TaxTMI 
TaxTMI 
2023 (7) TMI 573
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.... but within the same company. Later on, the respective GSTIN would be making book adjustments to square off the receivables/payables. Similar adjustments are done for the purchase of bullion from banks and other vendors, jewellery from jewel makers, certain other goods like stationery, packing material, etc., and availing of many services such as advertisement services, etc. In essence, dues on inward and outward supplies are settled by using the receivables netting method ie., sales value minus purchase value, and the balance will be paid or received by the GSTIN. 2. At the outset, it is clarified that the provisions of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as CGST Act) and the Kerala State Goods and Services Tax Act, 2017 (hereinafter referred to as KSGST Act) are the same except for certain provisions. Accordingly, a reference made hereinafter to the provisions of the CGST Act, Rules, and the notifications issued thereunder shall include a reference to the corresponding provisions of the KSGST Act, Rules, and the notifications issued thereunder. 3. The Applicant requested an advance ruling on the following: 3.1 Whether net off of receivab....
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....specified transactions as given above, there are independent supplies between the different branches of the company with different GSTIN, wherein applicable GST is paid and credit is being availed bn such inter GSTIN transactions. It is relevant to note that the supplier raises the invoice in the GSTIN of the concerned branch who has procured/received the goods/services and ITC is availed in compliance with the provisions of Section 16 of CGST Act, 2017, Only the payment either by way of book adjustment / online banking channels is made by the Head Office / another GSTIN, which is a common business practice. The applicant further explains that the above-said book adjustments / net-off of receivable / payables are generally made in various situations (though not exhaustive) listed below; 4.2.1. MPGL Kerala purchases jewellery from various vendors. In consideration of the above purchase, bullion is sold to the vendors. The sale and purchase may be done by branches holding the same or different GSTIN. 4.2.2. MPGL purchases diamonds from MBMG Pvt Ltd for its various branches holding the same or different GSTIN. Invoices are raised in the name of concerned branches, but payments a....
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....eparate accounts except. for the requirement that consideration should be settled, which is factually settled by the Head office / another GSTIN of the company. 4.4. It is further submitted that, as per Sections (93) of CGST Act, 2017 "Recipient' of the supply of goods or services means: a). where a consideration is payable for the supply of goods and/ or service, the person who is liable to pay that consideration; b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goads is given or made available, and c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered. 4.5. further as per Section 2(31) of CGST Act, 2017 'consideration' in relation to the supply of goods or services or both include: a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government....
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.... Section 25, when made in the course or furtherance of business shall be treated as supply even if made without consideration", 4.10. As per Section 7(1) of CGST Act, 2017 "supply" includes - a) all forms of supply of goods and services or both such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; b) import of services for a consideration whether or not in the course or furtherance of business; c) the activities specified in Schedule I, made or agreed to be made without a consideration; and d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. 4.11. Further as per Section 2 (52); "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crop, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; 4.12. Further, as per Section 2 (102) of CGST Act, 2017 "services" means anything other than goods, money, and securities but includes act....
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....isions of Section 16 of CGST Act, to avail ITC, it is relevant to analyse whether book adjustment would qualify as payment. Based on the general concept of accounting principles, the books most frequently referred to are the books of account in which business transactions are recorded. Books of account are normally considered to be legal documents. Books of account contain various accounts (say, debtors and creditors). Such accounts mean an account or register of debt or credit in a book. A 'book account' means a book containing a statement in detail of the transactions between parties, including prices, made contemporaneously with the transaction, and entered in a book, Adjustment in finance and accounts means correcting figures or making allowances for charges, credits, etc. It involves alteration in debit or credit balances by way of allowances or charges posted in an account by means of debit or credit notes; It is a process of adjusting financially the sums due or owed. 4.17. The applicant also submitted before the authority the decision of AAR West Bengal in M/s. Seneo Gold Limited (2019 (24) GSTL 688 (App. A.A.R : GST) wherein it is held that "the applicant can pay the co....
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....ccounts, such transfer will be reported as a reduction in the book value of the asset being transferred. 4.20. The CGST Act, 2017 does not restrict the availment of ITC, where the payment to the vendor is made by mode other than cash or cheque or online banking. Section 49(1) only deals with the way suppliers shall make the payment of tax, interest etc to the Government and not to the supplier of goods or services. Section 49 (2) provides that ITC as self-assessed by the registered person shall be credited to his electronic credit ledger. It doesn't prohibit the applicant from reporting in the return ITC when consideration is paid to the supplier by way of book adjustment. Consideration defined under the CGST Act, 2017 also includes payment made in money or otherwise and the monetary value of any act or forbearance. For example, a mix of money and monetary value of the goods offered together with it is a valid consideration. 4.21. Similarly, if the payee owes the payer a debt, and accepts a reduction in such a debt liability as a valid form of payment, that should also be regarded as a valid 'consideration' for a supply. In other words, reduction in book debt (an asset in the....
