GOODS AND SERVICE TAX GST IMPACT ON SERVICE

GOODS AND SERVICE TAX (GST) IMPACT ON SERVICE SECTOR V. Raghuraman 1

SECTORS COVERED CONSTRUCTION REAL ESTATE TOURISM TRAVEL V. Raghuraman 2

CONSTRUCTION V. Raghuraman 3

GST Rates Sl. No. Heading Description of service GST Rate 1 Heading 9954 (Construction services) (i) Construction of a complex for sale where the consideration is received prior to issuance of completion certificate or before its first occupation Value charged from customer shall include land cost and a deduction of 1/3 of total value is given towards value of land. 18% (ii) Works contract services (iii) Construction services other than the above 18% Real estate services 18% 2 3 Heading 9972 V. Raghuraman 4

EXEMPTIONS Sl. No. Heading 3 Chapter 99 Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under article 243 G of the Constitution or in 2 Description of service Services by Central Government, State Government, Union territory, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. V. Raghuraman 5

EXEMPTIONS Sl. No. Heading Description of service 10 Heading 9954 Services provided by way of pure labour contracts of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana. 11 Services by way of pure labour contracts of construction, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex. V. Raghuraman 6

EXEMPTIONS Sl. Description of service No` 12 Services by way of renting of residential dwelling for use as residence. 13 Services by a person by way of- (a) conduct of any religious ceremony; | (b) renting of precincts of a religious place meant for general public, owned or managed by an entity registered as a charitable or religious trust under section 12 AA of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution registered under sub clause (v) of clause (23 C) of section 10 of the Income-tax Act or a body or an authority covered under clause (23 BBA) of section 10 of the said Income-tax Act: Provided that nothing contained in entry (b) of this exemption shall apply to, - (i) renting of rooms where charges are one thousand rupees or more per day; (ii) renting of premises, community halls, kalyanmandapam or open area, and the like where charges are ten thousand rupees or more per day; (iii) renting of shops or other spaces for business or commerce where charges are 7 V. Raghuraman

EXEMPTIONS Sl. Description of service No` 41 One time upfront amount (called as premium, salami, cost, price, development charges or by any other name) leviable in respect of the service, by way of granting long term (thirty years, or more) lease of industrial plots, provided by the State Government Industrial Development Corporations or Undertakings to industrial units. V. Raghuraman 8

GST RATES FOR TOURISM & TRAVEL INDUSTRY V. Raghuraman 9

GST Rates – food supply Description of service GST Rate Supply of food by restaurant, etc. , neither having the facility of air-conditioning or 12% central air-heating in any part of the establishment, at any time during the year nor having licence or permit or by whatever name called to serve alcoholic liquor for human consumption. Supply of food by restaurant, etc. , having licence or permit or by whatever name 18% called to serve alcoholic liquor for human consumption. Supply of food by restaurant, etc. , having the facility of air-conditioning or central 18% air-heating in any part of the establishment, at any time during the year . Outdoor catering 18% V. Raghuraman 10

GST Rates - Accommodation Description of service GST Rate Bundled service by way of supply of food or any other article of human 18% consumption or any drink, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organizing a function) together with renting of such premises Accomodation services Declared Tariff Rs. 1000 and above but less than Rs. 2500 per day 12% Declared Tariff Rs. 2500 and above but less than Rs. 7500 per day 18% Declared Tariff 7500 per day and above 28% Accommodation or food supply other than covered above (entry (ix) of 9963) 18% V. Raghuraman 11

GST Rates – passenger transport Description of service GST Rate Rail Transport(AC Class) 5% (no itc on goods used) Renting of motorcar (If fuel cost is borne by the service recipient, then 18% GST will apply) 5% No ITC on goods or sevices Transportation of passengers (i) Air conditioned contract/stage carriage other than motorcab; (ii) a radio taxi. 5% No ITC on goods or services Transport of passengers by air in economy class 5% with ITC of input services Transport of passengers, with or without accompanied belongings, by air, embarking from or terminating in a V. Raghuraman 5% with ITC of input services 12

