GST Simplified for Business Associations- Part-2

 

SPECIFIC REQUIREMENTS FOR  BUSINESS ASSOCIATIONS

Let us discuss about the activities which business associations usually undertake and how to handle such activities under GST provisions.

 Activities where there will be no tax under GST.

  • Supplies without consideration will not attract tax under GST. In simple words, there will be no tax against free supplies. Free supplies do not include barter deals.
  • No GST on Government Grants.
  • Meetings/seminars/conferences and events held by business associations with the partnership of other organizations will not attract GST. But Agreements and MOUs entered with such organizations need to be simple and clear without any room for alternative interpretations.

 Activities where tax will be charged under GST.

  • On all supplies of services.
  • Generally, associations supply following services:
  1. Membership Subscription
  2. Meetings/Seminars/Conference and workshops.
  3. Exhibitions
  • Nature of Receipts are:
  1. Delegation Fee.
  2. Services to Exhibitors e.g. renting of stalls, Electricity Expenses etc.
  3. Sponsorships
  4. Sale of Tickets.

GST must be charged based on the Place of supply of Services.

  • There can be three types of transactions
  1. Where both service provider & service receiver are within the same state intra state GST will be applicable.
  2. Where service provider & service receiver is in two different states and or union territories interstate GST will be applicable.
  3. Where supply of services is outside India, no GST will be payable as such supplies will be treated as Export of Services.

Determination of Place of Supply of Services.

  • Place of supply of services is the most important factor for the application of tax.
  • Place of supply is required to be established at the time of preparation of invoices.
  • Wrongly issued invoices will mean loss of revenue as no input credit of taxes paid may be allowed apart from various liabilities to the supplier of services.

 Determination of Place of Service in the case of Membership Subscription.

  • Location of Supplier: Place of registration under GST. Supplier’s location will be place from where invoices are being issued as per GSTIN No…….
  • Place of Supply of service will be:
  1. If the recipient is registered dealer (GSTIN No….) –location of recipient.
  2. If the recipient is not registered dealer- location of the recipient, if known.
  3. If the location of the recipient is not known- location of the supplier.
  4. If the location of the recipient is outside India- location of the recipient.

 Determination of Place of Service in the case of Exhibitions.

  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.

Place of Supply of service will be:

  • If the exhibitor is registered dealer (GSTIN No….) –Place of recipient.
  • If the exhibitor is not registered dealer- Place of the exhibition.
  • Place of exhibition for foreign Exhibitor-Place of the exhibition (GST PAYABLE)

 Exhibition being held outside India:

  • Where exhibition is organized out of India, Place of supply of services shall be location of the recipient.
  • GST shall be payable on a and b as mentioned above and not on c.

Determination of Place of Service for Sale of Tickets:

  • Place of supply is the location of event in all cases
  • GST is payable in case the event is being held in India.

 Determination of Place of Service in case of sponsorship:

  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.
  • Place of Recipient of Service:
    1. Place of recipient is the registered -GSTIN No.
    2. Otherwise Location of the event for which sponsorship is being made.
  • Payment of Tax will be on reverse charge i.e. by service recipient.
  • Important: Invoice must show that GST payment is required to be made under reverse charge method.
  • Determination of Place of Service in  case of  Meetings/Conferences/Seminars/ Workshops.
  • Place of the Supplier: Invoice bearing GSTIN NO…. from where the invoice is generated.
  • Place of Recipient of Service: 
    •  Place of recipient is the registered -GSTIN No.
    • Place of the event in the recipient is not registered.
  • Delegate Fee: 
    • If recipient is registered, GSTIN is needed and the place of supply shall be the Place of recipient.
    • If recipient is not registered, or GSTIN is not available, place of supply shall be the place of event.
    • In case delegate ask for invoice/receipt in the name of company/organization, we need to insist on GSTIN No. to pass on the credit of GST paid.

 Time of Supply:

  • Tax is required to be paid on earliest of the following dates:
    • Date of payment of receipt.
    • Date of preparation of Invoice.
    • Date on which revenue is booked in the account books.
    • Within 30 days of the completion of service.

Rate of Tax:

  • Most of association supplies of services like membership subscription, exhibitions, meetings, seminars and conferences will attract GST @ 18%.
  • Sale of tickets will attract GST @ 28%.

Note: Any changes in the rates will be updated and intimated at all.

 Services where applicability of payment of GST will be on Reverse Charge:

  • Following services shall attract tax on reverse charge:
  • Sponsorship- our invoices must show that tax is payable on reverse charge mechanism.
  • Services received from outside India.
  • Service received from transporters.
  • Services received from lawyers, law firm or arbitrators.
  • Services received from Government or local authority except renting, services received from Department of post or in relation to aircraft or passenger transportation.
  • Payment for copyright.
  • Services received from Unregistered persons.
  • Location of supplier and place of supply is necessary to determine if CGST & SGST or IGST is payable.

 Export of Services:

  • Where the recipient of supply is outside India, and payment is received in foreign exchange, association can get Export benefit.
  • No GST shall be payable on export supplies, and no credit reversal is required.
  • Exporting services have become easy now. Foreign exchange earning shall be rewarded by the Government. We are waiting for DGFT Foreign trade policy to take into account new tax regimes.

Exceptions to claim Input Credit on Exhibitions/Events:

  • Invoices related to property based services w.r.t. exhibitions/events the place of service will be location of the property.
  • The supplier of services must pay SGST.
  • Association will not be able to claim input credit in such cases unless registered locally.
  • Solution:
    • Use local registration in case registered locally.
    • Get registered and claim the input credit.
    • Use an agent for procurement of such property based services.
    • Association need to decide on case to case basis.

No Input Credit of Taxes Paid will be available in the following cases:

  • Input tax credit is available on all items except:
    • Motor vehicles
    • Rent a cab, life insurance or health insurance (except statutorily required).
    • Food and beverages, catering, personalized services like beauty treatment, health club membership, health services etc.
    • Construction services.
    • It is important that our vendors prepare correct invoices, upload it properly and pay duty. If it is not done, we shall not get the credit.

Payment of Tax:

  • The assessee shall have electronic credit register, consisting of SGST, CGST and IGST credit separately.
  • IGST credit can be used to pay CGST/SGST and vice versa; CGST credit cannot be used to pay SGST and vice versa.
  • Present service tax credit shall be migrated to CGST credit.

WORD OF CAUTION

  • The liability of GST will be around 20% of the transaction value. Thus, loss of input tax credit will mean heavy loss to the organization.
  • Thus, every business activity must be examined beforehand to determine
    • GST liability and
    • (b) Elimination of loss of Input tax credit due to bad planning.
  • No invoice need to be generated before considering GST liability.
  • With meticulous compliance of GST law, and proper credit management- GST provisions are a boon to an honest and organized business.
  • No organization can survive without complying with GST laws meticulously.

Note: I have used inputs from presentation by Mr. Rajesh Kumar of Rajesh Kumar & Associates (Advoctes).

B.Com; FCA (ICAI); LL.B.;PGDFM; PGDCA; DBM; Cert. IFRS (ICAEW); NCFM Capital Market (Dealers Module); Microsoft Certified IT Professional: Application for Microsoft Dynamics NAV (ERP) & AXAPTA (ERP).

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