GST WEEKLY UPDATE :13/2024-25 (30.06.2024) BY CA Vipul Khandhar
-By CA Vipul Khandhar
- Recent Circulars:
The place of supply in terms of newly added clause (ca) of section 10(1) of the IGST Act, in case of supply of goods made to an unregistered person where billing address is different from the address of delivery of goods, especially in the context of supply being made through e-commerce platforms. The place of supply shall be the location of delivery of goods as declared by the Buyer.
The value of supply in case of services from foreign affiliate including related person to a registered person in India who is eligible to claim full ITC in case of import of services from foreign related persons/affiliates, the amount charged from registered person shall be deemed to be the open market value even if the consideration is Nil provided the recipient is eligible for Full ITC.
The time limit for claiming ITC u/s 16(4) of CGST Act in case of RCM supplies received from Un-registered persons.:
- In case of supplies from un-registered person attracting RCM liability u/s 9(3) or 9(4), the recipient is required to issue invoice u/s 31(3)(f).
- The Rule 36(1)(b) prescribes that ITC shall be availed on the basis of the invoice issued u/s 31(3)(f).
- The relevant financial year to determine the time limit u/s 16(4) shall be the FY in which the said invoice is issued by the recipient.
In case, the GST liability is paid under RCM after the time of supply, the interest on delayed payment shall be levied. This clarifies that ITC shall not be denied even in case of the delayed payment of GST.
- Circular No. 212/5/2024-GST:Post sale discount:
Till the functionality is not available, it is suggested that the supplier should obtain following documents as supporting from the recipient to ensure the compliance to Section 15(3)(b)(ii) of the Act:
- If the amount of GST involved in credit note for discount is more than Rs. 5 Lakhs
A CA/CMA certificate from the recipient that the ITC has been proportionately reversed by the recipient in in respect to the amount of credit note as required under the provisions of Section 15(3)(b)(ii) of the CGST Act, 2017 along with following information:
– Detail of credit notes, Invoice number against which credit note was issued, The amount of ITC reversal i.r.t. each of said credit notes
– Detail of Form DRC-03/other relevant document through which ITC was reversed.
- If the amount of GST involved in credit note for discount is not more than Rs. 5 Lakhs
Undertaking/certificate from the recipient that the said Input tax credit attributable to such discount has been reversed by the recipient along with following information:
– Details of credit notes, Invoice number against which credit note was issued, The amount of ITC reversal i.r.t. each of said credit notes
– Detail of Form DRC-03 or other relevant document through which ITC was reversed.
ESOP issued by the foreign company to Indian subsidiary company: The following conditions must be met to qualify the transaction of recovery out of the purview of GST.
- The ESOPs are transferred at the request of Indian Subsidiary company by Foreign holding
- Reimbursement of such securities/ shares is done by Indian subsidiary company to foreign holding company on cost-to-cost basis i.e. equal to the market value of securities without any element of additional fee, markup or commission.
It is clarified that no supply of service appears to be taking place between the foreign holding company and the Indian subsidiary company where the foreign holding company issues ESOP/ESPP/RSU to the employees of Indian subsidiary company, and the subsidiary company reimburses the cost of such securities/shares to the foreign holding company on cost-to-cost basis.
However, in cases where an additional amount over and above the cost of securities/shares is charged by the foreign holding company, by whatever name called, GST would be leviable on such additional amount charged as consideration for the supply of services of facilitating/ arranging the transaction in securities/ shares by the foreign holding company to the domestic subsidiary company. The GST shall be payable by the domestic subsidiary company on reverse charge basis in such a case on the said import of services.
The liability to reverse input tax credit in respect of cases where goods as such or the parts are replaced under warranty: In cases where warranty is provided by the manufacturer/ suppliers to the customers in respect of any goods, and if any defect is detected in the said goods during the warranty period, the manufacturer may be required to replace either one or more parts or the goods as such, depending upon the extent of damage/ defect noticed in the said goods. However, Table in Para 2 of the said circular only clarifies in respect of the situations involving replacement of part/ parts and does not specifically refer to the situation involving replacement of goods as such. It is clarified that the clarification provided in Para 2 of the said circular is also applicable in case where the goods as such are replaced under warranty.
