Transfer of Business Asset

Supply to related person or Distinct person

Supply between principle and Agent

Schedule II : Activity to be treated as supply of goods or supply of services

Schedule III : Activity not treated as Supply

Import of Services

Composite and Mixed Supply

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

Total No. of Illustrations

8

8

10

12

13

15

16

18

19

20

20

21

21

23

24

25

3

7

7

5

4

3

4

4

1

1

4

1

4

3

4

4

59

StudentsNotes

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Explain the applicability of CGST & IGST Act? Whether the act also extends to the state of Jammu & Kashmir?

Answer

CGST & IGST Act 2017 is applicable to whole of India. Initially it was not applicable to State of Jammu & Kashmir but by special ordinance it was made applicable to the State of Jammu & Kashmir from 8th July 2017.

APPLICABILITY OF GST LAW

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Question 3� CASE�STUDY� � � �

Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the continental shelf of India for the purposes of prospecting natural gas, State briefly whether goods & service tax will be levied in this case.

Answer

Charging Section 7 of CGST, inter alia , provides that goods & service tax shall be levied on the services provided in the taxable territory by registered person to another.

As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act applies i.e. whole of territory of India. The vessels located in the continental shelf of India for the purpose of prospecting natural gas fall within the ambit of definition of 'India'.

Since in the present case, Nitin Ltd. provided services to Jagat Oil Corporation from vessels located in the continental shelf of India for the purposes of prospecting natural gas, it implies that services have been provided in taxable territory by one person to another for consideration. Thus, goods & service tax is leviable on such services.

Question 2� � � � �

Define Taxable territory & Non-taxable Territory?

Answer

As per section 2(109), Taxable territory means the territory to which the provisions of the CGST act applies i.e. whole of territory of India.

Whereas a Non-taxable territory has been defined under section 2(79) of CGST act as a “non-taxable territory” means the territory which is outside the taxable territory

LEVY OF GST - SEC 9(CGST) & SEC 5 (IGST)


What is a taxable event under GST? (ICAI Material)

Answer

As per section 9 of CGST Act & section 5 of IGST Act, Taxable event under GST is supply of goods or services or both. CGST and SGST/ UTGST will be levied on intra-State supplies. IGST will be levied on inter- State supplies.


Supply of all goods and/or services is taxable under GST. Discuss the validity of the statement. (ICAI Material)

Answer

The statement is incorrect. Supplies of all goods and services are taxable except alcoholic liquor for human consumption. Supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be taxable with effect from a future date. This date would be notified by the Government on the recommendations of the GST Council.

StudentsNotes



Mention the commodities kept outside the purview of GST? (MTP – ICAI)

Answer

Goods and Services tax (GST) is a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption. So, alcohol for human consumption is kept out of GST by way of definition of GST on constitution.

Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be included in GST.


What do you mean by Intra State & Inter State supply? (CA Final-Nov.17)

Answer

As per section 8 of IGST Act,2017, where the location of supplier and the place of supply are in the same State or same Union territory it shall be treated as an 'Intra State supply'.

As per section 7 of IGST Act,2017, where the location of supplier and the place of supply are in

Ü two different States or

Ü two different Union territories or

Ü a State & a Union Territory

it shall be treated as an 'Inter State supply'.

Question�8� CASE�STUDY� � � �

India wines has registered place of business in Pune, it is engaged in sale of wine & beer from its outlet to various dealers across Pune. Whether GST is applicable on such supply?

Answer

As per section 9(1) of CGST Act, Supply of alcoholic liquor for human consumption is not leviable to GST, Thus for above case no GST shall be charged on value of supply.


Mr R a businessman located in Mumbai (Maharashtra) procures goods from a trader located in Nagpur (Maharashtra).

Determine the nature of supply & GST applicable on such supply?

Answer Location of Supplier – Nagpur(Maharashtra) Place of supply - Mumbai (Maharashtra) Nature of supply – Intra state supply (as within state) GST applicable - CGST + SGST (MH)

Question�10� � � �

Are exports and supplies to SEZ units/Developers out of the ambit of GST?

Answer

No, They are leviable under IGST Act, 2017. However, the tax burden on the same will be neutralized by granting refunds to persons making such supplies u/s 16 of IGST Act as Zero rated Supplies subject to such safeguards, conditions and procedures as may be prescribed.

