Levy and Collection of Tax under GST

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Levy and Collection of Tax

Table of Contents

1. Relevant Notifications

2. Relevant Circulars

3. Relevant Case Laws

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1. Relevant Notifications

1.1 Notified supplies which shall be treated neither as a supply of goods nor as a supply of services

In exercise of the powers conferred by sub-section (2) of section 7 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council hereby notifies that the following activities or transactions undertaken by the Central Government or State Government [or Union territory] or any local authority in which they are engaged as public authority, shall be treated neither as a supply of goods nor a supply of service, namely:—

“Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution [or to a Municipality under article 243W of the Constitution].”

This notification shall come into force with effect from the 1st day of July, 2017.— Notification No. 14/2017-Central Tax (Rate), dated 28-6-2017, as amended by, Notification No. 16/2018-Central Tax (Rate), dated 26-7-2018.

1.2 Notified supplies which shall be treated neither as a supply of goods nor a supply of services

In exercise of the powers conferred by sub-section (2) of section 7 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council hereby notifies that the following activities or transactions undertaken by the State Governments in which they are engaged as public authorities, shall be treated neither as a supply of goods nor a supply of service, namely:—

“Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee or application fee or by whatever name it is called.”

—Notification No. 25/2019-Central Tax (Rate), dated 30-9-2019.

1.3 Supplies which shall be treated neither as supply of goods nor supply of services

Notification No. 11/2017-Integrated Tax (Rate), dated 28-6-2017—For details see section 20 of Integrated Goods and Services Tax Act, 2017.

1.4 Notified supplies which shall be treated neither as a supply of goods nor a supply of services

Notification No. 24/2019-Integrated Tax (Rate), dated 30-9-2019—For details see section 20 of Integrated Goods and Services Tax Act, 2017.

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2. Relevant Circulars

2.1 Taxability of inter-State movement of various modes of conveyance, carrying goods or passengers or for repairs and maintenance

The inter-State movement of goods like movement of various modes of conveyance, not involving further supply of such conveyance between distinct persons as specified in section 25(4) of the CGST Act, 2017, may not be treated as supply and consequently IGST will not be payable on such supply.

However, applicable CGST/SGST/IGST, as the case may be, shall be leviable on repairs and maintenance done for such conveyance.—Circular No. 1/1/2017-IGST, dated 7-7-2017.

2.2 GST on Inter-State Transfer of Aircraft Engines, Parts and Accessories for use bY their own Airlines

  1. Under Schedule I of the CGST Act, 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, even if, without consideration, attracts GST.
  2. The credit of GST paid on aircraft engines, parts & accessories will be available for discharging GST on inter-State supply of such aircraft engines, parts & accessories by way of inter-State stock transfers between distinct persons as specified in section 25 of the CGST Act, notwithstanding that credit of input tax charged on consumption of such goods is not allowed for supply of service of transport of passengers by air in economy class at GST rate of 5%.—Circular No. 16/16/2017-GST, dated 15-11-2017.

2.3 Inter-State movement of rigs, tools and spares and all goods on wheels (like cranes)

Inter-State movement of rigs, tools and spares, and all goods on wheels [like cranes] shall be treated ‘neither as a supply of goods or supply of service, (except in cases where movement of such goods is for further supply of the same goods)’ and consequently no IGST would be applicable on such movements.

In this context, it is also reiterated that applicable CGST/SGST/IGST, as the case may be, is leviable on repairs and maintenance done for such goods.—Circular No. 21/21/2017-GST, dated 22-11-2017.

2.4 Sending of art works to gallery not a supply

In case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply.—Circular No. 22/22/2017-GST, dated 21-12-2017.

2.5 Taxability of tenancy rights under GST

The activity of transfer of ‘tenancy rights’ is squarely covered under the scope of supply and taxable per se. Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable. However, renting of residential dwelling for use as a residence is exempt [Sl. No. 12 of Notification No. 12/2017-Central Tax (Rate)]. Hence, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt. As regards services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in the form of a portion of tenancy premium is liable to GST.—Circular No. 44/18/2018-CGST, dated 2-5-2018.

2.6 Taxability of servicing of cars involving both supply of goods (spare parts) and services (labour), where the value of goods and services are shown separately

The taxability of supply would have to be determined on a case to case basis looking at the facts and circumstances of each case.

Where a supply involves supply of both goods and services and the value of such goods and services supplied are shown separately, the goods and services would be liable to tax at the rates as applicable to such goods and services separately be.—Circular No. 47/21/2018-GST, dated 8-6-2018.

2.7 Taxability moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a component manu-facturer and reversal Input Tax Credit

Moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a component manufacturer (the two not being related persons or distinct persons) on FOC basis does not constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no requirement for reversal of input tax credit availed on such moulds and dies by the OEM.

Further while calculating the value of the supply made by the component manufacturer, the value of moulds and dies provided by the OEM to the component manufacturer on FOC basis shall not be added to the value of such supply because the cost of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in the value of supply in terms of section 15(2)(b) of the CGST Act.

