Whether banks are required to capture the details of ATMs in registration certificate as a 'place of business'?
No. Banks are not required to provide the details of ATMs while applying for
registration. For the purposes of registration, ATM on its own does not
constitute a place of business, as defined in the CGST Act, 2017.
As per RBI guidelines, Banks can use third party ATMs, Business Correspondents (BC), Customer Service Points (CSP), or third party Warehouses. Are banks required to include these third party places also in their GST registration?
No. Third party places are neither places of business nor fixed establishments
from where Banks ordinarily carry on their business. These are independent
service providers to the Bank which are subject to GST. Thus, these places are
not required to be declared as place of business by the Bank.
What will be the time of supply in respect of services rendered upto 30th June, 2017 where the invoices are raised or payments are received after 30th June, 2017?
Where the services are rendered upto 30th June, 2017 and invoices in respect
thereof are also raised on or before 30th June, 2017, the point of taxation would
be as per the earlier service tax law and the services will be subject to service
tax.
Where the services are rendered upto 30th June, 2017 and the services are liable
to be taxed under the reverse charge mechanism, the point of tax for such
services as per the Point of Taxation Rules, 2011 shall be the date of payment. If the payment is made on or after 1st July, 2017, the supply of services shall be
liable to GST.
Which tax is to be applied by the service provider on invoice issued on or after 1st July, 2017 for services rendered upto 30th June, 2017?
The time of supply being issuance of invoice under the CGST Act, 2017, the
supplier of services must charge GST in this case. However, where the payment
for such supplies has been made (prior to issuance of invoice) as advance
before the 1st of July, 2017, the tax would be payable under the law prevalent
prior to 1st July, 2017, as the point of taxation had arisen before this date to the
extent of advance.
It is envisaged that many customers may not provide the GSTIN to the Banks in time. In such cases the Banks/insurers would report the supply as B-to-C transactions in the returns filed by it. Later, in case the customer reverts with the GSTIN, how should this amendment be reflected?
A transaction once reported as B2C cannot be amended later to add GSTIN and
convert the transaction as B2B.
No, this condition is not required to be complied with by the recipient. As per
the proviso to sub rule (1) of Rule 37 of the CGST Rules, 2017 the value of
supplies made without consideration as specified in paragraph 2 of Schedule I
of the CGST Act, 2017 shall be deemed to have been paid for the purposes of
the second proviso to sub-section (2) of Section 16 of the CGST Act, 2017.
A customer may avail numerous services from the bank/insurer. Is it mandatory for banks to issue a tax invoice for each transaction or can the bank issue a consolidated invoice for the service rendered during the tax period?
As per the provisions contained in the first proviso to Rule 47 of the CGST
Rules, 2017 an insurer, a banking company or a financial institution, including a
NBFC may issue invoices within 45 days from the date of supply of service.
Further, sub-rule (2) of rule 54 of CGST Rules, 2017 provides that such entities
may issue any other document in lieu of the tax invoice. Accordingly, such
entities may issue a consolidated statement/ invoice/ advice to the customer at
the end of the month, with the details of all the charges levied during such
month and GST payable thereon.
When a banking company is not required to serially number its invoices/document for supply of its services, how will the service recipient get credit for GST on the services provided by the bank?
Under Rule 54(2) of the CGST Rules, 2017 a banking company or a financial
institution including a NBFC or an insurer can issue an invoice or any other
document in lieu thereof whether or not serially numbered and whether or not
containing the address of the recipient but containing other information as
mentioned under Rule 46. There is no restriction on the invoice/document
being a consolidated invoice/document but it must bear an identification
number, which need not necessarily be serially numbered. The recipient of
service will get the credit for GST so long as the bank, etc. uploads the details
of the invoice / document under that number with GSTIN of the recipient in its
statement if FORM GSTR-1.
Is the registered person procuring goods or services from a supplier outside India required to raise a self-invoice, debit note or credit note in respect of the price or value of services and adjustments thereto? When should the details of such transactions be reported in the GST returns?
