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GST Registration for Private Limited Companies in Pune — The Complete Guide

Complete Guide  ·  Akhil Amit And Associates, Pune

GST Registration for Private Limited Companies in Pune — The Complete Guide

When to register, what documents you need, how the process works on the GST portal, and what the compliance calendar looks like after you get your GSTIN — everything a Private Limited Company founder in Pune needs to know.

GST Registration Private Limited Company Pune & Pimpri Chinchwad GSTR-1 · GSTR-3B · GSTR-9

Most founders who incorporate a Private Limited Company in Pune focus on getting the Certificate of Incorporation. What they often underestimate is the step that must follow immediately after — GST registration — and the ongoing compliance obligations that begin the moment a GSTIN is issued.

GST registration for a Private Limited Company is not optional once you begin operations. It is mandatory at specific turnover thresholds, mandatory regardless of turnover in certain transaction types, and practically essential for corporate client onboarding even when you are technically below the threshold. A company that raises its first invoice to a corporate client without a GSTIN will almost always be rejected at the vendor onboarding stage.

This guide covers the complete picture — when GST registration is mandatory, the documents required for a Private Limited Company, the step-by-step registration process, and the monthly and annual compliance calendar that follows. If you are still at the stage of deciding whether to incorporate, start with our Private Limited Company Registration Guide for Pune Founders.

When is GST Registration Mandatory for a Private Limited Company?

GST registration is governed by the Central Goods and Services Tax Act, 2017. The registration obligation arises either through crossing a turnover threshold or through the nature of the transactions your company undertakes — irrespective of turnover.

Threshold-Based Mandatory Registration

Type of Supply Threshold (Most States incl. Maharashtra) Special Category States
Services ₹20 lakh per year ₹10 lakh per year
Supply of Goods ₹40 lakh per year ₹20 lakh per year
Mixed Supply (Goods + Services) ₹20 lakh per year ₹10 lakh per year

Special Category States: Manipur, Mizoram, Nagaland, Tripura (lower thresholds apply). Maharashtra is NOT a special category state — the standard thresholds above apply.

Mandatory Registration Regardless of Turnover

These categories require GST registration from the first transaction, regardless of annual turnover:

▶

Inter-State Supply of Goods

If your company sells goods to a buyer in a different state, GST registration is mandatory from the first transaction under Section 24 of the CGST Act, 2017. No turnover threshold applies.

▶

E-Commerce Sellers (Amazon, Flipkart, Meesho, etc.)

Any company selling goods through an e-commerce operator must register for GST regardless of turnover. The e-commerce operator will also deduct TCS (Tax Collected at Source) under Section 52 of the CGST Act.

▶

Reverse Charge Mechanism (RCM) Transactions

Where a company is the recipient of specified services and is liable to pay GST under reverse charge (e.g., legal services from advocates, import of services from overseas), GST registration is mandatory.

▶

TDS Deduction under GST (Section 51)

Companies required to deduct TDS under the GST Act (government entities, PSUs, and notified entities) must be registered regardless of turnover.

▶

Casual Taxable Person

If a company supplies goods or services in a state or territory where it does not have a fixed place of business (e.g., participating in an exhibition), it must register as a Casual Taxable Person before the supply.

The Practical Reality for Pune Companies — Below Threshold Does Not Mean Unregistered

Most corporate clients — IT companies, manufacturers, multinationals operating in Pune and Pimpri Chinchwad — require a GSTIN for vendor onboarding, regardless of your annual turnover. Without a GSTIN, your invoice will be rejected by their accounts payable team. For any Private Limited Company that plans to serve corporate clients, registering for GST voluntarily before the first invoice is the professional standard, not an optional step.

Documents Required for GST Registration of a Private Limited Company

The document requirements for a Private Limited Company are more extensive than for a proprietorship or partnership. Ensure all documents are current and valid before initiating the application on the GST portal.

Company Documents

✓ Certificate of Incorporation (CoI)
✓ PAN Card of the Company
✓ Memorandum of Association (MOA)
✓ Articles of Association (AOA)
✓ Board Resolution authorising the GST signatory

Registered Office Proof

✓ Electricity bill / property tax receipt (not older than 2 months)
✓ Rent agreement (if premises is rented)
✓ NOC from property owner (if rented or owned by another person)
✓ Complete address with PIN code matching CoI

Authorised Signatory (Director)

✓ PAN Card of the authorised signatory
✓ Aadhaar Card of the authorised signatory
✓ Passport-size photograph
✓ DSC (Digital Signature Certificate) of the director

Bank Account Details

✓ Cancelled cheque (showing company name, account number, IFSC)
✓ OR First page of bank passbook
✓ OR Bank statement (most recent, showing name and account details)

Important: Bank Account Must be in the Company’s Name

The bank account submitted as proof during GST registration must be in the name of the Private Limited Company — not in the personal name of a director. If your company has not yet opened a business current account, open one first. Most banks in Pune require the GST registration or Shop Act licence as part of current account KYC — which creates a chicken-and-egg situation. The resolution: apply for GST registration using the CoI and address proof, get your GSTIN, and then use it for bank account opening.

Step-by-Step GST Registration Process on the GST Portal

GST registration is done entirely online at gst.gov.in through Form GST REG-01. With complete documentation, approval is typically received within 7 working days. Applications that require verification of the premises may take up to 30 days.

GST Registration Process — 8 Steps

1

Visit gst.gov.in → Register Now

Go to gst.gov.in → Services → Registration → New Registration. Select Taxpayer as the type. Fill Part A of Form GST REG-01 with the company’s PAN, email address, and mobile number.

2

OTP Verification

Verify the email and mobile number via OTP. A Temporary Reference Number (TRN) is generated. This TRN is used to access Part B of the application and is valid for 15 days.

3

Fill Part B — Business Details

Login using the TRN and fill Part B which includes: business details, principal place of business, additional places of business (if any), HSN/SAC codes for goods and services, bank account details, and details of promoters/partners/directors.

4

Select HSN / SAC Code Correctly

Select the correct Harmonised System of Nomenclature (HSN) code for goods or Service Accounting Code (SAC) for services. Incorrect HSN/SAC selection is one of the most common errors at this stage and can cause application rejection or compliance issues later.

5

Upload All Documents

Upload all documents listed in the previous section — CoI, PAN, MOA, AOA, address proof, director details, bank proof, and Board Resolution. Documents must be in PDF or JPEG format within the specified file size limits.

6

Submit with DSC of Authorised Director

For a Private Limited Company, the application must be submitted using the Digital Signature Certificate (DSC) of an authorised director. EVC (Aadhaar OTP) submission is not available for companies; DSC is mandatory.

7

GST Officer Verification

The application is assigned to a GST officer for verification. If the officer is satisfied, the registration is approved. If clarification is sought, a notice in Form GST REG-03 is issued and the applicant must respond within 7 working days via Form GST REG-04.

8

GSTIN Issued — Form GST REG-06

Upon approval, the GSTIN (GST Identification Number) is issued in Form GST REG-06. The GSTIN is a 15-digit number: the first 2 digits represent the state code (Maharashtra = 27), followed by the 10-digit PAN of the company, followed by entity-specific identifiers.

Special Cases: Export of Services, E-Commerce, and RCM

1. Export of Services — LUT is Essential

If your Private Limited Company provides services to clients outside India — IT services, consulting, software development, or any other service — these qualify as zero-rated supplies under Section 16 of the IGST Act, 2017. You can export services without paying IGST by filing a Letter of Undertaking (LUT) in Form RFD-11 on the GST portal before raising the first export invoice of each financial year.

LUT Filing Rule — Do This Before Your First Export Invoice

LUT must be filed at the start of each financial year (or before the first export invoice, whichever comes first). Without a valid LUT, you must charge IGST on export invoices and then claim a refund — which ties up your working capital. For IT companies and software exporters in Pune, this is the first thing to do after GST registration. Read our detailed guide for IT companies and startups in Pune for more on export compliance.

2. E-Commerce Sellers — TCS and Mandatory Registration

Private Limited Companies selling on Amazon, Flipkart, Myntra, or any other e-commerce platform must register for GST regardless of turnover. The e-commerce operator deducts TCS (Tax Collected at Source) at 1% on the net taxable supplies made through the platform. This TCS is available as input credit in your GST returns. Your GSTIN must be linked with the e-commerce platform’s seller portal.

