GST Alerts - N J Jain & Associates

GST Alert on Unlocking Clarity on Post Sale Discount

admin — Fri, 06 Feb 2026 10:50:55 +0000

Date: 06.02.2026

Game-Changing Amendment to Section 15(3) and 34(1)

In a significant move to plug a long-standing interpretational gap, the Central Goods and Services Tax (CGST) Act, 2017 has been proposed to be amended via the Finance Bill 2026 which is in line with the recommendations of the 56th GST Council Meeting.

Section 15 and 34 pre and post amendment are as follows:

Section

Pre – Amendment

Post Amendment

15(3)(b)

after the supply has been effected, if-

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.

“(b) after the supply has been effected, if for such discount, a credit note has been issued by the supplier and input tax credit as is attributable to such discount has been reversed by the recipient of the supply, in accordance with the provisions of section 34.”.

Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, or where a discount referred to in clause (b) of sub-section (3) of section 15 is given the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.

In Section 15(3)(b) of the CGST Act, 2017 has been proposed to be amended to eliminate the need for pre-supply agreements or invoice linkage in case of post-sale discounts.

It can be seen that, prescriptions in section 15 have been diluted and merged with section 34.

This tweak, effective from a date to be notified in official gazette, addresses a critical ambiguity around time limits for issuance of credit notes under Section 15(3)(b) for post-supply discounts not agreed or not confirmed upon at the time of supply.

The Pre-Amendment Scenario: A Grey Area Exposed

Prior to this proposed amendment, Section 34(1) provided for issuance of credit notes solely under following 3 conditions:

a. Where tax invoices are found to exceed the taxable value or tax payable
b. Where the goods supplied are returned by the recipient
c. Where the goods or services or both supplied are found to be deficient

Such credit notes must be declared at the earliest of the following:

30th November following the end of the financial year in which the supply occurred (so technically by 31st October, so same can be reported before 30th November in GSTR-1), OR
The filing of the annual return (now includes GSTR-9C reconciliation also).

However, credit notes for post-supply discounts under Section 15(3)(b) such as volume rebates, promotional incentives, or performance-based discounts given after supply was executed weren’t explicitly covered. So, often it was argued that these credit notes fell outside the scope of Section 34 providing for time limit, as they were not fulfilling any of the conditions mentioned in Section 34(1). This has resulted into:

Endless litigations.
Compliance headaches for exporters, manufacturers and retailers relying on such schemes.
Input Tax Credit accumulation at the end of Distributor or Retailor resulted in blocking of huge working capital.

For instance, a supplier offering a 5% year-end rebate on bulk purchases couldn’t adjust output tax if the credit note came after 31st October, even if documented properly under Section 15(3)(b).

What the Amendment Achieves: Crystal-Clear Coverage

The insertion explicitly covers Section 15(3)(b) discount credit notes under Section 34(1)- time limit regime. Now:

Earlier, for post supply discounts if one wanted to issue a GST credit note, he was required to established it in terms of an agreement entered into at or before the time of such supply and also linking of the same with the original invoice through which the underlying supply was made, this was a major bottleneck for the industry. Many industries took a safe view and issued Non-GST credit notes to avoid litigations at their side, but this resulted in ITC accumulation in the supply chain. Once these amendments are notified the industry can issue GST credit notes without any fear of litigation.
All credit notes – whether for deficient supplies or post-supply discounts—must adhere to the 31st October/Annual Return deadline.
No more wiggle room: Late issuance means permanent disallowance of tax adjustment, pushing suppliers to reverse ITC claims via debit notes or cash refunds.

Reversal of ITC By the recipient

Earlier provision of section 15(3)(b) was containing phrase “Subject to reversal of attributable ITC by the recipient” which imposes a general condition that the recipient must reverse the proportionate ITC linked to the transaction (e.g., due to a discount via credit note). It emphasizes the recipient’s duty without specifying the exact mechanism or proof to be produced by the supplier.

Post amendment Section 15(3)(b) contains the phrase “Attributable ITC has been reversed by the recipient in accordance with Section 34” is more stringent, requiring proof of actual reversal by the recipient under Section 34 procedures (e.g., via GSTR-3B reporting or IMS acceptance etc.). These shifts focus on compliance verification, often for the supplier to claim relief.

Aspect	Pre-Amendment	Post-Amendment
Coverage	– Excess Taxable Value or Tax Payable – Goods Return – Deficient supplies only	– Excess Taxable Value or Tax Payable – Goods Return – Deficient supplies only – Post supply discounts
Time Limit of reporting CN	30 November / Annual Return (whichever is earlier)	Same, now strictly enforced
Business Impact	Blocking of Working Capital	Working capital savings

This amendment isn’t just procedural—it’s a compliance booster that fosters predictability in GST’s discount ecosystem. As GST evolves, staying ahead means proactive policy tweaks.

Author’s Note: This analysis is based on the Finance Act amendment as of Feb 2026. Consult the official Gazette for exact applicability dates and seek professional advice for case-specifics.

The post GST Alert on Unlocking Clarity on Post Sale Discount first appeared on N J Jain & Associates.

GST Alert on Union Budget 2026 – Custom

admin — Thu, 05 Feb 2026 09:56:23 +0000

Date: 02.02.2026

1. Expansion of Scope of Customs Act beyond Territorial Waters

The Finance Bill, 2026 proposes to expand the scope of the Customs Act, 1962 to explicitly cover fishing and fishing-related activities by Indian-flagged vessels beyond territorial waters.

Section 1(2) of the Customs Act, 1962 is proposed to be amended to extend the Act to fishing and fishing-related activities by Indian-flagged fishing vessels beyond territorial waters.

A new definition has been inserted:

Section 2(28A): “Indian-flagged fishing vessel” means a vessel which is used or intended to be used for the purpose of fishing in the seas and entitled to fly the flag of India;’.

The expansion of the Act’s scope now explicitly encompasses “fishing and fishing- related activities conducted by Indian-flagged fishing vessels outside India’s territorial waters.”

This measure seeks to regulate and streamline fishing operations within India’s Exclusive Economic Zone (EEZ) and further afield, offering customs duty exemptions for harvested fish and classifying landings at foreign ports as exports. It bolsters the fishing sector by easing duties on related imports and exports, promoting marine product exports, and aligning with the government’s emphasis on the blue economy and fisheries growth as outlined in Budget 2026.

2. Proposal in relation to Recovery, Warehousing and Courier Imports

Section 28(6) amended to treat voluntary penalty paid as a charge for non-payment of duty.

The amendment adds a new phrase to clause (i) of sub-section (6), specifying that the penalty paid voluntarily under sub-section (5) (for cases without fraud) shall, upon determination by the proper officer, be deemed as a “charge for non- payment of duty.” This effectively treats the penalty as an additional component of the duty liability.

This amendment bolsters revenue collection by classifying voluntary penalties as recoverable duty amounts, enhancing enforcement and curbing disputes on payment classification. It promotes voluntary compliance while channeling penalties toward duty shortfalls, supporting Budget 2026’s customs simplification drive to cut litigation and improve efficiency.

Section 28J amended to extend validity of advance rulings from three to five years.

The validity of advance rulings under customs law is now extended from three to five years, with a proviso enabling businesses to request extension of their existing rulings to the new five-year limit.

This delivers extended certainty on classifications and duties, minimizing disputes and bolstering ease of doing business in line with Budget 2026’s tariff simplification agenda.

Section 67 substituted to simplify inter-warehouse movement by removing the requirement of ensuring due arrival.

Prior to amendment: The owner of any warehoused goods may remove them from one warehouse to another, subject to such conditions as may be prescribed for the due arrival thereof at the warehouse to which removal is intended.

Post amendment: The owner of any warehoused goods may remove them from one warehouse to another, subject to such conditions as may be prescribed.
This amendment eliminates the “due arrival” condition at the destination warehouse, streamlining transfers by removing prior permission and verification requirements. It reduces paperwork and administrative delays, enabling faster logistics and cost savings for businesses handling inventory movements.

Section 84(b) amended to empower CBIC to prescribe regulations relating to custody of goods imported or exported by post or courier.
Prior to amendment: the examination, assessment to duty, and clearance of goods imported or to be exported by post or courier.
Post amendment: the custody, examination, assessment to duty, and clearance of goods imported or to be exported by post or courier.
This amendment adds “custody” before “examination,” broadening CBIC’s rule- making authority to cover storage and handling of postal/courier goods alongside existing examination, duty assessment, and clearance processes. It strengthens security measures, curbs potential misuse, and boosts compliance in booming e- commerce and small-shipment sectors, supporting Budget 2026’s goals for efficient indirect tax administration.

3. Insertion of Special Provision for Fisheries – Section 56A

A new Section 56A is proposed to be inserted in the Customs Act, 1962.

A new provision allows duty-free import of fish caught by Indian-flagged vessels in international waters and classifies fish unloaded at foreign ports as exports. This strengthens the fisheries sector by waiving duties on catches to spur deep- sea fishing, while enabling export-linked benefits like refunds for overseas landings. It supports Budget 2026’s drive for blue economy expansion and higher marine exports.

Way Forward

The proposed indirect tax amendments under Budget 2026 reflect a clear policy intent towards simplification, trade facilitation, liquidity enhancement and reduction of disputes. Taxpayers should proactively evaluate the impact of these changes on contracts, pricing models, refund strategies and cross-border transactions.

The post GST Alert on Union Budget 2026 – Custom first appeared on N J Jain & Associates.

