GST AMENDMENTS

ADMINISTRATION 1-1 SUPPLY – TAXABLE EVENT 2-5 COMPOSITE & MIXED SUPPLY 6-7 REVERSE CHARGE MECHANISM 8-9 COMPOSITION 10-12 VALUATION OF SUPPLY 13-13 REGISTRATION 14-17 INPUT TAX CREDIT 18-19 JOB WORK 20-25 INPUT SERVICE DISTRIBUTOR 26-27 INVOICE 28-29 ACCOUNTS AND RECORDS 30-30 TIME OF SUPPLY 31-33 TDS / TCS 34-34 RETURNS 35-35 EXPORTS 36-37 DEEMED EXPORTS 38-38 REFUND 39-46 ADVANCE RULING 47-47 APPEALS AND REVISION 48-48

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ADMINISTRATION

1. Power to grant registration in Bengaluru given to Principal Commissioner of Central Tax in case of

OIDAR • Overseas supplier of OIDAR Service supplying service to NTOR (Non-taxable online recipient): GST payable by

overseas supplier – RCM not applicable, GST payable by overseas entity • Simplified registration scheme has been made for such overseas supplier – Sec 14 of IGST Act

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• Where to apply for registration?: CG notified the Principal Commissioner of Central Tax, Bengaluru and all the officers subordinate to him as the officers empowered to grant registration in such case. .

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This power was granted by the CG through N/N 2/2017 - IT dated 19 June 2017. w.e.f. 22.06.2017

2. Superintendent empowered to issue show cause notice and order Section 74 of the CGST Act, 2017 read with Rule 142 For optimal distribution of work relating to the issuance of show cause notices and orders under section 73 and 74

of the CGST Act and also under the IGST Act, monetary limits for different levels of officers of central tax has been prescribed. These limits have been prescribed as below:

Sl. No.

Officer of Central Tax Monetary limit of the amount of CGST (including cess)

Monetary limit of the amount of IGST (including cess)

Monetary limit of the amount of CGST and IGST (including cess)

(1) (2) (3) (4) (5) 1. Superintendent of

Central Tax Not exceeding 10 lakhs Not exceeding Rupees

20 lakhs Not exceeding Rupees 20 lakhs

2. Deputy or Assistant Commissioner of Central Tax

Above 10 lakhs and not exceeding Rupees 1 crore

Above Rupees 20 lakhs and not exceeding Rupees 2 crores

Above Rupees 20 lakhs and not exceeding Rupees 2 crores

3. Additional or Joint Commissioner of Central Tax

Above 1 crore without any limit

Above Rupees 2 crores without any limit

Above Rupees 2 crores without any limit.

• Detection of Case by Central Tax officer of Audit Commissionerate / Director General of GST

Intelligence (DG-GST I): They shall exercise the powers only to issue SCN. A SCN issued by them shall be adjudicated by the competent central tax officer of the Executive Commissionerate in whose jurisdiction the noticee is registered. o In case there are more than one noticees mentioned in the SCN having their principal places of business

falling in multiple Commissionerate’s, the SCN shall be adjudicated by the competent central tax officer in whose jurisdiction, the principal place of business of the noticee from whom the highest demand of central tax and/or integrated tax (including cess) has been made falls.

The above has been prescribed vide Circular no. 31/05/2018-GST dated 9th February 2018.

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SUPPLY – TAXABLE EVENT

1. Applicability of GST on inter-state transfer of aircraft engines, parts and accessories for use by their own airlines

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Consider following situation

• ABC Ltd. is an aircraft operator operating pan-india air travel services. It has registered officers in different states. It sent some parts and accessories of aircraft from its Delhi registered premise to Maharashtra registered premise. Whether this transaction would amount to supply of goods under GST?

• Sec 7(1)(c) read with Schedule I of the CGST Act, 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, even if, without consideration, attracts GST. Thus, GST is payable on such inter-state transfer of aircraft engines. .

• Clarification: o Recipient unit shall be eligible to avail ITC. o ITC admissible notwithstanding that credit of input tax charged on consumption of such goods is not

allowed for supply of service of transport of passengers by air in economy class at GST rate of 5%.

This was clarified by the Circular no. 16/16/2017-GST dated 15th November 2017.

2. Movement of goods (such as jewellery) for supply on approval basis (intra or inter-State) At times, suppliers have to visit other places and carry their goods along for approval. They can only issue the

invoice at the time of supply and while carrying the goods they are not aware if the goods will be sold. While carrying goods to other goods, the supplier cannot even register as a casual taxable person as it is impossible for him to ascertain the supplies beforehand. • For carrying out this supply, it has been provided that the supplier should issue a delivery challan for initial

transportation of goods. • Only when the supply gets confirmed, the invoice can be issued. • Further, such supplies where the supplier carries the goods from one State to another and supplies them in a

different State, will be treated as inter-State supplies. Therefore, they will attract integrated tax.

The above has been clarified vide Circular No. 10/10/2017-GST dated 18th October 2017.

Author Jeweler of Delhi taking jewelry with him for sale on approval basis to a buyer in UP • Jewellery taken from Delhi Showroom to UP = Not a supply – movement under delivery challan • Jewellery shown to customer • Customer confirms acceptance after 3 days • Now, supply is taking place – [acceptance creating supply] – this supply involving no movement • PoS as per Sec 10(1)(c) of IGST Act = Location of goods at time of delivery to recipient = UP • Thus, this supply by jeweler = Inter State Supply = IGST Chargeable

3. Supply of goods by artist in various states to art galleries

Consider following situation An artist/painter of Delhi sending his painting for exhibition in Mumbai – subsequent sale therefrom • Artist of Delhi sending their artwork to ART GALLERY for exhibition in Mumbai – Art Gallery exhibit it for supply • If art work is selected, then sale/transaction takes place and invoice is issued by artist. • Issues:

• Whether sending goods to Art Gallery is ‘supply’? .

• If not, then what shall be the place of supply of such transaction and consequent nature of supply?

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Clarifications:

1) Time when supply is taking place: in case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply. • The confusion here was regarding the treatment of this activity whether it is taxable in the hands of the artist

when the same is given to the art gallery or at the time of actual supply by the gallery. • It is seen that Rule 55 (1)(c) of the CGST Rules, 2017 provides that the supplier shall issue a delivery challan

for the initial transportation of goods where such transportation is for reasons other than by way of supply. • It is also seen that Rule 55(4) of CGST Rules provides that where the goods being transported are for the

purpose of supply to the recipient, but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods. .

2) Dispatch to Art Gallery: Documentation: Removal of art work is for supply on approval basis. Such movement shall take place on a delivery challan along with the e-way bill wherever applicable.

The invoice may be issued at the time of actual supply of art work. .

3) Nature of Supply: The supplies of the art work from one State to another State will be inter-State supplies and attract IGST in terms of section 5 of the IGST Act, 2017.

This was clarified vide Circular no. 22/22/2017-GST dated 21st December 2017.

Author:

• Artist of Delhi sending their artwork to ART GALLERY for exhibition in Mumbai – Art Gallery exhibit it for supply • Movement of art work to art gallery = Not a supply – movement under Delivery Challan (Rule 55) & EWB (Rule 168) • Visitor selecting artwork and purchasing it • Now, supply is taking place –– now, tax invoice shall be issued - this supply involving no movement • PoS as per Sec 10(1)(c) of IGST Act= Location of goods at time of delivery to recipient = Mumbai • thus, this supply by Delhi’s Artist = Inter State Supply = IGST Chargeable ..

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Issue which may come up in mind::: • Whether artist can be labelled as Casual TP in the State where Art Gallery is situated? (it can be so if Art Gallery can

be considered as place of business of artist in other state) .

• Artist does not arrange any resources (technical or human) at Art Gallery. Thus, Art Gallery shall not be considered as ‘place of business’ of artist.

• Thus, Artist cannot be treated as ‘Casual TP’ of the State in which Art Gallery is situated.

• Where a supplier of goods takes a stall in ‘Trade Fair’ / Some Business Exhibition for making sales therefrom, whether he becomes casual TP in that case?

• In such case, supplier has arranged resources (technical or human) at Business Exhibition. Thus, such stall shall be considered as ‘place of business’ of the supplier of goods.

• Thus, he is treated as ‘Casual TP’ of the State in which trade fair is held. .

4. Applicability of GST on the Superior Kerosene Oil retained for the manufacture of Linear Alkyl Benzene Consider following situation IOC (Refinery) sending SKO (kerosene oil) to Manufacturer • Generally supplied through pipeline • Manufacturer retain 17%, returned balance quantity • IOC (refinery) raised invoices only for that 17% quantity retained by manufacturer • Issues:

• Whether the said practice is correct? View I: Correct – invoice shall be raised only on quantity sold (i.e., 17%)

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View-2: Incorrect – invoice shall be raised for whole quantity (100%), raise credit note for quantity returned (83%)

and claim adjustment in output tax liability in the period in which credit note is issued (Sec 34) • .

CBEC /CBIC Circular No. 12/12/2017-GST, dated 26.10.2017

Background: LAB manufacturers receive superior Kerosene oil (SKO) from, a refinery, say, Indian Oil Corporation (IOC). They extract n-Paraffin (C9-C13 hydrocarbons) from SKO and return back the remaining of SKO to the refinery. LAB manufacturers generally receive superior kerosene oil [SKO] from a refinery through a dedicated pipeline; on an average about 15 to 17% of the total quantity of SKO received from refinery is retained and balance quantity ranging from 83%-85% is returned back to refinery. The retained SKO is towards extraction of Normal Paraffin, which is used in the manufacturing of LAB. In this transaction consideration is paid by LAB manufactures only on the quantity of retained SKO (n-paraffin). .

Issues: a. Whether in this transaction GST would be levied on SKO sent by IOC for extracting n-paraffin or only on

the n-paraffin quantity extracted by the LAB manufactures? b. Whether the return of remaining Kerosene by LAB manufactures would separately attract GST in such

transaction? .

Clarifications: a. GST will be payable by the refinery (IOC, in our case) on the value of net quantity of superior kerosene

oil (SKO) retained (i.e., 15% to 17%) for the manufacture of Linear Alkyl Benzene (LAB). b. The refinery (IOC) would be liable to pay GST on such returned quantity of SKO, when the same is supplied

by it to any other person.

[Delivery Challan = for sending goods, Tax Invoice = For quantity sold in the transaction]

Author:

• IOC (refinery) shall do following: • Dispatch of SKO – Raise delivery Challan for entire quantity send

[EWB is not required (as transportation is through pipeline, not through motorized conveyance) – Rule 138(14)]

• Sale Materialization – Raise Tax Invoice for quantity sold (15% to 17%).

5. Fee/amount charged by Consumer Dispute Redressel Commission officer for hearing/registering

complaints of consumer – Whether out of scope of supply? Consider following situation

• Consumer found his product purchased from a dealer is faulty. • He seeks replacement but dealer refused. • He filed a complaint with Consumer Dispute Redressal Commission (CDRC). • CDRC charged fees for registering the complaint. • Issues:

• Whether such supply falls out of scope of supply as per Sec 7(2) read with Schedule III (Entry 2) or whether GST shall be applicable on such fee? View I: Within scope of supply – CDRC is neither Court not Tribunal.

View-2: Out of Scope of Supply– CDRC is like a court (though not a court) – So spirit wise, treatment similar to

fees received by Court/Tribunal shall be given • .

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CBEC /CBIC Circular No. 32/ 6/ 208- GST (Dated 2nd Feb, 2018)

Issue Is GST leviable on the fee / amount charged in the following situations / cases : — • A customer pays fees while registering complaints to Consumer Disputes Redressal

Commission office and its subordinate offices. These fees are credited into State Customer Welfare Fund’s bank account.

• Consumer Disputes Redressal Commission office and its subordinate offices charge penalty in cash when it is required.

• When a person files an appeal to Consumers Disputes Redressal Commission against order of District Forum, amount equal to 50% of total amount imposed by the District Forum or Rs. 25000/-, whichever is less, is required to be paid.

