Project On GST
Project On GST
Project On GST
of
Supply for Goods and Services
under GST
Introduction
Under GST, three types of taxes can be charged in the invoice. SGST and CGST in case
of an intra-state transaction and IGST in case of an inter-state transaction. But deciding
whether a particular transaction is inter or intrastate is not an easy task.
Think about an online training where customers are sitting in different parts of the world.
Say in case, hotel services, where the receiver may have an office in another state and
may be visiting the hotel only temporarily, or where goods are sold on a train journey
passing through different states.
To help address some of these situations, the IGST act lays down certain rules which
define whether a transaction is inter or intrastate.
Time of supply means the point in time when goods/services are considered supplied’.
When the seller knows the ‘time’, it helps him identify due date for payment of taxes.
Place of supply is required for determining the right tax to be charged on the invoice,
whether IGST or CGST/SGST will apply.
Value of supply is important because GST is calculated on the value of the sale. If the
value is calculated incorrectly, then the amount of GST charged is also incorrect.
Time of Supply of Goods
Point of taxation means the point in time when goods have been deemed to be supplied or
services have been deemed to be provided. The point of taxation enables us to determine
the rate of tax, value, and due dates for payment of taxes.
Under GST the point of taxation, i.e., the liability to pay CGST / SGST, will arise at the
time of supply as determined for goods and services. There are separate provisions for
time of supply for goods and time of supply for services
(a) The date of issuing of invoice (or the last day by which invoice should have been
issued)
or
(b) The date of receipt of payment
-whichever is earlier
If the supplier receives an amount up to Rs. 1000 in excess of the invoice amount, the
time of supply for the extra amount shall be the date of issue of invoice (at the option of
the supplier).
For (a) and (b)- The supply shall be assumed to have been made to the extent it is covered
by the invoice or the payment (as the case may be).
Example:
(a) Date of invoice- 15th May 2018
(b) Date of receipt of payment- 10th July 2018
(c) Date when supplier recorded receipt in books- 11th July 2018
Reverse charge means the liability to pay tax is on the recipient of goods/services instead
of the supplier.
In case of reverse charge, the time of supply shall be the earliest of the following dates:
(a) the date of receipt of goods or
(b) the date of payment or
(c) the date immediately after 30 days from the date of issue of invoice by the supplier
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply
shall be the date of entry in the books of account of the recipient.
If for some reason time of supply could not be determined supply under (a), (b) or (c)
then it would be 18th May 2018 i.e., date of entry
Time of Supply of Services
Time of supply for vouchers
In case of supply of vouchers the time of supply is-
(a) The date of issue of voucher, if the supply can be identified at that point
or
(b) The date of redemption of voucher, in all other cases;
Example: PQR Ltd. Purchased for its employees 80 vouchers dated 16.10.2018 worth Rs.
500 each from RST Ltd., a readymade garment manufacturing company. RST Ltd. Issued
such vouchers on 18.10.2018. The vouchers can be encashed at retail showroom of RST
Ltd. at any time within 10 days from the date of its issue. The employees of PQR Ltd.
encashed these vouches on 24.10.2018.
In this case, the supply of goods, i.e. readymade garments is identifiable at the time of
issue of vouches. Hence the time of supply shall be the date of issue of vouchers by RST
Ltd., i.e. 18.10.2018.
In GST regime, the tax collection event will be earliest of the dates as given above. The
various events like issuing invoice/making payment in case of supply of goods /services
or completion of event-in case of supply of service triggering the tax levy, confirms that
the Government wants to ensure tax is collected at the earliest point of time.
The time of supply of services shall be the earlier of the following dates:
(a) If invoice is issued within the period prescribed
(i) the date of issuing invoice
or
(ii) the date of receipt of payment
-whichever is earlier
Note: Prescribed period for the purpose of clause (a) and (b) means before the provision
of service, or within 30 days after the provision of service, as per invoice rules (within 45
days in case of insurance or banking companies, or financial institutions).
If the supplier of taxable service receives an amount up to Rs. 1000 rupees in excess of
invoice amount, the time of supply for the extra amount shall be the date of issue of
invoice (at the option of the supplier).
For clauses (a) and (b)-
(i) The supply shall be assumed to have been made to the extent it is covered by the
invoice or the payment (as the case may be).
(ii) The date of receipt of payment shall be earlier of-
(a) the date on which he entered the payment in his books
or
(b) the date on which the payment is credited to his bank account
Example:
If it is not possible to determine the time of supply under (a), (b) or (c), the time of supply
shall be the date of entry in the books of account of the receiver of service.
