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The GST Council has been proactively taking up representations
made by various industry stakeholders to remove hardships and
increase compliance. Rulings by Authority for Advance Rulings (AAR)
have also begun providing clarity and direction on various
ambiguous provisions. With this, the GST regime could stabilize in
the coming months. Furthermore, the decision to simplify
compliances in the last GST Council meeting should also hasten this
process.
Top Trends
E-Way Bill on the intra-state
movement of goods to be implemented across all remaining states by
3 June 2018.
A centralized depository of rulings
passed by AARs across all states to be created on the GST
Council's website.
Few key points that businesses should
ensure while finalizing their balance sheets: Reconcile sales
according to books of accounts with GSTR-1 and GSTR-3B.
Input tax credit according to books
match with electronic credit ledger on the GST portal.
Input tax credit claimed matches with
GSTR-2A.
Certain functionalities have been
added to the GST portal:
Taxpayers can make Input Tax Credit
(ITC) reversal under one head without affecting the other head,
e.g., reverse only CGST/SGST without affecting the other.
Exporters claiming a refund of
accumulated ITC would now be required to provide invoice-wise
details of shipping bill, Export General Manifest (EGM), Bank
Realisation Certificate (BRC) /Foreign Inward Remittance
Certificate (FIRC), etc. while filing the refund application. A
template has been provided for this purpose.
Judicial Pronouncements
Issue
Ruling
SKP
Comments
Whether hotel
accommodation and restaurant services provided to the employees and
guests of SEZ units, be treated as a supply of goods and services
to such SEZ units, and therefore, zero-rated?
[AAR, Karnataka]
Under Section 12(3)(b) of the IGST Act, 2017, the place of
supply of services by way of lodging accommodation by a hotel,
should be the location at which the immovable property (hotel) is
located, i.e., outside SEZ in this case.
Furthermore, under Section 12(4) of the IGST Act, 2017, the
place of supply of restaurant and catering services should be the
location where the services are actually performed, i.e., outside
SEZ in this case.
The services are not part of authorized operations of SEZ, as
required under CGST Rules, 2017.
Under Section 16(1) of the IGST Act, 2017 supply of services to
an SEZ unit is to be treated as 'zero-rated supply.'
Furthermore, 'accommodation services' are covered in
uniform list of services as default authorized services for an SEZ
unit, as conveyed by the Ministry of Commerce & Industry dated
2 January 2018.
It is a well-settled principle of law that a specific provision
shall prevail over a general provision.
In view of the above, there is a possibility that the decision
of the AAR could be subject to reconsideration at higher appellate
courts.
Whether a supply of UPS
along with battery can be treated as composite supply?
[AAR, West Bengal]
A standalone UPS and a battery can be separately supplied in
retail set up.
The contract for the supply of a combination of UPS and
battery, if not built as a composite machine, is not
indivisible.
The said goods are not naturally bundled and cannot be treated
as a composite supply.
The said supply should be considered as mixed supply as they
are supplied under a single contract at a combined single
price.
The AAR has placed importance on whether the products are
'naturally bundled.'
The applicant admitted that UPS and the battery were being sold
separately as well. The AAR pointed out that the products are
capable of being supplied as part of separate contracts and hence
cannot be considered as composite supply.
Businesses involved in supplying more than one product bundled
together should carefully evaluate whether their supply constitutes
a mixed or composite supply.
Whether supply of
turnkey Engineering, Procurement and Construction (EPC) contract in
case of a solar power plant, wherein both goods and services are
supplied, should be construed as a composite supply or a works
contract?
[AAR, Maharashtra]
In a turnkey contract, the contractor is expected to perform
all activities from engineering to commissioning.
Furthermore, on examining the various clauses of the agreement,
it can be seen that the liability of the contractor doesn't end
with the procurement of materials but extends till successful
commissioning of the system, like in a 'works
contract.'
Viewing the principles laid down by the Supreme Court in
various cases in light of the facts of the present case makes it
clear that there is an inherent element of permanency to the solar
power plant, and hence it is classifiable as immovable
property.
Consequently, the said contract would be classified as a
'works contract' under Section 2(119) of the CGST Act,
2017, as it results in the creation of immovable property.
The AAR examined the substance of the contract entered into by
the parties as opposed to the drafting of the contract as
constituting a separate supply of goods and services. The AAR ruled
that the invoicing pattern, the language of the agreement, etc. is
secondary to the substance of the transaction being
undertaken.
In view of this ruling, the question whether a transaction
qualifies as a works contract/results in the creation of immovable
property has acquired further importance under GST regime.
Whether liquidation
damages should be subjected to GST?
[AAR, Maharashtra]
Liquidated damages would be subject to GST as the same are
towards the tolerance of the delay caused by the contractor which
will be covered as a 'supply of services' under clause (e)
of Para 5 of the Schedule II to the CGST Act, 2017.
Even though such liquidated damages are presented in the form
of a deduction from the payments to be made to the contractor, they
are the income of the applicant/contractee towards the supply of
service.
The revenue authorities have considered liquidated damages as
consideration towards the supply of service of 'tolerance'
of non-performance/delayed performance under the erstwhile service
tax law as well.
However, whether a clause for liquidated damages is for
tolerance of an act or actually inserted to act as a deterrence for
non-performance/delayed performance is open to interpretation.
In view of the above, this ruling by the AAR is bound to open a
Pandora's Box in terms of taxability under GST of similar
transactions.
It is to be noted that an Advance Ruling is binding only on
the applicant who had sought it and the concerned jurisdictional
authority, i.e., an Advance Ruling is specific to an applicant and
shall not be applicable to other taxpayers facing similar
issues.
However, the above mentioned Advance Rulings provides
clarity about the issues being faced and provide persuasive value
in matters before the tax authorities.
Upcoming GST Due Dates
Form
Applicable
to
Period
Due
Date
GSTR-1 (monthly)
Taxpayers with annual
aggregate turnover more than INR 15 million
May 2018
10 June 2018
GSTR-3B
All registered
taxpayers
May 2018
20 June 2018
GSTR-5
Non-resident taxable
persons
May 2018
20 June 2018
GSTR 5A
Online Information and
Database Access or Retrieval (OIDAR)
May 2018
20 June 2018
GST TRAN-2
Taxpayers not registered
under pre-GST regime willing to claim transitional credit
Six tax periods for
which the scheme is applicable
30 June 2018
OTHER KEY ASPECTS
GST from a Macro Perspective
Return filing process
The GST Council in its 27th meeting held on 4 May 2018 has
approved the simplified returns filing system which is bound to be
implemented in a phased manner as follows:
Revenue collections
The GST revenue exceeded the INR 1 trillion threshold for the
first time in April 2018 with gross GST collections standing at INR
1.03 trillion. The gross GST revenue for the month of May 2018 has
dropped to INR 0.94 trillion. However, this is more than t e
average gross GST revenue for the period of July 2017 to March 2018
which stood at INR 0.89 trillion.
e-Way Bill
Post the smooth rollout of the e-Way Bill system for inter-state
movement of goods, the government is gradually implementing the
system for intra-state movement of goods in the following
manner:
e-Way Bill – A snapshot
More than 22.6 million e-Way Bills generated
in May 2018 (up to 21 May 2018).
More than 50 million e-Way Bills generated
till date.
On an average 2 million e-Way Bills are being
generated every day.
State-wise GST officers have been appointed to resolve e-Way
Bill related grievances.
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.
