Points to be covered:
1- Registration
4- Rate of GST
10- RCM Services
11- Important Points
Registration: (28 states & 8 UTs)
If any person is supplying goods or service or both then the threshold limit will be Rs 20 lacs (10 lacs in case of 4 states).Sec 2(6) “aggregate turnover” means
the aggregate value of all taxable supplies
exempt supplies,
exports of goods or services or both and
inter-State supplies of persons having the same Permanent Account Number,(i.e. Stock transfer)
excluding the value of inward supplies on which tax is payable by a person on reverse charge basis
excluding central tax, State tax, Union territory tax, integrated tax and cess;
excluding value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.
Section 2(47): Exempt supply is the supply of any goods/services which have nil tax rate or fully exempted tax under Section 11 or under section 6 of the Integrated Goods and Services Tax Act (IGST). It also includes the non-taxable supply.
Non-taxable supply
As per Section 7(2)(b) of the CGST Act, the transactions which are neither considered as supply of goods nor supply of service are not chargeable under GST.Compulsory Registration (Relevant for Banking): Required to register under this Act irrespective of the threshold:
Persons required to pay tax under reverse charge
ISD persons
Persons making any inter-State taxable supply (Notification 10/ 2017–Integrated Tax, dated 13.10.2017, persons making inter-State supply of services and having turnover not exceeding Rs 20 lakhs have been exempted under section 23 from obtaining registration.)
Effective date of Registration
Where the application for registration has been submitted within 30 days from the date on which the person becomes liable to registration, the effective date of registration shall be date on which he become liable for registration.
Where an application for registration has been submitted by the applicant after 30 days from the date of his becoming liable to registration, the effective date of registration shall be the date of grant of registration.
In case of suo-moto registration, i.e. registration pursuant to any survey, enquiry, inspection, search or any other proceedings, the effective date of registration shall be the date of order of registration.
GST Payment dates
In case of bank, GST should be remitted by 20th of the next month.
FORM GST PMT-6 Challan for deposit of GST — valid for 15 days from the date of generation of challan.
Further, interest under Section 50, to be paid in case of failure to pay tax or part thereof to the Government within period prescribed is 18% from the due date of payment to the actual date of payment of tax and 24% in case Excess claim of ITC or excess reduction in output tax liability.
Time limitation for issuance of invoice
Invoice shall be issued before or after the provision of service, but within 45 days from the date of supply of services.
A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, the tax charged thereon, and such other particulars as may be prescribed
Provided that the Government may, on the recommendations of the Council, by notification and subject to such conditions as may be mentioned therein, specify the categories of services in respect of which:
any other document issued in relation to the supply shall be deemed to be a tax invoice; or
tax invoice may not be issued
Options to Banking & NBFC wrt to Invoice:
Therefore, Banking companies
may issue tax invoice or any other document, whether serially numbered or not and issue an invoice even without containing the address of the recipient of service but contains the other information as provided by Rule 46 of the CGST Rules.
have the option to issue a consolidated tax invoice or any other document in lieu of tax invoice for the supply of services made during a month, at the end of the month, either in physical form or electronically.
Further, where at the time of receipt of advance,
the rate of tax is not determinable; the tax shall be paid at the rate of 18%
the nature of supply is not determinable, the same shall be treated as inter-State supply.
Rate of GST on Banking & Financial Services
18% on the transaction charges levied on the financial services provided by the banks in relation to credit card, fund transfer, ATM transactions, processing fees on loans etc.
Relevant Exemptions under GST
GST is applicable on all services provided by the banks except followings:
Services by the RBI;
Services by way of:
extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services);
inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers.
Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY). [inserted w.e.f. 01-01-2019 vide Notification No. 28/2018- Central Tax (Rate), dated 31-12-2018 in CGST and vide Notification No. 29/2018-Integrated Tax (Rate), dated 31-12-2018 in IGST.]
Services by an acquiring bank, to any person in relation to settlement of an amount upto Rs. 2,000/- in a single transaction transacted through credit card, debit card, charge card or other payment card service.
Explanation. — For the purposes of this entry, “acquiring bank” means any banking company, financial institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card.
Services by way of collection of contribution under the Atal Pension Yojana
Services by way of collection of contribution under any pension scheme of the State Governments
Services by business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;
Services by an intermediary of financial services located in a multi services SEZ with International Financial Services Centre (IFSC) status to a customer located outside India for international financial services in currencies other than Indian rupees (INR).
Services provided to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by the Central Government, State Government and Union territory.
Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.
Input Tax Credit
OPTION I
Section 17(2) of the CGST Act stipulates that, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the IGST Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
Credit attributable to exempt supplies is not available to a registered person. Exempt Supplies’ for this purpose mean all supplies other than taxable and zero-rated supplies and specifically include the following:
Supplies liable to tax under RCM;
Transactions in securities;
Sale of land; and
Subject to Para 5(b) of Schedule II, sale of the building.
OPTION II
Avail 50% of the eligible ITC on inputs, capital goods and input services in that month and the rest shall lapse. And accordingly follow the following procedure in accordance with Rule 38 of the CGST Rules:
Such banking company or financial institution shall not avail credit of:
the tax paid on inputs and input services that are used for non-business purposes and
the credit attributable to the supplies specified in Section 17(5), in FORM GSTR-2.
Condition of 50% restriction would not be applicable (i.e. 100% ITC shall be availed) in case of the tax paid on supplies made by one registered person to another registered person having the same PAN.
Hence, banking company or financial institution shall avail the credit of tax paid on inputs and input services in case of supplies made to its own branches i.e. inter branch i.e., by one registered person to another registered person having different GSTIN.
Non availment of ITC for non business use and of blocked credits: Credits of tax paid on inputs and input services that are used for non-business purposes and items mentioned u/s 17(5) can not be availed.
Option once exercised can not be withdrawn during the financial year.
Credit utilization [Sec 49(5)]
CBIC vide Circular No. 98/17/2019-GST, dated 23.04.2019 clarified that after the insertion of Rule 88A, the order of utilization of input tax credit will be in any order and in any proportion. The same has been given below:
Time of Supply: Forward Charge System
One of important factors for determination of the time of supply of services is the date of issue of invoice by the supplier of such services.
The service providers are required to issue invoice within 30 days of provision of service as per the relevant provisions of GST law. However, the Banking sector has been provided additional time limit of 45 days instead of usual 30 days to issue such invoice.
Accordingly, if a bank issues invoice within 45 days, the time of supply is earlier of the:
date of issue of invoice, or
date of receipt of payment;
If the invoice is not issued within the said time limit, time of supply is earlier of:
date of provision of service, or
date of receipt of payment.
Time of Supply: Reverse Charge System (RCM)
In case of reverse charge, the time of supply shall be the earliest of the following dates:
The date of payment
The date immediately after 60 days from the date of issue of invoice by the supplier
If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.
Place of Supply
Default Rule:
Place of supply of services
made to a registered person shall be the location of such registered person.
made to any person other than a registered person shall be – the location of the recipient where the address on record exists. – the location of the supplier of services in other cases.
Specific Rule:
The place of supply of banking and other financial services, including stock broking services to any person shall be the location of the recipient of services on the records of the supplier of services.
Provided that if the location of recipient of services is not on the records of the supplier, the place of supply shall be the location of the supplier of services.
Sec 15: Value of Taxable Supply
1- The value of a supply of goods or services or both shall be:
- the transaction value,
- which is the price actually paid or payable for
- the said supply of goods or services or both
- where the supplier and the recipient of the supply are not related and
- the price is the sole consideration for the supply.
2- The value of supply shall include–
any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than CGST/SGST/UTGST/Compensation to states if charged separately by the supplier;
any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both;
incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and any amount charged for anything done by the supplier in respect of the supply of goods or services or both at the time of, or before delivery of goods or supply of services.
interest or late fee or penalty for delayed payment of any consideration for any supply; and
subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.
Explanation–For the purposes of this sub-section, the amount of subsidy shall be included in the value of supply of the supplier who receives the subsidy.
3- The value of the supply shall not include any discount which is given–
before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and
after the supply has been effected, if –
such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and
input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply.
4- Where the value of the supply of goods or services or both cannot be determined under section 15(1), the same shall be determined in such manner as may be prescribed. (Rule 27 to 35).
5- Notwithstanding anything contained in section 15(1) or (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.
Explanation. For the purposes of this Act,–
a- persons shall be deemed to be “related persons” if–
such persons are officers or directors of one another’s businesses;
such persons are legally recognised partners in business;
such persons are employer and employee;
any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them;
one of them directly or indirectly controls the other;
both of them are directly or indirectly controlled by a third person;
together they directly or indirectly control a third person; or
they are members of the same family.
b- the term “person” also includes legal persons.
c- persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related.