GST Alert on Union Budget 2026 – GST

admin — Thu, 05 Feb 2026 09:25:30 +0000

Date: 02.02.2026

1. Rationalisation of Post-Supply Discount Provisions

The Finance Bill, 2026 proposes a significant and taxpayer-friendly amendment in Section 15(3) and Section 34 of CGST Act, 2017 to address long-standing interpretational issues surrounding post-supply discounts under the GST law. The amendments seek to align statutory provisions with prevailing commercial practices and reduce avoidable working capital blockages.

Provision prior to Amendment

Section 15(3)(b) of the CGST Act, 2017 provided that post-supply discounts were deductible only if such discount was established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoices, subject to reversal of attributable ITC by the recipient.

Provision after Amendment

Section 15(3)(b) of the CGST Act, 2017 shall provide that the value of supply shall not include any discount given after supply, if for such discount a credit note
has been issued by the supplier and the attributable ITC has been reversed by the recipient in accordance with Section 34.

A corresponding amendment has been proposed in Section 34(1) of the CGST Act, 2017 to expressly permit issuance of credit notes where discounts referred to in Section 15(3)(b) are granted.

Provision prior to Amendment

Provision after Amendment

Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient or where a discount referred to in clause (b) of sub-section (3) of section 15 is given, the registered person, who has supplied such goods or services or both, may issue to the recipient

The amendment to Section 34(1) of the CGST Act, 2017, explicitly incorporates post-supply discounts under Section 15(3)(b) as a valid ground for issuing credit notes, alongside existing scenarios like excess taxable value or tax charged, goods returns or deficient supplies.

Prior to amendment the credit notes were permissible where tax invoices exceeded actual taxable value or tax payable, or for goods returns or deficient supplies. Further there were ambiguity regarding post sale discount credit notes were covered by Section 34 or not. Further post sale discount credit notes were allowed subject to prior agreement as well as linkage to relevant invoices under Section 15(3)(b).

Post amendment where a discount referred to in clause (b) of sub-section (3) of section 15 has eliminated the need for pre-supply agreements or invoice linkage. This change, aligned with parallel updates to Section 15(3), significantly eases compliance by allowing flexible discount mechanisms without documentation hurdles, reducing litigation risks, enhancing cash flow for businesses through smoother ITC reversals, and promoting GST’s ease-of-doing-business objectives.

Impact Analysis

Removal of mandatory pre-supply agreement and invoice-wise linkage
Facilitation of volume-based and performance-linked trade discounts
Reduction in working capital blockage and litigation

Aspect	Pre-Amendment	Post-Amendment
Coverage	Excess Taxable Value or Tax Payable Goods Return Deficient supplies only	Excess Taxable Value or Tax Payable Goods Return Deficient supplies only Section 15(3)(b) discounts
Time Limit	30 Oct / Annual Return (whichever is earlier)	Same, now strictly enforced
Business Impact	Blocking of Working Capital	Working capital savings

2. Proposals related to GST Refund Mechanism

The Finance Bill, 2026 proposes to significantly expand the scope of provisional refunds under GST to improve cash-flow for taxpayers.

Presently provisional refunds under GST law were limited to zero-rated supplies (exports/ Supplies to SEZ) and the similar provisions are not applicable to Inverted Duty Structure.

Section 54(6) of the CGST Act, 2017 is proposed to be amended to extend provisional refunds not only to zero-rated supplies but also to refund claims arising on account of inverted duty structure.

Under the amended provision:

Provisional refund up to 90% of the claim shall be granted within 7 days of filing the refund application
Withholding of provisional refund shall be permitted only in “exceptional cases”, with reasons recorded in writing

Further, the restriction on grant of refund where the refund amount is less than Rs. 1,000 in cases of exports with payment of tax is proposed to be removed. For exports with payment of Tax certain industries particularly e-commerce, courier service faces the issue due to low value. This amendment aims to automate even refunds for small value consignments.

Aspect	Pre-Amendment	Post-Amendment
Coverage	Zero-rated supplies only	+ IDS (Sec 54(3)(ii))
Payout Timeline	90% within 7 days (limited scope)	Same, expanded scope
Export Threshold	No refund < ₹1,000	Removed—full automation
Business Impact	Cash flow loss/delays for IDS/exporters	Quick 90% refunds; WC boost

Impact Analysis

Faster liquidity for inverted duty structure taxpayers
Automation of refunds for low-value export consignments
Significant relief for e-commerce and courier-based exporters

3. National Appellate Authority for Advance Ruling (NAAAR)

The Finance Bill, 2026 proposes amendments to streamline the functioning of the National Appellate Authority for Advance Ruling.

A new sub-section is proposed to be inserted in Section 101A of the CGST Act, 2017 empowering the Government to notify any existing authority, including a Tribunal, to hear appeals under Section 101B. In such cases, sub-sections (2) to
(13) of Section 101A shall not apply.

It further seeks to provide that in such case, the provisions of sub-sections (2) to
(13) shall not apply.

It also seeks to insert an Explanation in the said sub-section so as to provide that the expression “existing Authority” shall include a Tribunal.

Impact Analysis

Faster operationalisation of appellate mechanism
Reduced delays in resolution of conflicting advance rulings
Improved certainty for taxpayers

4. Proposal in relation to change in Place of Supply provision in relation to Intermediary Service

A landmark amendment has been proposed in the IGST Act, 2017 to address long-standing disputes relating to intermediary services.

2(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

Earlier the place of supply for Intermediary services were governed by Section 13(8) of the IGST Act, 2017 which provides that place of supply shall be the location of the supplier of service.

The Finance Bill, 2026 proposes deletion of the term “intermediary” from Section 13(8) of the IGST Act, 2017.

Effect of Amendment:

Place of supply shall be determined under the default rule, i.e., location of the recipient
Services provided to overseas recipients shall qualify as export of services and be zero-rated enabling suppliers to provide services without charging GST and to claim refund of unutilised ITC under LUT or bond.
Payments made to overseas intermediaries shall qualify as import of services and attract GST under reverse charge mechanism (RCM).
These reforms embody GST’s and constitutional fundamental principle of exporting services, not taxes—ensuring Indian providers compete globally on a level playing field with zero tax drag.

Impact Analysis:

Restoration of GST’s core principle of exporting services and not taxes
Improved global competitiveness of Indian service providers
Substantial reduction in litigation

Way Forward

The post GST Alert on Union Budget 2026 – GST first appeared on N J Jain & Associates.

GST Alert on Time of Supply – Deciding the Correct Tax Rate

admin — Fri, 19 Sep 2025 12:57:38 +0000

GST Alert: 02/2025-26
Date: 19.09.2025

Time of Supply – Deciding the Correct Tax Rate

56th GST Council meeting has changed the rate landscape for many goods and few services, these changes as we all know are effective from midnight of 22nd September 2025. This brings up the core question of how to decide the GST rate on transactions which fall in both the time periods. In any commercial transactions there are 3 major events:

Invoice
Supply
Receipt of payment

In normal business scenario when Tax rates are steady, invoice date is considered to be sacrosanct for selecting which rate applies – this in technical terms is called the “Time of Supply.” But when Rate change occurs from a specified date, it becomes more important to affix exact ‘time of supply’ so that taxpayers can know what rate to charge in the invoice. Section 14 of the CGST Act prescribes certain conditions for deciding whether to tax at old rate or the new rate. We call this as the 2 by 3 rule for ease of understanding; it can simply be understood in following manner:

I. 2 by 3 Rule (Section 14 of the CGST Act):

If any two of the 3 listed above [Supply, invoice and payment] occur after 21st Sept, tax is payable at new rate.
If any two events occur before 22nd Sept, tax is payable at old rate.
This alert deals gives a detailed breakdown on these aspects:

Time of Supply where Rates have changed

There could be 2 different scenarios possible going forward

Goods/Services Supplied BEFORE 22.09.2025

Invoice	Payment	GST Rate Applicability
Before 22.09.2025	Before 22.09.2025	Old Rate
After 22.09.2025	After 22.09.2025	New Rate
Before 22.09.2025	After 22.09.2025	Old Rate
After 22.09.2025	Before 22.09.2025	Old Rate

Goods/Services Supplied AFTER 22.09.2025

Invoice	Payment	GST Rate Applicability
Before 22.09.2025	Before 22.09.2025	Old Rate
After 22.09.2025	After 22.09.2025	New Rate
Before 22.09.2025	After 22.09.2025	New Rate
After 22.09.2025	Before 22.09.2025	New Rate

We all know the exact time of Invoice and Payment; question is how to interpret when goods or services have been “supplied”

Exact phrase used in section 14 is “Supplied before” and “Supplied after”.

Term ‘Supply’ has been defined in Section 7; relevant abstract is as under:

7(1) For the purposes of this Act, the expression “supply” includes—

(a) 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;

If the above provision is deciphered, the common thread that comes out is that when the title over the goods or services is transferred by supplier to recipient, that process can be termed as “Supply” or “Supplied”. So if a supplier issues an invoice and with it if the ownership/title over the goods get transferred, along with the risk and reward, then it can be legally and constructively presumed that delivery of the goods has been given to the recipient even though the physical possession of those goods is still with the supplier.

In view of the above understanding, 3 transactional events discussed above can now be read as under:

Invoice
Transfer of title or Constructive Delivery
Receipt of payment

II. Important issues:

If risk and reward over the goods or services being sold get transferred on the day of Invoice, then 2 events get combined and get fulfilled on single date and rate applicable on that day will be payable.
In case of services, if advance is received before 22.09.2025, tax must be paid at the old rate as advances for services are taxable. However, if both the supply of service and the invoice are issued after 22.09.2025, the tax becomes payable at the new rate. In such cases, tax already paid on the advance can be adjusted against the new liability.
The date of receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after four working days from the date of change in the rate of tax.
The date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

III. III. Conclusion

This is a very critical issue which needs to be taken into consideration before choosing the tax rate on those goods and services where rates have changed. 2 by 3 rule needs to be diligently applied for each transaction so as to avoid any hassles in assessment.

