Subject : Place of Supply

Indian Freight forwarding Company books air freight contract for Indian recipient for transportation of goods from Singapore to China.

Issue:

i) From which place supply is made?

ii) Whether this transaction is taxable in India?

Reply

The supply which is being made here is a supply of booking service by the Indian Freight Forwarding Company. The Freight Forwarding Company is not actually supplying goods or actually supply transportation services. They are simply doing booking and arranging for the transportation without actually carrying out the transportation or without actually selling the goods.

This transaction is undoubtedly taxable in India. There is nothing extra-territorial in the services being provided. The booking is done by a service provider located in India and the service is being provided to an Indian entity. The actual performance of the service, that is the booking, is also in India. Thus, situs of the service is in India. India therefore has jurisdiction to tax this service.

For services, the question of inter-state or intra-state supply is determined in accordance with Section 7(3) and Section 8(2) of Integrated GST Act:

“7(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in ––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of services in the course of inter-State trade or commerce.”

“8(2) Subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-State supply.”

The “location of supplier of service” for the purposes of determining whether supply is inter-state or intra-state is defined in Section 2(15) of the Integrated GST Act:

“2(15) “location of the supplier of services” means,––

(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply; and

(d) in absence of such places, the location of the usual place of residence of the supplier.”

Absent contrary indication in the query, we are assuming that the services are being provided by the Indian Freight Forwarding Company from their Indian registered place of business or Indian fixed establishment. Therefore, the “location of supplier of service” will be in India. There are no details given as to the State from which the Indian Freight Forwarding Company is providing services.

The place of supply must be determined either with reference to Section 12 or Section 13 of the Integrated GST Act. Sections 12 and 13 are mutually exclusive, in asmuch Section 12 deals with domestic supplies and Section 13 deals with international supplies. Sections 12(1) and 13(1) read as follows:

“12(1): The provisions of this section shall apply to determine the place of supply of services where the location of supplier of services and the location of the recipient of services is in India.

13(1): The provisions of this section shall apply to determine the place of supply of services where the location of the supplier of services or the location of the recipient of services is outside India.”

We have already concluded that the location of supplier of service is in India. Now, to determine whether Section 12 applies or Section 13 applies, one must first determine whether the location of recipient of service is also in India or outside India. “Location of recipient of service” is defined in Section 2(14):

“2(14): “location of the recipient of services” means,––

(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

(d) in absence of such places, the location of the usual place of residence of the recipient.”

No details are provided as to where the services are received, that is, in which State the services are received. From the query we are presuming that the services are also received in India. Therefore the “location of recipient of services” is within India itself. As per Section 12(1), when the location of supplier of services and the location of recipient of services are both within India, the place of supply is to be determined in accordance with Section 12.

Section 12 of the Integrated GST Act does not have any specific provision dealing with “intermediary services” or arranging the supply of transportation services unlike a specific provision in Section 13(8)(b) read with Section 2(13). However, since the supply here is covered by Section 12 and not Section 13, the two being mutually exclusive, one cannot look at provisions of Section 13 or draw analogies therefrom.

Section 12(8) deals with:

“2(8) The place of supply of services by way of transportation of goods, including by mail or courier to,––

(a) a registered person, shall be the location of such person;

(b) a person other than a registered person, shall be the location at which such goods are handed over for their transportation.”

It is apparent that Section 12(8) cannot cover the booking service provided herein. Services “by way of” transportation means actual service of transportation and not just booking or arranging of transportation.

There is no specific provision at all in Section 12 dealing with the services provided herein. Therefore Section 12(2), which is like a residuary provision, will apply:

“12(2): The place of supply of services, except the services specified in sub-sections (3) to (14),––

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,––

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.”

The place of supply will therefore have to be determined as per Section 12(2). There are not sufficient details in the query, but the place of supply will be in India because the query says the recipient is in India.

