Industry Specific Analysis – Advanced Tax Laws and Practice Important Questions
Question 1.
What is “Electronic Commerce” and who is an “E-commerce Opera-tor”?
Answer:
As per Section 2(44) of the CGST Act, 2017, Electronic Commerce means the supply of goods or services or both, including digital products over a digital or electronic network. As per Section 2(45) of the CGST Act, 2017, Electronic-commerce Operator means any person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce.
Question 2.
Discuss the following:
- Is it mandatory for e-commerce operators to obtain registration?
- Whether a supplier of goods or services supplying through an e-commerce operator would be entitled to threshold exemption?
- Whether TCS is required to be collected by e-commerce operators on supply of services by unregistered suppliers through their portal?
Answer:
(1) Yes. As per section 24(x) of the CGST Act, 2017, every electronic commerce operator has to obtain compulsory registration irrespective of the value of supply made by him. The benefit of threshold exemption is not available to e-commerce operators.
(2) As per Section 24(ix) of the CGST Act, 2017, every person supplying goods through an e-commerce operator shall be mandatorily required to register irrespective of the value of supply made by him. However, a person supplying services, other than the supplier of services under section 9(5) of the CGST Act, 2017, through an eCommerce platform is exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category states) in a financial year. The government has issued notification No. 65/2017-Central Tax dated 15th November 2017 in this regard.
(3) As per Section 24(ix) of the CGST Act, 2017, every person supplying goods or services through an e-commerce operator is mandatorily required to register. However, vide Notification 65/2017-Central Tax dated 15th November, 2017a person supplying services, other than the supplier of services under section 9 (5) of the CGST Act, 2017, through an e-commerce platform were exempted from obtaining compulsory registration provided their aggregate turnover does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category states) in a financial year. Since such suppliers are not liable for registration, eCommerce operators are not required to collect TCS on the supply of services being made by such suppliers through their portal.
Question 3.
Samode Charitable Trust, registered under section 12AA of the Income-tax Act, 1961, furnishes the following details of its income/receipts with respect to the activities undertaken by it during August 2020:
| Particulars of Income/receipts | Amount(₹) |
| Renting of the room where charges are ₹ 500 per day | 2,00,000 |
| Renting of the room where charges are ₹ 1,500 per day | 3,00,000 |
| Renting of community hall given for celebrations, for which amount charged is ₹ 25,000 or more per day. | 5,00,000 |
| Renting of shops for business purposes, where charges for each shop are ₹ 6,000 per month | 3,50,000 |
You are required to compute the value of the taxable supply of Samode Charitable Trust for the above period. Give brief reasons for the treatment given to each while making the computation of taxable supply.
Answer:
Computation of value of Taxable Supply for the month of August 2020
| Particulars | Amount(₹) |
| Renting of rooms where charges are ₹ 500 per day | Nil |
| Renting of rooms where charges are ₹ 1500 per day | 3,00,000 |
| Renting of Community hall where charges are ₹ 25,000 or more per day | 5,00,000 |
| Renting of shops for business purposes where charges are ₹ 6,000 per month for each shop | Nil |
| Value of Taxable Supply | 8,00,000 |
Note:
As per Entry number 13 of Notification No. 12/2012-Central Tax (Rate) dated 28.6.2017, services by a person by way of renting of precincts of a religious place meant for the general public, owned or managed by an entity [ registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961 are exempt. However, this exemption shall not be available to the trust where: —
- renting of rooms for ₹ 1000 or more per day.
- renting of premises, community halls, Kalyan mandapam or open area j and the like for ₹ 10,000 or more per day.
- renting of shops or other space for business/commerce purposes for ₹ 10,000 or more per month.
Question 4.
