Solutions Pvt. Ltd.

GST Handout updated 01/23

Sector-wise Impact of GST : 1. GST on Gems, Ornaments & Jewellery

There has been a lot of confusion and multiple interpretations are doing rounds over the past few weeks in respect of the taxability
of Jewellery. In the ensuing paragraphs, an effort has been made to clear the air around this issue. Before going in to details first let
us point out the rate of taxes applicable on this industry:-
HSN/ SAC
S. No. Particulars GST Rate
Code
1. Rough and un-worked diamonds, precious and semi-
7103, 7104,
precious stones, cut & polished diamonds, synthetic 0.25%
7102
stones – not strung or mounted or set
2. Pearls, Gold, Silver, Articles of jewellery of gold, 7106, 7108,
3%
imitation etc. 7113, 7118
3. Making Charges for jewellery 9988 5%
4. Job work in relation to cut and polished Diamonds,
9988 1.5%
plain or studded jewellery of gold, silver, etc.
5. Other professional, technical and business services
9983 18%
(residuary clause) (includes repairing)

Now let us understand the complex situation with different examples:-

1. Customers walks into a Jeweller showroom and buys a Gold ornament worth Rs. 1,00,000
The Jeweller will charge GST @ 3% on Rs. 1,00,000. It is important to note that this supply is a composite supply as defined under
section 2(30) comprising of supply of Gold ornament along with supply of ornament making services. Gold ornament being the
principal supply, the entire value of taxable supply shall be charged @ 3% as per section 8 of the CGST Act.
2. Customers walks in to a Jeweller showroom and buys a Gold ornament worth Rs. 1,00,000 and the Jeweller charges
separately for Gold and making charges
In this case, since the consideration for both Gold and making charges have been disclosed separately in the invoice by the Jeweller,
the supplies will be taxable at their respective applicable rates, i.e. Gold @ 3% and making charges @ 5%.
3. Customer gives old jewellery and in return buys a Gold ornament worth Rs. 1,00,000
The old jewellery given by the Customer does not constitute supply under GST law. As per section 7 of the CGST Act, one of the
essential elements of supply is furtherance of business of the person making the supply. In the instant case, sale of personal jewellery
by a customer does not constitute furtherance of business by the customer.
Further, as per notification no. 10/2017 (CT and UT Act), dated 28 June 2017, local purchase of second hand goods by a registered
dealer (Jeweller in this case) is exempt from tax provided the dealer pays tax at the time of resale on the value determined as per
Valuation rules.
4. Customer sells old jewellery to the Jeweller and does not buy anything in exchange
The subject transaction does not constitute supply for the reasons discussed in case 3. Accordingly, there will be no tax implications
in this case.
It is important to note that in cases 3 & 4, it is desirable for the Jewellers to obtain suitable KYC documents, declaration from the
customers in order to substantiate the fact that the sale of old jewellery by the customers is not in the course of business.
5. Customer owns 20 gm gold and gets a gold bangle made from the Jeweller. The Jeweller charges Rs. 5,000 as making charges
from the customer and pays Rs. 2,000 to the Karigar
The Jeweller shall charge GST @ 5% on the making charges of Rs.5000
It is to be noted that the making charges paid by the Jeweller to the Karigar (job worker) will attract GST @ 5% under reverse charge
(assuming that the Karigar is not a registered person).

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 Solutions Pvt. Ltd. GST Handout updated 01/23

Sector-wise Impact of GST : 4. GST on Works Contract

Works Contract is clearly defined in GST Schedule II as:-

✓ Construction or repair/renovation of a complex, building, civil structure or a part thereof, intended for sale to a buyer,
wholly or partly,
✓ Transfer of property in goods (eg. sale of furnished flat) (whether as goods or in some other form) involved in the execution
of a works contract
✓ Renting services
Works contract will be treated as service and tax would be charged accordingly (not as goods or part goods/part services).
To put in simple terms, ‘Works Contract’ is effected only in case of immovable property. But may or may not involve direct supply
of ‘immovable property’. An example will make it clear:-
‘ABC Realtors Co.’ takes booking amount from 50 customers who intends to buy flats at Asansol @10 lacs/customer.
- Here, question arises whether ABC Realtors Co. need to collect GST also?
- Ans - Yes, ABC Realtors Co. will have to collect GST. Because is a ‘supply of Works Contract’ which involves direct
selling (supply) of an immovable property (flats)
Again, say Mr. Sekhar who purchased a single flat as above, now after 5 years decides to do certain repairing and interior decoration.
So he employs ‘Magichomes Co.’ to do the job at Rs.4 lac.
- Here, again question arises what type of supply does Magichomes supplies, so as to charge GST?
- Ans – It will again be ‘supply of Works Contract’ which even though doesn’t involve direct selling of any immovable
property, but involves renovation/repair of an immovable property i.e his flat. And hence GST is applicable.

