Beruflich Dokumente
Kultur Dokumente
What is Tax ?
A ‘tax’ is a compulsory exaction of money by public
authority for public purpose enforceable by law
and is not for payment of service rendered. -
Matthews v. Chicory Marketing Board, 60 C.L.R.
263.
Adopted by Supreme Court in the case of: Commr,
Hindu Religious Endowments Sri Laksmindra
Thirtha Swamiar of Sri Shirur Mutt AIR 1954 SC
282 – 9 Judge Bench
..
Goods
shall be deemed to be the sale of those
goods.
by the person making transfer delivery &
supply
& a purchase of those goods by a person to
whom such transfer delivery & supply is made.
Now what is the definition of Sale in CST?
As Sec 2(g) of CST Act, Sale with its grammatical
variations and cognate expressions, means any
transfer of property in goods by one person to
another in cash or for deferred payment or for any
other valuable consideration, and includes:
i) Transfer other than by contract (compulsory
transfer)
ii) Goods involved in works contract.
iii) Right to use goods (like leasing)
iv)Transfer among members of unincorporated
association
v) supply of food articles
vi) Hire purchase, but does not include a mortgage
or hypothecation or a charge or pledge in goods.
The first part of the definition is ‘sale’ as is
conventionally understood and the second part i.e
the inclusive part is deemed sale.
It is worthwhile to note that the definition of ‘deemed
sale’ is identical to the wordings as used in the
definition in Article 366(29A) of the Constitution of
India.
Thus the essentials of a conventional sale are:
a) There must be transfer of goods
general property in goods should be transferred to
buyer from seller
c) consideration i.e price must be paid or agreed to
be paid. It may be in cash , deferred payment or any
other valuable consideration.
The expanded definition of ‘sale’ includes hire
purchase, goods involved in works contract, lease or
sale of food articles, which is deemed sales.
Transfer of ‘property ‘ is essential in ‘sale’. – There
is no sale unless there is transfer of property.
Property means a thing over which a person has
domain. This implies transfer of ownership. Mere
‘agreement to sale’ does not mean sale as
there is no transfer of property.
Now every transaction is not sale. The instances of
transactions which are not sales are as follows:
Charge/mortgage/hypothecation/pledge are not sale.
Job work / processing
The concept of job work is that the owner sends the
goods for some job work like (machining, cutting,
heat treatment, welding etc.) or processing (like
bleaching, painting etc) Goods are returned to the
owner after such job work/processing. Property in
goods remains with the person supplying the
material.
Thus it is a contract for labour or work and not a
contract of sale and there is no tax liability. Thus it is
a deemed sale.
Consignment/depot transfer/branch transfer – Goods
are dispatched to Consignment Agent/branch/depot
by Principal.
Consignment agent collects sale proceeds and
remits the same to the principal. However this does
not amount to sale as ownership of goods continue
with principal.
Barter or Exchange is not sale – In a barter or
exchange there is no ‘money consideration’ and
hence it is not sale. - Devi Das Gopal Krishnan v
State of Punjab (1967) 3 SCR 557.
Free Gift is not sale – Free gifts given by Company
cannot be taxed as there is no consideration.
Goods (e.g Furniture, utensils machinery, mattresses
etc.) given on hire is ‘transfer of right to use for
consideration’ if full possession
and control is given to hirer. In such a case, sales
tax (VAT) is payable. If complete possession and
control is not handed over, service tax would be
payable.
Deemed Sale includes Hire Purchase.
Are hire purchase and instalment purchase and
instalment purchase the same?
The answer is -- -- -- -- -- -- -- -- -- -- -- -- --
No. they are not the same.
In case of a hire purchase title over the goods
does not pass to the buyer till last installment of
price is paid and thereby option to buy is
exercised.
In case of ‘instalment purchase’ (i.e payment in
instalments), title passes immediately and
stipulation to pay price in instalments is only a
financial arrangement between the buyer and
seller.
In the former the relationship between seller and
buyer is one of bailor and bailee, while in the later it
is of creditor and debtor.
