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GST

Impact of GST on Education – All 6 Educational Services Simplified

The lawmakers have consciously laid down the GST on education in a manner that the taxation on educational services is either exempted or being taxed at a very low in order to boost the overall literacy rates and education levels of the country. The literacy rate in India as per the Government’s data is 76.32% in the year 2022. Although this is a huge improvement, we still have to work our way up to survive competition with China that has a staggering literacy rate of 96.8% in 2022. However, with the focus on educational services, there has also been a parallel increase in commercialization in the education sector.

An analysis of the GST on education will make the intention of the lawmakers very clear and the distinction between the exempted and taxable educational services has been keeping in mind both the boost to basic and higher education as well as taxation of commercialization of the sector. Moreover, apart from educational services, certain other services are also being provided by the educational institutions, and the tax implications on these services have also been elaborated in the law.

gst on education

GST on Education – Meaning of Educational Institutes

As per the GST law, the term “Educational Institution” means an institution providing services by way of:-

  • Pre-school education and education up to higher secondary school or equivalent;
  • Education as a part of the curriculum for obtaining a qualification recognized by any law for the time being in force;
  • Education as a part of an approved vocational education course.

As per Para 2(h) of Notification No. 12/2017-CT (Rate) the term “approved vocational education course” has been defined as:-

  • A course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training or State Council for Vocational Training offering courses designated trades notified under the Apprentices Act, 1961; or
  • A Modular Employable Skill Course, approved by the  National Council for Vocational Training, run by a person registered with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship.

Educational Services – Categories

For a better analysis of the GST on education, we must understand the categories of educational institutes or educational services that are being currently offered in our country:-

  • Pre-primary educational services
  • Primary educational services
  • Secondary educational services
  • Higher educational services
  • Specialized educational services
  • Other education and training services and educational support services.

GST on Education – Services provided by Educational Institutions

Services provided by educational institutions as defined above, to

  • its staff, faculty and students
  • by way of conduct of entrance examinations against consideration as entrance fees,

will be exempted from GST as per Entry No. 66 of Notification No. 12/2017 – CT.

GST on Education – Services provided to Educational Institutions

Services provided to the following categories of educational institutions – Pre-primary, primary, secondary or higher secondary schools –

  • Transportation of students, faculty and staff,
  • Catering services,
  • Security or cleaning or housekeeping services,
  • Admission related or examination services,

will be exempted from GST as per Entry No. 66 of Notification No. 12/2017 – CT.

GST on Education – Services provided by Indian Institutes of Management (IIM)

Educational services provided by Indian Institutes of Management (IIM) are either offering long duration courses or short duration executive development programs.

  • Long duration programs (i.e. one year or more) conferring degree/diploma as per the IIM Act, 2017 including one-year Post Graduate Program for Executives – Exempted from GST.
  • Short duration programs like executive development programs or need based specially designed programs (less than one year) which are not a qualification recognized by law – Taxable.

GST on services supplied by Centre and State Boards such as NBE

Central and State Boards such as National Board of Education (NBE) are treated as “educational institutions” for the limited purpose of providing services by way of conduct of examination including entrance examinations to the students. Therefore, GST will not be applicable on such supplies by Central and State Boards.

Boarding Schools – Composite and Mixed Supplies

When it comes to boarding schools, if the charges for education, lodging, and boarding are combined and cannot be separated, they are exempt from GST. However, when a boarding school offers dual qualifications, it’s considered as providing two distinct services since each qualification follows separate curriculum guidelines, resulting in separate GST assessments for each qualification.

GST on supply of food in Anganwadis and schools

A common question arises regarding the supply of food in schools under the Mid-Day Meals scheme funded by the government grants and/or corporate donations. As per Circular No. 149/05/2021, any catering service including mid-day meal provided to educational institutions – Schools and Pre-Schools will be exempt from tax irrespective of whether it was funded by government grants or through corporate donations.

Similary, an Anganwadi provides pre-school non-formal education and thus serving of food in anganwadis will be covered under the exemption.

GST on Private Coaching Centres

Since the curriculum of private coaching centres is not specific under any law and they do not provide any qualification under law, the GST will be applicable at 18% on such services.

GST on Libraries

The supply of service of lending of books by both public as well as private libraries will be exempted from GST.

Services supplied by Skill Development Programs and Corporate-cum-institutes

Any services provided by:-

  • National Skill Development Corporation (NSDC)
  • Sector Skill Council (SSC)
  • Assessment Agency (AA)
  • Assessments under Skill Development Initiative (SDI)
  • Training Providers under the Deen Dayal Upadhyay Grameen Kaushalya Yojna (DDUGKY)
  • Training partners like – Ambuja Cement Foundation, Hindustan Soft Education, etc.

will be exempted.

Moreover, any service provided under any training program to Central or State Government where 75% or more expenditure is borne by the government will be exempted.

GST on technical aids for education

Technical aids for education, rehabilitation, vocational training and employment of the blind such as Braille typewriters, braille watches, teaching and learning aids, games and other instruments and vocational aids specifically adapted for use of the blind. – GST @ 5% as per Schedule I of the Notification No. 1 CTR dated 28.06.2017.

GST on instruments

Instruments, apparatus and models designed for demonstration purposes in education or exhibitions, unsuitable for other uses. – GST @ 28% as per Schedule IV of the Notification No. 1 CTR dated 28.06.2017.

FAQs

Q1. What will be GST implications on supply of online educational periodicals to colleges?

A1. The supply of online educational periodicals to colleges will be exempted from GST.

Q2. What will be GST implications on services of yoga training programs?

A2. GST @ 18% will be applicable on services of yoga training programs.

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GST

Debit Note in GST – Sec 34 – Simplified Guide

Debit note in GST is a document that is issued by the supplier when the value of the invoice has been understated and the actual supply of goods and/or services are more than the value originally invoiced. Debit/credit notes are a crucial aspect of GST compliance, allowing for the rectification of errors or adjustments in transactions while maintaining transparency and adherence to regulatory requirements. We will now elaborate on the debit note meaning, circumstances of issuance, examples, entries in Tally and reporting in the GST returns.

Debit Note Meaning

A debit note is a document issued by the supplier to the recipient in case where the actual supply of the value of goods or services or both is more than the invoice previously raised by the supplier. It serves as a way to rectify errors or omissions made in the original invoice. The method of using it for recording such returns is the best way to keep a track of all adjustments. It also includes supplementary invoice.

debit note

Issuance of Debit Note u/s 34(3)

Debit notes are issued when one or more tax invoices have been issued for supply of any goods or services or both and

  • the taxable value in the original invoice is less than the actual value of such supply or,
  • the tax charged in the original invoice is less than the tax payable for such supply,

then the registered supplier shall issue one or more such notes to the recipient for adjustment of such supplies.

Reasons for issuance of debit note in GST

It is usually issued by the supplier in the following circumstances:-

  • Increase in the quantity of goods or services supplied,
  • Increase in the rates of the goods or services supplied,
  • Increase in the tax rates for the goods or services supplied.

Time limit for issuance of debit note u/s 34(4)

As per GST rules, a supplier should issue a debit note to the recipient within a specified time frame from the occurrence of the event necessitating the issuance of the note. This time frame is generally within the financial year or before filing the annual return for the relevant financial year, whichever is earlier.

Contents of a debit note

As per Rule 53(1A), a debit note should contain the following details for it to be a valid note:-

  • Details of the supplier – Name, address and GSTIN
  • Details of the recipient if registered – Name, address and GSTIN
  • Details of the recipient if unregistered – Name, address of delivery, name of State and its code
  • Nature of the document
  • A consecutive serial number and date of issue
  • Serial number of date of issue of the corresponding original tax invoice or bill of supply
  • Value of taxable supply of goods or services or both, rate of tax and amount to be debited or credited to the recipient
  • Signature or digital signature of the supplier or his authorized representative.

Conditions for validity of a debit note

A debit/credit note will be considered a valid document only if it is issued and reported within the time specified and the original invoice number is mentioned in the note.

