Taxation - Income TaxQuestion 5594 of 146
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Question 6 (a) Nootan Ltd., a registered person in Indore, Madhya Pradesh, provides details of the following transactions carried out during the month of June 2024: Sr. No. Particulars Amount in ` 1. Paid remuneration to Mr. Madan, for the services rendered by him in the capacity of Director. Company deducted TDS under section 192 (Salary) and 194J (Professional or Technical services) of Income-Tax Act, 1961. Gross payments made were ` 8,50,000 and ` 11,50,000 respectively for Salary and Professional services. (Intra-State supply) 20,00,000 2. Paid rent to Indian Railways, registered in Madhya Pradesh, for its property located in the same State, which was taken on lease by the company. 1,25,000 3. Paid to XYZ Security Private Limited, for providing security services to its warehouses across the State. Security agency is not registered under GST. 5,35,000 4. Paid fee to Local Municipal corporation for renewal of the company's factory License for the financial year 2024-2025. 4,800 Additional Information: (i) All above figures are exclusive of taxes, wherever applicable. (ii) Assume the rate of GST as 18%, 9% and 9% for IGST, CGST/SGST respectively. (iii) Turnover of Nootan Limited for the preceding financial year was ` 67 lakh. You are required to compute the GST payable by Nootan Limited under Reverse Charge basis for the month of June 2024. Reason for the treatment of each item should form part of the answers. (5 Marks) (b) Determine the Place of Supply for the following independent cases, by briefly stating the relevant provisions : (i) Marxy Pharmaceuticals, registered under GST at Jaipur, Rajasthan hires Sargam Events LLP, registered under GST at Sagar, Madhya Pradesh for its annual event to be held in Gandhinagar, Gujarat. (ii) PSL Ltd., a registered person in Chandigarh, Punjab orders from CMR Ltd., a registered person in Ranchi, Jharkhand for delivery of goods to MHT Ltd., a registered person in Ranchi, Jharkhand. You are required to determine PoS for both of the above supplies made by CMR Ltd. as well as PSL Ltd. (5 Marks)

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Detailed Solution & Explanation

**(a) Computation of GST Payable by Nootan Limited under reverse charge for the month of June 2024:**

| Sr. No. | Particulars | Value (₹) | CGST (₹) | SGST (₹) | Reason / Treatment | | :--- | :--- | :---: | :---: | :---: | :--- | | 1. | **Remuneration paid to Director Mr. Madan:** | | | | | | | (i) Portion subjected to TDS u/s 194J (Professional services) | 11,50,000 | 1,03,500 | 1,03,500 | Remuneration paid to a director for professional services subjected to TDS u/s 194J is outside the scope of Schedule III of the CGST Act, 2017 (as it does not arise from an employer-employee relationship). Tax is payable under Reverse Charge Mechanism (RCM) by the recipient company (Nootan Ltd.).
CGST = 9% of ₹ 11,50,000 = ₹ 1,03,500;
SGST = 9% of ₹ 11,50,000 = ₹ 1,03,500. | | | (ii) Portion subjected to TDS u/s 192 (Salary) | 8,50,000 | Nil | Nil | Services provided by an employee to the employer in the course of or in relation to his employment are outside the scope of supply in terms of Schedule III of the CGST Act, 2017. Thus, no GST is payable. | | 2. | **Rent paid to Indian Railways:** | 1,25,000 | Nil | Nil | Tax on renting of immovable property services provided by the Ministry of Railways (Indian Railways) to a registered person is taxable under forward charge (by the supplier) and is not payable under reverse charge. | | 3. | **Security services received from XYZ Security Private Limited:** | 5,35,000 | Nil | Nil | Tax on security services is payable under reverse charge only if the supplier is a person other than a body corporate. Since XYZ Security Private Limited is a body corporate, RCM is not applicable. | | 4. | **Fee paid to Local Municipal Corporation:** | 4,800 | Nil | Nil | Services provided by local authorities to a business entity are exempt from GST if the consideration charged does not exceed ₹ 5,000 in a financial year. Since the factory license renewal fee is ₹ 4,800, it is exempt. | | | **Total GST Payable under Reverse Charge** | | **1,03,500** | **1,03,500** | |

**(b) Determination of Place of Supply (PoS):**

**(i) Marxy Pharmaceuticals (registered in Jaipur, Rajasthan) hires Sargam Events LLP (registered in Sagar, Madhya Pradesh) for an event in Gandhinagar, Gujarat:**
* **Provision:** Under Section 12(7)(a)(i) of the IGST Act, 2017, the place of supply of services provided to a registered person by way of organization of a cultural, artistic, sporting, scientific, educational or entertainment event, or services ancillary to such organization, is the location of such registered person.
* **Conclusion:** Since the recipient (Marxy Pharmaceuticals) is registered under GST in Jaipur, Rajasthan, the Place of Supply is **Jaipur, Rajasthan**.

**(ii) PSL Ltd. (registered in Chandigarh, Punjab) orders from CMR Ltd. (registered in Ranchi, Jharkhand) for delivery to MHT Ltd. (registered in Ranchi, Jharkhand):**
* **For the supply from CMR Ltd. to PSL Ltd. (Bill-to-Ship-to model):**
* **Provision:** Under Section 10(1)(b) of the IGST Act, 2017, where goods are delivered by the supplier to a recipient on the direction of a third person, it is deemed that such third person has received the goods and the place of supply of such goods shall be the principal place of business of such third person.
* **Conclusion:** The third person directing the supply is PSL Ltd. (Chandigarh, Punjab). Therefore, the Place of Supply is **Chandigarh, Punjab**.
* **For the supply from PSL Ltd. to MHT Ltd.:**
* **Provision:** Under Section 10(1)(a) of the IGST Act, 2017, where the supply involves movement of goods, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
* **Conclusion:** The movement of goods terminates for delivery to MHT Ltd. in Ranchi, Jharkhand. Therefore, the Place of Supply is **Ranchi, Jharkhand**.

Key Concepts to Understand

Supply

Total amount of a good available to consumers.

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