Response to questions raised by members in relation to Goods and Services Tax ( GST )

Transcription

1 Response to questions raised by members in relation to Goods and Services Tax ( GST ) 1. What will be the treatment for hallmarking charges recovered from Customer? As per Section 15 of the CGST Act, 2017, the value of supply of goods shall include all incidental expenses and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. Accordingly hallmarking charges recovered from the customer shall be included in the transaction value. Further, the supply would be a composite supply, where the principal supply would be the supply of jewellery. Accordingly, GST shall be charged on total value at the rate applicable on the principal supply (i.e. supply of jewellery). If charged separately (i.e. over and above the principal supply of goods), the hallmarking charges are to be mentioned in the Invoice. 2. What will be the treatment for goods sent for exhibition? Where the goods are sent for display at an exhibition (including entailing inter-state movement) the same would not constitute supply under the GST regime as the same are not supplies made for a consideration. In context of such movementsa. The consigner may issue a delivery challan in lieu of an invoice at the time of removal of goods for transportation b. Since such movement is only under a delivery challan no liability arises as there is no invoice or payment As regards the return movement, whereas the GST framework does not prescribe any mechanism, the goods may be moved under the same delivery challan. To that extent, the delivery challan should explicitly state that the goods covered there under are destined to come back post the exhibition. However, for an exhibition-cum sale event, the dealer may qualify as casual taxable person as the dealer would undertake transactions involving supply of goods. In such a case the dealer would be required to obtain a temporary registration in the State where the exhibition is held as well as pay an advance tax to the extent of his estimated tax liability. 3. What will be the treatment where goods sent for display at an exhibition are supplied there from (after end of the exhibition) to another State? What happens when the goods are carried by representative of an entity to another State[s]? If the goods are sent directly from the location where the exhibition is held to the customer in another State, the supplier needs to take registration as a casual taxable person and pay IGST in the State where the exhibition is held. Where the customer is known, the goods may be moved on sale on approval basis to such customer, under a delivery challan. As and when the customer approves the goods, an invoice may be issued charging IGST. However, where the customer is not pre-identified or where the goods are to be shown to various persons in one or more States, the supplier will need to obtain registration as a casual taxable person in the respective State[s].

2 4. What would be the GST implication where goods are carried by representative of an entity to another State[s]? Where the customer is known, the goods may be moved on sale on approval basis to such customer, under a delivery challan. As and when the customer approves the goods, an invoice may be issued charging IGST. However, where the customer is not pre-identified or where the goods are to be shown to various persons in one or more States, the supplier will need to obtain registration as a casual taxable person in the respective State[s]. The registration must be obtained at least 5 days prior to making any sales, and will be for a limited period of time. The supplier has to pay an advance deposit of the estimated GST amount at the time of taking registration, which can be adjusted for paying the GST on sales. If any balance amount of deposit is left, the same will be refunded. Alternatively, the goods may be moved under delivery challan as samples for display purposes only and then brought back to the origin State. Interested customer may be requested to place orders subsequently, based on which orders a separate inter-state supply, charging IGST, may be made. 5. At the time of selling jewellery, can we mention break-up of commodity price and making charges separately, in terms of the practice followed prior to GST? Since the supplier is making sale of finished jewellery, the invoice should mention only the value of jewellery sold alongwith its HSN. However, if, in terms of trade practice, it is necessary to provide a price break-up, the same may be provided on the invoice or as an enclosure thereto. 6. What would be the treatment for packing costs and freight charges recovered from the customer? As per Section 15 of CGST Act, 2017, the value of supply of goods shall include all incidental expenses and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services. Accordingly the said charges recovered from the customer shall be included in the transaction value. Further, the supply would be a composite supply, where the principal supply would be the supply of goods and GST shall be charged on total valueat the rate applicable on the principal supply. If charged separately (i.e. over and above the principal supply of goods), the said charges are to be mentioned in the Invoice. 7. Would any GST implication arise on irrecoverable processing loss in course of job work? In terms of Section 143(5) any waste and scrap generated during the job work may be supplied by the job worker directly from his place of business on payment of tax, if such job worker is registered, or by the principal, if the job worker is not registered However, the aforesaid provision does not cover process loss/ manufacturing loss which is not recoverable. Ideally, to establish that such loss is within an acceptable range, it should be within the limits as recognised in trade. In terms of Foreign Trade Policy issued by the DGFT, specific wastage norms are prescribed for the jewellery sector ranging from 0.20% to 5% (depending upon the nature of product).

