SECTION B: GOODS AND SERVICES TAX

1. Section B comprises of questions from 5-8. In Section B, answer question no. 5 which is compulsory and any two questions from question nos. 6-8.

2. Working notes should form part of the answer.

3. All questions in Section B should be answered on the basis of position of GST law as amended by Finance Act, 2023 and the significant notifications/ circulars issued upto 31st October, 2023.

Question-5(a) [M-10]

Evershine Pvt. Ltd., a GST registered supplier located in Jaipur, Rajasthan is engaged in taxable supply of packaging goods and consultancy services. It provides following details of various activities undertaken during the month of September, 2023:

(A) Details of Outward Supplies

(1) Supply of goods of Rs.18,00,000 to Vaidehi Enterprises, a registered person of Udaipur, Rajasthan. Further, received Rs.50,000 from Vaidehi Enterprises towards freight charges (as agreed to deliver the goods at Vaidehi Enterprises' premises) which was not included in above value of supply.

(2) Supply of goods worth Rs.35,00,000 to Calc. Exim, a registered person of Prayagraj, Uttar Pradesh. Further, the amount of Rs.60,000 charged separately (not included above) from Calc. Exim on account of municipal taxes levied in relation to such outward supply.

(3) Supply of services to Sunshine Ltd., a registered person in Jodhpur, Rajasthan before discount worth Rs.6,00,000. Further, discount of Rs.30,000 which has been given at the time of supply of service and duly recorded in the invoice.

(4) It delivered the goods worth Rs.2,00,000 to Jeevan Solutions, a registered person located at Bikaner, Rajasthan on the direction of Raghu Enterprise, a registered person of Mumbai, Maharashtra and tax invoice was issued by Evershine Pvt. Ltd. to Raghu Enterprise of Mumbai, Maharashtra.

(B) Details of Inward Supplies:

(1) Purchased raw material goods worth Rs.20,00,000 from PQR Ltd; a GST registered dealer, located at Kanpur, Uttar Pradesh. Goods worth Rs.1,00,000 out of total purchases were not received during the month.

(2) Purchased machinery for manufacturing process worth Rs.2,00,000 from MPQ Pvt. Ltd., a GST registered dealer, located at Bengaluru, Karnataka. Company has claimed depreciation under Income Tax Act 1961 on full value of the machine, including the GST component.

(3) Purchased truck worth Rs.15,00,000 from GST registered dealer, located at Ajmer, Rajasthan for transportation of its goods. GST rate on truck is: CGST 14%, SGST 14%, IGST 28%.

(4) Purchased car (having seating capacity of 7 persons) costing to Rs.10,00,000 excluding GST from Mihir Automobiles Pvt. Ltd., a GST registered dealer, located at Ajmer, Rajasthan for use of its director for official purpose. GST rate on car: CGST 14%, SGST 14%, IGST 28%

(5) Purchased goods worth Rs.5,00,000 from DEF Buildwell Pvt. Ltd., a registered person of Jaipur, Rajasthan for construction of an additional floor of factory building, of Evershine Pvt. Ltd.

Opening balance of Input tax credit as on the beginning of September 2023-CGST Rs.20,000, SGST Rs.50,000 and IGST Rs.75,000.

Rate of GST applicable on both inward and outward supply of goods & services: CGST 9%, SGST 9% and IGST @18%, except where otherwise provided.

Notes:

(i) All the figures mentioned above are exclusive of taxes.

(ii) Subject to the information given above, conditions necessary for claiming ITC were complied with. (

iii) All inward supplies are used for taxable goods only.

(iv) Brief and suitable notes should form part of your answer.

Calculate the amount of net minimum GST payable in cash by Evershine Pvt. Ltd. for the month of September, 2023.

Answer

WN-1 Calculation of Total output Tax

Notes:

1. The value of supply shall include

(a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws, if charged separately by the supplier;

(c) incidental expenses, commission, packing and any amount charged by the supplier to the recipient; [Section 15(2)]

Hence value shall include freight charges and municipal tax.