However, if the contract between OEM and component manufacturer was for supply of components made by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be added to the value of the components. In such cases, the OEM will be required to reverse the credit availed on such moulds/dies, as the same will not be considered to be provided by OEM to the component manufacturer in the course or furtherance of the former’s business be.—Circular No. 47/21/2018-GST, dated 8-6-2018.

2.8 Del Credere Agent (DCA) as agent under Para 3 of Schedule I of the CGST Act

Whether or not the DCA will fall under the ambit of agent under Para 3 of Schedule I of the CGST Act depends on the following possible scenarios:

    • In case where the invoice for supply of goods is issued by the supplier to the customer, either himself or through DCA, the DCA does not fall under the ambit of agent.
    • In case where the invoice for supply of goods is issued by the DCA in his own name, the DCA would fall under the ambit of agent.—Circular No. 73/47/2018-GST, dated 5-11-2018.

2.9 Scope of Principal-agent relationship in the context of Schedule I of CGST Act

The two limbs of any supply under GST are “consideration” and “in the course or furtherance of business”. Where the consideration is not extant in a transaction, such a transaction does not fall within the ambit of supply. But, in certain scenarios, as elucidated in Schedule I of the CGST Act, the key element of consideration is not required to be present for treating certain activities as supply. One such activity which has been detailed in para 3 of Schedule I (hereinafter referred to as “the said entry”) is reproduced hereunder:

Supply of goods

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

Here also, it is worth noticing that all the activities between the principal and the agent and vice versa do not fall within the scope of the said entry. Firstly, the supply of services between the principal and the agent and vice versa is outside the ambit of the said entry, and would therefore require “consideration” to consider it as supply and thus, be liable to GST. Secondly, the element identified in the definition of “agent”, i.e., “supply or receipt of goods on behalf of the principal” has been retained in this entry.

The key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not. Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry. However, it may be noted that in cases where the invoice is issued by the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Schedule I of the CGST Act. Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry. In other words, the crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.—Circular No. 57/31/2018-GST, dated 4-9-2018, as amended by Circular No. Cbec/20/16/04/2018-GST, dated 5-11-2018.

2.10 GST on supply of cranes, rigs, tools and Spares and other machinery, when moved from one state to another by a person on his account for there, use for supply of service

Any inter-State movement of goods for provision of service on own account by a service provider, where no transfer of title in such goods or transfer of goods to the distinct person by way of stock transfer is not involved, does not constitute a supply of such goods. Hence, any such movement on own account (not involving distinct person in terms of section 25), where such movement is not intended for further supply of such goods does not constitute a supply and would not be liable to GST.—Circular No. 80/54/2018-GST, dated 31-12-2018.

2.11 Taxability in case of Buy one get one free offer

As per of section 7(1)(a) of the CGST Act, the goods or services which are supplied free of cost (without any consideration) shall not be treated as ‘supply’ under GST (except in case of activities mentioned in Schedule I of the said Act). It may appear at first glance that in case of offers like ‘Buy One, Get One Free’, one item is being ‘supplied free of cost’ without any consideration. In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a single price is being charged for the entire supply. It can at best be treated as supplying two goods for the price of one.

Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed supply and the rate of tax shall be determined as per the provisions of section 8 of the said Act.—Circular No. 92/11/2019-GST, dated 7-3-2019.

2.12 Applicability of GST on additional/penal interest

The transaction of levy of additional/penal interest does not fall within the ambit of entry 5(e) of Schedule II of the CGST Act i.e. “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act”, as this levy of additional/penal interest satisfies the definition of “interest” as contained in Notification No. 12/2017-Central Tax (Rate), dated 28-6-2017. However any service fee/charge or any other charges that are levied by lender in respect of the transaction related to extending deposits, loans or advances does not qualify to be interest as defined in Notification No. 12/2017-Central Tax (Rate) dated 28-6-2017, and accordingly will not be exempt.

Further as per the provisions of section 15(2)(d) of the CGST Act, the amount of penal interest is to be included in the value of supply where such interest is charged by supplier of taxable goods/services. In such cases, the penal interest would be taxable as it would be included in the value of the taxable supply, irrespective of the manner of invoicing.—Circular No. 102/21/2019-GST, dated 28-6-2019, as amended by, Corrigendum No. CBEC/20/16/4/2018-GST, dated 15-7-2019.

2.13 When is the supply of specified goods sent/taken out of India said to take place

(a) The specified goods sent/taken out of India are required to be either sold or brought back within the stipulated period of six months from the date of removal as per the provisions contained in section 31(7) of the CGST Act.

(b) The supply would be deemed to have taken place, on the expiry of six months from the date of removal, if the specified goods are neither sold abroad nor brought back within the said period.

(c) If the specified goods are sold abroad, fully or partially, within the specified period of six months, the supply is effected, in respect of quantity so sold, on the date of such sale.—Circular No. 108/27/2019-GST, dated 18-7-2019.