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SEC 7 : SUPPLY - MEANING

Question�11� � �

When does a particular activity attract GST? Explain the scope?

Answer

As per section 9 of CGST act, GST is leviable on supply of goods / services or both

As per section 7 of CGST act, supply includes (1) All forms of supply of goods or services or both Ü such as sale, transfer, barter, exchange, licence, rental, lease, or disposal

Ü made or agreed to be made for a consideration by a person Ü in the course or furtherance of business(2) import of services for a consideration whether or not in course or furtherance of business(3) the activities specified in Schedule I, made or agreed to be made without a consideration &(4) the activities to be treated as supply of goods or supply of services as referred in Schedule II Thus, all the activities specified above falling under the scope of supply shall attract GST excluding those activities as specified in Schedule III.


Mention the necessary elements that shall constitute supply under CGST Act?

Answer

For any activity to qualify as a 'supply', the following elements are required to be satisfied, i.e. –

i) the activity involves supply of goods or services or both

ii) the supply is for a consideration unless otherwise specifically provided under Schedule I

iii) the supply is made in the course or furtherance of business

iv) the supply is made in the taxable territory


State the types of supplies under the GST law?

Answer

The different types of supplies under GST law are as follows:-

i) Taxable & exempt supplies

ii) Inter-state & Intra-state supplies

iii) Composite & mixed supplies

iv) Zero rated supplies


Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods? (ICAI Material)

Answer

Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II(1)(b) of the CGST Act. In some cases, possession may be transferred immediately but title may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.

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StudentsNotes


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Differentiate between a taxable supply & non-taxable supply under GST?

Answer

Taxable Supply

As per section 2(108) of CGST Act, means supply of goods or services or both which is leviable to GST under this act

Falls under the purview of 'Supply' as per section 7 of CGST Act.

For eg:- Supply of Gold jewellery or Silver Articles

Non-Taxable Supply

As per section 2(78) of CGST Act, means supply of goods or services or both which is not leviable to GST under this act or under Integrated Goods & Service Tax Act.

Does not fall under the purview of 'Supply' as per section 7 of CGST act.

For eg:- Supply of Petrol or Diesel


What is the difference in between 'Nil rated', 'taxable at 0%' supply of goods and services?

Answer

There exist a difference between a Nil rated supply and a Zero rated supply as per GST law 'Nil rated supply' means a supply of Goods or Services which has Nil rate in tariff or exempt by notification.

'Zero rated supplies' means a supply of Goods or Services for export or to SEZ units [Sec 16 of IGST]


Discuss whether the following activities constitute 'Supply' in accordance with section 7 of CGST Act

(i) Mr. Raj sold electronic gadgets to XYZ Co.

(ii) Arya pvt. ltd. entered into a hire purchase agreement with AB pvt. ltd. for supply of a machine unit.

(iii) Asha purchase an LED TV of 24 inch from Sony electronics store and in return gave away her old TV.

(iv) VB associates a CA firm appointed Mr. Urja as an interior decorator to design it's office outlet in exchange for such service, VB associates rendered tax compliance services to Mr. Urja.

(v) M/s Bharat electronics disposed scrap part of electric unit to a scrap dealer.

Answer

i) Yes, as term sale is included in the expression supply

ii) Yes, as hire purchase involves transfer of title in goods as per Schedule II of section 7, shall be classified as supply of goods

iii) Yes, as the above supply falls under barter transaction which is also included under the scope of supply

iv) Yes, it is a form of exchange which is included under the scope of supply

v) If the disposal is in course or furtherance of business of M/s Bharat electronics then it shall be considered as a supply.

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PERSON, SUPPLIER & RECIPIENT


. Define the following terms

I) Person ii) Supplier iii) Recipient

Answer

(i) As per section 2(84) of CGST Act, 2017 , “person” includes—

(a) an individual (b) a Hindu Undivided Family (c) a company

(d) a firm (e) a Limited Liability Partnership

(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India;

(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013;

(h) any body corporate incorporated by or under the laws of a country outside India

(i) a co-operative society registered under any law relating to co-operative societies

(j) a local authority; (k) Central Government or a State Government;

(l) society as defined under the Societies Registration Act, 1860

(m) trust; and (n) every artificial juridical person, not falling within any of the above

ii) As per section As per section 2(105) of CGST Act, the term 'Supplier' in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied

iii)As per section 2(93) of CGST Act, “recipient” of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered

And any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.