As per clause (f) of sub-section (3) of Section 31 of the CGST Act, 2017 read with
section 20 of the IGST Act, 2017 a registered person liable to pay tax under subsection (3) or sub-section (4) of Section 9 of the CGST Act, 2017 (or sub-section
(3) or (4) of section 5 of the IGST Act, 2017) shall issue an invoice in respect of
goods or services or both received by him from the supplier who is not
registered on the date of receipt of goods or services or both. Therefore, in case
of goods or services, the registered person procuring goods or services from an
unregistered person located in India or services from a person located outside India is required to raise a self-invoice on the date of receipt of such supplies.
Banks / insurers may raise a self-invoice, debit note or credit note for each such
supply. This invoice, debit note or credit note for each such supply should be
reported in the GST return of the month in which the supply takes place as per
the provisions of section 12(3) or 13(3) of the CGST Act, 2017. As the import of
goods would be under the cover of a bill of entry, there is no need to raise a
self-invoice.
It may, however, be noted that section 9(4) of the CGST Act, 2017 / section 5(4)
of the IGST Act, 2017 has been suspended vide notification No. 38/2017-Central
Tax, as amended from time to time.
For supply of taxable services, can a digitally signed invoice be issued in duplicate, with the original being marked as "Original" and the duplicate copy being marked as "Duplicate"?
In the context of digitally signed documents, the requirement of issuing
original and duplicate invoices does not arise. A digitally signed invoice can be
retained by the supplier and also be made available to the recipient.
Is there a requirement to issue a 'payment voucher' at the time of making payment to the foreign supplier? When should the details of such transactions be reported in the GST returns?
Section 31(3)(g) of the CGST Act, 2017 mandates issuance of a payment voucher
in such cases and the same is therefore required to be issued at the time of
making payment to the foreign supplier of services. It would be reflected in the
GSTR return of the tax period in which the supply takes place as per the
provisions of section 13(3) of the CGST Act, 2017.
Banks deploy various equipment such as Point of Sale machines or ATMs at various locations. At times, the equipment is required to be moved between locations for the purpose of repairs, encryption, etc. Will such movement constitute a supply for the purpose of the GST law?
Procedure prescribed under Section 143 of the CGST Act, 2017 and Rule 55 of
the CGST Rules, 2017 may be followed in such cases. Movement of equipment
for the purpose of repairs, etc. does not constitute a supply. The equipment
may be moved by the Banks to the location of the third party service providers
and after repairs, the equipment may be moved to a central / regional location
for the purpose of programming, encryption, reconfiguration, etc. and
thereafter to that place of business from where the equipment had been sent
earlier. The equipment can be moved between such locations on the basis of a
‘delivery challan’.
Is a 'Bill of Supply' to be issued by a bank for exempt services like interest on loans and advances, inter-se sale or purchase of foreign currency amongst banks?
As per clause (c) of sub-section (3) of section 31 of the CGST Act, 2017 read with
Rule 49 of the CGST Rules, 2017, there is a requirement for issuance of bill of
supply for supply of exempt services by Banks. It may be noted, however, that
there is no need to issue a separate bill of supply in case any invoice or
document has already been issued in accordance with the provisions of any
other law. Further, in view of the provisions contained in sub-rule (5) of rule 54
of the CGST Rules, 2017, banks may issue any other document in lieu of bill of
supply.
Yes. Input Tax Credit (ITC) can be availed by a GST registrant in respect of the
services procured in a consolidated manner from third party vendor which are
directly used in the course or furtherance of business in more than one State,
e.g. statutory audit fees, advertisement and marketing expenses, consultancy
fees etc. The same needs to be appropriately invoiced or distributed through
the ISD mechanism to the “distinct persons” who have actually used such
services.
Where a bank takes a seperate registration for a separate business vertical, say for bullion business, whether the requirement for reversal of 50 percent will also apply to bullion purchased by the bank?
In terms of Section 2(94) read with Section 25(4)&(5) of the CGST Act, 2017, a
person required to obtain more than one registration within a State or more
than one State shall be treated as a distinct person for each such registration.
Section 17(4) of the CGST Act, 2017 is applicable qua each registration and not
for the Bank as a whole, provided each of the business verticals is separately
registered. Therefore, a bank engaged in trading in bullion may not opt for 50
percent reversal in respect of its purchases of bullion, where it is separately
registered as a business vertical.