It is not possible to determine whether the service is in inter-state or intra-state since there is no sufficient information on the State from which the services is being supplied or the State in which the service is being received. Therefore, the provisions of Section 7(3) or 8(2) for determination of inter-state or intra-state supply cannot be applied at this stage. Suffice to say that since the service is being provided from India and the place of supply is in India, the service will be taxable in India in some State as a local supply or taxable as an inter-state supply.

Purchases from Composition Dealer

Query

Composition dealer registered under GST in Uttar Pradesh purchases goods from another composition dealer what will be tax liability on the sales. Whether he will have to pay any tax on purchases incurred from another composition dealer?

Reply: There is no restriction for purchases from composition dealer. The composition scheme is given in section 10 of the CGST Act. The said section is reproduced below:

“10. (1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding, ––

(a) one per cent of the turnover in State or turnover in Union territory in case of a manufacturer,

(b) two and a half per cent of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) half per cent of the turnover in State or turnover in Union Territory in case of other suppliers, subject to such conditions and restrictions as may be prescribed:

Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council.

(2) The registered person shall be eligible to opt under sub-section (1), if:—

(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;

(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;

(c) he is not engaged in making any inter-State outward supplies of goods;

(d) he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and

(e) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council

Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.

(3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).

(4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty.”

(The amendments in this section about limits etc., are not covered as this section is reproduced for the purpose of reference for above query).

It can be seen that there is no restriction on inward supply. Therefore, purchasing from composition dealer is also valid and there is no adverse effect on the composition scheme.

Sale in course of import from bonded warehouse

Query

Under CST Act, as per second limb of section 5(2), the sales made by transfer of documents of title to goods before the goods cross the customs frontiers of India are exempt from levy of tax. Whether sales effected from the bonded warehouse are eligible to exemption under above provision?

Reply: It is true that the sales effected by transfer of documents of title to goods before the goods cross the customs frontiers of India are exempt. However, there is litigation about scope of crossing the customs frontiers.

In case of State Trading Corporation of India Ltd. (129 STC 294), the Madras High Court has held that the sale effected from bonded warehouse is still sale before crossing Customs Frontiers of India and hence duly entitled to exemption. In this case Madras High Court has relied upon judgment in case of Kiran Spinning Mills v. Collector of Customs (113 ELT 753)(SC). In this judgment the issue before Supreme Court was about payment of Custom duty. Supreme Court held that the duty is payable at prevailing rate when goods are cleared from bonded warehouse. It is observed by Supreme Court that the Custom Frontier ends when the imported goods mingle with common mass and that takes place only upon payment of duty. Based on above ratio, the Hon. Madras High Court has ruled that such sale from 
bonded warehouse is exempt u/s. 5(2) of CST Act, 1956.

At this juncture reference can also be made to judgment of Bombay High Court in case of Narang Hotels and Resorts Pvt. Ltd. (135 STC 289)(Bom).

In this case the Hon. Bombay High Court, while dealing with case of sale in course of export, observed as under on page 331.

92. According to Mr. Bharucha, learned counsel for the respondents, so long as the goods do not cross the area of any customs port, and here, the Sahar Airport, the transfer of title to goods will always be regarded as a local sale. According to Mr. Bharucha, merely storage of the goods in the customs area for delivery on delivery van or supply unit will not amount to crossing the limits of customs station. According to him, it is necessary that the goods must go out of the customs station by crossing the area of customs station. According to him, mere bringing of goods into the customs station or on tarmac after customs and quarantine clearance will not amount to crossing the limits of customs area unless those goods have crossed the limits of customs station. Mere parking of the supply unit with goods even after completing the customs formalities will not amount to crossing of the customs frontiers of India.

