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GST (GOODS & SERVICE TAX)

TABLE OF CONTENT
 The concept of tax and the objective for its levy
 The concept of direct and indirect tax and the differences between the two
 The basic features of indirect taxes
 The Constitutional provisions pertaining to levy of taxes
 What are the principal indirect taxes
 As to how the indirect taxes are administered in the country.

BASIC CONCEPT OF GST


 Meaning of GST
 Constitutional authority for GST
 input Tax Credit under GST
 Benefits of GST
 FAQ and MCQ

What is TAX?
A tax may be defined as a pecuniary burden lay upon individuals or property owners to support the Government, a
payment exacted by legislative authority. A tax “is not a voluntary payment or onation, but an enforced contribution,
exacted pursuant to leg slative authority.” In simple words, tax is nothing but money that people have to pay to the
Government, which is used to provide public services.

Direct and Indirect Taxes

Taxes are broadly classified into direct and indirect taxes.


Direct Taxes: A direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the
Government by the persons (juristic or natural) on whom it is imposed. A direct tax is one that cannot be shifted by the
taxpayer to someone else. A significant direct tax imposed in India is income tax.

Indirect Taxes: They are transferable tax from one person to another. The entire burden of tax is on ultimate consumer,
but immediate liability to pay tax is on supplier of goods or services.
They are also called consumption based tax & regressive in nature because they are not burden principle of ability
to pay. All consumers including bagger bear the burden of tax.
Indirect taxes are levied on goods or services but not on income or property. From 1st of July 2017 all indirect taxes
on goods or services are merged into one unified code called as GOODS AND SERVICE TAX (GST).
Economists world over agree that direct and indirect taxes are complementary and therefore, a rational tax
structure should incorporate in itself both types of taxes.

Sr N Direct Tax Indirect Taxes


1. It is levied on income earned activities conducted. It is levied on product or services
2. It is paid, directly by person concerned It is paid by one person but he recover the same from another
person i.e. person who actually bear the tax ultimate consumer
3. It is paid after the income reaches in the hands of It is paid before goods/ service reaches the tax payer
tax payer
4. Tax collection is difficult. Tax collection is relatively easier
5. E.g. Income tax, wealth tax etc. e.g. GST, excise duty, custom duty, sale tax, service tax etc.,

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Features of Indirect Taxes

(i) An important source of revenue: Indirect taxes are a major source of tax revenues for Governments worldwide and
continue to grow as more countries move to consumption oriented tax regimes. In India, indirect taxes contribute
more than 50% of the total tax revenues of Central and State Governments.
(ii) Tax on commodities and services: It is levied on commodities at the time of supply, manufacture or purchase or sale
or import/export thereof. Hence, it is also known as commodity taxation. It is also levied on provision of services.
(iii) Shifting of burden: There is a clear shifting of tax burden in respect of indirect taxes. For example, GST which is paid
by the seller of the goods is recovered from the buyer by including the tax in the cost of the commodity.
(iv) No perception of direct pinch: Since, value of indirect taxes is generally inbuilt in the price of the commodity, most
of the time the tax payer pays the same without actually knowing that he is paying tax to the Government. Thus, tax
payer does not perceive a direct pinch while paying indirect taxes.
(v) Inflationary: Tax imposed on commodities and services causes an all-round price spiral. In other words, indirect
taxation directly affects the prices of commodities and services and leads to inflationary trend.
(vi) Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax base. Majority of the products or services are
subject to indirect taxes with low thresholds.
(vii) Promotes social welfare: High taxes are imposed on the consumption of harmful products (also known as, sin
goods) such as alcoholic products, tobacco products etc. This not only checks their consumption but also enables the
State to collect substantial
(viii) Regressive in nature: Generally, the indirect taxes are regressive in nature. The rich and the poor have to pay the
same rate of indirect taxes on certain commodities of mass consumption. This may further increase the income
disparities between the rich and the poor

Constitutional Provision & Basics of Law


Personally feel, before starting discussion on various laws under indirect Taxes, we must have knowledge of constitutional
authority of such laws. Constitution of India contains the authority to make various legislations for the levy and collection
of' any tax in India which is given below:

Article 265 Taxes not be imposed save by authority of law

Extent of laws made by Parliament and by the


Article 245
Legislatures of States
Subject-matter of laws made by Parliament
Article 265
and by the Legislatures of States

Article 265: Taxes not to be imposed save by authorities of law


“No tax shall be levied or collected except under authority of Law”

Tax is of two types Direct


Taxes and Indirect Taxes.

If you read article 265 carefully, then it said for levy of any tax ‘Authority’ of law is needed..

Who can make the laws in India?


Authority to make laws in India is given under article 245 as below -

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Article 245: Extent of laws made by Parliament and by the Legislatures of States

It empowers the parliament to make £aw for whole or any part of the territory of India, and the legislature of a state may
make the laws for the whole or any part of the state.
India is federal, not a unitary state. Laws are enacted by the union parliament as well as state legislature. The allocation of
subject between the union & state is spelt out by Article 246 of the constitution through the schedule VII.
The allocation of subject between the union & state is spelt out by article 246 of the constitution of India.

Schedule VII
List- I [referred as Union list]: List- II [referred as State list]: List- III [referred as the Concurrent List:
This list enumerates the matters in This list enumerates the matters This list enumerates the matters in
respect of which the parliament has in respect of which the legislature respect of which both the parliament &
an exclusive right to make Laws of any state has an exclusive right legislature of any state have power to
to make laws make laws
Entry Item Entry Item Entry Item
no. no. no.
82 Income Tax other than tax on 46 Agriculture Income Tax 17A Forests
agriculture Income
83 Custom duty including export 51 State Excise Duty on 25 Education
duty liquor, opium etc.
84 Duties of excise on the 54 Taxes on the sale of
following goods  petroleum crude,
manufactured or produced in  high speed diesel,
India namely:  Motor Spirit
(a) Petroleum crude  Natural Gas
(b) High speed diesel  Aviation turbine fuel
(c) Motor spirit (commonly and alcoholic liquor for
known as petrol) human consumption,
(d) Natural gas But Not including
(e) Aviation turbine fuel and  Sale in the course of
(f) tobacco and tobacco inter-State trade or
products commerce or
85 Corporation Taxes  Sale in the course of
international trade or
92A Tax on interstate Sales (CST)
commerce of such
97 Any other matter not goods.
included in List II & List III
(Levy of Service Tax through 62 Taxes on entertainment
Finance Act, 1994) and amusement to the
extent levied a collect by a
panchayat or a
Municipality or a Regional
Council or a Dist. Council.

Taxes to be subsumed in GST

In the GST Regime, the major indirect taxes have been subsumed in the ambit of GST. The present concept of manufacture
or sale of goods or tendering of services is no longer application since the tax is now levied on “Supply of Goods and/ or
services”

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Central Taxes
Central Taxes State Taxes
 Central excise duty
 Additional
 Excise duty levied under Medicinal
& Toiletries preparation Act
 Additional duties of Customs (CVD
& SAD)
 Service Tax
 Surcharges & Cesses
Central Excise Surcharges & State Vat/
Duty Excise duty levied under Cesses
State Taxes Sales Tax
medicinal & Toiletries
 State VAT/ Sales Tax Preparation Act Taxes on Central
 Central Sales Tax Additional Lottery, Sales Tax
Purchase
 Purchase Tax duties of excise betting & Tax
Additional duties of
 Entertainment Tax Custom (CVD & SAD) Gambling Luxury
 (other than those levied by local Service Tax Tax Entertainment
Tax (other than
bodies) Surcharges &
those levied by
 Luxury Tax Cesses Entry Tax
(All forms) local bodies)
 Entry Tax (All from)
 Taxes on lottery, betting &
gambling
GST
CGST IGST
SGST
Taxes not subsumed in GST

1. Property Tax & Stamp Duty 2. Electricity Duty 3. Excise Duty on Alcohol

4. Basic Custom Duty 5. Excise Duty on Petrol Diesel

CONCEPT OF GST
GST is value added GST is a destination based consumption tax levied at multiple stage of production & distribution of
Tax goods & services in which taxes paid on inputs are allowed as set-off against taxes payable on
output. Thus, GST will be a single comprehensive integrated indirect tax on pure value addition at
each stage.
Continues Chain of GST offers comprehensive and continuous chain of tax credits from the producer's point/service
Tax Credits upto the retailer‘s level/consumer‘s level thereby taxing only the value added at each stage of
supply chain.
Ultimate burden on Since GST permits a ailment of input credit at every stage hence it can be noted that the final
final consumer burden of GST is borne by the consumer as it is charged by the last supplier with set off benefits at
all previous stages.
No Cascading Effect The present tax structure of India has number of indirect taxes collected both by state and Central
of Taxes Govt as per power vested to them under Constitution of India.
Due to such multiple taxes, there has been cascading effect of taxes (tax on tax) and double
taxation (a value being subject to tax twice or subject to two or more than two taxes)GST will
subsume all these indirect taxes and will thus, facilitate seamless flow of credit resolving the
problem of double taxation and cascading effect of taxes. This will check the cost of goods along
with making compliances easy and bringing stability in Govt. tax revenues

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Dual GST Model Introduced in India

(1) Dual GST along with Legislative Framework


India is a federal country where both the Centre and the States have been assigned the powers to levy and collect
taxes through appropriate legislation.

Both the levels of Government have distinct responsibilities to perform according to the division of powers
prescribed in the Constitution for which they need to raise resources.

A dual GST wail, therefore, be in keeping with the Constitutional requirement of fiscal federalism. GST in India will
be dual model based- i.e. state and Central Govt will both levy GST termed as SGST and CGST respectively

However, chargeability, definition of taxable event and taxable person, measure of levy basis of classification etc.
would be uniform in both CGST and SGST
GST is a destination based tax applicable on all transactions involving supply of goods and service; for a
consideration subject to exceptions thereof.

GST in India will comprise of


Central Goods and Service Tax (CGST) - levied and collected by Central Government,

State Goods and Service Tax (SGST) -levied and collected by State Governments with State Legislatures and

Union Territory Goods and Service Tax (UTGST) (Andaman and Nicobar Islands, Lakshadweep, Dadra Nagar
Haveli, Daman and Diu and Chandigarh) - levied and collected by Union Territories without State Legislatures, on
intra-State supplies of taxable goods and/or services.

Integrated Goods and Service Tax (IGST)-Inter-State supplies of taxable goods and/or services will be subject
to integrated Goods and Service Tax (IGST).
IGST will approximately be a sum total of CGST and SGST/UTGST and will be levied by Centre on all inter-State
supplies
.

Inter State Supply Intra-State Supply


Sec 7 of IGST Act, 2017 Sec 8 of IGST Act, 2017
Supply of goods/services shall be treated as inter-state Supply of goods/services shall be treated as intra-state
supply Where the location of the supplier and the place of supply Where the location of the suppler and the place of
supply are in- supply are in-
(a) Two different States (a) Same Slate
(b) Two different Union territories; or (b) Same Union territory
(c) A State and a Union territory

CONSTITUTIONAL AMENDMENTS FOR GST


Insertion of new article 246A
Special provision with respect to goods and services tax
“246A. (1) Notwithstanding anything contained in articles 246 and 254, Parliament, and, subject to clause (2), the
Legislature of every State, have power to make laws with respect to goods and services tax imposed by the Union or by
such State.

(2) Parliament has exclusive power to make laws with respect to goods and services tax where the Supply of goods, or of
services, or both takes place in the course of inter-State trade or commerce.
The provisions of this article, shall, in respect of goods and services tax referred to in clause (5), of
Explanation
article 279A, take effect from the date recommended by the Goods and Services Tax Council.

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Insertion of new article 269A
Levy and collection of goods and services tax in course of inter-State trade or commerce.
269A. (1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and collected by
the Government of India and such tax shall be apportioned between the Union and the States in the manner as
may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council.
Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of import into
the territory of India shall be deemed to be supply of goods, or of services, or both in the course of inter-State
trade or commerce.
(2) The amount apportioned to a State under clause (1) shall not form part of the Consolidated Fund of India.

Goods and Services Tax Council

279A. (1) The President shall, within sixty days from the date of commencement of the Constitution (One Hundred and
First Amendment) Act, 2016, by order, constitute a Council to be called the Goods and Services Tax Council.

(2) The Goods and Services Tax Council shall consist of the following members, namely:-
(a) The Union Finance Minister...................... Chairperson;
(b) The Union Minister of State in charge of Revenue or Finance ..............................Member;
(c) The Minister in charge of Finance or Taxation or any other Minister nominated by each State
Government…...........Members.

(3) The Members of the Goods and Services Tax Council referred to in sub-clause (c) of clause (2) shall, as soon as
may be, choose one amongst themselves to be the Vice- Chairperson of the Council for such period as they may
decide.

(4) The Goods and Services Tax Council shall make recommendations to the Union and the States on-
(a) The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be
subsumed in the goods and services tax;
(b) The goods and services that may be subjected to, or exempted from the goods and services tax;
(c) Model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on
supplies in the course of inter-State trade or commerce under article 269Aand the principles that govern the
place of supply;
(d) The threshold limit of turnover below which goods and services may be exempted from goods and services
tax;
(e) The rates including floor rates with bands of goods and services tax;
(f) Any special rate or rates for a specified period, to raise additional resources during any natural calamity or
disaster;
(g) Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
(h) Any other matter relating to the goods and services tax, as the Council may decide.

Goods and Services Network (GSTN)


Resultantly, Goods and Services Network (GSTN) - a Special Purpose Vehicle -has been set to provide a shared IT
infrastructure and services to Central and State Governments, taxpayers and other stakeholders for implementation of GST.
The functions of the GSTN, inter alia, include:
1) Facilitating registration
2) Forwarding the returns to Central and State authorities
3) Computation and settlement of IGST
4) Matching of tax payment details with banking network
5) Providing various MIS reports to the Central and the State Governments based on the taxpayer return information
6) Providing analysis of taxpayers' profile

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7) Running the matching engine for matching, reversal and reclaim of input tax credit

Benefits of GST
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, Government and the
consumer. It will lower the cost of goods and services give a boost to the economy and make the products and services
globally competitive. The significant benefits of GST are discussed hereunder:

Creation of unified national market


GST aims to make India a common market with common tax rates and procedures and remove the economic barriers thus
paving the way for an integrated economy at the national level.

Mitigation of ill effects of cascading


By subsuming most of the Central and State taxes into a single tax and by allowing a set-off of prior-stage taxes for the
transactions across the entire value chain, it would mitigate the ill effects of cascading, improve competitiveness and
improve liquidity of the businesses. Eradication of "tax on tax" & allows cross utilization of input tax credits by making the
entire supply chain tax neutral- benefit to industry sector

Elimination of multiple taxes and double taxation:


GST will subsume majority of existing indirect tax levies both at Central and State level into one tax i.e., GST which will be
leviable goods and services. This will make doing business easier and will also tackle the highly disputed issues relating to
double taxation of a transaction as both goods and services.

