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    Composition Scheme Under GST, One Page On GST,Advance Ruling,Input Tax Credit,SME,Valuation,Supply

    1. What is Composition Scheme under GST?

     

    Composition scheme under GST is an optional levy provided to the manufacturers, traders and Restaurants to opt for composition scheme whose aggregate turnover in the previous financial year does not exceed Rs.100 Lakhs which leads to reduction of compliances for small scale businesses i.e. maintenance of books of accounts, issuance of invoices, furnishing of returns etc and to pay a fixed percentage of turnover as tax inlieu of paying taxes at higher rate. In case of suppliers located in special category states, the turnover limit to opt for composition scheme is Rs. 75 lakhs.

     

    1. Are there any conditions to be satisfied apart from threshold limit to opt for this scheme?

     

    Yes. In addition to the threshold limit, following are the additional conditions to satisfied to opt this scheme:

     

    1. The goods held-in-stock as on 01.07.2017 should not have been procured in the course of inter-state trade or commerce or procured from a branch, agent/principal situated outside the State orimported from outside the State.

     

    1. The supplier should not be engaged in supply of services other than restaurant services.

     

    1. The supplier should not be engaged in making any supply of goods which are not leviable totax under GST Act;

     

    1. The supplier should not be engaged in making any inter-State outward supplies of goods;

     

    1. The supplier should not be engaged in making any supply of goods through an e-commerce operator

     

    1. The supplier should not be a manufacturer of such goods as may be notified as ineligible for composition scheme viz. ice cream and other edible ice, pan masala and tobacco products.

     

    1. Not a casual taxable person or a non-resident taxable person

     

    1. What are the additional conditions to be satisfied by entities having more than one place of business?

     

    Under GST, single registration can be obtained for multiple place of businesses having same PAN are in same State. When place of business is in different state then separate registration is required in each of the states in which such place of businesses is located. Such registered persons having same PAN shall not be eligible to opt for composition scheme unless all of them opt to pay tax under the composition scheme.

     

     

     

     

     

     

     

     

     

     

     

     

     

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    1. What is the rate at which GST is required to be paid by a tax payer opting for composition scheme? The rate prescribed for the taxpayers opted to pay tax under this scheme are as follows.

    S. No

    Category of registered persons

    CGST Rate

    SGST Rate

    Total rate

     

     

     

     

     

    1

    Manufacturer

    1%

    1%

    2%

    2

    supply, by way of or as part of any service or in any

    2.5%

    2.5%

    5%

     

    other manner whatsoever, of goods, being food or

     

     

     

     

    any other article for human consumption or any drink

     

     

     

     

     

     

     

     

    3

    Others (including traders)

    0.5%

    0.5%

    1%

     

     

     

     

     

     

    1. Can a composition tax payer be entitled to recover GST at the above rates separately from the recipient of supply?

     

    No. The supplier opted to pay tax under composition scheme shall not be entitled to collect the tax amount separately from the recipient of supplies.

     

    1. What is procedure to be followed to opt for composition scheme?

     

    Any person who has been granted registration on a provisional basis (i.e. migration from existing regime to GST) and who opts to pay tax under composition scheme, shall electronically file an intimation in FORM GST CMP-01.

     

    However, an unregistered person can make an application for registration under GST and can simultaneously opt for composition scheme by duly filing in Part-B of Form GST REG-1.

     

    For the FY 2017-18, a registered taxable person has given an option to adopt composition scheme by filing FORM GST CMP-02 at any time on or before 31.03.2018. Such tax payer can pay tax under the composition scheme from the first day of the month succeeding the month in which the intimation under FORM GST CMP-02 is filed. Up to the month in which such intimation is filed, the registered taxable person is required to pay tax as per the applicable regular rates of tax. If such registered taxable person is left with any ITC, then the same shall be lapsed. Composite scheme is required to be opted for every financial year by way of an intimation in FORM GST CMP-02. Such an intimation shall be filed prior to the commencement of a financial year.

     

    1. Can composition tax payer entitled to claim ITC on inputs, capital goods and input services received?

     

    As the composition tax payer is paying the tax at a fixed percentage of turnover as tax in lieu of standard rate of tax, they shall not be eligible either to avail credits or pass on such composition tax. Any cost incurred towards CGST, SGST and IGST shall be added to the cost of goods or service so procured.

     

     

     

     

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    Composition scheme under GST

     

     

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    1. Can a composition tax payer issue a tax invoice to allow the recipient of supply to claim ITC?

     

    No. Composition tax payer is not eligible to raise a tax invoice. Instead he shall issue a document called ‘Bill of Supply’ for supplies made. He shall mention the words ‘Composition Taxable Person Not Eligible to Collect Tax on Supplies’ at the top of the bill of supply issued by him. The corresponding recipient of supply is barred from ITC.

     

    1. What is frequency of tax payment and returns to be filed by a Composition tax payer?

     

    Suppliers opted for composition scheme should make payment and file a quarterly return in Form GSTR- 4 within 18 days from end of the quarter to which the return relates furnishing all the outward supplies made during the quarter. Annual return must be filed in Form GSTR-9A by 31st December of the subsequent Financial Year. However, the GSTR-4 to be filed for the quarter July to September 2017 has been extended from 18.10.2017 to 24.12.2017.

     

    1. When does a composition tax payer gets disqualified from the scheme? What are the consequences upon such disqualification?

     

    Composite tax payer shall become disqualified from the Composition scheme if the aggregate turnover during the FY exceeds Rs. 100 Lakhs or has made interstate outward supplies. Upon such disqualification, he will be liable to pay tax at the regular rates by claiming ITC. He shall also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days of the occurrence of such event. However, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock and on capital goods (reduced by the percentage points) on the day immediately preceding the date from which he becomes liable to pay tax at the regular rates.

     

    1. Is a composition tax payer required to pay tax under reverse charge for supplies received by him?

     

    Yes. Composition tax payer is also required to pay tax as applicable at normal rates for the supplies procured by him for which tax is payable by recipient under reverse charge.

