GST Certificate Course (Webinar Series 1) · 2020-04-22 · Landmark cases C.Cu (Import), Mumbai...

GST Certificate Course

(Webinar Series 1)

CA Vasant K. Bhat

22.04.2020

Coverage Today

Classification of Goods & Service:

➢Important aspects

➢Scheme of classification

➢Step by step procedure

➢Interpretation Rules

➢Possible issues of dispute

➢Landmark legal precedent

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Exemptions:

▪ Scheme of exemptions

▪ Importance of claiming

▪ Impact of mistakes

▪ Issues in exemptions

▪ Some examples

▪ Landmark legal precedent

Exemptions Principles

What is exemption?

The general meaning is - no liability to pay tax.

Definition:

2(47) “exempt supply” means supply of any goods or services or both

which attracts nil rate of tax or which may be wholly exempt from tax

under section 11, or under section 6 of the Integrated Goods and

Services Tax Act, and includes non-taxable supply;

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Sec 11 of the CGST Act - Power to grant exemption:

➢Exemption by way of notification

➢May be conditional or un-conditional (Mandatory to avail un-

conditional exemptions)

➢Exemption may be full or partial

➢General Exemption and Special exemption

Exemptions by way of Refunds-Sec 55

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Why Exemptions?

- To reduce the tax burden on the ultimate consumers (Essential goods

like agriculture produce, life saving medicines, Food items).

- Helps certain industries to establish.

- Helps SMEs to manage their working capital.

- SMEs Free from compliances.

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Scheme of Exemptions

General Exemptions:

Applicable to goods and services both.

Specific Exemptions:

Exemptions for specified goods

Exemptions for specified services

Area based exemptions:

End use based exemptions:

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Exemption Upto Specified TO Limit

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Goods: Aggregate Turnover:

Special Category States Upto Rs. 10 Lakhs

(Rs. 20 lakhs wef 01.04.2019)

Normal States Upto Rs. 20 Lakhs

(Rs. 40 lakhs wef 01.04.2019)

Service:

Special Category States Upto Rs. 10 Lakhs

Normal States Upto Rs. 20 Lakhs

Importance of claiming Exemptions

➢Un conditional exemptions – Mandatory

➢There could be no refund since incidence of tax is passed on.

➢Credit to Consumer Welfare fund

➢ITC could be rejected, interest and penalty.

➢Recipient may not be able to claim refund due to time lapse

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Impact of wrong claims of Exemptions

➢Demand of tax, interest and penalty.

➢Cost unsustainable.

➢Loss of ITC

➢Prolonged litigation

➢Loss of business reputation

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Issues in Exemptions

➢Understanding the meaning of exemption notifications and its terms.

➢Every word in the notification could be strictly construed.

➢Any world or expression in exemption notification normally be

interpreted in its ordinary, natural and grammatical sense and not in

scientific or technical understanding of the terms.

➢An exemption notification issued under the Act cannot override the

provisions of the Act itself.

➢While interpreting a notification recourse to other notification is not

permissible as each notification is independent of one another.

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➢An exemption to an intermediate product/process does not mean an

exemption to finished product and vice-versa.

➢When there are two exemption notifications on the same subject

matter, the interpretation which does not make either of them

inoperative or redundant is to be adopted.

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Interpretation of terms used in exemption notifications:

➢By way of – restrict the scope of entry only to the activities specified

in such entries.

➢In relation to – is used to expand the scope of the entry

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Landmark cases

C.Cu (Import), Mumbai Vs. Dilip Kumar & Company 2018 (361)

ELT 577 (S.C.)

- Burden to prove for its entitlement is on assessee claiming

exemption.

- If there is any ambiguity in exemption Notification, benefit of such

ambiguity cannot be claimed by assessee and it must be interpreted

in favour of Revenue.

- Burden to prove tax liability of an assessee is on Revenue.

- In case of any ambiguity in a taxing statute imposing tax liability on

the assessee, benefit of doubt to be given to assessee.13

Landmark cases

Dai-Ichi Karkaria Ltd Vs. UOI 2000(119) ELT 516(S.C.)

➢Doctrine of promissory estoppel not applicable if change in the stand

of the Government is made on account of public policy.

➢But exemption notification being a piece of subordinate legislation,

curtailment or withdrawal of grant of the exemption is open to

challenge on the ground of being unreasonable or arbitrary .

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Landmark cases

C.C.Ex Mumbai-I V. Bombay Dyeing & Mfg. Co. Ltd. 2007(215)

ELT 3 (S.C.)