Thus in case of hire purchase, full possession and
control should be transferred to the hirer only then it
will be taxable. State of AP v Rashtriya Ispat Nigam
(2002) 3 SCC 314.
Sale of food in canteen, restaurant or hotel can be
taxed.
What is Works Contract:
Sec 2 (ja) defines works contract and
it means a contract for carrying out any work which
includes assembling, construction, Building, altering,
manufacturing, processing, fabricating, erection,
installation, fitting out, improvement, repair or
commissioning of movable or immovable property.
Sale includes transfer of property in goods
involved in execution of works contract.
Sales Tax (VAT) is on the goods involved in works
contract and not on the works contract as such.
The principle in works contract is that property in
goods should pass when the works contract is
getting executed.
If property in goods pass after the execution of the
works contract it is a sale and not ‘transfer of
property in goods involved in execution of works
contract. Gannon Dunkerly & Co. v State of
Rajasthan – (1993) 1 SCC 364.
In case of works contract sales tax/vat can be
levied only on value of goods involved and not on
entire value of contract.
What is the test for ascertaining whether a
particular contract is contract for work or
contract of sale.
According to Halsbury‘s laws of England it depends
on the main object of the parties, circumstances and
custom of trade. There is nor rigid or flexible test to
ascertain the same.
Generally, a contract of sale is contract whose main
object is transfer of property in, and
delivery and possession of, a chattel as a chattel to
the buyer.
Where the main object of the work undertaken by the
payee of the price is not the transfer of the chattel
qua chattel, the contract is one of labour and work. –
State of Gujarat v Variety Body Builders – AIR 1976
SC 2108.
Illustrations of works contract :
i) Building Contract – State of Madras v Gannon
Dunkerly AIR 1958 SC 60.
ii) Supplying windows duly fixed in building. –State of
Rajasthan v Man Industrial Corporation
iii) Photographic work. BC Kame v ASTO AIR 1977 SC
1642.
iv) Tax can only be levied on the value of material in
case of works contract – Builders Association of
India v UOI AIR 1989 SC 1371. (5 member
constitution bench)
Sale Works Contract
It is a sale
Relationship is seller and buyer Relationship is contractor and contractee
In sale of goods the thing In works contract the things produced as a
produced/manufactured as a whole is whole is never the property of the maker
the absolute property of the maker even though the material used in works
when it comes into existence. He then contract might have been his absolute
transfers it to the buyer. property.
In sale, the sale is chattel ‘qua’ chattel The article produced as a whole directly
i.e goods are sold as goods. The becomes property of the buyer, without
property in goods is transferred at the at first becoming property of the maker.
the time of the delivery of the finished Property in goods contained in works
article. contract passes by accretion, accession or
blending during execution of work.
Sale Works Contract
Sale can be of standard goods as well as Works contract is only tailor made i.e
tailor made goods for a specific contractee.
Details A B A B
Imported Goods (Imported duty is not eligible as input credit, hence import duty will form part of cost) 12000/-
Local Purchases (Input VAT is eligible for credit hence will not form part of the cost) 20000/-
Purchases from other state (CST is ineligible for credit hence will not form part of the cost) 7140/-
Basic Ingredients
From the above definitions of ‘goods’, the two
essential elements of goods are :
(i) They should be movable, and
(ii) They should be marketable.
Goods must be movable
In order to be movable, an article must fulfill two
conditions:
(i) It should come into existence (as a result of
manufacture); and
(ii) It should be capable of being moved to market
to be bought and sold.
Thus, goods must exist. Where goods have not
come into existence, they can not be moved as
well.
So long as the goods have not come into
existence, no question of levy of excise duty would
arise. It has been observed that the word
‘manufacture’ or ‘production’ are associated with
movables.
CBEC has clarified that whatever is attached to
earth, unless it is like a tree/building/similar thing,
shall not necessarily be regarded as immovable
property if the whole purpose behind such
attaching to the concrete base is to secure
maximum operational efficiency and safety.
Thus, excise duty cannot be levied on immovable
property.