     

    1. Are there any changes expected in composition scheme under GST?

     

    The following changes are recommended by GST Council in their 23rd meeting held on 10.11.2017. The recommendations are going to be implemented soon by amending the law and issuing notifications.

     

    • Uniform composition rate of 1% for manufacturers and traders
    • Annual turnover limit for eligibility to composition scheme shall be increased to Rs. 1.5 crores.

     

    No disqualification or no ineligibility to composition scheme if the composition tax payer is engaged in providing services up to Rs. 5 lakhs per annum.

    ONE PAGE ON GST

     

    Contributed by CA Sri Harsha & CA Manindar

     

    KNOW ABOUT GST:

     

    1. Brief about GST: GST stands for Goods and Services Tax. It is introduced to subsume multiple indirect taxes both at centre and state level. The current duties namely Central Excise, Service Tax, Additional Excise Duties, Additional Customs Duties, Value Added Tax, Octroi, Entertainment Tax and Luxury Tax are being subsumed into one tax namely GST. Hence, on its introduction, there will be majorly GST and customs duty. GST is a destination based consumption tax. Hence, the state where a supply of goods and services are consumed, the taxes shall reach such state.

     

    1. Applicability of Goods and Services Tax: All forms of supply of goods and/or services for consideration and for the furtherance of business or commerce are taxable except those transactions covered in Schedule III of the Central Goods and Services Act, 2017 (“CGST Act”) and Exemption Notifications. There are certain transactions mentioned vide Schedule I and II which shall be taxable even there is no consideration.

     

    1. Types of GST: There are two kinds of GST- Intra State GST and Inter State GST. If the location of supplier and place of supply is within a state, Central Goods & Services Tax (CGST) and State Goods & Services Tax (SGST) must be charged. If the location of supplier and place of supply are in different states, a tax called Integrated Goods & Service Tax(IGST) must be charged. Whether a supply is an Inter-State or Intra-State shall be determined by Section 7 and Section 8 read with Section 10 to Section 14 of Integrated Goods & Services Tax Act, 2017. Further, the rate of IGST is arrived by summation of CGST and SGST.

     

    1. Understanding of GST: Every taxable person who is making a supply shall put either CGST/SGST or IGST on his invoice depending upon place of supply of goods and services as stated above. For example, if an architect is making a taxable supply to any person and assume the place of supply is in the same state as of the architect, then he is supposed to charge CGST and SGST on his invoice. In the same manner, if a dealer is making a supply of taxable goods, he is supposed to charge CGST and SGST in his invoice. CGST must be paid to the credit of Central Government and SGST must be paid to the credit of State Government.

     

    Let us assume in the above example, the architect and place of supply are in different states, then the architect is supposed to charge IGST on such invoice and pay to the credit of Central Government. Then, the Central Government shall transfer the state share of IGST to the respective state where such supply is ultimately consumed.

     

     

     

     

     

     

     

     

     

     

     

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    1. Payment of Goods and Services Tax: GST is required to be paid by the supplier of the goods and/or services in majority of the instances. GST must be charged from recipient of the goods and/or service and the same must be paid to the credit of Central Government. GST is required to be paid even if the same is not collected from the recipient. The law deems that the consideration received is inclusive of tax. GST shall be paid before filing the GSTR3 return which is due by 20th of next month. It can be paid by utilising the eligible credit from his electronic credit ledger and balance can be paid in cash from electronic cash ledger, where as in case of reverse charge mechanism, tax is required to be paid only in cash from electronic cash ledger. If tax is not paid, then the return shall not be treated as valid return and the taxable person shall be denied filing all the succeeding returns until the earlier return was made good.

     

    1. Reverse Charge for Specified Services: ln case of certain supply of goods or services, instead of supplier, recipient is required to pay the GST to Government. This is called reverse charge. The notified goods for this purpose includes cashew nuts, beedi wrapper leaves, Tobacco leaves, Silk yarn and lottery. The notified services for this purpose include goods transport agency, sponsorship services, advocate services, arbitral tribunal services and specified services provided by government and other notified services. Apart from the notified services, any service or goods procured from unregistered person shall also attract compliance under reverse charge.

     

    1. Requirement of Registration: Every supplier shall be liable to be registered in each state/union territory from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs 20 lakhs (Limit for special category states is Rs 10 lakhs). Aggregate turnover would include all value of taxable supplies, non-taxable supplies, exempt supplies and export supplies having same PAN Number, to be computed on all India basis. Registration can be obtained electronically in GST portal. Certain class of persons are not required to register under GST namely agriculturist, employee providing supplies to employer, supplier engaged exclusively in making exempted supplies. Certain person as specified under Section 24 including a person making inter-state supplies are mandatorily required to register, irrespective of the threshold.

     

    1. Composition Scheme: If the aggregate turnover does not exceed Rs75 lakhs in a financial year, then the taxable person can opt for payment of GST under composition scheme till first 75 lakhs in the current year. The rate prescribed for the taxpayers opted to pay tax under this scheme is 2% of the turnover in State in case of a manufacturer,5% of the turnover in State in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II and1% of the turnover in State or turnover in Union territory in case of other suppliers. Persons opting for composition must register and file returns on quarterly basis under GST. However, they shall not be eligible either to avail credits or pass on such composition tax. The scheme shall not be available for some of the notified persons and persons engaged in supply of any service other than restaurant services.

     

    1. Valuation of GST: Value of supply of goods or services shall be the transaction value of the supply, which is price actually paid or payable if the supplier and recipient are not related persons and price is the sole consideration for supply being valued. The scope of transaction value has been laid down vide Section 15. Certain items are to be mandatorily included in the scope of transaction value. If valuation cannot be made vide Section 15, then resort must be made to Rule 27 to Rule 35 ofCGST Rules 2017.

