E-units out of the scope of GST: AAR

E-units out of the scope of GST: AAR

An advance ruling is given by the Authority of the Advance Ruling(AAR) of Karnataka. Regarding the transfer of E-units to the other party. This ruling was submitted by the M/s Rajarathnam‟s Jewels. The applicant will provide EVR to the other party and the other party can claim the Diamonds. There is no direct involvement of the diamonds. Following is the issue/question raised by the applicant and ruling given by the AAR:

Issue/Question Raised by the Applicant

• Whether mere deposit of diamond with safe vaults acknowledged by Electronic Vault Receipts (EVR) would be treated as the supply for the purpose of levy of GST?
• Whether conversion of EVR (representing receipt for diamonds deposited) into E-units (securities) would be treated as supply liable to GST?
• Whether E-units would be treated as securities and thereby transaction in E-units would remain out of the scope of the levy under GST?
• Whether the derivative contracts in E-unit and settlement thereof would be treated as the transaction in securities and thereby would remain out of the scope of the levy under GST?
• Whether conversion of E-units into diamonds would be treated as supply liable to GST?

Download the full explanation and reasoning provided by the both by clicking the below image:

Ruling

1. The mere deposit of diamond with safe vaults acknowledged by Electronic Vault Receipts (EVR) does not constitute of supply of diamonds for the purpose of levy of GST.
2. The conversion of Electronic Vault Receipts representing the diamonds held in the Vaults to E Units would constitute a supply of diamonds liable to tax under the Goods and Service Tax Act.
3. The E Units are securities under the clause (101) of section 2 of the Central Goods and Services Tax Act and hence transactions in E Units would remain out of the scope of levy of tax under Goods and Services Tax Act.
4. The derivative contracts in E Units and settlement thereof would be treated as transactions in securities in case it involves only E-Units without any involvement of physical diamonds and thereby would remain out of the scope of levy under GST.
5. The conversion of E Units into diamonds would constitute a supply of diamonds liable to tax under the Goods and Services Tax Act.