Though more than one year has lapsed after the introduction of GST, many confusions arised among the stakeholders. Now and then the Central Government made amendments in the Act as well as Rules. As on date 61 circulars have been issued by the GST Policy Wing clarifying various issues in GST. On 04.09.2018 the GST policy wing issued 5 circulars clarifying the various aspects as detailed below-
Principal-agent relationship
Schedule I to the Central Goods and Services Tax Act, 2017 (‘Act’ for short) lists the activities that are to be treated as supply even made without consideration. The third para of the Schedule provides that the supply of goods-
- by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
- by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal
is treated as supply even the same is made without consideration.
In this connection, various representations have been received regarding the scope and ambit of the principal-agent relationship under GST. In order to clarify some of the issues and to ensure uniformity in the implementation of the provisions of the law across the field formations, the Board issued clarifications vide Circular No. 57/2018 about the scope of principal-agent relationship.
It is clarified as follows-
- All the activities between the principal and the agent and vice versa do not fall within the scope of the said entry.
- The supply of services between the principal and the agent and vice versa is outside the ambit of the said entry, and would therefore require “consideration” to consider it as supply and thus, be liable to GST.
- The key ingredient for determining relationship under GST would be whether the invoice for the further supply of goods on behalf of the principal is being issued by the agent or not.
- Where the invoice for further supply is being issued by the agent in his name then, any provision of goods from the principal to the agent would fall within the fold of the said entry in Schedule I.
- Where the goods being procured by the agent on behalf of the principal are invoiced in the name of the agent then further provision of the said goods by the agent to the principal would be covered by the said entry in Schedule I.
- The crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.
- The Agent would be liable for registration if his aggregate turnover of supply of taxable services exceeds the threshold specified in sub-section (1) of section 22 of the CGST Act.
- The ‘services’ provided by the commission agent for sale or purchase of agricultural produce is exempted. Such commission agents (even when they qualify as agent under Schedule I) are not liable to be registered according to sub-clause (a) of sub-section (1) of section 23 of the CGST Act, if the supply of the agricultural produce, and /or other goods or services supplied by them are not liable to tax or wholly exempt under GST.
- In cases where the supply of agricultural produce is not exempted and liable to tax, such commission agent shall be liable for compulsory registration under sub-section (vii) of section 24 of the CGST Act.
Recovery of arrears of wrongly availed CENVAT credit
Various representations have been received seeking clarification on the process of
recovery of arrears of wrongly availed CENVAT credit under the existing law and CENVAT credit wrongly carried forward as transitional credit in the GST regime. In this regard the Board issued clarifications vide Circular No. 58/2018-GST, dated 04.09.2018.
The Board has already clarified that the recovery of arrears arising under the existing law shall be made as central tax liability to be paid through the utilization of the amount available in the electronic credit ledger or electronic cash ledger of the registered person, and the same shall be recorded in Part II of the Electronic Liability Register (FORM GST PMT-01).
Since the liability register is not available in the GST portal the Board clarifies that the tax payers taxpayers may reverse the wrongly availed CENVAT credit under the existing law and inadmissible transitional credit through Table 4(B)(2) of FORM GSTR-3B. The applicable interest and penalty shall apply on all such reversals which shall be paid through entry in column 9 of Table 6.1 of FORM GSTR-3B.
Refund issues
Vide Circular No. 59/2018-GST, dated 04.09.2018 the Board clarifies the refund related issues. According to the clarifications the refund process involves the following steps-
- Submission of invoices for processing of claims of refund;
- System validation in calculating the refund amount;
- Re-credit of electronic ledger in case of rejection of refund claim;
- Disbursal of refund amount after sanctioning by the proper officer.
The detailed procedure involved in refund application is discussed as below-
- The registered persons, including importers, who are directly purchasing/importing supplies on which the benefit of reduced tax incidence or no tax incidence under certain specified notifications has been availed, shall not be eligible for refund of integrated tax paid on export of goods or services as per section 96(10) of the Act as amended with effect from 04.09.2018.
- No refund under sub-section (5) or sub-section (6) of section 54 shall be paid to an applicant, if the amount is less than ₹ 1000/-.
- The refund claim shall be accompanied by a print-out of FORM GSTR-2A of the claimant for the relevant period for which the refund is claimed.
- The proper officer shall not insist on the submission of an invoice (either original or duplicate) the details of which are present in FORM GSTR-2A of the relevant period submitted by the claimant.
- The claimant shall also submit the details of the invoices on the basis of which input tax credit had been availed during the relevant period for which the refund is being claimed, in the format enclosed as Annexure-A manually along with the application for refund claim in FORM GST RFD-01A and the Application Reference Number (ARN).
- The claimant shall also declare the eligibility or otherwise of the input tax credit availed against the invoices related to the claim period in the said Annexure for enabling the proper officer to determine the same.
- In case of refund of unutilized input tax credit (ITC for short), the common portal calculates the refundable amount as the least of the following amounts-
- The maximum refund amount;
- The balance in the electronic credit ledger at the end of the tax period for which refund is claimed;
- The balance in the electronic credit ledger at the time of filing of the refund application.
- After calculating the least of the three amounts, as detailed above, the equivalent amount is to be debited from the electronic credit ledger of the claimant in the order of integrated tax, Central tax and State tax/Union territory tax.
- The refund application can be filed only after the electronic credit ledger has been debited
and the ARN is generated on the common portal.
- In case of rejection of claim the proper officer shall order for the re-credit the rejected amount to the electronic credit ledger of the claimant using GST RFD – 01B and proceed further for the recovery of the said amount by issuing a show cause notice and after getting reply and giving a reasonable opportunity of being heard may confirm the demand.
