rule 35 of cgst is registration mandatory

[nayaz shaik]

My query is from 18.07.22, stem cell banking service has been brought under GST ambit under Health Care Services. client have not registered under gst and not collected gst from 18.07.2022 to 31.01.2023. Now client want to pay gst, for for this I have applied Rule 35 of CGST Rules by including the gst portion in the turnover collected. But the department officials objecting that since registration is not done during that period. Rule 35 cannot be applied. pls clarify me that whether gst registration is mandatory for application of rule 35

[KASTURI SETHI]

Sh.Nayaz Shaik Ji,

What is the date of registration with GST department ?

Do you want cum-tax benefit for the period prior to registration but after getting registration ?

[nayaz shaik]

sir

registration done on 14.02.2023. But we need to pay gst from 18.07.2022 to 31.01.2023. I need cum tax benefit for the period prior to registration.

[KASTURI SETHI]

Q. Whether gst registration is mandatory for application of Rule 35 of CGST Rules ?

Ans. Registration is not mandatory in this scenario for claiming cum-tax benefit. You are claiming cum-tax benefit for the period prior to the date of registration but only after getting registered.

The cum-tax benefit cannot be denied.

[nayaz shaik]

sir,

can you please refer any article , corresponding section and rules in this regard.

[KASTURI SETHI]

Sh.Nayaz Shaik Ji,

(i) Rule 35 of CGST Rules does not talk of 'the value is deemed to be inclusive of GST'.

(ii) Non-registration is not a hurdle. Your books of account should prove that tax was not collected. (Being unregistered, tax cannot be collected but sometimes it happens that terms and conditions of the contract indicate that prices are inclusive of tax, duty etc.).

(iii) Corresponding Section in GST is Section 33 of CGST Act and in erstwhile Finance Act, 1994(Service Tax law) is Section 67 (2)

(iv) GST laws are still in their infancy. You will not find any case law on this issue in GST regime. However, case law and Board's circular( based on the judgement of hon'ble Supreme Court ) pertaining to pre-GST period are as under :-

Valuation (Central Excise) — Cum-duty price — Assessable value to be arrived after deducting duty element

Circular No. 803/36/2004-CX., dated 27-12-2004

Valuation (Central Excise) — Assessable value to be arrived after deducting duty element from cum-duty price

The Supreme Court Bench comprising Hon’ble Mr. Justice N. Santosh Hegde, Hon’ble Mr. Justice Shivaraj V. Patil and Hon’ble Mr. Justice B.P. Singh on 9-12-2004 after condoning the delay, dismissed the Review Petition (Civil) No. 75/2003 in C.A. No. 3783 of 2000 with R.P. (C) Nos. 76-85/2003 in C.A. Nos. 660, 3841 & 5867-5868 of 2000, 4082, 4455, 6072, 8455, and 3913 of 2001 and 92 of 2002, R.P. (C) No. 1054/2003 in C.A. No. 5368 of 2002, R.P. (C) Nos. 116-117/2003 in C.A. Nos. 5862-5863 of 1999, R.P. (C) No. 1170/2003 in C.A. No. 1833/2002, C.A. No. 2602/2004, C.A. Nos. 6795-6797/2004, C.A. No. 7450-7452 of 2003. The Review Petition (Civil) No. 75/2003 in C.A. No. 3783/2000 with other appeals was filed against the Supreme Court judgment and order dated 27-2-2002 as reported in 2002 (141) E.L.T. 3 (S.C.) (Commissioner v. Maruti Udyog Ltd.). R.P. (C) No. 1054/2003 in C.A. Nos. 5368/2002 was filed against the Apex Court Order dated 3-9-2002 as reported in 2003 (151) E.L.T. A306 (S.C.) (Commissioner v. Supreme Fabrics (P) Ltd.). R.P. (C) Nos. 116-117/2003 in C.A. Nos. 5862-5863/1999 was filed against the Supreme Court Order dated 26-2-2002 as reported in 2002 (142) E.L.T. A279 (S.C.) (Collector v. Srichakra Tyres Ltd.). C.A. Nos. 6795-6797/2004 was filed against the CESTAT Order Nos. A/489-491/2004-NB(B), dated 15-3-2004 as reported in 2004 (171) E.L.T. 343 (Tri. - Del.) (Vasundhara Containers & Pipes (P) Ltd. v. Commissioner). While dismissing the review petitions and appeals, the Supreme Court held as follows :-

“Heard learned Counsel for the parties.

Delay condoned.

The review petitions and civil appeals are dismissed.

C.A. Nos. 6795-6797/2004 :

Taken on board.

Heard learned Counsel for the parties.

The civil appeals are dismissed.”

The Supreme Court and the CESTAT in their impugned orders had held that the sale price which is charged is deemed to be the value for the purpose of levy of excise duty, but the element of excise duty, sales tax or other taxes which are included in the wholesale price are to be excluded in arriving at the assessable value. That means, that the cum-duty price when charged, then in arriving at the excisable value, the element of duty which is payable has to be excluded.

[Commissioner v. Maruti Udyog - 2004 (12) TMI 669 - SC ORDER]

[KASTURI SETHI]

In continuation of my reply, it is added that the above case laws will be valid in GST regime also.

[Padmanathan KV]

When department is alleging that impugned activity is taxable from 18-7-2022 to 31-02-2023, and it is not disputed that GST has not been collected separately, then the amount collected by assessee is inclusive of GST.

Rule 35 benefit cannot be denied in your case.

AI Summary

Cum tax treatment under Rule 35 permits including tax in turnover after registration when tax was not previously collected. Rule 35 of the CGST Rules may be applied to treat amounts as inclusive of GST for periods prior to registration if registration is later obtained and the supplier proves tax was not collected; non-registration during the taxable period does not bar claiming cum tax benefit, and Section 33 CGST and pre GST precedents support excluding tax elements from assessable value.