Yes, the recipient branch / office will be eligible for 100% credit. The second
proviso to section 17(4) of the CGST Act, 2017, expressly provides that the
restriction of 50% shall not apply to the tax paid on supplies made by one
registered person to another registered person having the same Permanent
Account Number.
In terms of the second proviso to section 17(4) of the CGST Act, 2017, the
restriction of reversal of 50% credit would not apply to the tax paid on supplies
made by one registered person to another registered person having the same
PAN. The non-applicability of 50% reversal is only to the extent of inter-branch
services between registered branches having the same PAN in India.
Thus, tax paid on services received from a related person / distinct person
located outside India would be liable to 50% reversal.
Yes. The provisions of section 18(6) of the CGST Act, 2017 for reversal of input tax credit availed on capital goods would be applicable to banks only to the
extent of the input tax credit availed by it. In case the Bank opts to avail input
tax credit to the extent of 50% in terms of the second proviso to Section 17(4) of
the CGST Act, 2017, reversal of credit would be in proportion to the actual
credit availed by the Bank i.e. only with reference to 50% of the input tax credit
availed by it on capital goods.
Yes, As per section 16(4) of the CGST Act,2017, availment of input tax credit can be deferred and availed upto the due date of furnishing of return for the month of september following the end of financial year to which relevant invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Which address should be considered for determining the 'place of supply' in the case of banking/insurance services?
As per Section 12(12) of the IGST Act, 2017, the place of supply of banking and
other financial services, including stock broking services to any person shall be
the location of the recipient of services on the records of the supplier of
services. Address available on the records of the Bank or Financial Institution
or stock broker, which is ordinarily used for communication with the customer,
may be considered as the ‘Place of Supply’.
As per Section 12(13) of the IGST Act, 2017 the place of supply of insurance
services shall be the location of registered person if services are provided to a
registered person and the location of the recipient of services on the records of
the supplier of services if services are provided to an unregistered person.
Address available on records of the insurance company, which is ordinarily
used for communication with the customer, may be considered as the ‘Place of
Supply’.
Who is the 'supplier' of service of purchase or sale of foreign currency?
The ‘supplier’ of service of purchase or sale of foreign currency is the
Authorised Dealer or authorized moneychangers who are getting the
commission. For example, in case of a purchase or sale of foreign currency
between a Bank and a Corporate, the bank is the ‘supplier’ of the service.
Would services provided by banks to RBI be also taxable?
Yes. Services provided by banks to RBI would be taxable as these are not
covered by any of the exemptions or excluded from the purview of GST under
the CGST Act, 2017 or under the IGST Act, 2017.
Whether a bank /insurer is required to charge GST on the taxable services provided to United Nations or a specified international organization or, services provided for official use of a foreign diplomatic mission or consular post in India or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein?
Yes, the bank / insurer is required to charge GST in such cases. However, as per
section 55 of the CGST Act, 2017, subject to such conditions and restrictions as
may be prescribed, such service recipients would be entitled to claim a refund
of taxes paid on the notified supplies of services received by them.
In the case of banks which are not availing the reversal of ITC at 50%, how should inter-branch services be valued where open market value of services of like kind and quality is not available?
In such cases, banks can adopt any reasonable basis consistent with Rule 30
and 31 of the CGST Rules, 2017.
What is the nature of income earned/expended in instruments like repos and reverse repos and is such income taxable under GST?
Section 45U(c) of the RBI Act, 1934 defines ‘repos’ as an instrument for
borrowing funds by selling securities with an agreement to repurchase the
securities on a mutually agreed future date at an agreed price which includes
interest for the funds borrowed. Section 45U (d) of the RBI Act, 1934 defines
‘reverse repos’ as an instrument for lending funds by buying securities with an
agreement to re-sell the securities on a mutually agreed future date at an
agreed price which includes interest for the funds lent.
Repos and reverse repos are financial instruments of short term call money
market that are normally used by banks to borrow from or lend money to RBI.
The margins, called the repo rate or reverse repo rate, in such transactions are
nothing but interest charged for lending or borrowing of money. Thus they
have the characteristics of loans and deposits for interest and are accordingly
exempt from GST [serial no. 27 of the table of notification No. 12/2017-Central
Tax (Rate) dated 28th June, 2017, as amended].