- A sanction order shall be issued for the refund amount for the disbursal of the sanctioned amount to the claimant.
The tax authority may refuse to disburse the sanctioned amount on the contention that the amount is sanctioned incorrectly. The Board clarified that the remedy for correction of an incorrect or erroneous sanction order lies in filing an appeal against such order and not in withholding of the disbursement of the sanctioned amount. If any discrepancy is noticed by the disbursing authority, the same should be brought to the notice of the counterpart refund sanctioning authority, the concerned counterpart reviewing authority and the nodal officer, but the disbursal of the refund should not be withheld.
It is further clarified that any adjustment of the amount sanctioned as refund against any outstanding demand against the claimant can be carried out by the refund disbursing authority if not already done by the refund sanctioning authority.
Where any deficiencies in the application for refund are noticed, the proper officer shall communicate the deficiencies to the claimant in FORM GST RFD-03, requiring him to file a fresh refund application after rectification of such deficiencies. Where any deficiencies have been communicated the amount debited shall be re-credited to the electronic credit ledger. In case a deficiency memo in FORM GST RFD-03 has been issued, the refund claim will have to be filed afresh.
It is clarified that show-cause-notices are not required to be issued where deficiency memos have been issued.
Refund applications filed by Canteen Stores Department
The Central Government has specified the Canteen Stores Department (CSD for short), under the Ministry of Defence, as a person who shall be entitled to claim a refund of-
- 50% of the applicable central tax, integrated tax and Union territory tax paid by the CSD on all inward supplies of goods received by the CSD for the purposes of subsequent supply of such goods to the Unit Run Canteens of the CSD or to the authorized customers of the CSD.
- 50% of the applicable State tax paid by the CSD on the inward supply of goods received by it and supplied subsequently.
Vide circular No. 60/2018-GST, dated 04.09.2018 the Board clarifies the procedure involved in refund to CSD. The above said refund process involves two steps-
- Filing application for refund;
- Processing and sanction of the refund claim.
The complete process of refund is as below-
- The CSD are required to apply for refund on a quarterly basis.
- The CSD will apply for refund with the jurisdictional Central tax/State tax authority to whom the CSD has been assigned.
- Since the form is not available in the portal manual refund claim is to be made in Form GST –RFD 10A which is furnished in the annexure to the circular.
- The Form shall be accompanied by the following documents-
- Copies of valid return GSTR – 3B for the period covered in the claim;
- Copies of FORM GSTR-2A of the CSD for the period covered in the refund claim along with the attested hard copies of the invoices on which refund is claimed but which are not reflected in FORM GSTR-2A;
- A declaration is to be furnished stating that no refund has been claimed earlier against the invoices on which the refund is being claimed.
- Details of the bank account in which the refund amount is to be credited.
- On receipt of the application an acknowledgement for the receipt of claim form is to be issued in GST RFD – 02 by the proper officer within 15 days of the receipt of the claim.
- If there is any deficiency in the claim the proper officer is to issueonly onedeficiency memo covering all aspects, manually in GST RFD – 03.
- The proper officer is to verify with the portal as to the filing of GSTR – 3B.
- The proper officer is to scrutiny the details in Form GST RFD – 10A, GSTR 2A and 3B.
- The Form GSTR – 2A will be an evidence of the accountal of the supply made by the corresponding suppliers to the CSD in relation to which the refund has been claimed by the CSD.
- The proper officer should ensure that the amount of refund sanctioned is 50 % of the Central tax, State tax, Union territory tax and integrated tax paid on the supplies received by CSD.
- The proper officer shall issue the refund sanction/rejection order manually in FORM GST RFD-06 along with the payment advice manually in FORM GST RFD-05 for each tax head separately.
- The amount of sanctioned refund in respect of central tax/integrated tax along with the bank account details of the CSD shall be manually submitted in the PFMS system by the jurisdictional Division’s DDO and a signed copy of the sanction order shall be sent to the PAO for release of the said amount.
- The refund order issued by the proper officer of any tax authority is duly communicated to the concerned counter-part tax authority within seven days for the purpose of payment of the remaining sanctioned refund amount.
E-way bill in case of storing of goods in godown of transporter
In view of the difficulties being faced by the transporters and the consignee/recipient taxpayer the Board issued clarifications vide Circular No. 61/2018-GST, dated 04.09.2018 as detailed below-
- E-way bill is a document which is required for the movement of goods from the supplier’s place of business to the recipient taxpayer’s place of business. Therefore, the goods in movement including when they are stored in the transporter's godown (even if the godown is located in the recipient taxpayer’s city/town) prior to delivery shall always be accompanied by a valid e-way bill.
- In case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, then the transporter’s godown has to be declared as an additional place of business by the recipient taxpayer.
- Where the transporter’s godown has been declared as the additional place of business by the recipient taxpayer, the transportation under the e-way bill shall be deemed to be concluded once the goods have reached the transporter’s godown (recipient taxpayer’ additional place of business). Hence, e-way bill validity in such cases will not be required to be extended.
- Whenever the goods are transported from the transporters’ godown, which has been declared as the additional place of business of the recipient taxpayer, to any other premises of the recipient taxpayer then, the relevant provisions of the e-way bill rules shall apply. Hence
- The transporter to maintain accounts and records as specified in section 35 of the CGST Act read with rule 58 of the CGST Rules shall continue as a warehouse keeper.
- As per rule 56 (7) of the CGST Rules, books of accounts in relation to goods stored at the transporter’s godown (i.e., the recipient taxpayer’s additional place of business) by the recipient taxpayer may be maintained by him at his principal place of business.
- The facility of declaring additional place of business by the recipient taxpayer is in no way putting any additional compliance requirement on the transporters.
