No input tax credit for liquor sales: GST-AAR

Restaurants that have offset input tax credit (ITC) in respect of liquor sales will be impacted by a recent goods and services tax (GST) advance ruling given by the West Bengal bench.

In this regard, the GST-Authority for Advance Rulings has held that the applicant would have to reverse the ITC. While advance rulings do not set a judicial precedent, they do influence tax assessments.

Karnani FNB Specialities, the applicant, operated a lounge bar called 'The Grid'. It also provided catering services as well as banquet renting services. It submitted to the AAR that as sale of liquor (aka, alcohol meant for human consumption) was outside the ambit of the GST, it is not liable to reverse the ITC.

The AAR bench did not agree with this view. "The AAR bench held that section 17 (2) of the GST Act, read with rule 42, allows a GST-registered taxpayer to utilise ITC to the extent of input tax paid on inputs and input services that are used for making taxable supplies including zero-rated supplies. However, credit of input tax attributable to exempt supplies is to be reversed according to the prescribed formula.

As the AAR bench held the sale of liquor to be an exempt supply, it ruled that the applicant would have to reverse the ITC attributed to the exempt supply.




Source from: https://timesofindia.indiatimes.com/business/india-business/no-input-tax-credit-for-liquor-sales-gst-aar/articleshow/98287927.cms

Abhishek Gupta

Advocate

Taxability of Labour cess under CGST Act,2017. Whether it should be included in Taxable Value?

 Labour Cess or certainly this could be referred to Building & Other Construction Workers' Welfare Cess (BOCWW Cess).

BOCWW Cess is levied on the cost of construction incurred by the employer as per the provisions of the Building and Other Construction Workers' Welfare Cess Act,1996

In order to find the value of supply of goods or supply of services in GST, we need to examine the term Consideration which is defined under Section 2(31) of CGST Act,2017 as under:

(31) 'consideration' in relation to the supply of goods or services or both includes''

(a)   any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b)   'the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

          Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

Thus the above definition of 'consideration' clearly includes any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government.

As per the above given explanation, consideration would include the entire payment received by the supplier of services and GST would be payable on the entire amount collected by them from the recipient of service which include labour cess.

We also need to refer Section 15 of the CGST Act,2017, which pertains to Valuation of taxable supply and reads, as under:

Section 15: Value of taxable supply.     

(1) The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

'(2) The value of supply shall include''

a)  any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier;

b)  any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;.

c)  incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services;

d)  interest or late fee or penalty for delayed payment of any consideration for any supply; and

e)  subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Explanation.''For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.

(3) The value of the supply shall not include any discount which is given''

a) before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and

b) after the supply has been effected, if'

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

(ii)    input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

(4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.

(5) Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.

Explanation.'For the purposes of this Act,''

'(a) persons shall be deemed to be 'related persons' if''

                (i) such persons are officers or directors of one another's businesses;

                (ii) such persons are legally recognised partners in business 2(17)

'business' includes''

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; ;

                (iii) such persons are employer and employee;

                (iv) any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them;

                (v) one of them directly or indirectly controls the other;

                (vi) both of them are directly or indirectly controlled by a third person;

                (vii) together they directly or indirectly control a third person; or they are members of the same family;

'(b) the term 'person' also includes legal persons;

(c) persons who are associated in the business 2(17)
'business' includes''
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a licensed book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities; of one another in that one is the sole agent  'agent' means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another; or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.

Now as per the above mentioned extract, it can be seen that Section 15(1) clearly stipulates that the value of supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.

Further ,sub section (2) of Section15 elaborates  in detail, the items that are required to be included in the value of supply, whereas sub-section (3) of section15 specifically elaborates the items that are not included in the value of supply .

As per Section 15 of the CGST Act,2017, there is intent to include all taxes ,duties, cesses, fees and all charges in the value of supply and there can be no exception for BOCWW Cess (labour cess) from the recipient of service.

Thus, from the above mentioned explanation it can be  suggested that Labour Cess will be included in the value of supply and the same is taxable under the CGST Act,2017.

Disclaimer : The entire content of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation .Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT,INDIRECT,SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.

Abhishek Gupta

Advocate

Decisions taken in 49th GST Council Meeting

Key decisions w.r.t. recommendations of 49th GST Council meeting, held in New Delhi on February 18,2023 under the Chairmanship of Union Minister for Finance & Corporate affairs Smt. Nirmala Sitharaman.

The GST Council has, inter-alia, made the following recommendations relating to GST compensation, GST Appellate Tribunal, approval of the Report of Group of Ministers (GoM) on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST, recommendations relating to GST rates on Goods and Services and other measures for facilitation of trade:

GST Compensation

Government of India has decided to clear the entire pending balance GST compensation of Rs. 16,982 crore for June’2022 as shown in the table below. Since, there is no amount in the GST compensation Fund, Centre decided to release this amount from its own resources and the same will be recouped from the future compensation cess collection. With this release, Centre would clear the entire provisionally admissible compensation due for five years as envisaged in the GST (Compensation to States) Act’2017. In addition, Centre would also clear the admissible final GST compensation to those States who has provided the revenue figures as certified by the Accountant General of the States amounting to Rs. 16,524 crore.

GST Appellate Tribunal


The Council adopted the report of Group of Ministers with certain modifications. The final draft amendments to the GST laws shall be circulated to Members for their comments. The Chairperson has been authorised to finalise the same.