2.14 Goods sent/taken out of India for exhibition or on consignment basis for export promotion

The activity of sending/taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act (hereinafter referred to as the “specified goods”), do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as ‘Zero rated supply’ as per the provisions contained in section 16 of the IGST Act.—Circular No. 108/27/2019-GST, dated 18-7-2019.

2.15 Taxability of supply of securities under Securities Lending Scheme, 1997

The activity of lending of securities is not a transaction in securities as it does not involve disposal of securities. The clause 4 of para 4 relating to the Scheme under the Securities Lending Scheme, 1997 doesn’t treat lending of securities as disposal of securities and therefore is not excluded from the definition of services.

The lender temporarily lends the securities held by him to a borrower and charges lending fee for the same from the borrower. The borrower of securities can further sell or buy these securities and is required to return the lended securities after stipulated period of time. The lending fee charged from the borrowers of securities has the character of consideration and this activity is taxable in GST since 01.07.2017.

Apart from above, the activities of the intermediaries facilitating lending and borrowing of securities for commission or fee are also taxable separately – Circular No. 119/38/2019-GST, dated 11-10-2019.

2.16 GST on license fee charged by the States for grant of liquor licences to vendors

Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee or application fee or by whatever name it is called, by State Government as neither a supply of goods nor a supply of service as per Notification No. 25/2019-Central Tax (Rate) dated 30th September, 2019.

This special dispensation applies only to supply of service by way of grant of liquor licenses by the State Governments as an agreement between the Centre and States and has no applicability or precedence value in relation to grant of other licenses and privileges for a fee in other situations, where GST is payable.—Circular No. 121/40/2019-GST, dated 11-10-2019.

2.17 Levy of GST on the services of display of name or placing of name plates of the donor in the premises of Charitable Organisation receiving donation or gifts from individual donors

Where all the three conditions namely the gift or donation is made to a charitable organization, the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, are satisfied, GST is not leviable – Circular No. 116/35/2019-GST, dated 11-10-2019.

2.18 Levy and collection of tax – Clarification in respect of Levy of Gst on Director’s Remuneration

It is clarified that the part of Director’s remuneration which are declared as ‘Salaries’ in the books of a company and subjected to TDS under section 192 of the IT Act, are not taxable being consideration for services by an employee to the employer in the course of or in relation to his employment in terms of Schedule III of the CGST Act, 2017.

It is further clarified that the part of employee Director’s remuneration which is declared separately other than ‘salaries’ in the Company’s accounts and subjected to TDS under section 194J of the IT Act as Fees for professional or Technical Services shall be treated as consideration for providing services which are outside the scope of Schedule III of the CGST Act, and is therefore, taxable. Further, in terms of notification No. 13/2017-Central Tax (Rate), dated 28-6-2017, the recipient of the said services i.e. the Company, is liable to discharge the applicable GST on it on reverse charge basis – Circular No. 140/10/2020-GST, dated 10-6-2020.

2.19 GST on liquidated damages

The amount paid as ‘liquidated damages’ is an amount paid only to compensate for injury, loss or damage suffered by the aggrieved party due to breach of the contract and there is no agreement, express or implied, by the aggrieved party receiving the liquidated damages, to refrain from or tolerate an act or to do anything for the party paying the liquidated damages, in such cases liquidated damages are mere a flow of money from the party who causes breach of the contract to the party who suffers loss or damage due to such breach. Such payments do not constitute consideration for a supply and are not taxable.

The key in such cases is to consider whether the impugned payments constitute consideration for another independent contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply doing an act. If the answer is yes, then it constitutes a ‘supply’ within the meaning of the Act, otherwise it is not a “supply”.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.20 GST on penalty paid by builder to buyers for delayed construction of houses

It is a penalty paid by the builder to the buyers to compensate them for the loss that they suffer due to such delayed construction and not for getting anything in return from the buyers. Thus no GST will apply.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.21 GST on forfeiture of earnest money

Forfeiture of earnest money by a seller in case of breach of ‘an agreement to sell’ an immovable property by the buyer or by Government or local authority in the event of a successful bidder failing to act after winning the bid, for allotment of natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in return for such forfeiture of earnest money. Forfeiture of Earnest money is stipulated in such cases not as a consideration for tolerating the breach of contract but asa compensation for the losses suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being merely flow of money are not a consideration for any supply and are not taxable.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.22 GST on pre-payment penalty charged by Bank

Such amounts paid for acceptance of late payment, early termination of lease or for pre-payment of loan or the amounts forfeited on cancellation of service by the customer as contemplated by the contract as part of commercial terms agreed to by the parties, constitute consideration for the supply of a facility, namely, of acceptance of late payment, early termination of a lease agreement, of prepayment of loan. Therefore, such payments, even though they may be referred to as fine or penalty, are actually payments that amount to consideration for supply, and are subject to GST, in cases where such supply is taxable. Since these supplies are ancillary to the principal supply for which the contract is signed, they shall be eligible to be assessed as the principal supply, as discussed in detail in the later paragraphs. Naturally, such payments will not be taxable if the principal supply is exempt.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.23 GST on compensation for cancellation of coal blocks