Debit Note Example

ABC Ltd., a registered supplier has made the following sales to its customer XYZ Ltd. during the month of April, 2023:-

Invoice No. 10 dated 02.04.2023 – 20 jackets for an invoice value of Rs. 10,000, however, the actual supply was made of 22 jackets. Thus, ABC Ltd., the registered supplier will now raise a debit note on the recipient for the additional 2 jackets.

Impact on Tax liability

The impact on tax liability on such issuance will be as under:-

  • For the supplier: Issuing a debit note may result in an increase in taxable turnover and tax liability for the relevant tax period.
  • For the recipient: Receiving a debit note allows adjustments to input tax credit, potentially affecting the recipient’s tax liability.

How to generate a debit note in Tally Prime?

The supplier can issue a debit note in Tally Prime by following the steps explained below:-

  • Go to Vouchers
debit note tally
  • Select Debit Note voucher (Shortcut key Alt+F5)
  • Enter details of the recipient
  • Enter the linked ledger as the Sales Ledger
debit note tally prime 1
  • Enter the details of the additional goods
  • While entering the details of the additional goods, mention the original invoice details
debit note tally prime 2
  • Generate the voucher.

How to report debit note in the GST returns?

The debit note issued by the supplier must be reported by the supplier in his GSTR – 1 for the same month in Table 9B.

debit note gstr 1

The debit/credit notes issued to registered persons have to be reported in Table 9B (for registered).

debit note gstr 1 table 9b 1

The debit/credit notes issued to unregistered persons have to be reported in Table 9B (for unregistered).

debit note gstr1 table 9b 2

Important Circular – Circular No. 160/16/2021 – GST dated 20.09.2021

As per Circular No. 160/16/2021 – GST dated 20.09.2021, starting from 01.01.2021, for the purpose of Section 16(4), the relevant financial year for availing ITC on debit notes is determined based on the date of issuance of the note itself, not the date of issuance of the underlying invoice. These amendments provide a benefit to taxpayers, especially recipients, who can now avail themselves of ITC on GST charged inadequately or not charged at all by suppliers, even if the note is issued at a later date.

FAQs on Debit Note under GST

Q1. For how long do we need to maintain records of debit/credit notes?

A1. All the information and related records of a debit/credit note has to be maintained both physically and digitally for 72 months from the date of filing the annual returns.

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GST

Credit Note under GST – Sec 34 – Simplified

Credit note serve as a record of the adjustment to the buyer’s account and are often used in accounting to reconcile transactions and maintain accurate financial records. Before we finalize our books of accounts for the FY 2023-24, we must remember to take into account the adjustments to our accounts receivable or payable as failing to incorporate credit and debit notes, wherever necessary, can lead to discrepancies, affecting the financial statements, tax filings, and overall financial health. We will now elaborate on the credit note meaning, circumstances of issuance, examples, entries in Tally and reporting in the GST returns.

Credit Note Meaning

A credit note is a document issued by the supplier to the recipient in case where the actual supply of the value of goods or services or both is lesser than the invoice previously raised by the supplier. For instance, in case of sales return of goods on account of deficient supply, instead of cancelling the invoice and raising a fresh one, a credit note is issued to record this transaction. The method of using it for recording such returns is the best way to keep a track of all adjustments.

credit note

Issuance of Credit Note u/s 34(1)

Where the supplier has raised one or more invoices for supply of goods or services or both and

  • The taxable value in the tax invoice is in excess of the taxable value of such supply, or
  • The tax charged in the tax invoice is in excess of the tax chargeable for such supply, or
  • Goods are returned by the recipient, or
  • Goods or services or both supplied are found to be deficient,

then the registered supplier of such goods or services or both issues to the recipient credit note for adjustment of such supplies.

Reasons for issuance of credit note

A credit note is usually issued by the supplier in the following circumstances:-

  • Cases of sales return
  • Erroneously higher tax had been charged in the original invoice
  • Post-sale discount given to the buyer
  • The actual quantity supplied was less than the quantity mentioned in the original invoice.

Time limit for issuance u/s 34(2)

A registered supplier can issue a credit note in relation to a supply of goods or services or both in the return for the month during which such credit has been issued but not later than A registered supplier can issue this in relation to a supply of goods or services or both in the return for the month during which such credit has been issued but not later than 30th September of the year following the end of the financial year.

Contents of a credit note

As per Rule 53(1A), a credit note should contain the following details for it to be a valid document:-

  • Details of the supplier – Name, address and GSTIN
  • Details of the recipient if registered – Name, address and GSTIN
  • Details of the recipient if unregistered – Name, address of delivery, name of State and its code
  • Nature of the document
  • A consecutive serial number and date of issue
  • Serial number of date of issue of the corresponding original tax invoice or bill of supply
  • Value of taxable supply of goods or services or both, rate of tax and amount to be credited
  • Signature or digital signature of the supplier or his authorized representative.

Conditions for validity of a credit note

A credit note will be considered a valid document only if it is issued and reported within the time specified and the original invoice number is mentioned in the note.

Credit Note Example

ABC Ltd., a registered supplier has made the following sales to its customer XYZ Ltd. during the month of April, 2023:-

Invoice No. 10 dated 02.04.2023 – 20 jackets for an invoice value of Rs. 10,000,

Invoice No. 15 dated 03.04.2023 – 10 shirts for an invoice value of Rs. 5,000,

Invoice No. 20 dated 05.04.2023 – 10 trousers for an invoice value of Rs. 7,000.

However, XYZ Ltd. has returned 5 jackets, 5 shirts and 2 trousers to ABC Ltd. for quality reasons.

Q1. How will the supplier record this sales return?

A1. The supplier, ABC Ltd., will issue a credit note for the returned goods and report the same in GSTR – 1 for the month of April, 2023.

Q2. Can the supplier issue a consolidated credit note?

A2. Yes, a consolidated credit note can be issued in respect of multiple invoices issued in a financial year.

How to generate a credit note in Tally Prime?

The supplier can issue a credit note in Tally Prime by following the steps explained below:-

  • Go to Vouchers
credit note tally prime 1
  • Select Credit Note voucher (Shortcut key Alt+F6)
  • Enter details of the recipient
  • Enter the linked ledger as the Sales Ledger
credit note tally prime 2
  • Enter the details of the goods returned
  • While entering the details of the returned goods, mention the original invoice details
credit note tally prime 3
  • Generate the voucher.

How to report credit note in the GST returns?

The credit note issued by the supplier must be reported by the supplier in his GSTR – 1 for the same month in Table 9B.

credit note gstr1 table 9b

If issued to registered persons, it has to be reported in Table 9B (for registered).

credit note gstr1 table 9b 1

If issued to unregistered persons, it hasto be reported in Table 9B (for unregistered).

credit note gstr1 9b 2

Circular No. 72/46/2018 – Clarification on procedure in respect of return of time expired drugs or medicines

In the pharmaceutical sector, the common practice is that drugs or medicines are sold by the manufacturers to the wholesalers, from wholesalers to the retailers and from the retailers to the end customers. However, since the shelf life of the medicines is usually a few months, the drugs often get expired and have to be returned back to the original manufacturer in the supply chain.

As per the Circular No. 72/46/2018 dated 26.10.2018, it has been clarified that the wholesaler/retailer has the following 2 options to return back the time expired goods:-

  • Return of the time expired goods to be treated as a fresh supply

The registered person returning the time expired goods may, at his option, return the goods by treating it as a fresh supply and thereby raising an invoice for the same.

  • Return of the time expired goods by issuing a credit note

The registered person returning the time expired goods may, at his option, return the goods by issuing a credit note within the time limit as per Section 34(2).

FAQs

Q1. For how long do we need to maintain records of credit notes?

A1. All the information and related records of a credit note has to be maintained both physically and digitally for 72 months from the date of filing the annual returns.

Q2. Can a credit note be issued by the recipient?

A2. No, it can be issued by a registered supplier only. It is a unidirectional flow from the supplier.

