Assignment Tax.docx

Assignment “Corporate Tax Planning& Management” Submitted By – Samyak Jain A0101917212 Section A Roll no- 49

Q1)Value,Time,Types of Supply in GST Time of Supply Time of supply means the point in time when goods/services are considered supplied’. When the seller knows the ‘time’, it helps him identify due date for payment of taxes. CGST/SGST or IGST must be paid at the time of supply. Goods and services have a separate basis to identify their time of supply. Let’s understand them in detail. A. Time of Supply of Goods Time of supply of goods is earliest of: 1. Date of issue of invoice 2. Last date on which invoice should have been issued 3. Date of receipt of advance/ payment

B. Time of Supply for Services Time of supply of services is earliest of: 1. Date of issue of invoice 2. Date of receipt of advance/ payment. 3. Date of provision of services (if invoice is not issued within prescribed period) Let us understand this using an exam

C. Time of Supply under Reverse Charge In case of reverse charge the time of supply for service receiver is earliest of: 1. Date of payment* 2. 30 days from date of issue of invoice for goods (60 days for services) *w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only to services. Notification No. 66/2017 – Central Tax Place of supply

It is very important to understand the term ‘place of supply’ for determining the right tax to be charged on the invoice. Here is an example: Location of Service Receiver

Place of supply

Nature of Supply

GST Applicable

Maharashtra

Maharashtra

Intra-state

CGST + SGST

Maharashtra

Kerala

Inter-state

IGST

A. Place of Supply of Goods Usually, in case of goods, the place of supply is where the goods are delivered. So, the place of supply of goods is the place where the ownership of goods changes. What if there is no movement of goods. In this case, the place of supply is the location of goods at the time of delivery to the recipient.

B. Place of Supply for Services Generally, the place of supply of services is the location of the service recipient. In cases where the services are provided to an unregistered dealer and their location is not available the location of service provider will be the place of provision of service. Special provisions have been made to determine the place of supply for the following services: 

Services related to immovable property



Restaurant services



Admission to events



Transportation of goods and passengers



Telecom services



Banking, Financial and Insurance services.

In case of services related to immovable property, the location of the property is the place of provision of services. Value of Supply of Goods or Services Value of supply means the money that a seller would want to collect the goods and services supplied. The amount collected by the seller from the buyer is the value of supply. But where parties are related and a reasonable value may not be charged, or transaction may take place as a barter or exchange; the GST law prescribes that the value on which GST is charged must be its ‘transactional value’. This is the value at which unrelated parties would transact in the normal course of business. It makes sure GST is charged and collected properly, even though the full value may not have been paid.

Q2) What is Input Tax Credit under GST? When you buy raw materials as inputs to create and sell your product, you pay tax on the material or input. So when you are required to pay tax on the finished good or output, you can take the deduction of the tax that you have already paid on such inward materials and just pay the balance as the net tax liability. Conditions To Claim A registered person will be eligible to claim Input Tax Credit (ITC) on the fulfilment of the following conditions: 1. Possession of a tax invoice or debit note or document evidencing payment 2. Receipt of goods and/or services 3. Goods delivered by supplier to other person on the direction of a registered person against a document of transfer of title of goods 4. Furnishing of a return 5. Where goods are received in lots or installments ITC will be allowed to be availed when the last lot or installment is received. 6. Failure of the supplier towards supply of goods and/or services within 180 days from the date of invoice, ITC already claimed by recipient will be added to output tax liability and interest to paid on such tax involved. On payment to supplier, ITC will be again allowed to be claimed

7. No ITC will be allowed if depreciation has been claimed on tax component of a capital good 8. Time limit to claim ITC against an Invoice or Debit Note is earlier of below dates: The due date of filing GST Return for September OR Date of filing the Annual Returns relevant for that Financial year

of

next

Financial

year

For instance, XY Corp, a buyer has a Purchase Invoice was dated 8th July 2017( FY 2017-18), wants to claim GST paid on that purchase. As per the criteria laid down to reckon the time limit: The Due date of filing GST return for September 2018( FY 2018-19) is 20th October 2018 and the Date of filing GST Annual Return for FY 2017-18 is 31st December 2018, whichever is earlier will be the time period within which XY Corp has to claim ITC. Therefore, the date is 20th October 2018 and XY Corp can claim this ITC in any of the months between July 2017 to September 2018. Note: For Debit Notes, above condition must be considered with respect to Original Invoice Date. 9. Common credit of ITC used commonly for 

Effecting exempt and taxable supplies



Business and non-business activity

Q3) What do you mean by ARM’S LENGTH PRICE and explain the methods of its computation A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party. Under Companies Act, 2013 define Arm’s Length Transactions for the purpose of Section 188(1), the expression Arm’s Length Transaction means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest. METHODS OF COMPUTATION OF ARM’S LENGTH PRICE SECTION 92C Arm’s Length Price can be computed by the following methods;

1.