     

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    ONE PAGE ON GST

     

     

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    1. Returns under GST: Every taxable person must file a monthly return of outward supplies in GSTR-1 and inward supplies in GSTR-2. The outward supplies of a taxable person shall be matched with inward supplies of corresponding taxable person and accordingly the duty liability and credits will be determined. Then, a return in GSTR-3 must be filed showing the duty liability under GSTR-1 and credit availability under GSTR-2. If payable is greater than credit, tax must be paid in cash and if payable is less than the credit, the credit can be carried forward. There are separate returns notified for casual, non-resident taxable person and composition tax payer and other tax payers.

     

    Credits under GST: Every taxable person making an outward supply shall be eligible to avail the credits unless if they are expressly stated not to be eligible as per Section 17(5) of CGST Act. All credits shall be allowed under the electronic credit ledger and shall be available for set-off against tax payable. However, when credits are utilised, there are certain restrictions like CGST cannot be used for payment of SGST, SGST cannot be used for payment of CGST, IGST must be used to pay IGST, CGST and SGST in such order.

    ONE PAGE ON ADVANCE RULING

     

    Contributed by CA Sri Harsha & CA Manindar

     

    1. What is Advance Ruling?

     

    Advance ruling a mechanism prescribed under a taxing statute to seek clarity on applicability of respective tax. Such rulings or decisions are obtained in advance prior to undertaking a transaction by making suitable applications before the prescribed authorities. Under GST, advance ruling can be sought on any of the following matters;

     

    1. Classification of goods or services or both
    2. Applicability of a notification issued under the provisions of GST Law
    3. Determination of time and value of supply of goods or services or both
    4. Admissibility of Input Tax Credit of tax paid or deemed to have been paid
    5. Determination of liability to pay tax on any goods or services or both
    6. Whether registration is required

     

    1. Whether anything done with respect to goods or services or both amounts to or results in supply of goods or services or both.

     

    1. Who can apply for advance ruling?

     

    Any person registered under GST Law or desirous of obtaining registration can apply for advance ruling

     

    1. How can we apply for Advance Ruling?

     

    The application for advance ruling shall be made in GST Common Portal in Form GST ARA-01 along with all the relevant documents, which shall also be accompanied by a fee of Rs. 5000/-. As the portal is not fully ready, applications can also be submitted manually before the Authority for Advance Ruling.

     

    1. Whether Authority for Advance Ruling(‘AAR’) is entitled to reject any Application filed? If so on what grounds?

     

    The AAR has the right to ask for any other information as may be required by him from the applicant. After verifying the relevant application and the information asked for, the AAR can admit or reject the application. Application can be rejected on the grounds like question raised in the application is already pending or decided in any proceedings of an applicant. No application shall be rejected without giving an opportunity of being heard to the applicant and passing an order specifying the reasons for rejection.

     

    1. What is the procedure for obtaining the advance ruling if the application has been admitted?

     

    The AAR shall give an opportunity of being heard to the applicant or his authorised representative and the concerned officer of the Department. After considering the relevant material on record, the AAR shall pronounce its ruling within ninety days from the date of receipt of application. A copy of the advance ruling duly signed by members of AAR shall be sent to applicant and to the concerned officer.

     

     

     

     

     

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    In case of any difference of opinion on any question between members of AAR, then the application shall be referred to Appellate Authority for Advance Ruling for hearing and decision on such question.

     

    1. Whether ruling obtained on a legal matter by an applicant is also applicable to all other tax payers? The advance ruling obtained is applicable only to the applicant who has sought it and such ruling is binding on the Concerned Jurisdictional Officer only in respect of matters relating to applicant. The legal clarifications provided in advance rulings cannot be applied to or relied upon by other tax payers. In case of applicant, the advance ruling is applicable until the law, facts or circumstances supporting the ruling have changed.

     

    1. Whether any appeal lies on advance ruling?

     

    If the advance ruling is not in favour of applicant, then the applicant can file an appeal against advance ruling before Appellate Authority for Advance Ruling. Similarly, if any advance ruling is in favour of applicant and against the Revenue, then the concerned officer can file an appeal against the advance ruling before Appellate Authority.

     

    1. What is the procedure involved in filing an appeal before Appellate Authority?

     

    Such appeal shall be filed within a period of 30 days from the date of communication of order by AAR. Upon showing the sufficient reasons, the time limit can be extended by a further period of 30 days. The Appeal by applicant shall be filed in Form GST ARA-02 while that of concerned officer shall be filed in Form GST ARA-03. The Appellate Authority after giving the parties an opportunity of being heard, shall within a period of 90 days from the date of filing appeal, shall pass such order as they deem fit. A copy of the advance ruling duly signed by members of Appellate Authority shall be sent to applicant and to the concerned officer.

     

    1. Is there any mechanism to rectify any error apparent on the advance rulings?

     

    The advance ruling passed by the AAR, or the orders passed by Appellate Authority pursuant to appeals filed against advance rulings can be rectified by AAR or Appellate Authority for any errors apparent on the face of record. Such rectification can be made by AAR or Appellate Authority as the case may be on suomoto basis or brought to their notice by the Concerned Officer or Applicant or the Appellant within a period of six months from the date of the order. Any rectification which has the effect of increasing the tax liability or reducing the input tax credit shall not be made unless the Appellant or Applicant has been given an opportunity of being heard.

     

    1. What are the circumstances in which an advance ruling can be treated as void?

     

    Advance Ruling obtained shall be treated as void by AAR or Appellate Authority by passing an Order in this regard if the same was obtained by fraud or suppression of facts or misrepresentation of facts. Such order shall be passed only after giving an opportunity of being heard to Applicant or the Appellant as the case may be. Upon such order being passed, then all the provisions of GST law shall apply to the applicant as if the advance ruling has never been made.

    ONE PAGE ON INPUT TAX CREDIT

     

    Contributed by CA Sri Harsha & CA Manindar

     

    1. What is Input Tax Credit under GST?

     

    GST is a value added tax where the tax paid by a supplier on all goods or services procured for further supply of goods or services by him shall be available as input tax credit (ITC), which shall be used to pay the GST collected on goods or services supplied by him. The difference between the GST collected and the ITC shall be paid in cash. ITC is defined to mean CGST, SGST and IGST paid including tax paid under reverse charge on supplies received by a tax payer.

