Not too long ago, a round dated 26.06.2024 (Ref: Round No. 209/3/2024 – GST) was issued to make clear the place of provide for provides made to unregistered individuals (Round). This Round is in furtherance to a notification dated 29.09.2023 (Ref: Notification 02/2023 – Built-in Tax) which amended sure provisions of the Built-in Items and Companies Tax Act, 2017 (IGST Act). The stated modification launched clause (ca) to Part 10(1) of the IGST Act, to inter alia prescribe that the place of provide for provides made to an unregistered particular person can be the situation as per the tackle of the related particular person as recorded within the bill.
It’s pertinent to notice that as per the amended clause learn with the Round, the place billing tackle is completely different from the tackle of supply, the place of provide of products, notably being provided via e-commerce platform to unregistered individuals, shall be the tackle of supply of products recorded on the bill and never the billing tackle. The clarification is consistent with the intention of insertion of Part 10(1)(ca) of the IGST Act i.e., the income ought to move to the State the place the products are being consumed.
Nonetheless, this clarification is kind of opposite to the already current provisions for ‘invoice to ship to’ transaction in case of provides made to a registered particular person. In different phrases, as per Part 16(2)(b)(i) of the Central Items and Companies Tax Act, 2017 (CGST Act) learn with Part 10(1)(b) of the IGST Act, in a ‘invoice to ship to’ transactions the place the invoice to and ship to events are positioned in numerous States, the place of provide is the situation of the ‘invoice to’ celebration and tax is accordingly discharged. Accordingly, the taxpayers have been paying CGST and SGST the place the products are delivered to an unregistered particular person positioned in one other State.
It is going to now be fascinating to see the observe adopted by the departmental authorities for recovering taxes the place the taxpayers have discharged CGST and SGST as a substitute of IGST or vice versa, since Part 10(1)(ca) of the IGST Act has been inserted with impact from 01.10.2023 and the Round has been issued on 26.06.2024. Thus, the taxpayers are left to guess the proper authorized place for the transactions that happened between the 2 abovementioned dates. Will they face tax calls for for the previous interval, or would the difficulty be regularized on as is foundation by way of the proposed Part 11A of the CGST Act?
Since this new Part 10(1)(ca) supersedes Part 10(1)(a) of the IGST Act, the place of provide would now be the situation the place the motion ends for supply. The topic of what constitutes ‘provide involving motion’ may be very debatable as a result of items are thought-about to ivolve motion solely after they contain motion, both earlier than or after provide and last supply. This Round additionally makes an attempt to put down the identical place that’s prescribed underneath Part 10(1)(a) of the IGST Act, so what’s the distinction?The Round states that the clarification would apply to e-commerce transactions the place the person inserting the order needs to switch the merchandise to a 3rd celebration in one other State. Nonetheless, the place of provide controversy for over-the-counter gross sales stays unresolved. Would this clarification solely apply to transactions made on-line?
One other subject that is still open is that if the clarification supplied within the Round is taken into account to be retrospective, whether or not the taxpayers can declare refund of the taxes paid underneath the heads of CGST and SGST and pay tax underneath the pinnacle of IGST for the previous interval by taking shelter underneath Part 77 of the CGST Act and search waiver from fee of curiosity? Or can the taxpayers contest the identical contemplating the already current provisions and the observe adopted by them for making fee of tax?
It seems that the Round supersedes the provisions of the IGST Act and is issued to resolve an issue that by no means existed within the first place. This causes additional confusion within the trade concerning the right way to really put these clarifications into observe, as they don’t try to handle many vital points presently confronted by the trade, as a substitute addressing a non-existent downside which solely leads to elevated issues and confusion.
Brijesh Kothary, Associate and Saundarya Sinha, Affiliate at Khaitan & Co.
