OTHER COMPOSITION SCHEMES
In addition to and independent of Section 10, Section 15 of the CGST Act, 2017 read with Rule 32 of the CGST Rules, 2017 provides for an alternative mechanism to compute the value of supply of certain specified services like air travel agent, currency exchange, money-changing transactions etc. These provisions are carried over from the erstwhile service tax provisions and are briefly summarized hereunder:
A. Services in relation to purchasing or sale of foreign currency, including money changing
1. Currency exchanged from, or to, INR
- If RBI Reference rate is available - Value shall be equal to [Total units of currency x (Difference between the buying or selling rate and RBI Reference rate for that currency)].
- If RBI Reference rate is not available - Value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the money.
2. Neither currencies exchanged are INR - Value shall be equal to 1% of the lesser of
- [Total number of units of currency x Foreign currency 1 x INR]; or
- [Total number of units of currency x Foreign Currency 2 x INR].
B. Services in relation to the supply of foreign currency, including money changing
Value shall be deemed to be -
1. Gross amount of currency exchanged up to Rs. 1 lakh - Higher of
- Rs. 250; or
- 1% of the gross amount of currency exchanged.
2. Gross amount of currency exchanged exceeds Rs.1 lakh but does not exceed Rs.10 lakhs - Rs.1000 + 1/2% of the gross amount of currency exchanged.
3. Gross amount of currency exchanged exceeds Rs.10 lakhs - Lower of
- Rs. 60,000; or
- 1/10 % of the gross amount of currency exchanged.
Note: A person supplying the currency services may exercise option to ascertain value in terms of B instead of A for a financial year and such option shall not be withdrawn during the remaining part of that financial year.
C. Services provided by air travel agent for booking of tickets for travel by air
Value shall be -
- In case of domestic bookings - 5% of the basic fare
- In case of international bookings - 10% of the basic fare
The expression "basic fare" means that part of the air fare on which commission is normally paid to the air travel agent by the airline
D. Services in relation to life insurance business
1. If amount allocated for investment or savings is intimated to policyholder at the time of supply - Gross premium charged less amount allocated for investment or savings;
2. In case of single premium policies other than (1) - 10% of the single premium charged from the policyholder;
3. In all other cases
- First year - 25% of the premium charged from the policyholder;
- Subsequent years - 12.50% of the premium charged from the policyholder.
4. The above provisions do not apply the entire premium paid by the policyholder is only towards the risk cover in life insurance.
E. Supply by way of dealing and selling of second-hand goods
1. Value of supply shall be difference between selling price and the purchase price (value to be ignored if difference is negative) where -
- the goods are sold as such or sold after minor processing which does not change the nature of goods and
- input tax credit is not availed on purchase of such goods
2. Where goods are repossessed from an unregistered defaulting borrower for the purpose of recovery of loan or debt, value of supply shall be the purchase price of the goods by the defaulting borrower as reduced by 5% points per quarter thereof, between the date of purchase and the date of disposal by the person making such repossession.
F. Value of token, voucher, coupon or stamp (other than postage stamp) redeemable against supply of goods or services or both
Value of supply shall be equal to the money value of the goods or services or both redeemable against such token, voucher, coupon or stamp
G. Value of supplies provided by the class of service providers as notified by Government
Value of taxable services, where input tax credit is available, shall be NIL.
An important point to note is that a lot of traders or manufacturers hesitate to supply or buy from a composition dealer thinking that they may be denied ITC. It is important to note that there is no restriction to buy from or sell goods to a composition dealer by a person supplying goods under the regular taxation scheme. As a composition dealer cannot collect tax, he shall issue only a bill of supply instead of a tax invoice.
Further, a registered person is obligated to collect tax, if opting for regular provisions, on all supplies made irrespective of a registered person or unregistered person or irrespective of subsequent use for business or personal purposes. As such, such person can make an outward supply to a composition dealer without having to worry about reversal of input tax credit as long as it is a taxable supply.
A composition dealer must also ensure that no outward supply of goods or services are made between his own branches under the same PAN in different states as such supplies would be treated as inter-state supply between establishments of distinct persons and would render all such branches ineligible for composition scheme.
Note: The above provisions, including the due dates, are compiled based on the statutory provisions given in the CGST Act and the rules made thereunder. For regular updates on due dates and other statutory revisions, readers are requested to visit the official portal of CBIC/GST on a regular basis.
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