PRACTICAL ISSUES Place and time of supply AUGUST 2017

500 Representations/AARs 50 Action pact days at office 5000 FAQs/ Tweets 50 Action pact days at office 50,000 Cr tax collection 5 Laws 5,00,000WhatsApp msgs 50 days of GST

RELEVANCE OF PLACE OF SUPPLY Determining Jurisdiction of levy of tax ‘Origin’ based levy vis-à-vis ‘Destination’ based levy CURRENT LAWS VIS-À-VIS PLACE OF SUPPLY PRINCIPLES TAXES LEVY PLACE OF SUPPLY PRINCIPLE Value Added Tax Sale of goods Place of Movement Origin based tax Central Sales Tax Central Excise duty Manufacture of goods Place of Removal Service tax Provision of service Place of Recipient Destination based tax

Taxes to be levied on Supply of Goods / Services Type of Transactions Taxes to be levied on Supply of Goods / Services Intra State CGST + SGST Inter State IGST Import Export including supplies to SEZ Developer and SEZ Unit Zero Rated

INTERSTATE VS. INTRASTATE Deciding Parameters Location of the Supplier Place of Supply

Place of supply of goods

SUPPLY INVOLVING MOVEMENT OF GOODS… PLACE OF SUPPLY WITH/ WITHOUT MOVEMENT OF GOODS SUPPLY INVOLVES MOVEMENT OF GOODS (EITHER BY SUPPLIER OR RECIPIENT OR BY ANY OTHER PERSON) SUPPLY DOES NOT INVOLVE MOVEMENT OF GOODS Location of goods at the time where movement of goods terminates for delivery to recipient Location of such goods at the time of the delivery to the recipient

…SUPPLY INVOLVING MOVEMENT OF GOODS Sells goods to the customer (Ex-works) Workshop Factory Gate PUNE GUJARAT POSITION ADOPTED PLACE OF SUPPLY APPLICABLE TAXES Ex-factory (No movement contemplated outside the State) Pune CGST+ SGST Movement terminates at buyers premises Gujarat IGST ISSUES IN CASE OF EX-WORKS Whether there is movement of goods?? If yes, whether it terminates at factory gate of the supplier?? Who will generate E way bill in case of ex- works delivery terms?? Who will give the acceptance of receipt of goods??

PLACE OF SUPPLY – BILL TO SHIP TO When on direction of a ‘third person’ Goods delivered by supplier to a recipient Place of Supply is principal place of business of such ‘third person’ Company A - Supplier (U.P.) Ship to Bill to Company B - Branch Office (Punjab) Company B - Head Office (U.P.) Third person not defined under the Act ISSUE IN CASE OF BILL TO – SHIP TO Whether ‘third person’ includes ‘Distinct Persons’ ? Section 25(5) : “Distinct Persons” means establishments of a person in same/different States/Union Territories for which separate registration is obtained

BILL TO SHIP TO - ISSUE Ship to Supplier of goods Mr. A Ship to Maharashtra Maharashtra “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India India ------------------------------------------------------------ Direction Bill to USA Mr.A ISSUE IN CASE OF BILL TO – SHIP TO Place of supply of goods in the instant case is USA. Whether this transaction can be construed as ‘export of goods’ even though goods haven’t moved out of India ?

PLACE OF SUPPLY - INSTALLATION Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly Installation of Goods involving movement Installation of goods resulting into ‘Immovable Property’ It would be works contract – which would be treated as ‘Service’ The same shall be taxed as per ‘Place of supply of Service ’ Installation of goods not resulting into ‘Immovable Property’ It would be a ‘Composite Supply’ and taxed as per principal supply In case the principal supply is goods which clause shall be applicable

Place of supply of services

LOCATION OF SUPPLIER OF ‘SERVICE’ Where supply is made from… Then the location of… a place of business for which registration has been obtained place of business a place other than the place of business for which registration has been obtained, that is to say, a fixed establishment elsewhere, such fixed establishment More than one establishment, whether the place of business or fixed establishment the establishment most directly concerned with the provision of the supply in absence of such places the usual place of residence of the supplier ISSUE IN CASE OF LOCATION OF SUPPLIER Location of supplier of ‘Goods’ not defined What constitutes a ‘fixed establishment’ ?