There was no agreement between the prior allottees of coal blocks and the Government that the previous allottees shall agree to or tolerate cancellation of the coal blocks allocated to them if the Government pays compensation to them. Therefore, it would be incorrect to say that the prior allottees of the coal blocks supplied a service to the Government by way of agreeing to tolerate the cancellation of the allocations made to them by the Government or that the compensation paid by the Government for such cancellation in pursuance to the order of the Supreme Court was a consideration for such service. Therefore, the compensation paid for cancellation of coal blocks pursuant to the order of the Supreme Court in the above case was not taxable.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.24 GST on penalty imposed for violation of laws

There is no agreement between the Government and the violator specifying that violation would be allowed or permitted against payment of fine or penalty. There cannot be such an agreement as violation of law is never a lawful object or consideration.It was also clarified vide Circular No. 192/02/2016-Service Tax, dated 13.04.2016 that fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax. The same holds true for GST also.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.25 GST on Forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period

The said amounts are recovered by the employer not as a consideration for tolerating the act of such premature quitting of employment but as penalties for dissuading the non-serious employees from taking up employment and to discourage and deter such a situation. Further, the employee does not get anything in return from the employer against payment of such amounts. Therefore, such amounts recovered by the employer are not taxable as consideration for the service of agreeing to tolerate an act or a situation.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.26 GST on Compensation for not collecting toll charges

It has been clarified vide Circular No. 212/2/2019-ST dated 21.05.2019 that the service that is provided by toll operators is that of access to a road or bridge, toll charges being merely a consideration for that service. During the period from 8.11.2016 to 1.12.2016, the service of access to a road or bridge continued to be provided without collection of toll from users. Consideration came from the project authority. The fact that for this period, for the same service, consideration came from a person other than the actual user of service does not mean that the service has changed.—Circular No. 178/10/2022-GST dated 3-8-2022.

2.27 GST on Late payment surcharge or fee

Since it is ancillary to and naturally bundled with the principal supply such as of electricity, water, telecommunication, cooking gas, insurance etc. it should be assessed at the same rate as the principal supply.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.28 GST on Fixed Capacity charges for Power

Both the components of the price, the minimum fixed charges/capacity charges and the variable/energy charges are charged for sale of electricity and are thus not taxable as electricity is exempt from GST. Power purchase agreements may have provisions that the power producer shallnot supply electricity to a third party without approval of buyer. Such agreements which ensure assured supply of power to State Electricity Boards/DISCOMS are ancillary arrangements; the contract is essentially for supply of electricity.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.29 GST on Cancellation charges

The amount forfeited in the case of non-refundable ticket for air travel or security deposit or earnest money forfeited in case of the customer failing to avail the travel, tour operator or hotel accommodation service or such other intended supplies should be assessed at the same rate as applicable to the service contract, say air transport or tour operator service, or other such services.—Circular No. 178/10/2022-GST, dated 3-8-2022.

2.30 GST on issue of tax invoice without underlying supply

It there is no supply in respect of tax invoice in terms of Section 7 of the CGST Act, no tax liability arises on issuer of such tax invoice.—Circular No. 171/03/2022-GST, dated 6-7-2022.

2.31 Perquisites provided by employer to the employees as per contractual agreement

Schedule III to the CGST Act provides that “services by employee to the employer in the course of or in relation to his employment” will not be considered as supply of goods or services and hence GST is not applicable on services rendered by employee to employer provided they are in the course of or in relation to employment.

Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee.—Circular No. 172/04/2022-GST, dated 6-7-2022.

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3. Relevant Case Laws

3.1 Advance, forfeiture of

Advance forfeited by applicant received from prospective buyer, on account of non-fulfilment of conditions as stipulated in agreement of purchase of land shall be treated as supply of service and be liable to GST – Fastrack Deal Comm (P.) Ltd., In re [2021] 124 taxmann.com 399 (AAR – Gujarat)

3.2 AMC services

Where applicant provides AMC services in respect of equipments supplied to customers across India and these AMC contracts are executed by one JNSIPL, Maharashtra and further, applicant, on request for goods to execute contractual obligation, delivers goods from its account to ultimate consumer and raises invoice on JNSIPL, Maharashtra and charges IGST on invoice, delivery of spares by applicant to ultimate consumer on account of JNSIPL, Maharashtra would not amount to a supply to ultimate consumer – Juniper Networks Solution (P.) Ltd., In re [2019] 110 taxmann.com 350 (AAR – Karnataka)

3.3 Answer booklet, printing of

Where applicant received an order from Karnataka State Secondary Education Board for printing of answer booklet, centre pinning and hand numbering and only content of water mark to be printed on each page of answer booklet along with format and design is supplied by Board, whereas printing inputs as well as paper belong to applicant, supply of printed, centre pinned and hand numbered answer booklet to Karnataka State Secondary Education Board constitutes supply of goods – Datacon Technologies, In re [2019] 110 taxmann.com 394 (AAR – Karnataka)

