No – E-way Bill Required under GST

No EWB is required to be generated in respect of exempt goods and specific cases covered under Rule 138(14). It may be noted that movement of goods exempted under Notification No.2/2017- Central Tax (Rate) dated June 28.2017 except de-oiled cake do not require EWB pursuant to Rule 138(14)(e) of CGST Rules. Moreover, movement of goods notified under

Clause (d) of Rule 138(14) of State/UT GST Rules will also be excluded under the Central GST Rules. 

This also acknowledges that State/UT GST Rules are stand-alone on the requirements of EWB in respect of intra-State movement and the Central GST Rules are limited only in respect of inter-State movement. EWB is not even required when there is a supply without any movement of goods (see section 10(1)(c) of the IGST Act, 2017).

For example, where goods move from a DTA unit to SEZ unit or vice-versa located in the same State, there will be no requirement to generate an e-way bill, if the same has been exempted by the particular State under rule 138(14)(d) of the CGST Rules. -Circular No. 47/21/2018-GST dated 28.06.2018.

Such exclusion from EWB is allowed to all kinds of goods, if the value is up to Rs.50,000 or the threshold prescribed (refer “Threshold - State EWB” heading in this Chapter) in the case of intra-State Supplies.

Care should be taken not to misapply the threshold limit prescribed by States for use of EWB to inter-State movement. This discretion enjoyed by States in prescribing exceptions (to the CGST Rules) is limited to movement within the respective State.

Summary of ‘no EWB’

(a) where the specified goods being transported. (LPG, Kerosene, postal bags, jewellery & precious stones, currency, used personal household, alcoholic liquor, petrol, diesel, fresh milk, vegetables, etc.,) 

(b) where the goods are being transported by a non-motorised conveyance

(c) where the goods are being transported from the customs port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by

Customs

(d) in respect of movement of goods within such areas as are notified under clause (d) of sub-rule (14) of rule 138 of the State or Union territory Goods and Services Tax Rules in that particular State or Union territory

(e) where the goods, other than de-oiled cake, being transported, are specified in the Schedule appended to Notification No. 2/2017- Central tax (Rate) dated the 28th June, 2017

(f) where the goods being transported are alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas or aviation turbine fuel

(g) where the supply of goods being transported is treated as no supply under Schedule III of the Act

(h) where the goods are being transported— (i) under customs bond from an inland container depot or a container freight station to a customs port, airport, air cargo complex and land customs station, or from one customs station or customs port to another customs station or customs port, or (ii) under customs supervision or under customs seal

(i) where the goods being transported are transit cargo from or to Nepal or Bhutan

(j) where the goods being transported are exempt from tax under Notification No. 7/2017-Central Tax (Rate), dated 28th June 2017 and Notification No. 26/2017-Central Tax (Rate), dated the 21st September, 2017

(k) any movement of goods caused by defence formation under Ministry of defence as a consignor or consignee

(l) where the consignor of goods is the Central Government, Government of any State or a local authority for transport of goods by rail

(m) where empty cargo containers are being transported

(n) where the goods are being transported upto a distance of twenty kilometres from the place of the business of the consignor to a weighbridge for weighment or from the weighbridge back to the place of the business of the said consignor subject to the condition that the movement of goods is accompanied by a delivery challan issued in accordance with rule 55.

(o) where empty cylinders for packing of liquefied petroleum gas are being moved for reasons other than supply 

CSR expenditure under GST regime

 CSR expenditure under GST regime

Section 16(1) of CGST Act, 2017 provides that input tax shall be allowed on goods or services which are used or intended to be used in the course or furtherance of business. Further, Section 17(5) disallows credit on certain goods and services.

It is pertinent to note that the GST provisions do not specifically allow or disallow input tax credit on CSR expenses. Further, there is no explanation similar to what is available under the Income Act. Thus, one may take a view that credit is available under GST. However, department places reliance on clause (h) of section 17(5) to disallow CSR related credit which restricts ITC on goods given in the form of gifts.

Yes

M/S. BAMBINO PASTA FOOD INDUSTRIES PRIVATE LIMITED - 2022

(11) TMI 482 - AUTHORITY FOR ADVANCE RULING, TELANGANA

No

M/S. DWARIKESH SUGAR INDUSTRIES LIMITED - 2020 (1) TMI 1430

-AUTHORITY FOR ADVANCE RULING, UTTAR PRADESH

M/S. ADAMA INDIA PRIVATE LIMITED- 2021 (9) TMI 1061 – AUTHORITY FOR ADVANCE RULING, GUJARAT

M/S. POLYCAB WIRES PRIVATE LIMITED - 2019 (4) TMI 111 – AUTHORITY FOR ADVANCE RULINGS, KERALA

Considering this confusion on ITC eligibility, the Government decided to introduce amendment in Section 17(5) of the CGST Act, 2017

Finance Bill, 2023

The Government inserted clause (fa) in Section 17(5) of the CGST Act, 2017 which reads as under:

Section 17(5). Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18, input tax credit shall not be available in respect of the following, namely: -

“(fa) goods or services or both received by a taxable person, which are used or intended to be used for activities relating to his obligations under corporate social responsibility referred to in section 135 of the Companies Act, 2013;”

The amendment states that input tax credit on goods and services received by companies to undertake CSR activities under section 135 of Companies Act, 2013 is not allowed. The amendment will come into effect from the date to be notified.

