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GST

The Institute of Chartered Accountants of India v. DGIT W.P.(C) No.3147/2012

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA V. DGIT

The Institute of Chartered Accountants of India v. DGIT W.P.(C) No.3147/2012

ISSUE:

  • Whether the Institute of Chartered Accountants of India (ICAI) is a charitable institution and is therefore exempt from income tax on its income?

RULE:

  • A professional body can be a charitable institution if its primary object is to promote charitable purposes and its income is used solely for the advancement of its charitable objects.

FACTS:

  • The Institute of Chartered Accountants of India (ICAI) is a statutory body established under the Chartered Accountants Act, 1949.
  • It is responsible for regulating the profession of chartered accountancy in India.
  • The ICAI provides a number of services to its members and students, including education, training, and professional development.
  • The ICAI argued that it is a charitable institution because its primary object is to promote the education and training of chartered accountants.
  • The ICAI also argued that its income is used solely for the advancement of its charitable objects.
  • The Director General of Income Tax (DGIT) argued that the ICAI is not a charitable institution because it is a professional body that provides services to its members for a fee.
  • The DGIT also argued that the ICAI’s income is not used solely for the advancement of its charitable objects.

HELD:

  • The Delhi High Court held in this case held that the Institute of Chartered Accountants of India (ICAI) is a charitable institution and is therefore exempt from income tax on its income.
  • The Court held that the ICAI satisfies both of the following criteria for being a charitable institution:
  • The ICAI’s primary object must be to promote charitable purposes.
  • The ICAI’s income must be used solely for the advancement of its charitable objects.
  • The Court found that the ICAI’s primary object is to promote the education and training of chartered accountants.
  • The Court also found that the ICAI’s income is used solely for the advancement of this charitable object.
  • The Court’s judgment is important because it clarifies that professional bodies can be charitable institutions if their primary object is to promote charitable purposes.
  • The judgment also clarifies that the fact that a professional body charges its members for its services does not necessarily mean that it is not a charitable institution.
Categories
GST

CST v. Sai Publication Fund 2002 (4) SCC 57

CST V. SAI PUBLICATION FUND

CST v. Sai Publication Fund 2002 (4) SCC 57

ISSUE:

  • Whether the respondent is a dealer in accordance with Section 2(11) of The Bombay Sales Tax Act, 1959?
  • Whether the trust, by publishing and selling booklets and other literature bearing Saibaba’s words, can be said to be engaged in a “business” as contained under Section 2(5A) of the Act?

RULE:

  • A trust or religious organization that sells books and other literature at a nominal price to cover costs are not engaged in a business and is therefore not liable to pay sales tax.

FACTS:

  • The respondent, Sai Publication Fund, was a trust created by four devotees of Saibaba of Shirdi with the object of spreading his message.
  • In furtherance of its object, the trust published books, pamphlets, and other literature containing the message of Saibaba under the aegis of “Sai Publications”.
  • The trust sold these publications to devotees at a nominal price to cover costs.
  • The sale proceeds of the publications went to the trust and form part of the trust property, which could be utilized only for the advancement of the objects of the trust.
  • There was a specific provision in the trust deed that in the event of the failure of the trust to carry on its aims and objects, the remaining fund in its hands would be handed over to Sansthanam of Shirdi.

HELD:

  • The Hon’ble Supreme Court of India in this case held that the trust / organization was not a “dealer” within the meaning of Section 2(11) of the Bombay Sales Tax Act, 1959.
  • The Court held that the trust’s activities were not commercial in nature and that the sale of literature was incidental to its main purpose of spreading the message of Saibaba.
  • The Court also noted that the trust was not generating a profit from the sale of literature.
  • The Court further held that the trust’s activities were not covered by the definition of “business” under Section 2(5A) of the Act.
  • The Court held that the trust was not engaged in any trade, commerce, or manufacture, and that its activities were not in the nature of trade, commerce, or manufacture.
  • The Court’s judgment in this case has important implications for trusts and religious organizations that sell literature and other goods at a nominal price to cover costs.
  • The judgment clarifies that these organizations are generally not liable to pay sales tax.
Categories
Supply

Re: M/s Rashmi Hospitality Services Ltd (2019, Karnataka AAR)

RE: M/S RASHMI HOSPITALITY SERVICES LTD (2019, KARNATAKA AAR)

Re: M/s Rashmi Hospitality Services Ltd (2019, Karnataka AAR)

ISSUE:

  • Whether the subsidy received from the state government would form part of consideration under section 2(31) of the Central Goods and Services Tax Act, 2017 (CGST Act)?

