Example

ABC Ltd. a manufacturing concern supplies automatic plant to Mr. X on 15-04-2018. Invoice is made on the same date. Price of plant including installation charges Rs 50,45,000 but excluding following charges:

 Loading charges Rs. 20000/-

 Subsidy provided by Government for supply of plant Rs. 15000/-

 ABC Ltd. arranges GTA for transport of plant but freight of Rs. 15000/- is paid directly by the customer.

 Company also allows Cash discount @ 2% on the price of plant if the payment is made within 10 days of supply otherwise discount given was recovered and interest will be charged @ 1% for each month or part of month on the amount due.
 Determine the taxability under GST if:
   1. Mr. X makes payment on 20-04-2018
   2. Mr. X makes payment on 20-05-2018

 GST on machinery is 12%

Answer

Computation of value & GST liability of ABC Ltd.

Case 1

PARTICULARS AMOUNT
Price of Plant (including installation charges) 50,45,000
Loading charges [section 15(2)(c )]  20,000
Subsidy provided by Government [section 15(2)(e )] NIL
Transportation cost (GTA service note 1) NIL
Value of Plant (u/s 15) 50,65,000
Less: cash discount 2% of 50,00,000  1,00,000
Taxable value (case 1) 49,65,000
Tax liability (case 1) @ 12%  5,95,800
   


Case -2

Computation of Value and tax liability of ABC ltd

Taxable value (case 1) (in invoice issued at the time of supply)

49,65,000

Discount recovered

1,00,000

Interest charges 2% on 50,65,000

1,01,300

Value of discount + interest 

2,01,300

Taxable value

51,66,300

Tax liability (case 2) @ 12%

6,19,956

As per section 12 (6) of the CGST Act, 2017, the time of supply in case of addition in value by way of interest, late fee, penalty etc. for delayed payment of consideration for goods is the date on which the supplier receives such addition in value. Thus, the time of supply of interest received and cash discount recovered on account of delayed payment of consideration is 20th May 2018, as the payment of interest and discount is paid in full payment.

The supplier issue a debit note u/s 34 corresponding to earlier invoice for such interest and cash discount recovered (i.e . Taxable value 201300 + Tax 24156 ( 12%).

Notes:

1. GTA provides their service directly to Mr. X and he is liable to pay freight and tax under Reverse charge. ABC ltd only arranges the transport but not providing transport service.