GST on Charitable Trusts, Non-Profit Organizations and Co-Operative Societies

Transcription

1 GST on Charitable Trusts, Non-Profit Organizations and Co-Operative Societies CA Yashwant J. Kasar B.Com, FCA, DISA, CISA, PMP, FAIA Feb 2018

2 Supply" includes (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (b) import of services for a consideration whether or not in the course or furtherance of business; (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Excludes (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council CA YASHWANT J. KASAR 2

3 Person" includes (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (e) a Limited Liability Partnership; (f) an association of persons or a body of individuals, whether incorporated or not, in India or outside India; (g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government company as defined in clause (45) of section 2 of the Companies Act, 2013 (18 of 2013) 1 ; (h) any body corporate incorporated by or under the laws of a country outside India; (i) a co-operative society registered under any law relating to co-operative societies; (j) a local authority; (k) Central Government or a State Government; (l) society as defined under the Societies Registration Act, 1860 (21 of 1860); (m) trust; and (n) every artificial juridical person, not falling within any of the above; CA YASHWANT J. KASAR 3

4 Business" includes (a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit; (b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a); (c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business; (e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) admission, for a consideration, of persons to any premises; (g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; (h) services provided by a race club by way of totalisator or a licence to book maker in such club; and (i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; CA YASHWANT J. KASAR 4

5 The provisions relating to taxation of activities of charitable institutions and religious trusts have been borrowed and carried over from the erstwhile service tax provisions. All services provided by such entities are not exempt. In fact, there are many services that are provided by such entities which would be within the ambit of GST. CA YASHWANT J. KASAR 5

6 Notification No.12/2017-Central Tax (Rate) dated 28th June 2017 Exempts services provided by entity registered under Section 12AA of the Income-tax Act, 1961 by way of charitable activities from whole of GST vide entry No. 1 of the notification, which specifies that "services by an entity registered under Section 12AA of Income-tax Act, 1961 by way of charitable activities" are exempt from whole of the GST. Thus as per this notification, exemption is given to the charitable trusts, only if the following conditions are satisfied. a) Entities must be registered under Section 12AA of the Income-tax Act, and b) Such services or activities by the entity are by way of charitable activities. CA YASHWANT J. KASAR 6

7 Thus, it is essential that the activities must conform to the term Charitable Activities which has been defined in the notification as under "charitable activities" means activities relating to: (i) public health by way of: (A) care or counseling of (I) terminally ill persons or persons with severe physical or mental disability; (II) persons afflicted with HIV or AIDS; (III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or (B) public awareness of preventive health, family planning or prevention of HIV infection; (ii) advancement of religion, spirituality or yoga; (iii) advancement of educational programmes or skill development relating to: (A) abandoned, orphaned or homeless children; (B)physically or mentally abused and traumatized persons; (C ) prisoners; or (D) persons over the age of 65 years residing in a rural area; (iv) preservation of environment including watershed, forests and wildlife. CA YASHWANT J. KASAR 7

8 This notification makes the exemption to charitable trusts available for charitable activities more specific. While the income from only those activities listed above is exempt from GST, income from the activities other than those mentioned above is taxable. Thus, there could be many services provided by charitable and religious trust which are not considered as charitable activities and hence, such services come under the GST net. The indicative list of such services could be renting of premises by such entities, grant of sponsorship and advertising rights during conduct of events/functions etc. CA YASHWANT J. KASAR 8

9 NOTIFICATION NO. 11/2017-CENTRAL TAX (RATE), DATED , AS AMENDED BY NOTIFICATION NO. 1/2018-CENTRAL TAX (RATE), DATED (iv) Composite supply of works contract as defined in clause (119) of section 2 of the Central Goods and Services Tax Act, 2017, supplied by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,.. 1 [ (g) a building owned by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961), which is used for carrying out the activities of providing, centralised cooking or distribution, for mid-day meals under the mid-day meal scheme sponsored by the Central Government, State Govern-ment, Union territory or local authorities.] CA YASHWANT J. KASAR 9

