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Are services for facilitating supply of products without supply on own account classified as intermediary service?

GST as a whole having vast coverage, it sometimes gets really strenuous to figure out the classification of services provided, what rates will apply so as to there is certainty in tax liability. Section 2(13) of the IGST Act defines the term “intermediary” as – “a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more person but does not include a person who supplies such goods or services or both or securities on his own account.”

Let us refer to the case of Rajendran Santhosh (GST AAAR Karnataka) where the issue under consideration was whether services for facilitating supply of products without supply on own account was an intermediary service or not?

Facts of the Case

The Appellant is an individual and an employee of an overseas company engaged in business of manufacturing and selling various categories of distribution transformer components and accessories.
He was employed as the Regional Sales Manager for the Middle East and Indian markets by H-J Family of Companies having its office in the United States.
The Appellant was required to make a presentation of the various categories of distribution transformer components and accessories offered by the company.
The Appellant was required to report the status of the sales development (with customers in the Middle East and Indian Markets) to the Sales Manager based in the European Office on a weekly basis.
The customers approached by the Appellant place their orders for the products with the Company and make payments to the Company’s account.

The Appellant does not raise any invoice for the products ordered by the said customers.
The Appellant is paid lump-sum compensation monthly for the aforementioned services.
The Appellant does not raise any invoice to the Company for the said services.
In addition to the aforementioned compensation, the Company provides a credit card (that has been issued in the name of the company) for the purpose of reimbursing reasonable travel expenses, office needs and other business expenses incurred by the applicant in performing the said services.

Appellant sought an advance ruling on the following questions:-

What is the classification of the services rendered by the appellant to the company?
Is the appellant required to be registered under the CGST Act, 2017?
What is the liability of the appellant to pay tax on the services rendered by him to the Company?
What is the time and value of the supply of services rendered by the Appellant to the Company?

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The Karnataka Authority for Advance Ruling (AAR) held as follows:-

The services provided by the applicant to the company would result in the supply of services within the meaning of that term.
The services provided would be classifiable under HSN 9983.11 under the description “Other professional, technical and business services”
The applicant is required to be registered under the Central Goods and Services Tax Act, 2017
The rates of tax applicable for the service provided are-
In case of inter-State supply at 18% under the IGST Act
In case of intra-State Supply – Under CGST at 9%, Under KGST at 9%
The time of such supply would be determined as per the provisions of section 13(2) of the CGST Act, 2017 and the value of such supply would be the amount received by the applicant from the recipient of services and also includes the amounts reimbursed to the applicant by the recipient of services for the expenses incurred

Appeal to the Appellate Authority for Advance Ruling (AAAR)

The Appellant was aggrieved by the ruling given and filed an appeal before the AAAR on the following grounds.

The AAR was wrong in the finding that the appellant was an intermediary and not an employee within the meaning of the CGST Act
The AAR was wrong in the appreciation of evidence (including the Appellant’s Income Tax returns and the marketing brochure of H-J Family of Companies) in determining the nature of services performed by the Appellant under the GST law and had erred in the application of the established principles of law in the classification of income under indirect tax legislation.

Observations of AAAR on the issue of the appellant

The Appellant had admitted to the aspect of there being a supply of service by him to M/s H-J Family of Companies.
AAR had classified the service under Service Code 9983.11 as “Other professional, technical and business services”.
It was held by the AAR that the Appellant was providing management services as an intermediary.
It was the case of the Appellant that he was rendering a market research service for the US Company and his service was not that of an intermediary as held by the lower Authority.
AAAR found that the market research service was also classifiable under Service Code 9983 as “Other professional, technical and business services”.

The explanatory notes to the classification of services explain the entry code 9983.11 provided that. “This service code also includes providing advice, guidance and operational assistance concerning the marketing strategy and marketing operation of an organization. Marketing management consulting assignments may deal with one or a combination of the following:
analysis and formulation of a marketing strategy
formulation of customer service programmes, pricing, advertising and distribution channels
sales management and sales staff training
organization of marketing channels (sale to wholesalers or directly to retailers, direct mail, franchise, etc.), package design and other matters related to the marketing strategy and operations of an organization “
Therefore the only grievance of the Appellant was regarding the finding by the AAR that the management services were being provided in the capacity of an ‘intermediary’ as defined in Section 2(13) of the IGST Act.

Observations of the AAAR on the nature of services rendered by the appellant

The nature of the transactions of the Appellant as explained by him in his appeal was examined.
The Appellant was appointed as an “Independent Regional Sales Manager for the Middle East and Indian Markets” by the H-J Family of Companies, a company engaged in the business of manufacturing and selling various categories of distribution transformer components and accessories.
The Appellant was required to make a presentation of the products offered by the H-J Family of Companies.
The Appellant did not conclude contracts between H-J Family of Companies and the final customer and did not directly receive or deal with the products of H-J Family of Companies in any manner.
The customers entered into contracts directly with H-J Family of Companies.

It was evident from the above arrangement that the Appellant was merely doing sales presentations of the Company’s products to prospective customers in the Middle East and India.
The sales presentations made by the Appellant to the prospective customers resulted in some customers directly entering into a purchase contract with the H-J Family of Companies for purchase of the Company’s products.
The service of making the sales presentations regarding the product of the Company amounted to facilitating the sales and distribution of products by the H-J Family of Companies.

Observations of the AAAR on whether the appellant was an intermediary or not

It was evident from the definition of ‘intermediary’ as contained in Section 2(13) of the IGST Act that, to be called an ‘intermediary”, a person must satisfy the following conditions:-
He must be a ‘broker’ or an ‘agent’ or ‘any other person by whatever name called’, who arranges or facilitates the supply of goods or services or both or securities’.
The supply arranged or facilitated must be between two or more persons.
He is not the person who supplies such goods or services or securities on his own account.
The terms ‘arrange’ and ‘facilitate’ used in the definition of ‘intermediary’ have not been defined in the Act. Merriam Webster Dictionary defines the two words as:-
Facilitate: to make (something) easier; to help cause (something); to help (something) run smoothly and effectively.
Arrange: to bring about an agreement or understanding concerning; to make preparations; to move and organize (things) into a particular order or position; to organize the details of something before it happens; to plan (something).
Therefore, the terms ‘arranging’ or ‘facilitation’ covered a very wide range of activities ranging from marketing or sales promotion of the goods or services of the client, locating prospective buyers for the client’s products or locating sources of supply of the goods or services required by the client, price negotiation with the prospective buyer/ prospective supplier, procuring sales orders in respect of the goods or services of the client and like activities.

When AAAR applied the general understanding of the term ‘arranging’ or ‘facilitation’ to the instant case, they found that the Appellant facilitated the sale of the products of the company by undertaking sales presentations to the prospective customers in the Middle East and India.
Without the product, there was no purpose in the sales presentations made by the Appellant. It was only with the sole intention of facilitating the sales of the product of the principal that the Appellant provided the service.
The definition of ‘intermediary’ as given in Section 2(13) of the IGST Act excluded a person who supplied such goods or services or both on his own account.
It was the contention of the Appellant that the services of sales presentation were being provided to H-J Family of Companies on their own account and they did not directly receive or deal with the products of H-J Family of Companies in any manner.
In this connection, AAAR analyzed the definition of the term “intermediary services” under the GST regime and pre-GST regime.
In the pre-GST regime, an intermediary referred to a person who facilitated the provision of a main service between two or more person but did not include a person who provided the main service on his account.
Similarly, in the GST regime, an intermediary referred to a person who facilitated the supply of goods or services or both between two or more persons but excludes a person who supplies such goods or services or both on his own account.

