Simplifying GST
In this fortnightly column, RAJEEV VARAIYA, partner at Varaiya & Shah LLP (chartered accountants) answers your queries on this knotty subject of Goods and Service Tax
TRADE Q. We are into manufacturing and supplying laboratory equipments business. We had sold certain goods in FY 2017-18 to a customer and paid GST thereon. The customer wants to reject part of the said goods as 'defective' in FY 2019-20. Since the period prescribed to issue credit note (which was September, 2018) has expired, the customer wants to sell the said defective goods to us. Can he do so?
A. Yes. He can sell the said goods to you by raising Tax Invoice charging GST. You will get Input Tax Credit (ITC) of such inward supply.
Q. We are engaged in the business of building and mounting body on the chassis of buses received from customers who remain owner of chassis. For building such body, we buy inter alia steel sheets, seats, glasses, FRP, air conditioner, paints, etc. on which we pay GST. On receiving chassis, we build body and mount the same on chassis. What is our GST liability?
A. In the facts of your case, your activity is treated as supply of services liable to 18% GST (HSN 998882).
Q. We are supplying certain goods to a customer. The same customer supplies some goods to us. We settle the mutual debts through book adjustments. Are both of us eligible for ITC on inward supply when we settle accounts by book entries and not by cash/bank payments?
A. The relevant provision of ITC says that ITC would be available subject to payment towards supply of goods along with tax thereon. The time limit of 180 days has been fixed for such payment. However West Bengal Advance Ruling Authority has allowed ITC in case of such book entries adjustment, considering the definition of ‘consideration’.
Q. We are registered under GST laws in Maharashtra State. We procure services of hotel accommodation in Gujarat. The hotel in Gujarat charges SGST and CGST of Gujarat. Can we claim ITC of such SGST and CGST while discharging GST in Maharashtra?
A. No. GST is a destination-based tax. Tax is payable where services are consumed. So, GST charged by hotel in Gujarat is eligible for ITC in Gujarat only. (Advance Ruling – Rajasthan)
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Q. Please explain GST implications of following: Interest on overdue payment and Cheque bounce charges
A. Both are subject to GST
Q. We are wholesale suppliers of chocolates. We propose to come out with a ‘Gold scheme’ under which we will gift 10 gram of gold coin to anyone buying a stipulated amount of chocolates. Can we claim ITC of GST paid on purchase of such gold coins?
A . The government has clarified that ITC will not be available considering Section 17(5)(4) of the CGST Act.
Q. We undertake Annual Maintenance Contracts (AMCS) of white goods such as air conditioners, washing machines etc. Contract is to service such goods to keep them in good conditions and replace faulty parts, if any. Our intention is to give service. Please explain GST implications and rate in this case.
A. Maharashtra Advance Ruling Authority has in an identical case, ruled that it is a service contract and a composite supply where single composite amount is charged. Thus, total GST would be 18% irrespective of rate of parts used.
Q. We are selling ready made shirts. During festival season, we are going to offer ‘Buy one, get one free’ scheme. Please explain GST implications.
A. The government has clarified that when a single price is charged for entire sale of two shirts, GST will apply on such price. And ITC would be available on entire inward supply.
Q. We are outdoor caterers; supplying food to inhouse canteens of customers. What is the rate of GST?
A.Till 30th September 2019, the GST rate would be 18% with ITC. With effect from 01st October 2019, GST rate would be 5% without ITC.
Write to Sachin (sachin@fpj.co.in) with a subject line ‘Simplifying GST’