GST WEEKLY UPDATE : 46/2022-23 (12.02.2023) By CA Vipul Khandh
1. Gujarat GST Audit Manual Clarified Some Of The Issue Pertaining to GST:
(1) A reseller is returning time expired goods to his distributor. Suppose, both the reseller and the distributor are registered as normal tax payers.
If, in the supply chain someone destroys the expired goods what will be the treatment in GST? If the reseller in above example is under composition scheme or unregistered person then what are the processes?
So, many questions may arise. Circular No. 72/46/2018-GST dt.26.10.2018 clarifies some of these aspects.
(2) During audit the officer noticed that Mr. X is an independent director of the Auditee to whom the company paid Rs.1.5 Cr. as yearly remuneration. Whether this remuneration is leviable to GST?
The services provided by the directors who are not the employees of the company are outside the scope of Schedule III of the GGST Act and are therefore taxable. In terms of entry at Sl. No. 6 of the Table annexed to notification No. 13/2017 – CT (R) dated 28.06.2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis. Clarification in Circular No: 140/10/2020 – GST dt. 10.06.2020 is relevant for audit officers in this case.
(3) ABC Printers has made supplies against two different printing orders:
- Printing of brochures of a real-estate company where only the content is provided by the real- estate company.
b. Printing of envelopes and letter pads with the logo of the developer. Whether the above supplies are supplies of goods or service?
The first case is a composite supply of goods (paper, ink) as well as services (printing) where printing of the content supplied by the recipient of supply is the principal supply. Hence, tax in this case will be guided by the tax rate of printing services.Clarification in Circular No: 11/11/2017-GST dated: 20.10.2017
In the second case too, the printing has been made as a part of composite supply, but the supply of printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods. Therefore, in the second case, the tax rate of goods will prevail.
(4) Fabrication of buses may involve the following two situations:
- Bus body builder builds a bus, working on the chassis owned by him and supplies the built-up bus to the customer.
b) Bus body builder builds body on chassis provided by the principal for body building.
Whether the above supplies are supply of goods or service?
In the above context, for situation (a) above, the supply made is that of bus, and accordingly supply would attract GST@ 28%. In situation (b) above, fabrication of body on chassis provided by the principal (not on account of bodybuilder), the supply would be treated as service, and 18% GST as applicable will be charged accordingly.
(5) Popcorn is available in packets both as ready to eat and ready to fry. Whether GST rate is same in both the cases?
A packet of corn, which needs to be heated before eating would attract GST @5%. But, ready to eat popcorn bag or packet attracts 18% GST.Vide, AAR- Gujarat: Jay Jalaram Enterprises [2020]117.
(6) A manpower agency is extracting minerals from a mine owned by another person. Is it supply of goods or services?
Applicant is providing a support in extraction of mineral and therefore it is a kind of supplying support Service.
In view of the above, we find that the Applicant is providing supporting service related to mining. The said service is classifiable under HSN 998622. The rate of GST on the said service is 18% (CGST 9% + SGST 9%) as provided under the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. AAR-Rajasthan (KSC Buildcon (P) Ltd.]
(7) As per sec 17(5)(d) ITC is blocked when an RTP procures goods and services for construction of any immovable property on his own account, which is capitalized, including when such goods or services or both are used in the course or furtherance of business.
Now, whether ITC is admissible on lease rent paid during pre-operative period for the leasehold land on which a resort is being constructed to be used for furtherance of business?
Input Tax Credit is not available for lease rent paid during pre-operative period for the leasehold land on which the resort is being constructed on his own account to be used for furtherance of business, when the same is being capitalized and treated as capital expenditure. Vide, AAR, WB, GGL Hotel & Resort Company Limited, 30/WBAAR/2018-19 dated 08/01/2019
(8) If consumable inputs like furnace oil, zinc etc. are not returned to any principal from a job performing job of galvanizing within the specified time limit whether it will be treated as supply in GST?