2. The value of the supply shall not include any discount which is given before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; [S-15(3)(a)]

3. where the goods are delivered by the supplier to a recipient on the direction of a third person, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;

Hence in given case, POS shall be Maharashtra.

WN-1 Calculation of Input Tax

Notes:

1. Goods must have been received for availing ITC. [S-16(2)(b)]. Hence ITC on Rs.1,00,000 shall be available on receiving goods.

2. If depreciation are claimed on the tax component of cost of capital goods and plant and machinery under Income-tax Act, ITC on said tax component shall not be allowed. [S-16(3)]

Hence ITC on machinery shall not be allowed.

3. ITC on capital goods are available.

4. ITC on motor vehicles for transportation of persons of seating capacity =< 13 persons (including driver) shall not be available. [S-17(5)(a)]

Hence ITC on car is not available.

5. ITC is not available on works contract services supplied for construction of an immovable property (other than plant and machinery). [S-17(5)(c)]

Hence ITC is not available on factory building

3. Net payment of Tax

WN-3 Payment of Net GST

Note-5. Order of Utilisation of ITC [S-49B rw R-88A]

Question-5(b) [M-5]

Mr. Ravindra, a registered person in Bhopal, Madhya Pradesh has provided the following information regarding outward transactions made during the month of January, 2024:

(1) He was appointed by recognized sports body as a chief selector of hockey team and received Rs.5,00,000 as remuneration.

(2) Services of pure labour contract was provided for construction of independent residential unit for Rs.1,80,000.

(3) He rented out his warehouse for warehousing of sugarcane and received rental income of Rs.75,000.

(4) Provided services to Municipal Corporation of Bhopal for slum improvement and upgradation for Rs.6,50,000.

(5) He has charged consideration of Rs.1,25,000 against western music dance performance in an event.

You are required to compute the taxable value of supply on which GST is to be paid by Mr. Ravindra for the month of January, 2024. All the amount stated above are exclusive of GST, wherever applicable.

Suitable Notes should form part of answer.

Answer

Calculation of Taxable value for Jan-24

Notes:

1. Services provided to a recognised sports body by an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized is exempt. [E-68 of N-12/2017-CT rate]

However in given case, remuneration is received as chief selector is taxable.

2. Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex is exempt. [E-11 of N-12/2017-CT Rate]

3. Warehousing of sugarcane being an agricultural produce is exempt. [E-54 of N-12/2017-CT rate]

4. Pure Services provided to a Local Authority is exempt [E-3 of N-12/2017-CT rate]

It has been assumed that either the services provided are pure services or composite supply where value of supply of goods is upto 25% of value of such supply and consequently, said supply has been considered as exempt from GST.

However, it is also possible to assume that it is a composite supply with value of supply of goods more than 25% of value of such supply. In that case, said supply will be liable to GST.

5. Taxable, since the amount received for western music dance performance but the exemption is available for performance in folk or classical art forms of music or dance if the consideration charged for such performance is not more than Rs.1,50,000. [E-78 of N-12/2017-CT rate]

Question-6(a) [M-5]

As per the CGST Act 2017, Vishnu Limited was not mandatorily required to get registered, however it opted for voluntary registration and applied for registration on 12^th Feb 2024. Registration certificate has been granted by the Department on 24th Feb 2024.

Vishnu Limited is not engaged in making inter-State outward taxable supplies.

The CGST and SGST liability for the month of February, 2024 is Rs.31,000 each.

Vishnu Limited provides the following information of goods held in stock on 23rd February 2024:

You are required to determine the eligible ITC available and amount of net minimum GST to be paid in cash by Vishnu Limited for the month of February 2024.

Answer

1. Statutory Provisions

(a) Section 18(1) – In case of voluntary registration, ITC may be availed on inputs held in stock and inputs contained in semi finished or finished goods held in stock on the date immediately preceding the date of grant of registration. ITC on capital goods is not available.