In the same way, the following will be included in supply of services under Works Contract:-
i. Building
ii. Construction
iii. Fabrication
iv. Completion
v. Erection
vi. Installation
vii. Fitting Out
viii. Improvement
ix. Modification
x. Repair
xi. Maintenance
xii. Renovation
xiii. Alteration
xiv. Commissioning

No other type of job will come under the purview of ‘works contract’ apart from the above 14. I think I have made a pretty clear
demarcation between a ‘Job Work’ and ‘Works Contract’. There’s no scope of confusion between the two and their treatment will
remain different in GST.

Taxability
Now the question arises about the taxability of works contract. As stated earlier also, that works contract may involve supply of goods
or services or both. But for the purpose of GST, it will be regarded as a SUPPLY OF SERVICE only. Also do note, that whenever both
goods and services will be bundled together and then supplied, such transaction will be regarded as a composite supply (of services).
Why am I emphasising the nature (i.e Supply of Services) again and again? That is bcoz I want you all to recall, that time and place of
supply is different in case of goods than that of services. Services supplied under works contract are taxed @ 1%/5%/12%/18%. The
detail of which can only be learnt when we discuss ‘GST in Real-Estate’ later in our course.
(Note:- Pure labour contract means supplier of service should not utilize any material in supplying the service. It should be a labour
contract only. The rate of tax in case of pure labour services shall be 18%)

Next, let us discuss the matter of ITC availability to works contract service. ITC will be available to works contract service only if it is
for further sub-contract. Eg. ABC Realtors is constructing a residential project in Asansol. But after 2 years it realises that it might not
be able to complete the project within time limit all by itself. And employs MNO Builders for building 30% of the remaining project.
Now, MNO Builders will charge their price with GST to ABC Realtors. And ABC Realtors will be able to avail ITC in this case. It is allowed
bcoz ABC & MNO are two in the same line of business.
However, in a different example – Tally Academy contracts with ABC Realtors to repair and renovate their interiors, and ABC Realtors
charges the bill with GST. Tally Academy will not be able to avail this ITC as Tally & ABC are not in the same line of business.
However, in another example – IISCO constructs an office building by ABC Realtors. ITC will not be available to IISCO. But if IISCO
constructs a new blast furnace/chimney then ITC is available since it is a plant. ITC on plant & machinery will be allowed to all.
Again, in a different example – ABC Realtors builds an office building for themselves. ITC will not be available to ABC Realtors. As it is
not in course of furtherance of business
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 Solutions Pvt. Ltd. GST Handout updated 01/23

And now, exploring a little deeper on the topic of ITC for works contractor, we also need to keep in mind that there’s anothe r point
as well which need to be kept in mind while judging the ITC eligibility of a works contractor i.e, ‘expense capitalisation in books of
accounts’. It states that if any GST is paid on services like ‘repairs/renovation’ etc., AND if such expense have already been charged in
books of accounts, then ITC on such works contract (for repairs/renovation) will not be available.
Lets sum up with some examples-
1. A trader gives a building repair/ renovation contract for his shop to a contract wherein the contractor would be procuring the
materials and would be paid a lump sum amount for services and materials.
➢ The aforesaid activity would qualify as a works contract since repair/renovation is in relation to the building i.e.,
immovable property. The input tax credit on the said supply can be availed to the extent that the repair/renovation
expense has not been capitalized in the books.
2. Continuing with the above example if the trader bought the materials by himself and awarded only the labour activity to the
contractor, it is a case of goods or service received on own account for construction (i.e. repair/ renovation) of an immovable
property.
➢ The same can be claimed as input tax credit to the extent of material and labour not capitalized in the books.
3. Further, if a trader owing to compliance with income tax provisions capitalizes building repair/ renovation expenditure, since the
benefit of the same accrues over the years, input tax credit under scenario 1 and 2 above would not be available since the same
would be capitalized in books of account.
To summarise, it can be said that GST paid on inward supply being works contract can be availed as input tax credit, provided they are
used for the construction of an immovable property and the same is not capitalized in the books of account. Further, one has to keep
in mind the accounting treatment of the expenses incurred whether the same has to be capitalized or to be accounted as an expense
as per the applicable Accounting Standards and income tax provisions.

