GST INTERMEDIATE COURSE PLACE OF SUPPLY, TIME OF SUPPLY AND VALUE OF SUPPLY

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1 GST INTERMEDIATE COURSE PLACE OF SUPPLY, TIME OF SUPPLY AND VALUE OF SUPPLY By Adv. Hardik Modh 15 th April 2017

2 Taxes to be subsumed in GST GST Purchase Tax & Luxury Tax VAT Taxes on Betting Lottery & Gambling State Taxes Entry Tax & Octroi Surcharge & Cesses on Goods & Services Central Sales Tax Entertainment tax (Except applied by local bodies) 2

3 Taxes to be subsumed in GST GST Central Excise Duty + Additional Duty of Excise Service Tax Central Taxes Surcharges Additional & Special Duties Of Custom Cesses on Goods & Services 3

4 Not subsumed in GST Taxes on vehicles Levies on Petroleum products Levies on Alcoholic products Stamp duties on immovable properties Custom duties on import of goods into India Electricity duties/ taxes Taxes levied by municipalities or panchayats 4

5 Applicability and Date of applicability Section 1. Short title, extent and commencement Acts stand applicable to whole of India except the state of Jammu Kashmir as in earlier Laws. Applicable from the date as the Central or a State Government may by notification in the Official Gazette notify, PROVIDED that different dates may be appointed for different provisions of this act GST at an outset is expected to roll out on 1 July Validity of the constitutional amendment till 8 September The next GST Council meeting is proposed to be held on May 18-19, 2017 to consider finalization of rules and rate structure in relation to individual commodities 5

6 BASIC CONCEPTS OF GST 6

7 GST Impact Four Point Analysis Compliance Taxable Event Valuation & Rate Credit 7

8 IMPORTANT DEFINITIONS AND CONCEPTS IN SUPPLY 8

9 Relevant definitions under Section 2 of CGST Bill, 2017 (2) address of delivery address of the recipient of goods and/or services and indicated on the tax invoice issued by a registered person for delivery of such goods and/or services; (3) address on record means The address of the recipient as available in the records of the supplier 9

10 Relevant definitions under Section 2 of CGST Bill, 2017 (30) composite supply means A supply made by a taxable person to a recipient comprising two or more supplies of goods or services, naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply; Any Combination (Goods+ Services) (Goods+ Goods) (Services+ Services) E.g:- Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply. Cargo Handling Section 8 provides tax liability on a composite be determined in the following manner Comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply; 10

11 Relevant definitions under Section 2 of CGST Bill, 2017 (31) consideration in relation to supply of goods and/or services includes, Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both but shall not include the any subsidy given by CG or SG. The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both but shall not include the any subsidy given by CG or SG Provided that a deposit given shall not be considered as payment unless the supplier applies such deposit as consideration for the supply. 11

12 Relevant definitions under Section 2 of CGST Bill, 2017 (32) continuous supply of goods means provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for which the supplier issues invoices to the recipient on a regular or periodic basis; and includes such goods as the Government may, subject to such conditions as it may be notify. (33) continuous supply of services means provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes such services as the Government may, subject to such conditions as it may be notify. 12

13 Relevant definitions under Section 2 of CGST Bill, 2017 (50) fixed establishment means a place, other than the place of business, Characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs (52) goods means Every kind of movable property other than money and securities but includes actionable claims, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply. 13

14 Relevant definitions under Section 2 of CGST Bill, 2017 (74) mixed supply means two or more individual supplies of goods or services, or any combination,made in conjunction with each other by a taxable person for a single price, where such supply does not constitute a composite supply; E.g. Chocolate or Gift Assortments Tax rate shall be the higher of the product available in such supply 14

15 Relevant definitions under Section 2 of CGST Bill, 2017 (85) place of business includes place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods and/or services; a place where a taxable person maintains his books of account; or a place where a taxable person is engaged in business through an agent, by whatever name called; (86) place of supply means The place of supply as referred to in Chapter V of IGST Act. (89) principal place of business means the place of business specified as the principal place of business in the certificate of registration 15

16 Relevant definitions under Section 2 of CGST Bill, 2017 (93) recipient of supply of goods and/or services means- Cases Consideration is payable No consideration is payable No consideration is payable for supply of services Recipient Person liable to pay consideration Person to whom the goods are delivered or goods are made available Person to whom the service is rendered Explanation:- The expression recipient shall also include an agent acting as such on behalf of the recipient in relation to the goods and/or services supplied. 16

17 Relevant definitions under Section 2 of CGST Bill, 2017 (96) removal, in relation to goods, means dispatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier, or collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient; (102) services means anything other than goods, money and securities but includes; activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. 17

18 Relevant definitions under Section 2 of IGST Bill, 2017 (6) export of service, means supply of any service when - Supplier Located in India; Recipient Located outside India; Place of supply Outside India; Payment of such service has been received by the supplier in convertible forex; Supplier and recipient are not merely establishment of distinct person. (11) import of service, means supply of any service when - Supplier Located outside India; Recipient Located in India; Place of supply In India; 18

