CS Professional:Advanced Tax Laws [Ch-2 Supply]

 PART-A:SUPPLY 

• incidence of tax levy under GST = supply
• central excise act,1944 = manufacture
• customs act,1965 = import/export
• value added tax = sale
• CGST act,2017 
• Sec. 7(1)(a)- SUPPLY
• (1)(b)- import of services
• (1)(c)- supply without consideration
• (1A)- deemed supply
• (2)- neither supply of goods nor services
• (3)- issue of notification by government
• SCHEDULE I- DEEMED SUPPLIES,i.e., supplies even without consideration

• SCHEDULE II- activities to be treated as supply
• SCHEDULE III- neither supply of goods nor service

• Imp. case laws:
• IN RE : IIT Madras Alumni Association [2020 (42) G.S.T.L. 564 (A.A.R. - GST - T.N.)]
• IN RE : B.R. Sridhar [2021 (44) G.S.T.L. 211 (A.A.R. - GST - Kar.)]
• Sec. 8- COMPOSITE & MIXED SUPPLY

• Imp. case laws-
• In Re: Aquaa Care (Surat) Ro Technologies Private Limited, (2019)- Aar Gujarat
• In Re : Mfar Hotels & Resorts Pvt. Ltd.[ 2020 (42) G.S.T.L. 470 (A.A.R. - GST - T.N.)]
• Sec. 9- TAX LEVY & COLLECTION
• (1)- general
• (2)- tax on petroleum
• (3)- reverse charge on notified services
• (4)- Reverse charge in case of specified category of supplies received from unregistered persons as may be notified by the Government. 
• (5)- tax on electronic commerce operator

• Sec. 10- COMPOSITION LEVY
• alternative method of tax payment but no ITC and can't collect tax from recipient
• not contrary to Sec. 9(3) and (4)- who can opt?
• registered person
• aggregate turnover in preceding FY doesn't exceed 150 lakhs for supply of goods and restaurant services (75 lakhs for select states)
• may opt to pay in lieu of Sec. 9(1)
• tax as per rule 7 of CGST rules, 2017
• may supply services (other than restaurant services) of upto 10% of turnover in preceding FY or 5 Lakhs, whichever is HIGHER.
• (2)- eligibility to opt
• not engaged in supply of services
• not engaged in supplying goods not leviable to tax
• not engaged in making inter-state outward supplies
• not engaged in supplying through an Electronic Commerce Operator (ECO) who collects TCS under Sec. 52
• not manufacturing notified goods
• people with same PAN have to opt for this scheme for all of their supplies.
• (3)- lapse on the day when aggregate turnover exceeds all the limits
• (4)- not collect tax on any recipient separately in the invoices
• consider tax payable as cost and factor in price
• (5)- such person be liable to tax payable by him and a penalty and Sec. 73,74
• RULE 3- PROCEDURAL ASPECTS
• provisional registration under rule 24- GST CMP-01
• opts to pay tax under Sec. 10 shall file- GST CMP-02 prior to FY commencement and statement in GST ITC-03 and such persons not allowed to file GST TRAN-1 
• furnish details of inward supply with 60 days of exercise of Sec. 10
• RULE 4- EFFECTIVE DATE
• from FY beginning 
• RULE 5- CONDITIONS & RESTRICTIONS
• neither a casual taxable nor a NR taxable
• goods held in stock not been purchased in course of inter-state trade or commerce/imported/received from branch outside state/from agent
• purchases not from an unregistered supplier
• pay tax under Sec. 9
• not engaged in manufacture of notified goods during preceding FY
• mention 'composite taxable person'
• not required to file fresh intimation every year
• RULE 6- VALIDITY
• so long as conditions are satisfied
• liable to pay tax under Sec. 9 if all conditions aren't satisfied and intimate within 7 days in GST CMP- 04 intending withdrawal
• GST CMP- 05 show cause notice for 15 days
• GST CMP- 06 reply of show cause notice
• order in GST CMP- 07 within 30 days either accepting or denying
• stock statement within 30 days of withdrawal
• intimation deemed to be for all other places
• SPECIAL COMPOSITION SCHEME- sec. 10(2A) w.e.f. 01/04/2019 to let the service sector also reap its benefits