3. Reverse Charge Mechanism (RCM)

Under RCM, the recipient of certain services is liable to pay GST instead of the supplier. Common RCM transactions for Private Limited Companies include: legal services from advocates, services from a GTA (Goods Transport Agency), import of services from outside India, and specified categories of services from unregistered suppliers. RCM liability must be self-assessed and paid directly by the company, even if the supplier has not charged GST.

Post-Registration GST Compliance Calendar

Once registered, your Private Limited Company has ongoing monthly and annual GST compliance obligations. Missing return due dates attracts a late fee of ₹50 per day per return (₹20 per day for nil returns), subject to a maximum of ₹10,000 per return per month.

Return / Compliance Frequency Due Date What It Contains
GSTR-1 Monthly / Quarterly 11th of following month Details of all outward taxable supplies (sales) made during the period
GSTR-2B Monthly 14th of following month Auto-populated ITC statement from suppliers’ GSTR-1 filings. Must be reconciled with purchase register before filing GSTR-3B.
GSTR-3B Monthly 20th of following month Summary return of outward supplies, ITC claimed, and net tax liability for the period. Tax must be paid before or with this return.
GSTR-9 Annual 31st December Annual return summarising all monthly returns for the financial year. Mandatory for all registered taxpayers with turnover above ₹2 crore.
GSTR-9C Annual 31st December Reconciliation statement between annual return and audited financial statements. Mandatory if annual turnover exceeds ₹5 crore.

E-Invoicing — Is It Mandatory for Your Company?

E-invoicing under the GST framework requires specified businesses to generate invoices through the Invoice Registration Portal (IRP) and obtain an IRN (Invoice Reference Number) before issuing invoices to B2B customers. As of the current threshold, e-invoicing is mandatory for companies with an aggregate turnover exceeding ₹5 crore in any preceding financial year.

If your Private Limited Company crosses this threshold, every B2B invoice must be generated through the IRP. Non-compliance results in the invoice being treated as invalid, and the buyer cannot claim ITC on a non-compliant invoice.

5 Common GST Mistakes Private Limited Companies Make in Pune

1

Registering after the first B2B invoice

The most common mistake. A company onboards a corporate client, issues the first invoice, and the client’s accounts team rejects it for missing GSTIN. GST registration should happen before the first invoice — not after.

2

Not filing LUT before export invoices

IT companies and service exporters in Pune regularly miss this. Without a valid LUT, the first export invoice charges IGST which then has to be claimed as a refund. Filing LUT takes 10 minutes on the GST portal and avoids this entirely.

3

Not reconciling GSTR-2B before claiming ITC

Input Tax Credit (ITC) can only be claimed on purchases that appear in GSTR-2B (auto-populated from suppliers’ GSTR-1 filings). Claiming ITC without GSTR-2B reconciliation leads to mismatches and GST notices under Section 61.

4

Missing GSTR-9 annual return

Many small companies with below ₹2 crore turnover assume GSTR-9 is not applicable. It is mandatory for all registered taxpayers with turnover above ₹2 crore. The late fee is ₹200 per day, subject to a maximum of 0.25% of turnover in the state.

5

Ignoring RCM liability on imports and legal services

Companies that use overseas software subscriptions (AWS, Google Workspace, Zoom, etc.) or receive services from foreign entities are liable to pay GST under RCM on the import of services. This is commonly missed and surfaces during GST audits.

Frequently Asked Questions

Can a newly incorporated Private Limited Company register for GST before starting operations?

Yes. Voluntary GST registration is permitted even before crossing the mandatory threshold or commencing operations. This is advisable for companies expecting corporate clients who require GSTIN at vendor onboarding. Registration also makes you eligible to claim ITC on purchases made after the effective date of registration, including pre-launch expenses.

What is the Composition Scheme and can a Private Limited Company opt for it?

The Composition Scheme under Section 10 of the CGST Act allows eligible taxpayers to pay GST at a flat rate on turnover instead of the standard rate, with simplified compliance. A Private Limited Company with turnover up to ₹1.5 crore can opt for the scheme. However, composition taxpayers cannot issue tax invoices, cannot claim ITC, and cannot make inter-state supplies. For most Private Limited Companies serving corporate B2B clients or making inter-state supplies, the regular scheme is more appropriate.

What is the QRMP scheme and who should use it?

The Quarterly Return Monthly Payment (QRMP) scheme allows eligible taxpayers with annual turnover up to ₹5 crore to file GSTR-1 and GSTR-3B quarterly instead of monthly, while making monthly tax payments through a challan. This reduces the number of return filings from 24 (monthly) to 8 (quarterly) per year. It is well-suited for smaller companies with consistent monthly turnover and minimal ITC mismatch issues.

Can GST registration be done at a registered office that is a residential address?

Yes. A residential address can be used as the registered office and principal place of business for GST registration purposes, provided adequate address proof (electricity bill or property tax receipt not older than 2 months) and an NOC from the property owner are provided. This is common for newly incorporated companies in Pune and PCMC that have not yet taken up a commercial office.

Is GST registration different for a company’s branch office in another state?

Yes. GST is a state-level registration. A Private Limited Company operating from multiple states — for example, with a registered office in Pune (Maharashtra) and a branch in Bengaluru (Karnataka) — must obtain a separate GSTIN for each state. Both registrations are linked to the same company PAN but carry different state codes (Maharashtra = 27, Karnataka = 29).

Akhil Amit And Associates — Chartered Accountants, Pune

Need help with GST registration or compliance for your Private Limited Company?

We handle complete GST registration, monthly GSTR-1 and GSTR-3B filing, GSTR-2B reconciliation, annual GSTR-9, LUT filing for exporters, and RCM compliance for Private Limited Companies across Pune and Pimpri Chinchwad. Three offices — Chinchwad, Wakad, and Ravet-Kiwale.

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Union Budget-2023-24 – Amendments in GST

Here is a summary of amendments proposed by the Union Budget in GST :

1. ITC Denied on goods or services procured for Corporate Social Responsibility (CSR)

  • ⦁ Union budget, 2023-24 has proposed to restrict the ITC on goods and services procured for Corporate Social Responsibility.
  • ⦁ However, so far, companies are entitled to take such ITC unless the same is restricted under any other clause.

2. Amendments on offenses and Compounding provisions

  • ⦁ Following offenses has been decriminalized under section 132 of CGST Act:
    • ⦁ obstructs or prevents any officer in the discharge of his duties under this Act;
    • ⦁ tampers with or destroys any material evidence or documents;
    • ⦁ fails to supply any information which he is required to supply under this Act
  • ⦁ The minimum and maximum amounts for compounding of offences reduced to 25 per cent and 100 per cent of tax involved, respectively.

3. Penalties on e-commerce operators (Section 122 of CGST Act)

  • ⦁ Specific penalty provisions has been incorporated for e-commerce operator if it:
    • ⦁ Allows supply of goods or services by unregistered person through it, other than persons who are specially exempted, or
    • ⦁ Allows inter-State supply of goods or services or both by a person who is not eligible to make such supply; or
    • ⦁ Fails to furnish correct information in TCS return
  • Defaulting e-commerce operator shall be liable to pay penalty of higher of following amounts:
    • ⦁ INR 10,000; or
    • ⦁ Amount of tax involved

4. Maximum time limit specified to file GST Returns

  • ⦁ Till date, a registered person is allowed to file pending GST returns (GSTR-1, GSTR-3B, GSTR-9, GSTR-9C or any other GST returns) with applicable interest and penalties without any limit of period.
  • ⦁ Union budget has proposed to impose time limit of 3 years from due date for filing of following returns:
    • ⦁ GSTR-1: Return of outward supplies
    • ⦁ GSTR-3B: Return of summary of outward and inward supplies and corresponding tax payable
    • ⦁ GSTR-9: Annual return
    • ⦁ GSTR-9C: ITC Reconciliation
    • ⦁ GSTR-8: TCS Return
  • ⦁ Such a period of 3 years can be further extended by the government.

