EXAMPLE-81
Old Co. Ltd of Ghaziabad is in the business of renting of assets like AC, ventilator, generator and other appliance etc. They rented out 4 ACs to Y Ltd.(registered under GST) of Delhi on 1st April for Rs 4000 PM per AC (not including tax) for whole summer season. Company Y Ltd. purchased all 4 ACs, which were rented to them on Ist June for Rs. 1 lakh. How the rental income of AC for April & May would be charged under GST in the Old Co. Ltd books and what will be the time of supply and place of supply of sale of ACs already installed at Delhi in Y Ltd.
Answer
Supply of service (right to use)
Step 1 (whether covered under supply of goods or services)
Transfer of any assets is covered under section 7 (scope of supply).
Paragraph 5, point (f) of Schedule II specifies that transfer of the right to use of any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration shall be deemed as supply of services.
Thus, renting of AC is taxable as supply of services.
On this supply of services same
rate of GST is applicable as on supply of similar goods [SCHEDULE
OF GST RATES FOR SERVICES AS APPROVED BY GST COUNCIL]
Say Air conditioning machine
taxable @28%
According to Section 12 of IGST Act,
place of supply is the location of the registered recipient person.
In
view of the above provision location of supplier and place of supply is in
different States
Thus,
supplier is required to charge IGST on inter-state supply of services.
Integrated tax on rent of
April = (4000*4)*28%
= Rs. 4480
Total amount of invoice for
the month of April = 16000+4480= Rs. 20480
Integrated tax on rent of May
= (4000*4)*28%
=
Rs. 4480
Total amount of invoice for
the month of May = 16000+4480= Rs. 20480
Continuous
supply of services ceased on 31st May, therefore, section 31(6) comes
into play to decide the remaining aspect of the example. The said section
specifies that in a case where the supply of services ceases under a contract
before the completion of the supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be issued to the extent of the
supply effected before such cessation.
Old
Co. Ltd will show supply of services for rent of two months.
Sale
of ACs
Step 1-
Determine whether it amounts to supply.
When rented
ACs are sold to Y Ltd. it amounts to supply of goods under GST.
Step
2 - Determine Place of supply
As per section
10(1)(c) of IGST Act, where the goods supplied do not involve movement, the
place of supply shall be the location of goods at the time of their delivery.
Thus the ACs are already installed at Y Ltd office, thus place of supply is the
State of Delhi.
Supplier
is required to charge IGST on inter-state supply for consideration of Rs. 1 lakh.
Step 3
Determine last date of issue of invoice
Section
31(1) specifies that every registered taxable person supplying goods shall issue
invoice before or at the time of-
(a)
Removal
of goods, when supply involve movement of goods
(b)
Delivery
of goods or making available thereof to
the recipient.
Thus supplier
required to issue invoice at the time of delivery of goods i.e. on 1st
June .
As
per section 12(2) time of supply of goods shall be the earliest of the following
dates:-
(a)
Date
of issue of invoice
(b)
Last
date on which invoice required to be issued
(c)
Date on which
supplier receives payment
If in the above case
payment and invoice issued after time limit of issue of invoice i.e. 1st
June.
Then time of supply
is 1st June itself.
Rate
of GST at the time of supply is the tax rate for collecting IGST.
Step
5 During which month the supply will be shown in the monthly return
Supply
will be reflected in the return for the month of June.