The phrase ‘such goods or services’ used in the definition of ‘intermediary’ implied that the person should not be supplying on his risk and reward entirely, the very goods or services whose supply he was arranging or facilitating.
In the instant case, the Appellant was facilitating the supply of the products of H-J Family of Companies.
He was not supplying the products of H-J Family of Companies on behalf of the Principal.
He was only facilitating the sales with the prospective customers.
The actual supply of the products was done by the Principal directly to the customer.
The service of facilitating a supply of goods between the Principal and the customers was provided by the Appellant to the overseas client (H-J family of Companies).
The Appellant was not supplying such goods on his own account.
The argument of the Appellant that they fall within the exclusion clause of the definition of intermediary was not a correct interpretation of the law.
The language of the exclusion clause was such that it was applicable to those persons who supplied goods, services or both on their own account.
If a person either ‘facilitated’ or alternately ‘arranged’ any supply of goods, services or both, between two or more persons, and did not supply such goods, services or both on his own account, he would be regarded as an ‘intermediary’.
The Appellant was clearly facilitating the supply of the products of H-J Family of Companies directly to the latter’s customers and is not supplying such goods on his own account. Therefore, the Appellant did not fall within the ambit of the exclusion.

Therefore, AAAR upheld the decision of the AAR that the service of sales presentations of the products of H-J Family of Companies was classifiable as “Other professional, technical and business services” under Service Code 9983.11 and the same was being rendered as an ‘intermediary service’ as defined under Section 2(13) of the IGST Act.

Hence, services for facilitating supply of products without supply on own account are intermediary services.

What difference would it make if one classified this service as a market research service and not an intermediary service?

It is important to remember here that the assessee was providing services to an overseas client. As per Section 13 of IGST – The place of supply of services except the services specified in sub-sections (3) to (13) shall be the location of the recipient of services (in this case it is outside the taxable territory). Hence, if it was a market research service then it would not be taxable as recipient was outside India.

Now as per Section 13 of IGST – The place of supply of the Intermediary services shall be the location of the supplier of the service. Hence, if it was an intermediary service then it would be taxable as the supplier is located in India.

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September, 14
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GST, Legal Court Judgement
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Know all Registration Provisions under GST

Introduction

Registration of an entity is the initial basic step one has to follow to carry on supply or any other GST compliances. While one may find the registration process unnecessary and complicated, it is followed by a number of advantages, such as legal recognition as supplier of goods/services, availment of ITC, legal authorisation to collect tax from customers etc. Let us learn the varied GST provisions in detail.

Salient features of registration under GST

Registration in GST is PAN based and State specific.
Supplier has to register in each of such State or Union territory from where he supplies.
A person registered in one State is considered ‘unregistered person’ outside the State.
If a person has unit in SEZ or is a SEZ developer and also unit in domestic tariff Area (i.e. outside the SEZ) in the same State, then he has to take separate registration for his SEZ unit.
In GST registration, the supplier is allotted a 15-digit GST identification number called “GSTIN” and a certificate of registration. The first 2 digits of the GSTIN is the State code, next 10 digits are the PAN of the legal entity, the next two digits are for entity code, and the last digit is check sum number.
Registration under GST is not tax specific which means that there is a single registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
A given PAN based legal entity would have one GSTIN per State, that means a business entity having its branches in multiple States will have to take separate State-wise registration for the branches in different States. But a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business.
Every registered person is required to display his certificate of registration and GSTIN in a prominent location at his principal place of business and at every additional place of business.

Who is not required to obtain registration under GST

Every supplier is required to get registered under GST apart from the following:-

Entities fulfilling the below mentioned criteria are not required to obtain registration mandatorily

a. In case of Exclusive Supply of Goods

Small businesses having aggregate turnover not exceeding Rs 40 Lakh (Rs 20 lakh if business is in the notified special category states)

b. In case of supply of services or mixed supplies

Small businesses having aggregate turnover not exceeding Rs 20 lakhs (Rs 10 lakh business is in the notified special category states)

i. Persons who are engaged exclusively in the business of supplying goods, services or both that are not liable to tax or wholly exempt from tax

ii. An agriculturist to the extent of supply of produce out of cultivation of land

iii. When all the supplies being made by a supplier are taxable under reverse charge i.e. where total tax is payable by the recipient of the goods or services.

What do you mean by aggregate turnover?

Aggregate Turnover is the value of all taxable supplies (excluding inward supplies under RCM), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number
It excludes Central tax, State tax, Union territory tax, Integrated tax and cess
Aggregate turnover includes supplies made by him on behalf of his principals
The value of job-worked goods is excluded from aggregate turnover if he is a job worker.

Who is required to get registered mandatorily?

The GST law enlists certain categories of suppliers who are required to get compulsory registration irrespective of their turnover.

1.Supplier supplying goods or services outside the State [i.e inter state supplier]

2. Registration for inter state supplier is mandatory. However, this compulsion is relaxed (If the turnover of the below mentioned suppliers is less than specified threshold limit, they will not be required to register), even if they supply such goods outside the State for certain categories of suppliers like:-

a. supplier of handicraft goods

b. supplier of services (except in relation to jewelry, goldsmiths’ and silversmiths’ wares)

c. supplier of job work services. (except in relation to jewelry, goldsmiths’ and silversmiths’ wares)

3. Those paying tax on reverse charge basis.

4. Casual taxable person (casual taxable persons making supplies of specified handicraft goods need not take compulsory registration and are entitled to the threshold exemption limit)

5. Non-resident taxable persons who are not having fixed place of business or residence in India.

6. A person who supplies on behalf of some other taxable person (i.e. an Agent of some Principal).

7. E-commerce operators

8. Authorities notified who are mandated to deduct TDS @ 1% on payment made to supplier (value of supply > Rs. 2.5 lakh)

9. Input service distributor

10. Those supplying online information and data base access or retrieval services from outside India to a non-registered person in India. Instead of State-wise registration, he will take single registration for entire India either himself or through his appointed agent in India, and will pay IGST.

What is the time limit for applying for registration under GST?

An application has to be submitted online through the common portal (GSTN) within 30 days from the date when liability to register arose.
The casual and non-resident taxable persons need to apply at least 5 days prior to the commencement of the business.
For transferee of a business as going concern, the liability to register arises on the date of transfer.

Within how much time will an application of registration be accepted/rejected?

The Proper Officer has to either raise a query or approve the grant of registration within 3 working days failing which registration would be considered as deemed to have been approved.
The applicant would have to respond within 7 working days starting from the 4th day of filing the original application.
The proper officer would have to grant or reject the application for registration within 7 working days thereafter.

Can the registration information be amended?