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....ther substantiated by the practice of verification of the supplier statements to ensure that the book adjustments/payments are correctly accounted for by the supplier and the dues are settled by both parties. Therefore, the net-off of receivables of one GSTIN by another GSTIN of the same company or net-off of receivables by the same GSTIN with payable of supplier of goods/service would amount to payment to the vendor and meet the compliance requirements of Section 16(2] of CGST Act, 2017 in all the scenarios listed in the questions. The GST Act and rules do not restrict the claiming of ITC when consideration is paid through book adjustment. 4.24. Further, the arrangement of settlement of dues by another GSTIN would not trigger any nature of supply between the two GSTINs, as these are mere transactions in money and there is no underlying supply between the GSTIN on account of such book adjustment or payment. 5. PERSONAL HEARING: The applicant was granted an opportunity for a personal hearing on 20/07/2022 via virtual mode. Sri Ajith Kumar. U, Finance Controller, Authorized Representative of the applicant attended the personal hearing. The representative reiterated the conte....
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....be deemed that the registered person has received the goods or, as the case may be, services,- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person. (ba) the details of input tax credit in respect of the said supply communicated to such registered person under section 38 has not been restricted; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has famished the return under section 39: PROVIDED that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: PROVIDED FURTHER that....
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.... given by the Central Government or a State Government: PROVIDED that a deposit given in respect of the supply of goods or services or both, shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. 7.5. Accordingly, from the above definition it is revealed that the term consideration includes, in relation to the supply of goods or services, any payment, made or to be made, whether in money or otherwise, and also the monetary value of any act or forbearance. Thus, definition of 'consideration' is an inclusive definition which covers in its ambit any form of payment. Therefore, if the payee owes the payer a debt, and accepts a reduction in such a debt liability as a valid form of payment, that should also be regarded as a valid 'consideration' for a supply. 7.6. The relevant provisions of Section 12 and 13 of the CGST Act, 2017 which governs the time of supply of goods and time of supply of services is reproduced below; SECTION 12 - Time of supply of goods.- (1) The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of thi....
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.... (c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply: Provided that where the supplier of taxable service receives an amount up to one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount. Explanation- For the purposes of clauses (a)-and (b),- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; (ii) "the date of receipt of payment shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank, account, whichever is earlier. (3) In case of supplies in respect of which tax is paid or liable to be paid, on reverse charge basis, the time of supply shall be the earlier of the following dates, namely: - (a) the date of payment as entered in the books of account of the recipient or the date on....
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....plete information regarding the nature of the transactions that are perceived to be covered under the category by the applicant Therefore, we proceed to analyse arid decide the taxability only in respect of the transactions that are specifically enumerated in the eight different circumstances / scenario [Para 4.2.1 to 4.2.8 above] as listed by the applicant in their application. 8.1. The provisions regarding the meaning and scope of supply are contained in Section 7 of the CGST Act, 2017; which reads as follows; (1) For the purposes of this Act, the expression. - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration Explanation. -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or an....
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....ction in money and there is no separate supply of goods or services other than the supplies already received by the respective GSTIN's. Therefore, such transactions do not come within the meaning and scope of supply as defined in Section 7 of the CGST Act, 2017 and accordingly no liability for payment of GST arises on account of such transactions. 8.4. However, the cases covered under the 6th scenario [Para 4.2.6] are different. The activity is described as follows; "MGPL purchases old gold from its franchisee showrooms. The above purchases are settled either in cash or by other modes of settlement like an issue of gold ornaments of equal value etc. The above settlements may be done either by the same GSTIN or different GSTIN of the same company." 8.5. In the above scenario where the franchisee supplies old gold to the applicant and a distinct person supplies new gold ornaments of equal value as consideration to the franchisee of the applicant on behalf of the applicant and the applicant reimburses the consideration to the distinct person by book adjustment; there are in effect two supplies. The first supply is the supply of old gold by the franchisee to the applican....
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....upply of services to or by a Special Economic Zone developer or a Special Economic Zone unit. Explanation l.-For the purposes of this Act, where a person has,- (i) an establishment in India and any other establishment outside India; (ii) an establishment in a State or Union territory/ and any other establishment outside that State or Union territory; or (iii) an establishment in a State or Union territory and any other establishment registered within that State or Union territory, then such establishments shall be treated as establishments of distinct persons. Explanation 2. - A person carrying on a business through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory. 8.9. In view of the? provisions as discussed above, in cases where the franchisee supplies old gold to the applicant and a distinct person supplies new gold ornaments of equal value as consideration to the franchisee of the applicant on behalf of the applicant, there is a supply of gold ornaments from the distinct person to the applicant, and further, another distinct supply of such ornaments f....