Taxation - GSTQuestion 5619 of 512
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Question 5 (a) MLM Private Limited, a registered person in Udaipur, Rajasthan engaged in various lines of business, provided the following details regarding the transactions undertook in the month of March, 2024: Outward Transactions Amount (`) Advance received from Mr. Gokul for Business support services to be supplied in the month of April, 2024. 2,00,000 Provided commissioning services under Pure labour contract to M/s Raj Builders of Jaipur, Rajasthan for Multi-storey residential complex. 5,00,000 Stock transferred without consideration to its branch in Jodhpur, Rajasthan. Branch has same GSTIN. 1,25,000 Outward sale of goods to various unrelated persons: Particulars Market Value (`) Transaction Value (`) Intra-State 5,00,000 5,75,000 As provided in the column Provided warehousing services for Kidney beans (Rajma), Red lentils and other pulses. 50,000 Inward Transactions Amount (`) Received Car rental services from Carman Private Limited, an unregistered company in Udaipur engaged in car renting services. MLM Private Limited paid rent on monthly basis (Cost of fuel also 1,20,000 TAXATION included in the monthly rent). [Rate of CGST and SGST is 6% each] Intra-State inward supply of various goods and services for use in the course or furtherance of business. 7,50,000 [Goods] 2,50,000[Services] Additional Information (i) The Company paid ` 50,000 to Mr. Ajay, an independent director, as sitting fees. (ii) The Company made donation of ` 4,50,000 to a local old age home (a trust not registered under GST) for setting a Water Cooler at old age home with the name of company embedded on the water cooler to express their support for the good cause. (iii) All the figures are exclusive of GST. (iv) All inward and outward supplies are intra-State except where otherwise stated. (v) Subject to information given above, all the conditions necessary for availing the ITC have been fulfilled. (vi) Rates of GST are given below except where otherwise stated: Particulars CGST SGST IGST Supply of Goods 6% 6% 12% Supply of Services 9% 9% 18% Calculate the net GST Payable in cash by MLM Private Limited for the month of March, 2024. Support your calculations with relevant reasons. (10 Marks) (b) Ajay, a registered person, provided the following details about transactions entered into by him in the month of July, 2024: (i) He sold 3,000 units of goods to Wellness Pharma @ ` 400 each. Under section 206C(1H) of Income Tax Act, 1961, he is required to collect tax (TCS) of ` 2,000 from Wellness Pharma. He included ` 2,000 as TCS in tax invoice issued to the party. (ii) Under a contract with State Government, he sold 1,000 units of goods (unit price is ` 400 per unit) @ ` 200 per unit to families of Economic Weaker Section (identified by State Government). Balance ` 200 per unit will be paid to him by State Government as subsidy. (iii) Issued credit notes worth ` 1,50,000 net of GST as discount to its registered dealers who purchased more than 5,000 units between October, 2023 to December, 2023 under Festival Bonanza Scheme declared on 01.10.2023. The above discount was provided invoice wise with a condition of reversal of ITC by registered dealer. (iv) Sold goods to Old Age Home for consideration of ` 1,00,000 (Normal Sale Value is` 2,00,000). SAMVEDNA, an NGO registered under Section 12AA of Income Tax Act, 1961 gave them a subsidy of ` 30,000 to acknowledge his services to elderly people living in old age home. (v) After analysis of sale report of first quarter, he decided to give discount of 1% to shopkeepers whose total purchases exceeds ` 25,00,000 during the quarter ending June, 2024. Total discount given to such shopkeepers is ` 1,30,000. Compute the taxable value of supply for the month of July, 2024 on which Mr. Ajay shall pay GST. Suitable notes and assumptions should form part of your answer. All the amounts stated above are exclusive of GST. (5 Marks)

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Detailed Solution & Explanation

