Time and value of supply under GST Seminar

Time and value of supply under GST Seminar by GSTPAM ON 13 TH AND 14 TH MAY 2017 By Nikita R Badheka Adv & Notary -Mumbai

2 Material Relied on CGST Act IGST ACT Revised invoice rules N R Badheka Valuation draft rules FAQ by CBEC

Subjects Broadly covered 3 TIME of SUPPLY OF GOODS AND SERVICES VALUE OF TAXABLE SUPPLY TAX INVOICE, CREDIT & DEBIT NOTE ACCOUNTS & RECORDS N R Badheka

What is GST ? 4 Tax on supply of Goods and/or/both services Supplier of Goods and/or/both services Recipient of Goods and/or /both services Tax --State Tax –SGST Act - Central Tax – CGST Act -- Integrated Tax –IGST Act - Union Territory Tax--UGST Act All intra State Supplies –SGST +CGST All Inter State supplies –IGST N R Badheka

5 Relevant Important Definitions Sec 2(32) – Continuous Supply of Goods Sec 2(33) – Continuous supply of Services Sec 2(47) – Exempt Supply Sec 2(78) – Non-taxable Supply Sec 2(108) – Taxable Supply Sec 2(67) - Inward Supply Sec 2(83) – Outward Supply Sec 2(90) – Principal supply Sec 2(74) – Mixed Supply Sec 2[30}– Composite Supply Sec 2(105) – Supplier Sec 2(93) – Recipient N R Badheka

Time of supply of goods 6 Important to determine the date or point of time when liability to pay arises Supply of goods ---physical Supply of service –time of supply challenging Point of taxation had multiple issues Liability to pay---the month in which it should be included in the return N R Badheka

7 Time of supply of goods (Sec 12) DESCRIPTION OF EVENT Normal case – Thumb Rule; TIME OF SUPPLY 1. Date of Issue of Invoice by Supplier, OR Earlier of the dates-- 2. Last date by which the Invoice has to be issued under Sec 31(1) – Removal of goods or delivery of goods OR 3. The date on which supplier receives the payment of supply Meaning of Date of Receipt of Payment Date on which payment entered into books or the date on which payment credited to the bank account Reverse Charge Mechanism Supply-- Date of Receipt of Goods or Date of Payment of Goods earliest of ----or date following the last Date on which the Invoice N R Badheka should have been issued Contd…

Supply of Voucher 1. Supply Identifiable - Date of Issue of Voucher 8 2. Supply not Identifiable - Date of Redemption of Voucher In any other case Date of filing of periodical return or the date on which the tax is paid. Additional consideration like Date of Receipt of Additional Consideration by interest , late fee, penalty for supplier delayed payment N R Badheka

TIME OF SUPPLY OF SERVICES - SEC 13 9 DESCRIPTION OF EVENT Normal Case -Thumbrule TIME OF SUPPLY Earlier of the following: 1. Date of Issue of Invoice (if Invoice issued within 30 days of supply of services) 2. Date of Receipt of Payment or Date of Provision of Service (if Invoice not issued within 30 days) 3. The date on which recipient shows receipt of service in his books Liability under Reverse Charge 1. Date of payment entered into books of accounts of basis Recipient or payment debited in bank account 2. Date Immediately following 60 days from date of Issue of Invoice or any other documents In any other case N R Badheka Date of receipt of service in the books of accounts of the Recipient

10 TIME OF SUPPLY - CHANGE IN RATE OF TAX - SEC 14 DESCRIPTION OF EVENT TIME OF SUPPLY - Goods or Service supplied BEFORE change TOS - Earlier of Date of Receipt of Payment or Invoice Issued, and Payment received Date of Issue of Invoice after the change Invoice Issued prior to change but payment received after the change Payment received before change but Invoice issued after the change N R Badheka TOS - Date of Issue of Invoice TOS - Date of receipt of Payment

11 Goods or Service supplied AFTER change TOS - Date of receipt of Payment received after change but invoiced prior to change Invoice Issued and Payment received TOS-Date of receipt of Payment or Issue of Invoice, whichever is earlier before change Invoiced after the change but payment before the change TOS - Date of Issue of Invoice Proviso - If Credit in the Bank after four working days of Change - Date of receipt of payment to be date of credit in Bank Account N R Badheka