Potential issues in the amendment

i. Whether companies can take credit of procurements made until this new provision is notified?

ii. What is the scope of the phrase “activities relating to his obligations under CSR”?

iii. What is the meaning of the phrase “intended to be used”?

iv. Whether credit is allowed if CSR expenditure is incurred by the Company over and above the mandatory threshold?

v. Whether credit is allowed if CSR expenditure is incurred by partnership firm, etc.?

Accounts and other Records Under GST

 

Accounts and other Records Under GST

Section 35 of Central Goods and Services Tax Act 2017 - Accounts and Other Records

(1) Every registered person shall keep and maintain, at his principal place of business, as mentioned in the certificate of registration, a true and correct account of-

·       production or manufacture of goods.

·       inward and outward supply of goods or services or both.

·       stock of goods.

·       input tax credit availed.

·       output tax payable and paid; and

·       such other particulars as may be prescribed:

Provided that where more than one place of business is specified in the certificate of registration, the accounts relating to each place of business shall be kept at such places of business:

Provided further that the registered person may keep and maintain such accounts and other particulars in electronic form in such manner as may be prescribed.

(2) Every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not, shall maintain records of the consigner, consignee and other relevant details of the goods in such manner as may be prescribed.

(3) The Commissioner may notify a class of taxable persons to maintain additional accounts or documents for such purpose as may be specified therein.

(4) Where the Commissioner considers that any class of taxable person is not in a position to keep and maintain accounts in accordance with the provisions of this section, he may, for reasons to be recorded in writing, permit such class of taxable persons to maintain accounts in such manner as may be prescribed.

(5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy of the audited annual accounts, the reconciliation statement under sub-section (2) of section 44 and such other documents in such form and manner as may be prescribed.

(6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered person fails to account for the goods or services or both in accordance with the provisions of sub-section (1), the proper officer shall determine the amount of tax payable on the goods or services or both that are not accounted for, as if such goods or services or both had been supplied by such person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of such tax.

Section 36 – Retention of accounts – 72 months from furnishing annual return.

Rule 56

Maintenance of accounts by registered persons.

(1) Every registered person shall keep and maintain, in addition to the particulars mentioned in sub-section (1) of section 35, a true and correct account of the goods or services imported or exported or of supplies attracting payment of tax on reverse charge along with the relevant documents, including invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers and refund vouchers.

(2) Every registered person, other than a person paying tax under section 10, shall maintain the accounts of stock in respect of goods received and supplied by him, and such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof.

(3) Every registered person shall keep and maintain a separate account of advances received, paid and adjustments made thereto.

(4) Every registered person, other than a person paying tax under section 10, shall keep and maintain an account, containing the details of tax payable (including tax payable in accordance with the provisions of sub-section (3) and sub-section (4) of section 9), tax collected and paid, input tax, input tax credit claimed, together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received during any tax period.

(5) Every registered person shall keep the particulars of –

(a) names and complete addresses of suppliers from whom he has received the goods or services chargeable to tax under the Act;

(b) names and complete addresses of the persons to whom he has supplied goods or services, where required under the provisions of this Chapter;

(c) the complete address of the premises where goods are stored by him, including goods stored during transit along with the particulars of the stock stored therein.

(6) If any taxable goods are found to be stored at any place(s) other than those declared under sub-rule (5) without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person.

 

 

TDS under GST

 TDS under GST

TDS under GST is applicable since 1st October 2018

Sec 51 of CGST Act deals with TDS on GST

Applicability

If the contract value is more than Rs 2.50 Lakhs, the following class of persons who are registered under GST Law are required to deduct TDS on GST

1. A Department of Establishment of the Central Government or State Government.

2. Local Authority

3. Government Agencies

4. Such persons or Category of persons notified by Government.

The following category of persons have been notified by the Govt on which the provisions of TDS on GST would be applicable.