LOCATION OF RECEIPIENT OF ‘SERVICE’ Where supply is received at ... Then the location of… a place of business for which registration has been obtained place of business a place other than the place of business for which registration has been obtained, that is to say, a fixed establishment elsewhere, such fixed establishment More than one establishment, whether the place of business or fixed establishment the establishment most directly concerned with the receipt of the supply in absence of such places the usual place of residence of the supplier

FIXED ESTABLISHMENT The concept of fixed establishment under GST law to mean: ‘unregistered’ places of business fulfilling following conditions: 1. Sufficient degree of permanence; and 2. Suitable structure in terms of: Human and Technical resources for supply or receipt of services ISSUES IN CASE OF FIXED ESTABLISHMENT What is the yardstick for measuring ‘permanence’ - whether it is 3 months, 6 months or a year? What is meant by ‘suitable structure’ in terms of human and technical resources

CASE STUDY – MULTIPLE ESTABLISHMENTS Mumbai Delhi Company A gives a contract from its Head office for hardware maintenance of its branches located in 2 states Company A Head Office Company B Head Office Company B provides these services from its Head office and two branches located in 2 states Delhi Jaipur Jaipur Mumbai Branch Branch Branch Branch Whether the location of the service recipient is company A’s head office or each of its branch offices ? Whether the location of the service provider is the head office of company B and/or its two regional offices ?

‘LOCATION OF RECIPIENT OF SERVICE’ V/S ‘RECIPIENT’ – CASE STUDY ‘Recipient’ of supply of services/goods means [sec 2(93)]:- Consideration payable - Person liable to pay consideration No consideration payable(Service) - Person to whom service is rendered No consideration payable(Goods) - Person to whom goods are delivered Service Provider Company A Branch IT Service INDIA ----------------------------------------------------------- ‘Export of Services’ means when :- the supplier of service is located in India the recipient of service is located outside India the place of supply is outside India Payment received in Forex Not establishments of distinct persons USA Company A Head Office Raises PO & pays in Forex

IMMOVABLE PROPERTY RELATED SERVICE Directly in relation to immovable Property services provided by Architects, Interior decorator , Surveyor, Engineers and other experts, Grant of right to use immovable property, Carrying out co-ordination of construction work and other ancillary service Property / Boat / Vessel are located in India POS – location of the immovable property Property / Boat / Vessel are located outside India POS – location of service recipient (if both recipient and supplier are in India) By way of lodging and accommodation by: Lodging accommodation by a hotel, Inns, Guesthouse, Home stay, Club or campsite including: House boat or any other vessel; Accommodation in any immovable property for organising any function; and Other ancillary service

IMMOVABLE PROPERTY – ISSUE I What if immovable property is located in more than one State, or Union Territory ? Place of supply shall be each respective States or Union Territory in proportion to value of services provided as mentioned in the contract as entered or on reasonable basis Single Road Construction Contract for construction 1000 k.m. road between Maharashtra and Gujarat Mumbai (Service Provider) Delhi (Service Receiver) 600 k.m. of road to be constructed in Maharashtra and balance in Gujarat POS – 40% value in Gujarat POS – 60% value in Maharashtra

IMMOVABLE PROPERTY – ISSUE II Whether landlord/tenant of immovable property has to take registration in the state where the immovable property is located ? Case I Case II Registered in Gujarat Property in Rajasthan Unregistered Person Property in Rajasthan Leasing Leasing The landlord is unregistered and has leased out a property in Rajasthan to a tenant registered in various states (other than Rajasthan) - whether registration to be obtained in Rajasthan by the tenant liable to pay tax under reverse charge ? The landlord registered in Gujarat has leased out a property in Rajasthan to a tenant registered in Rajasthan - whether registration to be obtained in Rajasthan or he can pay IGST from Gujarat?