RULE:

  • Subsidies are not part of consideration in the ordinary and commercial sense. A subsidy is financial assistance provided by the government to promote the public good. It is not payment made by a customer for goods or services.

FACTS:

  • M/s Rashmi Hospitality Services Ltd (the applicant) is a company that provides catering services.
  • The applicant entered into a contract with the Government of Karnataka to supply food and beverages in the premises of “Indira Canteen” in various districts in the state of Karnataka.
  • The applicant received a subsidy from the state government for the services provided.
  • The applicant sought an advance ruling from the Authority for Advance Ruling (AAR) in Karnataka on whether or not the subsidy received from the state government would form part of consideration under Section 2(31) of the CGST Act.

HELD:

  • The subsidy received from the state government to promote the public good does not form part of consideration under section 2(31) of the Central Goods and Services Tax Act, 2017 (CGST Act).
  • The word "subsidy" in section 2(31) of the CGST Act should be interpreted in its ordinary and commercial sense, which means financial assistance provided by the government to promote the public good.
  • The subsidy received by the applicant was not part of the consideration received for the services provided, as the applicant would have provided the services even if the subsidy was not provided by the government.
Categories
Supply

Re: M/s Hical Technologies Pvt Ltd (Karn AAR, 2019)

RE: M/S HICAL TECHNOLOGIES PVT LTD (KARN AAR, 2019)

Re: M/s Hical Technologies Pvt Ltd (Karn AAR, 2019)

ISSUE:

  • Whether or not the value of free of cost supplies by the principal is included in the value of supply by the job worker under the Goods and Services Tax (GST) regime?

RULE:

  • Free of cost supplies are not part of the consideration received by the job worker for the services provided. Consideration is the price paid by the customer for the goods or services supplied. Since the principal supplies the components free of cost, the value of these components is not part of the consideration received by the job worker.

FACTS:

  • M/s Hical Technologies Pvt Ltd (the applicant) is a job worker that manufactures printed circuit boards (PCBs) for its principal, M/s ABC Ltd.
  • The principal supplies certain components to the applicant, free of cost, to be used in the manufacturing of the PCBs.
  • The applicant then supplies the finished PCBs to the principal.
  • The applicant sought an advance ruling from the Authority for Advance Ruling (AAR) in Karnataka on whether or not the value of the free of cost supplies by the principal is included in the value of supply by the job worker.

HELD:

  • The Authority for Advance Ruling held that the value of free of cost supplies by the principal is not included in the value of supply by the job worker under the Goods and Services Tax (GST) regime.
  • The free of cost supplies are not part of the consideration received by the job worker for the services provided.
  • The free of cost supplies are not essential for the job worker to provide the services.
  • The free of cost supplies are not part of the business arrangement between the job worker and the principal.
  • This ruling is significant for job workers as it clarifies that the value of free of cost supplies by the principal is not included in the value of supply by the job worker and therefore not subject to GST.
Categories
ITC

In Re Vijayneha Polymers Private limited (GST AAR Telangana) 11 December 2021

IN RE VIJAYNEHA POLYMERS PRIVATE LIMITED (GST AAR TELANGANA)

In Re Vijayneha Polymers Private limited (GST AAR Telangana) 11 December 2021

ISSUE:

  • Whether or not the applicant is entitled to avail input tax credit (ITC) on the GST charged by the contractor supplying the service of works contract to the extent of machine Foundation?

RULE:

  • The relevant rule in the case is Section 17(5)(c) of the Central Goods and Services Tax Act, 2017. This section provides that input tax credit (ITC) is available on goods and services used for the construction of a building for the purpose of business or renting to others.