Boost to ‘Make in India' initiative


GST will give a major boost to the ‘Make in India' initiative of the Government of India by making goods and services
produced in India competitive in the national as well as international market.

Buoyancy to the Government Revenue


GST is expected to bring buoyancy to the Government Revenue by widening the tax base and improving the taxpayer
compliance

Benefits of GST from different prospects


For overall business sector
 Easy in compliance process:- As its technology driven. There will be simplified & automated procedure for various
processes, such as registration, returns, tax payment etc.
 Speedy decisions:- As reduced human interface between the tax payer and tax administration though a common
portal GSTN
 More transparency & accountability:- Online electronic verification, matching of input tax credit across India will
lead to encourage culture of compliance
 Harmonized laws, procedures & rates of tax:- This will make compliance easier & simple also lead to greater
certainty to taxation system.
 Reduced compliance cost:- removal of multiple taxation of same transaction will alleviate the need for multiple
record keeping for variety of taxes, thus lesser manpower in maintaining records.

Gain to manufacturers & exporters


 As majority of central & state taxes are subsumed in GST with full set off of input goods & services, and complete phase
out of central sales tax would reduce the cost of locally manufactured goods.
 This will increase the competitiveness of Indian goods and services in the international market and give boost to Indian
exports.

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For the Consumer
 Single & transparent tax proportionate to the value of goods & services under There would be only one tax from
manufacturers to the consumer & thus lead to transparency of taxes paid to final consumer.
 Relief in overall tax burden as result of better control mechanism & prevention of this will reduce tax on most of
commodities & ultimately lead to reduced prices leakages which will benefit the consumer.

For Central & State Government:-


 Higher revenue efficiency:- By widening tax base & improved taxpayer compliance it will reduce cost of collection of
tax revenues of the government.
 Simple and easy administration:- As multiple indirect taxes at the Central and State levels are being replaced by GST.
Backed with a robust end-to-end IT system, it would be simpler & administer than the current indirect tax law.
Better control mechanism:-As a result of better compliance through robust IT infrastructure, and an in-built
mechanism in design of GST that would incentivize tax compliance by traders.

Manner of Utilization of ITC

INWARD SUPPLY OUT WARD SUPPLY

1st 2nd
1. CGST CGST IGST

1st 2nd
2. SGST SGST IGST

1st 2nd 3rd


3. IGST IGST CGST SGST

It should be noted that CGST cannot be used against SGST/UGST or vice-versa

Illustration 1: The below case pertains to the local supply of goods/services. Rate applicable for CGST and SGST @ 9%
respectively
Supply of goods/services by Mr. A to Mr. B the value of which is Rs. 10,000
i) Calculate the total price charged by Mr. A from Mr. B. Also state the amount of credit availed by Mr. B.
ii) Assuming there is a value addition @ 20% on the supply of goods/services by Mr. B to Mr. C. Calculate the price
charged by Mr. B.
iii) On the basis of the working for the above two questions compute the CGST and SGST payable by Mr. B to the
Government.
iv) Prepare statement of revenue earned by Central and State Government.

Illustration 2: The below case pertains to inter-state supply of goods/services. Rate applicable tor lGST@18%, CGST&
SGST @ 9% respectively.
i) Supply of goods/services by Mr. X of Maharashtra to Mr. A of the same state the value of which is Rs. 10,000.
Calculate the total price charged by Mr. X. Also state the amount of credit availed by Mr. X.
ii) Assuming there is value addition @ 20% calculate the total price charged for supply of goods/services by Mr. A of
Maharashtra to Mr. B of Karnataka.
iii) On the basis of working of the above two questions compute IGST payable to the Government by Mr. B.
iv) Assuming a further value addition @ 20% on supply of goods/services by Mr. B of Karnataka to Mr. C of the same
state, calculate the total price charged by Mr. B.
v) As per the working above compute IGST payable to the Government by Mr. B.
vi) Calculate the revenue earned by Central and State Governments respectively.

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Chapter – 2
(Charge of Tax & Application of CGST & IGST Laws)
Central Goods and Service Tax Act, 2017
Sec 9 Levy & collection of CGST

Integrated Goods & Service Tax Act, 2017


Sec 5 Levy & collection of CGST
Sec 7 Inter State supply
Sec 8 Intra State supply

Three Stages of Tax Collection

Levy Assessment Collection

Creation of Liability Quantification of Payment to


liability Government

What is a Taxable event in a Law?


A taxable event in the law is the event, happening of which triggers applicability of provision of the law. For e.g. under
Income Tax Act, taxable event is earning of Income. Thus, earning of income is trigger and once a person earns any income,
he is covered by the provision of Income Tax Act. IN GST TAXABLE EVENT IS SUPPLY OF GOODS OR SERVICE.

Central goods & Service Tax Act, 2017


Sec 1: Title, Extent & Commencement
Title
(1)
This Act may be called the Central Goods and Service Tax Act, 2017
(2) Extent
It extends to the whole of India except the State of Jammu and Kashmir.
CGST Act and IGST Act are applicable to Jammu & Kashmir from 8 th of July 2017
.

(3) Commencement
It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint
(This Act is applicable from 1st July 2017)

Means
a) Territory of India as referred to in article 1 of Constitution (The territory of the Union of India viz., state and the union
territories.)
b) Its
 Territorial Water,
 Seabed and
 Sub-soil underlying such waters,
 Continental shelf,
 Exclusive economic zone or

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 Any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and
Other Maritime Zones Act, 1976
c) The airspace above its territory and territorial waters
1 NM = 1.85km

The High Seas

Exclusive Contiguous Zone


Economic Zone Territorial Water
200 NM 24 NM 12 NM

Seabed & Subsoil


Continental Shelf

Sec 2: Relevant Definitions are discussed in each chapter


Sec 3: Hierarchy of officers - The Government shall, by notification, appoint the following classes of officers for the
purposes of this Act, namely:
(a) Principal Chief Commissioners of Central Tax or Principal Directors General of Central Tax
(b) Chief Commissioners of Central Tax or Directors General of Central Tax,
(c) Principal Commissioners of Central Tax or Principal Additional Directors General of Central Tax,
(d) Commissioners of Central Tax or Additional Directors General of Central Tax,
(e) Additional Commissioners of Central Tax or Additional Directors of Central Tax,
(f) Joint Commissioners of Central Tax or Deputy Directors of Central Tax,
(g) Deputy Commissioners of Central Tax or Deputy Directors of Central Tax,
i) Any other class of officers as it may deem fit

Provided that the officers appointed under the Central Excise Act,
Proviso
1944 shall be deemed to be the officers appointed under the of this Act.

Sec 4: Power of CBEC to notify other officers for execution

Sec 5: Power of decide scope & duties of officers

Sec 6: Authorization to the officers of SGST/UTGST


Sec 7: Supply

Sec 8: Composite and Mixed Supply

Sec 9: Levy and Collection of CGST

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(1) Levy of CGST
Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax
 On all Intra State supplies of goods or services or both, except on the supply of alcoholic liquor for human
consumption,
 On the value determined under section 15 and
 At such rates, not exceeding twenty per cent., as maybe notified by the Government on the recommendations of the
Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

(2) Goods out of the scope of CGST


The central tax on the supply of
 Petroleum crude, High speed diesel,
 Motor spirit (commonly known as petrol), Natural gas and
 Aviation turbine fuel

Shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.

(3) Reverse Charge under notified cases


The Government may, on the recommendations of the Council,
 By notification, specify categories of supply of goods or services or both,
 The tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both 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 service or both.

(4) Reverse Charge – when supply of goods or services by unregistered person to registered person
The central tax in respect of the

Shall be paid by such person on reverse charge basis as


Supply of taxable
the recipient and all the provisions of this Act shall
goods or services or A registered
both by a supplier, to apply to such recipient as if he is the person liable for
person paying the tax in relation to the supply of such goods or
who is not registered,
services or both

(5) CGST liability of E-Commerce operator


The Government may, on the recommendations of the Council,
 By notification, specify categories of services
 The tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied
through it, and
 All the provisions of this Act shall apply to such electronic commerce operator as it he is the supplier liable for paying
the tax in relation to the supply of such services:

Proviso Provided that where an electronic commerce Any person representing such electronic
operator does not have a physical presence in commerce operator for any purpose in the
the taxable territory, taxable territory shall be liable to pay tax

Provided further that where an electronic Such electronic commerce operator shall appoint
Proviso commerce operator does not have a physical a person in the taxable territory for the purpose
presence in the taxable territory and also he does of paying tax and such person shall be liable to
not have a representative in the said territory, pay tax.
Sec 2(45): E Commerce Operator- means any person who owns, operates or manages digital or electronic facility or
platform for electronic commerce

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E-Commerce Operator

Involving an aggregator
Payment of GST in Any manner

SR
SP

GPS System

A Person Any Person

Payment of GST

Buyer

Seller

IGST ACT 2017


Section 5: Levy and Collection of IGST
1. Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax
 On all inter-State Supplies of goods or services or both except on the supply of alcoholic liquor for human
consumption,
 On the value determined under section 15 of the Central Goods and Services Tax Act and
 At such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the
Council and collected in such manner as may be prescribed and shall be paid by the taxable person

Proviso: Levy of IGST on imported goods


Provided that the integrated tax on goods imported into India
 Shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975
 On the value as determined under the said Act
 At the point when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

2. Goods out of the scope of IGST


The integrated tax on the supply of
 Petroleum Crude,

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 High speed Diesel,
 Motor spirit (commonly known as petrol)
 Natural gas and
 Aviation turbine fuel
Shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council

3. Reverse Charge under notified cases


The Government may, on the recommendations of the council,
 By notification, specify categories of supply of goods or Services of both,
 The tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both 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 or services or both.

4. Reverse Charge - when supply of goods or services by unregistered person to registered person
The integrated tax in respect of the supply of taxable goods or services or both

By a supplier who A registered


is not registered to 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 or services or both.

5. IGST liability of electronic commerce operator


The Government may, on the recommendations of the Council,
 By notification, specify categories of services,
 The tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are
supplied through it, and
 All the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for
paying the tax in relation to the supply of such services

Proviso Provided that where an electronic commerce Any person representing such electronic
operator does not have a physical presence commerce operator for any purpose in the
in the taxable territory, taxable territory shall be liable to pay tax

Provided further that where an electronic Such electronic commerce operator shall
commerce operator does not have a physical appoint a person in the taxable territory for
presence in the taxable territory and also he does the purpose of paying tax and such person
Proviso not have a representative in the said territory, shall be liable to pay tax.

Section 7: Inter-State Supply

1. Inter-State Supply of Goods (within India)


Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in
(a) Two different States
(b) Two different Union territories; or
(c) A State and a Union territory,
Shall be treated as a supply of goods in the course of inter-State trade or commerce

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2. Inter-State Supply - Imported Goods
Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to
be a supply of goods in the course of inter-State trade or commerce.

3. Inter-State Supply of Service (within India)


Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in
(a) Two different States
(b) Two different Union territories; or
(c) A State and a Union territory,
Shall be treated as a supply of services in the course of inter-State trade or commerce

4. Inter-State Supply - Imported Service


Supply of services imported into the territory of India shall be treated to be a supply of services in the course of
inters State trade or commerce.

5. Inter-State Supply - Supply of Goods or Service outside India (Export)


Supply of goods or services or both
(a) When the supplier is located in India and the place of supply is outside India
Shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce

Section 8: Intra-State Supply


Intra State Supply
1. Subject to the provisions of section 10, supply of goods where the location of the supplier and the place of supply of
goods are in
 The same State or Shall be treated as intra-State supply:
 Same Union territory

2. Subject to the provisions of section 12, supply of services where the location of the supplier and the place of supply
of services are in
 The same State or
Shall be treated as intra-State supply:
 Same Union territory

GST Rates in India

Rate Goods Service

0% 50% of the consumer price


basket, including food grains
Exemption is given in service tax for some services

5% Mass consumption items like


spices and mustard oil
Transport of goods by Rail/Road/ Air/ Ship Transport of passengers Rail /
Road/ Economy air travel, Tour operator, Print Media, Ads, News Paper
Printing

12% Processed foods Air travel business class, Non-AC restaurant, Hotel Rooms rent Rs. 1000-
2500, Construction of building /complex, Temp transfer of intellectual prop.

18% Soaps, Oil, toothpaste,


refrigerator, Smartphone’s
General Rate on all services except covered in 5%, 12% and 28%

28% White goods, Cars Race club, Gambling, Hotel rent more than Rs. 5000/day, Services provided
in Five star Hotels, Cinema/ Multiplexes/ IPL/ Casino, Amusement
Parks/Sporting events
28% Luxury cars, pan masala,
tobacco, aerated drinks
Plus Cess

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(CHAPTER-3: CONCEPT OF SUPPLY)

CGST Act, 2017


Sec 2 Important definitions

2 (52): Goods 2(31): Consideration 2(84): Person 2 (108): Taxable Supply


2 (102): Services 2 (17): Business 2 (105): Supplier 2 (78): Non – Taxable Supply
2 (93): Recipient 2 (47): Non- Taxable Supply
2 (107): Taxable Person
2 (98): Reverse Change
2 (45): E-Commerce Operator

CGST Act, 2017


Sec 7 Meaning of Supply
Sec 8 Composite & Mixed Supply

Taxable event of GST


Taxes Taxable Event Taxable event in GST Levy of Tax in GST
State VAT Sale of Goods within the State
Excise Duty Manufacturing of Goods
Central Sales Tax Sale of Goods between two States
Additional Custom Duty Import of Goods
Special Additional Duty Import of Goods
Entry Tax Entry of Goods into Local Area
Service Tax Provision of Service
Entertainment Tax Provision of Entertainment
Luxury Tax Provision of Luxury

CGST

SGST Supply
IGST

=
Person, Supplier & Recipient

Rule 2 (84) “Person” – Includes

(a) An Individual (b) A Hindu undivided family

(c) A Company (d) A Firm

(e) A limited Liability (f) An association of person or a body


Partnership of individuals, whether incorporation
or not, in India or outside India

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(g) Any corporation established by or under (h) Anybody corporate incorporated


any Central Act, State Act or Provincial Act or a by or Linder the laws of a country
Govt. company as defined in clause (45) of outside India
section 2 of the Companies Act, 2013
(J) A local authority
(i) A co-operative society registered under
any law relating to co-operative societies
(l) Society as defined under the
Societies Registration Act, 1860
(k) Central Government or a State Government
(n) Every artificial juridical person, not
(m) Trust falling within any of the above

Deemed Distinct Persons: Sec 25 CGST Act


25 (4): A person who has obtained or is required to obtain more than one registration, whether in one State or Union
territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct
persons for the purposes of this Act.
25 (5): Where a person who obtained or is required to obtain registration in a State or Union territory in respect of an
establishment, has an establishment in another State or Union territory, then such establishment shall be treated
as establishment of distinct persons for the purposes of this Act.

