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Monday, July 23, 2018

Ask the express: Post GST, taxable event is supply, taxability will arise even on products manufactured earlier

V K Krishnan is answering questions on GST from the readers of The Indian Express. A selection of questions and answers will be published in these columns.

Written by Express News Service | Updated: August 1, 2017 12:05:03 am
gst, disabled exemption, artificial limb gst tax, gst on disabled aids, gst exemptions, goods and services tax, indian express The question of double taxation would not arise, as the service tax will be charged on the supply made to customers after July 1, 2017. (Representational)

Many retail outlets are selling old inventory of branded products that were probably manufactured before July 1, 2017, and charging service tax over and above the printed MRP. But this MRP already has central and local taxes, VAT etc. built into the value. Does this not amount to taxing the customer twice over?
– Puneet Mathur, New Delhi

Service tax and GST cannot be simultaneously charged on the same product. With effect from July 1, 2017, service tax is subsumed in the CGST. Further, the taxable event after July 1, 2017 is supply, and therefore, taxability under GST would arise even though the product may have been manufactured earlier. Therefore, the question of double taxation would not arise, as the service tax will be charged on the supply made to customers after July 1, 2017.

We are a branch office in India (permitted by RBI) of a foreign company, exclusively providing back office support to our head office. Our branch does not do any business on its own. It does not raise any invoices, and has no income as such. The foreign head office reimburses the expenses of the Indian branch on a monthly basis. The branch is currently filing a zero service tax return. Are we liable to pay GST?
– Janak Mulani

GST would not be chargeable in such cases as this is a case of services rendered to a foreign company that is headquartered outside India. This would be a case of export of services.

I am a broker as well as a dealer of used/refurbished equipment for the chemicals and pharmaceuticals industry. What rate of GST will be applicable to me? A chartered accountant I consulted said 18%, while a dealer is charging 28%.
– Ashish Bachubhai Tanna, Mumbai

The rate of duty chargeable for the dealer and brokers would be 18%. As per the rules, all dealers are supposed to display their prices and registration number. Dealers with a turnover of less than Rs 20 lakh cannot charge any duty as they would be unregistered, and wouldn’t have a GST registration number. There is also a possibility that some dealers with an annual turnover of between Rs 20 lakh and Rs 75 lakh may opt for the composition scheme, where the duty is at a flat rate of 1% on the turnover for dealers. All these facts will emerge only if the GST registration is displayed prominently in the shop premises. Customers must, therefore, be vigilant.

Mobile apps host advertisements without paying any service tax. How will it be ensured that all these paid services come under the ambit of GST?
Bharjil Kalita, New Delhi

Online advertisements were subject to service tax after 2014. The GST would be payable on such advertisements on the basis of the contract signed between the app service provider and the advertiser.

V S Krishnan, Advisor, Tax Policy Group, EY India, and former Member (Service Tax & GST), Central Board of Excise & Customs

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