Vidya Ltd is engage in education services in Gurgaon, has three verticals of business, namely, School affiliated from CBSE, Online coaching classes and Pre-School operating on three floors in same building for which rent is paid Rs. 30,00,000 per month.

Following data and information is related for the month of November 2019

Particulars	Online Coaching Classes			CBSE School	Pre School
	HO Gurgaon	Mumbai	Chennai	Gurgaon	Gurgaon
Collection of Fees	28,00,000	35,00,000	21,00,000	25,00,000	22,00,000
Library Fees	90,000	15,000	10,000	–	–
Transport Fee	150,000	89,000	90,000	2,80,000	2,00,000
Judo & Music fee (after school hours)	–	–	–	5,00,000
Rent Received from sub-letting of rooms & halls	52,000	10,000	71,000	1,25,000	–
Annual Fee(Proportion of total fee)	–	–	–	10,00,000	–
Boarding Fee	–	–	–	12,00,000	–
Canteen Receipts (own canteen)	30,000	7,000	15,000	2,00,000	–
Fee from prospective employers for campus interview	25,000	18,000	15,000	–	–
Sponsorship Receipts	50,000	–	–	70,000	20,000
Total Receipts	31,97,000	36,39,000	23,01,000	58,75,000	24,20,000
Salary to teachers	7,50,000	–	–	18,00,000	4,00,000
Salary to admin staff & others	2,00,000	–	–	3,00,000	2,50,000
Fee to faculties	40,00,000	–	–	–	–
Rent for Gurgaon building	30,00,000	–	–	–	–
Rent	–	50,000	40,000	–	–
Printing of Study material	750,000	–	–	2,00,000	3,50,000
Transportation Charges	75,000	–	–	1,00,000	70,000
Security Charges to outside agency	–	–	–	70,000	–
Electricity Expenses	15,000	12,000	15,000	40,000	32,000
Total Expenses	87,90,000	62,000	55,000	25,10,000	11,02,000

Questions:

1. Discuss the applicability of GST provisions for above business.
2. Is GST recoverable on transport charges recovered from students and staff?
3. Vidya Ltd. is seeking to outsource its canteen facility to third party vendor rather than running itself. What is the GST implication in that scenario?
4. What will be the consequences in case all fee is already received, and company cannot recover GST from its students?
5. Is GST leviable on Judo and Music fee charged by the school as it is not covered in academics?
6. Also clarify GST implication on boarding fee charged by school.
7. During this month, Company has purchased two buses from TATA, one is exclusively used for CBSE school and Pre-school and another is used for coaching classes costing Rs. 18,00,000 each.
8. In case of online classes from Gurgaon, all procurements and services of faculties received in Gurgaon only and no other major expenses borne in Mumbai and Chennai. If, in case, GST is applicable on online classes, can company distribute the credit of procurements made at Gurgaon to Mumbai and Chennai.
9. Company organized annual function for which sponsorship fee received in following manner, half of the fee received from Ayush Ltd. and half from Sangeet Vidyalaya (sole proprietorship). What are the GST implications on fee received?
10. Owner of Gurgaon building asking advice whether he will charge GST on rent?
11. Is company liable to charge GST on rent for sub-letting the hall and rooms?
12. Vidya Ltd. planning to offer Modular Employable Skill Course for 12^th class students and for graduates. Is GST chargeable on that course also.
13. Company is planning to recruit people for security services rather than outsourcing as given in above information. You are advised to GST consequences.
14. One of the folk-dance artists wants to perform in school for which she will charge Rs. 1,21,000. Is GST applicable on this amount?

Answers:

1.Discuss the applicability of GST provisions for above business.

Solution: As per clause (a) Entry No. 66 of exemption Notification No. 12/2017 dated 28.06.2017, Services provided by an educational institution to its students, faculty and staff is exempt from GST.

As per the definition given at the end of notification, clause (y), “educational institution” means an institution providing services by way of, –

(i)    pre-school education and education up to higher secondary school or equivalent;

(ii)   education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force;

(iii)  education as a part of an approved vocational education course;

Hence, as per above entry, only online coaching classes are leviable to GST and services provided by school affiliated to CBSE and Pre-School are exempt from GST.

2. Is GST recoverable on transport charges recovered from students and staff?

Solution: As per clause (a) Entry No. 66 of exemption Notification No. 12/2017 dated 28.06.2017, any service provided by educational institution is exempt from GST. Hence, transportation charges recovered from students studying in CBSE school and Pre-school is exempt from GST.

Whereas, Vidya Ltd. is require to charge GST on transportation charges recovered from students taking classes online.

3. Vidya Ltd. is seeking to outsource its canteen facility to third party vendor rather than running itself. What is the GST implication in that scenario?

Solution: As per clause (b) Entry No. 66 of exemption Notification No. 12/2017 dated 28.06.2017, Services provided to an educational institution, by way of,-

1. transportation of students, faculty and staff;
2. catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
3. security or cleaning or house-keeping services performed in such educational institution;
4. services relating to admission to, or conduct of examination by, such institution; upto higher secondary:
5. supply of online educational journals or periodicals

Provided that nothing contained in entry (b) of sub-items (i), (ii), (iii) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher secondary school or equivalent.

Hence, as per item (iii) of above entry, catering services received by an educational institution is exempt from GST if it is received by CBSE school and Pre-school.

It is to be noted here that, canteen services provided in online coaching classes is GST leviable in both cases whether it is outsourced or in house.