Question�19� � CASE�STUDY� � �

If Mr A pays consideration to Mr.Yash and Mr.Yash performs surgical operations on Mr R, determine the supplier & recipient for the given case in accordance with GST law? Would your answer differ if consideration is paid by Mr. A on the behalf of Mr. R

Answer :

Ü As per section 2(93) of CGST Act, where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration

so in given case Service Recipient is Mr A

Ü However, if consideration is payable by Mr R but same is paid by Mr A on behalf of Mr R then, service recipient – Mr R.

Ü As per section 2(105) of CGST Act, Supplier – MrYash

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StudentsNotes



Explain the term of 'Deemed Distinct Person’

Answer

The term has not been specifically defined under GST but as per clause (4) & clause (5) of section 25 of CGST Act, has categorized certain person who shall be treated as distinct persons which states that:-

Ü A person who has obtained or is required to obtain more than one registration,

F whether in one State or Union territory or

F more than one State or Union territory shall,

F in respect of each such registration,

be treated as distinct persons for the purposes of this Act.

Ü Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act.


Smart pvt ltd has head office located in Bangalore (Karnataka). However, the branch of Smart pvt ltd is located in state of Gujarat. Will they fall under the ambit of deemed distinct person under GST Act?

Answer

As per clause (4) of section 25 of CGST Act, Smart pvt ltd shall be required to obtain a separate registration in State of Karnataka & Gujarat in respect of its head office & branch respectively. Thus, head office & branch shall be treated as distinct persons.


Shreya ltd is having an establishment in Goa. It has another establishment in the Union Territory of Chandigarh. Will they be treated as establishments of distinct persons under GST Act?

Answer

As per clause (5) of section 25 of CGST Act, Shreya ltd shall be required to obtain separate registration in Goa & Chandigarh in respect of both the establishments & shall be treated as distinct establishments.

Supply in the course or Furtherance Business


Define the term 'Business' under CGST Act.

Answer

As per section 2(17) of CGST Act, 'business' includes-

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a)

(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business

(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members

(f) admission, for a consideration, of persons to any premises

(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation

(h) services provided by a race club by way of totalisator or a licence to book maker in such club ; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities

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Ms Shreya buys a Mobile for her personal use and after a year sells it to a Mobile dealer. Will it constitute 'supply' & is GST leviable on such supply?

Answer

Legal Provision:- As per sec 7 (1)(a) When any Sale, Transfer, barter etc is made for a consideration in the course or furtherance of business then it would be treated as supply & liable to GST.

In the given case sale of mobile by Ms Shreya to a Mobile dealer shall not be considered as supply, As such sale is not in course or furtherance of business of Ms Shreya. Hence, not treated as supply & no GST is payable.


Determine whether the following activities fall under the scope of business?

i) M/s X pvt ltd is engaged in the manufacture of auto parts for industrial purposes

ii) M/s ABC ltd acquired capital goods lying in stock of M/s S ltd as on takeover of business of M/s S ltd.

iii) ETA Star adventure club provides a free trekking camp to members of the club

iv) Adlabs Imagica charges ̀ 1500 as an entry fee into the park to its customers

Answer

i) Yes, the given activity of manufacture has been included in the definition of business.

ii) Yes, as per the definition of business, supply or acquisition of goods including capital goods and services in connection with commencement or closure of business.

iii) No, as per the definition of business, provision of services to members as in return for subscription fee, thus in the given case as free trekking camp is organized for non-members.

iv) Yes, as per definition of business, admission, for a consideration, of persons to any premises as in the given case the entry fee is charged for admission into the park.