If for some reason time of supply could not be determined supply under (a), (b) or (c)
then it would be 18th July 2018 i.e., date of entry in books
Time of supply for vouchers
In case of supply of vouchers, the time of supply is-
(a) the date of issue of voucher, if the supply can be identified at that point
or
(b) the date of redemption of voucher, in all other cases
Example:
Under GST, there are three levels of Tax, IGST, CGST & SGST and based on the ‘’place
of supply’’ so determined, the respective tax will be levied. IGST is levied where
transaction is inter-state, and CGST & SGST are levied where the transaction is intra-
state.
Example:
2. Where the goods are delivered to the The principal place of business of
recipient, or any person on the direction of such person
the third person by way of transfer of title
or otherwise, it shall be deemed that the
third person has received the goods
4. Where goods are assembled or installed at The place where the goods are
site assembled or installed
5. Where the goods are supplied on-board a The place where such goods are
conveyance like a vessel, aircraft, train or taken on board the conveyance
motor vehicle
These are the transactions where both the parties i.e the supplier as well as recipient of
service are in India.
General Rule
In general, the place of supply for services will be the location of the service recipient
(the recipient needs to be a registered person). In cases, where service is provided to an
unregistered person, the place of supply will be the:
For understanding Place of Supply for Services the following two concepts are very
important namely:
C where a supply is received at more than one the location of the establishment
establishment, whether the place of business or most directly concerned with the
fixed establishment receipt of the supply
A where a supply is made from a place of business the location of such place of
for which the registration has been obtained business
B where a supply is made from a place other than the location of such fixed
the place of business for which registration has establishment;
been obtained (a fixed establishment elsewhere)
C where a supply is made from more than one the location of the establishment
establishment, whether the place of business or most directly concerned with the
fixed establishment, provision of the supply
D in absence of such places, the location of the usual place of
residence of the supplier;
2. International Transactions
These are the transactions where either of the service recipient or the provider is outside
India. Transactions in which both the recipient as well as provider are outside India are
not covered here.
General Rule
The Place of Supply for services treated as international transactions shall be:
In case where the location of service recipient is not available, the place of supply
shall be location of the supplier.
Since the goods and service tax is realized on the value of goods and services at a
prescribed rate, hence it is important to determine the correct value of goods and services
GST is charged on the ‘transaction value’. Transaction value is the price actually paid(or
payable) for the supply of goods/services between un-related parties (i.e., price is the sole
consideration)
1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.
Example: The owner of a building is liable to pay Municipal Taxes or local taxes
to the local authority. If such taxes are paid by the tenant to the owner of the
building or is directly paid to the local authority, then such amount shall be added
while ascertaining the transaction value.
2. Any amount that the supplier is liable to pay which has been incurred by the
recipient and is not included in the price actually paid or payable
It made a supply of garments worth Rs. 500000 to X. As per the contract it was
decided that the designing for the garments would be arranged by X and provide to
Ram and Co. X spent an amount of Rs. 20000 in designing of these garments. It
was agreed that the cost of designing the garments shall be paid and borne by X
only for which Ram and Co. shall not make any deduction in the contract cost.
Ram and Co. prepared an invoice of Rs 500000 and X paid the amount. In normal
course GST shall be levied on the invoice price of Rs 500000 and there shall be a
loss of revenue to the Government. If X had not taken the liability to pay
designing charges, it would have been borne by Ram and Co., and the amount that
would have been charged to X was Rs. 520000. X, in both the situations has
actually paid Rs. 520000. In the first situation X has paid an amount of Rs. 500000
to Ram and Co. and Rs. 20000 as designing charges for the garments. In the
second situation the entire amount of Rs. 520000 was to be paid to Ram and Co.
Therefore for calculating the transaction value designing charges of Rs. 20000
shall be added to the invoice price of Rs 500000 and then GST shall be levied on
the transaction value of Rs 520000.
3. The value will include all incidental expenses in relation to sale such as packing,
commission etc.
Example: PQR Ltd. supplied goods to Ram and Co. under a contract for which the
payment shall be made in 30 days. It was also agreed in the contract for any delay
in payment, interest at the rate of 12% per annum shall be charged. GST law
clearly mentions that any amount charged for delayed payment shall always be the
part of consideration and it shall be included in the price of taxable supply for the
purpose of ascertaining transaction value.