     

    1. What are the conditions to be satisfied to claim input tax credit?

     

    In general, ITC can be claimed by a registered tax payer on GST paid on all goods or services procured for use or intended to be used in the course or furtherance of business. The amount claimed shall be credited to the electronic credit ledger maintained in GST portal upon satisfaction of the following conditions;

     

    1. The registered tax payer claiming ITC should be in possession of tax invoice, debit note issued by supplier or such other documents as may be prescribed.

     

    1. He should have received the goods or services. In case the goods are received in lots or instalments, ITC can be claimed only upon the receipt of last lot or instalment

     

    1. He has furnished the return under section 39 i.e. GSTR3/GSTR3B

     

    1. The amount claimed as ITC shall be allowed on provisional basis to the tax payer which shall be finalised upon the corresponding supplier declaring this supply as his outward supply in his

     

    return (GSTR-1) and paid the respective tax amount

     

    If the registered tax payer has failed to pay the supplier of goods or services other than supplies attracting reverse charge, the amount towards the value of supply along with tax payable thereon within a period of 180 days from invoice date, the amount equal to ITC availed shall be added to his output liability along with interest. If the due amounts are paid to the supplier subsequently, then ITC can be claimed back.

     

    1. What are the documents on the basis of which ITC can be claimed?

     

    Apart from invoice and debit notes, the other documents on the basis of which ITC can be claimed are bill of entry to claim IGST paid on import of goods, invoice issued by recipient to supplier under section 31(3)(f) for supplies covered under reverse charge and invoice issued by an input service distributor.

     

    1. What is the time limit claim ITC on an invoice?

     

    The ITC relating to invoices dated in a particular financial year(FY) can be claimed on or before the due date for filing GSTR-3 for the month of September of succeeding FY(i.e. 20th October) or before furnishing the annual return (due by 31st Dec of succeeding FY) whichever is earlier.

     

     

     

     

     

     

     

     

     

     

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    1. What are the supplies on which input tax credit cannot be availed?

     

    Section 17(5) provides list of supplies on which input tax credit cannot be availed. These include the following;

     

    1. Motor vehicles except when used for further supply of such vehicles, transport of goods or passengers or imparting driving skills.

     

    1. Food, beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery services except when used to provide similar outward supply

     

    1. Membership of club, health and fitness centre
    2. Travel benefits extended to employees on vacation such as leave or home travel concession

     

    1. Rent-a-cab, life insurance services except when used to provide outward supply or Government notified such services are obligatory for employer to provide to his employees under any law.
    2. Works contracts except when used to supply similar works contract outward supplies and towards plant and machinery

     

    1. Goods or services received for construction of immovable property other than plant and machinery

     

    1. Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples

     

    1. Can GST paid under reverse charge be availed as ITC? If yes, at what point of time?

     

    Yes. GST paid on inward supplies attracting reverse charge shall be claimed as ITC for the month in which such inwards supplies are received. Eg: XYZ Ltd has received legal services from an Advocate vide invoice dated 20.08.2017. The payment has also been made on 25.08.2017. XYZ Ltd is required to pay GST under reverse charge on or before filing GSTR-3/3B (i.e. on or before 20th of September). The GST paid can be claimed as ITC in the month of August and can be used for set-off against GST payable on outward supplies of August month.

     

    1. What is the manner in which the availed ITC can be used in payment of GST on outward supplies? ITC is required to be claimed separately for CGST, SGST and IGST. Such accumulated ITC can be used

    for payment of GST on outwards supplies in the following sequential manner;

     

    1. CGST credit can be used for payment of CGST and balance if any shall be used for payment of IGST

     

    1. SGST credit can be used for payment of SGST and balance if any shall be used for payment of IGST

     

    1. IGST credit can be used for payment of IGST, the balance if any shall be used for payment of CGST and SGST in that order

     

    1. CGST credit cannot be used for payment of SGST and vice-versa

     

    It is important to note that credit accumulated on one taxable business can be used for payment of GST on other taxable business.

     

    1. Are there any other conditions to be satisfied in claiming ITC on Capital Goods?Can credit relating to capital goods be claimed in the same financial year?

     

    Capital goods under GST are defined to mean goods the value of which is capitalised in the books of account of the person claiming ITC and which are used or intended to be used in the course or furtherance of business. Full ITC can be claimed in the same financial year in which the said goods are procured. However, no depreciation under income tax shall be claimed on GST paid on these goods.

     

     

     

     

     

     

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    One Page on Input Tax Credit

     

     

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    1. Are there any restrictions in availing ITC if goods or services received are used partly for taxable supplies and partly for exempt supplies and other purposes?

     

    ITC shall not be claimed on goods or services exclusively used for exempt supplies and those used for non-business purposes. In case where ITC is claimed on goods or services commonly used for undertaking both taxable and exempt supplies, then portion of ITC claimed as attributable to the turnover of exempt supplies shall be foregone.

     

    1. What is the concept of Input Service Distributor?

     

    ISD is an office of the person engaged in supply of goods or services or both which receives tax invoices towards input services received by various business establishments of such person and issues a prescribed document for distributing the credit of CGST, SGST and IGST. To act as ISD, the office of the person engaged in supply of goods or services shall be required to take registration as ISD in addition to registration that is required as taxable person. ISD may distribute the credit subject to the following documents;

     

    1. The amount of credit distributed shall not exceed the amount of credit available for distribution.

     

    1. The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient

     

    The credit of tax paid on input services attributable to more than one recipient shall be distributed on pro-rata on the basis of turnover in a State of particular recipient during the relevant tax period to aggregate turnover of all such recipients located in different states to whom such input service is attributable, and which are operational in the current year during the relevant period.

    ONE PAGE FOR SME

     

    Contributed by CA Sri Harsha & CA Manindar

     

    1. Applicability of this document: This document on GST is applicable to all Micro, Small and Medium Enterprises having turnover up to Rs. 1.5 Crore.

