Presentation on Time of Supply and Value of Supply Conference on GST Organised by Aurangabad Branch of WIRC of ICAI Presenter –CA Mandar Telang mandar@gokhalesathe.in Mobile No – 9819540450 17/11/2018

Coverage of Presentation. Important Concepts – Supply and Taxable Persons Value of Supply Time of Issue of Invoice Time of Supply 17/11/2018

Important Concepts 17/11/2018

Supply – Section 7 General Meaning Extended Meaning Exclusions All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person In the course or furtherance of business Extended Meaning Import of services for a consideration whether or not in the course or furtherance of business Activities mentioned in schedule – I, made or agreed to be made without a consideration Activities treated as supply of goods or supply of service referred to in Schedule - II Exclusions Activities or transactions specified in Schedule – III Notified activities or transactions undertaken by Central/State Government/ Local Authorities as public authorities. 17/11/2018

Schedule I – supply without consideration Permanent Transfer or disposal of business assets without consideration where ITC has been availed on such services Supply of goods or services or both between related persons without consideration when made in the course or furtherance of business Exception – Gifts by an employer to an employee not exceeding Rs.50,000 in value in a financial year Import of service by a taxable person from a related person or from any of his other establishments outside India, in the course of business. Supply of goods or services or both between distinct persons as specified in section 25, when made in the course or furtherance of business Supply of goods by Principal to Agent where the Agent undertakes to supply such goods on behalf of the Principal By an Agent to Principal where the agent undertakes to receive such goods on behalf of the Principal. 17/11/2018

Taxable Person – Section 25(4) and 25(5) Section 25(4) - A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Section 25(5) - Where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act. 17/11/2018

Related Person – Explanation Explanation.—For the purposes of this Act,–– (a) persons shall be deemed to be “related persons” if–– (i) such persons are officers or directors of one another’s businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; (c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. 17/11/2018

Composite Supplies vs Mixed Supplies Section 2(30) “Composite supply” means a supply made by a Taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply. Illustration: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply Section 2 (90) “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary A Composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply. 17/11/2018

Composite Supplies vs Mixed Supplies Section 2(74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. 17/11/2018

Valuation Provisions 17/11/2018

Valuation in General – Section 15 Section 15(1) - Concept of “transaction value” [1] Section 15(2) - Inclusions in the value of supply [5] Section 15(3) - Exclusions from value of supply [4] Section 15(4) - Valuation in cases where Section 15(1) not applicable (Rules to be prescribed).[2] Section 15(5) – Special cases overriding Section 15(1) and Section 15(4) (Rules to be prescribed) [3] GST valuation Rules 17/11/2018

Section 15(1) – Concept of transaction value The value of a supply of goods and/or services shall be the transaction value, which is The price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related . The price is the sole consideration for the supply. 17/11/2018

Section 15(4) – Valuation where 15(1) not applicable Where the value of the supply of goods or services cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. Services where the supplier and the recipient of the supply are related. The price is not the sole consideration for the supply. No price is payable (Discuss with reference to supply without consideration mentioned in Schedule I). 17/11/2018

Section 15(5) –Special cases overriding Sec.15(1) & Sec. 15(4) Components of special cases are: Notwithstanding anything contained in sub-section (1) or sub-section (4) Value of such supplies as may be notified by the Central or a State Government. Recommendation of the Council. Determined in such manner as may be prescribed. 17/11/2018

Section 15(3) – Exclusions from value of supply Discount shall not form part of value if certain conditions are fulfilled : Situation Conditions a) If discount given before or at the time of supply. Discount is duly recorded in the invoice. b) If discount is given after the supply a) An agreement should be entered for providing such discount at or before the time of supply. b) The discount should be specifically linked to invoices. c) Input tax credit has been reversed by the recipient of the supply 17/11/2018

Section 15(3) – Exclusions from value of supply(Cont.) Questions that may arise? How the discount is specifically linked to invoice ? Whether there is any time limit for claiming discount? 17/11/2018

Section 15(2) Inclusions & Exclusions in value of supply Any taxes, duties, cesses , fees and charges levied under any statute Any taxes, duties, cesses , fees and levied under SGST Act/UTGST Act/ CGST Act/IGST Act & cess levied under GST (Compensation to States) Act, if charged separately by the supplier. Subsidies directly linked to the price [The amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy] Subsidies provided by the Central and State governments 17/11/2018

Section 15(2) – Inclusions in value of supply (Cont.) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services. Incidental expenses, such as, commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or, as the case may be, supply of the services. [ Concept of composite supply ??] Interest or late fee or penalty for delayed payment of any consideration for any supply. 17/11/2018