19 Relevant definitions under Section 2 of IGST Bill, 2017 (14) location of the recipient of service, means Where a supply is received at a place of business for which the registration has been obtained - location of such place of business; At Fixed establishment elsewhere such FE; Supply is received at more than one place of business- location of place most directly concerned with the receipt of supply In absence of such place, the usual place of residence. (15) location of the supplier of service, means Where a supply is made from a place of business for which the registration has been obtained - location of such place of business; From Fixed establishment elsewhere such FE; Supply is made from more than one place of business- location of place most directly concerned with the provision of supply In absence of such place, the usual place of residence. 19

20 Flow Chart Time of Supply to determine when to pay duty Registration- Whether required or not? Supply of goods or service Place of Supply to determine what to pay CSGT/SGST or IGST Take Input tax credit on eligible Inputs Value of Supply Monthly tax liability Upload necessary Returns and pay taxes 20

21 CHARGING PROVISIONS 21

22 Taxable Event in Existing Regime Present Tax Structure [5 Important Constituents] Excise Duty Service Tax Sales Tax / VAT/ CST Customs Duty Entry Tax/ Entertainm ent Tax Entry No. 84, List I, Schedule VII Residuary Entry No. 97, List I, Schedule VII Entry No. 54 of List II (VAT) and 92A of List I (CST) Entry No. 83, List I, Schedule VII Entry No. 52 &62 List II, Schedule VII Taxable Event is Manufacture Taxable Event is Provision of Service Taxable Event is Sale Taxable Event is Import & Export Taxable Event is Entertainment & Entry of Goods 22

23 Taxable Event in GST Regime The Taxable event in GST regime is SUPPLY' of goods as well as services. Taxable event in any legislation is imperative to trigger the tax liability or is the only barometer to levy the tax. In a layman language, anything that changes the possession, custody or ownership of goods or services would be treated as taxable event for levy of GST. Whether or not in the course or furtherance of business. Whether or not consideration is paid. 23

24 CONCEPT OF SUPPLY 24

25 Supply with consideration Section 7 (1) a of Model GST Law, Supply is a inclusive definition which should have following elements:- Supply of goods and / or services Supply is made in the course or furtherance of business Supply is a taxable supply, and Supply is by a taxable person. Examples of supply Sale :- Over the counter sale of goods Transfer:- Transfer of possession without rights & ownership Barter/ Exchange :- One commodity for another Rental:- Residential and commercial properties Lease / License:- Mining business Disposal 25

26 Importation of Service Section 7 (1) b of Model GST Law, For a consideration Whether or not in course or furtherance of business Location of supplier :- Outside India Location of recipient :-In India Place of supply of service:- In India 26

27 Supply without consideration - Schedule I Section 7 (1) c of Model GST Law, (Schedule I) 1. Permanent transfer/disposal of business assets where input tax credit has been availed on such assets. Inter unit transfers Asset given in Gift Donation Destruction of business asset 2. Supply of goods or services between related persons, or between distinct persons (Section 10) In the course or furtherance of business. Holding Subsidiary Transfers Supply of flowers in family marriage Free supply of physician sample 27

28 ..Supply without consideration - Schedule I 3. Supply of Goods Principal Agent Agent supply such goods on behalf of the principal, C&F Agents, Sole selling agents, Business commission, Del-credre commission or Agent Principal Agent receive such goods on behalf of the principal. Procurement of raw material by agent 4. Importation of services by a taxable person Related person or from any of his other establishments outside India, In the course or furtherance of business. Services received by Indian holding or subsidiary company from it s foreign holding or subsidiary company free of cost. 28

29 ..Supply without consideration - Schedule I 3. Supply of Goods Principal Agent Agent supply such goods on behalf of the principal, C&F Agents, Sole selling agents, Business commission, Del-credre commission or Agent Principal Agent receive such goods on behalf of the principal. Procurement of raw material by agent 4. Importation of services by a taxable person Related person or from any of his other establishments outside India, In the course or furtherance of business. Services received by Indian holding or subsidiary company from it s foreign holding or subsidiary company free of cost. 29

30 Activities to be treated as supply of Goods or Services - Schedule II Section 7 (1)(d) of CGST Bill, (Schedule II) 1. Transfer of Title in goods then it is supply of goods: E.g. Over the counter sale (transfer of possession and right both) Without transfer of title of goods, is a supply of services E.g. Goods on bailment Where title passes on a future date is a supply of goods E.g. Goods on Hire purchase 2. Land and Building Lease, tenancy, easement, license to occupy land- Supply of services. Lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. 3. Treatment or process applied to other persons good Such treatment or process is a supply of services. Repair and maintenance services 30

31 Activities to be treated as supply of Goods or Services - Schedule II 4. Transfer of business asset Permanent transfer of business assets Supply of Car to a employee on retirement:- Supply of Goods Temporary transfer of business assets for personal purpose or for any purpose other than business purpose Supply of Car to a employee for recreation :- Supply of Services Supply of business assets by person who ceases to be a taxable, unless Transferred as a going concern; or Carried on by a taxable person s representative supply of goods E.g Dissolution, Liquidation, Merger 5. The following shall be treated as supply of service Renting of immovable property:- renting of marriage hall Construction intended for sale to a buyer, wholly or partly, except Entire consideration has been received after issuance of completion certificate, Or before its first occupation, whichever is earlier. "construction" includes additions, alterations, replacements 31

