Month: September 2017

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In the scenario envisaged in previous question, the main branch is said to be entitled to ITC of the GST paid by the other branches. Thus, it is a revenue neutral situation. What are the valuation guidelines for such services

The second proviso to rule 28 of the CGST Rules, 2017
provides that where the recipient is eligible for full input tax credit,
the value declared in the invoice shall be deemed to be the open
market value of goods and services.

(FAQ 24: IT/ITES)

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What is the tax liability in a scenario where supplies are made from multiple locations (in different States) of the supplier to the recipient under a single contract

  1. Delivering services from various locations and integrated pricing for the contract as a whole is the norm in IT/ITES industry.
  2. Normally the contract or agreement with the recipient is entered into by one of the branches (let us say “Main Branch”).
  3. Therefore, in such cases of service delivery from multiple locations of the supplier to the recipient, the supply could be visualized as consisting of two distinct supplies.
  4. First supply- the different branches of the supplier located
    across different States are making the supply to the main branch
    which entered into a contact or an agreement with the recipient for
    the supply of such service.
  5. Second supply- main branch is making a supply to the customer. GST is to be levied accordingly. In such a  scenario, the main branch would get input tax credit of GST paid by the other branches on supplies made by them to the main branch.

(FAQ 23: IT/ITES)

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What would be the tax liability on replacement of parts (no consideration is charged from a customer) under a warranty and whether the supplier is required to reverse the input tax credit

  1. As parts are provided to the customer without a consideration under warranty, no GST is chargeable on such replacement.
  2. The value of supply made earlier includes the charges to be incurred during the warranty period.
  3. Therefore, the supplier who has undertaken the warranty replacement is not required to reverse the input tax credit on the parts/components replaced.

(FAQ 20: IT/ITES)

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What special provisions are attracted in GST with regard to associated enterprises

  1. An enterprise which participates, either directly or indirectly, through one or more intermediaries, in the management, or control or capital of the other enterprise is an associated enterprise.
  2. In the context of GST, associated enterprise is particularly relevant in the case of supply of services, where the supplier is located outside India.
  3. In such cases, the time of supply will be the earlier of date of entry in the books of account of the recipient of supply or the date of payment – thus, within ‘associated enterprises’, the levy under GST is attracted once such book entries are made even if no actual payment takes place or no invoice
    is issued.

(FAQ 20: IT/ITES)

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When would it be construed that I have made a supply of services involving temporary transfer or permitting the use or enjoyment of any intellectual property right

  1. Generally, the End User Licence Agreement (EULA) is the legal contract between a software application author or publisher and the user of that application governing the usage.
  2. The agreement is renewable and/or could be amended from time to time.
  3. To find out as to whether there is an element of supply involved when software is delivered to its customer, the terms and conditions of EULA are
    material.
  4. The contract for supply therefore assumes significance in this test to decide whether or not there has been ‘temporary transfer or permitting the use or enjoyment of any intellectual property right’.

( FAQ18: IT/ITES)

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I am a whole seller of rice dealing in both branded and un-branded rice. I purchase them locally (i.e. from within the State) and also from outside the State (inter-State purchase). In the last financial year my turnover was Rs 5.5 Crore. Today, I am not registered under VAT.The suppliers of basmati rice (branded) are saying that they will charge 5% IGST and I must get myself registered to avail the ITC. What do I do?

As rice put up in a unit container and bearing a registered brand name is taxable @ 5%, the suppliers of branded basmati rice located in other States would be charging IGST @ 5%, whose credit can be availed only when the recipient is registered under the CGST Act, 2017.Therefore, if you want to avail of input tax credit,  you must get yourself registered. That said, for making inter State purchases one is not mandatorily required to be registered.

(FAQ-9 (ii) :Food Processing)