3 8. When would a principal be required to pay GST on a reverse charge basis in respect of job work services? What are the compliance requirements when job work services are obtained from unregistered job workers? As per Sec 9(4) of the CGST Act, 2017, where supplies are received by a registered person from an unregistered person, GST shall be paid by such registered person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. Therefore if you are availing any service from a job worker who is unregistered, you will be liable to pay GST on reverse charge basis. Where the job worker remains unregistered even though his turnover is beyond the taxable threshold, the principal would continue to be liable under reverse charge till such job worker obtains a registration. Separate proceedings may be initiated against the job-worker for having not obtained registration and due paid taxes. In such cases, the recipient is required to issue the following documents- (a) A self- invoice in respect of services received from the job-worker (b) A payment voucher at the time of making payment to the job-worker 9. Can goods be sent to own branch of the same entity (in another State) on sale on approval basis? In terms of Section 25(4) of the CGST Act, 2017, units of same person in different states shall be considered as distinct persons for the purposes of this Act. As per Section 12 of the CGST Act, 2017 read with Section 31(7) thereof, where the goods are sent on sale on approval basis, the time of supply would trigger only when such supply is made or six month from the date of removal, whichever is earlier. Accordingly, it may be possible to send such goods on sale on approval basis to own branch of the same entity (in another State), which branch would be considered to be a distinct person. However, considering that commercially, there cannot be such a transaction between own units of the same entity, coupled with the fact that, in terms item 2 of Schedule I to the said Act, supply of goods between distinct persons are taxable, even though made without any consideration, it may be prudent to treat such transactions as stock transfers and charge IGST on the same. 10. Are there any uniform e-way bill requirements under GST for each state? In terms of the E-Way Bill Rules, each State Government has been empowered to specify the documents that the person in charge of a conveyance carrying any of goods shall carry while the goods are in movement or in transit storage. Accordingly, requirements as prescribed in the individual States has to be seen. 11. What would be the treatment in case where alloy is mixed by job worker in jewellery? Under GST, the aforesaid supply should be considered as composite supply, wherein, supply of services would be the principal supply. Accordingly, on the entire value (including value of alloy), GST would be charged at the rate of 5%

4 12. Whether advances received against supply of goods would attract GST? Yes, advance will be liable to GST at the time when it is received from the customer. However, where supply is made against such advances in the same tax period, the time of supply would be determined based on the date of invoice. Thus, GST shall be payable on advances only to the extent supply against the same have not been made during a tax period. 13. How can input tax credit of CGST and SGST charged by a hotel be claimed in case the recipient is not registered in that State? Input tax credit can only be claimed if the recipient is registered in that State. In case the recipient qualifies as a casual taxable person, he can obtain registration and claim such input tax credit. Alternatively, the recipient may obtain an ISD registration in such State to claim and distribute such input tax credit. However, where the aforesaid scenarios are not workable, the recipient may consider making the bookings though an agent, in which case the recipient would be charged IGST by such agent. 14. What would the GST rate for intermediaries/ aggregators, who themselves do not undertake any treatment or process on inputs? For qualifying as job worker, the intermediary/ aggregator would be required to carry some treatment or process. Absent the same, GST would apply at the rate of 18%. However, it may be argued that qua the principle who sends the goods to the intermediary/ aggregator, in substance, the latter would be commercially perceived as a job-worker, and hence GST at the rate of 5% should be applicable, though such view may be litigious. 15. What documentation has to be followed for sending jewellery for hallmarking? The jewellery should be moved under a delivery challan. 16. What would be the treatment when imported rough diamonds are sent to own cutting and polishing units located in another state and brought back post polishing? In terms of Section 25(4) of the CGST Act, 2017, units of same person in different states shall be considered as distinct persons for the purposes of this Act Further, as per of Section 143(1) of the CGST Act,2017, a registered personmay under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker Also, in terms of Section 2(68) of the CGST Act, 2017, job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly Evidently, the facilitation under Section 143 is available in relation to job work activity carried out by a job worker on goods belonging to another registered person. Thus, as both the units of the same person are different registered persons for the purposes of GST, the said transaction should