32 Activities to be treated as supply of Goods or Services - Schedule II Temporary transfer or permitting the use or enjoyment of any intellectual property right; E.g. Royalty Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software; E.g. Tailor made software Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; E.g. Non Compete Agreement 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; and 32

33 Matters to be treated as supply of Goods or Services - Schedule II 6. Composite supply Works contract E.g. Erection of building or any immovable property Supply of food or article of human consumption (not being alchohol) E.g. Restaurants 7. The following shall be treated as supply of goods supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. E.g. Clubs 33

34 Neither supply of Goods nor as a supply of Services - Schedule III Section 7(2)(a) of CGST Bill, (Schedule III) Services by an employee to the employer Services by any Court or Tribunal Functions performed by the Members of Parliament/ State Legislature, Panchayats/ Municipalities/ Local authorities; Duties performed by any person who holds any constitution post E.g. Comptroller and Auditor General of India (CAG), Judges of Courts Duties of Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority E.g. Services by a chairperson of Telecom Department Services of funeral, burial, crematorium or mortuary including transportation of the deceased. Sale of land and, building - subject to paragraph 5(b) of Schedule II. Actionable claims other than gambling and betting. 34

35 Levy & taxability under CGST Bill Section 8 levy taxability on Composite & mix supply Supply Composite Supply Mixed Supply Tax liability Rate at which the principal supply is taxable Rate at which the supply which attracts highest rate of duty. Section 9 levy taxability on Intra-State supply Levy on Intra-State supply Notified goods on which tax payable under RCM Purchases from unregistered supplier Notified supplies done via E-commerce platform Person who is required to pay tax Supplier Recipient Recipient under RCM E-commerce operator The maximum rate of CGST can be 20% 35

36 PLACE OF SUPPLY PROVISIONS 36

37 Importance of Place of Supply Provisions Intra State Vs. Inter State Critical to decide whether the transaction is intrastate or inter-state 37

38 Intra State Vs. Inter State Deciding Parameters Location of the Supplier Place of Supply Registered place of business Fixed Establishment Directly concerned Residence As determined under Chapter V of IGST Bill If location of Supplier & Place of Supply falls in same state - CGST / SGST If location of Supplier & Place of Supply falls in different state - IGST 38

39 Levies under GST Transaction CGST SGST IGST Intra State a) Sale of Goods; b) Provision of Services Inter State a) Sale of Goods; b) Provision of Services Import of goods/ services Export Zero rating 39

40 PLACE OF SUPPLY UNDER GST 40

41 Section 10(1)(a) of IGST Bill Supply involves movement of Goods Place of supply is - Where the movement of goods terminates or delivery is made to the recipient. Movement of goods Seller in State A Buyer in State B Particulars Existing legislation GST legislation Nature of transaction Inter-state (movement of goods from one state to another) Inter-State (Location of supplier State A and place of supply State B Tax payable CST IGST in State A 41

42 Section 10(1)(a) of IGST Bill Supply involves movement of Goods Movement of goods Seller in State A Delivery in State B Goods are sold at Ex-works price Buyer in State A Particulars Existing legislation GST legislation Nature of transaction Inter-state (movement of goods from one state to another) Intra-State (Location of supplier State A and place of supply State A Tax payable CST CGST and SGST in State A 42

43 Section 10(1)(b) of IGST Bill Direction of a Third Person 3 rd Party Supplier Agency Business, E-Commerce Transaction Recipient or Any Other Person Place of Supply shall be the Principal Place of Business of Such Person Where goods are delivered before or during their movement either by way of transfer of documents of title to the goods or otherwise, to a recipient or any other person on the direction of a third person Principal place of business of third person (the place which is mentioned in the registration certificate) 43

44 Section 10(1)(c) - No Movement of Goods Where supply does not involve movement of goods Location of goods at the time of delivery. E.g.- Symbolic Delivery, Mergers & Acquisitions Section 10(1)(d) Assembled or Installed Place of installation or assembly Section 10(1)(e) On Board Conveyance Where the goods are supplied on board a conveyance, such as a vessel, an aircraft, a train or a motor vehicle Location at which Goods are taken on board In Cases other than above as Law as made by Parliament applies. 44

45 In Case of Import & Export Section 11 Place of Supply in case of goods Imported into India Location of Importer Exported from India Location Outside India 45

46 Place of Supply Goods (summary) Place of supply shifts from origin to destination Particulars Place of Supply of Goods (Section 5) Where supply involves movement of goods Location at which movement of goods terminates for delivery Where goods are delivered before or during their movement either by way of transfer of documents of title to the goods or otherwise, to a recipient or any other person on the direction of a third person Where supply does not involve movement of goods Principal place of business of third person (the place which is mentioned in the registration certificate) Location of goods at the time of delivery Installation / assembly at site Where the goods are supplied on board a conveyance, such as a vessel, an aircraft, a train or a motor vehicle Inany other case (not covered above) Place of installation or assembly Location at which goods are taken on board Determined by law made by the Parliament in accordance with the recommendations of the Council 46