FACTS:

  • The applicant was a manufacturer of plastic products and it constructed a factory building for which it hired works contractors.
  • The contractors provided both material and services. The applicant paid GST on the services provided by the contractors.
  • The applicant filed an application with the Telangana Authority for Advance Ruling (AAR) seeking clarification on whether or not it is entitled to avail input tax credit (ITC) on the GST charged by the contractors to the extent of machine foundation.
  • The applicant argued that machine foundation is an integral part of a factory building and is used for the purpose of business.
  • Therefore, it is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
  • The AAR agreed with the applicant's arguments and held that the applicant is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
  • The AAR relied on Section 17(5)(c) of the Central Goods and Services Tax Act, 2017, which provides that ITC is available on goods and services used for the construction of a building for the purpose of business or renting to others.
  • The AAR also noted that machine foundation is an integral part of a factory building and is used for the purpose of business.

HELD:

  • The Telangana Authority for Advance Ruling (AAR) held in the case of M/s Vijayneha Polymers Private limited (GST AAR Telangana) that the applicant is entitled to avail input tax credit (ITC) on the GST charged by the contractors to the extent of machine foundation.
  • The AAR held that machine foundation is an integral part of a factory building and is used for the purpose of business. Therefore, the applicant is entitled to avail ITC on the GST charged by the contractors to the extent of machine foundation.
  • The AAR relied on the following arguments in support of its ruling:
  • Section 17(5)(c) of the Central Goods and Services Tax Act, 2017, provides that ITC is available on goods and services used for the construction of a building for the purpose of business or renting to others. Machine foundation is an integral part of a factory building and is used for the purpose of business.
  • The definition of “plant and machinery” under the GST Act includes foundation and structural support. Therefore, machine foundation is considered to be a part of plant and machinery.
  • The objective of the GST Act is to simplify and rationalize the tax system. The GST Act allows businesses to claim ITC on goods and services used in the course or furtherance of business. This helps businesses to reduce their overall tax burden and makes them more competitive.
Categories
ITC

Re: Chowgule Industries Ltd (2019, Mah, AAR)

RE: CHOWGULE INDUSTRIES LTD, 2019

Re: Chowgule Industries Ltd (2019, Mah, AAR):

ISSUE:

  • Whether the input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available ?

RULE:

  • The input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available.

FACTS:

  • Chowgule Industries Ltd is a company that sells motor vehicles.
  • The company purchases motor vehicles from registered dealers.
  • The company uses the motor vehicles for demonstration purposes to promote the sale of its products.
  • The company claimed the input tax credit (ITC) on the motor vehicles purchased for demonstration purposes.
  • The tax authorities denied the ITC on the motor vehicles, arguing that the motor vehicles were not used for business purposes.
  • The company appealed to the Authority for Advance Ruling (AAR) in Goa.

HELD:

  • The judgement in the case of Chowgule Industries Ltd, 2019 was given by the Authority for Advance Ruling (AAR) in Goa.
  • The AAR is a quasi-judicial body that is set up under the Goods and Services Tax (GST) Act to provide advance rulings on GST-related matters.
  • The AAR in Goa held that the input tax credit (ITC) on motor vehicles purchased for demonstration purposes is available.
  • The AAR reasoned that the use of motor vehicles for demonstration purposes is an essential part of the marketing and sales process of the company.
  • Therefore, the motor vehicles are used for business purposes and the ITC on these vehicles is available.
  • The AAR’s decision is significant for businesses that purchase motor vehicles for demonstration purposes.
  • It clarifies that the ITC on these vehicles is available, which can lead to a significant reduction in the cost of doing business.
Categories
Supply

Re: M/s CMC Vellore Association (2019, TN AAR)

RE: M/S CMC VELLORE ASSOCIATION, 2019

Re: M/s CMC Vellore Association (2019, TN AAR)

ISSUE:

  • Whether the medicines, drugs, stents, consumables, and implants used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures would be considered as a “Composite Supply” of health care services under GST and consequently can exemption under Notification No.I2/2OI7 read with. Section B(a) of GST be claimed?

