QUESTION
Discard Motor Company has discard motors a self invoice is generated &
transaction is shown as B2C in GST return? As per Sec. 7 of CGST Act, Supply
means all forms of supply of goods or services or both such as sale, transfer,
barter, exchange, license, rental, lease or disposal made or agreed to be made
for a consideration by a person in the course or furtherance of business.
Discard of motors is an activity of dismantling assembled motor & taking back
receipt of raw materials which were part of that motor. No consideration
involved in this activity and hence shall not be accounted as Supply. Even if
there is no consideration a transaction can be brought under a purview of GST by
following - 1) Schedule 1 : Supply without consideration on permanent transfer
of asset. 2) Sec. 17(5)(h) Reversal of ITC on goods lost, stolen, or written off
or disposed of by way of gift or free sample. Discard of motor neither get cover
under Schedule 1 nor u/s 17(5)(h). So no need to raise self invoice & pay GST
ANSWER
Facts of the case: Discard of motors is an activity of dismantling
assembled motor & taking back receipt of raw materials which were part of that
motor. No consideration is involved in this activity. Whether GST is applicable
and self invoice is required to be raised?
Law Applicable:
SECTION 7 OF CGST ACT
(1) For the purposes of this Act, the expression 'supply' includes''
(a) all forms of supply of goods or services or both such as sale, transfer,
barter, exchange, licence, rental, lease or disposal made or agreed to be made
for a consideration by a person in the course or furtherance of business;
SCHEDULE I OF CGST ACT
1. Permanent transfer or disposal of business assets where input tax credit has
been availed on such assets.
Interpretation: A person can't make supply to himself. If the
discard motors are used under the same GST registration number, then it is not
supply as per section 7 of CGST Act.
But if the discard motor are used by the person having different registration
number, then it will attract tax only if the transaction is covered under
schedule I as no consideration is involved.
However, If the transaction is not covered under Schedule I and there is no
consideration then it will not be considered as supply in GST and thus there is
no need to charge tax or issue tax invoice but the provision relating to
reversal of ITC will apply.
Conclusion: As no consideration is
involved, transaction will be considered as supply and tax will be charged only
if it covered under Schedule I. However, If the transaction is not covered under
Schedule I, then it will not be considered as supply in GST and thus there is no
need to charge tax or issue tax invoice but ITC is required to be reversed as
per CGST Rules.
Further reply to unsatisfied answer
QUESTION
please suggest me the case laws on writeoff of advances coz i have a party faced
excise &service tax audit the department is demanding service tax on write off
amount which is showing in the income side of profit & loss account K Chandrakar
9893622500
ANSWER
In normal course if you take a bare reading of the act Then it is service and
subjected to service tax
The definition of service is given below
Finance Act (ST) 1994- Section 65A- Classification of taxable services
44) "service" means any activity carried out by a person for another for
consideration, and includes a declared service, but shall not include'
Therefore service tax is chargeable on the services provided as per above
definition which includes declared services also .The same are declared under
section 66 of the service tax act .The relevant service is as follow
Finance Act (ST) 1994- Section 66- Charge of service tax
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act;
Reading these two parts together we can conclude as follow
If some consideration is received for doing some act or for refraining from
doing some act then it is taxable under declared service
Now coming to your case The consideration (advance )was received for sale of
goods or providing of service and not for write off the advance therefore it
should not be taxable until there was some clause in the agreement
we can take following illustration to make this point more
Suppose a customer comes to a shop and give advance to the shop keeper for
supply of some goods but does not turn back to the shopkeeper to take delivery
of the goods The shop keeper after waiting till a logical period write off this
amount and take it in income side then how If this is the case then how can it
be considered as service because the act of writeoff was not done to refrain any
act It is sweet will of the customer that he didn't turn up to take delivery
But there can be an agreement between the buyer and the supplier that the buyer
will make rest of the payment in next two days and will arrange the transport of
the goods to his place etc etc and the agreement may contain a clause regarding
treatment of advance or compensation for not giving timely delivery with aright
to go to the court etc If this the case then the situation is different because
the shop keeper has write off the amount to refrain himself from going to the
court
So in our view there can be a clause in the agreement making it liable to
classify this act of write off as service under the category of declared service
(Reply dt.14.08.2020)