47 Place of Supply Services (IGST Bill) The provision for place of supply of service is bifurcated on the following basis Section Place of supply of service 12 Where location of supplier and recipient is in India 13 Where location of supplier or recipient is Outside India 14 For supplier of Online Information and database access or retrieval services. (Provider and recipient is located in non-taxable territory) 47

48 Place of Supply - Services Section 12 of IGST Bill - Place of supply of service, where location of supplier and recipient is in India Default Principle Scenario Services provided to registered persons Services provided to unregistered persons Place of Supply Location of the service recipient. Address available with service provider, else location of service provider Separate Place of Supply provisions for the certain specified services 48

49 Location of Recipient of Service where a supply is received at a place of business for which registration has been obtained. Registered place of business where a supply is received at a place other than the place of business for which registration has been obtained. where a supply is received at more than one establishment. Fixed establishment Establishment most directly concerned with the receipt of the supply in absence of such places Usual place of residence of recipient 49

50 Location of Supplier of Service where a supply is received at a place of business for which registration has been obtained. Registered place of business where a supply is received at a place other than the place of business for which registration has been obtained. where a supply is received at more than one establishment. in absence of such places Fixed establishment Establishment most directly concerned with the provision of the supply Usual place of residence of supplier 50

51 Specific Cases- Immovable Property Services or any ancillary service in relation to Immovable property such as: Construction Leasing & Renting Interior Designing Estate Agents Surveyor or Any Other similar services Accommodation in (Including any ancillary service) Hotel Inn Guest house House boat or vessel Any immovable property for organizing marriage or any reception 51

52 Specific Cases- Immovable Property By way of accommodation in any immovable property for organizing any official, social, cultural, religious or business function (incl. ancillary service). Provided that if place of supply due to above provision is outside India, the place of supply shall be location of the recipient. Explanation to section 12 (3) of IGST Act Where the Immovable property or boat or vessel is located in more than one state supply of service shall be treated as made in each state in proportion to the value of services separately collected or determined as per the agreement entered. If no such agreement is entered than any other reasonable matter as may be prescribed. Interior designing services provided for a hotel chain located in more than 1 state. 52

53 Specific Cases- Performance Based Services Restaurant, Catering, Personal Grooming, Fitness, Beauty treatment, Health services, Plastic surgery Location where the services are actually performed 53

54 Specific Cases Continued Place of Supply for: Services in relation to training, performance appraisal Admission to cultural, artistic, sporting, scientific, educational, entertainment events or amusement park (incl. ancillary service) Organisation of a cultural, artistic, sporting, scientific, educational, entertainment event including conference, fair, exhibition. Insurance services Service Recipient is registered Location of service recipient Location of the event or park Location of service recipient Location of service recipient. Service Recipient is unregistered Location where the services are performed. Location where the events are performed and if event held o/s India then location of SR. Location of the service recipient on records of the service provider 54

55 Transportation Service Passenger Goods Registered Unregistered Registered Unregistered Location of Such Person Embarks for Continuous Journey Location of Such Person Location where goods are handed over for transportation Rent a Cab Counter Tickets B2B Transactions B2C Transactions 55

56 Telecommunication Service Fixed Telecommunication Line, Leased Circuits, Dish Antenna, Cable Mobile or Internet Services Location of Installation of Line Prepaid Postpaid Billing Address On record Through a selling agent- Address of such agents Through a Voucher- Where such Vouchers are sold Online Transactions- Locations of Recipient as per records Any other case Locations of Recipient as per records and if not available then SP 56

57 Specific Cases Continued Place of Supply for: Service on board a conveyance such as vessel, aircraft, train or motor vehicle. Banking or other financial services including stock broking. Advertisement services to the central /state government and a statutory / local authority meant for identifiable states. Service Recipient Location of the FIRST scheduled point of departure of that conveyance for the journey. Location of the service receiver on the record of the service provider. Where service not linked to the account of the recipient of services - location of the supplier of services Each identifiable State where these services are provided 57

58 Summary- Place of Supply Place of Supply for: Service Recipient is registered Service Recipient is unregistered Services in relation to immovable property Accommodation by a hotel, inn, guest house, house boat or vessel Restaurant, catering, personal grooming, fitness, beauty treatment, health services, plastic surgery Services in relation to training, performance appraisal Admission to events or amusement park Organization of events and services ancillary to these events Transportation of goods including mail or courier Insurance services Location of immovable property. Location of immovable property, boat or vessel Location where the services are actually performed Location of service recipient Location of the event or park Location of service recipient Location of service recipient Location of service recipient. Location where the services are performed Location where services are performed location where goods are handed over for transportation Location of the service recipient on records of the service provider 58