In case the change in the registration information (change in legal name, State of place of business or additional place of business) the taxable person will apply for amendment within 15 days of the event necessitating the change.
The proper office may approve or reject the amendment within next 15 days, but the proper officer shall not reject the application without giving the person an opportunity of being heard
For other changes like name of day to day functionaries, e-mail Ids, Mobile numbers etc. no approval of the proper officer is required, and the amendment can be affected by the taxable person on his own on the common portal.

Can registration be cancelled?

The GST law provides for two scenarios where cancellation of registration can take place

1.Taxable person no more requires the registration and wants to voluntarily cancel it

2. When the proper officer considers the registration liable for cancellation in view of certain specified defaults:-

i. registered person has contravened such provisions of the Act or the rules made thereunder as may be prescribed

ii. a person paying tax under composition scheme has not furnished returns for 3 consecutive tax periods

iii. a person, (other than a person under composition levy), has not furnished returns for a continuous 6 months

iv. any person who has taken voluntary registration under of section 25(3) has not commenced business within 6 months from the date of registration

v. registration has been obtained by means of fraud, wilful misstatement or suppression of facts

Within how much time can a person apply for cancellation suo moto?

The taxable person desirous of cancellation of Registration will apply on the common portal within 30 days of event warranting cancellation.

How will the pending dues be affected in the event of cancellation?

The cancellation of registration shall not affect the liability of the person to pay tax and other dues under this Act or to discharge any obligation under this Act or the rules made thereunder.

From what date will a registration considered as suspended?

Where a registered person has applied for cancellation of registration, the registration shall be deemed to be suspended (pending the completion of the proceedings for cancellation of registration) from later of

i. the date of submission of the application

ii. the date from which the cancellation is sought

Can order of cancellation of registration be revoked?

When the registration has been cancelled by the Proper Officer on his own motion and not on the basis of an application by the registered person, then the registered person, whose registration has been cancelled, can submit an application for revocation of cancellation of registration.
Application for revocation is to be filed in FORM GST REG-21, to the Proper Officer, within a period of 30 days from the date of order of cancellation of registration.
If the registration has been cancelled for failure to furnish returns, revocation application shall be filed only after such returns are furnished and any amount due, has been paid along with any interest, penalty or late fee.
On examination of the application, if the Proper Officer is satisfied, that there are sufficient grounds for revocation of cancellation of registration, then he shall revoke the cancellation of registration by an order in FORM GST REG-22.
Such order will be passed within a period of 30 days from the date of the receipt of the application.
If on examination of the application for revocation, if the Proper Officer is not satisfied then he will issue a notice in FORM GST REG–23 requiring the applicant to show cause as to why the application submitted for revocation should not be rejected.
Applicant has to furnish the reply within a period of 7 working days from the date of the service of the notice in FORM GST REG-24
Upon receipt of the information or clarification in FORM GST REG-24, the Proper Officer shall dispose of the application within 30 days from the date of the receipt of clarification from the applicant. In case the information or clarification provided is satisfactory, the Proper Officer shall dispose the application as per Point 4 above.
In case it is not satisfactory the applicant will be mandatorily given an opportunity of being heard, after which the Proper Officer after recording the reasons in writing may by an order in FORM GST REG- 05, reject the application for revocation of cancellation of registration and communicate the same to the applicant.

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July, 30
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GST
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Is separate GST registration required if a contractor is providing services in different state?

Introduction

Entities fulfilling the below mentioned criteria are not required to obtain registration mandatorily

1.In case of Exclusive Supply of Goods

Small businesses having aggregate turnover not exceeding Rs 40 Lakh (Rs 20 lakh if business is in the notified special category states)

2. In case of supply of services or mixed supplies

Small businesses having aggregate turnover not exceeding Rs 20 lakhs (Rs 10 lakh business is in the notified special category states)

Registration in GST is PAN based and State specific. Supplier has to register in each of such State or Union territory from where he supplies. A person registered in one State is considered ‘unregistered person’ outside the State.

If a person is registered in one state and is hired to provide works contract services in another state, will such person be required to be registered in such other case?

Let us refer to the advance ruling of the Karnataka Advance Ruling Authority (AAR) in the case of M/s T & D Electricals (31.03.2020) where the applicant intends to supply goods or services or both from their principle place of business, which is located in Rajasthan for providing services as a work contractor in Karnataka.

Facts of the Case

The Applicant is registered under the Goods and Services Act, 2017 as works contractor and wholesale supplier in Rajasthan.
They have been awarded a contract by M/s Shree Cement Ltd for electrical, instrumentation and IT jobs (works contract) at a township for Karnataka Cement Project (a unit of Shree Cement Ltd) in the state of Karnataka.
The scope of work of the contract includes complete electrical & instrumentation jobs, installation, testing and commissioning at township. The job involves supply of material and installation, testing and commissioning of the same.
The contractor (applicant) will have to arrange all required tools, materials and manpower/electrician/technician as per the contract.
The invoices have to be addressed to Karnataka Cement Project and the GSTIN of the Shree Cement Ltd (Karnataka) is required to be mentioned in the invoices.
The contractor (applicant) does not have any premises in Karnataka. M/s Shree Cement Ltd will only provide temporary small space for office & store in their premises without any written documents.

In view of this, the applicant filed the instant application, as an unregistered person, seeking advance ruling in respect of the following questions:-

Whether separate registration is required in Karnataka state? If yes, whether agreement would suffice as address proof since nothing else is with the applicant and service recipient will not provide any other proof?
If registration is not required in Karnataka and if goods are purchased from Rajasthan and shipped directly to the township at Karnataka then whether the dealer in Rajasthan has to charge CGST & SGST or the IGST?
If registration is not required in Karnataka and if goods are purchased from Karnataka to use the goods at the township in Karnataka then whether the dealer in Karnataka has to charge CGST & SGST or IGST?
What documents would be required with transporter to transit/ship material at Karnataka site from dealer/supplier of Rajasthan and in case of dealer/supplier is of Karnataka.

Submissions by the Applicant:-

Section 22 of the CGST Act 2017 provides requirement for registration according to which every supplier shall be liable to be registered under this Act in the state or union territory, other than special category of states, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds Rs 20 lakhs.
Section 2(71) defines location of supplier and in the instant case location of supplier (applicant) is Rajasthan, as the supply is made from Rajasthan.
Further Section 2(71) also defines location of supplier of services’ and in the instant case the location of the applicant (works contractor) will be the state where his principal place of business is registered (unless he has established office/establishment in the place where the services are supplied)
The place of supply, in case of works contract services, shall be the location at which the immovable property (construction site) is located, as per Section 12(3)(a) of IGST Act 2017.
Therefore according to the applicant, they are not required to have any separate GST registration in Karnataka State.
Section 10(1) of the IGST Act 2017 determines the place of supply of goods, other than supply of goods imported into, or exported from India, which has two clauses i.e. (a) and (b). We understand that clause (b) is applicable to the instant case and hence CGST & SGST should be charged in case when registration is not required and goods are purchased from Rajasthan and shipped directly from dealer of Rajasthan to township at Karnataka. Further if the goods are purchased from a dealer of Karnataka and shipped to the site of Karnataka, then IGST should be charged in terms of Section 10(1)(b) of the IGST Act 2017.