In the given case,

Date of grant of registration = 24/02/2024

Hence ITC may be availed on inputs held on 23/02/2024.

(b) Section 18(2) - Person shall not be entitled to take ITC u/ss (1) after the expiry of 1 year from the date of issue of tax invoice relating to such supply.

2. Calculation of ITC that may be availed

3. Net payment of Tax

Note- Order of Utilisation of ITC [S-49B rw R-88A]

Quesiton-6(b) [M-5]

Examine the following independent cases and determine the place of supply:

(1) Mr. Joy, an unregistered person of Kolkata, West Bengal sends a courier through Kolkata, West Bengal based Mohan Courier Agency to his sister in Mumbai, Maharashtra.

(2) Mr. Nitin, an unregistered person, resides at Rewa, Madhya Pradesh books a two way air journey ticket from Prayagraj, Uttar Pradesh to Jaipur, Rajasthan on 6 Sep and back. He leaves Prayagraj on 11 Sep in a morning flight and land in Jaipur the same day. He leaves Jaipur on 15 Sep in a late night flight and lands in Prayagraj the next day.

(3) Rimjhim Pvt. Ltd, located at Lucknow, Uttar Pradesh, purchases a manufacturing machine from Manav Steel Industries Ltd., located at Jaipur, Rajasthan, for being installed in its factory located at Haridwar, Uttarakhand.

Answer

(1) Section 12(8) of IGST Act - POS of services by way of transportation of goods, including by mail or courier to unregistered person, shall be location where goods are handed over.

In given case, Mr. Joy is unregistered person and courier is handed over in Kolkotta, hence

POS = Kolkota [West Bengal]

(2) Section 12(9) of IGST Act - The place of supply of passenger transportation service to an unregistered person is place where the passenger embarks on the conveyance for a continuous journey wherein the return journey is treated as a separate journey, even if the tickets for onward and return journey is issued at the same time.

Therefore, the place of supply for the outward and return journey are the locations where Mr. Nitin embarked on the conveyance for the continuous journey, i.e. Prayagraj, Uttar Pradesh for outward journey and Jaipur, Rajasthan, for return journey.

(3) Section 10(d) of IGST Act - Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly.

Since machine are being installed at Hardwar, POS = Haridwar

Question-7(a) [M-5]

GSTR 3B for the month of January 2024 has been filed by M/s Avisha Limited, a registered person, within the due date prescribed by the CGST Act 2017 which is on February 20th, 2024. It came to the notice of the Co. that tax due for the month of January, 2024 has been paid short by Rs.16,000. The short fall of Rs.16,000 has been paid through cash ledger and credit ledger at the time of filing GSTR 3B for the month of February 2024 on March 20th, 2024 in the following manner:

Assume that electronic cash ledger and credit ledger carry sufficient balance for the above short fall. (i) You are required to calculate the amount of interest payable if any u/s 50 of the CGST Act 2017 and rule 88B of the CGST rules 2017.

(ii) Give the effect if GSTR3B for the month of January 2024 had been filed belatedly on March 20, 2024 and all other conditions remaining same.

Calculation should be rounded off to nearest rupee. As 2024 is leap year, give effect of same.

Answer

(1) Proviso to Section 50(1) read with Rule 88B(1) - If GSTRB is late furnished, then interest is payable @18% on portion of tax which is paid by debiting the electronic cash ledger, for the period of delay.

(2) Rule 88B(2) - In all other cases, interest shall be paid on tax which remains unpaid, for the period starting from the due date till the date such tax is paid, at 18% rate.