5. Extension of Composition Scheme to taxpayer selling through e-commerce operator

  • ⦁ As per Section 10(2) and (2A) of CGST Act, a registered person engaged in making supply of goods through e-commerce operators is not entitled to opt for composition scheme.
  • ⦁ Union budget has proposed to extend the facility of composition scheme to such dealers as well.

6. Other Amendments:

  1. 1. It has been clarified that Entry No. 7, High seas sales, and Entry No. 8, supply of goods from bonded warehouses before clearance for home consumption, are effective from 01.07. 2017 itself. Further, no refund shall be granted of tax collected in pursuance of such entries so far.
  2. 2. In definition of “online information and database access or retrieval services’ (‘OIDAR’), condition of “essentially automated and involving minimal human intervention” has been removed.
  3. 3. Where both supplier and recipients are located in India, place of supply In case of transportation of goods to outside India was “designation of goods”. Such provision has been omitted and now in such case, place of supply will be:
    1. a. B2B Supplies: Location of Recipient of service
    2. b. B2C Supplies: Place where goods are handed over for transportation
  1. 4. Power granted to prescribe the manner and conditions for computation of interest in case of delayed refunds.
  2. 5. Power is granted to the GST portal to share information provided by taxpayers with other systems notified by the Government. Such details to be shared post obtaining consent of supplier/recipient as applicable. 

The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

Overview of GST Returns in India

Goods and Services Tax (GST) is a tax reform that has transformed the Indian taxation system. It was introduced in India on July 1, 2017, with the aim of bringing a uniform tax structure across the country. GST replaced multiple indirect taxes levied by the state and central government, such as value-added tax (VAT), service tax, excise duty, and others.

Under the GST regime, taxpayers are required to file periodic returns with the GST authorities. GST returns are documents that contain details of all transactions made by a taxpayer during a specific period, including sales, purchases, and taxes paid and collected.

In this blog, we will discuss the different types of GST returns, their due dates, and the process of filing GST returns in India.

Types of GST Returns There are different types of GST returns that taxpayers are required to file, depending on their category and turnover. The following are the main types of GST returns:

  1. 1. GSTR-1: GSTR-1 is a monthly or quarterly return filed by registered taxpayers that contain details of all outward supplies or sales made during the period. The due date for filing GSTR-1 is the 11th day of the following month, for monthly filers, and the 13th day of the month following the end of the quarter, for quarterly filers.
  3. 2. GSTR-2A: GSTR-2A is an auto-generated return that contains details of all purchases made by a taxpayer from a registered supplier, as uploaded by the supplier in their GSTR-1. It is a read-only return, which means that taxpayers cannot make any changes to it.
  5. 3. GSTR-3B: GSTR-3B is a monthly return filed by registered taxpayers that contains details of all outward supplies, inward supplies, and input tax credit claimed during the period. The due date for filing GSTR-3B is the 20th day of the following month.
  7. 4. GSTR-4: GSTR-4 is a quarterly return filed by taxpayers who have opted for the Composition Scheme. It contains details of all outward supplies made during the period, including tax collected. The due date for filing GSTR-4 is the 18th day of the month following the end of the quarter.
  9. 5. GSTR-5: GSTR-5 is a monthly return filed by non-resident taxpayers who are registered under GST. It contains details of all outward supplies made during the period, including tax collected. The due date for filing GSTR-5 is the 20th day of the following month.
  11. 6. GSTR-6: GSTR-6 is a monthly return filed by Input Service Distributors (ISDs) that contains details of all input tax credit received and distributed during the period. The due date for filing GSTR-6 is the 13th day of the following month.
  13. 7. GSTR-7: GSTR-7 is a monthly return filed by taxpayers who are required to deduct tax at source (TDS) under GST. It contains details of all TDS deducted during the period, as well as the details of the deductee. The due date for filing GSTR-7 is the 10th day of the following month.
  15. 8. GSTR-8: GSTR-8 is a monthly return filed by e-commerce operators who are required to collect tax at source (TCS) under GST. It contains details of all supplies made through the e-commerce platform, including tax collected. The due date for filing GSTR-8 is the 10th day of the following month.

Due Dates of Filing GST Return

The due dates for filing GST (Goods and Services Tax) returns depend on the type of return and the turnover of the taxpayer. Here are the due dates for filing GST returns in India for regular taxpayers:

  1. 1. GSTR-1: This return contains details of outward supplies and is filed monthly. The due date for GSTR-1 is the 11th of the following month.
  3. 2. GSTR-3B: This return contains details of both inward and outward supplies and is filed monthly. The due date for GSTR-3B is the 20th of the following month.
  5. 3. GSTR-4: This return is filed by composition scheme taxpayers and contains details of quarterly returns. The due date for GSTR-4 is the 18th of the month following the quarter.
  7. 4. GSTR-5: This return is filed by non-resident taxpayers and contains details of inward supplies. The due date for GSTR-5 is the 20th of the following month.
  9. 5. GSTR-6: This return is filed by Input Service Distributors (ISDs) and contains details of input tax credit received and distributed. The due date for GSTR-6 is the 13th of the following month.
  11. 6. GSTR-7: This return is filed by taxpayers who are required to deduct tax at source (TDS) and contains details of TDS deducted. The due date for GSTR-7 is the 10th of the following month.
  13. 7. GSTR-8: This return is filed by e-commerce operators who are required to collect tax at source (TCS) and contains details of TCS collected. The due date for GSTR-8 is the 10th of the following month.

It is important to note that the due dates may change from time to time, and taxpayers are advised to check the official GST portal for the latest updates. Additionally, late filing of GST returns may attract penalties and interest, and taxpayers should ensure timely compliance.

Late Fees Under GST

Under GST (Goods and Services Tax), late fees are charged for delay in filing of returns. The late fees for GST return filing depend on the type of return and the duration of the delay.

  1. 1. For GSTR-3B, the late fee is Rs. 50 per day for each day of delay (Rs. 20 per day for taxpayers having nil tax liability). The maximum late fee is capped at Rs. 5,000.
  3. 2. For GSTR-1, GSTR-5, and GSTR-5A, the late fee is Rs. 100 per day for each day of delay (Rs. 25 per day for taxpayers having nil tax liability). The maximum late fee is also capped at Rs. 5,000.
  5. 3. For GSTR-6, the late fee is Rs. 50 per day for each day of delay (Rs. 20 per day for taxpayers having nil tax liability). The maximum late fee is capped at Rs. 5,000.

It is important to note that the late fees for GST return filing are subject to change by the GST council. It is also important to file GST returns on time to avoid late fees and penalties.

Interest Under GST

In the context of the Goods and Services Tax (GST) system in India, interest is charged under certain circumstances. Here are some of the key points related to interest under GST:

  1. 1. Interest on late payment of tax: If a registered taxpayer fails to pay the GST liability within the due date, interest will be charged at a prescribed rate. The interest is calculated from the day after the due date till the date of actual payment.
  3. 2. Interest on claim of excess input tax credit: If a registered taxpayer claims excess input tax credit (ITC) in their GST returns, interest will be charged on the amount of excess credit claimed. The interest is calculated from the date of claiming excess ITC till the date of its reversal.
  5. 3. Interest on refund of excess tax paid: If a registered taxpayer has paid excess tax and claims a refund of the same, interest will be paid by the government on the amount of excess tax paid. The interest is calculated from the date of payment of excess tax till the date of its refund.
  7. 4. Interest on delayed refunds: If the government delays the refund of excess tax paid to a registered taxpayer beyond a prescribed time limit, interest will be paid by the government on the amount of delayed refund. The interest is calculated from the date after the expiry of the prescribed time limit till the date of refund.

The rate of interest for each of these scenarios is prescribed by the government and is subject to change from time to time. It is important for taxpayers to comply with the GST regulations and pay their taxes on time to avoid interest charges.

Note – This is an educational content and should not be treated as legal advice, kindly contact our team so that they can help you with exact solution.

What is due date for claiming ITC for FY 2021-22 ?

Vide Finance Act 2022 Government has amended Sec 16(4) of CGST Act 2017 and extended due date for claiming ITC to 30th November of next year.