Observations by the AAR

The applicant herein has got the contract form M/s Shree Cement Ltd., Rajasthan for execution of the same at the location situated in Kalaburagi district of Karnataka State.
The applicant is a registered person in Rajasthan and with this background has sought advance ruling in respect of the questions mentioned at para 2 supra. We take up each question at a time for discussion.

Is separate registration is required to execute the contract in Karnataka State or not?

Section 22 of the CGST Act 2017 is relevant to registration and stipulates that every supplier shall be liable to be registered in the state from where the said supplier makes the taxable supply of goods or services or both, subject to the threshold limit of the aggregate turnover in a financial year.
In the instant case, the applicant intends to supply goods or services or both from their principle place of business, which is located in Rajasthan.
The applicant has only one principle place of business, for which registration has been obtained and does not have any other fixed establishment other than the principle place of business, as admitted by the applicant.
Therefore the location of the supplier is nothing but the principle place of business which is in Rajasthan.
Thus there is no requirement for a separate registration in Karnataka for execution of the contract.

If registration is not required in Karnataka and if goods are purchased from Rajasthan and shipped directly to the township at Karnataka then whether the dealer in Rajasthan has to charge CGST & SGST or the IGST?

In this situation the supplier i.e. dealer in Rajasthan and the recipient of goods i.e. the applicant, both are situated in the same state of Rajasthan and hence the impugned supply becomes intra-state supply, in terms of Section 8 of the IGST Act 2017.
The said supply gets covered under Bill to – Ship to transaction, in terms of Section 10(1)(b) of IGST Act 2017.
Under “Bill To Ship To” model of supply, there are three persons involved in a transaction (‘A’ is the person who has ordered ‘B’ to send goods directly to ‘C’)
According to section 10 (1)(b) of the IGST Act, where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person.
Thus CGST & SGST has to be charged by the dealer in the relevant invoice. However, the applicant has to charge IGST in their invoice addressed to M/s Karnataka Cement Project.

If registration is not required in Karnataka and if goods are purchased from Karnataka to use the goods at the township in Karnataka then whether the dealer in Karnataka has to charge CGST & SGST or IGST?

In this situation the supplier i.e. dealer is situated in Karnataka & the recipient of goods i.e. the applicant, is situated in the state of Rajasthan and hence the impugned supply becomes inter-state supply, in terms of Section 7(1) of the IGST Act 2017.
Further the said supply gets covered under Bill to – Ship to transaction, in terms of Section 10(1)(b) of the IGST Act 2017.
Thus IGST has to be charged by the dealer in the relevant invoice. However, the applicant also has to charge IGST in their invoice addressed to M/s Karnataka Cement Project (a unit of Shree Cement Ltd.).

Thus it can be concluded that,

It is not required to obtain a separate registration in a separate state, to execute the project in that state, when they are registered in another. However, one is at liberty to obtain the said registration, if they are able & intend to have a fixed establishment at the project site in of the different state.

The dealer from a one state has to charge CGST & SGST when the goods, purchased by the applicant who is registered in the same state as the dealer but are shipped to project site in a different state, under “bill to ship to” transaction in terms of Section 10(1)(b) of the IGST Act 2017.

The dealer in state where the project is taking place has to charge IGST when the goods, purchased by the applicant, are shipped to project site, under bill to ship to transaction in terms of Section 10(1)(b) of the IGST Act 2017.

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July, 21
0
GST
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Standard

Issuing GST Invoice? Know all about Invoice provisions under GST

Introduction

An invoice is basically a bill of the list of goods sent or services provided, along with the amount due for payment. It is a commercial instrument issued by the supplier to the recipient.

What is the importance of an invoice?

Evidences of supply of goods or services
A registered person cannot avail input tax credit unless he is in possession of a tax invoice or a debit note.
Invoice is an important indicator of the time of supply.

When a tax invoice or a bill of supply should be issued by a registered person?

For Supply of Goods

A registered person supplying taxable goods shall issue a tax invoice,

before or at the time of removal of goods (for movable goods)
before or at the time of delivery of goods or when it is made available to the recipient (for immovable goods)

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For Supply of Services

Invoices should be issued within 30 days from the date of supply of services

Can a registered person issue a revised invoice?

1.A registered person may, within 1 month from the date of issuance of certificate of registration, issue a revised invoice against the invoice already issued during the period beginning with the effective date of registration till the date of issuance of certificate of registration to him.

2. A person who becomes liable for registration has to apply for registration within 30 days of becoming liable for registration. When such an application is made within the time period and registration is granted, the effective date of registration is the date on which the person became liable for registration.

3. Thus there would be a time lag between the date of grant of certificate of registration and the effective date of registration.

4. For supplies made by such person during this period, a revised invoice can be issued, so that ITC can be availed by the recipient on such supplies.

5. Let us refer to the below mentioned example of Mr ABC to understand the same:-

i. Date from which Mr ABC became liable for registration – 01/01/2020

ii. Date of Application of Registration – 15/01/2020 (within 30 days)

iii. Date when registration was granted – 22/01/2020

iv. Date from which registration is applicable – 01/01/2020

v. Revised invoice can be issued for supplies made by ABC for the period of – 01/01/2020 to 22/01/2020

What documents are to be issued for advance payments?

Whenever a registered person receives an advance payment w.r.t any supply of goods, services or both, he has to issue a receipt voucher or any other document, containing such particulars as prescribed, evidencing receipt of such payment.
Where any such receipt voucher is issued, but subsequently no supply is made and no tax invoice issued, the registered person who has received the advance payment can issue a refund voucher against such payment.

What documents are to be issued by a person liable to pay tax under the reverse charge mechanism (RCM)?

A registered person liable to pay tax under RCM has to issue an invoice in respect of goods or service or both received by him.
Such a registered person in respect of such supplies also has to issue a payment voucher at the time of making payment to the supplier.

How are Invoices to be issued in case of continuous supply?

Continuous supply of	Situation	Invoice to be issued on or before
Goods	successive statements of accounts or successive payments are involved	the time of each of the statements is issued or each of the payments are received.
Services	due date of payment is ascertainable from the contract	the due date of payment
Services	due date of payment is not ascertainable from the contract	the time when the supplier receives the payment
Services	payment is linked to the completion of an event	the date of completion of that event

What is the due date of issuing an invoice, where supply of service ceases under a contract before completion of supply?

In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such cessation.

When is an invoice to be issued when sale is on approval basis?

The invoice w.r.t goods sent on approval basis has to be issued at the earliest of:

Before or at the time of supply
6 months from the date of removal of goods from factory/godown etc

What is a Credit Note?

In cases where tax invoice has been issued for a supply and subsequently it is found that the value or tax charged in that invoice is more than what is actually payable or where the recipient has returned the goods, the supplier can issue a credit note to the recipient.
A registered person who issues such a credit note has to declare details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made or date of furnishing of the relevant annual return whichever is earlier.
The tax liability of the registered person will be adjusted in accordance with the credit note issued
No reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

What is a Debit Note?

In cases where tax invoice has been issued for a supply and subsequently it is found that the value or tax charged in that invoice is less than what is actually payable, the supplier can issue a debit note to the recipient.
Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the details of such debit note in the return for the month during which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.