Rule 2 (105) “Supplier”


“Supplier” means in relation to any goods or services or both, shall mean the person supplying the said goods or services or
both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied

Rule 2 (93) “Recipient”


“Recipient” of supply of goods or services or both, means-
(a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that
consideration;
(b) Where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made
available, or to whom possession or use of the goods is given or made available; and
(c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any
reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply
and
Shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied

Other Important Definition


2 (108): Taxable Supply Means a supply of goods or services or both which is leviable to tax under this Act
2(78): Non-Taxable Means a supply of goods or services or both which is not leviable to tax under this Act (i.e. CGST
Supply Act) or under the integrated Goods and Services Tax Act
2(107): Taxable Person Means a person who is registered or liable to be registered under section 22 or section 24
2(98): Reserve Charge Means the liability to pay tax by the recipient of supply of goods or services or both instead of
the supplier of such goods or services or both under section 9(3) or 9(4), or under section 5(3)
or 5(4) of the Integrated Goods and Services Tax Act
2(45): E-Commerce Means any person who owns, operates or manages digital or electronic facility or platform for
Operator electronic commerce
2(72): Manufacture Means processing or raw material or inputs in any manner that results in emergence of a new
product having a distinct name, character and use and the term “manufacturer” shall be
construed accordingly [Section 2(72) of CGST Act]

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Taxable event - Supply

Sir what is a Supply?


Levy of tax: Every supply of goods or services will be liable to tax. The Tax would upon the nature of Supply, viz.,
 Inter-State supplies will be liable to IGST and
 Intra-State supplies will be liable to CGST and SGST (UGST).

Section 7- Meaning and Scope of supply

1. Supply includes
(a) All forms of supply of goods and 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.

(b) Importation of services, for a consideration whether or not in the course or furtherance of business

(c) The activities specified in Schedule I, made or agreed to be made without a consideration.

(d) The activities to be treated as supply of goods or supply of services as referred to in Schedule II.

2. Activities not treated as supply and not liable to GST


Notwithstanding anything contained in sub-section (1)
(a) Activities or transactions specified in Schedule III or
(b) Such activities or transactions undertaken by the Central Government, a State Government or any local authority in
which they are engaged as public authorities, as may be notified by the Government on the recommendations of
the Council,
Shall be treated neither as a supply of goods nor a supply of services

3. Subject to sub-sections (1) & (2), the Government may, on the recommendations of the Council, specify, by
notification, the transactions that are to be treated as
(a) A supply of goods and not as a supply of services or
(b) A supply of services and not as a supply of goods.

Therefore, following shall be discussed herein:


Section 7 Meaning and scope of supply
Schedule I Matters to be treated as supply even if made without consideration
Schedule II Matters to be treated as supply of a goods or as supply of services
Schedule III Matters or transactions which shall be treated neither as supply of goods nor as supply of services.

Business Activities

1. Sale of Scrap

2. Consultancy on Computer Shop

3. Commencement of Business Closer of Business

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4. Service by Club

5. Weger

Business:
Normally every supply is liable to GST only if it is mode in the course or furtherance of business.

Rule 2 (17) “Business” includes

(a)
 Any trade commerce manufacture Profession, vocation,
 Adventure, Weger (a place of bet)
Or
 Any other similar activity,
Whether or not it is for a pecuniary benefit (it means intention to earn the profit is not a criterion in determining the
states of business.)

(b) Any activity or transaction in connection with or incidental or ancillary to sub-clause (a)
Examples:
i) Sale of old furniture or scrap by a trader of mobile shop.
ii) Sale of old machinery by manufacturer,

(c) Any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or
regularity of such transaction
Examples: Even occasional transactions are also subject to GST e.g. Trader of computer also providing consultancy for
“how to set up Computer Shop" to his friend for consideration.

(d) Supply or acquisition of goods including capital goods and services in connection with commencement or closure of
business
Examples: lf covers purchase of capital asset or material before commencement of business or sale of stock or fixed asset
at the closure of business.

(e) Provision by a club, association, society, or any such body (for a subscription or any other consideration) of the
facilities or benefits to its members
Examples: Facilities or benefits provided by club etc. are i) Sports facilities like swimming pool, table tennis, cricket etc. ii)
Restaurant facility iii) banquet hall or open ground iv) Accommodation facility (rooms) v) Library vi) Conference room
etc.
(f) Admission, for a consideration, of persons to any premises
Examples: Entry tickets to amusement park, Diwali Meta, Cinema Theater etc.

(g) Services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of
his trade, profession or vocation
Examples: i) An advocate get appointed as member of the Arbitration Tribunal.
ii) CA in practice provides CFO or independent director services, he would be covered

(h) Services provided by a race club by way of totalisator or a licence to book maker in such club ; and
Totalisator: A device showing the number and amount of bets staked on a race, to facilitate the division of the total
among those backing the winner.

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(i) Any activity or transaction undertaken by the Central Government, a State Government or any local authority in which
they are engaged as public authorities
Notes: This clause makes it clear that even the supplies of goods or services or both undertaken by the Central
Government, a State Government or any local authority shall also get covered in the definition of business.

IN THE COURSE OF FURTHERANCE OF BUSINESS


RULE 2of(17)
Supply “BUSINESS”
goods INCLUDES
or services must be in the course of or furtherance of business. If any supply not in the Course of or in
furtherance of business even though for consideration then it shall not be treated as supply as per Sec 7(1)(a)

Activity not treated as in course or furtherance of business


Question: 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. (FAQ –CBEC)
Answer: No, because supply is not made by the individual in the course of 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.
Old car sale
Sale of old jewellery

Supply: Generic Meaning The word 'supply' should be understood as follows:


 It should involve delivery of goods and / or services to another person.
 Transfer of property in goods from the supplier to recipient is not necessary
Sale and Presently, VAT is levied by the State on the sale of goods which has been defined under most State VAT laws as
Transfer transfer of property for consideration. Under the CGST Act, although sale has been treated as a form of supply
leviable to GST, the definition of 'sale' has not been provided.

Further, the term ‘transfer' which has also been included as a form of supply is also not defined
Hence for “Sale” or “Transfer” we should take a general meaning i,e, transfer of ownership of goods for
consideration and also includes hire purchase transactions
Barter and While barter may deal with a transaction which only includes an exchange of goods/services, exchange may
Exchange cover a situation where the goods are partly paid for in goods and partly in money.
By making a specific inclusion in the definition of supply, all barters and exchanges would be leviable to GST.
Buying a new car in exchange of old car
Licence, Licenses, leases and rentals of goods are presently treated as services where the goods are transferred without
Lease, effective possession and control and treated as sales where the goods are transferred with effective possession
Rental etc. and control. Under the GST regime, such licenses, leases and rentals of goods with or without transfer of right
to use would be covered under the supply of service as per Schedule II to the CGST Act.
As per Sec 7 Supply includes three events
 Wholly Supply of Goods
 Wholly supply of services
 Supply of both (Goods and services)

Sec 2(52): Goods


Means Every kind of movable property
Other than Money and securities
But includes Actionable claim, growing crops, grass and things attached to or forming part of the land which
are agreed to be severed before supply or Under a Contract of Supply

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Examples
Transaction in 1. Deposit or withdrawal of Money from Bank
Money 2. Borrowing or repayment of loan
3, Conversion of Currency
4. Conversion of Rupees in to Coin
Securities Transaction of Securities does not attract GST example sale or purchase of Stock, Shares, and
Derivatives etc.
Actionable claim i) Transfer of unsecured debts (promissory note)
ii) Right to participate in the draw to be held in a lottery.
iii) Right to arrears rent is actionable claim
iv) Insurance claim

Supply of Goods by following ways liable to GST


1. Sale Furniture House sold furniture to Mr. Ganesh. This will be treated as supply of goods, because on
sale, the title of the furniture is transferred Mr. Ganesh.
Transfer 1) Transfer between branches, between factory and warehouse, factory premise to depot.
2. 2) Vishal buys a dump truck for RM125,000 under a hire purchase agreement with a bank. The
ownership of the truck is caveat by the bank until the company makes full payment of the hire
purchase, loan amount. This hire purchase transaction is a supply of goods and subject to GST
3. Barter Mr. A trades his motorcycle with Mr. B’s second hand car without cash exchange between the
two parties
4. Exchange Where a new phone is supplied for 24000 along with an exchange of an old phone and if the
price of the new phone without exchange is 24000 the open market value is 24000
5. Disposal Sale of Machinery after the completion of its life as a scrap sale X

Sec 2(102): Services


Means Anything other than goods, money and securities
But includes Activities relating to the use of money or its conversion by cash or by any other mode, from one form,
currency or denomination, to another from currency or denomination for which a separate
consideration is charged.

Activity relating to use or conversion of Money

1. Deposit or withdrawal of Money from Bank Transaction in Money


2. Borrowing or repayment of loan
3. Interest on loan or deposits It is a Supply of Service (separate consideration in relation to use of
money)
4. Processing fees It is a Supply of Service (separate consideration in relation to use of
money)

Conversion of Currency Transaction in Money


Commission It is a Supply of Service (separate consideration in relation to use of money)

Conversion of Rupees in to Coins Transaction in Money


Commission It is a Supply of Service (separate consideration in relation to use of money)

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Supply in the context of Service

1. Sale The term ‘Sale’ is normally used for goods. For services it can be considered as provision of service.
For eg Mr. X is providing GST consultation to his client. This is a provision of service by Mr. X to his
clients.
2. Transfer A wedding planner hires the services of a pendal or shamiana contractor wherein the supply of
furniture (goods) by the contractor, the title of which remains with him is used by the wedding
planner for a short duration, is a supply of service and liable to GST.
3. Barter A CMA providing consultancy service and in return an Architect designing the house of the CMA
4. Exchange As per the understanding of the term 'Exchange' one service cannot be exchanged for another as
providing of service requires requisite skill which is developed over a period of time and hence
exchangers not applicable for service
5. Licence Licence required for the use of Software eg use of Tally software,
6. Rental Furniture House supplied furniture to Mr. Rakesh, on rental basis, for a period of 3 months. This
amounts supply of service because furniture is transferred for Mr. Rakesh usage, and title of the
furniture is still with Furniture House.
7. Lease 1) Mr. Suresh lets out land on lease to Furniture House. The letting out of land on lease is
considered as supply of services.
2) Mr. Suresh lets out a building to Furniture House. Furniture House used the building for display
and sale of furniture. This is a supply of services.
8. Disposal Disposal means to alienate (transfer ownership of (property rights) to another person or group)
which can’t be done with services. A person can choose to either avail services or not but not
alienate hence not applicable to services.

Supply of Both (Goods and Services)


All form of supply of BOTH (Goods & services) made or agreed to be made for consideration by a person in the course or
furtherance of business

Normally it includes following types of contract


1) Works contract
2) Catering, restaurant etc.

Sec 2(119) 1 Works contract

 Building,
 Construction,
 Fabrication,
 Completion,
 Erection of any immovable property
 Installation,
 Fitting Out,
 Improvement, wherein transfer of property in goods
 Modification, (whether as goods or in some other
 Repair, form) is involved in the execution of
 Maintenance, such contract
 Renovation,
 Alteration or Commissioning

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Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other
article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply
or service is for cash, deferred payment or other valuable consideration.

Supply made or agreed to be made


No. Particulars Explanation Examples of Goods Examples of Services
1. Made Goods are already delivered provided to Mr. A trader who is in the Mr. X who is a CMA
the recipient business of selling has provided the
electronic items has made service of Statutory
the delivery of a TV to the Cost Audit for his
customers location client XYZ Pvt. Ltd.
2. Agreed to This is split up in two parts namely: Mr. M a trader in imitation Mr. B an Architect has
be made (i) There is an agreement for supply of jewellery has taken an entered into a
goods or provision of service advance from his contract with Mr. C,
(ii) An advance has been received against customer Miss Y to be his client, to design
the supply of goods or provision of service supplied at a later date Mr. C’s house

Supply made or agreed to be made for consideration

As per section 2(31) of CGST Act: Consideration in relation to the supply of goods or services or born includes
(a) Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or tor the
inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall
not include any subsidy given by the Central Government or a State Government;
(b) The monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of
goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the
Central Government or a State Government:
PROVIDED that a deposit, given in respect of the supply of goods or services or both shall not be considered as payment made
for such supply unless the supplier applies the deposit as consideration for the said supply;

Consideration Monetary As per Sec 2(75) of CGST act defined “money” means the
 Indian legal tender or any foreign currency, cheque, promissory note, bill of
exchange, letter of credit, draft, pay order, traveler cheque, money order, postal or
electronic, remittance or
 Any other instrument recognized by the Reserve Bank of India when used as a
consideration to settle an obligation or exchange with Indian legal tender of
another denomination
 But shall not include any currency that is held for its numismatic value.
Non Monetary Supply of goods and services in return for provision of service
To do an Act or The monetary value of any act or forbearance, in respect of, in response to, or for the
forbearance inducement of, the supply of goods or services,

Illustrations:
If…. And in return...
A agrees to dry clean B‘s clothes B agrees to click A’s photograph
A agrees not to open dry clean shop in B‘s neighborhood B agrees not to open photography shop in A’s neighborhood
A agrees to design B‘s house B agrees not to object to construction of A's house in his
neighborhood
A agrees to construct 3 flats for B on land owned by B B agrees to provide one flat to A without any monetary
consideration

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Meaning of Term inducement of
Inducement means to gives something to a person so that he will do something else in return

Illustration 1: A restaurateur offered 'free' meals to drivers of buses Term inducement carrying passengers as an
inducement to bring potential customers to of his business premise. Since the meals were not given to drivers of empty
buses, there is a direct link between the act of bringing passengers to the food outlet and the provision of the free meals.
The consideration here is the free meals provided.

Illustration 2: A football player is offered a branded car as an inducement for him to join the club. In this case, the car
offered is the consideration that induces the player to join the club to provide his football skills. There is a direct link
between the act of joining the club and the provision of the car.

Supply without Consideration


Free supplies of goods or Services are not subject to GST unless it is specifically covered in Schedule I or Sec 7.
 Access to free TV channels
 Tourism information free of charge.
 Large number of governmental activities for citizens.

TREATMENT OF DEPOSITS
Deposit shall not be treated as consideration unless it is appriated by the supplier towards supply of goods and/ or services.

Illustration 1: MTNL telecom service provider, receiver’s security deposits from subscriber in connection with supply of
telecom services. This Security deposit is refundable. This security deposit is not consideration for supply of service and
hence, shall not be taxable. However, if in future, if it is adjusted towards value of service supplied, then this security
deposit shall be treated as consideration.

IMPORT OF SERVICE
As per Sec 7(1)(b) Supply includes “Import of Service” for consideration whether or not in the course or furtherance of
business.