Advice

(1) Since Avisha Limited has furnished GSTR-3B for the month within the prescribed due date, interest is payable on the gross tax liability deposited with a delay of 29 days [21.02.2024 - 20.03.2024 (both inclusive)] as under

= Rs.16,000 x 18% x 29/366 = Rs.228 (rounded off)

(2) If Avisha Limited has filed Form GSTR-3B for the month after the due date, i.e. on 20.03.2024, interest is payable on the net tax liability paid through Electronic Cash Ledger only, for a delay of 29 days, as under: = Rs.12,000 x 18% x 29/366 = Rs.171 (rounded off)

Quesiton-7(b) [M-5]

Who is liable to collect TCS (collection of tax at source) under Section 52 of the CGST Act, 2017. Briefly explain the provisions relating to registration, filing of return and deposit of TCS to Government as per the provisions of section 52 of the CGST Act, 2017 and rule 12 of the CGST Rules, 2017.

Answer

1. Section 52(1) - every ECO, not being an agent, shall collect TCS @ 1% of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the ECO.

2. Registration of ECO

Such ECO is required to submit a registration application in prescribed form through the common portal.

The proper officer shall, after due verification, grant registration within 3 working days from the date of the application. On a request or upon an enquiry or pursuant to any other proceeding under GST law, if the proper officer is satisfied that a person is no longer liable to collect the tax at source, he may cancel his registration.

3. Filing of return [Section 52(4) read with Rule 67(1)]

Such ECO shall furnish a monthly statement in prescribed form containing the details of the outward supplies of goods and/ or services effected through it, including supplies returned through it and the amount collected by it as TCS during the month within 10 days after the end of each month in which tax has been collected at source.

They also required to file annual statement4 on or before 31st December following the end of the financial year. The TCS amount collected by the ECO has to be deposited by 10th of the month succeeding the month in which TCS has been collected

Question-8(a) [M-5]

Describe the conditions to be satisfied for availing deduction of post supply discounts from the value of supply as per the provisions of section 15(3) of the CGST Act 2017.

Answer

The value of the supply shall not include any discount which is given after the supply has been effected, if

(i) such discount is in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) ITC attributable to the discount has been reversed by the recipient of the supply.

Question-8(a) [M-5]

Examine the existence of "consideration" for donation received by charitable institutions from individual donors, without quid pro quo an important feature as defined in section 2(31) of the CGST Act, 2017.

Answer

Donations received by the charitable institutions from individual donors are treated as consideration only if there exists, quid pro quo, i.e., there is an obligation on part of recipient of the donation or gift to do anything.

When the name of the donor is displayed in recipient institution premises, in such a manner, which can be said to be an expression of gratitude and public recognition of donor’s act of philanthropy and is not aimed at giving publicity to the donor in such manner that it would be an advertising or promotion of his business,

then it can be said that there is no supply of service for a consideration (in the form of donation). There is no obligation (quid pro quo) on part of recipient of the donation or gift to do anything (supply a service). Therefore, there is no GST liability on  consideration.

Question-8(b) [M-5]

Mohan Enterprise is a registered person having principal place of business in Gandhinagar, Gujarat. They received services of Advocate Sameer, a registered person from Ahmedabad, Gujarat. Shekhar, an unregistered person provided services of labour to Mohan Enterprise. Explain the provisions relating to issue of invoice by recipient Mohan Enterprise if he is liable to pay tax under reverse charge under Section 9(3) or 9(4) of the CGST Act, 2017.

Answer

Section 31(3)(f) read with Rule 47A

a registered person who is liable to pay tax u/s 9(3) or (4) under RCM shall issue an invoice in respect of goods or services received by him from the supplier who is not registered on the date of receipt of goods or services;

Rule 47A – Invoice must be issued within a period of 30 days from the date of receipt of the said goods or services [Rule 47A inserted wef 08-10-2024]

Advice

However, Mohan Enterprises is not required to issue an invoice with respect to said supply as supplier Sameer is registered.

Further, tax on labour services received from unregistered person-Shekhar is not payable under reverse charge. Therefore, Mohan Enterprises is not required to issue an invoice with respect to said supply.