GST on Supply of Goods and Services when the supply is "MIXED" and "Composite" as per CGST Act,2017.

The provision of two or more commodities or services might be classified as a ‘composite supply’ or a ‘mixed supply.’  In the GST framework, the idea of composite supply is akin to the concept of organically bundled services in the Service Tax Law. The notion of mixed supply, on the other hand, is wholly new. Every supply should include either products or services, or a combination of goods and services, or a combination of the two. In the event of all such combinations, the law states that such deliveries must be classified as either completely goods or wholly services for tax purposes.

Section 8. Tax liability on composite and mixed supplies.-

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:-

(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; and


(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.

Section-8(a) of CGST Act,2017- Composite Supply

A composite supply is one that consists of two or more goods/services that are naturally combined and supplied together in the regular course of business, one of which is a primary supply. It signifies that the things are usually sold together. The goods are not available individually.

If a supply of commodities and/or services meets the following characteristics, it is considered a composite supply:

>The provision of two or more goods or services concurrently;

 
>It is a natural bundle, i.e., goods or services are often delivered concurrently in the normal course of business.

>They are inseparable.

Applicability of Tax Rates on composite supply

The major supplier’s tax rate will be applicable to the total supply.

A popular example of composite supply is the supply of a laptop with pre-installed software. In this case, the laptop is the principal supply and the software is the secondary supply. As per Section 8(a), the tax liability on this composite supply will be determined based on the tax rate applicable to the laptop (principal supply), regardless of the tax rate on the software.

Section-8(b) of CGST Act,2017- Mixed Supply

Under GST, a mixed supply is a combination of two or more commodities or services sold together for a single price. Each of these components may be given alone and is not reliant on the others.

A Mixed Supply will have the tax rate of the item with the highest rate of tax applied to it under GST.

For example, let’s consider the case of a gift hamper that contains chocolates, a soft toy and a perfume. These items are not naturally bundled or dependent on each other. In this case, the tax liability will be determined by the item with the highest tax rate. Suppose the tax rates are 12% for chocolates, 18% for the soft toy and 28% for the perfume. The tax rate for the entire gift hamper will be considered as 28% (the highest rate), as per Section 8(b).

Time of Supply of Composite and Mixed Supplies under GST:

The following are the Time of Supply for Mixed Supply and Composite Supply respective-

Time of Supply in case of Mixed Supply:

1) Supplies that involves the supply of a service that is subject to higher tax rates than any other constituent supply – Would be regarded a supply of services; and hence provisions pertaining to the supply of services would apply.

2)Supplies that involves supply of products subject to higher tax rates than any other constituent supply – Would be regarded a supply of goods; and hence laws relevant to a supply of goods would apply.

Time of Supply in case of Composite Supply:

1)The primary supply is a supply of services — would be deemed a supply of services; and hence provisions pertaining to the supply of services would apply.

2)The primary supply is a supply of goods — would be deemed a supply of goods; and hence provisions pertaining to the supply of goods would apply.

In conclusion, Section 8 of the CGST Act, 2017 provides guidelines for determining tax liability on composite and mixed supplies. The tax liability on composite supplies is determined based on the principal supply, while the tax liability on mixed supplies is determined based on the supply with the highest tax rate.

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.

Inspection of Place of Business by GST officials--Section 67(1)

 Power of Inspection, search and seizure is dealt under section 67, These powers are given to the authorized officers in every law dealing with taxation be it Income Tax Act or Any other Act.

These are very harsh measures and not to be invoked in a casual manner. Reputation of person who is subject to these action/s is at stake and sometimes it pierces the personal privacy of the said person. However, these provisions are necessary to protect the interest of revenue. Looking from another prospective these provisions are also necessary to instill the confidence in the mind of honest taxpayer and fear in the mind of persons who are engaged in the evasion of taxes. 

Section 67(1) of CGST Act,2017 deals with "Inspection of any place of business of taxable person" which can be read as under:

1. Where the proper officer, not below the rank of Joint Commissioner, has reason to believe that-

    (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

    (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act,

he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business 

Thus in order to invoke the power of inspection  i.e. section  67 (1) the proper officer of the rank of Joint Commissioner or an officer higher in rank has reason to believe that :

(1) A taxable person has:

 (a) Suppressed any transactions relating to supply of goods or services or both : 

It shall include

:)not recording the transactions in the books of account or

:) recording of transactions at value less than transactional value or 

:)recording in an incorrect manner to evade payment of taxes.