Clarification • Services by an court or Tribunal established under any law for the time being in force is neither a

supply of goods nor services. Consumer Disputes Redressal Commissions (National / State / District) may not be tribunals literally as they may not have been set up directly under Article 323B of the Constitution. However, they are clothed with the characteristics of a tribunal on account of the following : — o Statement of objects and reasons as mentioned in the Consumer Protection Bill state that one of

its objects is to provide speedy and simple redressal to consumer disputes, for which a quasi judicial machinery is sought to be set up at District, State and Central levels. The President of the District / State / National Disputes Redressal Commissions is a person who has been or is qualified to be a District Judge, High Court Judge and Supreme Court Judge respectively.

o These Commissions have been vested with the powers of a civil court under CPC for issuing summons, enforcing attendance of defendants / witnesses, reception of evidence, discovery / production of documents, examination of witnesses, etc.

o Every proceeding in these Commissions is deemed to be judicial proceedings as per sections 193/228 of IPC. The Commissions have been deemed tobe a civil court under CrPc.

o Appeals against District Commissions lie to State Commission while appeals against the State Commissions lie to the National Commission. Appeals against National Commission lie to the Supreme Court. .

In view of the aforesaid, it is hereby clarified that fee paid by litigants in the Consumer Disputes Redressal Commissions are not leviable to GST.

Any penalty imposed by or amount paid to these Commissions will also not attract GST. .

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Author:

• Extending the logic of above circular: • Fees paid for obtaining Advance Ruling from Advance Ruling Authority (AAR) will also not be subject to GST. • Fees paid for obtaining Advance Ruling from Appellate Authority for Advance Ruling (AAAR) will also not be

subject to GST. .

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COMPOSITE & MIXED SUPPLY

1. Activity of printing (taxability as supply of goods or supply of services) .

Consider following situation

• Praksh Mishra running a printing press. • He obtained 2 orders:

o Order from ‘Plaza Restaurant for printing of Napkins (bearing logo of Plaza Restaurant)’ o Order from SUJATA PUBLICATION HOUSE for printing of books / magazines for them

• Mishra will be purchasing paper and other inputs and using those will supply output (napkin/ books) to customers. .

• Issues: • Whether supply of Mishra is – supply of Goods or supply of service?

Order I: Supply of napkin – It is essentially sale of napkins.

Order-2: Supply of books/ magazines– Is it also sale of books/ magazines? – No – as Mishra has no right / authorization to sell books/ magazines (as content is owned by Sujata Publication) – so it is supply of service.

• .

CBEC / CBIC Circular No.11/11/2017-GST

It is clarified that supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc. printed with logo, design, name, address or other contents supplied by the recipient of such printed goods, are composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply. .

In the case of printing of books, pamphlets, brochures, annual reports, 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, supply of printing [of the content supplied by the recipient of supply] is the principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of classification of services.

In case of 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 the supply of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or 49.

. CRUX

Situation Analysis What is the position in respect of printing of books, pamphlets, brochures, annual reports, and the like?

Contents : Belongs to publisher or the person who owns the usage rights to the intangible inputs; Physical inputs including paper : Belongs to printer; Categorization : Treated as supply of services falling under CTH 9989.

What is the position in respect of supply of printed envelopes, letters cards, printed boxes, issues, napkins, wall paper etc. falling under Chapter 48 or 49?

Design, logo etc. : supplied by the recipient of goods; Physical inputs including paper : Belongs to printer; Categorization : Treated as supply of goods falling under Chapter 48 or 49

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Clarifications issues in relation to PRINTING OF BOOKS Whether supply in the situations listed below shall be treated as a supply of goods or supply of service : 1. The books are printed / published / sold on procuring copyright from the author or his legal heir. [e.g. White Tiger

Procures copyright from Ruskin Bond]

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2. The books are printed / published / sold on paying copyright fees to a foreign publisher for publishing Indian edition (same language) of foreign books. [e.g. Penguin (India) Ltd. pays fees to Routledge (London)]

3. The books are printed / published / sold on paying copyright fees to a foreign publisher for publishing Indian language edition (translated). [e.g. Ananda Publishers Ltd. pays fees to Penguin (NY)]

4. The books are printed / published / sold against a specific brand name. [e.g. Manorama Year Book]. .

Clarification: The supply of books shall be treated as supply of goods as long as the supplier owns the books and has the legal rights to sell those books on his own account.

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2. Activity of re-treading of tyres (taxability as supply of goods or supply of services) [Retread, also known as "recap," or a "remold" is a re-manufacturing process for tires that replace the tread/rubber on worn tires.]

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Consider following situation

• Ramesh is engaged in activity of ‘retreading of worn out tyres'. • He obtained 2 orders:

o Order from B ltd. – B Ltd. will send 1000 worn out tyres on which it wants Ramesh to do retreading o Order from A Ltd. – A Ltd. wants 1000 re-treaded tyre .

• Issues: • Whether supply of Ramesh is – supply of Goods or supply of service?

Order I: Doing retreading for B Ltd. – it is supply of service. .

Order-2: Selling retreaded tyres – (supply of goods or service) – Composite Supply - supply of goods. • .

Circular No. 34/8/2018-GST

Retreading of tyres (where tyres belong to recipient)** In re-treading of tyres, which is a composite supply, the pre-dominant element is the process of re-treading which is a supply of service . Rubber (goods) used for re-treading is an ancillary supply. Which part of a composite supply is the principal supply, must be determined keeping in view the nature of the supply involved. Value may be one of the guiding factors in this determination, but not the sole factor. The primary question that should be asked is what is the essential nature of the composite supply and which element of the supply imparts that essential nature to the composite supply. Retreading of tyres (where tyres belong to supplier) Supply of re-treaded tyres, where the old tyres belong to the supplier of re-treaded tyres, is a supply of goods (re-treaded tyres under heading 4012 of the Customs Tariff attracting GST @ 28%)

Author:

Retreading of tyres (where tyres belong to recipient)** Re-treading = (supply of goods/rubber and supply of service/labour) = Composite Supply CBEC Circular = Treatment as per Sec 8 of CGST Act which provides that determine principal supply and treat the

combination as principal supply)

Author = Treatment as provided by Schedule II (Para 3) which provides that any treatment or process which is supplied on another person’s goods is a supply of service.

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What to write in exams? Option 1: State as per Circular – as done in answer above .

Option-2: State as per circular and at the end, mention yours opinion (i.e. restate Author note) .

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REVERSE CHARGE MECHANISM

1. RCM of Section 9(4) of CGST Act/ Sec 5(4) of IGST Act (Supply by unregistered supplier to GST Registered recipient)

Vide N/N 10/2018-CT (Rate) and N/N 11/2018-IT (Rate) dated 23rd March 2018, reverse charge under

Sec 9(4) / Sec 5(4) has been deferred till 30th June 2018. .

This means that all such supplies will be treated as exempt in nature till 30th June 2018.

Author:

Above RCM has been made practically ineffective via issuance of exemption in respect of GST payable on such supplies. • Since GST has been exempted. the registered recipient is not required to pay RCM GST. He is also not required to

raise any self-invoice in respect of such supply.

2. RCM of Section 9(3) of CGST Act/ Sec 5(3) of IGST Act

(RCM on notified goods / RCM on notified services)

[A] RCM on goods Entry No. 4A Added: Supply of raw-cotton by Agriculturist to a GST registered entity

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Notifications Amended -- N/N 4/2017-CT (Rate) + N/N 4/2017-IT (Rate) Effective date of applicability of amendment – 15th Nov, 2017

Tariff item, sub-heading, heading or Chapter

Description of supply of Goods

Supplier of goods

Recipient of supply

(1) (2) (3) (4) (5)

4A 5201

Raw Cotton

Agriculturist

Any registered person

Effect of the amendment – o Supply Chain of Raw Cotton

• Supply by Agriculturist to A Ltd. (GST registered) – RCM applicable (GST payable by A Ltd.) .

• Further supply by A Ltd. to B Ltd. (GST registered) -- RCM not applicable (GST payable by A Ltd.)

[B] RCM on services .

Entry No. 5A Added: Renting of immovable property by Government/local authority to a registered person

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Notifications Amended -- N/N 13/2017-CT (Rate) + N/N 10/2017-IT (Rate) Effective date of applicability of amendment - 25th January 2018

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Category of Supply of Services Supplier of service

Recipient of Service [Liable to pay GST under RCM]

5A Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under CGST Act, 2017

CG, SG or UT or local authority

Any person registered under the CGST Act, 2017

Effect of the amendment – o Renting of immovable property to GST registered entity – GST on rental payable by recipient .

o Renting of immovable property to unregistered entity – GST on rental payable by Govt / Local Authority

Entry No. 7: Insurance agent services subject to RCM – Insurance agent has now been defined. .

Notifications Amended -- N/N 13/2017-CT (Rate) + N/N 10/2017-IT (Rate) Effective date of applicability of amendment - 25th January 2018

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Category of Supply of Services Supplier of service

Recipient of Service [Liable to pay GST under RCM]

7 Services supplied by an insurance agent to any person carrying on insurance business.

An insurance agent

Any person carrying on insurance business, located in the taxable territory.

Explanation.- For purpose of this notification,-

(f) “Insurance Agent” shall have the same meaning as assigned to it in Sec 2(10) of the Insurance Act, 1938.

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Effect of the amendment – o Insurance Agent has been defined to mean agent as defined in Sec 2(10) of Insurance Act.

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Insurance Agent: Sec 2(10) of Insurance Act, 1938 “insurance agent” means an insurance agent licensed under section 42 who receives or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring insurance business [including business relating to the continuance, renewal or revival of policies of insurance.

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o Thus, if there is an insurance company selling insurance policies through an ECO (E-Commerce Operator) and paying commission to ECO for sale of policies, then such ECO shall not be termed as ‘insurance agent’ unless such ECO is licensed under Section 42 of Insurance Act.

o Unless ECO can be termed as ‘insurance agent’, RCM shall not be applicable. .

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COMPOSITION 1. Rule 7 of CGST Rules : Rate of tax of the Composition Levy .

The rate of tax for persons under composition scheme was revised with effect from 23rd January 2018 vide Notification no. 3/2018-Central Tax dated 23rd January 2018. .

Rule 7: : Rate of tax for composition levy

Pre-Amendment .

Eligible Registered person Rate (as prescribed) Total Liability

CGST SGST / UTGST

1. Manufacturers (other than manufacturers of notified goods)

1% of the TO in the State/ UT

1 % of the TO in the State/ UT

2% of TO in the State / UT

2. Suppliers making supplies referred to in Schedule II – Para 6(b), i.e., Restaurant and Caterers .

2.5%

2.5%

5% of TO in the State / UT

3. Any Other Supplier (basically, traders of goods)

0.5% of the TO in the State/ UT

0.5% of the TO in the State/ UT

1% of TO in the State / UT

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Post-Amendment .

Eligible Registered person Rate (as prescribed) Total Liability

CGST SGST / UTGST

1. Manufacturers (other than manufacturers of notified goods)

0.5% of the TO in the State/ UT

0.5% of the TO in the State/ UT

1% of TO in the State / UT

2. Suppliers making supplies referred to in Schedule II – Para 6(b), i.e., Restaurant and Caterers .

2.5% of the TO in the State/ UT

2.5% of the TO in the State/ UT

5% of TO in the State / UT

3. Any Other Supplier (basically, traders of goods)

0.5% of the TO of taxable supplies of goods in the State/ UT

0.5% of the TO of taxable supplies of goods in the State/ UT

1% of TO of taxable supplies in the State / UT

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Effect of the amendment – Effect on Manufacturer (other than manufacturer of notified goods)

• Composition Rate stands reduced from 2% to 1%. Great Savings to manufacturer, especially considering the fact that composition supplier does not collect GST payable from his customer.

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Effect on Trader of Goods • TO of exempted goods* will now be excluded from ATO.

