Goods & Services Tax GST Conclave III Hosted by: LEVY & Scope of Supply GST Conclave III Hosted by: Kolkata Branch of EIRC of ICAI 17th June, 2017

Goods and services tax Scope of Supply

Schedule I – Activities treated as supply includes All forms of supply Made/ agreed to be made for consideration In the course/ furtherance of business Sale, transfer barter, exchange, licence, rental, lease, disposal Import of services For consideration whether or not in the course/ furtherance of business Supplier – outside India Recipient – in India Schedule I – Activities treated as supply If made/ agreed to be made without a consideration 1. Permanent transfer/ disposal of business assets (ITC availed) 2. Supplies between related/ distinct persons 3. Supplies between principal & agent 4. Services imported by taxable persons from related persons in the course/ furtherance of business Schedule II Treated as supplies of goods/ services For example:- Supply of goods - transfer of title in goods, HP transfers, transfer of title in goods where property passes at a future date Supply of services – Hotelier, Constn of complex, civil structure, software, renting of immovable property, leasing

Exclusions from scope of supply Schedule III Services by employee to employer Services by Court/ tribunal Functions of MPs, MLAs, etc. Services of funeral, burial, etc. Sale of land, sale of building (except those covered under 5(b) of Sch II) Actionable claims other than lottery, betting, gambling Notified activities/ transactions undertaken as public authorities by:- Central Govt. State Govt. Local authority

Scope of supply 2 or more taxable supplies of goods/ services The Government may notify transactions that are to be treated as: supply of goods and not as supply of services; or supply of services and not as supply of goods. Composite supplies will be treated as supply of principal supply Mixed supplies will be treated as supply of goods/ services attracting highest rate of tax 2 or more taxable supplies of goods/ services Naturally bundled One principal supply 2 or more supplies of goods/ services Not a composite supply Single price

Scope of supply – examples of composite and mixed supplies Composite Supply Mixed Supply Rajdhani Express provides rail transportation services; they also supply food on board to passengers. Supply of transportation services would be the principal supply and such supply would qualify as composite supply. Dell Electronics sells laptops with pre-installed software. Such supplies, being naturally bundled, would qualify as composite supplies with the sale of laptops being the principal supply. Surf Excel offers plastic buckets free along with supplies of detergent powder. Since such supplies are not naturally bundled and the buckets are capable of being sold independently, the supply would be treated as mixed supply. Since plastic buckets attract a higher rate of tax, the entire supply would be taxed at 18% Item Rate of tax (assumed) Detergent 12% Plastic bucket 18%

Goods and services tax LEVY

Levy CGST & SGST IGST Levied on all intra-state supplies Rates, CGST & SGST taken individually, will not exceed 20% Levied on all inter-state supplies Rates will not exceed 40% CGST, SGST and IGST will apply on all supplies of goods/ services Except: alcoholic liquor for human consumption Petroleum, natural gas, ATF, etc., will be taxed w.e.f. date notified Reverse charge mechanism will apply:- On notified categories of goods/ services In cases where the supplier of goods/ services is an unregistered person Notified e-commerce operators will be required to pay tax on intra-state supplies OF SERVICES ONLY made through them as if they are the persons liable to pay tax on such supplies

INTRA-STATE & INTER-STATE SUPPLIES Goods and services tax INTRA-STATE & INTER-STATE SUPPLIES

NATURE OF SUPPLY Intra-state supply Inter-state supply Location of supplier and place of supply are in the same State* Location of supplier and place of supply are in the same Union Territory Intra-state supply Location of supplier and place of supply are in:- 2 different States or 2 different UTs or A State and an UT Supply of imported goods into territory of India till they cross customs frontiers Supply of imported services into territory of India Supply of goods and/ or services where supplier is located in India and place of supply is outside India Supplies made to/ by an SEZ developer/ SEZ unit Residual clause – all supplies into taxable territory which are not intra-state supplies Inter-state supply Notes:- “State” includes a UT with legislature (Delhi & Chandigarh) Location of supplier or place of supply is in territorial waters – such location or place will be deemed to be in the coastal State/ UT where the nearest point of the appropriate baseline is located.