     

    1. Levy of GST:

     

    1. Brief about GST: GST stands for Goods and Services Tax. It is introduced to subsume multiple indirect taxes both at centre and state level. The current duties namely Central Excise, Service Tax, Additional Excise Duties, Additional Customs Duties, Value Added Tax, Octroi, Entertainment Tax and Luxury Tax are being subsumed into one tax namely GST. Hence, after its introduction, GST and customs duty will form the indirect taxes. GST is a destination based consumption tax. Hence, the state where a supply of goods and services are consumed will receive the corresponding GST paid.

     

    1. Applicability of GST: All forms of supply of goods and/or services for consideration and for furtherance of business or commerce are taxable except those transactions covered in Schedule III of the Central Goods and Services Act, 2017 (“CGST Act”) and Exemption Notifications. There are certain transactions mentioned vide Schedule I and II which shall be taxable even when there is no consideration. The GST is applicable to whole of India W.E.F. 1st day of July 2017. GST is not applicable on supply of alcoholic liquor for human consumption and electricity. Petroleum products are temporarily kept outside GST and will be brought under GST from the date to be decided by GST Council.

     

    1. Types of GST: There are two kinds of GST- Intra State GST and Inter State GST. If the location of supplier and place of supply are within a state, Central Goods & Services Tax (CGST) and State Goods & Services Tax (SGST) must be charged. If the location of supplier and place of supply are in different states, a tax called Integrated Goods & Service Tax (IGST) must be charged. Whether a supply is an Inter-State or Intra-State shall be determined by Section 7 and Section 8 read with Section 10 to Section 14 of Integrated Goods & Services Tax Act, 2017. Further, the rate of IGST is arrived by summation of CGST and SGST.

     

    1. Time of supply: GST is payable at the time of supply which is nothing but earlier of invoice date or payment date. However, the suppliers of goods including the supplier under composition scheme are relieved from paying tax on advance and can pay tax on invoice basis even though money is received in advance. This benefit was not extended to suppliers of services.

     

    1. Registration under GST:

     

    1. Every supplier shall be liable to be registered in the state or union territory, from where he makes a taxable supply of goods/services/both, if his aggregate turnover in a financial year exceeds Rs 20 lakhs.(Limit for special category states is Rs 10 lakhs).

     

    1. Registration is compulsory irrespective of the aggregate turnover if the supplier is engaged in inter-state supply. However, W.E.F 13.10.2017, this condition has been relaxed for service providers alone engaged in inter-state supply having aggregate turnover less than 20 lakhs. Suppliers who have already registered but are falling under this category must deregister under GST to claim such exemption from registration.
    2. Separate registrations must have been taken for each branch in different states.

     

     

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    1. Reverse Charge for Specified Services:

     

    1. ln case of certain supply of goods or services, instead of supplier, recipient is required to pay the GST to Government. This is colloquially called reverse charge mechanism (RCM). The notified goods for this purpose includes cashew nuts, beedi wrapper leaves, Tobacco leaves, Silk yarn and lottery. The notified services for this purpose include goods transport agency, sponsorship services, advocate services, arbitral tribunal services and specified services provided by government and other notified services.

     

    1. Apart from the notified services, any service or goods procured from unregistered person shall also attract compliance under reverse charge if limit exceeds Rs. 5,000/- per day. However, the said reverse charge onservice or goods procured from unregistered person is suspended from 13thOctober 2017 to 31stMarch 2018.

     

    1. Amount paid as reverse charge is eligible as Input credit in the same month/Quarter to which such expense relates.

     

    1. Invoicing under GST: Every registered person must raise the Tax invoices, debit notes, credit notes, RCM invoices, Receipt voucher for advances, Payment voucher for payment towards supplies under reverse charge, Refund voucher for refund of advance amounts in the formats as prescribed under CGST Rules and the same must be disclosed in the GSTR-1 return. Failure to raise these documents as per the CGST rules may lead to cancellation of the registration under GST.

     

    1. Composition Scheme: If the aggregate turn overdoes not exceed Rs 100 lakhs in a preceding financial year, then the taxable person can opt for payment of GST under composition scheme till first 100 lakhs in the current year. The rate prescribed for the taxpayers opted to pay tax under this scheme is 2% of the turnover in case of a manufacturer, 5% of the turnover in case of restaurants and 1% of the turnover in case of traders. Other suppliers of services are ineligible to opt for composition scheme. Persons opting for composition must register and file quarterly return in GSTR-4 along with tax payment on or before 18th of month following the quarter. However, they shall not be eligible either to avail credits or pass on such composition tax. The scheme shall not be available for some notified goods viz. ice cream, pan masala and tobacco products. Last date for moving into composition scheme is 31stMarch 2018.

     

    1. Credits under GST: Every taxable person making an outward supply shall be eligible to avail the credits unless they are expressly restricted as per Section 17(5) of CGST Act. All credits shall be allowed under the electronic credit ledger and shall be available for set-off against tax payable. However, when credits are utilised, there are certain restrictions like CGST cannot be used for payment of SGST, SGST cannot be used for payment of CGST, IGST must be used to pay IGST, CGST and SGST in such order. Input credit is not available to supplier who is providing exempt, non-GST, nil rated supplies.

     

    1. Returns under GST: Every taxable person must file three returns in a month(GSTR-1, 2&3) while GSTR-1 is to provide details of outward supplies made (due by 10th of next month) while GSTR-2 is for inward supplies (due by 15th of next month) and GSTR-3 is to submit the details of assessment of tax liability, input credit & setoff, tax payment, exemptions claimed, refunds, interest etc (due by 20th of next month. Whenever, the due dates for filing the above-mentioned returns gets extended, then the taxable person is required to file GSTR-3B for every month by 20th of subsequent month. In

     

     

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    this return, summary details of outward supplies, input credit availed, and tax liability shall be disclosed along with tax payment thereof. However, the requirement of filing GSTR-2 and GSTR-3 has been suspended till March 2018 and GSTR-3B and GSTR-1 are made mandatory for these months. Tax payers having annual aggregate turnover less than Rs. 1.5 crores, are given relaxation file to GSTR-1 quarterly with due dates notified as under;

     

    Period

    Due Date

     

     

    Jul-Sep

    31st December 2017

     

     

    Oct-Sep

    15th Feb 2018

     

     

    Jan-Mar

    30th April 2018

     

     

     

    1. Payment of GST: The law requires payment of tax on or before filing the GSTR-3/GSTR-3B of the respective month which is generally due by 20th of subsequent month. If tax is not paid before filing the return, the return shall not be treated as valid return and the taxable person shall be denied filing all the succeeding returns until the earlier return was made good with tax payment. GST being indirect tax, the supplier can charge and collect the tax amount from recipient. The tax liability can be met by using ITC in electronic credit ledger and the balance shall be met in through cash deposit in electronic cash ledger maintained in GST Portal. Delay in payment of tax attracts interest at 18% p.a.

