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  • Tax Matters: Is GST applicable on sale of goods on high seas?

    Supply of common services and goods by resident welfare association of members who contribute up to Rs 7500 per month per member is exempt from GST

    During the sales tax regime, there was controversy surrounding high seas sales (HSS). What about goods and services tax (GST)?

    — Ilesh, dated 03/01/2019

    HSS are carried out by the consignee shown in the bill of lading to another buyer while the goods are on high seas. Goods on high seas mean they have been dispatched from the port or airport of origin but have yet to arrive at the port or airport of destination.

    The area beyond 200 nautical miles is high seas, where all countries have equal rights. These high seas are reserved for peaceful purposes. Any country can use the area for navigation for over-flight, laying submarine cables and pipes, fishing, construction of artificial islands as permitted under international law and for scientific research.

    In the new indirect tax regime, GST was not levied on HSS initially. Now, as per the Central GST (Amendment) Act, 2018, Paragraph 8(b) of Schedule III, in effect from 01 February 2019, supply of goods by endorsement of documents before clearance for home consumption is neither supply of goods nor supply of services, i.e., HSS.

    There is no GST liability on HSS. GST will be levied only when the goods are cleared from customs. The importer, i.e., the last buyer, will be required to furnish the entire chain of documents such as original invoice, HSS contract and details of service charges and commission. Bill of entry (B/E) is to be filed in the name of the last HSS buyer.

    There is no bar on the same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for levying of duty.

     

    I am secretary of a cooperative housing society (CHS). As I was out of India for a number of days, I missed the clarification given to CHS by the Maharashtra government. What is it about?

    — Vijaykar, e-mail

    Supply of services by resident welfare association (RWA), unincorporated body or a non-profit entity registered under any law, to members who reimburse the charges or contribute up to Rs 7500 per month per member for common services and goods is exempt from goods and service tax (GST). Prior to 25 January 2018, the exemption was available if the charges or share of contribution did not exceed Rs 5000 per month per member. If the aggregate turnover of an RWA does not exceed Rs 20 lakh in a financial year, it will not be required to take registration and pay GST even if the amount of maintenance charges exceeds Rs 7500 per month per member.

    RWA is required to pay GST on monthly subscription or contribution charged from the members if such subscription is more than Rs 7500 per month per member. The annual aggregate turnover of RWA for supplying of services and goods should also be Rs 20 lakhs or more.

    RWAs are entitled for input tax credit of GST paid by them on capital goods and input services such as repair and maintenance services.

    A person who owns two or more residential apartments in a housing society or a residential complex gets membership of the RWA for each residential apartment owned by him separately. The ceiling of Rs 7500 per month per member is applied separately for each residential apartment owned by him.

    The exemption from GST on maintenance charges levied by RWA from residents is available only if such charges do not exceed Rs 7500 per month per member. If the charges exceed Rs 7500 per month per member, the entire amount is taxable.

     

    Value of supply also determines the goods and services tax (GST) payable. Hence, I will like to have reasonable clarity on value of supply.

    — Rajveer, e-mail

    Goods supplied under normal course of business when the parties to supply are not related persons and price is the sole consideration for such supply are valued at their transaction value, as per Section 15(1) of the Central GST Act, 2017.

    Transaction value includes taxes, duties, cess, fees and charges levied under any Act, except GST. GST compensation cess is excluded if charged separately by the supplier. The value will include the amount the supplier is liable to pay and has been incurred by the recipient but is not included in the price. It comprises all incidental expenses in relation to sale such as packing and commission. Subsidies linked to supply except subsidies provided by government are incorporated. The value consists of interest, late fee and penalty for delayed payment.

    Open value of supply is taken into account when consideration not made fully in money between distinct or related persons, other than through an agent. If the open market value is not available, then it will be the sum total of consideration in money and amount equivalent to the consideration not in money if such amount is known at the time of supply.

    If the value of supply still cannot be determined, then the value is the value of supply of goods or services, or both, of like kind and quality. If value cannot be quantified even after this, then rule 30 or 31, in that order, will be applicable provided that when the goods are intended for further supply by the recipient, the value, at the option of the supplier, will be an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person.

    Value of supply made through an agent is the open market value of the goods being supplied. At the option of the supplier, the value can be 90% of the price charged for similar kind and quality of goods supplied by the recipient to his customer not being a related person.