3.4 Banking codes and standards, development of

Activities undertaken by applicant such as developing, publishing and publicizing banking codes and standards for its member banks, monitoring its compliance, and, undertaking further research with regard to codes and standards and also training bank employees about these codes would fall under category of ‘supply of services’, and, contribution made by member banks to applicant in form of annual membership fees and registration fees for performing said activities would be eligible to GST – Banking Codes & Standards Board of India, In re [2018] 100 taxmann.com 404 (AAR – Maharashtra)

3.5 Bonus

Where applicant is Del Credere Agent of supplier of goods and collection of payment from customers is its responsibility and if a customer makes payment to applicant before 10 days credit period, then he asks applicant for additional bonus towards early payment, additional bonus passed on by applicant to customer is not in nature of a ‘supply’ – K. K. Polymers, In re [2018] 100 taxmann.com 17/[2019] 72 GST 41 (AAR – Rajasthan)

3.6 Books, sale and purchase outside India

Where applicant is involved in supply of books, purchased from Amazon, USA from a place outside India, to another place outside India, without said goods entering into India, impugned supply of books by applicant is neither supply of goods nor supply of services in terms of Schedule III to section 7 – Guitar Head Publishing LLP, In re [2021] 130 taxmann.com 242/87 GST 778 (AAR – Karnataka)

3.7 Building, construction for sale

Determining factor as to whether GST liability will be attracted for services of construction of building/apartment intended for sale is receipt of consideration in respect of contract of sale – If any consideration is received in respect of contract, before issuance of completion certificate then activity/transaction shall fall within scope of supply as defined in sub-section (1) of section 7 and consequently would be deemed to be a supply of services as per provisions contained in sub-section (1A) of section 7 read with paragraph 5(b) of Schedule II – Confederation of Real Estate Developers Association of India, In re [2021] 133 taxmann.com 252/[2022] 89 GST 319 (AAR – Kerala)

  • Where applicant and one ‘P’ have amalgamated their land parcels to construct a multi-storeyed building on it on condition that legal ownership of land parcels will continue to be vested with applicant and ‘P’ respectively, pooling of land by way of amalgamation of separate parcels would not constitute a supply but activity of construction undertaken by applicant with respect to share belonging to ‘P’ is a supply of service – Gowra Ventures (P.) Ltd., In re [2018] 98 taxmann.com 320 (AAR – Telangana)

3.8 Business arrangement

Where applicant-AAI conducted bidding process for undertaking operation, management and development of certain airports of AAI on a public private partnership basis in which concessionaire who is successful bidder formed a Special Purpose Vehicle (SPV) to carry contract, said business arrangement between AAI and SPV is a supply of transfer of going concern service as per section 7(1) – Airport Authority of India, In re [2021] 131 taxmann.com 249 /88 GST 670 (AAR – Gujarat)

3.9 Business chain, sale of one outlet

Where under ‘Purchase agreement’, an operating outlet is sold to purchaser along with all of its assets which are necessary for continuing outlet’s operations with regularity and permanency, Since only one outlet of business chain is being transferred/sold to recipient, it is not a case of transfer of an ongoing concern as a whole and transfer of business assets is covered under category of ‘supply of goods’ and transaction becomes a taxable event in terms of provisions of section 7 – Tea Post (P.) Ltd., In re [2021] 123 taxmann.com 281/86 GST 726 (AAR – Gujarat)

3.10 Canteen bill payment of employees

Where applicant-society, engaged in processing of milk and milk Products provides lunch and refreshments to its employees, by engaging a contractor and premises is provided to contractor in area of applicant’s factory, since applicant merely pays part of value of canteen bill, on behalf of employees, and is not involved in provision of any supply to contractor, instant activity of applicant does not amount to supply in terms of section 7(1) – Dakshina Kannada Co-op. Milk Producers Union Ltd., In re [2021] 131 taxmann.com 8/88 GST 114/55 GSTL 574 (AAR – Karnataka)

3.11 Cattle feed, manufacturing of

Where applicant is engaged in manufacturing of Cattle Feed and Poultry Feed on job work basis and total raw material is supplied by principal manufacturer, activity undertaken by applicant is covered under definition of supply – Gupta Steel Udyog, In re [2019] 110 taxmann.com 242 (AAR – Punjab)

3.12 Central Government, State Government etc., transactions undertaken for

E-procurement transaction fee collected on behalf of ITE&C department as custodian is not liable to GST as amounts so collected are for services rendered by State Government – Andhra Pradesh Technology Services Ltd., In re [2018] 99 taxmann.com 100/[2019] 71 GST 160 (AAR – Andhra Pradesh)

  • Where applicant-company has been entrusted with contract for construction of road by Government and funds will be provided to NHPC in form of grants, applicant, being a Government company, is entitled to exemption under Notification No. 12/2017 – Central Tax (Rate) dated 28-6-2017. – NHPC Ltd., In re [2018] 100 taxmann.com 16/[2019] 71 GST 202 (AAR – Uttarakhand)