93. In order to explain concept of crossing of the customs frontiers of India, Mr. Bharucha, relied upon the decision of the Supreme Court in Kiran Spinning Mills v. Collector of Customs (1999) 113 ELT 753. As held by the Supreme Court in the case of Kiran Spinning Mills v. Collector of Customs (1999) 113 ELT 753, which arose under the Additional Duty of Excise (Textiles and Textile Articles) Ordinance, 1978 the taxable event is the crossing of the customs barrier, and not the date when the goods had landed in India, or had entered the territorial waters. When goods are imported into India even after the goods are unloaded from the ship, and even after the goods are assessed to duty subsequent to the filing of a bill of entry, the goods cannot be regarded as having crossed the customs barrier until the duty is paid and the goods are brought out of the limits of the customs station. In the case of Kiran Spinning Mills. v. Collector of Customs (1999) 113 ELT 753 (SC), the Apex Court has observed thus:

In other words, the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse, the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country.’

Based on the above judgment Mr. Bharucha contended and, in our opinion, rightly that in case of import the customs frontiers of India are not crossed until the goods find their free access into the country by crossing the outer limits of the area of customs station which is possible only at the time of clearance by the customs authorities. According to him, under section 5(2) read with the section 2(ab) of the CST Act and the relevant definitions in the Customs Act, the expression ‘before goods have crossed the customs frontiers of India’ means before the goods have crossed the limits of customs station, namely, a customs port, or in other words, before the goods have crossed entire area of customs station including its outer boundary so that the goods can find their free access into the country beyond the customs station upon clearance by the customs authorities.”

The above observations also support the reason adopted by Hon. Madras High Court in above case of State Trading Corporation of India Ltd. (129 STC 294).

Similarly in case of State of Tamil Nadu v. Rajan Universal Export (MFRS) Pvt. Ltd. & Another (29 VST 279), Hon’ble Madras High Court reiterated the above legal position and allowed the exemption for sale from bonded warehouse.

Based on Madras High Court judgment the Maharashtra Sales Tax Tribunal in case of Radha Sons International (S.A. 1358 & 1359 of 9-10-2007) has allowed sale from bonded warehouse as exempted sale under section 5(2) of CST Act, 1956.

However, the Government of Maharashtra made reference against above judgment to Hon. Bombay High Court. Now Hon. Bombay High Court has decided the above Reference vide judgment in case of Commissioner of Sales Tax vs. Radhasons International (Sales Tax Reference No. 52 of 2009 dated 8-2-2019).

In this judgment Hon. Bombay High Court has taken different view. Hon. High Court has held that sales from bonded warehouse are not eligible as sale by transfer of documents of title to goods before crossing Customs Frontiers of India. After elaborate judgment, Hon. Bombay High Court has concluded as under in paras 74 & 75:

74. The High Court of Judicature of Andhra Pradesh at Hyderabad was dealing with a similar case (Minerals and Metals Trading Corporation of India Ltd. vs. The State of Andhra Pradesh) where the argument that the imported goods were transferred by endorsement of bill of lading in favour of the local buyers before the customs clearance of goods was turned down. The MMTC approached the High Court of Andhra Pradesh at Hyderabad and this argument was dealt with by the Division Bench as under:

14. In order to get over the judgment of the Supreme Court the amendment in Section 2(ab) is made. On the basis of the report submitted by the Law Commission recommending amendment to Section 2 of CST to get over the difficulty to actually ascertain the point of time when a ship crosses the territorial waters of India.

We have already referred to Section 5(2) read with Section 2(ab). The goods will cross the limit of the area of the customs station only on clearance by the customs authorities.