59 Summary -Place of Supply Place of Supply for: Passenger transportation service. Service on board a conveyance such as vessel, aircraft, train or motor vehicle. Telecommunication services For fixed telecommunication line Post-paid services; Pre-paid services through a voucher or any other means. Banking or other financial services including stock broking. Advertisement services to the central /state government and a statutory / local authority meant for identifiable states. Service Recipient is registered Location of service recipient Service Recipient is unregistered Place where the passenger embarks on the conveyance Location of the first scheduled point of departure of that conveyance for the journey. Location of installation of line Billing address of service receiver Where the voucher is sold Location of the service receiver on the record of the service provider. Where service not linked to the account of the recipient of services - location of the supplier of services Each identifiable State where these services are provided 59

60 Place of Supply - Services Section 13 of IGST Bill - Place of supply of service, where location of supplier or recipient is outside India Default Principle Place of Supply Location of the service recipient. If location of SR not available in ordinary course of business then location of service provider Separate Place of Supply provisions for the certain specified services 60

61 Place of Supply u/s 13 Place of Supply for: Performance based services i.e. services are supplied in respect of goods which are made physically available by the Service recipient. Eg. Goods for repair purpose. Or services for which physical presence of recipient is required. Location Location of service actually performed. If services are performed online, then location of such goods at the time of performance of service. Provided that nothing in this clause should be applied to goods which are imported in India for repair purposes. Services in relation to immovable property Admission or organization of cultural, artistic, sporting, scientific, educational, entertainment events or amusement park (incl. ancillary service) Location of immovable property Location of such event In the above cases, if services is supplied at more than one location, including a location in taxable territory, its place of supply shall be location in taxable territory. Where above supplies are provided in more than one state or UT, the value of such supply shall be proportionate on the basis of agreement. If no agreement then on such basis as prescribed. 61

62 Place of Supply u/s 13 Place of Supply for: 1) Services provided by a banking company, or a financial institution or NBFC to account holders. 2) Intermediary service 3) Hiring of means of transport, incl. yachts but excl. aircraft and vessel, up to a period of 1 month. Transportation of goods other than mail or courier Passenger transportation service. Service on board a conveyance such as vessel, aircraft, train or motor vehicle. Online Information and database access or retrieval service Location Location of Supplier of service Destination of goods Place where the passenger embarks on the conveyance for continuous journey Location of the first scheduled point of departure of that conveyance for the journey. Location of Service recipient. Subsequent slide 62

63 Place of Supply u/s 13 Service recipient will be considered to be located in taxable territory if any two of the following conditions satisfied Transaction Location of SR through internet Issue of Debit card/ Credit card (through which payment settled) was done Billing address of SR is IP address of the device used by the SR Account of Bank used for payment is maintained Location of fixed line through which service is received by SR is Country code of Subscriber identity module card used by the recipient is Locatio AT Taxable territory 63

64 Place of Supply Section 14 Section 14 of IGST Bill For OLIDAR services, place of supply of service, where location of supplier and recipient is non taxable territory The supplier of service located in non-taxable territory shall pay IGST on such service. If there is an Intermediary who facilitates such OLIDAR services, then he will be considered as deemed recipient of such service and will be considered as deemed supplier of the service to actual recipient. However, if intermediary satisfies following conditions then he won t be consider as deemed supplier. Bill issued clearly states that supplier in non taxable territory and service as OLIDAR service. Doesn t charge, collect or not responsible for payments. Doesn t authorize delivery Terms and conditions are not set by intermediary. 64

65 Place of Supply Section 14 The intermediary shall pay IGST and take a single registration under Simplified Registration Scheme to be notified by government. If any person located in taxable territory may get registered in behalf of such supplier and pay IGST. Such supplier may also appoints a person in taxable territory for paying IGST. 65

66 TIME OF SUPPLY 66

67 Time of supply of Goods- Section 12 Objective:- Determines the Liability to pay tax on Goods / Services Date shall be the earlier of their specific cases as below mentioned General Provision Date of Issue of the Invoice or the last date on which he is required to do so Date of receipt of payment Time of supply in case where Tax is payable on Reverse Charge basis Date of receipt of Goods Date of Payment Invoice + 30 Days In case of supply by vouchers Date of Issue of voucher[if identifiable] Date of redemption [in other cases] In the cases where it is not determinable as per the above provisions Date of filing of periodic return[e.g. 20] Other cases data on which tax is paid 67

68 Time of supply of Services- Section-13 Date shall be the earlier of their specific cases as below mentioned Date of Issue of the Invoice or the last date on which he is required to do so General Provision Date of receipt of payment Time of supply in case where Tax is payable on Reverse Charge basis* Date on which payment is made Invoice + 60 Days Date of Issue of voucher[if identifiable] In case of supply by vouchers Date of redemption [in other cases] In the cases where it is not determinable as per the above provisions Date of filing of periodic return[e.g. 20] Other cases data on which tax is paid *In case of Associated Enterprises[Provider[Supplier] located outside India]- Date of entry in books or recipient of supply or Date of Payment 68

69 Change in rate of Tax Section 14 Where services have been provided BEFORE the change in rate of Tax Whichever earlier Invoice issued before Date of Invoice Invoice issued before Date of receipt of payment Invoice issued after Payment received before Payment received after Payment received before Where services have been provided AFTER the change in rate of Tax Whichever earlier Invoice issued after Date of Invoice Invoice Issued after Date of receipt of Payment Invoice Before Payment received after Payment Received before Payment received after 69