The post GST Alert on Time of Supply – Deciding the Correct Tax Rate first appeared on N J Jain & Associates.

GST Alert on Revision of MRP due to change in GST Rates

admin — Tue, 16 Sep 2025 11:38:27 +0000

GST Alert: 1/2025-26
Date: 16.09.2025

Revision of MRP due to change in GST Rates

I. Change in GST Rates on goods & Services [effective from 22.09.2025]

The 56th GST Council Meeting was held on 3rd Sep 2025 which resulted in GST Rate reduction on many goods and services, it has also been clarified that new rates would become effective from 22.09.2025. To ensure that ultimate benefit of reduction in GST rates is passed on to the consumers, certain clarifications and relaxations have been provided by the government.

II. Revision in MRP

Many of the goods on which rates have been reduced are covered under Legal Metrology Act, 2009 (LMA). As GST rates on many such MRP goods have been reduced and therefore it is mandatory to reduce MRP of these goods. However, there are practical issues in implementing this change as changing of MRP in all packs is near impossible. To give relief Ministry of Consumer Affairs, Food and Public Distribution has issued notification no. I-10/14/2020-W&M dated 9.09.2025. Before we explain the measures announced by this notification please that:

This alert is applicable only if your goods are liable for affixing MRP on it, if that is not the case please ignore this alert.
This alert is applicable only for goods where GST rates have been reduced or increased effective from 22.09.2025 and not otherwise.
This alert is applicable only to Manufacturer, Packers and Importers of pre-packaged goods liable for MRP affixing, it is not applicable to any person other than the 3 mentioned above.

Following is a gist of these relief measures:

1. The government has allowed manufacturers, packers and importers of pre-packaged goods to revise MRPs on their unsold stock.
2. This revision of MRP can be done on all goods which were packaged before the rate reduction becomes effective and can be done till such stock is exhausted by sale or otherwise.
3. Declaration of the revised retail sale price (MRP) shall be made by any one of the following ways: • Stamping or • Putting sticker or • Online Printing

4. While revising the MRP, following conditions are compulsory:

a. Original MRP shall continue to be displayed and the revised price shall not overwrite on it.
b. In case of tax reduction, the new MRP must reflect the reduction.
c. In case of tax increase, the revised MRP must not exceed the extent of actual increase in tax.
d. Manufacturer, packer or importer must do the following as well:
- a. Give at least 2 advertisements in one or more newspapers.
- b. Give notice to inform their dealers / distributors ideally in writing. Notification doesn’t prescribe mode of notice, so email system can be used but written communication would be better in case any issue arises in future.
- c. Give written notice to inform i. State Controllers of Legal Metrology, and ii. Director of Legal Metrology (Central Govt.)

5. Existing packaging material (printed with old MRPs) which is there in stock can be used up to 31st December 2025 or till the same is exhausted after making necessary corrections.

6. It is pertinent to note that retailers who buy goods from manufacturers, packers or importers are not required to make any change in MRP, but they are required to sell at the revised retail price as notified by the supplier.

III. How to calculate change in price

Pertinent question that arises is how to calculate the revised price where GST rates have been reduced, following table explains the formulae to be adopted:

Particulars	Rate	Calculation	Notation	Calculation
Old Price (Inclusive of GST)			A	100.00
Old GST Rate & GST Amount	18%	100 / 1.18 x 18%	B	15.25
Basic Price (Old)		100 – 15.25	C=A-B	84.75
New GST Rate and Amt	5%	84.75 x 5%	D=C*5%	4.23
New Sale Price (Inclusive of GST)		84.75+ 4.23	E=C+D	88.98
Effective Reduction in Price		100 – 88.98	F=A-E	11.02%

Following table gives a gist of percentile change in various rate change scenarios, this may be used:

Existing GST Rate	New GST Rate	Difference in Rate	% Change needed in MRP
12%	5%	-7%	– 6.25%
12%	18%	6%	+ 5.36%
18%	5%	-13%	– 11.02%
28%	18%	-10%	– 7.81%

The above calculations are illustrative only, prices are a subject matter of many factors and decision may be taken after considering all issues.

The post GST Alert on Revision of MRP due to change in GST Rates first appeared on N J Jain & Associates.

GST Alert on Input Service Distributor (ISD) vs Cross Charge

admin — Wed, 26 Feb 2025 06:10:42 +0000

GST Alert: 18/2024-25
Date: 25 Feb 2025

Input Service Distributor (ISD) vs Cross Charge

[Section 20 of CGST Act read with rule 39 and 54]

Before you read the below alert, please note this alert is important for only the following taxpayers and that it is mandatory to be followed from 1.04.2025:
a. Who has multiple GSTINs under one company
b. Who incurs common expenses at one Head/Branch office(s)
c. This applies only to expenses relating to services and not goods

I. Brief background of the issues involved
Many businesses hold multiple GST registrations across various states, they have an administrative office in one state which is called the head office and rest all branch offices (for ease of reference we will also address them as HO and Branch). Many expenses relating to marketing, logistics, legal or statutory requirements and the likes are incurred from the HO whereas branch related localized expenses are incurred from the branch offices.

Under GST by now we all know that one is required to take registration in every state where one is supplying goods or services, so a company having single PAN may have multiple GST registrations which as per section 25 are called ‘distinct persons’. This gives rise to the fact that HO incurs COMMON expenses, benefit of which goes to all or more than one branch. All these common expenses bear GST which is eligible for Input Tax Credit (ITC), as the invoice of these COMMON ITC is received by the HO, it is the one which is required to avail the ITC thereof in its GST returns. States questioned this fact that one state is getting all the ITC whereas the benefit of the underlying service is accrued to some other state and therefore the state having the HO is at a loss as cash payment of taxes reduces due to excess ITC availments.

To cover these apprehensions, GST law has been amended to make ISD mandatory from 1.04.2025 onwards, this alert tries to explain the concept, compliances involved and simplify the issue as much as we can.

II. Input Service Distributor vs Cross Charge

a. Cross Charge:

Taxpayers used to raise invoices from say HO to branch saying that certain services which were received by HO from a vendor are now being further supplied to the branch, thereby passing on the ITC from HO to that branch, this way of raising invoice between distinct persons is known as ‘Cross Charge’.

b. Input Service Distributor (ISD)

Another way of passing on ITC by one GSTIN to another GSTIN (under same PAN) is through the mechanism of ISD, whereby the ITC is availed in an ISD GSTIN and passed on to the relevant branch by way of an ISD invoice. The concept of ISD has been in the statute book since the old Service tax days, however it was never made mandatory like it has been done now.

Please note that under ISD mechanism one is required to distribute ITC relating to common Input SERVICES only and ITC relating to procurement of goods for common use would not be subjected to ISD.

III. What’s changing from 1.04.2025:

Issue		Action Required
Registration as ISD	:	Any taxpayer (having single PAN) fulfilling ALL the following conditions will have to register as an ISD (hereinafter referred to as an HO) a. having more than 1 GST registration b. in 1 or more states c. incurring common service expenses and receiving those invoices in one GSTIN
Invoicing by supplying vendors	:	HO will have to ask all its vendors supplying common ITC to raise invoices in new ISD GSTIN, this exercise is of the utmost importance.
RCM related GST Payments	:	All COMMON RCM related GST payments (like sponsorship expense) will have to be done in HO GSTIN (not in HO ISD GSTIN) (See Note Below)
ITC reconciliation Form like GSTR 2A/2B	:	As we have GSTR 2A/2B for normal ITC, we will have GSTR 6A for ITC in case of ISD. When vendor uploads any invoice in its GSTR 1 in HO ISD GSTIN, it will be reflected in GSTR 6A of HO.
Ratio for Transfer of ITC by ISD for existing GSTINs	:	Ratio of Turnover of past financial year of all GSTINs held by the taxpayer will have to be calculated, so for FY 2025-26 one will have to take the turnover ratio of FY 2024-25.
Ratio for Transfer of ITC by ISD if new GSTIN is added	:	In case a new state GSTIN is taken say in FY 2025-26, then past years turnover ratio will be of no use. Turnover ratio of last quarter for which details of such turnover of all the GSTIN recipients are available, previous to the month during which credit is to be distributed.
Turnover Value	:	Turnover value for the purposes of calculation of ratio would be taken without any GST component.