Nature of supply - examples Works Ltd., located in Bangalore, imports goods from China via sea-routes to a port located in Chennai and then transports such goods to Bangalore. The goods are deemed to have been imported when the goods reach the Chennai port and not when they are ultimately transported to Bangalore. Sec 7(2) of the IGST Act, 2017 Import Logwood Ltd., an SEZ unit, located in Karnataka purchases goods from a supplier located in Karnataka. Although such purchase takes place within the state of Karnataka, it would be reckoned as an inter-State supply and would be zero-rated in the hands of the supplier. Sec 7(5)(b) r/w Sec 16(1)(b) SEZ Indian Oil has an offshore oil field off the coast of Mumbai. Supplies from such oil field would be deemed to be supplies from the state of Maharashtra. Sec 9 of the IGST Act, 2017 Territorial Waters

Reverse Charge - specified goods or services Government may notify the list of goods or services or both based on the recommendation of Council On such recommended supplies- recipient shall pay All the provisions of the Act in respect of levy, collection, invoicing etc., shall apply to the recipient Similar provisions under IGST Act- Section 5(3)

Issues This will be applicable for registered and unregistered persons Examples: Import of services or import of goods- must register under GST irrespective of the turnover

Reverse Charge- Supply of goods and services or both by an un registered to a registered supplier- shall be paid by the registered supplier on RCM- Section 9(4). Similar provisions under Section 5(4) of IGST Act

Levy-supply of service through e-comm The Govt may notify on the recommendation of the Council, the list of services supplied intra state through e commerce operator- E commerce operator will be liable to pay GST. If the e commerce operator does not have any presence in the state, then the person representing such e commerce operator for any purpose in the taxable territory shall be liable to pay tax. Similar provisions under Section 5(5) of the IGST Act and 7(5) of UTGST

Issues The classification such as supply or works contract or composition supply or mixed supply is on receiver Pay tax by cash Comply other requirements like preparation of purchase invoice Create separate serial number for RCM for URD purchases How under IGST act one can sell without registration- Section 24) of CGST Act.

Relevance Applicable for certain services only. Who operates within the state without physical presence As per the second proviso to Section 9(5), if they do not have physical presence, they have to appoint the agent in “taxable territory”.

Issue Whether a lawyer or CA representing the tax issue would be held liable to pay tax? A courier person acting for the e commerce operator for supply of goods can be held responsible for supply of services Whether a non-resident e-commerce operator should appoint agents in each State if they want to operate within that state?

Goods and services tax COMPOSITION OF TAX

COT Composition of tax… Availed Available Allowed Eligible Compliance 1% - Manufacturers 2.5% - Hoteliers 0.5% - Others Eligible Available Availed Allowed Compliance

Composition suppliers: Conditions & restrictions Unless all registrations of the same PAN also eligible and opt for composition If aggregate turnover (all India basis) of preceding FY exceeds 75 Lakhs (If during the FY, the aggregate turnover exceeds 75 Lakhs, no composition from the following day.) In the following specific cases composition scheme will not be available: Services supplied: Any/ all services except service specified in Sch II Para 6 clause (b) Goods supplied: Non-taxable goods Inter-State outward supplies Through e-commerce operators Notified goods manufactured by the supplier

Tax Invoice

Tax Invoice – Sec 31 Before/ at the time of :- Removal of goods for supply (supply involves movement of goods) Delivery of goods/ making available to the recipient (other cases) Supply of taxable goods Registered taxable person shall issue tax invoice Supply of taxable services Before/ after provision of service but within prescribed period Revised invoices may be issued against the invoice already issued during the period starting from the effective date of registration till the date of issuance of certificate of registration within one month from date of issuance of certificate of registration. (Rule 8) A registered person supplying exempted goods or opting for composition to issue a bill of supply instead of tax invoice (Rule 4) Receipt voucher shall be issued by a person receiving advances and refund voucher (Rule 6) when such advance is returned for not having effected supplies. (Rule 5) A registered person is required to issue an invoice on receiving goods/services from unregistered person and a payment voucher (Rule 7) at the time of making payment of such taxes on behalf of the supplier.

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