Questions 1
“State Government has exclusive power to notify a transaction to be supply of goods or services.” Discuss the correctness of the statement.
2
M/s X & Sons, tax consultant of Zenson Ltd., have advised them that reverse charge mechanism is applicable only to services. Examine the validity of the advice given by M/s X & Sons.
3
Pepper & Salt Ltd., registered in Madhya Pradesh has the turnover amounting to Rs. 80 lakh in the financial year 2017-18. It wants to avail the benefit of composition scheme in the year 2018-19. You are required to advise Pepper and Salt Ltd. regarding the availability of composition scheme in the year 2018-19. Will your answer change, if Pepper & Salt Ltd. is registered in Arunachal Pradesh?
4
Mr. X availing composition scheme during a financial year crosses the turnover of Rs.1 crore during the course of the year i.e. say he crosses the turnover of Rs.1 Crore in December? Will he be allowed to pay tax under composition scheme for the remainder of the year i.e. till 31st March?
5
LMN & Co, an unregistered supplier under GST wants to claim input tax credit and collect tax. Can it do so?
6
What is the difference between casual and non- resident taxable persons?
7
State the necessary elements for a supply to be chargeable to GST.
8
Modest Ltd., registered in Delhi dealing in supply of electronic items transferred some of its stock to its another unit located in Haryana (inter-state transfer). Whether such self-supplies are taxable under GST?
9
Mr. P supplied goods for the value of Rs. 10,000 to its customer Miss Prem on 01.01.20XX on the condition that payment for the same will be made within a week. However, Miss Prem made payment for the said goods on 02.02.20XX and thus paid interest amounting to Rs. 500. What is the time of supply with regard to addition in the value by way of interest in lieu of delayed payment of consideration?
10
There are separate valuation provisions for CGST, SGST and IGST and for Goods and Services. Examine the correctness of the statement.
11
Whether post-supply discounts or incentives are allowed as admissible deduction under section 15 of the CGST Act? If yes, what are the necessary conditions to be complied with for availing such deduction?
12
The time of liability to pay GST is independent of the time of supply of goods/ services. Discuss the correctness of the statement?
13
LP Ltd., obtains registration for paying taxes under section 9 of CGST Act. He asked his tax manager to pay taxes on quarterly basis. However, LP Ltd.’s tax manager advised the Co.to pay taxes on monthly basis. You are required to examine the validity of the advice given by tax manager?
Answers 1
The said statement is not correct. State Government can notify a transaction to be supply of goods or services but only on the recommendations of the GST Council. Further, Central Government or State Government, both on the recommendations of the GST Council, can notify an activity to be the supply of goods and not supply of services or supply of services and not supply of goods or neither a supply of goods nor a supply of services.
2
The advice given by M/s X & Sons is not valid in law. The reverse charge mechanism applies to supplies of both goods and services, as notified by the Government on the recommendations of the GST Council vide section 9(3)/5(3) of CGST/IGST Act, 2017. Notification No. 4/2017-Central Tax (Rate) and 13/2017- Central Tax (Rate) both dated 28/06/2017 have been issued. Similar notifications have been issued under IGST Act also. Reverse charge also applies to supplies received by a registered person from unregistered persons under section 9(4)/5(4) of CGST/IGST Act, 2017. However, the provision of reverse charge liability on supplies received from unregistered persons, as provided in sections 9(4) and 5(4) of the CGST Act and the IGST Act respectively, have been kept in abeyance till 31.03.2018.
3
Pepper & Salt Ltd. can avail the benefit of the composition scheme in the year 2018-19 as the threshold for composition scheme is ` 1 Crore of aggregate turnover in the preceding financial year* under section 10(1) of CGST Act, 2017. The benefit of composition scheme can be availed up to the turnover of ` 1 Crore in current financial year*. However, it has to be ensured that Pepper & Salt Ltd. fulfills the following conditions as given under section 10(2) of CGST Act, 2017:(i)
Pepper & Salt Ltd. is not engaged in the supply of services other than supplies of food articles (restaurant service).
(ii)
It is not engaged in making any supply of goods which are not taxable under the CGST Act/SGST Act/ UTGST Act.
(iii)
Pepper & Salt Ltd. do not make any inter-State outward supplies of goods.
(iv)
It does not supply goods through an electronic commerce operator.
(v)
It does not manufacture ice cream, pan masala and tobacco etc.
