Category: GST Course

The framework for implementing Goods and Service Tax (GST) in India is anchored on the principle of a standard tax treatment of supply of goods and services. To determine the exact nature and application of tax under GST, it is essential to understand three critical concepts: namely the time of supply, the place of supply and the taxable value of the supply. All of these have a significant function in determining the taxes that have to be paid effectively. It is now necessary to go into detail concerning such aspects.

1. Time of supply under GST

The time of supply is an important factor in defining a situation when a subject becomes liable to pay the tax. It enables determining when the supply of goods or services takes place and as a result making it easy to know when the tax needs to be paid. For goods and services, the time of supply varies slightly:

For goods: The time of supply is typically the earlier of:

• The date of issue of the invoice.
• The date on which the goods are removed (if it involves the movement of goods).
• The date on which the goods are made available to the recipient (if there is no movement involved).

Moreover, in case of a supply that is made against an advance receipt of payment, the time of supply is also deemed to be the time when the said advance amount was received.

For services: For services, the time of supply is either:

• The date of issue of the invoice.
• The date of receipt of payment (earliest of the two).

But if invoice is not issued within the specified timeframe then the time of supply is the date on which the service is rendered.

Through determining the time of supply, the taxpayer avoids the penalties that arise from filing late or submitting wrong returns.

2. Place of supply under GST

The place of supply is key because while making a sale, it differentiates between intra-state transactions and inter-state supplies and determines the type of tax liability that ensues- goods and services tax (Integrated GST, Central GST, or State GST).

1. GST For goods

The place of supply for goods is usually fixed at the point of time when goods reach the recipient or the point of delivery.

1. If the supply of goods is made within the same state then it is known as Inter State supply and CGST and SGST are charged.

2. Goods and services supplied in a particular state to another state are known as inter-state supply, for which IGST is charged.

There are circumstances whereby the goods supplied are delivered directly to a third party for the use of the recipient and in this case the supply is made at the place where the third party is situated.

2. GST for services

With respect to services, the location of the supply could be relatively difficult to ascertain owing to the fact that services are intangible.

1. Domestic transactions: However, the basic rule, which governs the place of supply of services, is that it is the location of the service consumer.

2. International transactions: Where the service recipient is not in India the place of supply shall be the location of the service provider unless the service is one which is considered as supplied under the provisions relating to the supply made in the course of export of services.

For some services such as transport, communication, or accommodation there are provisions to determine the place of supply.

3. Value of supply under GST

The meaning of supply value is the value on which the GST is charged upon. It is a very important factor in calculating the amount of tax for any specific one supply of goods or services.
In most cases the value of supply under the GST regime is the transaction value meaning the price paid or payable for the goods or services supplied. However, certain elements must be added to or excluded from the transaction value to arrive at the final taxable value:

Inclusions:

1. Any taxes, duties, cess, fees and charges under any other law for the time being in force but does not include GST.

2. Other costs include packing, commission and any other charges that are connected with the supply.

3. Interest charges, fees charged for late payment or penalties for delayed payment.

4. Subsidies which are related to the price (except governmental subsidies).

Exclusions:

• The first type of discount is the pre-supply or supply discount, as long as the discount is documented on the invoice.

The value of the supply is based on the transaction value but may be adjusted depending on whether the supply is made in the course of related party transactions or without charge.

Conclusion

For any business to be on the right side of the law with regards to GST, it is important to grasp the time, place and value of supply. It helps to ensure that business organizations estimate their tax liability, submit their returns within the required time and run their operations without interference.

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We all think that taxes are an incredibly complicated ordeal. But not to those who have knowledge about it. Wouldn’t all of us like to be one of those people? So, head on to S20’s website and check out our taxation course in Ahmedabad and become an expert in taxes. Read on to know one of the most important concepts under taxation, ISD.

A provider of goods or services may have several locations, including their head office, registered office, regional office, marketing office, branch, godown, and sales depot. Each of these locations uses a variety of input services, including security, communication, courier, and housekeeping costs, to name a few, and is responsible for paying service tax. To overcome the difficulty of effectively utilising accumulated credit, such units and premises may register as an Input Service Distributor to get credit on such input services and to distribute credit to other units.

A taxpayer who receives invoices for the services used by its branches is known as an Input Service Distributor (ISD). By generating ISD invoices, it distributes the tax paid, known as the Input Tax Credit (ITC), to such branches in a proportionate manner. The branches must share the same PAN as the ISD but may have different GSTINs.

Let’s use an illustration to clarify. Company ABC Limited’s head office is in Mumbai, and company also has offices in Chennai, Delhi, and Kolkata. On behalf of all of its branches, the head office incurred a yearly software maintenance charge (service received) and was billed for it. Since the software is utilised by every branch, Mumbai is not a valid location to claim input tax credits for the full scope of services. To all three sites, the same must be given. The Input Service Distributor in this case is the headquarters in Mumbai.