RULE:

  • The supply of medicines, drugs, stents, consumables, and implants used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures is a composite supply of health care services and is exempt from GST under Notification No.12/2017-CTR dated 28.06.2017.

FACTS:

  • M/s CMC Vellore Association is a multi-specialty tertiary care hospital that provides health care services.
  • The hospital has two categories of patients: out-patients and in patients.
  • Out-patients are those who visit the hospital for routine check ups or clinical visits.
  • In-patients are those who are admitted to the hospital for diagnosis, medical treatment, or procedures.
  • The hospital provides medicines, drugs, stents, consumables, and implants to in-patients as part of their treatment plan.
  • The hospital applied to the Authority for Advance Ruling (AAR) in Tamil Nadu for a ruling on whether the supply of medicines, drugs, stents, consumables, and implants to in-patients is exempt from GST under Notification No.12/2017-CTR dated 28.06.2017.

HELD:

  • The Authority for Advance Ruling (AAR) in Tamil Nadu held in the case of M/s CMC Vellore Association, 2019 that the supply of medicines, drugs, stents, consumables, and implants used in the course of providing health care services to in-patients admitted to the hospital for diagnosis, or medical treatment or procedures is a composite supply of health care services and is exempt from GST under Notification No.12/2017-CTR dated 28.06.2017.
  • The AAR reasoned that the supply of medicines is incidental to the provision of health care services and is not a separate supply.
  • The medicines are provided to in-patients as part of the overall treatment plan and are essential for their recovery.
  • Therefore, the supply of medicines to in-patients is exempt from GST under Notification No.12/2017-CTR dated 28.06.2017.
  • The AAR’s decision was considered to be significant for hospitals and other healthcare providers, as it clarified that the supply of medicines to in-patients is exempt from GST.
Categories
Supply

Re: Bharatiyar University, Tamil Nadu AAR, Order Date 19.11.2020

BHARATIYAR UNIVERSITY, TAMIL NADU AAR

Bharatiyar University, Tamil Nadu AAR, Order Date 19.11.2020:

ISSUE:

  • Whether the services provided by the University to its constituent colleges (viz) self-financing and management colleges relating to admission to, or conduct of examination by such institution by way of affiliation fee, registration fee such as Application form fees, Inspection fees (each course/section) are exempted from GST under Notification No.12/2017-CTR dated 28.06.2017?

RULE:

  • The services provided by a university to its constituent colleges relating to admission to, or conduct of examination by such institution by way of affiliation fee, registration fee are not exempted from GST.

FACTS:

  • Bharatiyar University is a public university established by the Government of Tamil Nadu.
  • The university provides a variety of services to its constituent colleges, including affiliation, examination, and inspection.
  • The university charges fees for these services.
  • The university applied to the Authority for Advance Ruling (AAR) in Tamil Nadu for a ruling on whether the fees collected for affiliation, examination, and inspection are exempted from GST under Notification No.12/2017-CTR dated 28.06.2017.
  • The AAR held that the fees collected for affiliation, examination, and inspection are not exempted from GST.

HELD:

  • In the case of Bharatiyar University, Tamil Nadu AAR, the Authority for Advance Ruling (AAR) held that the fees collected by the university for affiliation, examination, and inspection are not exempted from GST.
  • The AAR reasoned that the services provided by the university are not related to the education provided by the colleges.
  • The fees collected by the university are for the purpose of affiliation and examination, which are distinct services from the education provided by the colleges.
  • Therefore, the services provided by the university are not covered by the exemption under Notification No.12/2017-CTR dated 28.06.2017.
  • The fees collected for affiliation are for the purpose of granting permission to the colleges to offer courses and admissions.
  • The fees collected for examination are for the purpose of conducting examinations for the students of the colleges.
  • The fees collected for inspection are for the purpose of ensuring that the colleges are complying with the requirements of the university.
  • The AAR held that these fees are not related to the education provided by the colleges.
  • They are distinct services that are provided by the university to its constituent colleges. Therefore, the fees collected for these services are not exempted from GST.
Categories
Supply

Re: Bajaj Finance Ltd (2019, Maharashtra AAAR)

RE: BAJAJ FINANCE LTD.