An authority or board or any other body with 51% or more participation by way of equity or control

1. Set up by an Act of Parliament or a State Legislature; or

2. Established by any Govt., Society established by the Central Govt. or State Govt. or a Local Authority under the Society Regulation Act 1860

Public Sector Undertakings

The above persons “As per provisions of section 24(vi) (Who are required to deduct TDS under Section 51, Shall take registration in the Form GST REG-07

 

Registration

A person who is liable to deduct TDS has to compulsorily register under Section 24(vi) and there is no basic exemption limit. Registration under GST can be obtained without PAN and by using the existing tax deduction and collection account number (TAN) issued by Income Tax Act.

A person liable to deduct tax is required to register as a diductor even if he is registered separately as supplier.

 

Applicability and Rate

 on payment made to supplier of taxable Goods or Services, where the total value of such supply or services under individual contract in excess of Rs 2.50 lakhs.

 

Deposit of TDS on GST

The amount of TDS deducted should be deposited with Government by the deductor by the 10th of next month. In FORM GSTR 7, through the online portal gst.gov.in.

Late filing of GSTR-7 results in a late fee of Rs 100 per day under CGST and Rs 100/- under SGST, hence, a total of Rs 200/- per day is levied. Maximum penalty cap is Rs 5000/= under CGST and Rs 5000/- under SGST.

Apart from Late fee- Interest @ 18% PA, applicable from next day of the due date of filing of return to the day of making actual payment.

Any excess or erroneous amount deductible and paid to the Government shall be dealt for refund under section 54. However, if the deduction amount is already credited to the Electronic Cash Ledger of the Supplier, the same shall not be refunded.

 

TDS Certificate

TDS certificate would also to be issued by the deductor in GSTR 7A to the deductee, within 5 days of depositing the TDS with the Government. Non- Compliance of the above will attract late of Rs 100/- per day subject to maximum of Rs 5000/-

 

Tax deduction is not required in following situations:

a) Total value of taxable supply? Rs. 2.5 Lakh under a contract.

b) Contract value > Rs. 2.5 Lakh for both taxable supply and exempted supply, but the value of taxable supply under the said contract? Rs. 2.5 Lakh.

c) Receipt of services which are exempted. For example, services exempted under notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.

d) Receipt of goods which are exempted. For example, goods exempted under notification No. 2/2017 – Central Tax (Rate) dated 28.06.2017 as amended from time to time.

e) Goods on which GST is not leviable. For example, petrol, diesel, petroleum crude, natural gas, aviation turbine fuel (ATF) and alcohol for human consumption.

f) Where a supplier had issued an invoice for any sale of goods in respect of which tax was required to be deducted at source under the VAT Law before 01.07.2017, but where payment for such sale is made on or after 01.07.2017 [Section 142(13) refers].

g) Where the location of the supplier and place of supply is in a State(s)/UT(s) which is different from the State / UT where the deductor is registered.

h) All activities or transactions specified in Schedule III of the CGST/SGST Acts 2017, irrespective of the value

i) Where the payment relates to a tax invoice that has been issued before 01.10.2018.

j) Where any amount was paid in advance prior to 01.10.2018 and the tax invoice has been issued on or after 01.10.18, to the extent of advance payment made before 01.10.201

k) Where the tax is to be paid on reverse charge by the recipient i.e. the deductee.

l) Where the payment is made to an unregistered supplier.

m) Where the payment relates to “Cess” component.

Taxability of Liquidated Damages under GST

 Taxability of Liquidated Damages under GST

Liquidated damages refer to the pre-determined amount of compensation that a party agrees to pay in the event of a breach of contract or default by one of the parties. Under GST (Goods and Services Tax), liquidated damages may be subject to tax depending on the circumstances of the case.

If liquidated damages are part of the contract price and are paid for the supply of goods or services, they are treated as consideration for the supply and are subject to GST at the same rate as the supply. This means that if the supply is subject to GST, the liquidated damages will also be subject to GST at the same rate.

However, if the liquidated damages are paid for reasons other than the supply of goods or services, such as compensation for breach of contract or default, they may not be subject to GST. In such cases, the payment of liquidated damages will be treated as a penalty or fine, and penalties and fines are not subject to GST.

It is important to note that the tax treatment of liquidated damages under GST will depend on the specific facts and circumstances of each case.

 

As and when there is any breach of contract, the suffering party would be paid the amount in the form of liquidated damage or compensation, penalty, or cancellation charges, etc.

Notably, there prevailed a lot of confusion in the trade and industry concerning the applicability of GST on such liquidated damage or compensation or penalty or cancellation charges vis-à-vis entry at para 5(e) of Schedule II of the Central Goods and Services Tax Act, 2017.

In a view to providing clarification on the above issue, the Ministry of Finance issued a circular no. 178/10/2022-GST dated 3^rd August 2022.