Goods must be marketable
Marketability denotes the capability of a product, of
being put into the market for sale. Where goods
are not marketable, excise duty cannot be charged
on them. Marketability is the decisive test for
durability. The article must be capable of being
sold to consumer without any additional thing.
The test of marketability will depend on the facts
and circumstances of each case.
It is a question of fact. Marketability is to be
decided on the basis of condition in which goods
are manufactured or produced.
Everything that is sold is not necessarily
‘marketable’.
Waste and Scrap can be ‘goods’ but dutiable only
if ‘manufactured’ and are mentioned in Tariff.
The marketability test requires that the goods as
such should be in a position to be taken to market
and sold.
If they have to be separated, the test is not
satisfied. Thus, if machinery has to be dismantled
before removal, it will not be goods -
MANUFACTURE OR PRODUCTION
According to Section 2(f) of Central Excise Act
“manufacture” includes any process: -
i). Incidental or ancillary to the completion of
manufactured product or
ii). Which is specified in relation to any goods in
the Section or Chapter notes of the Schedule
to the Central Excise Tariff Act, 1985 as
amounting to manufacture, or
iii. Which, in relation to goods specified in
third schedule to the CEA, involves packing
or repacking of such goods in a unit container
or labelling or re-labelling of containers or
declaration or alteration of retail sale price or
any other treatment to render the product
marketable to consumer.
GOODS AND SERVICES TAX ACT, 2017
WHAT IS GST
Goods and services tax means a
It specifically includes:
(i) Sale (ii) Transfer (iii)
Barter (iv) Exchange (v) License (vi) Rental (vii)
Lease (viii) Disposal
The law has provided an inclusive meaning to the word
‘supply’ which implies that the specific transactions
which are listed in the said section are only illustrative.
Supply should be by a person engaged in business: It is
essential that such supplies should be by the supplier
who is engaged in business. (‘Business’ as defined in
Section 2(17) of the Act).
However, in case of import of services for a
consideration, even if such services are imported
otherwise than in the course or furtherance of business,
it would be deemed to be a supply.;
The word ‘supply’ should be understood as follows: —
It should involve delivery of goods and / or services to
another person; —
The supply will be treated as wholly one supply – goods,
or services, based on Schedule II and the provisions
pertaining to composite supply and mixed supply; —
It should involve quid-pro-quo – viz., there should be
something in return which the person supplying will
obtain from the recipient (except in cases of matters
specified in Schedule I where it is deemed to be a
supply, even if it is made without consideration).
It is not important that what is received in return is
‘money’; it can be money’s worth; — Transfer of
property in goods from the supplier to recipient is not
necessary
Under this clause, it is essential that all the above forms
of transactions including the extended and generic
meaning given to ‘supply’ should be made for a
‘consideration’.
Only exception for this will be cases specified in
Schedule I. Absence of consideration (as defined in
Section 2(31)) will take away the character of ‘supply’
under this clause.
(b) Supply should be in the course or furtherance of
business: For a transaction to qualify as ‘supply’, it is
essential that the same is ‘in the course or furtherance of
business’.
Paymen
Invoice Invoice t entry Credit Time of
Section 12(2) date due in in bank
date supplier account supply
's books
Sale on approval
Accepted Receipt
basis Removal Issue of Time of
by of
Section 12(2) of goods invoice supply
recipient payment
r/w Section 31(7)
Acceptance
communicated
11 01-Nov-17 25-Nov-17 15-Nov-17 25-Nov-17 15-Nov-17
within 6 months of
removal
Amount paid to
supplier before
12 01-Nov-17 25-Nov-17 15-Nov-17 12-Nov-17 12-Nov-17
informing
acceptance
Acceptance not
communicated 02-May-
13 01-Oct-17 15-May-18 15-May-18 01-Apr-18
within 6 months of 18
removal
Time of Supply of Services – 343
Sec 13(2) Illustrations
Payment
Section 13(2) Invoice Invoice entry in Credit
bank
in Time of
date due date supplier' account supply
s books
Invoice raised
1 before completion 10-Oct-17 20-Oct-17 26-Oct-17 30-Oct-17 10-Oct-17
of service
Based on due
date for Commen Completi Receipt
invoicing Invoice cement Time of
date of on of of supply
Section 13(2) service payment
r/w Section service
31(2).