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• Great Savings to trader, especially considering the fact that composition supplier does not collect GST payable from his customer.

• Earlier, such trader used to open a separate premise for selling / supplying exempted goods (that separate premise was operated without taking GST registration as per Sec 23(1)(a) of CGST Ac)

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Composition Liability of Manufacturer Earlier, CT liability = 2% of TO in the State / UT (which includes exempt as well as non-exempt supplies)

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Now, CT liability = 1% of TO in the State / UT (which includes exempt as well as non-exempt supplies)

Composition Liability of Trader of Goods Earlier, CT liability = 1% of TO in the State / UT (which includes exempt as well as non-exempt supplies)

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Now, CT liability = 1% of TO of taxable supplies of goods in the State / UT (it will excludes exempt supplies)

Note: o GST Council has mentioned that w.e.f. 1st Jan, 2018, for traders, turnover will be counted only for

supply of taxable goods. o Thus, ‘taxable supplies of goods’ to be understood to mean ‘supply of taxable goods’.

o Taxable supply = Supply on which GST is leviable under GST Act (thus, even supply of exempted

goods is also taxable supply)

o Supply of taxable goods = Supply of goods on which GST is payable (thus, supply of exempted goods is not supply of taxable goods)

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o Since GST Council has stated that ‘taxable supplies of goods’ to be understood to mean ‘supply of taxable goods’, thus, taxable of exempted goods shall now not be counted into ATO while computing composition liability of trader.

Determine the Composition tax liability for FY 2018-19 in following cases Status

under GST Nature of Supply Case-A Case-B Case-C

Supply of Product A GST@12%

(taxable supply) - supply of taxable goods (non-exempt goods)

25,00,000 25,00,000 25,00,000

Supply of Product B GST Exempt

(taxable supply) - supply of goods which are not taxable (exempt goods)

----- 25,00,000 25,00,000

Supply of Alcoholic Liquor

GST Not leviable

(non-taxable supply) - supply of goods which are not taxable

--- ---- 25,00,0000

Discuss composition tax liability in above cases: (a) For manufacturer (b) For trader

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Answer Case-A

[Product A only] Case-B [Product A & B only]

Case-C [Product A, & & C also]

For Manufacturer CT liability = 1% of 25,00,000

CT liability = 1% of 50,00,000

Composition Scheme not available

For Trader CT liability = 1% of 25,00,000

CT liability = 1% of 25,00,000

Composition Scheme not available

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Spl Note: Next year eligibility (FY 2019-20): Any supplier is eligible if his ATO in preceding year did not exceed Rs 100 lakhs. For that purpose, ATO shall be determined in usual manner (i.e., it will include all supplies – exempt as well as non-exempt,

taxable supply as well as non-taxable supply) .

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2. Time limits - extension thereof .

Supplier opting for composition scheme for the first time : Allowance of Composition Scheme at any time during the year 2017-18 Generally, composition scheme has to be opted for from the beginning of FY (and intimation as to that shall be given well in advance – i.e., before beginning of such FY) However, for FY 2017-18 (first year of implementation of GST), considering increase in composition limits in between the FY 2017-18 itself, supplier have been allowed to opt for composition scheme during the year itself. Supplier can submit intimation (Form GST CMP-02 on the GST portal) and can avail composition scheme with effect from the first day of the month succeeding the month in which he opts for the same.

Supplier shall also need to furnish the statement in Form GST ITC-03 within a period of 180 days from the date of commencement of payment of tax under composition scheme. This amendment was brought vide N/N 45/2017 -CT dated 13th October 2017.

Also, the aforesaid period of 180 days was enhanced from 90 days vide N/N 3/2018 - CT dated 23rd January 2018.

Supplier migrated into GST law and opted for composition scheme at the stage of migration itself : Extension of time period for furnishing stock Statement in Form GST CMP-03 A person who had migrated from the earlier law into the GST law has to furnish a stock statement in Form

GST CMP-03. The original time period was 60 days from the date of commencement of payment under composition

scheme. Through multiple extensions, the final date for furnishing such statement was 31st January 2018

vide Order No. 11/2017-GST dated 21st Dec 2017.

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VALUATION OF SUPPLY 1. Valuation of lottery, betting, gambling and horse racing

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Earlier -- Special valuation through notification .

Now -- Special valuation through new specific rule – Rule 31-A of CGST Rules, 2017 (vide N/N 3/2018- CT) .

Effective date of applicability of amendment –23rd January 2018 Rule 31A : Value of supply in case of Lottery, Betting, Gambling And Horse Racing .

(1) Supply of Lottery (a) The value of supply of lottery run by State Governments shall be deemed to be

… 100/112 of the higher of following … face value of ticket or … the price as notified in the Official Gazette by the organizing State.

(b) The value of supply of lottery authorized by State Governments shall be deemed to be

… 100/128 of the higher of following … face value of ticket or … the price as notified in the Official Gazette by the organizing State.

.

Explanation:– For the purposes of this sub-rule, the expressions- (a) “lottery run by State Governments” means a lottery not allowed to be sold in any State other than the organizing

State; (GST Rate on such lottery is 12%) (b) “lottery authorised by State Governments” means a lottery which is authorized to be sold in State(s) other than

the organizing State also; (GST Rate on such lottery is 28%) and

.

(c) “Organizing State” has the same meaning as assigned to it in rule 2 (1)(f) of the Lotteries (Regulation) Rules, 2010.

Author: Manner of taxation as well as valuation of taxation is still the same as it was earlier. Only change is that now specific rule has been inserted in CGST Rules, 2017. So, now valuation is covered by a specific rule (rather than though a notification) Student may refer discussion under

chapter of RCM

(2) Value of betting, gambling or horse racing

The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be

100% of the face value of the bet or the amount paid into the totalisator1 .

1 Totalisator = (Horse Racing) the machine that records bets in this system and works out odds, pays out winnings, etc

14

REGISTRATION

1. Sec 23(2): Exemption from registration – Notified person Section 23(2) empowers the Government to issue a notification specifying the categories of persons who may be exempted from obtaining registration under the GST law. Multiple notifications have been issued from time to time exempting various category of persons from registration.

Added new category: Persons making supply of services through ECO .

N/N 65/2017 -CT -dated 15th Nov, 2017 The persons

making supplies of services (other than supplies specified u/Sec 9(5) of CGST Act) through an ECO who is required to collect tax at source u/Sec 52 of the CGST Act, and

. having an aggregate turnover, to be computed on all India basis, not exceeding Rs 20 lakh

rupees in a financial year (Rs 10 lakhs in case of Special Category States, other than J&K)

are notified as the category of persons exempted from obtaining registration under GST law. .

Effect of the amendment – As per Section 24(ix) of the CGST Act, 2017, every person making supplies of goods or services through electronic

commerce operator has to compulsorily register under GST without any threshold limit. A number of small service providers who provide services through electronic commerce operator would have been

covered within the ambit of registration. To provide relief to such small service providers, the Government vide N/N 65/2017-CT dated 15th November 2017 has exempted them from registration if they do not exceed specified turnover.

Author: All notified persons which till date have been exempted from registration under section 23(2): .

Description (Linked to TO) CT or IT Goods Services

Taxable supply covered under RCM u/Sec 9(3) No N/N 5/2017- CT Covered Covered

Inter-State supply of Handicraft Goods Yes N/N 8/2017 -IT Covered ----

Intra-State Supply of Handicraft Goods by Casual Taxable Person

Yes N/N 32/2017 -CT Covered ----

Inter-State supply of Job-Worker Services

No N/N 7/2017 -IT ---- Covered

Inter-State supply of Any Service Yes N/N 10/2017 -IT ---- Covered

Supply of Services through ECO (intra-state) Yes N/N 65/2017 –CT (dated 15th Nov, 2017)

---- Covered

.

15

CGST Rules, 2017: .

2. Registration Procedure : Specified Entities/ Notified Entities allotted UIN for enabling them to claim refund of GST paid on inward supplies

Rule 17 : Assignment of UIN to certain SPECIAL ENTITIES (1) Every person required to be granted a UIN may submit an application electronically in FORM GST REG-13, duly

signed or verified through EVC, at the Common Portal, either directly or through a Facilitation Centre notified by the Board or Commissioner.

(1A) The UIN granted under sub-rule (1) to a person under section 25(9)(a) shall be applicable to the territory of India.

[inserted by N/N 75/2017-CT (dated 29th Dec, 2017)]

(2) The proper officer may, … upon submission of an application in FORM GST REG-13 or after filling up the said form or .

… after receiving a recommendation from the Ministry of External Affairs, Government of India* ,

.

assign a Unique Identity Number to the said person and issue a certificate in FORM GST REG-06 within a period of three working days from the date of the submission of the application. .

* Circular No.36/10/2018-GST dated 13th March, 2018: Due to delays in making available FORM GST REG-13 on the common portal, an alternative mechanism has been developed. Entities covered under Section 25 (9)(a) of the CGST Act may approach the Protocol Division, Ministry of External Affairs in this regard, who will facilitate grant of UINs in coordination with the CBEC/ CBIC and GSTN.

Effect of the amendment – It has decided that the entities having UIN may be given centralized registration at the option of such entities. The

Central Government will be responsible for all administrative compliances in respect of such entities. Circular No.36/10/2018-GST dated 13th March, 2018: It is clarified that the facility of single UIN is optional and an entity

may seek more than one UIN.

Basic benefit of centralized registration: The facility of centralized UIN ensures that irrespective of the type of tax (CGST, SGST, IGST or Cess) and the State where such inward supply of goods or services have been procured, all refunds would be processed by Central authorities only.

3. Amendment to registration: Amendment will be allowed with prospective effect

Rule 19 : Amendment of registration (1) Where there is any change in any of the particulars furnished in the application for registration or for UIN,

… the registered person shall, within 15 days of such change, submit an application, duly signed or verified through EVC, electronically in FORM GST REG-14, along with documents relating to such change at the Common Portal either directly or through a Facilitation Centre notified by the Commissioner.

Provided that Change/ Amendment requiring approval of PO (a) Where the change relates to- (i) legal name of business; (ii) address of the principal place of business or any additional place of business; or (iii) addition, deletion or retirement of partners or directors, Karta, Managing Committee, Board

of Trustees, Chief Executive Officer or equivalent, responsible for day to day affairs of the business,-

16

which does not warrant cancellation of registration under section 29, the PO shall, after due verification, approve the amendment within 15 working days from the date of receipt of application in FORM GST REG-14 and issue an order in FORM GST REG-15 electronically and such amendment shall take effect from the date of occurrence of the event warranting amendment.

(b) The change relating to sub-clause (i) and sub-clause (iii) of clause (a) in any State or Union territory shall be applicable for all registrations of the registered person obtained under these rules on the same PAN.

Change/ Amendment not requiring PO approval (c) Where the change relates to any particulars other than those specified in clause (a), the certificate of

registration shall stand amended upon submission of the application in FORM GST REG- 14 on the Common Portal:

.

Provided that any change in the mobile number or e-mail address of the authorized signatory, as amended from time to time, shall be carried out only after online verification through the Common Portal in the manner provided under the said rule.

.

Change/ Amendment requiring FRESH REGISTRATION (d) Where a change in the constitution of any business results in change of PAN of a registered person,

the said person shall apply for fresh registration in FORM GST REG-01.

(1A) Notwithstanding anything contained in sub-rule (1), any particular of the application for registration shall not stand amended with effect

from a date earlier than the date of submission of the application in FORM GST REG-14 on the common portal .

except with the order of the Commissioner for reasons to be recorded in writing and subject to such conditions as the Commissioner may, in the said order, specify. (i.e., Commissioner may order for retrospective amendment)

[inserted by N/N 75/2017-CT (dated 29th Dec, 2017)] .

Effect of the amendment – The law requires a person to make requisite application in Form GST REG-14 for amendment in the particulars of

registration. Vide N/N 75/2017- CT dated 29th December 2017, it has been stated that this amendment will be prospective. The amendment will not be effective earlier than the date of application for amendment except with the order of the Commissioner and the conditions as stated in the said order.