Valuation of services between the distinct and related persons (excluding agents)
Generally, banks would have lot of common/ shared services being supported from Head Office such as call centre, security software etc. Further, many times one branch would internally provide service to other branches for example: resolving issue of a customer having PAN India accounts, providing local information etc. to other branches etc. The value will be determined in terms of Rule 28 of the CGST Rules.
Rule 28
The value of the supply between distinct persons[as specified in section 25(4) / 25(5)]
or
where the supplier and recipient are related (other than an agent) shall be in the following order:
- the open market value. *
- like kind and quality.
- As per rule 30 or rule 31. Rule 30: 110% of COPRule 31: Residual methodProvided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person.
India comprises 28 States and 8 Union Territories. They are: Andhra Pradesh, Assam, Arunachal Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Punjab, Rajasthan, Sikkim, Tamil Nadu, Telangana, Tripura, Uttarakhand, Uttar Pradesh and West Bengal. Union Territories are: Andaman and Nicobar Islands, Chandigarh, Dadra and Nagar Haveli and Daman and Diu, National Capital Territory of Delhi, Jammu and Kashmir, Lakshadweep, Ladakh and Puducherry.
Content of Invoice
Rule 46 of the CGST Rules, a tax invoice referred to in section 31 of the CGST Act, shall be issued by the registered person containing the following: -
name, address and GSTIN of the supplier;
consecutive serial number (upto 16 characters)
date of its issue;
name, address and GSTIN or UIN, if registered, of the recipient;
name and address of the recipient and the address of delivery, along with the name of State and its code, if such recipient is un-registered and where the value of taxable supply is fifty thousand rupees or more;
name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is un-registered and where the value of the taxable supply is less than ` 50,000/- and the recipient requests that such details be recorded in the tax invoice;
Harmonised System of Nomenclature code for goods or services;
description of goods or services;
quantity in case of goods and unit or Unique Quantity Code thereof;
total value of supply of goods or services or both;
taxable value of supply of goods or services or both considering discount or abatement, if any;
rate of tax (central tax (CGST), State tax (SGST), integrated tax (IGST), Union territory tax (UTGST) or cess);
amount of tax charged in respect of taxable goods or services (CGST, SGST, IGST, UTGST or cess);
place of supply along with the name of State, in case of a supply in the course of inter-State trade or commerce;
address of delivery where the same is different from the place of supply;
whether the tax is payable on reverse charge basis; and
signature or digital signature of the supplier or his authorized representative.
Reverse Charge Mechanism
A supplier cannot take the GST paid under the RCM as ITC. The recipient can avail of ITC on GST amount paid under RCM on receipt of goods or services, only if such goods or services are used or will be used for business purposes.
The recipient cannot use the ITC to pay output GST on goods or services under reverse charge and should be paid in cash only.
What is self invoicing?
Self-invoicing is to be done when purchased from an unregistered supplier, and such purchase of goods or services falls under reverse charge. This is because your supplier cannot issue a GST-compliant invoice to you, and thus you become liable to pay taxes on their behalf. Hence, self-invoicing, in this case, becomes necessary.
RCM Services
Important Cases
Qualification of Co-operative credit society as Financial Institution
This issue was raised in case of of Knanaya Multi Purpose Co-op. Credit Society Ltd. [2020] 119 taxmann.com 65/82 GST 34 4 (AAR - Kerala) - Authority for Advance Ruling, Kerala wherein the Authority held that, the applicant being registered with the Central Registrar of Co-operative Societies carrying on the business of financing qualifies to be a "financial institution" for the purpose of the CGST Act, 2017.
It was further held that, since the applicant satisfies both the conditions i.e. being a Financial Institution and engaged in supplying services by way of accepting deposits, extending loans or advances, a co-operative credit society is qualified as a financial institution and is eligible for exercising the option of 50% ITC.
ATMs as a 'place of business'
Queries were raised whether banks are required to provide the details of ATMs while applying for registration under GST. It was clarified that, banks are not required to provide such details of ATMs while applying for registration as ATMs on their own do not constitute a place of business.
Third party places in registration
As per RBI guidelines, banks can use third party ATMs, Business Correspondents (BC), Customer Service Points (CSP) or third party warehouses.
Such third party places are neither places of business nor fixed establishments from where banks ordinarily carry on their business. Hence, banks are not required to add such places in GST registration certificate.
Movement of various equipment
Movement of various equipment's such as Point of sale machines or ATMs at various locations for repairs, encryption etc. for the purpose of repairs, etc. does not constitute a supply. The equipment can be moved between such locations under a cover of a 'Delivery challan'.
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