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INTERPRETATION OF CENTRAL GOODS AND SERVICES TAX (CGST) ACT (PART-6)(Meaning of Important Terms)

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INTERPRETATION OF CENTRAL GOODS AND SERVICES TAX (CGST) ACT (PART-6)(Meaning of Important Terms)
By: Dr. Sanjiv Agarwal
May 19, 2017
  • Contents

This part of the series contains meanings of certain terms covered in Section 2 of the CGST Act, 2017.  These are Credit Note, Debit Note, Deemed Exports, Document, Electronic Commerce, Electronic Commerce Operator, Exempt Supplyand Fixed Establishment.

Credit Note [Section 2(37)]

'Credit note' means a document issued by a registered person under sub-section (1) of section 34. Accordingly, Credit note has to be issued by taxable person who had issued a tax invoice for supply of any goods and/or services. Credit note should contain prescribed particulars.

Credit note has to be issued :

  • where tax invoice has charged excess value and/or excess tax  than required,
  • where goods supplied are returned by recipient.
  • Where services supplied are found to be deficient.

Thus, a credit note serves the purpose of accounting adjustment to settle the correct amount of value and tax.

Debit Note [Section 2(38)]

'Debit note' means a document issued by a registered person under sub-section (3) of section 34.

Where tax invoice has been issued for supply of any goods and/or services and the taxable value and/or tax charged in that tax invoice is found to be less than the taxable value and/or tax payable in respect of such supply, the taxable person, who had supplied such goods and/or services, shall issue to the recipient, a debit note containing prescribed particulars.

Following points should be kept in mind for debit notes:

  • debit note has to be issued by taxable person who had issued a tax invoice for supply of any goods and/or services, 
  • debit note has to be issued where tax invoice has charged short value and/or short tax charged than required,
  • debit note should contain prescribed particulars.

Thus, a debit note serves the purpose of accounting adjustment to settle the correct amount of value and tax.

Deemed Exports [Section 2(39)]

'Deemed exports' means such supplies of goods as may be notified under section 147.

For a transaction of supply of goods, to be covered under the scope of 'deemed exports', following conditions ought to be satisfied:

  • to be notified by the Central Government/State Government on the recommendation of the GST Council.
  • transactions should be those in which the goods supplied do not leave India, and
  • payment for such supplies is received  either in Indian Rupees or in convertible foreign exchange.

Example of such deemed exports could be transactions in relation to Special Economic  Zones (SEZs).  This deeming provision will not apply to supply of services.

Document [Section 2(41)]

'Document' includes written or printed record of any sort and electronic record as defined in clause (t) of section 2 of the Information Technology Act, 2000.

Document includes written or printed record of any sort and electronic record as defined in clause (t) of section 2 of the Information Technology Act, 2000. As per section 2(t) of the Information Technology Act, 2000, "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche.

Electronic Commerce [Section 2(44)]

'Electronic commerce' means the supply of goods or services or both, including digital products over digital or electronic network.

Electronic commerce’ means the supply of goods or services or both, including digital products over digital or electronic network. For example, supply of watch online through Flipkart/Amazon, cab ride by Uber/Ola to passengers.

Electronic Commerce Operator [Section 2(45)]

'Electronic commerce operator' means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

‘Electronic commerce operator’ means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. For example, Flipkart, Amazon, Uber cab, Ola cab.

Thus, an E-commerce operators should:

  1. own, operate or manage any electronic platform
  2. facilitate the supply of goods and / or services,
  3. provide services to others or on behalf of others

Examples of e-commerce operators are Amazon, Flipkart or Paytm etc. The orders for goods and services are booked on such platforms and these platforms also receive the payment. Such orders in turn may be supplied by different suppliers and payment to them is made by e-commerce  operator. There are different business models under e-commerce.

Exempt Supply [Section 2(47)]

'Exempt supply' means 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 and Services Tax Act, and includes non-taxable supply.

Goods and / or services not taxable under the Act, attracting nil rate of tax and exempt from tax shall be considered as exempt supply.

NIL rate of tax is different than zero rate of tax. Whereas supply of goods and / or services at nil rate of tax have been considered as exempt supply. Zero rate of tax has been provided for exports or deemed export.

Input tax credit can be availed and is also eligible for complete refund in respect of supply of goods and services attracting zero rate of tax. Whereas input tax credit is not eligible to be taken in respect of supply of goods and / or services taxable at NIL rate of tax.

Fixed Establishment [Section 2(50)]

'Fixed establishment' means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.

Fixed establishment means a place which is characterized by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs. Such fixed establishment should be a place which is other than the registered place of business.

(To be continued......)

 

By: Dr. Sanjiv Agarwal - May 19, 2017

 

 

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