Latest Judgments by GST Authority for Advance Ruling

Source: GST Sutra

Punjab AAR: Forward contract settled by differential rate payment considering prevailing market rate constitutes ‘securities’, not liable to GST

• Punjab AAR held that forward contract in cotton sales and cotton purchases, being settled by applicant with another party to contract by way of payment of differential of forward rate and prevailing market rate on settlement date, falls within purview of ‘securities’ defined u/s 2(101) of CGST Act, 2017, therefore not eligible to GST;

• However, where settlement takes place without supply of goods at a discretionary price other than market price of cotton on the day of settlement, same would not be covered under term ‘securities’, and would amount to a supply of ‘service’, liable to GST u/s 9 of CGST Act, 2017;

• Further explained that the said activity shall be liable to GST in terms of Schedule II to Section 7, as, agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

• Referred to FAQs on Financial Service to find that Govt.’s intention is not to tax settlements under forward contracts where same takes place by way of net settlement of differential of forward rate over prevailing market rate on settlement date;

• Lastly, Referring to various clauses of Securities Contracts (Regulation) Act, 1956 (SCRA) elucidated that, term securities which cover commodity derivatives refers only to those contracts which are traded or settled in recognized stock exchange.

Telangana AAR: Pooling of land, by way of amalgamation, not ‘supply’; construction undertaken w.r.t. partner’s share qualifies ‘supply of service’

• Telangana AAR held that pooling of land by way of amalgamation of separate parcels would not constitute a supply under CGST Act, 2017 and Telangana GST Act, 2017 as the said activity of amalgamation of land do not fall under any of sub-clauses (1) to (3) of Section 7 of CGST Act, 2017;

• Elucidated that, in terms of clause 1(c) of Schedule II of the CGST Act, 2017 “any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods”, however, as per Section 2(52), ‘goods’ includes only moveable property but land is not covered under the definition of ‘goods’;

• However, referring to clause 5 (b) of Schedule II of the CGST Act, 2017, holds that construction activity undertaken with respect to share belonging to partners would be treated as ‘supply of service’;

• Perusing the MOU, nature of service provided by assessee and provisions of Section 15 of CGST Act, 2017, Rule 28 and Rule 30 of CGST Rules, 2017, states that having regard to the nature of service, value cannot be determined under clause (a) or (b) of Rule 28 of the said Rules, therefore value needs to be determined by applying the provisions of rule 30 of CGST Rules, 2017;

• Expounded that as the applicant is providing service to related persons, therefore, value of construction service supplied shall be 110% of cost of provision of said service, moreover clarified that, vesting of constructed portion upon partners would not independently constitute a supply as neither any service nor any consideration has been received for vesting of constructed portion to partners.