Mr. Mayank Kohli, a famous cricketer, furnishes you with the following information and particulars of his various receipts/income for the month of March 2020:
| Particulars | Amount(₹) |
| Receipts from Sports Authority of India for participation in recognized events of matches. | 30,00,000 |
| Receipts from the franchise of Indian Premier League which is not a recognized sports body for participation in the league matches. | 50,00,000 |
| Receipts from sports training academy for providing Coaching to young players; the academy is not registered u/s 12AA of the Income-tax Act, 1961. | 30,00,000 |
You are required to calculate the value of taxable supply and the amount of GST payable thereon by taking the rate of GST as applicable of 18%.
Answer:
Computation of Value of taxable supply for Mr. Mayank Kohli and GST for March 2020
| Particulars | Amount(₹) |
| Receipts from Sports Authority of India for participation in recognized sports events. [Exempt vide Entry No. 68 of Exemption Notification No. 12/2017-CT (Rate)] | Exempt |
| Receipts from the franchise of Indian Premier League, not a recognized sports body, [being not exempt] | 50,00,000 |
| Receipts of sports training academy to coach young players [Liable for GST since sports training by charitable entities registered under section 12AA of the Income-tax Act, 1961 alone is exempt vide Entry No. 80 of Exemption Notification No. 12/2017-CT (Rate)]. | |
| This Academy is not registered under section 12AA of the Income-tax Act, 1961. | 30,00,000 |
| Value of Taxable Supply | 80,00,000 |
| GST payable @ 18% | 14,40,000 |
Question 5.
With brief reasons, state whether the following will attract GST levy:
- Lodging accommodation with room tariff @ ₹ 900 per day.
- SKT & Co. transporting textile goods through ESSEM Transport Agency by paying ₹ 700 per bundle and sending 10 bundles on 31st March 2019.
- Kaziranga National Park collecting ₹ 200 per person as an entrance fee.
- Muthu Lab is a pathological lab owned by Muthu. He is a post-graduate in Microbiology. He collects fees for services rendered.
- Samy Transports carried agricultural produce i.e. turmeric from villages to towns (markets) by charging ₹ 2,000 per day per person.
Answer:
Exemption for certain services
Service exemption is to be considered in the light of Notification No. 12/2017-
- Lodging accommodation with a tariff below ₹ 1,000 is not liable for GST.
- Services provided by the goods transport agency where the consideration for the transportation of goods for a single consignee does not exceed ₹ 750 is not liable for GST. However, in the present case, the consideration for 10 bundles [being single consignment] is ₹ 7000. Hence, GST is attracted.
- As per Entry No. 79 of Notification No.l2/2017-CT (Rate) dated 28.6.2017, the Entrance/admission fee received by the national park from visitors is not liable for GST.
- Services by way of health care including paramedical service are not liable for GST.
- As per Entry No. 20 of the referred notification, Transportation of agricultural produce by rail or vessel from one place in India to another place is not liable for GST.
Question 6.
Anand Nursery engaged in agricultural-related services provides the following details of the transactions for the month of December 2018:
| Particulars | Amount (₹ in lakhs) |
| Renting of Agro-machinery | 5 |
| Cultivation of Ornamental flowers | 2.5 |
| Processing of Tomato ketchup | 3 |
| Processing of Potato chips | 1.5 |
You are required to compute the value of taxable services of Anand Nursery for December 2018. Brief reasons to be given for each item along with the working.
Answer:
Computation of Taxable Services of Anand Nursery
| Particulars | Amount ( ₹ in lacs) |
| Renting of Agro-machinery [Note 1] | – |
| Cultivation of Ornamental flowers [Note 2] | – |
| Processing of Tomato ketchup [Note 3] | 3 |
| Processing of Potato chips [Note 3] | 1.5 |
| Value of Taxable Service | 4.5 |
Notes:
1. The above case falls within the purview of Exemption Notification 12/2017-Central Tax (Rate) SI. No. 54 under heading 9986. Renting
of Agro-machinery is exempt as per the aforesaid notification. Hence, the same is not liable to GST.