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GST

GST Place of Supply – Service – Sec 13 – Made Easy

Section 13 shall be applicable for determination for GST place of supply of service when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India. For any service provider, as crucial as it is to compute the taxes accurately and discharge the tax liabilities on time, it is of equal importance to ascertain whether the tax has to be paid as IGST or CGST and SGST/UTGST which is determined by the sections governing the Place of Supply of services under GST.

Section 12 v/s Section 13 – Place of supply of services under GST

Place of supply provisions in the GST law have been laid down in two distinct categories that are governed by the two distinct sections – Section 12 and 13. Section 12 of the IGST Act, 2017 governs the place of supply of services under GST where the location of the supplier as well as the recipient in within India.

However, Section 13 shall be applicable for determination for GST place of supply of service when then location of the recipient of service or the location of the supplier of service is outside India i.e. either the supplier or the recipient of service is located outside India. The provisions of Section 13 determine the import and export of services in various types of supply of services.

GST place of supply

For GST place of supply of service – Section 13

The detailed analysis of the section with examples is as under:-

General Provisions – Section 13(2)

Transaction – For any case, where the service is not covered from Section 13(3) to 13(13)

(a) If the location of the recipient of service is available in the ordinary course of business

For GST place of supply of service – Location of the recipient of service

(b) If the location of the recipient of service is not available in the ordinary course of business

For GST place of supply of service – Location of the supplier of service.

Performance Based Services – Section 13(3)

Transaction 1 – Services supplied in respect of goods, which are required to be made physically available by the recipient of services to the supplier of services, or to a person acting on behalf of the supplier of services in order to provide the services.

For GST place of supply of service – Location where the services are actually performed.

Example – M/s XYZ Ltd. from New Delhi has been engaged to provide testing services to the spare parts of cars. XYZ will have to perform the testing work in the car factory located in Ludhiana. Here, for GST place of supply of service will be Ludhiana i.e. the location where the services are actually performed.

Transaction 2 – Services supplied in respect of goods, where the services are provided from a remote location by way of electronic means.

For GST place of supply of service – Location where the goods are situated at the time of supply of services.

Example – M/s XYZ Ltd. from New Delhi has repaired laptops for M/s ABC Ltd. of Mumbai remotely by using Team Viewer. Here, the place of supply of services will be Mumbai, i.e., where the goods are situated at the time of supply of services.

Transaction 3 – Services supplied in respect of goods which are temporarily imported into India for repairs or treatment or process and are exported after such repairs or treatment or process without being put to any use in India, other than that which is required for such repairs or treatment or process.

For GST place of supply of service – Provisions of Section 13(3) will not be applicable and the place of supply will be determined as per Section 13(2).

Example – M/s ABC Ltd. has been engaged for providing services of cutting and polishing on unpolished diamonds which will be temporarily imported into India from Hong Kong and then exported back to Hong Kong once the process is done without the diamonds being put to any use in India. Here, for GST place of supply of service will be Hong Kong as per the provisions of Section 13(2).

Transaction 4 – Services supplied to an individual, represented either as the recipient of services or a person acting on behalf of the recipient, which require the physical presence of the recipient or the person acting on his behalf, with the supplier for the supply of services.

For GST place of supply of service – Location where the services are actually performed.

However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.

Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 7 of the IGST Rules, 2017will be applicable.

Services related to immovable property – Section 13(4)

Transaction – Services supplied directly in relation to an immovable property, including services supplied in regard by experts and estate agents, supply of accommodation by way hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use immovable property, services for carrying out or co-ordination of construction work, including that of architects or interior decorators.

For GST place of supply of service – Place where the immovable property is located or is intended to be located.

Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka. Here, for GST place of supply of service will be Sri Lanka i.e. the place where the immovable property is located or is intended to be located.

However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable. Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 8 of the IGST Rules, 2017 will be applicable.

Services relating to events – Section 13(5)

Transaction – Services supplied by way of admission to, or organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition or similar events, and of services ancillary to such admission or organization.

GST Place of supply

For GST place of supply of service – Place where the event is actually held.

Example – A talent hunt show in USA is conducting auditions in India for which it has engaged a talent agency from Mumbai for auditions in Mumbai and New Delhi. Here, the place of supply of service under GST will be Mumbai and New Delhi i.e. the place where the event is actually held.

However, where the services are provided in more than one location including a location in the taxable territory, then the provisions of Section 13(6) will be applicable.

Further, where the services are provided in more than State or Union Territory, then the provisions of Section 13(7) read with Rule 9 of the IGST Rules, 2017 will be applicable.

Services provided at more than one location – Section 13(6)

Transaction – Where any performance based services u/s 13(3), services related to immovable property u/s 13(4), or services relating to events u/s Section 13(5), is supplied at more than one location, including a location in the taxable territory.

For GST place of supply of service – Location in the taxable territory.

Example – Mr. Shiva from Jaipur has been engaged by Mr. Khan from Singapore for providing architecture services for his property in Sri Lanka and in Varanasi for which he has charged a consolidated amount as his fees. Here, the place of supply of service under GST will be Varanasi i.e. the location in the taxable territory.

Services provided in more than one State or Union Territory – Section 13(7)

This section is applicable when any performance based services u/s 13(3), services related to immovable property u/s 13(4), or services relating to events u/s Section 13(5), is supplied at more than one State or Union territory.

(a) Value of such services separately collected or determined in terms of the contract or agreement entered into in this regard

For GST place of supply of service – Location as per the proportion of services as per the contract.

(b) In absence of such contract or agreement for Performance Based Services u/s 13(3), Services related to immovable property u/s 13(4) or Services relating to events u/s Section 13(5)

For GST place of supply of service – As per Rule 7 of IGST Rules, 2017, Rule 8 of IGST Rules, 2017 or Rule 9 of IGST Rules, 2017 respectively.

Specified Services – Section 13(8)

This section covers the services supplied by banks, NBFCs and intermediaries.

Here, for GST place of supply of service is the location of the supplier of services. The services included in this section are as under:-

  • Services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders.

Explanation:-

  • “Account” means an account bearing interest to the depositor and includes a non-resident external account and a non-resident ordinary account.
  • “Banking company” shall have the same meaning as assigned to it under Section 45A(a) of the Reserve Bank of India Act, 1934.
  • “Financial Institution” shall have the same meaning as assigned to it in Section 45-I(c) of the Reserve Bank of India Act, 1934.
  • “Non-banking financial company” means a financial institution which is a company, a non-banking financial institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending in any manner, or such other non-banking institution or class of such institutions, as the Reserve Bank of India may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.
  • Intermediary services – Intermediary means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
  • Services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, upto a period of one month.

Services of transportation of goods, other than by way of mail or courier – Section 13(9)

Transaction – Services of transportation of goods, other than by way of mail or courier.

Place of supply of service under GST – Place of destination of such goods.

Section 13(9) of the IGST Act, 2017 has been omitted vide Section 162 of the Finance Act, 2023 which will come into effect from 01.10.2023. After this amendment, for GST place of supply of service of transportation of goods will be as per the provisions in the default section i.e. Section 13(2) of the IGST Act, 2017.

Passenger Transportation Services – Section 13(10)

For GST place of supply of service is the place where the passenger embarks on the conveyance for a continuous journey.

Example – Mr. A is travelling by Sunday Superfast Express from Kota to New Delhi covering 2 states. Here, the place of supply of services under GST is Kota i.e. the place where the passenger embarks on the conveyance for a continuous journey.

Services provided on board – Section 13(11)

Transaction – Services provided on board a conveyance during the course of a passenger transport operation, including services intended to be wholly or substantially consumed while on board.

For GST place of supply of service – First scheduled point of departure of that conveyance for the journey.

Example – M/s Neon Enterprises is providing services on Sunday Superfast Express from Kota to New Delhi covering 2 states. Here, the place of supply of services under GST is Kota i.e. the first scheduled point of departure of that conveyance for the journey.

OIDAR Services – Section 13(12)

Transaction – Supply of online information and database access or retrieval services (OIDAR services).

