India: Recent GST Updates

Last Updated: 6 November 2017
Article by SKP  

In order to clear the confusion in the initial stages of GST implementation, the state and central government have come out with various notifications, trade notices, press notes, etc. for providing clarifications on contentious issues. The summary of certain key points has been given hereunder:

  1. National Anti-Profiteering Authority

    • GST Council has formed a Selection Committee under the Chairmanship of Cabinet Secretary to identify and recommend eligible persons for appointment as Chairman and members of National Anti-Profiteering Authority under GST.
    • The Authority shall be responsible for applying anti-profiteering measures in the event of GST rate reduction or if the benefit of Input Tax Credit (ITC) is not passed on to the recipients by way of commensurate reduction in prices.
    • The Authority shall be headed by a senior officer of the level of Secretary to the Government of India and shall have four technical members from centre and/or states.
  1. Addressing difficulties faced by exporters in Maharashtra

    • Exporters undertaking exports without payment of integrated tax under Section 16(3) of the IGST Act, 2017, are required to submit a bond/letter of undertaking in respect of such exports.

      • The State Government of Maharashtra has issued a Trade Circular which has clarified that the bond/letter of the undertaking shall be accepted by the jurisdictional Central Tax officers.
      • This shall be applicable to all exporters in the state, irrespective of the fact that a provisional ID for GST has been issued by the state GST department.
  1. GST on rental income

    The Revenue Secretary Hasmukh Adhia, while speaking at "GST Ki Master Class" organised by the Government of India, has clarified that rental income beyond INR 2 million from renting of immovable property for commercial purposes will attract GST.

  1. Clarifications issued by the Ministry of Finance vide various press releases/notifications

    • Reverse charge on sale of old jewellery

      • It has been clarified that Section 9(4) of the Central Goods and Services Tax Act, 2017 dealing with the provisions of reverse charge mechanism shall be read in conjunction with Section 2(105) and Section 7 of the said Act. While Section 2(105) defines supplier as a person supplying the goods or services, Section 7 provides that a supply is a transaction for a consideration by a person in the course or furtherance of business.
      • Thus, as sale of old jewellery by an individual cannot be said to be in the course or furtherance of his business, it will not be a supply for the purpose of the CGST Act, and consequently, the jeweller will not be liable to pay tax under reverse charge mechanism on such purchases.
      • The reverse charge mechanism will apply only if an unregistered supplier of gold ornaments sells it to a registered supplier.
    • Reverse charge on lawyer's fees

      • Vide Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017, it has been clarified that legal services provided by individual advocates, including senior advocates is covered under the ambit of reverse charge mechanism in the GST regime.
      • In this context, it has been further clarified that legal service means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.
    • GST on gifts to employees

      • As per the CGST Act, gifts to employees of value more than INR 50,000 in a year made without consideration are subject to GST, when made in the course of furtherance of business.
      • It has been clarified that the word 'gift' shall derive its meaning from common parlance, i.e. it should be:

        1. Made without consideration
        2. Voluntary in nature
        3. Made occasionally
        4. Cannot be demanded as a matter of right by the employee
        5. Employee cannot move a court of law for obtaining a gift.
      • The applicability of GST on transactions between employer and employee can be encapsulated as under:
Service provider Service recipient Taxability Remarks
Employee Employer Outside the scope of GST Such service should be in the course of or in relation to his employment.
Employer Employee Outside the scope of GST Such service should be in terms of contractual agreement for employment.
  • Furthermore, if services like membership of a club or a health and fitness centre, on which ITC is not allowed have been supplied free of charge by the employer to all the employees, then the same will not be subject to GST, provided appropriate GST was paid when the service was procured by the employer. This will also apply to free housing provided to employees when the same is provided in terms of the contract between the employer and the employee and is a part and parcel of the cost-to-company.
  • GST on hotels

    • It has been clarified that accommodation in any hotel, including 5-star hotels, having a declared tariff of a unit of accommodation of less than INR 7,500 per unit per day, will attract GST at the rate of 18%. Star rating of hotels is, therefore, irrelevant for determining the applicable rate of GST.
    • It should be noted that declared tariff includes "charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit." Accordingly, even if the accommodation is booked for an effective price below INR 7,500 after discount where the original tariff was INR 7,500 or more, a higher rate of 28% rate could be applicable.
  1. Launch of 'GST Rates Finder' app

    • The CBEC has launched the GST Rates Finder App on the Android platform to ease the process of finding the applicable rate on the supply of goods and services. This app will be soon available on iOS platform as well.
    • This functionality has also been made available on CBEC's website.

SKP's comments

  • The clarification issued on the applicability of reverse charge mechanism on the sale of gold jewellery should end the confusion caused in the industry after a contrary view was expressed in the 'GST ki Master Class' session organised by the government.
  • The trade notice issued by the Maharashtra GST department will come as a huge relief to exporters who were facing trouble due to the absence of an administrative mechanism to file their bond/letter of undertaking.
  • The GST Rates Finder App is not only useful for businesses but is also a handy tool for all citizens who can easily verify the GST rates billed to them on the supply of goods and services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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