1. Proposed Goods and Services Tax (GST) in India
Presentation Plan
Proposed Goods and Services Tax (GST) in India
- Scope of Supply including related provisions for :
(a) Agent u/s 2(5) of the CGST Act
(b) Job Worker u/s 2 (68) of the CGST Act
(c) Zero-rated Supplies
(d) Refunds
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2. Agent u/s 2(5) of the CGST Act
Means a person, including a factor, broker, commission agent, arhatia, del credre agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.
Principal Agent
[ Contractual Agreement – written / oral / merely inferred from the way an agent and its principal conduct their business affairs]
Conditions:
Agreement must be explicit to show that an agent is arranging the transactions on behalf of its principal, rather than trading on its own account;
Agent must not be the owner of any of the goods, or use any of the services which they procure / avail for making outward supplies on behalf of its principal;
No alteration either in the nature or value of any of the supplies made between principal and third parties
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3. Agents and their Liabilities
(i) Acting on behalf of the Principals
(ii) Acting in their own name
(iii) Importing goods on behalf of a non-taxable person in India
(iv) Acting on behalf of a person having no place in India
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4. (i) Agents - Acting on behalf of the Principals, may
receive or deliver goods;
Hold stock of goods for his principal; or
Make or receive payment
Conditions :
The supply is between the principal and the customer
Tax invoice must be issued by the principal for the supply that he made to his customer
If the agent is a registered person, he must also issue a tax invoice for the supply of services that he made to his principal
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5. Contd..(i) Agents - Acting on behalf of the Principals
X Ltd. (Principal), a GST registered Taxable Person, engages Mr.B, a GST registered taxable person, as an agent to sell its products. The products were sold for Rs.10 lacs. 10%. GST 28%
(on goods) ( on services).
Activities:
X Ltd. will levy 28% on Outward Supplies ( of goods) of Rs.10 lacs.
Mr. B will levy 18% on Outward Supplies ( of services) on Rs.(10 lacs x 10% x 18%).
X Ltd. will claim Input Tax Credit on GST paid on Commission to Mr.B.
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6. (ii) Agents - Acting in their own name Customer
Principal
Agent
Customer
Charge GST on
Supply of Goods
Tax Invoice in the name of the Principal
Charge GST on
Supply of Goods
Tax Invoice in the name of the Agent
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7. (iii)(a) Agents – importing goods on behalf of a non-taxable person
Principal
(outside India)
? Commission + GST
Agent
( In India)
Import Goods
Pay IGST
claim as ITC
Customer
Of the Principal
(In India)
Charge GST on
Supply of Goods
Tax Invoice in the name of the Agent
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8. (iii)(b)Agents – importing goods on behalf of a non-taxable person
Overseas Company
Agent
( Taxable Person In India)
Import Goods
Pay IGST
claim as ITC
Customer
Of the Principal
( in India)
Charge GST on
Supply of Goods
Tax Invoice in the name of the Agent + GST
Commission + GST
Principal
(Non-Taxable Person India)
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9. (iv) Agents – acting behalf of persons having no place in India
registration must be made through an agent, having a registered place of business in India
GST registration in the name of the overseas principal and not in the name of the appointed agent
Agent would be responsible for liabilities under GST
Agent may represent more than one Principal
Principal
- An Overseas Company
ABC Inc.
Agent
( Taxable Person In India)
Customer
Of the Principal
( in India)
Commission + GST
Charge GST on
Supply of Goods
Tax Invoice on behalf of the Principal (ABC Inc.) + GST
Order for goods
Issue Tax Invoice to ABC Inc. and charge GST
XYZ Ltd.
- Principal
(Registered Taxable Person India)
Deliver goods
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10. Goods & Services Tax (GST) in India
Job Work
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11. “Job Work“
- means undertaking any treatment or process by a person on goods belonging to another registered
taxable person and the expression “job worker” shall be construed accordingly.