V. Method of Distribution of ITC by an ISD

a. ITC available for distribution in a month shall be distributed in same month. One will not be allowed to carry forward any ITC to the next month.

b. The amount of the ITC distributed shall not exceed the amount of ITC available for distribution.

c. If an expense is incurred by HO exclusively for one branch then ITC relating to that expense will be distributed to that Branch only. Example – HO in Ahmedabad hired an interior designer to furnish an office in Mumbai. Designer raised an invoice on the HO ISD GSTIN. HO will have to transfer this ITC to Mumbai GSTIN only and not proportionately to all its GSTINs.

d. ITC which relates to more than one branch but not all branches, will have to be distributed to only those branches which it relates to by taking a ratio of aggregate turnover of those branches only.

e. ITC relating to all branches shall be distributed on pro rata basis to all branches in their respective turnover ratio.

f. Formula for distribution of ITC would be as under:
C 1 = (t 1 / T) x C
where,
“C” is the amount of credit to be distributed,
“t1 ” is the turnover of the branch, and
“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable

g. ISD shall have to distribute eligible and ineligible ITC to all the relevant branches. Once the branch receives an ineligible ITC say for example ITC relating to construction, will then have to first avail the ITC and then reverse the same in its GSTR 3B.

h. Distribution of various taxes will happen as under:

A. If the HO and Branch are in 2 DIFFERENT STATES:

a. IGST as IGST

b. CGST as IGST

c. UTGST / SGST as IGST

B. If the HO and Branch are in SAME STATE:

a. IGST as IGST

a. CGST as CGST

b. SGST as SGST / UTGST as UTGST

i. ISD shall issue an ISD Invoice for transferring ITC to branch. See detailed note on invoice below.

j. In case a vendor issues a credit note to HO ISD GSTIN, it will further issue Credit notes to branches in same ratio as was the original ITC which was transferred earlier.

k. Same shall be the case with debit note issued by a vendor.

l. ISD will have to file return in form GSTR 6 every month to distribute the ITC, all ISD invoices will be reported in this return. Said return will have to be filed on or before 13th of the next month.

VI. Invoice or Credit Note of an ISD shall be as under:

Normal ISD Invoice or ISD Credit Note shall contain following details

a. ISD Name, GSTIN and address

b. Maximum 16 digits serial number unique to a financial year

c. Date of issue

d. Name, GSTIN and address of the Branch to whom credit is distributed

e. Amount of credit being distributed

f. Signature – Physical or digital, of the ISD or his authorised representative

Invoice, Debit Note or Credit note for transferring RCM ITC by HO GSTIN to an ISD

a. Name, GSTIN and address of HO who has paid RCM tax

b. Maximum 16 digits serial number unique to a financial year

c. Date of issue

d. GSTIN of original supplier (of the RCM related common service) and its original invoice number whose credit is sought to be transferred to the Input Service Distributor Amount of credit being distributed.

e. Name, address and GSTIN of ISD

f. Taxable value, rate and amount of the credit to be transferred

g. Signature – Physical or digital

h. The taxable value in the invoice issued by HO GSTIN to ISD shall be the same as the value of the common services on which RCM is paid.

One can choose to make one invoice for transferring RCM ITC to the ISD GSTIN which can have all the above information as an annexure.

Abstract of provisions from CGST Act and rules relevant to this alert are placed at Annexure A appended at the end.

VII.Suggestive list of common expenses which may be subjected to ISD:

The following is merely a suggestive list of expense heads, please note only ITC relating to those expenses will have to be transferred through ISD mechanism benefit of which accrues to 2 or more GSTINs of the organisation. If an expense is incurred by HO (invoice is received in HO GSTIN) and the benefit thereof accrues only to that HO, in that case ITC relating to it will not have to be transferred through ISD.

a. Statutory Audit.

b. Common IT infrastructure set up and maintenance expenses

c. Advertisement / Sales promotion / Branding expenses

d. Annual General Meeting Expenses

e. CSR expenses

f. Banking related Charges

g. Internet Expense (if the same is utilized commonly for entire business)

h. Legal & professional Fees (if common for all branches – one will have to sift through each invoice and mark it common for all, common for few branches or only for HO)

i. License and Royalty Expenses

j. Listing Fees

k. Membership, Subscription charges

l. Rent, Hire and Lease Expense

m. Research and Development Expenses

n. Software Expense (including AMC)

o. Travelling Expense

p. Website Handling charges

VIII. Conclusion / Opinion

Since tax was introduced by mankind, any policy change therein was driven by any one or both of the following attributes:

a. Augmenting / increasing tax revenue

b. Bringing qualitative and positive changes in taxpayer’s experience

We personally don’t see how any of the above attributes are being achieved by making this humongous policy change. It is a settled principle that ISD mechanism doesn’t result in increase in revenue, I may concede this much that some consuming states may see small increase in cash revenue but then the question that must be answered by the policy makers is, was such a huge amendment in law like this warranted for such small distributive revenue change. Should the taxpayers who are already under a mountain of compliance be forced to comply with one more set of compliances? This is in our view is completely unwarranted and asymmetric policy intervention. Come April 2025, taxpayers will soon be faced with unnecessary paperwork, mounting compliances and mistakes which are inevitable in this flawed law, will result in litigation for ages.

Who will decide whether an expense is ‘common’, whether it is beneficial to any or all branch, will the officers who assess have the requisite knowledge to make such decisions.

Dare one say “ONE NATION ONE TAX” – we are 32 state countries fighting for tax from one hapless taxpayer base.

Once these 32 state country governments realize the unforeseen outcome of this change, I believe it will be rolled back ‘in the larger interest of public’ on ‘as is where is basis’, it may take 2 years or more but it will be rolled back. It’s a prophecy we would really like to come true.

Formulated by:
N J Jain & Associates
Chartered Accountants

CA Nitesh Jain
Managing Partner

CA Gaurav Khetan
Partner

CA Praveen Maheshwari
Partner

CA Jay Dalwadi
Partner

Annexure A

Abstract of provisions from CGST Act and rules relevant to this discussion:

From 1.07.2017 to 31.03.2025

2(61) “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office;”

From 1.04.2025 onwards

2 (61) “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;]

Annexure A

Abstract of provisions from CGST Act and rules relevant to this discussion:

From 1.07.2017 to 31.03.2025

From 1.04.2025 onwards

2 (61) “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;]

Section 20 From 1.04.2025 onwards

Manner of distribution of credit by Input Service Distributor.
20. (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.

(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section(4) of section 9 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.

(3) The credit of central tax shall be distributed as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit, in such manner as may be prescribed.]

Procedure as per Rule 39

Rule 39. Procedure for distribution of input tax credit by Input Service Distributor.-

1[(1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the following conditions, namely: ––

(a) the input tax credit available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR-6 in accordance with the provisions of Chapter VIII of these rules;

(b) the amount of the credit distributed shall not exceed the amount of credit available for distribution;

(c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;

(d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;

(e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period;

(f) the input tax credit that is required to be distributed in accordance with the provisions of clause (d) and (e) to one of the recipients “R1”, whether registered or not, from amongst the total of all the recipients to whom input tax credit is attributable, including the recipients who are engaged in making exempt supply, or are otherwise not registered for any reason, shall be the amount, “C1”, to be calculated by applying the following formula –

C 1 = (t 1 / T) x C
where,

“C” is the amount of credit to be distributed,

“t1 ” is the turnover, as referred to in clause (d) and (e), of person R1 during the relevant period, and

“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable in accordance with the provisions of clause (d) and (e);

(g) the Input Service Distributor shall, in accordance with the provisions of clause (d) and (e), separately distribute the amount of ineligible input tax credit (ineligible under the provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible input tax credit;

(h) the input tax credit on account of central tax, State tax, Union territory tax and integrated tax shall be distributed separately in accordance with the provisions of clause (d) and (e);

(i) the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated tax to every recipient;

(j) the input tax credit on account of central tax and State tax or
Union territory tax shall–

(i) in respect of a recipient located in the same State or Union territory in which the Input Service Distributor is located, be distributed as input tax credit of central tax and State tax or Union territory tax respectively;

(ii) in respect of a recipient located in a State or Union territory other than that of the Input Service Distributor, be distributed as integrated tax and the amount to be so distributed shall be equal to the aggregate of the amount of input tax credit of central tax and State tax or Union territory tax that qualifies for distribution to such recipient as referred to in clause (d) and (e);

(k) the Input Service Distributor shall issue an Input Service Distributor invoice, as provided in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of input tax credit;

(l) the Input Service Distributor shall issue an Input Service Distributor credit note, as provided in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit already distributed gets reduced for any reason;

(m) any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor by the supplier shall be distributed in the manner and subject to the conditions specified in clauses (a) to (j) and the amount attributable to any recipient shall be calculated in the manner provided in clause (f) and such credit shall be distributed in the month in which the debit note is included in the return in FORM GSTR-6;

(n) any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in which the input tax credit contained in the original invoice was distributed in terms of clause (f), and the amount so apportioned shall be-

(i) reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR-6; or

(ii) added to the output tax liability of the recipient where the amount so apportioned is in the negative by virtue of the amount of credit under distribution being less than the amount to be adjusted.]
(1A) For the distribution of credit in respect of input services, attributable to one or more distinct persons, subject to levy of tax under sub-section (3) or (4) of section 9, a registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note as per the provisions of sub-rule(1A) of rule 54 to transfer the credit of such common input services to the Input Service Distributor, and such credit shall be distributed by the said Input Service Distributor in the manner as provided in sub-rule (1).]

(2) If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for any other reason for any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process specified in 3[clause (n)] of sub-rule (1) shall apply, mutatis mutandis, for reduction of credit.

(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the Input Service Distributor credit note specified in 4[clause (l)] of sub-rule (1), issue an Input Service Distributor invoice to the recipient entitled to such credit and include the Input Service Distributor credit note and the Input Service Distributor invoice in the return in FORM GSTR-6 for the month in which such credit note and invoice was issued.

Explanation. — For the purpose of this rule, –

(i) the term “relevant period” shall be—

(a) if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or

(b) if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed;

(ii) the expression “recipient of credit” means the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor;

(iii) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entries 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.]

Rule 54. Tax invoice in special cases.-

(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor credit note issued by an Input Service Distributor shall contain the following details:-

(a) name, address and Goods and Services Tax Identification Number of the Input Service Distributor;

(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters hyphen or dash and slash symbolised as- “-”, “/” respectively, and any combination thereof, unique for a financial year;

(d) name, address and Goods and Services Tax Identification Number of the recipient to whom the credit is distributed;

(e) amount of the credit distributed; and

(f) signature or digital signature of the Input Service Distributor or his authorised representative:

Provided that where the Input Service Distributor is an office of a banking company or a financial institution, including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as mentioned above.