Import of Service in the course of furtherance of business


Example 1: Super Cars Ltd. Pune imported navigation design services from a vendor in Singapore for a consideration of
SGD (Singapore Dollars) 20,000, Now, Super Cars Ltd is liable pay IGST on the above mentioned import of service on
reverse charge.

Import of Service not in the course of furtherance of business


Example 1: Mr. Happy (an unregistered person) plans to pursue his higher education in UK. He receives career consultancy
services from a UK based consultant for Rs. 1,20,000. Does it qualify as a supply?
Answer: Yes. Importation of services for a consideration whether or not in the course or furtherance of business is covered
under supply. Hence, in the above case it will be treated as supply. The UK based consultant would be required to register
as Non Resident Taxable Person and shall discharge GST liability.

SCHEDULE –I [SEC 7]

Activities to be treated as supply even if made without consideration


1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
Example 1: An insurance company disposes its used computer (its book value is more than RM500) by giving it to a
charitable organization. The disposal of the computer is a supply of goods and subject to GST.

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Example 2: Star Furniture Enterprise, a sole proprietor, is in the business of selling furniture. Its owner took a set of
furniture to furnish his bedroom permanently. The transfer of the furniture by the owner, whether or not for a
consideration, is a supply of goods and subject to GST

2. Supply of goods or services or both


 Between related persons or
 Between distinct person as specified in section 25,
When made in the course or furtherance of business.
Proviso: Provided that gift not exceeding fifty thousand rupees in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.

Related Person (as per explanation to Sec 15 of CGST Act


Persons shall be deemed to be "related persons" it
(i) Such persons are of officers or directors of one another’s business
(ii) Such persons are legally recognized partners in business
(iii) Such person are employer and employee
(iv) An person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting
stock or shares of both of them
(v) One of them directly or indirectly controls the other
(vi) Both of them are directly or indirectly controlled by a third person
(vii) Together they directly or indirectly control a third person; or they are members of the same family

Example: Happy Ltd provides management services without charge to Joy Ltd. having common directors - it qualify as
a supply and GST is payable.

Gift by employer to employee


By virtue of aforesaid definition of related person, employer and employee are related r persons. However services
provided by an employee to the employer in the course of or in relation to his employment shall not be treated as
supply of services [Schedule III (discussed in subsequent paras)]

Further, Schedule l provides that gifts not exceeding Rs. 50,000 in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.
However, gifts of value more than Rs. 50,000 made without consideration are subject to GST, when made in the course
or furtherance of business.

3. Supply of goods -
(a) By a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

Example: When Mr. Sager [the Principal] located in Maharashtra supplies certain goods to his agent Mr. Mayur
[located in Delhi] and Mr. Mayur undertakes to supply the said goods in Delhi on behalf of Mr. Sagar.
In the aforesaid case, supply of goods by Mr. Sager to Mr. Mayur shall fall within the ambit of the term ‘supply' even
if made without consideration and shall be liable to GST (i.e. IGST or SGST)

(b) By an agent to his principal where the agent undertakes to receive such goods on behalf of the principal
Example: Mr. Atul works as an agent and is located in Maharashtra. Mr Rajesh is a manufacturer and located in
Maharashtra. Mr. Atul agrees to purchase certain goods from New Delhi market on behalf of Mr. Rajesh every month
and supply the same to Mr. Rajesh.
In the aforesaid case, supply of goods by Mr. Atul to Mr. Rajesh shall fall within the ambit of term ‘supply’ even if
made without consideration. This supply of goods from Atul to Rajesh shall be subject GST. (i.e CGST or SGST)

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Important Definitions
Sec 2(88) Principal Means a person on whose behalf an agent carries on the business of supply or receipt of
goods or services or both
Sec 2(5) Agent Means a person including a factor, broker, commission agent, arhatia, del credere agent, an
auctioneer or any other mercantile agent, by whatever name called, who carries on the
business of supply or receipt of goods or services or both on behalf of another

4. Import of Service without consideration


Import of services by a taxable person
 From a related person outside India or
 From any of his other establishments outside India,
In the course or furtherance of business

Example: John Ltd, USA is the holding company of VB Ltd., India. VB Ltd. imports Business Consultancy Service from John
Ltd. in September, 2017 in the course of furtherance of business.
The aforesaid importation of services shall fall within the ambit of term “supply” and VB ltd. shall be liable to pay
integrated tax under IGSTAct,2Oi 7.

Example: ABC Associate received legal consultancy services from its head office located in Malaysia. The head office has
rendered such services free of cost to its branch office. Since ABC Associates and the branch office are related persons,
services received by ABC Associates will qualify as supply even though the head office has not charged anything from it.

Analysis
Sec 7(1)(b) Schedule I – Entry 4
Import of Services Import of services by a taxable person
 For a consideration  From a related person outside India or
 whether or not In the course or furtherance  From any of his other establishments outside India,
of business in the course or furtherance of business

SCHEDULE –II [SEC 7]

Importance of Schedule II

Schedule II plays an important role in the bifurcation of specific activities. Point to be noted here is that even though
activities such as sale, transfer, barter, exchange, license, rental, lease or disposal have been stated in Section 7 (1) (a)
Schedule I1 provides an insight on whether the same should be classified under the category of supply of goods or supply of
services.
It should also be noted that in the previous laws there were numerous litigations pertaining to the treatment of
activities as goods or as services for example works contract, intellectual property rights etc. Schedule II with its specific
classification provides a corrective action as compared to the issues faced in the past
Hence we can conclude that in the new regime, GST has been formulated in a manner so as to avoid the litigations
experienced in the previous law and move forward with minimal issues.
Under earlier laws, the restaurants used to charge both service tax and VAT on the value of foods served. This so
because both sale of goods and provision of service were involved and therefore taxable event under both the Statutes i.e.
respective VAT law and service tax law got triggered.

Activities to be treated as Supply of Goods or Supply of Services

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1. Transfer
(a) Supply of Goods (b) Supply of Service
Any transfer of the title in goods is a supply of Any transfer of right
goods.  In goods or
Example: Furniture House sold furniture to Mr.  Of dividend share in goods
Ganesh This will be treated as supply of Without the transfer of title thereof, is a supply of
goods, because on sale, the title of the services
furniture is transferred to Mr. Ganesh. Example: Mr. A shall transfers right to use of a JCB
(c) Any transfer of title in goods under an agreement Machine for a period of two months for an
which stipulates that property in goods shall pass agreed consideration Mr.B in August, 2017.
at a future date upon payment of full consideration The foregoing transfer of JCB Machine
as agreed, is a supply of goods. without transfer of title in JCB Machine shall
Example: Furniture House supplied furniture to Mr. be treated as a supply of service.
Ramesh in an agreement to receive Example: Mr. X and Mr. Y is joint-owner/co owner of a
payments in 6 installments. This amounts movable property Mr. X sells his share in
supply of goods, because the title of the movable property (goods) to another
furniture will pass on to Mr. Ramesh on person. It would be treated as transfer of
completing the payment of 6 installments. undivided shares in goods.

2. Land and Building


Supply of Service
(a) Any lease, tenancy, easement, licence to occupy land is a supply of services
Example: Mr. Suresh late out land on lease to Furniture House. The letting out of land on lease is considered as
supply of services.
(b) Any lease or letting out of the building including
 A commercial,
 Industrial or
 Residential complex
For business or commerce, either wholly or partly, is a supply of services

 Cricket Ground on Rent


 Residential House Rented for Residential Use
 Hotel

3. Treatment of Process
Supply of Service
(a) Any treatment or process which is applied to another person’s Goods is a supply of services.
Example: XYZ Tools sent their tools to Mercury for heat treatment to harden them. The heat treatment done by
Mercury is a supply of services.

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4. Transfer of Business Assets
Supply of Goods Supply of Service
(a) Where goods forming part of the assets of a business (b) Where,
are  By or under the direction of the person carrying
 Transferred or disposed of on the business
 By or under the direction of the person carrying on  Goods held or used for the purpose of the
the business business
 So as no longer to form part of those assets, Are put to any private use or are used, or
Whether or not for a consideration, such transfer or made available to any person for use, for any
disposal is a supply of goods by the person purpose other than a purpose of the business.
Example 1: An insurance company disposes its used Whether or not for a consideration, the usage or
computer for Rs. 500 (its book value is more making available of such goods is a Supply of
than Rs. 500) by giving it to a charitable Service
organization. The disposal of the computer is Example 1: Ramesh Enterprise is a supplier of tents
a supply of goods and subject to GST. for its business. The company lends a few
Example 2: GST registered retailer is in the business of tents to its manager for his son’s wedding.
supplying mineral water. His family is The private usage of the tents by the
consuming 100 bottles of mineral water manager (with or without a consideration)
regularly every month. The disposal of the is deemed as a supply of services by the
mineral water for his family’s consumption company to him.
is a supply of goods and subject to GST Example 2: Suresh Enterprise, a sole proprietor, is in
Example 3: Star Furniture Enterprise, a sole proprietor, is the business of selling furniture. Its owner
in the business of selling furniture. Its owner took a set of furniture to furnish his
took a set of furniture to furnish his houses Vishal temporarily for 3 months.
bedroom permanently. The transfer of the The personal use of the furniture by the
furniture by the owner, whether or not for a owner, whether or not for a consideration,
consideration, is a supply of goods and is deemed as a supply of services by the
subject to GST company to him.

(c) Where any person ceases to be a taxable person,


Any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in
the course or furtherance of his business immediately before he ceases to be a taxable person, unless-
i) The business is transferred as a going concern to another person; or
ii) The business is carried on by a personal representative who is deemed to be a taxable person.
Example 1: AEC a registered person under GST acquires a noodle machine from Sim Enterprise who is not registered
under GST on 2.1 .2018.After the machine has been used for more than 2 tears. ABC ceases to be a taxable
person and de-registers on 28.1.2020. The noodle machine held on hand by ABC at the time of its cessation
as a taxable person is deemed as supply by him.
Example 2: A, trader, is winding up his business because of his ill health. At the time of de-registration he has goods in
stock valued Rs. 2,00,000. Any goods left in stock shall be deemed to be and GST shall be payable.

Comparative analysis
Schedule I- Entry -1 Schedule II- Entry -4(a)
Permanent transfer or Where goods forming part of the assets of a business are
disposal of business  Transferred or disposed of
assets where input tax  By or under the directions of the person carrying on the business
credit has been availed on  So as no longer to form part of those assets,
such assets. Whether or not for a consideration, such transfer or disposal is a supply of goods by the
person

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Example Activity GST Liability
Disposal of Printing machine installed Transfer of goods forming part of Sec7 read with Schedule I (Entry 1)
(ITC availed) to some charitable business assets (without  Supply
organization for free consideration) Sec 7 read with Schedule Il (Para 4 (a))
 Supply of Goods
Motor Vehicles used in factory (ITC not Transfer of goods forming part of Sec 7 read with Scheme II (Para 4 (a))
availed - not allowed as per Sec 17) business assets (for consideration)  Supply of Goods
Sale for Rs. 50,000
Motor Vehicles used in factory (ITC not Transfer of goods forming part of Sec 7 read with Schedule I
availed- being blocked as per Sec 17) business assets (without  Not Supply at all
Disposal to some charitable consideration) Sec 7 read with Schedule II (Para 1)
organization for free Supply of Goods

5. Supply of services
The following shall be treated as supply of service, namely:-
(a) Renting of immovable property.
(b) Construction of a complex, building, civil structure or a part thereof,
Including a complex or building intended for sale to a buyer, wholly or partly except where the entire consideration
has been received
 After issuance of completion certificate, where required, by the competent authority or
 After its first occupation,
Whichever is earlier

For the purposes of this clause-


(1) The expression "competent authority" means the Government or any authority authorized to issue completion
certificate under any law for the time being in force and in case of non-requirement of such certificate from such
authority, from any of the following, namely:-
i) An architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
ii) A chartered engineer registered with the Institution of Engineers (India); or,
iii) A licensed surveyor of the respective local body of the city or town or village or development or planning
authority;
(2) The expression "construction" includes additions, alterations, replacements or remodeling of any existing civil
structure.

Taxability of transactions
Situation Supply of Goods
Entire consideration is received after Not a supply at all
 Issuance of completion certificate, where require by Such supply shall be considered as neither as supply
competent authority of goods nor as supply of services [Sec 7(2) read with
 After its first occupation whichever is earlier Schedule III [Entry 5)]
Entire consideration or any part of consideration is received before Supply of Service
 Issuance of completion certificate, where require by [Sec 7(1)(d) read with Schedule II
competent authority, (Para 5(b))]
 After its first occupation whichever is earlier

(c) Temporary transfer or permitting the use or enjoyment of any intellectual property right
(d)  Development
 Design
 Programming
 Customization

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 Adaptation
 Up gradation
 Enhancement
 Implementation
‘Of information technology software’

Customized Software Pre-packed / canned /Shrink – Wrapped Software


1) If is tailor made software made as per requirement of 1) There software treated as goods when put on any
customer. media [Tata Consultancy Service 2002]
2) These contract involved Sale of Pre-Packed License to use preplaced
- Provision of service & Software Software
- Transfer of property in goods [HDD/CD]
Supply of goods Supply of Service
3) Pre-dominant nature of transaction is supply of service
Supply of Service

(e) Agreeing to the obligation to refrain from an act, or to tolerate an actor a situation, or to do an act,
After referring to the aforementioned definition the said clause can be broken in to three parts which read as
follows:
i) Obligation to retrain from an act: Means any act, which binds a person, of not to do or not doing a particular
thing in a particular manner in a given circumstances.
For example: Non-compete fees for not doing a particular business or not to practice a particular profession.
ii) Obligation to tolerate an act or a situation: Means to accept the occurrence or existence of an act or a
particular thing, which is imposed by a condition or circumstances, in a contract, agreement or any other
document which is legally enforceable by law.
For Example:
a) Penalty on early termination of rental or lease agreement.
b) Prepayment charges on early payment of loan installment.
c) Demurrage charges paid to the port authorities for not clearing the goods within a specified period of time.
iii) Obligation to do an Act: Means to perform or to do something, necessarily prescribed in an agreement,
contract or any other document which is required under any law for the time being in force.
For Example: Non compete Agreements
By virtue of a non-compete, agreements, one party agrees, for a consideration, not to compete with one other in
any specified manner. Such action on the part of one person is an activity for consideration and will be covered by
declared services.
(f) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred
payment or other valuable consideration.