 EXEMPT SUPPLY 

• Sec. 2(47)
• attract nil rate of tax
• wholly exempted under notification issued under Section 11 CGST Act or Section 6 IGST Act. [Refer Notification No. 12/2017- Central Tax (Rate)]
• goods held as no-supply and excluded from GST's purview
• also includes services under Schedule III
• POWER TO GRANT EXEMPTION (SEC. 11)
• (1) general- by notification
• (2) exceptional circumstances- in public interest
• (3) insert explanation within one year of notification issue
• SERVICES EXEMPT FROM TAX [NOTIFICATION NO. 12/2017- CENTRAL TAX (RATE)]
• IMPORTANT CASE LAWS
• IN RE: ACHARYA SHREE MAHASHRAMAN CHATURMAS PRAVAS VYAVASTHA SAMITI TRUST, 2020 (37) G.S.T.L. 83 (App. A.A.R. - GST - Kar.)
• IN RE : CMC Vellore Association, 2020 (39) G.S.T.L. 330 (A.A.R. - GST - A.P.)

 PART-B:TIME OF SUPPLY 

•  when GST liability arises for GOODS (Sec. 12)
• (2)- earlier of:
• invoice issue date or last date at which he is required under Sec. 31 before/at supply 
• goods removal if supply involves movement
• delivery/making available in other cases
• in case of continuous supply Sec. 31(4), invoice issued before/at 
• a successive statement is issued
• a successive payment is received 
• in case of goods sent on approval Sec. 31(7) EARLIER of:
• if,removed before supply issued before/at supply
• OR 6 months from removal 
• date on which supplier receives payment (earlier of,not really relevant) 
• (3)- in case of reverse charge,EARLIER of; 
• goods receipt
• payment in books or debit in books (applies only to services),whichever EARLIER;
• date immediately 30 days from invoice issue
• if not possible to determine=date of entry in books
• (4)- in case of VOUCHERS;
• issue date if supply identifiable
• redemption date
• (5)- RESIDUAL SECTION;
• filing date of periodical return
• tax paid date
• (6)-value addition after sale
• interest,late fee or penalty=date at which supplier receives such

• (Sec. 13) for SERVICES;
• (2)(a)- invoice issued within prescribed time EARLIEST of;
• issue date (Sec. 31)
• within 30 days from supply
• supplier is insurer/banking co./FI including an NBFC=45 days OR in enters his books of accounts OR before quarter expiry
• (31[5]) in case of CONTINUOUS SUPPLY;
• payment date ascertainable=issued on/before payment due date
• payment date unascertainable=issued before/at receipt OR at event completion 
• receipt payment
• (2)(b)- invoice not issued within prescribed time,EARLIEST of;
• service provided date
• payment receipt
• (2)(c)- date on which recipient shows service receipt if above don't apply
• (3) REVERSE CHARGE,EARLIEST of;
• payment date or debit in books
• 60 days from invoice issue
• (4) VOUCHER
• (5) RESIDUAL
• (6) VALUE ADDITION

• (Sec. 14) TIME WHEN TAX RATE CHANGES W.R.T SUPPLY
• IMP CASE LAW:IN RE : KARNATAKA STATE ELECTRONICS DEVELOPMENT CORPN. LTD., 2020 (42) G.S.T.L. 284 (App. A.A.R. - GST - Kar.)

