The input tax credit availed in GST is under provisional basis…the reason is matching is not done…….so what are the financial implications? Do i need to state it as contingent item or make a provision for the same in the financials? – point to ponder before close of financial statement for the FY 2017 – 18?
F. No. B-1/20/2016-TRU
Government of India
Ministry of Finance
Department of Revenue
Tax research Unit
Room No. 146G, North Block,
New Delhi, 5th March 2018
The Principal Chief Commissioners/Chief Commissioners/ Principal
Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)
Subject: Joint Venture —taxable services provided by the members of the Joint
Venture (JV) to the JV and vice versa and inter se between the members of the JV-reg
I am directed to say that in the Service Tax regime, CBEC vide Circular No.
179/5/2014 – ST issued from F.No. 179/5/2014-ST dated 24 September 2014 had clarified
that if cash calls are merely transaction in money, then they are excluded from the definition
of service provided in Section 65B (44) of the Finance Act, 1994. Whether a cash call is
merely a transaction in money and hence not in the nature of consideration for taxable
service, would depend on the terms of the Joint Venture Agreement, which may vary from
case to case. The Circular clarified that cash calls, sometimes, could be in the nature of
advance payments made by members towards taxable services received from joint
venture(JV); and that payments made out of cash calls pooled by a JV towards taxable
services received from a member or a third party is in the nature of consideration and hence attracts Service Tax. The Circular further stated that JV being an unincorporated temporary association constituted for the limited purpose of carrying out a specified project within a time frame, a comprehensive examination of the various JV agreements (at times, there could be number of inter se agreements between members of the JV) holds the key to understanding of the taxation of transactions involving taxable services between the JV and its members or inter-se between the members of a JV. Therefore, officers in the field formations were advised to carefully examine the leviability of service tax with reference to the specific terms/clauses of each JV agreement.
2. In the Service Tax Law, service was defined as an activity carried out by a person
for another for consideration [Section 65B(44) of the Finance Act 1994]. Explanation 3 to
the said definition stated than an unincorporated association or a body of persons as the case may be, and a member thereof shall be treated as distinct persons.
3. GST is levied on intra-State and inter-State supply of goods and services. According
to section 7 of CGST Act, 2017, the expression “supply” includes all forms of supply of
goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a person in the course or
furtherance of business, and includes activities specified in Schedule II to the CGST Act,
2017. The definition of “business” in section 2(17) of CGST Act states that “business”
includes provision by a club, association, society, or any such body (for a subscription or
any other consideration) of the facilities or benefits to its members. The term person is
defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a
body of individuals, whether incorporated or not, in India or outside India. Further,
Schedule II of CGST Act, 2017 enumerates activities which are to be treated as supply of
goods or as supply of services. It states in para 7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods. A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services. The above entry in Schedule II is analogous to and draws strength from the provision in Article 366(29A)(e) of the Constitution according to which a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
4. Therefore, the law with regard to levy of GST on service supplied by member of an
unincorporated joint venture (JV) to the JV or to other members of the JV, or by JV to the
members, essentially remains the same as it was under service tax law. Thus, it is clarified that the clarification given vide Board Circular No. 179/5/2014 – ST dated 24.09.2014 ibid in the context of service tax is applicable for the purpose of levy of GST also. It is reiterated that the question whether cash calls are taxable or not will entirely depend on the facts and circumstances of each case. ‘Cash calls’ are raised by an operating member of the joint venture on other members in proportion to their participating interests in the joint venture(unincorporated) to meet the expenditure on the operations to be carried out as per the approved work programme and budget. Taxability of cash calls can be further explained by the following illustrations:
Illustration A: There are 4 members in the JV including the operating member and
each one contributes Rs 100 as part of their share. A total amount of Rs 400 is
collected. The operating member purchases machinery for Rs 400 for the JV to be
used in oil production.
Illustration B: There are 4 members in the JV including the operating member and
each one contributes Rs 100 as part of their share. A total amount of Rs 400 is
collected. The operating member thereafter uses its own machine and performs
exploration and production activities on behalf of the JV.
4.1 Illustration A will not be the subject matter of ‘ST/GST’ for the reason that the
operating member is not carrying out an activity for another for consideration. In Illustration
A, the money paid for purchase of machinery is merely in the nature of capital contribution
and is therefore a transaction in money.