For GST place of supply of service – Location of the recipient of services.

To know more, read OIDAR Services.

Power of Government to notify – Section 13(13)

In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application of rules, the Government shall have the power to notify any description of services or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service.

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GST

OIDAR Services – Place of Supply – Sec 13(12) – Simplified

OIDAR Services is a commonly used acronym for ‘online information and database access or retrieval services’. The services that are being provided by service providers like Netflix, Youtube, amongst others are being consumed by more and more consumers YOY. Their subscriber base has grown by leaps and bounds owing to the affordable access to internet and phones. In order to include these services under the purview of GST, the term ‘OIDAR Services’ has been included that is a comprehensive term for all such services.

OIDAR Services – Meaning

OIDAR Services have been defined u/s 2(17) of the IGST Act, 2017 as services whose delivery is mediated by information technology over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention and impossible to ensure in the absence of information technology and includes electronic services such as –

  • Advertising on the internet;
  • Providing cloud services;
  • Provision of e-books, movie, music, software and other intangibles through telecommunication networks or internet;
  • Providing data or information, retrievable or otherwise, to any person in electronic form through a computer network;
  • Online supplies of digital content (movies, television shows, music and the like);
  • Digital data storage;
  • Online gaming.
OIDAR Services

OIDAR Services – Indicative List

An indicative list of OIDAR services is as under:-

  • Website supply, web-hosting, distance maintenance of programmes and equipment;
  • Supply of software and updating thereof;
  • Supply of images, text and information and making available of databases;
  • Supply of music, films and games, including games of chance and gambling games, and of political, cultural, artistic, sporting and entertainment broadcasts and events;
  • Supply of distance teaching.

OIDAR Services – Taxability

Under GST, the lawmakers intend to tax all OIDAR services provided from within or outside India for business or for non-business purposes. This includes services provided by the government, charitable entities or any other entity.

If an online service provider does not have an office in India, they must appoint an agent to handle tax payments. Additionally, if a non-taxable online recipient receives online services from a non-taxable territory, the supplier in that territory must pay the pay according to Section 14 of the IGST Act, 2017 as discussed below.

OIDAR Services – Place of Supply – Section 13(12)

As per Section 13(12), the place of supply of online information and database access or retrieval services shall be the location of the recipient of services.

Recipient shall be deemed to be in India if any 2 non-contradictory conditions of these 7 conditions are fulfilled:-

  • The location of address presented by the recipient of services through internet is in the taxable territory;
  • The credit card or debit card or store value card or charge card or smart card or any other card by which the recipient settles payment has been issued in the taxable territory;
  • The billing address of the recipient of services is in the taxable territory;
  • The internet protocol address of the device used by the recipient of services is in the taxable territory;
  • The bank of the recipient of services in which the account used for the payment is maintained is in the taxable territory;
  • The country code of the subscriber identity module card used by the recipient of services is of taxable territory;
  • The location of the fixed land line through which the service is received by the recipient is in the taxable territory.

OIDAR Services – Rate of GST

The IGST rate for the sale of digital services in India is 18%, which applies to both OIDAR service providers located in India and outside India.

There is an exception for the online sale of e-books. This service is classified under HSN code 9984 (Telecommunications, broadcasting and information supply services) of the GST Tariff and is subject to a reduced rate of 5%.

OIDAR Services – Special provision for payment of tax by supplier of OIDAR services – Section 14

  • Applicability – This section is applicable in case of supply of online information and database access or retrieval services by any person located in a non-taxable territory and received by a non-taxable online recipient.
  • A non-taxable online recipient means any Government, local authority, governmental authority, an individual or any other person not registered and receiving online information and database access or retrieval services in relation to any purpose other than commerce, industry or any other business or profession, located in taxable territory.
  • In case of OIDAR services, the supplier of services liable to pay IGST. If an intermediary located outside India arranges or facilitates supply of such service to a non-taxable online recipient in India, the intermediary would be deemed to be the supplier of the said service, except when the intermediary satisfies the following conditions namely:-
    • The invoice or customer’s bill or receipt issued or made available by such intermediary taking part in the supply clearly identifies the service in question and its supplier in non-taxable territory;
    • The intermediary involved in the supply does not authorize the charge to the customer or take part in its charge. This means that the intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services;
    • The intermediary involved in the supply does not authorize delivery; and
    • The general terms and conditions of the supply are not set by the intermediary involved in the supply but by the supplier of services.
  • Registration scheme in respect of OIDAR Services –

As per Section 14(3), the supplier of OIDAR Services referred shall, for payment of integrated tax, take a single registration under the Simplified Registration Scheme to be notified by the Government.

Any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay integrated tax on behalf of the supplier.

If such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.

FAQs on OIDAR Services

Q1. Is GST registration mandatory for OIDAR?

A1. Yes, GST registration mandatory for OIDAR, irrespective of their place of establishment.

Q2. Who can become the authorized signatory for OIDAR?

A2. For anyone to become an authorized signatory in GST, they must have a valid PAN card. They have to be authorized by the OIDAR service provider to act on their behalf in all GST related matters, including registration, filing of returns and making payments.

Categories
GST

Place of Supply of Services under GST – Sec 12 – Complete Analysis

For any service provider, the sections governing the Place of Supply of services under GST are as crucial as it is to compute the taxes accurately and discharge the tax liabilities on time. It is of equal importance to ascertain whether the tax has to be paid as IGST or CGST and SGST/UTGST.

Separate Rules for Place of Supply in GST for – Goods and Services

Goods are usually tangible and thus there is no difficulty in ascertaining the place of supply in GST, on the other hand, services are intangibles and the place of supply of services under GST depends on the manner of delivery, billing address, etc. Considering the difficulties in determining the actual place of supply of services, the various elements involved in a service transaction can be used for determining the place of consumption or place of supply of such services. The following elements give more exact results than others for determining the place of supply of services under GST :-

      • Location of service supplier

      • Location of service recipient

      • Place where the activity takes place or Place of performance

      • Place where the service is consumed

      • Place/person to which/whom actual benefit flows

    Thus, the place of supply of goods in GST is governed by Section 10 and 11 and the place of supply of services under GST are governed separately by Section 12 and 13.

    Separate Rules for B2B and B2C transactions

    Before we analyze the relevant sections of place of supply in GST, we must understand that there are separate rules for place of supply for B2B and B2C transactions.

    In B2B transactions, the recipient being a registered person avails ITC for paying his taxes and no real revenue accrues to the Government. Therefore, in B2B transactions, the place of supply in GST is usually the location of the recipient.

    However, in B2C transactions, the supply is made to an unregistered person who consumes the same and cannot avail ITC, therefore, the taxes paid actually reach the government.

    Definitions – Location of Supplier of Service and Location of Recipient of Service

    Section 2(15) of the IGST Act, 2017 defines the term location of supplier of service in different circumstances. The definition is explained as under:-

      Situation Location of Supplier of Service
    a Where supply is made from a place of business for which registration has been obtained Location of such place of business
    b Where supply is made from a fixed establishment located elsewhere Location of the fixed    place
    c Where supply is made from more than one establishment, whether place of business or a fixed establishment Location of the place most directly concerned with the provision of supply
    d Absence of any such place Location of the usual place of residence of the supplier

    Section 2(14) of the IGST Act, 2017 defines the term location of recipient of service in different circumstances. The definition is explained as under:-

      Situation Location of Supplier of Service
    a Where supply is received at a place of business for which registration has been obtained Location of such place of business
    b Where supply received at a fixed establishment located elsewhere Location of such fixed place
    c Where supply is received at more than one establishment, whether place of business or a fixed establishment Location of the place most directly concerned with the receipt of supply
    d Absence of any such place Location of the usual place of residence of the recipient

    Place of Supply of Services under GST – Section 12

    As per Section 12 of the IGST Act, 2017 governs the place of supply of services under GST where the location of the supplier as well as the recipient in within India. The detailed analysis of the section with examples is as under:-

    General Provision – Section 12(2)

      Recipient Place of Supply of Services under GST
    a Registered Person Location of the recipient
    b Unregistered person but the location of the recipient is available Location of the recipient
    c Unregistered person and the location of the recipient is also not available Location of the supplier

    Illustrations

      Situation   Explanation
    a Ms. Hina from Bangalore provided some professional services to Hitech Engineers from Chandigarh which is registered under GST.   Chandigarh – Since the recipient is registered under GST, the Place of Supply of Services under GST will be the location of the recipient.
    b M/s Ravi Cleaners from Kanpur provided cleaning services to Mr. Rakesh at his office premises at Jhansi for which his Jhansi address was available on record with M/s Ravi Cleaners.   Jhansi – Even though the recipient is an unregistered person, since his location is available on record with the supplier, the Place of Supply of Services under GST will be the location of the recipient.
    c Mr. Ram from Ludhiana provides services to all the walk-in clients but does not maintain a record of their names and addresses.   Ludhiana – Since the recipient is an unregistered person and the address of the recipient is also not available on record, the Place of Supply of Services under GST will be the location of the supplier.