4. Cancellation of registration: Voluntarily registered person allowed to cancel registration even within period of 1 year

Rule 20 : Application for cancellation of registration A registered person,

other than tax deductor or tax collector to whom a registration has been granted or a person to whom a UIN has been granted, seeking cancellation of his registration .

shall electronically … submit an application in FORM GST REG-16, … including therein the details of inputs held in stock or inputs contained in semi-finished or finished goods held in

stock and of capital goods held in stock on the date from which cancellation of registration is sought, liability thereon, details of the payment, if any, made against such liability

and may furnish, along with the application, relevant documents in support thereof at the Common Portal within thirty days of occurrence of the event warranting cancellation, either directly or through a Facilitation Centre notified by the Commissioner:

Provided that no application for cancellation of registration shall be considered in case of a taxable person, who has registered voluntarily, before the expiry of a period of one year from the effective date of registration.

[deleted by N/N 3/2018-CT (dated 3rd Jan, 2018)]

17

Effect of the amendment – It had been specified in the Registration rules that a person cannot opt for cancellation of registration for a period of 1

year from the effective date of registration if he had registered himself voluntarily. This provision has been removed vide N/N 3/2018-CT dated 23rd January, 2018. Hence, any person who had registered himself voluntarily can now apply for cancellation of registration without waiting for any time limit..

5. Cancellation of registration for taxpayers registered under the earlier law Quite a number of taxpayers who were registered under the earlier law got migrated/migrated themselves into the

GST regime though they were not liable for registration under GST. These persons had given an option to make an application for cancellation of their registration upto 30th October 2017 as per the originally notified rules. Through multiple amendments, the final date for cancellation of this registration was stated to be 31st March

2018 as per N/N 3/2018- CT dated 23rd January 2018.

18

INPUT TAX CREDIT

1. Sec 17 – Apportionment of ITC (for supplier of exempt supply as well as non-exempt supply)

ITC to be apportioned by application of Rule 42 (input and input service) and Rule 43 (Capital Goods) ITC to be apportioned in ration of TO (exempt supply) to Total TO (exempt supply as well as non-exempt

supply) Explanation has been inserted in Rule 43 providing that certain exempt supplies are to be treated as non-

exempt and thus, would not necessitate any ITC Reversal

Explanation inserted in Rule 43 of CGST Rules, 2017

1 Inserted vide N/N. 55/2017-CT dt 15.11.2017 Explanation: For the purposes of rule 42 and this rule, it is hereby clarified that the aggregate value of exempt supplies shall exclude: - .

(a) the value of supply of services specified in the N/N 42/2017-Integrated Tax (Rate); • N/N 42/2017-IT provides full exemption to supply of services having place of supply in Nepal and Bhutan,

against payment in Indian rupees.

(b) the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, except in case of a banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances; and

(c) the value of supply of services by way of transportation of goods by a vessel from the customs station of clearance in India to a place outside India.

.

Effect of the amendment – 3 categories of EXEMPT SERVICES = To be treated as NON-EXEMPT .

Any service Supply outside India

Supply to any country other than Nepal & Bhutan = Forex is mandatory

Forex received Such supply = Export of Service = (zero-rated supply (as per sec 16 of IGST Act)

Such supply = Non-exempt supply

Supply to Nepal & Bhutan= Forex is not mandatory

Forex received Such supply = Export of Service = (zero-rated supply (as per sec 16 of IGST Act)

Such supply = Non-exempt supply

Indian Rs received

Such supply = Not Export of Service = (Not zero-rated supply (as per sec 16 of IGST Act) - But, separately exempted

[through N/N 42/2017-IT (Rate)]

Such supply = Exempt supply

Newly inserted explanation: Such supply = Non-exempt

19

Financial Service of Extending loans / advances (by bank or any private entity)

Financial Service of Extending deposits / loans / advances

Processing Fee Chargeable to GST Such supply = Non-exempt supply

Interest income

Exempted by Notification [through N/N 12/2017-CT (Rate)- Entry No. 27]

Such supply = Exempt supply

Newly inserted explanation:: Such supply = Non-exempt

However, this exclusion is not applicable to Banking Co.,& Financial Institution as for them special provision as to ITC availment has been made available.

Sea Transportation of GOODS (from Customs Station in India to a place outside India – i.e., of EXPORT GOODS)

Sea transportation of Export Goods (Supplier and recipient in India: PoS as per Sec 12 of IGST Act = Location of recipient who is GST Registered)

Freight Charges

Exempted by Notification [through N/N 12/2017-CT (Rate) – Entry 19-B (inserted w.e.f. 25th Jan, 2018)]

Such supply = Exempt supply

Newly inserted explanation:: Such supply = Non-exempt

.

20

JOB WORK 1. Simplification of sending of goods on job work basis

Recap of Job-work Provisions: 1. Sending goods for job-work:-

Removal of goods: Removal shall be under cover of delivery challan (Sec 31 read with Rule 55 of CGST Rules, 2017)

.

Quarterly Intimation over portal: Dispatches to job-worker as well as receipt back from job-worker shall be intimated over portal [Form GST ITC 03] ---- Sec 143 read with Rule 45 of CGST Rules, 2017

2. Receipt back from Job-worker:-

Received back within specified period of 1 year (input)/ 3 years (CG): No consequence will arise

Direct supplies from J/Wker premise within specified period of 1 year (input)/ 3 years (CG): No consequence will arise

Breach of specified period of 1 year (input)/ 3 years (CG): Earlier dispatch = Deemed supply (GST payable with Interest)

i. Tax invoice shall be raised for such supply now. ii. Such supply shall now be reported in GSTR-1 (Statement of Outward Supplies).

.

Rule 45 of CGST Rules, 2017 has been amended vide N/N 14/2018-CT dated 23rd March, 2018, the procedure for sending of goods on job work basis has been simplified.

21

Rule 45: : Conditions and restrictions in respect of inputs & capital goods sent to the JOB WORKER (1) The inputs, semi-finished goods or capital goods shall be sent to the job worker under the

cover of a CHALLAN issued by the principal, including where such goods are sent directly to a job-worker

(inserted by N/N 14/2018-CT(23rd March, 2018) and where the goods are sent from one job worker to another job worker,

… the challan may be issued either by the principal or the job worker sending the goods to another job worker.

.

Provided that

… the challan issued by the principal may be endorsed by the job worker, indicating therein the quantity and description of goods where the goods

… are sent by one job worker to another or .

… are returned to the principal: .

Provided further that … the challan endorsed by the job worker may be further endorsed by another

job worker, indicating therein the quantity and description of goods where the goods … are sent by one job worker to another or … are returned to the principal.

.

.

(2) The challan issued by the principal to the job worker shall contain the details specified in rule 55:

(3) Quarterly Return for the goods sent for job-work

(4) Goods sent to J/Wker must be received within period-stipulated u/Sec 143

Consequence of Non-Receipt = Transaction to be treated as supply (made at the time goods were sent for job-work)

(Supplier)

(P)- Principal (J) – Job-Worker 1

(J) – Job-Worker 2

Effect of the amendment – Job-work procedure has been simplified.

22

CBEC/ CBIC Clarifications on issues related to Job Work – issued on 26th March, 2018 .

Sec 2 (68) Job-work “Job Work” means any treatment or process undertaken by a person on goods* belonging to another registered person* and the expression “job worker” shall be construed accordingly; .

Author : 1. Job-Work = Treatment or process undertaken by one person on goods of other persons

[Job-Work = Supply of Service - Schedule II] 2. Person undertaking job-work = Job-worker (may be registered or unregistered) 3. Person on whose goods job-work is being done = Principal (must be registered) .

Clarifications on issues related to Job Work – issued on 26th March, 2018

Scope of Job-work: Whether any inputs, other than the goods provided by the principal, can be used by the job worker for providing the services of job-work? .

Clarification: The job worker, in addition to the goods received from the principal, can use his own goods for providing the services of job work. Requirement of registration for a principal / job worker: Whether the principal must be a registered person? .

Clarification: The provisions of section 143 of the CGST Act are applicable to a registered person. Thus, it is only a registered person who can send the goods for job work under the said provisions.

• It may also be noted that the registered person (principal) is not obligated to follow the said provisions. It is his choice whether or not to avail or not to avail of the benefit of these special provisions.

Whether the job-worker must be a registered person? .

Clarification: Job-worker may be registered or unregistered person. .

Principal and job-worker within same state: In case both the principal and the job worker are located in the same State , job worker is required to obtain registration only if his aggregate turnover, to be computed on all India basis, in a financial year exceeds the specified threshold limit (i.e. Rs 20 lakhs or Rs. 10 lakhs in case of special category States except J&K). .

Principal and job-worker in different states: Where the principal and the job worker are located in different States, the requirement for registration flows from Sec 24(i) of the CGST Act which provides for compulsory registration of suppliers making any inter-State supply of services. • However, exemption from registration has been granted in case the aggregate turnover of the inter- State

supply of taxable services does not exceed Rs 20 lakhs or Rs. 10 lakhs in case of special category States except J&K in a financial year vide N/N 10/2017 – IT.

.

Therefore, it is clarified that a job worker is required to obtain registration only in cases where his aggregate turnover, to be computed on all India basis, in a financial year exceeds the threshold limit regardless of whether the principal and the job worker are located in the same State or in different States.

23

Movement of goods from the principal to the job worker and the documents and intimation required therefor: the documents required to be issued for sending the goods

(i) by the principal to the job worker, (ii) from one job worker to another job worker; and (iii) from the job worker back to the principal?

Relevant Legal provisions:

Sec 143 Send goods for job-work under intimation [Form GST ITC-04]

Rule 45 Goods sent for job-work - Dispatch under challan issued by the Principal Rule 55 Dispatch of goods other than by way of supply – Delivery Challan to be issued by the

Consignor Rule 138 EWB (E-way Bill): EWB to be raised for movement of goods (whether by way of supply or not)

Clarification: On conjoint reading of the relevant legal provisions, the following is clarified with respect to the issuance of challan, furnishing of intimation and other documentary requirements in this regard: (i) Where goods are sent by principal to only one job worker:

o The principal shall prepare in triplicate, the challan in terms of rules 45 and 55 of the CGST Rules, for sending the goods to a job worker.

o Two copies of the challan may be sent to the job worker along with the goods. o The job worker should send one copy of the said challan along with the goods, while returning them

to the principal. o The FORM GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act,

2017. (ii) Where goods are sent from one job worker to another job worker:

• In such cases, the goods may move under the cover of a challan issued either by the principal or the job worker.

• In the alternative, the challan issued by the principal may be endorsed by the job worker sending the goods to another job worker, indicating therein the quantity and description of goods being sent. The same process may be repeated for subsequent movement of the goods to other job workers.

(iii) Where the goods are returned to the principal by the job worker:

• The job worker should send one copy of the challan received by him from the principal while returning the goods to the principal after carrying out the job work.

(iv) Where the goods are sent directly by the supplier to the job worker:

• In this case, the goods may move from the place of business of the supplier to the place of business/premises of the job worker with a copy of the invoice issued by the supplier in the name of the buyer (i.e. the principal) wherein the job worker’s name and address should also be mentioned as the consignee, in terms of rule 46(o) of the CGST Rules.

• The buyer (i.e., the principal) shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly in terms of para (i) above.

• In case of import of goods by the principal which are then supplied directly from the customs station of import, the goods may move from the customs station of import to the place of business/premises of the job worker with a copy of the Bill of Entry and the principal shall issue the challan under rule 45 of the CGST Rules and send the same to the job worker directly.

24

(v) Where goods are returned in piecemeal by the job worker:In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to another job worker or to the principal, the challan issued originally by the principal cannot be endorsed and a fresh challan is required to be issued by the job worker.