70 VALUATION OF SUPPLIES 70

71 Valuation under Central Excise Legal reference Section 4 Section 4A Rule 4 Rule 5 Rule 6 Rule 7 Rule 8 Rule 9 Rule 10 Rule 10A Rule 11 Title Transactional Value MRP Based valuation Goods are not sold at the time of removal Goods maybe sold at the place other than the place of removal Price is not the sole consideration Stock transfer to depots Captive consumption Related party transaction Inter connected units Job worker Residuary 71

72 Valuation under Service Tax Legal reference Section 67 Rule 2A Rule 2B Rule 2C Rule 3 Rule 4 Rule 5 Rule 6 Title Basic provision for Valuation of Services Valuation of Works contract services Valuation of money changing service Valuation of restaurant services Valuation as per similar services Rejection of value Inclusion / Exclusion from value Treatment of Commission, costs, etc. 72

73 Valuation under Gujarat VAT Legal reference Section 2(35) Title Value of goods (35) "value of goods" means the value as ascertained from the purchase invoices or bills and includes insurance charges, excise duties, countervailing duties, value added tax, sales tax, transport charges, freight charges and all other charges incidental to the transaction of the goods Provided that where the purchase invoices or bills are not produced or when the goods are acquired or obtained otherwise than by way of purchase, the value of goods shall be the value at which the goods of like kind or quality are sold or are capable of being sold in open market; 73

74 Valuations under GST section 15 Transaction Value Inclusions & Exclusions Valuation Rules 74

75 Transaction Value & Inclusion /Exclusions Value of a supply of Goods/ Services -Transaction Value Price actually paid or payable The supplier and the recipient of the supply are not related Price is the sole consideration for the supply. Transactional Value shall be determined in monetary terms Supply Specific Exclusions and Inclusions Particulars Inclusions Exclusions Example Taxes / Duties All type of taxes CGST/SGST/IGST Non Creditable Taxes Free of Cost supply Cost incurred by recipient - Not included in value of supply Incidental Expenses At the time or before delivery After the delivery of goods Commission and packing charges charged to the recipient Interest / Late fee / Penalty For delayed payment of any consideration - Subsidies Directly Linked - Price Provided by CG/SG Backward Area Discount

76 Transaction Value & Inclusion /Exclusions Discounts Given Exclusions:- Before or at the time of supply [recorded in invoice ]- Trade Discount After the Supply effected provided that Such discount is on the basis of terms and agreement entered earlier ITC has been reversed by the recipient of the supply on the basis of doc issued by supplier Where the value of the supply cannot be determined [15(4)] U/s (1) [Transaction Value] it shall be determined prescribed manner (Valuation Rules). Value of supplies as may be notified by the CG or SG On the recommendation of the Council Shall be determined in such manner as may be prescribed. Overriding provision to 15(1) Transaction Value or 15(4) 76

77 Comparison of transactional value under GST and present regime Point to consider Under GST regime Under Current regime Interest on late payment Subsidy Place of removal of goods Included in transactional value Subsidies directly linked to the price excluding subsidies provided by the CG / SG to be included in the transactional value No such concept under GST, all expenses incurred before supply is included in the transactional value No such provision under current regime to include late payment under transactional value Subsidies does not form part of transaction value under Excise regime Under Excise, expenses incurred up to the place of removal forms part of the assessable value. 77

78 Valuation Rules under GST Rule 1. Consideration not wholly in money Consideration shall be Open market value (OMV) of such supply; If OMV not available, then Consideration in money + Equivalent amount in money of consideration received, if known at the time of supply If value not determined as per (a) and (b), then value of supply of like kind and quality. If not as per (a), (b) or (c), then Consideration in money + Valuation of consideration as per Rule 4 or 5. Illustration Old smartphone exchange with new phone and paid Rs extra. Open market value of new phone is Rs. 10,000/-. Thus value of supply is Rs. 10,000/- open market value of a supply means the full value in money, excluding the GST and the cess payable by a person in a transaction, where the supplier and the recipient are not related and price is the sole consideration, at the time when the supply being valued is made. 78

79 Valuation Rules under GST Rule 2. Supply between distinct or related person, other than agent. Open market value If OMV not available, then value of like kind and quality If not as per clause (a) or (b); then as per Rule 4 or Rule 5 Provided that if SR is eligible for full ITC, then invoice value is OMC. Following person shall be deemed to be related person Officers or directors of one another s business; Legally recognized partners; Employer and employee; Any person directly or indirectly owns, controls or holds 25% or more of voting stock; One of them directly or indirectly controls the other; Both od them are directly or indirectly controlled by third person; Together they control a third person; They are members of same family. 79

80 Valuation Rules under GST Rule 3. Supply made or received through agent Open market value At the option of the supplier, 90% of the value charged for supply of like kind and quality by the recipient to unrelated person. If not as per clause (a); then as per Rule 4 or Rule 5 Rule 4. Value of goods or services based at Cost 110% of Cost of production or cost of provision of such service. Rule 5. Residual Rule If any prior rules does not apply than it should be computed on the basis of reasonable means consistent with the principles and general provisions of section 15 and these rules. Supplier of service may opt for this rule, disregarding rule 4 80