Clearance by the customs authorities will be after filing the bill of entry and after the assessment of duty under Section 38 of the Act. Before the assessment of the duty the goods kept in the customs port cannot cross the limits of the customs port. Therefore irrespective of the fact whether duty is paid or not, when once the bill of entry is filed and the imported duty is assessed, then only the goods can cross the limits of the customs port, therefore, any transfer of documents of title before the clearance of the goods by the customs authorities on making the assessment of goods would amount to a sale in the course of import, as after the assessment is made and on filing of the bill of entry the goods get mingled with the general mass of goods and merchandise of the country. The goods get the eligibility to be declared as local goods after clearance, even though they are not physically removed from the harbour premises. They attain the character of local goods and cease to be foreign goods. Therefore, the relevant point of time for determining as to whether the sale of goods is in the course of import by a transfer of title deeds is the transfer by title deeds before filing the bill of entry and the assessment of duty irrespective of the fact whether the goods are physically cleared from the harbour or not and whether duty is paid or not. As pointed out in the earlier paras after the filing of the bill of entry the assessment of the duty the import stream dries up and ceases to flow after the customs department levies the duty declaring the eligibility of the goods to be cleared and mingles with the general mass of goods and merchandise in the country. Once the duty is levied the import is at an end and the national customs barrier is supposed to have been crossed. The reason being it is difficult to ascertain the point of time or the place at which the goods have entered the limits of the customs port. Therefore, the assessing authorities under the APGST Act does not get jurisdiction to assess the goods if the transfer of title deeds is effected before the clearance of goods by filing the bill of entry under the Customs Act and after making the assessment of the import duty payable under Section 28 of the Customs Act, 1962.”

75. We do not think that our view is in any way different. We have noticed all the sections of the Customs Act, 1962 which are relevant to the issue, including Chapter VI and particularly sections 15 and 18 thereof. Hence, we are of the firm view that it is not necessary to refer to all the judgments relied upon by Mr. Sonpal.”

Thus in Maharashtra the sales from bonded warehouse will not be exempt unless the facts are distinguished or any judgment from higher forum is available.

1. A charitable trust not registered under the Income-tax Act has received donations of  3,20,000, including corpus donations of 50,000. It has no other income. It has used the donations partly for the charitable purpose for which it is received, to the extent of 1,00,000, and has surplus as per its income and expenditure account of  1,70,000.

Is it required to pay any income tax?

Ans: The tax payable by a charitable or religious trust on income which is not exempt from tax is governed by section 164(2), which provides that tax shall be charged on such income which is not so exempt as if the relevant income were the income of an Association of Persons (AOP). Part I of Schedule I to the Finance Act of each year provides for slab rates of tax for individuals, HUFs, AOPs and BOIs. Therefore, the income of the trust would be exempt up to ₹ 2,50,000, and income between ₹ 2,50,000 and ₹ 5,00,000 would be taxable at 5%.

The income for this purpose would be computed under the head “Income from Other Sources”, and therefore only expenditure incurred for earning such income would be deductible from the gross income, and not expenditure incurred on objects of the trust.

As regards corpus donations, the Delhi High Court in the case of DIT v. Basanti Devi and Chakhan Lal Garg Education Trust – ITA 927/2009 dated 23-9-2009, and the Tribunal in a number of cases, including Sree Sree Ramkrishna Samity v. DCIT 64 taxmann.com 330 (Kol.), Chandraprabhu Jain Swetamber Mandir v. ACIT 82 taxmann.com 245 (Mum.) and ITO(E) v. Serum Institute of India Research Foundation 169 ITD 271 (Pune), has held that even in case of a charitable trust which is not registered under section 12AA, corpus donations would be a capital receipt, and would therefore not be taxable.

The income of the trust would therefore be the amount of donations, other than corpus donations, i.e. ₹ 2,70,000, and the tax payable would be 5% of ₹ 20,000, i.e. ₹ 1,000.

2. A was holding 50,000 equity shares in B Pvt. Ltd., which had cost  50,00,000 in 2008-09. The book value of the shares as per Rule 11UA as on 31st January 2018 was  325 per share. B Pvt. Ltd. has merged with a listed company, C Ltd., in December 2018, whereby shareholders of B Pvt. Ltd. have been allotted 1 share of C Ltd. for every 2 shares of B Pvt. Ltd. held by them. A currently holds 25,000 equity shares of C Ltd. The market price of shares of C Ltd. on 31st January 2018 was 1,200 per share.

A wishes to sell the shares of C Ltd. held by him. Will he be entitled to the benefit of grandfathering of the market value of shares as on 31st January 2018? If so, what would be the fair market value of the shares – the fair market value of shares of B Pvt. Ltd., or the market price of shares of C Ltd.?

