1. Suppose our project is in west Bengal and we need to raise invoice from Maharashtra (from our H.O. Mumbai) , then which tax we can apply because in Maharashtra we are going to apply GST and in west Bengal i donot know the which tax structure is there. please explain also the percentage of GST or any other tax.
Answer
If the supply is being rendered by a tax payer in Mumbai to a recipient in West Bengal, the tax that would be applicable would ordinarily be IGST West Bengal. However, if the tax payer is providing such services from an office / establishment in West Bengal, the applicable tax would ordinarily be CGST + SGST West Bengal. Management of business consultant services would typically fall under the 18% rate.
As you would appreciate, the individual facts would determine the location of the supplier, the location of the recipient, the place of supply and the rate of tax.
2. Please confirm the SAC code for SaaS services for invoicing.
Answer
SaaS (Software as a Service) is model that offers a means whereby software may be used by a person without acquiring / purchasing it. By virtue of Schedule II of the CGST Act, 2017, the supply would be treated as a supply of services. The relevant entries would fall under the head Licensing services for the right to use intellectual property and similar products, attracting tax at 18%. The 6-digit code may be determined based on the description provided in the scheme of classification of services. The most relevant entries are reproduced below:
997331: Licensing services for the right to use computer software and databases;
997339: Licensing services for the right to use other intellectual property products and other resources nowhere else classified.
3. We are an STPI unit exporting BPO /Software services with clients in Germany, Austria & Italy. All our exports are received in Euro (ie convertible exchange).
To facilitate our after sales service we have an entity in Germany whom we pay almost every month. This entity works on our instructions to facilitate our workings with our clients. We pay this entity from India in Euro. This Entity has NO ESTABLISHMENT in India.
Our question: Do we have to pay GST on a reverse charge basis for this Entity ? If so, how much. Please advise
Answer
The STPI unit exporting BPO /Software services with clients in Germany, Austria & Italy and obtaining the after-sales services from the German entity, would be liable to pay IGST @ 18% on the consideration paid to such entity, as the services would qualify as import of services.
Sharing some more insights as below:
An import of service shall be liable to tax on reverse charge basis, payable by the recipient of the service being located in India.
For a service to qualify as an import of service, it must satisfy the following 3 conditions cumulatively:
the supplier of service is located outside India;
(ii) the recipient of service is located in India;
(iii) the place of supply of service is in India;
In the instant case, the place of supply would be the location of the recipient (i.e., location of the STPI unit in India), in terms of Section 13(2) of the IGST Act. Therefore, regardless of the fact that the German entity (providing the facilitation services to the STPI unit in India) does not have an establishment in India, the supply, being an import of service, would attract IGST @ 18% under the code 9985 (support services).
4. We Supply software License to the customers online. The same is downloaded and used by the customers using encrypted keys. Is this supply of goods or supply of services?
Answer
The FAQs are leading to divergent views on this. It is clarified in the FAQs (response to Q1) that “…temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services”. It is further clarified that pre-developed software made available through encryption keys, typically covering electronic download as qualifying to be “supply of goods”. However, the FAQs further mention that where EULA is executed and depending on the terms of such EULA (response to Q 18), software can qualify to be “temporary transfer or permitting the use or enjoyment of any intellectual property rights” and would be a “supply of service”. Software licensing involves the execution of an End User License Agreement and by the sheer nature of intangibles and its sale, results in enjoyment of an IP by the customer. Therefore, ideally, all software licensing ought to be treated as “supply of services”. However, due to the clarification provided to question 1 that “pre-developed or pre-designed software ………………. made available through the use of encryption keys, the same is treated as supply of goods” there is a confusion.
5. SAAS model – Is it supply of goods or supply of service ? Though it is supply of service on the face of it, since the password is encrypted online, does it mean it would be termed as supply of goods as per the inputs provided in GST FAQ on IT/ITES sector ?
Answer
There are no clear guidelines on SaaS model in the FAQs. We have sought clarification on both these points as part of our representation.
6. Will a software company, operating only out of Special economic zone area be liable to pay GST under reverse charge when it procures goods/ services from unregistered dealers?
Answer
The provisions requiring a registered person to discharge taxes on reverse charge basis, on effecting inward supplies from unregistered persons, hold goods across all registrations, including SEZ units/ developers. Therefore, such a software company would be liable to pay GST under RCM basis and would have to generate an invoice on receipt of goods / services from unregistered persons.
Additional comments: The GST Law mandates every person effecting taxable inter-State supplies to compulsorily obtain registration, regardless of their turnover – even the threshold of Rs. 20 lacs will not apply. Therefore, prima facie an unregistered person will not be eligible to make a supply to an SEZ – thus, the SEZ unit may have to educate the supplier on the provisions of the law if the supplier is unregistered. However, this does not absolve the company from complying with the aforesaid provisions, if the supplier continues to remain unregistered.
7. Sale of goods before the appointed date is returned after the appointed date. Is it mandatory to receive a supply invoice from the customer for the transitional period?
Answer
Prima facie, sales returns will qualify as ‘supply of goods’ and would be liable to GST in the hands of the person returning. It would qualify as ‘outward supplies’ in the hands of the person returning and as ‘inward supplies’ in the person receiving the goods. The payment of GST and claim of input credit would accordingly apply, to the supplier and the recipient, respectively.
However, as a transitional provision, an exception has been provided for cases where the goods are sold during the pre-GST regime (sales within 6 months upto introduction of GST) and are returned within a period of 6 months from the date of introduction of GST, in respect of returns from unregistered persons.
