Tax Research Unit of under department of revenue ,Ministry of Finance and under direct control of CBEC has issued few clarification on tax...
Tax Research Unit of under department of revenue ,Ministry of Finance and under direct control of CBEC has issued few clarification on taxability of various services /goods under GST
Q 1.Whether activity of bus body
building, is a supply of goods
or services?
In the case of bus body building there is supply of
goods and services. Thus, classification of this
composite supply, as goods or service would depend
on which supply is the principal supply which may be
determined on the basis of facts and circumstances of
each case.
Q 2.Whether retreading of tyres
is a supply of goods or
services?
In retreading of tyres, which is a composite supply,
the pre-dominant element is the process of retreading
which is a supply of service. Rubber used for
retreading is an ancillary supply. Which part of a
composite supply is the principal supply, must be
determined keeping in view the nature of the supply
involved. Value may be one of the guiding factors in
this determination, but not the sole factor. The
primary question that should be asked is what is the
essential nature of the composite supply and which
element of the supply imparts that essential nature to the composite supply.
Supply of retreaded tyres, where the old tyres belong
to the supplier of retreaded tyres, is a supply of goods
(retreaded tyres under heading 4012 of the Customs
Tariff attracting GST @ 28%)
Q 3.Whether Priority Sector
Lending Certificates
(PSLCs) are outside the
purview of GST and
therefore not taxable?
In Reserve Bank of India FAQ on PSLC, it has been
mentioned that PSLC may be construed to be in the
nature of goods, dealing in which has been notified as
a permissible activity under section 6(1) of the
Banking Regulation Act, 1949 vide Government of
India notification dated 4th February, 2016. PSLC are
not securities. PSLC are akin to freely tradeable duty
scrips, Renewable Energy Certificates, REP license
or replenishment license, which attracted VAT.
In GST there is no exemption to trading in PSLCs.
Thus, PSLCs are taxable as goods at standard rate of
18% under the residuary S. No. 453 of Schedule III
of notification No. 1/2017-Central Tax(Rate). GST
payable on the certificates would be available as ITC
to the bank buying the certificates.
Q 4(1) Whether the guarantee provided by State Government to state owned companies against guarantee commission, is taxable under GST?
(2) The service provided by Central Government/State Government to any business entity including PSUs by way of guaranteeing the loans taken by them from financial institutions against consideration in any form including Guarantee Commission is taxable.
Q 4(2) Whether the activities
carried by DISCOMS
against recovery of charges
from consumers under State
Electricity Act are exempt
from GST?
(1) Service by way of transmission or distribution of
electricity by an electricity transmission or
distribution utility is exempt from GST under
notification No. 12/2017- CT (R), Sl. No. 25. The
other services such as, -
- i. Application fee for releasing connection of electricity;
- ii. Rental Charges against metering equipment;
- iii. Testing fee for meters/ transformers, capacitors etc.;
- iv. Labour charges from customers for shifting of meters or shifting of service lines;
- v. charges for duplicate bill;
provided by DISCOMS to consumer are taxable.
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Comment : This is the most shocking clarification for transmission and distribution company as the all the above services are provided in relation to electricity services(pre-dominant element) which is exempt under the GST.
2(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
Where a supply involves multiple (more than one) goods or services, or a combination of goods and services, the treatment of such supplies would be as follows:
If we apply the logic taken in circular to other exempted services then it will create a mess .
Suppose a Hospital is charging for application form ,whether that will be also taxed ?
Suppose a Hospital is charging for application form ,whether that will be also taxed ?
In our view bundled services of supply of electricity services is covered under [Composite Supply as per GST Act].
2(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
Where a supply involves multiple (more than one) goods or services, or a combination of goods and services, the treatment of such supplies would be as follows:
- (a) If it involves more than one goods and / or services which are naturally bundled together: These are referred to as composite supply of goods and / or services. It shall be deemed to be a supply of those goods or services, which constitutes the principal supply therein.
Accordingly Supply of electricity (Including ancillary services like application fess,meter rent ,testing fees, shifting fee, duplicate bill) are covered under the definition of Composite services,where the principal service is exempted. So all ancillary services must also be exempted which has been provided to complete the principal services .The supply of Electricity pass on all the tests given in definition of Composite supply under section 2(30) above.
- The the supply of electricity involves more than one services
- All the services are naturally bundled together.
- They are supplied in conjunction with each other in the ordinary course of business;
Moreover in service tax era ,as per circular Circular No. 131/13/2010-ST, dated 7-12-2010 read with exemption notification 11/2010 service tax dated 27.02.2010 it has been clarified that meter rent charged by Discoms is not chargeable to service tax.
Under this circular following has been clarified
"A doubt has been raised whether renting of electricity meter by a service provider rendering the service of transmission or distribution of electricity, is covered by the exemption available under Notification No. 11/2010-ST dated 27.02.2010 and/ or 32/2010-ST dated 22.06.2010.
2. The matter has been examined. It is a general practice among electricity transmission (TRANSCO) / distribution companies (DISCOM) to install electricity meters at the premises of the consumers, to measure the amount of electricity consumed by them and ‘hire charges' are collected periodically. Supply of electricity meters for hire to the consumers being an essential activity having direct and close nexus with transmission and distribution of electricity, the same is covered by the exemption for transmission and distribution of electricity, extended under the relevant notifications."
The above logic stands valid in GST era also and hold good even on today , so in our view Govt should issue a revised clarification on the above issue to exempt all this charges from GST.
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COMMENTS