10 Charitable Healthcare Trusts CA YASHWANT J. KASAR 10

11 Human health and social care service Exemptions are provided vide Notification No. 12/2017-CT (Rates) and 9/2017-IT (This service falls under heading Exemption to health care services Services by way of- (a) health care services by a clinical establishment, an authorised medical practitioner or para-medics (b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above are exempt from GST. Waste treatment facility to medical establishment Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto are exempt. CA YASHWANT J. KASAR 11

12 Services of cord blood bank Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation are exempt. Authorised Medical Practitioner "Authorised medical practitioner" means a medical practitioner registered with any of the councils of the recognised system of medicines established or recognised by law in India and includes a medical professional having the requisite qualification to practice in any recognised system of medicines in India as per any law for the time being in force - para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from Clinical Establishment "Clinical establishment" means a hospital, nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India, or a place established as an independent entity or a part of an establishment to carry out diagnostic or investigative services of diseases - para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from CA YASHWANT J. KASAR 12

13 Health Care Services "Health care services" means any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and includes services by way of transportation of the patient to and from a clinical establishment, but does not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma - para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from CA YASHWANT J. KASAR 13

14 Circular No. 32/06/2018-GST -Clarifications (1) Hospitals hire senior doctors/ consultants/ technicians independently, without any contract of such persons with the patient; and pay them consultancy charges, without there being any employeremployee relationship. Will such consultancy charges be exempt from GST? Will revenue take a stand that they are providing services to hospitals and not to patients and hence must pay GST? - Services provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are healthcare services which are exempt. CA YASHWANT J. KASAR 14

15 (2)Retention money: Hospitals charge the patients, say, Rs.10000/- and pay to the consultants/ technicians only Rs. 7500/- and keep the balance for providing ancillary services which include nursing care, infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood pressure etc. Will GST be applicable on such money retained by the hospitals? - Healthcare services have been defined to mean any service by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India[para 2(zg) of notification No. 12/2017- CT(Rate)]. Therefore, hospitals also provide healthcare services. The entire amount charged by them from the patients including the retention money and the fee/payments made to the doctors etc., is towards the healthcare services provided by the hospitals to the patients and is exempt. CA YASHWANT J. KASAR 15

16 (3) Food supplied to the patients: Health care services provided by the clinical establishments will include food supplied to the patients; but such food may be prepared by the canteens run by the hospitals or may be outsourced by the Hospitals from outdoor caterers. When outsourced, there should be no ambiguity that the suppliers shall charge tax as applicable and hospital will get no ITC. If hospitals have their own canteens and prepare their own food; then no ITC will be available on inputs including capital goods and in turn if they supply food to the doctors and their staff; such supplies, even when not charged, may be subjected to GST? - Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply of healthcare and not separately taxable. Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable. CA YASHWANT J. KASAR 16

17 So, if charitable trusts run a hospital and appoint specialist doctors, nurses and provide medical services to patients at a concessional rate, such services are not liable to GST. If hospitals hire visiting doctors/specialists and these deduct some money from consultation/visit fees payable to doctors and the agreement between hospital and consultant doctors is such that some money is charged for providing services to doctors, there may be GST on such amount deducted from fees paid to doctors. CA YASHWANT J. KASAR 17

18 Charitable Religious Trusts CA YASHWANT J. KASAR 18

19 Entry No. 13 of Notification No. 12/2017-Central Tax (Rate) dated 28th June, 2017 Provides the following exemption to entities registered under Section 12AA of the Income Tax Act: Services by a person by way of: (a)conduct of any religious ceremony; (b)renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub-clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23BBA) of section 10 of the said Income-tax Act: Provided that nothing contained in entry (b) of this exemption shall apply to: CA YASHWANT J. KASAR 19