5 be eligible for the facilitation of Section 143 of the CGST, Act, Even otherwise, as per Section 25(4) such units are deemed to be distinct persons for the purposes of GST. Where the transaction is structured as job work, GST would not apply on the corresponding stock transfers of inputs / finished products. GST would however be applicable on the processing charges for undertaking manufacture. The movement of rough diamonds and the cut and polished diamonds would have to be made under delivery challans. However, it may be disputed that as the goods are owned by the same entity, the cutting and polishing unit cannot be said to be working on goods belonging to another person. Accordingly, the movement of the diamonds between such branches may be said to be not covered by Section 143 of the CGST Act, 2017, and GST may be sought to be recovered on the corresponding stock transfers at the rate of 0.25% or 3%. 17. Where invoice is issued, is there a need to also issue a delivery challan? No. 18. What would be the implication where old jewellery is sold by a consumer to a jeweller? In terms of press release dated 13th July 2017 issued by the CBEC, it has been clarified as under- Even though the sale of old gold by an individual is for a consideration, it cannot be said to be in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se. Accordingly the sale of old jewellery by an individual to a jeweller will not attract the provisions of section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism on such purchases. However, if an unregistered supplier of gold ornaments sells it to registered supplier, the tax under RCM will apply It is advisable that a declaration may be obtained from the customer to the effect that he is undertaking the said transaction in a personal capacity and not in course of furtherance of any business 19. Where imported goods are shipped prior to 1st July 2017 but against which bill of entry is filed post 1st July 2017, which tax would apply? IGST would apply in lieu of CVD and SAD 20. Whether bond is meant for traders/merchant exporter and LUT is meant for manufacturers making zero rated supplies? There is no such bifurcation. Separate conditions are prescribed where-under bond/ LUT may be given, which apply equally to type of exporters. 21. What will be the GST rate on electroplating services of on jewellery? Considering that electroplating is a treatment required to be undertaken in the course of jewellery manufacturing, the same should be chargeable to5% GST.

6 22. Whether it is permitted to have different series for various documents? Yes, in terms of CGST Rules, 2017, documents (invoices, debit notes, credit notes etc.) should be of a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolized as - and / respectively, and any combination thereof, unique for a financial year 23. What is the definition of exports under the GST? Exports of goods means- taking goods outside India. It comes under Section 2(5) of IGST Act.) 24. What categories of supplies have been covered as the Zero rated supplies under the IGST Act? All exports (whether of goods or services) as well as supplies to SEZs have been categorized as Zero Rated Supplies in the IGST Act. Zero rated supply under Section 16 of the IGST Act, 2017 means any of the following supplies of goods or services or both, namely: (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. On account of zero rating of supplies, the supplier will be entitled to claim input tax credit in respect of goods or services or both used for such supplies even though they might be non-taxable or even exempt supplies. 25. What are the GST refund options available to the exporters? Every person making claim of refund on account of zero rated supplies has two options. Either he can export under Bond/LUT and claim refund of accumulated Input Tax Credit or he may export on payment of integrated tax and claim refund of thereof as per the provisions of Section 54 of CGST Act, Thus, the GST law allows the flexibility to the exporter (which, will include the supplier making supplies to SEZ) to claim refund upfront as integrated tax (by making supplies on payment of tax using ITC) or export without payment of tax by executing a Bond/LUT and claim refund of related ITC of taxes paid on inputs and input services used in making zero rated supplies (attributable to zero- rated supplies in case the exporter also has domestic turnover) 26. What is the time line for obtaining refund on the GST paid? Grant of Provisional Refund in Case of Zero Rated Supplies GST law also provides for grant of provisional refund of 90% of the total refund claim, in case the claim relates for refund arising on account of zero rated supplies. The provisional refund would be paid within 7 days after giving the acknowledgement. The acknowledgement of refund application is normally issued within a period of 14 days but in case of refund of integrated tax paid on zero rated supplies, the acknowledgement would be issued within a period of three days. The provisional refund would not be granted to such supplier who was, during any period of five years immediately preceding the refund period, was prosecuted. 27. Can the EOUs continue to get duty free supplies from domestic market?

