Southern India Regional Council of
The Institute of Chartered Accountants Of India
(Setup by an Act of Parliament)

 

Professional Updates


Professional Updates- November 2018

By CA Annapurna Kabra

 

Karnataka VAT Audit – (April 2017 to June 2017)

Notification No FD 53 CSL 2018 Bangalore dated 27/09/2018/Press Note No KSA CR 10/2018-2019 dated 06/10/2018

With reference to the powers conferred by section 174(2) of the Karnataka GST Act 2017 the Government of Karnataka amends Rule 34(3) KVAT Rules 2005. This Rule is effective from 01.4.2017.

Section 31(4) of the KVAT Act states that every dealer whose turnover is exceeding one crore shall submit Audited statement of Accounts in Form VAT 240 electronically within nine months after the end of the relevant year. Rule 34(3) of the KVAT Rules state that the Audited Statement of accounts shall be submitted in Form VAT 240 to the Jurisdictional Local VAT officer or VAT sub officer within nine months after the end of the Relevant Year. For the period from April 2017 to June 2017 of the financial year April 2017 to June 2017 of the financial year 2017-2018 every dealer whose total turnover exceeds one crore shall file the Audit Report within the due date i.e 31st December 2018.

The Government has notified the notification no FD CSL 2018 dated 27/9/2018 according to which if total turnover for the period April 2017 to June 2017 exceeds 25 lakhs but less than one crore it is required to submit Audited statement of Accounts in Form VAT 240 electronically and the last due date of furnishing the Audit Report is 31st March 2019.

Analysis

Therefore, effectively if the total turnover for the period April 2017 to June 2017 is exceeding 25 lakhs and less than one crore then the due date of filing the Form VAT 240(Audit Report) is March 2019 and if the total turnover for the said period is exceeding one crore than the due date of filing the Form VAT 240(Audit Report) is December 2018.

Role of Auditor

Section 31(4) of the KVAT Act 2003, states that every dealer whose ‘total turnover’ in a year exceeds rupees one Crore shall have his accounts audited by a Chartered Accountant or a Cost Accountant or a Tax Practioner. The Auditor should be updated with KVAT laws, CST laws, KTEG laws, applicable notification, exemptions, and circulars while conducting the audit. The auditor forms the opinion or conclusion based on the audit evidence and decides the matters, which are required to be reported and commented.

KVAT Audit Report

The KVAT Audit Report (Form VAT 240) has been bifurcated between the Certificate and the Report. The contents of the KVAT Audit report is classified as general information, particulars of turnover, deduction and payment of tax and particulars of declaration and certificates.

Given the nature of business and the volumes involved, the auditor should apply the sampling audit techniques for compliance of the KVAT Audit. The key success factor for an effective audit will be clear understanding the nature of business of the dealer, verification of the documents and controls, effective Implementation of the KVAT Act and KVAT Rules and Impact of GST Transition Provisions in KVAT Audit

Audit Procedures

Generally the Auditor should comply with Basic Audit Procedures like verification of sales book, corresponding entries in the stock records should have been made, ensure that rates on which sales have been made are according to price list, sales return should be duly account for and stock should duly adjusted, ensure that goods sent on approval basis, goods sent on consigner are not recorded as sales, tally sales with sales tax returns, reconcile VAT collections with payments and transfer after adjusting the input tax credit, the net balance to appropriate accounts, Check adjustment of input tax by setting off against output tax by relevant journal entries, Check the different classification of sales at different of taxes as per schedule, Check the credit notes issued and reason for issue, Check the tax invoices, bill of sale prepared as per the Provisions of account, tally the monthly figures with the figures shown in the monthly return, Check the purchase invoices and proper classification of purchase is made at different rate of taxes, Purchase returns are accounted correctly, Check whether any stock is transferred to branches within the state and outside the state, Check whether capital goods are purchased, Ensure rebates and discounts have been adjusted properly etc

Documentation

The Documentation for Audit under KVAT law should be like Books of accounts including trading account (as required under VAT), all Invoices/Bills, declarations, E-Sugam bills, Delivery notes relating to stock, Purchase and Purchase orders, Input credit – Partial rebating, special rebating, Output tax , Copies of Audited Balance sheets, Copies of Vat returns filed, Copies of Form VAT 240 for earlier periods, Internal, Statutory Audit & Tax Audit reports , Agreements/Contract copies, details of Consignment sales, Form 140/145, particulars of details for each contract like material procured, utilization, payments received etc, Bank Statements in support of Advances Received, Running Account Bill Copies in support of Works Contract Bills Raised bifurcating material and labor, etc

Reconciliation Statement

The Auditor should prepare the list of Reconciliations statements like reconciliation of purchase in the P&L Account to purchases in VAT 100, Reconciliation of Sales in the P&L Account to Sales in VAT 100, Reconciliation of Vat payable as per returns with details of payments made, Reconciliation of E-Sugam generated to purchases/sales, Reconciliation of interstate / export / sale-in-transit / SEZ / stock transfer with statutory forms and other reconciliations.

Aspects of KVAT Audit

The Important Aspects on KVAT Audit for the Quarter April 2017 to June 2017

Though the above points would merely give brief about the aspects of verification of records and documentation, there would be necessity to consider details as to each of the aspects discussed above and other related aspects as well.


 

Professional Updates- October 2018

 

GST updates

By CA Annapurna Kabra

Notifications under GST law

  1. Tax Deducted at Source to be effective from 01.10.2018

As per Notification No 50/2018 – Central Tax Dated 13.9.2018, the Central Government appoints 1st day of October 2018 as the date on which provisions of section 51 shall come into force with reference to persons specified in

(a) A department or establishment of the Central Government or State Government; or

(b) Local authority; or

(c) Governmental agencies; or

(d) Such persons or category of persons as may be notified by the Government on the recommendations of the Council.

The persons notified are an authority or a board or any other body, - (i) set up by an Act of Parliament or a State Legislature; or (ii) established by any Government, with fifty-one per cent. or more participation by way of equity or control, to carry out any function; (b) Society established by the Central Government or the State Government or a Local Authority under the Societies Registration Act, 1860 (21 of 1860) (c) public sector undertakings.

  1. Collection of Tax at Source to be effective from 01.10.2018

The Central Government appoints the 1st day of October 2018 as the date on which the provisions of section 52 (TCS) shall be effective.

  1. Amendment in the CGST Rules

As per Notification No. 39/2018- Central Tax dated 04.09.2018 seeks to amend certain Rules under CGST:

  1. Central Goods and Services Tax (Amendment) Act, 2018 (No 31 of 2018)

“activities of a race club including by way of totalizator or a license to book maker or activities of a licensed book maker in such club; and”

“The expression services includes facilitating or arranging transaction in securities”

Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1) of Section 7, they shall be treated either as supply of goods or supply of services as referred to in Schedule II. Second Schedule is excluded from the ambit of scope of supply and therefore Schedule II is meant only to clarify the supply as either a supply of goods or services.

In Section 9(4) the following is substituted; “The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to such supply of goods or services or both.”

In other words, the applicability of section 9(4) is restricted only to notified registered persons for specified goods and services, but as per notification no. 22/2018 dated 06.08.2018 the section is deferred till 30th September 2019. Though the section is amended that won’t have any effect till 30th September, 2019 until any further notification is issued.

The threshold limit of aggregate turnover from Rs. 1 crore to Rs. 1.5 crores has been substituted. The person who opts to pay tax under composition may supply services of value not exceeding 10% of the turnover of the State or Union Territory in the preceding financial year or Rs. 5 lakhs, whichever is higher.

It shall be deemed that the registered person has received the services where the services are provided by the supplier to any person on the direction of and on account of such registered person. Earlier, the deeming fiction was applicable only in case of ‘Bill- to- ship- to’ supplies.

The expression ‘value of exempt supply’ shall not include the value of activities or transactions specified in Schedule III, except those specified in Paragraph 5 of the said Schedule. In other words, sale of land and sale of building subject to paragraph 5(b) of Schedule II will be considered in value of exempt supply.

    1. Motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:— (A) further supply of such motor vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor vehicles

    2. Vessels and aircraft except when they are used––

(i) for making the following taxable supplies, namely:— (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft;

(ii) For transportation of goods;

    1. Services of general insurance, servicing, repair and maintenance in so far as they relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa)

In proviso has been substituted to, “Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified.” In other words, the threshold limit of special category state for registration is increased from Rs. 10 lakhs to Rs. 20 lakhs.