    Services related to immovable property – Section 12(3)

      Services Place of Supply of Services under GST
      Immovable Property – Located In India  
    a Directly in relation to an immovable property including services of interior decoration, architects, surveyors, engineers Location where the im-movable property or boat or vessel, is located or is intended to be located.
    b By way of lodging accommodation by a hotel, inn, club, guest house by whatever name called including a house boat or any other vessel
    c By way of accommodation in any immovable property for organizing any marriage function, social, cultural, religious or business function, including services provided in relation to such function at such property
    d Any ancillary services to (a), (b) and (c)
      Immovable Property – Located outside India  
    a If the location of the recipient and supplier is in India but the immovable property is located outside India Location of the recipient

    Personalized Services – Section 12(4)

    Transaction – This section pertains to restaurant and catering services, personal grooming, fitness, beauty treatment, health services including cosmetic and plastic surgery.

    Place of Supply of Services under GST – Location where the services are actually performed.

    Explanation – This section covers either individual related services like beauty treatment or other services like restaurant and catering services that are covered under the scope of blocked credit under GST. Thus, in these cases there is no concept of B2B transactions and the Place of Supply of Services under GST is the location where the services are actually performed.

    Example – Mr. Paresh lives in New Delhi and is a member of a gym in Gurgaon. Here, the place of supply of services under GST is Gurgaon i.e. the location where the services are actually performed.

    Training and Performance Appraisal Services – Section 12(5)

      Recipient Place of
    Supply
    of Service
    under GST
    a Any Registered Person Location of
    the recipient
    b Any Unregistered Person Location where
    the services
    are actually performed

    Example – M/s ABC Solutions is providing GST and Tally training classes to the employees of M/s Ind Taxcorp from New Delhi as per contract with M/s Ind Taxcorp and also to people who are joining their classes at their centre at Noida.

    Place of Supply of Services under GST – In the first case, since the recipient is a registered person i.e. M/s Ind Taxcorp, the place of supply will be the location of the recipient i.e. New Delhi. In the second case, where the recipients are unregistered, the place of supply will be the location where the services are actually performed i.e. Noida.

    Place of supply of services under GST

    Event Admission Services – Section 12(6)

    Transaction – Services provided by way of admission to a cultural, artistic, sporting, entertainment event or amusement park or any other place or services.

    Place of Supply of Services under GST – Place where the event is actually held or where the park or such other place is located.

    Example – Mr. Rajiv from Ranchi has attended a cultural event in Udaipur for which he had paid the organizers. Here, the place of supply of services under GST will be Udaipur i.e. the place where the event is actually held.

    Event Linked Services – Section 12(7)

    Transaction – Services provided by way of organization of a cultural, artistic, sporting, entertainment event including conferences, fair, exhibition, celebration or similar services or services ancillary to the organization of the event or assigning of sponsorship to such events.

    Place of supply of services event linked

      Recipient Place of Supply of Services under GST
    a Registered Person Location of recipient
    b Unregistered Person and the event is held in India Location where the event is actually held
    c Unregistered Person but the event is held outside India Location of recipient

    Rule 5 of the IGST Rules, 2017 has been inserted vide Notification No. 4/2018-IT w.e.f. 01.01.2019 to cover the scenario where the event linked services are supplied in different states or union territories. This rule is applicable when all the following conditions are fulfilled:-

        • The recipient is an unregistered person

        • The event is held in more than one State or Union Territory

        • A consolidated amount is charged for supply of the service

      In the absence of any contract or agreement between the supplier of service and recipient of services for separately collecting or determining the value of the services in each such State or Union territory, as the case maybe, it shall be determined by application of the generally accepted accounting principles.

      Example – An event management company E has to organize some promotional events in States S1 and S2 for a recipient R. 3 events are to be organized in S1 and 2 in S2. They charge a consolidated amount of Rs.10,00,000 from R. The place of supply of this service is in both the States S1 and S2. Say the proportion arrived at by the application of generally accepted accounting principles is 3:2. The service shall be deemed to have been provided in the ratio 3:2 in S1 and S2 respectively. The value of services provided will thus be apportioned as Rs. 6,00,000/- in S1 and Rs. 4,00,000/- in S2 .

      Services provided by way of transportation of goods – Section 12(8)

      Transaction – Services provided by way of transportation of goods including by way of mail or courier.

        Recipient Place of Supply of Services under GST
      a Registered Person Location of recipient
      b Unregistered Person and the location is in India Location at which such goods are handed over for their transportation
      c Transportation of the goods is to a place outside India Location of destination of such goods i.e. outside India

      Passenger Transportation Services – Section 12(9)

      Transaction – Services provided by way of transportation of passengers.

        Recipient Place of
      Supply of
      Services
      under GST
      a Registered Person Location of
      such person
      b Unregistered Person Location where
      the passenger embarks on
      the conveyance
      for a
      continuous journey

      Services on board a conveyance – Section 12(10)

      Transaction – Services on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle.

      Place of supply of services under GST – Location of the first scheduled point of departure of that conveyance for the journey.

      Example – Mr. A boarded a train from Mumbai to go to his hometown in Chhatisgarh. He paid in Mumbai for watching a movie on board. Here, the place of supply of services under GST will be Mumbai, i.e. the location of the first scheduled point of departure of that conveyance for the journey.

      Telecommunication Services – Section 12(11)

      As per Section 2(110) of the CGST Act, 2017, telecommunication service means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services), which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means.

      Telecommunication service including data transfer, broadcasting, cable and direct to home television services to any person as under:-

      Transaction 1 – In case of services by way of fixed telecommunication line, leased circuits, internet leased circuits, cable or dish antenna

      Place of supply of services under GST – Location where the telecommunication line, leased circuits, internet leased circuits, cable or dish antenna is installed for receipt of services

      Transaction 2 – In case of mobile connection for telecommunication and internet services provided on postpaid basis

      Place of supply of services under GST – Location of billing address of the recipient of services on the record of the supplier of services.

      Transaction 3 – In cases where mobile connection for telecommunication, internet service and direct to home television services provided on pre-payment basis through a voucher or any other means –

      Situation Place of supply of services under GST
      Through a selling agent or a re-seller or  a distributor of subscriber identity module card or re-charge voucher Address of the selling agent or a re-seller or  a distributor as per the record of the supplier at the time of supply
      By any person to the final subscriber Location where such prepayment is received or such vouchers are sold
      The pre-paid service is availed or the recharge is made through internet banking or other electronic mode of payment Location of recipient of services on record of the supplier of services

      Transaction 4 – Any other case

        Recipient Place of supply of service under GST
      a If the address of the recipient is available in records of the supplier Address of the recipient is available in records of the supplier
      b If the address of the recipient is not available in records of the supplier Location of the supplier of service

      Banking and other financial services – Section 12(12)

      Transaction – Banking and other financial services, including stock broking services to any person

        Recipient Place of supply of services under GST
      a If the address of the recipient is available in records of the supplier Address of the recipient is available in records of the supplier
      b If the address of the recipient is not available in records of the supplier Location of the supplier of service

      Example – Mr. Tarun travels from New Delhi to Dehradun and uses some banking service in Dehradun. If the service is not linked to the account of person, place of supply shall be Dehradun i.e. the location of the supplier of services. However, if the service is linked to the account of the person, the place of supply shall be New Delhi, the location of recipient on the records of the supplier.

