GST – Q AND A

Q. I am a small businessman with annual turnover about Rs.20 lacs,  I am into installation of fountains, which includes complete fitting on turnkey basis, it includes providing of material and labour whatever required for completion, what are my tax liabilities? My materials include electrical panel, pumps, sanitary fittings lights, electrical and so on I work for local bodies too I mean municipalities, besides private small contracts,  these contracts may be in different states

A. Your work will be considered as Work Contract and you need to register as a normal registered person u/s 22 of GST Act. Since Work Contract is treated as service you cannot opt for composition scheme. Works Contract is a mixture of goods and services but it is neither a composite supply nor a mixed supply as it has been defined as per Sec. 2(119) of CGST Act. Schedule II ( Entry 6(a)) which states that such composite supplies which includes labour and material both shall be treated as a supply of services namely  Works contract under S. 2(119)”.

Q. We are supplying goods to various Government agencies like Railways & Defense, PSUs and private sector industries on payment of GST. If any materials gets rejected and needs to be rectified /replaced, we have to get back the materials but the Govt. Agencies and PSUs are not issuing GST Invoice for return of goods on the ground that they have not accepted & accounted for the goods (GRN not issued) and not taken any ITC credit of GST. How to get back the rejected GST paid goods and replace without paying GST twice. Can we issue Credit Note against our invoice and take back the credit of GST paid and issue fresh GST Invoice while replacing the goods. In any case, customer will have nothing to do with GST portal till GSTR-2 is not operative.

A. 1. The customer has informed that they have not accounted and not taken ITC.

2. Ask them to send (return) the goods on a Delivery Challan (returning the goods is not a supply)

3. Issue Credit Note to reduce your tax liability and your accounting.

4. After receipt of the material and issuance of credit note, supply the replacement on a new Invoice.

Q. We are manufacturers of automobile parts supplying to OEM. The finished goods are supplied to them through transport agency. We have an understanding with an intermediate service provider who will receive the transport agency invoices in his name with GST 5% and he will pay to the transport agency and GST to the government. After that he will raise invoice on us for this transport service along with his service and claim GST. Whether GST paid and claimed by the intermediate service provider is eligible for GST credit by us?

A. Yes the credit is eligible. The intermediary is a service provider. He needs to charge GST on his invoice to you. The GST so paid can be claimed as credit by you. One of the condition for input tax credit is that the supplier of service should file GST return. And that the invoice uploaded by him should match with your uploaded detail. So please make him aware of the importance of filing return with correct information.  You can take credit for payment to intermediary (including amount paid to GTA) for his agency services and your intermediary can take credit for amount paid to GTA. As per section 24(vii) of CGST Act, registration is mandatory for agents, so intermediary is supposed to be registered and eligible to get credit for GTA payment. You should not be concerned for GTA credit eligibility clause. ITC is eligible on intermediary services and GTA part not to be considered as services of intermediary is charged to 18% in this case.

Q.We are having different opinion for admissibility of ITC on                                             1. Hotel Bills - Our sales & marketing team is mostly on tour (domestic & foreign) and taking services of hotels and paying applicable GST. What are the legal provisions preventing us to avail credit on SGST & CGST paid? 

2. GTA Services - Most of GTA service providers are raising invoices without charging any GST and we are paying GST @ 5% under RCM. If ITC for the same is admissible if not, specify the ruling/ notification issued by authority.                                                     A. 1. The hotel bills would show the intra state GST and this would not help in availing the credit. Foreign Tour no GST under the Indian law. In other words, ITC not available. Please refer to FAQ also in this Regard.                                                                  2. GTA - ITC eligible.

Section 17(5)(b) disallows credit for Food and beverages, hence any inclusion of said amount in Hotel Bill is ineligible for ITC. However Room Rent is eligible for ITC.

Now conditions for admissibility and Non-Admissibility

If your POS and Hotel is situated in same state, then ITC is eligible for CGST/SGST.

In case your POS and Hotel is situated in different states, then also CGST/SGST is applicable as per Place of Supply Rules.(Section 12 of IGST Act) and ITC is not eligible, reason being is stated below.

Suppose your POS and Hotel is in different state, then Hotel Business will show POS in his GSTR-1 return as his state. The same entry will not reflect in your GSTR-2 as POS is not your state, which makes you ineligible for credit.

ITC on CGST charged in hotel bills will available. In a recent example, one of our client's customer (inter-state) has insisted for charging SGST & CGST which was charged and posted on GST portal. It was accepted and accounted for accordingly for total GST payable for the month.