(Circular No. 47/21/2018-GST)dated 08-06-2018

GST Update (Circular No. 47/21/2018-GST)dated 08-06-2018

Update on Clarifications of certain issues under GST

This update intends to discuss about the certain clarifications issued vide circular No. 47/21/2018-GSTdated 08-06-2018.Let us analyze the following Clarifications issued by CBIC:-

Moulds and dies owned by Original Equipment Manufacturers(OEM) that are sent free of cost (FOC) to a component manufacturer (regarding liability of tax & reversal of credit)

Since in the service tax regime, the cost of free supply of material supplied by service recipient to service provider was to be added in the taxable value. This concept has generated a lot of litigation and ultimately, it has been decided by Apex Court in case of Bhayana Builders. But there is no such concept in the GST regime. Thus, the cost of free supply material is not to be added to arrive at taxable value. This is also clarified by CBIC in this circular.

However, circular further says that if the agreement between provider and recipient says that the material was to be supplied by provider only. But the recipient has supplied this material to provider then its value is to be added in the taxable value. Hence, the litigation of service tax regime does not end here and continued in the GST also.

Moreover, the problem arises when the moulds and dies are supplied free of charge by recipient. But the agreement says that the same is to be purchased by provider onhis own. But crux of problem is that the complete value of dies and moulds cannot be loaded in a single transaction. A example will clarify the same.

Suppose,a die of Rs, 10,000/-can be used to manufacture 10,00,000 pieces. But the recipient has ordered only 5000 pieces @ 10/- per piece. Now the complete cost of die comes to Rs. 10,000/- cannot be loaded to supply of 5000 pieces. Hence, the amortised value is to be arrived at and value is to be added. So, we will calculate the amortized value by dividing 10,000 by 10,00,000 and will add per unit cost in the GST value. This was concept
prevailing in service tax regime and now it has been added in GST regime also. Litigation will take place on this issue also.

Liability of tax in case of Servicing of cars involving both supply of goods (spare parts) and services (labour) -

This dispute was going on since long as to whether the service provided by authorized service stations will be termed as composite supply and it will be taxed accordingly. But most of the service providers, bill separately for material as well as for labour charges. Many representations have been sent to the Government in this regard. Hence, they were billing at the rates applicable on them.

Now it has been clarified that if assessee supply both goods and services and the value of such goods and services supplied are shown separately, then goods and services would be liable to tax at the rates as applicable to such goods and services separately.

Auction of tea, coffee, rubber etc. (regarding maintenance of books of accounts & eligibility to avail input tax credit)

Books of accounts will be maintained at the principal place of business and additional place(s) of business as follow-

The principal and the auctioneer may declare the warehouses, where such goods are stored, as their additional place of business.

The buyer is also required to disclose such warehouse as his additional place of business if he wants to store the goods purchased through auction in such warehouses.

(For the purpose of supply of tea through a private treaty, the principal and an auctioneer may also comply with the said provisions) The principal and the auctioneer are required to maintain the books of accounts relating to each and every place of business in that place it.
However, in case of any difficulty, they may maintain the books of accounts relating to the additional place(s) of business at their principal place of business. (Principal and the auctioneer are required to intimate their jurisdictional officer in writing about the same.)

Principal and the auctioneer shall be eligible to avail input tax credit subject to the fulfillment of other provisions of the CGST Act read with the rules made there under.

E-way Bill-Whether goods can be delivered without producing e-way bill at the time of delivery in case of transportation of goods by railways.

It has been clarified that Railways shall not deliver the goods unless the e-way bill is produced at the time of delivery.

Whether e-way bill is requiredin the following cases-
Where goods are sent in another State while moving from one area in a State to another area in the same State –

The circular states that, If the goods are sent in second State while moving from one place in a State to another place in the same State, an e-way bill is required to be generated.

Where goods move from a DTA unit to a SEZ unit or vice versa located in the same State-

Where goods move from a DTA unit to a SEZ unit or vice versa located in the same State, there is no requirement to generate an e-way bill (this exemption is applicable only if state has exempted the same.)
Means for Rajasthan E-way is required to be generated as there is no exemption regarding the same.

The content of this GST update is for educational purpose only and not intended for solicitation.

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GST Update (Circular No. 47/21/2018-GST)dated 08-06-2018

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