2019 (10) TMI 943 - AAR - GST

Supply or not - activity of depositing the timber / wood by the applicant with the Government Timber Depot for disposal as per the provision of Section 104 of the Karnataka Forest Act - levy of GST for keeping the goods at the custody of the auctioneer i.e. Government Timber Depot - HELD THAT - The supply of goods by the applicant to the depot for further supply on behalf of the principal would also amount to a supply and the applicant has to issue a tax invoice and discharge GST on the same - Hence the transaction of depositing timber with the Government Timber depot for disposal would amount to supply within the meaning assigned to it under the GST Act and GST is chargeable on the value of such supply. Valuation - on what value GST is chargeable in the invoice by the applicant? - HELD THAT - Section 15(4) of the CGST Act, 2017 mandates that where the value of supply of goods cannot be determined as per Section 15(1) then the same shall be determined in such manner as may be prescribed - the value of supply of timber to the Depot by the applicant shall be the open market value or the value as may be determined under rule 30 or rule 31 in that order. Whether the payment of GST on the full amount by the auctioneer i.e. Government Depot, will be the complete discharge of liability in the hands of the applicant and hence the applicant is not required to charge any GST while depositing as well as receiving the net consideration from the auctioneer? - HELD THAT - There is no provision in the GST Act for shifting of the tax liability and considering that as a deemed discharge of liability. There are two supplies of timber involved in the chain of transactions, one when the timber is handed over to the depot by the applicant and the second when the timber is sold by the depot. Both are independent supplies in the eyes of the GST Act and hence the tax needs to be discharged at both stages. Time of supply of timber - HELD THAT - The time of supply is the time of removal of timber/ wood by the applicant for supply to the depot. If the transaction is considered as supply in the hands of the applicant when consideration is not fixed / known at the time of supply, when would be the time of supply and when the applicant has to remit the tax on what value? - HELD THAT - It is pertinent to note that the time of second supply involving timber i.e. by the depot (agent) to the third party-does not have any impact on the value or time of supply of the first supply, i.e. supply of timber/ wood by the applicant to the depot for sale. Should GST be paid by the applicant on supervision charges collected by the Government Timber Depot under Reverse Charge as per the SI.No.5 of N/N. 13/2017? - HELD THAT - Since the activity of providing supervision services is not covered under the exceptions in entry 5, the same is liable to tax under reverse charge and this is subject to the condition that the Government Timber Depots are Government Departments, the applicant is liable to pay tax on the receipt of supervision services. In case the Government Timber Depots are not Government Department then such reverse charge mechanism shall not be applicable and the Government Timber Depot shall collect the GST and issue invoice to the applicant.

Summary

Issues Involved:
1. Determination of whether depositing timber with the Government Timber Depot constitutes a supply subject to GST.
2. Clarification on the GST applicability and invoicing for depositing timber with the auctioneer.
3. Examination of the liability discharge for GST on supervision charges collected by the Government Timber Depot.
4. Determination of the time of supply of timber in the transaction.
5. Assessment of GST payment responsibilities for supervision services under reverse charge mechanism.

Analysis:
1. The applicant sought an advance ruling on whether depositing timber with the Government Timber Depot for disposal constitutes a supply subject to GST. The Authority found that the Depot acts as an agent of the applicant, transferring goods to third parties, making it a supply as per the CGST Act.

2. Regarding GST applicability and invoicing, the value of supply of timber to the Depot by the applicant shall be determined as per Rule 29 of the CGST Rules, based on open market value or other prescribed methods.

3. The Authority ruled that there is no provision for shifting tax liability as a deemed discharge. Both the supply of timber to the depot and the subsequent sale by the depot are independent supplies, requiring GST payment at both stages.

4. The time of supply was determined to be when the timber is removed by the applicant for supply to the depot, as per the provisions of the CGST Act.

5. The GST liability for supervision services was analyzed under the reverse charge mechanism. The applicant is liable to pay tax on supervision services if the Government Timber Depots are Government Departments; otherwise, the Depot should collect GST and issue an invoice to the applicant.

This comprehensive analysis of the judgment provides detailed insights into the issues raised by the applicant and the authoritative rulings provided by the Advance Ruling Authority.