4. What will be the consequences in case all fee is already received, and company cannot recover GST from its students?

Solution: As per solution 1, fee collected from students of CBSE school and Pre-school is exempt from GST. Further, GST is leviable in case of fee collected from students in case of online coaching classes. Furthermore, as per rule 35 of CGST rules,[

‘Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory tax, the tax amount shall be determined in the following manner, namely, –

Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be, CGST, SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)’

5.Is GST leviable on Judo and Music fee charged by the school as it is not covered in academics?

Solution: As per Section 2(30), “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;

In the given case study, Judo and music activities are naturally bundled with principal supply of education services, supply of these activities is composite supply.

Further, as per Section 8(a), a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply

Hence, GST is not leviable on fee charged for Judo and Music activities conducted by school.

6. Also clarify GST implication on boarding fee charged by school.

Solution: As per Para 5(a) of Schedule II of CGST Act, 2017, renting of immovable property shall be treated as supply of services and leviable to GST.

But taking the premise of solution 5, supra, renting of immovable property (boarding fee here) is naturally bundled with principal supply of education services. Predominant nature is determined by the service of education, the other service of providing residential dwelling will not be considered for the purpose of determining the tax liability and hence, entire consideration for the supply will be exempt from GST

7. During this month, Company has purchased two buses from TATA, one is exclusively used for CBSE school and Pre-school and another is used for coaching classes costing Rs. 18,00,000 each.

Solution: As discussed in solution 1, supra, only online coaching classes are GST leviable.

Further, as per Section 17(2) of CGST Act, 2017, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the IGST Act, and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Henceforth, credit is available only for GST paid on bus purchased for online coaching classes.

8. In case of online classes from Gurgaon, all procurements and services of faculties received in Gurgaon only and no other major expenses borne in Mumbai and Chennai. If, in case, GST is applicable on online classes, can company distribute the credit of procurements made at Gurgaon to Mumbai and Chennai.

Solution: As per Section 16(1) of CGST Act, 2017, Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of ‘input tax’ charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person.

As the online coaching classes are taxable service, Vidya Ltd. will get credit of GST paid on all procurements made for providing such service except on those goods and service or both which are not allowed as per Section 17(5).

As per Section 2(61), “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.

Referring, the above definition, Gurgaon office can distribute the credit of GST paid to it’s offices in Mumbai and Chennai.

Further, as per Proviso of rule 8(1) of CGST Rules, 2017 ‘every person being an Input Service Distributor shall make a separate application for registration as such Input Service Distributor.

 Section 20(2)(d), specifies the manner of distribution of credit among branches as follows,

‘the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period’

Further, as per Rule 39 of CGST Rules,2017, ‘Procedure for distribution of input tax credit by Input Service Distributor’,

Clause (d) provides the input tax credit that is required to be distributed in accordance with the provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients ‘R1’, whether registered or not, from amongst the total of all the recipients to whom input tax credit is attributable, including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any reason, shall be the amount, ―C1‖, to be calculated by applying the following formula

C1 = (t1÷T) × C

where,

“C” is the amount of credit to be distributed,

“t1” is the turnover, as referred to in section 20, of person R1 during the relevant period, and

“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable in accordance with the provisions of section 20;

Clause (e) provides that the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated tax to every recipient

Clause (f) provides the input tax credit on account of central tax and State tax or Union territory tax shall-

1. in respect of a recipient located in the same State or Union territory in which the Input Service Distributor is located, be distributed as input tax credit of central tax and State tax or Union territory tax respectively
2. in respect of a recipient located in a State or Union territory other than that of the Input Service Distributor, be distributed as integrated tax and the amount to be so distributed shall be equal to the aggregate of the amount of input tax credit of central tax and State tax or Union territory tax that qualifies for distribution to such recipient in accordance with clause (d) Clause (g) provides the Input Service Distributor shall issue an Input Service Distributor invoice, as prescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of input tax credit;

Hence, Vidya Ltd. can distribute its GST credit among its branches.

9. Company organized annual function for which sponsorship fee received in following manner, half of the fee received from Ayush Ltd. and half from Sangeet Vidyalaya (sole proprietorship). What are the GST implications on fee received?

Solution: As per Section 9(3), The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such 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 the supply of such goods or services or both.

In this regard, Government has issued Notification No. 13/2017 dated 28.06.2017, which provides, inter alia, where Services provided by way of sponsorship to any body corporate or partnership firm then such Body Corporate or Partnership Firm located in the taxable territory is liable to pay

Hence, in instant case, GST on fee received for sponsorship is payable by Ayush Ltd. but where it is received from Sangeet Vidyalaya (sole proprietorship) then Vidya Ltd. is required to charge GST.

10. Owner of Gurgaon building asking advice whether he will charge GST on rent?

Solution: As per Para 5(a) of Schedule II of CGST Act, 2017, renting of immovable property shall be treated as supply of services and leviable to GST.

Further, as per clause (b) of Entry No. 66 of 12/2017 dated 28.06.2017, Service provided to an educational institution, by way of,-

1. transportation of students, faculty and staff;
2. catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory;
3. security or cleaning or house-keeping services performed in such educational institution;
4. services relating to admission to, or conduct of examination by, such institution; upto higher secondary:
5. supply of online educational journals or periodicals are exempt from GST

Hence, only above-mentioned services provided to an educational institution are exempt from GST. Owner is required to charge GST on whole amount of rent.

