The Central Board of Excise and Customs (CBEC) clarified the liability to pay tax on the taxable services provided by the members of the Joint Venture (JV) to the JV and vice versa and inter se between the members of the JV under the Goods and Services Tax (GST) regime.
Under the old regime, as per the CBEC circular dated 24th September 2014, if cash calls are merely transaction in money, then they are excluded from the definition of service provided in Section 65B (44) of the Finance Act, 1994.
‘Cash calls’ are raised by an operating member of the joint venture on other members in proportion to their participating interests in the joint venture(unincorporated) to meet the expenditure on the operations to be carried out as per the approved work programme and budget.
A CBEC missive issued on Monday said that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as the supply of services. According to Article 366(29A)(e) of the Constitution, a tax on the sale or purchase of goods includes a tax on the supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
“Therefore, the law with regard to levy of GST on service supplied by the member of an unincorporated joint venture (JV) to the JV or to other members of the JV, or by JV to the members, essentially remains the same as it was under service tax law. Thus, it is clarified that the clarification given vide Board Circular No. 179/5/2014 – ST dated 24.09.2014 ibid in the context of service tax is applicable for the purpose of levy of GST also,” the circular clarified.
The circular also reiterated that the question whether cash calls are taxable or not will entirely depend on the facts and circumstances of each case. The Board explained the taxability of cash calls by using the following illustrations; that the payments made out of cash calls pooled by a JV towards taxable services received from a member or a third party is in the nature of consideration and hence attracts Service Tax.
It further clarified that if the operating member who uses its own machinery under the joint venture agreements is providing ‘service’ within the scope of supply of CGST Act, 2017.