20 (i)renting of rooms where charges are one thousand rupees or more per day; (ii)renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day; (iii)renting of shops or other spaces for business or commerce where charges are ten thousand rupees or more per month. Thus, the law gives a limited exemption to renting of only religious precincts or a religious place meant for general public by the entity registered under section 12AA of the Income Tax Act. As per clause (zc) of the said notification, the term "general public" means "the body of people at large sufficiently defined by some common quality of public or impersonal nature". The term "religious place" as per the clause (zy) of the said notification means "a place which is primarily meant for conduct of prayers or worship pertaining to a religion, meditation, or spirituality". Dictionary meaning of "precincts" is an area within the walls or perceived boundaries of a particular building or place, an enclosed or clearly defined area of ground around a cathedral, church, temple, college, etc. CA YASHWANT J. KASAR 20

21 This implies that if immovable properties owned by charitable trusts like marriage hall, convention hall, rest house for pilgrims, shops situated within the premises of a religious place are rented out, income from letting out of such property is wholly exempt from GST. But if such properties are not situated in the precincts of a religious place meaning thereby not within walls or boundary walls of the religious place, income from such letting out will lose this exemption and income from it will be liable to GST. Income from a religious ceremony organised by a charitable trust is exempt as per the above notification. So the income from Navratri functions, other religious functions, and religious poojas conducted on special occasions like religious festivals by persons so authorised for this purpose by the charitable or religious trust are exempt from GST. But a careful perusal of this exemption shows that all income from such a religious ceremony is not exempt (services other than by way of conduct of religious ceremony are not exempt). Therefore, the nature of income is an essential factor for ascertaining whether it will be taxable or exempt. If income loses its religious nature, it is definitely chargeable to GST. For example, if with regard to Ganeshutsav or other religious functions, charitable trusts rent out their space to agencies for advertisement hoardings, income from such advertisement is chargeable to GST, as this will be considered as income from the advertisement services. Further, if donation for religious ceremony is received with specific instructions to advertise the name of a donor, such donation income will be subject to GST. But if donation for religious ceremony is received without such instructions, it may not be subject to GST. CA YASHWANT J. KASAR 21

22 Entry No. 80 of Notification No. 12/2017-Central Tax (Rate) Similarly, entry No. 80 of Notification No. 12/2017-Central Tax (Rate), provides the following exemption to an entity registered under Section 12AA. Services by way of training or coaching in recreational activities relating to: (a)arts or culture, or (b)sports by charitable entities registered under section 12AA of the Income-tax Act. Thus, services provided by way of training or coaching in recreational activities relating to arts or culture or sports by a charitable entity will be exempt from GST. CA YASHWANT J. KASAR 22

23 Charitable Educational Trusts CA YASHWANT J. KASAR 23

24 Education Services This service falls under heading The commercial education is subject to 18% (CGST 9% and SGST 9%) or IGST 18%. Various exemptions are contained in Notification No. 12/2017-CT (Rates) and 9/2017-IT (Rates) both dated , effective from Services provided by education institution Service supplied by an educational institution to its students, faculty and staff is exempt from GST. CA YASHWANT J. KASAR 24

25 GST on management of educational institutions by charitable trusts If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST. Meaning of the word rural area defined in said notification is rural area means the area comprised in a village as defined in land revenue records excluding the area under any municipal committee, municipal corporation, town area committee, cantonment board or notified area committee or any area that may be notified as an urban area by the Central Government or a State Government. CA YASHWANT J. KASAR 25

26 Services by and to Education Institutions (including institutions run by Charitable trusts) If the trust is running school for the purpose which is not covered above (i.e. not coming within the scope of charitable activities as defined in the notification), income from such activity will not be exempt under Entry 1 of notification no. 9/2017-lntegrated Tax (Rate) or 12/2017-Central Tax (Rate), but will be exempt under entry 66 of notification no.12/2017-central Tax (Rate). Entry 66 provides for exemption w.r.t supply by and to educational institutions and only the following services received by eligible educational institution are exempt. CA YASHWANT J. KASAR 26

