Background:
CBIC has clarified the manner of dealing with differences in ITC available in GSTR-3B and ITC available as per GSTR-2A vide Circular No. 183/15/2022-GST dated 27th December, 2022 for FY 2017-18 and 2018-19 in various situations.
Now the GST council has issued the similar following guidelines for the period of 01.04.2019 to 31.12.2021 vide Circular No. 193/05/2023-GST dated 17th July, 2023:
ITC available in GSTR-2A: INR 3,00,000
ITC availed in GSTR-3B: INR 5,00,000
ITC admissible under Rule 36(4) of CGST Rules: INR 3,60,000 (3,60,000 * 120%)
ITC of INR 1,40,000 has been availed in excess of ITC permitted under Rule 36(4) of CGST Rules. Therefore, such ITC shall not be allowed even if documents prescribed under Circular No. 183/15/2022 is also produced by the registered person.
Benefit of Circular Circular No. 183/15/2022 can be taken for INR 60,000.
In this circular, the CBIC clarified the Tax Collected at Source (TCS) liability under Section 52 of CGST Act for transactions involving multiple E-commerce Operators (ECOs).The ECO responsible for collecting TCS and compliance depends on whether the supplier-side ECO is also the goods/services supplier.
In case of open network for digital commerce(ONDC) agreements where multiple E-commerce operators are involved. The clarity was required to decide which ECO shall be responsible to deduct the TCS and comply with other provisions of Section 52.
In the case of the ONDC Network or similar other arrangements, there are multiple ECOs involved in a single transaction, i.e., one providing an interface to the buyer and the other providing an interface to the seller. In this setup, the buyer-side ECO could collect consideration, deduct their commission and pass on the consideration to the seller-side ECO.
a. Issue 1:
In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through the ECO platform and where the supplier-side ECO himself is not the supplier in the said supply, who is liable for compliances under section 52 including collection of TCS ?
Buyer > Buyer Side ECO > Supplier side ECO > Supplier
Clarification :
The responsibility for compliance under section 52 of CGST Act, including collection of TCS, is to be done by the supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him.
For Example: Buyer-side ECO collects payment from the buyer, deducts its fees/commissions and remits the balance to Seller-side ECO. Here, the Seller-side ECO will release the payment to the supplier after deduction of his fees/commissions. Therefore, supplier side ECO will be required to comply with provisions of Section 52 of CGST Act.
Issue 2:
In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and the Supplier-side ECO is himself the supplier of the said supply, who is liable for compliances under section 52 including collection of TCS?
Buyer > Buyer Side ECO > Supplier (also and ECO)
Clarification :
In such a situation, TCS is to be collected by the Buyer-side ECO while making payment to the supplier for the particular supply being made through it.
For example : Buyer-side ECO, receiving payment from the buyer, deducts its fees, and sends the balance to the supplier (also an ECO per CGST Act Sec 2(45)). Here, the Buyer-side ECO must also collect and pay applicable TCS (Section 52, CGST Act) , along with other Section 52 compliances.
The Government of India’s Ministry of Finance, Department of Revenue (Tax Research Unit), has recently issue Circular No. 201/13/2023-GST, providing clarifications on the rates and classification of certain goods and services based on the recommendations of the GST Council in its 50th meeting held on 11th July 2023.These clarifications resolve doubts and ensure consistent GST application across various sectors.
Issue: 1 Whether the services supplied by director of a company in his personal capacity such as renting of immovable property to the company or body corporate are subject to Reverse Charge mechanism(RCM):
Clarification :
Entry No. 6 of notification No 13/2017 CTR dated 28.06.2017 provides that tax on services supplied by director of a company shall be paid by the company under Reverse Charge Mechanism.
Therefore, CBIC has clarified that Services provided by a director to their company in a personal capacity, like property renting, aren't taxed under Reverse Charge Mechanism (RCM). Only director services in an official capacity are taxed under RCM.
Issue 2:
Whether the supply of food or beverages in the cinema hall is taxable as restaurant service of 5%.
Clarification :
The cinema operator may run refreshment or eating stalls in Cinema halls themselves or may give to a third party on contract basis. The customer may like to avail the services supplied by these stalls or choose not to avail these services. Also, the cinema operator can also install vending machines, or supply any other recreational service such as through coin operated machines etc.
CBIC has clarified that supply of food or beverages in a cinema hall is taxable as ‘restaurant service’ under GST at the rate of 5% as long as:
Also, CBIC has clarified that where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply.
CBIC has received various representations that as a common trade practice, the original equipment manufacturers (OEM) offers warranty for the goods supplied by them. During the warranty period, replacement goods /services are supplied to customers on Free of Charge basis and as such no separate consideration is charged and received at the time of replacement.
Therefore, clarification is required to avoid unnecessary litigation with respect to GST liability as well as liability to reverse ITC against such supplies of replacement of parts and repair services during the warranty
Key points on Applicability of GST and ITC reversal are summarized below:
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