THE CHAMBER OF TAX CONSULTANTS Indirect Tax Study Circle Meeting GST Impact Analysis on Service Sector - By CA Parita Shah & CA Payal Shah - On 17 th May, 2017 I Logistics Marine Logistics Pvt. Ltd is a custom house agent (CHA) and is also in the business of being a freight forwarder acting on a principal to principal basis providing end to end logistics solutions. The company is centrally registered with the service tax department with centralized accounting in Mumbai. The company has branches in New Delhi, Gandhidham, Ludhiana, Bhopal and Nagpur. In addition thereto, the company has also acquired table space at various ports viz. Nhava Sheva, Pipavav, Kandla to monitor and coordinate the movement of the cargo at the port and assist in relation to the various documentations. The company also has an administrative office in the city of Gurgaon. The table space acquired at the port and the administrative office are not currently registered with the service tax department as no billing is undertaken from the said premises. Issues for Consideration (a) Whether the company is required to obtain registration for the table space and the administrative office under the GST Regime from where no billing is undertaken by the company. However, there are various overhead costs Page 1 of 5
involved in relation to the said premises i.e. rent, telephone expenses etc. on which applicable taxes would be charged by the vendors? (b) As a CHA, the company incurs various expenses as a pure agent of the shipper which includes charges for loading, unloading, buffer yard charges, dock expenses etc. The company procures these services from third party vendors/port authorities who in turn raise their invoice on the company with service tax and generally mention only the name of the shipper. Currently, the company is making the payment to these vendors and is issuing a debit note on the shipper incorporating the various expenses as receipted/nontaxable and is also enclosing the invoices of the vendors/port authorities to entail the shipper to avail the CENVAT credit. Whether the said practice can continue in the GST Regime? (c) The company has the following queries in relation to their freight forwarding business (i) A shipper in Gujarat has approached the Gandhidham Office of the Company to transport goods from Nhava Sheva to Mombasa, Uganda. The Gandhidham Office has in turn instructed their Mumbai Office to undertake the said transportation activity. Accordingly, the Mumbai Office has contracted with the shipping line for the transportation. The Mumbai office is responsible to transport the goods from the factory of the shipper in Mumbai to the port, undertake the port formalities and handover the goods to the shipping line. Page 2 of 5
(ii) In relation to the above transaction, the Mumbai office appoints a networking partner located in Uganda who acts in the capacity of a CHA and gets the goods cleared at the customs station outside India, gets the loading, unloading of goods done, pays the custom clearance charges and transports/delivers the goods to the consignee. The charges for all the above services is recovered by the networking partner outside India from the Mumbai Office. Determine the tax implications under GST in the scenario and the manner in which the billing will be done to the shipper. II Banking & Financial Services HMSC Ltd. is a NBFC engaged in providing loans, project finances etc. It has operations across India and has got more than 120 branches spread in 10 States. Major income source of HMSC are interest on loans, processing charges and pre-payment charges. In case the borrower does not pay EMI on time, HMSC also collects interest on delayed EMI payments. Presently, HMSC is operating under centralised service tax registration and CENVAT Credit of all input services is accumulated at Head Office. Issues for Consideration (a) If one borrower residing at Delhi, is taking loan from Mumbai Branch of HMSC and is providing communication address of Mumbai to HMSC. What should be the place of supply for such transaction: Delhi or Mumbai? (b) Whether interest on delayed EMI payments would be taxable under GST? If yes, when would the GST liability arise for such interest? Page 3 of 5
(c) HMSC has certain common expenses such as marketing, audit fees, IT support etc. How to distribute ITC in respect of such services to respective branches? (d) HMSC has availed 50% of CENVAT credit on capital goods amounting to Rs. 10,00,000/- under pre-gst regime. Whether HMSC can claim input tax credit of balance Rs. 10,00,000/- under GST? (e) Since HMSC has numerous branches, it is common for them to transfer furniture and certain capital assets from one branch to another. Whether such transfers would face any implications under GST? (f) HMSC procures services at all such branches and therefore, has various service providers spread across India. HMSC understands that in order to claim Input tax Credit under GST, HMSC is required to ensure that GST collected by all such service providers is deposited to Government Treasury. HMSC is looking forward to you for setting up a proper system to claim ITC. III Real-Estate Broking Housing Company Ltd, a real estate broker registered in Maharashtra has appointed various sub-brokers across India. Most of these sub-brokers located in various states are below the threshold limit and accordingly not required to be registered under GST. The company seeks your advice to determine whether they are required to discharge GST on the supplies received from these unregistered brokers? Page 4 of 5
IV Courier Door to Door delivery Ltd is a courier agency centrally registered under service tax at Mumbai. The company has set up collection centers in various states to collect the courier parcels of their clients. The company seeks your advice to determine the place of supply in respect of their services and also whether they are required to obtain registration in each state under the GST Regime. Page 5 of 5