An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act? Give reasons fo the answer. (CBEC FAQ)

Answer

No, because supply is not made by the individual in the course of furtherance of business further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

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Define the following term as in accordance with GST

I) Goods ii) Services

Answer

As per section 2(52) of CGST Act, 2017 as under:-

I) Goods:- “Goods” means every kind of movable property –

Ü Other than –

F money &

F securities

Ü but includes –

F actionable claim,

F growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

ii) As per section 2(102) of CGST Act, 2017 “services” means

Ü anything other than goods, money and securities

Ü but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

Goods or Service Under GST


State whether the following activities will be considered as a supply of service in relation to 'Money' in accordance with GST Act

i) Mr A borrows an amount of ` 1, 50,000 from one of his relative Mr Q and agrees to repay the entire amount after a year

ii) M/s Raj enterprises applied for loan from SBI Bank against which a processing fees and interest is charged by the bank

iii) Mr H exchanged INR against purchase of US $ for which a commission was charged

Answer

I) No, the activity of borrowing from a relative is without any charge of interest and hence it will be considered as merely a transaction in money

ii) Yes, the activity of borrowing loan amount for which a consideration in form of processing fee has been charged by SBI shall be considered as a supply of service.

iII) Yes, the activity of exchange of currency for which a commission is charged will be considered as supply of service.


CBC ltd, an NBFC transfers a secured debt to Sam pvt ltd. Does it qualify as supply?

Answer

Actionable claims are covered in the definition of goods. However, Schedule III of CGST Act excludes actionable claims other than lottery, gambling and betting from the scope of supply but as secured debts do not fall under the definition of actionable claim. The same will constitute transaction in money. However, if a service fee or processing fee or any other charges are collected in the course of such transfer of debt then the same will be a supply leviable to GST.

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116


Define the term 'Works Contract’

Answer

As per section 2(119) of CGST Act, “works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning

Ü of any immovable property

Ü wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract


Aspire Ltd enters into contract with Beta Ltd for execution of works contract for ` 50,00,000 excluding taxes for following activities pertaining to construction of a complex. Determine whether the following activities fall under the ambit of 'works contract'

i) Erection & installation of structural designs to the complex which involved material.

ii) Fabrication works relating to the structure of complex no material is involved.

iii) Assembling of units pertaining to movable property which involved material and goods.

iv) Tiling & painting work of the entire building which involved material.

Answer

As per section 2(119) of CGST Act, defining the term works contract. Only if the activities fall under the definition it shall be considered as a works contract.

i) Yes, the given activity is in relation to an immovable property thus qualifies as a works contract

ii) No, eventhough the given activity of fabrication is in relation to immovable property thus it does not qualifies as works contract because material is not involved.

iii) No, the activity of assembling units will not qualify as works contract as it is relation to a movable property.

iv) Yes, the given activity is in relation to building which is immovable property & thus qualifies as works contract.

Works Contract Under GST

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Shambhu Pvt. Ltd. was awarded contract in Nov.2018 for moving flooring & wall tiling services in resptect of building located in Delhi by Nath Ltd. As per terms of contract, Shambhu Pvt. Ltd. was to provide all the required material for execution of contract. Following are the particulars given by Shambhu Pvt. Ltd.?

Description Inward Supply

Value Rate

Outward Supply

Value Rate

Granite used

Cement used

Other material

Labour & other services

3,00,000

5,00,000

4,00,000

6,00,000

28%

28%

18%

---

4,00,000

6,00,000

5,00,000

7,00,000

28%

28%

18%

18%

Determine GST Liability of Shambhu Pvt. Ltd. if (i) Separate charges made for supply of material services(ii) Supplied as works contract.@18%

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Calculation of GST liability if Separate charges is made for supplier, material & Service

Particular ValueTax (`)

CGST SGST

Granite used

Cement used

Other material


Total GST payable (a)

4,00,000

6,00,000

5,00,000

7,00,000

56,000

84,000

45,000

63,000

2,48,000

56,000

84,000

45,000

63,000

2,48,000

Less ITC on Inward Supplier

Granite used

Cement used

Other material


Total ITC payable (b)

Net GST payable (a) - (b)

-

3,00,000

5,00,000

4,00,000

6,00,000

-

42,000

70,000

36,000

-

1,48,000

1,00,000

-

42,000

70,000

36,000

-

1,48,000

1,00,000

Calculation of GST liability if supplied as a works contract

Particular ValueTax (`)

CGST SGST

Works Contract @ 18%

Total GST payable (a)

22,00,000 1,98,000

1,98,000

1,98,000

1,98,000

Less ITC on Inward Supplier

Granite used

Cement used

Other material


Total ITC payable (b)

Net GST payable (a) - (b)

-

3,00,000

5,00,000

4,00,000

6,00,000

-

42,000

70,000

36,000

-

1,48,000

50,000

-

42,000

70,000

36,000

-

1,48,000

50,000

StudentsNotes

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Vasavi Pvt. Ltd. in Calcutta receives advance of ̀ 10,000 (excluding tax) from Pioneer Electronics in Calcutta for an order of 2 Software. On this advance of ̀ 10,000, Vasavi Pvt. Ltd. should charge tax @ 18%, which is the GST rate applicable to software.