Manner of issuing invoice

In case of supply of goods, the invoice shall be prepared in triplicate,

the original copy being marked as ORIGINAL FOR RECIPIENT
the duplicate copy being marked as DUPLICATE FOR TRANSPORTER
the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.

In case of supply of services, the invoice shall be prepared in duplicate:-

the original copy being marked as ORIGINAL FOR RECIPIENT
the duplicate copy being marked as DUPLICATE FOR SUPPLIER.

Tax Invoice in special cases

Supplier	Tax Invoice
Input Service Distributor (ISD) is an office of a banking company or a financial institution (including a NBFC)	a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the prescribed information
Insurer, banking company or a financial institution, (including a NBFC)	a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the prescribed information
Goods transport agency (GTA) supplying services in relation to transportation of goods by road in a goods carriage	tax invoice or any other document in lieu thereof, by whatever name called, containing 1. gross weight of the consignment 2. name of the consignor and consignee 3. registration number of the carriage in which the goods are transported 4. details of goods transported 5. details of place of origin and destination 6. GSTIN of the person liable for paying tax whether as consignor, consignee or GTA
Person supplying passenger transportation service	tax invoice shall include ticket in any form, by whatever name called, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information as prescribed

Can goods be transported without an invoice?

In the following cases it is permissible for the consignor to issue a delivery challan in lieu of invoice at the time of removal of goods:

supply of liquid gas where the quantity at the time of removal from the place of business of the supplier is not known
transportation of goods for job work
transportation of goods for reasons other than by way of supply
such other supplies as may be notified by the Board.

How is a delivery challan to be issued?

The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following manner:

the original copy being marked as ORIGINAL FOR CONSIGNEE
the duplicate copy being marked as DUPLICATE FOR TRANSPORTER
the triplicate copy being marked as TRIPLICATE FOR CONSIGNER

Where the goods are being transported in a semi knocked down or completely knocked down condition

the supplier shall issue the complete invoice before dispatch of the first consignment
the supplier shall issue a delivery challan for each of the subsequent consignments, giving reference of the invoice
each consignment shall be accompanied by copies of the corresponding delivery challan along with a duly certified copy of the invoice
the original copy of the invoice shall be sent along with the last consignment.

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July, 17
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Interest on PPF, Savings, Loans to be included for calculating GST Registration threshold: AAR

Interest on PPF, Savings, Loans to be included for calculating GST registration threshold: AAR

The value of exempted income, like interest on PPF, savings bank account and loans given to family/friends, will be included along with taxable supplies while calculating the threshold limit for obtaining GST registration

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Introduction

GST is a tax leviable on the event of “supply”.According to Section 7 of the CGST Act, 2017 the expression “supply” includes

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
import of services for a consideration whether or not in the course or furtherance of business
activities specified in Schedule I, made or agreed to be made without a consideration
Activities to be treated as supply of goods or supply of services as referred to in Schedule II.

Under GST law, every supplier is required to get registered. However, the below mentioned small businesses have been provided relief of mandatory registration under GST law:-

In case of exclusive supply of goods, businesses having all India aggregate turnover below:-

Rs 40 lakhs (for other than notified special category states)
Rs 20 lakh (for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura and Uttarakhand)

In case of supply of services or in case of mixed supplies

Rs 20 lakhs (for other than notified special category states)
Rs 10 lakh (for Manipur, Mizoram, Nagaland and Tripura)

The GST Council in its 32nd meeting gave an option to the hilly and north eastern states to choose either Rs. 20 lakhs or Rs. 40 lakhs as the turnover limit for GST exemption in case of supplier of goods.

What do you mean by aggregate turnover?

From reading the registration criteria, it is clear that computing nationwide aggregate turnover is essential in order to determine whether a person is required to get mandatory registration under GST.

Section 2(6) of the Central Goods & Services Tax Act, 2017 defines the term “aggregate turnover”.

‘Aggregate turnover’ means the aggregate value of all:-

taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis)
exempt supplies
exports of goods, services or both
inter-state supplies of persons having the same Permanent Account Number

Aggregate turnover is to be computed on an all-India basis. It excludes Central tax, State tax, Union territory tax, Integrated tax and cess.

Is exempted income, like interest on PPF, savings bank account and loans given to family/friends, to be included in aggregate turnover while calculating the threshold limit for obtaining GST registration?

The Gujarat Authority for Advance Ruling (AAR) recently passed a ruling for Shree Sawai Manoharlal Rathi on a similar situation, where the applicant had not engaged in any business and his only income was exempt under GST.

Facts of the Case

The applicant is an individual having not engaged in any business.
His receipts are only from savings, personal loans and advances and deposits, which are reflected in the Income Tax Returns.
The applicant submitted that his estimated receipts for the F.Y. 2018-19 is likely to be totally Rs.20,12,000, which includes:

i. Rent receipts = Rs.9,84,000

ii. Bank interest = Rs.3,000

iii. Interest on PPF deposit = Rs.2,76,000

iv. Interest on Personal Loans and Advances = Rs.7,49,000

Issue Raised:

In this case, the point is to be decided as to whether interest received on deposit in Public Provident Fund (PPF), Personal Loans & Advances to family/friends and deposit in Saving Bank Accounts, would be considered for the purpose of calculating the threshold limit of Rs. 20 Lakh for registration under GST Law?

AAR Proceedings

1.“Aggregate Turnover” is relevant to a person to determine the threshold limit to obtain registration under the Act (supply of Services or goods and services both): Rs.20 Lakh (Rs.10 Lakh in case of supplies effected from special category states).

2. We find that the “aggregate turnover” is an all-encompassing term covering all the supplies effected by a person having the same PAN.

3. “Exempt supply” is defined under Section 2(47) of the CGST Act, 2017 as supply of any goods or services or both which attracts nil rated of tax or which may be wholly exempt under section 11, or under section 6 of the IGST Act, and includes Non- Taxable supply.

4. “Nil rated supply” is nowhere defined in GST Law. However, the basic difference between nil rated and exempt supply is that the tariff is higher than 0% in case of exempt supply. But there is no tax payable due to exemption notification. Whereas in case of NIL rated supply, the tariff is at NIL rate so there is no tax without the exemption notification.

5. Thus, the different kinds of supplies covered under the “aggregate turnover” are:

i. Taxable Supplies;

ii. Supplies that have a NIL rate of tax

iii. Supplies that are wholly exempted from SGST, UTGST, IGST or Cess

iv. Supplies that are not taxable under the Act

v. Export of goods or services or both, including zero-rated supplies.

6. We further find that under GST, Supply is considered a taxable event for charging tax. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to decide GST’s applicability.

7. Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST. Supply has two important elements:

i. Supply is done for a consideration

ii. Supply is done in course of furtherance of business.

8. Notification No. 12/2017-Central Tax (Rate) and Notification No.9/2017-Integrated Tax (Rate), provides a list of services exempted from payment of Central Tax on intra-State supply and Integrated Tax on Inter-State supply.

9. Entry 27(a) of Notification No. 12/2017 and Entry 28(a) of the Notification No. 9/2017 relates to services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest.

