Q 1. Who is responsible to pay taxes?
Ans. Generally, the person effecting taxable supplies is liable to pay taxes. However, following are certain exceptions:
- a. Reverse charge: In terms of Section 5(3) of the IGST Act, 2017, supply of goods or services or both, as may be notified by the Government on the recommendations of the Council, the tax shall be paid by the recipient under reverse charge; and
- b. E-Commerce: Categories of supplies as may be notified by the Government on the recommendation of Council where supply is effected through e-commerce operator in terms of Section 5(5) of the IGST Act, 2017. In the event the e-commerce operator do not have physical presence in the taxable territory, following persons will be liable to pay tax:
- i. a person who is representing the e-commerce operator in the taxable territory;
- ii. in the absence of such representative, e-commerce operator should appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
Q 2. How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to CGST Act, 2017 enlists the activities whether to be treated as supply of goods or services. One may refer Schedule II with reference to Section 7 to classify the transaction whether involves supply of goods or services.
Q 3. Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4), the branches which are required to obtain separate registration whether located within the State or otherwise shall be treated as distinct persons. Accordingly, the transfer of goods (stock transfers) to a branch / unit located outside India will qualify as supply liable to tax in terms of clause 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, transfer of goods to a branch / unit located within the same State having separate registration will also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).
Q 4. How to ascertain the taxable value for levy of CGST & SGST/UTGST be levied?
Ans. Section 15 of the CGST Act, 2017 specifies that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. Further Section 15 provides for certain inclusions which will form part of the value viz., incidental expenses, commission, interest, penalty etc. In case where the supplier and recipient are related persons, the draft valuation rules published contains the provisions and method for ascertaining the value of supplies.Similar provisions have been specified under Section 7 of UTGST Act, 2017.
Q5. Whether Council has powers to grant exemption on payment of taxes?
Ans. No. The power to grant exemption is vested with the Government. In other words, the Government by way of issuance of notification on the recommendations of the council may either grant the exemption absolutely or subject certain conditions.
Q6. What is time of supply with respect to escalation in price after the issuance of invoice (Eg: Invoice is issued for Rs. 5,000 on June 22, 2017 by the supplier. Subsequently, due to variation in price the recipient pays scenario 1: Rs. 5,500/- and scenario 2: 8,000/-)?
Ans. In terms of the proviso to Section 12(2)(b) of the CGST Act, 2017, the time of supply with respect to the amount received in excess up to Rs. 1,000/- of the amount indicated in tax invoice, the time of supply shall be the date of issue of invoice. Where the amount is received exceeds Rs. 1,000/-the time of supply of goods shall be the earliest of the following (in case where the invoice is already issued):
- a. Date on which payment is entered in books of accounts of the supplier; or
- b. Date on which payment is credited to the bank account.
Accordingly, the time of supply in each of the scenarios given in the example would be as follows:
Scenario 1: The time of supply of goods with respect to the amount of Rs. 500/- received in excess shall be the date of invoice.
Scenario 2: The time of supply would be as follows:
Q7. What would be the time of supply of services taxable under reverse charge mechanism?
Ans. In terms of Section 13(3) of the CGST Act, 2017, the time of supply of services for remittance of tax under reverse charge mechanism shall be the earliest of the following:
- a. Date of payment recorded in the books of accounts;
- b. Date of debit in bank account;
- c. Sixty days from the date of issue of invoice or any other document by the supplier; or
- d. Date of entry in the books of accounts of the recipient.
Q 8. Time of supply where services are supplied online?
Ans. The CGST Act, 2017 does not provide separate provisions for ascertaining the time of supply of service where such services are supplied online. Accordingly, in terms of Section 13, the time of supply of services shall be the earliest of the following:
- a. Date of issue of invoice; or
- b. Due date of issue of invoice under Section 28; or
- c. Date when the payment entry in relation to supply of services is recorded in books of accounts; or
- d. Date on which the payment is credited to suppliers bank account.
Q 9. Can the transaction value be questioned if supplier and recipient’s relationship come into existence after entering into a contract/arrangement to supply goods or services?
Ans. The laws assume that the relationship between the contracting parties prima facie has influenced the price at which the transaction is being carried out. Since the relationship did not exist on the date the prices were finalized (i.e., entering into the contract), the transaction value should be accepted in case of supplies effected prior to the forming of such relationship. However, for supplies effected after the two persons become ‘related persons’ for the purpose of the GST law, the transaction value cannot be accepted and reference must be made to the valuation rules.
Q 10. Will GST be applicable on any interest charged for payment after the credit period?
Ans. Interest, Penalty or Late fee charged from the customer would also be liable to GST. However, the law provides that the GST liability on such values can be paid only on receiving such additional amounts.
Q 11. Will compliance of the provisions of Section 17(2) regarding restriction of credits relatable to exempt supplies be mandatory to a Banking Company/ Financial Institution engaged in accepting deposits or extending loans or?
Ans. No. A Banking Company/ Financial Institution engaged in supplying services by way of accepting deposits, extending loans or advances has the following options:
- Comply with the provisions of Section 17(2) regarding restriction of credits relatable to exempt supplies in the manner prescribed; or
- Avail 50% of the eligible input tax credit every month on inputs, capital goods and input services.
The option exercised cannot be withdrawn in the same year. The restriction of 50% will not apply to the tax paid on supplies made by one registered person to another registered person having the same PAN.
Q 12. What is the need for apportionment of tax collected between Centre and State?
Ans. As we all know, that unlike CST, GST is destination based consumption tax. The State where the goods or services or both are consumed will get the right upon tax paid on the said goods or services or both so as to ensure the flow of input tax credit to the recipient in the consuming State. Further, in the case of inter-State supplies, where the tax is collected and paid by the supplier in the origin State, the burden is borne by the receipt in the consuming State. Hence, the integrated tax collected by the central government needs to apportioned between center and consuming state in the proportion to CGST and the SGST. In case of consumption in the Union Territories, the entire tax will be retained by the central government though under different account