    When the value of a supply cannot be determined, it has to be decided by the application of rule 30 or rule 31, in that order.

    The value of supply of services of sale of foreign currency including money changing is equal to the difference in the buying rate or the selling rate when a currency is exchanged from or to Indian rupees and the Reserve Bank of India (RBI) reference rate for that currency at that time, and multiply it by the total units of currency. When the RBI reference rate for a currency is not available, the value is 1% of the gross amount of Indian rupees provided or received by the person changing the money. The value of supply of services of booking tickets for travel by air provided by an air travel agent is the amount calculated at 5% of the basic domestic fare or 10% of the basic international fare.

    The value of supply of services of life insurance business is the gross premium charged from a policy holder reduced by the amount allocated for investment or savings on behalf of the policy holder if such an amount is intimated to the policy holder at the time of supply of service. The value is 10% of single premium charged from the policy holder, In other cases, the value is 25% of the premium charged from the policy holder in the first year and 12.5% of the premium charged from the policy holder in subsequent years. The calculations will not apply when the entire premium paid by the policy holder is only for risk cover.

    When a taxable supply is provided by a person buying and selling of second-hand goods and when no input tax credit has been availed on the purchase of such goods, the value of supply is the difference between the selling price and the purchase price. If negative, the value of such supply is to be ignored.

    The costs incurred by a supplier as a pure agent of the recipient of supply is excluded from the value of supply if the prescribed conditions are satisfied.

     

    Accounts and records cannot be ignored to comply with goods and services tax (GST). Can you elaborate?

    — Dushyant Pandya, e-mail

    Every registered person has to keep and maintain at his principal place of business 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 including tax; goods or services imported or exported; supplies attracting payment of tax on reverse charge; and advances received, paid and adjustments made.

    If more than one place of business is specified in the certificate of registration, accounts of each place of business has to be kept at such places of business. Every registered person has also to keep the particulars of names and complete addresses of suppliers from whom he has received the goods or services chargeable to tax, Record has to be maintained of the names and complete addresses of the persons to whom goods or services have been supplied. Complete address of the premises, where goods are stored by him including goods stored during transit, along with the particulars of the stock stored, are to be disclosed.

    Every registered person supplying services has to maintain accounts showing quantitative details of goods used in the provision of services, details of input services utilized and services supplied.

    Every manufacturer has to maintain monthly production accounts showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including waste and by-products.

    Every owner or operator of warehouse, godown or any other place used for storage of goods and every transporter, irrespective of whether he is a registered person or not, has to keep details of the consigner, consignee and books of account including the particulars relating to dispatch, movement, receipt and disposal of such goods.

    Every agent has to maintain accounts depicting the particulars of authorization received by him from each principal separately and description, value and quantity (wherever applicable) of goods or services received or supplied on behalf of every principal; details of accounts furnished to every principal; and tax paid on receipts or on supply of goods or services effected on behalf of every principal.

    Every registered person executing works contract has to keep separate accounts for works contract showing the names and addresses of the persons on whose behalf the works contract is executed; description, value and quantity (wherever applicable) of goods or services received for or utilized in the execution of works contract; details of payment received in respect of each works contract; and the names and addresses of suppliers from whom he received goods or services.

    If maintained manually, each of the volume of books of account with GST records has to be serially numbered. Any entry in registers, accounts and documents should not be erased, effaced or overwritten. All incorrect entries, otherwise than those of clerical nature, have to be scored out under attestation. Thereafter, the correct entry has to be recorded. If the registers and other documents are maintained electronically, a log of every entry or deletion has to be maintained.

    Books of account or other records in accordance with the provisions of Section 35(1) of the Income Tax Act, 1961, have to be retained until the expiry of 72 months from the due date of furnishing of annual return for the year of such accounts and records.

    A registered person, who is a party to an appeal or revision or other proceedings or is under investigation for an offence, has to retain the books of account and other records for one year after the final disposal of such appeal, revision or proceedings or investigation, or for the period specified, whichever is later.

     

    The replies are only in the nature of guidelines. The tax counsellors and the publication are not responsible for any decision taken by readers on the basis of the same. Readers may e-mail their queries on direct taxation to: tax-matters@capitalmarket.com

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Flash News 07-Dec-2019
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