Comparative analysis
Schedule II –Entry 1 (b) Schedule II –Entry 5 (f)
Any transfer of right in goods or of undivided share in Transfer of the right to use any goods for any purpose
goods (whether or not for a Specified period) for cash,
Without transfer of title thereof, deferred payment or other valuable consideration is a
Is a Supply of Service Supply of Service

6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:

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(a) Work contract as defined in clause (119) of section 2; and
Work contract of immovable property= Supply of service Labour + Material Contract on movable goods =
Entry 6(a) Schedule II Processing of goods = supply of service (Entry 3
Schedule ii)
Labour + Material = Works Contract (Constriction) Labour + Material (AMC of Computer)
Labour + Material = Works Contract (Erection / Labour + Material (Repair & maintenance of AC)
installation)
Labour + Material = Works Contract (Tiling & Painting) Labour + Material (Assembly of movable machine)

(b) Supply
 By way of or as part of any service or
 In any other manner whatsoever
Of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for
human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

This can be explained with the help of an example in the


Position under earlier Laws Position under GST
Food Value = Rs. 100 Food Value = Rs. 100
Service Charge= Rs. 10 Service Charge= Rs. 10
VAT @ 14% on food value= Rs. VAT was charged on full value GST @ 18%= Rs. 19.8 The entries supply would
100 of food be treated as a single
Service Tax @ 6% on food value Service tax at abated rate was Composite supply under
= Rs.100 Service Tax @ 15% on charged on food value GST. The same is taxable as
service charges = Rs. 1.5 per supply of services @
Total Taxes paid In nutshell, food was taxed 18% on the entire value of
VAT = Rs. 14 twice under VAT laws and supply assuming it is an air
Services Tax = Rs. 7.5 service tax was levied on conditioned restaurant
Total = Rs. 21.5 services charges

7. Supply of Goods
The following shall be treated as supply of goods, namely
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.
Activity Treatment under GST
(a) Supply of Goods Supply of Goods
 By unincorporated AOP/BOI [Sec 7(1)(d) read with Schedule II (Para 7)]
 To its members
(b) Supply if Services Para 7 is not applicable
 By unincorporated AOP/BOI However, it shall still be applicable as ‘Supply of Services’
 To its members  Definition of ‘supply' is wide to cover ‘supply of services' also.
 This activity has been specifically included in the definition of
‘business’

SCHEDULE –III [Sec 7] – Negative


List
Activities in neither Transactions which under
shall GST
be treated neither as a supply goods nor a Supply of Services
1. Services by an employee to the employer in the course of or in relation to his employment.
Analysis – Departmental Clarified
Provision of Service By An Employee To Employer- Not a supply

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1) Service provided in the course of employment
Services that are provided by the employee to the employer in the course of employment are outside the ambit
of supply.
Amounts received by an employee from employer on premature termination of contract of employment-
Not supply, as it arises in course of employment:
Such amounts paid by the employer to the employee for premature termination of a contract of employment are
treatable as amounts paid in relation to services provided by the employee to the employer in the course ot
employment. Hence, amounts so paid would not be chargeable to GST.

2) Service provided not in the course of employment


a) Services provided outside ambit of employment for a consideration would be a service.
For example, if an employee provides his services on contract basis to an associate company of the
employer, then this would be treated as provision of supply.
b) Non-compete fees - Taxable: However, any amount paid for not joining a competing business would be
taxable, as it is paid for providing the service of for bearance to act.

3) Status of services provided by casual workers or contract Labour:


If… Then…
Services provided by casual worker to These are services provided by the worker in the course of
employer who gives wages on daily basis employment, to the worker. Hence not included in supply
.

2. Services by any court or Tribunal established under any law for the time being in force.
Example: For the purposes of paragraph 2, the term "court" includes District Court, High Court and Supreme Court.
3. (a) The functions performed by the Members of Parliament, Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members of other local authorities

(b) The duties performed by any person who holds any post in pursuance of the provisions of the Constitution
in that capacity
Example: Diplomats, Governors of the States, C&AG of India, Attorney General of India (AGI) etc.

(c) The duties performed by any person as a Chairperson or a Member or a Director in a body established by
the Central Government or a State Government or local authority and who is not deemed as an employee
before the commencement of this clause.
1. Example: Finance Commission is a body established by President of India (under Article 280 of Constitution of
India). Chairman/Member/Directors (who are not employees) of these bodies shall be out of GST.
2. Example: Telecom Regulatory Authority of India (TRAI) is also a body established by CG.
Chairman/Member/Directors (Who are not employees) of these bodies shall be out of GST
4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building

6. Actionable claims, other than lottery, betting and gambling.

COMPOSITE & MIXED SUPPLY

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Introduction
As we look in market today, we notice that very often, two or more goods or a combination of goods and services, are
supplied together. This could be due to either of the following reasons:
 A sales strategy - to attract more customers
 The nature or type of goods or services, which requires them to be bundled or supplied together

GST is payable on individual goods or services or both at the notified rates. The application of rates poses no problem if the
supply is of individual goods or individual services, which is clearly identifiable and such goods or services are subject to a
particular rate of tax.
Under the GST low, supplies which are bundled with two or more supplies of goods or services or combination of
goods and services are classified, with distinct characteristics, as Composite supply or mixed supply. This is a new concept
introduced in GST which will cover supplies made together whether the supplies are related or not

Need of Classification of Bundle supplies


 In many cases, the transactions that fall within the scope of GST may consist of more than one element. These elements
may be a mix of goods, or services, or both.
 Sometimes, these elements, if supplied separately, may have different GST liabilities depending upon the rates.
Applicability of time of supply and place of supply provisions.
 To avoid disputes about whether the supplier is making a single supply with one liability, or multiple supplies with
different liabilities, it has to be determined whether the supply is one of goods, or of services, or it is a supply
constituted of both goods and services (composite supplies/mixed supplies).

Sec 8: Composite and Mixed Supply


The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:
(a) A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a
supply of such principle supply; and
(b) A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which
attracts the highest rate of tax.

Definition, Concept and Classification of Composite supply

Definition:
Composite Supply as per Sec 2 (30): means a supply made by a taxable person to a recipient consisting of
 Two or more taxable supplies of goods or services or both or any combination thereof
 Which are naturally bundled and
 Supplied in conjunction with each other in ordinary course of business one of which is a principal supply

IIIustration.- (Goods + Service) Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal supply;

Concept:
How to determine whether the supply is naturally bundled in the ordinary course of business
No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of
business. Each case has to be individually examined in the backdrop of several factors some of which are outlined below.

1. Large number of recipient reasonability expect such supply to the provide as a package
Example: (i) Breakfast with hotel room booking,

2. Majority of Supplier in a particular area or business provide such supply in bundle


Example: (i) Television Set with warranty and servicing
(ii) Printer with Scanner

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3. Nature of various supply of goods or services in a bundle
Example: (i) Stay in a Hotel with Laundering Free
(ii) Mobile with Charger
4. Elements are normally advertised as a package
Example: (i) Dosa pan with wooden spoon

5. The different elements are integral to one overall supply. lf one or more is removed, the nature of the supply would be
affected.
Example: (i) Spects with glass and frame

Classification:
As we have seen as per Sec 8 Clause (a) Composite Supply shall be treated as a supply of such principal supply.
Example: When a consumer buys a television set and he also gets warranty and a maintenance contract with the Tit this
supply is a composite supply. In this example, supply of TV is the principal supply warranty and maintenance services are
ancillary.

Classification of Supply (Goods + Goods) - Examples


Situations Classification Composite or Applicable Rate
Mixed Supply
Supply of Laptop with Bag and Power Laptop Rale18% Composite 18% rate is applicable
Cable Supply
A supply of a package consisting of Aerated waters, containing added Mixed Supply Aerated drinks will be
canned foods, Sweets, Chocolates, sugar or other sweetening matter treated principal supply.
Cakes, dry fruits, aerated drink and or flavored is taxed at 28% with Hence rate of aerated
fruit juices when supplied for a single 12% Compensation Cess. Dry drinks will be
price is a mixed supply. All can be Fruits is taxed at the rate of 12%. considered i.e. 28%
sold separately. Cake is taxed at rate of 18%.
Consider a kit which contains a tie, a Watch is faked at 28%. Wallet is Mixed Supply Hence rate applicable
watch, a wallet, and a pen, as a taxed at 28%. Pens are taxed at the will be 28%
combo, for Rs. 4.500 Tie. Watch, rate of 12%.
wallet and pen are bundled as a kit.
The supply of a tie does not naturally
necessitate the supply of other
elements (watch, pen) and vice versa.
The kit is supplied for a single price.

Classification of Supply (Service + Service) - Examples

Situations Classification Composite or Applicable Rate


Mixed Supply
A 5-star hotel in Mumbai provides a 4 Supply of food/drinks in 5-star Composite In this case, the hotel
days/3 night’s package, with hotel is taxed at the rate of 28%. Supply accommodation is the
breakfast. This is a composite supply Accommodation in a 5 star hotel principal supply, and
as the package of accommodation where rate is Rs 5000 and above breakfast is ancillary to the
facilities and breakfast is natural per night is taxed at the rate of hotel accommodation.
combination in the ordinary course 18% Hence applicable rate is
of business for a hotel. 18%

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A 5 star hotel in Mumbai provides a 4 Accommodation in a 5-star hotel Mixed Supply Highest rate 28% is
day/3 night’s package with the where rate is Rs 7500 and above is applicable
breakfast and one day Mumbai taxed at the rate of 28% _ Supply of
Darshan. The inclusion of Mumbai services of Tour Operator is taxed
Darshan in this package is not a at 5%. The rate applicable will be
natural requisite to accommodation 28%. (The hotel would hire an
in the hotel. operator for sightseeing purpose)

Classification of Supply (Goods + Service) - Examples

Situations Classification Composite or Applicable Rate


Mixed Supply
Mr. C buys a car from a car dealer. Transportation of Goods is taxed at Composite Highest rate 28% is
The contract for the purchase of the the rate of 5%. Motor Cars are Supply applicable
car is inclusive of its delivery. In this taxed at the rate of 28%.
case, the principal supply is the goods
(the car) and the incidental supply is
the services (its delivery).
A car repair workshop supplies both Batteries are taxed at the rate of Mixed Supply Hence it will be taxed
repair services and car batteries to its 28%. Service of Repair (others) is at28%
customers. When it charges a at 18%.
customer for supply of repair
services and a car battery at a single
inclusive price

CHARGE OF GST
(Normal Change & Reverse Charge)

Normally under GST supplier of Goods or services is liable to pay Tax to the Government and he recover such tax from the
Recipient of goods and services. It is called as normal charge.
In some cases (notified by the Government under sec. 9(3)/9(4)/9(5)) Payment of GST to the Government is not by
supplier but by recipient of goods or services (Reverse Charge) or any other person as notified.
What is reverse charge and whether it cast extra liability of Tax on recipient?
Reverse charge means tax is payable to the Government directly by recipient of goods of services.
It is important to note that GST being an indirect tax, burden of the tax has to be passed on to the recipient. Normally
supplier pays the GST to the Govt. and pass on the burden to the recipient.
Under reverse charge also, the burden to pay GST is on the recipient where recipient directly pay the tax to the Govt. on his
inward supply of goods or services and supplier don't pay and charged the tax to the recipient However, the compliance
requirements, i.e. to obtain registration under GST, deposit tax, filing returns with the Government, etc. has been shifted
from supplier to recipient.
Hence, there is no extra burden of GST on the recipient, only compliance requirement get increased.

Who is liable to pay GST?


As per Sec 9 (I)(a) of CGST Act (Sec s(I)(a) of IGST Act) GST is payable by taxable person.
Before going ahead we should first understand the meaning of supplier, recipient and taxable person.

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Sec 2 (105) "Supplier"
"Supplier" means in relation to any goods or services or both, shall
 Mean the person supplying the said goods or services or both and
 Shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied

Sec 2 (93) "Recipient"


"Recipient' of supply of goods or services or both,

Means-
(a) Where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that
consideration;
(b) Where no consideration is payable for the supply of goods, (he person to whom the goods are delivered or made
available, or to whom possession or use of the goods is given or made available; and
(c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any
reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and
Shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied

Sec107: Taxable Person


“Taxable Person” means a person who is registered or liable to be registered under section 22 or section 24.
Assessment Supplier has to assess the tax & Recipient has to assess the tax and Supplier will not charge
transfer to Recipient GST in invoice.
Payment to C.G. Supplier is liable to make payment to Recipient is liable to make payment to Govt.
Govt.
Registration Supplier has to register under GST Recipient has to register under GST
Due date of Monthly [In some cases quarterly] Monthly [In some cases quarterly]
Payment
Time of Supply Goods- Sec 12(2) of CGST Service-Sec Goods-Sec 12(3) of CGST Service-Sec 13(3) of CGST
13(2) of CGST
Mode of by using By using electronic cash ledger Recipient cannot use his
Payment - Electronic credit ledger electronic credit ledger for payment of GST on such supply,
- Electronic Cash ledger but after payment of GST under RCM, he can take input tax
credit as per the provision of ITC.

Cases of Reverse Charge


CGST shall be paid by the recipient of goods or services or both, on reverse charge basis, in the following cases:
 Supply of goods or services or both, notified by the Government on the recommendations of the GST Council. (Sec 9(3))
 Supply of taxable goods or services or both by an unregistered supplier to a registered person. (Sec 9(4))
All the provisions of the CGST Act shall apply to the recipient in the aforesaid cases as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.
Note: Reverse Charge also applicable in above cases under IGST and SGST act.

Legal Provision
Sec 9(3): Reverse Charge under notified cases
The Government may, on the recommendations of the Council,
 By notification, specify categories of supply of goods or services or both.
 The tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both.