➢In case of exemption subject to condition of non taking of Cenvat

credit, credit taken but before utilisation credit reversed amounts to

not taking credit - Exemption is available.

C.C.Ex & Cu. V. Precoat Meridian Ltd. 2015(325)ELT 234(S.C.)

➢Reversal of Cenvat/Modvat credit amounts to non-taking of credit.

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Exemptions - Goods

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Notification No. Details of exemptions

2/2017-CGST(R) Specified goods therein (Basic & essential goods)

6/2017-CGST(R) Supply of Goods to CSD:

Exemption to Canteen Stores Department for all inward

supplies of goods for subsequent supplies to unit run canteens

of CSD or to the authorised customers of CSD by way of 50%

refund of CGST.

(Exemption by way of refund u/s 55)

7/2017-CGST(R) Goods Supplied by CSD:

Exemption to goods supplied by CSD to units run canteens and

to the authorized customers by them from CGST

Exemptions - Goods

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16/2017-CGST(R) Supply to UNO & Diplomatic Agencies:

Exemption to goods and services supply to specialize

agency of UNO, Embassies and other specified

international organisation by way of refund under

Section 55 of CGST Act

40/2017-CGST(R) Supply to Merchant Exporters:

Reduced CGST Rates prescribed for supply of taxable

goods by a registered supplier to a registered recipient

for export subject to specified conditions

Exemptions - Goods

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40/2017-CGST(R) Conditions:

1) The supplier and recipient must be registered

under GST.

2) The recipient shall exports the goods within 90

days.

3) The GSTN and the tax invoice number of the

supplier shall be mentioned in the Shipping Bill

or Bill of export.

Exemptions - Goods

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4) The recipient must be registered with any Export

Promotion Council or a Commodity Board

recognized by the Department of commerce.

5) The purchase order shall indicate that the goods

shall be supplied under concessional rate. A

copy of such purchase order shall be submitted

to the GST officer of the supplier.

Exemptions - Goods

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6) The goods shall be directly delivered to port of

export. If the goods needs to be aggregated,

then may be delivered to registered warehouse

(registered premise of the recipient). The receipt

of the goods at registered warehouse shall be

submitted to the GST officer of the supplier.

Exemptions - Goods

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7) After export, copy of shipping bill or bill of

export along with export general manifest or

export report shall be submitted to the recipient

and also to the GST officer of the recipient.

Exemptions – Service

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Entry No. Particulars

1 Services of Charitable Institutions:

Services by an entity registered under section12AA of the

Income-tax Act, by way of charitable activities.

(r) “charitable activities” means activities relating to -(i) public health by way of ,-(A) care or counseling of

(I) terminally ill persons or persons with severe physical or mental disability;(II) persons afflicted with HIV or AIDS;(III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

Notification No. 12/2017-CGST (R), as amended


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(B) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion , spirituality or yoga;(iii) advancement of educational programmes or skill development relating to,-

(A) abandoned, orphaned or homeless children;(B) physically or mentally abused and traumatized persons;(C) prisoners; or(D) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife;



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SHRIMAD RAJCHANDRA ADHYATMIK SATSANG SADHANA

KENDRA (Maha. AAR)

Sale of various spiritual products such as books, audio CDs, DVDs,

statues and calendars for advancement of religious teachings -

Covered under definition of ‘business’.

Hon’ble Supreme Court in the case of Commissioner of Sales

Tax Vs. Sai Publication Fund (2002) 4 SCC 7 (SC)

where the main activity is not business, then any incidental or ancillary transaction, unless established by the

revenue department to be an independent business transaction, will also be considered as charitable only and

not business.


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4 Services by Govt Authority:

Services by governmental authority by way of any activity

in relation to any function entrusted to a municipality

under article 243 W of the Constitution.

“Governmental Authority” means an authority or a board or any otherbody, -(i) set up by an Act of Parliament or a State Legislature; or(ii) established by any Government,with 90per cent. or more participation by way of equity or control, tocarry out any function entrusted to a Municipality under article 243W ofthe Constitution or to a Panchayat under article 243G of theConstitution.



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12 Renting of Residential Dwelling:

Services by way of renting of residential dwelling for use as

residence. (Heading 9963, 9972)

Education Guide:

The phrase ‘residential dwelling’ has not been defined in the Act. It has

therefore to be interpreted in terms of the normal trade parlance as per

which it is any residential accommodation, but does not include hotel,

motel, inn, guest house, camp–site, lodge, house boat, or like places

meant for temporary stay.



