Sunday, 16 February 2020

GST : Meaning & Scope of Supply (Part 1)

Part 1 |

Under any tax law, taxable event is a very important concept. Taxable event is an event on occurrence of which the levy of tax arises. In other words, there is no tax liability unless the taxable event occurs. For example, under pre-GST indirect tax regime, in case of excise duty, ‘manufacture’ was the taxable event. Excise duty used to arise only when the activity falls under the scope of manufacturing. Now we are in GST regime. Under GST law, ‘supply’ is the taxable event. Once an activity falls under the ambit of supply, levy of GST arises. In today's article, we will try to understand the concept of supply under GST laws.

The term ‘Supply’ is defined under Section 7 of Central Goods and Service Tax Act, 2017 (CGST Act). Section 7 gives an inclusive definition of supply. According to Section 7 of CGST Act,

“7 (1)- For the purpose of this Act, the expression ‘supply’ includes

(a) All forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

(b) Import of service for a consideration whether or not in the course or furtherance of business; and

(c) The activities specified in Schedule I, made or agreed to be made without consideration
7 (1A)- where certain activities or transactions constitute a supply in accordance with provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II;

7 (2)- notwithstanding anything contained in sub-section (1), -

(a) Activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,

shall be treated neither as a supply of goods nor a supply of services.

7 (3)- Subject to the provisions of 5[sub-sections (1), (1A) and (2)], the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.”
On reading of aforesaid definition, we can list following important points in relation to supply:
  1. Supply should be of goods or services. Supply of anything other than goods or services for example, money, securities etc. will not attract GST.
  2. Supply should be made for consideration. Anything supplied without consideration or free of cost will not attract GST. (Exception to this is activities listed in Schedule I. This will be discussed in later part)
  3. Supply should be in the course or furtherance of business. (However, in case of import of service, import of services for the consideration whether or not in the course or furtherance of business is treated as supply.
  4. GST Act has classified certain transactions as supply of goods or supply of services. This classification is provided in Schedule II of the Act.
  5. Further, there are some cases which are not treated as supply even though these transactions fulfill all the conditions necessary for treating an activity to be supply in normal course. These activities are given in Schedule III of the Act.

Every part of the above definition needs detailed analysis to understand the concept of supply thoroughly. We will try to elaborate the two important concepts in the definition in the next part of this article. These two important concepts are
  1. Consideration 
  2. In the course or furtherance of business
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....to be continued

Sunday, 9 February 2020

Doctrine of Merger

  1. Assessee who is resident in India filed the return of income u/s 139(1) on 31-07-2014 for the AY 2013-14 declaring the income at 50 crore INR. Assessee is an individual engaged in the business of manufacturing & export of readymade garments.
  2. Return was processed under section 143(1) without any variation.
  3. On 30-11-2015, assessment u/s 143(3) was finalised by making addition on account of bogus purchase to the tune of Rs 5 crore by assessing officer.
  4. Aggrieved by that, assessee filed the appeal before CIT Appeal and CIT appeal partly allowed the appeal & restricted the addition to the extent of 2 crores & deleted the addition of 3 crore.
  5. Against this order both AO & Assessee are in appeal at tribunal and both the cases are pending.
  6. For the same AY, On 29-03-2016, AO issued the notice u/s 148 by alleging that assessee has claimed the bogus gifts.
  7. Assessee filed a fresh return which was identical to the return u/s 139(1).
  8. Assessment order u/s 143(3) read with section 147, was framed on 31-08-2016 and addition on account of bogus gifts were made to the tune of 1 Crore INR.
  9.  Aggrieved by that, assessee filed the appeal before CIT Appeal challenging reassessment as well as addition. Case is yet to be disposed.
  10. On 31-03-2019, Principal Commissioner of Income Tax Issued the notice under section 263 by alleging that during the proceedings under section 143(3) rws 147, AO should have inquired about the source of the fresh investment in the residential house owned by the assessee to the tune of 5 crore & such absence of the inquiry by AO makes the assessment order erroneous & prejudicial to the interest of revenue & accordingly he set aside the order passed by the AO dated 31-08-2016 & directed the AO to make the fresh assessment order after making investigation as stated above.
  11. Assessee contended that stand taken by PCIT is not correct as the matter raised by PCIT stands covered in the assessment order dated 30-11-2015 and by doctrine of merger, this issue is no more open under section 263.