 PART-C:VALUE OF SUPPLY 

• Sec. 2(31) CONSIDERATION

• Sec. 15
• (1) TRANSACTION VALUE
• price actually paid/payable
• supplier & recipient unrelated
• price-sole consideration
• (2) INCLUSIONS
• taxes,duties,cesses,fees and charges if charged separately
• supplier liable to pay
• commision/packing charges and anything done before/at delivery
• int./late fee/penalty
• subsidies directly linked to price except by govts.
• (3) DISCOUNT BEFORE/AT/AFTER SUPPLY NOT INCLUDED
• before/at
• if duly recorded
• after
• established in agreement terms and specifically linked to relevant invoices
• ITC attributable to discount reversed by recipient
• Trade discount, cash discount, quantity discount, discount on meeting target if entered into the terms of agreement then it shall be deducted from value.
• (4) RESIDUAL: as prescribed
• (5)VALUE SPECIFICALLY NOTIFIED BY GOVT.
• IMP. CASE LAWS:IN RE : MIDCON POLYMERS PVT. LTD., 2020 (41) G.S.T.L. 403 (A.A.R. - GST - Kar.)

RULES FOR VALUE DETERMINATION

• applicable when:
• consideration wholly/in part not in monetary terms
• by related parties or by specific suppliers and transaction value is unreliable
• RULE 27:CONSIDERATION NOT WHOLLY IN MONEY
• open market value
• total of consideration of money & not money
• supply of like kind or quality
• or acc. to rule 30/31
• RULE 28:SUPPLY BETWEEN DISTINCT OR RELATED PERSONS
• other then through agent
• open market value
• of like kind/quality
• acc. to rule 30/31
• if intended for further supply, @ supplier's option=90% price charged of like kind/quality
• if recipient eligible for ITC, invoice value=deemed open market value
• RULE 29:SUPPLY THROUGH AN AGENT
• open market value or 90% price not charged to a related person
• rule 30/31
• RULE 30:COST BASED VALUE- 110% of production/mft./acquisition cost
• RULE 31:RESIDUAL METHOD
• using reasonable means consistent with Sec. 15; in case of service supply, opt for this instead of rule 30
• RULE 31A: SUPPLY VALUE OF LOTTERY,BETTING,GAMBLING AND HORSE RACING
• run by state govts. deemed to be 100/112 of face value or as notified in official gazette, whichever HIGHER
• authorised by state govt. to be 100/128 of face value or as in official gazette, whichever HIGHER
• amt. of actionable claim is 100% of bet face value or amt. paid to totalisator
• PURCHASE/SALE OF FOREIGN CURRENCY, INCLUDING MONEY CHANGING [RULE 32(2)(A)]

• [RULE 32(3)] SUPPLY RELATED TO AIR TRAVEL  AGENT
• domestic booking= 5% basic fare
• international booking= 10% basic fare
• [RULE 32(4)] SUPPLY RELATED TO LIFE INSURANCE
• if amt. intimated= gross investment amt.
• single premium policy= 10% single premium
• other policy= 25% first year premium and 12.5% subsequent years
• nothing applicable where entire premium paid towards risk cover
• [RULE 32(5)] RELATED TO SECOND HAND GOODS
• sale price-purchase price
• applicable when goods sold as such and no ITC taken
• [RULE 32(6)] VALUE OF TOKEN,VOUCHER,COUPON,STAMP= money value
• [RULE 32(7)] TAXABLE SERVICES BETWEEN DISTINCT PERSONS= where ITC available, deemed nil
• [RULE 32A] SUPPLY APPLICABLE TO KERALA FOOD CESS= acc. to Sec. 15
• [RULE 33] SUPPLY OF SERVICES IN CASE OF PURE AGENT
• expenditure/costs incurred by supplier as pure agent excluded from supply value if below satisfied,
• makes payment to 3rd party as pure agent
• payment separately indicated in invoice 
• supplies procured by pure agent in addition to services he supplies on his own account

 CASE LAW:IN RE : ASIATIC CLINICAL RESEARCH PVT. LTD. (2019) A.A.R Karnataka

• [RULE 35] VALUE INCLUSIVE OF ALL TAXES: tax amt.= value inclusive tax ✖ tax rate ➗ 100 + rate of tax

 IMPORTS & EXPORTS 

IMPORTS

1. article 269A considers imports as supply
2. all considered as INTER-STATE along with custom duties

GOODS IMPORT: instead of Countervailing Duty (CVD), IGST is charged on all imports but other duties continue to be charged.