11. Is company liable to charge GST on rent for sub-letting the hall and rooms?

Solution: As per Entry No. 66 of 12/2017 dated 28.06.2017, Service provided

1. by an educational institution to its students, faculty and staff;
2. by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee are exempt from GST

Hence, if sub-letting of hall and rooms by CBSE shool is for purpose other than clause (b) above then Vidya Ltd. is require to charge GST.

In case of online coaching classes, GST is required to be charge irrespective of its use.

12. Vidya Ltd. planning to offer Modular Employable Skill Course for 12^th class students and for graduates. Is GST chargeable on that course also.

Solution: As per solution 1, supra, “educational institution” means an institution providing services by way of, inter alia, education as a part of an approved vocational education course.

As per clause (h) of definition of same notification, approved vocational education course” means, –

1. a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the Apprentices Act, 1961
2. a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship

Hence, as per above definition, if such modular program as propose by company get approval from the National Council of Vocational Training, Ministry of Skill Development and Entrepreneurship then no GST is leviable on course.

13. Company is planning to recruit people for security services rather than outsourcing as given in above information. You are advised to GST consequences.

Solution: As per Para 1 of Schedule III of CGST Act, 2017, Services by an employee to the employer in the course of or in relation to his employment

Hence, if company is planning to recruit people for security services then will be no GST liability.

Further, it to be noted here that in reference of this question, that GST is not leviable on such services where these services are taken for CBSE school and Pre-School as per Entry 66 of N.No. 12/2017.

14. One of the folk-dance artists wants to perform in school for which she will charge Rs. 1,21,000. Is GST applicable on this amount?

Solution: As per Entry No. 78 of Exemption Notification No. 12/2017 dated 28.06.2017,  Services by an artist by way of a performance in folk or classical art forms of-

(a) music, or

(b) dance, or

(c) theatre,

if the consideration charged for such performance is not more than Rs. 1,50,000 is exempt from GST provided that the exemption shall not apply to service provided by such artist as a brand ambassador.

Hence, No GST is leviable on such performance.

Question:

XYZ private limited is a private coaching institute registered in Pune which provides coaching in relation to UPSC exams, IELTS and TOEFL etc. Apart from providing private coaching’s, the institute is also running a Boarding School and is also engaged in providing certain other services.

Throughout the year, following incomes are received:

Sr. No.	Particulars	Amount (in INR)
1	Receipt from face-to-face classes in Pune (out of this material Rs.1 lakh belongs to sale of study material which is required for studying in the class)	9,00,000
2	Receipt from online classes	20,00,000
3	Receipt from pen drive classes	15,00,000
4	Receipt from postal coaching (classes recoded in CD’s sent via post)	10,00,000
5	Receipt from sale of books in the market having HSN code 4901	9,00,000
6	Gross receipts from Running a Boarding School (including receipts of Rs. 12,00,000/- from renting of residential dwelling for residence purpose of students)	28,00,000
7	Conducting modular employable skill course, approved by National Council of vocational training	10,00,000
8	Renting of furnished flats for temporary stay of faculty members	6,80,000
9	A building which was let out to school providing pre-school education	8,00,000

Expenses:

Sr. no.	Particulars	Amount (in INR)	ITC (in INR) (excluding ITC on RCM)
1	Remuneration to outsource teaching staff	15,00,000	2,70,000 (C & S)
2	Remuneration to outsource non-teaching staff	1,50,000	27,000 (C & S)
3	Electricity expenses	3,00,000	–
4	Rent	3,00,000	54,000 (C & S)
5	Repair and maintenance	50,000	9,000 (C & S)
6	Legal expenses	2,00,000	13,500 (C & S)
7	Postal expenses	2,00,000	36,000 (C & S)
8	Audit fees	3,50,000	63,000 (C & S)
9	Insurance of staff	9,00,000	1,62,000 (C & S)
10	Advertisement expenses	1,00,000	18,000 (C & S)
11	Printing expenses	10,00,000	50,000 (C & S)
12	Rental of coffee machine used for personal purpose	1,00,000	18,000 (C & S)
13	Directors sitting fees	6,00,000	–
14	Miscellaneous expenses	9,00,000	1,62,000 (C & S)
15	Generator rent	1,50,000	27,000 (C & S)
16	Catering services taken for function	12,00,000	2,16,000 (C & S)

Input Tax Credit:

Particulars	CGST	SGST	IGST
Opening balance (E-credit Ledger)	10,000	10,000	20,000

Some more information:

1. Some pen drives are sent within Pune, some in the different states of India and some in other countries.

Receipt from Pune – Rs. 12.5 lakhs

Receipt from remaining states of India – Rs. 1 lakh

Receipt from foreign countries (exports without payment of tax) – Rs. 1.5 lakhs.

2. Further, all the postal coaching’s were sent outside Maharashtra.

3. Legal expenses include

1. 25,000 paid to advocate legal firm of Pune for taking copyrights of books
2. 50,000 paid to company secretary of Pune for filing various returns of the company
3. 25,000 paid to chartered accountant of Pune for taking opinion on GST
4. 1,00,000 paid to another advocate of Pune for regular consultancy service

4. 1/4^th of the rent is for personal purpose.

