Category: Miscellaneous

GST Sectoral Series: FAQs on Gems & Jewelery

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GST Sectoral Series: FAQs on Gems & Jewelery

Question 1: When we are selling Gold, Diamond or Silver Jewellery to the end consumer (Customer) like a Gold Chain weighing10gm at a total value of Rs. 30,000/- (gold value is Rs. 28000/- and making charges on that gold chain is Rs 2000/-), can we charge GST @3% on the total value or @3% on the gold value and @5% on making charges?

Answer: GST is payable at the rate of 3% of the total transaction value of jewellery, whether the making charge is shown separately or not.



Question 2: When we issue gold as raw material to our Job Worker for Job Work and he returns that gold as finished goods,what GST treatment will be done and how to calculate the value?

Answer: The job worker, if registered, would be required to pay GST at the rate of 5% on job charges only. The jewellery manufacturer would in turn take credit of GST paid on such job work and may utilize the same for payment of GST on his outward supply of manufactured jewellery. However, if the job worker is exempted from registration, the jewellery manufacturer would be required to pay GST on his input supply from the job worker [of jewellery made out of precious metal given by him] on reverse charge basis. Nonetheless, he would be eligible to avail input credit of the tax so paid under reverse charge mechanism.



Question 3: Whether advertising and communication material
 (banners/hoardings/posters) provided to distributors would be treated as supply in the course of business by the company thereby not requiring any reversal of ITC.

Answer:
(a) Where the material is provided free of cost:
This would not amount to a supply and hence no tax is payable on such transaction and in such a case credit availed by the company would need to be reversed in accordance with section 17(5) of the CGST Act, 2017.
(b) Where the material is provided for a consideration:
This would amount to a normal supply.



Question 4: Currently Banks do not pay any VAT on import of precious metals. Banks/nominated agencies pay only customs duty on imports. In the new regime of GST, will the Banks have to pay IGST while importing?

Answer: Yes, 3% IGST is payable on all imports of precious metals in addition to the basic customs duty. IGST paid can be taken as input tax credit by the banks.



Question 5: Banks import gold / silver on consignment basis wherein the ownership of the metal is with the supplier of the bullion which maybe an overseas entity. Is the overseas entity required to have GST registration because currently they do not file returns and are governed by multi-nation treaties?

Answer: This amounts to an import in accordance with the definition of the word “import” in the IGST Act, 2017 which provides that “bringing into India of any goods from any place outside India” is an import of the goods. What is material in this definition is the mere act of bringing into India; the ownership is not material for determining whether an import has taken place. Banks, being registered entities, would be liable to pay IGST on such imports but not the overseas entities since they are not effecting the import.

Question 6: Gold and silver imported by banks/nominated agencies on consignment basis are lying in stock as on 1st July. Clarification is required on how to charge the customers in transition phase from VAT to GST. Will customers be liable to pay GST rates?

Answer: GST is payable @ 3% with effect from 01.07.2017.


Question 7: Banks lend gold in physical form for a period not exceeding 6 months. Banks receive interest on the gold ounces disbursed and the same is converted into Rupees after calculation of interest on the ounces and the USD/INR conversion. Will the same methodology continue in case of GST as well wherein Banks shall pay a provisional GST (i.e. IGST/SGST/CGST) on ongoing market prices and pay the final GST as and when the prices are fixed?

Answer: Yes, Banks may avail of the benefit of provisional assessment provided under section 60 of the CGST Act, 2017.



Question 8: Banks pay provisional VAT currently at the time of delivery of gold on the basis of ongoing market prices. When customer fixes the price of metal, Banks pay actual VAT on the maturity date of the Gold Loan. Banks must be allowed to set-off the excess provisional GST paid to the government against future fixation of prices. In case of excesspayment, the same should be refunded on Pan – India basis and not on the basis of States.

Answer: Banks may claim refund in accordance with the provisions of section 54 of the CGST Act, 2017. Interest is payable in such cases as provided in section 56 of the CGST Act, 2017. In this connection, section 60(5) of the CGST Act, 2017 may be referred to.


Bhagavad Gita : Supreme is eternal (Text 4 & 5, Ch 4, Transcendental Knowledge)

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Arjuna uvaca
Aparam bhavato janma param janma vivasvatah
katham etad vijaniyam tvam adau proktavan iti(Text 4, Ch 4, Transcendental Knowledge)

Meaning:  Arjuna said: The sun-god vivasvan is senior by birth to you. How am I to understand that in the beginning You instructed this science to him?

Sri-bhagavan uvaca
bahuni me vyatitani janmani tava carjuna
tany aham veda sarvani na tvam vettha parantapa
(Text 5, Ch 4, Transcendental Knowledge)

Meaning: The personality of Godhead said: Many, many births both you and I have passed. I can remember all of them, but you cannot, O subduer of the enemy!

Bhagavad Gita: Science of relationship with Supreme (Text 3, Ch 4, Transcendental Knowledge)

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Sa evayam maya te dya yogah proktah puratanah
bhakto’ si me sakha ceti rahasyam hy etad uttamam
(Text 3, Ch 4, Transcendental Knowledge)

Meaning:  That very ancient science of the relationship with the Supreme is today told by Me to you because you are My devotee as well as My friend and can therefore understand the transcendental mystery of this science.