      Insurance Services – Section 12(13)

        Recipient Place of Supply of Services under GST
      a Registered Person Location of recipient
      b Unregistered Person Location of recipient

      In insurance services, the insurance companies will always have the details such as address of the insured on their records; therefore, the place of supply of services under GST will be the location of the recipient.

      Example – Mr. Khan from Jaipur is travelling from New Delhi to Bangalore via Indigo and has availed the travel insurance on New Delhi. Here, the place of supply of services under GST will be Jaipur i.e. the location of the recipient.

      Advertisement Services to Government/Govt. bodies – Section 12(14)

      Transaction – Section 12(14) pertains to the determination of place of supply of advertising service to the Central Government/State Government/Statutory body/Local authority meant for the State or Union territory identified in contract or agreement.

      Place of supply of services under GST – Each of such States/Union territories where the advertisement is broadcasted/run/played/dissemination.

      Categories
      GST

      Place of Supply in GST – Goods – Sec 10 and 11 – Simplified

      Place of supply in gst goods

      The concept of place of supply in GST is of paramount importance to determine the taxable jurisdiction considering whether the transaction is intra state or inter state on the basis of which tax (IGST or CGST and SGST/UTGST) is to be levied. GST is a destination based i.e. the supply of goods or services will be taxed at the place where they are consumed and the consumption state will have the right to collect.

      Significance of correct determination of place of supply in GST

      If an inter state transaction is wrongly treated as an intra state transaction, then the taxpayer will have to pay the tax correctly again and claim the refund of the wrongly deposited tax. Therefore, to avoid any such confusion, it is crucial that there is correct determination of place of supply in GST.

      Separate Rules for B2B and B2C transactions

      Before we analyze the relevant sections of place of supply in GST, we must understand that there are separate rules for place of supply for B2B and B2C transactions.

      In B2B transactions, the recipient being a registered person avails ITC for paying his taxes and no real revenue accrues to the Government. Therefore, in B2B transactions, the place of supply in GST is usually the location of the recipient.

      However, in B2C transactions, the supply is made to an unregistered person who consumes the same and cannot avail ITC, therefore, the taxes paid actually reach the government.

      Separate Rules for Place of Supply in GST for – Goods and Services

      Goods are usually tangible and thus there is no difficulty in ascertaining the place of supply in GST, on the other hand, services are intangibles and the place of supply of services under GST depends on the manner of delivery, billing address, etc. Thus, the place of supply of goods in GST is governed by Section 10 and 11 and the place of supply of services under GST are governed separately by Section 12 and 13.

      Place of Supply in GST – Goods u/s 10 related to domestic transactions

      As per Section 10 of the IGST Act, 2017 governs the place of supply of goods other than supply of goods imported into or exported outside India i.e. domestic transactions. The detailed analysis of the section with examples is as under:-

      Transaction I – Where the supply involves movement of goods either by the supplier or the recipient or the transporter.

      Place of Supply in GST – The location of the goods at which the movement of goods terminates for delivery to the recipient.

      Example – M/s Ajay Plywood from Kota sells 10 chairs to M/s Mahesh Traders which has to be delivered at their shop at Jaipur. Thus, the Place of Supply is Jaipur.

      Place of supply in GST

      Transaction II – Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, commonly known as ‘bill to ship to’ transactions.

      Place of Supply in GST – The important point to note here is that this section captures only the first supply between supplier and third person. Therefore, the place of supply is the principal place of business of the third person and not the actual recipient or the original buyer.

      Example – Mr. Kailash of Maharashtra purchased goods from Mr. Suresh of Haryana which on the instruction of Mr. Kailash has to be delivered by Mr. Suresh to Mr. Rajendra of Chennai. Thus, there are 3 parties here:-

      Mr. Suresh – Supplier

      Mr. Rajendra – Recipient

      Mr. Kailash – Third party on whose instructions goods are being delivered.

      Therefore, the place of supply will be Maharashtra i.e. the principal place of business of the third person.

      Transaction III – Where the supply involves no movement of goods either by the supplier or the recipient

      Place of Supply in GST – The location of such goods at the time of delivery to the recipient.

      Example – This is usually in the case of sale and lease back transactions. ABC from Mumbai had leased out its plant for production of bottles to XYZ from Noida. Later, XYZ purchased the same plant from ABC and continued the production as it is. Thus, there was no actual movement of the plant on account of the sale transaction and the place of supply will be Noida i.e. the location of the plant at the time of sale.

      Transaction IV – Where the supply involves installation or assembly of goods

      Place of Supply in GST – The assembly or installation site.

      Example – Tanya from New Delhi purchased chimneys from M/s Deluxe Equipments for installation at her restaurants in Chandigarh. Here, the place of supply of the chimneys will be the installation site i.e. Chandigarh.

      Transaction V – Where the supply of goods is on board for conveyance

      Place of Supply in GST – The location where the goods are taken on board.

      Example – Mr. Patel boarded the New Delhi-Bangalore superfast express from New Delhi. He was carrying some goods for sale during the journey when he boarded the train at New Delhi, however, since the train had maximum passengers boarding from Bhopal, he started selling his goods only when the train had reached Bhopal. However, irrespective of where the goods on board are sold, the place of supply will be the location where the goods are taken on board i.e. New Delhi.

      Place of Supply in GST – Goods u/s 11 related to import and export of goods

      As per Section 11 of the IGST Act, 2017 governs the place of supply of goods imported into or exported outside India. The detailed analysis of the section with examples is as under:-

      Transaction I – Where the goods are imported into India

      Place of Supply in GST – The location of the importer

      Example – Mr. Vikas is a manufacturer of heavy machinery in Chennai. For his production activities, he required some accessory parts from Japan. He imported the goods from Japan to his factory in Chennai. Thus, the place of supply will be Chennai.

      Transaction II – Where the goods are exported from India

      Place of Supply in GST – Location outside India

      Example – Mr. Shekhar is a manufacturer of machines in Haryana. He has sold his machines to buyers in Singapore. The place of supply will be outside India.

      Circular No. – 33/2017-Cus dated 01.01.2018 – Regarding taxation of high seas sales of imported goods

      High Seas Sale is a transaction whereby the original importer sells the goods to a third person before the goods are entered for custom clearance. Doubts arise whether original importer as well as the buyer purchasing on high seas both liable to pay IGST. In this regard, circular no.33/2017-Cus dated 01.01.2018 issued to clarify that IGST on High Sea Sale transactions of imported goods shall be levied and collected only at the time of importation i.e. the buyer of high seas sale shall only be liable to pay IGST at the time of clearance of imported gods.

      High seas seller (original importer) won’t be liable to pay IGST. Buyer shall pay IGST on the final purchase value as per last High Sea Transaction envisaging all margins earned by all persons who made High Sea Sales of such goods.

      FAQs related to place of supply in GST

      Q1. What is the jurisdiction of the National (& Regional Benches) & the State (& area benches) of the Tribunal?

      A1. The National Bench or Regional Benches of the Appellate Tribunal shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in the cases where one of the issues involved relates to the place of supply. The State Bench or Area Benches shall have jurisdiction to hear appeals against the orders passed by the Appellate Authority or the Revisional Authority in the cases involving matters other than those cases where the issues involved relates to the place of supply.

      Q2. Whether questions relating to place of supply can be asked under Advance Ruling Mechanism?

      A2. No, the questions relating to place of supply cannot be asked under Advance Ruling Mechanism.