81 Valuation in Certain cases- Money Changer Value of taxable service provided for the services in so far as it pertains to purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the following manner:- Where RBI reference rate is Available Conversion From or To INR Purchase:- (Buying rate RBI reference rate ) * No of units Sell :- (Selling rate RBI reference rate ) * No of units Where RBI reference rate is Not available 1% of the gross amount of the Indian currency exchanged None of the currency exchanged is Indian $,, 1% of the lesser amount of the currency converted in Indian denominations on the basis of RBI reference rate available on that date 81

82 Valuation in certain cases At the option of supplier, in relation to following Supplies, value of such supply may be computed at rate as specified in column opposite to it. Money changing or supply of foreign currency 1) Currency exchange up to 1 lac 2) Currency exchange from 1 lac to 10 lacs 3) Currency exchange above 10 lacs Booking of air tickets by travel agent Token, coupon, stamp or a voucher Dealer in second hand goods (Scrap dealer) NO ITC on purchase taken by the supplier Value of Supply 1) 1% of currency exchange (minimum 250) 2) Rs % of currency exchange above 1 lac up to 10 lacs 3) Rs % of currency exchange above 10 lacs (max. 60,000) Domestic flights - 5% of the basic fare International flight 10% of basic fare Equal to the money value of the goods or services redeemable against such items Sale price Purchase price (If negative value then ignored) 82

83 Valuation in certain cases At the option of supplier, in relation to following Supplies, value of such supply may be computed at rate as specified in column opposite to it. Service in relation to Life insurance business (Nothing in clause will apply where entire premium is only towards the risk cover in life insurance) Services provided by the such class of service provider as notified by the Govt. between distinct person other than those where ITC is not available u/s 17(5) Value of Supply a) (Gross premium amount allocated for invst (if such amt. is intimated to policy holder at the time of supply of service) b) Single premium policy other than (A) above- 10% of single premium c) In all other case, 25% of 1 st year premium 12.5% of subsequent years premium. Nil. 83

84 Valuation in Certain cases- Pure Agent The expenditure or costs incurred by the service provider [SP] as a pure agent of the recipient of service, shall be excluded from the value of the taxable service if all the following conditions are satisfied, namely:- Procures Goods / Service from Third Party Service Provider Third Party Transfers the same to Service Recipient Service Recipient Recovers actual amount from service recipient if paid by him; no commission (profit) is involved. Services procured are in addition to those rendered by him in his own account Invoice raised to service recipient indicates amount separately Uses the Goods / Services procured by the provider Aware of the fact that goods/ services are provided by 3 rd party for which payment is made by him. He may directly pay to 3 rd party or authorize provider to pay the amount. Provider and recipient entered into agreement to act as a pure agent and incur cost for providing service. Service provider doesn t holds any title of goods and does not use goods which are procured in the capacity of pure agent. 84

85 Valuation examples Factory / Premises of A (Seller) Goods worth Rs /- Transportation Cost Rs. 1000/- Premises of B (Purchaser) Sr. No. Situation Valuation of Supply 1 Ex-works contract 10,000/- (Transportation cost not included in the Supply) 2 Other case where risk and reward is transferred at recipient s premises. 11,000/- (Transportation cost is charged from the recipient.) 85

86 Valuation examples Factory of A Goods worth Rs /- Transportation Cost Rs. 1000/- Branch of A Sr. No. Situation Valuation of Supply 1 Branch is situated in the same state 2 Branch is situated in different state Not considered as supply under Section 3 because branch is not considered as distinct person as same registration number is applicable for Factory and Branch. (Assuming state wise registration is obtained by A) To be considered as supply. Will be governed by Valuation rules. OMV Supply value = Rs. 11,000/- 86

87 Valuation examples A selling Air conditioner Goods worth Rs /- Warranty Rs. 5000/- B Sr. No. Situation Valuation of Supply 1 Air conditioner Value Rs. 1,00,000/- 2 Warranty Will be considered as service and value of supply will be Rs. 5000/- 3 Part transferred within the warranty period Permanent transfer of asset, Will it be considered as supply? * 87

88 IMPACT ON INDUSTRY 88

89 Hotel Industry As per Section 12 of IGST Bill 2017, the place of supply will be location of immovable property. (i.e. Location of Hotel). If hotel located o/s India then place of supply will be location of service recipient Location of supplier will also be the state in which hotel is located as fixed establishment directly concerned with the provision of service. Thus, in most cases, supplies done by hotels are intrastate supply. For supply to unrelated customers, value will be the transactional value. In case transaction value is not accepted then value will be as per OMV. 89

90 Hotel Industry Service Time Place Value Accommodation Accommodation + Complimentary Breakfast (concept Of principal supply in composite supply) Acc. + Breakfast + Dinner (concept Of composite supply) Rate of tax will be important ** Date of issue of invoice or date of payment whichever is earlier Date of issue of invoice or date of payment whichever is earlier Date of issue of invoice or date of payment whichever is earlier Location of hotel Location of hotel Location of hotel Transactional Value Transactional Value Transactional Value 90