4.2 On the other hand, in Illustration B, the operating member uses its own machinery
and is therefore providing ‘service’ within the scope of supply of CGST Act, 2017. This is
because in this scenario, the operating member is recovering the cost appropriated towards
machinery and services from the other JV members in their participating interest ratio.
5. Difficulty if any, in the implementation of this circular may be brought to the notice
of the Board.
Technical Officer (TRU)
Recommendations made during the 26th meeting of the GST Council held in New Delhi Today
- Return filing System
The present system of filing of GSTR 3B and GSTR 1 is extended for another three months i.e., April to June, 2018 till the new return system is finalized. A new model was discussed extensively and Group of Ministers on IT has been tasked to finalize the same.
II. Reverse charge mechanism
The liability to pay tax on reverse charge basishas been deferred till 30.06.2018. In the meantime, a Group of Ministers will look into the modalities of its implementation to ensure that no inconvenience is caused to the trade and industry.
The provisions for deduction of tax at source (TDS) under section 51 of the CGST Act and collection of tax at source (TCS) under section 52 of the CGST Act shall remain suspended till 30.06.2018. In the meantime, the modalities of linking State and Central Governments accounting system with GSTN will be worked out so that seamless credit is available to the registered traders whose tax is deducted or collected at source.
IV. Grievance Redressal Mechanism
GST implementation Committee (GIC) has been tasked with the work of redressing the grievances caused to the taxpayers arising out of IT glitches.
(Release ID: 1523715) Visitor Counter : 1731
Recommendations regarding E-way Bill made during meeting of the GST Council
In the 26th meeting held here today , the GST Council has recommended the introduction of e-way bill for inter-State movement of goods across the country from 01st April 2018. For intra-State movement of goods, e-way bill system will be introduced w.e.f. a date to be announced in a phased manner but not later than 01st June, 2018.
Major improvements over the last set of rules, as approved by the Council now, are as follows:
- E-way bill is required to be generated only where the value of the consignment exceeds Rs. 50000/-. For smaller value consignments, no e-way bill is required.
- The provisions of sub-rule (7) of Rule 138 will be notified from a later date. Therefore, at present there is no requirement to generate e-way bill where an individual consignment value is less than Rs. 50,000/-, even if the transporter is carrying goods of more than Rs. 50,000/- in a single conveyance.
- Value of exempted goods has been excluded from value of the consignment, for the purpose of e-way bill generation.
- Public conveyance has also been included as a mode of transport and the responsibility of generating e-way bill in case of movement of goods by public transport would be that of the consignor or consignee.
- Railways has been exempted from generation and carrying of e-way bill with the condition that without the production of e-way bill, railways will not deliver the goods to the recipient. But railways are required to carry invoice or delivery challan etc.
- Time period for the recipient to communicate his acceptance or rejection of the consignment would be the validity period of the concerned e-way bill or 72 hours,whichever is earlier.
- In case of movement of goods on account of job-work, the registered job worker can also generate e-way bill.
- Consignor can authorize the transporter, courier agency and e-commerce operator to fill PART-A of e-way bill on his behalf.
- Movement of goods from the place of consignor to the place of transporter up to a distance of 50 Km [increased from 10 km] does not require filling of PART-B of e-way bill.They have to generate PART-A of e-way bill.
- Extra validity period has been provided for Over Dimensional Cargo (ODC).
- If the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period in case of transhipment or in case of circumstances of an exceptional nature.
- Validity of one day will expire at midnight of the day immediately following the date of generation of e-way bill.
- Once verified by any tax officer, the same conveyance will not be subject to a second check in any State or Union territory, unless and until, specific information for the same is received.
- In case of movement of goods by railways, airways and waterways, the e-way bill can be generated even after commencement of movement of goods.
- Movement of goods on account of Bill-To-Ship-To supply will be handled through the capturing of place of despatch in PART-A of e-way bill.
In the 26th meeting held here today , the GST Council has been apprised of the fact that CBEC and GSTN have started detailed data analytics across a number of data sets available with them. The outcome of preliminary data analysis has revealed interesting insights:
- It has emerged that there is variance between the amount of IGST & Compensation Cess paid by importers at Customs ports and input tax credit of the same claimed in GSTR-3B.
- There are major data gaps between self-declared liability in FORM GSTR-1 and FORM GSTR-3B.
It was deliberated that this information may be further analysed and adequate action may be initiated accordingly.