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and ail 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 or services or both.
N/N 4/2017-CT (Rate)
RCM Notified Goods N/N 13/2017-UTT (Rate) Dated 28th June, 2017
N/N 10/2017-IT (Rate)

Liability under RCM for Supply of Goods


(N/N 4/2017 Central Tax (Rate)) dated 28 June 17
S. Tariff item, Description of Supplier of goods Recipient of supply (Liable to Pay
No. sub-heading, supply of Goods Tax
heading or Chapter
(1) (2) (3) (4) (5)
1. 0801 Cashew nuts, not Agriculturist Any registered person
shelled or peeled
2. 1404 9010 Agriculturist Any registered person
3. 2401 Tobacco leaves Agriculturist Any registered person
4. 5004 to 5006 Silk yarn Any person who Any registered person
manufactures silk yarn
from raw silk or silk
worm cocoons for
supply of silk yam
4A. Any Chapter Used vehicles, Central Government, Any registered person
seized and State Govt., Union (Newly inserted by N/n 37/2017
confiscated goods, territory or a local
old and used goods, authority
waste and scrap
5. - Supply of lottery. State Government, Lottery distributor or selling agent.
Union Territory or any Explanation.- For the purposes of this
V.V.IMP local authority entry, lottery distributor or selling
agent has the same meaning

Value of Supply of Lottery


In case of lottery run Rate In Case of Lottery Rate
by State Government 12% Authorized By State Government 28%
Value = 100/112 of Value = 100/128 of
 Face value or  Face value or
 Price notified in the Official  Price notified in the Official
Gazettte by the organizing State whichever is higher Gazette by the organizing State whichever is higher

Exemption: Supply of Lottery by any person other than State Government/Union Territory/Local Authority subject to the
Condition that the supply of such lottery has suffered appropriate GST when supplied
 By State Government, Union Territory, Local authority
 To the lottery distributor or selling agent appointed by the by state government, union territory or local authority.
\

N/N 13/2017-CT (Rate)


RCM Notified Goods N/N 4/2017-UTT (Rate) Dated 28th June, 2017
N/N 4/2017-IT (Rate)

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Services 100% liability
1. Supply of Services in relation to transportation of goods by road
By To
Person Mentioned in (a) to (g) i.e.
Goods Transport Agency Where a person liable to pay freights
 Factory
who has not paid central tax a. Any factory registered under or governed by
 Society registered
at the rate of 6% (CGST 6% factories Act, 1948
 Co-operative Society
& SGST 6%) b. Any society registered under Societies
 Any person registered under
(inserted by N/N 22-2017 Registration Act, 1860 or under any other
CGST Act, under IGST Act, under
C.T. (Rate) law for time being in force in any part of
SGST Act
India
 Or UTGST Act
Goods Transport Agency c. Any co-operative society established by or
 Body Corporate
(GTA) Defined in Para 2(ZE) under any;
 Partnership Firm or AOP
of N/N 12/2017 means any d. Any person registered under CGST Act, under
 Casual Taxable Person
person who provides IGST Act, under SGST Act or UTGST Act
service in relation to e. Anybody corporate established, by or under Located in Taxable territory
transport of goods by road any law; or
AND issues Consignment f. Any partnership firm (Including LLP) whether GTA is liable in following cases
Note, b whatever name registered or not under any law including
1. If notified person located
called. association of persons
in non-taxable territory:
g. Any Casual Taxable Person
2. If person liable to pay freight is
not falling under notified
Exemption N/N 32/2017 CT (Rate) (w.e.f. 13.10.17)
categories.
Services provided by a GTA to an unregistered person, including an unregistered casual taxable person other than above
notified person is exempted from tax (for detailed discussion refer exemption chapter)

2. Service Supplied
By To
An individual advocate To any business
Including a senior advocate by way of representations! services before entity located in the
any court, tribunal or authority directly or indirectly, to any business entity taxable territory
located in the taxable territory, including where contract for provision of such
service has been entered through another advocate or a firm of advocates or by a
firm (including LLP) of advocates, by way of legal services, to a business entity.

Person liable to pay tax: Any business entity located in the taxable territory.
1) "Legal service" [Para 2(ZM)N/N 12/2017] means any service provided in relation to advice, consultancy or
assistance in any branch of law, in any manner and includes representational services before any court, tribunal or
authority
2) "Senior advocate" [Para 2(ZZD) N/N 12/2017] has the meaning assigned to it in section 16oftheAdvocates Act, 1961".
As per Section 16 of the Advocates Act, 1961 an advocate may, with his consent, be designated as senior advocate if the
Supreme Court or a High Court is of opinion that by virtue of his ability 1 [standing at the Bar or special knowledge or
experience in law] he is deserving of such distinction.
3) "Advocate" [Para 2(b)N/N 12/2017] shall have same meaning as assigned to it u/s 2(1 (a) of Advocates Act, 1961.
4) "Business Entry" [Para 2(n)N/N 12/2017] means any person carrying out business.
5) "LLP" [explanation (e)N/N 22/2017 C.T. (Rate) ] A "Limited Liability Partnership" formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be considered as a partnership firm or a firm.

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Note: Clarification on 15th July, 2017 (Ministry of Finance)
 The words "by way of legal services" are preceded and succeeded by a comma. Therefore the said words apply to an
individual advocate and a firm of advocates. Legal Services provided by either of them are liable for payment of GST
under RCM by the business entity.
 The words "by way of representational services before any Court, tribunal or authority," appear in conjunction with
senior advocate without a comma and merely describe the nature and mode of representational services provided by a
senior advocate to a business entity.

3. In respect of services provided to agreed to be provided


By To Business Entity in Taxable
Arbitral Tribunal Business entity in taxable territory territory is liable

Note:
1) Arbitral Tribunal is a private tribunal constituted by parties in disputes where one or more person (Arbitrator) are
referred by the parties to resolve the dispute in themselves and by who's decision they agreed to bound
2) Definition of SERVICE as given u/s 65-B (44) excludes fees taken in any court or tribunal established under any
law. That exclusion will not cover fees paid to ARBITRAL TRIBUNAL .

4. In relation to SPONSORSHIP SERVICE


By To Body Corporate or
Any person Anybody corporate or partnership partnership firm in taxable
firm located in taxable territory territory is liable
5. Service Supplied By
By To

 Central Govt. State Govt. Business Business entity in Taxable territory is liable
 Union Territory entity in
In following cases government or local
 Local authority taxable
authority is liable
territory
Except (a) Renting of immovable property, and
(a) Renting of immovable property, and (b) (i) Services by the department of post by
(b) (i) Services by the department of post by way of way of speed post, express parcel post, life
speed post, express parcel post, life insurance, and insurance, and agency services provided to
agency services provided to a person other a person other than Central Government
than Central Government State Government or State Government or Union Territory or
Union Territory or local authority. local authority.

(ii) Services in relation to an aircraft or a vessel, (ii) Services in relation to an aircraft or a


inside or outside the precincts of a port or an airport vessel, inside or outside the precincts of a
port or an airport
(iii) Transport of goods or passengers
(iii) Transport of goods or passengers

6. Services supplied
By To
Director of a Company or Body Said Company or Body Corporate Company or Body Corporate is liable
Corporate

Whole time director-Employee of the Company (incl. Executive director, Non


Director Company
Executive director)
Non Executive director-Can’t be called as employee of Company. Hence sitting
fees, commission is taxable.

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7. Services Supplied by
By To Any person carrying any insurance
Insurance Agent Any person carrying insurance business located in taxable territory e.g.
business LIC or GIC

8. Service Supplied by
By To Person liable to pay tax : Banking
Recovery Agent  A Banking company or company or financial Institution or Non-
 A Financial Institution or NBFC banking financial institutions located in
taxable territory

9. Supply of Services by way of transfer or permitting use or enjoyment of a copyright covered under sec. 13(1)(a) of
Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works.
Person liable to pay tax: A publisher music company, producer or the like, located in the taxable territory.
By To
An author, music composer, photographer, artist A publisher, music company, producer or the like, located in the
taxable territory

RCM Notified Services (Notified in IGST) N/N 10/2017-IGST (Rate) Dated 28th June, 2017

10. Any service supplied


By To
Person liable to pay tax : Any person
Any person from a non taxable Any person other than non taxable
located in taxable territory
territory online recipient (NTOR)

Note 1: When any service provided by a person in non taxable territory to a person in a taxable territory then it
amounts to import of services (Inter-State Supply) and subject to IGST
Note 2: Non taxable online recipient (NTOR) is discussed in the chapter of place of supply under IGST Act, 2017.

11. In respect of services provided or agreed to be provided by way of transportation of goods by a vessel from a
place outside India up to the customs station of clearance n India
By To Person liable to pay tax : Importer as defined in
Person located in non-taxable Person located in Non-taxable clause (26) of Section 2 of the Customs Act,
territory 1962 located in the taxable territory

Newly inserted by N/N 33-2017 (w.e.f. 13.10.2017)

12. Supply of Services


By To
Person liable to pay tax : Reserve Bank of
Members of Overseeing Reserve Bank of India (RBI)
India (RBI)
committee

Note: Overseeing Committee formed by RBI which aimed to vet resolution of all types of dead loans would harm
customers as well as banks.

Legal Provision
Sec 9(4) (CGST) Reverse Charge-when supply of goods or services by unregistered person to registered person
The central tax in respect of the

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Supply of taxable goods or services or both TO A registered person


by a supplier, who is not registered

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 or services or both

Exemption N/N 8/2017 – CT (Rate) + N/N 8/2017-UTT (W.e.f. 1st July, 2017)(Rate) – 28th June, 2017

Intra-State supplies of goods or services or both


 Received by a registered person
 From any supplier, who is not registered
Shall be exempt from tax

Illustration:
ABC Ltd. Of Pune is registered dealer under GST. If makes following purchases of goods or services from URD. Determine
liability of ABC Ltd. Under reverse Charge?
CASE 1: URD
S1 Printing & Stationery V=1200
S2 Food & Drink V= 800 ABC
S3 Electrical Fittings V=2000 Ltd.
S4 Commission Paid V= 800

CASE 2: URD
S1 Printing & Stationery V=2000
S2 Food & Drink V= 1800 ABC
S3 Electrical Fittings V=2000 Ltd.
S4 Commission Paid V= 1000

Electronic Commerce Operators

Introduction: Electronic Commerce Operators (ECO) display products as well as services which are actually supplied by
some other person to the consumer, on their electronic portal. The consumers buy such goods/services through these
portals. On placing the order for a particular product/ service, the actual supplier supplies the selected product/ service to
the consumer. The price/ consideration for the product/ service is collected by the ECO from the consumer and passed on
to the actual supplier after the deduction of commission by the ECO.

Sec 9 (5) - CGST liability of E-commerce operator


The Government may, on the recommendations of the Council,

 By notification, specify categories of services


 The tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are
supplied through it, and
 All the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying
the tax in relation to the supply of such services:

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Proviso Provided that where an electronic commerce Any person representing such electronic commerce
operator does not have a physical presence in operator for any purpose in the taxable territory
the taxable territory. shall be liable to pay tax
Proviso Provided further that where an electronic Such electronic commerce operator shall appoint a
commerce operator does not have a physical person in the taxable territory for the purpose of
presence in the taxable territory and also he does paying tax and such person shall be liable to pay tax.
not have a representative in the said territory.

Definition

Sec 2(45): E Commerce Operator - means any person who owns, operates or manages digital or electronic facility or
platform for electronic commerce.

Notified ECO N/N 17/2017-CT (Rate)-28th June, 2017

It has notified the following categories of services supplied through ECO for this purpose –
(a) Services by way of transportation of passengers by a radio-taxi, motorcar, maxi cab and motorcycle.
(b) Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places
meant for residential or lodging purposes, except where the person supplying such service through electronic
commerce operator is liable for registration under section 22(1) of the CGST Act.

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(Chapter 4): Composition Scheme & Threshold Exemption


Introduction: Composition Scheme
The word 'Composition’ comes from the Latin componere, meaning 'Put together'.
It is a feature of Indirect tax lows that in order to provide a com fort to an assessee from completing with the requirement
of pacing tax on value addition by maintaining details of 'inputs' & 'outputs', an option is provided to go for a 'put together
scheme', & make a payment of an amount.
The objective of composition scheme is to bring simplicity and to reduce the compliance cost for the small
taxpayers. Small taxpayer’s with an aggregate turnover in a preceding financial year up to Rs. 75 Lakh shall be eligible for
composition levy. Suppliers opting for composition levy need not loony about the classification of their goods or services or
both, the rate of GST applicable on the same, etc. They are not required to raise any tax invoice, but simply need to issue a
Bill of Supply. At the end of a quarter, the registered person opting for composition levy would pay a certain specified
percentage of his turnover of the quarter as tax, without availing the benefit of input tax credit.

Introduction: Threshold Limit (Basic Exemption)


Threshold means basic criteria to limit the exemption.
The Government has provided the benefit of exemption from registration based on the criteria of Aggregate turnover.
Benefit the small scale business entities & boost startup entity to compute & further expand smoothly as it initial stage of
business there is negligible revenue generated and huge expenses to be borne.
Thus, by availing the exemption benefit it will help the survival & growth of small sectors of economy.

Very Small Dealer Small Dealer Big Dealer

Aggregate Aggregate
Turnover Turnover
20 L 75 L

Threshold Composition Normal

Aggregate Turnover Section 2(6)

`
Includes Excludes
CGST
All Taxable Supplies
SGST

Exempt Supplies UTGST

IGST
Export of goods or Services or Both
CESS
Inter- State Supples of person having Value of inward supplies on which tax payable
the same permanent account number under revere charge

Person having the same PAN be computed on all India basis

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Legal Provision

Section 10-Composition Scheme


1. Notwithstanding anything to the contrary contained in this Act
But subject to the provisions of sub-section (3) and (4) of section 9,
A registered person, whose aggregate turnover in the preceding financial year did not exceed Rs. 50 Lakh,
(increase to 1 Cr. and for notified areas 75 Lakhs as per N/N 46/2017 CT) may opt to pay, in
Lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding-
(a) One per cent of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) Two and a half per cent the turnover in State or turnover in Union territory in case of persons engaged in making
supplies referred to in clause (b) of paragraph 6 of Schedule II, and

(c) Half per cent of the turnover in State or turnover in Union territory in case of other suppliers, subject to such
conditions and restrictions as may be prescribed.

Proviso Provided that the Government may, by notification, increase the said limit of fifty Lakh rupees to
such higher amount, not exceeding one crores rupees, as may be recommended by the Council.
2. The registered person shall be eligible to opt under sub-section (1), if—
a) He is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;
b) He is not engaged in making any supply of goods which are not leviable to tax under this Act;
c) He is not engaged in making any inter-State outward supplies of goods;
d) He is not engaged in making any supply of goods through an electronic commerce operator who is required to collect
tax at source under section 52; and
e) He is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council:
Proviso Provided where more than one registered persons are having the same Permanent Account
Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that
sub-section.
The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his
3
aggregate turnover during a financial year exceeds the limit specified under sub-section (1).
A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on
4
supplies made by him nor shall he be entitled to any credit of input tax.
If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being
5
eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act,
be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination
of tax and penalty.

Rate of Tax under Composition Scheme would be as under

Sr. No. Categories of registered person Central Rate State/UT GST Rate Total Rate
1 Manufacturers other than manufacturers of such goods as 1% 1% 2%
may be notified by the government
2 Suppliers making supplies referred to in Clause (b) of Para 2.50% 2.50% 5%
6 of schedule II
Example - Restaurant, Catering, Mess or any other service
contract where goods as food or drink is supplied for
human consumption
3 Other Suppliers 0.50% 0.50% 1%
4 Service Provider NA NA NA

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Sec 10(1) Difference between the Terms

Aggregate Turnover Turnover in State” or “Turnover in Union Territory


1. “Aggregate Turnover”. Section 2 "Turnover in State" or "turnover in Union
Section means the aggregate value of (112) territory" means
2(6)  All taxable supplies (excluding the value the aggregate value of
 All taxable supplies (excluding the value of
of inward supplies on which tax is
inward supplies on which tax is payable by a
payable by a person on reverse charge person on reverse charge basis) and
basis),  Exempt supplies made within a State or Union
 Exempt supplies, territory by a taxable person,
 Exports of goods or services or both and  Exports of goods or services or both and
 Inter-State supplies of persons having the  Inter-State supplies of goods or services or
same Permanent Account Number, both made from the State or Union territory by
the said taxable person
to be computed on all India basis
but excludes central tax, State tax, Union But excludes Central Tax, State Tax, Union territory
territory tax, integrated tax and cess tax, Integrated Tax & cess.