(vi) Submission of intimation:

Rule 45(3) of the CGST Rules provides that the principal is required to furnish the details of challans in respect of goods sent to a job worker or received from a job worker or sent from one job worker to another job worker during a quarter in FORM GST ITC-04 by the 25th day of the month succeeding the quarter or within such period as may be extended by the Commissioner. It is clarified that it is the responsibility of the principal to include the details of all the challans relating to goods sent by him to one or more job worker or from one job worker to another and its return therefrom. The FORM GST ITC-04 will serve as the intimation as envisaged under section 143 of the CGST Act.

Liability to issue invoice, determination of place of supply and payment of GST Relevant Legal provisions:

Sec 12 ToS in case of supply of Goods

Sec 13 ToS in case of supply of services

Sec 15 Valuation of supply (of goods or of services)

Sec 31 Issuance of Tax Invoice

Clarification: On conjoint reading of all the provisions, the following is clarified with respect to the

issuance of an invoice, time of supply and value of supply: (1) Supply of job work services: The job worker, as a supplier of services, is liable to pay GST if he is liable

to be registered. • He shall issue an invoice at the time of supply of the services as determined in terms of section 13 read

with section 31 of the CGST Act. • The value of services would be determined in terms of section 15 of the CGST Act and would include not

only the service charges but also the value of any goods or services used by him for supplying the job work services, if recovered from the principal.

It may be noted that if the job worker is not registered, GST would be payable by the principal on reverse charge basis in terms of the provisions contained in section 9(4) of the CGST Act. However, the said provision has been kept in abeyance for the time being.

(2) Supply of goods by the principal from the place of business/ premises of job worker: Section 143

of the CGST Act provides that the principal may supply, from the place of business / premises of a job worker, inputs after completion of job work or otherwise or capital goods (other than moulds and dies, jigs and fixtures or tools) within one year or three years respectively of their being sent out, on payment of tax within India, or with or without payment of tax for exports, as the case may be. This facility is available to the principal only if he declares the job worker’s place of business / premises as his additional place of business or if the job worker is registered.

Since the supply is being made by the principal, it is clarified that the time, value and place of supply would have to be determined in the hands of the principal irrespective of the location of the job worker’s place of business/premises. Further, the invoice would have to be issued by the principal. It is also clarified that in case of exports directly from the job worker’s place of business/premises, the LUT or bond, as the case may be, shall be executed by the principal.

25

Illustration: The principal is located in State A, the job worker in State B and the recipient in State C. In case the supply is made from the job worker’s place of business / premises, the invoice will be issued by the supplier (principal) located in State A to the recipient located in State C. The said transaction will be an inter-State supply. In case the recipient is also located in State A, it will be an intra-State supply.

.

(3) Violation of conditions laid down in section 143: As per the provisions contained in section 143 of the CGST Act, if the inputs or capital goods (other than moulds and dies, jigs and fixtures or tools) are neither received back by the principal nor supplied from the job worker’s place of business within the specified time period, the inputs or capital goods (other than moulds and dies, jigs and fixtures or tools) would be deemed to have been supplied by the principal to the job worker on the day when such inputs or capital goods were sent out to the first job worker.

Thus, if the inputs or capital goods are neither returned nor supplied from the job worker’s place of business / premises within the specified time period, the principal would issue an invoice for the same and declare such supplies in his return for that particular month in which the time period of one year / three years has expired. The date of supply shall be the date on which such inputs or capital goods were initially sent to the job worker and interest for the intervening period shall also be payable on the tax.

• If such goods are returned by the job worker after the stipulated time period, the same would be treated as a supply by the job worker to the principal and the job worker would be liable to pay GST if he is liable for registration in accordance with the provisions contained in the CGST Act read with the rules made thereunder.

o It may be noted that if the job worker is not registered, GST would be payable by the principal on reverse charge basis in terms of the provisions contained in section 9(4) of the CGST Act. However, the said provision has been kept in abeyance for the time being.

Note: There is no requirement of either returning back or supplying the goods from the job worker’s place of business/premises as far as moulds and dies, jigs and fixtures, or tools are concerned.

Availability of input tax credit to the principal and the job worker Doubts have been raised regarding the availability of input tax credit (ITC) to the principal in respect of inputs / capital goods that are directly received by the job worker. Doubts have also been raised whether the job worker is eligible for ITC in respect of inputs, etc. used by him in supplying job work services.

Clarification: • In view of the provisions contained in section 16 (2)(b) of the CGST Act, the input tax credit would be

available to the principal, irrespective of the fact whether the inputs or capital goods are received by the principal and then sent to the job worker for processing, etc. or whether they are directly received at the job worker’s place of business/premises, without being brought to the premises of the principal. .

• It is also clarified that the job worker is also eligible to avail ITC on inputs, etc. used by him in supplying the job work services if he is registered.

. .

26

INPUT SERVICE DISTRIBUTOR .

1. Invoice of Common Service- received by one of unit (instead of ISD) ISD = Office of supplier which distributes credit of input services among its various units registered with same PAN Manner of Distribution = Sec 21 of CGST Act Invoicing by ISD (distributing ITC) = Rule 54(1) of CGST Rules, 2017 Recipient unit books ITC on basis of ISD Invoice.

What if invoice of common service is received by one of the unit/premise registered as taxpayer?

• Solution 1: Such unit shall now registered as a new ISD and then distribute ITC to all. • Solution-2: Such unit shall transfer ITC to ISD who shall then distribute ITC to all. Solution 1 is easy and simple. Law has introduced provisions for materializing solution1.

27

Rule 54 : Tax invoice in SPECIAL CASES

(1A) .

(a) A registered person, having the same PAN and State code as an Input Service Distributor, … may issue an invoice or, as the case may be, a credit or debit note to transfer the

credit of common input services to the Input Service Distributor, which shall contain the following details:- i. name, address and GSTIN of the registered person having the same PAN and same State

code as the ISD; ii. a consecutive serial number not exceeding sixteen characters, in one or multiple series,

containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

iii. date of its issue; iv. GSTIN of supplier of common service and original invoice number whose credit is sought to

be transferred to the Input Service Distributor; v. name, address and GSTIN of the ISD; vi. taxable value, rate and amount of the credit to be transferred; and vii. signature or digital signature of the registered person or his authorized representative.

(b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common services.

.

[Inserted vide N/N 3/2018- CT (dated 23 Jan, 2018)]

Effect of the amendment –

Transfer of ITC by taxable person in name of ISD • Sometimes, invoice of common service may be received by taxable person (registered as taxpayer) – say, Delhi’s

branch. • While different entity is registered as ISD – say, Head Office. • Rule 54(1A) has been inserted to provide that registered taxable person can avail ITC and then transfer such ITC to

the ISD who will then distribute such common credit among various unit. • In other words, taxable person (registered as taxpayer) need not himself carry out a separate registration in capacity of

ISD. HOWEVER, this special relaxation shall be applicable only if both registered person and the already

registered ISD are having same PAN and State Code.

28

INVOICE

1. Special Invoicing by Bank/FI or Insurer: Issuance of Consolidated tax invoice is optional (not mandatory) 1) Rule 54(2) - Banks/FI & Insurer allowed ‘consolidated invoices’ on monthly basis

Rule 54 : Tax invoice in SPECIAL CASES

(1) Invoicing by ISD:

(2) Where the supplier of taxable service is an insurer or a banking company or a financial institution, including a non-banking financial company, … the said supplier shall may issue a CONSOLIDATED tax invoice or any other document in lieu thereof,

by whatever name called, for the supply of services made during a month at the end of the month .

… whether issued or made available, physically or electronically … whether or not serially numbered, and … whether or not containing the address of the recipient of taxable service

but containing other information as prescribed under rule 46.

[amended vide N/N 55/2017-CT dated 15th November 2017] .

Let us first understand the application of Rule 54 Q 1. A customer may avail numerous services from the Bank / insurer in a given taxable period. Is it mandatory for

Banks to issue a tax invoice for each transaction or can the Bank issue a consolidated invoice for the service rendered during the tax period?

(CBIC – FAQ on Financial Services) Ans. As per the provisions contained in the Rule 47 of the CGST Rules, 2017 an insurer, a banking company or a financial

institution, including a NBFC may issue invoices within 45 days from the date of supply of service. Further, rule 54(2) of CGST Rules, 2017 provides that such entities may issue any other document in lieu of the tax invoice. Accordingly, such entities may issue a consolidated statement/ invoice/ advice to the customer at the end of the month, with the details of all the charges levied during such month and GST payable thereon.

.

Q 2. When a banking company is not required to serially number its invoices / document for supply of its services, how will the service recipient get credit for GST on the services provided by the bank?

(CBIC – FAQ on Financial Services) Ans. Under Rule 54(2) of the CGST Rules, 2017 a banking company or a financial institution including a NBFC or an insurer

can issue an invoice or any other document in lieu thereof whether or not serially numbered and whether or not containing the address of the recipient but containing other information as mentioned under Rule 46. There is no restriction on the invoice/document being a consolidated invoice/document but it must bear an identification number, which need not necessarily be serially numbered. The recipient of service will get the credit for GST so long as the bank, etc. uploads the details of the invoice / document under that number with GSTIN of the recipient in its statement if FORM GSTR-1.

.

Q 3. Whether commission paid to insurance agents shall be construed as supplies received under Section 9(3) of CGST Act, 2017? If yes, whether the Life Insurance Company can raise a consolidated invoice for such commission payments?

.

Ans. Supplies received from Insurance Agents and provides for the Insurance Company to pay GST on such supplies under Section 9(3) of the CGST Act, 2017. Insurance company is liable to pay GST as RCM liability. In such cases, the insurance company may issue agent-wise consolidated invoice at the end of the month for the supply of services received during the month. [rule 54(2) of CGST Rules, 2017]

29

Effect of the amendment – The original rules required the insurers/banks/financial institutions/non-banking financial companies to mandatorily

issue invoices even though the same might have been without the serial number and the address of the recipient. Consolidated invoicing allowed. o Earlier, the suppliers were mandated to issue consolidated tax invoice for supply of services made during the

month at the end of the month. o However, vide N/N 55/2017-CT dated 15th November 2017, this mandatory requirement was changed to optional.

So, these categories of persons were provided an option only to issue consolidated invoices. 2. Transport of Goods: Tax Invoice / Bill of Supply is must, even if EWB is not required in any case

Rule 55-A : Tax Invoice or bill of supply to accompany transport of goods. .

The person-in- charge of the conveyance shall carry a copy of the tax invoice or the bill of supply issued in accordance with the provisions of

– rules 46, (Rule 46 makes provision for issuance of tax invoice) – 46A or (Rule 46-A makes provision for issuance of tax invoice-cum-bill of supply) – 49 (Rule 49 makes provision for issuance of bill of supply)

in a case where such person is not required to carry an E-WAY BILL under these rules.

[inserted vide N/N 3/2018-CT dated 23rd Jan, 2018]

Effect of the amendment – Rule 55 seeks to clarify/ emphasize that tax invoice / bill of supply shall be mandatory for transport of goods even if

EWB is not required for transportation of goods in a particular case. 3. Movement of goods of value exceeding specified value – EWB mandatory

Rule 138 Information to be furnished prior to commencement of movement of goods and generation of EWB

.

Rule 138-A Documents and devices to be carried by a person-in-charge of a conveyance. .

Rule 138-B Verification of documents and conveyances. .

Rule 138-C Inspection and verification of goods.. .

Rule 138-D Facility for uploading information regarding DETENTION OF VEHICLE .

Amendments related to EWB has been discussed separately. (Separate file will be shared for this. If you wish it, then drop a request mail at dggstamendments@gmail.com)

30

ACCOUNTS AND RECORDS

1. Maintenance of books of accounts relating to additional place of business by a principal or auctioneer

for the purpose of auction of tea, coffee, rubber etc. Difficulties were being faced by a principal and an auctioneer in relation to

maintaining books of accounts at each and every additional place of business related to stock of goods like tea, coffee, rubber, etc. meant for supply through an auction.

As per the first proviso of section 35(1) of the CGST Act, 2017 both the

principal and the auctioneer are required to maintain the books of accounts relating to their additional place(s) of business in such places.

