The most important thing in communication is hearing what is not said - Clarification on GST

The most important thing in communication is hearing what is not said. - Peter Drucker

To make sure the un-intended assumptions of not said, the CBEC has issued a list of clarification for certain industry such as Accommodation services, betting and gambling in casinos, horse racing, admission to cinema, homestays etc.

Following are the worth reading clarification issued by the government vide circular no. 27/01/2018-GST.

1. Hotel industry (Currently, **hotel rooms with tariffs below Rs 1,000 per day attracts zero tax, those below Rs 2,500 are taxed at 12%, while staying in rooms with tariffs between Rs 2,500 and Rs 7,500 are taxed at 18%. The highest slab of 28% tax has been reserved for only luxury hotel accommodation, which can be defined as the one with tariffs above Rs 7,500 per day.)

a. Will GST be charged on actual tariff or declared tariff for accommodation services?

Declared or published tariff is relevant only for determination of the tax rate slab. GST will be payable on the actual amount charged (transaction value).

b. What will be GST rate if cost goes up (more than declared tariff) owing to additional bed?

GST rate would be determined according to declared tariff for the room, and GST at the rate so determined would be levied on the entire amount charged from the customer. For example, if the declared tariff is Rs. 7000 per unit per day but the amount charged from the customer on account of extra bed is Rs. 8000, GST shall be charged at 18% on Rs. 8000.

c. Where will the declared tariff be published?

Tariff declared anywhere, say on the websites through which business is being procured or printed on tariff card or displayed at the reception will be the declared tariff. In case different tariff is declared at different places, highest of such declared tariffs shall be the declared tariff for the purpose of levy of GST.

d. Same room may have different tariff at different times depending on season or flow of tourists as per dynamic pricing. Which rate to be used then?

In case different tariff is declared for different seasons or periods of the year, the tariff declared for the season in which the service of accommodation is provided shall apply.

e. If tariff changes between booking and actual usage, which rate will be used?

Declared tariff at the time of supply would apply.

f. GST at what rate would be levied if an upgrade is provided to the customer at a lower rate?

If declared tariff of the accommodation provided by way of upgrade is Rs 10000, but amount charged is Rs 7000, then GST would be levied @ 28% on Rs 7000/-.

g. Whether for the purpose of entries at Sl. Nos. 34(ii) [admission to cinema] and 7(ii)(vi)(viii) [Accommodation in hotels, inns, etc.], of notification 11/2017-CT (Rate) dated 28th June 2017, price/ declared tariff includes the tax component or not?

This is really interesting. Because as far as hotel room tariffs are concerned the confusion is about whether the above stated tax slab** is inclusive of tax or exclusive.

CBEC has clarified that Price/ declared tariff does not include taxes. So the given tax slab is exclusive of GST.

2. GST on admission to Casino and Betting and Gambling

Entry no. 34 of Notification no. 11/2017 CGST Rate has two line items which are as follows:

"Heading 9996 (Recreational, cultural and sporting services) -

(iii) Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go rounds, go carting, casinos, race-course, ballet, any sporting event such as Indian Premier League and the like. - 14%

(v) Gambling. - 14 %"

As is evident from the notification, "entry to casinos" and "gambling" are two different services.

GST is leviable at 28% on both these services (14% CGST and 14% SGST) on the value determined as per section 15 of the CGST Act.

The clarification has been provided about the valuation part of Gambling. GST @28% would apply on entry to casinos as well as on betting/ gambling services being provided by casinos on the transaction value of betting, i.e. the total bet value, in addition to GST levy on any other services being provided by the casinos (such as services by way of supply of food/ drinks etc. at the casinos).

Betting, in pre-GST regime, was subjected to betting tax on full bet value.

3. GST on Horse Racing

The provision in rate schedule notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 does not clearly state the tax base to levy GST on horse racing.

GST would be leviable on the entire bet value i.e. total of face value of any or all bets paid into the totalisator or placed with licensed book makers, as the case may be. Illustration: If entire bet value is Rs. 100, GST leviable will be Rs. 28/-.

4. Patient room rent

CBEC clarifies that Room rent in hospitals is exempt.

5. Whether home stays providing accommodation through an Electronic Commerce Operator, below threshold limit are exempt from taking registration?

Notification No. 17/2017-Central Tax (Rate), has been issued making ECOs liable for payment of GST in case of accommodation services provided in hotels, inns guest houses or other commercial places meant for residential or lodging purposes provided by a person having turnover below Rs. 20 lakhs (Rs. 10 lakhs in special category states) per annum and thus not required to take registration under section 22(1) of CGST Act. Such persons, even though they provide services through ECO, are not required to take registration in view of section 24(ix) of CGST Act, 2017

6. Publication of Books

Whether supply in the situations listed below shall be treated as a supply of goods or supply of service:

a. The books are printed/ published/ sold on procuring copyright from the author or his legal heir. [e.g. White Tiger Procures copyright from Ruskin Bond]

b. The books are printed/ published/ sold against a specific brand name. [e.g. Manorama Year Book]

c. The books are printed/ published/ sold on paying copyright fees to a foreign publisher for publishing Indian edition (same language) of foreign books. [e.g. Penguin (India) Ltd. pays fees to Routledge (London)] The books are printed/ published/ sold on paying copyright fees to a foreign publisher for publishing Indian language edition (translated). [e.g. Ananda Publishers Ltd. pays fees to Penguin (NY)]

The supply of books shall be treated as supply of goods as long as the supplier owns the books and has the legal rights to sell those books on his own account. So in all the above situations the same shall be considered as supply of goods only.

7. Legal Service other than Representational service

Whether legal services other than representational services provided by an individual advocate or a senior advocate to a business entity are liable for GST under reverse charge mechanism?

Yes. In case of legal services including representational services provided by an advocate including a senior advocate to a business entity, GST is required to be paid by the recipient of the service under reverse charge mechanism, i.e. the business entity.