GST law: Who are the persons eligible to opt for composition scheme?

GST law: Who are the persons eligible to opt for composition scheme?

GST Law model

There’s an event management company that organises events in different states. Does it need to register in all states?

The Government through its ‘FAQ tweets’ has clarified that in case of event-related services, a supplier shall be required to obtain the GST registration in the state where the event is held only if such person supplies services from such state. Where the services are provided from a different state, the supplier can charge IGST, treating the location of the event as the ‘Place of Supply’.

Therefore, the need for the event management company to obtain the GST registration in the state where the event is held would need to be determined based on whether they supply any services from such state or not under GST law.

A company has a registered office in Delhi. It needs to purchase goods from one registered manufacturer located in West Bengal and supply them on IGST to their customer in Haryana. To save time and freight charges from West Bengal to Delhi, the company wants to dispatch the goods directly to the location of his customer in Haryana. Please advise on how to issue the invoice keeping in mind that the supplier located in West Bengal will be directly sending the goods to Haryana. Can the company issue the IGST invoice from Delhi to Haryana and send the same to the transporter?

Under the GST law, if a supplier of goods instructs its vendor to supply products directly to a third person, it shall be deemed that the supplier of goods had received them from its vendor at its principal place of business and the tax is to be determined accordingly.

Based on the facts, the principal place of business of the company is Delhi, for which they have obtained the GST registration. Though the vendor would ship the goods directly from its location in West Bengal to the customer’s location in Haryana, it would be deemed that the company has first received the goods in Delhi. Subsequently, the supply of goods by the company shall be treated as supply from Delhi to Haryana, which shall attract integrated tax.

Also read: What is an e-way bill and why is it important?

Who are the persons eligible to opt for composition scheme under the GST law? Also, I want to know if the liability to pay taxes under Reverse Charge Mechanism is covered under the Composition scheme?

The GST law provides an option to a supplier of goods having an annual aggregate turnover not exceeding Rs10 million to opt for payment of GST under composition scheme.

Similar, option has also been provided to a person engaged in the supply of food/beverages (other than alcohol). However, this option is not available for other service providers. This option is also not available if the supplier is engaged in undertaking inter-State supplies.

The GST payable under reverse charge mechanism is not covered under composition scheme. If a person registered under composition scheme procures any goods/services in respect of which the GST is payable under reverse charge mechanism, the person shall be required to pay the GST at applicable rate and not based on rates prescribed under composition scheme.

What would be the GST liability in case of auction of goods? If the bidder is located outside the state of the auction, will IGST be charged or CGST+SGST?

The ‘Place of Supply’ of goods would be the location of goods at the time at which the delivery of goods terminates for supply to the recipient. If the intention of the parties is to transfer the property in goods during the auction or the goods would be sent to the premises of the recipient with the supplier bearing the risk while the goods are in transit. In the former case, CGST and SGST would be levied while in the latter case, IGST would be levied in case inter-state movement is involved.

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(The author of this article is Amit Bhagat, Tax partner, PwC India. Aditya Khanna, associate director, PwC )

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