The distributor replaces the parts/ goods with the customer as part of warranty out of his own stock on behalf of the manufacturer and subsequently gets replenishment of the said parts/ goods from the manufacturer: There may be cases where the distributor replaces the goods or its parts to the customer under warranty by using his stock and then raises a requisition to the manufacturer for the goods or the parts, as the case may be. The manufacturer then provides the said goods or the parts, as the case may be, to the distributor through a delivery challan, without separately charging any consideration at the time of such replenishment. In such a case, no GST is payable on such replenishment of goods or the parts, as the case may be. Further, no reversal of ITC is required to be made by the manufacturer in respect of the goods or the parts, as the case may be, so replenished to the distributor.
Nature of supply of extended warranty, at the time of original supply of goods, as a separate supply from supply of goods, if the supply of extended warranty is made by a person different from the supplier of the goods:
If a customer enters into an agreement of extended warranty with the supplier of the goods at the time of original supply, then the consideration for such extended warranty becomes part of the value of the composite supply, the principal supply being the supply of goods, and GST would be payable accordingly. However, if the supply of extended warranty is made by a person different from the supplier of the goods, then supply of extended warranty will be treated as a separate supply from the original supply of goods and will be taxable as supply of services.
Nature of supply of extended warranty, made after original supply of goods: In case where a consumer enters into an agreement of extended warranty at any time after the original supply, then the same shall be treated as a supply of services distinct from the original supply of goods and the supplier of the said extended warranty shall be liable to discharge GST liability applicable on such supply of services.”
The input tax credit on the ducts and manholes used in network of optical fiber cables (OFCs) for providing telecommunication services is barred in terms of clauses (c) and (d) of sub-section (5) of section 17 of the CGST Act, 2017. It appears that ducts and manholes are covered under the definition of “plant and machinery” as they are used as part of the OFC network for making outward supply of transmission of telecommunication signals from one point to another. Moreover, ducts and manholes used in network of optical fiber cables (OFCs) have not been specifically excluded from the definition of “plant and machinery” in the Explanation to section 17 of CGST Act, as they are neither in nature of land, building or civil structures nor are in nature of telecommunication towers or pipelines laid outside the factory premises.
Accordingly, it is clarified that availment of input tax credit is not restricted in respect of such ducts and manhole used in network of optical fiber cables (OFCs), either under clause (c) or under clause (d) of sub-section (5) of section 17 of CGST Act 2017.
Under HAM model of National Highways Authority of India (NHAI), the concessionaire has to construct the new road and provide Operation & Maintenance of the same which is generally over a period of 15-17 years and the payment of the same is spread over the years. What is the time of supply for the purpose of payment of tax on the said service under the HAM model. It is clarified that the tax liability on the concessionaire under the HAM contract, including on the construction portion, would arise at the time of issuance of invoice, or receipt of payments, whichever is earlier, if the invoice is issued on or before the specified date or the date of completion of the event specified in the contract, as applicable. If invoices are not issued on or before the specified date or the date of completion of the event specified in the contract, tax liability would arise on the date of provision of the said service (i.e., the due date of payment as per the contract), or the date of receipt of the payment, whichever is earlier.
It is also clarified that as the installments/annuity payable by NHAI to the concessionaire also includes some interest component, the amount of such interest shall also be includible in the taxable value for the purpose of payment of tax on the said annuity/installment.
- Rajasthan GST Dept Implements Faceless Management System phased manner for GST:
This works a new faceless/randomized system will be implemented for mainly Scrutiny, Business audit, enforcement, appeal & refundhe Central Board of Indirect Taxes and Customs (CBIC) on Thursday said it will launch on July 4 the automated system of publishing currency exchange rates.
- The online Exchange Rate Automation Module (ERAM) system will replace the existing manual process of notifying exchange rates through a notification.
“ERAM is a significant step towards trade facilitation as the exchange rates of 22 currencies would now be published online in advance for ease of consumption by all importers and exporters,” the CBIC said in a statement.
- Judicial Decisions:
(i) The Hon’ble Madras Highcourt Decision Regarding condonation delay in filling appeal allowed:
The Hon’ble Madras High Court in Tvl. SKL Exports v. Deputy Commissioner (ST)(GST)(Appeal) [W.P. No. 6825 of 2024 dated March 14, 2024], the delay in filing appeal before the Appellate authority due to the reason the assessee preferred rectification petition should be condoned and directed the appellate authority to dispose the case on merits.
Disclaimer:
This publication contains information for general guidance only. It is not intended to address the circumstances of any particular individual or entity. Although the best of endeavour has been made to provide the provisions in a simpler and accurate form, there is no substitute to detailed research with regard to the specific situation of a particular individual or entity. We do not accept any responsibility for loss incurred by any person for acting or refraining to act as a result of any matter in this publication.
(The author is a well known Chartered Accountant practicing at Ahmedabad)
