Wednesday, 5 July 2017

Reverse Charge under GST



 Notification -  Reverse charge under GST

GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No.8/2017-Central Tax (Rate) New Delhi, the 28th June, 2017 G.S.R. (E).-

In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017):

 Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.
This notification shall come into force with effect from the 1st day of July, 2017. [F.No.354/117/2017-TRU]


Following point are worth noting!!

1. The above notification has been issued by CG by exercising the power under section 9(4) of CGST ACT 2017

"9 (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both."

which means if a registered person receive goods/ services form any or all the supplier who is unregistered under GST and amount of such supplies exceeds 5000 in  A DAY

for Exanple- if XYZ receives goods (not covered under zero rate) for 4000 from "YZ"- unregistered and also receives goods for Rs. 2000 from :XZ"- unregistered

In this case RCM will apply under section 9(4) read with notification. and GST will be on full amount. i.e on 6000/-

Attention 

Know the following.

1. under section 9 (3) of CGST ACT 2017 - CG has power to specify certain goods/ service for which GST to be paid under RCM.

Extract of provision of section 9(3)

"9 (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both."

 IN GST for certain services - Receiver has to pay GST ( List is available - link - http://www.cbec.gov.in/resources//htdocs-cbec/gst/list-of-services-under-reverse-charge-2.pdf

which means for these specified service - Service receiver has to pay Tax under RCM and claim Input Tax Credit if eligible.

2. if supplier of goods and services are unregistered then check the following.

    (a) check whether such goods and services are covered under NIL rate of GST?
      - if YES then no RCM
      - if NO then  Pay GST under RCM at the rate specified for goods / services.


NOTE:- Section 9(3) for registered supplier and for Specified services alone. Whereas section 9 (4) is for unregistered Supplier of goods or services.



:- please comment for any clarification or mail me at - adarshsinghonline@gmail.com




Wednesday, 19 March 2014

         TDS ON SOFTWARE PURCHASED  
Section 194j of Income Tax Act.
As per this section: -
1.
Any person, not being an individual or a Hindu undivided family,
2.
who is responsible for paying to a resident any sum by way of   royalty
3.
shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier,
4
Deduct an amount equal ten per cent of such sum as income-tax.
And as per Explanation of section 194j royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
 Notes:-
Section 9 of Income Tax talks about “Income deemed to accrue or arise in India”.
And sub section vi of section 9 talks about “income by way of royalty”.
 And Explanation 2 of sub section vi of section 9 defined the meaning of royalty.
Extract of Explanation 2
 Royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head "Capital gains") for—
(i)  the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;
(ii)  the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;
(iii)  the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;
(iv)  the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
    (iva) the use or right to use any industrial, commercial or scientific equipment but not including the amounts referred to in section 44BB;]
(v)  the transfer of all or any rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or
(vi)  the rendering of any services in connection with the activities referred to in sub-clauses (i) to 93(iv), (iva) and (v).
Notes:-
In in above explanation it can be observed that provision of this section didn’t talks about the following below matter and some judicial decisions have interpreted this definition in a manner which has raised doubts.
1
 Whether consideration for use of computer software is royalty or not;
2
Whether the right, property or information has to be used directly by the payer or is to be located in India or control or Possession of it has to be with the payer.
 Similarly, doubts have been raised regarding the meaning of the term processed
Considering the conflicting decisions of various courts in respect of income in nature of royalty and to restate the legislative intent,
Finance Bill 2012 has amended the following provision/explanation which is as follows:-
1.   Section 9 sub-section vi explanation 4 (extension to meaning of royalty which is define under Explanation 2)  “it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.
2.  Section 9(1)(vi) explanation 5, includes consideration in respect of any right, property or information, whether or not
a.
 The possession or control of such right, property or information is with the payer;
b
Such right, property or information is used directly by the payer;
c
The location of such right, property or information is in India.
These amendments will take effect retrospectively from 1st June, 1976 and will accordingly apply in relation to the assessment year 1977-78 and subsequent assessment years.
So it is very much clear from the above amendments that computer software is also regarded as royalty. And it is also clear that even uses of such computer software will be regarded as royalty.
 notes:-
[Explanation 3.—for the purposes of this clause, "computer software" means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data.]
Problem:-
 Very soon after Bill passed, it has been observed that amendment creates Double taxation, because generally software are sold by intermediate.
Example:- X ltd, being a Indian company engaged in a software development sold software to Y ltd being an Indian company engaged in sales of software without making any change to software.
As per amendment Y ltd while making payment to X ltd should deduct the TDS @ 10%. Now again when X ltd will shall software to some other company will other company should deduct the TDS???? Bcz it’s like two time tax on a particular transaction.
To avoid such confusion CBDT dated July1, 2012 issued Notification which is as follows;
Notification for Non deduction of TDS on Software.
In exercise of the powers conferred by sub-section (1F) of section 197A of the Income tax Act, 1961(43 of 1961), the Central Government hereby notifies that
No deduction of tax shall be made on the following specified payment under section 194J of the Act, namely:-
Payment by a person (hereafter referred to as the transferee) for acquisition of software from another person, being a resident, (hereafter referred to as the transferor), where
i. the software is acquired in a subsequent transfer and the transferor has transferred the software without any modification,
ii. Tax has been deducted,
(a) Under section 194J on payment for any previous transfer of  such software; or
(b) Under section 195 on payment for any previous transfer of such software from a Non-resident, and
3. The transferee obtains a declaration from the transferor that the tax has been deducted either under sub-clause (a) or (b) of clause (ii) along with the Permanent Account Number of the transferor.  

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