E- Commerce operators who are required to collect tax at source u/s 52 only would be required to take compulsory registration. Other e- commerce operators who are not required to collect taxes u/s 52 would not be required to register unless their turnover in the financial year exceeds Rs. 20 lakhs.

For sub- section (1), the following proviso shall be inserted, “Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.” Therefore, separate registration is required for persons having unit(s) in a SEZ or being a SEZ Developer as a business vertical distinct from his other units located outside the SEZ.

For sub- section (2), the following proviso shall be substituted, “Provided that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.” This substitution allows multiple places of business of the taxpayers in addition to business verticals within the State to be registered separately.

The words ‘suspension’ along with cancellation has been inserted and a proviso is also inserted for sub- section (1) and (2) stating; “Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.” . In other words, there will be temporary suspension of registration during the pendency of Cancellation Proceedings.

By certain substitutions, now debit notes and credit notes can be issued with respect to multiple invoices. Further permits to issue consolidated credit/ debit notes in respect of multiple invoices issued in a Financial Year without linking to individual invoices.

For sub- section (5) the following proviso shall be inserted, “Provided that nothing contained in this sub-section shall apply to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force.”. Therefore, audit of books of accounts is not required to any department of the Central Government or a State Government or a local authority, whose books of account are subject to audit by the Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities under any law for the time being in force .

The words “and to perform such other functions” has been inserted, thus widening the scope of goods and services tax practitioners such as filing of refund claim, filing application for cancellation of registration etc.

Relevant date for filing refunds in case of unutilized ITC arising out of inverted duty structure, shall be the due date for furnishing of return u/s 39 for the period in which such claim for refund arises. For other cases of unutilized ITC, the relevant date shall be the end of any tax period as mentioned in section 54(3) of the CGST Act. Refunds in case of exports of services, allows receipt of payment in Indian rupees where permitted by the RBI. Particularly in case of exports to Nepal and Bhutan, the payment is received in Indian rupees as per RBI regulations.

The recovery of taxes can be made from distinct persons as the word ‘person’ will include ‘distinct persons’.

The ceiling limit of the amount to be deposited before filing an appeal to the Appellate Authorities = 10% of the disputed tax amount subject to maximum limit of Rs. 25 crores.

The ceiling limit of the amount to be deposited before filing an appeal to the Appellate Tribunal = 20% of the disputed tax amount subject to maximum limit of Rs. 50 crores.

The words ‘CENVAT credit’ has been substituted with the words ‘eligible duties and taxes’, thus the transitional credit will be available only on eligible duties and taxes. Hence, no credit will be available on Education cess/ Secondary and Higher Education Cess/ Krishi Kalyan Cess. Further, this would be effective retrospectively.

The time period provided with respect to one year and three years in case of inputs and capital goods shall be extended by the Commissioner for a further period not exceeding one year and two years respectively.

  1. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

  2. Supply of warehoused goods to any person before clearance for home consumption;

  3. Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.


 

Professional Updates- September 2018

 

CST/GST updates

By CA Annapurna Kabra

Notifications under Central Sales Tax law

CST Karasamadhana Scheme, 2018: A scheme for waiver of penalty and interest under the CST Act.

Features of the Scheme: Grants waiver of 100% of arrears of penalty and interest payable by the dealer under the Central Sales Act, 1956 relating to assessments/ re- assessments completed on or before 30th June, 2018.

Conditions:

  1. Full payment of arrears of tax on or before 30.10.2018- 100% waiver of arrears of penalty and interest. However, not applicable for penalty under section 10- A of the CST Act, 1956.

  2. Arrears of only penalty and interest relating to assessments/ re-assessments completed on or before 30.06.2018- Waive of penalty and interest.

  3. In case of an appeal or any application against order or proceedings relating to arrears of tax, penalty and interest filed before the Appellate Authority or Court and where such disposal is still pending, the dealer shall withdraw such appeal or any other application before availing such benefits of waiver of penalty and interest under the Scheme.

  4. Any amount paid at the time filing of an appeal or other application shall be eligible for adjustment towards arrears of tax outstanding for the assessment year for which the benefit of waiver is claimed. However, the dealer is not eligible for any refund of any amount that may become excess as a result of such adjustment under the Scheme.

  5. No rectification of orders/ proceedings shall be seeked after filing of application for availing the benefits of this Scheme or after availing the benefits of this Scheme.

  6. Non applicability for the orders giving rise to arrears of tax, penalty and interest where:

    1. State has filed an appeal before the Karnataka Appellate Tribunal or the Central Sales Tax Appellate Authority or

    2. State has filed an appeal or revision or any kind of application before the High Court or the Supreme Court or

    3. Any competent authority has initiated suo moto revision proceeding under the CST Act as on 30.06.2018 or

    4. Any rectification is made after 30.06.2018.

Procedure:

  1. Submission of application in the prescribed format for each year relating to the assessments/ re- assessment concluded upto 30.06.2018.

  2. Electronic submission through the website http://ctax.kar.nic.in or http://gst.kar.nic.in on or before 30/10/2018.

  3. Duly signed copy of the said application downloaded shall be submitted to the concerned Assessing Authority as prescribed on or before 30/10/2018.

  4. Assessing Authority shall scrutinize the application and calculate the actual arrears of taxes, penalty and interest payable by the dealer upto the date of filing of application.

  5. Where no discrepancy is notice, the Assessing Authority shall proceed to pass the order in 15 days from the date of receipt of application and the same shall be served within 10 days from the days of passing such order.

  6. Where discrepancy is noticed in the amount calculated as declared by the dealer in the application, the Assessing Authority shall inform such discrepancy to the dealer within 15 days from the date of filing of application.

  7. The dealer shall pay the tax as intimated by the Assessing Authority within 15 days from the date of intimation.

  8. On satisfaction that applicant has paid the amount due, the Assessing Authority shall pass the order waiving the amounts of arrears of penalty and interest payable by the dealer for each assessment year separately.

  9. The order shall be passed within 15 days of making the payment and the same shall be served within 10 days from date of passing of such order.

  10. The Assessing Authority shall assist the dealer in correct quantification of the amount of interest and penalty.

Notifications under GST law

Notification No. 34/2018- Central Tax dated 10.08.2018 prescribes the due date for filing of FORM GSTR- 3B for the months of July’ 2018 to March’ 2019 to be on the 20th of the month succeeding such month. Further the payment of taxes, interest, penalty and late fees have to be discharged within the said due date.

Notification No. 33/2018- Central Tax dated 10.08.2018 prescribes the due date for quarterly filing of FORM GSTR- 1 for taxpayers having aggregate turnover of upto Rs. 1.5 crores for the months of July’ 2018 to March’ 2019 as follows:

Sl No.

Quarter for which details in FORM GSTR- 1 are furnished

Time period for furnishing details in FORM GSTR- 1

1

July- September 2018

31st October, 2018

2

October- December 2018

31st January 2019

3

January- March 2019

30th April 2019

Notification No. 32/2018- Central Tax dated 10.08.2018 prescribes the due date for monthly filing of FORM GSTR- 1 for taxpayers having aggregate turnover of more than Rs. 1.5 crores for the months of July’ 2018 to March’ 2019 till the eleventh day of the month succeeding such month.

Notification No. 31/2018- Central Tax and Notification (13/2018) No. FD 47 CSL 2017 dated 06.08.2018 lays down the special procedure for completing the migration for those taxpayers who did not complete the filing of FORM GST REG- 26 under the CGST Rules, 2017 but received only Provisional ID till 31st December, 2017 may now apply for GSTIN. The special procedure is provided as under

Notification No. 30/2018- Central Tax (Rate) and Notification (1-I/2018) No. KGST.CR.01/2017-18 dated 30.07.2018 extends the time limit for furnishing the return of Input Tax Distributor (ISD) in FORM GSTR- 6, for the months of July’2018 to August’2018 till the 30th September, 2018.

Notification No. 22/2018- Central Tax (Rate) and 23/2018- Integrated Tax (Rate) dated 06.08.2018 exempts payment of tax under Section 9(4) of the CGST Act, 2017 till 30.09.2019.

Notification No. 14/2018- Central Tax (Rate) and 15/2018- Integrated Tax (Rate) dated 26.07.2018 provides relief to Hotel Industry by substituting the words “Declared Tariff” with “Value of Supply” for claiming exemption.