2. Cultivation of plants falls within the purview of agriculture which is exempt. Hence, the same is not liable to GST.
3. Potato chips and tomato ketchup are not agricultural produce and thus do not fall under the exemption. However, conversion of potato and tomato into potato chips and tomato ketchup respectively amounts to manufacture since, after such processing new products with a different name, character and use emerge. Therefore, such processing will not fall under the exemption and hence, it is liable to GST.
Question 7.
Explain with reference to the provisions of the CGST Act, 2017 whether the following transaction of services provided by different persons shall be subject to levy of GST:
(1) Government of Rajasthan has provided technical services to ABC Ltd. of Jaipur in the month of February 2019 against consideration of ₹ 75,000. The turnover of ABC Ltd. in the Financial Year 2017-18 was ₹ 18,50,000.
(2) Jaipur Municipal Corporation has awarded a contract for the construction of city roads to QPR Construction Ltd. in April 2018. However, QPR Construction Ltd. could not carry out the work and failed to perform the contract work as per terms and had paid the number of liquidated damages to Jaipur Municipal Corporation in December 2018 amounting to ₹ 10,00,000 as per the terms of the contract.
(3) XYZ Ltd. has made a payment of ₹ 80,00,000 to Bihar Government on account of the assignment of rights to use minerals in the State of Bihar.
Answer:
Eligibility to GST
(1) Services provided by the Central Government, State Government, Union Territory or Local Authority to a business entity with an aggregated turnover of up to ₹ 20 lakhs (? 10 lakhs in case of a special category state) in the preceding financial year are exempt vide Entry 7 of Notification No. 12/2017-CT (Rate) provided the services are not in the nature as specified in Explanation to such entry.
Hence, GST shall not be levied on the amount of ₹ 75,000 charged for the technical services provided by the Government of Rajasthan to ABC Ltd. (being located in other than special category state), as the Turnover of ABC Ltd. in the preceding the financial year 2017-18 was of ₹ 18,50,000 being less than ? 20 lakh and the nature service is not falling in any of the exceptions specified in Explanation to said Entry 7 of Notification No. 12/2017-CT (Rate).
(2) Services falling under HSN 9991 or 9997 provided by Central Government, State Government, Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Central Government, State Government, Union territory or local authority under such contract are exempt vide Entry 62 of Notification No. 12/2017-CT(Rate).
Hence, no GST shall be payable on liquidated damages of ₹ 10,00,000 paid by PQR Construction Ltd. to Jaipur Municipal Corporation for non-performance of the contract.
(3) Transfer of the right to use any goods for any purpose (whether or not j for a specified period) for cash, deferred payment, or other valuable j consideration is deemed to be a supply of service in terms of Para 5(f) of Schedule II of the CGST Act, 2017 and is leviable to GST under HSN 997337 in terms of Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017.
Hence, GST is payable on the assignment of rights to use minerals in the State of Bihar by XYZ Ltd. in the amount of ₹ 80,00,000.
Question 8.
Ramakrishna Trivedi, a registered supplier of Bengaluru has received the following amounts from the various activities undertaken by him during the month ended on 31st October 2020:
| Particulars | Amount(₹) |
| Services related to funerals including transportation of dead bodies | 30,000 |
| The commission received as an insurance agent from the insurance company | 95,000 |
| Business assets (old computers) given to friends free of cost, the market value of all the computers was ₹ 2,00,000. No Input Tax Credit has been availed on such computers when used for business. | No amount received as given free. |
| Amount received from PQR Ltd. for the performance of classical dance in one program. | 1,99,000 |
| Service provided to recognized sport body as a coach for participation in a sporting event organized by a recognized sports body | 75,000 |
Note:
All the amounts stated above are exclusive of GST, wherever applicable. You are required to calculate the gross value of taxable supply on which GST is required to be paid by Ramkrishna Trivedi for the month of October 2020. Legal provisions explained in brief should form part of the answer.