5. The company had not discharged a creditor of Rs. 50,000 for 180 days but has taken the input for the same. ITC on the same availed amounting to Rs. 9,000/-

Questions:

1. Determine the Place of supply in case of the following:
2. Face to face classes
3. Online Classes provided outside India and online classes provided within India
4. Pen Drive Classes/ Classes in CD’s (Postal)
5. Categorise the income sources of the company into taxable and exempt along with reasons for the same in case of exempt services.
6. Calculate GST payable on outward supply.
7. Calculate GST payable under reverse charge mechanism.
8. What amount of ITC is blocked as per Section 17(5)?
9. Treatment of ITC availed in relation to an invoice where the payment has not been made to the creditor within a period of 180 days from the date of issue of invoice.
10. Calculate total ITC available.
11. Calculate net tax payable by XYZ.

Answers:

1. Place of Supply:

1. Face to Face Classes (Sub-section (6) or (7) of Section 12 of IGST Act’2017 (where the recipient and the supplier are within India):

(6) The place of supply of services provided by way of admission to a cultural, artistic, sporting, scientific, educational, entertainment event or amusement park or any other place and services ancillary thereto, shall be the place where the event is actually held or where the park or such other place is located.

OR

(7) The place of supply of services provided by way of, — (a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including supply of services in relation to a conference, fair, exhibition, celebration or similar events:

(i) to a registered person, shall be the location of such person;

(ii) to a person other than a registered person, shall be the place where the event is actually held and if the event is held outside India, the place of supply shall be the location of the recipient.

Face to Face Classes (Sub-section (5) of Section 13 of IGST Act’2017 (where the location of recipient or the location of supplier is outside India):

The place of supply of services supplied by way of admission to, or organisation of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organisation, shall be the place where the event is actually held.

2. Online Classes provided outside India:

As per section 13(12) of IGST Act’2017, the place of supply of online information and database access or retrieval services shall be the location of the recipient of services, where the location of supplier or location of recipient is outside India.

Online Classes provided within India:

Where online classes are provided within India, then the general rule as per section 12(2) shall apply, which states:

The place of supply of services:

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be, ––

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.

3. Pen Drive Classes or Postal Coaching Classes (Section 10(1)(a)) (where the recipient and the supplier are within India):

where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.

 Pen Drive Classes or Postal Coaching Classes (Section 11(b)) (where the recipient and the supplier are within India):

The place of supply of goods, ––

(b) exported from India shall be the location outside India.

2 & 3.

Sr. No.	Particulars	Amount (in INR)	Taxability (in INR)
1	Receipt from face-to-face classes in Pune (out of this material Rs.1 lakh belongs to sale of study material which is required for studying in the class)	9,00,000	9,00,000 (CGST & SGST)
2	Receipt from online classes(Assumed provided within Maharashtra)	20,00,000	20,00,000 (CGST & SGST)
3	Receipt from pen drive classes	15,00,000	15,00,000             (12.5 Lakhs-CGST & SGST, 1 Lakh IGST, 1.5 Lakhs-Zero Rate)
4	Receipt from postal coaching	10,00,000	10,00,000 (IGST)
5	Receipt from sale of books in the market having HSN code 4901	9,00,000	Exempt
6	Gross receipts from Running a Boarding School (including receipts of Rs. 12,00,000/- from renting of residential dwelling for residence purpose of students)	28,00,000	Exempt (Note -1)
7	Conducting modular employable skill course, approved by National Council of vocational training	10,00,000	Exempt (Note-2)
8	Renting of furnished flats for temporary stay of faculty members(Assumed flat is situated within Maharashtra)	6,80,000	6,80,000 (CGST & SGST)
9	A building which was let out to school providing pre-school education(Assumed Building is situated within Maharashtra)	8,00,000	8,00,000 (CGST & SGST)

Total Taxable Value: 68,80,000

GST @ 18%:

IGST: (1,00,000+ 10,00,000) *18%= 1,98,000/-

CGST: (9,00,000+ 20,00,000+ 12,50,000+ 6,80,0000+ 8,00,000) *9%= 5,06,700/-

SGST: (9,00,000+ 20,00,000+ 12,50,000+ 6,80,0000+ 8,00,000) *9%= 5,06,700/-

Note -1: Education up to higher secondary school is exempt vide Entry 66 of Notification No. 12/2017-CT (Rate) and renting of residential dwelling is exempt vide Entry 12 of Notification No. 12/2017-CT (Rate)

Note -1: Modular Employable Skill Course is an approved vocational education course and is exempt vide Entry 66 of Notification No. 12/2017-CT (Rate)

4. Calculation of GST payable under Reverse Charge

Particulars	Amount	Rate	GST (CGST & SGST)
Advocate	25,000	18%	4,500
Advocate	1,00,000	18%	18,000
Director Sitting Fee*	6,00,000	18%	1,08,000
Total			1,30,500

*It is assumed that director is residing in Pune. Hence, CGST & SGST has been calculated.