     

    1. Valuation of GST: Value of supply of goods or services shall be the transaction value of the supply, which is price paid or payable if the supplier and recipient are not related persons and price is the sole consideration for supply being valued. The scope of transaction value has been laid down vide Section 15. If valuation cannot be made vide Section 15, then resort must be made to Rule 27 to Rule 35 ofCGST Rules 2017.

     

    1. Zero rated Supply: Zero rated supply includes 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. The supplier must charge IGST on such supplies. However, there is an exemption provided from charging IGST if the supplier has obtained Bond or LUT from the GST department as the case maybe.

     

    Deemed exports: Supply of goods by a registered person against Advance Authorisation, Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation, Supply of goods by a registered person to Export Oriented Unit are treated as deemed exports. The supplier is required to charge GST and pay the tax at the time of transaction and subsequently after supply is completed can claim refund of tax by taking declaration from the recipient that he has not availed ITC and is not going to claim refund of the tax amount.

    ONE PAGE ON VALUATION

     

    Contributed by CA Sri Harsha & CA Manindar

     

    1. Overall Scheme of Valuation under GST: The value of supply of goods or services or both shall in general be the transaction value i.e. the price actually paid. In cases where consideration is non-monetary or supplies between related persons, offices/units of same entity located in different states, value shall be determined in the prescribed manner. Further, in case of certain notified supplies, the value shall be determined in the manner as prescribed.

     

    1. Transaction value under GST: In terms of section 15(1), the value of supplies of goods or services shall be the transaction value in all cases where supplier and recipient are un-related, and price is sole consideration for the supply. Thus, transaction value is not applicable in cases where supply is between related persons or consideration is partly or fully non-monetary. However, the value of supplies of goods or services shall in addition to transaction value include certain items as specified in section 15(2).

     

    1. Items to be Included in Value of Supplies: As stated above, Value of supply of goods or services shall in addition to transaction value, include items as specified in section 15(2). These items include the following;

     

    1. Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than those of GST and charged by the supplier.

     

    1. Any amount that the supplier is liable to pay in relation to such supply but has been incurred by the recipient and not included in the price paid or payable for the goods or services or both.
    2. Incidental expenses such as commission, packing... etc or any amount charged by supplier in respect of supply of goods or services or both

     

    1. interest or late fee or penalty for delayed payment of any consideration for any supply

     

    1. Subsidies directly linked to the price excluding subsidies provided by Central Government and State Governments

     

    1. Discounts: Discounts extended before or at the time of supply shall not be included in value of supplies of goods or services or both if it has been duly recorded in the invoice issued. In case of discounts extended after supply, the tax paid originally on the discount part at the time of supply shall be reduced during the month in which such discount is extended subject to satisfaction of the following conditions;

     

    1. The discount shall be established in terms of agreement entered at or before the time of supply and specifically linked to invoices.

     

    1. Input tax credit attributable to discount based on credit note issued by supplier shall be accepted by recipient and accordingly reversal shall be made.

     

    1. Related Persons: Persons shall be deemed to be related if such persons are officers, directors, partners of one another’s business, any person directly or indirectly owns more than 25% of the voting stock, one of them directly or indirectly controls the other, both of them are controlled by other, together they control a third person, or they are members of same family.


     

     

     

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    1. Understanding the meaning of the phrase ‘Open Market Value’:The term ‘Open Market Value’ is used as reference to determine the value in case of supplies involving non-monetary consideration or supplies between related persons or branches or through an agent. ‘Open Market Value’ means full value in money to obtain such supply (which is an identical supply from supplier) at the same time when the supply being valued is made subject to the following conditions;
      1. Where supplier and recipient are not related and Price is the sole consideration
      2. Excluding the integrated tax, central tax, state tax, union territory tax and cess payable

     

    1. Understanding the meaning of the phrase ‘Supply of goods or services or both of like kind and quality’:The term ‘Supply of Goods or Services or both of Like Kind and Quality’ is used as reference when open market value is not available to determine the value in case of transactions involving non-monetary consideration, between related persons or branches or through an agent. It means any other supply of goods or services or both made under similar circumstances that, in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.

     

    1. Valuation in cases where consideration is non-monetary: In all transactions where supply of goods or services or both are undertaken for non-monetary consideration or not wholly in money, the value of supply shall—

     

    1. Be the open market value of such supply

     

    1. If the open market value is not available, be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply

     

    1. if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality

     

    1. If the value is not determinable under clause (a) or clause (b) or clause (c), then it shall be a value equivalent to 110% of the cost of supply of goods or services or both.

     

    1. If the value cannot be determined in any of the above manner, then it shall be determined using reasonable means consistent with principles and provisions of section 15 and the corresponding CGST Rules, 2017 relating to valuation.

     

    1. Valuation in cases where supplies are between related persons or between two offices/units of same entity: The value of supply of goods or services or both between related persons or between two offices/units of same entity shall be determined in the following manner;

     

    1. be the open market value of such supply;

     

    1. if the open market value is not available, be the value of supply of goods or services of like kind and quality;

     

    1. If the value is not determinable under clause (a) or clause (b), then it shall be a value equivalent to 110% of the cost of supply of goods or services or both.