Re: Bajaj Finance Ltd (2019, Maharashtra AAAR)

ISSUE:

  • Whether the company is liable to pay Goods and Services Tax (GST) on the penal Charges that it recovers from its borrowers for late payment of EMIs?

RULE:

  • The rule in Re: Bajaj Finance Ltd., 2019 is still being determined by the Supreme Court of India. However, there have been conflicting rulings from different courts and tribunals on the issue of whether GST is payable on penal charges recovered from borrowers for late payment of EMIs.

FACTS:

  • Bajaj Finance Ltd. (BFL) is a non-banking financial company (NBFC) that provides a variety of loan products to its customers.
  • BFL charges its borrowers penal charges for late payment of EMIs.
  • The question of whether BFL is liable to pay Goods and Services Tax (GST) on the penal charges it recovers from its borrowers is a complex one.
  • There is no clear consensus on this issue, and there have been conflicting rulings from different courts and tribunals.
  • Some courts and tribunals have held that the penal charges are not subject to GST because they are not a consideration for the supply of any goods or services.
  • Rather, they are a penalty imposed by the company on its borrowers for breach of contract.
  • Other courts and tribunals have held that the penal charges are subject to GST because they are a part of the overall consideration that the borrowers pay to the company for the loan products that they avail.

HELD:

  • The Supreme Court of India has not yet ruled on the issue of whether or not GST is payable on penal charges recovered from borrowers for late payment of EMIs.
  • Therefore, the current state of the law is unclear.
  • The Bombay High Court and the Karnataka High Court have given conflicting rulings on this issue.
  • The Bombay High Court held that the penal charges are not subject to GST, while the Karnataka High Court held that they are subject to GST.
  • The Supreme Court is expected to rule on this issue in the coming months.
  • It is likely that the Supreme Court’s ruling will have important implications for all NBFCs that charge penal charges for late payment of EMIs.
  • In the meantime, it is advisable for NBFCs to consult with a tax expert to determine their GST liability on penal charges recovered from borrowers for late payment of EMIs.
Categories
GST

Skill Lotto Solution Pvt. Ltd. v. Union of India, 3 December, 2020

SKILL LOTTO SOLUTION PVT. LTD. V. UNION OF INDIA

Skill Lotto Solution Pvt. Ltd. v. Union of India, 3 December, 2020

ISSUE:

  • Whether the Writ Petition is maintainable under Article 32 or not
  • Whether the inclusion of lottery as actionable goods in the ambit of goods as per the Goods and Services Tax Act is constitutional or not?
  • Whether it should be taxed for the same reason or not?

RULE:

  • The levy of GST on lottery, betting, and gambling is constitutional. It has been held that these activities are “res extra commercium”, which means that they are outside the sphere of commerce. This means that the government is free to regulate and tax them in any way it sees fit.

FACTS:

  • Skill Lotto Solution Pvt. Ltd. is an authorized agent of the State of Punjab for the sale of lottery tickets.
  • The company challenged the levy of GST on lottery, betting, and gambling under the GST Act, 2017.
  • The company argued that the levy of GST on these activities was unconstitutional and discriminatory.
  • The case went to the Supreme Court, which had to decide whether the levy of GST on lottery, betting, and gambling was constitutional and discriminatory.

HELD:

  • The Supreme Court of India held that levy of GST on lottery, betting, and gambling is constitutional.
  • Lottery, betting, and gambling are “res extra commercium”, which means that they are outside the sphere of commerce which means that the government is free to regulate and tax them in any way it sees fit.
  • The Hon’ble Court held that levy of GST on lottery, betting, and gambling is not discriminatory.
  • These activities are already subject to other forms of taxation, such as income tax and entertainment tax.
  • The GST law also provides for a number of exemptions and concessions, which benefit certain categories of people and businesses which means that the government is free to tax lottery, betting, and gambling in any way it sees fit.