It was represented that both the principal as well as the auctioneer may be allowed to maintain the books of accounts relating to the additional place(s) of business at their principal place of business itself.

So, the matter was clarified vide Circular no. 23/23/2017-GST dated 21st December 2017. (a) The principal and the auctioneer of tea, coffee, rubber etc. are required to declare warehouses where such

goods are stored as their additional place of business. The buyer is also required to disclose such warehouse as his additional place of business if he wants to store the goods purchased through auction in such warehouses.

(b) Both the principal and the auctioneer are required to maintain the books of accounts relating to each and every place of business in that place itself as per the first proviso to sub-section (1) of section 35 of the CGST Act. However, in case difficulties are faced in maintaining the books of accounts, it is clarified that they may maintain the books of accounts relating to the additional place(s) of business at their principal place of business instead of such additional place(s).

(c) Such principal or auctioneer shall intimate their jurisdictional proper officer in writing about the maintenance of books of accounts relating to additional place(s) of business at their principal place of business.

(d) Further, the principal or the auctioneer shall be eligible to avail input tax credit subject to the fulfilment of other provisions of the Act and the rules made thereunder.

It is further clarified that this Circular is applicable to the supply of tea, coffee, rubber, etc. where the auctioneer

claims ITC in respect of the supply made to him by the principal before the auction of such goods and the said goods are supplied only through auction.

31

TIME OF SUPPLY

.

1. ToS for Supplier of Goods – Sec 12 .

Through Sec 148 (special procedure for certain persons), CG has made advances non taxable at time of receipt of advances – GST shall be payable only when goods are actually supplied.

Sec 12 (2): Time of supply in case of goods has been stated to be earlier of the following dates: a) Date of issue of invoice or the last date on which he is required to issue the invoice with respect to the supply; b) Date on which supplier receives the payment with respect to the supply;

Sec 148: Special procedure for certain processes The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed*, notify

… certain classes of registered persons, and … the special procedures to be followed by such persons including those with regard to registration,

furnishing of return, payment of tax and administration of such persons. Notification issued N/N 40/2017-CT (dated 13th Oct, 2017) (amended on 15th Nov) .

In exercise of the powers conferred by section 148 of the CGST Act, 2017, the CG, on the recommendations of the Council, hereby notifies … the registered person who did not opt for the composition levy under section 10 of the said

Act .

as the class of persons … who shall pay the central tax2 on the outward supply of GOODS at the time of supply as

specified in Section 12 (2)(a) of the said Act. .

.

Effect of the amendment – Normal Supplier of Goods (not operating under composition scheme) – paying GST on monthly basis

• The introduction of the date of payment as the time of supply under GST was a completely new concept for supplier of goods. Under the Excise and VAT law, the person manufacturing/selling goods did not consider the date of payment

at all while making the payment of taxes. The introduction of GST led to an additional process for these persons supplying goods. Receipt of advance

led to the time of supply to arise under GST. Lack of proper knowledge of this rule, infrastructural and administrative difficulties faced by supplier of goods

particularly in the SME segment prompted the Government to remove the condition of date of payment while determining the time of supply. However, this was made in a phased manner.

• Vide N/N 66/2017-CT dated 15th November 2017, all persons making supply of goods if they have not opted for composition scheme need to pay taxes considering only (a) above. Hence all supplier of goods can consider the time of supply as date of issue or last date of issue of invoice without considering the date of payment.

. * Composition supplier is not covered under notification. He shall be liable to pay GST on advances received by him.

• Possible logic is that he never recovers composition tax from recipient.

2 Notification under Integrated tax has not been issued -- This is an unintended omission- Practically, same treatment is being

allowed to inter-state supply also.

32

Special procedure is applicable only for supplier whose ToS is determined as per Sec 12(2) .

• ToS for supply of service is determined as per Sec 13. • Thus, above provision as to non-taxation of advances received is not applicable to supply of services.

• Supplier of services are still liable to pay GST on advances received by him. .

• ToS for supply of goods is determined as per Sec 12. If supply of goods is subject to RCM, then ToS for RCM liability is determined as per Sec 12(3)

• Thus, above provision as to non-taxation of advances received is not applicable to RCM situation.

• Thus advances paid for receiving supply of goods which are subject to RCM will attract GST liability.

2. ToS for Supplier of Services – Sec 13

Through Sec 148 (special procedure for certain persons), CG has changed ToS in case of transaction involving cross supply of services between landowner and builder/ developer / construction company.

Real estate developers usually do not have ownership of land when developing a property. It enters into an agreement with the land owner for transfer of development rights on the land. Against such development rights, the landowner can either be given share in the revenue of the total flats that will be sold, or he may be given a certain number of the flats through an area sharing agreement. In an area sharing agreement, there were quite a few areas of concern. One of the biggest concerns was that the time of supply of services in this case was very difficult to determine. If the date of joint development agreement would have been the time of supply, then determining the valuation on such date would have been very difficult. Also, the blockage of working capital for payment of taxes even before the commencement of construction was another issue which was prevailing. To settle such issues, the government issued N/N 4/2018- CT (Rate) dated 25th Jan 2018 and N/N 4/2018-IT (Rate) dated 25th Jan 2018 regarding time of supply in case of construction service against transfer of development right and vice versa. • The time of supply has been deferred to the time when the possession or right in the complex is transferred

through a conveyance deed or an allotment letter. This date will allow the valuation to be more certain as compared to the date of joint development agreement. Also, the blockage of working capital is cushioned due to the deferment in the payment of taxes especially for landowners who intend to keep flats for their own use.

N/N 4/2018-CT (Rate) + N/N 4/2018-IT (Rate) (dated 25th Jan, 2018) In exercise of the powers conferred by section 148 of the CGST Act, 2017, the CG, on the recommendations of the Council, hereby notifies the following classes of registered persons, namely- .

(a) registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure; and

(b) registered persons who supply construction service of complex, building or civil structure to supplier of development rights against consideration, wholly or partly, in the form of transfer of development rights,

as the registered persons in whose case the liability to pay central tax3 on supply of the said services, on the consideration received … in the form of construction service referred to in clause (a) above and … in the form of development rights referred to in clause (b) above,

shall arise at the time when the said developer, builder, construction company or any other registered person, as the case may be, transfers possession or the right in the constructed complex, building or civil structure, to the person supplying the development rights by entering into a conveyance deed or similar instrument (for example allotment letter).

3 If supply is inter-state supply attracting IGST – then same ToS has been prescribed by N/N 4/2018-IT.

33

Analysis Supply of Service

(Supply of development rights – consideration in form of construction service)

Landowner [LDR transferred – consideration (non-monetary) received at later stage]

Developer, Builder, Construction Company or any other Person

(Registered Person)

(Registered Person)

Supply of Service (Supply of construction service – consideration in form of

development rights) [Construction Service – will be provided in stages

– consideration (non-monetary / LDR) received in advance ].

Illustration: Discuss ToS in resepct of following service transaction: .

1) Mr. A, a land owner, enters into following agreement with PQR Builder: 2) Mr A will transfer development rights to PQR builder enabling PQR Builder to construct residential complex thereon. 3) The residential complex will consist of 25 residential units. 4) In lieu of transfer of development rights, PQR Builder will handover full constructed 10 residential units to Mr A. 5) Rest 15 residential units shall belong to PQR builder who shall be entitled to sell those in the market. PQR Builder has sold these flats

before completion of construction of project. .

Analysis Activity Consideration GST Liability Time of Supply

Mr A (land owner)

Transfer of development rights

10 complete residential unit

Transfer of LDR = Supply of Sr – GST payable

ToS as per Sec 148 = Date when conveyance deed is entered into (or date when allotment letter is issued to Mr A)

PQR (Builder)

Construction

(1) 10 units (handed over to landowner)

Development rights in land

Construction (Building sold under construction) = Supply of Sr – GST payable

ToS as per Sec 148 = Date when conveyance deed is entered into (or date when allotment letter is issued to Mr A)

(2) 15 units (sold in open market)

Money Construction (Building sold under construction) = Supply of Sr – GST payable

ToS as per Sec 13(2)

.

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TDS / TCS

1. Postponement of TDS provisions [Sec 51] .

It may be noted that the applicability of the provisions of TDS has been deferred to a date to be notified in future.

2. Postponement of TCS provisions [Sec 52] .

It may be noted that the applicability of the provisions of TCS has been deferred to a date to be notified in future.

35

RETURNS

1. Continuation of Form GSTR 3B and deferment of form GSTR 2 .

Form GSTR 2 and 3 have been deferred by the Government at least till 30th June 2018. .

Multiple notifications have been issued for the extension of this form GSTR 3B till June, 2018. 2. GSTR-1: Quarterly returns for persons having aggregate turnover less than Rs. 1.5 crores .

.

Section 148 : Special procedure for CERTAIN PROCESSES.

The Government may, on the recommendations of the Council, and subject to such conditions and safeguards as may be prescribed*, notify

… certain classes of registered persons, and … the SPECIAL PROCEDURES to be followed by such persons including those with regard to

registration, furnishing of return, payment of tax and administration of such persons. .

N/N 71/2017-CT (dated 29th Dec, 2017) In exercise of the powers conferred by Sec 148 of the CGST Act, 2017, the CG, on the recommendations of the Council, notifies the registered persons having aggregate turnover of up to 1.5 crore rupees in the preceding financial year or the current financial year, as the class of registered persons who shall follow the special procedure as detailed below for furnishing the details of outward supply of goods or services or both -

- They may file GSTR-1 on Quarterly basis.

Clarification: Circular no. 26/26/2017-GST dated 29th December 2017 It may be noted here that the registered person whose aggregate turnover is less than Rs. 1.5 crores have the option to

choose whether the return GSTR 1 will be filed quarterly or monthly. Once he chooses to file return on monthly/quarterly basis, the registered person will not have the option to change the return filing periodicity for the entire financial year. .

In cases where the registered person wrongly reports his aggregate turnover and opts to file FORM GSTR-1 on quarterly basis, he may be liable for punitive action under the CGST Act, 2017. This has been clarified as per.

3. Late fees for filing belated return: Sec 47 provides for levy of late fees for belated filing of statement / return / annual return. Belated filing of annual return – Late fee is Rs 100/per day upto 0.25% of TO Belated filing of monthly/quarterly statement/ returns – Late fee is Rs 100/per day upto Rs 5000

Sec 128 provides for waiver (full or partial) of late fees by CG (upon recommendation of Council) Waiver has been granted vide N/N 4/2018-CT. Considering waiver, new applicable late fee is

Reduced Late fee= Rs 25 per day (upto Rs 5000) In case of nil return, reduced rate fee shall be Rs 10 per day (upto Rs 5000)

Late fee will be double: [Late fee u/Sec 47 of CGST] + [Late fee u/Sec 47 of SGST Act] Thus, normally if GSTR is filed belatedly, then late fee shall be Rs 50 per day (subject to maximum of Rs 10,000).

ISD – return filing – GSTR-6 Reduced Late fee = [Rs 25 for failure to file in CGST + Rs 25 per day in SGST]

36

EXPORTS

1. Zero rated supplies – supply under Bond/ LuT without payment of GST .

As per Section 16(3)(a) of the IGST Act, 2017 provides for supply without payment of GST but upon execution of bond/ LuT. (Bond/LuT submission shall be governed by Rule 96-A of CGST Rules) • Such supplier can claim ITC – Sec 16(2) of IGST Act & Sec 17(2) of CGST Act • Such supplier is entitled to claim refund of ITC – Sec 16(3)(a) of IGST Act • ITC refund shall be subject to compliance with Sec 54 of CGST Act

o Refund procedure as specified in Sec 54 read with Rule 89(4), (4A) & (4B) shall be complied with. o Conditions for claiming refund as stated in Sec 54(3) shall also be complied with.

.

• Issue: Whether every supplier (of goods / services) can opt for execution of LUT instead of Bond? .