Rental Supply of Real Estate

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 Solutions Pvt. Ltd. GST Handout updated 01/23

Sector-wise Impact of GST : 5. GST on Hotels & Restaurants

After the advent of GST, hospitality industry has seen some rapid changes. Hotels may be understood to be one providing facility of
lodging and may or may not include fooding or other facilities. However, a restaurant may be meant to be a common place where
people enjoy cooked food and other facilities as per their preferences.
(Note - Restaurant does not provide any lodging facilities, but a hotel may also provide restaurant services in addition to lodging).

GST Rates
Hotels Restaurants
(Service -> Accommodation + Fooding) (Service -> Fooding)
Room Rent (per day) GST
Upto 7,500 12% with ITC All stand-alone restaurants (AC / Non-AC) 5% without ITC
Above 7,500 18% with ITC Food parcels (or takeaways) 5% without ITC
Restaurants in hotel premises** having room tariff of 5% without ITC
less than Rs.7500 /day
+ ‘outdoor catering’ (outdoor = events; functions;
office-mess-canteen on contract)
Restaurants in hotel premises having room tariff of 18% with ITC
Rs.7500 and above/day
IRCTC (or their licensees) 5% without ITC
** there it is stated for hotels (<7500/day) – if they provide restaurant service in their premise – then rate of GST on such restaurant
bill will be 5% without ITC. So, whatever expense that restaurant makes (eg. – fresh food materials purchased,
transporting charges, etc.) in its regular course of business - it will not be able to take benefit of ITC.

Lets discuss the above tariff with the help of an example:

Room tariff (per day) 10000 Room tariff (per day) 10000
Less: Off-season discount 2000 Less: Off-season discount 3000
Declared Value / Taxable Val. 8000 Declared Value / Taxable Val. 7000
GST @ 18% (on 8000) 1440 GST @ 12% (on 7000)* 840
Invoice Value 9440 Invoice Value 7840

Room tariff (per day) 7000 Room tariff (per day) 7000
Add: Extra bed charges 2000 Add: Extra Bed 1000
Declared Value / Taxable Val. 9000 Total 8000
GST @ 18% (on 9000) 1620 Less: Online OYO Discount 2000
Invoice Value 10620 Taxable Value 6000
Declared Value 8000
GST @ 18% (on 8000)# 1440
Invoice Value 7440

Room tariff (7000) + Complimentary Breakfast (1000) 8000 Room tariff 7000
Taxable Val. (composite supply) 8000 Declared value 7000
GST @ 12% (on 8000) 960 Add: Oyo charge 600
Invoice Value 8960 Taxable Value 7600
GST @ 12% (on 7000) 840
GST @ 18% (on 600) 96
Invoice Value 8536

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 Solutions Pvt. Ltd. GST Handout updated 01/23

Input Tax Applicability

Many businessmen related to this industry are of the notion that input tax benefit is not available in these type of businesses – it is
absolutely wrong. There are some genuine pull backs while attaining ITC pertaining specially to this industry, but it does not mean
that the whole industry is deprived of ITC. Let’s dig into this a little deeper:-
Expense/Asset Hotels Restaurants
ITC (Y/N) ITC (Y/N)
Repair Maintenance (P/L) Yes – for all No (Y-only for restaurants @18%)
Assets Yes – for all No (Y-only for restaurants @18%)
Under construction mat. No – However may cite Orissa H.C (Safari Retreads)