3 Delayed issue of
26-Dec-17 20-Oct-17 16-Nov-17 28-Jan-18 16-Dec-17
invoice
Contract provides
for payments on
6 completion of
event. Recipient to 24-Apr-18 24-Apr-18 20-Apr-18 24-Apr-18 20-Apr-18
pay within 1 month
from date of
completion
© Indirect Taxes Committee, ICAI
Time of Supply of Goods /
Services - Reverse Charge – Sec
12(3) / 13(3)
346
Date on which payment is
Date on which payment is
entered in the books of
debited to the recipient’s bank a/c
recipient
Date of
invoice Payment
Reverse charge Removal Receipt Time of
issued by
Section 12(3) of goods of goods supply
by recipient
supplier
No payment made
3 31-Oct-17 30-Dec-17 05-Jan-18 - 30-Nov-17
for the supply
Service by
unregistered
- 30-Nov-17 - 05-Dec-17 05-Dec-17
person, no
payment made
Time of Supply of Vouchers –
Sec 12(4)/13(4)
350
Date of redemption of
voucher – Other cases
For Date on
Time of Interest, Delayed which the
supply for Late Fees, payment supplier
value of receives
addition Penalty Considerat such
by way of ion shall addition
be in value
Change in rate of tax in respect of
supply of goods or services – Sec 14
355
Date of supply Date of Date of Time of supply Rate of tax
of goods or invoice receipt of
services payment
(1) (2) (3) (4) (5)
Before the After the After the Date of receipt of New rate
change in rate of change change in payment or date of
tax in rate rate issue of invoice
whichever is earlier
Before change in Before After the Issue of invoice Old rate
rate of tax the change in
change rate
in rate
Before change in After the Before the Receipt of Payment Old rate
rate of tax change change in
Change in rate of tax in respect of
supply of goods or services – Sec 14
356
Date of supply Date of Date of Time of supply Rate of tax
of goods or invoice receipt of
services payment
(1) (2) (3) (4) (5)
After the change Before After the Receipt of payment New rate
in rate of tax the change in
change rate
in rate
After the change Before Before the Date of receipt of Old rate
in rate of tax the change in payment or date of
change rate issue of invoice
in rate whichever earlier
After the change After the Before the Issue of Invoice New rate
in rate of tax change change in
in rate rate
VALUE OF SUPPLY
Introduction
Consideration is quid pro quo in a contract and
price is the consideration expressed in money terms.
Thus,
Value of supply is the component upon which tax is
levied and collected.
This section applies to both goods and services
supplied for purposes of valuation of the taxable
supply.
Transaction Value
Transaction Value INCLUDES:
EXCLUDES discount:
Amounts charged by supplier to recipient in
respect of any taxes, duties, cesses, fees Before / at the time of
and charges levied under any statute, supply
other than taxes paid under GST regime; • Single condition:
Amount incurred by Recipient which is Such discount is duly
liable to be paid by the Supplier; recorded in the invoice
Transaction value: Inclusions
and exclusions
364
Illustration:
(1) Where a new phone is supplied for twenty
thousand rupees along with the exchange of an old
phone and
if the price of the new phone without exchange is
twenty four thousand rupees, the open market
value of the new phone is twenty four thousand
rupees.
(2) Where a laptop is supplied for forty thousand
rupees along with the barter of a printer that is
manufactured by the recipient
and the value of the printer known at the time of
supply is four thousand rupees
but the open market value of the laptop is not
known, the value of the supply of the laptop
is forty four thousand rupees.
