GST Intermediary Dispute Remains Unresolved

GST Intermediary Dispute Remains Unresolved

Recently, a circular -159/51/2021-GST-Clarification on Doubts Regarding the Scope of ‘Intermediary’ was released, but I’m not sure if the doubts were cleared or persisted…

First and foremost, the term “intermediary” is defined as “a person who acts as a middleman between two parties.”

‘A broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services, or both, or securities, between two or more persons, but does not include a person who supplies such goods or services, or both, or securities on his own account,’ says the definition.

The term “intermediary” was borrowed from the Service Tax Regime in the GST. As stated in the circular, the scope of ‘’intermediary services” under the GST REGIME does not differ from the scope of ‘’intermediary services” in the Service Tax REGIME.

The circular merely mentions who is a middleman, however, it is unclear if the services provided by the intermediary are considered exports of services or not –– the debate continues —–

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Several instances are offered in a circular format but are only described once

Who is the intermediate

I.e., who arranges or facilitates the provision of products or services, i.e., a third party between two parties, although it is unclear if intermediary services are exportable or not?

Let’s look at an example:

A- Machine Manufacturer and Supplier in India

B- if you want to buy a machine but don’t live in India.

C- Assists ‘’B” in identifying customers –

C acts as an intermediary, invoicing ‘’B” in order to complete the transaction between ‘’A” and ‘’B”.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year. 

Why can’t C’s services be classified as exports of services because he provides services outside of India?

The supply of any service when it is exported is referred to as service export.

  • Supplier of service located in India –i.e A and C
  • Recipient of service located outside India- i.e B
  • Payment for such service received in convertible foreign exchange.
  • Place of supply of service is outside India – as per Sec 13(8) clause (b) IGST ACT 2017

IN THE CASE OF INTERMEDIARY SERVICE – SUPPLY PLACE – SUPPLIER LOCATION

The location of the supplier in India does not justify the export of services in this case.

The foregoing is still disputed, and litigation is ongoing, according to the circular.

Conclusion: If GST is a destination-based consumption tax, and C is providing a service to B – OUTSIDE INDIA, and payment is made in convertible foreign currency, why can’t it be classified as a service export?

So, unless the government clarifies the above, the litigation will continue.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year.

Businesses that fail to file a summary return or pay monthly GST will be unable to file a GSTR-1 sales return for the following month beginning January 1 of the following year. The GST Council met in Lucknow on September 17 and resolved on a slew of steps to simplify compliance, including requiring firms to use Aadhaar authentication when filing refund claims.

These steps will aid in preventing revenue leakage from the Goods and Services Tax (GST), which was implemented on July 1, 2017.

With effect from January 1, 2022, the Council agreed to alter Rule 59(6) of the Central GST Rules to specify that a registered person will not be allowed to file Form GSTR-1 if he has not filed the previous month’s return in Form GSTR-3B.

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Currently, the legislation prohibits businesses from filing a report for outward supplies, or GSTR-1, if they have not filed a GSTR-3B for the previous two months.

Businesses file GSTR-1 for a given month by the 11th day of the following month, but GSTR-3B, which is used to pay taxes, is filed in a staggered fashion between the 20th and the 24th day of the following month.

The GST Council has also made the Aadhaar authentication of GST registration essential for filing refund claims and applications for registration revocation or cancellation.

New GST registration denial have a serious impact on our economy 

With effect from August 21, 2020, the Central Board of Indirect Taxes and Customs (CBIC) has notified Aadhaar authentication for GST registration.

The announcement also stated that if a business does not give an Aadhaar number, GST registration will only be approved after a physical inspection of the business location.

Businesses will now be required to link their GST registration with biometric Aadhaar in order to claim tax refunds and apply for revocation or cancellation of registration, according to the Council.

In its 45th meeting, the Council, which consists of central and state finance ministers, also determined that GST refunds will be paid into the same bank account as the PAN used to get GST registration.

Swiggy, Zomato to collect 5% GST on deliveries, food not to be hesitating

Swiggy, Zomato to collect 5% GST on deliveries, food not to be hesitating

In its proposal, the GST Council accepted food supply applications such as Zomato NSE -2,92% and Swiggy as restaurants and levied 5% of GST on items it supplied. 

In the main, these applications will now be required to raise 5% GST or goods and services tax, as the Finance Minister, Nirmala Sitharama indicated on Friday night following the meetings of the Council, from customers instead of the restaurant from which they pick up orders.

The end consumers who receive meals from GST registered restaurants would not have an extra tax burden. The fee will however plug unregistered establishments into tax avoidance.

These amendments will apply from 1 January 2022 to allow the operators of e-commerce to make improvements to their software to levy these taxes.

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“Transportation of passengers, by any form of the car (such as 1 January 2022), restaurants services offered through this services is liable to be taxed for e-commerce operators by some exclusions (such as 1 January 2022)” stated a statement of the Department of Finance on the GST Council decision.

“The decision to make food aggregators pay tax on restaurant supplies from 1 January 2012, despite the fact that they had collected food supply taxes to their clients, appears to have been founded on empirical underreporting data from restaurants. It is envisaged that when the restaurant is registered, the impact on the end consumer will be neutral. For unregistered supplies, a GST of 5% may be applicable; “Mahesh Jaising said Deloitte India Partner.

“Typically, the proposal can be put into practice in two ways. Option 1 would charge GST to the food aggregator and not charge GST to the eatery. This is comparable to cab aggregators, and the restaurant would have to have 2 different invoicing systems under this option –

one for supplies at the restaurant and one for supplies via aggregators.

Option 2, GST may continue to be charged by restaurants and the food aggregator is treated as a supplier (and buyer). This would have the same effect as in Option 1, as the tax collection from the food aggregator. The difference was that the food aggregator would have to claim credit “He added. He added.

According to estimations, Rs 2,000 crore in the previous 2 years has been the tax loss to be paid for alleged under-reporting in the food supply aggregates.

New GST registration denial have a serious impact on our economy

The GST presently lists these apps as Tax Collectors at source (TCS).

One of the factors that led to the drafting of such a proposal was that Swiggy/Zomato had no obligatory registration check and that these apps provided unregistered restaurants.