(b) Suppressed the stock of goods in hand:
It shall include that the physical stock has already been sold but the same has not been recorded in books of account.

(c) Claimed Input Tax Credit in excess of his entitlement under this Act:

It can happen in many situations to quote, 

:) claiming blocked credit under section 17(5);

:) claiming credit of tax paid on supplies exclusively used for making exempted supplies or;

:) not reversing the credit of tax paid on supplies used for making both taxable and exempted supplies.

(d) Indulged in contravention of any of the provisions of this act or the rules made thereunder to evade tax under this Act

The scope of this term is very wide as it covers any action or activity carried out which is in contradiction to the provisions of the Act. The only restriction is that such non-compliance is made to evade tax and not under Bona fide mistake.

(2) This clause is also applicable to any person engaged in business of transportation of goods or owner or operator of warehouse or godown or any other place for keeping goods which have escaped payment of tax or kept its accounts or goods in a manner to evade tax.

Thus, in such case proper officer may authorise in writing to any other officer to inspect :

:) Any place of business of the taxable person; or

:) Any places of business of the person engaged in the business of transporting goods; or

:) Any places of business of owner or the operator of warehouse or godown; or

:) Any other place.

Power of Inspection by the proper officer is a softer provision than search to enable them to access any place of business of taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of warehouse or godown by issuing Form GST INS-01 authorising any other officer subordinate to him (i.e. Joint commissioner) to conduct inspection as per Rule 139(1) of CGST Rules,2017.

Conclusion:

On Inspection under 67(1), assessee must make the following checks:

a) INS-01 issued by JOINT COMMISSIONER or above.

b)Reason To Believe for suppression of transaction, suppression of stock, wrong or excess claim of Input tax credit.

c)Indulgence of Taxable person in any activity in contravention of the provisions of  the Act.

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.

 

GST Registration Amendments vide 50th Council Meeting

With GST evasion crossing over and above 1 lakh crore in 2022-23, CBIC had initiated a two month long special drive to identify fake GST registrations. The GST policy wing highlighted that non-genuine registrations are being used to fraudulently pass on the input tax credit to unscrupulous recipients by issuing invoices without any underlying supply of goods or services.

And therefore, the Council has recommended the following amendments in CGST Rules, 2017 to strengthen the registration process and to effectively deal with the menace of fake and fraudulent registrations in GST which are as follows:

A) RULE 10A - Furnishing  of Bank Account Details

After a certificate of registration in FORM GST REG-06 has been made available on the common portal and a Goods and Services Tax Identification Number has been assigned, the registered person, except those who have been granted registration under rule 12 or, as the case may be rule 16, shall as soon as may be, but not later than forty five days from the date of grant of registration or the date on which the return required under section 39 is due to be furnished, whichever is earlier, furnish information with respect to details of bank account, or any other information, as may be required on the common portal in order to comply with any other provision.

 Amendment in rule 10A to provide that the details of bank account, in name and PAN of the registered person, to be required to be furnished within 30 days of grant of registration or before filing of statement of outwards supply under section 37 of CGST Act in FORM GSTR-1/ IFF, whichever is earlier. 

B) Rule 21A. Suspension of registration (corresponding section 29)

(2A) Where, a comparison of the returns furnished by a registered person under section-39 with

(a) the details of outward supplies furnished in Form GSTR-1; or
(b) the details of inward supplies derived based on the details of outward supplies furnished by his suppliers in their Form GSTR-1,

or such other analysis, as may be carried out on the recommendations of the Council, show that there are significant differences or anomalies indicating contravention of the provisions of the Act or the rules made thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and the said person shall be intimated in Form GST REG-31, electronically, on the common portal, or by sending a communication to his e-mail address provided at the time of registration or as amended from time to time, highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to why his registration shall not be cancelled.