27 66. Services provided (a)by an educational institution to its students, faculty and staff; 1 [ (aa)by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee; ] (b)to an educational institution, by way of,- (i)transportation of students, faculty and staff; (ii)catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; (iii)security or cleaning or house- keeping services performed in such educational institution; (iv)services relating to admission to, or conduct of examination by, such institution; 1 [***] 2 [ (v)supply of online educational journals or periodicals: ] CA YASHWANT J. KASAR 27

28 Provided that nothing contained in 3 [sub-items (i), (ii) and (iii) of item (b)] shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent: 2 [Provided further that nothing contained in sub-item (v)of item(b)shall apply to an institution providing services by way of, (i)pre-school education and education up to higher secondary school or equivalent; or (ii)education as a part of an approved vocational education course. ] 1. Inserted by Notification No. 2/2018-Central Tax (Rate), dated , w.e.f Inserted by Notification No. 2/2018-Central Tax (Rate), dated , w.e.f CA YASHWANT J. KASAR 28

29 Circular No. 32/06/2018-GST -Clarifications Is hostel accommodation provided by Trusts to students covered within the definition of Charitable Activities and thus, exempt under Sl. No. 1 of notification No. 12/2017-CT (Rate)? Hostel accommodation services do not fall within the ambit of charitable activities as defined in para 2(r) of notification No. 12/2017- CT(Rate). However, services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent are exempt. Thus, accommodation service in hostels including by Trusts having declared tariff below one thousand rupees per day is exempt. [Sl. No. 14 of notification No. 12/2017- CT(Rate) refers] CA YASHWANT J. KASAR 29

30 Services supplied by IIM Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their students, by way of the following educational programmes, except Executive Development Programme (a) two year full time Post Graduate Programmes in Management for the Post Graduate Diploma in Management, to which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of Management (b) fellow programme in Management (c) five year integrated programme in Management CA YASHWANT J. KASAR 30

31 Services supplied by National Skill Development Corporation (NSDC) Services provided by - (a) the National Skill Development Corporation set up by the Government of India (b) a Sector Skill Council approved by the National Skill Development Corporation (c) an assessment agency approved by the Sector Skill Council or the National Skill Development Corporation (d) a training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to following are exempt (i) the National Skill Development Programme implemented by the National Skill Development Corporation; or (ii) a vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or (iii) any other Scheme implemented by the National Skill Development - Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from CA YASHWANT J. KASAR 31

32 Services of assessment bodies under NSDC Services of assessing bodies empanelled centrally by the Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under the Skill Development Initiative Scheme are exempt. Services under Deen Dayal Upadhyaya Yojana Services provided by training providers (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana implemented by the Ministry of Rural Development, Government of India by way of offering skill or vocational training courses certified by the National Council for Vocational Training are exempt. Training programmeswhere expenditure borne by Central Government - Services provided to the Central Government, State Government, Union territory administration under any training programme for which total expenditure is borne by the Central Government, State Government, Union territory administration are exempt. CA YASHWANT J. KASAR 32

33 Definitions relevant in respect of education services "Approved vocational education course" means, -(i) a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961 or (ii) a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship - para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from Educational Institution "Educational institution" means an institution providing services by way of- (i) pre-school education and education up to higher secondary school or equivalent (ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force (iii) education as a part of an approved vocational education course - para 2 of Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from CA YASHWANT J. KASAR 33

34 GST on Online Educational Services? CA YASHWANT J. KASAR 34

35 Other Services CA YASHWANT J. KASAR 35

36 GST on services provided to charitable trusts Services provided to charitable trusts are not out of ambit of GST. All services other than those specifically exempted provided to charitable trusts will be subject to GST. CA YASHWANT J. KASAR 36

37 GST on supply of goods by Charitable Trusts There is no exemption for supply of goods by charitable trusts. Thus any goods supplied by such charitable trusts for consideration shall be liable to GST. For instance, sale of goods shall be chargeable to GST. CA YASHWANT J. KASAR 37

38 Import of Services Also as per the entry no. 10 of Notification no.9/2017-lntegrated Tax (Rate) dated , if charitable trusts registered under Section 12AA of Income-tax Act receives any services from provider of services located in non-taxable territory, for charitable purposes, such services received are not chargeable to GST under the reverse charge mechanism. CA YASHWANT J. KASAR 38