(Refer Note 1)

5 & 7. Calculation of ITC available and blocked ITC:

Sr. no.	Particulars	Amount (in INR)	ITC (in INR)	Categorisation (T1/T2 etc.)	Eligible
1	Remuneration to outsource teaching staff	15,00,000	2,70,000 (C & S)	C1	Eligible
2	Remuneration to outsource non-teaching staff	1,50,000	27,000 (C & S)	C1	Eligible
3	Electricity expenses	3,00,000	–		–
4	Rent	3,00,000	54,000 (C & S)	T1=13,500T3=40,500	Eligible
5	Repair and maintenance	50,000	9,000 (C & S)	C1	Eligible
6	Legal expenses (including RCM availed in the same month)	2,00,000	36,000 (C & S)	C1	Eligible
7	Postal expenses	2,00,000	36,000 (C & S)	C1	Eligible
8	Audit fees	3,50,000	63,000 (C & S)	C1	Eligible
9	Insurance of staff	9,00,000	1,62,000 (C & S)	T3	Blocked 17(5)
10	Advertisement expenses	1,00,000	18,000 (C & S)	C1	Eligible
11	Printing expenses	10,00,000	50,000 (C & S)	T2	T2: used for effecting exempt supplies
12	Rental of coffee machine used for personal purpose	1,00,000	18,000 (C & S)	T3	Blocked 17(5)
13	Directors sitting fees (RCM)	6,00,000	1,08,000 (C & S)	C1	Eligible
14	Miscellaneous expenses	9,00,000	1,62,000 (C & S)	C1	Eligible
15	Generator rent	1,50,000	27,000 (C & S)	C1	Eligible
16	Catering services taken for function	12,00,000	2,16,000 (C & S)	T3	Blocked 17(5)
Total (Rs.)			12,56,000.00

Calculation of ITC Available:

Exempt Turnover: (9,00,000 + 28,00,000 + 10,00,000) = 47,00,000

Total Turnover = 1,15,80,000

T= 12,56,000/-

T1= 1/4 * 54,000 = 13,500/-

T2= 50,000/-

T3= 3,96,000/-

C1= T-(T1+T2+T3)

C1= 7,96,500

C2= C1-T4

T4= 0

C2= C1= 7,96,500/-

D1= (E/F) *C2

D1= 47,00,000/1,15,80,000 * 7,96,500 = 3,23,277 /-

D2 = 5% * C2 = 5% * 7,96,500 = 39,825/-

Eligible ITC or C3 = 7,96,500 – 3,23,277 – 39,825 = 4,33,398/-

(Refer Note 2 & 3)

6. According to the second proviso to section 16(2) of CGST Act, 2017, where the company has failed to pay to the supplier an amount equal to the value of supply along with tax payable thereon within a period of 180 days from the date of issue of invoice, the ITC availed by the recipient will have to be added to the output tax liability of the recipient.

Therefore, ITC of 9,000 will have to be deducted from the amount of eligible ITC calculated in above part.

Net Eligible ITC = 4,33,398 – 9,000 = 4,24,398/-

7. Net Tax Payable by XYZ:

Particulars	IGST	CGST	SGST
Tax Payable: Forward Charge	1,98,000	5,06,700	5,06,700
Tax Payable: Reverse Charge	–	65,250	65,250
ITC: Opening Balance	20,000	10,000	10,000
ITC availed	–	2,12,199	2,12,199
Set Off	20,000	–
	–	2,12,199	2,12,199
Net Tax Payable- RCM	–	65,250	65,250
Net Tax Payable – FC	1,78,000	2,84,501	2,84,501

(Refer Note 2 & 3)

Notes:

• Tax payable under Reverse charge (Explanation to Answer 4):

Notification No. 13/2017-CENTRAL TAX (RATE), DATED 28-6-2017, enlists certain services wherein the recipient of service is liable to pay tax under reverse charge:

Category of Service	Supplier of Service	Recipient of Service
Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly	An individual advocate including a senior advocate or firm of advocates.	Any business entity located in the taxable territory
Services supplied by a director of a company or a body corporate to the said company or the body corporate	A director of a company or a body corporate	The company or a body corporate located in the taxable territory

• Apportionment of Credit (Explanation to Answer 5 & 7):

Section 17 of CGST Act, 2017, read with rule 42 of CGST Rules 2017, provides the apportionment of Input Tax Credit. According to this the input tax credit in respect of inputs or input services, being partly used for the purposes of business and partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, discussed below—

• the total input tax involved on inputs and input services in a tax period, be denoted as ‘T’
• the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for the purposes other than business, be denoted as ‘T₁‘
• the amount of input tax, out of ‘T’, attributable to inputs and input services intended to be used exclusively for effecting exempt supplies, be denoted as ‘T₂‘
• the amount of input tax, out of ‘T’, in respect of inputs and input services on which credit is not available under sub-section (5) of section 17, be denoted as ‘T₃‘
• the amount of input tax credit credited to the electronic credit ledger of registered person, be denoted as ‘C₁‘ and calculated as—

C₁ = T- (T₁+T₂+T₃)

• the amount of input tax credit attributable to inputs and input services intended to be used exclusively for effecting supplies other than exempted but including zero rated supplies, be denoted as ‘T₄‘
• ‘T₁‘, ‘T₂‘, ‘T₃‘ and ‘T₄‘ shall be determined and declared by the registered person at the invoice level
• input tax credit left after attribution of input tax credit used exclusively for effecting supplies other than exempted but including zero rated supplies shall be called common credit, be denoted as ‘C₂‘ and calculated as—

C₂ = C₁ – T₄

• the amount of input tax credit attributable towards exempt supplies, be denoted as ‘D₁‘ and calculated as—

D₁= (E÷F) × C₂

where,

‘E’ is the aggregate value of exempt supplies during the tax period, and

‘F’ is the total turnover in the State of the registered person during the tax period:

Provided further that where the registered person does not have any turnover during the said tax period or the aforesaid information is not available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and ‘F’ of the last tax period for which the details of such turnover are available, previous to the month during which the said value of ‘E/F’ is to be calculated.