91 Hotel Industry Service Time Place Value Acc. + Breakfast + Dinner + Other facilities (e.g. Spa, theatres) (concept Of composite supply) Rate of tax will be important ** Conference booking Banquet Hall + Catering charges (composite supply) Date of issue of invoice or date of payment whichever is earlier Date of issue of invoice or date of payment whichever is earlier Date of issue of invoice or date of payment whichever is earlier Location of hotel Location of hotel Location of hotel Transactional Value Transactional Value Transactional Value 91

92 Hotel Industry If Gujarat resident, books a hotel in Mumbai, then supplier of hotel services will charge CGST and SGST of Mumbai which will not be eligible as ITC for Gujarat. Thus block in credit chain. Summary of place of supply for hotel industry if Supplier is Located in taxable territory Resident Indian Hotel Foreign Hotel Indian Foreign Location of Indian hotel Location of Indian hotel Location of service recipient Location of foreign hotel 92

93 Construction Industry As per Schedule II, works contract service qualified as Service. As per Section 12 of IGST Bill 2017, the place of supply will be location of immovable property. (i.e. Construction at site). If site located o/s India then place of supply will be location of service recipient. State wise registration may be obtained by service provider. Composition rate benefit not available to the Works Contractor. Currently VAT and Service Tax applicable on such transaction. GST not applicable on transfer of immovable property. Therefore any transfer done after the completion certificate will not attract GST. There are restriction on claiming ITC on goods or services used for providing Works contract service. For valuation of works contract service, inclusion of land value method of valuation of such land is not yet prescribed. 93

94 Construction Industry Various basic models under Construction Industry Land own and developed by builder and sold to customer Land own by different person and builder agrees to develop the land in exchange of allocation of certain flats to the land owner (Barter System) Land owner and developer incorporates third party which develops land and sale it to the customers. Taxability of this model will be similar to 1 st model as tax will be paid by the third party as owner and developer of the land. 94

95 Construction Industry Service Time Place Value Land own and developed by builder and sold to customer before completion certificate is obtained Date of issue of invoice or date of payment whichever is earlier Location of property Transactional Value** Land own by different person and builder agrees to develop the land in exchange of allocation of certain flats to the land owner Barter system, For land owner supply won t be taxable as immovable property but for developer it will be taxable but land as consideration therefore at the time of agreement Location of property Open market value of flats given, if value not know at the time of supply then as per rule 1 or Rule 4 or Rule 5 in that order. 95

96 Diamond / Textile Industry As per Section 10 of IGST Bill 2017, the place of supply will be location of goods at the time at which the movement of goods terminates for delivery to the recipient. (where supply involves movement of goods) For supply to unrelated customers, value will be the transactional value. In case transaction value is not accepted then value will be as per OMV. Normal provision for Time of supply will be applicable for these industry. Various excise exemption or benefits are currently availed by the these industries which might not be continue in GST.** 96

97 Diamond / Textile Industry Service Time Place Value Buy and sale of goods Date of issue of invoice or date of payment or on last date of issue of invoice whichever is earlier As per Section 10 of IGST law. Depending on each transaction Transactio nal Value if done to unrelated buyer Purchase + Process and then sale of goods Date of issue of invoice or date of payment or on last date of issue of invoice whichever is earlier As per Section 10 of IGST law. Depending on each transaction Transactio nal Value if done to unrelated buyer Purchase + Process to Job work & then sale to customer. Job work charges will be considered as separate trans. between supplier and JW Date of issue of invoice or date of payment or on last date of issue of invoice whichever is earlier As per Section 10 of IGST law. Depending on each transaction Transactio nal Value if done to unrelated buyer 97

98 Automobile Industry As per Section 10 of IGST Bill 2017, the place of supply will be location of goods at the time at which the movement of goods terminates for delivery to the recipient. (where supply involves movement of goods) For supply to unrelated customers, value will be the transactional value. In case transaction value is not accepted then value will be as per OMV. Normal provision for Time of supply will be applicable for automobile industry. Currently, Excise, VAT, Service Tax and CST is applicable against which single tax will be applicable reducing compliances for this industry. 98

99 Automobile Industry Service Time Place Value Sale from Manufacturer to dealer & Sale from Dealer to Customer Date of issue of invoice or date of payment or on last date of issue of invoice whichever is earlier As per Section 10 of IGST law. Depending on each transaction Transactio nal Value if done to unrelated buyer Warranty provided on payment of Fees (Considered as service) Date of issue of invoice or date of payment whichever is earlier Residual rule I Transactio nal Value Supply of parts from manufacturer to dealer during the warranty period. (taxable only if ITC is taken for such product) Date of issue of invoice or on last date of issue of invoice whichever is earlier (as no pyt is to be recvd) As per Section 10 of IGST law. Depending on each transaction OMV. 99

100 E-COMMERCE INDUSRTY 100

101 Definition Section 2(44)- electronic commerce means supply of goods and/or services including digital products over digital or electronic network; Section 2(45)- electronic commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce; 101