Critical Points:- * Rate of GST in hospitality industry does not depend on the type of hotel/restaurant, but on the tariff and nature
of supply made.
* Complimentary breakfast with room stay will be a composite supply as usual – as will be banquet hall with catering
* Contrary to tolerating tendency of hotel owners – they charge 18% GST on cancellation charges – DON’T DO THIS
* Till 18th July 2022 – Exemption was allowed on room rent upto Rs.1,000. In such cases - Do note that even if you
supply hotel services where room rent/day < 1000 (prior to july 2022), it is your supply – include it in the
‘exempted supply’ column & include liquor supply in ‘non-GST supply’ while filing GSTR 1 & 3B.
---- a further point arises here, that if room rent < 1000/day – then you’re providing exempted supply – so you’re
not eligible for ITC – if already availed then u will need to reverse it – see the rate table above – however you need
not worry about the ‘exempted’ part now – as rents < 1000/day has been brought under taxable bracket of 12%.
* Tax will be charged on ‘declared value’ = the value declared to Govt. – and not on ‘taxable value’
* If employer provides free canteen service to its employees, then it will be treated as a part of salary – hence out of
ambit of GST. However, do note that if employer procures such canteen services from a 3rd party contractor, then
the employer will need to pay GST as usual (& will get ITC benefit as well)
* Service charge has nothing to do with Govt. taxation, restaurants charge is as ‘tips’
* Food e-commerce operators like Zomato, Swiggy are brought under ‘Restaurant’ services from 1/1/22. They are
liable to collect GST u/s 9(5) from the end customer (the restaurant will not collect GST in such cases) and pay the
same in cash to Govt. This rule applies to all supplies made by a restaurant (whether regd. or unregd.) through a
ECO. The restaurant will only collect GST from customers who visits the premise. The rate of GST in such cases will
be @5% without ITC.
-> The ECO is required to report supplies made u/s 9(5) in Table 7A(1) or Table 4A of GSTR-1 and in Table 3.1.1(i) of
GSTR-3B and shall not include such supplies in Table 3.1(a) of GSTR-3B. The applicable tax on such supplies shall be
paid by ECO in cash only and not by ITC.
-> The registered person (restaurant) who is making supplies of such services as specified u/s 9(5) through an ECO,
shall report such supplies in Table 8 of GSTR-1 and in Table 3.1.1(ii) of GSTR-3B (and shall not include such supplies in
Table 3.1(a) of GSTR-3B). The registered person is not required to pay tax on such supplies as the ECO is liable to pay
tax on such supplies.
* Oyo.com // Yatra.com will only charge 18% on their service fee

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 Solutions Pvt. Ltd. GST Handout updated 01/23
Sector-wise Impact of GST : 7. Education Sector
Education sector has got a relief in GST regime, as such, the sector is out of ambit of GST. To be precise, the following services fall
under the exempt category:-
1) Pre-school education and education up to higher secondary school or equivalent;
2) Education as a part of a curriculum for obtaining a qualification recognized by any law for the time being in force;
3) Education as a part of an approved vocational education course;
Apart from the above, the following institutes are also exempt:-
4) Educational institutes/coaching centres run by a charitable trust;
5) Education institution for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or
persons over the age of 65 years or above residing in a rural area;
6) Government schools / Municipal schools / Madrasas;
7) 2 year full-time residential PG programs in Management for Post Graduate Diploma in Management, admission in which is
IIM only

granted via CAT

8) Fellowship programs in Management
9) 5 Year Integrated Programs in management studies (but excludes the Executive Development Program).
10) It is to be noted that procurements by pre-school and HS schools are also exempt from GST. Eg. Transportation of students,
faculty and staff; Catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union
territory; Security or cleaning or house-keeping services performed in such educational institution; Services relating to admission to,
or conduct of examination etc – which are provided to educational institutes in point no. 1) above only will be exempt.

PTN for educational institutes:-

Registration of Educational Institutes:-

• Where the educational institution is providing only education as a service then such fees are chargeable at NIL rate and such
educational institutions are not required to be registered.
• Where educational institutions are also providing other supplies or other services, i.e., providing books to students, providing
shoes or uniforms etc to students then in such cases such institutions are liable to get themselves registered.

Applicability of GST on Higher Educational Institutions:-

• While services provided by an educational institution are out of the GST ambit, the same is not the case with services provided
to an educational institution. Services provided to higher educational institutions are taxable.
• The GST exemption on procurements (as mentioned in point 10 above) is available only to schools (from pre-school up to
higher secondary school or its equivalent). Hence, the ‘input’ or supply of services such as transportation, catering,
housekeeping, services relating to admission or conduct of examination to higher educational institutions will bear GST levy.
This will have to be borne by the higher educational institution.

Applicability of GST on Training programs, camps, yoga programs and other events:-
• Training programs, camps, yoga programs and other events would be considered a commercial activity, liable for GST.

Supply of books or stationery distributed to students :-

• Uniform, stationery, and other non-academic supplies are taxable under GST. Supplies provided by third parties like musical
instrument, computers, sports equipment and after-school activities offered directly by third parties are also taxable.
• Supply of books is however exempt under GST.

Chargeability of GST on Private Coaching centres and Distance Education:-

• Private institution and coaching centres do not have any specific curriculum and do not conduct any examination or award
any qualification. Hence taxable at the rate of 18 percent.
• Distance Education is taken up generally for higher education and hence taxable at the rate of 18 percent.

