1. Special Problems & Situations in GST
exceeding expectations
since 1985
Special Problems & Situations in GST
Mr. L. Badrinarayanan
5 November 2017

2. Agenda Permanent Transfer of Intellectual Property Rights
Issues in various sectors
Agency Service Sector
Insurance Sector
Impact on Trade Promotion Schemes
Cross Charge v/s ISD

3. Permanent Transfer of Intellectual Property Rights

4. Goods or Services? Permanent Transfer of IPR
Article 366(29A) in The Constitution Of India
(29A) tax on the sale or purchase of goods includes
(d) a tax on the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
V/s
Notification No. 11/2017-Central Tax (Rate), dated 28th June, 2017 Under Sl. No. 17, Heading 9973-
Chapter, Section or Heading
Description of Service
Rate (per cent.)
9973 (Leasing or rental services, with or without operator)
(iii) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.
Same rate of central tax as on supply of like goods involving transfer of title in goods -

5. Issues in Agency Service Sector

6. G.T.A.- Location of Supplier of Service
Truck Company
Mumbai
(Registered H.O.)
Sale
Transferred
Service Receiver
Jaipur
(Unregistered Branch)

7. G.T.A.- Location of Supplier of Service
(71) “location of the supplier of services” means,—
where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;
where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provisions of the supply; and
in absence of such places, the location of the usual place of residence of the supplier;
What is the location of Service Provider?
Who will avail the ITC of Truck?
Accumulation of ITC

8. Agent as a Service Provider
Airlines
Agent
Passenger
Whether sale of air tickets by agent to Passenger be treated as Supply of services?
Schedule I does not covers transactions between Principal & Agent in case of services
Can Agent as per IATA be treated as Service Provider?

9. Issues in Insurance Sector

10. Garage Repair Services
Insurance Company
(Maharashtra)
Tax Invoice
Garage (Gujarat)
Supply of parts
Insured
Agreement for repairing in Gujarat
What will be place of supply for parts?
Location of goods when movement of goods terminates for delivery to recipient [Section 10(1)(a) – CGST + SGST]
Principal place of business of recipient [Section 10(1)(b) – IGST]

11. WHA Model Crystal - Gibraltar Insurance Co. - UK Customer - UK
(exempt service)
Crystal - Gibraltar
Reinsurance
Insurance Co. - UK
Customer - UK
8 5%
Reinsurance
Group
Companies
Service to
Service
Invoice to
Viscount - Gibraltar
WHA Ltd - UK
Garage - UK
Insurance Company, Customer, Garage and WHA Ltd located in UK
Crystal and Viscount of Gibraltar and WHA Ltd of UK are group companies
WHA Ltd claiming refund of input tax credit for export service to Viscount
Economic reality - WHA Ltd only making payment to cover garage costs. ITC not available

12. Trade Promotion Schemes

13. Types of Promotion Schemes
Gifts
Samples
Buy One – Get One (Linked Goods/Multiple goods)
Money Off Coupons/Vouchers
Discounts
Joint marketing Schemes

14. GST Implications - Gifts
Section 17(5)(h) - Non availability of input tax credit
“goods lost, stolen, destroyed, written off or disposed by way of gift or free samples”
Under UK VAT law, free business gifts – Taxable + Available input tax credit
Above 50 pounds
VAT due on the price of identical products
Also applicable on series of gifts to a single person
Below 50 Pounds
No VAT due, input tax credit available

15. Free Samples also to qualify as supply without consideration ?
Samples / Gifts
“Specimen of a product which intends to promote the sales of that product and which allows the characteristics and qualities of that product to be assessed without resulting in final consumption, other than where final consumption is inherent in such promotional transactions”
In UK – No VAT payable
In Australia – Free Samples are GST-free
Under GST Act,
No distinction between free samples and gifts made in course or furtherance of business
Promotion of
a new product
Free Samples also to qualify as supply without consideration ?

16. Mixed Supply / Linked Goods
Promotion of Goods/Services for a single Price
Considered to be a ‘multiple supply’ of goods/services under both UK VAT and Australia GST laws.
In case combination of goods/services with differential rates of VAT or taxable and non taxable supplies – Rules of apportionment provided.
Apportionment Rules in UK
Apportionment Rules in Australia
VAT Notice 700: The VAT Guide
Linked Supplies Concession
Section 9-75 – 10/11 of the consideration
Section 9-80 – value of actual supply = price of actual supply*10/ 10+ Taxable proportion

17. Vouchers – Goods or Service?
“goods’’ means every kind of movable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply;
Explanation.– For the purpose of this clause, the term ‘moveable property’ shall not include any intangible property.
“services’’ means anything other than goods;
Explanation: Services include intangible property and actionable claim but does not include money.
Vouchers – Goods or Services?
Supply of Sodexo Coupons –
Sodexo SVC India Private Limited v. State of Maharashtra & Ors. Civil Appeal Nos SC

18. Point of Taxation of Vouchers – Issuance or Redemption?
Face Value Vouchers
Vouchers ,tokens or stamps that represents a right to receive goods or services to the value of an amount stated on it or recorded in it.
Single Purpose Vouchers - Redeemable against specific goods/service of a specific VAT rate – VAT payable on the issue
Multi Purpose Vouchers – Redeemable against different goods/services - VAT payable if consideration exceeds face value
Credit Vouchers
Retail Vouchers
Point of Taxation of Vouchers – Issuance or Redemption?

19. Joint Marketing Schemes
A single supply of services versus A simultaneous supply of services
Barter Transaction – How to determine the valuation for the purposes of GST?
Elida Gibbs (European Court of Justice)
Loyalty Management UK (House of Lords & European Court of Justice)
Baxi Group (House of Lords)

20. Sales linked gifts Supply of Main Product Supply of Free Product
Manufacturer
Retailer
Customer
Supply of Free Product
Supply
Manufacturer
Customer
Customer receives 1 point on purchase of every product by Retailer.
Customer can purchase 1 product for free from Manufacturer by using 5 such points.
Is there any consideration involved in Second Transaction?

21. Gifting used car to employee
Car Company
Company
Employee
Company cannot avail ITC of GST paid on purchase of car? [Section 17(5)]
Company has to charge GST from employee on transfer of car? [ Schedule I]

22. Cross charge v/s ISD

23. Cross Charge v/s ISD Support Services Common Services
Which is the ideal method?
Which services shall be received in HO / ISD GSTIN?
Any loss of credit – implications?
Support Services
Common Services
Cross charging only
Input service Distributor
Can cross charge method be adopted?
What will be the basis to cross charge?

24. Thank You