In the light of the above facts, you are required to write a note:
A. If course of action adopted by the PCIT u/s 263 is valid or not
B. What could be the possible recourse & available defence for the assessee henceforth.
C. Would your answer be different if assessee has been non resident.
Hint:
  • Absence of inquiry vs Sufficiency of the inquiry
  • Doctrine of Merger
Please give your answers in comment section.

Saturday, 25 January 2020

Kuber Eats


  1. Kuber Eats is in business of food delivery in India. They have hired various individuals to collect the food from various food sellers & to deliver the same to customers.
  2. Kuber Eats does not own any food, they merely collect from various sellers to deliver it to the customers. In turn, they earn the commission at 20% from food sellers & a delivery fees from the end customers. 
  3. Kuber Eats have hired delivery persons on a principal to principal basis. They need to bring their own vehicles & cellular phones with internet where they get the notification regarding the locations, to collect the food parcels from a food seller & its end customer. Payment might be cash on delivery or an internet based prepaid one. Delivery persons get 15000 Rs per month as a fixed pay & 500 Rs per day as an extra incentive if they complete 15 deliveries in 8 hours. However, they get nothing if they do not remain available for delivery work for at least 8 hours a day. 
  4. These business operations in India are owned by Kuber Eats India Private Limited which is the wholly owned subsidiary of a Singapore Based Company named as Kuber Eats India Holding Singapore Limited. Kuber Eats India Holding Singapore Limited is a wholly owned subsidiary of a Singapore Based Company named as Kuber Eats Asia Pacific Holding Singapore Limited. Kuber Eats Asia Pacific Holding Singapore Limited is a wholly owned subsidiary of a Cayman Island Based Company named as Kuber Eats Global Holding Limited. Kuber Eats Global Holding Limited is a wholly owned subsidiary of a USA Based Company named as Kuber Eats Limited. 
  5. Due to commercial considerations, Tomato India Limited has offered to buy the India-Specific Operations of the Kuber Eats India for a 100% shares swap deal. Price of the India-Specific Operations of the Kuber Eats India has been mutually agreed to be worth 10% of the Tomato India Limited. Market value of the Tomato India Limited is Rs. 3000 Crore. In substance Investment held by Kuber Eats India Holding Singapore Limited will be transferred to Tomato India Limited in consideration for fresh shares to be issued by Tomato India Limited to the extent of 300 Crore. 
  6. Based on above information you are required to comment on:
A. Taxation of income in the hands of Kuber Eats India arising out of the food delivery business
B. Taxation of income in the hands of Delivery Persons hired by Kuber Eats India.
C. Will the answer to question B be any different if delivery persons are not resident in India
D. Taxation of transaction specified in para 5
E. Will the answer to Question C, be different if provisions of DTAA are not available.

Hint:
  • Authority to conclude the agreement of sale
  • Agreement for work vs Agreement of work
  • Independent Personal Services vs Dependent Personal Services
  • POEM, Indirect Transfer
  • GAAR

Monday, 6 January 2020

CA Examinations May 2020 Timetable Announced

On 1st January 2010, ICAI announced Exam dates, Exam fees. Form Submission dates and Late fees for CA Examination to be held in May 2020.

Important Points from this announcement are as follows,

Foundation Examination

Examination for CA Foundation Course will be held on 11th, 13th, 15th and 17th May 2020.

Intermediate Examination

Dates

Examination for CA Intermediate (Old) Course will be held on,
  • Group I  : 3rd, 5th, 8th and 10th May 2020
  • Group II : 12th, 14th and 16th May 2020
Examination for CA Intermediate (New) Course will be held on,
  • Group I  : 3rd, 5th, 8th and 10th May 2020
  • Group II : 12th, 14th, 16th and 18th May 2020

Fees

  • Single Group: Rs. 1,500/-
  • Both Groups: Rs. 2,700/-

Final Examination

Dates

Examination for CA Final (Old and New) Course will be held on,
  • Group I  : 2nd, 4th, 6th and 9th May 2020
  • Group II: 11th, 13th, 15th and 17th May 2020

Fees

  • Single Group: Rs.1,800/-
  • Both Groups: Rs. 3,300/-

Form Submission Dates

The forms are to be submitted onlne only at https://icaiexam.icai.org from 5th February 2020 to 26th February 2020. The fees are also to be paid online by using any Debit or Credit Card or by using Net Banking or Bhim UPI.

If due to any reasons you missed the deadlines mentioned above, then don't worry. You can still submit the examination form online up to 4th March 2020. However in this case you will have to pay late fees of Rs. 600/- over and above the basic examination fee mentioned above.

In case you need any more clarification, please click here to read the ICAI announcement regarding May 2020 examination.

All the best to all of you.