Sector-wise Impact of GST : 8. Healthcare Sector

India is the largest producer for generics. Country’s Pharmaceutical Industry is currently the 3rd largest in the world in terms of volume
and ranks 14th in terms of value. As the population continues to grow, the need for better Healthcare Services is also growing.
Currently, 5 percent of the country’s GDP is spent on the Healthcare sector.
Healthcare services are exempt in the GST regime. But what is the meaning of health care services on which exemption is granted, we
have to understand the nature of services presently exempt under GST. The point of discussion on GST on health care services will be
incomplete if we do not talk in totality on health care services i.e. taxability of consultation fees of doctors, Room rent in Hospital,
Medicines, Medical and clinical tests, Services of ambulance, Blood Banks, treatment of clinical waste etc. Also, we would like to
discuss about the taxability of other income of doctors in addition to income from practicing as a doctor. The GST impact on various
issues are as under:

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 Solutions Pvt. Ltd. GST Handout updated 01/23
• Health care Services by a
1) Clinical Establishment (Hospital; Nursing Home; Maternity centre; Clinic & Sanatorium) or
2) Authorized Medical Practitioner (Registered Doctor of Allopathy, Homeopathy, Ayurveda, Yunani, Naturopathy) or
3) Para medics (nursing staff, physiotherapists, technicians, lab assistants)
- are exempt from Goods and services tax, and includes:-
4) services by way of transportation of the patient in an ambulance;
5) pathological / investigation centres
6) services provided by veterinary doctors
7) room rent for patient* - Rent charged for rooms for patients are not taxable under GST. However, if the hospital is
renting space for a chemist shop or providing rooms on rent for care takers, then that would attract GST.
• Complete overview of taxability of Clinical establishments -
Generally, the services provided in the Hospital Sector consists of:
a) Out-patient Department - Medical consultancy for Out-patient including regular check-up and small treatment. It
also includes medical consultancy and treatment without admitting a patient in the Hospital. These services are
exempted from GST. Sale of owned medicine while doing treatment or consultancy directly in shop or through
doctor is not exempted from GST.
b) In-patient Department - In-patient includes the various surgeries conducted on the patient, charges for room rent,
consultancy charges, food & beverages, bed charges, operation theatre rent, equipment charges, Doctor fees,
pharmacy consumed. (All the charges are recovered from IPD for purpose of curing of disease or disorder) The above
services are exempted from GST.
c) Various tests conducted - Various tests in a hospital may include charges collected directly by Hospital or charges
collected by Centre and then proportionate charges are shared between doctor and Centre owner OR monthly fixed
payment is made to the Doctor by such center. GST is exempted under both the situation as such services either
directly or indirectly is given as health-care services and thus is exempt from GST.
d) Sale of medicine - Sale of medicine Sale of medicine by medical practitioner itself to the patient will be chargeable
to GST at the rate specified. Also if the sale is done through the medical shops owned by such practitioners, such
sale will also be liable to GST on MRP basis. MRP based taxation is the system where the MRP includes the GST rates
inclusive on such product and thus the GST will be paid by such medical shops to the Government of India. GST
cannot be levied separately on the medicine bills by the medical shops to the customers.

PTN for Hospitality sector:-

• Medical services not for the purpose of curing disease but for the purpose of enhancement of beauty or physical appearance
of the person are not covered under Sr.No.82 of the exemption list and thus such services are liable to GST.
• Kerala’s Authority for Advance Rulings (AAR) has made it clear that supply of medicine through pharmacy to in-patients will
not be levied Goods and Services Tax (GST) separately.
• Supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients is taxable.
• A person (Under GST) is identified through his PAN. The need of taking registration arises when his aggregate turnover exceeds
Rs 40 lakh per annum (Except in special category states where the limit is Rs 20 Lakh). The aggregate turnover means sum
total of all outward supplies of goods or services or both made by a PAN entity anywhere in India. This includes all taxable,
tax free and exempted supplies. A person whose total outward supplies is exempt or not taxable is not required to register.
But where even a small part of services provided or goods sold are taxable, he is required to get registered. Also, registration
is required to be taken in all states from where the business is carried out.
Example: A person having hospital in Delhi, Haryana and UP. He has shops also in these states which has been given on rent.
His turnover from the hospital and rental income from the shops crosses the limit of Rs 40 lacs in a year. He has to take
registration on these states as the threshold limit requiring registration has crossed.
• Providing medicine/room/etc. to in-patients will be regarded as a ‘composite supply’ and as such will not be chargeable to
GST
• *Room rent (excluding ICU) exceeding Rs.5000 per day per patient charged by a hospital shall be taxed to the extent of the
amount charged for the room at 5% without ITC. As a result, GST rates would now go up for many goods and services with
effect from July 18, 2022.

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