Answer

Ü As per Sec 7(1)(a) of CGST Act supply made or agreed to be made for consideration in the course of business is liable to GST. Thus, any advance received by supplier is also liable to GST.

As per section 31(3)(d) of CGST Act, on receipt of advance payment with respect to any supply of goods or services or both, a registered person shall issue a receipt voucher evidencing receipt of such payment.

Ü The nature of supply in the given case is 'Intra state supply' as within Calcutta, the taxes to be charged are CGST + SGST

also if at the time of advance tax rate cannot be determined then 18 % GST shall be levied.

Consideration for Supply


Explain the term consideration?

Answer

As per section 2(31) of CGST Act, 2017, “consideration” in relation to the supply of goods or services or both includes––

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply


Determine whether the following terms fall under the ambit of 'Consideration’

i) Reliance JIO offers free mobile handset on payment of security deposit worth ` 1500/- which is fully refundable.

ii) Isha a customer purchases a gold necklace weighing 275 gms from PN gadgil jewel showroom in exchange sells her old gold articles weighing 200 gms and pays differential amount in cash.

iii) RC cricket association Chennai, gifts a motor bike to Rahul as inducement to join their cricket club.

iv) XYZ ltd is manufacturing fertilizers used for agriculture purpose. State govt. has given 30% subsidy on sale of such fertilizer.

v) ABC and Co. a trading concern , has supplied the product X to Mr. Y at subsidize rate of ̀ 30,000 (Open market value of such goods is ` 45,000). The supplier of ABC and Co. has given the subsidy to it to compensate for the price difference.

Answer

i) No, As the amount of deposit in the given case is not applied by the supplier towards the mobile handset provided. No levy of GST

ii) In this case there exist two forms of supply i.e.

Ü Sale of gold necklace by jeweler to the customer – This falls under the ambit of supply as such sale by the jeweler is in course of his business, thus the consideration here is partly in kind & in money for differential gms i.e. 75 gms paid by customer. GST shall be levied on the value determined as per open market value for 275 gms of gold necklace.

StudentsNotes


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Venus music world charged a late fee as a penalty for late return of a DVD compact disc to its customer. Will the late fee charged to its customer be considered as a part of consideration?

Answer

As per sec 2(102) Service means anything other than goods, money & securities

Also as per Schedule II para 5 of CGST Act, refraining from an act or to tolerate an act is called as supply of service.

Hence, late fee, fine, penalty charged by the supplier for any reason would be treated as supply of service for consideration & liable to GST.

Ü Sale of old gold articles by customer to jeweler – This falls out of purview of supply as the sale by customer is not in course of business.Thus, does not fall under the ambit of consideration hence no GST

iii)Yes, as supply of motorbike is in response to an offer to join the cricket club. GST shall be levied

iv) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy received from the Central Government or State Government. Thus in the given case the amount of subsidy shall be excluded from the value of consideration.

v) As per section 2(31) of CGST Act, pertaining to 'consideration' clearly excludes the value of subsidy received from the Central Government or State Government. But in given case subsidy is given by the supplier and not by Govt. hence subsidy is treated as consideration.


Will GST be applicable on any interest charged for payment after the credit period?

Answer

As per sec 2(102) Service means anything other than goods, money or securities.

Hence, Interest charged for the following activities are liable to GST:

(1) Interest for use of money (i.e. loan, advances, deposits)

(2) Interest for delay payment of consideration (i.e. interest from debtors, receivables)

Interest on loan advances or deposit is subject to exemption but any interest, late fee or penalty for delay payment of consideration is liable to GST.


Whether supply of goods or services without consideration is liable to tax?

