ISSUE - whether provisions of GST under Reverse Charge basis are applicable to purchase of Goods by a registered person from a CONSUMER supplier.

1) Sale of Old Jewellery

2) Sale of Consumer scrap such as plastic, newspapers, steel

3) Sale of used goods

4) Sale of used Car etc.

Can the transactions of the above nature be subject to GST under Reverse Charge basis?

As per the provisions of Sec.9(4) of the Central Goods and Services Tax Act – "The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods".

Tax shall be payable by the registered recipient on reverse charge basis if:-

a) The transaction is within the scope of "SUPPLY"

b) The Supply is of Taxable goods or Services

c) By an unregistered supplier

d) To a registered recipient

The scope of supply is governed by the provisions of Sec.7.

As per the provisions of Sec.7(1)(a) of the Central Goods and Services Tax Act – " Supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business."

For a transaction to fall within scope of supply, it should also satisfy the following conditions:-

a) made or agreed to be made for a consideration

b) in the course or furtherance of business

Under clause(a) of Sec. 2(17),Business includes "Any trade, commerce, manufacture, profession, vocation, adventure,wager or any other similar activity, whether or not it is for a pecuniary benefit"

A general view of the provisions of Section 9(4) depicts that purchases of Goods by a registered person from Consumer, being an unregistered person, shall be subject to Tax under Reverse Charge Basis. However, on analysis of the above provisions, an alternate view also appears that: -

1) Sale of personal Goods by the consumer is not in course of furtherance of business of the Consumer.

2) The definition of business includes Trade and Trade refers to activities of buying and selling of goodsand not Selling of goods alone.

3) Since the sale of goods by the consumer is not in course of furtherance of business, it is outside the scope of Supply.

4) Since Sale of Goods by a consumer is not a SUPPLY, such purchase of Goods by the registered person from consumer supplier should not be subject to Tax under Reverse charge basis.

We may also appreciate the following:-

A) The Consumer is destination point in the Chain of Supply.

B) The consumer does not avail credit of tax paid and Tax on goods have been fully paid.

C) There is no loss of revenue to the Government as the goods have passed through Tax.

D) The goods that are sold are used Goods, on which tax has been fully paid.

E) Even the FAQ's dated 31/03/2017 released by CBEC, Q.no10 under Scope of Supply, page 50, mentions -

Q. An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act? Give reasons for the answer.

Ans. No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

(Source: Different)

How do banks calculate interest on savings accounts?

It really depends on the bank, the savings account, and the depositor's preferences. Somewhere in the fine print of the account paperwork, the methodology must be disclosed in considerable detail.

At a high level, there are two components to the interest calculation:

1. Day-Count Convention
2. Compounding Convention

Day-Count Convention: Some examples include these

• Actual/Actual - actual number of days over actual numbers of days
• Actual/365 - actual number of days over a presumed 365 day year (i.e. even leap years are treated as 365 days)
• Actual/360 - actual numbers of days over a presumed 360 day year
• 30/360 - number of days with all months presumed to have 30 days over a presumed 36o day year

Specifically for 30/360, there are several different standards that detail how to handle February (e.g. the ISDA standard is one).

Compounding convention: These are best explained by example, but here are some samples

• Annual
• Semiannual
• Quarterly
• Daily
• Continuous
• Simple

Let's run through some examples.

Example 1: 

• 1.5% interest, annual compounding, actual/actual day-counting

One month's interest for January 2015 would be (1 + 1.5%)^(31/365) - 1
One month's interest for February 2016 would be (1 + 1.5%)^(29/366) - 1
(Note: the year 2016 is a leap year)

Example 2:

• 2.0% interest, quarterly compounding, actual/365 day-counting

One month's interest for January 2015 would be (1 + 2.0%/4)^(4 * 31/365) - 1
One month's interest for February 2016 would be (1 + 2.0%/4)^(4 * 29/365) - 1
(Note: the year 2016 is a leap year, but it's still treated like it has 365 days)

Example 3:

• 2.5% interest, daily compounding, 30/360 day-counting

One month's interest for January 2015 would be (1 + 2.5%/360)^(360 * 30/360) - 1
One month's interest for February 2016 would be (1 + 2.5%/360)^(360 * 30/360) - 1
(Note: all full months are treated as 30 days in total length, and both formulas reduce to (1 + 2.5%/360)^(30) - 1)

The general formula is then (1 + r/k)^(k * t) - 1, where

• r = interest rate
• k = coumpounding factor
• t = time factor

What about "continuous compounding" you ask? Well that's just what happens when the compounding factor, k, approaches infinity. In that case we get the formula: e^(r * t) - 1

Continuous compounding is useful in quantitative finance because it's easy to take a derivative of e^x.

Lastly, there is "simple compounding", which is just: r * t. Note that this isn't really compounding at all, since there is no exponential.

To calculate dollars of interest with non-continuous, non-simple compounding use:
(account balance)(1 + r/k)^(k * t) = account balance + dollars of interest

If deposits and withdrawals are being made during the interest accrual period, the bank may adopt an average balance approach wherein interest is calculated on some weighted average balance over the accrual period. Alternatively, consider this example:

Example 4: 

• 1.5% interest, annual compounding, actual/actual day-counting
• $100 at start of month
• $200 deposit on the 15th

Depending on the terms of the account, one month's interest in dollars for January 2015 could be

• $100((1 + 1.5%)^(15/365) - 1) + $300((1 + 1.5%)^(16/365) - 1)
• $100((1 + 1.5%)^(31/365) - 1) + $200((1 + 1.5%)^(16/365) - 1)
• ($100(15/31)+$300(16/31))((1 + 1.5%)^(31/365) - 1)

There are many possibilities here that will vary from bank to bank and even account to account.