The goods like furnace oil, zinc etc. consumed in the process of galvanizing are inseparable from the galvanized goods. If return of the galvanized goods to the principal satisfies the condition of receiving back the inputs in accordance with section 143(1)(a) of the GST Act and the goods like furnace oil, zinc etc. have been entirely used up in the process of galvanizing then question of returning of furnace oil, zinc etc. should not arise and not be treated as supply.[Vide, AAR, WB, Ratan Projects & Engineering Co Private Limited, 49/WBAAR/2018-19 dated 28/03/2019].
(9) Whether any sale done by the liquidator of the assets of a corporate debtor under the provisions of the Insolvency and Bankruptcy Code, 2016 is a “supply” under GST?
The sale of the assets of a corporate debtor is a supply of goods by the liquidator, who is required to take registration u/s 24 of the GST Act. If she is already registered as a distinct person of the corporate debtor in terms of Notification No. 11/2020 – Central Tax dated 21/03/2020, she should continue to remain registered till her liability ceases under section 29 (1) (c) of the GST Act.Vide, AAR, WB,M/s Mansi Oils and Grains Pvt Ltd,02/WBAAR/2020-21 dt 29/06/2020
(10) Whether medicines and surgical goods supplied by Hospitals and nursing homes to the inpatients and outpatients are exempted?
The supply of medicines & other surgical goods by the hospital from its pharmacy to inpatients are in the course of providing health care services which are bundled and are provided in conjunction with each other, would be considered as “Composite Supply” & eligible for exemption under ‘health care services’.
The supply of medicines & other surgical goods by the hospital from its pharmacy to outpatients not a part of health care services is a taxable supply of goods and thereby GST is applicable. [Vide, AAR, Kerala, M/s Baby Memorial Hospital Ltd, KER/57/2019 dt 05.09.2019]
(11) Whether Input credit on Purchase of Lift would be available to Hotel as it has been used in the course or for the furtherance of business?
The input tax credit of tax paid on Lifts procured and installed in hotel building shall not be available to the applicant as the same is blocked in terms of Section 17(5)(d) of the CGST Act 2017, become an integral part of the building which is immovable property. [Vide:- Jabalpur Hotels Pvt Ltd (GST AAR Madhya Pradesh),
- AAR & Judicial Decisions:
(i) Hon’ble Delhi Highcourt Decision On Refund can not be rejected on minor error which can be rectifiable:
(Applicant – M/s. Shri Shyam Footwear)
The Highcourt has set aside the order of the Revenue Department rejecting the refund application of the assessee on the grounds that the rectified information submitted by the assessee was not taken into account while passing such order. Held that, the assessee cannot be penalised for an inadvertent error in submitting an erroneous information, which had already been rectified. Further that, it is essential for the Revenue Department to examine the information as submitted by the assessee and process its claim for refund of unutilized Input Tax Credit (“ITC”) in accordance with law.
(ii) Hon’ble Madras Highcourt Decision On Assessee can be liable to attend proceeding of CGST and SGST Authority subject to different subject matter:
(Applicant – Tvl Metal Trade Incorporation)
The Highcourt has held that, the State Tax Authority cannot prosecute the assessee, when the Central Tax Authority has already initiated action in respect of the very same subject matter. Further held that, to substantiate such defence, the assessee has to participate in the personal hearing/ enquiry and only then it can be ascertained whether the proceedings initiated by the Central and State Tax Authority are one and the same involving the same subject matter. Directed the assessee to appear before the Revenue Department and state all its objections.
(iii) AAR On Classification of stepper motor under Sub-heading 85011012:
(Applicant – Hitachi Astemo FIE Private limited)
CAAR Delhi held that stepper motor (3800-B07F-0000) proposed to be imported by the applicant for use in manufacture of idle air control valve will be classifiable under Sub-heading 8501 10 12 of the First Schedule of the Customs Tariff.
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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.
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