Circulars under GST law

Circular No. 55/2018 dated 10.08.2018 clarifies the taxability of the following:

a) Services provided by a private ITI in respect of designated trades notified under Apprenticeship Act, 1961 are exempt from GST. And Services provided by private ITI in respect of other than designated trades would be liable to GST.

Circular No. 54/2018 dated 09.08.2018 clarifies the classification of fertilizers for use in the manufacture of other fertilizers. Fertilizers supplied for direct use as fertilizers or supplied for use in the manufacturing of other complex fertilizers for agricultural use (soil or crop fertilizers) will attract 5% IGST.

Circular No. 53/2018 dated 09.08.2018 provides clarification on the following issue:

Here, the raw materials are supplied by oil refineries to manufacturers on continuous basis through dedicated pipelines, while a portion of the raw material is retained by the manufacturers. The issue is whether in this transaction GST would be leviable on the whole quantity of the principal raw materials supplied by the oil refinery or on the net quantity retained by the manufacturers of petrochemical and chemical products. It has been clarified that GST will be payable by the refinery only on the net quantity of petroleum gases retained by the recipient manufacturer for the manufacture of petrochemical and chemical products. And the refinery will be liable to pay GST on such returned quantity of petroleum gases, when the same is supplied to any other person.

This clarification will mutatis mutandis apply to feed stock which is retained by the recipient and remaining residual material is returned back to the supplier. The net billing is to be done on the retained by the recipient.

Circular No. 51/2018 dated 31.07.2018 states that service of transportation in ambulance provided by SG’s and private service providers to patients are exempt vide Notification No. 25/2012 dated 20.06.2012 under the Service Tax Law. The ambulance services provided by PSP’s to SG’s under NHM is a service provided to Government by way of public health and hence exempt under Notification no. 25/2012 dated 20.06.2018. Similar provisions under GST law exist; the above mentioned services are exempt under Notification No. 12/2017- Central Tax (rate) dated 28.06.2017.


 

Professional Updates- August 2018

 

Tax Notes- GST Updates

By CA Annapurna D Kabra

Advance Ruling under Karnataka GST law

Advance Ruling No . KAR ADRG 09/2018: M/s United Breweries Ltd, Bengaluru Rural dated 28.06.2018

Facts:

The Applicant is engaged in the manufacture and supply of beer under various brand names. The Applicant, apart from manufacturing beer on its own, also has manufacturing arrangement with contract brewing/ bottling units (CBU) who manufacture brands of beer belonging to the Applicant and supply such beer to market. The CBU’s manufacture beer bearing brand owned by the Applicant by procuring raw materials, packaging materials, incurring overheads and other manufacturing costs etc on its own and sell the beer directly to Government corporations/ wholesale depending on the state market.

The CBUs account for all the sales, manufacturing costs and overheads in their book of accounts. A certain portion of profit is retained by them and the balance is transferred to the Applicant.

The contract manufacturing arrangement empowers the CBUs to use the brand name of UBL for limited purpose of facilitating manufacture of UBL owner brands of beer by the CBUs.

Issue 1:

  1. Whether beer bearing brand/ s owned by M/s United Breweries Limited manufactured by Contract Brewing Units (CBU’s) out of the raw materials, packaging materials and other input materials procured by it and accounted by it and thereafter selling such beer to various parties under its invoicing would be considered as supply of services and whether GST is payable by the CBU’s on the profit earned out of such manufacturing activity?

Analysis

In the earlier laws, CBUs were discharging Service Tax on the agreed bottling charges, based on the circular issued under Service Tax. However, under GST regime the alcoholic liquor for human consumption is out of the levy of GST.The levy of GST on manufacturing activity carried out by the CBU’s would arise only when there is any treatment or process which is applied on another person’s goods [Schedule II Entry 3].

In this case, CBU’s are procuring the materials on their own account and not applying any treatment or process on goods belonging to the Applicant. In addition to this, the CBU’s are accounting the manufacturing costs in their books of accounts. Further on referring to the Termination clause in the agreement, it clearly states that the Applicant has to buy all the raw materials, WIP and Finished goods at ex- factory price.

Conclusion

Based on the facts, the CBU’s are not engaged in the supply of service to the Applicant and therefore, there does not arise any liability to pay GST on the amount retained by the CBU’s.

Issue 2:

Whether GST is payable by the brand owner on the “Surplus Profit” transferred by the CBU to the brand owner out of such manufacturing activity?

Analysis

The sharing of profits from the sale of alcoholic liquor is not a consideration for temporary transfer or permitting the use or enjoyment of any Intellectual Property Rights [Section 65B(44) of Finance Act, 1994 and Schedule II Entry 5(c ) of the CGST Act, 2017] based on Tribunal decisions in case of M/s Skol Breweries Ltd and such other various cases.

Since the Applicant provides the technical know- how and supervision on various activities to enable the CBU’s to achieve the desired results and this does not fall under the Intellectual Property Right Service. The fact that the supply of service is not covered under Schedule II does not imply that there is no supply of service and that GST is not chargeable. On examining the scope of supply under the CGST Act, 2017 it has been arrived that such supply is a supply of service based on the following reasons; a) the supply definition is an inclusive definition, b) it is a supply of service because there is no supply of goods from CBU to UBL and the definition of service in the said Act states that ‘Service means anything other than goods’, c) for such supply of service the Applicant receives certain amount as brand fee and business surplus. The terminology used does not change the fact that the Applicant receives an amount which is rightly a consideration for such supply and d) the Notification No. 11/ 2017- Central Tax (Rate) dated 28.06.2017 provides for the classification and this service has to be classified under Residual entry bearing the Heading 999799.

Conclusion:

Yes, GST is payable by the Brand Owner (UBL) on the ‘Surplus Profit’ transferred by the CBU to the brand Owner out of the manufacturing activity and the supply of service to the CBU’s is classified under Service Code 999799 and liable to GST at 18% on the amount received from the CBU’s .

Tax Proposals announced in the Karnataka State Budget 2018-19

Notifications under GST law

Notification No. 15/2018- Central Tax (Rate) dated 26.07.2018 notifies that services supplied by individual Direct Selling Agent (DSA’s) to banks/ non- banking financial company (NBFC’s) to be taxed under Reverse Charge Mechanism.

Refund of Unutilized Input tax credit:


 

Professional Updates- July 2018

 

Tax Notes- GST Updates

By CA Annapurna D Kabra

1. Advance Ruling under Karnataka GST law

Advance Ruling No . KAR ADRG 06/2018: M/s Rajashri Foods Pvt Ltd, Bengaluru dated 23.04.2018

Issue

Whether the transaction would amount to supply of goods or supply of services or supply of goods & services?

Facts:

The Applicant has three manufacturing units situated in Ramanagara, Hiriyur and Bengaluru. It intends to sell one of its branches, Hiriyur along with its fixed assets, current assets and liabilities for a lump sum consideration. The unit which is sought to be sold is fully functional unit and the transaction contemplates the transfer of the entire business to a new person, who would not only enjoy a right over the assets but shall also take over the liabilities. The said unit is functional and is desired to be transferred as a whole to a new owner.

Analysis:

The transfer of going concern either as a whole or an independent part, for a lump sum consideration does not constitute an activity, taking place in the course of business or for furtherance of business. However the use of word ‘includes’, extends the scope of supply beyond the meaning of the expression ‘in the course or furtherance of business’. Therefore, the above transaction qualifies as a supply. The reference to Serial No. 4 of Schedule II which provides ‘Transfer of business assets’ which is relating to only part of the assets transferred and not the whole business. Further Serial No. 4(c) of the said Schedule provides for ‘the business is transferred as a going concern’, then it does not amount to supply of goods. Thus, in this case transfer of business does not constitute as a supply of goods.

Further, this analysis brings a reference to Notification No. 12/2017 CT(R) dated 28.06.2017 which provides for description of services. In the said Notification, an entry ‘Services by way Transfer of a going concern, as a whole or independent part thereof’ indicates an activity of transfer of going concern as a ‘supply of service’ and further provides it as ‘NIL’ rate of tax. The aforesaid transaction and its analysis conclude that the transfer of a going concern constitutes a supply of service. The essential condition in built in the Notification is that the transaction should involve a going concern only. Therefore, the Applicant has to prove and show conclusively that the transaction involves a going concern, to fall under this entry. Therefore the activity of transfer of a going concern, as a whole or independent part thereof by the applicant is exempt from payment of tax.