      Categories
      GST

      Eway Bill Distance – Easy 3 Step Process

      eway bill distance

      There are specific rules regarding determining the eway bill validity, computing the eway bill distance based on the type of vehicle used for conveyance and consequences of failure to follow the eway bill rules laid down by the GST law. E-way bill is an electronic document generated online on the GST portal when there is movement of goods as the undisputed and unambiguous evidence of such movement, details of goods and the parties involved. It is an effective tool to reduce the instances of fake invoices, taking benefit of fake ITC without actual supply and reducing the tax frauds.

      As per Circular No. 47/21/2018-GST dated 08.06.2018 – It is important to note that eway bill generation is not dependent on whether a supply is inter-state or not, but on whether the movement of goods is inter-state or not. Therefore, if the goods transit through a second state while moving from one place in a State to another place in the same State, an eway bill is required to be generated.

      Computing eway bill distance and validity

      Eway bill distance to be covered has to be determined from the place where the movement of the goods starts to the place of delivery of such goods under the same invoice. Since the validity of the eway bill depends on the eway bill distance coverage, it is important that there is no error in determining the distance between the two places as per the invoice and the eway bill. For the ease of the users, the eway bill portal now has the feature of automatically calculating the eway bill distance based on the PIN codes entered by the users.

      Once the determination of the eway bill distance has been made correctly, the validity of the eway bill has to be ascertained based on eway bill distance as per the table below :-

      Nature of the ConveyanceValidity Period based on eway bill distance
      Over dimensional cargo1 day for any distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof
      Other than Over Dimensional Cargo1 day for any distance upto 200 kms and thereafter additional one day for every 200 kms or part thereof
      For multimodal Shipment i.e. in which at least one leg involves transport by shipSame as for over dimensional cargo i.e. 1 day for any distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof

      Over Dimensional Cargo refers to cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989.  Over Dimensional Cargo refers to the cargo which extends beyond the dimensions (Length or Breadth or Height) prescribed for a vehicle under the said Rules.Over Dimensional Cargo refers to cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of the Central Motor Vehicle Rules, 1989.  Over Dimensional Cargo refers to the cargo which extends beyond the dimensions (Length or Breadth or Height) prescribed for a vehicle under the said Rules.

      eway bill distance

      Example 1 : Normal Cargo carrying goods of value Rs. 75,000/- from New Delhi (PIN Code – 110004) to Varanasi (PIN Code – 221004). Date of start of movement : 01.07.2023.

      Step 1 :- First, we determine the eway bill distance from New Delhi (PIN Code – 110004) to Varanasi (PIN Code – 221004). This, comes to approximately 850 km.

      Step 2 :- Since a normal cargo is being used for transportation of the goods, the validity period will be calculated keeping in mind the validity period i.e. 1 day for any eway bill distance upto 200 kms and thereafter additional one day for every 200 kms or part thereof.

      Therefore, Number of days = 850/200 = 4.25 days i.e. 5 days.

      Step 3 :- Validity of the eway bill is till = 06.07.2023 i.e. (01.07.2023 + 5 days).

      Example 2 : Over dimensional Cargo carrying goods of value Rs. 2,55,000/- from New Delhi (PIN Code – 110001) to Jaipur (PIN Code – 302001). Date of start of movement: 15.07.2023.

      Step 1 :- First, we determine the eway bill distance from New Delhi (PIN Code – 110001) to Jaipur (PIN Code – 302001). This, comes to approximately 250 km.

      Step 2 :- Since an over dimensional cargo is being used for transportation of the goods, the validity period will be calculated keeping in mind the validity period i.e. 1 day for any eway bill distance upto 20 kms and thereafter additional one day for every 20 kms or part thereof.

      Therefore, Number of days = 250/20 = 12.5 i.e. 13 days.

      Step 3 :- Validity of the eway bill is till = 28.07.2023 i.e. (15.07.2023 + 13 days).

      Where multiple vehicles are used for transportation of the same goods

      In case the goods are being transported via multiple vehicles, ONE eway bill shall be prepared bearing details of all the vehicles and transporters in Part B of the eway bill. However, there is no need to update these details when the movement is intra-state and the eway bill distance is upto 50 kms only.

      Provisions for extending the Validity Period of EWay Bill

      Where, under circumstances of an exceptional nature, including trans-shipment, the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period after updating the details in Part B of FORM GST EWB-01.
      The validity of the eway bill may be extended within eight hours from the time of its expiry.

      As per Circular No. 61/2018-GST dated 04.09.2018 pertaining to eway bill in case of storing of goods in the godown of a transporter, a per rule 138 of the CGST Rules, 2017 e-way bill is a document which is required for the movement of goods from the supplier’s place of business to the recipient taxpayer’s place of business. Therefore, the goods in movement including when they are stored in the transporter’s godown (even if the godown is located in the recipient taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.

      Thus, in case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, then the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer. In such cases, mere declaration by the recipient taxpayer to this effect with the concurrence of the transporter in the said declaration will suffice. Where the transporter’s godown has been declared as the additional place of business by the recipient taxpayer, the transportation under the e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’ additional place of business). Hence, e-way bill validity in such cases will not be required to be extended.

      FAQs on eway bill

      Q1. Whether an eway bill is required if the goods are moving within 10 kms?

      A1. In intra-state movement of goods, an eway bill is not required if the distance being covered is upto 10 kms. However, in inter-state movement of goods, eway bill has to be generated even if the eway bill distance is within 10 kms.

      Q2. In a case where the invoice has been raised but the goods have not been transported yet, how is the validity of the eway bill extended?

      A2. Every eway bill has 2 parts – Part A bearing the details of the supplier, recipient, goods sold, invoice details and Part B has the details of the transporter and vehicle used for transportation. Once an invoice has been generated Part A of the eway bill should be generated incorporating all the required details.

      However, Part B can be generated only when the actual movement of goods takes place since the details of the transporter and vehicle have to be included. As per the GST law, the validity of the eway bill starts from the date when Part B is entered, thus, even if the invoice has been raised but there is delayed delivery, the eway bill will still be valid and will require no extension.



      Categories
      GST

      What is eway bill? Eway bill rules – 4 important Rules

      eway bill rules

      What is eway bill? Eway Bill Rules – As per the Press Release by the Ministry of Finance on 31.01.2023, 8.3 crore eway bills were generated which was higher than the previous high of 7.9 crore in November, 2022. In August, 2023, eway bill generation reached a record high of 9.34 crores as per the data from GSTN. Thus, the concept of eway bill has helped the department to effectively track movement of goods in compliance with all the GST laws pertaining to such movement. However, before working on the generation of eway bills, we must understand what is eway bill and the eway bill rules.

      E-way bill is an electronic document generated online on the GST portal when there is movement of goods as the undisputed and unambiguous evidence of such movement, details of goods and the parties involved. It is an effective tool to reduce the instances of fake invoices, taking benefit of fake ITC without actual supply and reducing the tax frauds. Eway bills are invoice based i.e. separate eway bills have to be made for each invoice.

      Instances of tax frauds plugged in by the concept of eway bills

      Case 1

      A supplier makes actual supply of goods to the recipient without generating invoice. The recipient pays the supplier in cash and thus earlier this transaction would have evaded tax and would not have come in the radar of the GST department. However, now since eway bill is required for movement of such goods, the parties will not be able to evade the tax and the compliance on the same.

      Case 2

      A supplier generates an invoice without making any supply of goods. Since an invoice has been generated there is the risk of parties taking the benefit of fake ITC. However, now as per the eway bill rules, since eway bill is required for movement of such goods, the parties will not be able to claim any such fake ITC.

      What is eway bill? Eway bill rules

      Eway Bill Rules

      Applicability

      As per the Eway bill rules, the concept of eway bill is on movement of goods and not supply of goods.

      1. Eway bills have to issued only for goods and not for services.
      2. As per the eway bill rules, eway bill has to be generated only when the value of the goods is exceeding Rs. 50,000/-. In this case, the meaning of ‘value of goods’ does not mean the assessable value of goods rather it means the ‘invoice value of goods’.