Answer Normally as per Sec 7(1)(a) supply of goods or services for consideration is liable to GST. The activities enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will qualify as supply in the absence of consideration and eventually would be liable to tax:1. Permanent transfer or disposal of business assets where input tax credit has been availed on such

assets. 2. Supply of goods or services or both between related persons or between distinct persons as specified

in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods— (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the

principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the

principal. 4. Import of services by a taxable person from a related person or from any of his other establishments

outside India, in the course or furtherance of business.

Schedule - I : Deemed supply without consideration

StudentsNotes

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Whether transfer of goods to another branch located outside the State is taxable? What would be your opinion on taxability of goods are transfer to another branch of same state.

Answer

In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of para 2 to Schedule I of the CGST Act, 2017.

Further, it is important to note that, supply of goods to a branch / unit located within the same State is not liable to GST if such branch is not separately registered.

In case branch in a same state having separate registration then it would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).


Whether gifts given by employer to employee will also qualify as supply?

Answer

As per definition of related person it includes employer & employee as related person.

As per Sch I [Sec 7 (1) (c)] para 2 any supply of goods or services to related person shall qualify as a supply when it is made in the course or furtherance of business.

Also as per proviso the gift value not exceeding ` 50,000 in a financial year by an employer to employee shall be treated as supply.


VB associates & Co a CA firm donated old laptops to charitable schools on account of renovation of office. The firm had taken input tax credit on the laptops so donated. Does it qualify as a supply?

Answer

As per section 7(1)(c) read with Schedule I of CGST Act,2017, Permanent transfer or disposal of business assets where input tax credit has been availed shall be treated as supply even if made without consideration. Hence donation of old laptops to charitable schools shall qualify as supply since ITC has been availed by VB associates & co.


Daksh gold pvt ltd. On occasion of Diwali distributes gift hamper to its employee worth ̀ 3, 00,000. Does it qualify as supply? Would your answer be different if gifts of ̀ 42,000 have been given to a employee?

Answer

As per section 7(1) (c) read with Schedule I of CGST Act, 2017, Supply of goods or services between related persons id treated as supply even if it is without consideration. As per explanation to section 15 of CGST Act 2017, persons shall be deemed to be as “related persons” if such persons are employer and employee. Thus, Diwali gifts to employee worth ` 3,00,000, will qualify as supply and such supply would be leviable to GST.

If gift of ` 42,000 is given instead of ` 3,00,000 , the same will not qualify as supply since it has been specifically provided that gifts not exceeding ` 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

Transfer of Business Asset

Supply to related person or Distinct person

StudentsNotes


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Disha Automobiles pvt ltd. Engages AS motors ltd , as an agent to sell cars on its behalf. For the purpose, Disha Automobiles pvt ltd has supplied 150 cars to the showroom of AS motors ltd. Located in Gujarat. Does it qualify as supply?

Answer

As per section 7(1)(c) read with Schedule I CGST Act, 2017, Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal shall be treated as supply even if made without consideration. In view of the same supply of cars by Disha Automobiles pvt ltd. to AS motors ltd to Disha Automobiles will qualify as supply.


VS ltd. Provides tax consultancy services without any consideration to SK ltd in which VS ltd holds 30% shares. The said consultancy has been provided for the benefit of entire group. Does it qualify as a supply?

Answer

As per section 7(1)(c) read with Schedule I of CGST Act 2017, Supply of goods or services between related persons is treated as supply even if it is without consideration. As per explanation to section 15 of CGST Act 2017, persons shall be deemed to be as “related persons” if any person directly or indirectly owns, controls, the other.

Normally if any person holds more than 50% shareholding in another then control is proved between both of them. In the given case merely holding 30% of share by VS ltd in SK ltd cannot be treated as related person.

Hence we can say that service is provided without consideration & it does not qualify as supply u/s 7 of CGST Act.

Supply between principle and Agent


Is it important to distinguish between supply of goods and services?

Answer

Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of supply of services respectively; similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply of services.

Further, the rate of tax applicable to supply of goods and supply of services may be different. Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of services.

Schedule II : Activity to be treated as supply of goods or supply of services


Mr S is the owner of a truck valued at ̀ 7, 00,000/- , He transfers the right to operate the truck to Mr Y for a consideration but the ownership of the truck is not transferred. Determine whether it will be considered as a supply?

Answer

As per section 7(1)(d) read with Schedule II of CGST Act,2017, Any transfer of rights in goods without transfer of title thereof shall be classified as supply of service.