GST Valuation Rules Where the consideration is not wholly in money ( i.e. price is not a sole consideration) Where the supply is between distinct persons without consideration Where the supply is between related persons with or without consideration. Where supply of goods is made or received through agent. Value based on Cost Residual Method Pure Agent. Special Valuation Provisions Purchase or sale of foreign currency, including money changing. Supply of services in relation to booking of tickets for travel by air provided by air travel agents. Life Insurance business. Person dealing in buying and selling of second hand goods Value of token or voucher or coupon or stamp redeemable against supply of goods or services or both. services between distinct persons (notified by Government) (other than those where ITC u/s 17(5) is not available) 17/11/2018

Where Price is not the Sole Consideration “Open Market Value” – full value in money excluding IGST,CGST, SGST, UTGST, Compensation Cess, payable by the person for obtaining such supply, where supplier and recipient are not related and price is the sole consideration, at the same time when the supply is made. consideration in money + money equivalent to non-monetary consideration if such amount is known at the time of supply. “Value of goods/ services of like kind and quality” - means other supply made under similar circumstances, quality, quantity, functional components, materials , and reputation of the goods or services or both is same as or closely or substantially resembles the supply of goods/services being valued. Rule 4 or Rule 5 in that order. 17/11/2018 www.gokhalesathe.in

Supply between related persons and Distinct Persons or Agent & Principal Particulars ITC is available ITC is not available Distinct Persons/ Related Persons Any Value declared on the Invoice Open Market Value* Value of supply of goods or services of like kind and quality* Rule 4 or Rule 5 in that order* Agent and Principal Open Market Value# 90% of the Price charged for the supply of goods of like kind and quality by the recipient to his unrelated customer when goods are intended for further supply by the said recipient# *order of rules needs to be followed # supplier may choose one of the two methods at his option 17/11/2018

Rule 4 & Rule 5 Rule 4 – 110 % of the Cost of Production or Manufacture or Cost of Acquisition of goods/services Rule 5 – reasonable means consistent with the principles and general provisions of section 15. Rule 4 and Rule 5 to be followed in that Order, however in case of services, supplier may opt between Rule 4 and Rule 5. 17/11/2018

Special Provisions Purchase or sale of foreign currency including money changing Services in relation to Booking of tickets for travel by air provided by air travel agent Services in relation to life insurance business. Buying & Selling of Second hand goods and where no input tax credit is availed on purchase of goods. Value of voucher or coupon or token which is redeemable against a supply of goods or services or both – Money value of such goods or services 17/11/2018

Time of Supply of Goods/ Services 17/11/2018

Section 12/13 Time of Supply of Goods/ services General Provision Reverse Charge Vouchers Residuary Interest/ late fee/ penalty for delayed payment. 17/11/2018

General Provision Goods [ Earlier of 1 to 4 ] Services [ Earlier of 1 to 4 ] 1 Date of Issue of Invoice by the Supplier Date of Issue of Invoice by the Supplier if Invoice is issued within prescribed time 2 Due date for the purpose of issue of invoice u/s 31(1) NA 3 Date of Provision of service if invoice is not issued within prescribed time. 4 Date on which supplier receives the payment Date on which supplier receives the payment* Date on which recipient shows the receipt of services in his books of accounts [ If 1 to 4 is not applicable] *date on which payment is entered into books of accounts or date on which payment is credited whichever is earlier 17/11/2018

When to issue Invoice ? – Section 31 Goods – Sec 31(1) Supply involves movement of goods - Time of Removal of goods Any other case - Time of Delivery of goods or making available goods Notified Goods/ Supplies - Prescribed Time 2 Services - Prescribed time after provision of services – Sec 31 (2) 3 Continuous Supply of Goods issue of successive statement or receipt of payment 4 Continuous Supply of Services Where due date of payment is ascertainable from contract – before due date of payment Where due date of payment is not ascertainable from contract – before or at the time when supplier receives the payment Where invoice is linked to completion of event – on or before date of completion of event. 5 Goods sent or taken on approval for sale or return - Before or at the time of supply or 6 months from date of removal whichever is earlier 17/11/2018

Reverse Charge Mechanism Goods [ Earlier of 1 to 4 ] Services [ Earlier of 1 to 4 ] 1 Date of receipt of goods NA 2 Date of payment as entered into the books of accounts of recipient 3 Date on which payment is debited in the bank account 4 The date immediately following 30 days from date of issue of invoice / other document in lieu thereof by the supplier. 5 Date of entry in the books of accounts of the recipient [ if 1 to 4 fails] Date of entry in the books of accounts of the recipient [ if 1 to 4 fails ] Associated Enterprises where the supplier is located outside India - Date of entry in the books of accounts of the recipient or date of payment whichever is earlier 17/11/2018

Voucher Goods Services 1 Supply is identifiable – Date of Issue of Voucher 2 Other cases – date of redemption of voucher 17/11/2018

Residuary Provision Goods Services 1 In case where periodic return has to be filed - Date on which return is to be filed. 2 In any other case – date on which the tax is paid 17/11/2018

Interest/late fee/penalty for delayed Payment Goods Services 1 The date on which the supplies receives such additional interest/late fee / penalty 17/11/2018

Thank You 17/11/2018