TAX INVOICE – CREDIT & DEBIT NOTE 12 Sec 31 to 34 - Read with Revised Invoice Rules Normal Ingredients of Tax Invoice required Specific mention of consecutive serial numbers in one or multiple series HSN Code of Goods or Accounting Code of Service In course of Inter-State supply – Place of Supply along with Name of State In case of Bill to / Ship To – both the addresses be given Case of Reverse Charge to be specified In case of Export of Goods or Service, specific endorsement “Supply meant for Export on payment of IGST or Supply meant for Export under Bond or Letter of Undertaking without payment of IGST” Name, Address and Country of Destination Number and Date of Application for removal of Goods for Export N R Badheka

13 TIME OF ISSUANCE OF INVOICE FOR SUPPLY OF TAXABLE GOODS If Supply requires movement -Time of Removal of Goods Or Delivery of Goods or making goods available to Recipient The Government empowered to notify the time and manner in which Tax Invoice should be issued by specified category of Goods or Supplies (Evidence for removal of goods, delivery of goods ) N R Badheka

14 TIME OF ISSUANCE OF INVOICE FOR SUPPLY OF TAXABLE SERVICES Before or After the provision of Service but within 30 days from the date of supply of service Government empowered to notify category of services in which Any other documents to be deemed to be Tax Invoice or Tax Invoice may not be issued. Time of Issue of Invoice for New Registration Within one month of date of issue of RC, RTP to issue revised Invoice against Invoice already raised for period between effective date of RC and date of Issue of RC---(The only event for Revised invoice) N R Badheka

15 EXCEPTION TO THE TAX INVOICE PROVISIONS If Invoice less than Rs. 200/-, may not issue Tax Invoice; Subject to Recipient not a Registered Person and does not require such Invoice Registered Person (RP) should issue consolidated Tax Invoice for such suppliers at close of each day in respect of all such supplies RP supplying exempted goods or service or both Or paying Composition Tax--To Issue Bill of Supply in terms of Rule 4 Bill of Supply to show Value of Supply of Goods or Service before considering discount or abatement N R Badheka

TREATMENT TO ADVANCE PAYMENT 16 On receipt of Advance Payment, Receipt Voucher to be issued in terms of Rule 5 Contents more or less same like Tax Invoice Except in place of Value of Goods to state amount of Advance taken If no supplies made and no Tax Invoice issued after receipt of Advance Payment, RP to issue Refund Voucher RECEIPT OF GOODS/Services FROM URP RP liable to pay Tax under Reverse Charge as Recipient to issue Invoice (self. Invoice) (small services or petty purchases from non taxable persons) Recipient RP should also issue Payment Voucher at the time of making payment to Supplier N R Badheka

Continuous Supply of Goods 17 Where successive Statement of Accounts or Payments involved Invoice before or at the time of each Statement / Payment received Continuous Supply of Services Date of Payment ascertainable from Contract Invoice on or before Due Date not ascertainable- Invoice before or at the time of receipt of Payment Invoice on or before Completion of Event – If Payment linked N R Badheka

18 CESSATION OF SERVICE CONTRACTD BEFORE COMPLETION Invoice at the time when supply ceases Invoice to the extent of supply before cessation Goods sent on approval- for sale or return Invoice – before or at the time of supply Or Six months from the date of Removal, whichever is earlier N R Badheka

19 SPECIFIC TIME LIMIT FOR ISSUE OF TAX INVOICE Supplier of Service – Insurer or Banking Company or Financial Institution including Non-Banking Financial Company The Period during which Invoice or any document in lieu thereof to be issued shall be 45 days The Government may notify Telecom Operator, Insurer, Banking Company or Financial Institution Making Taxable Supply of Service between Distinct Person N R Badheka

20 MANNER OF ISSUEING INVOICE Tax Invoice for Supply of Goods in Triplicate Original for Recipient, Duplicate for Transporter and Triplicate for Supplier Tax Invoice for Supply of Services in Duplicate Original for Recipient, Duplicate for Supplier Serial Number of Invoices issued during Tax Period to be furnished electronically through Common Portal in Form GSTR-1 N R Badheka

21 LAW ABOUT DEBIT NOTE & CREDIT NOTE After Issuance of Tax Invoice If Value or Tax found to be charged in excess Or Goods supplied are returned Or Goods or Services found deficient, Supplier to issue Credit Note as per Rule 6 N R Badheka