StudentsNotes

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Classify following activities as a supply of goods or services as per Schedule- II

i) Mr Suraj enters into a contract with Mr Vishal to rent out his property for commercial purpose

ii) M/s Swadh enterprises provides catering services on occasions such as party, seminars, conference etc..

iii) M/s XYZ pvt ltd transferred stock of raw materials from its unit in Pune to one of its branch located in Nagpur

iv) Mr X provided transportation facility for a deceased person in relation to performance of funeral rights

v) M/s Nirmitee developers undertakes a contract of fabrication works in office of a complex building

Answer The above activities are in relation to goods or services or both but in order to be classified as a 'Supply' it must be included in the scope of supply as per section 7 of CGST Act.

i) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Renting of immovable property has been classified as a 'supply of service'.

ii) Yes it is a supply, As per section 7(1)(d) read with Schedule II of CGST Act, Supply of food or any other article for human consumption where it is for a consideration is classified as a 'Composite Supply'.

iii) No, if goods are transferred from one unit to another unit in the same state of same business entity having same registration number, then it would not be considered as supply under section 7 of CGST Act.

iv) No, As per section 7(2)(a) read with Schedule III of CGST Act, Services of funeral, burial, crematorium or mortuary including transportation of deceased shall neither be treated as 'supply of goods' nor a 'supply of services'

v) Yes it is a supply, As per section 7(1) (d) read with Schedule II & definition of 'Works Contract' under section 2(119) of CGST Act fabrication works relating to an immovable property shall be classified as a 'supply of service'.


Mr Raju & Mr Aditya are running a partnership firm and having goods S & T in stock. Mr Raju & Mr Aditya decide to dissolve the partnership and the goods S & T are taken over by Mr Raju & Mr Aditya respectively. The business is not continued further. Whether such takeover of stock be considered as supply?

Answer

As per section 7(1)(d) read with clause 4(c) of Schedule II of CGST Act, the clause provides that where any person ceases to be a taxable person, any goods forming a part of asset of any business shall be deemed to be supplied by him in the course or furtherance of business.

Provided that it shall not be treated as supply if it falls under the following exceptions:

i) the business is transferred as a going concern to another person or

ii) the business is carried on by a personal representative who is deemed to be a taxable person

In both the above cases, the business is continued. Therefore, it will not be considered as supply of goods.

In the given case partnership firm is dissolved & ceases to be taxable person also, the business is not continued further hence stock of S & T is to be treated as supply & liable to GST.

StudentsNotes


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Enumerate the activities or transactions which shall be treated neither as a supply of goods nor a supply of services. (MTP – ICAI)

Answer

Schedule III in the CGST Act is akin to the negative list under the service tax regime. This schedule specifies transactions/ activities which shall be neither treated as supply of goods nor a supply of services.

1. Services by an employee to the employer in the course of or in relation to his employment.

2. Services by any court or Tribunal established under any law for the time being in force.

3. (a) Functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities

(b) Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or

(c) Duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building.

6. Actionable claims, other than lottery, betting and gambling.

Schedule III : Activity not treated as Supply


Employer provides bus service, meal coupon, telephone at residence, gives vehicle for official and personal use, uniform and shoes, to employee. Explain implication of GST?

Answer

As per Sec 7(2) of CGST Act read with Sch III any service provided by an employee to employer in the course of or in relation to employment then it is not called as supply.

Also as per Schedule I para 2 any gift given by the employer to an employee upto ` 50,000 in a financial year does not qualify as a supply.

In given case bus, service, meal coupon etc are provided by the employer in course or in relation to employment then no GST is payable, But if it is provided as a gift & not as a part of employment then GST is payable for any value in excess of ̀ 50,000 in a financial year.


Determine whether the following activities fall under the purview of supply as per section 7 of CGST Act, 2017:-

i) Mr Raj hires an ambulance for transport facility of a deceased person for performing funeral rituals

ii) Mr S enters into an agreement for sale of land to Mr R for a consideration

iii) M/s ABC developers sold fully furnished building to MrSagar for a valuable consideration

Answer

I) As per section 7 read with Schedule III para 4 of CGST Act, Services of funeral including transportation of the deceased are out of scope of supply. Thus there shall be no levy of GST on such activity.

ii) As per section 7 read with Schedule III para 5 of CGST Act, Sale of land is out of scope of supply and hence there shall be no levy of GST on such activity.

iii) As per section 7 read with Schedule III para 5 of CGST Act, Sale of building is out of scope of supply and hence there shall be no levy of GST on such activity.