      Exception :- There are 2 exceptions for this limit of Rs. 50,000/- for generating eway bills

      • When the movement of goods is inter-state between the principal and the job worker or vice-versa, or
      • Inter-state movement of goods by a dealer exempted from GST registration

      However, where the movement of goods is from a DTA unit to a SEZ unit or vice versa located in the same state, there is no requirement to generate an eway bill, if the same has been exempted under Rule 138(14)(d) of the CGST Rules.

      Who has to generate the eway bill?

      As per the Eway Bill Rules, the eway bill has to generated when the value of the goods in movement exceeds Rs. 50,000/- to or from a registered person. Unregistered persons are also required to generate e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier. Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill.

      The supplier, recipient or transporter can get enrollment numbers by the GST department based on their PAN card or Aadhar card to generate eway bills even if they are not registered.

      Eway Bill – Details to be mentioned

      The eway bill contains 2 parts – Part A and Part B.

      Part A contains the details of the supplier, recipient, goods in movement, invoice or transfer challan details.

      Part B contains the details of the transporter and the legs of movement of such goods.

      Generally, Part A is filled by the supplier or the recipient and Part B is filled by the transporter if not filled already by the supplier or the recipient.

      Bulk eway bills and Consolidated eway bills

      As per the Eway bill rules, Eway bills are invoice based i.e. separate eway bills have to be generated for each invoice. However, to ease this process, the concept of generating Bulk eway bills has been introduced. A bulk eway bill is generated when the person wants to generate eway bills in a single shot.

      The person will have to download the JSON template from the portal and upload the particulars for all the eway bills to be generated and the separate eway bills will be generated in one shot.

      Consolidated eway bill is used when there are multiple eway bills already generated that are being carried in one conveyance. The person will have to download the JSON template from the portal and upload the details of the eway bill numbers and the consolidated eway bill will be generated.

      Exemption from generating Eway bills

      As per the Eway bill rules, in the following cases, it is not required to generate eway bills :-

      1. When the movement of goods is through non-motorized vehicles
      2. Goods transported from Customs port, airport, air cargo complex or land customs station to Inland Container Depot (ICD) or Container Freight Station (CFS) for clearance by Customs.
      3. Goods transported under Customs supervision or under customs seal
      4. Goods transported under Customs Bond from ICD to Customs port or from one custom station to another.
      5. Transit cargo transported to or from Nepal or Bhutan
      6. Movement of goods caused by defence formation under Ministry of defence as a consignor or consignee
      7. Empty Cargo containers are being transported
      8. Consignor transporting goods to or from between place of business and a weighbridge for weighment at a distance of 20 kms, accompanied by a Delivery challan.
      9. Goods being transported by rail where the Consignor of goods is the Central Government, State Governments or a local authority.
      10. Goods specifed as exempt from E-Way bill requirements in the respective State/Union territory GST Rules.
      11. Transport of certain specified goods- Includes the list of exempt supply of goods, Annexure to Rule 138(14), goods treated as no supply as per Schedule III, Certain schedule to Central tax Rate notifications.
      Categories
      GST

      GST Composition Scheme Rules – All 7 mandatory rules

      It is important for businesses to understand the GST Composition Scheme Rules to carefully evaluate their eligibility and weigh the advantages against any potential limitations associated with this simplified tax structure. The GST Composition Scheme is aimed at providing a supportive framework for small businesses, contributing to ease of compliance and fostering their growth within the GST regime.

      GST Composition Scheme Rules – How to opt?

      If a taxpayer is eligible for the GST Composition scheme and opts to avail the scheme, the person has to file an application under Form GST – CMP – 02 prior to the beginning of the financial year to opt for the GST Composition Scheme.

      If the Form GST – CMP – 02 is filed during the year, then the scheme will be applicable for the person from the month succeeding the month in which the form was filed.

      GST Composition scheme rules Form CMP -02

      Example – A tax payer opts for the GST Composition scheme by filing the Form GST CMP – 02 in December, 2022, then it will be applicable for the person from January, 2023.

      GST Composition Scheme Rules – Form CMP – 02

      As per the GST Composition scheme rules, Form GST – CMP – 02 is an intimation that the person wants to pay tax under the GST Composition scheme.

      Steps to file Form GST – CMP – 02

      • Login to the portal
      • Go to Services > Registration > Application to opt for composition levy
      • In the form, fill the ‘Name of the authorized signatory’ and the ‘Place’
      • Select ‘Composition Declaration’ and ‘Verification’
      • For companies and LLPs, form can be submitted by using DSC only. However, other persons can submit the form using DSC, EVC or e-signature.
      • Click on ‘Proceed’
      • You will receive an acknowledgment on your registered e-mail address and phone number.
      GST Composition scheme rules

      After filing Form GST – CMP – 02, the person will have to file Form GST – CMP – 03 within 90 days from the date of submission of Form GST – CMP – 02.

      GST Composition Scheme Rules – Form CMP – 03

      As per the GST Composition scheme rules, in Form GST – CMP – 03, the person has to submit details of the stock in hand as on the date of opting into the scheme.

      Once the taxpayer has opted for the GST Composition scheme and the person has submitted Form GST CMP – 02, the person as to file Form GST – CMP – 03 within 90 days.

      Steps to file Form GST – CMP – 03

      • Login to the portal
      • Go to Services > Registration > Application for Composition levy
      • Download the template in excel and open the file
      • Enter your GSTIN and insert the required number of rows
      • In Point no. 7, put the details of purchases from registered dealers
      • In Point no. 8, put the details of purchases from unregistered dealers
      • Validate the sheet and post validation, generate the file to upload
      • Login to the portal again
      • Again Go to Services > Registration > Application for Composition levy
      • Select the option ‘Choose the file’ and upload and validate the file
      • On uploading the file, Tax Payable on the stock is calculated and displayed under ‘Details of tax paid’. Click on ‘Update Ledger Balance’.
      • Thus the tax payable in the E – Liability ledger will increase which has to be paid by the E- Cash ledger
      • Fill in the details of the authorized signatory and sign the form with the DSC or EVC and submit Form GST – CMP – 03. An Application Reference Number (ARN) will be generated.

      Once the application for GST Composition scheme is approved, the person can start carrying out business as a composition dealer.

      Returns to be filed as per the GST Composition scheme rules

      As per the GST Composition scheme rules, the composition dealer has to file quarterly returns in a challan-cum-statement format in Form GST – CMP – 08 by the 18th of the month succeeding the quarter end and an annual return in Form GSTR – 4.

      As per Notification No. 02/2023 dated 31.03.2023 regarding waiver of late fees for composition dealer, Late fees in case of FORM GSTR-4 for the periods from July-2017 till F.Y 2021-22 has been waived completely in case of NIL GST returns.

      It has been reduced to Rs. 500/- in other cases provided the said returns are filed between 01.04.2023 to 30.06.2023.

      GST Composition Scheme Rules – Validity

      The composition dealer can continue in the scheme as long as he is eligible for the scheme as per the GST composition scheme rules.

      What action can be taken by the proper officer for contravention of any provisions of composition levy and how?

      Where any contravention is observed by the proper officer wherein the registered person was not eligible to pay tax under the composition scheme or has contravened the provisions of the CGST Act, 2017 or provisions of Chapter II of the CGST Rules, 2017, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen days of the receipt of such notice as to why the option to pay tax under the composition scheme shall not be denied.

      Upon receipt of the reply to the said show cause notice in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of thirty days of the receipt of such reply, either accepting the reply, or denying the option to pay tax under the composition scheme from the date of the option or from the date of the event concerning such contravention, as the case may be.

      Can a person paying tax under composition levy, withdraw voluntarily from the scheme?

      Yes. The registered person who intends to withdraw from the composition scheme can file a duly signed or verified application in FORM GST CMP-04.

      GST Composition scheme – Compulsory withdrawal

      A taxpayer who fails to opt out of the scheme within 7 days of the disqualifying event, can be removed out of the scheme by the Tax officials by issuing a Show Cause Notice to the taxpayer.