 Amendment in rule 21A(2A) to provide for system-based suspension of the registration in respect of such registered persons who do not furnish the details of valid bank account under rule 10A with the time period prescribed under the said rule. 

Insertion of 3 proviso in rule 21A(4) to provide for automatic revocation of such system-based suspension upon compliance with provisions of rule 10A. 

C)RULE 59. Form and manner of furnishing details of outward supplies.- (corresponding sections 37 to 38)

(6) Notwithstanding anything contained in this rule, -

(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 , if he has not furnished the return in Form GSTR-3B [for the preceding month] ^old[for preceding two months];

(b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of  section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in Form GSTR-3B for preceding tax period;

(d) a registered person, to whom an intimation has been issued on the common portal under the provisions of sub-rule (1) of rule 88C in respect of a tax period, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in Form GSTR-1 or using the invoice furnishing facility for a subsequent tax period, unless he has either deposited the amount specified in the said intimation or has furnished a reply explaining the reasons for any amount remaining unpaid, as required under the provisions of sub-rule (2) of rule 88C.

Amendment in rule 59(6) to provide that where a registered person has not furnished details of a valid bank account under rule 10A, the said registered person may not be allowed to furnish the details of outward supplies in FORM GSTR-1 or using IFF. 

D) Amendment in rule 9 and rule 25 to do away with the requirement that the physical verification of business premises is to be conducted in the presence of the applicant and also to provide for physical verification in high risk cases even where Aadhaar has been authenticated.

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.

Taxability of GST on Stock Transfer of Goods

Stock transfers to a branch or consignee agent have been the norms of trade in both pre and post VAT regime and shall continue to be there in GST regime. Further. Stock Transfer can be both inter-State and intra-State. Various businesses contemplate options of supplying the goods to another dealer or opening up a branch in another State, sending the goods on stock transfer and then selling the same to its customers from that branch.

 Under Schedule I of the CGST Act, supply of goods or services or both between related persons or between distinct persons as specified in Section 25, when made in the course or furtherance of business, even if, without consideration, is subject to GST. Accordingly. Schedule I covers the transactions of stock transfer which is without consideration. The movement of goods or services from one State to another shall be considered as supply even though such transfer is to its own branch or to its own agent and consequently, same would be leviable to IGST. Further, the branch/consignment agent can avail the credit of IGST paid on such transfer and shall be entitled to adjust the against outward tax liability which will aid overall reduction of cost.

 

However, taxation of stock transfer is in effect only a pre-payment of tax on output which will primarily impact the working capital requirements. The quantum of impact will vary depending on stock turnaround time at warehouse, credit cycle to customer, quantum of stock transfer etc. Thus. working capital requirements of a supplier of goods or services or both shall increase in GST Regime. There is another reason for increase in working capital requirement of the supplier of goods due to abolition of C, E & H forms. Under GST regime, such supplier of goods who were making purchases against the strength of these forms will have to pay tax at applicable rate on all inward supplies made by them. It is not in dispute that credit for the same shall be available against outward tax liability, but funds will be blocked in the amount of tax till adjusted against output tax liability. In other words, firstly supplier of goods has to make payment of GST at full rate to its vendor on inward supplies of goods as benefit of concessional Central Statutory Forms is not available in GST regime. 

Further, such credit can be utilized by the supplier only when output tax liability will arise in future. Investment the amount of input lax till the credit of same can be utilized shall be an additional burden on the working capital of the supplier of goods. 

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.

Centre plans to make geotagging, biometric authentication mandatory to curb fake assessees.

In order to make the Goods & Services Tax (GST) system tougher for unscrupulous elements, but more helpful for genuine business, the government is examining two pronged strategy related with ‘place of business. While the first part of the strategy is related with converting the pilot geo tagging for place of business to mandatory for all new registration and latter for all, the second part is about recognizing co-working place as place of business for services sector. At the same time, effort to enhance the scope of biometric authentication to curb fake assessees. Talking to media on the sidelines of an event here to mark 6th anniversary of GST, Vivek Johri, Chairman of Central Board of Indirect Taxes & Customs (CBIC) said the tax authority is trying to see how the system can be tightened further to provide a clean system. Accordingly, tax authorities are looking at whether the registration verification needs to be strengthened further. There are two parts of this process: verification of the place of business and establishing the identity of the person.

