TaxTMI 
TaxTMI 
2019 (3) TMI 593
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.... facts having a bearing on the questions raised- 1) "The Mobile Wallet Private Limited (hereunder referred as Applicant) registered with the Registrar of Companies Vide Registration No. U67190MH2015PTC267015, having a corporate office at 3rd Floor, Tower 3, Equinox Business Park, LBS Marg, Kurla (West), Mumbai - 400070. 2) The applicant has obtained registration and holding valid registration certificate issued under Central Goods and Services Tax Act, 2017. 3) The applicant is in the business of issuance and operation of Pre-paid Payment instruments as per RBI guidelines. Pre-paid Payment Instrument includes mobile wallet and Pre-paid Card. 4) The applicant company has entered into an agreement dated 16th Jan 2018 with the Federal Bank Ltd having a registered Office at Federal Towers, Aluva-683101, Kerala. Applicant is issuing and operating Pre-paid Payment instruments as Business Correspondent (BC) of Federal Bank. As part of BC arrangement, Applicant has launched Co-branded Pre-paid Cards in India with Federal Bank powered by MasterCard. Definitions: 1) Merchant Discount Rate (MDR):- Rate charged by Acquiring Bank from Merchant on every Card transaction. This is a....
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....rchant Establishment for charging the card holder for purchase of goods or services. Such terminals are provided by the 'Acquiring Bank' to the Merchant Establishments which enables validation and acceptance of payment by Debit/ Credit/ Pre-Paid card. In case of Card not present transaction, card details are entered in online Payment Gateway (PG) of concerned the Merchant Establishment for charging the card holder for purchase of goods or services. Such PG services are provided by the 'Acquiring Bank' to the Merchant Establishments which enables validation and acceptance of payment by Debit/Credit/ Pre-Paid card. 2. The moment card holder swipes the card or enter Card details in PG at Merchant Establishment with amount to be debited, information is transmitted to the Issuing Bank with the help of settlement platform of the Network. The information regarding authenticity of the card holder and amount confirmation is then sent back to the Merchant Establishment by the Network 3. The VISA/ MasterCard/Rupay/AMEX network generates reports for merchant settlement and sends the same to concerned Acquiring Bank who pays the merchant after deducting MDR and applicab....
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....20 GST (SGST) @9% 16.20 Total Charge 212.40 Net payable to Merchant 9787.60 Acquiring bank to deposit GST (Rs.32.40) with Government after setting off inputs if any. 2. Settlement to Acquiring bank by Issuing Bank as per settlement files received From Network Particulars Rupees Amount 10000 Interchange rate 1.60% Interchange Amount 160.00 Total Charge 160.00 Net payable to acquiring bank 9840.00 It is evident that issuing bank is not able to charge GST on interchange Fee amount (as forward Charge) hence Acquiring Bank is not able to take GST input credit due to lack of information in settlement files shared by Networks. Issuing Bank is again depositing GST on Interchange amount of Rs. 160 and paying GST to Government by reverse charge method i.e. Rs. 24.40 (160/118*18) and is left with Rs. 135.60. This amount of Interchange Fee of Rs. 135.60 is shared between Business Correspondent (BC) and the Issuing bank in the agreed ratio as in this case it is 85:15 (85% by BC and 15% by Issuing bank). The BC again pays GST on the income value of Rs. 115.26 (85% of Rs. 135.60) @18% raised in favor of Issuing bank. In this cas....
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....on(s) (i.e. applicant's view point and submissions on issues on which the advance ruling is sought) Submission: Section 2(30) of Central Goods and Services Act defines Composite supply as "Composite Supply" means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply: A supply will be regarded as a composite supply if the following elements are present: (a) The supply should consist of two or more taxable supplies; (b) The supplies may be of goods or services or both; (c) The supplies should be naturally bundled; (d) They should be supplied in conjunction (event, time or contract) with each other in the ordinary course of business; (e) One of the supplies should be a principal supply (Principal supply means the predominant supply of goods or services of a composite supply and to which any other supply is ancillary). The following aspects need to be noted: The two or more) supplies must appear natural when bundled a....
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.... for successful provision of the principal supply, namely, the swiping of the card for the purchase of goods or services. The contention that a single composite supply should not be broken into its components and classified as separate supply is a well-accepted principle. Therefore, it is a settled position of law that interchange fee earned by the issuing bank' forming integral part of supply of service of 'acquiring bank' to the merchant establishment, and therefore should not be faxed again with 18% GST. In the present circumstances, the modus operadi goes against the basic principles of GST of seamless flow of credit and double taxation on the same transaction. In this instant case Acquiring bank is paying GST to Government which he is collected from merchant. Issuing bank calculating the GST by reverse charge method and paying the GST to Government. 03. CONTENTION - AS PER THE CONCERNED OFFICE the jurisdictional office has not made any written submissions. 04 HEARING The preliminary hearing in the matter was held on 04.12.2018 and Sh. Majesh Toshniwal appeared and stated that he was the Manager (Finance) in the applicant company but did not pro....