∗∗(a)ComputationofNetGSTPayableincashbyMLMPrivateLimitedforthemonthofMarch,2024:∗∗<br>∗∗1.OutwardSuppliesandTaxPayableunderForwardCharge:∗∗−∗∗AdvancereceivedfromMr.Gokul:∗∗UnderGST,taxispayableatthetimeofreceiptofadvanceforthesupplyofservices.Value=‘2,00,000‘.CGST@9−∗∗Purelabourcontractformulti−storeyresidentialcomplex:∗∗Theexemptionforpurelabourcontractsappliesonlytoasingleresidentialunitandnottoaresidentialcomplex.Thus,itistaxable.Value=‘5,00,000‘.CGST@9−∗∗StocktransferwithoutconsiderationtobranchinJodhpur:∗∗SincethebranchhasthesameGSTIN,itisnotadistinctpersonunderGST.Therefore,thetransferdoesnotconstituteasupply.Value=‘Nil‘.CGST=‘Nil‘,SGST=‘Nil‘.−∗∗Outwardsaleofgoodstounrelatedpersons:∗∗Thetaxablevalueisthetransactionvalue(‘5,75,000‘),notthemarketvalue.Value=‘5,75,000‘.CGST@6−∗∗Warehousingservicesforkidneybeans,redlentils,etc.:∗∗Warehousingofagriculturalproduceisexempt.Pulses(includingrajmaandredlentils)qualifyasagriculturalproduce.Value=‘Nil‘.CGST=‘Nil‘,SGST=‘Nil‘.<br>∗TotalOutputTaxLiability(ForwardCharge)∗:−CGST=‘18,000+45,000+34,500=97,500‘−SGST=‘18,000+45,000+34,500=97,500‘<br>∗∗2.InwardSuppliesandITCComputation:∗∗−∗∗CarrentalservicesfromCarmanPrivateLimited(bodycorporate):∗∗RCMonrentingofpassengermotorvehiclesu/s9(3)appliesonlywhentheservicesareprovidedbyanon−bodycorporatetoabodycorporate.Sincethesupplierisabodycorporate,RCMisnotapplicable.Underforwardcharge,sincethesupplierisunregistered,notaxwaspaid,hencenoITCisavailable.−∗∗Intra−Stateinwardsupplyofgoods:∗∗Usedinthecourseofbusiness.Value=‘7,50,000‘.ITC:CGST@6−∗∗Intra−Stateinwardsupplyofservices:∗∗Usedinthecourseofbusiness.Value=‘2,50,000‘.ITC:CGST@9−∗∗SittingfeespaidtoIndependentDirector:∗∗ServicesprovidedbyadirectortoacompanyaresubjecttoRCM.Therecipient(MLMPrivateLimited)mustpaytaxon‘50,000‘@9ITC:CGST@9−∗∗Donationofwatercoolertooldagehome:∗∗Thereisnocommercialpromotionoradvertisementintent(onlygratitudedisplaywithnameembedded),sothereisnoquidproquo.ItdoesnotqualifyasasupplyandnoITCisavailableonthecostofthewatercooler.<br>∗TotalITCAvailable∗:−CGST=‘45,000+22,500+4,500=72,000‘−SGST=‘45,000+22,500+4,500=72,000‘<br>∗∗3.CashPayable:∗∗−∗∗UnderForwardCharge(OutputTax−ITC):∗∗−CGST=‘97,500−72,000=25,500‘−SGST=‘97,500−72,000=25,500‘−∗∗UnderReverseCharge(Director′ssittingfees−mustbepaidincash,cannotbesetoffagainstITC):∗∗−CGST=‘4,500‘−SGST=‘4,500‘−∗∗TotalNetGSTPayableincash:∗∗−CGST=‘25,500+4,500=30,000‘−SGST=‘25,500+4,500=30,000‘<br><br>∗∗(b)ComputationoftaxablevalueofsupplyforMr.AjayforthemonthofJuly,2024:∗∗<br>−∗∗GoodssoldtoWellnessPharma:∗∗‘3,000units×400=12,00,000‘.TCScollectedunderSection206C(1H)oftheIncomeTaxActisaninterimlevyanddoesnothavethecharacterofatax,soitisnotincludibleinthevalueofsupply.Taxablevalue=∗∗12,00,000∗∗.−∗∗GoodssoldtoEWSfamilies:∗∗UnderSection15(2)(e),subsidiesdirectlylinkedtothepriceareincluded,exceptsubsidiesfromtheCentralorStateGovernments.Thus,theStateGovernmentsubsidyof‘200‘perunitisnotincludible.Taxablevalue=‘1,00,000units×200=2,00,000‘(Wait,itis1,000units,so‘1,000×200=2,00,000‘).−∗∗Creditnotesissued:∗∗Post−supplydiscountisallowedasadeductionu/s15(3)(a)(ii)asitwasagreedatthetimeofsupply,linkedtospecificinvoices,andthedealerreversestheITC.Value=∗∗(1,50,000)∗∗.−∗∗GoodssoldtoOldAgeHome:∗∗SubsidyfromNGO(SAMVEDNA)isablanketsubsidyandisnotdirectlylinkedtotheper−unitpriceofthegoods.Hence,itisnotincludibleinthevalueofsupply.Thevalueofsupplyistheactualconsiderationpaid=∗∗1,00,000∗∗.−∗∗Discountgiventoshopkeepers:∗∗Post−supplydiscountisnotallowedasadeductionbecauseitwasnotagreeduponatthetimeofsupply.Value=∗∗Nil∗∗.<br>∗∗TotalTaxableValueofSupplyu/s15∗∗=‘12,00,000+2,00,000−1,50,000+1,00,000=13,50,000‘.\displaystyle **(a) Computation of Net GST Payable in cash by MLM Private Limited for the month of March, 2024:** <br> **1. Outward Supplies and Tax Payable under Forward Charge:** - **Advance received from Mr. Gokul:** Under GST, tax is payable at the time of receipt of advance for the supply of services. Value = `2,00,000`. CGST @ 9% = `18,000`, SGST @ 9% = `18,000`. - **Pure labour contract for multi-storey residential complex:** The exemption for pure labour contracts applies only to a single residential unit and not to a residential complex. Thus, it is taxable. Value = `5,00,000`. CGST @ 9% = `45,000`, SGST @ 9% = `45,000`. - **Stock transfer without consideration to branch in Jodhpur:** Since the branch has the same GSTIN, it is not a