GST on Joint Venture Transactions

Joint Venture & GST- Taxable services provided by the members of the Joint Venture

As per erstwhile service Tax Laws, if coins calls are merely transaction in cash, then they’re excluded from the definition of provider furnished in the Finance Act, 1994.

Whether a coins call is merely a transaction in cash and not taxable, will depend on the terms of the Joint Venture Agreement, & may additionally vary from case to case.

JV – New Rules @ GST

As according to the brand new Circular we were given it clarified that money calls, from time to time, will be within the nature of improving bills made through participants toward taxable services received from joint assignment(JV); and that payments constituted of coins calls pooled by using a JV toward taxable offerings received from a member  draws GST.

New Circular @ GST in addition stated that JV being an unincorporated transient association with a specific objective, a comprehensive examination of the diverse JV agreements (at times, there can be quantity of inter se agreements among contributors of the JV) holds the key to knowledge of the taxation of transactions involving taxable services between the JV and its contributors .

Therefore, officers in the subject formations had been recommended to carefully take a look at the legibility of service tax on the subject of the precise phrases/clauses of every JV settlement.

GST is levied on the intra-State and inter-State supply of goods and services. According to phase 7 of CGST Act, 2017, the expression “supply” includes all sorts of supply of products or services or each consisting of sale, switch, barter, alternate, licence, condominium, hire or disposal made or agreed to be made for an attention via a person in the route or furtherance of business, and includes sports specified in Schedule II to the CGST Act, 2017.

The definition of “enterprise” in phase 2(17) of CGST Act states that “enterprise” includes provision via a club, association, society, or this sort of body (for a subscription or another attention) of the centers or benefits to its contributors. The time period character is defined in phase 2(eighty-four) of the CGST Act, 2017 to consist of an association of folks or a frame of individuals, whether or not included or not, in India or outside India. Further, Schedule II of CGST Act, 2017 enumerates activities which might be to be handled as the supply of goods or as the supply of offerings.

It states in para 7 that delivery of goods with the aid of any unincorporated affiliation or frame of individuals to a member thereof for cash, deferred payment or different valuable attention shall be treated as delivery of goods. A conjoint reading of the above provisions of the regulation implies that supply of services with the aid of an unincorporated association or body of men and women (AOP) to a member thereof for coins, deferred payment or other treasured attention will be handled as the supply of services. The above access in Schedule II has similarities to and attracts strength from the availability in Article 366(29A)(e) of the Constitution according to which a tax at the sale or purchase of goods includes a tax on the supply of goods with the aid of any unincorporated affiliation or frame of persons to a member thereof for cash, deferred price or different valuable consideration.

4. Therefore, the regulation with reference to the levy of GST on carrier provided with the aid of the member of an unincorporated joint undertaking (JV) to the JV or to different participants of the JV, or by using JV to the participants, basically stays similar to it became below service tax regulation. Thus, it’s miles clarified that the explanation given in the context of provider tax is relevant for the cause of levy of GST also.

It is reiterated that the query whether coins calls are taxable or no longer will absolutely depend on the facts and situations of each case. ‘Cash calls’ are raised by using a running member of the joint project on different individuals in percentage to their taking part hobbies within the joint mission(unincorporated) to meet the expenditure at the operations to be completed as in line with the permitted paintings programme and budget. Taxability of cash calls may be further explained by the subsequent


illustrations: Illustration A: There are 4 contributors within the JV including the running member and each one contributes Rs one hundred as part of their percentage. A total quantity of Rs four hundred is accrued. The working member purchases equipment for Rs four hundred for the JV to be used in oil manufacturing.

Illustration B: There are four contributors in the JV together with the running member and every one contributes Rs a hundred as part of their share. An overall amount of Rs 400 is gathered. The running member thereafter uses its own system and performs exploration and production sports on behalf of the JV.

Illustration A will not be the subject count number of ‘ST/GST’ for the reason that the operating member isn’t always wearing out an interest for any other for attention. In Illustration A, the money paid for the purchase of machinery is simply in the nature of capital contribution and is consequently a transaction in money.

On the alternative hand, in Illustration B, the operating member makes use of its own equipment and is, therefore, imparting ‘provider’ inside the scope of delivery of CGST Act, 2017. This is because, in this state of affairs, the running member is improving the price appropriated towards equipment and services from the opposite JV participants of their participating hobby ratio.  Difficulty if any, in the implementation of this round can be introduced to the notice of the Board