GST Rates – passenger transport Description of service GST Rate Motor Cab (cost of fuel shall be included) [No ITC] 5% Other passenger transport 18% Supply of tour operators’ services [ No ITC] V. Raghuraman 5% 13

GST Exemptions Sl. No. Details 14 of Ntfn Services by a hotel, inn, guest house, club or campsite, by whatever name 12/2017 called, for residential or lodging purposes, having declared tariff of a unit of accommodation below one thousand rupees per day or equivalent. 15 Transport of passengers, with or without accompanied belongings, by – (a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal; (b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or (c) stage carriage other than air-conditioned stage carriage. V. Raghuraman 14

GST Exemptions Sl. No. Details 16 Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding: Provided that nothing contained in this entry shall apply on or after the expiry of a period of one year from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation. 17 Service of transportation of passengers, with or without accompanied belongings, by— (a) railways in a class other than—first class; or (ii) an air-conditioned coach; (b) metro, monorail or tramway; (c) inland waterways; (d) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and (e) metered cabs or auto rickshaws V. Raghuraman (including e-rickshaws). 15

GST Exemptions Sl. No. Details 22 Services by way of giving on hire – (a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or (b) to a goods transport agency, a means of transportation of goods. 66 (b) to an educational institution, by way of, - (i) transportation of students, faculty and staff; Explanation states that educational institution for this purpose is pre school and education upto higher secondary V. Raghuraman 16

NEW SCHEME OF CLASSIFICATION OF SERVICES Service Code Service Description (Tariff) Group Travel arrangement, tour operator and related services 998551 Reservation services for transportation 998552 Reservation services for accommodation, cruises and package tours 998553 Reservation services for convention centres, congress centres and exhibition halls 998554 Reservation services for event tickets, cinema halls, entertainment and recreational services and other reservation services 998555 Tour operator services 998556 Tourist guide services 998557 Tourism promotion and visitor information services 998559 Other travel arrangement and related services n. e. c V. Raghuraman 17

PROPOSED NEW SCHEME OF CLASSIFICATION OF SERVICES Heading No. 9963 Accommodation, Food and beverage services Group 99631 Accommodation services 996311 Room or unit accommodation services provided by Hotels, INN, Guest House, Club etc 996312 Camp site services 996313 Recreational and vacation camp services Group 99632 Other accommodation services 996321 Room or unit accommodation services for students in student residences 996322 Room or unit accommodation services provided by Hostels, Camps, Paying Guest etc 996329 Other room or unit accommodation services n. e. c. V. Raghuraman 18

NEW SCHEME OF CLASSIFICATION OF SERVICES Group 996331 996332 Food, edible preparations, alchoholic & non-alchocholic beverages serving services Services provided by Restaurants, Cafes and similar eating facilities including takeaway services, Room services and door delivery of food. Services provided by Hotels, INN, Guest House, Club etc including Room services, takeaway services and door delivery of food. 996333 Services provided in Canteen and other similar establishments 996334 Catering Services in Exhibition halls, Events, Marriage Halls and other outdoor/indoor functions. 996335 Catering services in trains, flights etc. 996336 Preparation and/or supply services of food, edible preparations, alchoholic & non-alchocholic beverages to airlines and other transportation operators 996337 Other contract food services 996339 Other food, edible preparations, alchoholic & non-alchocholic beverages V. Raghuraman 19 serving services n. e. c.