*** Devotion and friendship are prerequisite for understanding science of the relationship with the Supreme.

Bhagavad Gita : Transcendental Knowledge (Text 2, Ch 4)

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evam parampara-praptam imam rajarsayo viduh
Sa kaleneha mahata yogo nastah parantapa

(Text 2, Ch 4, Transcendental Knowledge)

Meaning: This Supreme science was thus received through the chain of disciplic succession, and the saintly kings understood it in that way.But in course of time the succession was broken, and therefore the science as it is appears to be lost.

Bhagavad Gita : Fully absorbed in Me and attained Transcendental love (Happy Janamastrami)

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Vita-raga-bhaya-krodha man-maya mam upasritah
bahavo jnana-tapasa puta mad-bhavam agatah

वीतरागभयक्रोधाः, मन्मयाः, माम्, उपाश्रिताः,
बहवः, ज्ञानतपसा, पूताः, मद्भावम्, आगताः।।10।।

(Vita-freed from, raga-attachment, bhaya- fear, krodha-and anger, man-maya-Fully in Me,  mam-in Me, upasritah-being fully situated, bahavo-many, jnana-of knowledge, tapasa-by the penance,  puta-being purified, mad-bhavam-transcendental love foe Me,  agatah-attained)

(Text 10, Ch 4, Transcendental Knowledge )

Meaning: Being freed from attachment, fear and anger, being fully absorbed in Me and taking refuge in Me, many, many persons in the past became purified by knowledge of Me-and thus they all attained transcendental love for Me.

अनुवाद: (वितरागभयक्रोधाः) जिनके राग भय और क्रोध सर्वथा नष्ट हो गये और (मन्मयाः) जो मुझमें अनन्य प्रेमपूर्वक स्थित रहते हैं ऐसे (माम्) मेरे (उपाश्रिताः) आश्रित रहनेवाले (बहवः) बहुत-से भक्त उपर्युक्त (ज्ञानतपसा) ज्ञानरूप तपसे (पूताः) पवित्रा होकर (मद्भावम्) मतावलम्बी अर्थात् शास्त्रा अनुकूल साधना करने वाले स्वभाव के (आगताः) हो चुके हैं। (10)










Bhagavad Gita : Transcendental Knowledge (Text 1, Ch 4 )

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Sri-bhagavan uvaca
imam vivasvate yogam
proktavan aham avyayam
vivasvan manave praha
manur iksvakave bravit
(Text 1, Ch 4, Transcendental Knowledge)

Meaning: The personality of Godhead said: I instructed this imperishable science of yoga to the sun god, vivasvan, and vivasvan instructed it to Manu, the father of mankind and Manu in turn instructed it to iksvaku.

*** Human life is meant for cultivation of spiritual knowledge, in eternal relationship with the Supreme Personality of Godhead. To spread the science of divine consciousness so that the people may take advantage of this great science and pursue a successful path utilising the opportunity of the human form of life.

Lease agreement with own family shouldn’t be considered when it is made for tax evasion

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Where Income Tax Authorities found that assessee had leased out his property to his own family members, who in turn had sub-leased it to outsiders on much higher rentals, however income in fact belonged to assessee, Assessing Authorities could have taxed said income at hands of assessee.

Refer extract of case law:

IT : Where Income Tax Authorities found that assessee had leased out his property to his own family members, who in turn had sub-leased it to outsiders on much higher rentals, however income in fact belonged to assessee, Assessing Authorities could have taxed said income at hands of assessee.

Facts
• The assessee had leased out his property to his own family members, who in turn had sub-leased it to outsiders on much higher rentals.
• Assessment in case of assessee was completed by treating the rent received by the lessees of the assessee as rental income of the assessee.
• On appeal, the Commissioner(Appeals) upheld the assessment order passed by the Deputy Commissioner of Income Tax on the ground that it was in accordance with section 23(1).
• On second appeal, the Tribunal partly allowed the appeal of the assessee.
• On further appeal the High Court held that the Tribunal had recorded the finding of fact that the nature of leases executed by the assessee being bogus and structures being raised by the assessee himself, it would be proper to include the net rental value to the income of the assessee.
• On appeal to the Supreme Court:
Held
• Going by the nature of transaction, a clear finding of fact is arrived at by the authorities below that a devise was made by the appellant to show lesser income at his hand and because of this reason only he purportedly entered into a lease agreement with his wife, son and daughter-in-law in respect of the aforesaid property of which he is paying by letting them at a very nominal rates and allowing his family members to sub-let the same at much higher rents. In these circumstances, these findings of fact cannot be interfered with in the present appeals. Once it is found that the income in fact belongs to the appellant he was the right person for taxing the said income, it was permissible for the Income Tax Authorities to tax the said income at the hands of the assessee 

Lease agreement with own family shouldn’t be considered when it is made for tax evasion: Apex Court (([2017] 84 taxmann.com 116 (SC))