22 LAW ABOUT DEBIT NOTE & CREDIT NOTE Details of Credit Note to be shown in Return in the month of Issue or latest by September following the end of Financial Year or Date of furnishing Annual Return, whichever is earlier No Reduction in output Tax liability if the incidence of Tax & Interest is passed on to the other person Debit Note / Supplementary Invoice to be issued where Value or Tax charged found less (Price variation) Details of Debit Note to be declared in the Return and Tax liability to be adjusted N R Badheka

23 VALUE OF SUPPLY OF GOODS – SEC 15 R/W VALUATION RULES Levy of Tax on Value determined under Sec 15 Levy of Tax under RCM – Recipient to pay on Value of Goods / Services - Valuation Rule to apply to TDS and TCS N R Badheka

24 TRANSACTION VALUE – SEC 15(1) Basic Thumb rule –Transaction value of supply of goods or services or both. i. e Price actually paid or payable for Supply where Supplier and Recipient are not related And Price is the sole consideration for Supply N R Badheka

25 CONSIDERATION FOR SUPPLY OF GOODS & SERVICES – SEC 2(31) Inclusive Definition – includes Payment made or to be made – in money or otherwise – In respect of / In response to or For Inducement of Supply of Goods or Services Whether by Recipient or Any Other Person Excluding Subsidy by Government Incentive in Cash or Kind N R Badheka

26 CONSIDERATION FOR SUPPLY OF GOODS & SERVICES – SEC 2(31) Including Monetary Value of Any Act or Forbearance In respect of / In response to /For the Inducement of Supply of Goods and Services Whether by the Recipient or by Any Other Person Proviso – Deposit in respect of Supply to be considered only when Supplier applies such Deposit as Consideration N R Badheka

27 INCLUSION IN TRANSACTION VALUE Taxes, Duties, Fees and Charges levied under any law, other than SGST / UGST / GST (Compensation to States) Act, if charged separately by the Supplier Any amount that the Supplier is liable to pay in relation to such supply, Which has been incurred by the Recipient and Not included in the Price Example: Insurance, Transportation, Mould Development Charges, Free Supply of goods treatment N R Badheka

28 INCLUSION IN TRANSACTION VALUE (Contd. ) Incidental expenses, including Commission and Packing Charged by Supplier to the Recipient And any amount charged for anything done by the Supplier in respect of Supply of Goods or Services or both At the time of or before Delivery of Goods Specific job work done by the Supplier at the instance of the Recipient before Delivery N R Badheka

INCLUSION IN TRANSACTION VALUE (Contd. ) 29 Interest, Late Fee or Penalty for Delayed Payment to be included in the Consideration Subsidies directly linked to the Price excluding subsidies by the Government to be included Subsidy to be included in the Value of the Supplier who receives the Subsidy How to apply Subsidy Provision to RCM Difference between discounts and subsidy N R Badheka

EXCLUSION FROM VALUE OF SUPPLY – SEC 15(3) 30 Transaction Value shall not include the Discount given Before or at the time of Supply Recorded in the Invoice Discount after Supply to be allowed If established as per Agreement entered into before the Supply specifically linked to Invoice And, ITC is reversed by the Recipient of Supply N R Badheka

31 THE CASE OF GOODS RETURNED OR NON-SUPPLY – SEC 31 & 34 Value of Supply to be shown in the Tax Invoice The Reduction or Deduction on account of Short Supply, Non-Supply or Goods Returned only by Debit Note & Credit Note No provision for Revised Invoice-whether can be issued? Whether cancellation of invoice permitted? –rejection of goods or services -- N R Badheka

REFERENCE TO VALUATION RULES – SEC 15(4) & 15(5) 32 If Value of Supply of Goods cannot be determined as per Sec 15(1), then only refer to Valuation Rule The Government may notify Reference to Valuation Rule for specified supplies. Valuation Rules to be referred to where Consideration is not wholly in Money Supplier and Recipient are related person or distinct person Supply of Goods or Services without Consideration Supply of Goods made or received through Agent Value of Supply of Goods or Services based on Cost – 110% of Cost of Production or Acquisition or Provision of Service N R Badheka

CONCEPT OF OPEN MARKET VALUE 33 Where Supply of Goods or Services – not wholly in money Value of Supply shall be Open Market Value (OMV) of such Supply If OMV not available – Sum Total of Consideration in Money and any such further amount in Money as is equivalent to the consideration not in Money if such amount is known at the time of Supply (Refer to illustration-1– New phone supplied in exchange of old phone at Rs 20, 000/-, OMV of new phone Rs. 24, 000/- Illustration-2 – Laptop supplied at Rs. 40, 000/- with barter of Printer manufactured by Recipient. Value of Printer known Rs. 4000/- OMV of Laptop Rs. 44, 000/-) N R Badheka

