INTERPRETATION OF CENTRAL GOODS AND SERVICES TAX (CGST) ACT (PART-5) (Meaning of Important Terms)
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 16-5-2017
This part of the series contains meanings of certain terms covered in Section 2 of the CGST Act, 2017. These are compensation cess, common working days, composite supply, consideration, continuous supply of goods and continuous supply of services.
Compensation Cess [Section 2(22)]
Cess means compensation cess payable on designated items under Goods and Services Tax (Compensation to States) Act, 2017.
Cess will be payable on both, inter-State and intra-State supply of goods and services or both i.e., on CGST, SGST, IGST and UTGST. Cess is payable for a period of five years to finance compensation payable to States for any revenue loss on account of GST implementation
Common working days [Section 2(27)]
'Common working days' in respect of a State or Union territory shall mean such days in s
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ordinary course of business, one of which should be the principal supply.
To constitute a composite supply, the various goods and / or services forming a composite supply should pass through the test of 'naturally bundled'. This test distinguishes composite supply from mixed supply.
If supply of two or more goods and / or services are not naturally bundled, it will be considered as mixed supply and not as a composite supply. There is a special tax treatment of item of goods and / or services comprising composite supply.
The applicable rate of tax in case of composite contract is the rate of tax applicable on the item of principal supply comprised in a composite contract whereas the rate of tax applicable on mixed supply is the highest rate of tax applicable on any item of goods and / or service comprised in a mixed contract.
In view of the above, utmost care would be required for the classification of a bundled supply of goods and / or services as composite supply especially in ca
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r such supply unless the supplier applies such deposit as consideration for the said supply.
In respect of supply of goods and / or services, three methods of payment have been considered- by way of money, goods in kind, services in kind. Thus, consideration includes the payment in money, payment in kind through goods, payment in kind through provision of services. Payments by a person other than the recipient of goods and / or services will also qualify as consideration.
Receipt of any subsidy given by Central or State Government will not be considered as consideration and thus the amount of any subsidy will not be considered for the purpose of charge of GST,
Advance consideration received by supplier of goods and / or services is considered as a consideration and thus liable to be taxed. But any deposit, whether refundable or not, would not be considered as consideration and thus no tax would be levied thereon.
The transaction of deposits made by recipient of goods and / or servi
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be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify.
Continuous supply of goods happen when the supply of goods is made or agreed to be made on recurring or continuous basis for which supplier invoices the recipient on a regular or periodical basis.
Central or State Governments, on recommendation of the GST Council have the power to declare any supply of goods as a case of continuous or recurring supply of goods.
In respect of continuous supply of goods where successive statement of accounts or successive payments are involved, the invoice shall be issued before or at the time of each such statement or on receipt of each such payment.
The time of supply of continuous supply of goods will be determined
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