[(1A) (a) A registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the Input Service Distributor, which shall contain the
following details:-

(i) name, address and Goods and Services Tax Identification Number of the registered person having the same PAN and same State code as the Input Service Distributor;

(ii) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

(iii) date of its issue;

(iv) Goods and Services Tax Identification Number of supplier of common service and original invoice number whose credit is sought to be transferred to the Input Service Distributor;

(v) name, address and Goods and Services Tax Identification Number of the Input Service Distributor;

(vi) taxable value, rate and amount of the credit to be transferred; and

(vii) signature or digital signature of the registered person or his authorised representative.
(b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common services.]

The post GST Alert on Input Service Distributor (ISD) vs Cross Charge first appeared on N J Jain & Associates.

GST Alert on Reverse Charge on Goods Under GST

admin — Tue, 21 Jan 2025 10:57:44 +0000

GST Alert: 17/2024-25
Date: 18 Jan 2025

S. No.	HSN	Supplier of Goods	Recipient of Goods	Description of Goods	Tax payable by Supplier	Tax payable by Recipient	Effective from
1.	Any	Located Outside India	Importer	Any Goods which are imported into India	Nil	Rate Applicable	From 1.07.2017
2.	0801	Agriculturist (See Note 1)	Any registered person	Cashew nuts, not shelled or peeled	Nil	Rate Applicable	From 1.07.2017
3.	1404 90 10	Agriculturist (See Note 1)	Any registered person	Bidi wrapper leaves(tendu)	Nil	Rate Applicable	From 1.07.2017
4.	2401	Agriculturist	Any registered person	Tobacco leaves	Nil	Rate Applicable	From 1.07.2017
5.	3301 24 00, 3301 25 10, 3301 25 20, 3301 25 30, 3301 25 40, 3301 25 90 Effective from 1.01.2023	Any Unregistered Person	Any Registered Person	Following essential oils other than those of citrus fruit namely: – (a) Of peppermint (Mentha piperita); (b) Of other mints : Spearmint oil, Water mint-oil (ex-mentha aquatic), Horsemint oil, Bergamentoil, Mentha	Nil	Rate Applicable	From 1.10.2021 With minor changes made on 1.01.2023
6.	5004 to 5006	Manufacturer of silk yarn from raw silk or silk worm cocoons	Any registered person	Silk Yarn	Nil	Rate Applicable	From 1.07.2017
7.	5201	Agriculturist	Any registered person	Raw Cotton	Nil	Rate Applicable	From 15.11.2017
8.	–	State Government, Union Territory or any local authority	Lottery distributor or selling agent.	Supply of lottery	Nil	Rate Applicable	From 1.07.2017
9.	Any Chapter	Government or Local Authority excluding Ministry of Railways	Any registered person	Used vehicles, seized and confiscated goods, old and used goods, waste and scrap	Nil	Rate Applicable	From 13.10.2017 Railways excluded from 20.10.2023
10.	Any Chapter	Any registered person	Any registered person	Priority Sector Lending Certificate	Nil	Rate Applicable	From 28.05.2018
11.	72, 73, 74, 75, 76, 77, 78, 79, 80 or 81	Any unregistered person	Any registered person	Metal Scrap	Nil	Rate Applicable	From 10.10.2024

Important Notes

1.Agriculturist as defined in section 2 (7) of the CGST Act

(7) “agriculturist” means an individual or a Hindu Undivided Family who

undertakes cultivation of land—

(a) by own labour, or

(b) by the labour of family, or

personal supervision or the personal supervision of any member of the family;

Formulated by:
N J Jain & Associates
Chartered Accountants

CA Nitesh Jain
Managing Partner

CA Gaurav Khetan
Partner

CA Praveen Maheshwari
Partner

CA Jay Dalwadi
Partner

The post GST Alert on Reverse Charge on Goods Under GST first appeared on N J Jain & Associates.

GST Alert on Reverse Charge on Services Under GST

admin — Tue, 21 Jan 2025 10:25:31 +0000

GST Alert: 16/2024-25
Date: 18 Jan 2025

Reverse Charge Mechanism based tax payment is required to be done by the recipient in certain cases, following is gist of its applicability.

RCM Chart for Services

S. No.	Type of Service	Status of Service Provider(See note 2)	Status of Svs Recipient (Do u fall in this)	Description of Service	Tax payable by Provider	Tax payable by Recipient	Effective from
1	Procurement of goods or service from an unregistered person [See note 4]	Any Unregtered person	Any Registered person	Purchase of any goods and receipt of any service from an unregistered person	Nil	Rate applicable to goods or service recd	From 1.07.2017 to 12.10.2017
2	Import of Services	Any	Any	Any Services provided by a person outside India to any person in India	Nil	Rate applicable to the service	1.07.2017 onwards
3	Insurance agent Services	Any	Any	Services provided by an insurance agent to any person carrying on insurance business	Nil	18%	1.07.2017 onwards
4	Goods Transport by Road (GTA)	Goods Transport Agency (Who has not opted for FCM option in 5% or 12%)	Any person other than a non-business entity (see Note 5)	Service provided by the Good Transport Agency (GTA) in respect of transportation of goods by road.	Nil	5%	1.07.2017 onwards with minor changes
5	Sponsorship Service	Any Person other than a body corporate	Firm, LLP, or Company	Service provided by way of sponsorship.	Nil	18%	1.07.2017 onwards Body corporate suppliers put in FCM from 16.01.2025
6	Service by an Arbitral Tribunal	Arbitral Tribunal	Business entity located in India (See Note 6)	Service provided by an Arbitral Tribunal	Nil	18%	1.07.2017 onwards
7	Advocate Service (Including Senior Advocates)	Individual or Firm of Advocates	Any (See Note 6)	All Legal services	Nil	18%	1.07.2017 onwards
8	All Services provided by Government or local authority (See Note 7)	Govt. or Local authority	Any business entity	Any Service provided by Government or Local authority except a few services	Nil	18%	1.07.2017 onwards
9	Services provided by Directors [See note 8]	Individual	Company/Body Corporate	Service provided by Directors	Nil	18%	1.07.2017 onwards
10	Recovery Agent Services [See note 9]	Any	Banking Co. or Financial Inst. Or NBFC	Service provided by recovery agents to certain persons	Nil	18%	1.07.2017 onwards
11	Transfer or permitting the use or enjoyment of a copyright	Author or music composer, photographer, artist, or the like	Publisher, Music company, Producer, or the like	Transfer or permitting the use or enjoyment of a copyright covered under section 13 (1)(a) of the Copyright Act, relating to original literary, dramatic, musical or artistic works	Nil	18%	From 1.07.2017 with minor changes
12	Services provided by an agent of business correspondent (BC) to BC	An agent of business correspondent (BC)	A business correspondent, located in the taxable territory.	Services provided by an agent of business correspondent (BC) to business correspondent (BC).	Nil	18%	From 1.07.2017
13A	Radio taxi, Motor Cab or motorcycle done through an e-com operator	Taxi driver or Rent a cab operator	Any Person	services by way of transportation of passengers by a radio-taxi, motorcab, maxicab motorcycle;	Nil	18% by E-Commrce Operator	From 1.07.2017 with minor changes
13B	Accommodation Services through an e-commerce operator	Unregtered Hotel, inns, clubs etc [See note 10]	Any Person	services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes	Nil	18% by E-Commerce Operator	From 1.07.2017
13C	Restaurant Services through E-commerce operator	All types of Restaurants [excl those located in hotel having rooms above 7500]	Any Person	Restaurant Services	Nil	5% by E-Comerce Operator	From 1.01.2022
14	Services provided by Members of Overseeing Committee to RBI	Members of Overseeing Committee to RBI	Reserve Bank of India	Services provided by Members of Overseeing Committee to RBI	Nil	18%	From 13.10.2017
15	Renting of Immovable property	Govt. or Local authority excluding the Ministry of Railways	GST Registered Person	Renting of Immovable Property	Nil	18%	From 25.01.2018 Railways excluded wef 20.10.23
16	Services supplied by individual Direct Selling Agents (DSAs)	Individual, HUF or Proprietor	Bank or non-banking financial company	Services supplied by individual Direct Selling Agents (DSAs)	Nil	18%	From 26.07.2018
17	Services provided by business facilitator (BF) to a banking company	Business facilitator (BF)	A banking company, located in the taxable territory	Services provided by business facilitator (BF) to a banking company	Nil	18%	From 1.01.2019
18	Security services (services of supply of security personnel) [Note 11 & 12]	Any person other than a body corporate	Registered person, located in the taxable territory	Security services (services provided by way of supply of security personnel)	Nil	18%	From 1.01.2019
19	Procurement of gds or service frm an unregistered person by a residential real estate builder [See note 13]	Any Unregistered person	Registered builder / developer who has opted to pay tax @5% / 1%	Purchase of any goods and receipt of any service from an unregistered person	Nil	28% on Cement and 18% on other goods or services	From 1.04.2019
20A	Transfer of Development Rights / FSI [See Note 14]	Any Person	Builder / Developer	Services of TDR or FSI for construction of a project	Nil	18%	1.04.2019
20B	Long term lease of land (30 yrs +) [See Note 14]	Any Person	Builder / Developer	Services of Lease of land for construction	Nil	18%	1.04.2019
21	Renting of Passenger Vehicle where Fuel Cost is included [See Note 15]	Any person [excluding a body corporate tax @ 5%]	Body Corporate located in India	Renting of vehicle where the supplier is not charging GST @ 12% and where fuel cost is included	Nil	5%	From 1.10.2019
22	Lending of securities under Securities Lending Scheme	Lender	Borrower	Services of lending of securities under Securities Lending Scheme, 1997 of SEBI	Nil	18%	From 1.10.2019
23	Renting of Residential Property [See Note 16]	Any Person	Any Registered Person	Renting of residential dwelling	Nil	18%	From 18.07.2022
24	Renting of any immovable property other than residential dwelling	Any unregistred person	Any registred person other than a person who has opted for composition levy	Renting of Immovable Property other then residential	Nil	18%	From 10.10.2024 Exclusion of Composition persons frm 16.01.2025