Definition of ISD

• According to Section 2(61) of the CGST Act of 2017, a “Input Service Distributor” is a location of the supplier of goods or services or both that accepts tax invoices issued under Section 31 for the receipt of input services and issues a prescribed document in order to distribute the credit of central tax, State tax, integrated tax, or Union territory tax paid on the aforementioned services to a supplier of taxable goods or services or both having the same Permanent Account Number.

• According to the definition, an office of a firm that distributes input services is known as an input service distributor (ISD) under the GST. This office receives tax bills for input services and distributes the applicable input tax credit to other branch offices of the same company.

Registration Under GST

A distinct registration must be obtained by an ISD. There is no minimum need for ISD registration, and registration is required. Businesses that are currently ISDs under the current system (service tax, for example) will need to apply for a new ISD registration under the GST. This is due to the fact that the current ISD registration won’t be transferred to the GST system.

Relevance of ISD

For companies operating in India with several branches, ISD under GST is relevant. Each branch from which a taxable supply is made, as required by these businesses, must have a GSTIN. The business would receive ITC (Input Tax Credit) in the form of SGST, CGST, or IGST based on the purchases made by the head office or branch. Here, the government has created the ISD idea as mentioned below to make sure that the ITC is fairly allocated among the various business branches.

• If the recipients of the credit experienced turnover in their State or Union territory in the fiscal year prior to the fiscal year during which the credit is to be distributed, the fiscal year in question;
• If some or all of the recipients of the credit experienced no turnover in their State or Union territory in the fiscal year prior to the fiscal year during which the credit is to be distributed, the last quarter for which information regarding the recipients’ collective turnover is available.

Purpose of Registering As An ISD

The idea of an ISD is a facility made available to businesses with a high percentage of shared expenses, where invoicing and payment are handled from a single site. The facility is intended to strengthen the seamless flow of credit under GST, and the mechanism is intended to make the input tax credit application process for firms simpler.

Where Is ISD Not Applicable?

In the following circumstances, ISD cannot disburse the input tax credit:

• where input and capital products are eligible for ITC. procurement of equipment and raw supplies, for instance.
• ITC can’t be given to contractors who make goods or offer services.

Ratio of Distribution Of Credit By ISD

Only the unit to which the supply is directly due must receive the credit. If input services may be attributed to more than one credit recipient, the distribution will be based on the State/Union Territory’s turnover, pro rata. Assume an ISD has 4 locations around the nation. The ISD, however, may only transfer the credit to that unit and not to other units if a certain input service only relates to one unit and the bill is raised in the name of the ISD. If the input services are shared by all units, then the distribution will be based on the overall turnover ratio of all the units.

How Input Tax Distributor can distribute the credit under GST:

• In cases where ISD and the distributor are located in the same state:

In cases where ISD and the distributor are located in different states:

It should be noted that if the ISD and recipient are in different States, the credit for CGST and SGST can also be issued as IGST. Large organisations with presence in multiple States have added this for easy credit. A situation where an ISD receives invoices for input tax credit after paying CGST and SGST (on intra-State supply) yet the destination unit is some other states may occur in practise. The ISD cannot use the aforementioned input to make any credit claims if it transfers the SGST of its state to the destination state.

Consider this situation, Upon payment of CGST and SGST (West Bengal), an ISD located in Kolkata may get an invoice for intrastate supply of input services. This service may be shared by its units located in the State of Jharkhand as well as other states. The CGST credit can be given to all of the ISD’s units, and those units can spend the credit without any issues. However, if the SGST (West Bengal) credit is given to units in other states, those states are not permitted to use it for any other reason. Therefore, if the ISD and Unit are located in separate States, a careful provision has been provided in the statute that allows for the distribution of such SGST Credit as IGST. Once the SGT (West Bengal) credit has been allocated as IGST to the units in other states, those units may use the IGST credit to pay their respective state’s CGST or SGST.

Filing of Returns by ISD

Every ISD must submit monthly returns in GSTR-6 within thirteen days of the end of the month in accordance with Rule 65 of the CGST Rules 2017 and must provide details regarding all ISD invoices issued. The relevant recipients will receive the details from the returns in their GSTR 2A. The beneficiaries are free to credit them and include them in their GSTR-2. An ISD is exempt from filing an annual return. Any invoices for which the tax is to be discharged via the reverse charge procedure are not acceptable to an ISD. This is so that tax credit distribution can be made easier thanks to the ISD mechanism. As a person obliged to pay taxes, the ISD cannot release itself from any tax obligations or pay taxes to the government. ISD must register individually as a Normal taxpayer if it intends to accept products with reverse charges.

Taxation can become very complicated to understand. That is why we are here to make it easy for you! Head over to S20’s website and check out our taxation course in Ahmedabad and we are sure you’ll come out an expert.