(Release ID: 1523711) Visitor Counter : 128
Sending a strong positive signal to the exporting community, the GST Council in its 26thmeeting held here today decided to extend the available tax exemptions on imported goods for a further 6 months beyond 31.03.2018. Thus, exporters presently availing various export promotion schemes can now continue to avail such exemptions on their imports upto 01.10.2018, by which time an e-Wallet scheme is expected to be in place to continue the benefits in future.
In a related development which would benefit the exporters, the Council reviewed the progress in grant of refunds to exports of both IGST and Input Tax Credit. The Council appreciated that the pace of grant of IGST refund has picked up. Thereafter, the Council directed GSTN to expeditiously forward the balance refund claims to the Customs/Central GST/State GST authorities, as the case may be, for their immediate sanction and disbursal.
It may be recalled that in its meeting held on 06.10.2017 the Council had noted that exporters are experiencing difficulties of cash blockage on account of having to upfront pay GST / IGST on the inputs, raw materials etc. / finished goods imported / procured for purposes of exports. An interim solution was found by re-introducing the pre-GST tax exemptions on such imports. Additionally, for merchant exporters a special scheme of payment of GST @ 0.1% on their procured goods was introduced. Also, domestic procurement made under Advance Authorization, EPCG and EOU schemes were recognized as ‘deemed exports’ with flexibility foreither the suppliers or the exporters being able to claim a refund of GST / IGST paid thereon. All these avenues were made available upto 31.03.2018.
The permanent solution agreed to by the Council was to introduce an e-Wallet scheme w.e.f. 01.04.2018. The e-Wallet scheme is basically the creation of electronic e-Wallets, which would be credited with notional or virtual currency by the DGFT. This notional / virtual currency would be used by the exporters to make the payment of GST / IGST on the goods imported / procured by them so their funds are not blocked.
On 16.12.2017, Finance Secretary constituted a Working Group with representatives of Central and State Governments to operationalize the e-Wallet scheme. After reviewing the progress, the Council noted that whereas some preparatory work had been done, more needs to be done to address a large number of technical, legal and administrative issues that have been identified. The Council appreciated that this would require more time. The Council was also unanimous that there should be no disruption that may affect the exports. Accordingly, the Councilagreed to:
(a) Defer the implementation of the e-Wallet scheme by 6 months i.e., upto 01.10.2018; and
(b) Extend the present dispensation in terms of exemptions etc. which is available up to 31.03.2018, for a further 6 months i.e., upto 01.10.2018.
(Release ID: 1523716) Visitor Counter : 1621
About The Event
India-gst.in is coming up with a series of sessions on latest changes in GST and as part of it, the first session is being held in Hyderabad on 7th March 2018. Eminent speakers are being invited to address the sessions.
It will be useful to executives, professionals and key decision makers in the organization as the topics covered are of primary importance under GST like E-waybills, Refunds and Anti-profiteering provisions in GST.
Session – 1 E-waybill by MR. ROHIT KUMAR SINGH, Indirect Tax Consultant
E-waybills for an interstate movement of goods above Rs 50,000 under GST using the central portal. Topics to be covered are
- Introduction of e-Way Bill
- Why is e-Way bill required
- When should e-Way Bill be issued?
- Cases when e-Way bill is Not Required
- Who should Generate an e-Way bill
- States that have Notified e-Way Bill
- Processes involved in generation of web-based e-Way Bill
- Practical demo of E Way Bill generation – Thru excel tool
- Validity of e-Way Bill
- Documents required to generate e-Way Bill
- Enabling the various modes of the e-Way Bill generation
- Physical check on e-Way bill
— Lunch Break —
Session II – Refunds by CMA Bhogavallli Mallikarjuna Gupta, Founder India-gst.in
- Refunds – Law and documentation
- Refund on excess balance in electronic credit ledger
- Refund on export of goods and services with payment of IGST
- Refund on export of goods and services without payment of IGST
- Refund on deemed exports
- Refund on supplies to SEZ – with/without payment of duties
Session III – Anti Profiteering by CMA Bhogavallli Mallikarjuna Gupta, Founder India-gst.in
- Anti-Profiteering Meaning
- Documents to be verified
The venue will be announced shortly as our logistics partners are working on it to provide the best experience.
CMA Bhogavalli Mallikarguna Gupta
Advisor, Speaker, and Author on Indian GST
Founder and Chief Editor of http://www.india-gst.in
Director – Business Advisory Services, Procode Softech Pvt Ltd
Resource Person – ICAI Taxation
Special Invitee – GST and Customs Committee at FTAPCCI
National Advisory and Governing Body member at MSME World