Answer:
Computation of gross value of taxable supply on which GST is payable by Ramkrishna Trivedi for the month of October 2020:
| Particulars | Amount(₹) |
| Services related to funerals including transportation of dead bodies of ₹ 30,000 (Not a supply as per Schedule III) | Nil |
| Did commission receive as an insurance agent from an insurance company of ₹ 95,000
Note: Above service is covered under reverse charge mecha¬nism (RCM) where tax is payable by the recipient i.e. insurance company (Notification No.l3/2017-Central Tax (Rate) dated 28.06.2017) |
Nil |
| Business assets (old computer) given to friends free of cost
Note: As per Schedule I any kind of disposal or transfer of business assets made by an entity on a permanent basis even though without consideration qualifies as supply. However, this provision would apply only where the input tax credit (ITC) has been availed on such assets. Since no ITC is claimed when such computers are used for business, it is not a supply. |
Nil |
| Amount received from PQR Ltd. for the performance of classical dance in one program.
Note: This service is exempt only if the consideration charged for such performance is not more than ₹ 1,50,000. Here, it is more than ₹ 1,50,000, hence taxable in total. |
1,99,000 |
| Service provided to recognized sports body as a coach (Exempt as per notification No.12/2017-Central Tax (Rate) dated 28.06.2017) | – |
| Total Taxable Turnover | 1,99,000 |
Question 9.
BODMAS Ltd. providing educational services furnishes you with the following information for the various services provided by it for the month of March 2020:
| Particulars | Amount(₹) |
| Receipts from running a boarding school (including receipts for providing residential dwelling services of ₹ 14,00,000) | 30,00,000 |
| Receipts of “Gyan Uday” – an Industrial Training Institute (ITI) affiliated to the National Council for Vocational Training (NC VT) | 2,00,000 |
| Receipts of “Lakshya”, an institute registered with Directorate General of Employment and Training (DGET), Union Ministry of labor & employment, running a Modular Employable Skill Course (MESC) approved by the National Council for Vocational Training (NCVT) | 1,00,000
|
| Receipts of “Wizard”, a commercial coaching institute providing commercial coaching in the field of arts and science (no certificate was issued on completing the training) | 80,000 |
| Fees from prospective employers for campus interview | 4,00,000 |
| Renting of furnished flats for temporary stay to different persons | 5,00,000 |
| Receipts of “concepts” a commercial coaching institute providing coaching in the field of commerce (a certificate was awarded to each trainee after completion of training) | 1,40,000 |
| Receipts of Gurukul School providing education up to higher secondary | 5,00,000 |
Compute the value of taxable supply assuming that all the above receipts are exclusive of GST.
Answer:
Services provided by an educational institution to its students, faculty, and staff are exempt vide Notification No.12/2017- CT. Further, an educational institution means, inter alia, an institution providing services by way of
- education up to higher secondary school or equivalent;
- education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force.
- education as a part of an approved vocational education course. In view of the aforesaid provisions,
Value of taxable supply of BODMAS Ltd. for the month of March 2020 shall be computed as follows:
| Particulars | Amount(₹) |
| Receipts from Boarding school including receipts for residential dwelling service (Educational institution providing education up to Higher secondary school or equivalent – Exempt) | Nil |
| Receipts of Gyan Uday (Educational institution running approved vocational education course – Exempt) | Nil |
| Receipts of Lakshya running modular employable skill course – Exempt | Nil |
| Receipts of Wizard – a coaching institution (Taxable since coaching institute is not an educational institution) | 80,000 |
| Fees from prospective employers for campus interviews (Tax-able, since such services, are not specifically exempt) | 4,00,000 |
| Renting of Furnished flats for a temporary stay of different persons (Not exempt since services by a hotel, inn, guest house, club, or campsite, by whatever name called for residential or lodging purposes, are exempt only when the value of supply of a unit of accommodation is below ₹ 1,000 per day.) In the given case, we are assuming that rent per flat per day is more than or equal to ₹ 1,000. | 5,00,000 |
| Receipts of Concepts – a Coaching institute (Taxable, since Coaching institute, is not an educational institute) | 1,40,000 |
| Receipts of Gurukul school providing education up to higher secondary – Exempt | Nil |
| Value of Taxable Supply | 11,20,000 |
Question 10.
