V S Krishnan, Advisor at Tax Policy Group, EY India, and former Member (Service Tax & GST), Central Board of Excise & Customs answered questions on GST from readers of The Indian Express. A selection of questions and answers were published in these columns. This is the concluding set.
I am a small trader having a turnover of Rs 8-10 lakh per annum. But I get about Rs 14 lakh per annum as rental income from a commercial complex. Do I have to register for GST, and collect GST from complex tenants? PRABHAKAR HAVERI
For the purpose of computing the threshold limit for exemption, the value of all supplies, whether of goods or of services, have to be counted together.
I am a manufacturer of plywood boxes who purchases plywood after paying 28% GST. When I sell the finished product, at what rate should I charge GST?
SAVITA SHANKAR, Mumbai
Plywood boxes would also be chargeable at the rate of 28%.
A company has a single contract to provide services to a single client. The company has offices in almost every state. Is the company required to be registered in each of these states, even though it has only a single client?
Even though the contract is the same, the supply of services from different states require separate state-wise registration. However, if there is more than one office in a particular state, only one registration is required for that state.
GST ON RENTALS
Should a residential flat be rented out to a professional such as a CA or a doctor who runs his practice out of this flat, and the total rent of the flat exceeds Rs 20 lakh, will GST be applicable?
FAGUN SUCHDE, Mumbai
If the total rent amount exceeds Rs 20 lakh in a year, the renting out of residential flats would be subject to GST, irrespective of which category of professional it is rented to.
I work for a firm that has operations in multiple states. For a ticket booked for a Mumbai-based employee for the Mumbai-Indore-Mumbai sector, which GSTN is to be provided to get 100% ITC — Maharashtra or MP? The company is registered under GST in both states. –
PRADEEP NAIR, Mumbai
In cases where employees travel, GST has to be paid at the point of boarding.
I make handwork chikankari garments. Until now, chikankari was exempt under VAT. A single chikankari piece passes though several stages: stitching, embroidery, badla work, washing and finishing. There is no clarity on what rate will apply to job works at each of these stages. It will also be very difficult to manage challans and make payments and GST at every stage. Most artisans and contractors will not come above the Rs 20 lakh limit, and we will, therefore, have to make bills under the reverse charge scheme. Your comments, please.
BUSHRA FAHIM, Lucknow
Under GST, the taxable event is supply, and therefore, the old concepts relating to job work under VAT will not apply. For the textile industry, the job work rate has been fixed at 5%. If the annual turnover is below Rs 20 lakh, no duty will have to be paid, and the question of reverse charge would not be relevant.
I provide mechanical engineering inspection and consultancy services. Last year, my turnover was Rs 18 lakh; this year I expect it to be between Rs 16 lakh and Rs 18 lakh. I have obtained a provisional GST number. For Indian customers, I can select the option for registered GST vendor, since they can get input tax credit on GST collected by me. However, I have an Australian customer who gives me business of AUD 1,200-1,600 per month. When I bill my services with 18% IGST (earlier 15% service tax), this customer cannot get set back on GST-ITC. If I become an unregistered GST supplier, then Indian GST registered customers have to follow reverse charge mechanism, and they will prefer a registered supplier. Please advise.
M L KHATRI, Pimpri, Pune
Over a period of time, GST visualises the formalisation of the informal sector. All Indian vendors will move towards registration because they will become part of the value chain going forward.
SALE OF FLATS
As a family, we entered into a re-development agreement with a builder for our ancestral house in 2012. Our share of the flats that have now come up on the plot will be ready to be handed over by the end of this year. We do not, however, intend to live in all of these flats, and would like to sell a few of them immediately after they are handed over by the builder, without going through the process of registering them in our names. How will the GST regime impact us? Will there be any GST payable by us?
DATTA CHOUDHURY FAMILY, Kolkata
GST is not applicable on sale of flats, but will be applicable on the works contract, which would include the reconstruction of your ancestral house, on which GST would be payable at 12%.
GST ON RWAs
In housing complexes, residents come together to form management committees to run the day-to-day affairs of the complex, on a voluntary basis. The committee negotiates for and gets services such as security, housekeeping, gardening, etc. for the complex. The committee’s activities are by residents, of residents and for residents, without any commercial interest. Why then are the activities of housing societies under the ambit of GST?
SANJAY MATAI, Pune
Residents Welfare Associations will be required to pay GST on monthly subscription/contribution charged from their members if such payment is more than Rs 5,000 per member, and the annual turnover of the RWA by way of supplying of services and goods is also more than Rs 20 lakh. If the aggregate turnover of such an RWA is up to Rs 20 lakh in a financial year, then such supplies will be exempt from GST, even if the charges per member are more than Rs 5,000. However, RWAs supplying services and goods aggregating more than Rs 20 lakh per annum will attract 18% GST. The tax burden on RWAs will be lower under the GST since they would now be entitled to ITC in respect of taxes paid by them on capital goods like water pumps, generators, lawn furniture etc., and input repair and maintenance services.