2. Notifications under GST law

  1. I) Disposal of specified goods by the Proper Officer:

Notification No. 27/2018 CT dated 13.06.2018 notifies certain goods or classes of goods which shall after the seizure u/s 67(2) is disposed of by the Proper Officer, having regard to the perishable or hazardous nature, depreciation in value with the passage of time, constraints of storage space or any other relevant considerations.

  1. II) Extension of due date for filing FORM GSTR- 6:

Notification No. 25/2018 CT dated 31.05.2018 extends the time limit for furnishing the return of Input Service Distributor in FORM GSTR- 6 for the months of July’ 2017 to June’ 2018 till 31.07.2018

  1. III) Notifying NACIN as the Authority for conducting the examination for GST Practitioners:

Notification No. 24/2018 CT dated 28.05.2018 notifies National Academy of Customs, Indirect taxes and Narcotics (NACIN), as the Authority to conduct the examination.

  1. IV) Waiver of late fees for FORM GSTR- 3B:

Notification No. 22/2018 dated 14.05.2018 waives the late fees payable for failure to furnish the return in FORM GSTR- 3B by the due date for each of the months from October’ 2017 to April’ 2018, for the class of registered persons whose declaration in FORM GST TRAN- 1 was submitted but not filed on the common portal on or before 27.12.2017

  1. V) Extension of due date for filing of application for Refund

Notification No. 20/2018 dated 28.03.2018 provides for extension of due date for filing of application for refund under Section 55 by notified agencies. Initially, Section 55 provided that the specified persons like UNO or Multilateral Financial Institution and organization were entitled to claim refund of the tax paid by them on inward supplies of goods or services or both, should make an application for such refund before the expiry of six months from the last day of the quarter in which the supplies was received. However, the online facility was provided only recently and hence, an extension in the due date has been made. Presently the application can be made to the jurisdictional tax authority before the expiry of eighteen months from the last date of the quarter in which the supply was received.

  1. VI) Reverse Charge Mechanism:

Notification No. 11/2018 CT (Rate) dated 28.05.2018 notifies the levy of Priority Sector Lending Certificate under Reverse Charge Mechanism.

Notification No. 12/2018 CT (Rate) dated 29.06.2018 extends the time limit for applicability of RCM on supplies from an unregistered person i.e., Section 9(4) of CGST Act, 2017 till 30.09.2018

3. Circulars under GST Law

I) Clarifications on Refund Related Issues (Circular No. 45/2018 dated 30.05.2018)

A claim for refund of balance in the electronic cash ledger filed by an ISD or a composition taxpayer; and a non- resident taxable person, the filing of the details in FORM GSTR- 1 and the return in FORM GSTR- 3B is not mandatory. Instead, the return in FORM GSTR- 4 filed by composition taxpayer, the details in FORM GSTR- 6 filed by ISD and the return in FORM GSTR- 5 filed by a non- resident taxable person shall be sufficient for claiming refund.

For the tax periods commencing from 01.07.2017 to 31.03.2018, the registered persons shall be allowed to file the refund application in FORM GST RFD- 01A on the common portal subject to the condition that the amount of refund of integrated tax/ cess claimed shall not be more than the aggregate amount of Integrated tax/ cess mentioned in the Table under columns 3.1 (a), 3.1 (b) and 3.1 (c) of FORM GSTR- 3B filed for the corresponding tax period.

There is no necessary requirement for furnishing the Bond/ LUT on export of non- GST or exempted goods without payment of Integrated tax. Such Registered Persons exporting non- GST shall comply with the requirements prescribed in the Central Excise Act, 1944 or The Karnataka Sales Tax Act, 1956) or under the Customs Act, 1962. Further the exporter would be eligible for refund of unutilized Input Tax Credit of CGST, SGST, UTGST, IGST and Compensation cess in such cases.

  1. II) Clarification on applicability of rate of GST on Priority Sector Lending Certificates (PSLCs), Renewable Energy Certificates (RECs) and other similar scrips (Circular No. 46/2018 dated 06.06.2018): It is clarified that Priority Sector Lending Certificates (PSLCs), Renewable Energy Certificates (RECs) and other similar scrips are classifiable under heading 4907 and attract 12% of GST.

  1. III) Clarifications of certain issues under GST: Circular No. 47/2018 dated 08/06/2017: Taxability of moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost to a component manufacturer. Both, the Original Equipment Manufacturers and component manufacturer are not related persons or distinct persons and there is no consideration involved. Therefore, it does not constitute a supply. Moulds and dies are provided in the course or furtherance of business, hence there is no requirement for reversal of input tax credit. The value of moulds and dies provided to the component manufacturer on free of cost basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer. Treatment for servicing of cars involving both supply of goods and services, where the value of goods and services are shown separately - the goods and services would be liable to tax at the rates as applicable to such goods and services separately. In case of transportation of goods by railways, the goods shall be delivered only if the e-way bill is produced at the time of delivery. In case of transport of goods from one area to another area within the state, through another state, issuance of e-way bill is mandatory since movement of goods is inter-state, even though the destination of goods is within the same state. In case of movement of goods from DTA unit to a SEZ unit or vice-versa located in the same state, there is no requirement for issuance of E-way bill.

  1. IV) Certain issues relating to SEZ and Job work: Circular No. 18/2018:


 

Professional Updates- June 2018

 

Tax Notes- GST Updates

By CA Annapurna D Kabra

  • Constitution of Advance Appellate Authority

Vide Notification No. FD 47 CSL 2017, Bengaluru, dated 25.04.2018, the Government of Karnataka constitutes Karnataka Appellate Authority for Advance Ruling for Goods and Services Tax consisting of –
  • The Principal Chief Commissioner, Bengaluru, GST & CX Zone, Bengaluru
  • The Commissioner of Commercial Taxes (Karnataka), Bengaluru.

  • Advance Ruling under Karnataka GST law

I) Advance Ruling No . KAR ADRG 01/2018 : Giriraj Renewables Private Limited, Bijapur dated 21.03.2018

The Applicant is EPC contractor and enters into contract to set up and operate solar photovoltaic plants for supply of power generated. The contract includes end to end activities like supply of various goods and services intended for setting up, operation and maintenance of a solar power plant.

Issue 1: Whether the above EPC contract constitutes composite supply?

It is held that the contract as entered contemplates that the owner can procure the major equipment on their own also and the applicant can carry out the supply and service portion in respect of such contract. Therefore the concept of natural bundling does not apply to the above contract and cannot be constituted as composite supply.

Issue 2: Whether the benefit of concessional rate of 5% of solar power generation system and parts thereof would be available to subcontractors?

The concessional rate of 5% as applicable to main contractor is not applicable to sub -contractor. Therefore supply made by sub-contractor need to be viewed as an individual supply and therefore the appropriate rate of GST has to be applied.

II) Advance Ruling No . KAR ADRG 02/2018 : Gogte Infrastructure Development Corporation Limited Belgaum dated 21.03.2018

Issue:

Whether the Hotel Accommodation and Restaurant services provided by them within the premises of the Hotel to the employees and guest of SEZ units be treated as supply of goods and services to SEZ units in Karnataka or not?

The Hotel Accommodation and Restaurant Services being provided by the Applicant within the premises of the Hotel to the employees and guest of SEZ units cannot be treated as supply of goods and services to SEZ units in Karnataka as applicant is located outside the SEZ and services rendered by it are neither part of authorized operations nor consumed inside SEZ and hence such transactions will be Intra state supply and will be leviable to local taxes accordingly.

III) Advance Ruling No: KAR ADRG 03/2018: Skilltech Engineers and contractors Private Limited Mysuru.

Issue:

Whether the contract executed for KPTCL is divisible contract or indivisible contract?

The applicant is executing the single composite contract for supplying the material, providing erection of towers service and also civil works service. Therefore the contract entered by the applicant is of the nature of indivisible and falls under the works contract which is supply of service.

Whether the Applicant is providing services to State Government i.e KPTCL and is eligible for concessional rate of tax?

It is held that the statutory body, corporation or an authority as a judicial entity is separate from the state and cannot be regarded as the Central or a State Government and also do not fall in the definition of ‘local Authority’. Thus regulatory bodies and other autonomous entities would not be regarded as the government or local authorities for the purpose of GST Act. Therefore M/s KPTCL cannot be State Government or State Government Authority. Therefore the Applicant is not entitled for the benefit of concessional rate of GST @12% in terms of Notification No 24/2017- Central Tax (Rate) dated 21.09.2017.

