1. Concessional Rate of GST

Facts : The Applicant is a Limited Company, engaged in manufacturing of packaging material which includes HDPE Drums and containers and supplies HDPE drums, on receipt of a purchase order from a merchant exporter, raises invoice for supply of said drums on the merchant exporter and delivers the same, as per the merchant exporter’s direction, to the premises of the chemical manufacturer, who manufactures ethyl alcohol and packs the same in the said HDPE drums and the merchant exporter exports the said ethyl alcohol packed in said HDPE drums, within the stipulated time. In this regard, the applicant sought advance ruling in respect of the following question:

Whether they are liable for 0.1% concessional rate of tax under Notification No. 41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter?

Observations & Findings : The Notification No. 41/2017-IT (Rate) stipulates certain conditions for supply of goods to the merchant exporter at concessional rate of GST at 0.1%. To avail the concessional rate of GST, the registered recipient is required to move the goods directly from the place of registered supplier to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported, or to a registered warehouse from where the goods shall be further moved to the Port, Inland Container Deport, Airport or Land Customs Station. In case the merchant exporter procures goods from different registered suppliers, the merchant exporter should move such supplies to the registered warehouse, aggregate such procured goods at the warehouse and should move the goods to the Port, Inland Container Depot, Airport or Land Customs Station from where the goods are exported. In the instant case, the applicant supplies HDPE drums by raising the invoice under Billed to Merchant Exporter and shipped to the manufacturer of the ethyl alcohol. Thus, the impugned goods are not moved directly to the Port, Inland Container Deport, Airport or Land Customs Station or to a registered warehouse, which is a pre-condition for availing concessional rate of GST. Therefore, the applicant is not entitled to supply the impugned goods at the concessional rate of GST at 0.1%.

Ruling : The applicant is not entitled for 0.1% concessional rate of tax (GST) under Notification No.41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter.

[2021 (11) TMI 292 – AAR, Karnataka – M/s Time Technoplase Ltd.]

2. Input Tax Credit

Facts : Applicant purchases second hand cars (goods) and after minor processing on it such as change of tyres, change of battery, painting, denting, repairs, servicing, internal cleaning, polishing etc, which does not change the nature of the goods, the said goods are sold. Applicant does not claim Input tax credit on purchase of second hand goods and has opted for Margin Scheme and applies GST rate as per Notification No 8/2018- Central Tax (Rate) dt 25/01/2018. The applicant sought the ruling on the following question :

Can Input Tax Credit is allowed on other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc.?

Observations & Findings : From a reading of the Notification No. 8/2018 -Central Tax (Rate) New Delhi, the 25th January, 2018, it is seen that the concessional rate under the notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. In other words, since the applicant has been availing the benefit of the said notification and paying GST at a concessional rate, they shall not avail Input Tax Credit, as queried.

Ruling : Answered in the negative.

[2021 (10) TMI 1120 – AAR, Maharashtra – M/s Deccan Wheels]

3. Supply by Charitable Trust

Facts : The applicant is Charitable Trust registered under Maharashtra Public Charitable Trust Act The applicant is registered under section 12AA of the Income Tax Act 1961.

The trust undertakes supply of services to 50 orphans and homeless children by way of shelter, education, guidance, clothing, food and health for the Women and Child welfare. The trust also render services to destitute women who are litigating divorce or homeless or the victim of domestic violence. The trust represents them before legal forums, including lodging FIR at police stations against the culprits, The trust also arrange for counselling them through expert counsellors to bring them out of the trauma and help them to lead normal life.

Major source of income of the trust is from Government of Maharashtra’s Woman and Child Welfare ministry and also the Central Government and other donations from public. The applicant, seeking an advance ruling in respect of the following questions.

1. Whether applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017?

2. If answer to above question is affirmative, whether the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government.

3. If answer to above question 2 is affirmative, what will be the rate at which the GST would be charged?

Observations & Findings : The Sr. No. 1 of Notification No. 12/2017 dated 28-06-2017 exempts the charitable trusts available for charitable activities more specific. While the consideration from only those activities listed in the Notification are exempt from GST, while from the activities other than those mentioned is taxable. Thus, there could be many services provided by charitable and religious trust which are not considered as charitable activities and hence, such services come under the GST net.

Ruling

Question 1:– Whether applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017?

Answer:- Answered in the affirmative.

Question 2:- If answer to above question is affirmative, whether the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government.

Answer:- Answered in the affirmative in cases of grants received. In case of donations, if the gift or donation is made to a charitable organization; the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, then GST is not leviable. In all other cases GST is leviable.

Question 3:- If answer to above question 2. is affirmative, what will be the rate at which the GST would be charged.

Answer- GST would be charged @18%.