Legal Provision: Section 10(2)


`

2. The registered person shall be eligible to opt under sub-section (1), if—
(a) He is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of
Schedule II;
(b) He is not engaged in making any supply of goods which are not leviable to tax under this Act;
(c) He is not engaged in making any inter-State outward supplies of goods;
(d) He is not engaged in making any supply of goods through an electronic commerce operator who is required to
collect tax at source under section 52; and
(e) He is not a manufacturer of such goods as may be notified by the Government on the recommendations of the
Council:
Proviso Provided that where more than one registered persons are having the same Permanent Account
Number (issued under the Income-tax Act. 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that
sub-section.

Eligibility Conditions for opting composition scheme


Clause Category Condition
(a) Supply of he is not engaged in the supply of services other than supplies referred to in clause (b)
of paragraph 6 of Schedule II
(b) Goods not covered he is not engaged in making any supply of goods which are not leviable to tax under
under CGST this Act
(c) Inter State he is not engaged in making any inter-State outward supplies of goods
(d) Supply through E- he is not engaged in making any supply of goods through an electronic commerce
Commerce Operator operator who is required to collect tax at source under section 52
(e) Notified Goods he is not a manufacturer of such goods as may be notified by the Government on the
recommendations of the Council

Tariff item, subheading, heading or Chapter* Description


2105 00 00 Ice cream and other edible ice, whether or not containing cocoa
2106 90 20 Pan Masala
24 All goods, i.e. Tobacco and manufactured tobacco substitutes

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Restrictions as per Composition Rule 5 of CGST Rule 2017
Category Restriction
Category of He is neither a casual taxable person nor a non-resident taxable person
person
Stock held The goods held in stock by him on the appointed day have not been purchased in the course of
1) Inter-State trade or commerce or
2) Imported from a place outside India or
3) Received from his branch situated outside the State or
4) From his agent or principal outside the State, where the option is exercised under sub-rule (1) of rule 1
Reverse 1) The goods held in stock by him have not been purchased from an unregistered person and where
Charge purchased, he pays the tax under section 9 (4) on RCM basis
2) He shall pay tax under section 9 (3) or 9 (4), on RCM basis, on inward supply of goods or services or
both received from unregistered persons
3) He was not engaged in the manufacture of goods as notified under section 10 (2) (e) during the
preceding financial year
Declaration 1) He shall mention the words "composition taxable person, not eligible to collect tax on supplies" at the
and Display top of the bill of supply issued by him; and
2) He shall mention the words "composition taxable person" on every notice or signboard displayed at a
prominent place at his principal place of business and at every additional place or places of business
Note: There is no restriction on Composition Supplier to procure goods from inter-State suppliers.
Example: ABC Industries, a manufacturer in Mumbai. is engaged in supply of goods in Mumbai as well as Chennai (i.e.
inter-State supply of goods). Here, ABC Industries cannot enter into the composition scheme as it is effecting inter-State
supply of goods i.e. Chennai.

Additional Conditions
1. Would be applicable for all transactions under the same PAN : Composition scheme would become applicable for all the
business verticals having separate registrations within the State and all other registrations outside the State which are
held by the person with same PAN
Example:
A Registered Person whose "Aggregate turnover" (aggregate turnover in all states having same PAN) does not exceed
Rs.75 Lakhs in the preceding financial year will be eligible to opt for payment of tax under composition scheme. For
example: - M/s VB pvt ltd has the following business verticals separately registered:
 Sale of Electronics [Maharashtra]
 Sale of Furniture [Gujarat]
 Franchisee of Pizza Hut [Delhi]
In the above scenario, the composition scheme would be applicable for all the 3 business verticals. Taxable person will
not be eligible to opt for composition for sale of electronics and sale of Furniture and opt to pay taxes under the
regular scheme for franchisee of Pizza Hut
Thus from above example if any one of the units wishes to assess under regular scheme not under this scheme then
ail other units would be ineligible for composition scheme.
2. Shall not collect tax: Taxable person opting to pay tax under the composition scheme is prohibited from collecting tax
on the outward supplies.
3. Not entitled to input tax credit: Taxable person opting to pay tax under the composition scheme will not be eligible to
claim any input tax credits.

Intimation of opting for composition levy [Rules 3 & 4]


(i) Intimation by person applying for registration: Any person who is not registered and applies for registration may
give an option to pay tax under composition levy in Part B of the registration form, viz., FORM GST REG-01.

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The same shall be considered as intimation to pay tax under Composition Levy. Such intimation shall be
considered only after the grant of registration to the applicant and his option to pay tax under composition levy shall
be effective from the date from which registration is effective.
(ii) Intimation by a registered person: A registered person who opts to pay tax under composition levy scheme shall
electronically file intimation in prescribed form on the Common Portal [www.gst.gov.in], prior to the commencement
of the FY for which said option is exercised.
He shall also furnish the statement (Related to Stock) in prescribed form in accordance with the provisions of rule
44(4) of CGST Rules, 2017 within 60 days from the commencement of the relevant FY.
Any intimation in respect of any place of business in a State/UT shall be deemed to be an intimation in respect of
all other places of business registered on the same PAN.
The option to pay tax under composition levy shall be effective from the beginning of the FY.

Validity of composition levy [Section 10(3) read with


rule
 The6]option exercised by a registered person to pay amount under composition levy shall remain valid so long as he
satisfies all the conditions mentioned in the said section and these rules.
 The option to pay tax under composition scheme lapses from the day on which his aggregate turnover during the FY
exceeds the specified limit (Rs. 1 Cr. / Rs. 75 Lakh).
 Such person is required to pay normal tax under section 9(1) from the day he ceases to satisfy any of the conditions
prescribed for composition levy. He shall issue tax invoice for every taxable supply made thereafter.
 Further, he is required to file intimation for withdrawal from the scheme in prescribed form within 7 days of the
occurrence of such event.
 However, such person shall be allowed to avail the input tax credit in respect of the stock of inputs and inputs
contained in semi-finished or finished goods held in stock by him and on capital goods held by him on the date of
withdrawal and furnish a statement, within 30 days of withdrawal of the option, containing the details of such stock
held in prescribed form on the common portal.
Example: A person availing composition scheme during a financial year crosses the turnover of Rs. 1 Cr. on 9th of
December. The option availed shall lapse from the day on which his aggregate turnover during the financial year
exceeds Rs. 1 Cr, i.e. on 9th December in this case.

Composition scheme to be adopted uniformly by all the registered persons having the same PAN
[Proviso to section 10(2)]
All registered persons having the same Permanent Account Number (PAN) have to opt for composition scheme. If one such
registered person opts for normal scheme, others become ineligible for composition scheme.
Example: A dealer 'X' has two offices in Delhi and is eligible for composition levy. If 'X' opts for the composition scheme,
both the offices would pay taxes under composition scheme and abide by all the conditions as may be prescribed for the
composition scheme.

Composition scheme supplier cannot collect tax [Section 10(4]


Taxable person opting for the composition scheme shall not collect tax from the recipient on supplies made by him. It
implies that a composition scheme supplier cannot issue a tax invoice.

Imposition of penalty in case of irregular availment of the


composition scheme [Section 10(5) read with rule 6(4) and 6(5)]

 If a taxable person has paid tax under the composition scheme though he was not eligible for the scheme, the person
would be liable to penalty and the provisions of section 73 or 74 of the CGST Act shall be applicable for determination
of tax and penalty.

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 Further, where the proper officer has reasons to believe that the registered person was not eligible to pay tax under
composition levy or has contravened the provisions of the Act/provisions of this Chapter, he may issue a show cause
notice to such person in prescribed form.
 Upon receipt of the reply to such show cause notice from the registered person in prescribed form, the proper officer
shall issue an order in prescribed form within 30 days of the receipt of such reply, either accepting the reply, or
denying the option to pay tax under composition levy from the date of the option or from the date of the event
concerning such contravention, as the case may be.

Relevant Forms to be filed under Composition scheme

Sr. No. Form No. Due Date Details to be furnished


1 GST CMP-01 Before appointed date or within Application for opting Composition Scheme by the migrated
30 days from appointed date taxable person.
2 Part-B of GST Till date notified by CBEC Application for opting Composition Scheme by the new
REG-01 Registrant in the GST Regime
3 GST CMP-02 Prior to the commencement of Application for opting Composition Scheme by the Registered
the financial year Taxable Person in the GST Regime
4 GSTCMP-03 60 days from the date of Details of Stock
Composition Levy/withdrawal
5 GST ITC-03 60 days from the date of Details of Input claim in stock held on the date of opting
Composition Levy/withdrawal composition scheme for deposit of tax on the stock in hand
6 GSTCMP-04 Within 7 days of occurrence of Intimation for withdrawal of Composition Scheme either due
such event to turnover exceed quantum limit or voluntarily withdrawal
7 GST CMP-05 Within 15 days of receipt of Show cause notice by proper officer on receipt of application
such notice in GST CMP-04 or has reason to believe that dealer has
contravene the provision of Act & Rules
8 GST CMP-06 Within 15 days receipt of such Reply by composition dealer in response to notice in GST
notice CMP-05
9 GSTCMP-07 Within 30 days from date of Proper officer shall issue an Order either accepting the reply
withdrawal or denying the option to pay tax under composition Scheme

Content of Bill of Supply


Particulars Check
Name, Address & GSTIN of the supplier Y
A consecutive serial number, can be in one or more multiple series but unique for Y
a FY (NOT EXCEEDING SIXTEEN CHARACTER)
Date of its issue Y
Name, Address & GSTIN/UIN of the recipient Y
HSN Code or SAC Y
Description of goods or service Y
Total Value Y
Discount or Abatement Y
Taxable Value Y
Signature or digital signature of supplier or his authorized representatives - Y

COMPOSITION SCHEME IS AN OPTION


The taxable person should make an application exercising his option to pay tax under this scheme it's a voluntary scheme
not mandatory. There are three possibilities in which such option can be exercised:

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Option Procedure Date Effective
Taxable Person migrating from existing Exercising Option in Form GST CMP 01 From the appointed
registration to GST registration (all existing prior to appointed date or within 30 days date.
persons who want to opt composition under GST) after the appointed date
Taxable Person obtaining new registration under Such option can be exercised at the time of From date of
GST laws obtaining registration under section 22 in registration
Part B of Form GST REG-1
Taxable Person switching from normal levy in one Taxable Person switching from normal levy From the beginning of
FY to composition scheme in next FY in one FY to composition scheme in next FY the financial year

Note: - Composition scheme once granted, the eligibility would be valid lifetime unless the permission is cancelled or is
withdrawn or the person becomes eligible for this scheme.

TAX/INPUT TAX CREDIT TREATMENT IN SPECIAL CASES


Case 1:- Migration from Composition Scheme (Existing law) to Normal Levy (GST)
As per section 140 (6) of Transitional provisions of CGST Act: -A registered person, who was either paying tax at a fixed
rate or paying a fixed amount in lieu of the tax payable under the existing law shall be entitled to take, in his electronic
credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished
goods held in stock on the appointed day subject to the following conditions, namely:-
(i) Such inputs or goods are used or intended to be used for making taxable supplies under this Act
(ii) Registered person is not paying tax under section 10 i.e. composition scheme.
(iii) The said registered person is eligible for input tax credit on such inputs under this Act;
(iv) The said registered person is in possession of invoice or other prescribed documents evidencing payment of duty
under the existing law in respect of such inputs;
(v) Such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding
the appointed day;
Note:- Every registered person shall submit an application within 90 days from the appointed day in Form GST TRAN-1
shall specify separately the amount of tax or duty to the credit said person shall be entitled and shall also specify separately
details of stocks held on the appointed day.

Case 2:- Switching over from Normal Levy (GST Regime) to Composition Scheme (GST Regime)
 He shall pay an amount equivalent to the credit of input tax in respect of inputs held in stock and inputs contained
in semi- finished or finished goods held in stock by way of debit in electronic credit ledger or electronic cash
ledger.
 On capital goods as reduced by such percentage as may be prescribed.
 On the day immediately preceding the date of exercising composition option
 Any balance lying after payment of such amount shall be lapse.
 Furnish a statement in FORM GST ITC-3 within sixty days from the commencement of the relevant financial year.

Current Regime GST Regime Input Tax Credit on Stock


Composition Normal Yes ( subject to conditions)
Normal Composition No
Composition Composition No

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(Chapter 5): Time of Supply


Table of Content
Sections Descriptions
12 Time of Supply of Goods
13 Time of Supply of Service
14 Change in effective rate of Tax
Introduction:
GST is payable on supply of goods or services. A supply consists of elements that can be separated in time, like purchase
order f agreement, dispatch (of goods), delivery (of goods) or provision or performance of service, entry in the records,
payment, and entry of the payment in the records or deposit in the bank.

So, at which of these points of time will GST become payable? Will it become payable when an agreement to supply goods
or services is made, or when the goods are shipped or the services are provided, or when the invoice is issued or when
payment is made? What if the goods are shipped over a period of time? What if the service is provided over a period of
time? Provisions relating to 'time of supply' provide answer to all such and other questions that arise on the timing of the
liability to pay C6ST and S6ST/UT6ST (intrastate supply) and IGST (inter-State supply) as time of supply fixes the point in
time when the liability to pay tax arises.

The CGST Act provides separate provisions for time of supply for goods and services vide sections) 2 and 13 of CGST Act.
Section 14 provides for the method of determining the time of supply in case there is a change in the rate of tax on supply of
goods or services. I Sections 12 and 13 use the provisions of section 31 relating to issue of tax invoice as a reference point.

Events like issuing of invoices, receipt of payment, provision of service, receipt of services in books of account need to be
analyzed to determine the time of supply when the tax on supply is payable under forward charge. When the tax on supply
is payable under reverse charge, events like date of receipt of goods, date of making payment etc. need to be analyzed to
determine the time of supply. The provisions relating to time of supply essentially push the tax collection event to the
earliest possible time.

DATE OF ISSUE OF INVOICE BY SUPPLIER OF GOODS OR SERVICES (Relevant extract of Sec 31)
Invoice is main criteria for deciding Time of Supply. Hence before going ahead first try to understand when the invoice to be
issued by supplier of goods or services.

Invoice by supplier of the goods

As per Sec 31 a registered person supplying taxable goods shall, before or at the time of
(a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) Delivery of goods or making available thereof to the recipient, in any other case

Invoice Invoice

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Invoice by supplier of the Service
As per Sec 31 a registered person supplying taxable services shall, before or after the provision of service but not beyond
30 days (in case of banks or financial institution within 45 days) from the date of supply of service

Section 12: Time of Supply of Goods


1. The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with the provisions of this
section.
2. The time of supply of goods shall be the earlier of the following dates, namely
(a)
 The date of issue of invoice by the supplier or
 The last date on which he is required to issue the invoice with respect to the supply (Sec 31(1))

OR

Invoice before Invoice on


removal removal

(b) The date on which the supplier receives the payment with respect to the supply:
Explanation: For the purposes of clause (b),
“The date on which the supplier receives the payment” shall be
 The date on which the payment is entered in his books of account or
 The date on which the payment is credited to his bank account,
Whichever is earlier?