39 GST on arranging yoga and meditation camp by charitable trusts Charitable trusts organise yoga camps or other fitness camps and they generally are not free for participants, as trusts charge some amount from the participants in the name of accommodation or participation. If trusts are arranging residential or non-residential yoga camps by receiving donation or other charges from the participants, these will not be considered charitable activities (as it is different from advancement of religion, spirituality or yoga). Since donation is received for participation, it will be considered commercial activity and it will definitely be covered under the GST. Similarly, if charitable trusts organise fitness camps in reiki, aerobics, etc., and receive donation from participants, such income that comes under health and fitness services and will also be taxable. CA YASHWANT J. KASAR 39

40 GST on running of public libraries by charitable trusts No GST will be applicable if charitable trusts are running public libraries and lend books, other publications or knowledge-enhancing content/material from their libraries. This activity is specifically excluded by way of entry No. 50 of Notification No. 12/2017- Central Tax Rate (and is applicable for everyone, including charitable trusts); which means services by private libraries are not exempt. Thus, if donors of public library remain open to all and if it caters to educational, informational and recreational needs of its users and finance for such libraries can be provided from donation, subscription, from special fund created for this purpose or from combination of all such sources, it will be called public library and no GST will be applicable on such services. CA YASHWANT J. KASAR 40

41 Co-Operative Banks & Credit Societies CA YASHWANT J. KASAR 41

42 Bankingservices fall under heading The main service supplied by Banks is of course payment of interest to depositors. CA YASHWANT J. KASAR 42

43 Is Interest subject to GST? Goods" means every kind of movable property other than money and securities but includes actionable claim, 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; 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; CA YASHWANT J. KASAR 43

44 Services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) is exempt from GST - Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from "Interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. Sale or purchase of foreign exchange among banks or dealers is exempt Service of inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers is exempt - Notification No. 12/2017- CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from CA YASHWANT J. KASAR 44

45 Exemption to GST on bank charges for cashless transactions upto Rs 2,000 Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other payment card service. "Acquiring bank" means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card - Notification No. 12/2017-CT (Rate) and No. 9/2017-IT (Rate) both dated , effective from Bank, FI, NBFC liable to pay GST under reverse charge in respect of services received from recovery agent In case of services supplied by a recovery agent to a banking company or a financial institution or a non-bankingfinancial company, the recipient of service i.e. banking company or a financial institution or a nonbankingfinancial company, located in the taxable territory Notification is liable to pay GST under reverse charge - No. 13/2017-CT (Rates) and 10/2017-IT (Rates) both dated , effective from CA YASHWANT J. KASAR 45

46 Taxability of Services Taxable DD and Other Commission Loan Processing Charges ATM Charges Credit Card Interest Prepayment Charges Locker Rent Foreign Exchange Charges Letter of Credit Charges Guarantee Commission Entry Fees/ Membership Fees Exempt Interest Profit on Sale of Investment Dividend Penal Interest CA YASHWANT J. KASAR 46

47 Banking and other financial services within India The place of supply of bankingand other financial services including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services - section 12(12) of IGST Act. However, if the location of the recipient of services is not on the records of the supplier of services, the place of supply shall be location of the supplier of services. CA YASHWANT J. KASAR 47

48 Services supplied by Banks to account holders outside India In case of services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders, the place of supply shall be the location of the supplier of service - section 13(8)(a) of IGST Act. Really, this provision is applies only to Indian bank or Financial Institution, as a foreign bank can never be banking company or Financial Institution as defined "Account" means an account bearing interest to the depositor, and includes a non-resident external account and a non-resident ordinary account - Explanation (a) to section 13(8) of IGST Act. "Banking company" has the meaning assigned to it in clause (a) of section 45A of the Reserve Bank of India Act, Explanation (b) to section 13(8) of IGST Act. [Thus, a foreign Bank providing service from outside India cannot be 'banking company'. Hence, general provision of place of supply of service will apply i.e. location of recipient of service will be place of supply of service]. CA YASHWANT J. KASAR 48