Ans. Under section 55(2)(ac), in case of a long term capital asset, which is an equity share referred to in section 112A, acquired before 1st February 2018, the cost of acquisition is the higher of:

(i) The cost of acquisition of such asset; and

(ii) Lower of –

a. The fair market value of such asset; and

b. The full value of consideration received or accruing as a result of the transfer of the capital asset.

The equity share referred to in section 112A is a long term capital asset, on which securities transaction tax (STT) has been paid both on acquisition and transfer of the 
share (subject to notified exempt acquisitions).

Where the share is listed on a recognised stock exchange on 31st January 2018, “fair market value” is defined to mean the highest price quoted on the stock exchange on that date. This is effectively the concept of “grandfathering”, whereby the gains up to 31st January 2018 in respect of listed shares are effectively not taxed, by substituting the cost on that date for the actual cost. This concept of grandfathering applies only to shares which are listed on 31st January 2018. In this case, the shares of B Pvt. Ltd. were held by A on 31st January 2018, and not the shares of C Ltd. Therefore, substitution of fair market value of shares of C Ltd. as of 31st January 2018 will not be permissible.

Another clause of the definition of “fair market value” in the explanation to section 55(2)(ac) provides that in a case where the capital asset is an equity share in a company which is listed on the date of transfer, and which became the property of the assessee in consideration of a share which was unlisted on 31st January 2018 by way of an exempt transfer under section 47, the “fair market value” shall mean the indexed cost up to the financial year 2017-18.

In this case, listed shares of C Ltd. were acquired through a merger, which is an exempt transfer under section 47(vii). Therefore, the fair market value of the shares on 31st January 2018 would be the indexed cost of shares of B Pvt. Ltd. up to the financial year 2017-18. Since the cost of acquisition was ₹ 50,00,000 in financial year 2008-09, the indexed cost would be 
₹ 99,27,007 [50,00,000 x 272/137], which would be the fair market value for the purposes of section 55(2)(ac).

3. A had received shares of an unlisted company under a family settlement. The cost of the shares to the previous member of the family who held the shares, having acquired them in 2006, was  25 lakh. The fair market value of the shares on the date of the family arrangement was  40 lakh, and their current market value is  80 lakh.

A desires to sell the shares. What would be the value that he can adopt as the cost of his shares, and from which year would he be entitled to claim indexation of cost?

Ans. There is no specific provision under the Income-tax Act, 1961 dealing with the cost of acquisition in the case of assets received under a family arrangement. Courts have taken the view that a family arrangement is similar to the partition of a Hindu Undivided Family, and therefore the date of acquisition and cost of an asset received under a family arrangement should be taken in the same manner as in case of assets received under a family partition [CIT v. Shanthi Chandran (2000) 241 ITR 371 (Mad.)], ACIT v. Baldev Raj Charia [2009] 121 TTJ 366 (Delhi)], i.e., the cost of assets and date of acquisition to the previous owner should be taken.

Therefore, in this case, the cost of the shares would be ₹ 25 lakh, being the cost to the previous owner, and the indexation of cost would be available from 2006.

4. A charitable trust had filed an application for accumulation of income of the previous year 2013-14, relevant to Assessment Year 2014-15, under section 11(2) for  4,75,000, for a period of 5 years. It is unable to spend such accumulation by 31st March 2019.

In which year would such income be taxable – in Assessment Year 2019-20 or Assessment Year 2020-21? If the trust incurs a deficit by spending on purposes other than the purpose of accumulation in the year in which such unspent accumulation is taxable, can the trust set off such deficit against the income arising due to the unspent accumulation?

Ans. Under section 11(3), the unspent accumulation under section 11(2) is deemed to be the income of the previous year immediately following the expiry of the period of accumulation. Therefore, if accumulation for the year ended 31st March 2014 is accumulated for a period of 5 years up to 31st March 2019, the unspent portion is to be taxed in the following previous year, i.e., the sixth year, which is financial year 2019-20, corresponding to Assessment Year 2020-21, unless spent in that following year.