Whether assignment or sale of secured or unsecured debts is liable to GST?
Section 2(52) of the CGST Act, 2017 defines ‘goods’ to mean every kind of
movable property other than money and securities but includes actionable
claim. Schedule III of the CGST Act, 2017 lists activities or transactions which
shall be treated neither as a supply of goods nor a supply of services and
actionable claims other than lottery, betting and gambling are included in the
said Schedule. Thus, only actionable claims in respect of lottery, betting and gambling would be taxable under GST. Further, where sale, transfer or
assignment of debts falls within the purview of actionable claims, the same
would not be subject to GST
Further, any charges collected in the course of transfer or assignment of a debt
would be chargeable to GST, being in the nature of consideration for supply of
services.
What is the location of the supplier in case of banking and other financial services where multiple locations are involved in providing the services to a customer?
Banking services emanate from the bank account opened by a customer with
the branch of a bank or through a contractual relationship between the branch
of a bank and the customer. The branch holding the customer’s account is
referred to as the ‘Account Branch’ or the ‘Home Branch’. An account would
include all types of accounts – viz. interest bearing, non- interest bearing, loan
account, deposit account, etc. In the present day of “anywhere banking”, the
customer avails banking services through mobile/ internet banking or by
visiting any branch of the bank. At times the services are provided through
branches / locations other than the ‘Account Branch’ or the ‘Home Branch’. It
is clarified that the services provided by the other branches are actually services
provided to the ‘Home branch’ and are ultimately billed to the home branch.
Thus, the location of supplier in such cases is the Home Branch/Account
Branch.
What is the manner of dealing with various services provided by banks and other financial institutions?
Banks and financial institutions provide a bouquet of financial services relating
to lending or borrowing of money or investments in money and other related services. For such services invariably a variety of instruments are used in the
financial markets. Transactions in such instruments have to be examined on
the touchstone of definition of ‘supply’ given in Section 7(1) of the CGST Act,
2017 to see whether such transactions would be chargeable to GST. Broadly, the
following legal provisions would have a bearing on determining the taxability
of such transactions.
The definition of ‘goods’ and ‘services’ in Section 2(52) and Section 2(102) of the
CGST Act, 2017 specifically excludes money and securities respectively.
‘Money’ has been defined in Section 2(75) of the CGST Act, 2017 to include
instruments like cheques, drafts, pay orders, promissory notes, letters of credit,
etc.
Therefore, activities that are only transactions in such instruments would be
outside the definition of service. This would include transactions in
Commercial Paper (‘CP’) and Certificate of Deposit (‘CD’) (as they are in the
nature of promissory notes), issuance of drafts or letters of credit, etc.
While these transactions would be outside the ambit of supply, the related
activity, for which a separate consideration is charged, would be chargeable to
GST if other elements of taxability are present. Therefore, GST would be levied
on service charges normally charged for various transactions in money
including charges for making drafts, issuance charges for letter of credit etc.
Definition of ‘securities’ includes ‘derivatives’. Transactions in instruments like
interest rate swaps, and foreign exchange swaps would be excluded from the
definition of ‘supply’ since such instruments are derivatives, being securities,
based on contracts of difference. However, any attendant service charges or
fees would be chargeable to GST.
Further, services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount is exempt from
the levy of GST.
What will be the place of supply in cases where the account is held in a bank in one state but some services are availed in a different branch of the same bank in another state.
As per the provisions of Section 12(12) of the IGST Act, 2017, the place of supply
of services for a bank is the location of the recipient of the services on the
records of the supplier of services. In general, this will be the State in which the
account exists. For example, if the account is held in Delhi, and some services
are obtained by the account holder in Maharashtra, the place of supply of
services will be Delhi (and hence Central tax / State tax or Union territory tax
will be chargeable). In such transactions, the branch in Maharashtra will only
be a facilitator for providing these services. If the branch in Maharashtra levies any charges on the branch in Delhi for providing this facility, that will be a
separate supply between the two branches, it will be chargeable to Integrated
tax.