Comparable Uncontrolled Price Method;

2.

Resale Price Method;

3.

Cost Plus Method;

4.

Profit Split Method;

5.

Transaction Net Margin Method;

6.

Such other methods as may be prescribed by the board.

1. COMPARABLE UNCONTROLLED PRICE METHOD(CUP); Under this method; i) Determined the price charged or paid for the property transferred or services provided in a comparable uncontrolled transaction. ii) Such price is adjusted to account for differences, if any, between the International transaction and comparable uncontrolled controlled transactions or between the parties entering into such transactions, which could materially affect the price in the open market. iii) The adjusted price arrived at under ii) is taken to be Arm’s Length Price in respect of the property transferred or services provided in international transaction. 2. RESALE PRICE METHOD; Under this method, i) The price at which property purchased or services obtained by the enterprise from an associated enterprise are resold or are provided to an unrelated enterprise, is identified. ii) Such resale price is reduced by the amount of normal gross profit margin accruing to the enterprise or to an unrelated enterprise from the purchase and resale of the same or similar property or from obtaining and providing the same or similar services in a comparable uncontrolled transaction, or a number of such transactions; iii) The price so arrived at is further reduced by the expenses incurred by the enterprise in connection with the purchase of the property or obtaining the services. iv) The price so arrived at is adjusted to take into account the functional and other differences including differences in accounting practices , if any , between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such

transactions, which could materially affect the amount of gross profit margin in the open market; v) The adjusted price arrived at iv) is taken to be arm’s length price in respect of the purchase of property or obtaining of the services by the enterprise from the associated enterprise.

3. COST PLUS METHOD; Rule 10B prescribes the manner in which CPM can be applied. The text reads as follows: (i) the direct and indirect costs of production incurred by the enterprise in respect of property transferred or services provided to an associated enterprise, are determined; (ii) the amount of a normal gross profit mark-up to such costs (computed according to the same accounting norms) arising from the transfer or provision of the same or similar property or services by the enterprise, or by an unrelated enterprise, in a comparable uncontrolled transaction, or a number of such transactions, is determined; (iii) the normal gross profit mark-up referred to in sub clause (ii) is adjusted to take into account the functional and other differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect such profit mark-up in the open market; (iv) the costs referred to in sub-clause (i) are increased by the adjusted profit mark-up arrived at under sub-clause (iii); (v) the sum so arrived at is taken to be an Arm’s Length Price in relation to the supply of the property or provision of services by the enterprise;”

4. PROFIT SPLIT METHOD; Under this method; i) The combined net profit of the associated enterprises arising from the international transaction in which they are engaged, are determined; ii) The relative contribution made by each of the associated enterprises to the earning of such combined net profit, is then evaluated on the basis of the functions performed, assets employed or to be employed and risks assumed by each enterprise and on the basis of reliable external market data which indicates how such contribution would be evaluated by unrelated enterprises performing comparable functions in similar circumstances.

iii) The combined net profit is then split among the enterprises in proportion to their relative contributions, as evaluated under ii); iv) The profit thus apportioned to the assessee is taken into account to arrive at arm’s length price in relation to the international transaction

5. TRANSACTIONAL NET MARGIN METHOD (TNMM) Under this method; i) The net profit margin realised by the enterprise from an international transaction entered into with an associate enterprise is computed in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base; ii) The net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same basis; iii) The net profit margin referred to in ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences , if any between the international transaction and the comparable , uncontrolled transactions, or between the enterprises entering into such transactions , which could materially affect the amount of net profit margin in the open market; iv) The net profit margin realised by the enterprise and referred in i) is established to be the same as the net profit margin referred in iii); v) The net profit margin thus established is then taken into account to arrive at an arm’s length price in relation to the international transaction.