IV) Advance Ruling No: KAR ADRG 04/2018: Tathagat Health Care Centre LLP, Bangalore

The Applicant has taken the premises on lease and running exclusive health care centre and providing health care services on commercial basis. Issue:

Whether GST is leviable on the amount of rent paid/payable by applicant towards leasing of the premises by the hospital or not?

It is held that GST is payable on the rent paid/payable for premises taken on lease by the applicant

V) Advance Ruling No: KAR ADRG 05/2018: Sayre Therapeutics Private Limited Bangalore

The Applicant is involved in providing the services of diagnosis, pre and post counseling, therapy and prevention of disease by providing test.

Issue: Whether the Applicant services are Health care services and are exempted from GST?

The Applicant qualifies to be a clinical establishment and the services offered/provided by the applicant qualify to be Health care Services. The intra -state supply of said services attract NIL rate of GST.

  • Rescinding in late fees for GSTR- 5A


Vide Notification No. 13/2018- CT dated 07/03/2018 seeks to rescind the Notification No. 06/2018- CT dated 23/01/2018 which provided for reduction of late fee in case of delayed filing of FORM GSTR- 5A (This Form is to be filed by Non- Resident On line Information Data base Access or Retrieval) service Provider to unregistered person or Customers

  • Due Date for filing of GSTR- 3B

With reference to Notification No. 16/2018- CT dated 23/03/2018, prescribes the due date for filing GSTR- 3B for the month of April to June 2018

Sl No Month Last Date for filing of return GSTR- 3B
1 April 2018 20th May, 2018
2 May 2018 20th June, 2018
3 June 2018 20th July, 2018

  • Due date for filing monthly return GSTR- 1

With reference to Notification No. 18/2018- CT dated 28/03/2018, seeks to prescribe the due date for furnishing of FORM GSTR- 1 for those taxpayers with aggregate turnover of more than Rs. 1.5 crores.
Sl No Month Last Date for filing of return GSTR- 3B
1 April 2018 31st May, 2018
2 May 2018 10th June, 2018
3 June 2018 10th July, 2018

  • Due date for filing quarterly return GSTR- 1 :


With reference to Notification No. 17/2018- CT dated 28/03/2018, seeks to prescribe the due date for quarterly furnishing of FORM GSTR- 1 for those taxpayers with aggregate turnover of up to Rs. 1.5 crores. The due date for the quarter April to June 2018 would be 31st July, 2018.
  • Circular No .44/18/2018-CGST:

  • The activity of transfer of ‘tenancy rights’ is covered under the scope of supply and taxable per se. Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable.
  • However, Renting of residential dwelling for use as a residence is exempt.
  • Hence, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt.
  • As regards services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST.

  • Order No 2/2018 – Central Tax- dated 31/3/2018

GST on providing Catering Services in Train

The GST is applicable for all kinds of supply of food and drinks made available in trains, platforms or stations. The GST rate on supply of food and/or drinks by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms (static units), will be liable to tax at 5% without Input Tax Credit.


 

Professional Updates- March 2018


Tax Notes- GST Updates

By CA. Annapurna Kabra

Maya Appliances (Known as Preethi kitchen appliances) Ltd Vs Additional Commissioner of Commercial Taxes and others TS-28-SC-2018-VAT

The Appellant is manufacturer of mixies, grinders etc and offer the performance based quarterly discount to its distributors. The discounts were calculated on the basis of performance of dealers in the previous quarter. The department contended that quarterly discount given by the appellant was in respect of the performance of the previous quarter and not in respect of sales offered in the same invoices. While arriving at the conclusion, the judgment quoted with approval a two-judges’ bench decision of the Supreme Court in Southern Motors v. State of Karnataka (2017) 3 SCC 467. From the said decision the court observed that the liability to pay tax is on the taxable turnover. Taxable turnover is arrived at after making permissible deductions from the total turnover. Among them are “all amount allowed as discounts.” Such a discount must however be in accord with the regular trade practice of the dealer or the contract or agreement entered into in a particular case. Rule 3(2)( C )of KVAT Rules 2005 cannot mean that discount would not be allowed unless originally issued tax invoice pertaining to goods shows the discount. It states that the dealer must establish from his books of Accounts that the discount relates specifically to the sales with reference to which it is allowed. Therefore the discount is allowed as deduction from total turnover to compute the taxable turnover even though discounts are given subsequent to the point of original sale. It is held that trade discount is permissible deductions for arriving at Taxable Turnover under the KVAT Rules 2005.

M/s Kirloskar Electric Co. Ltd. & Ors. Vs. The State of Karnataka & Ors in the W.P. Nos.58917-58928/2016 (Karnataka High Court)

The petitioner engaged in the manufacture and sale of Electrical Motors, Generators, Transformers, etc. purchased materials from within the state and outside the state. The petitioner has claimed Input Tax Credit in different tax periods by filing the Returns. The Respondent denied the Input Tax Credit on the ground that the ITC is deductible only in that tax period during which the invoices of the selling dealer is raised and the accumulated VAT ITC available in the various months preceding the “Tax period” in question could not be used/given by way of input tax credit against the output tax for the tax period of a particular month. The Honorable High Court held that the claim of Input Tax credit cannot be restricted and denied because Input Tax credit is not made in respect of sale invoices which are not pertaining to same tax period nor it can be denied on the ground that such claim is not made immediately in the month or months following the month of purchase of goods in question. The machinery provisions of filing the returns under section 35 of the KVAT Act cannot defeat the substantive claims under section 10(3) of the Act. The Revenue is entitled only to verify that the sale invoices are genuine and valid and such ITC claim is not duplicate, fictitious or bogus. Therefore it directs the Commissioner of Commercial Taxes to issue circular to avoid multiplicity of litigation pertaining to claim of Input tax credit.