Approval of the Report of GoM on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST:


With a view to plug the leakages and improve the revenue collection from the commodities like pan masala, gutkha, chewing tobacco, the Council approved the recommendations of the GoM including, inter alia, that


the capacity based levy not to be prescribed;
compliance and tracking measures to be taken to plug leakages/evasions;
exports of such commodities to be allowed only against LUT with consequential refund of accumulated ITC;
compensation cess levied on such commodities to be changed from ad valorem to specific tax based levy to boost the first stage collection of the revenue.Recommendations relating to GST rates on Goods and Services


Changes in GST rates of Goods and Services


Sr. No. Description From To
1. Rab 18% 5% - If sold prepackaged and labelled


Nil- If sold Otherwise.



2. Pencil sharpener 18% 12%




Other changes relating to Goods and Services
It has been decided to regularize payment of GST on ‘rab’ during the past period on “as is basis” on account of genuine doubts over its classification and applicable GST rate.
It was decided to suitably amend notification No. 104/94-Customs dated 16.03.1994 so that if a device like tag- tracking device or data logger is already affixed on a container, no separate IGST shall be levied on such affixed device and the ‘nil’ IGST treatment available for the containers under notification No. 104/94-Customs shall also be available to the such affixed device subject to the existing conditions.
It has been decided to amend entry at Sl. No. 41A of notification No. 1/2017-Compensation Cess (Rate) so that exemption benefit covers both coal rejects supplied to and by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person.
It has been decided to extend the exemption available to educational institutions and Central and State educational boards for conduct of entrance examination to any authority, board or a body set up by the Central Government or State Government including National Testing Agency for conduct of entrance examination for admission to educational institutions.
It has been decided to extend the dispensation available to Central Government, State Governments, Parliament and State Legislatures with regard to payment of GST under reverse charge mechanism (RCM) to the Courts and Tribunals also in respect of taxable services supplied by them such as renting of premises to telecommunication companies for installation of towers, renting of chamber to lawyers etc.
Measures for facilitation of trade:


Extension of time limit for application for revocation of cancellation of registration and one time amnesty for past cases: The Council has recommended amendment in section 30 of CGST Act, 2017 and rule 23 of CGST Rules, 2017 so as to provide that –the time limit for making an application for revocation of cancellation of registration be increased from 30 days to 90 days;where the registered person fails to apply for such revocation within 90 days, the said time period may be extended by the Commissioner or an officer authorised by him in this behalf for a further period not exceeding 180 days.

The Council has also recommended that an amnesty may be provided in the past cases, where registration has been cancelled on account of non-filing of the returns, but application for revocation of cancellation of registration could not be filed within the time specified in section 30 of CGST Act, by allowing such persons to file such application for revocation by a specified date, subject to certain conditions.Amendment to Section 62 of CGST Act, 2017 to extend timelines under sub-section (2) thereof and one time amnesty for past cases: As per sub-section (2) of section 62 of CGST Act, 2017, the best judgment assessment order issued under sub-section (1) of the said section is deemed to be withdrawn if the relevant return is filed within 30 days of service of the said assessment order. The Council recommended to amend section 62 so as to increase the time period for filing of return for enabling deemed withdrawal of such best judgment assessment order, from the present 30 days to 60 days, extendable by another 60 days, subject to certain conditions.

The Council has also recommended to provide an amnesty scheme for conditional deemed withdrawal of assessment orders in past cases where the concerned return could not be filed within 30 days of the assessment order but has been filed along with due interest and late fee upto a specified date, irrespective of whether appeal has been filed or not against the assessment order, or whether the said appeal has been decided or not.Rationalisation of Late fee for Annual Return: Presently, late fee of Rs 200 per day (Rs 100 CGST + Rs 100 SGST), subject to a maximum of 0.5% of the turnover in the State or UT (0.25% CGST + 0.25% SGST), is payable in case of delayed filing of annual return in FORM GSTR-9. The Council recommended to rationalise this late fee for delayed filing of annual return in FORM GSTR-9 for FY 2022-23 onwards, for registered persons having aggregate turnover in a financial year upto Rs 20 crore, as below:Registered persons having an aggregate turnover of up to Rs. 5 crores in the said financial year: Rs 50 per day (Rs 25 CGST + Rs 25 SGST), subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory (0.02% CGST + 0.02% SGST).
Registered persons having an aggregate turnover of more than Rs. 5 crores and up to Rs. 20 crores in the said financial year: Rs 100 per day (Rs 50 CGST + Rs 50 SGST), subject to a maximum of an amount calculated at 0.04 per cent. of his turnover in the State or Union territory (0.02% CGST + 0.02% SGST).Amnesty in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10: To provide relief to a large number of taxpayers, the Council recommended amnesty schemes in respect of pending returns in FORM GSTR-4, FORM GSTR-9 and FORM GSTR-10 by way of conditional waiver/ reduction of late fee.Rationalization of provision of place of supply of services of transportation of goods: Council recommended to rationalize the provision of place of supply for services of transportation of goods by deletion of section 13(9) of IGST Act, 2017 so as to provide that the place of supply of services of transportation of goods, in cases where location of supplier of services or location of recipient of services is outside India, shall be the location of the recipient of services.
Note: The recommendations of the GST Council have been presented in this release containing major item of decisions in simple language for information of the stakeholders. The same would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law.


The Press Release can be accessed at: https://www.pib.gov.in/PressReleasePage.aspx?PRID=1900376




Abhishek Gupta
Advocate.