     

    1. If the value cannot be determined in any of the above manner, then it shall be determined using

     

    reasonable means consistent with principles and provisions of section 15 and the corresponding CGST Rules, 2017 relating to valuation.

     

    In cases where the goods supplied by supplier are intended for further supply by recipient, then the supplier can opt to value the goods at 90% of the price charged for supply of goods of like kind and quality by the recipient to his customer not being a related person.

     

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    As the issue of valuation is revenue neutral in all cases where the recipient is eligible for full ITC, it has been prescribed that the value adopted following the above parameters shall be deemed to be the open market value

     

    1. Valuation of goods supplied or received through an agent: The value of goods supplied between principal and agent shall be determined to be open market value of goods being supplied. In cases where the goods are intended for further supply by recipient, then at the option of the supplier, the goods can be valued at 90% of the price charged by recipient to his customer not being related

     

    1. Valuation of Second Hand Goods: Where a person is engaged in the business of buying and selling of second hand goods without availing input tax credit on purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price. In cases where, the value of supply is negative, then the value shall be considered as Nil.

     

    1. Cum-Tax: In all cases where GST is not collected separately, then the amount received towards the supply of goods or services or both shall be considered as inclusive of GST. Accordingly, GST is calculated as Value inclusive of taxes X (tax rate in % of GST) ÷ (100+ GST).

     

    Reimbursements: Any expenditure incurred by supplier as a pure agent of the recipient in the course of supply of goods or services or both shall be excluded from the value of supply subject to the condition that expenditure incurred is an obligation of recipient and is separately indicated in the invoice issued by recipient.

    ONE PAGE ON PLACE OF SUPPLY

     

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    1. What are inter-state and intra-state supplies under GST? What is their relevance?

     

    GST is a levy on supply of goods or services. To levy GST, supplies are categorised in two viz inter-state supplies (supplies from one state to another) and intra-state supplies (supplies within the state). In case of inter-state supplies, the Central Government will levy Integrated Tax under IGST Act, 2017 and in case of intra-state supplies, Central Government will levy Central Tax under CGST Act, 2017 and State Tax under SGST Act, 2017.

     

    1. What are the parameters to decide whether a supply is inter-state or intra-state?

     

    To decide whether a supply is inter-state or intra-state, two parameters are relevant viz. location of supplier and place of supply. In case of domestic supplies, if the location of supplier and place of supply are in two different states, then the supply is an inter-state supply to attract IGST. If the location of supplier and place of supply are in same State, then the supply is called intra-state supply to attract CGST and SGST. In case of cross border supplies i.e. supplies by supplier located in India to a recipient located outside India or vice-versa shall be treated as inter-state supplies.

     

    1. What is the location of supplier and receiver?

     

    The location of supplier is defined to mean a place of business for which registration has been obtained or the location of a fixed establishment in case where supply is made from unregistered place or the location of usual place of residence in cases where registered premises or fixed establishments are absent. The location of receiver is also defined in an identical manner to mean registered place of business, unregistered fixed establishment or the usual place of residence as the case may be. It is important to note that only location of supplier or receiver for services is defined.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    1. In case of supplies of goods within India, how would we determine the place of supply?

     

    Sl. No

    Nature of Supply

    Place of Supply

     

     

     

    1

    Supply involving movement of

    Place  where  the  movement  terminates  for  delivery  to

     

    goods

    recipient. Eg: Supplier in Hyderabad selling goods to a

     

     

    customer in Mumbai by transportation from Hyderabad to

     

     

    Mumbai— Place of supply is Mumbai (Maharashtra).

     

     

     

    2

    Goods  are  supplied  to  a

    There are two supplies involved. One is from the supplier to

     

    recipient on the direction of a

    third person and the other one is from third person to a

     

    third person (bill to and ship to

    recipient. The place of supply for first supply shall be the

     

    transactions)

    location of third person and for second supply is the location of

     

     

    recipient. Eg:X Ltd, Hyderabad received an order from Y Ltd,

     

     

    Bengaluru to deliver goods at Z Ltd, Mumbai. Supply from X Ltd

     

     

    to Y Ltd, place of supply is Bengaluru (Karnataka) and supply

     

     

    from Y Ltd to Z Ltd is Mumbai (Maharashtra)

     

     

     

    3

    Supply  does  not  involve

    Place of supply shall be the location of such goods at the time

     

    movement  of  goods  viz.

    of delivery to recipient. Eg: Mr. X of Delhi visited Hyderabad.

     

    Shop/Counter sales

    During visit, he purchased medicine from a medical store in

     

     

    Hyderabad.  The  place  of  supply  shall  be  Hyderabad

     

     

    (Telangana) as the goods does not involve movement and are

     

     

    delivered in Hyderabad.

     

     

     

    4

    Goods  are  assembled  or

    Place of supply shall be the place of such installation or

     

    installed at site

    assembly

     

     

     

    5

    Goods are supplied on board a

    Place of supply shall be the location where goods are taken on

     

    conveyance

    board

     

     

     

     

    1. In case of cross border supply of goods, how would we determine the place of supply?

     

    In case of goods imported into India, the place of supply shall be the location of the importer. In case of goods exported form India to a location outside India, the place of supply shall be such location outside India.

     

    1. In case of services, how would you determine the place of supply?

     

    The place of supply of services for domestic and cross-border services are provided in section 12 and section 13 respectively. The same are summarised as follows;

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Sl.No

    Nature of Service

    PoS for Domestic Supplies

    PoS for Cross Border Supplies

     

     

     

     

     

     

     

    Services in general not

    ?Supplied

    to

    registered

    ?PoSingeneral  be  the

     

    covered elsewhere

    person—

    Pos

    shall

    be

    location of recipient. If the

     

     

    l o c a t i o n

    o f  s u c h

    location of recipient is not

     

     

    registered person

     

    available  in  the  ordinary

     

     

    ?Suppl i e d

    t o

    course of business, then PoS

     

     

    u n r e g i s t e r e d

    shall  be  the  location  of

     

     

    person—Pos

    shall

    be

    supplier.

