Analysis
The IGST Law provides the basis for determination of a supply as an intra-State supply or an inter-State supply – simply put, if the location of the supplier and the place of supply are within the same State, the transaction will be an intra-State supply, barring the case of supplies made by / to SEZ, and all other supplies will be regarded as inter-State supplies. Please refer to the discussion in the IGST Chapters for a holistic understanding of ‘Levy’ as a concept under the GST law.
(i) Taxable supply: Every taxable supply will be subjected to GST. A taxable supply refers to any supply of goods or services or both, which qualifies as a supply in terms of Section 7. The exception to this rules would be all supplies that the levy Section forgoes to tax, as also all those supplies that have been notified to be nil-rated or exempted from tax. The provisions imposing GST are phrased in such a manner so as to exclude the supply of alcoholic liquor for human consumption from the scope of levy itself.
However, the law specifies certain other goods whereby the levy of GST has been deferred until such time the goods are notified in this regard to be taxable supplies (by the Government, based on the recommendation of the GST Council):
(1) petroleum crude
(2) high speed diesel
(3) motor spirit (commonly known as petrol)
(4) natural gas and
(5) aviation turbine fuel
(ii) Tax payable: The nature of tax would depend upon the nature of supply, viz., inter-State supplies will be liable to IGST and intra-State supplies will be liable to CGST and SGST/UTGST (i.e., UTGST in case intra-State supplies within a particular Union Territory).Every intra-State supply will attract CGST as well as SGST, as follows:
(1) Imposition of CGST by the Union Government of India
(2) Imposition of SGST by the respective State Government or (in case of UTGST, by the Central Government through the appointed Administrator)
(iii) Tax shall be payable by a ‘taxable person’: The tax shall be payable by a ‘taxable person’ i.e., a person who is liable to obtain registration, or a person who has obtained registration. Please note that there can be multiple taxable persons for a single person. It comprises separate establishments of persons registered or liable to be registered under sections 22 or section 24 of the CGST Act. Please refer to the discussion under Section 25 for a thorough understanding of this concept. Under the GST law, the person liable to pay the tax leviedon a supply under the Statute would be one of the following:
(1) The supplier, in terms of Section 9(1)–Referred to as forward charge. This is ordinarily applicable in case of all supplies unless the supplies qualify under the other two categories, i.e., this would be the residual category of supply wherein the supplier would be liable to pay tax. (In this regard, it must be noted that the term ‘supplier’ is attributed to an establishment, and not to the PAN as a whole. Therefore, if the supply is effected from an establishment in Karnataka, the establishment of the same entity located in say Delhi, cannot discharge the liabilities);
(2) The recipient – Referred to as tax under reverse charge mechanism; In such a case, all the provisions of the Act as are applicable to the supplier in a normal case, would apply to the recipient of supply (being a taxable person, and not the PAN as explained above). A supply would be subjected to tax in the hands of the recipientonly in the following cases:
1. Notified supplies under Section 9(3): The supply of goods or services is notifiedas a supply liable to tax in the hands of the recipient vide Notification No. 4/2017-Central Tax (Rate) in case of goods and Notification No. 13/ 2017- Central Tax (Rate) in case of services, as amended from time to time. Please note that the supplier discharging this liability would not render the liability discharged, since the law imposes the obligation on the recipient. The recipient of supply would nevertheless be liable to discharge the taxes, and the relief available to the supplier would be only by way of an application for refund;
2. Supplies received from unregistered persons under Section 9(4): The supply is an inward supply of goods and / or services effected by a registered person from an unregistered supplier. In this regard, it may be noted that the levy under this clause has been exempted upto 30.06.2018. It is important to note that a supply which has been notified under Section 9(3) will be categorised as a notified supply attracting tax under reverse charge mechanism even if the supply is effected by an unregistered supplier, thereby requiring the recipient to remit taxes thereon, although supplies received from unregistered persons are exempted from tax upto the said date.
(3) The e-commerce operator, in terms of Section 9(5): The Government is empowered to notify categories of services wherein the person responsible for payment of taxes would nether be the supplier nor the recipient of supply, but the e-commerce operator through which the supply is effected. It is important to note that, in case of such supplies, the e-commerce operator is neither the supplier nor does it receive the services. The e-commerce operator is merely the person who person who owns, operates or manages digital or electronic facility or platform for e-commerce purposes. Under the erstwhile service tax law, the e-commerce operator in such an arrangement was referred to as an ‘aggregator’.
1. The Government has notified certain services in this regard vide Notification No. 17/2017-Central Tax (Rate) as amended from time to time, including services by way of transportation of passengers by a radio-taxi, motor cab, maxi cab and motor cycle, etc.
2. Where the e-commerce does not have a physical presence in the taxable territory, any person representing his in the taxable territory would be liable to pay the taxes. If no such representative exists, the e-commerce operator is liable to appoint such a person in order to discharge this obligation.
3. All other provisions of the Act will apply to the e-commerce operator or his representative (as the case may be) in respect of such services, as if he is the supplier liable to pay tax on the services.
4. In this regard it may be noted that liability to pay tax on the supply by the ecommerce operator is not another provision imposing tax on the reverse charge basis. Reference to the definition of reverse charge in section 2(98) makes it clear that reverse charge is limited to tax payable under section 9(3) and 9(4). It is very important to note that the language employed in Section 9(5) makes it clear that the liability to pay tax on the supply is placed on the e-commerce operator, “as if” the e-commerce operator were the “supplier liable to tax”. The marked departure of the language from that used in case of the reverse charge provisions suggests that:
a. The tax that is applicable on the supply is to be paid by the e-commerce operator ‘” as if” such e-commerce operator was the supplier liable to tax. The provisions require the e-commerce operator to step into the shoes of the actual supplier, for the limited purpose of discharging his liability, and the supply by the e-commerce operator to the actual supplier (facilitation services, commission services or by any service inter se) will be taxable separately, in the hands of the e-commerce operator as a supplier of service to the actual supplier.
b. The actual supplier is no longer liable to pay any tax. This means that the suppliers will not be the persons liable to pay tax on such services effected through an e-commerce operator, even if they have obtained registration. (iv) Rate of tax: The rate of tax will be applicable as specified in the Notification No. 1/2017- Central Tax (Rate) for goods and Notification No. 11/2017- Central Tax (Rate) for services issued in this regard, and read with other Rate Notifications which may be ssued to partially exempt any other goods or services from payment of tax. The rates of tax contained in these notifications cannot exceed 20% under each limb (i.e., 20% under CGST Law and 20% under SGST), as amended from time to time. These rates would be notified based on the recommendation of the GST Council. In order to determine the applicable rate of tax, the following approach is to be adopted:
(i) Identify whether the supply is an intra-State supply;
(ii) Identify whether the supply is a plain supply / composite supply / mixed supply and adopt the treatment accordingly;
(iii) Identify HSN of the goods or services and applicable rate of tax as per rate notification;
(iv) Identify whether the HSN applies to more than one description-line. If yes, analyse which of the description is most specific to the supply in question;
(v) Once classification is ascertained, identify whether such goods or services qualify for any exemption (partially or wholly) from payment of tax.
(v) Taxable value: The rate of tax so notified will apply on the value of supply as determined under Section 15. The transaction value would be accepted subject to inclusions / exclusions specified in the said Section, where the price is the sole consideration for the supply and the supplier and recipient are not related persons. In all other cases, the value of supply will be that value which is determined in terms of thevaluation rules (i.e., Chapter IV of the CGST Rules, 2017).