N/N 37/2017-CT dated 4th October 2017 all registered persons shall be eligible to furnish a LUT except those who have been prosecuted for any offence under the GST or the earlier laws wherein the tax evaded exceeds Rs. 250 lakhs

• Issue: What shall be the validity period of LUT? .

N/N 37/2017-CT dated 4th October 2017 The LUT shall be valid for the whole financial year in which it is tendered.

• Issue: What shall be the manner of submission of LUT?

.

Circular no. 40/14/2018-GST dated 6th April 2018 • The facility to furnish LUT has become active on the GST portal. So, one can directly make an application

for acceptance of LUT online. The authorized signatory registered on the GST portal can act as the signing authority for application of such LUT.

• The registered person needs to fill and submit Form GST RFD 11 on the common portal. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same bearing Application Reference Number is generated online. In this situation no documents need to be physically submitted to the jurisdictional office for acceptance of LUT

• If it is discovered that an exporter whose LUT has been so accepted was ineligible to furnish an LUT, then the LUT will be liable for rejection. Once rejected, it shall be deemed to have been rejected ab initio. This has been clarified vide.

• Issue: Whether Bond/LUT may be submitted post-export?

.

Circular no. 40/14/2018-GST dated 6th April 2018 • Rule 96-A requires submission of bond/LuT prior to making exports. It had been brought to the notice of the Board that in some cases, such zero-rated supplies had been made

before filing the LUT and refund claims for unutilized input tax credit have been filed. In this regard, it is emphasized that the substantive benefits of zero rating may not be denied where it has

been established that exports in terms of the relevant provisions have been made. The delay in furnishing of LUT in such cases may be condoned and the facility for export under LUT may be allowed on ex post facto basis taking into account the facts and circumstances of each case.

37

• Issue: Even exempt supply is eligible for benefit of zero-rated supplies (Sec 16(2) of IGST Act). if outward supply is exempt from GST, whether still Bond/LuT will be required to avail benefits associated with zero-rated supply?

CBEC Circular 45/19/ 2018- GST • Bond/LUT is not required in case of supply of exempted goods.

… As per section 16(2) of the IGST Act, ITC may be availed for making zero rated supplies, notwithstanding

that such supply is an exempt supply. Whereas, as per section 2 (47) of the CGST Act, exempt supply includes non-taxable supply. Further, as per section 16(3) of the IGST Act, a registered person making zero rated supply shall be eligible to claim refund when he either makes supply of goods or services or both under bond or letter of undertaking (LUT) or makes such supply on payment of integrated tax. .

… However, in case of zero rated supply of exempted or non-GST goods, the requirement for furnishing a bond or LUT cannot be insisted upon.

… It is thus, clarified that in respect of refund claims on account of export of non-GST and exempted goods without payment of integrated tax; LUT/bond is not required..

38

DEEMED EXPORTS 1. Deemed Export Supplies – Transactions admissible as deemed export supplies notified

.

Contrary to export, deemed export supplies are made upon payment of GST. However, either the supplier or recipient is entitled to claim refund of that GST paid. • Sec 147 provides for notification of transactions which will be regarded as ‘deemed export’

4 types of supplies have been notified as deemed export. 1. Supply of goods by a registered person against Advance Authorization

2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization

3. Supply of goods by a registered person to Export Oriented Unit

4. Supply of gold by a bank or Public-Sector Undertaking specified in the N/N 50/2017- Customs, against Advance Authorization.

.

• Refund related to deemed export transaction shall be claimed as per – Sec 54 read with Rule 89 o Refund application: Form GST RFD 01 o Documentation: Statement of invoices of such supplies + Additional Documents (as notified)

• Regarding deemed export supply to EoU, additional document is tax invoice duly signed by EoU.

• Areas of amendment

o Circular no. 14/14/2017-GST dated 6th November 2017 has stated the procedure and safeguards as to issuance of invoice by EoU.

i. Prior Intimation by EoU (before procuring supply): The recipient EOU shall give prior intimation in a prescribed proforma in “Form–A” (appended herewith) bearing a running serial number containing the goods to be procured, as pre-approved by the Development Commissioner and the details of the supplier before such deemed export supplies are made. The said intimation shall be given to –

a) the registered supplier; b) the jurisdictional GST officer in charge of such registered supplier; and c) its jurisdictional GST officer.

.

ii. Supply by supplier under Tax Invoice: The registered supplier thereafter will supply goods under tax invoice to the recipient EOU. .

iii. Endorsement of tax invoice by EoU and submission of copy: On receipt of such supplies, the EOU shall endorse the tax invoice and send a copy of the endorsed tax invoice to –

a) the registered supplier; b) the jurisdictional GST officer in charge of such registered supplier; and c) its jurisdictional GST officer.

.

iv. Endorsed tax Invoice = Proof of Deemed Export: The endorsed tax invoice will be considered as proof of deemed export supplies by the registered person to EOU. .

v. EoU shall maintain records of deemed export supplies: The recipient EOU shall maintain records of such deemed export supplies in digital form [Form_B to be maintained by EOU/ for the receipt, use and removal of goods received under deemed export benefit] .

vi. Duty exemption Notification conditions are to be complied additionally: The above procedure and safeguards are in addition to the terms and conditions to be adhered to by a EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015-20 and the duty exemption notification being availed by such unit.

39

REFUND

1. Cross empowerment of officers for processing and grant of refund The officers appointed under the SGST/UTGST Act, 2017 who are authorized for the purposes of refund

shall act as proper officers even under the CGST Act 2017. • This is subject to specific sub-rules of Rule 96 of the CGST Rules, 2017 wherein the refund is granted in case

of export of goods on payment of tax. (i.e., IGST paid on exports – refund shall be granted by Customs Officer)

• This has been specified as per N/N 39/2017-CT dated 13th October 2017 and N/N 11/2017-IT dated 13th October 2017 as modified by N/N1/2018-IT dated 23rd January 2018 and N/N10/2018-CT dated 23rd January 2018.

2. Manual filing and processing Manual filing of application, intimation, reply, declaration, statement or issuance of the notice, order or certificate

will be allowed for the purpose of refund as per Notification No. 55/2017-Central Tax dated 15th November 2017.

.

Manual Claim allowed for time being: Rule 97-A of CGST Rules • In case refund claim is filed manually, then refund application is required to be filed in Form GST RFD-01A. • In manual process also, application is required to be prepared online. ARN will be generated. Applicant is then required to

submit the Form GST RFD-01A alongwith the relevant documents and a copy of ARN generated in the jurisdictional department. Modalities/Records in respect of manual refund claims • The Circular no.17/17/2017-GST dated 15.11.2017 read with Circular no. 24/24/2017-GST dated 21.12.2017 lays down

the modalities for maintenance of records in respect of such manual refund claims. The time limits laid down in the Act need to be followed and the prescribed forms need to be generated manually for processing of such refund claims

.

3. Refund of tax to UIN entities Sec 55 grants right of claiming refund of GST paid on inward supplies to UIN Entities.

• Procedure for claiming refund: As specified in Section 54(2) • Submission of application: Rule 95 - GST RFD 10 • Documentation: Statement of inward supplies (GSTR-11) • Claim: Quarterly Basis • Areas of amendment:

o Extension of time period: Time period extended to 18 months o Preparation of GSTR-11: Auto-population not required, may be prepared by self o Restriction on claiming refund on petty purchases of invoice value upto Rs 5,000: now removed

Section 54 : REFUND of tax. .

54 (2) -- A specialized agency of the United Nations Organization or … any Multilateral Financial Institution and Organization notified under the United Nations (Privileges

and Immunities) Act, 1947, … Consulate or Embassy of foreign countries or

… any other person or class of persons, as notified under section 55, (CSD – Canteen Stores Department)

. entitled to a refund of tax paid by it on inward supplies of goods or services or both,

.

40

… may make an application for such refund, … in such form and manner as may be prescribed*, (* Rule 95 of CGST Rules, 2017) … before the expiry of six months from the last day of the quarter in which such supply

was received. .

N/N 20/2018-CT (dated 28th March, 2018): Due dates for filing refund application extended for entities covered by Sec 55

Since the facility of claiming refund on the common portal has been made available only recently, exercising powers conferred by Sec 148 of CGST Act, CG, on recommendation of GST Council, has notified special procedures for filing refund claim by entities covered by Sec 55 as the class of persons who shall make an application for refund of tax paid by it on inward supplies, to the jurisdictional tax authority, in such form and manner as specified, before the expiry of 18 months from the last date of the quarter in which such supply was received.

Rule 95 : Refund of tax to CERTAIN PERSONS ** (1) Any person eligible to claim refund of tax paid by him on his inward supplies as per section 55

shall apply for refund in FORM GST RFD-10 .

… once in every quarter, … electronically on the common portal, either directly or through a Facilitation Centre notified by the

Commissioner, .

… along with a statement of the inward supplies of goods or services or both in FORM GSTR-11, prepared on the basis of the statement of the outward supplies furnished by the corresponding suppliers in FORM GSTR-1.

Crux of Amendment: (w.e.f. 29th Dec, 2012) Pre-amendment: Statement of Inward Supplies (GSTR-11) was required to be prepared on basis of

data auto-populated at GSTN portal. Post-amendment: No such requirement that Statement of Inward Supplies (GSTR-11) shall be

prepared on basis of data auto-populated at GSTN portal. Thus, in any refund application filed after 29th Dec, 2017, Statement of Inward Supplies (GSTR-11) shall be prepared by self.

.

(2) An acknowledgement for the receipt of the application for refund shall be issued in FORM GST RFD-02. .

(3) The refund of tax paid by the applicant shall be available if- (a) the inward supplies of goods or services or both were received from a registered person

against a tax invoice and the price of the supply covered under a single tax invoice exceeds five thousand rupees, excluding tax paid, if any;

.

Crux of Amendment:: Refund will be available even if invoice value is upto Rs 5,000 .

(b) name and UIN of the applicant is mentioned in the tax invoice; and .

(c) such other restrictions or conditions as may be specified in the notification are satisfied. (*nothing specified presently)

(4) The provisions of rule 92 (*i.e, order sanctioning refund) shall, mutatis mutandis, apply for the sanction and payment of refund. .

(5) Where an express provision in a treaty or other international agreement, to which the President or the Government of India is a party, is inconsistent with the provisions of this Chapter,

… such treaty or international agreement shall prevail.

41

4. Refunds due to exports: Refund of IGST paid on exports Sec 16(3)(b) grants right of claiming refund of IGST paid on export.

• Procedure for claiming refund: As specified in Section 54 • Submission of application: Rule 96 – Shipping Bill / Bill of Export = Deemed Refund Application • Documentation:

o Exporter of goods: Tax Invoices + Shipping Bills/ Bill of Export .

• Claim: monthly /quarterly (as the case may be) • Areas of amendment:

o Exporter of Service: Now covered by Rule 96 – but, then re-directed to Rule 89

Rule 96 : Refund of integrated tax paid on GOODS or SERVICES exported out of India.

Exporter of Goods: (1) Exporter of Goods: [Shipping Bill / Bill of export = Deemed RA]:

• Deemed filing when of refund application when ‘Bill of Lading’ and ‘GSTR-3 / 3B’ is filed <. .

.

.

Exporter of Services: [inserted in 2018 – w.e.f. 23rd Oct, 2017] (9) The application for refund of IGST paid on the services exported out of India shall be filed

in FORM GST RFD-01 and shall be dealt with in accordance with the provisions of rule 89.

Exporter of Goods & Services: [inserted in 2018 – w.e.f. 23rd Oct, 2017] (10) The persons claiming refund of IGST paid on exports of goods or services should not have

received supplies on which the supplier has availed the benefit of … notification No. 40/2017-CT (Rate) (supplies under ‘Deemed Export’)) or

… notification No. 40/2017-CT (Rate) (Supply of goods at 0.1%) or … notification No. 41/2017-IT (Rate) (Supply of goods at 0.1%) or … notification number 78/2017-Customs (Import of goods without payment of

IGST & Cess by EoU) or … notification No. 79/2017-Customs (Import of goods without payment of IGST &

Cess by Holder of Advance Authorization and Holder of EPCG Authorization)

Circular No. 45/19/2018-GST

What is the scope of the restriction imposed by rule 96(10) of the CGST Rules,

… regarding non-availment of the benefit of N/N 48/2017-CT, 40/2017-CT (Rate), 41/2017-IT (Rate, 78/2017-Customs or 79/2017-Customs? .