GST Updates

  • With reference to Notification No. 10/2018- CT dated 23.01.2018 and Notification No. 01/2018- IT dated 23.01.2018, amends cross-empowerment of State tax officers for processing and grant of refund.
  • With reference to Notification No. 8/2018- CT dated 23.01.2018 and Notification (01-B/2018) No.KGST.CR.01/17-18 dated 23.01.2018, extends the date of filing the return in FORM GSTR- 6 for the months of July’17 to February’18 to 31st March, 2018.
  • With reference to Notification No. 3/2018- CT dated 23.01.2018 and Notification (4-M/2017) No.FD 47 CSL 2017 dated 31.01.2018, amends the following rules.
  • In Rule 3 sub- rule (3A), Statement of ITC-3 by composition dealer should be furnished within one hundred and eighty days from the day on which such person commences to pay tax under section 10.
  • In Rule 7, Manufacturer is liable for composition rate of 1% and traders are liable for composition rate of 1% of turnover of taxable supplies of goods in the state.
  • In Rule 31A, the value of supply to be determined in case of lottery, betting, gambling and horse racing- Value of supply in case of lottery run by the State Government is 100/112 or price notified in official gazette or Value of supply in case of lottery authorized by State Government is 100/128 or price notified in official gazette and further the value of supply in case of Actionable claim in the form of chance to win in betting gambling or horse racing in a Race club is 100% of the face value of the bet or the amount paid into the totalizator.
  • Rule 42 and Rule 43 pertaining to exempt supply exclude value of supply of services having place of supply in Nepal or Bhutan against payment in Indian Rupees, Value of services by way of accepting deposits, extending loans or advances in so far as the consideration is represented by way of interest or discount except in case of banking or Financial Institution.
  • Rule 55A- The person in charge should carry bill of supply or tax invoice in cases where it is not required to carry E- way bill.
  • With reference to Notification No. 5/2018- CT (Rate) dated 25.01.2018, Notification No. 05/2018- IT (Rate) dated 25.01.2018 and Notification (05/2018) No.FD 48 CSL 2017 dated 25.01.2018, exempts the intra-State supply of services by way of grant of license or lease to explore or mine petroleum crude or natural gas or both, leviable on the consideration paid to the Central Government.
  • With reference to Notification No. 3/2018-CT (Rate) dated 25.01.2018, Notification No. 3/2018- IT (Rate) dated 25.01.2018 and Notification (03/2018) No.FD 48 CSL 2017 dated 25.01.2018, specifies services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a registered person to be taxed under Reverse Charge Mechanism (RCM).
  • With reference to Notification No. 6/2018- IT(Rate) dated 25.01.2018, exempts royalty and license fee from Integrated tax to the extent it is paid on the consideration attributable to royalty and license fee included in transaction value under Rule 10(1)(c) of Customs Valuation (Determination of value of imported Goods) Rules, 2007
  • With reference to Circular 33/07/2018- GST dated 23.02.2018, directions regarding non- transition of CENVAT credit u/s 140 of the CGST Act or non- utilization.
  • Non-utilization of Disputed Credit carried forward: In relation to certain CENVAT credit pertaining to the show cause notice issued under Rule 14 of the CENVAT Credit Rules, 2004 which has been adjudicated or where in the last adjudication order or the last order- in- appeal, as it existed on 1st July, 2017, it is held that if such CENVAT credit is inadmissible, then the credited amount to the electronic credit ledger u/s 140(1), (2), (3), (4), (5), (6) or (8) cannot be utilized by the registered taxable person to discharge the tax liability either under CGST or IGST. In case it is utilized, then the same shall be recovered along with interest and penalty as applicable.
  • Non-transition of Blocked Credit: As per Section 140(1) (i) of the CGST Act, 2017, the registered person cannot carried forward in the electronic credit ledger, the amounts which are not eligible u/ s 17(5) of the Act such as telecommunication towers and pipelines laid outside the factory premises. It case such credit has been utilized in contravention to the provision, then the same shall be recovered along with interest and penalty as applicable.
  • With reference to Circular No. 34/08/2018- GST dated 01.03.2018, provides clarification on certain services.
  • The bus body building involves both supply of goods and services. Hence, the same is considered as composite supply which would further depend on the principal supply based on the facts and circumstances for the purposes of taxability.
  • Retreading of Tyres: Retreading of tyres is a composite supply, where the pre- dominant supply is the process of retreading which is a supply of service. Rubber used for retreading is an ancillary supply. However, which is the principal supply should be determined keeping in the view the nature of supply involved. Supply of retreaded tyres, where the old tyres belong to the supplier of retreaded Tyres, is a supply of goods (retreaded tyres under heading 4012 of the Customs Tariff attracting GST @ 28%).
  • Priority Sector Lending Certificates (PSLCs): As per RBI, PSLC is construed to be in the nature of goods, which is a permissible activity under section 6(1) of the Banking Regulation Act, 1949.
  • PSLC are not Securities. PSLC are akin to freely tradeable duty scrips, Renewable Energy Certificates, REP license or replenishment license, which attracted VAT in the earlier law. In GST there is no exemption to trading in PSLCs. Thus, PSLCs are taxable as goods at standard rate of 18% under the residuary S. No. 453 of Schedule III. Further ITC would be available to the bank buying the certificates.
  • Service by way of Transmission or distribution of electricity by an electricity transmission or distribution utility is exempt from GST under notification No. 12/2017- CT (R), Sl. No. 25. However, other services provided the such as application fee for releasing connection of electricity, Rental Charges against metering equipment, Testing fee for meters/ transformers, capacitors etc, Labour charges from customers for shifting of meters or shifting of service lines, charges for duplicate bill are taxable when provided by DISCOMS to consumers.
  • The service provided by Central Government/State Government to any business entity including PSUs by way of Guaranteeing the loans taken by them from financial institutions against consideration in any form including Guarantee Commission are taxable.
  • With reference to Circular No. 32/06/2018- GST dated 12.02.2018 provides clarifications on the following:
  • Hostel accommodation services do not fall under the definition of charitable activities as defined in Notification No. 12/2017- CT (Rate). However, accommodation service in hostels including in hostels including by Trusts having declared tariff rate below Rs. 1,000/- shall be exempt as per 12/2017- CT (Rate).
  • In case fees paid to Consumer Disputes Redressal Commission or penalty paid in certain cases will not be leviable to GST. This is in respect with the services provided by any Court or Tribunal established will be considered as neither supply of goods nor services.
  • The Elephant/ Camel Rides cannot be classified as Transportation Services. These services will attract 18% with threshold limit available to small service providers.
  • Rate applicable on Rental services of Self- Propelled Access Equipment- where the equipment is imported at GST rate 28% and leased further in India where operator is supplied by the leasing company, then leasing or rental will be applicable at the same rate of GST on supply of like goods involving transfer of title in goods. Thus, the GST rate in this case will be 28% subject to the goods attracting the same GST rate.
  • Services provided by Senior Doctors/ Consultants/ Technicians hired by hospitals, whether employee or not, are health care services which are exempt. The entire amount charged by the hospitals from the patients including retention money and fees/ payments made to doctors is health care services to the patient and is exempt.


 

Professional Updates- February 2018

 

Tax Notes- GST Updates

By CA. Annapurna Kabra

  • E-Way bill in Karnataka: Vide Notification (25/2017) No 47 CSL 2017 Bengaluru dated 29/12/2017 and in exercise of the powers conferred by section 164 of CGST Act the Government of Karnataka appoints 1st day of February 2018 as the date from which the provisions of serial number 9 and 10 of Notification (4-D/2017) No FD 47 CSL 2017 dated 30.8.2017 published in Karnataka Gazette Extraordinary part IV-A number 849 dated 30.8.2017 shall come into force. Therefore E- Way Bills Rules will be effective from 01/2/2018 in Karnataka. Due to Technical glitches the website is not working and accordingly it is deferred as on date.
  • Clarification on College Hostel mess Fees: The Educational Institution have mess facility for providing food to their students and staff. Such facility is either run by the institution / Students themselves or is outsourced to a third person. Supply of food or drink provided by a mess or canteen is taxable at 5% without input tax credit. It is immaterial whether the service is provided by the Educational Institution itself or the Institution outsources the activity to an outside contractor.
  • Notifying Website: Vide Notification No 9/2018 dated 23rd January 2018, The Government notifies www.gst.gov.in as the common Goods and Service Tax Electronic portal for facilitating registration, payment of tax, furnishing of returns and computation and settlement of integrated tax. The Government notifies www.ewaybillgst.gov.in as the common Goods and Service Tax electronic portal for furnishing electronic way bill.
  • Extension of date for furnishing return by Input Service Distributor: Vide Notification No 8/2018 dated 23rd January 2018, the Commissioner hereby extends the time limit for furnishing the return by an Input Service distributor in Form GSTR-6 for the months of July 2017 to February 2018 till 31st March 2018.
  • GST on Old/Used Cars: Vide Notification No 8/2018 – Central Tax (Rate) dated 25/01/2018 , the GST at following rates will be leviable on the value that represents margin of the supplier on the following goods
  • a. Under chapter heading , Sub heading or Tariff item- 8703 the old and used petrol liquefied petroleum gases (LPG) or compressed Natural Gas (CNG) driven motor vehicles of engine capacity of 1200 CC or more and of length of 4000 mm or more-@ 18% (Includes CGST and SGST). The Motor vehicle shall be determined as per Motor Vehicle Act 1988
  • b. Under chapter heading , Sub heading or Tariff item- 8703 the old and used diesel driven motor vehicles of engine capacity of 1500 CC or more and of length of 4000 mm-@ 18% (Includes CGST and SGST). The Motor vehicle shall be determined as per Motor Vehicle Act 1988
  • c. Under chapter heading , Sub heading or Tariff item- 8703 the old and used motor vehicles of engine capacity of 1500 CC popularly known as Sports utility vehicles (SUV) including utility vehicles. @ 18% (Includes CGST and SGST). Sports utility vehicle includes a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm and above.
  • d. All old and used vehicles other than the above will be liable to tax at 12% (CGST and SGST).
  • The rate of tax as specified above is applicable if the supplier of such goods have not availed GST credit under GST Act 2017, Cenvat Credit as defined in CENVAT Credit Rules 2004 or the Input Tax credit of VAT or any other taxes paid on such goods.
  • If the supplier of goods has claimed depreciation under Income Tax Act 1956, then the value that represents the margin of the supplier shall be the difference between the consideration received for supply of such goods and the depreciated value of such goods on the date of supply.
  • The Margin of the supplier shall be difference between selling price and purchase price. And if the margin is negative it shall be ignored.
  • Nil rated Compensation cess on old and used vehicles


 