3.13 Cheque dishonour fee

Where applicant is engaged in making supply of Electrical energy to customers and it recovers electricity charges from customers as per tariff rates fixed by Rajasthan Electricity Regulatory Commission and also recovers cheque dishonour fee from customers in cases where cheques given by them are dishonoured, cheque dishonour fee is a consideration for ‘tolerating an act’, which is supply in terms of clause 5(e) of Schedule II to Central Goods and Services Tax Act and hence leviable to GST – TP Ajmer Distribution Ltd., In re [2019] 103 taxmann.com 227 (AAAR – Rajasthan)

3.14 Coaching services through partner

Where applicant intends to provide coaching services to its enrolled students through Network partner and it shall provide study material and student kit which will include test paper, printed material, uniform, bag and other goods and students enrolled with applicant will be charged a consolidate amount which will include supply of goods and/or services, supply made by applicant will be considered a supply of service – Symmetric Infrastructure (P.) Ltd., In re [2021] 130 taxmann.com 136/88 GST 816 (AAR – Rajasthan)

3.15 Club

Where entire subscription/membership amount collected by appellant rotary club from its members was not being utilized for providing any facility or benefit to any of its members, it was to be concluded that appellant was not doing any business as envisaged under section 2(17) and therefore, activities carried out by appellant would not come under scope of supply as envisaged under section 7(1) – Rotary Club of Mumbai Queens Necklace, In re [2020] 117 taxmann.com 449 (AAAR – Maharashtra)

  • Amount collected from members by club which is used for administrative purpose and meetings, is consideration for supply of goods or services procured from third parties and provided to members; activity being covered under term supply is liable to GST – Rotary Club of Bombay Queen City, In re [2021] 132 taxmann.com 298/[2022] 89 GST 226 (AAR – Maharashtra)
  • Where Lions Club collects fee from its members in form of entrance fee and annual membership fee and spends same for meeting administrative expenses and towards organising leadership programme for direct and indirect benefits of members, trans-action between Lions Club and its members is nothing but supply and accordingly will attract GST – Assistant Commissioner, Central Tax v. Lions Club of Poona Kothrud [2020] 115 taxmann.com 168 (AAAR – Maharashtra)
  • Amount collected as membership subscription and admission fees from members by club which is used for meetings, communication expenses, etc., is consideration for supply of goods or services procured from third parties and provided to members; activity is covered under term supply and is liable to GST – Rotary Club of Nagpur Vision, In re [2021] 133 taxmann.com 25 (AAR – Maharashtra)
  • Where applicant-club is collecting GST on subscription fee and infrastructure development fund from its members, applicant is not liable to pay GST on subscription fees and infrastructure development fund collected from members and this ruling is subject to amendment to CGST Act by section 1 of Finance Act, 2021, as and when it is notified – Bowring Institute, In re [2021] 127 taxmann.com 166/86 GST 608/50 GSTL 440 (AAR – Karnataka)

3.16 Commission Agent

Where applicant is providing service of a commission agent and has been allowed commission of 2 per cent by NAFED for procurement of oilseeds and pulses, either, through Kray Vikray Sahakari Samiti (KVSS) or by itself, activity undertaken by the applicant, though involves transfer of title of holding goods but since it is not for consideration, it does not fall under sub-section (a) of section 7. However, activity of further supply of goods on direction of NAFED by the applicant is a supply of goods under Schedule-I of CGST/RGST Act, 2017, and attracts GST as applicable – Rajasthan Rajya Sahakari Kriya Vikraya Sangh Ltd., In re [2019] 104 taxmann.com 415/74 GST 61 (AAR – Rajasthan)

3.17 Commercial Built-up Area, Sale of

Where Ministry of Housing and Urban Affairs (MoHUA), Government of India, under a MOU, has appointed applicant as executing agent for redevelopment of certain colonies in Delhi by constructing dwelling units, commercial space and supporting infrastructure and maintenance thereof and in terms of MOU, applicant has announced sale of commercial super built-up area on behalf of MoHUA, sale of commercial built-up area is a supply of service – NBCC (India) Ltd., In re [2018] 98 taxmann.com 333/70 GST 662 (AAR – New Delhi)

3.18 Compensation to tenant towards alternate accommodation/delayed possession

Amount received by tenant towards alternate accommodation or delayed possession of new premises would be receipt of amounts for doing an act, i.e., vacating premises for redevelopment as well as tolerating construction cum redevelopment work till possession of new redeveloped premises and further for tolerating an act of not having completed redevelopment period within time, same would be a ‘supply’ and therefore, GST to be levied on such amount – Zaver Shankarlal Bhanushali, In re [2018] 95 taxmann.com 3/68 GST 730 (AAR – Maharashtra)

Taxmann Advisory

3.19 Complimentary tickets, free of charge

Activity of applicant of providing complimentary tickets free of charge to certain persons would be considered as supply of service as per provisions of both section 7(1)(a) and 7(1)(d) and would, therefore, be exigible to tax as per provisions of section 9 – K.P.H. Dream Cricket (P.) Ltd., In re [2018] 98 taxmann.com 243 (AAR – Punjab)