• the amount of credit attributable to non-business purposes if common inputs and input services are used partly for business and partly for non-business purposes, be denoted as ‘D₂‘, and shall be equal to 5% of C₂ and
• the remainder of the common credit shall be the eligible input tax credit attributed to the purposes of business and for effecting supplies other than exempted supplies but including zero rated supplies and shall be denoted as ‘C₃‘, where,—

C₃ = C₂ – (D₁+D₂);

• the amount ‘C3’, ‘D1’ and ‘D2’ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax
• the amount equal to aggregate of ‘D₁‘ and ‘D₂‘ shall be reversed by the registered person.

• Blocked Credit (Explanation to answer 5 & 7):

As per Section 17(5) of CGST Act, 2017, the ITC is not be available for the following:

(5)(b)(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance.

Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply.

 (5)(b)(g) goods or services or both used for personal consumption.

CASE Study

ABC Ltd is engaged in providing multiple services and is registered under the GST law. Following information is available for the month of January

Income Details:

Particulars	Rupees
Interest received on Fixed deposits of company from XYZ Bank	750000
Receipts from coaching institute providing coaching in science field	282000
Fees from employers for campus interviews	620000
Four buses with seating capacity of 40 passenger given on hire to state transport undertaking.	750000
Receipts for vocational courses undertaken in the college by AZX Training Institute affiliated to the National Council for vocational Training (NCVT).	360000
Receipts from running boarding school (including receipts for providing residential dwelling services of Rs 192000)	490000
Professional services provided to foreign diplomatic mission located in India.	204000
Security services (supply of security personnel) provided to Govind Engineering college (GEC)*[registered under GST] for the security of the college premises*All the engineering courses run by GEC are recognised by law [All India Council for Technical Education].	38000

Further, he has received following services:

S. No.	Particulars	Amount
(a)	Amount paid as upfront payment for acquiring land on lease for more than 40 years for developing a unit   for research related work.	10,00,000
(b)	Legal advice received from M/s Taxsolutions, a partnership firm seeking advice in relation to a tax dispute.	2,00,000

Also, an international painting exhibition is going to be held in United States of America in January. ABC Ltd has participated in it. It intends to send 20 units of taxable goods to USA for display in the said exhibition.

Further, details of Purchases made by ABC Ltd are as follows:

S. No.	Particulars	GST paid
1.	Capital goods purchased on which depreciation has been taken  on full value including input tax thereon	25,000
2.	Goods purchased from A-one Enterprises(A-one Enterprises sent the invoice in the month of January, but  goods were received in month of April)	30,000
3.	Books and uniforms destroyed in fire	40,000
4.	Goods used for setting up telecommunication towers being  immovable property	60,000
5.	Goods purchased from B-one Ltd.(Full payment has been made by ABC Ltd. to B-one Ltd. against such supply, but tax has been deposited by Sumo Ltd. in April)	20,000
6.	Bus purchased for transportation facility	50,000

Questions:

1. Compute the tax payable by ABC Ltd assuming the above receipts are exclusive of GST wherever applicable and the rate of tax is 18%.
2. Calculate the amount of tax payable by ABC Ltd under RCM?
3. ABC is of the view that the activity of sending the goods out of India for exhibition is a zero-rated Do you agree?
4. Assuming that ABC could not sell any goods at the exhibition and brings back entire 20 units to India Discuss the requirement to issue invoice, if any?
5. Would your answer be different if ABC sells an aggregate of 5 units of the taxable goods in USA exhibition on different dates in January and remaining 15 units are brought back on 31st The tax advisor of ABC advises ABC that the export of 5 units qualify as zero-rated supply and it should apply for refund of the unutilized ITC in respect of the same. Examine the technical veracity of the tax advisor’s advice.
6. Determine the amount of input tax credit (ITC) available to ABC Ltd. while filing GSTR-3B for the month of January by giving necessary explanations for treatment of various items as per the provisions of the CGST Act, 2017.
7. Determine the ITC blocked under sec 17(5) of CGST Act, 2017.
8. Explain section 17(5) of the CGST Act, 2017.
9. ABC ltd received adjudication order and filed an appeal against the same. Briefly examine whether the appeal/review is within the time limit prescribed under the GST law:-

The adjudicating authority issued the adjudication order on 23rd April and the same is communicated to the taxpayer ABC Ltd on 28th April. Mr. ABC Ltd, aggrieved by the order of the adjudicating authority filed an appeal to the Appellate Authority on 26th July.

10. What will be the answer if the adjudicating authority passed the order on 3rd March (communicated same day to the Commissioner). The Commissioner directs his subordinate officer to file a review application with the Appellate Authority. The subordinate officer filed the review application on 23rd

Answer: 1

Computation of GST payable by ABC Ltd.