49 ITC: Special provisions in respect of Banks, FI and NBFC A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions of section 17(2) of CGST Act, or avail of, every month, an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month - section 17(4) of CGST Act. The option once exercised shall not be withdrawn during the remaining part of the financial year - first proviso to section 17(4) of CGST Act. The 50% restriction shall not apply to the tax paid on supplies made by one registered person to another registered person having same PAN number - second proviso to section 17(4) of CGST Act. This provision applies when Bank/FI/NBFC in one State provides services (or supplies goods) to its own branch in another State. In most of the cases, Bank, FI or NBFC may find it easy and profitable to avail 50% of input tax credit instead of availing input tax credit on proportionate basis as per section 17(2) of CGST Act. CA YASHWANT J. KASAR 49

50 CA YASHWANT J. KASAR 50

51 Time limit for issuing tax invoice for services The invoice in case of taxable supply of services, shall be issued within a period of thirty days from the date of supply of service - Rule 47 of CGST and SGST Rules, If the supplier of services is an insurer or a banking company or a financial institution, or NBFC, invoice can be issued within forty five days from the date of supply of service - first proviso to Rule 47 of CGST and SGST Rules, Relaxations to insurance, Bank, FI, telecom operator and NBFC in issuing invoice for own branch/division in other States As per section 25(5) of CGST and SGST Act, if a person (with single PAN) has establishments in different States, he requires GST registration in each State. Such establishments in different States are treated as 'distinct persons' for purpose of CGST and SGST Act. The establishment in one State may supply service to establishment in another State. This is particularly in sectors like banking, insurance, NBFC, Financial Institutions and telecom. In such cases, they may be given relaxation by Government on issue of invoice either when the supplier records the same in his books or on quarterly basis - second proviso to Rule 47 of CGST and SGST Rules, So far, such notification has not been issued. Such inter-state invoices and transfers are required as GST is a destination based tax and tax is to be paid where the services or goods are finally consumed. CA YASHWANT J. KASAR 51

52 Tax Invoices issued by Bank, FI, NBFC and insurance company Tax Invoice issued by Bank, FI, NBFC and insurer may be called by any other name. It can be made available physically or electronically. It may not have serial number and address of recipient. However, it should have other details as specified in rule 46 of CGST and SGST Rules - Rule 44(2) of CGST and SGST Rules, This relaxation shall also apply to Bill of Supply, Receipt Voucher, Refund Voucher, Payment Voucher, Debit Note, Credit Note and Revised Invoice. Invoice of ISD of banking, FI or NBFC - Where the Input Service Distributor is an office of a bankingcompany or a financial institution or NBFC, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as prescribed above - proviso to Rule 54(1) of CGST and SGST Rules, CA YASHWANT J. KASAR 52

53 Co-Operative Housing Societies CA YASHWANT J. KASAR 53

54 Activity of Housing Society ØFormation of Society on completion of building ØAllotment of Share to it s member ØContribution from members for maintenance of Building Whether Exemption is available on this contribution from Member? CA YASHWANT J. KASAR 54

55 Services of housing societies or Resident Welfare Association This service is 'Home Owners' Association' and falls under service classification tariff Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution up to an amount of Rs 7,500 per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex are exempt. Services provided by housing society or RWA for provision of service which is exempt from GST Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution for the provision of carrying out any activity which is exempt from the levy of Goods and Service Tax is exempt [This provision applies when the housing society or RWA undertakes activity which is exempt from GST like medical camp, social activities etc.] CA YASHWANT J. KASAR 55