⦁ However it is to be noted that, yet this amendment is not made effective by government.

⦁ Therefore as of now , kindly claim pending ITC of FY 2021-22 before due date of Sep 2022 return.

#gst #itc #gstreturn #gstitc #inputtaxcredit

Due to recent changes in ITC Table of GSTR 3B, additional details to be checked for the purpose of GSTR 3B –

1.    Details of Ineligible Credit – Ineligible ITC is now required to reversed from the gross ITC availed in GSTR 3B and therefore, the complete details of Ineligible ITC is required to be reported in GST return. Such Ineligible ITC should include the following details:
 
·      ITC not allowed as per section 17(5) of CGST Act
·      ITC not allowed on account of POS rules
·      ITC pertaining to the invoices which are pending for payment for more than 180 days to be counted from the date of invoice
 
2.    Details of ITC which was claimed inadvertently in the previous periods – It may include the following:
 
·      Ineligible ITC wrongly claimed earlier
·      ITC claimed twice and to be reversed now
·      ITC to be reversed due to other reasons

#gstreturn #gstindia #gstregistration #gst #gstlitigation #gstupdates

Penalty cannot be imposed for incorrect address in e-way bill

Penalty cannot be imposed for incorrect address mentioned in the e-way bill, unless an inquiry is made to ascertain whether there was any intent to evade tax in mentioning the wrong address: Madras High Court

Petitioner’s transporter, on being intercepted, was found to carry GST paid goods to the petitioner’s office at Jabalpur whereas e-way bill generated showed destination as Indore. The State Tax Officer invoking its power under sec. 68 r/w sec. 129 of CGST Act, levied tax as well as penalty. Petitioner challenged the order by way of appeal but the same was rejected. Being aggrieved, petitioner moved the High Court by way of Writ Petition.

Petitioner argued that due to inadvertence during generation of the e-way bill, a clerical error took place due to which the registered address of the petitioner at Indore was mentioned in the e-way bill instead of the address at Jabalpur.

Revenue argued that exemption from the rigour of sec. 129 can only be availed on arising of contingencies as enumerated in Clause 5 of Circular No. 64/38/2018-GST, dated 14-09-2018. One of the contingencies which may extend immunity from sec. 129 relates to error in address of the consignee to the extent of locality, provided that the other details of consignee are mentioned correctly. As such, the benefit of clause 5 of the said Circular is not available to the petitioner.

The HC observed that strictly going by the terminology used in the immunity provision under Clause 5 of the circular, the benefit flowing therefrom may not be available to the petitioner, but in penal provision such as sec. 129, the element of intention to evade tax must be present to sustain an order of penalty. To gather the intention of the petitioner an inquiry must be undertaken to ascertain whether the mistake was inadvertent with no element of malice or intention to evade tax. It does not appear that either the Taxing Authority or the appellate authority has undertaken the said exercise of to ascertain the real intent behind the act of petitioner to mention wrong address.

The HC, therefore, quashed the appellate order and directed the appellate authority to reconsider the appeal solely on the question of presence or absence of any malafide intention to evade tax on the part of the petitioner and pass appropriate orders within three months.

𝗜𝗺𝗽𝗼𝗿𝘁𝗮𝗻𝘁 𝘁𝗮𝗸𝗲𝗮𝘄𝗮𝘆𝘀:
1. Element of intention to evade tax must be present in order to sustain order of penalty.

2. An inquiry must be undertaken to ascertain intention of the taxpayer as to whether the mistake was inadvertent or with intent to evade tax.

3. Penalty is not automatic and should not ordinarily be imposed unless the party obligated either acted deliberately in defiance of law or is found to be guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not be imposed merely because it is lawful to do so as held by the Hon’ble Supreme Court in Hindustan Steel Ltd. 25 STC 211.

Maharashtra AAR – 18% GST payable on PV DC cables

The Maharashtra Authority of Advance Ruling (AAR), consisting of Rajiv Magoo and T.R. Ramnani, has ruled that 18% GST is payable on PV DC cables.

The applicant is in the business of manufacturing and supplying solar cables, commonly known as photo-voltaic DC cables (PVDC cables) under various brand names. The cables are made from copper conductors with cross-linked polyolefin (XLPO) insulation and are used between solar modules and inverters in a photovoltaic system.

The applicant supplies cables to its customers for the commissioning and stationing of solar power generating systems (SPGS). The cables connect a solar panel or array with inverters only for the purpose of carrying electricity between solar panels and inverters. The cables are exclusively used by manufacturers of SPGS, Procurement, Construction Company (EPC Company), for setting up a solar power plant as inputs for transmitting direct current from a PV module in SPGS. The cables are specifically designed and tailor-made for solar power projects. Thus, the cables have restricted applications and are used in a photovoltaic system only for the generation and transmission of solar energy.

The applicant has sought an advance ruling on the issue in respect of GST rates on PV DC Cables manufactured and supplied by Leoni Cable Solutions (India) Pvt Ltd to its customers who are into the business of manufacturing solar power generating systems or EPC companies setting up a solar power plant.

The AAR noted that the PV DC cables manufactured and supplied by the applicant to its customers would be classified under Entry number 395 of Schedule III of Notification No. 1/2017-Central Tax (Rate) (as amended) dated June 28, 2017, and liable to GST at 18%.

Applicant’s Name: Leoni Cable Solutions (India) Pvt Ltd

Chartered Accountant in Pimpri Chinchwad

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Mandatory Deduction Of 1/3rd For Value Of Land Held Ultra Vires–Gujarat High Court

Mandatory Deduction Of 1/3rd For Value Of Land Held Ultra Vires–Gujarat High Court.

Case Details:Munjaal Manishbhai Bhatt Vs Union of India
Appeal No.:1350, 6840 of 2021 & 5052 of 2022,
Ruling pronounced by:Gujarat High Court
Date of Order:6th May 2022