Professional Updates- December 2017

TAX NOTES – KARNATAKA

By CA. Annapurna Kabra

  • With reference to the Notification No. FD 48 CSL 2017, Bengaluru, dated 14/11/2017, in exercise of power conferred under section 11(1) of KGST Act, 2017 on the recommendation of the Council, the Government of Karnataka makes further amendments in the Notification (4/2017) No. FD 48 CSL 2017, dated 29th June 2017 – in the said Notification after Serial No. 4, the supply of goods being raw cotton where the supplier being agriculturist and recipient being any registered person will be liable to pay tax under reverse charge.
  • With reference to the Notification No. FD 48 CSL 2017, Bengaluru, dated 14/11/2017, in exercise of power conferred under section 54(3) of KGST Act, 2017 on the recommendation of the Council, the Government of Karnataka makes further amendments in the Notification (5/2017) No. FD 48 CSL 2017, dated 29th June 2017- In the said notification for serial No. 6A and the entries relating thereto, the following entries shall be substituted:

    "6A 5608 Knotted netting of twine, cordage or rope; made up fishing nets and other made up nets, of textile materials
    6B 5801 Corduroy fabrics
    6C 5806 Narrow woven fabrics, other than goods of heading 5807; narrow fabrics consisting of wrap without weft assembled by means of an adhesive (bolducs)".

    where no refund of unutilized input tax credit shall be allowed, where credit has been accumulated on account of rate of tax on inputs being higher than the rate of tax on the output supplies of such goods (other than NIL rated or fully exempt supplies).
  • With reference to the Notification No. FD 47 CSL 2017, Bengaluru, dated 19/10/2017 the Government of Karnataka hereby notifies the following details as evidences which are required to be produced by the supplier of deemed export supplies for claiming refund, namely:-
  • Acknowledgment by the jurisdictional Tax officer of the Advance Authorization holder or Export Promotion Capital Goods Authorization holder, as the case may be, that the said deemed export supplies have been received by the said Advance Authorization or Export Promotion Capital Goods Authorization holder, or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.
  • An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.
  • An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.
  • This notification will come into effect from 18th day of October, 2017.
  • With reference to the Notification No. FD 47 CSL 2017, Bengaluru, dated 19/10/2017 the Government of Karnataka hereby notifies the following supply of goods as deemed exports:
  • Supply of goods by a registered person against Advance Authorization.
  • Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization.
  • Supply of goods by a registered person to Export Oriented Units.
  • Supply of gold by a Banker Public Sector Undertaking specified in the Notification No. 50/2017- Customs, dated 30th June, 2017 (as amended) against Advance Authorization.
  • With reference to the Notification No. FD 47 CSL 2017, Bengaluru, dated 13/10/2017, in exercise of power conferred under section 6(1) of KGST Act, 2017 on the recommendation of the Council, the Government of Karnataka hereby specifies that the officers appointed under CGST act, 2017 who are authorized to be proper officers for the purposes of Section 54 or Section 55 of the CGST Act by the Commissioner in the Board, shall act as proper officers for the purpose of sanction of refund under section 54 or section 55 of KGST Act, 2017 read with rules in respect of registered person located in territorial jurisdiction of the said officers who applies for the sanction of refund to the said officers.
  • With reference to the Notification No. FD 47 CSL 2017, Bengaluru, dated 13/10/2017, in exercise of power conferred under section 23(2) of KGST Act, 2017 on the recommendation of the Council, the Government of Karnataka hereby specifies the casual taxable persons making taxable supplies of handicraft goods as the category of persons exempted from obtaining registration under the aforesaid Act provided that the aggregate value of such supplies, to be computed on all India basis, does not exceed an amount of Twenty Lakh rupees in a financial year.
  • The casual taxable persons mentioned shall obtain a Permanent Account Number and generate an E- way bill in accordance with the provisions of Rule 138 of the Karnataka Goods and Services Tax Rule, 2017.
  • The above exemption will be available to such persons who are making inter- State taxable supplies of handicraft goods and availing the benefit of 8/2017- Integrated Tax dated the 14th September, 2017.
  • With reference to the Order No. 01/2017- GST/ Karnataka dated 21/11/2017 provides for division of taxpayer base between the Central Government and State Government to ensure single interface under GST, the State Level Committee comprising Principal Chief Commissioner, Central Tax, Bengaluru Zone and Commissioner of Commercial Taxes, Government of Karnataka, has decided to assign the taxpayers registered in the State of Karnataka.
  • The taxpayers and the Trade and Industry can view and check their details including the name of administering authority i.e. Centre and State by visiting either of the websites- gstkarnataka.gov.in or gst.kar.nic.in.
  • In case of discrepancy in the name of GSTIN are noted or if the taxpayer name is missing from the annexure, the same may be informed by email to the authorities of Centre or State for appropriate action by the State level committee. The email communication made in this regard should have the subject line Karnataka State Level Committee on Division of Taxpayers.
  • Email: Centre- ccbz-excise@nic.in
  • Email: State- cto.karbng@nic.in
  • The GST Portal will now calculate Late Fee (CGST+ SGST) payable as below:
  • Rs. 50/- per day for filing of FORM GSTR- 3B return after the due date for the month of October, 2017 onwards
  • Rs. 20/- per day for filing of NIL Form GSTR- 3B return after the due date.


Professional Updates- November 2017

TAX NOTES – KARNATAKA

By CA. Annapurna Kabra

  • With Reference to Notification No.PT.CR-01/2017-2018 dated 23.10.2017 it is notified that every employer liable to be registered under the Karnataka Professional Tax Act shall submit an Application for a Certificate of Registration electronically through Internet. The details like legal name of employer PAN of employer, Trade name, Constitution of Profession, Nature of Profession, Postal Address and Contact Numbers, GSTIN Number, Scanned Photographs, Bank Account Proof and other relevant details. After entering the Permanent Account Number, the legal name and constitution will be validated from the CBDT data base. The person shall enter the details and upload the required documents. The Computer would generate a registration certificate with a unique number.
  • With reference to Notification No FD 47 CSL 2017 Bangalore dated 4/10/2017 the Government of Karnataka hereby constitutes the Karnataka Authority for Advance Ruling for the State of Karnataka. As per section 96 the Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax Act shall be deemed to be the Authority for Advance Ruling in respect of that State.
  • As per Amended Rule 103 of KGST Rules 2017 (Vide Notification No FD 47 CSL 2017 Bengaluru dated 29/08/2017) the Government shall appoint officers not below the rank of Joint Commissioner as member of the Authority for Advance Ruling.
  • Karnataka Government has started Eway bill registration. The common portal for generation of e-way bill is http://gst.kar.nic.in/ewaybill and register by providing GSTIN.
  • The Commissioner of Commercial Taxes have started @Karnataka CTD twitter account for GST updates to benefit all the stakeholders including officers, GSTPs and Tax Payers.
  • Vide Notification (2-A/2017) No KGST CR 45/17-18 dated 17.08.2017 wherein Karnataka Government appoints Authority for GST Practioners enrollment as GST Practioners. The Authorities are Additional Commissioner of Commercial Taxes (Revision and Recovery) and Office of the Commissioner of Commercial Taxes (Karnataka). The officer may make necessary enquiry with regard to application for enrolment as GST Practioner made electronically in Form GST PCT-01 and either issue certificate in Form GST PCT-02 or reject the application where it is found that application is not qualified to be enrolled as Goods and Service Tax Practioner.
  • Vide Notification No FD 47 CSL 2017, Bengaluru dated 24.10.2017, wherein the Government of Karnataka on the Recommendations of the Council hereby waives the late fee payable under Section 47 of the KGST Act for all the registered persons who failed to furnish the return in Form GSTR- 3 B for the month of August and September 2017 by due date.


Professional Updates- September 2017

Karnataka State GST and Central GST- Updates

By CA. Annapurna Kabra

The concept of deducting tax at source was conventionally introduced by the Income Tax authorities, and soon, was adopted by the Commercial Tax Department of various states. The provision for deduction of tax at source in case of works contracts gained its importance in the recent years. On transition to GST which is considered to be the biggest tax reform of our country, it is important to understand the applicability of such TDS provision in the earlier law, and also under GST, further special attention should be given during the transition period. Section 9-A of the Karnataka VAT Act provides for deduction of tax at source in case of works contract. This provision applies to works contract involving transfer of property in goods being executed within the State of Karnataka. The following are responsible to deduct out of the amount payable to the dealers, tax at source and remit the collected tax to the Commercial Taxes Department i.e. The Central government, The State government, Public sector undertaking of the central or state Government or any such undertaking in Joint sector or any other industrial, commercial or trading undertaking or body, a local authority and a statutory body. The amount payable is in respect of sale of goods in course of interstate trade or commerce, in course of export out of the territory of India or import into the territory of India or outside the State. It is to be made by the Authority on the basis tax payable calculated by the dealer. Earlier law provided for deduction of tax deduction for specific dealers. However, the GST regime provides for deduction of tax for all dealers as mentioned in Section 51 of the CGST Act, 2017.