  • Where petitioner filed a writ petition in nature of PIL seeking direction to respondent No. 1 to pay GST at rate of 18 per cent on complimentary tickets given for four IPL matches held in Usha Raje Holkar Stadium, Indore, since entire petition was based on report published in local newspaper about distribution of free passes worth Rs. 80 lakhs to Collector, writ petition was not liable to be entertained – Digvijay Singh Bhandari v. Nishant Warwade [2018] 96 taxmann.com 464/69 GST 271 (MP)

3.20 Co-operative societies, in case of

Where applicant, a co-operative educational institute registered under Maharashtra State Co-operative Societies Act, 1960, provides education to members of co-operative societies in State of Maharashtra and charges annual fees/contribution from its member societies, activity undertaken by applicant is covered within scope of supply of services and liable to GST at applicable rates – Maharashtra Rajya Sahakri Sang Maryadit, In re [2018] 100 taxmann.com 239 (AAR – Maharashtra)

  • Where applicant, a co-operative housing society, provides services to its members in form of facilities or benefits like security, cleaning, repairs, water, common electricity, amounts received by applicant from its members against maintenance charges are nothing but consideration received for supply of goods/services as a separate entity and applicant is liable to pay GST on maintenance charges – Emerald Court Co-operative Housing Society Ltd., In re [2021] 129 taxmann.com 369/87 GST 311/54 GSTL 41 (AAR – Maharashtra)
  • Where applicant, a Housing Co-operative Society, is an unincorporated body and a non-profit entity and it collects maintenance charges (repair and maintenance fund and sinking fund) separately from its members for providing services and goods for common use of its members and issues monthly bill, it is ruled that applicant is engaged in supply of services to its members and GST is applicable on repair and maintenance fund and sinking fund – Forest County Co-operative Housing Society Ltd., In re [2021] 130 taxmann.com 373/87 GST 675 (AAR – Maharashtra)

3.21 Crane hiring services

Activity of providing crane on hire is nothing but transfer of right in cranes without transfer of title thereof and is, therefore, a supply of ­service – Sanghvi Movers Ltd., In re [2018] 98 taxmann.com 332 (AAR – Maharashtra)

3.22 De-oiled cake, sale of

The word supply replaces the operative term sale. Thus no scope has been left for any confusion and the definition includes every term which is in any form liable to be termed as sale. Even the supply which is made or agreed to be made without a consideration will also amount to sale. Thus, sale of de-oiled cake is undoubtedly ‘supply’ – Indo Prosoya Foods (P.) Ltd., In re [2019] 111 taxmann.com 116/76 GST 672 (AAAR – Uttar Pradesh)

3.23 Developed plot, sale of

Where applicant is engaged in promotion of gated community villas for prospective villa buyers and It buys land in its own name and develops land and after getting lay-out approvals in its name sells plots to various prospective buyers without any construction activities, sale of developed plots/land by applicant without receiving any advance from customers for undertaking development activities is covered by Para 5 of Schedule III of CGST Act and it is neither supply of goods nor a supply of services and such sale is not liable to GST – Dharmic Living (P.) Ltd., In re [2021] 131 taxmann.com 164/53 GSTL 462 (AAR – Kerala)

  • Where appellant engaged in business of property development has entered into a joint development agreement with landowners for development of land into residential layout, where cost of development shall be borne by appellant, and revenue accruing from sale of plots is to be shared between landowners and appellant, activities undertaken by appellant amount to supply of service to landowners – Maarq Spaces (P.) Ltd., In re [2020] 116 taxmann.com 702 (AAAR – Karnataka)

3.24 Diamonds, supply of

Mere deposit of diamond with safe vaults acknowledged by Electronic Vault Receipts (EVR) does not constitute of supply of diamonds for purpose of levy of GST but conversion of Electronic Vault Receipts representing diamonds held in Vaults to e-Units would constitute a supply of diamonds liable to tax – Rajarathnam’s Jewels, In re [2018] 96 taxmann.com 244/69 GST 434 (AAR – Karnataka)

3.25 Donations

Donations received by trust without any instruction would not be taxable, however where donor is clearly receiving identifiable benefits in return either in terms of advertising or publicity, said donation amount received is to be treated as a consideration for supply of goods or services or both and liable to GST – Students’ Welfare Association, In re [2019] 103 taxmann.com 449/73 GST 650 (AAR – Maharashtra)

3.26 Electricity supply/distribution

Where appellant power company i.e. JEL generates power from coal supplied by JSL, a steel company and JEL supplies power to JSL, proposed arrangement of supply of coal or any other inputs by principal JSL to appellant JEL for generation of electricity will be construed as job work chargeable to GST – JSW Energy Ltd., In re [2020] 117 taxmann.com 319 (AAAR – Maharashtra)