Understanding the scope of entry at para 5(e) of Schedule II –

As per para 5(e) of Schedule II, the following supply is specifically declared as a supply of service –

1.    Agreeing to the obligation to refrain from an act – Some of the relevant examples are –

• Non-compete agreement,
• An industry refraining from carrying out the manufacturing activity per certain specified hours.

2.    Agreeing to the obligation to tolerate an act/a situation – One of the relevant examples is –

• A hawker can operate in front of the shop on payment of a monthly amount to the shopkeeper.

3.    You are agreeing to the obligation to do an act.

Going through the above examples, it would be somewhat clear that the intention was to cover such services within the ambit of para 5(e) of Schedule II. However, taking the recourse of para 5(e) of Schedule II, demands were being raised on –

• Amount of charges i.e., fine/ penalty levied on dishonor of the Cheque,
• Liquidated damages paid on account of breach of contract,
• Late payment charges collected by the service provider on account of late payment of bills,
• The penalty levied for violation of any law,
• Notice pay recovery, etc.

Clarification provided on the taxability of liquidated damages and liked charges under GST –

General clarification was given vide circular no. 178/10/2022-GST dated 3^rd August 2022, is that –

• An agreement to do/ refrain from an act/ situation should not be imagined/ presumed to exist.
• In order to bring the payment within the ambit of GST, there should be an express/ implied promise done on the part of the recipient of the money to either agree to do or abstain from doing something against the money so paid to him.
• It is specifically clarified that the following payments are not a consideration for tolerating an act/ situation –
• Liquidation damages for breach of contract.
• Penalty for the dishonor of Cheque.
• Forfeiture of salary/ payment of the amount on the basis of the employment bond for leaving employment before the minimum agreed period.
• The penalty levied under the mining act on account of excess stock found with the mining company; etc.
• Importantly, such payment will not be considered as ‘consideration’ and accordingly will not be considered as ‘supply’ unless –
• Payment is made for an independent activity of tolerating an act; and
• Payment is made under an independent agreement entered for such activity of tolerating act.

Free Samples

 Free Samples

Free Samples are products given to consumers to try before purchasing. Providing free or sample products is a tried and tested marketing method used by various industries in India such as pharmaceuticals, FMCG, etc.

For example, buy 3 and get 1 Soap free or 1 Garment free on purchase of 3 Garments or distribution of free samples to distributors, agents, customers, doctors, etc.

When does a product qualify as a free sample?

To qualify as a free sample, a product normally possesses the following features:

a) Distributed free of cost i.e., without any consideration.

b) Are marked NOT FOR SALE and normally no MRP is printed.

GST is applicable when a transaction involves the supply of goods/services for consideration. Goods or services that are supplied free of cost (without any consideration) cannot be treated as ‘supply’ as per Schedule I of the CGST Act, 2017 except on activities specifically mentioned on which GST needs to be charged even when supplied without consideration. Section 17(5)(h) of the CGST Act, 2017 restricts ITC on goods disposed of by way of gift or free samples. Thus, ITC has to be reversed on goods distributed as free samples.

Output Tax Payment and availment of credit to a certain extent depend on the taxability at the time of supply of such free samples / free supplies. The same has been summarized below:

CONDITION	OUTPUT TAX TREATMENT	ITC TREATMENT
Goods manufactured as free samples and then distributed	No output tax payable	ITC to be reversed
Goods manufactured as normal goods and then transferred as free samples	No output tax payable	ITC to be reversed
Goods manufactured as free samples and then distributed to RELATED PARTY	Output tax payable	ITC allowed
Free supply i.e., without any consideration	No output tax payable	ITC to be reversed
Buy one get one free offer	Output tax payable on assessable value	ITC allowed

 

Which Activities are Treated as Supply Even If Made Without Consideration?

Permanent transfer or disposal of business assets where input tax credit has been availed on such assets. This is not applicable when ITC was not availed on such assets.

Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business.

By a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or.

If the agent is working on a commission basis and does not undertake goods, then there is no need to pay GST on goods, but the agent needs to discharge GST on the commission earned.

Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Further, as per Circular No. 92/11/2019 – GST issued by the CBIC released on 07th March 2019, states that any goods or gifts provided under the category of gifts, samples, and other related categories without consideration, it shall not become categorized as ‘supply’ as per the Act. Hence, the input tax credit shall also not apply to those said goods.

From Schedule I reproduced above, it can be noted that the supply of free samples does not fall under the category of activities to be treated as supply even if made without consideration.

How to disclose free Samples supplies in the returns?

Since the free Samples are not supplies, there is no requirement of disclosing the same as outward supplies in the returns. The credit relating to the same can be disclosed in Table 4 of Form GSTR 3B as Ineligible ITC under Section 17(5) or Credit Reversal under “Others” if credit was already availed.