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18 Transportation of Goods (GTO):

Services by way of transportation of goods-

(a) by road except the services of-

(i) a goods transportation agency;

(ii) a courier agency;

(b) by inland waterways.



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21 Services by GTA:Services provided by a goods transport agency, by way of transport in a goods carriage of a) agricultural produce;(b) Consideration less than Rs. 1500/- per carriage(c) Consideration is less than Rs. 750 per consignee.(d) milk, salt and food grain including flour, pulses and rice;(e) organic manure;(f) newspaper or magazines registered with the Registrar of Newspapers;(g) relief materials meant for victims of natural or manmade disasters, calamities, accidents or mishap; or(h) defence or military equipments.



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41A Transfer of TDR/FSI:

Transfer of TDR/FSI on or after 01.04.19 for construction of residential

apartments, by a promoter in a project, intended for sale to a buyer

during construction.

Where the project consists of both residential as well as commercial

units, the exemption shall be computed proportionate to the carpet

area of the residential apartments.



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41A Conditions:

• Promoter pays under RCM, GST on portion of value of TDR/FSI

attributable to residential apartments remained unsold on the date

of OC. The computation shall be made on the basis of carpet are of

residential units sold/unsold.

• The tax rate shall be 1% or 5%

• The liability arises on the date of completion or first occupation

whichever is earlier.



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66 Educational Institutions:

(y)“educational institution” means an institution providing

services by way of,-

(i) pre-school education and education up to higher secondary

school or equivalent;

(ii) education as a part of a curriculum for obtaining a

qualification recognised by any law for the time being in force;

(iii) education as a part of an approved vocational education

course;



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66 Services provided -

(a) by an educational institution to its students, faculty and

staff;

(aa) by an educational institution by way of conduct of

entrance examination against consideration in the form of

entrance fee

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;



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66 (ii) catering, including any mid-day meals scheme

sponsored by the CG/ST/UT;

(iii) security or cleaning or house-keeping services

performed in such educational institution;

(iv) services relating to admission to, or conduct of

examination by, such institution;

(v) supply of online educational journals or periodicals:



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66 Provided that nothing contained in sub-items (i), (ii) and

(iii) of item (b) shall apply to an educational institution

other than an institution providing services by way of pre-

school education and education up to higher secondary

school or equivalent.

Provided further that nothing contained in sub-item (v) of

item (b) shall apply to an institution providing services by

way of,-



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66 (i) pre-school education and education up to higher

secondary school or equivalent; or

(ii) (ii) education as a part of an approved vocational

education course.



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74 Services by Healthcare & Clinical Establishments:

(zg) “health care services” means any service by way of diagnosis or

treatment or care for illness, injury, deformity, abnormality or

pregnancy in any recognised system of medicines in India and includes

services by way of transportation of the patient to and from a clinical

establishment, but does not include hair transplant or cosmetic or

plastic surgery, except when undertaken to restore or to reconstruct

anatomy or functions of body affected due to congenital defects,

developmental abnormalities, injury or trauma;



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74 (s) “clinical establishment” means a hospital, nursing home, clinic,

sanatorium or any other institution by, whatever name called, that

offers services or facilities requiring diagnosis or treatment or care for

illness, injury, deformity, abnormality or pregnancy in any recognised

system of medicines in India, or a place established as an independent

entity or a part of an establishment to carry out diagnostic or

investigative services of diseases;



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74 Services by way of-

(a) health care services by a clinical establishment, an

authorised medical practitioner or para-medics;

(b) services provided by way of transportation of a patient

in an ambulance, other than those specified in (a) above.



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77 Services by Trade Union Housing Society:

Service by an unincorporated body or a non- profit entity

registered under any law for the time

being in force, to its own members by way of

reimbursement of charges or share of contribution –

(a)as a trade union;

(b) for the provision of carrying out any activity which is

exempt from the levy of Goods and service Tax; or



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77 (c) up to an amount of seven thousand five hundred

rupees per month per member for sourcing of goods or

services from a third person for the common use of its

members in a housing society or a residential complex.


Supreme Court in the case of Calcutta Club Ltd. [Civil Appeal No.

4184/2009] and Ranchi Club Ltd. [Civil Appeal No. 7497/2012]

Relevant/ Latest GST Tariff with Commentary

ICAI Publication- BGM, Handbook on Class/ Exemption

Classification- Exemption Books

Compendium of Issues & Solutions- 2018

Online/ Physical Workshops/ Certification Courses - 2020

How to Learn More

For any [email protected]

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GST Certificate Course (Webinar Series 1) · 2020-04-22 · Landmark cases C.Cu (Import), Mumbai...

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