Important Notes

1.When to Pay GST in RCM

In case of RCM based tax payments – the tax becomes payable on the earlier of the following 2 dates:

When the payment to the vendor is made
30 days from the date of the invoice for purchase of goods
60 days from the date of the invoice for service

In case where the service was completed and invoice was raised prior to GST date but service tax is not paid, then GST will become payable. In case service tax was paid by the recipient before GST date then he will not be required pay GST again

2.How to ascertain Status of Service Provider:

We can ascertain the same from the PAN of the party. Normally Service Tax registration number starts from the PAN. Check the 4th digit of PAN. It denotes Status of Party.

4^th digit of PAN or 6^th digit of GSTIN	Status
P	Individual
F	Firm
H	HUF
B	Body of Individual
A	Association of Person (AOP)
L	Local Authority
C	Company
T	Trust
J	Artificial Judicial Person

How to ascertain State of Supplier:

We can ascertain the same from the PAN number of the supplier. The GSTIN always contain 1st two digits as State Code.

3.Declaration in Invoice

Every Supplier of goods or services whose supply falls under RCM is required to declare the same in his Tax Invoice

4.Purchases from Unregistered Persons:

From 1.07.2017 to 12.10.2017

RCM shall apply only where the aggregate value of purchases by a registered person from an unregistered purchases of goods or service from 1 or all the unregistered suppliers exceeds five thousand rupees in a day.

Also note that in case of receipt of inter-state services or goods one shall NOT be required to pay tax under RCM because as per section 24 (i) of CGST and SGST act, the vendor is required to compulsorily register as he is supplying goods or services on inter-state basis.

Further, effective from 13.10.2017 RCM on procurement from Unregistered persons have been removed and therefore one will not be required to pay any GST on such procurements.

From 1.02.2019, provisions which provide for applicability of RCM on supplies made by unregistered persons have been amended. Earlier all categories of recipients be it individual, partnership firm or companies receiving supplies made by unregistered persons were falling under RCM.

As per new provisions government can choose to apply RCM only on certain class of registered persons who shall then be liable to pay GST on RCM basis on all types of supplies received from unregistered persons. Separate notification specifying type of registered person will be issued, till that time this provision will have no play.

Government has vide notification 2/2019-CTR rescinded notification 8/2017-CTR which gave exemption from leviability of RCM on Supply from Unregistered Persons. This would not make any difference whatsoever because the section under which 8/2017-CTR was issued has itself been amended and now to levy tax on supplies from unregistered person government will have to issue a new notification specifying class of registered persons as discussed above.

5. GTA Service

The person who pays or is liable to pay freight for the transportation of goods by road in goods carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of RCM.

If the recipient falls in any of the following categories, he will have to pay GST on RCM basis:

a. any factory registered under or governed by the Factories Act, 1948;

b. any society registered under the Societies Registration Act, 1860 or under any other law for the time being in force in any part of India

c. any co-operative society established by or under any law;

d. any person registered under CGST/SGST/UTGST Act;

e. anybody corporate established, by or under any law; or

f. partnership firm – registered or not under any law including association of persons.

g. Casual taxable person

A. Exemption on GST on GTA Service

GTA services provided to following organisations will not be under RCM from 1.01.2019 as the same have been specifically exempted.

Department of the Central Government or State Government or Union territory; or
local authority; or
Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.

B. GTAs who have opted for Forward Charge Tax payments

Recipients of GTAs service suppliers, who have exercised the option to pay tax on GTA services under forward charge whereby they would be charging GST (either at 12% or 5%) in their invoice and discharge the liability on their own, shall not be eligible for payment of GST under RCM.

C. Declaration for opting for Forward Charge Mechanism

As discussed above, GTA service providers are eligible to choose whether they want to fall under FCM whereby they can charge and pay GST or they can choose RCM whereby their customers would be liable to pay GST.

One is required to file a declaration on GSTN for choosing FCM between 1^st Jan to 31^st March, once opted, the GTA supplier would be classified under FCM till he chooses to opt out. If any GTA supplier doesn’t file this declaration, he would be deemed to have chosen RCM method.

Advocates and Arbitral tribunals:

a. Please note the term “Business entity” is not defined anywhere in the GST Law. However, it is defined in Notification 12/2017 CT (Rate) as under:

2 (n) “business entity” means any person carrying out business;

b. Legal Services means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.

The words used are “deduct 1 % FROM the payment made or credited to the supplier”. There is no reference to the words invoice in the above provision. Payments are debited and not credited in the account of supplier and therefore constructive interpretation of above provision would be that as and when payment (in cash or kind) is made or accounted to the account of supplier liability to deduct TDS would arise. Another interpretation could be that as 1% is to be deducted FROM the payment being made and not OF the payment being made hence one could say that TDS is to be deducted from the value of the supply booked on or after 10.10.2024 but then question arises is TDS required to be deducted on payments being paid in October or thereafter on Invoices booked pre 10th October 24.

In view of above interpretation, answer to the above 2 questions in my opinion would be as under:

1. Is TDS required to be deducted on 20 crores or 10 crores only

TDS is to be deducted on 10 crores only because payment of 10 crores was made in September 2024 (pre TDS regime)

2. Is TDS required to be deducted in October 24 or November 24

TDS is required to be deducted in November 2024 because remaining 10 crores are being paid in November 24.

7. All Services by the Government or Local Authority: In case of all services provided by the Government or Local authority which are taxable under the present service tax law except a few listed below the tax on the same shall be payable by the service recipient.

Following services if provided by the Government or Local Authority are not under RCM

Recipient has to pay tax on all Services as explained above except the following services on which the Government will pay the tax.

Renting of immovable property
Services by the Department of Posts
Services by the Ministry of Railways (effective from 20.10.2023)
Services in relation to an aircraft or a vessel
Transport of goods or passengers

a. What is the meaning of ‘Government’

“Government” means the Central Government, State Government or Union Territory Administration

b. What is the meaning of ‘Local Authority’

Local authority means-

a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
a “Municipality” as defined in clause (e) of article 243P of the Constitution;
a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to, or entrusted by the Central Govt or any State Government with the control or management of a municipal or local fund;
a Cantonment Board as defined in section 3 of the Cantonments Act 2006;
a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
a Development Board constituted under article 371 of the Constitution; or
a Regional Council constituted under article 371A of the Constitution;

8. Services provided by director

Services provided or agreed to be provided by a director of the Company to the said Company would be taxable under reverse charge mechanism wherein the Company would be required to discharge the tax liability in full.

It has been our consistent view (as espoused in all earlier GST alerts on RCM) that, only those services will be covered under this head which are provided by the director in the capacity of a director and not otherwise. A director who has rented his office to the company and draws lease rentals will be required to pay tax in his individual capacity and the company will not be required to pay tax on the same under RCM. This view has now been clarified vide circular 201/13/2023 dated 1.08.2023.

Services provided by director who is employee of the company would not get covered under this entry as Schedule III specifically excludes service provided by employee to employer.

9. Recovery Agent Services:

Services provided or agreed to be provided by a recovery agent to Banking Company, Financial Institutions or Non-Banking Company in relation of recovery any sum due to such Banking Company, Financial Institutions or Non-Banking Company shall be taxable under Reverse Charge Mechanism. Now the Banking Company, Financial Institutions or Non-Banking Company shall be required to pay tax on the same.

10. Services provided through E-Commerce Operator

E-commerce operator would be liable to pay GST in case of Accommodation Services and radio taxi services (at sr. __ above) provided through it only where these 2 types of service providers are not liable to obtain registration under section 22. Which in other words means that if any of these 2 service providers has turnover above 20 lacs, he becomes liable to register, hence the liability to pay GST on service supplied through an E-commerce operator would fall on the supplier themselves.

11. Security services provided to following organizations will not be under RCM.

a department or Establishment of the Central Government or State Government or Union territory; or
local authority; or
Governmental agencies, which has taken registration under the Central Goods and Services Tax Act, 2017 only for the purpose of deducting tax under section 51 and not for making a taxable supply of goods or services.
a registered person paying tax under Composition Scheme.

12. Time of Supply for Security Services

As Security Services are now brought into the RCM net, question would arise as to the taxability of invoices being raised for period on or before December 2018, who would be liable to pay GST for such past period invoices whose payments are made in January 19 or thereafter. Thumb rule of any tax law is that once a time for payment of tax has been affixed, it cannot be again subjected to the time of supply test. Hence, where the invoice has been issued on or before 31.12.2018, then the Security Service Supplier will be liable to pay tax irrespective of the fact as to when the payment is received by him. If the invoice is made on or after 1.01.2019 then the service recipient would only be liable to pay tax.

There could be 3 different scenarios possible going forward

a. Services completed and invoice made on or before 31.12.2018 but payment made after 31.12.2018.