Such amount is deemed to be income, but is not deemed to be income from property held under trust for charitable or religious purposes. Therefore, spending of income for purposes other than the purpose of accumulation would not qualify as an application of income for charitable purposes for the purposes of section 11. Therefore, any deficit in the previous year relevant to assessment year 2020-21 would not be eligible for set off against such income taxable under section 11(3).

Publications for sale

Sr. No. Name of Publication Rate ()
Edition Members Non-Members Courier Charges
1. 311 – Frequently Asked Questions on Survey – Direct Taxes Dec., 2018 600.00 675.00 100.00
2. Handbook on FEMA – Taxation – Frequently Asked Questions Oct., 2018 600.00 675.00 100.00
3. “Income Tax Appellate Tribunal – A Fine Balance – Law, Practice, Procedure and Conventions – Frequently Asked Questions” Dec., 2017 1,000.00 1,050.00 100.00
4. AIFTP – Of Milestone and Beyond – History Book Nov., 2016 400.00 450.00 80.00

Notes: 1. The above publications are available for sale; those who desire to buy may contact the office of the Federation.

2. Local/Outstation members not collecting from office are requested to add courier charges, as mentioned above.

3. Please draw Cheque/Draft in favour of “All India Federation of Tax Practitioners” payable at Mumbai.

The CGST Rules, 2017 have been amended vide Notification No. 3/2019 – CT dated 29th January, 2019 to make certain consequential and necessary changes to the Rules in view of the Amendment Acts being made effective from 1st February, 2019. A brief analysis has been done below for ease of comparison, the possible reasoning and implications of the changes.

Heading of Chapter II – “Composition Rules” substituted with “Composition Levy”

Comments – This amendment has been made to bring uniformity in the Composition Scheme by providing the power of complete framing of the Composition Scheme to the CGST Rules, under Section 10 of the CGST Act.

The Composition rates are prescribed under Rule 7 of the CGST Rules, however, even Notification No. 8/2017 – CT prescribed the rates separately. Notification No. 8/2017-CT has now been amended.

Amendment to Rule 7 – Inclusion of the words “and services” in the Sr. No. 3 of the table

Comments – The CGST (Amendment) Act, 2018 has added a proviso to Section 10 that allows the persons opting for the Composition Scheme to provide services up to a certain value. This amendment to Rule 7 is in wake of the amendment to Section 10 of the CGST Act.

Form GSTR-4 has been amended to include reporting of value of services provided by the Composition taxable person.

Amendment to Rule 8 – Deletion of first proviso

Comments – By omitting this proviso, the requirement for having separate registration under GST for SEZ Developers and SEZ units in the same State is removed, as a corollary to the amendment that allows to obtain separate registrations for multiple places of business within the same State.

Substitution of old Rule 11 for separate registration of business verticals with new Rule 11 providing for multiple registrations in same State

Comments – Consequent to the decision of the GST Council in the earlier meetings, the CGST Rules have been amended to allow separate registrations for multiple places of business within the same State without the requirement of having a separate business vertical. There are also certain conditions prescribed for opting for multiple registrations regarding opting of composition scheme and inter-branch transactions in the new Rule 11.

Form GST REG-01 has been amended to include the necessary changes.

Addition of Rule 21A for temporary suspension of Registration

Comments – This Rule has been inserted after Rule 21 to provide for suspension of GST Registration for the period from date of application for cancellation of registration till the completion of proceedings. This means that the taxpayer shall not have to comply with the requirements of the GST from the date of application for cancellation till completion of cancellation proceedings subject to conditions prescribed in the new Rule.

Form GST REG-17 (Show Cause Notice) & Form GST REG-20 (Dropping of Proceedings) have been amended to include a note for suspension of Registration.

Addition of Rule 41A for transfer of ITC on obtaining separate Registration within the State

Comments – By virtue of this Rule, the available closing balance of ITC in a particular State may be distributed to the new registrations obtained for the different places of business in the same State on the basis of value of assets held by the places of business at the time of such new Registrations.