Rule 96 (10) of the CGST Rules seeks to prevent an exporter, who is receiving goods from suppliers availing the benefit of certain specified notifications under which they supply goods without payment of tax or at reduced rate of tax, from exporting goods under payment of integrated tax. This is to ensure that the exporter does not utilise the input tax credit availed on other domestic supplies received for making the payment of integrated tax on export of goods.

However, the said restriction is not applicable to an exporter who has procured goods from suppliers without availing benefit of any of the above notifications.

.

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5. Refunds due to exports: Refund of ITC availed on inputs/ inputs services used in exports Sec 16(3)(a) grants right of claiming refund of ITC related to export.

• Procedure for claiming refund: As specified in Section 54 • Submission of application: Rule 89 - Refund Application = GST RFD 01 • Documentation:

o Exporter of Services: Tax Invoices + Bank Realization certificate

o Exporter of goods: Tax Invoices + Shipping Bill/ Bill of Export Circular No. 17/17/2017 – GST dated 15th November 2017 and Circular No. 24/24/2017-GST dated 21st December 2017 Bank Realization Certificates (BRC) or Foreign Inward Remittance Certificates (FIRC) for export of goods: It is clarified that the realization of convertible foreign exchange is one of the conditions for export of services. In case of export of goods, realization of consideration is not a pre-condition. In rule 89 (2) of the CGST Rules, a statement containing the number and date of invoices and the relevant BRC / FIRC is required in case of export of services whereas, in case of export of goods, a statement containing the number and date of shipping bills or bills of export and the number and the date of the relevant export invoices is required to be submitted along with the claim for refund. It is therefore clarified that insistence on proof of realization of export proceeds for processing of refund claims related to export of goods has not been envisaged in the law and should not be insisted upon.

• Claim: multiple months/quarter (as desired by exporter) • Areas of amendment:

o Separate refund method specified: Input/ input service used for export were procured either without payment of duty/tax or upon payment

of concessional rate – Rule 89(4A) & (4B) Input/ input service used for export were procured upon payment of normal GST – Rule 89(4) -

formulae based refund … change has been made in formulae 1) The definition of Net ITC has been modified to exclude inputs or input services received on account

of deemed export and inputs or input services used by exporters who are procuring goods at a concessional rate of 0.1% from the domestic supplier.

2) Turnover of zero rated supplies of goods has been modified to exclude supplies on which refund is claimed due to deemed export and export in respect of which inputs or input services have been claimed as a concessional rate of 0.1% by the exporter

3) Adjusted total turnover has been modified to exclude supplies on which refund is claimed due to deemed export and export in respect of which inputs or input services have been claimed as a concessional rate of 0.1% by the exporter

Rule 89 : Application for refund of tax, interest, penalty, fees or any other amount.

(4) In the case of zero-rated supply of goods or services or both without payment of tax under bond or letter of undertaking in accordance with the provisions of Sec 16(3) of the IGST Act, 2017, .

refund of ITC shall be granted as per the following formula-

Refund Amount* = (Max)

Net ITC*

x (Turnover of zero-rated supply of goods* + Turnover of zero-rated supply of services*)

Adjusted Total Turnover*

Where — (A) “Refund amount” means the maximum refund that is admissible;

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(B) “Net ITC” means ITC availed on inputs and input services during the relevant period;

“Net ITC” means ITC availed on inputs and input services during the relevant period other than the ITC availed for which refund is claimed under sub-rule (4A) or (4B) or both; .

Particulars Amount

ITC availed on receipt of input and input services XXX

Less : ITC availed for which refund is claimed u/Rule 89 (4A) : XXX

Less : ITC availed for which refund is claimed u/Rule 89 (4B) : (XXX)

Net ITC XXX

(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or LuT;

“Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the relevant period without payment of tax under bond or LuT, other than the turnover of supplies in respect of which refund is claimed under sub-rules (4a) or (4B) or both;

Particulars Amount

Zero-rated supply of goods made without payment of tax under bond or LuT XXX

Less : TO of supply of goods for which refund is claimed u/Rule 89 (4A): XXX

Less : TO of supply of goods for which refund is claimed u/Rule 89 (4B): (XXX)

Turnover of zero-rated supply of goods XXX

(D) “Turnover of zero-rated supply or services” means the value of zero-rated supply of services made without payment of tax under bond or LuT, calculated in the following manner, namely :—

Aggregate of the payments received during the relevant period for zero-rated supply of services

XXX

Add : Zero-rated supply of services where supply has been completed for which payment had been received in advance in any period prior to the relevant period.

XXX

Less : Advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period.

(XXX)

Turnover of zero-rated supply of services XXX

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period

“Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding —

(a) the value of exempt supplies other than zero-rated supplies and

(b) the turnover of supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both, if any,

during the relevant period

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Particulars Amount

Turnover in a State or Union territory (includes all non-taxable, exempt, non-exempt supplies)

XXX

Less : Exempt supplies other than those which have been exported (XXXX)

Less : TO of supply of goods for which refund is claimed u/Rule 89 (4A): (XXXX)

Less : TO of supply of goods for which refund is claimed u/Rule 89 (4B): (XXXX)

“Adjusted Total turnover” XXXX

(F) “Relevant period” means the period for which the claim has been filed.

.CBEC Clarification:

Filing frequency of Refunds: Tax period = Period for which return is furnished – Sec 2(107) of CGST Act Relevant Period = Period for which refund claim is filed – Explanation to Rule 89(4) .

The terms ‘Net ITC’ and ‘turnover of zero rated supply of goods/services’ are used in the context of the relevant period in rule 89(4) of CGST Rules. In many scenarios, exports may not have been made in that period in which the inputs or input

services were received, and ITC has been availed. Similarly, there may be cases where exports may have been made in a period, but no ITC has been availed in the said period. The above referred rule, taking into account such scenarios, defines relevant period in the context of the refund claim and does not link it to a tax period.

In this regard, it is hereby clarified that the exporter, at his option, may file refund claim for one calendar month / quarter or by clubbing successive calendar months / quarters. The calendar month(s) / quarter(s) for which refund claim has been filed, however, cannot spread across different financial years.

.

(4A) Refund to exporter of goods who received supplies under ‘deemed export’ mechanism (without payment of GST) .

In the case of supplies received on which the supplier has availed the benefit of … notification No. 48/2017-CT (supplies under ‘Deemed Export’),

refund of … ITC, availed in respect of other inputs or input services used in making zero-rated supply of goods or

services or both, shall be granted- .

(4B) Refund to merchant exporter where he receives the inward supply of goods without payment of GST / at concessional rate

In the case of supplies received on which the supplier has availed the benefit of … notification No. 40/2017-CT (Rate) (Supply of goods at 0.1%) or … notification No. 41/2017-IT (Rate) (Supply of goods at 0.1%) or … notification number 78/2017-Customs (Import of goods without payment of IGST & Cess by EoU) … or notification No. 79/2017-Customs (Import of goods without payment of IGST & Cess by Holder

of Advance Authorization and Holder of EPCG Authorization) or … all of them,

.

refund of … ITC, availed in respect of inputs received under the said notifications for export of goods and … the ITC availed in respect of other inputs or input services to the extent used in making such

export of goods, shall be granted.

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6. Refunds OF ITC due to INVERTED TAX STRUCTURE: Formula amended Sec 54(3)(ii) grants right of claiming refund of ITC to a supplier having inverted tax structure under GST.

• Inverted tax structure = (Rate of tax on inputs) higher than (Rate of GST on outward supply of goods/service) • Procedure for claiming refund: As specified in Section 54 • Submission of application: Rule 89 - Refund Application = GST RFD 01 (Formulae based refund) • Documentation:

o Inputs: Purchase of inputs o Outward Supply: Tax Invoices of outward supplies (goods/ services)

• Areas of amendment: o Formulae for claiming refund has been amended: – Rule 89(5) The formulae has been modified to cover unintended omission of services The definition of Net ITC has been modified to exclude ITC of input services Adjusted total turnover has been modified to exclude supplies on which refund is claimed due to

deemed export and export in respect of which inputs have been procured either without payment of GST or upon payment of concessional GST

Rule 89 : Application for refund of tax, interest, penalty, fees or any other amount. Refund of ITC arising out of zero-rated supplies made without payment of tax – Sec 54(3)(i)

(4) Zero-rated supply (whether exports or supply to SEZ): Refundable ITC to be computed as per formulae

(4A) Zero-rated supply (whether exports or supply to SEZ): where inward supply consists of ‘deemed export transactions’ (where deemed export refund

is involved)

(4B) Zero-rated supply (whether exports or supply to SEZ): where inward supply consists of specified procurements

… either at concessional rate … or without payment of tax

Refund of ITC arising out of inverted tax structure – Sec 54(3)(ii)

(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula-

Maximum Amount* Of Refund =

Net ITC

x (Turnover of INVERTED rated supply of Goods)

Adjusted Total Turnover*

Less: tax payable on such inverted rated supply of goods

Maximum Amount* Of Refund =

Net ITC

x (Turnover of INVERTED rated supply of Goods and Services)

Adjusted Total Turnover* Less: tax payable on such inverted rated supply of goods

or services Explanation.- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4).

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Explanation.- (as amended by N/N 21/2018-CT- dated 18th April, 2018) For the purposes of this sub rule, the expressions (a) “Net ITC” shall mean ITC on availed on inputs during the relevant period other than

ITC availed for which refund is claimed under sub-rules (4A) or (4B) or both;

and (b) “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-

rule (4).

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ADVANCE RULING

1. Manual filing and processing The law has allowed manual filing and processing of the application, intimation, reply, declaration, statement or

issuance of the notice, order or Certificate. This is because the electronic filing and processing of such documents have not yet been enabled.

Application to AAR (and appeal to AAAR): Online or manual Rule 104 of CGST Rules – Application to AAR shall be filed on the common portal Rule 106 of CGST Rules – Appeal to AAAR shall be filed on the common portal .

However, due to the unavailability of the requisite forms on the common portal, a new rule 107A has been inserted vide N/N 55/2017-CT, dated 15.11.2017, which states that in respect of any process or procedure prescribed in Chapter XII, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include the manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to the CGST Rules. Circular no. 25/25/2017-GST dated 21.12.2017 prescribing the detailed procedure for manual filing of

applications for Advance Ruling and appeals before Appellate Authority for Advance Ruling has been issued. Therefore, till the advance ruling module is made available on the common portal, the conditions and procedure

have been prescribed for the manual filing and processing of the applications. . Payment of Fees (Fee of Rs 5,000 for filing application / Fees of Rs 10,000 for filing appeal): Online or manual Though the application shall be filed manually till the advance ruling module is made available on the common portal, the fee is required to be deposited online in terms of section 49 of the CGST Act. How to make online payment? - the applicant has to fill his details using “Generate User ID for Advance Ruling”

under “User Services”. After entering the email id and mobile number, a OTP shall be sent to the email id. Upon submission of OTP, Systems shall generate a temporary ID and send it to the declared email and mobile number of the applicant.

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APPEALS AND REVISION

1. Appellate Authority (before whom first appeal is filed) has been appointed

Sec 107 provides for filing of appeal before Appeallate Authority. CG has appointed Appellate Authority Vide N/N 55/2017-CT dated 15th November 2017

Notification No. 55/2017-CT dated 15th November 2017. .

1. if adjudication order is passed by Assistant Commissioner/Deputy Commissioner or Superintendent – appeal lies before Additional Commissioner (Appeals)

2. if adjudication order is passed by Addl/ Joint Commissioner – appeal lies before Commissioner (Appeals)

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