The Hon’ble High Court of Gujarat vide its order dated 6th May 2022 in the matter of Munjaal Manishbhai Bhatt Vs Union of India in R/Special Application No.s – 1350, 6840 of 2021 & 5052 of 2022, held that the deeming fiction of mandatory deduction of 1/3rd of the value of the land while ascertaining the taxable value in view of entry 3(if) of Notification No. – 11/2017 – Central Tax (Rate) and similar notification in the State Tax along with paragraph 2 of both the notifications is ultra vires, and the same was struck down.
The writ Applicant preferred the Writ application praying for striking down entry 3(if) of Notification 11/2017 – Central Tax (Rate) as well as the similar entry 3(if) in notification No. 11/2017 – State Tax (Rate) along with paragraph No. 2 of both the notifications being ultra-vires and the Section 7(2) of the GST Act read with Entry 5 of Schedule III to GST Act as well as the Section 9 (1) and Section 15 of the GST Act.  Further, the aforesaid entry of both the notification was prayed to be struck down as being manifestly arbitrary, grossly discriminatory, and violating Article 14 as well as ultra-vires Article 246A of the Constitution of India. It was also urged to declare that paragraph 2 of both notifications would be applicable in case wherein undivided share in land is transferred along with constructed flat without separate consideration being fixed towards the sale of land as well as GST cannot be imposed on sale and purchase of land.
Facts: –
⦁ The writ applicant is a practicing Advocate in this High Court and entered into a contract with Respondent No. 4 i.e., Navratna Organisers and Developers Pvt. Ltd. for the purchase of a plot of land measuring about 1021 square meters located the Unit No. 937, “Kalhar Blues and Greens”, Bopal-Sanand Bypass Road, Ahmedabad as well as for the construction of Bungalow on the said plot by Respondent No. 4.
⦁ That a separate consideration was agreed upon for the sale of land and construction of Bungalow on the land.
⦁ That as per the terms of the agreement, the writ-applicant was under a bonafide belief, as the liability of all taxes including GST was on him, that he would be liable to pay GST on the construction of Bungalow.
⦁ That, however, the respondent No. 4 in view of entry 3(if) of Notification 11/2017 – C.T. (Rate) dated 28.06.2017 and similar entry and notification in State Tax (Rate) read with paragraph 2 of both the notifications, raised an invoice for collection of GST on 1/3rd of the entire consideration received for the sale of land and construction of bungalow, and without excluding the consideration for the sale of land in computing GST. Hence, the present writ application.
Writ-Applicant Submissions: –
⦁ It was submitted on the behalf of the writ-applicant that Section 9 is a charging Section. The scope of supply is defined under Section 7 and by virtue of Section 7(2), the transactions specified in Schedule III to GST Act, which includes ‘sale of land’ at entry 5, are excluded from the purview of Supply. Thus, the imposition of a tax on the sale of land is ultra-vires Section 7 & 9 of the GST Act.
⦁ That referring to the terms/clauses of the booking agreement between the writ-applicant and the developer, it was submitted that it is quite evident from the agreement that the consideration towards the land is separately fixed and agreed, upon and is outside the purview of the GST Act.
⦁ Further, it was submitted that the booking agreement was entered after the land was fully developed, so no further activity is to be done by the developer in respect of the said booking agreement.
⦁ The writ-applicant explained the situation with an illustration submitted that ‘Total Amount’ is defined in the impugned notifications and the liability fixed by deeming fiction presuming only 1/3rd of total consideration towards land is ultra-vires the CGST Act. Moreover, the liability computed in view of the said deeming fiction is more than the liability computed as per the provisions of the statute.
⦁ That relying on the decisions of Indian Express Newspapers (Bombay) Private Limited v. Union C/SCA/1350/2021 CAV JUDGMENT DATED: 06/05/2022 of India & Ors.; (1985) 1 SCC 641, Kerala Financial Corporation v. Commissioner of Income Tax; (1994) 4 SCC 375, Deputy Commercial Tax Officer v. Sha Sukraj Peerajee; AIR 1968 SC 67 11 and on ITW Signode India Ltd. v. Collector of Central Excise; (2004) 3 SCC 48, it was submitted that delegated legislation cannot travel beyond the scope of parent legislation.
⦁ Further, reference was made to the 14th GST Council meeting to show that before the issuance of impugned notifications deliberations were made with regard to the sale of Apartment/Flat, and abatement of 1/3rd value of land was thought of only with respect to the sale of Apartment/Flats. However, the said entry in the notification was inserted with a wide scope as to even include the sale of plots along with the construction of bungalows, is arbitrary and contrary to the object sought to achieve by the deeming fiction.
⦁ It was submitted on the behalf of the writ-applicant that the legislative history of tax on construction is required to be looked into, which can be divided into two parts (i) tax on goods ‘element’ and (ii) tax on ‘service’ element, of the construction contracts. The legislative history with respect to the goods element involved in the construction contracts is as under: –1. That Entry 54 of List II to the Constitution of India empowered the State legislatures to impose a tax on the sale or purchase of goods. The legislative competence of the State legislatures to impose a tax on goods used in the course of execution of indivisible works contracts came up for scrutiny before the Supreme Court of India in the case of State of Madras v/s Gannon Dunkerley and Co. (Madras) Ltd. (1958) 9 STC 353 (1st Gannon Dunkerley’s case) wherein it was held that ‘The property in goods does not pass as chattel pursuant to the agreement of sale and therefore it is not sale as per the Sale of Goods Act, 1930’.
2. The 46th Constitutional amendment was made effective to nullify the said judgment of Hon’ble Supreme Court in Gannon Dunkerley, and the transfer of property in goods involved in the course of execution of works contract was deemed to be sales.
3. The next issue which arose was on what amount such tax would be imposed, the issue was settled and explained by the Supreme Court in Gannon Dunkerley and Co. v/s State of Rajasthan (1993) 1 SCC 364 (Second Gannon Dunkerley’s case), wherein it was held that that tax ‘could be imposed only on the value of goods incorporated in the works contract and that the labor expenses and profit thereon were to be excluded’.
4. In view of the above decision various states formulated valuation procedures for Works Contract. However, so far as the State of Gujarat is concerned, Section 2(30) (c) of the Gujarat Value Added Tax Act, 2003 provided for ‘taxable turnover’ to be determined after deduction of charges towards labor, service, and like charges and Rule 18AA of Gujarat Value Added Tax Rules, 2006 provided the manner of determining the taxable value in Works Contract. It was provided that actual value is to be taken if the value is ascertainable.
5. That various states provided for a lump-sum tax on the total value of Works Contract at the option of the dealer, its validity was upheld by the Supreme Court in State of Kerala v/s Builders Association of India (1997) 2 SCC 183 as well as Mycon Construction Ltd. v/s State of Karnataka and Another (2003) 9 SCC 583.
6. Thereafter as the question arose, it was held in Raheja Development Corporation vs the State of Karnataka (2005) 5 SCC 162 – that even a tripartite agreement involving the construction of flats for the prospective buyer would constitute a sale in the course of the execution of works contract.
7. The above decision of Raheja was doubted and referred to a larger bench, which later on was affirmed in Larsen and Toubro Ltd. v/s State of Karnataka (2014) 1 SCC 708, however it was clarified in para 110 that only after the developer enters into a contract with the flat purchaser the activity of the construction provided by the developer would be considered as works contract and the goods transferred in the said activity of construction would be chargeable to tax. Further, in para 112, it was observed that at the time or after the completion of construction, if there is no agreement between the developer and the flat purchaser for construction, the goods used could not be deemed to be sold by the builder.
8. While conceiving the impugned Notification regarding deduction towards land, the aforesaid judgment in 1st Larsen and Toubro Ltd was discussed however not followed and ad hoc deduction of 1/3rd towards land was proposed.
⦁ That relying on the observations in Larsen and Toubro Ltd. (Supra) the exclusion of land and building has a historical perspective. Hence, the sale of land and fully constructed buildings is excluded from the purview of the GST Act as well. Further, if the agreement is entered after the land has been fully developed, the supply of goods and services would be to the extent of construction activity only, however, prior to execution of the contract, such activity would not be covered under Section 7 of GST Act and there is no charge of tax on the activity.
⦁ That in view of the above, the sale of land, whether developed or not, would not be exigible to GST and the tax liability is to be restricted to the construction activity only.
⦁ That referring to the observations made in Gannon Dunkerley’s case (2nd case), Builders Association of India & Mycon Construction Ltd., it was submitted that the impugned notification prescribed the fixed percentage of i.e., 1/3rd without taking into consideration the variants of contract and size of the land, thus contrary to the judgment of Supreme Court in 2nd Gannon Dunkerley’s case.
⦁ Thereafter referring to legislative history pertaining to service element, it was submitted: –1. Service tax was introduced for the first time by the Finance Act, 1994 by way of a positive list of taxable services.
2. Section 65(105) of the Finance Act, 1994 contained a list of taxable services which were amended from time to time. Clause (zzq) and (zzh) of the said provision included construction service within the ambit of service tax.
3. Clause (zzzza) in Section 65(105) in 2007 for ‘services in relation to the execution of Works contract’.
4. Thereafter as the question arose, the Hon’ble Supreme Court in the matter of Commissioner, Central Excise and Customs, Kerala v/s Larsen and Toubro Ltd. (2016) 1 SCC 170, held that Works Contract Service was made taxable from 2007 and prior to that only pure service contract can be taxed under construction service.
5. That in the Finance Act, 2010 clause (zzzh) was introduced whereby ‘construction of a complex intended for sale was deemed to be service by builder to the buyer unless entire consideration was received after granting of completion certificate by the competent authority.
6. The imposition of tax on builder services was challenged before the Delhi High Court in Suresh Kumar Bansal v/s Union of India (2016) 92 VST 330 (Del.) wherein it was held by the Hon’ble High Court that ‘there was no mechanism for computing service tax in case of a transaction involving the transfer of land and no service tax can be demanded in absence of computation mechanism. The contention of the revenue was rejected on the ground that mere abatement by way of notification could not be a substitute for the statutory valuation mechanism which was absent.
7. Later to overcome the judgment of Suresh Kumar Bansal, Rule 2A of Service Tax (Determination of Value) Rules were amended retrospectively to provide for deduction of amount charged for land and undivided share of land and for lump-sum deduction where value cannot be determined.
⦁ It was further contended that in the judgment of Suresh Kumar Bansal, it was held that the abatement by way of notification is not sufficient and there has to be a specific provision excluding the value of land from the taxable value of the works contract. Thus, the impugned notifications under GST providing for a fixed percentage of the deduction for land by way of abatement are against the judgment of Suresh Kumar Bansal of the Delhi High Court.
⦁ The statement of objects and reasons for the enacting of the GST Act is to merge and consolidate earlier laws relating to indirect taxes. Moreover, when GST Council considered the judgment of the Supreme Court in Larsen and Toubro, the legislative history of earlier laws has to refer to deciding the validity of the impugned notification, from which it is quite evident that the tax can be imposed only on construction activity provided by the developer. Further, in view of entry 5 of schedule III, and when it has been clearly held that where actual value can be ascertained then the fictional value cannot be taken into consideration, the impugned notification is against the provisions of the Statue and thus ultra-vires.
