India witnessed tax revolution in 2017 when Goods and Services Tax (“GST“) was implemented to subsume existing indirect taxes on production, provision of services, sale of goods, entry, etc. The intent clearly has been to provide seamless flow of credit and avoid multiple levies on same transaction. Unfortunately, due to Integrated GST (“IGST“) payable on import of good at the transaction value, (including transport value), as well as on the procurement of transportation services as a separate supply of service, there have been instances of GST being levied twice.
Since its implementation, the levy of the Goods and Services Tax (GST) on online games has been a point of contention due to potential revenue leakage. The first question is to determine whether online game is actually a game of skill or a kind of gambling, whilst the second issue concerns the value of services and, as a result, the amount of GST that is required to be paid. The conundrum is exacerbated by the range of games and the possible income structures that are available. The GST Council had set up a group of ministers (“GOM”) to address the corresponding disputes and uncertainties. According to the publicly available information, a decision on the rate applicable to online games and how to value the supplies is scheduled to be published soon. The Government aims to raise the applicable rate of GST on such online games to 28 % to discourage gambling-style operandi while leaving the GST rate on learning games unchanged.…
With re-opening of offices post the second wave of COVID-19, various employers have re-initiated providing canteen, cab, health insurance and many other services to their employees as part of welfare programme as well as obligations under various labour law regulations. The employer may choose to recover the cost of providing such services in full or offer a concession or deduct it from the concerned employees’ salaries or supply them free of cost. Surprisingly, the Goods and Services Tax (“GST”) legislation neither provides for any exemption nor declares that services rendered by the employer to its employees would not be in the nature of goods or services.…
As the world grapples with the Covid-19 pandemic; different approaches of the judiciary to pending tax matters merit attention. In mid-March, both the Kerala and Allahabad High Courts proactively took note of the risk to lawyers, court staff and judges on account of increase in the number of petitions being filed daily and passed orders restricting the Centre and State Governments from initiating tax recovery proceedings or taking any coercive measures till April 6, 2020. The Kerala High Court also held that the assessment proceedings required to be completed before March 31, 2020 could also be deferred subject to the order of the Court.
Continue Reading Covid-19 – A Tale of two Courts
A recent social media post by an Indian actor depicting an invoice issued by a prominent hotel where he was charged INR 442 for two bananas created widespread furor among the public, industry players and the tax authorities, with certain quarters challenging the legality of levy of Goods and Service Tax (“GST”) itself on the supplies made. The invoice indicated the description of the sale item as a ‘fruit platter’ and the cumulative rate of GST as 18%. The Central Excise & Taxation Department also swung into action, served a show cause notice to the hotel and imposed a penalty of INR 25,000 for levying GST on sale of bananas. According to the department, serving bananas to the customer in a hotel room was an exempt supply of goods, not involving any element of service.
The banana row brings to light the classic conundrum of classification of composite supplies and consequent rate of GST applicable to such supplies. Composite supplies refers to supplies of two or more taxable supplies of goods or services or both, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply (for example, supply of an air-conditioner coupled with delivery and installation at the customer’s premises would be a composite supply with supply of air-conditioner being the principal supply). The rate of tax in case of a composite supply is the rate applicable to the principal supply.
Continue Reading Banana Bytes: A Classification Conundrum under GST
With the decision in Sh. Rishi Gupta v. M/s Flipkart Internet Pvt. Ltd., the National Anti-profiteering Authority (NAA) has shifted the focus from the Fast Moving Consumer Goods (FMCG) sector to the e-commerce sector.
In this case, the applicant alleged that the excess amount charged at the time of placing the order should be refunded to him, given that the rate of Goods and Services Tax (GST) reduced from 28% to 18%, between the date of placing the order and the date of supply. It was further alleged that the respondent, i.e. Flipkart, was resorting to profiteering in contravention of the provisions of Section 171 of the Central Goods and Services Tax Act, 2017 (CGST Act), by not refunding the differential amount.
Continue Reading Anti-Profiteering Orders – A Right Step Forward? Part II
Since its implementation on July 01, 2017, the Goods and Services Tax (GST) regime continues to evolve on various fronts by way of rationalisation of tax rates, availability of exemptions, procedural amendments, etc. While the Government has been relentless in its efforts to iron out every crease, bottlenecks continue to persist. With the benefit of hindsight, here is a critical look at some of the significant triumphs and misses on completion of its first anniversary.
Continue Reading GST – First Report Card
Parties entering into contractual arrangements usually insist on including a clause for liquidated damages to pre-emptively agree upon the amount of reparation that would be payable by either Party on failure to meet its commitment. Generally, such commitments are in the nature of adhering to timelines, fulfillment of conditions, quality of products, etc.
The levy of an indirect tax on the amount of liquidated damages, has faced a series of challenges under the erstwhile service tax regime. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act was deemed to be service under the service tax regime . Where liquidated damages were in the nature of accidental damages caused due to unforeseen actions and not relatable to the provision of service, these were not included in the value of the service, and hence not to be taxed .…
The industry has been grappling with uncertainty around anti-profiteering provisions since its introduction. While the Goods and Services Tax (GST) legislation and rules were available in the public domain long before the effective date of July 01, 2017, the rules relating to anti-profiteering were made public only on June 28, 2017.
To everyone’s disappointment these rules failed to bring transparency and clarity to the implementation of anti-profiteering provisions; they merely chalked out the administrative hierarchy and framework of the authorities dealing with anti-profiteering complaints.
Subsequently, the Finance Ministry has made various statements promising clear guidelines on the manner of computation of commensurate benefit to be passed on to customers. However, till date nothing has been notified on this front.
Continue Reading Anti-Profiteering Orders – A Right Step Forward?
In the first concrete step towards implementing the much awaited Goods and Services Tax (“GST”) regime, the Model GST Law was released on June 14, 2016 (“Model”), even as the Government strives to pass the enabling Constitutional Amendments. Under the Model, Central/State GST shall be leviable on all intra-state supplies of goods and/or services and Integrated GST shall be leviable on all inter-state supplies of goods and/or services.
- A new Taxable Event:
As the GST regime is meant to subsume existing indirect taxes, concepts such as manufacture, provision of service, sale of goods, etc. shall be replaced by a single taxable event: supply of goods and/or services. The term “supply” has been defined to include all forms of supply of goods and/or services made or agreed to be made for a consideration by a person in the course or furtherance of business, importation of service, and supplies made or agreed to be made without consideration such as permanent transfer of business assets, etc. Interestingly, the definition also deems the supply of any branded service by an aggregator under a brand name owned by him to be a supply by the aggregator. This all pervasive definition of “supply” has to be complemented by seamless availability of input tax credit, which has been largely addressed by the Model.
However, note that the supply of goods by a registered person to a job-worker shall not be treated as supply of goods. A negative list has also been prescribed for transactions (e.g. transactions by Government, etc.) on which GST shall not apply.…