Case Study 

Trade Mark Registration & Certification Company (herein after referred as ‘TMRC’) engage in various types of services like assessment services, trainings, certifications, audits, etc. It has 7 branches in States, and all are registered in GST. It has its head office in Delhi. Following data is extracted from its book of accounts and they appoint you to assess GST liability for the month of Aug 19 and Sept 19. They also seek your advice regarding compliance to be followed observing their business process.

Additional Information:

1. Income from Training: In Aug 19, one of the clients whose HO in Delhi but trainings were conducted across India, total bill amounts to Rs. 12,00,000 Delhi: 200,000; UP: 300,000; Tamil Nadu: 500,000; Rajasthan: 200,000

1. In point no. 4 of Incomes, GST credit was availed at the time of purchase of Projector.
2. All E-way bills were prepared by company in respect of consignment above Rs. 50,000/-
3. In Aug 19, Depreciation include purchase of Innova (including GST), Cost Rs. 15,00,000 (Inter-state)
4. In Sept 19, Depreciation include purchase of Mini-Bus, seating capacity 16 (including GST), Cost Rs. 25,00,000 (Inter-state)

Questions:

1. What will be the place of supply of services as per GST law in reference of point no.1 of additional information?
2. Can company claim credit for the lodging expenses paid within Delhi and for outside for their Trainers’ visited from outside Delhi.
3. Is company liable to pay GST on sale of Projector? Explain, if any, with workings
4. Can company claim the credit of GST paid on purchase of motor vehicle as mentioned in point (4) and (5) of additional information. Explain with relevant provision
5. On which of the supplies company is liable to pay GST on RCM basis
6. Is there any exempt supply as per GST law in the given case study? Please mention, with relevant provision, if any
7. What are the Compliance Company needs to fulfill for taking credit of GST paid on RCM basis?
8. Whether the provisions of continuous supply of service as per Section 13 of CGST Act, applicable to company.
9. Company distribute free handouts in seminars and in conferences conducted by other training centers. At the time of procuring, company paid GST on such material. Can company claim credit of GST paid.
10. Will company charge GST on Rental Income received by it?
11. Calculate the amount of ITC which needs to be reversed as per Rule-42, if any
12. What will be the treatment of Gifts as shown in above extract?
13. Can company take GST credit on travel tickets booked by them for providing services to their client across India
14. Suggest any 5 compliance points which company should kept in mind
15. Compute the tax liability under RCM & FCM for the month Aug 19 &Sept 19 assuming tax rate is 9%, 9%, 18% for CGST, SGST & IGST respectively.

Solution 1

The relevant provision in this regard are as follows:

1. As per Section 12(5) of IGST Act, The place of supply of services in relation to training and performance appraisal to,––

1. 1. a registered person, shall be the location of such person;
   2. a person other than a registered person, shall be the location where the services are actually performed.
2. As per Explanation of Section 16(2)(b) of CGST Act, 2017, inter alia,

For the purposes of this clause, it shall be deemed that the registered person has received the goods or, as the case may be, services––

(i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise;

(ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person

With analysis of the above provisions, if company is raising invoices to every branch separately and every branch of client is registered under GST law then by following Section 12(5), Company will raise IGST invoices for branches except Delhi.

Another view is, by following Explanation to Section 16(2)(b), Company can raise C+S (GST) invoice to Delhi HO for consolidated amount of Rs. 12,00,000

Solution 2:

Yes, company can claim GST paid within Delhi. But it will not get credit of GST paid in another states. For example if taxes paid are in Maharashtra i.e. Maharashtra CGST and SGST this cannot be used to pay Delhi output CGST and SGST.

Solution 3:

Company is liable to pay GST on Sale of Projector as per section 18(6) read with rule 40(2).

Following is the working as per the relevant provision of GST, assuming GST rate is 18%

Where on capital goods or plant and machinery on which input tax credit (ITC) has been taken are supplied outward by a registered person, he must pay an amount that is higher of the following:

1. ITC taken on such goods reduced by 5% per quarter of a year or part thereof from the date of issue of invoice for such goods or
2. tax on transaction value.

Accordingly, the amount payable on supply of machinery by Bharat Associates Pvt. Ltd. shall be computed as follows:

Solution 4:

As per Section 17(5), ITC shall not be available in respect of, inter alia,motor vehicles for transportation of persons having approved seating capacity of not more than 13 persons (including the driver)

Further, as per Section 16(3),where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit on the said tax component shall not be allowed.

Following the above provision, company can claim the credit of GST paid on Rs. 25,00,000 for Mini-Bus and that too only when it does not claim depreciation on GST component.

 Solution 5:

As per Section 9(3) of CGST Act, 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.