⦁ It was contended that the total value of land is deemed to be 1/3rd of total consideration irrespective of the nature and size of the land on which the construction is to be carried on.
⦁ The deeming fiction is ex-facie discriminatory, completely arbitrary, and in violation of Article 14 as the person like the writ-applicant has to pay a higher tax for the construction of bungalow on only 10-20% of the land, and a similar deduction is given to a flat buyer in multi-storied building, where the major portion of agreement value is towards construction. Further, in the present case, the seller and the developer are different persons.
⦁ That strong reliance was placed on Wipro Ltd. v/s Assistant Collector of Customs and Others (2015) 14 SCC 161, wherein ‘the Rule provided for adding 1% of the FOB value of goods towards loading, unloading and handling charges even though the actual value of such charges was ascertainable, was held to be ultra-vires the provisions of Customs Act’.
⦁ That reliance was also placed on the Commissioner of Central Excise, Pondicherry v/s Acer India Ltd. (2004) 8 SCC 173, wherein it was held by the Hon’ble Court that the tax cannot be indirectly levied on software by including its value in the value of computers.
⦁ Further, taking reference to the law stated in Section 15 of GST Act, Rule 27, Rule 28, Rule 29, and rule 30,31, it was submitted that a detailed valuation mechanism is available in the statute primarily based on actual consideration and such provisions cannot be ignored by simply providing an arbitrary abatement of land by way of a notification.
⦁ That referring to the contention raised by the respondents in an affidavit in reply filed, it was submitted that Section 15(5) provides for fixing of value of goods & services, and the value of the sale of land cannot be prescribed under Section 15(5). As per Section 2(87) ‘prescribed’ means prescribed by rules, thus prescription of value for the purpose of Section 15(5) can be done only by rules, not notification.
⦁ That strongly relying on the case of Wipro Ltd. (supra), it was submitted that an arbitrary notification, as in the present case, could not be saved simply on the ground that the government has the power to issue such notifications.
⦁ That the respondent’s reliance on entry 5(b) of Schedule II is totally misconceived as the sole purpose of Schedule II is to provide whether a supply will be a supply of goods or supply of services. It does not provide for any deeming fiction so as to enlarge the scope of supply.
⦁ Lastly reliance was placed on the decision of State of Rajasthan v/s Rajasthan Chemists Association (2006) 6 SCC 773, wherein it was held observed’ that tax cannot be imposed on a value unconnected with the subject of tax’, and submitted that the impugned notification is ultra-vires as it leads to a consequence whereby tax is imposed on land which is never sought to be taxed by the statute.
Submissions with respect to Special Civil Application No. 6840 of 2021 & 5052 of 2022:
⦁ It was submitted on the behalf of the writ-applicants that the writ-applicants are developers and sought an advance ruling about the taxability under the GST Act on the supply of developed land. The Advance ruling authority in its order held that the deduction for the sale of land is available only to the extent of 1/3rd of the total consideration in view of the impugned notifications. Further, the said advance ruling order was affirmed by the Appellate Authority for advance ruling. Thus, the present writ application challenges the validity of the impugned notification and the order of the Appellate Authority for the Advance ruling.
⦁ That relying on Supreme Court decision in Mangalore Ganesh Beedi Works v/s Commissioner of Income Tax (2015) 378 ITR 640 (SC), Mohit Marketing v/s CIT Tax Appeal No. 157 of 2000 & Commissioner of Income Tax v/s Parle International Ltd. Tax Appeal No. 1905 of 2009, it was submitted that once a particular consideration was agreed for the sale of land between two parties, it was not open to the taxing authorities to re-write the terms of the agreement.
⦁ Further reliance was placed on the Supreme Court decision on Commissioner of Income Tax, Hyderabad v/s Motor and General Stores (P) Ltd. AIR 1968 SC 200 ‘wherein it was observed that if a document in question was intended to be acted upon and there was no suggestion of malafide or bad faith or fraud, then the taxing statute was required to be applied in accordance with the legal rights of the parties to the transaction.’
⦁ It was submitted that developed land would be included within the meaning of the term ‘land’ and if the impugned notification is not to be struck down as ultra-vires, the same is required to be read down as inapplicable where the value of land is ascertainable separately.
⦁ At last, it was argued that the Appellate orders of Advance Ruling, which held that 1/3rd of the deduction would be available in view of the impugned notification, were also liable to be set aside and quashed. 
Submissions on the behalf of Respondents: –
⦁ It was submitted on the behalf of the respondents that Article 246A (1) of the Constitution empowers the Parliament and the Legislature of every state to make laws in respect of the Goods and Service Tax to be imposed by State or Central Government. Section 9 provides for the levy of GST on the supply of goods and services. As per Article 279A (4), the GST Council shall make recommendations to the Union and the States on the issue related to GST. Section 9(1) provides that GST will be levied on all intra-State supplies of goods and services, on the value determined under Section 15.  Thus, the levy of CGST shall be on the value as determined under Section 15.  Section 15(5) of the CGST Act, 2017 provides that notwithstanding anything contained in sub-section (1) or sub-section (4), the value of such supplies as may be notified by the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.
⦁ That the GST Council in the 34th meeting also agreed to apply tax at a new rate to be applicable to new projects or ongoing projects. Thereafter, notification 3/2019 Central Tax (Rate) dated 29.03.2019 was issued on the recommendation of the GST Council, which provided for deemed valuation of land as provided in paragraph 2 of the impugned notification. Thus, the contention that the determination of the value of the supply by subordinate legislation, when the value of land and cost of construction are separately ascertainable, is ultra-vires Section 15 of the CGST Act does not hold ground. Further, the contention that deduction of deemed value of land is beyond the scope of a delegation under Section 9 (1) of the CGST Act has no legal basis at all.
⦁ That reliance was placed on the Supreme Court decision in Union of India v. Nitdip Textile Processors Pvt. Ltd. (2012) 1 SCC 226, wherein ‘it is observed that the legislature enjoys very wide latitude in classification for taxation. Reference was also made to Anant Mills Co. Ltd. vs. State of Gujarat & Ors., (1975) 2 SCC 175.
⦁ That the Government is empowered to decide the rate in the public interest on the basis of recommendations from the GST Council and the GST Council is well within its power to recommend such reduction.
⦁ Thereafter relying on the judgments of the Union of India (UOI) and Ors. Vs. VKC Footsteps India Pvt. Ltd. AIR 2021 SC 4407, 2021 [52] G.S.T.L. 513, Spences Hotel Pvt. Ltd. and Ors. Vs. State of West Bengal and Ors. (1991) 2 SCC 154, Khyerbari Tea Co. Ltd. and Ors. Vs. The State of Assam AIR 1964 SC 925, it was submitted that the impugned Notification is not ultra-vires Section 7(2), Section 9 (1), Section 15 of CGST Act and Article 14 and Article 246A.
⦁ That taking reference to Para 5(b) of Schedule – II, it was submitted that in case of a transaction that involves the construction of a building, civil structure, or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, wherein the completion certificate with respect to such constructions have not been received, such transactions shall be treated as services under Paragraph 5(b) of Schedule II and therefore, shall be taxed as per the aforestated Notifications.
⦁ It was contended that the transaction in the present case comprises land, construction of Bungalow, and the development of various amenities, facilities, and common areas. None of these components of the transaction can be separated and are integral parts of the transaction.
⦁ Taking reference to the Supreme Court decision in Narne Construction P. Ltd. and Ors. Vs. Union of India (UOI) and Ors. (2012) 5 SCC 359, it was submitted that the transaction in the present case is for the sale of a developed piece of land and not of plain land and therefore; it is subject to many conditions, limitations, prohibitions, and restrictions unlike a transaction of sale of land.
⦁ The present transaction is one of the development and construction of a building, civil structure or part thereof, intended to be sold to the writ applicant, and therefore, the present transaction falls squarely under Paragraph 5(b) of Schedule II not under Schedule III.
⦁ Further explaining the formula in paragraph 2 of the notifications for ascertaining the value of land, submitted that deeming fiction in the notifications was recommended by the GST Council to consider the land portion in supply, apart from construction and other development services. Further, the consideration as provided in the booking agreement, entered between the parties, with respect to land and construction activity might not reflect the actual value of the land involved in the transaction.
⦁ That as per the booking agreement with the developer, it’s not only land but a developed land with all facilities, amenities, and common area as part of the plotting scheme. Hence, land includes these developments also and the value of such development cannot be ascertained as the same is to be enjoyed by all the occupants of the scheme.
⦁ That is the contention of the writ-applicants is accepted it may lead to absurd results as the buyer and developer may mutually decide that 99% of the total consideration is towards value of land and the rest is for construction. This may lead to huge losses to the public exchequer.
⦁ It was argued that inequities cannot render a provision susceptible to challenge to its legality/constitutionality. Further, relying on the decision of the Supreme Court in Union of India & Ors. vs. VKC Footsteps India Pvt. Ltd. AIR 2021 SC 4407, it was submitted that the Hon’ble Supreme Court after referring to its earlier decisions, held ‘that the formula is to evolved/read down by the Courts only if it leads to absurd results or is unworkable’.
⦁ That in respect of advance ruling orders, it was argued that the writ application under Article 226 of the Constitution of India in not maintainable against such orders.
Held: –
⦁ The Hon’ble High Court after considering the submissions from both sides, facts of the case, and law applicable, took note of the law stated in Section 9, Section 7, Schedule – II & Schedule – III of the CGST Act.
⦁ That after perusal of the above sections and schedules, it was observed that supply includes all forms of supply made or agreed to be made for a consideration by a person in the course or furtherance of business. Further, the activities falling under Schedule II would be considered as supply of service or goods and the activities falling under Schedule III would not be considered as supply of goods or services.
⦁ Further taking note of entry 5(b) of Schedule II which states ‘construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of the completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier and entry 6 as well as entry 5 of Schedule III which states ‘Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building’, it was observed that it is not in dispute that the sale of land and building is not subject to GST, however, the exclusion is subject to entry 5(b) of Schedule II, which provides that the transaction pertaining to the sale of land is taxable as construction services unless the consideration is received after the grant of completion certificate or occupation whichever is earlier.
⦁ The Hon’ble High Court after the perusal of entry 3(if) and paragraph 2 of the impugned notifications observed that in the case of construction services involving the transfer of land, the deduction of such transfer of land or undivided share will be given to the extent of 1/3rd of the total consideration charged. 
What sought to be taxed by the Parliament and State Legislatures?