Nursing Home has received the following amounts in the month of February 2020 in lieu of various services rendered by it in the same month. You are required to determine its GST liability for February 2020 from the details furnished below: –
| Particulars | Amount (₹ In lakhs) |
| Palliative care for terminally ill patients at patient’s home (Palliative care is given to improve the quality of life of patients who have a serious disease) | 30 |
| Services provided by cord blood bank unit of the nursing Home | 24 |
| Hair transplant services | 100 |
| Ambulance services to transport critically ill patients from various locations to a nursing home | 12 |
| Naturopathy treatments | 80 |
| Plastic surgery to restore the anatomy of a child affected due to an accident. (Anatomy means the study of the structure of human or animal bodies) | 30 |
| Reiki healing treatments (Such treatment is not a recognized system of medicine) | 120 |
| Mortuary services | 10 |
Note:
All the amounts given above are exclusive of tax and the Rate of Tax is CGST @ 9% and SGST @ 9%. The point of supply for the services rendered by J Nursing Home in the month of February 2020 falls in the month of February itself.
| Particulars | Amount (₹ in lakhs) |
| Palliative care for terminally ill patients at patient’s home (Palliative care is given to improve the quality of life of patients who have a serious disease) | Nil |
| Services provided by cord blood bank unit of the nursing Home | Nil |
| Hair transplant services | 100 |
| Ambulance services to transport critically ill patients from various locations to a nursing home | Nil |
| Naturopathy treatments | Nil |
| Plastic surgery to restore, anatomy of a child affected due to an accident. (Anatomy means the study of the structure of human or animal bodies) | Nil |
| Reiki healing treatments (Such treatment is not a recognized system of medicine) | 120 |
| Mortuary services | Nil |
| Value of taxable supply | 220 |
| CGST at 9% (220 × 9%) | 19.80 |
| SGST at 9% (220 × 9%) | 19.80 |
Note:
All healthcare services by a clinical establishment or authorized medical practitioner by way of diagnosis or treatment or care for illness, injury, deformity, abnormality, or pregnancy are currently exempt from GST. However, hair transplants or cosmetic or plastic surgery does not get an exemption and is taxed.
Question 11.
Mr. Hemant Kumar, a registered supplier of Chandigarh, has received an amount of ₹ 50,000 for providing services of a selector of the national team to a recognized sports body in Delhi. Will he be liable to charge GST on the same? What will be the status of Mr. Hemant Kumar does not have any other income except ₹ 50,000 as mentioned above.
Answer:
Services provided to a recognized sports body by an individual only as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body are exempt from GST vide Exemption Notification No. 9/2017-IT(R) dated 28.06.2017. Thus, service provided as a selector of the team is not covered in the above-referred notification, Mr. Hemant Kumar is liable to charge GST on ₹ 50,000/. In case the turnover of Mr. Hemant Kumar falls below the minimum threshold of ₹ 20 lakhs, he is not required to charge any tax.
Question 12.
Define: Exempt Supply
Answer:
Exempt Supply {Section 2(47) of CGST Act, 2017}
Exempt Supply means the 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 & Services Tax Act, and includes the non-taxable supply.
Industry-Specific Analysis Notes
- Section 11 of the CGST Act empowers the Central Government to issue Notifications to exempt certain supplies of goods and services, Accordingly, Central Government has notified the list of services exempted to vide Notification No. 12/2017-CT. In this topic, analyzing the entries in the said notification, analysis of the applicability of GST in various sectors/industries is done. It should be noted that students should have at least once gone through all exemptions given in the said topic in their study material.