New Form ITC – 02A has been prescribed for this purpose in the Amendment Rules.

Addition of “Entry 92A” in Rules 42 & 43

Comments – Minor amendment to exclude the duties and taxes levied under Entry 92A of List I from the value of exempt supplies as provided in the Explanation to Rules 42 & 43.

Deletion of clause (a) of Explanation to Rule 43(2) for exempt services

Comments – This amendment has removed the clause (a) of Explanation to Rule 43(2) which excluded the supplies of services made to Nepal & Bhutan against payment in INR from the value of “exempt supplies” for the purpose of Rule 42 & 43. Hence, such services shall now be considered as “exempt supplies”.

Amendment to Rule 53 for revised tax invoice

Comments – The particulars to be mentioned of credit notes and debit notes have been prescribed under a separate sub-rule 53(1A) and removed from Rule 53(1). The following requirements have also been removed from the particulars to be mentioned on the Revised Invoice –

– “Nature of document

– Value of taxable supply of goods or services, rate of tax and the amount of the tax credited or, as the case may be, debited to the recipient.”

Addition of sub-Rule 1A to Rule 53

Comments – The particulars to be mentioned on credit notes and debit notes have been separately provided under this new sub-Rule. The requirements are in line with the requirements of other documents prescribed under the Rules.

Amendment to Rule 80

Comments – The CGST (Amendment) Act 2018 has inserted a proviso to Section 35(5) of the CGST Act to exclude “any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities” from the GST Audit under Section 35(5). The amendment to Rule 80 is a consequential amendment to exclude the persons provided in the above proviso from Rule 80 which prescribes the conditions for GST Audit.

Amendments to Rule 83

Comments – The time limit for passing the GSTP examinations has been extended from 18 months to 30 months from the appointed date (1st July, 2017).

Sub-rule 8 has been substituted with new sub-rule 8 to add compliances that can be undertaken by a GST practitioner on behalf of his clients. The new additions include generation of e-Waybill, filing of GST ITC-04 and application or withdrawal of Composition scheme.

Consequential amendment to the proviso to Rule 83(8) has also been made to accommodate the enhanced scope of the GST practitioner.

Form GST PCT-05 (Authorisation of GST Practitioner) has also been amended to include the above enhancement of scope.

Amendment to Rule 85(3) & 86(2) to add Sections 49A and 49B

Comments – Sections 49A and 49B were introduced by the CGST (Amendment) Act, 2018 to change the method of inter-head utilisation of Input Tax Credit. The amendments to Rule 85(3) and Rule 86(2) have been made consequent to introduction of above Sections.

Amendment to Rule 89(2) to substitute clause (f)

Comments – Rule 89(2) prescribes the documentary evidences to be submitted for claim of refund of tax or any other amounts. The old clause (f) mentioned that a declaration had to be submitted that the SEZ developer or units had not availed the ITC of the tax paid by the supplier. However, the new clause (f) provides for a declaration stating that the tax has not been collected from such SEZ developer or unit. This could possibly remove the hassle of obtaining the declaration from the SEZ customer.

Form GST RFD-01 (Application for Refund) and GST RFD-01A (Manual Application for Refund) has been amended to include the new clause (f)

Amendments to Rules 91 & 92 for revalidation of applications

Comments – Procedural amendments to Rule 91 and Rule 92 have been made to provide for revalidation of payment advice of refund in Form GST RFD-05, where the refund is not disbursed within the same financial year as the payment advice. Also, the order sanctioning refund in Form GST RFD-04 and GST RFD-06 shall not be required to be revalidated by the officer sanctioning the refund.

Amendment to Rule 96A

Comments – The IGST (Amendment) Act, 2018 has amended the definition of “exports of services” to allow for consideration to be received in INR where permitted by the RBI. The amendment to Rule 96A is in consequence to the above amendment in the Act.

The more longing grows the more will the cloud of obstacles be dispelled, and stronger will faith be established.

— Swami Vivekananda