⦁ Taking reference to legislative history relied upon by the writ-applicants, it was observed that the controversy with respect to taxability of construction contracts was first raised before the Hon’ble Supreme Court in the 1st Gannon Dunkerley’s, wherein ‘it was held that wherein it was held that the State legislatures do not have the legislative competence to impose sales tax on indivisible works contracts since they did not involve the sale of goods as understood under the Sales of Goods Act, 1930’.
⦁ Further, relying on the observation of the Supreme Court in the said judgment it was found that in a building construction contract the contract is forgetting the building constructed not for the sale of goods used in the course of construction and the property in goods would pass to the buyer through the theory of accretion.
⦁ It was found based on the observations of the Supreme Court that when the goods are embedded into the earth pursuant to the construction contract, such contract could not be said to be for the sale of goods.
⦁ From the 46th Constitutional amendment, the state legislature was granted the powers to impose a tax on the property in goods involved in the Works Contract. Then, the question arose regarding the determination of the value of goods in the indivisible works contract, which was answered in the 2nd Gannon Dunkerley’s case wherein it was held that the value of goods can be determined by excluding the value of labor and profit element. However, these contracts were only purely construction contract,s not development agreements that involve the sale of land as well.
⦁ The decision of the Supreme Court in Raheja Development Corporation wherein it was held that the tripartite agreements would also be considered as works contract and would involve deemed sale of goods, was doubted and referred to a larger bench.
⦁ The Larger Bench in the 1st Larsen and Toubro also held that even the tripartite agreement between the buyer, developer, and owner for construction of flats at the behest of the buyer, thus it involved the taxable deemed sale of goods. It was further held that the construction which was undertaken after agreement with the purchaser was held to involve a works contract.
⦁ That when the impugned notifications were discussed and finalised by the GST Council, the decision of the Supreme Court in 1st Larsen and Toubro Ltd. (Supar) was specifically referred in the 14th GST Council meeting. Thus, the base of the levy is not changed under CGST Act. The construction which is carried on by a developer as per the terms of the contract with the buyer, which was earlier taxable under VAT/Service tax is now sought to be taxed under the CGST Act, and therefore the deduction is given for the sale of land.
⦁ That as Section 7 of CGST Act, includes the supply of goods and services made or agreed to be made for a consideration, implies that supply would be initiated only after the agreement between the supplier and the receiver is entered. The similar ratio has been laid down by Supreme Court in 1st Larsen and Toubro Ltd. that there cannot be a sale in respect of construction undertaken prior to agreement with the buyer.
⦁ Thus, from the legislative history, it is quite evident that there is no intention to impose tax on the supply of land in any form and for this reason, only it has been provided in Schedule III of the CGST Act.
Relevance of Developed vis-à-vis Undeveloped land: –
⦁ The Hon’ble Court rejecting the contention of the revenue found that if Schedule III provides for ‘sale of land’ then it can be land in any form, so even in the case of the tripartite agreement for the sale of land and building, the imposition of the tax would be on construction activity only.
⦁ That if the agreement is entered after the land is already developed by the developer, then such development activity was not undertaken for the prospective buyer, therefore GST cannot be imposed on the developed land and only construction activity can be taxed as supply.
⦁ The fact that the land is not a plain parcel of land but a developed land cannot be a ground for imposing a tax on the sale of such land. Thus “sale of land” under Schedule III to the GST Acts covers the sale of developed land even as per the impugned notification. 
The measure of Tax: –
⦁ Taking note of Section 15, it was observed that ordinarily, the value of the supply of goods and services should be the actual price paid or payable, however, subsections (2) & (3) provide for certain inclusions and exclusions from the value of supply.
⦁ In the case of Writ-applicant Special Civil Application 1350 of 2021, as per the booking agreement consideration for the sale of land and construction of bungalow, has been specifically mentioned. Thus, the fixed deduction as per the impugned notification would not be applicable in the present case when the statutory provisions provide for valuation in accordance with the actual price paid or payable.  Deeming Fiction can be applied only where the actual price is not ascertainable.
⦁ The above proposition is squarely covered by the decision of the Supreme Court in the 2nd Gannon Dunkerley’s case wherein it was held that ‘if the actual value of labor was available then the same was to be deducted and if in case actual value was not ascertainable deeming fiction could be applied’.
⦁ Further, in the 1st Larsen and Toubro case (supra), one of the points to be considered before the Supreme Court was whether a rule in the Maharashtra Value Added Tax Rules capping the value of the land at 70% of the agreement value was permissible or not. It was held by the hon’ble Supreme Court that Taxing the sale of goods element in a works contract is permissible even after incorporation of goods provided tax is directed to the value of goods at the time of incorporation and does not purport to tax the transfer of immovable property. The mode of valuation of goods provided in Rule 58(1-A) has to be read in the manner that meets this criterion and we read down Rule 58(1-A) accordingly.
⦁ Further reference was also made to the judgment of the Supreme Court in the matter of Wipro Ltd. (Supra)
⦁ The Hon’ble Court with the all above findings held that deeming fiction of 1/3rd of deduction of total consideration for the value of land where the actual value of land is ascertainable is clearly contrary to the provisions and scheme of CGST and therefore ultra-vires the statutory provisions.
The arbitrariness of the Deeming Fiction by the Impugned Notification: –
⦁ Apart from being contrary to provisions the impugned notifications are also arbitrary as the deeming fiction is uniformly applied irrespective of the size of the plot of land and construction on it.
⦁ There is no distinction between a flat and bungalow as far as deduction provided in the deeming fiction is concerned. The deduction as per the deeming fiction has been applied without any regard to the size of land and the area constructed on such land.
⦁ In the 14th GST Council meeting, the discussion was in respect of flats while the ultimate notification was issued and made applicable even to other transactions such as the sale of land with the construction of bungalows.
⦁ Such deeming fiction which leads to arbitrary and discriminatory consequences could be clearly said to be violative of Article 14 of the Constitution of India which guarantees equality to all and also frowns upon arbitrariness in law. 
Arbitrary Deeming Fiction has led to measure of Tax having no nexus with Charge: –
⦁ The Hon’ble Court referring to the decision of Hon’ble Supreme Court in Govind Saran Ganga Saran v. CST [1985 Supp SCC 205 : 1985 SCC (Tax) 447 : AIR 1985 SC 1041] held that the arbitrary deeming fiction by way of delegated legislation has led to a situation whereby the measure of tax imposed has no nexus with the charge of tax on supply of construction service.
Section 15 (5) does not further the case of the Respondents: –
⦁ It was noticed by the Hon’ble Court that it was the case of the respondents that the impugned notification is issued in exercise of powers under Section 15(5) of the CGST Act. In this regard it is to be noted that in Section 2(87) – prescribed” means prescribed by rules made under this Act on the recommendations of the Council;”. Thus, the prescription under Section 15 (5) has to be by way of rules not notification.
⦁ Taking reference to the judgment of the Supreme Court in Wipro Ltd. (supra), it was held that where a delegated legislation is challenged as being ultra-vires and in violation of Article 14 of the Constitution of India, the same cannot be defended merely on the ground that the Government had the competence to issue such delegated piece of legislation. 
What if the Supplier Artificially Inflates the price of land thereby Deflating the value of the Construction Service? –
⦁ The Hon’ble Court rejecting the contention of the revenue, i.e., that the parties may artificially fix a higher value for land so as to reduce tax the liability under the GST Acts, held that value, as mentioned in the agreement, are not challenged in the affidavit in reply, therefore, such contention is not applicable.
⦁ That the possibility of obtaining indirect consideration cannot be ruled out for any supply transaction in view of Section 15(4) which states ‘Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed.”
⦁ It was held that the revenue was not remediless even in a case where there is a doubt about the correctness of value assigned in the contracts toward construction. The resort can be made to valuation rules – Rule 27, Rule 28, Rule 29, Rule 30, and Rule 31 for ascertaining the value of construction.
⦁ When such a detailed statutory mechanism for determination of value is available, then the impugned deeming fiction cannot be justified on the basis that it is meant to curb avoidance of tax when in fact such fiction is leading to arbitrary consequences.
Already similar mechanism existed under Service Tax Law which is not required to be deviated from: –
⦁ When in view of the judgment of the Delhi High Court in Suresh Kumar Bansal (Supra) Deduction at a fixed percentage was made applicable only where the actual value was not ascertainable. When such a workable mechanism for deduction of land was already in force under the service tax regime, the same ought to have been continued. Instead, the Government has chosen to fix a standard rate of deduction without any regard for different possible factual scenarios which is completely arbitrary and violates Article 14 of the Constitution of India.
Entry 5(b) of Schedule II is not relevant for determining the validity of Impugned Notification: –
⦁ Originally clause (d) of Section 7(1) includes transaction enlisted in Schedule II of CGST Act however such clause was deleted retrospectively and a new clause (1A) was inserted which provides that if a transaction qualifies as supply, then it would be treated as a supply of goods or services in accordance with Schedule II. The Parliament clarified that Schedule II to GST is not meant for expanding the scope of supply but only to clarify whether a particular transaction qualifies as supply or not. Thus entry 5(b) of Schedule II is not relevant for deciding the issue in the matter.
⦁ Further, it was held that the judgments of VKC Footsteps Pvt. Ltd. and Narne Construction Ltd. are completely misplaced and are not applicable to the facts of the present case.
Conclusion: –
⦁ With the above findings, it was held by the Hon’ble Court that the impugned Paragraph 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 and identical notification under the Gujarat Goods and Services Tax Act, 2017 which provide for a mandatory fixed rate of deduction of 1/3rd of total consideration towards the value of land is ultra-vires the provisions as well as the scheme of the GST Acts and in violation of Article 14 of the Constitution of India.
⦁ The mandatory deduction as per paragraph 2 will not be mandatory in nature and can be permitted at the option of the taxable person where the actual value of land is not ascertainable.
⦁ That in Special Civil Application No. 1350 of 2021 the writ-applicant has deposited the amount of GST charged by the supplier i.e. Respondent No. 4. That amount is to be refunded to the writ-applicant with interest at the rate of 6% p.a. as the burden of tax has been borne by the writ-applicant.
⦁ In the other two writ applications numbered Special Civil Application No. 6840 of 2021 & 5052 of 2022, since the advance ruling appellate orders are based on the impugned notification providing for mandatory deeming fiction for deduction of the value of land, the said orders are hereby quashed and set aside.
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No GST payable on fees collected towards the training of football, basketball, athletics, cricket, swimming, Karate, and dance: AAR

