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Supply to Distinct Persons
Facts
Shreyans Ltd. is a conglomerate has its corporate office in Delhi and operations across multiple States in India. As an internal policy, the company has obtained single GST registration in each State irrespective of the diversified business operations being undertaken in the State.
Question: The FMCG division of the company in Jaipur, Rajasthan agreed to use the vacant godowns within the premises of Hotel Division in Udaipur, Rajasthan for storage of its goods. The value of such an arrangement was agreed at ` 5 lakh per month.
Amount of GST Payable on such transaction ?
Option:
a. The Hotel Division shall charge CGST and SGST amounting to Rs. 45,000 each in the tax invoice issued to FMCG Division.
(b) No GST is chargeable on usage of vacant godown of Hotel Division.
(c) The Hotel Division shall charge IGST amounting to Rs. 90,000 in the tax invoice issued to FMCG Division.
(d) The Hotel Division, Rajasthan shall charge IGST amounting to Rs. 90,000 in the tax invoice issued to Corporate Office in Delhi.
Answer: No GST is Chargeable. (Explanation is given in the end of the Questions)
Question: Amount of GST Payable in case Land is used by FMCG (Rajasthan) in Hotel Division of Haryana?
Option:
a. The Hotel Division shall charge CGST and SGST amounting to Rs. 45,000 each in the tax invoice issued to FMCG Division.
(b) No GST is chargeable on usage of vacant Godown of Hotel Division.
(c) The Hotel Division shall charge IGST amounting to Rs. 90,000 in the tax invoice issued to FMCG Division.
(d) The Hotel Division, Rajasthan shall charge IGST amounting to Rs. 90,000 in the tax invoice issued to Corporate Office in Delhi.
Answer: The Hotel Division shall charge CGST and SGST amounting to Rs. 45,000 each in the tax invoice issued to FMCG Division.
Question: Hotel Division (Rajasthan) avails IT Services from IT Department (Delhi) for Rs. 25 Lakhs for which Invoice was raised by IT Division on 25th April, 2024. Hotel Division avails ITC against this invoice, however, no payment was made for such services by the Hotel Division to the IT Division.
Options:
(a) should reverse the input tax credit so availed while filing Form GSTR-3B of the October month.
(b) need not reverse the input tax credit so availed in Form GSTR-3B of the October month.
(c) should have availed the input tax credit only after the end of the current financial year and not in April.
(d) should not have availed the input tax credit in respect of said transaction as the same is deemed supply under Schedule I of the CGST Act, 2017.
Answer: Need not reverse the input tax credit so availed in Form GSTR-3B of the October month.
Question: In above case, in case Open Market Value of Supply of such Deemed Supply was Rs. 30 Lakhs but IT Division raised Invoice of Rs 25 Lakhs. What is the correct valuation?
Options:
a. Rs. 25 Lakhs, In case Hotel Division is eligible for full Credit.
b. Rs. 30 Lakhs, In case Hotel Division is eligible for full Credit.
c. Rs. 25 Lakhs, In case Hotel Division is not eligible for full Credit.
d. Rs. 30 Lakhs, in case Hotel Division is not eligible for full Credit.
Answer: a & d.
Explanations
For Qns-1 & 2
As per section 25(4) of the CGST Act, 2017: Where a person has obtained or required to obtain more than one Registration whether in One State or UT or more than One State/UT, all such Registrations would be considered as " Distinct Persons". (For instance, Mr. A take 20 Registrations (whether in one State/UT or more than One State/UT, all such 20 Registrations would be considered as Distinct Persons).
(Note: As per Section 25(1), a separate GST Registration is required in each State or UT from where He is making supplies.
Further, as per Section 25(2), Single Registration will be provided for each State/UT, However Taxpayer may (voluntary) take more than One Registration in Each State/UT in case there are multiple places of business.
Furthermore, as per Schedule-I of the CGST Act, Supplies between Distinct Persons would be considered as Supply even without consideration under GST Law.
Since, in above case, Shreyans Ltd. has decided to take single Registration in a State (i.e. Rajasthan), in that case multiple divisions in the Rajasthan State does not become distinct persons, accordingly, GST is not payable.
In case, Supply is provided to different Registration, it would be taxable (Qns-2). In Qns-2 though Registrations belongs to two different States, it would still be considered as Intra-State Supply as Place of Supply in case of services pertaining to Immovable Property will be the State in which such Immovable Property is situated (i.e. Haryana).
For Qns-3
As per proviso to Rule 37 of the CGST Rules, Condition of Payment to Suppliers with in 180 days does not apply to Deemed Supplies under Schedule-I.
Accordingly, ITC needs not to be reversed.
For Qns-4
As per Rule-28 of CGST Rules (for valuation of Related Parties Supplies and Supplies between Distinct Persons), In case Recipient (i.e. Hotel Division) is eligible for Full ITC, any value declared in the invoice would be considered as Open Market Value i.e. Invoice Value would be accepted by the Department.
In case, Full ITC is not eligible to the Recipient, GST needs to be discharged on the Open Market Value. In case OMV is not available, it should be calculated at Cost plus 10%. In case both are not available, value should be calculated based on reasonable methods.
Accordingly, answer would be :
Rs. 25 Lakhs, In case Hotel Division is eligible for full Credit.
Rs. 30 Lakhs, in case Hotel Division is not eligible for full Credit.
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Disclaimer: We have taken due care to the best of our knowledge while explaining the provisions surrounding the issue purely for informational/academic purpose. It should not be considered as professional advice or consultancy to be relied upon. While due care has been taken by Fab Gyan in preparing this article, certain mistakes and omissions may creep in. The Fab Gyan or its Author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
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