Particulars	Value (Rupees)	GST@18% (Rupees)
Interest received on Fixed deposits from XYZ Bank  (Note 1)	NIL	NIL
Receipts from coaching institute (Note 2)	282000	50760
Fees from employers for campus interviews	620000	11160
Four buses with seating capacity of 40 passenger given on hire to state transport undertaking. (Note 3)	NIL	NIL
Receipts for vocational courses from AZX institute (Note 4)	NIL	NIL
Receipts from running boarding school (Note 5)	NIL	NIL
Professional services provided to foreign diplomatic mission located in India. (Note 6)	204000	36720
Security services (supply of security personnel) provided to Govind Engineering college (Note 7)	NIL	NIL
Total	1106000	199080

Notes:  

1. Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) are exempt vide exemption notification.]
2. [Services provided by an educational institution to its students, faculty and staff are exempt vide exemption notification. However, coaching institute is not an educational institution.]
3. [Services by way of giving on hire to a State transport undertaking (STU), a motor vehicle meant to carry more than 12 passengers, are exempt vide Notification No. 12/2017 CT(R) dated 28.06.2017 (hereinafter referred to as exemption notification).]
4. [Services provided by an educational institution to its students, faculty and staff are exempt vide exemption notification. AZX institute is an educational institution running approved vocational education course.]
5. [Services provided by an educational institution to its students, faculty and staff are exempt vide exemption notification. Boarding School providing education up to higher secondary school or equivalent is an educational institution since it provides composite supply of education service coupled with other services like providing dwelling units for residence and food wherein the principal supply is supply of education service.]
6. [While services provided by a foreign diplomatic mission located in India are exempt from GST vide exemption notification, no such exemption is available to the services provided to such mission.]
7. Services provided to an educational institution, by way of security services performed in such educational institution are exempt from GST only when said services are provided to an institution providing services by way of pre-school education and education up to higher secondary school or equivalent, vide exemption notification. Thus, in the given case, security services provided to GEC are not exempt. Further, the tax on security services (supply of security personnel) provided by any person other than a body corporate to a registered person is payable by the recipient of service under reverse charge in terms of reverse charge notification. Hence, ABC will not be liable to pay GST in the given case.

Answer: 2

Tax to be paid under RCM by ABC Ltd.

Particulars	Value (Rupees)	GST@18% (Rupees)
Amount paid upfront for lease of land.  (Note 8)	1000000	180000
Legal services received (Note 9)	200000	36000

Note 8

In case of Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, and development charges or by any other name) and/or periodic rent for construction of a project by a promoter is covered under Reverse Charge Mechanism. (Notification No. 13/2017-C.T. (Rate), dated 28-6-2017)

Note 9

Legal services provided by a partnership firm of advocates to a business entity is covered under Reverse Charge Mechanism. Thus ABC ltd will be required to pay tax under RCM (Notification No. 13/2017-C.T. (Rate), dated 28-6-2017)

Answer:3

No, the view of ABC that the activity of sending the goods out of India for exhibition is a zero-rated supply, is not correct.

As per section 7 of the CGST Act, for any activity or transaction to be considered a supply, it must satisfy the following two conditions:

1. it should be for a consideration by a person; and,
2. it should be in the course or furtherance of

The exceptions to the above are the activities enumerated in Schedule I of the CGST Act which are treated as supply even if made without consideration

Further, section 2(21) of the IGST Act defines “supply”, wherein it is clearly stated that it shall have the same meaning as assigned to it in section 7 of the CGST Act.

Section 16 of the IGST Act defines “zero rated supply” as any of the following supplies of goods or services or both, namely:–

1. export of goods or services or both; or
2. supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Thus, only such “supplies” which are either “export” or are “supply to SEZ unit/ developer” would qualify as zero-rated supply.

In view of the above provisions, Circular No. 108/27/2019 GST dated 18.07.2019 clarified that the activity of sending/ taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act, do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as “zero rated supply” as per the provisions contained in section 16 of the IGST Act.

Answer 4

Circular No. 108/27/2019 GST dated 18.07.2019 further clarified that the activity of sending/taking goods out of India for exhibition is in the nature of “sale on approval basis” wherein the goods are sent/ taken outside India for the approval of the person located abroad and it is only when the said goods are approved that the actual supply from the exporter located in India to the importer located abroad takes place.

The activity of sending/ taking specified goods is covered under the provisions of section 31(7) of the CGST Act, 2017 read with rule 55 of CGST Rules, 2017. As per said provisions, in case of the goods being sent or taken on approval for sale, the invoice shall be issued before/at the time of supply or 6 months from the date of removal, whichever is earlier.

The goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on a delivery challan.

In view of the said provisions, ABC is not required to issue invoice at the time of taking the goods out of India since the activity of merely sending/ taking the taxable goods out of India is not a supply. However, the goods shall be accompanied with a delivery challan.

Answer 5

In case the entire quantity of goods (20 units) sent to USA is not sold but brought back by ABC in February, i.e. within the stipulated period of 6 months from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a case

In case, the entire quantity of goods (20 units) sent to USA is not sold and brought back by ABC in August, i.e. after 6 months from the date of removal, a tax invoice is required to be issued for entire 20 units of taxable goods in accordance with the provisions contained in section 12 [determining time of supply of goods] and section 31 [tax invoice] of the CGST Act, 2017 read with rule 46 [tax invoice] of the CGST Rules, 2017 within the time period stipulated under section 31(7) of the CGST Act, 2017.

However, if an aggregate of 5 units of the goods are sold in USA exhibition by ABC on different dates in January (i.e. within the stipulated period of 6 months), a tax invoice would be required to be issued for these units, at the time of each of these sales, in accordance with the provisions contained in section 12 and section 31 of the CGST Act read with rule 46 of the CGST Rules. When the goods are sold in exhibition, actual supply from the exporter in India to the importer located abroad takes place and this supply qualifies as export. Export of goods is a zero-rated supply in terms of section 16(1)(a) of the IGST Act, 2017.

If the remaining 15 units are brought back on 31st January, i.e. within the stipulated period of 6 months from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a case.