SERVICES IMPORT: 

• if imported without consideration, not be deemed as supply unless imported from related persons
• tax paid under reverse charge

ITC ON IMPORTS: subject to Sec. 16;however credit of basic customs duty and other duties not available

EXPORTS

1. zero-rated per Sec. 16
2. inter-state as per Sec. 7(5)

ZERO-RATED SUPPLY

1. exports
2. supply for authorized operations to SEZ
3. [16(2)]credit availed except in case of exempt supply
4. [16(3)] eligible to claim refund of unutilised ITC
5. permitted to charge output tax and later claim refund

IMP Case Law:

In re Carnation Hotels Private Limited (2019) - GST AAR Karnataka

RULE 96A: GOODS EXPORT PROCEDURE UNDER BOND/UNDERTAKING LETTER

RULE 89(4) ITC REFUND RELATED TO ZERO-RATED SUPPLY

refund amount= (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) × Net ITC ÷ Adjusted Total Turnover

REFUND RECOVERY OF UNUTILISED ITC/INTEGRATED TAX WHERE EXPORTS PROCEEDS NOT REALISED [RULE 96B]

• the person to whom refund has been made shall deposit refund along applicable interest within 30 days failing which, the amt. shall be recovered.
• RBI could could write off the realisation requirement for refund
• if proceeds are realised after recovery, applicant produces evidence within 3 months from realisation; amt. realised shall be refunded proportionate to realisation.

DEEMED EXPORTS (Sec. 147)

• goods supplied don't leave India
• following notified:

1. supply against advance authorisation
2. against Exports Promotion Capital Goods Authorization
3. to export oriented unit
4. gold supply by bank/PSU

CLASSIFICATION OF SUPPLY UNDER GST

1. HARMONIZED SYSTEM OF NOMENCLATURE (hsn)
2. chapter 99 specially earmarked for services
3. SIGNIFICANCE
• effective rate
• no additional liability at later stages due to misidentification
• no missed exemptions
4. interpretative rules applicable to customs tariff continue to apply for GST 
5. other factors for determination for GOODS
• raw material classification/rates
• customer credit and usage, if available
6. others for SERVICES
• agreement terms
• independent service classification
• bifurcation of combo services
• essential characters
7. care taken by professional while classifying
• plain/simple terms.
• no presumptions/assumption
• coverage construed strictly
• no claims given without due diligence
• strict compliance to conditions
• reasonable selection

IMP CASE LAWS:

• In Re Sadguru Seva Paridhan Pvt. Ltd. (2020) - GST A.A.R. West Bengal--Fusible interlining cloth is not a woven fabric, 12% GST applicable
• In re Jay Jalaram Enterprises (2020) - GST A.A.R. Gujarat
• In re ID Fresh Food (India) Pvt. Ltd. (2020) - GST A.A.R. Karnataka
• IN RE : Tool & Gage Co., 2020 (43) G.S.T.L. 119 (A.A.R. - GST - U.P.)

 PART D:OTHER PROVISIONS 

1.  job work [S.2(68)]: 
•  treatment/process undertaken on another's goods.
•  as per entry 3, it is a service supply
2.  principal [S.2(88)]
3. JOB WORK PROCEDURE [S. 143]:
• send without tax payment
• bring back inputs, post-completion
• supply such inputs as required
• principal shall not supply unless declares the JW's place as additional business place except: 
• JW registered under S. 25
• if principal supplies commissioner notified goods.
• PROPER ACCOUNTS [S. 143(2)]
• DEEMED SUPPLY IF INPUTS,CAPITAL GOODS NOT RETURNED BACK [S. 143(3,4)]
• WASTE & SCRAP SUPPLIED DIRECTLY TO PRINCIPAL[S. 143(5)]
4. ITC IN JOB WORK [S. 19]
• [19(1)] principal allowed
• [19(2)] (1) applicable even if goods sent directly to job worker without being sent to principal first.
• (3) inputs not received back within time deemed supply