[2021 (11) TMI 397 – AAR, Maharashtra – M/s Jayshankar Gramin Va Adivasi Vikas Santha]

4. Input Tax Credit

Facts : The Applicants are engaged in the business of manufacture and supply of ghee and other products. They have their factory premises at Tamil Nadu and Karnataka having separate GST registration in both the States. The products supplied by them are taxable under the Act and none of the products are either “Exempted” or “Nil rated”. They sell their products through various retail stores across the country and obtain substantial revenue from Export Sales too. With the objective of expanding the market share’, the applicant launched a sales promotional offer to enhance sales of its products. The sales promotional offer was named as ‘Buy n Fly’ scheme. Based on the quantity and value purchases made by retailers from sub stockists, the rewards fixed under the scheme would be awarded by the company to retailers. The applicants sought Ruling on the following question :

Whether the GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name ‘Buy n Fly’ is eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the CGST Act, 2017.

Observations & Findings : As per Section 17 (5)(h), goods disposed of by way of gift are not eligible for ITC. The term ‘gift ‘ is not defined in CGST Act, the meaning of the term ‘gift’ as defined in the Gift Tax Act, Is as below:

“(xii) “gift” means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth, ………….”

The promotional rewards were extended by the applicant at their own will voluntarily without any consideration in money or money’s worth on achievement of a set target to the retailers. The rewards are not in the nature of discounts to the products but are in the nature of personal consumables and qualifies to be termed as gifts. It is to be noted that these rewards are announced based on the retailers stocking the targeted products and not on the sales made by the retailers. It is further to be noted here that the rewards are handed out to the successful persons and no tax invoice/any taxation document is raised for such handout. Also, it is stated that the goods are distributed on fulfillment of the conditions of the scheme, with no separate consideration, therefore, the distribution of goods and services to the retailers as per the Scheme is not a ‘Supply’ as defined under Section 7 of the GST Act. Section 17(5)(h) expressly restricts ITC on such gifts, even if they are procured in the course of furtherance of business. Therefore, it is clear that the tax paid on the goods/services procured for distribution as rewards extended by the applicant in the ‘Buy n Fly’ scheme is not available to them as ITC in as much as such rewards have been extended as gifts.

Ruling : The GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name ‘Buy n Fly’ is not eligible for Input Tax Credit under the GST law in terms of Section 17(5)(g) and (h) of the CGST Act, 2017 and TNGST Act, 2017.

[2021 (10) TMI 1117 – AAR, Tamilnadu – M/s GRB Diary Foods P Ltd.]

5. Sale of Developed Plots

Facts : The applicant has stated that it is a company formed by industrialists as required by the Telangana State Industrial Infrastructure Corporation Limited (TSIIC) as a special purpose vehicle (SPV) representing the member industrialists with an objective of providing industrial infrastructure by development of land acquired by TSIIC It is informed by the applicant that a sale deed will be executed with TSIIC upon completion of development of internal infrastructure. Similarly the applicant is authorized in turn to sell to individual industrialists after each of his allottee commences commercial operation by executing individual sale deeds. They seek to ascertain whether their activity is within the purview of GST and whether it qualifies the supply under Section 7 of the CGST Act..

1. Whether in the facts and circumstances the activity of disposal of developed plots of land to allottee members of the applicant from and out of the land received from the TSIIC for specified purpose of industrial development is outside the purview of GST by virtue of the said activity failing under Entry 5 of Schedule III of Central Goods & Service Tax Act, 2017.

2. Whether in the facts and circumstances the activity of infrastructure development (ID) of land received from the TSIIC for specified purpose of industrial development and undertaken on behalf of allottee members (allottee(s) or the member(s)) does not qualify as a “supply” under Section 7 of the Central Goods & Service Tax Act, 2017.

Observations & Findings : The paragraph 5 of Schedule III includes the sale of land as exempt from levy of GST subject to clause (b) of paragraph 5 of schedule II.

Paragraph 5 of Schedule II deals with levy of tax on immovable property involving the construction of a complex or a building or any civil structure intended for sale. Therefore the exclusive sale of land is exempt from GST except when sold along with a constructed complex or a building or a civil structure.

Further the Clause b of Paragraph 6 of Schedule II deems the composite supply of works contract as supply of services.

The value of such supply of service i.e., the transaction value which is paid or payable should be discernable according to Sec 15 of the CGST Act, 2017. And where the supply of service is for a consideration not wholly in money it shall be determined as per chapter IV of the CGST Rules, 2017.

Therefore the activity undertaken by the applicant for construction of the immovable property would qualify to be a “works contract” if

1. It is executed in pursuance of a contract or agreement; and

2. There is a transfer of property in goods in execution of works contract from the contractor to the contractee; and

3. There is a consideration paid by the contractee to the contractor.

Ruling

1. If the applicant sells the land after developing by way of erecting a civil structure or a building or a complex then such supply is liable to tax under CGST/SGST Acts. However if land is sold without any development involving any civil structure or building or complex such supply falls under paragraph 5 of schedule III to Section 7(2) of CGST Act, 2017 and hence is exempt from tax.

2. If the applicant executes works contracts involving transfer of property in goods for a consideration under an agreement of contract such consideration will be liable to tax. However if these elements are missing in execution of a construction it shall not be liable to tax.

[2021 (10) TMI 1061 – AAR, Telangana – M/s TIF Integrated Industrial Parks P Ltd.]