7 The EOUs will continue to get exemption from payment of the basic Customs Duty; however they will have to pay IGST on imports. On the IGST paid on import of inputs, ITC would be available which can be utilized for payment of GST payable on the goods cleared in the DTA. Refund of the unutilized ITC can also be claimed under Section 54(3) of CGST Act. 28. Under GST regime, can we get duty free benefit (all duties exempted) if we import using Advance authorization or EPCG? Under GST regime, both the Advance Authorization and EPCG holders would continue to get the exemption from payment of the Basic Customs Duty, Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. And for items specified in Fourth Schedule to Central Excise Act 1944 (specified petroleum products, tobacco etc.) exemption from Additional C Duty leviable under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 will also be available. However there is one major change. Now an Advance Authorization holder will have to pay IGST at the time of imports. He can take input Tax Credit (ITC), and after export, claim refund of any unutilized input tax credit at the end of tax period. The EPCG holder also will have to pay IGST at the time of imports and take input Tax Credit (ITC) on the duty paid. He cannot claim refund of any unutilized input tax credit after the exports. 29. Whether balance import quantities under Advance Authorizations issued before can be utilized after ? And, will there be any implications on export obligation? The balance import quantities under Advance Authorizations can be utilized for duty free import but only Basic Customs Duty will be exempted on import after The applicable IGST will be required to be paid. There will be no implication on export obligation of Advance Authorizations. 30. Whether an exporter intending to claim ITC refund needs to necessarily register? Yes. 31. Can the exporter avail both duty drawback and input tax credit? No. Where duty drawback is claimed no input tax credit of GST can be availed. 32. How will the tax amount be determined if the supply value is inclusive of the taxes? As per rule 35 of CGST rules 2017, where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory tax, the tax amount shall be determined in the following manner, namely,- Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST) (100+ sum of tax rates, as applicable, in %)

8 33. Expenses are incurred by employees and hence invoice is in the name of the employees. The same is claimed as reimbursement. Will the company be entitled to claim GST on the same? The Company cannot claim input tax credit for such expenses as the invoice is not issued in the name of the Company and against its GSTIN. 34. How can input tax credit be claimed in respect input services received by an office of a separately registered SEZ unit, which office does not engage in making any taxable supplies? Such office may register as an input service distributor to pass on input tax credit to the SEZ unit 35. Whether ITC of the purchase of car by a private company situated in Seepz will be available and how it will differ from the company situated outside Seepz? Input tax credit of Motor vehicle is specifically restricted in Section 17(5)(a) except when they are used for making the following taxable supplies, namely: (A) Further supply of such vehicles or conveyances; or (B) Transportation of passengers; or (C) Imparting training on driving, flying, navigating such vehicles or conveyances; Therefore, the ITC of GST paid on purchase of car will not be available irrespective of whether the unit is located in SEZ or otherwise. 36. Do we need to mention taxable value, if goods are supplied to job worker on delivery challan? Yes, the taxable value has be mentioned in the delivery challan. 37. If company A gives order on job work to B and B adds some gems from his company and finishes the goods and supply it back to A. In that scenario what will be the calculations? Will A pay GST and service charges at 5 % or B will collect it from A and deposit to Govt.? In such cases, there will be two supplies by the job worker: (i) supply of labor; and (ii) supply of gems. The parties should identify separate consideration for the labor part and for the sale of gems. Separate invoices should also be raised for the labor and gems. GST should be 3% on the supply of precious/ semi-precious gemstones. GST should be 5% on labor. If the job worker is unregistered, the principal has to pay the under reverse charge. 38. What is the status of GST provisions in case we wish to get any job work done from an unregistered entity from out of state? Firstly is the unregistered entity permitted to stay unregistered if its total earnings from job work are below Rs 20 lacs? Also, does the reverse charge apply to these criteria?

9 As per Section 5(4) of the IGST Act, for any inter-state supply made by an unregistered person to a registered person, the registered person is liable to pay IGST under the reverse charge mechanism. The unregistered entity need not register if his aggregate turnover is below Rs. 20 lakh. However, if he makes any inter-state supply, he has to compulsorily register. If a job worker who is required to register fails to take registration in default of the statutory requirement, the registered recipient will still be liable to discharge the GST under the reverse charge mechanism. 39. What will be the GST implication when goods are routed through branch office for further job work? IGST has to be paid on the to and fro movement of inputs and the corresponding finished product between the inter-company units, unless the receiving branch also carries out some treatment or process so as to qualify for benefit under Section 143 of the CGST Act, In case of procurement of goods/services, do we need to mention item wise summary while filing monthly return? For B2B supplies where there is a possibility of the recipient taking credit, all invoices, whether Intra-State or Inter-State supplies will have to be uploaded. In the case of inter-state B2C supplies, invoices of value more than Rs. 2.5 lakh will have to be uploaded. For inter-state B2C invoices below Rs. 2.5 lakh and all B2C intra-state invoices, State wise summary will be sufficient.