On the rollout of GST, certain transitional clarifications have been issued by the Commercial Tax Department regarding the deduction of tax at source.

The following circular clarifies the following:

Circular No. 07/2017-18,No. KSA/GST/ Cr. 02/ 2017-18, dated 18/07/2017

Various representations were made before the departmental authorities with regard to applicability of TDS on works contracts during transition to GST. The Department has clarified the deduction of TDS in case of works contracts falling under the Transition period i.e., executed prior to 30/06/2017, payment for which is received after 01/07/2017.

Deduction of TDS on works contracts – Transition Period

The circular has referred to Section 7(1) of the KVAT Act, 2003 and has clarified that even those works contracts which have been executed up to 30/06/2017, shall be liable for deduction of TDS by the concerned Governmental authority or undertaking, though payments for the same are made on or after 01/07/2017.

Rate of tax: 4% or an amount equal to the tax payable by such dealer as permitted by the prescribed authority.

However, the provision relating to TDS under GST Law has been put on hold for the time being and the same will be brought into force from a date which shall be communicated later.

II) Amendment in the Central Goods and Services Tax Rules, 2017 to prescribe the E- way bill procedure (Notification No 27/2017 Central Tax dated 30/8/2017):

Rule 138 of the CGST Rules, 2017 provides the following procedures and information to be furnished for the generation of E- way Bill. Every registered person causing the movement of goods of consignment value exceeding Rs. 50,000/- in relation to:

  1. (1) Supply

  2. (2) Reasons other than supply

  3. (3) Due to inward supply from an unregistered dealer


shall furnish the information thereto in Part A of FORM GST EWB- 01 before commencement of such movement.

Where the goods are transported by registered person as consignor/ recipient of supply as consignee, the said person or recipient may generate E- way Bill in FORM GST EWB- 01 electronically.

Where goods are handed over to the transporter, registered person shall furnish transporter’s information in Part B of FORM GST EWB- 01 and the E- way bill shall be generated by the transporter on the basis of information furnished by the registered person in Part A.

There is no requirement to generate E- way bill where goods are transported for a distance of less than 10 km within the State or Union Territory.

In case of multiple consignments are intended to be transported in one conveyance, the transporter may indicate the serial number of E- way Bills generated in respect of each such consignment and a consolidated E- way bill in FORM GST EWB- 02 may be generated.

The validity of the E- way Bill will be 1 day for distance upto 100 km and an additional one day for every 100 km or part thereof in every State or Union Territory.

On the following, there is no requirement of E- way Bill:

  1. (i) In case of 154 goods as specified,

  2. (ii) Goods transported by non- motorized conveyance,

  3. (iii) Goods transported from port/ airport/ air cargo complex/ land customs stations to inland container depot/ container freight station for customs clearance,

  4. (iv) Movement of goods within the notified areas

  5. (v) An option is provided to the registered person and the transporter to generate the E- way Bill even if the consignment value is less than Rs. 50,000/-.

  6. (vi) Upon generation of the E- way bill, a unique e-way bill number (EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.

  7. (vii) The information furnished in Part A of FORM GST EWB-01 shall be made available to the registered supplier on the common portal who may utilize the same for furnishing details in FORM GSTR-1.

  8. (viii) Where an e-way bill has been generated under this rule, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal, either directly or through a Facilitation Centre within 24 hours of generation of the e-way bill.


Professional Updates- August 2017

KARNATAKA GST 2017

Commissioner of Commercial Taxes Circular No. 6/2017-18 / Submission of bond/ LUT by the Exporter.

By CA Annapurna D Kabra

Section 16(3) provides that a Registered person making zero rated supply shall be eligible for refund under either of the options as supply goods under bond/ LUT without payment of tax and claim refund of the unutilized input tax credit or supply goods with payment of tax and claim refund of such tax paid on goods or services or both. Rule 96A of Karnataka GST Rules, 2017, provides that refund of IGST paid on export can be availed by submission of bond/ LUT in ‘FORM GST RFD-11. Any registered person availing the option to supply goods or services for export without payment of integrated tax is required to furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 to the Jurisdictional Commissioner binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of fifteen days after the expiry of 3 months from the date of issue of the invoice for export, if goods are not exported out of India or fifteen days after the expiry of one year from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange. As per the Rule 96A of CGST Rules, 2017, every person exporting goods under a letter of undertaking, is required to furnish ‘FORM GST RFD – 11’ before the Jurisdictional Commissioner. Since, large numbers of exporters are located at a distance from the office of the Jurisdictional Commissioner, it causes hardships to the exporters to file the form before the Jurisdictional Commissioner. Therefore, vide Circular No. 2/2/2017- GST dated July 4th, 2017, the authority to accept FORM GST RFD – 11 has been delegated to Jurisdictional Deputy / Assistant Commissioner having jurisdiction over the principal place of business of the exporter. The exporter is at the liberty to furnish bond/ LUT before Central Authority/ State Tax Authority till the administration mechanism for assigning taxpayers to respective authority is implemented. However, if in a State, the Commissioner of State Tax by general instruction to exporter can accept the bond/ LUT and this responsibility is provided to Central Tax Officer. In reference to notification 16/2017-18, the Karnataka Government in its circular has provided the Authority with whom the bond/ LUT to be submitted. This circular is clarificatory in nature and cannot be used for interpretation of provisions of law. In order to mitigate the issues involved in relation to fulfill the mandate of Sec 16 of the IGST Act, 2017 and Rule 96A of the Karnataka GST Rules, 2017 has informed the exporters in this State to submit the bond/ letter of undertaking to the following Authorities till the administrative mechanism for assignment of tax payers to Respective Authority is implemented.

  • Jurisdictional Assistant Commissioner of Commercial Taxes
  • Local Goods and Services Tax office/ Commercial Tax Officer of Local Goods and Service Tax Office in the absence of Assistant Commissioner of Commercial Taxes, and
  • Commercial Tax Officer, Sub GST Office


Professional Updates- July 2017

UPDATE UNDER KARNATAKA VAT LAWS – WITH REFERENCE TO GST LAW

By CA Annapurna D Kabra

As per E- way Rules, the information should be furnished before commencement of movement of Goods. The information relating to the Goods needs to be furnished before commencement of movement of goods in cases where consignment value exceeds Rs. 50,000. The Generation of E-Way Bill by the supplier being registered person or recipient of supply. The E way Bill can be generated by the Transporter even if value of consignment is less than Rs. 50,000. The person in charge of a conveyance shall carry the invoice or bill of supply or delivery challan, as the case may be and a copy of e-way bill. Where a vehicle has been intercepted and detained for a period exceeding 30 minutes, the transporter may upload the said information. Until an E- way Bill system is developed and approved by Council, the Govt. may notify the specific documents that a person in charge of a conveyance shall carry while goods are in movement or in transit storage. It is believed that the documents for movement specified in the local VAT laws can be applied as E-way bill in Karnataka.

Esugam Notification in Karnataka (No. ADCOM(I&C)/DC(A3)- CR:158/2013-2014 dated 5/3/2014

  • Part A - For dispatch by Registered Dealer as result of sale: If value of listed goods sold exceeds Rs. 25,000 – details of such goods to be entered before commencement of movement of goods
  • Part B - For transportation not as result of sale: Every Registered dealer transporting taxable goods not as a result of sale shall enter details of goods before commencement of movement of goods
  • Part C - For receipts of goods from places outside the state: Every Registered Dealer receiving listed goods from outside the state shall enter details of goods before the goods vehicle enter the state

The above E-sugam Notification is applicable only for notified goods and where the value exceeding 25000. Therefore it is advised that as the E-way bill format is not ready we can apply the E-sugam form and it is advisable to issue for all the goods. It is not clarified that whether it should be issued for above 25000/- or 50000/- so it is advisable to issue e-sugam for the movement above 25000/-.