3.27 E-procurement transaction fee

Where applicant, State public sector undertaking, is providing services to various departments of State Government in field of Information Technology and related services, e-procurement transaction fee collected by applicant on behalf of ITE&C Department of State Government towards online tenders falls within meaning of supply – Telangana State Technology Services Ltd. (TSTSL), In re [2021] 133 taxmann.com 117/[2022] 89 GST 258 (AAR – Telangana)

3.28 E-vouchers, buy and sale of

Where applicant receives orders for supply of e-vouchers wherein applicant sources e-vouchers for such customers as per order received and acts as an intermediary for buying and supplying of e-vouchers, applicant is involved in trading of vouchers, for a consideration in course or furtherance of business and thus transaction amounts to supply in terms of section 7(1)(a) – Premier Sales Promotion (P.) Ltd., In re [2021] 130 taxmann.com 404/88 GST 33 (AAR – Karnataka)

3.29 Exam fee

Where applicant institute, engaged in providing training to students in medical coding, is also facilitating students (both who are enrolled with assessee and outsiders) to pay examination fee to American Academy of Professional Coders (AAPC) by providing online facility/platform to pay exam fee, since said fee payment service is provided by applicant as a pure agent and without collecting any service charges from students or AAPC, such service is not chargeable to GST – Cigma Medical Coding (P.) Ltd., In re [2021] 128 taxmann.com 191/53 GSTL 51 (AAR – Kerala)

3.30 Foods/bottled water, supply in train

A train is a mode of transport and cannot be called as a restaurant, eating joint, mess or canteen, etc., and, hence, supply of goods, i.e., food, bottled water, etc. to passengers in trains or railway platforms, shall be charged to GST on value of goods (excluding service charges) at applicable rates as pure supply of goods, as same have no element of service – Deepak & Co., In re [2018] 93 taxmann.com 94/68 GST 57 (AAR – New Delhi)

3.31 Foreign going vessels, supply to

Where applicant supplies foreign going vessels stores like paint, rope, spare parts, electronic equipment, etc. applicant’s supplies to foreign going vessels would be treated neither as a supply of goods nor services, if such stores are warehoused goods supplied to recipient before clearance for home consumptionShewratan Company (P.) Ltd., In re [2019] 111 taxmann.com 230 (AAR – West Bengal)

3.32 Home owner association

Where applicant, home owners association, collects annual contributions from its members for maintenance of common areas, applicant is liable to pay CGST and KGST on amount of contribution received from its members as its activity is taxable supply of service Vaishnavi Splendour Home Owners Welfare Association, In re [2019] 110 taxmann.com 249 (AAR – Karnataka)

  • Definition of business includes services provided by club or association to members and thus GST is payable on amounts received by housing society from members 107 towards maintenance charges – Mahindra Splendour CHS Ltd., In re [2022] 135 taxmann.com 71/90 GST 231 (AAR – Mah.)
  • Amount collected towards sinking/repair fund by housing society from members is nothing but collection of certain amount as maintenance advance for overall maintenance of society and is liable to tax – Mahindra Splendour CHS Ltd., In re [2022] 135 taxmann.com 71/90 GST 231 (AAR – Mah.)
  • Charges collected by society on account of property tax, electricity charges and other statutory levies would be excluded while calculating the exemption limit of Rs. 7,500 – Mahindra Splendour CHS Ltd., In re [2022] 135 taxmann.com 71/90 GST 231 (AAR – Mah.)
  • Where applicant (Apartment Owners Association) is engaged in providing maintenance or repair of common area of apartments and surrounding area, activity of procuring goods and services by applicant from third parties for upkeep and maintenance of apartments and collecting monies from its members to pay third parties is an activity liable to GST –Prestige South Ridge Apartment Owners’ Association, In re [2019] 110 taxmann.com 235 (AAR – Karnataka)

3.33 Ice cream supply of

Where applicant is supplying ice creams, chocolates, ice cream cakes and pizza cakes and other items of food made as per orders of customers, supply made by applicant shall be deemed to be a supply of service Hatsun Agro Product Ltd., In re [2019] 110 taxmann.com 287 (AAR – Karnataka)

3.34 Indian made foreign liquor, manufacture of

Where applicant, holding various registered brands in relation to Indian Made Foreign Liquor (IMFL) approached and contracted with various Contract Bottling Units (CBUs) who held requisite licenses under State Excise Laws to undertake manufacture of IMFL for the applicant, in return for payment of bottling charges, in view of facts that CBUs after manufacturing IMFL, deliver said goods to buyers as per applicant’s directions and sale price for said goods is received by the applicant from State Corporation or other buyer and moreover the applicant is not receiving any consideration for allowing CBU to use their brand/logo etc. on IMFL, there is no supply of goods or services by the applicant as per definition of ‘supply’ under section 7 and hence, the applicant cannot be said to be making a taxable supply to CBU [Maharashtra Goods and Services Tax Act, 2017] – Allied Blenders and Distillers (P.) Ltd., In re [2019] 103 taxmann.com 125/74 GST 48 (AAR – Maharashtra)

Dive Deeper:
Meaning and Scope of Supply and Levy of GST
Time & Value of Supply of Goods under GST
Place of Supply in GST with Examples

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