Rule 28: Value of supply of goods or services or both
between
distinct or related persons, other than through an agent
shall
372
(a) be the open market value of such supply
Value as determined by
application of Rule 30 or Rule
31, in that order
Provided that where goods are intended for further
supply as such by the recipient, the value shall,
at the option of the supplier, be an amount
equivalent to 90% of the price charged for the
supply of goods of like kind and quality
by the recipient to his customer not being a related
person
Where the recipient is eligible for full input tax
credit, the value declared in the invoice shall be
deemed to be the open market value of goods or
services
Rule 29: Value of supply of goods made or received
through an agent
374
Illustration:
A principal supplies groundnut to his agent and
the agent is supplying groundnuts of like kind and
quality in subsequent supplies at a price of five
thousand rupees per quintal on the day of the supply.
Another independent supplier is supplying
groundnuts of like kind and quality to the said agent
at the price of four thousand five hundred and fifty
rupees per quintal.
The value of the supply made by the principal
shall be four thousand five hundred and fifty
rupees per quintal or
Option-1
When exchanged from or/ to INR:
Difference of Buying rate / Selling rate and RBI reference
rate x Total units of currency
(If RBI reference rate is not available, value shall be 1% of
gross amount of INR received or provided)
• If neither of two currencies exchanged in INR ,
• the value shall be equal to 1% of the lesser of the
two amounts
• the person changing the money would have
received by converting any of the two currencies
into INR
• on that day at the reference rate provided by RBI.
Rule 32: Determination of value
in respect of
certain supplies
381
OPTION-2
Amount of currency 1% of the gross amount of currency
exchanged up to Rs.1 exchanged or Rs. 250/-, whichever
lakh is higher
Amount of currency
Rs. 1,000/-plus 0.5% of the gross
exchanged exceeding
amount of currency exchanged
Rs.1 lakh and up to
above Rs. 100,000/-
Rs.10 lakhs
Rs. 5,500/- plus 0.10% of the gross
Amount of currency
amount of currency exchanged
exchanged exceeding
above Rs.10 lakhs or Rs. 60,000/-,
Rs.10 lakhs
whichever is lower
© Indirect Taxes Committee, ICAI
Rule 32: Determination of value
in respect of
certain supplies
382
Rule 32(4)
Life Insurance Business
a) gross premium charged from a policy holder
reduced by the amount allocated for investment, or
savings on behalf of the policy holder, if such
amount is intimated to the policy holder at the time
of supply of service;
Rule 32(6)
Token / Coupon / Voucher / Stamp
• The value of a token, or a voucher, or a coupon, or a
stamp (other than postage stamp)
service providers;
• as may be notified by the Government between distinct
UTGST then:
Value inclusive of taxes X tax rate in % of IGST
or as the case may be CGST, SGST or UTGST
Tax
Amount = (100 + sum of tax rates, as applicable, in %)
The price of each Hero pen in the open market is Rs.52. The
supplier additionally charges Rs.5,000 for delivering the
goods to the recipient’s place of business.
Ans. Mr. Mohan and Lekhana Wholesalers
would not be treated as related persons
merely because the spouse of the recipient is an
employee of the supplier,
although such spouse and the supplier
would be treated as related persons.
Therefore, the transaction value will be accepted as
the value of the supply.
The transaction value includes incidental expenses
incurred by the supplier in respect of the supply up
to the time of delivery of goods to the recipient.
On appeal to Tribunal:
HELD
Pre-GST situation.
Here, the price paid by the readymade
manufacturer is Rs 110 and his value addition is Rs
100. Totally this will come to Rs 210.
ASSESSMENTS
In terms of Section 2(11) of the Act, “assessment”
means determination of tax liability under this Act
and includes
self-assessment,
re-assessment,
provisional assessment,
summary assessment and
best judgement assessment.
The CGST Act, 2017 contemplates the following types of
Assessments:
Self-assessment (Section 59)
Provisional Assessment (Section 60)
Scrutiny of returns filed by registered taxable
persons (Section 61 )
Held :
From perusal of the record it is noticed that the
vehicle has been detained and the goods/vehicle
was seized by the respondent no.4 on 27.3.2018
whereas the time has been granted for submission
of reply and appearance of the person concerned
before the respondent no. 4 on the later date.
Introduction:
This section provides for the provision relating
to detention of goods or conveyances or both in
case of certain defaults under the law.
Analysis : (a) If a person contravenes any provision
of the Act while transporting or storing goods,