As discussed above, Security Service Supplier will be liable to pay tax irrespective of the fact as to when the payment is received by him.

b. Services completed on or before 31.12.2018 but invoice as well as payment made in January 2019

Service Recipient will be liable to pay GST

c. Services completed, invoice as well as payment made on or after 31.12.2018

Service Recipeint will be liable to pay GST

Similar issue arose in Service tax regime as well and it was clarified as under:

10.1.7 Is the reverse charge applicable on services provided and complete before 1.7.2012 though payments were made after 1.7.2012?

For any service whose point of taxation has been determined and whole liability affixed before 1.7.2012 the new provisions will not apply. Merely because payments are being made after 1.7.2012 will not add any additional liability on the service receiver in respect of such services.

13. Procurement of goods or services by a builder / developer in a residential real estate project from unregistered persons

Detailed analysis on this issue can be found in our alert placed at following link.

https://njjain.com/gst-alert-1-1920-changes-in-gst-law-for-real-estate-sector-2/

14. Transferable Development Right, Floor Space Index and Long-term lease

From 1.04.2019 onwards TDR, FSI and Long-term lease of land have been put under RCM both for commercial as well as residential real estate projects, tax on the same would be payable by the promoter of the project. However, for residential projects, exemption has also been granted whereby proportionate value of TDR/FSI would be taxed based on the unsold units on the day the project receives Occupation certificate.

15. RCM on Renting of motor vehicle Services was introduced in GST w.e.f. 1.10.2019 however some doubts arose due to the way the entry was worded. Council has issued notification 29/2019-CTR to reword the entry so that doubts can be addressed.

RCM shall be applicable on the service by way of renting of any motor vehicle (MV) when following conditions are met:

MV is designed to carry passengers
Cost of fuel is included in the invoice value
Supplier is not a body-corporate;
Recipient (Customer) is ONLY a body Corporate
Supplier does not issue an invoice charging GST @12% from the service recipient.

This provision will be applicable from 1.10.2019 onwards.

16. Renting of Residential Property

Detailed analysis on this issue can be found in our alert placed at following link.

https://njjain.com/gst-alert-12-renting-of-residential-unit-to-registered-person-proprietor-2/

17. Agriculturist as defined in section 2 (7) of the CGST Act

(7) “agriculturist” means an individual or a Hindu Undivided Family who

undertakes cultivation of land—

(a) by own labour, or

(b) by the labour of family, or

personal supervision or the personal supervision of any member of the family;

18. Reverse Charge on Ocean Freight

a. From 1.07.2017 to 30.09.2023

As per notification, GST on Ocean freight services provided by a person located outside India to an importer located in India, was payable by the Importer located in India under RCM. However, Supreme Court in the case of Mohit Minerals, had struck down this levy, hence practically no tax was payable under RCM. Infact tax paid by the Importers was to be refunded due to this judgement.

b. From 1.10.2023 onwards

Ocean freight services provided by a person located outside India to a person located in India have been exempted.

Formulated by:
N J Jain & Associates
Chartered Accountants

CA Nitesh Jain
Managing Partner

CA Gaurav Khetan
Partner

CA Praveen Maheshwari
Partner

CA Jay Dalwadi
Partner

The post GST Alert on Reverse Charge on Services Under GST first appeared on N J Jain & Associates.

GST Alert on TDS Provisions and Compliances under GST

admin — Wed, 20 Nov 2024 11:27:24 +0000

GST Alert: 15/2024-25
Date: 11 Oct 2024

Government vide notification no. 50/2018-CTR dated 13.09.2018 had notified applicability of section 51 whereby TDS provisions were made effective from 1.10.2018.
Till 9.10.2024, GST TDS provisions were applicable only to following persons:
a. A department or establishment of the Central Government or State Government
b. Local authority
c. Government Agencies
d. An Authority or a Board or any other body:
i. Set by an Act or Parliament or State Legislature; OR
ii. Established by any Government
And
having 51% or more Equity and Control to carry out any function
e. Society established by Central or State Government or local authority under the Societies Registration Act, 1860
f. Public Sector Undertakings

It may be noted that transaction between 2 Private companies or organisations were not liable to TDS provisions till 9.10.2024, however effective from 10.10.2024 vide notification 25/2024-CT dated 9.10.2024 TDS provisions have been made applicable to Non-Government taxpayers also.

From 10.10.2024 onwards any registered buyer receiving supplies from other registered supplier of metal scrap falling under Chapters 72 to 81 will now have to deduct and pay GST TDS.

This note attempts to explain GST TDS provisions made applicable to metal scrap sector

2. Nature of Transactions covered:

Supply of metal scrap falling in HSN chapter 72 to 81 shall be liable to TDS in the following situations:
a. In case of Intra State Transaction where all 3 parameters:
i. Location of Supplier,
ii. Place of supply of goods or services and
iii. Location of recipient
are in one state, then TDS @ 2% (CGST 1% + SGST 1%) shall be deducted.
b. Location of Supplier as well as the place of supply are in different states. In such cases, Integrated tax would be levied. TDS to be deducted would be TDS (IGST – 2%).
c. Supplier as well as the place of supply are in one State and the recipient is located in another State. In such cases, TDS would not be deducted.

In tabular form, above can be explained as under:

Transactions liable under TDS
State – A			State – B		TDS
State – A			State – B		Supply	Tax Payable	TDS
Supplier	Recipient	Place of Supply	Place of Supply	Recipient
Yes	Yes	Yes			Intra-State	CGST+SGST	Yes
Yes	Yes		Yes		Inter-State	IGST	Yes
Yes			Yes	Yes	Inter-State	IGST	Yes
Yes			State-C	Yes	Inter-State	IGST	Yes
Yes		Yes		Yes	Intra-State	CGST+SGST	No

3. Whether TDS is deductible on Invoices and received on or before 9.10.2024 where payment thereon is being released on or after 10.10.2024.

As per section 51 (1) of the Act, one is required to deduct tax from the payment made or credited to the supplier of taxable goods or services or both. In other words, Invoices issued prior to 10.10.2024 whose payments are being released on or after 10.10.2024 will also be subject to TDS.

4. Whether TDS is deductible on Advances paid prior to 10.10.2024 whose invoices get raised after 10.10.2024.

A larger question arises here, whether TDS is deductible on invoices raised or payments made whichever is earlier as is the case in Income Tax Act or is TDS deductible purely as and when payment is being made. This can be best explained through an example.

Example

A scrap buyer ABC Ltd has entered into a contract to buy metal scrap worth 100 crores from supplier XYZ Ltd. ABC paid 10 crores as Advance to XYZ in September 2024. In October 2024 XYZ raised first invoice of 20 crores. ABC after adjusting 10 crores advance paid earlier from 20 crores paid the remaining 10 crores in November 2024.

Questions:

1. Is TDS required to be deducted on 20 crores or 10 crores only
2. Is TDS required to be deducted in October 24 or November 24

Section 51 reads as under:
51. (1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,––
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be notified by the Government on the recommendations of the Council,
(hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one per cent. from the payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty thousand rupees

In view of above interpretation, answer to the above 2 questions in my opinion would be as under:

1. Is TDS required to be deducted on 20 crores or 10 crores only

TDS is to be deducted on 10 crores only because payment of 10 crores was made in September 2024 (pre TDS regime)

2. Is TDS required to be deducted in October 24 or November 24

TDS is required to be deducted in November 2024 because remaining 10 crores are being paid in November 24.

Further, language of section 194C of the Income tax is a bit different in this regards interpretation of which is that TDS is required to be deducted on payment or invoice credited to the books whichever is earlier – section reads as under:

194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to—

(i) one per cent where the payment is being made or credit is being given to an individual or a Hindu undivided family;

(ii) two per cent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,
of such sum as income-tax on income comprised therein.

(2) Where any sum referred to in sub-section (1) is credited to any account, whether called “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

(3) Where any sum is paid or credited for carrying out any work mentioned in sub-clause (e) of clause (iv) of the Explanation, tax shall be deducted at source—

(i) on the invoice value excluding the value of material, if such value is mentioned separately in the invoice; or

(ii) on the whole of the invoice value, if the value of material is not mentioned separately in the invoice.

5. Other key provisions are as under

A. TDS deduction is to be done if the total value of such supply, under a contract, exceeds Rs. 2.50 lacs. Thus, individual supplies may be less than Rs. 2,50,000/-, but if contract value is more than Rs. 2,50,000/-, TDS will have to be deducted.

B. In case there is no contract written or oral, then the limit of 2.50 lacs will be made applicable transaction wise.

C. Value of 2.50 lacs is to considered without GST.

D. TDS is to be deducted at following rates:
CGST – 1% + SGST – 1% = Total – 2%
OR
IGST – 2%

E. TDS will be deducted on the basic taxable value shown in the Tax invoice, in other word Value on which TDS is to be deducted shall be excluding CGST, SGST, IGST or Cess, if any.

F. TDS so deducted must be paid to Government within 10 days from the end of the month in which deduction is made.

G. Any excess payment or erroneous deduction shall be eligible as a refund to the deductor or deductee as per section 54 of CGST Act, 2017.

H. Refund shall not be granted to deductor, if the amount has already been credited to electronic cash ledger of deductee.

6. Compliance requirements regarding GST TDS

Registration

A. Person liable to deduct TDS is required to take separate registration vide form GST REG–07

B. TDS deductor has to compulsorily register without any threshold limit. The deductor can obtain registration under GST without requiring PAN. He can obtain registration using his Tax Deduction and Collection Account Number (TAN) issued under the Income Tax Act.