PLACE OF SUPPLY - REGISTRATION Employee of Co. A Facts of the case :- Employee stays in an unregistered hotel in Punjab for a business meeting. Liable to pay GST under RCM. Company A (Karnataka) Unregistered Hotel (Punjab) ISSUES IN SUCH SCENARIOS Place of Supply being Punjab, CGST + SGST will be liable ? Will the Company be liable to take registration in the State of Punjab for discharging its tax liability? Availability of credit and its utilization goes for a toss!

PERFORMANCE BASED SERVICE Coverage Nature of Service Restaurant and catering Personal grooming Fitness Beauty treatment Health service (including cosmetic and plastic surgery) The section specifically lists these five services and applies to only these services Place of Supply Location where services are actually performed

PERFORMANCE BASED SERVICE – ISSUE I Supplies catering service Caterer registered in Gujarat Mr.X's function in Rajasthan ISSUE IN CASE OF PEFORMANCE BASED SERVICE Whether the caterer registered in Gujarat has to register in Rajasthan i.e. in the State from where he is supplying such services ?

TIME OF SUPPLY

ISSUES IN SUCH SCENARIO REAL ESTATE Supply in GST regime, say flat worth Rs. 2 crores Property Amount is collected in advance on which VAT & ST is paid by the builder Builder Flat Buyer ISSUES IN SUCH SCENARIO On the transition day, say only 70% of the construction is complete. As per the law, on the 30% of the advance received, GST will be payable. Sec 142 (11)(c) – Credit can be taken of the VAT and Service tax paid on such amount. Balance needs to be paid as per the rates under GST. Who will bear the burden?

ISSUES IN SUCH SCENARIO ADVANCES Supplier of Goods/Services Recipient of Goods/Services Pays advance Rate and Nature of supply is not known If at the time of receipt of advance : Rate of tax is not known – Pay tax @ 18% Nature of supply is not known – treat as Inter State supply ISSUES IN SUCH SCENARIO Advance receipt – whether towards goods or services? Treatment of the tax paid on advance received, in case of variation in the rates at the time of actual supply Actual supply is Intra-State , whether IGST can be adjusted against CGST+SGST liability or to be claimed as refund?? Whether Interest is applicable??

TIME OF SUPPLY – PARTIAL REVERSE CHARGE Scenario Service Prior to GST (June) Invoice Payment In GST regime (July) ASSOCIATED ISSUES No partial reverse charge under GST regime. As a service provider, rent-a-cab service operator charged service tax on 50% of taxable value when abetment is not claimed Whether GST payable on partial reverse charge liability? On the balance portion i.e. 50%, Service tax liability under reverse charge mechanism for the Company - point of taxation being the date of payment. Whether the Company should pay under RCM? If yes, whether GST or Service tax?

CONTINUOUS SUPPLY OF GOODS Supplies Raw materials on daily basis – Example iron ore ISSUES IN SUCH SCENARIO Is invoice to be issued on daily basis ? In the case where debit note / credit note is required to be issued, references of multiple invoices – a procedural bottleneck Can this be treated as continuous supply of goods?

OCEAN FREIGHT – DOUBLE TAXATION INDIA CHINA IGST is to be paid by the importer on ocean freight services availed from foreign freight forwarder under RCM basis. Supplies Goods Exporter Transportation service up to Port Importer In determining transaction value of imported goods, cost of transport is to be included as per Rule 10 of Customs Valuation Rules. Foreign Freight Forwarder ISSUE IN CASE OF OCEAN FREIGHT CHARGES Double taxation on Ocean freight – IGST and Customs Duty??

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