CONCEPT OF RELATED PERSON – SEC 15 – EXPLANATION 34 Persons deem to be related persons if such persons are Officers or Directors of One another’s businesses Legally recognized Partners in Business Employer and Employee Any Person – directly or indirectly – owns, controls or holds 25% or more of outstanding Voting Stock or Shares of both of them One of them directly or indirectly controls others or Both are controlled by third person, or Together they control third person, or Members of the same family The terms person to include legal person The Persons associated as Sole Agent, Sole Distributor, Sole Concessionaire deem to be related N R Badheka

VALUATION RULE FOR SPECIFIC SUPPLIES 35 Notwithstanding anything with the Act or Rule, whether transaction value to be applied to specify supplies? Supply of Service in relation to Purchase or Sale of Foreign Currency including Money Changing Currency exchanged from or to Indian Rupee Difference in Buying Rate or Selling Rate and the RBI Reference Rate for the Currency multiplied by total unit of currency If RBI rate not available, 1% of the Gross Amount of Indian Rupee provided or received by the person changing the money If currency exchanged is not in Indian Rupee, value shall be 1% of lesser of the two currencies if converted in to Indian Rupee N R Badheka

SUPPLY OF FOREIGN CURRENCY, MONETY CHANGING 36 Annual Option 1% of Gross Amount of money exchanged for an amount of Rs. 1. 0 lac, minimum Rs. 250/ Rs. 100/- plus 0. 5% of gross currency for amount exceeding Rs. 1. 0 lacs up to Rs. 10 lac Service value for air ticket by travel agent- 5% of basic fare for domestic travel , 10% of basic fare for international travel N R Badheka

37 Supply of service valuation rules service in relation to LIC Gross premium, as reduced by amount allocated for investment or saving on behalf of customer -single premium annuity— 10% of single premium charged In all other cases 25% of premium charged for first year And 12. 5% for later years Exception-entire premium towards rick covered. -no tax? N R Badheka

38 Sr number Discription of services 1 Second hand goods , some alteration Difference between -modification-no itc on purchase selling price and purchase price 2 Value of token, voucher coupanredeemable against supply 3 Supply of service between branches NIL etc between related persons sch 1, entry 2 –branches, where no ITC claimed N R Badheka GST Valuation Value of goods or services redeemable

39 Concept of Pure agent – Cost incurred by supplier as pure agent of recipient to be excluded Pure agent is a person Who enters in to contractual agreement with recipient Do not hold title to goods Do not use goods for his interest Receives only actual amount incurred to procure services or goods N R Badheka

40 Explanation. - For the purposes of this Chapter, - (a) “open market value” of a supply of goods or services or both means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and price is the sole consideration, to obtain such supply at the same time when the supply being valued is made. * N R Badheka

(b) 41 “supply of goods or services or both of like kind and quality” means any other supply of goods or services or both made under similar circumstances that, in respect of the characteristics, quality, quantity, functional components, materials, and reputation of the goods or services or both first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both. N R Badheka

42 Accounts and Records High lights Accounts relating to each place at such place Electronic form permitted Owner of warehouse, godown, any place used for storage of goods and every transporter –whether RP or not , to maintain record of consigner and consignee and other relevant record Commissioner empowered to notify additional record Commissioner can grant Permission to maintain records in different N R Badheka manner

Accounts and Records 43 Audit by CA and Cost accountant on exceeding prescribed limit. Reconciliation with Income tax audit report mandatory Rp failing to account for goods/ services or both –proper Officer to determine amount of tax payable –as if they are supplied Accounts and records to be retained for 72 months after due date for filling appeal –ie for 6 years and 9 moths after the end of year If appeal/revision/proceeding pending- retain the books for one year after completion of all proceedings N R Badheka

44 Accounts and Records Normal provisions to be strictly followed Failure invites demand recovery proceedings u/s 73 and 74 determination of liability Goods found other than declared storage-presumption of goods supplied Account of each activity , each stock etc N R Badheka

45 GST ---No Play. . Hard work Additional cost , Additional Burden One Nation - One tax = Multiple issues Beyond One Persons Capacity Thank You N R Badheka

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