C. The proper officer may grant registration after due verification and issue a certificate of registration in FORM GST REG-06.

Returns

D. Recipient person who deducts TDS will have to file a return in form GSTR 7 on monthly basis, on filing of this, TDS so deducted will get reflected in Part C of GSTR 2A of the Supplier.

E. Due date for filing GSTR 7 would be 10th of the month succeeding the month in which TDS is deducted. Therefore, due dates for depositing TDS as well as filing TDS return both are same, as is the case with GSTR 3B. For eg. GSTR 7 for the month of October 24 will have to filed on or before 10.11.2024.

F. GSTR 7 is required to be filed every month even if no deductions were made in that particular month, in other words, one is required to be file Nil GSTR 7 as well.

G. As per section 51 (5) of the Act read with rule 60 (4) of the CGST Rules, details of TDS furnished in FORM GSTR-7 shall be made available to the deductee in Part C of GSTR-2A electronically through the common portal where he will have to accept the same and submit it, post this exercise TDS so deducted and reflected in GSTR 2A will be deposited in Electronic Cash ledger of the supplier which he can then use for payment of his Output tax.

H. The deductor is required to give a TDS certificate in form GSTR 7A with following details:
a. Contract Value
b. Rate of Deduction
c. Amount Deducted
d. Amount paid to Government
e. Any other particulars as may be prescribed by the Government

I. The deductor shall be required to give a TDS certificate in form GSTR 7A within 5 days of filing return in form GSTR 7. TDS certificate shall be auto generated on the basis of information furnished in GSTR 7 and will be available on GST Portal.

J. Penalty for late filing of GSTR 7 return is Rs. 200 per day maximum to Rs. 10,000/-.

7. Refund of excess TDS Procedural aspects regarding TDS

As discussed above, Supplier can utilize the GST TDS lying in his cash ledger towards payment of his regular output tax or RCM liability. In case he is unable to utilize the entire cash ledger balance, he can opt for taking refund of the same by filing application on GST website in FORM GST RFD-01

Formulated by:
N J Jain & Associates
Chartered Accountants

CA Nitesh Jain
Managing Partner

CA Gaurav Khetan
Partner

CA Praveen Maheshwari
Partner

CA Jay Dalwadi
Partner

The post GST Alert on TDS Provisions and Compliances under GST first appeared on N J Jain & Associates.

GST Alert on Recent Changes in GST Rates, Reverse Charge Provisions, GST TDS and Refund Rules

admin — Tue, 19 Nov 2024 06:07:22 +0000

GST Alert: 14/2024-25
Date: 11 Oct 2024

I. Change in GST Rates on goods [Noti – 5/2024-CTR – effective from 10.10.2024]

1. GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab reduced from 12% to 5%

2. GST rate of extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 reduced from 18% to 12% at par with namkeens, bhujia, mixture, chabena (pre-packaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90.

3. The GST rate of 5% will continue on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion.

4. GST rate on car seats classifiable under 9401 increased from 18% to 28%. This has been done to bring parity with seats of motorcycles which already attract a GST rate of 28%.

II. Change in GST Rates on Services [Noti – 7/2024-CTR – effective from 10.10.2024]

Transport of passengers by helicopters on seat share basis to be taxed @ 5%. In case helicopter is chartered it will still attract 18% GST.

Past period transaction will be regularized on ‘as is where is’ basis whereby ay person who has paid GST @ 5% on helicopter travel on seat sharing basis prior to 10.10.2024 will not be questioned however a person who had paid 18% will not be eligible for any refund. Circular on this aspect is not yet issued, it is expected anytime soon.

III. Exemptions extended to certain services [Noti – 8/2024-CTR – effective from 10.10.2024]

Following services have been exempted from levy of GST

1. Providing metering equipment on rent, testing for meters/transformers/capacitors etc., releasing electricity connection, shifting of meters/service lines, issuing duplicate bills etc., which are incidental or ancillary to the supply of transmission and distribution of electricity provided by electricity transmission and distribution utilities to their consumers.

2. Research and development services against consideration received in the form of grants supplied by –

(a) a Government Entity; or

(b) a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961.

Provided that the research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 is so notified at the time of supply of the research and development service.

3. Services of affiliation provided by a Central or State Educational Board or Council or any other similar body, by whatever name called, to a school established, owned or controlled by the Central Government, State Government, Union Territory, local authority, Governmental authority or Government entity.

IV. Changes introduced for Metal Scrap suppliers and buyers – RCM on goods [Noti – 6/2024-CTR and 25/2024 CT – effective from 10.10.2024]:

METAL SCRAP falling in HSN chapter 72, 73, 74, 75, 76, 77, 78, 79, 80 or 81 have been put under Reverse Charge method. In other words, if a registered buyer purchases such metal scrap from an unregistered person, the buyer who is registered will be liable to pay GST on the same under RCM provisions. Longstanding demand of the industry was to put metal scrap bought either from registered or unregistered suppliers under RCM, however, council has chosen to accept only part of the demand. With this change, Metal scrap traders and other purchasers are hit with a triple whammy effective from 10.10.2024 as under:

1. GST on Purchases of metal scrap from unregistered suppliers will have to be paid by buyer under RCM at 18% – this is not that bad as ITC will be available to the buyer.

In case the buyer is also unregistered he will have to take GST registration as it is mandatory u/s 24 of the GST Act.

2. ⁠In B2B transactions where metal scrap is sold by a registered supplier to a registered buyer, the buyer will be responsible for deducting TDS @ 2% (CGST 1% & SGST 1% or IGST 2%) – this will increase of additional compliance and will also result in huge blockage of working capital as margins are wafer thin.

3. ⁠In case of goods and services falling under RCM where recipient has to pay the tax, suppliers are exempt for taking registration even if their turnover is over 20 lacs or 40 lacs, but this crucial benefit has been withdrawn for metal scrap suppliers.

Impact of this registration becoming mandatory on crossing of threshold limit of 40 lacs is explained by way of an example.

Unregistered supplier A sells scrap to B worth Rs. 5 lacs in October 2024. B pays 90,000 tax on RCM @ 18%. After 3 yrs, i.e. in 2027 department discovers that A’s turnover in 2024-25 (upto October 2024) was beyond 40 lacs and he was required to register

Impact would be as under

a. Supplier (A) will be forced to pay tax under Forward charge on earlier sale to B.
b. Buyer B will be given demand notice seeking reversal of ITC claimed by him of tax paid under RCM as he was not liable to pay tax under RCM in first place.

I am not saying this out of thin air, department has issued such demand notices on recipients in the past on several such mirror issues. buyer will eventually win in court of law but litigation cost will have to be borne.

These are unwarranted changes being brought which have zero revenue, zero intelligence but a a great deal of nuisance value attached to it. Scrap sector is reeling under the fake invoicing cases, expecting them to undertaken RCM and TDS compliances is huge ask. These changes will increase the compliance, working capital and litigation cost for the sector by huge proportions.

Detailed note covering all aspects including GST TDS is being published separately for the benefit of users.

V. RCM on Services [Noti – 09/2024-CTR – effective from 10.10.2024]:

Service by way of renting of ANY property other than a residential dwelling by an unregistered person to a registered person has been put under RCM, in other words if a non-residential dwelling has been rented to a registered person, then the recipient will have to pay GST thereon under RCM @ 18%.

The recipient will be eligible to avail ITC of the tax so paid if it is into supply of taxable goods or services.

VI. Time Limit prescribed for issuance of invoice by recipient for goods and services falling under RCM [Rule 47A – Noti – 20/2024-CT – effective from 8.10.2024]:

As per section 31(3)(f) a registered person who is liable to pay tax under sub-section under RCM is required to issue an Self invoice if the purchase is done from an Unregistered supplier. However, there was no time-limit prescribed in law as to when this invoice was required to be issued.

Rule 47A has been specifically included in the GST rules whereby effective from 8.08.2024 such recipient shall issue the said invoice within a period of 30 days from the date of receipt of the said supply of goods or services.

VII. Changes in Refund related rules – [Rule 89 and 96 – Noti – 20/2024-CT – effective from 8.10.2024]:

1. There is a formula-based refund mechanism prescribed in rule Rule 89(4) which is simple and practical to follow. However, Rule 89 (4A) and (4B) were mandated to seek refund of ITC for persons availing benefit of certain notifications applicable for deemed exports or merchant exports etc.

Now, these 2 sub-rules [4A and 4B] have been deleted summarily, which means effective from 8.10.2024, all refunds pertaining to zero-rated supply of goods or services without payment of tax will be processed in rule 89(4).

2. Rule 96 (10) provided that persons availing benefit of certain notifications were not allowed to seek refund of IGST paid on export of goods. Such exporters were required to export goods without payment of tax and seek refund of unutilized ITC. This rule has been subject to huge litigation which has travelled to many high courts including Gujarat High Court where it has been held that this rule was not effective prior to 9.10.2018. For period thereafter, judgement on its validity has been reserved.

This rule now stands deleted which means all exporters, whether or not they avail benefit of Advance Authorization Licence, deemed exports, merchant exports etc., will be allowed to export goods with payment of IGST and seek refund thereof.

Both these amendments are welcome.

Formulated by:
N J Jain & Associates
Chartered Accountants

CA Nitesh Jain
Managing Partner

CA Gaurav Khetan
Partner

CA Praveen Maheshwari
Partner

CA Jay Dalwadi
Partner

The post GST Alert on Recent Changes in GST Rates, Reverse Charge Provisions, GST TDS and Refund Rules first appeared on N J Jain & Associates.