To illustrate the taxability of sales returns, the date of implementation of GST is reckoned as 01.07.2017 in the following table:
1. If the returns are by a registered taxable person (viz., person who is registered under the GST law and is returning the goods to the seller / supplier). It would be taxable in all circumstances.
Date of original sale of goods | Date of return of goods | Taxability | Remarks |
01.01.2017 upto 30.06.2017 | 01.07.2017 upto 31.12.2017 | Taxable | Proviso to Section 142 of the Model GST law |
On or after 01.01.2018 | Taxable | Section 142 would not be applicable. Hence, would qualify as ‘supply’ under GST and would be taxable. |
On or after 01.07.2017 | On or after 01.07.2017 | Taxable | Sales return will be a normal ‘supply’ and would accordingly be taxable. |
Note: Sales returns not falling within the above would also be taxable. |
2. If the returns are by a person who is not registered under GST (viz., person returning the goods is not registered under GST).
Date of original sale of goods | Date of return of goods | Taxability | Remarks |
01.01.2017 upto 30.06.2017 | 01.07.2017 upto 31.12.2017 | Not taxable | Specifically excluded under Section 174 of the Model GST law. Tax / duty paid under the earlier law may be claimed as refund by the supplier (seller) of goods. |
On or after 01.01.2018 | Taxable | Section 174 would not be applicable. Hence, would qualify as ‘supply’ under GST and would be taxable. Would be taxable as a receipt of goods from unregistered persons – under reverse charge mechanism. |
On or after 01.07.2017 | On or after 01.07.2017 | Taxable | Sales return will be a normal ‘supply’ and would accordingly be taxable. |
Note: Sales returns not falling within the above would also be taxable. |
- 8. We want to know that “Software as a Service” (SaaS pronounced) is a software, in which software is licensed/ Provide UID & PWD on a subscription basis and is centrally hosted. It is sometimes referred to as on-demand software, and was formerly referred to as software plus services.
SaaS is typically accessed by users using a thin client via a web browser. SaaS has become a common delivery model for many business applications, including office and messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, virtualization, accounting, collaboration, customer relationship management (CRM), Management Information Systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), talent acquisition, content management (CM), and service desk management.SaaS has been incorporated into the strategy of nearly all leading enterprise software companies.
The term software as a service (SaaS) is considered to be part of the nomenclature of cloud computing, along with infrastructure as a service (IaaS), platform as a service (PaaS), desktop as a service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MBaaS), and information technology management as a service (ITMaaS).
We are proving Customer relationship management (CRM) software with advanced features to use by retailers and they (users) using this software via a web browser only through Desktop as well as Mobile App. No Database shall provide by us. Respective retailers use their own database prepared/ entered/ maintained by every retailers by their own.
Query: What will be our SAC code for our Service?
Answer: The HSN will be 9983, ie, “Other professional, technical and business services”
Query: What will be the Place of Supply for our service?
Answer: The place of supply in case of SaaS in general would fall under the residual category of determination of place of supply, ie, location of the recipient of services as provided under section 12(2)/ section 13(2) of IGST Act, 2017.
Query: Invoicing shall be made and Tax shall be paid accordingly, as per the answer to Q.2 above
All Billing shall be made under SGST & CGST to our Establishment State in UP
OR
(ii) Invoicing shall be made as per the Section 12-2-a/b of IGST Act where the service actually consumed/ utilized and the address of Retailers on bill (from where his/her shop located) and pay IGST for Inter-state address and pay SGST & CGST for Intra-state address from the Business Establishment our Company i.e. UP.
Answer: “Bill to” location based on application of principles laid down in the definition of “location of recipient of service” would need to be determined based on detailed analysis of underlying facts. Further, the place from where the services are provided would also need to be examined basis definition of “location of supplier of service” in order to accurately comment on whether it is an inter-state transaction liable to IGST or intra-state transaction liable to CGST + SGST.
Query: We shall also liable to discharge the liability under reverse charge against purchase/ service received in the above mentioned premises, more than 5,000/- rupees per day either goods or service or both, is it Right?
Answer: We concur with your understanding. All procurements made from unregistered persons exceeding Rs 5,000 in a day will attract GST.
Query: The threshold limit of Rs.5000/- per day for a single company or for each registration under GST?
Answer: The threshold of Rs 5,000 is required to be computed qua the registrations obtained state-wise under GST.
Query: We have installed Telephone, Internet, and Computer on Rent at our Sales/ Marketing offices in different states, so we want to take ITC against such services! Therefore, we have to take Registration under ISD, Right? Then prepared Invoice to transfer ITC to our Establishment/ work office at Noida, Right?
Answer: Whether registration needs to be obtained for such sales/ marketing offices in order to avail ITC would depend on several underlying facts including nature of input services in question. Further, once it is determined that registration is required, whether the registration is ISD or a regular registration would depend on the underlying facts of the case in terms of transfer of credit or self-supply of services. The definition of input service distributor (‘ISD’) as per the CGST Act which is relevant with respect to the same has been extracted below for your reference:
“means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office”.
Further, the Authorities on various occasions have clarified that ISD is not mandatory.
Query: As per Q.4 we have to discharge the reverse charge liability on Renting of immovable property of Sales/Marketing offices in respective states or from our establishment at Noida, UP?
If we will take Registration in respective Sales/ Marketing Officers in respective states then how ITC will transfer to our Noida Establishment?
Can we take both Registrations at our Sales/Marketing offices in respective states?
i – for discharge the liability of reverse charge – general registration ( Rent)
ii – for transfer of ITC to Noida Establishment – ISD
Answer: Response to this query would first involve understanding of various underlying facts including locations of offices, details with respect to locations from where supplies are made etc.