10. The services regarding interest income are covered under the above Notification. Therefore, such services are exempted from payment of GST and the individual is not required to discharge GST on the activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest. Therefore, in given case GST is not leviable on Interest Income earned by the Applicant.

11. From the above, it is revealed that the applicant is an individual with an annual turnover of more than Rs 20 Lakh.

12. Since this income is interest-related, the turnover is exempt from GST.

13. However, the Applicant also supplies services of “Renting of immovable property” along with activity of providing services by way of extending deposits, loans or advances where the consideration is represented by way of interest.

14. His turnover from the rent income is Rs.9.84 Lakh and this transaction (Renting of immovable property) is chargeable to GST. However, his taxable turnover is only Rs.9.84 Lakh. Going by the definition of “aggregate turnover”, the Applicant is required to consider the value of both the taxable supply i.e. “Renting of immovable property” and exempted supply of service provided by way of extending deposits, loans or advances for which they earned interest income, to arrive at “Aggregate Turnover” to determine the threshold limit for the purpose of obtaining registration under the GST Act.

The AAR thus concluded that, the Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF & Bank Saving accounts and loans and advances given to his family/friends along with the value of the taxable supply i.e. “Renting of immovable property” for the purpose of calculating the threshold limit of Rs.20 Lakh for obtaining registration under GST law.

Ruling may lead to homemakers, retired persons and freelancers may have to taking GST registration

Let us refer to the example given below to understand this better:-

Supplier	State	Nature of Taxable Supply	Taxable Supplies	Exempt Income (interest , etc)	Limit	Is registration mandatory
A	Maharashtra	Exclusive supply of goods	35 lakhs	6 lakh	40 lakhs	Yes
B	Arunachal Pradesh	Exclusive supply of goods	15 lakhs	8 lakhs	20 lakhs	Yes
C	Tripura	Supply of services	Nil	11 lakhs	10 lakhs	Yes
D	Gujarat	Exclusive supply of goods	20 lakhs	1 lakh	40 lakhs	No
E	Manipur	Supply of services	5 lakh	3 lakhs	10 lakhs	No
F	Karnataka	Mixed Supply	15 lakhs	7 lakhs	20 lakhs	Yes

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Goods Purchased Overseas and Sold Overseas are Liable for GST in India : AAR

GST payable on goods sold to customer outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises

Introduction

The world has become one huge integrated market. Businesses based in India are scattered all around the world. A business in India may have suppliers or customers from outside India. Issues arise in these cases pertaining to the leviability of taxes. GST is a destination based tax on consumption of goods and services in India. However, is GST payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises?

The Gujarat Authority of Advance Ruling (AAR) had recently passed a decision with respect to a similar issue raised in the case of M/s. Sterlite Technologies Ltd, which led to confusion, concern and doubt among taxpayers.

Let us first refer to certain applicable provisions of the law before we move forward

As per Section 2(10) of the IGST Act, 2017, “import of goods” with its grammatical variations and cognate expressions, means bringing goods into India from a place outside India.

Section 7(2) of the IGST Act, 2017, supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-state trade or commerce.

According to Section 7 of the CGST Act, 2017, “supply” includes

all forms of supply of goods, 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
import of services for a consideration whether or not in the course or furtherance of business
activities specified in Schedule I, made or agreed to be made without a consideration

Section 7 of the IGST Act, 2017 helps to determine whether the supply is an Intra-state supply or inter-state supply. According to Section 7, inter-state supply will occur when

location of the supplier and the place of supply are in two different States
location of the supplier and the place of supply are in two different Union territories
location of the supplier and the place of supply are in a State and a Union territory
supply of goods imported into the territory of India, till they cross the customs frontiers of India
supply of services imported into the territory of India
supply of goods or services when the supplier is located in India and the place of supply is outside India
supply of goods or services to/by a SEZ developer/unit

Facts of the Case

M/s Sterlite Technologies Limited is engaged in the Development and supply of software with respect to telecommunication, service management platform, pre integrated offerings etc. and trading in hardware.
They procure requisite hardware from the vendor located within India or outside India on payment of applicable duties/taxes
Such hardware is sold as per the requirement of the customer on payment of GST, except in case of export.
The applicant proposed to undertake transaction and supply of hardware, commercially known as ‘Merchant Trade Transaction’, wherein the applicant will receive an order from the customer located outside India and as per their instruction, Vendor would directly ship the goods to customer located outside India.
Vendor would issue invoice on applicant against which payment would be made in foreign currency and applicant would raise invoice on customer and would receive consideration in foreign currency. In the above transaction, goods would not physically come into India, but would move from place outside India to another place outside India.

Issue Raised

Whether GST is payable on goods procured from vendor located outside India in a context where the goods so purchased are not brought into India?
Whether GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises?

Proceedings of the Ruling

Whether GST is payable on goods procured from vendor located outside India in a context where the goods so purchased are not brought into India?

1.From a combined reading of the provisions of the IGST Act, 2017, the Customs Tariff Act, 1975, and the Customs Act, 1962, it is evident that integrated tax in leviable on goods imported into India shall be levied and collected at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962

2. Reference was given to the ‘High Sea Sales’, Circular No. 33/2017 Customs dated August 1, 2017 which clarifies that:

i. GST council had decided that IGST on high sea sale transactions of imported goods, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Customs authorities for customs clearance purposes for the first time.

ii. Value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance.

3. The above circular is applicable in the present case. Similarly, it was found that, where Bill of Entry/import declarations are not being filed with respect to the goods so procured, GST would not be leviable.

Similar Case:-

The issue has already been decided by Authority for Advance Ruling, Kerala in the case of M/s Synthite Industries Ltd. It was held that “the goods are liable to IGST when they are imported into India and the IGST is payable at the time of importation of goods into India. The applicant is neither liable to GST on the sale of goods procured from China and directly supplied to USA nor on the sale of goods stored in the warehouse in Netherlands, after being procured from China, to customers, in and around Netherlands as the goods are not imported into India at any point.

With regards to the second query regarding leviability of GST on outward supply from place of vendor to customer

The thumb-rule for determining the taxability of any transaction is to ascertain whether the transaction amount to ‘supply’ as per Section 7 of the CGST Act, 2017.
In the instant case, the applicant is selling goods for a consideration in the course or furtherance of business and as such the transaction tantamount to ‘supply’ in terms of the definition of ‘supply’
The next step is to determine whether the same is an Intra-state supply or inter-state supply.
Section 7 of the IGST Act, 2017 indicates that in the event that the supplier is located in India and the place of supply is outside India, such supplies shall be treated as Inter-state supplies.
Section 10 of IGST Act, 2017 pertains to place of supply of goods, other than supply of goods imported into, or exported from India. According to Section 10, where the supply involves movement of goods, whether by the supplier, recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
In the instant case, the supply involves movement of goods and therefore the place of supply would be the termination for delivery to the recipient.
The goods under consideration are supplied to overseas buyers and as such the place of supply will be a place outside India. Further, the supplier is the applicant who has declared the principal place of business within India and issues the invoices for sale of such goods.
The above indicates that the supplier is located in India and the place of supply is outside India and as such the same would be Inter-state supply in terms of the provisions of Sec. 7(5) of IGST Act, 2017.
Therefore it can be deduced that IGST will be leviable unless the goods are exempted or are zero-rated supplies which have been defined as export of goods or services in terms of the provisions of Section 16 of the IGST Act, 2017.
In the instant case the applicant has not stated the nature of goods and has not declared that such goods are exempted under any notification issued under the GST Law.
Thus, the only possibility of goods not subject to levy of IGST would be the circumstances where the goods are exported
Section 2(5) of IGST Act, indicates that the act of taking goods out of India to a place outside India qualifies as export. In the instant case, the goods have not crossed the Indian customs frontier and as such it is clear that the goods are not physically available in the Indian Territory.
When the goods are not available in the Indian Territory, the question of taking goods out of India does not arise. Thus, the subject transaction does not qualify as export of goods.
In view of the above, it appears that the transaction is covered under the ambit of Inter-state supply and is neither exempted nor covered under export of services. Thus, by the theory of elimination, AAR concluded that such supplies will be subject to levy of IGST.