Composite & Mixed supply Description Composite Supply Mixed Supply Naturally bundled Supplied together Can be supplied separately Yes No No Yes One is predominant supply for recipient Yes No Other supply is not ‘aim in itself’ of recipient Yes No Each supply priced separately No No All supplies are goods All supplies are services One supply is goods and other supply is services Yes Yes Yes V. Raghuraman 20

COMPOSITION SEC. 10 OF CGST COMPOSITION Who is eligible All taxable persons other than service providers (except service provider on supply of food articles) Conditions a) b) c) d) e) f) Previous year’s aggregate turnover shall be less than 75 Lakhs Should not engage in interstate supply Should not engage in supply of goods exempt /not leviable to tax Should not be supplying goods through e-comm operator Not engaged in manufacture of goods which are notified by Govt. All the taxable persons under same PAN shall opt for composition a) Option shall lapse on exceeding Rs. 75 Lakhs limit in any year a) Not to collect tax from recipients V. Raghuraman 21

COMPOSITION SEC. 10 OF CGST COMPOSITION Rates A. Manufacturer- 2%(1+1)of the Turnover B. Supply of food- 5%(2. 5%+2. 5%) of the Turnover C. Other supply of goods- 1%(0. 5%+0. 5%) of the Turnover In terms of Sec. 20 of IGST Act and Section 21 of UGST Act, provisions relating to Composition in Sec. 10 of CGST Act shall mutatis mutandis be applicable to IGST and UTGST provisions V. Raghuraman 22

VALUATION V. Raghuraman 23

VALUATION RULES SECTION 32 6. Determination of value in respect of certain supplies B. Air Travel Agent. Domestic travel 5% of the basic fare International travel 10% of the basic fare

VALUATION RULE 32 SECTION 15 6. Determination of value in respect of certain supplies E. value of a token, or a voucher, or a coupon, or a stamp The value of a voucher etc. , which is redeemable against a supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon, or stamp. F: The value of taxable services provided by such class of service providers as may be notified by the Government on the recommendations of the Council , as referred to in Entry 2 of Schedule I between distinct persons as referred to in section 25, where input tax credit is available , shall be deemed to be NIL

REVERSE CHARGE V. Raghuraman 26

The Central government notifies the following categories of supply of services under section 9 of the CGST Act, shall be paid on reverse charge basis by the recipient of services Sl. Category of supply of Supplier of Recepient of service No services service 1. Supply of Services by a goods transport agency Goods Transport (a) Any factory agency (b) any society service(GTA) (c) any co-operative society (d) any person registered under the CGST, IGST, SGST, UGST (e) any body corporate (f) any partnership firm whether registered or not (g) any casual taxable person; located in the taxable territory 2 Services supplied by an individual advocate including a senior advocate by way of representational services to any business entity located in the taxable territory An individual Any business entity located in the advocate taxable territory including a senior advocate or firm of advocates.

Sl. Category of supply of No services Supplier of service Recepient of service 3. Services supplied by an arbitral tribunal to a business entity. An arbitral tribunal. Any business entity located in the taxable territory. 4. Services provided by way of sponsorship to any body corporate or partnership firm. Any person Any body corporate or partnership firm located in the taxable territory. 5. Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, - (1) renting of immovable property, and (2) services specified below- (i) services by the Central Any business entity located in the Government, taxable territory. State Government, Union territory or local authority

Sl. Category of supply of No services Supplier of service Recepient of service agency services to central or state government or union territory or local authority (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers 6. Services supplied by a A director of a company or a a body corporate to the body corporate said company or the body corporate. The company or a body corporate located in the taxable territory.

Sl. Category of supply of No services Supplier of service Recepient of service 7. Services supplied by an insurance agent to any person carrying on insurance business. An insurance agent Any person carrying on insurance business, located in the taxable territory 8. Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company. A recovery agent A banking company or a financial institution or a non-banking financial company, located in the taxable territory.

Sl. Category of supply of No services Supplier of service Recepient of service 9. Supply of services by an Author or music Publisher, music company, author, music composer, producer or the like, located in the photographer, artist or photographer, taxable territory. the like by way of artist, or the like transfer or permitting the use or enjoyment of a copyright relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like. The Central government , hereby exempts intra state supplies of goods / services or both received by a registered person from any supplier, who is not registered, under subsection (4) of section 9 of CGST Act. However the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.

Thank You V. RAGHURAMAN, Advocate B. Com, FCA, LLB, ACS, Grad. CWA Email id : vraghuraman@vraghuraman. in V. Raghuraman 32