     

     

    location

    of

    recipient

     

     

     

    where  address  exists

     

     

     

    otherwise

    it

    is

    the

     

     

     

    location of supplier

     

     

     

     

     

     

     

    Immovable  property

    Location  of  immovable

    Location of immovable property

     

    related services including

    property

     

     

     

     

     

     

    accommodation

     

     

     

     

     

     

     

     

     

     

     

    Services  which  require

    ?Supplies by  way  of

    PoS shall be the location where

     

    the physical presence of

    restaurant,

    catering,

    the services are performed

     

    service recipients or their

    personal  grooming,

     

     

    representatives to supply

    f i t n t e s s ,

    b e a u t y

     

     

    the services

    treatment,

    health

     

     

     

    s e r v i c e s ,  p l a s t i c

     

     

     

    surgery— PoS shall be

     

     

     

    location where services

     

     

     

    are performed

     

     

     

     

     

    ?Trainingservices when

     

     

     

    made  to  registered

     

     

     

    person—shall

    be

    the

     

     

     

    location of such person.

     

     

     

    Otherwise, it

    shall

    be

     

     

     

    the  location

    where

     

     

     

    services are performed

     

     

     

     

     

     

    Services  in  respect  of

    PoS shall be determined as

    PoS shall be the location where

     

    goods, which are to be

    per the general rule (Sl.No 1)

    the services are performed. In

     

    made physically available

     

     

     

     

     

    case  where  the  services  are

     

    to supplier in order to

     

     

     

     

     

    provided  electronically,  then

     

    provide the services

     

     

     

     

     

    PoS  shall  be  the  location  of

     

     

     

     

     

     

     

    goods at the time of supply.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Services

    relating

    to

    ?Services by  way  of

    Services

    by

    way

    admission,

     

    Events

     

     

    admission to an event

    organisation

    of

    event

    and

     

     

     

     

    including

    ser vices

    ancillary services— PoS shall be

     

     

     

     

    a n c i l l a r y

    t o  s u c h

    the location where the event is

     

     

     

     

    admission —

    place

    actually held.

     

     

     

     

     

     

     

     

    where event is held

     

     

     

     

     

     

     

     

     

     

     

     

    ?Services

    relating

    to

     

     

     

     

     

     

     

     

     

     

     

    organisation

    of

    event

     

     

     

     

     

     

     

     

     

     

     

    and

    sponsorship

    and

     

     

     

     

     

     

     

     

     

     

     

    o t h e r  a n c i l l a r y

     

     

     

     

     

     

     

     

     

     

     

    services— PoS shall be

     

     

     

     

     

     

     

     

     

     

     

    location

    of

    registered

     

     

     

     

     

     

     

     

     

     

     

    person. Otherwise, it is

     

     

     

     

     

     

     

     

     

     

     

    location

    where

    the

     

     

     

     

     

     

     

     

     

     

     

    event is held.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Transportation of goods

    If recipient is registered—

    ?Transportation

    of  goods

     

    including mail or courier

    PoS shall be the location of

    other  than  by  mail  or

     

     

     

     

    such person. Otherwise it

    co u r i e r

    s h a l l

    b e

    t h e

     

     

     

     

    shall be the location where

    destination of goods.

     

     

     

     

     

    goods are handed over for

    ?Incaseofmail or courier, the

     

     

     

     

    transportation.

     

     

     

    PoS shall be determined as

     

     

     

     

     

     

     

     

     

     

     

    per

    the

    general

    rule

     

     

     

     

     

     

     

     

     

     

     

    (Sl.No:1)

     

     

     

     

     

    Passenger transportation

    I f  r e c i p i e n t

    i s

    PoS shall be the place where

     

    services

     

     

    registered—PoS

    shall

    be

    p a s s e n g e r

    e m b a r k s

    fo r

     

     

     

     

    the location of such person.

    continuous journey

     

     

     

     

     

     

     

    Otherwise, it shall be the

     

     

     

     

     

     

     

     

     

     

     

    place  where

    passenger

     

     

     

     

     

     

     

     

     

     

     

    embarks

    for

    continuous

     

     

     

     

     

     

     

     

     

     

     

    journey

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Services

    supplied

    on

    PoS shall be the location of

    PoS shall be the location of the

     

    board a conveyance

     

    the first scheduled point of

    first

    scheduled

    point  of

     

     

     

     

    d e p a r t u r e

     

    o f  t h a t

    departure of that conveyance

     

     

     

     

    conveyance for journey

     

    for journey

     

     

     

     

     

     

     

     

     

     

    Banking

    and  financial

    PoS shall be the location of

    ?Servicessupplied to account

     

    services

     

     

    the recipient of services on

    holders— PoS shall be the

     

     

     

     

    record.

    If

    the

    recipient

    location of supplier.

     

     

     

     

     

    location

    is

    not

    available,

    ?Otherservices— Pos Shall

     

     

     

     

    then  PoS  shall  be  the

    be

    determined

    as

    per

     

     

     

     

    location of supplier.

     

     

    general rule (Sl.No.1)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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    Intermediary  services

    PoS shall be determined as

    PoS shall be the location of the

     

    and hiring of means of

    per general rule (Sl.No.1)

    supplier

     

    transport  for  up  to  a

     

     

     

    period of one month

     

     

     

     

     

     

     

    (Note:Due to space constraints and taking into consideration of rare applicability, the Place of supply for domestic supply of telecommunication and insurance services are not covered here.)

     

    1. Does all cross-bordersupplies by a supplier in India are subject to GST?

     

    No. In terms of section 16 of IGST Act, 2017, export of goods or services shall be treated as zero-rated. Accordingly, the said supplies can be exported without payment of any GST if Bond/Letter of Undertaking is obtained from department. For this purpose, goods are said to be exported if they are sent to a place outside India and services are said to be exported if the recipient of supply located outside India is not a mere establishment of supplier, place of supply is outside India and consideration is received in convertible foreign exchange. In cases where tax is paid at the time of export, then same can be claimed as export after goods or services are exported as per the prescribed procedure.

     

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