Conclusion provided by Gujarat Authority of Advance Ruling:-

GST is not payable on goods procured from vendor located outside India, where the goods so purchased are not brought into India
GST is payable on goods sold to customer located outside India, where goods are shipped directly from the vendor’s premises (located outside India) to the customer’s premises.

The ruling on supplies goods bought from abroad and sold to a customer in another country without entering the Indian territory is set to cause uncertainty and anxiety among traders as it could lead to a degree of tax terrorism for exporters community

Our View

In the above transaction, goods would not physically come into India, but would move from place outside India to another place outside India.

Schedule-III states that transactions where “supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India” shall be treated neither as supply of goods or services and hence not liable to GST.

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June, 18
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GST
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Is development and subsequent sale of land under Joint Development Agreement to be considered as sale of land on which GST will not be applicable?

Introduction

Is activity of development of land leading to its consequent sale to be considered as ‘sale of land’ which is not taxable under GST? Or is development of land a supply of service which is taxable under GST. Let us find out the same in detail by referring to the case ofM/s Maarq Spaces Private Limited (GST AAAR Karnataka).

Impact of development and subsequent sale of land under Joint Development Agreement- GST applicability

In an interesting case of M/s Maarq Spaces Private Limited the AAAR Karnataka has thrown light on this concept

Brief Facts of the Case:-

The applicant is a private limited company, registered under GST and is engaged in the business of property development.
The Applicant submitted that he had entered into a Joint Development Agreement (JDA) with landowners for development of land into residential layout along with specifications and amenities.
The consideration was agreed on revenue sharing basis in the ratio of 75% for landowner and 25% for applicant.
Cost of the development is borne by Applicant.
Pursuant to JDA, Applicant had entered into an agreement with customers for sale of developed plots for consideration.

Advance ruling was sought for the Authority of Advance Ruling (AAR) on the below issues:-

Whether the activity of development and sale of land attract tax under GST?
Whether provision of rule 31 (residual method for determination of value of supply) is applicable in ascertaining the value of land & supply of service, if GST is applicable?

Order passed by AAR:-

The activities as envisaged in the agreement between the applicant and the landowners amount to supply of service and is liable to be taxed under GST
Rule 31 applies in the instant case and the value of the supply is equal to the total amount received by the applicant, which is equal to 25% of the market value of each plot.
The appellant being dissatisfied with the order of AAR further appealed to the Appellate Authorities for Advance Rulings (AAAR)

Contention of Appellant:-

There is nothing in the JDA which gives rise to the contention that the appellant has agreed to supply services to the landowner which are in terms of Section 9 of the GST Law.
Supply includes all forms of supply of goods, services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
In order to constitute there should be person who supplies goods or service and there should be person who receives such goods or service and the contract should specify the intention of parties having agreed to the sell goods or provide service for consideration
The parties had never agreed for supply of goods or service between them, rather it is agreed to contribute mutually in the form of land and development work by each other and share the revenues out of sale of developed plots.
The law recognizes the “recipient” as the person who is liable to pay consideration. There is no such clause in the JDA, which fixes the responsibility on Land Owners to pay the consideration to the Appellant for development of land
It was agreed by the Appellant that, irrespective of sale of plots, Appellant would complete the development work within the specified time
The JDA is also silent about the consequences of unsold plots, as to whether Land Owners are liable to pay any consideration to the Appellant or not.
Therefore, in the absences of consideration flowing from Land Owners, it cannot be construed that, Appellant had agreed to execute work to the Land Owners for consideration.
In the case of sale of developed plots, the principal supply is land and development activity is incidental to the main principal supply, therefore sale of land does not attract tax under GST
Sale of land is excluded from the scope of “supply” and by applying the provisions of ‘composite supply’ and ‘principal supply’ they submitted that, the predominant activity is sale of land and development activity is incidental to the sale of land.
Moreover, the development activity is naturally bundled with sale of land. Therefore, sale of Developed Plot is nothing but sale of land, which does not attract tax under GST.
As per Section 32(5) of Karnataka Urban Development Authorities Act, 1987, a person who forms lay-outs is required to transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the authority, permanently without claiming any compensation thereof.
In order to comply with the above provisions, Appellant had executed a relinquishing deed & Rectification deed in favour of Chikkaballapur Urban Development Authority.
They argued that, where law requires the Appellant to transfer the ownership on the developmental works such as roads, drains, water supply mains, parks and open spaces, civic amenity areas.
Appellant has no right in entering into an agreement for supply of service but can only enter into an agreement for sale of land.
The Appellant relied on the decision of the Karnataka Appellate Tribunal in the case of Continental Builders and Developers Bangalore Vs State of Karnataka, 2009 wherein the court examined the issue whether development of plots and sale, is works contract or not. They submitted that the Tribunal had held that, “Civic amenities work done by land developer, subsequent to transfer of same to the local authority, there is no transfer of property in goods to the site purchasers either collectively or individually.”
They submitted that the ratio of the above decision is squarely applicable to the supply of service under GST and therefore the consideration received for the sale of land does not attract GST.
The Appellant further submitted that the ruling by the AAR that the Appellant has no title, right or interest in the property and thereby does not become owner of the property to claim as sale of land, is not acceptable under law.
Ownership is the exclusive right and control over the property. Ownership involves multiple rights such as right to enjoy, right to use, right to dispose etc. There are absolute and limited, sole ownership, co-ownership, vested ownership, contingent ownership, corporeal, incorporeal. Since the Appellant has right in the project to the extent of 25% of total revenue (as per JDA), it can be considered that Appellant has ownership right in the property.
Any right or interest in the immovable property is considered to be an immovable property therefore the Appellant share of revenue shall be treated as sale of immovable property and does not attract tax under GST Law.