Case Study on Place of Supply

Case

(A) is registered under GST in Agra ( Uttar Pradesh) as a car dealer and service centre. (B) is a customer located in Agra(U.P.) as unregistered person. For providing the service of repair maintenance of car CGST and SGST is charged on the invoice for labour as well as spare parts both. (C) is a Un registered customer having address of its office at Delhi and he sends his car at Agra(UP) for repair. Whether IGST or CGST/SGST would be charged for the service and repair work as well as for spare parts utilized in the said repair work. (D) is a registered person Manufacturer of Car located in Andhra Pradesh. In this scenario car purchaser located in Agra(UP) gets free service on behalf of the manufacturer under warranty period for which the company (A) issues its Invoice for repair in the name of the manufacturer of car located at Andhra Pradesh for which B2B invoice is raised charging IGST. In this situation which is the place of supply, whether IGST charged on B2B Invoice is proper or not?

FACTS OF THE CASE:

Place of supply for car repair maintenance service provided by Company registered in Agra to unregistered customers located in Agra/Delhi.

LAW APPLICABLE:

SECTION 12 of IGST Act defines POS of services as follows:

(2) The place of supply of services, except the services specified in sub-sections (3) to (14),''

(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.

INTERPRETATION:

Both supplier and recipient of service are located in India, therefore POS is to be determined as per Section 12 of IGST Act. Since service of repair and maintenance of car do not fall in any of the specified clauses, residuary clause i.e. 12(2) will apply.

CONCLUSION:

1. Service provided by A (registered in Agra) to B (unregistered person located in Agra).
As per section 12(2)(b) POS shall be the location of the B i.e. Agra [CGST & SGST will be charged] where the address on record exists; otherwise location of A i.e. Agra [CGST & SGST will be charged].

2. Service provided by A (registered in Agra) to C (unregistered person located in Delhi).
As per section 12(2)(b) POS shall be the location of the C i.e. Delhi [IGST will be charged] where the address on record exists; otherwise location of A i.e. Agra [CGST & SGST will be charged].

3. Company A (registered in Agra) provides free of cost service to customers on behalf of Company D (registered in Andhra Pradesh) and issues invoice to Company D.
As per section 12(2)(a) POS shall be the location of the D i.e. Andhra Pradesh [IGST will be charged].

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.

Transportation services provided by one GTA to another GTA.

CASE STUDY


Mr. A has a registered Transporter under GST who does billing in Reverse Charges Mechanism. He hires some vehicles from outside which are registered supplier in GST. when the supplier (outsiders) files his GSTR -1, the liability of RCM automatic Shown in GSTR 3B on recipient portal. In this case the online GSTR 3B portal not allowed to file the return without payment of RCM.
Will there be any liability to deposit the RCM on the hire charges if not, so please what is the process to file the GSTR 3B?

FACTS OF THE CASE:

Applicability of RCM on transportation services provided by one GTA to another GTA.

LAW APPLICABLE:

Serial number 22 of Notification No. 12/2017 exempts the following services;

Sl.No.	Chapter, Section, Heading, Group or Service Code (Tariff)	Description of Services	Rate (per cent.)	Condition
22	Heading 9966 or Heading 9973	Services by way of giving on hire (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (aa) to a local authority, an Electrically operated vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods. (c) motor vehicle for transport of students, faculty and staff, to a person providing services of transportation of students, faculty and staff to an Educational Institution providing services by way of pre-school education and education upto higher secondary school or equivalent.	Nil	Nil

NTERPRETATION:

The services provided by way of giving on hire to a goods transport agency, a means of transportation of goods would be exempt from GST as per serial number 22 of Notification No. 12/2017 CTR.

Since these services are specifically mentioned in the exemption notification, hence GST would not be applicable on these services. Accordingly, the question of RCM would not arise in this case.

The supplier should record these services under exempt supply while filing GST Returns, then it would not be reflected under RCM liabilty of the recipient.

CONCLUSION:

RCM would not be applicable as such services are exempt from GST as per serial no. 22 of Notification No. 12/2017- Central Tax (Rate)

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.