*- ` 75 lakhs for 9 special category states viz 1. Arunachal Pradesh, 2. Assam, 3. Manipur, 4. Meghalaya, 5. Mizoram, 6. Nagaland, 7. Sikkim, 8. Tripura, and 9. Himachal Pradesh. If Pepper & Salt Ltd. is registered in Arunachal Pradesh, it can not avail the benefit of composition in the year 2018-19 as its turnover in the preceding financial year (` 80 lakhs) exceeds the threshold limit (` 75 lakhs). 4
No. The option availed shall lapse from the day on which his aggregate turnover during the financial year exceeds `1 Crore vide section 10(3) of CGST Act, 2017. Casual Taxable Person Occasionally undertakes transactions involving supply of goods or services or both in a State or Union territory where he has no fixed place of business. Has a PAN Number
Non-resident Taxable Person Occasionally undertakes transactions involving supply of goods or services or both, but has no fixed place of business or residence in India.
Do not have a PAN Number; A non- resident person, if having PAN number may take registration as a casual taxable person Same application form for registration as for Separate application form for registration by nonnormal taxable persons. resident taxable person. Has to undertake transactions in the course or Business test is absent in the definition. furtherance of business
Can claim input tax credit of all inward supplies. Can get input tax credit only in respect of import of goods and /or services. 5
No, LMN & Co. cannot claim input tax credit and collect tax. A person without GST registration can neither collect GST from his customers nor can claim any input tax credit of GST paid by him. However, if LMN & Co. nevertheless wants to claim input tax credit and collect tax, it can apply for voluntary registration under section 25(3) of CGST Act, 2017.
6
Casual and Non-resident taxable persons are separately defined in the CGST Act in Sections 2(20) and 2(77) respectively. Some of the differences are outlined below:
7
The following elements are required to be satisfied for a supply to be chargeable to GST, i.e.-
8
a)
the activity involves supply of goods or services or both;
b)
the supply is for a consideration unless otherwise specifically provided for;
c)
the supply is made in the course or furtherance of business;
d)
the supply is a taxable supply; and
e)
the supply is made by a taxable person.
Yes, transfer of stock made by Modest Ltd. are taxable under GST. The definition of supply given under section 7 of CGST Act, 2017 is an inclusive one. It does not specify that supply is to be made by one person to the another. So, self-supplies are to be treated as supply in terms of section 7 of CGST Act. Further, section 25(5) provides that where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons. Clause (2) of Schedule I of CGST Act, 2017 inter alia provides that supply of goods between distinct persons as specified in section 25 made in the course or furtherance of business is to treated as supply even if made without consideration. Inter-state self-supplies such as stock transfers, branch transfers or consignment sales shall be taxable under IGST even though such transactions may not involve payment of consideration. Every supplier is liable to register under the GST law in the State or Union territory from where he makes a taxable supply of goods or services or both in terms of Section 22 of the CGST Act. However, intra-state selfsupplies are not taxable subject to not opting for registration as business vertical.
9
As per section 12(6) of CGST Act, 2017, the time of supply with regard to an addition in value on account of interest, late fee or penalty or delayed payment of consideration shall be the date on which the supplier received such additional consideration. Thus, time of supply in respect of interest would be the date on which the supplier has received such additional consideration, i.e. 02.02.2018. Further, Mr. P is required to make payment on or before 20th of March, 2018.
10
No, the said statement is not correct. Section 15 of CGST Act determines the value of supply of goods or services or both. Further, section 15 is applicable for determining value of taxable supply under IGST as well vide section 20 of IGST Act. Section 20 of IGST Act inter alia provides that the provisions of CGST Act relating to time and value of supply shall mutatis mutandis apply in relation to integrated tax as they apply in relation to central tax. Thus, section 15 is common for all three taxes and also common for goods and services.
11
Yes, post-supply discounts or incentives are allowed as admissible deduction under section 15 of the CGST Act. Where the post-supply discount is established as per the agreement which is known at or before the time of supply and where such discount specifically linked to the relevant invoice and the recipient has reversed input tax credit attributable to such discount, the discount is allowed as admissible deduction under Section 15(3)(b) of the CGST Act.
12
The said statement is not correct. Liability to pay arises at the time of supply of goods as explained in
Section 12 and at the time of supply of services as explained in Section13 of CGST Act. The time is generally the earliest of one of the three events, namely receiving payment, issuance of invoice or completion of supply. Different situations envisaged and different tax points have been explained in the aforesaid sections. 13
The advice given by tax manager is valid in law. Payment of taxes by the normal tax payer is to be done on monthly basis by the 20th of the succeeding month. Cash payments will be first deposited in the Cash Ledger and the tax payer shall debit the ledger while making payment in the monthly returns and shall reflect the relevant debit entry number in his return. However, payment can also be debited from the Credit Ledger. Payment of taxes for the month of March shall be paid by the 20th of April. Composition tax payers will need to pay tax on quarterly basis.