56 Whether any Exemption is allowed to Housing Society Entry No. 77 of Notification No. 12/2017- Central Tax (Rate) Service by an unincorporated body or a non-profit entity registered under any law for the time being in force, to its own members by way of reimbursement of charges or share of contribution (a)as a trade union; (b)for the provision of carrying out any activity which is exempt from the levy of Goods and Service Tax; or (c)up to an amount of 1 [seven thousand five hundred] rupees per month per member for sourcing of goods or services from a third person for the common use of its members in a housing society or a residential complex. 1. Substituted for "five thousand" by Notification No. 2/2018-Central Tax (Rate), dated , w.e.f CA YASHWANT J. KASAR 56

57 Case Contribution from Members Other receipts Total Receipts Contrib ution Upto 7500 Above 7500 Exempted Receipts Total Receipts Cont ribut ion Total Receipts Eg. Interest Income Taxable Receipts Eg. Renting of Tower in the Financial Year Whether liable to register No No 0 Tax Payable on Yes No Yes No Yes Yes No Yes Yes CA YASHWANT J. KASAR 57

58 Property Tax What about property tax on parking which is sold to member? As it is separately identifiable for each member, this is pure agent service What About Property tax on common area? Sinking Fund/ Building What is Sinking Fund/building fund? Fund collected for development of building in future Whether it is Taxable? It is used by society in future for its member for development. Therefore it will be treated as service and will be taxable on receipt basis. CA YASHWANT J. KASAR 58

59 Whether it is covered for calculating exemption limit? Yes, as it is contribution from member for common purpose it will be counted for 7500 limit. Maintenance and Repair charges What is Maintenance and Repair charges? Maintenance as the a e suggest is the amount collectively reimbursed to the society to upkeep and maintain the building and premises on regular basis. What type of Charges are include in this? Electricity charges for common areas, watchman or security charges and other miscellaneous expenses incurred by the society including accounting, audit etc. is part of maintenance charges. Whether it is Taxable? Yes, subject to to limit of exemption of CA YASHWANT J. KASAR 59

60 Share Transfer Fees What is Share and Transfer Fees? Share transfer fees are the amount charged bythe society for transfer of shares by member Whether it is Taxable? Yes, it is taxable. Whether it is covered for calculating exemption limit? No, it is not cover in exemption as it is not contribution for sourcing of service from third person. CA YASHWANT J. KASAR 60

61 Non Occupancy Charges What is Non occupancy Charges? Non occupancy charges are charges levied by a housing society only when a flat or unit is let out by its members Whether it is Taxable? Yes, it is taxable Whether it is covered for calculating exemption limit? No, it is not cover in exemption as it is not contribution for sourcing of service from third person CA YASHWANT J. KASAR 61

62 Parking Charges What is Parking Charges? Charges to regulate the parking place between the members and providing of space by use of vacant land belonging to the society for a consideration. Whether it is Taxable? Yes it is purely service and thus it is taxable in Nature. Whether it is covered for calculating exemption limit? No as there is no 3 rd person is involved in this service. CA YASHWANT J. KASAR 62

63 Water Charges What is Water Charges? the society is not selling the water to its members. It is just providing the pipeline to deliver water in the enterprises. What is role of Society in this? Billing by Municipal corporation in the name of society and then on some basis society collect charges from member. Whether it is Taxable? Yes, as it is again contribution from member for common use of its member. This is taxable subject to limit of exemption of What about common Water used like Swimming Pool? It is also taxable subject to limit of exemption of What if different meter is provided for each member? It will fall under pure agent service, so not taxable. CA YASHWANT J. KASAR 63

64 Charges for use of club house, swimming Pool, etc What is Water Charges? These are specific services by the society to the member opting for such facilities. Whether it is Taxable? Yes, subject to exemption limit of Rs Other Transaction Rental for Mobile tower Renting Service Liable to tax at Hording charges Advertisement Charges Liable to Tax Use of terrace for function of non member or member Renting Service Liable to tax Interest on default charges Not covered in exemption as it is not interest on advances. Therefore liable to tax CA YASHWANT J. KASAR 64

65 CA YASHWANT J. KASAR 65

66 Thank You! CA Yashwant J. Kasar B.Com, FCA, DISA, CISA, PMP, FAIA Cell: yashwant@ykc.co.in CA YASHWANT J. KASAR 66