Notification No. 13/2017, inter alia, provide GST to be paid on RCM basis on following services

1. Directors’ Sitting Fee
2. Legal Services received from Advocate

Solution 6:

Yes, as per entry no. 119 of notification no. 2/2017 dated 28th June, 2017, the sale of books is exempt from Goods and Services Tax.

Solution 7:

GST Liability on Recipient

As per Section 9(3), 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.

As per Notification No. 13/2017 dated 28.6.2017, in the given case, in case of Supplies mentioned in Answer 5 recipient is liable to pay GST.

Time of Supply in case RCM supplies

As per Section 13(3), inter alia, Time of supply in case of Services where recipient is liable to GST is earliest of the following:

1. the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
2. the date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier: In the given case of Directors’ sitting fee, fee for legal services received from advocate are liable to pay GST under RCM as per above provision.

Self-Invoicing and Payment Voucher in case of RCM Supplies

As per Section 31(3)(f),a registered person who is liable to pay tax under section 9(3) (4) shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;

Further, As per Section 31(3)(g), a registered person who is liable to pay tax under section 9(3) (4) shall issue a payment voucher at the time of making payment to the supplier

Solution 8:

As per Section 2(33) of CGST Act, 2017

“continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify.

In the given case study, if any of the services, mentioned in details of income carry on for a period exceeding 3 months and payment obligation on periodic basis then said supplies called as continuous supply of services and the provisions of Section 31(5) will be applicable for raising invoice.

 Solution 9:

As per Section 17(5), ITC shall not be available in respect of, inter alia,goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Hence, credit of GST is not available on such fee handouts.

 Solution 10:

As per charging Section 9(1), inter alia, there shall be LEVIED a tax called the ‘central goods and services tax’ on all intra-state supplies goods or services or both.

Further, Section 7(1)(a) provide that supply include all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.

Hence, Company is liable to charge GST on rental income.

Solution 11:

 Working showing computation of reversal of ITC under rule 42

for the month of Aug 19 & Sept 19

Notes:

1. Gifts to employees exceeding Rs, 50,000 is deemed supply as per Proviso of Para 2 of Schedule 1.

2.Gifts to business associates is not supply as there is no consideration and no credit is availed on such gifts.

3.In working of Rule 42, ‘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

3. As per clause (l) Rule 42(1), amount ‘C3‘ shall be computed separately for input tax credit of central tax, State tax, Union territory tax and integrated tax

4. Assuming no inputs is used for other than business purposes, hence there is no working for ‘D₂’ as per Rule 42

Solution 12:

 As per Section 17(5), ITC shall not be available in respect of, inter alia, goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.

Hence, no GST credit available on gifts given to employees and to business associates.

Further where gifts given to employees exceeding Rs. 50,000, as given in the case study, deemed as supply as per proviso to Para 2 of Schedule 1.

Hence there is taxability to pay GST on Rs. 650,000 @18% for Gifts made employees.

Gifts to business associates is neither supply as per Section 7(1)(a) as there is no consideration and it is not deemed supply as per Para 1 of Schedule 1 as credit is not claimed on these gifts.

Solution 13:

Yes, Company can avail GST credit on travel tickets booked by it following the provisions of Section 16. One of the conditions mentioned in Section 16(2)(a) is possession of Tax Invoice which should be issued as per Section 31.

Further, As per Rule 54 ‘Tax invoice in special cases’ sub-rule specified that

‘Where the supplier of taxable service is supplying passenger transportation service, a tax invoice shall include ticket in any form, by whatever name called, whether or not serially numbered, and whether or not containing the address of the recipient of service but containing other information as mentioned under rule 46’

Solution 14:

Following points shall be kept in mind while working for GST compliances

1. As the Company mainly engage in supply of services, company shall take care of the advances received by it from its clients. As per the provision of Section 13(2), liability to pay GST to government arises as when payment is received from client even if invoice is not raised and services is not supplied to client.
2. Company should avail the ITC as per Rule 36(4) and as per that provision, company can avail the credit maximum 10% of credit available in GSTR-2A
3. Company should do issue self-invoice and payment voucher as per Section 31(3)(f) and Section 31(3)(f)
4. All outward supplies should be cautiously posted GSTR-1 so that customer can get credit of same.
5. To defer the tax liability for procurement on which GST is payable on reverse charge basis, company can avoid booking that expense and payment for 60days in case of services respectively.
6. Company should draft their contracts from vendors in manner that their payment does not get delayed by 180 days from date of issue of invoice to comply with 2^nd Proviso of Section 16(2).

Solution 15

Computation of GST payable by M/S TMRC from cash ledger for the month of August 2019

Working Note 1: GST Payable details for the month of Aug 2019

Working Note 2: Details of ITC of Aug 19

Computation of GST payable by M/S TMRC from cash ledger for the month of September 2019

Working Note 1: GST Payable details for the month of September 2019

Working Note 2: Details of ITC of September 19