 PURE AGENT 

• includes factor,broker,commission agent,arhatia,del credere agent,auctioneer or another mercantile agent.
• receives and incurs expenditure on behalf of recipient and claims reimbursement without adding to own supply value.
• as per rule 33 of GST Valuation rules, 2017
• doesn't use supply procured, for own interest and this is determined through contact terms.
• receives only actual amount used for provided services.

 E-COMMERCE 

• including digital products over digital/electronic network
• marketplace= e-commerce platform owned by e-commerce operator
1. enables 3rd party sellers to register and sell
2. charges subscription fee/commission on sale value
3. sellers gain access to a larger customer base
4. customers gain access to multiple sellers and competitive prices
• govt. allowed FDI under such models
• vide Notification No. 65/2017-C.T., dated 15-11-2017, the Government provided that the persons making supplies of services, other than supplies specified under sub-section (5) of section 9 of the said act through an electronic commerce operator who is required to collect tax at source under section 52 of the said act, and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of twenty lakh rupees in a financial year, as the category of persons exempted from obtaining registration under the said act. Similar threshold is ten lakh rupees in case of “special category States” as specified in the first proviso to sub-section (1) of section 22 of the said act, read with clause (iii) of the Explanation to the said section.
• no benefit of composition scheme [10(2)(d)]
• notification has been issued by all state Governments requiring collection of TCS @ 0.5% on Intra-State supply. Thus, the rate of TCS on the specified transaction/inter-state supply comes to 1%.
• RULE 67: statement in GSTR-8 (monthly) containing supply details and TAX COLLECTED
• RULE 78: matching of details furnished
• RULE 79: Communication/Rectification of detail discrepancy

TAX COLLECTED AT SOURCE (TCS)

1. applied to "net value" by ECO
2. net value= Net Value of Taxable Supplies = [(Aggregate Value of Taxable Supplies of Goods + Services) - (Section 9(5) Services)] - (Aggregate Value of Returned Taxable Supplies + Goods)]
3. paid to govt. within 10 days after end of collection month by debiting e-cash ledger

ANTI-PROFITEERING PROVISIONS

• so that doesn't lead to inflation 
• instilling citizen confidence
• AUSTRALIA= first,200
• MALAYSIA= latest,2015
• per Sec. 171: reduction in tax rate on supply, ITC benefit passed on to the recipient
• CG may constitute supervisory authority [RULE 122]
• chair= govt. secretary
• 4 technical members
• after authority examination= penalty @ 10% of profiteered amount
• [RULE 123] committee constitution

• [RULE 124] appointment,salary,allowances and other T&C of chair and members
• [RULE 125] authority's secretary
• [RULE 126] power to determine methodology/procedure

• [RULE 127] authority's duties
• [RULE 128] application examination by the committees
• [RULE 129] proceedings
• [RULE 130] info confidentiality
• [RULE 131] co-operation with other agencies/authorities
• [RULE 132] power to summon 
• [RULE 133] order
• [RULE 134] majority decision
• [RULE 135] compliance by regstd. person
• [RULE 136] order monitoring
• [RULE 137] tenure
• OBJECTIVES
• reduction in tax rate on supply: price inclusive of output tax and tax rate lower than pre-GST
• ITC benefit: increased availability compared to pre-GST
• overall reduced cost of products/inputs
• APAF-1= anti-profiteering app form

IMP CASE LAWS:

1. Assistant Commissioner of State Tax vs N. Rai Delights LLP (2020) - NAA
2. State of officer vs. Bonne Sante (2020) - NAA
3. Kumar Gandharv vs. KRBL Ltd. (2018) - NAA
4. Shri Abhishek vs Signature Builders Pvt. Ltd. (2019)- NAA