Observations and Findings of the Hearing:

The liability to GST arises when there is a supply of either goods or services or both. However, the activity of sale of land has been treated as neither a supply of goods nor a supply of service.
It is the contention of the Appellant that they are primarily engaged in the sale of land which has been developed by them and the development activity is incidental to the sale of land and hence they are not liable to GST.
However, a transaction shall be out of GST only if the activity is exclusively dealing with transfer of title or transfer of ownership of land, which is immovable property.
If the transaction of sale of land is coupled with another activity such as infrastructure works, then this exclusion will not apply.
The JDA authorised the Appellant-Developer to develop the scheduled property into a residential layout.
The Appellant prepares the necessary plans/drawings/designs for the residential layout with the help of architects and other professionals and incurs expenditure for the development of the property.
The plans drawn up by the Appellant-Developer will be submitted by the landowner to the Government Authorities for obtaining the necessary sanctions/permissions.
The Appellant shall develop the project according to the sanctioned plan.
All cost incurred by the Appellant recoverable from the purchasers of the plots in the project and the Appellant shall be responsible for the maintenance of the property till the project completion.
The landowner has authorised the Appellant to sell the sites in the project and share the revenue out of the sale proceeds in the agreed upon revenue sharing ration.
The revenue accruing from the sale of the plots shall be shared between the landowner and the Appellant in the ratio of 75% and 25% respectively.
It is therefore, clear that the transaction between the landowner and the Appellant is not a sale of land but a transaction coupled with obligations for development of the land and provision of infrastructure/amenities.
There is an element of service rendered by the Appellant in the form of plotted development of the land which is the dominant activity of the agreement
Composite supply means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods, services or both, which are naturally bundled and supplied in conjunction with each other, one of which is a principal supply.
In the instant case there are two activities involved – development of land and sale of plots.
The transaction relating to the sale of land is not a supply of either goods or service under GST. This activity of sale of land cannot be considered as an ‘exempt supply’ for the reason that the activity is not at all a supply and hence the question exempting it under Section 11 of the Act does not arise.
On the other hand, the activity of development of land is a supply in terms of Section 7 of CGST Act. A combination of two activities one of which is not a supply under GST cannot be said to be a composite supply.
The Appellant had put forth the argument that under the Karnataka Urban Development Authorities Act, 1987, they are required to permanently transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the Urban Development Authority and where the law requires them to transfer the ownership of the developmental works.
In terms of Section 32 of the Karnataka Urban Development Authorities Act, any new layout can be formed only after getting the sanction from the Urban Development Authority.
The JDA mandates that the landowner shall submit the finalised plans to the relevant governmental authorities to procure the sanctioned plan. The landowner shall obtain all required licenses, sanctions, consents, permissions, no-objections and such other orders as are required to procure the Sanctioned Plan.
If the Appellant intends to modify the plans, the landowner shall obtain the required modifications to the sanctioned plan. Therefore, it is evident that the onus is on the landowner to comply with the provisions of Section 32 of the Karnataka Urban Development Authorities Act. The Appellant has no role to play in obtaining the sanctions and in transfer of ownership. Therefore, this argument of the Appellant does not hold good.
In real estate transactions involving plotted development, one party owns the land and another party has the expertise to develop the land. The two parties come together with the common intention of developing the land and sharing the revenue accruing for the sale of the developed plots in the land.
However, the landowners give the rights of using the land to the developer in exchange for which, the developer gives the service of developing the land of the owners.
While the JDA is entered into for the two parties to jointly reap the benefits of the sale of the land to customers, there is a clear rendering of a service by the developer to the landowner in developing the land which belongs to the landowner.

Ruling

Therefore, it was held that the activity of developing the land is a supply of service by the Appellant.

AAAR upheld the order passed by the AAR and the appeal filed by the appellant was dismissed.

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supply of goods

Are services for facilitating supply of products without supply on own account classified as intermediary service?

Are services for facilitating supply of products without supply on own account classified as intermediary service?

Facts of the Case

Appellant sought an advance ruling on the following questions:-

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The Karnataka Authority for Advance Ruling (AAR) held as follows:-

Appeal to the Appellate Authority for Advance Ruling (AAAR)

Observations of AAAR on the issue of the appellant

Observations of the AAAR on the nature of services rendered by the appellant

Observations of the AAAR on whether the appellant was an intermediary or not

What difference would it make if one classified this service as a market research service and not an intermediary service?

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Know all Registration Provisions under GST

Know all Registration Provisions under GST

Introduction

Salient features of registration under GST

Who is not required to obtain registration under GST

What do you mean by aggregate turnover?

Who is required to get registered mandatorily?

What is the time limit for applying for registration under GST?

Within how much time will an application of registration be accepted/rejected?

Can the registration information be amended?

Can registration be cancelled?

Within how much time can a person apply for cancellation suo moto?

How will the pending dues be affected in the event of cancellation?

From what date will a registration considered as suspended?

Can order of cancellation of registration be revoked?

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Is separate GST registration required if a contractor is providing services in different state?

Is separate GST registration required if a contractor is providing services in different state?

Introduction

Entities fulfilling the below mentioned criteria are not required to obtain registration mandatorily

1.In case of Exclusive Supply of Goods

2. In case of supply of services or mixed supplies

If a person is registered in one state and is hired to provide works contract services in another state, will such person be required to be registered in such other case?

Facts of the Case

In view of this, the applicant filed the instant application, as an unregistered person, seeking advance ruling in respect of the following questions:-

Submissions by the Applicant:-

Observations by the AAR

Is separate registration is required to execute the contract in Karnataka State or not?

If registration is not required in Karnataka and if goods are purchased from Rajasthan and shipped directly to the township at Karnataka then whether the dealer in Rajasthan has to charge CGST & SGST or the IGST?

If registration is not required in Karnataka and if goods are purchased from Karnataka to use the goods at the township in Karnataka then whether the dealer in Karnataka has to charge CGST & SGST or IGST?

Thus it can be concluded that,

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Issuing GST Invoice? Know all about Invoice provisions under GST

Issuing GST Invoice? Know all about Invoice provisions under GST

Introduction

What is the importance of an invoice?

When a tax invoice or a bill of supply should be issued by a registered person?

For Supply of Goods

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For Supply of Services

Can a registered person issue a revised invoice?

What documents are to be issued for advance payments?

What documents are to be issued by a person liable to pay tax under the reverse charge mechanism (RCM)?

How are Invoices to be issued in case of continuous supply?

What is the due date of issuing an invoice, where supply of service ceases under a contract before completion of supply?

When is an invoice to be issued when sale is on approval basis?

What is a Credit Note?

What is a Debit Note?

Manner of issuing invoice

In case of supply of goods, the invoice shall be prepared in triplicate,

In case of supply of services, the invoice shall be prepared in duplicate:-

Tax Invoice in special cases

Can goods be transported without an invoice?

How is a delivery challan to be issued?

Where the goods are being transported in a semi knocked down or completely knocked down condition

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Interest on PPF, Savings, Loans to be included for calculating GST Registration threshold: AAR

Interest on PPF, Savings, Loans to be included for calculating GST registration threshold: AAR

Introduction

In case of exclusive supply of goods, businesses having all India aggregate turnover below:-

In case of supply of services or in case of mixed supplies

What do you mean by aggregate turnover?

Is exempted income, like interest on PPF, savings bank account and loans given to family/friends, to be included in aggregate turnover while calculating the threshold limit for obtaining GST registration?

Facts of the Case

Issue Raised:

AAR Proceedings

Let us refer to the example given below to understand this better:-