Further, tax advisor’s advice is technically correct. Since the activity of sending / taking specified goods out of India is not a zero-rated supply, execution of a bond/Letter of Undertaking (LUT), as required under section 16 of the IGST Act, is not required.

However, the sender can prefer refund claim even when the specified goods were sent / taken out of India without execution of a bond/LUT, if he is otherwise eligible for refund as per the provisions contained in section 54(3) of the CGST Act, 2017 read with rule 89(4) of the CGST Rules, 2017 in respect of zero-rated supply of 65 units.

Answer 6

Computation of ITC available to ABC Ltd. in January

S.NO	Particulars	Amount
1	Capital goods (Note 10)	NIL
2	Goods purchased from Rupesh Enterprises (Note 11)	NIL
3	Books and uniforms destroyed in fire (Not  e   12)	NIL
4	Goods used for setting telecommunication towers (Note 13)	NIL
5	Goods purchased from B-one Ltd. (Note 14)	20000
6	Bus purchased for transportation facility. (Note 15)	50000
	Total ITC available for ABC Ltd	70000

Note 10

Since depreciation has been claimed on the tax component of the value of the capital goods, ITC of such tax cannot be availed in terms of section 16 of the CGST Act, 2017.

Note 11

ITC in respect of goods not received cannot be availed (Section 16 of the CGST Act, 2017). Since the goods have been received in the month of April, ITC thereon can be availed in April and not January even though the invoice for the same has been received in January.

Note 12

ITC in respect of books and uniform destroyed in fire is blocked under section 17(5) of the CGST Act, 2017. Thus ITC will not be available.

Note 13

ITC on goods used by a taxable person for construction of immovable property on his own account is blocked even when such goods are used in the course or furtherance of business (Section 17 of the CGST Act, 2017).

Note 14

ITC can be claimed provisionally in January since all the conditions necessary for availing the same have been complied with (Section 16 of the CGST Act, 2017). However, the claim will get confirmed only when the tax charged in respect of such supply has been actually paid to the Government.

Note 15

ITC on motor vehicles having seating capacity of more than thirteen is not blocked under section 17(5) of the CGST Act, 2017. Thus ITC will be available.

Answer 7

Blocked credit under sec 17(5) of CGST Act, 2017.

S.NO	Particulars	Amount
1	Books and uniforms destroyed in fire (Note 12)	NIL
2	Goods used for setting telecommunication towers (Note 13)	NIL

Answer 8

As per the GST law, whatever tax has been paid on purchases the benefit of same will be allowed to be adjusted at the time of making payment of the taxes in the form of input tax credit. But section 17(5) of the CGST Act, 2017 is an exception to the free flow of credit i.e. the ITC will not be available to the assesse if the same falls under sec 17(5) of the CGST Act, 2017 even if it qualifies the basic conditions of availment of the ITC given in sec 16 of the CGST Act, 2017.

Thus as per sec 17(5) input tax credit shall not be available in respect of the following, namely:—

(a)	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;
(aa)	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;
(ab)	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):
	Provided that the input tax credit in respect of such services shall be available—
(i)	where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein;
(ii)	where received by a taxable person engaged—
(I)	in the manufacture of such motor vehicles, vessels or aircraft; or
(II)	in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him;
(b)	the following supply of goods or services or both—
(i)	food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance:
	Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply;
(ii)	membership of a club, health and fitness centre; and
(iii)	travel benefits extended to employees on vacation such as leave or home travel concession:
	Provided that the input tax credit in respect of such goods or services or both shall be available, where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. ]
(c)	works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service;
(d)	goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business.
	Explanation.—For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the said immovable property;
(e)	goods or services or both on which tax has been paid under section 10;
(f)	goods or services or both received by a non-resident taxable person except on goods imported by him;
(g)	goods or services or both used for personal consumption;
(h)	goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
(i)	any tax paid in accordance with the provisions of sections 74, 129 and 130.

Answer 9

A person aggrieved by any decision/order of an adjudicating authority can file an appeal to the Appellate Authority within 3 months from the date of communication of such decision/order. The Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that there was a sufficient cause for such delay [Section 107 of the CGST Act, 2017].

In view of the aforesaid provisions, in the given case, the relevant date for computing the period of 3 months (for filing the appeal to Appellate Authority) is 28th April (date of communication of order) and not 23rd April. Accordingly, an appeal can be filed by ABC Ltd to Appellate Authority within 3 months from the date of communication of order (28th April), i.e. 28th July.

Thus, Mr. ABC ltd has filed the appeal within the time limit prescribed under the GST law.

Answer 10

The Commissioner may, by order, direct any officer subordinate to him to apply to the Appellate Authority within 6 months from the date of communication of the decision/ order for the determination of such points arising out of the said decision/ order as may be specified by him. The Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that there was sufficient cause for such delay [Section 107 of the CGST Act, 2017].

In the present case, the Commissioner directs his subordinate officer to file a review application with the Appellate Authority. The subordinate officer should have filed the said application till 3rd September (i.e. within 6 months from the date of communication of order). However, the subordinate officer filed the application on 23rd September, i.e. after the expiry of period of 6 months from the date of communication of order. Thus, in the given case, appeal has not been filed within the time limit prescribed under the GST law.

However, Appellate Authority can condone delay in filing of appeal upto 3rd October (up to 1 month) if it is satisfied that there was sufficient cause for such delay.