distinct person under GST. Therefore, the transfer does not constitute a supply. Value = `Nil`. CGST = `Nil`, SGST = `Nil`. - **Outward sale of goods to unrelated persons:** The taxable value is the transaction value (`5,75,000`), not the market value. Value = `5,75,000`. CGST @ 6% = `34,500`, SGST @ 6% = `34,500`. - **Warehousing services for kidney beans, red lentils, etc.:** Warehousing of agricultural produce is exempt. Pulses (including rajma and red lentils) qualify as agricultural produce. Value = `Nil`. CGST = `Nil`, SGST = `Nil`. <br> *Total Output Tax Liability (Forward Charge)*: - CGST = `18,000 + 45,000 + 34,500 = 97,500` - SGST = `18,000 + 45,000 + 34,500 = 97,500` <br> **2. Inward Supplies and ITC Computation:** - **Car rental services from Carman Private Limited (body corporate):** RCM on renting of passenger motor vehicles u/s 9(3) applies only when the services are provided by a non-body corporate to a body corporate. Since the supplier is a body corporate, RCM is not applicable. Under forward charge, since the supplier is unregistered, no tax was paid, hence no ITC is available. - **Intra-State inward supply of goods:** Used in the course of business. Value = `7,50,000`. ITC: CGST @ 6% = `45,000`, SGST @ 6% = `45,000`. - **Intra-State inward supply of services:** Used in the course of business. Value = `2,50,000`. ITC: CGST @ 9% = `22,500`, SGST @ 9% = `22,500`. - **Sitting fees paid to Independent Director:** Services provided by a director to a company are subject to RCM. The recipient (MLM Private Limited) must pay tax on `50,000` @ 9% each and is eligible to claim ITC for the same. ITC: CGST @ 9% = `4,500`, SGST @ 9% = `4,500`. - **Donation of water cooler to old age home:** There is no commercial promotion or advertisement intent (only gratitude display with name embedded), so there is no quid pro quo. It does not qualify as a supply and no ITC is available on the cost of the water cooler. <br> *Total ITC Available*: - CGST = `45,000 + 22,500 + 4,500 = 72,000` - SGST = `45,000 + 22,500 + 4,500 = 72,000` <br> **3. Cash Payable:** - **Under Forward Charge (Output Tax - ITC):** - CGST = `97,500 - 72,000 = 25,500` - SGST = `97,500 - 72,000 = 25,500` - **Under Reverse Charge (Director's sitting fees - must be paid in cash, cannot be set off against ITC):** - CGST = `4,500` - SGST = `4,500` - **Total Net GST Payable in cash:** - CGST = `25,500 + 4,500 = 30,000` - SGST = `25,500 + 4,500 = 30,000` <br> <br> **(b) Computation of taxable value of supply for Mr. Ajay for the month of July, 2024:** <br> - **Goods sold to Wellness Pharma:** `3,000 units \times 400 = 12,00,000`. TCS collected under Section 206C(1H) of the Income Tax Act is an interim levy and does not have the character of a tax, so it is not includible in the value of supply. Taxable value = **12,00,000**. - **Goods sold to EWS families:** Under Section 15(2)(e), subsidies directly linked to the price are included, except subsidies from the Central or State Governments. Thus, the State Government subsidy of `200` per unit is not includible. Taxable value = `1,00,000 units \times 200 = 2,00,000` (Wait, it is 1,000 units, so `1,000 \times 200 = 2,00,000`). - **Credit notes issued:** Post-supply discount is allowed as a deduction u/s 15(3)(a)(ii) as it was agreed at the time of supply, linked to specific invoices, and the dealer reverses the ITC. Value = **(1,50,000)**. - **Goods sold to Old Age Home:** Subsidy from NGO (SAMVEDNA) is a blanket subsidy and is not directly linked to the per-unit price of the goods. Hence, it is not includible in the value of supply. The value of supply is the actual consideration paid = **1,00,000**. - **Discount given to shopkeepers:** Post-supply discount is not allowed as a deduction because it was not agreed upon at the time of supply. Value = **Nil**. <br> **Total Taxable Value of Supply u/s 15** = `12,00,000 + 2,00,000 - 1,50,000 + 1,00,000 = 13,50,000`.

Key Concepts to Understand

Consideration

Something of value exchanged for a promise. 'Quid Pro Quo' (Something for something).

Supply

Total amount of a good available to consumers.

Sale of Goods

A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price (Section 4, Sale of Goods Act, 1930). In a 'Sale', property in goods passes immediately; in an 'Agreement to Sell', it passes in future.

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