A registered taxable person may under intimation and subject to such conditions as may be prescribed
Bring back inputs, after completion of job work or otherwise, and / or capital goods, other than moulds and dies, jigs and fixtures or tools,
- Inputs - within one year, of their being sent out,
- Capital Goods – within three years of their being sent out,
to any of his place of business, without payment of tax
Supply such inputs, after completion of job work or otherwise, and / or capital goods, other than moulds and dies, jigs and fixtures or tools,
- Capital Goods – within three years of their being sent out from the place of business of a job worker on payment of tax within India, or with or without payment of tax for export, as the case may be
Provided:
principal shall not supply from the place of job worker, unless, the principal has declared such place as his additional place of business,
Except
– job worker is registered u/s 25; or
- Principal is engaged in the supply of such goods as may be notified by the Commissioner in this behalf
Responsibility for accountability of the inputs and / or capital goods shall be with the principal
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12. Job Work
Inputs sent for job work and not received by the principal after completion :
Within a period of one year from of their sent out,
Shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out
Capital Goods sent for job work and not received by the principal after completion :
Within a period of three years from of their sent out,
Shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the said capital goods were sent out
Any waste and scrap generated during the job work may be supplied by the job worker, directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered.
INPUT TAX CREDIT
On INPUTS – YES, provided such is returned within one year, else, ITC will be added to OUTPUT TAX LIABIITY
On Capital Goods – Yes, over a period of three years. ITC will be reversed and added to OUTPUT TAX LIABILITY, if CG not returned within 3 years.
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13. Job Work
A) Supply of goods by principal to job worker for job work – Not liable to GST, subject to compliance of provisions of
sec 143.
B) Supply of job work services by the job worker – Job work charges will attract GST.
C) Return of processed goods back to the principal by the job worker – Not liable to GST, subject to compliance of
provisions of sec 143.
Thus we see implications under GST law on the aspects related to job-work transactions is very crucial having
regard to the above analysis.
Transitional Provisions relating to Job Work:-
Where goods have been removed from a factory for further processing to a job worker prior to the GST applicable
date, i.e. goods were removed under current tax regime however received back after GST roll-out;
》No tax shall be payable if such inputs or semi finished goods are returned to the said factory within six months
from the GST applicable date.
Note:- The time limit of six months can be increased on the basis of a reasonable cause. However such time limit will
not be more than two months in excess of six months from GST applicable date. In other words, this can be
extended to a maximum time limit of eight months from GST applicable date.
It is to be noted that the manufacturer would have already taken credit on such inputs.
》If such inputs or semi finished goods are not returned within the specified period, the input tax credit shall be liable
to be recovered in accordance with the provisions of clause (a) of sub-section (8) of section 142. (i.e as an arrears of
tax.) [Since the manufacturer would have already taken credit on such inputs earlier]
The above provisions would be applicable only when both principal and job worker declare the details of stock of
inputs, semi-finished goods or finished goods, as the case may be, on the appointed day.
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14. Zero-rated Supplies u/s 2(23) read with Sec. 16 of the IGST Act
U/s 16(1) - means any of the following supplies of goods or services or both, namely:
Export of goods or services or both; or
Supply of goods or services or both to a Special Economic Zone Developer or a Special Economic Zone Unit
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15. Refund ( for taxable persons)
– Chapter XI of CGST Act ( Sec )
= (Turnover of Zero-rated supply of Goods + Turnover of Zero-rated supply of Services) x Net ITC / Adjusted Total Turnover
Where,
Zero-rated supply of goods /services means the value of zero-rated supply of goods/ services made during the relevant period without payment of tax under bond or letter of undertaking
Zero rated supply of services =
aggregate of payments received during the relevant period for zero rated supply of services
(+)
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
(–) advances received for zero-rated supply of services for which the supply of services has not been completed during the relevant period
Subject to issues only relating to:
zero-rated supplies made without payment of tax;
Inverted duty structure ( other than nil rated or fully exempted supplies)
Refund Not eligible :
If exports are subject to export duty but zero-rated supplies
If duty draw back is availed of central tax or claims refund of the integrated tax paid on such supplies
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16. (to an International Tourist) u/s 15 of IGST Act
Refund
(to an International Tourist) u/s 15 of IGST Act
integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed
(provided such person, not normally a resident in India, enters into India for a stay of not more than six months for legitimate non-immigrant purposes)
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17. CMA Chiranjib Das, FCMA, ACA, M
CMA Chiranjib Das, FCMA, ACA, M.Com Practising Chartered Accountant Empanelled GST Faculty, Indirect Taxation Committee The Institute of Chartered Accountants of India Former Joint Director & Head – Tax Research Department The Institute of Cost Accountants of India Phone:
LET US ALL CONTRIBUTE EFFECTIVELY TOWARDS THIS BIGGEST ECONOMIC REFORM THROUGH INTRODUCTION OF GOODS AND SERVICES TAX (GST) IN INDIA