Discuss the taxability of import of services under GST. (RTP – ICAI)

Answer

As per section 7(1)(b) of CGST Act, 2017 supply includes the importation of services for a consideration whether or not in the course or furtherance of business. Thus, import of services with consideration is taxable in both of the following situations:

in course or furtherance of business

not in course or furtherance of business

Further, Schedule I of CGST Act, inter alia, stipulates that import of services by a taxable person from a related person or from his establishments located outside India is treated as “supply” even if made without consideration if it is provided in the course or furtherance of business.

Import of Services


Shreya a student of engineering plans to pursue her higher education in US. He receives career consultancy services from a US based consultant for ̀ 2, 50,000. Does it qualify as a supply?

Answer

Yes, As per section 7(1)(b) of CGST Act, 2017, Supply includes import of services for a consideration whether or not in the course or furtherance of business. Hence, in the above case it will be treated as a supply.


John Ltd, USA is the holding company of VB Ltd. imports Business Consultancy Service from John Ltd. without consideration in September, 2017, does it qualify as a supply.

Answer

Yes, As per para 4 of Schedule -I import of services by taxable person from related person outside India in the course or furtherance of business without consideration would be treated as supply.

In given case import of business consultancy service by V.B. Ltd. from John Ltd. without consideration qualify as supply.


ABC Associate received legal consultancy services from its head office located in Malaysia. The head office has rendered such services free of cost to its branch office, does it qualify the supply?

Answer

Yes, As per para 4 of Schedule -I import of services by taxable person from any of his other establishment outside India in the course or furtherance of business without consideration would be treated as supply.

Since ABC Associates and the branch office are related persons, services received by ABC Associates will qualify as supply even though the head office has not charged anything from it.

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StudentsNotes


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Determine whether the following supplies amount to composite supplies:

(a) A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is provided along with the room accommodation.

(b) A toothpaste company has offered the scheme of free toothbrush along with the toothpaste. (ICAI Material

Answer

Under composite supply, two or more taxable supplies of goods or services or both, or any combination thereof, are naturally bundled and supplied inconjunction with each other, in the ordinary course of business, one of which is a principal supply [Section 2(30) of the CGST Act]. In view of the same,

(a) since, supply of breakfast and dinner with the accommodation in the hotel are naturally bundled, said supplies qualify as ‘composite supply’.

(b) since supply of toothbrush alongwith the toothpaste are not naturally bundled, said supplies do not qualify as ‘composite supply’.

Define the following terms as in accordance with GST Act:-

i) Composite supply

ii) Mixed supply

Answer:

As per section 2(30) of CGST Act, “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;

As per section 2 (74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Illustration — A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

Question : 56


Nirvana Manufacturers entered into a contract with XYZ Ltd. for supply of readymade shirts packed in designer boxes at XYZ Ltd.’ outlet. Further, Nirvana Manufactures would also get them insured during transit. Determine nature of supply?

Answer

In this case, supply of goods, packing materials, transport & insurance is a composite supply wherein supply of goods is principal supply. In this case, entire transaction would be taxed as ‘supply of goods’.

Composite & Mixed Supply

StudentsNotes

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Sagar Ltd. supplying a kit which contains a tie (12%), a watch(28%), a wallet (28%), and a pen (12%), as a combo, for ̀ 4,500. Tie, watch, wallet, and pen are bundled as a kit. The kit is supplied for a single price. Determine nature of supply?

Answer

Each of the goods in the package have individal identity and can be supplied separately, but are deliberately supplied conjointly for a single conjointly for a single consolidated price. Hence, the supply would constitute a mixed supply, as per section 2(74).

The supply of a tie does not naturally necessitate the supply of other elements (watch, wallet, pen) and vice versa.

As per section 8(b), tax rates applicable in case of mixed supply would be the rate of tax attributable to that one supply (goods, or services) which suffers the highest rate of tax from amongst the supplies forming part of the mixed supply. Therefore, entire package will be chargeable to 28% GST.

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