The Maharashtra Authority of Advance Ruling (AAR) consisting of Rajib Magoo and T.R. Ramnani, has ruled that GST is not payable on fees collected towards training in respect of football, basketball, athletics, cricket, swimming, karate, and dance.

The association, M/s Navi Mumbai Sports Association, has constructed an international sports complex on land allotted by M/s CIDCO to it. The main aim and object of the association are to encourage and foster sports, and cultural and social activities. It also provides health and sports education.

The applicant association is regulated and managed by an elected body, i.e., the managing committee, which looks into the affairs of the association and makes policy decisions that aim at the promotion of sports, fellowship, and fitness for individuals, families, schools, institutions, and corporate bodies.

For the promotion of sports, annual camps are held to select talents and rigorous workouts are given to make them champions. Schools and colleges provide the association’s infrastructure for sports and competitions. For fellowship, it has affiliations with prestigious clubs across India and abroad for the benefit of its members. The sports complex is equipped with various facilities for achieving its objectives, which include indoor badminton, squash, table tennis courts, gym and health club, retiring rooms, football and cricket grounds, swimming pools, restaurants, conference halls, etc.

The applicant has sought an advance ruling on the issue of whether the amount collected by the applicant in respect of entrance/admission fees, which forms part of the corpus fund, annual subscription fees, and annual maintenance fees from its members is liable to GST.

Yet another issue raised was whether the amount/fees collected towards rendering training/coaching in recreational and sports activities are exempt from payment of GST under entry no.80 of notification 12/2017-CTR dated June 28, 2017.

As per Entry 80 of the notification 12/2017-CTR dated June 28, 2017, no GST is payable on the Services by way of training or coaching in recreational activities relating to arts or culture, or sports by charitable entities registered under section 12AA of the Income-tax Act.

The AAR observed that football, basketball, athletics, cricket, swimming, and karate are sports, and “dance” would be covered under the arts. However, physical fitness can not be considered a sport, art, or culture. Further, the term “summer coaching” is a general term that cannot cover sports, arts, or culture.

“We find that training and coaching in football, basketball, athletics, cricket, swimming, karate, and dance by the applicant would be covered under Entry No. 80 of notification 12/2017-CTR dated June 28, 2017, as amended, and “physical fitness” training and “summer coaching” are not covered under the said Entry No. 80 mentioned above.

Therefore, the benefit as per Entry No. 80 of notification 12/2017-CTR dated June 28, 2017, as amended will be available to the applicant only in respect of training and coaching in respect of football, basketball, athletics, cricket, swimming, karate, and Dance,” the AAR said.

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