Invoice
Explanation: For the purposes of clauses (a) and (b),
“Supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the
payment.

Case : Where ‘movement of goods’ is involved


S. N. Date of Removal Date of Last date of Date Receipt of Payment Time
of goods Invoice Invoice as per In suppliers Credit in Bank of supply Comments
1 20.10.2017 10.10.2017 20.10.2017 28.10.2017 30.10.2017
2 20.10.2017 20.10.2017 20.10.2017 28.10.2017 30.10.2017
3 20.10.2017 23.10.2017 20.10.2017 28.10.2017 30.10.2017
4 20.10.2017 20.10.2017 20.10.2017 10.10.2017 13.10.2017
5 20.10.2017 15.10.2017 20.10.2017 08.10.2017 05.10.2017

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Time of Supply if excess amount is received upto 1000
Proviso Provided that where the supplier of taxable goods
 Receives an amount upto Rs. 1000
 In excess of the amount indicated in the tax invoice, the
Time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of
issue of invoice in respect of such excess amount
Example 1 Company XYZ receives an advance of Rs. 70,000 on 30th June, against which it dispatches goods worth Rs.
69,200 under invoice dated 5th July.
In this example, Company XYZ has received Rs. 800 in excess, which cannot be considered as payment for
the present invoice, in terms of Explanation 1 to section 12(2). Company XYZ will adjust this excess amount
against the next supply.
The time of supply for Rs. 800 can be taken as the date of the next invoice if the supplier so chooses, though the
payment was received earlier.

Example 2: Determine the Time of Supply in the following cases-


1. M/s. ABC Ltd. removed the goods valuing Rs. 10 Lakh on 15.6.2018 & issued invoice thereof on 12.6.2018.The payment
is received on 1.8.2018 (book entry and bank realization is on same date).
2. M/s. A Ltd. removed the goods valuing Rs. 12 Lakh on 15.6.2018 & issued invoice thereof on 15.6.2018.The payment is
received on 21.9.2018 (book entry and bank realization is on same date).
3. Mr. A removed the goods valuing Rs. 14 Lakh on 15.7.2018 & issued invoice thereof on 20.7.2018.The payment is
received on 21.9.2018 (book entry and bank realization is on same date).
4. M/s. MNLAOP removed the goods on 1.5.2018. An invoice towards value of Rs. 2 Lakh was issued on 1.5.2018. The
payment is received by cheque and entered in books on 10.4.2018. It is realized in bank by 13.4.2018.
5. M/s. ABHUF removed the goods valuing Rs. 12 Lakh on 19.6.2018 & part payment Rs.4,00,000 received on 21.6.2018 &
balance payment received on 2.7.2018 (book entry and bank realization is on same date).The invoice thereof is issued
on19.6.2018.
6. M/s. XYZ Ltd. removed the goods valuing Rs. 12 Lakh on 19.6.2018 & part payment Rs. 5,00,000 received on 21.5.2018
(book entry is on 21.5.2018 and bank realization is on 19.5.2018) & balance payment received on 2.8.2018 (book entry
and bank realization is on same date).The invoice thereof is issued on 2.7.2018.

Solution:

3. Time of Supply for goods in case of reverse charge


In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be
the earliest of the following dates, namely :-
(a) The date of the receipt of goods;

Whichever
is higher?

OR

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(b) The date of payment as
 Entered in the books of account of the recipient
OR Whichever
is higher?
The date on which the payment is debited in his
bank account, whichever is earlier, or
OR

(c) The date immediately following thirty days from the


date of issue of invoice or any other document, by Whichever
is higher?
whatever name called, in lieu thereof by the
supplier;

Proviso Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause
(c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

Case: Where reverse charge is applicable as per section 9(3) & 9(4) of CGST act
Sr. Date of receipt Date of issue 31st day Time of Comments
No. of goods of Invoice by after Date of Supply
supplier invoice
Payment in books Payment debited
of recipient in bank a/c
1 22.10.2017 20.10.2017 23.10.2017 25.10.2017
2 22.10.2017 15.10.2017 17.10.2107 18.10.2017
3 22.10.2017 15.10.2017 20.10.2017 18.10.2017
4 22.10.2017 10.10.2017 23.11.2017 25.11.2017

4. Time of Supply in case of Voucher


In case of supply of vouchers by a supplier, the time of supply shall be
(a) The date of issue of voucher, if the supply is identifiable at that point; or
(b) The date of redemption of voucher, in all other cases

Any foods item Supply is not Date of Issue of


can be purchase identifiable at the time Redemption
from foods pass of issue of voucher Voucher

Only a shirt can be Supply is identifiable


Date of Issue of
purchased from the at the time of issue of
Voucher
shirt coupon voucher

Example 1: Miss Priya won a voucher hamper of purchases of 'W' brand apparel worth Rs 5000 to be redeemed on
12.10.2017.
Ans: - Thus here in above case as per section 12(3)(a) of CGST act, the time of supply shall be 12.10.2017 because the item
of supply is identifiable at that point of time.

Example 2: Mr. Rajiv on purchases received vouchers for Rs 7000/- on 17.07.2017 from a trader M/s Shoppers stop,
which deals in variety of products. The aforesaid voucher is valid for a period of 3 months.
Ans: - In the above case as per section 12(3)(b) of CGST act the time of supply shall be the date of redemption of voucher
because the item of supply is not identifiable at the date of issue of voucher.

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5. Residual Case
Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or
subsection (4), the time of supply shall
(a) In a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) In any other case, be the date on which the tax is paid.

Example: Investigation reveals clandestine removal of goods by a supplier who is not registered under GST. The
evidence is in the form of noting, often undated, and some corroborative material. The supplier voluntarily pays tax
during the investigation, to close the case. The time of supply will be the date on which the tax is paid, as being
unregistered; the supplier is not required to file periodical returns.

6. Enhancement in value on account of Interest/late fee etc. for delayed payment of consideration
The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for
delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

Example: Mr. Raj, a registered supplier supplied certain goods to Mr. Yash on 3 months credit with a penalty clause in
the agreement levying a penalty of 3% of the invoice value in case of delay payment. The invoice was dated on 01-12-
2017. Mr. Yash could not make the payment on the due date due to unavoidable reasons he however made the payment
of invoice value on 08-03-2018. Mr. Raj raised a debit note of penalty amount such amount was paid by Mr. Yash on 10-
05-2018. Hence with respect to the goods supplied the time of supply shall be the invoice date (assuming the delivery
of goods is on the date of invoice) i.e. 01-12-2017. With respect to the penalty amount the time of supply shall be date
of payment by Mr. Yash towards the penalty i.e. 10-05-2018 as per Sec. 12(6) of CGST Act.

Section 13: Time of Supply of Service


1) The liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions of this
section.
2) Time of Supply for Normal Charge: Time of supply of services shall be the earliest of the following dates, namely

(a) If the invoice is The date of issue of invoice


issued within the by the supplier,
period prescribed Or
The date of receipt of “The date of receipt of payment” shall be the date on
under section 31(2)-
payment, which the payment is entered in the books of account
Whichever is earlier? of the supplier or the date, on which the payment is
credited to his bank account, whichever is earlier.

(b) If the invoice is not The date of provision of


issued within the service,
period prescribed Or
under section 31(2)- The date of receipt of “The date of receipt of payment” shall be the date on
payment, which the payment is entered in the books of account
Whichever is earlier? of the supplier or the date, on which the payment is
credited to his bank account, whichever is earlier.

(c) In a case where the provisions of clause The date on which the recipient shows the receipt
(a) or clause (b) do not apply of services in his books of account,

The supply shall be deemed to have been made to the extent it is covered by the
Explanation
invoice or, as the case may be the payment

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Case: Supply of service in normal case
S. N. Date of Completion Date of issue of Last date to issue invoice Date on which Time of Comments
of Service invoice as per Sec. 31(2) payment received Supply
1 10.07.2017 20.07.2017 10.08.2017 30.07.2017
2 10.07.2017 06.08.2017 10.08.2017 30.06.2017
3 10.07.2017 20.08.2017 10.08.2017 17.07.2017
4 10.07.2017 20.08.2017 10.08.2017 05.07.2017

Case:
S. N. Date of Date of Last date of issue Date of Receipt of Payment Time
provision of issue of of invoice as per In books of Credit in Bank of supply Comments
Service invoice Sec 31 (2) supplier a/c
1 01.10.2017 20.10.2017 31.10.2017 21.10.2017 23.10.2017
2 01.10.2017 20.10.2017 31.10.2017 15.10.2017 16.10.2017
3 01.10.2017 24.10.2017 31.10.2017 15.10.2017 13.10.2017
4 01.10.2017 10.11.2017 31.10.2017 12.11.2017 13.11.2017
5 01.10.2017 10.11.2017 31.10.2017 27.09.2017 26.09.2017

Example 2: Determine the Time of Supply in the following cases-


1. M/s. ABC Ltd. provided taxable services valuing Rs. 10 Lakh on 15.6.2018 & issued invoice thereof on 12.6.2018.The
payment is received on 1.8.2018 (book entry and bank realization is on same date).
2. M/s. A Ltd. provided taxable services valuing Rs. 12 Lakh on 15.6.2018 & issued invoice thereof on 15.6.2018.The
payment is received on 21.9.2018 (book entry and bank realization is on same date).
3. Mr. A provided taxable services valuing Rs. 14 Lakh on 15.7.2018 & issued invoice thereof on 20.7.2018.The payment
is received on 21.9.2018 (book entry and bank realization is on same date).
4. M/s. MNL AOP provided taxable services on 1.5.2018. An invoice towards value of Rs. 2 Lakh was issued on 1.5.2018.
The payment is received by cheque and entered in books on 10.4.2018. It is realized in bank by 13.4.2018.
5. M/s. ABHUF provided taxable services valuing Rs. 12 Lakh on 19.6.2018 & part payment Rs. 4,00,000 received on
21.6.2018 & balance payment received on 2.7.2018 (book entry and bank realization is on same date).The invoice
thereof is issued on19.6.2018.
6. M/s. XYZ Ltd. provided taxable services valuing Rs. 12 Lakh on 19.6.2018 & part payment Rs. 5,00,000 received on
21.5.2018 (book entry is on 21.5.2018 and bank realization is on 19.5.2018) & balance payment received on 2.8.2018
(book entry and bank realization is on same date).The invoice thereof is issued on 2.7.2018.

Solution:

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Proviso Time of Supply if excess amount is received upto 1000
Provided that where the supplier of taxable service receives an amount upto one thousand rupees in excess
of the amount indicated in the tax invoice,
the time of supply to the extent of such excess amount shall, at the option of the said supplier, be
the date of issue of invoice relating to such excess amount
Example Idea bill amount is Rs 1453/-. Mr. Vishal is the service recipient has paid Rs 1500 (through Credit card
online) So, for Idea company Rs 47/- is advance received. Idea company at its option can issue invoice for
such excess amount received as per proviso to section 13(2) of CGST act.

3) Time of Supply for goods in case of reverse charge


In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be
the earlier of the following dates, namely

(a) The date, of payment as entered in the books of account of


the recipient or
The date, on which the payment is debited in his bank
account, whichever is earlier?
OR

(b) The date immediately following sixty days from the date of
issue of invoice or
Any other document, by whatever name called, in lieu
thereof by the supplier

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b), the
Proviso 1
time of supply shall be the date of entry in the books of account of the recipient of supply.
Provided further that in case of supply by associated enterprises, where the supplier of service is located
Proviso 2 outside India, the time of supply shall be the date of entry in the books of account of the recipient of supply
or the date of payment, whichever is earlier.

Case: - Where reverse charge is applicable as per section 9(3) & 9(4) of CGST act
S. N. Date of services Date of Last date section Date of Time
provision by Invoice by issue as per Payment in Payment of supply Comments
supplier issue of 13(3)(b) i.e. 60 Book of Debited in
supplier of days recipient Bank A/c
1 01.10.2017 01.10.2017 01.12.2017 03.10.2017 04.10.2017
2 01.08.2017 01.08.2017 01.10.2017 21.10.2017 20.10.2017

Case:
Sane & Sane Ltd is located in India and holding 51% of the shares of Parker Ltd., a USA based Company. Parker Ltd.
provides Business Auxiliary services to Sane & Sane Ltd.
From the following details, determine the Point of Taxation of Sane & Sane Ltd:

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Agreed Consideration US$1,00,000
Date on which services are provided by Parker Ltd. 16.09.2017
Date on which invoice is sent by Parker Ltd 19.09.2017
Date of debit in the books of account of Sane & Sane Ltd 30.09.2017
Date on which payment is made by Sane & Sane Ltd 23.12.2017

Hint: Time of supply shall be as on 30.09.2017 as per proviso to Sec. 13(3) of CGST Act.

4) Time of Supply in case of Voucher


In case of supply of vouchers by a supplier, the time of supply shall be
(a) The date of issue of voucher, if the supply is identifiable at that point; or
(b) The date of redemption of voucher, in all other cases.

5) Residual Case
Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-section (3) or
sub-section (4), the time of supply shall
(a) In a case where a periodical return has to be filed, be the date on which such return is to be filed; or
(b) In any other case, be the date on which the tax is paid.

6) Enhancement in value on account of interest/late fee etc. for delayed payment of consideration
The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for
delayed payment of any consideration shall be the date on which the supplier receives such addition in value.

Sec. 14: Determination of Time of Supply in case of Change in Rate of Tax of Goods or Services
Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a change in the rate of
tax in respect of goods or services or both, shall be determined in the following j manner, namely
(a) In case the goods or services or both have been supplied before the change in rate of tax
(i) Where the invoice for the same has been issued and the payment is also received after the change in rate of tax,
the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or

----- 12% ---- CERT ----- 18% ------

S I R
TOS I or R
whichever is
----- 12% ---- CERT ----- 18% ------ earlier

S R I
TOS

(ii) Where the invoice has been issued prior to the change in rate of tax but payment is received after the change in
rate of tax, the time of supply shall be the date of issue of invoice; or

----- 12% ---- CERT ----- 18% ------


S I R

TOS

(iii) Where the payment has been received before the change in rate of tax, but the invoice for the same is issued after
the change in rate of tax, the time of supply shall be the date of receipt of payment

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----- 12% ---- CERT ----- 18% ------


S R I
TOS

S Goods or Services Supplied

I Invoice
`

R Payment Received
(b) In case the goods or services or both have been supplied after the change in rate of tax
(i) Where the payment is received after the change in rate of tax but the invoice has been issued prior to the change
in rate of tax, the time of supply shall be the date of receipt of payment; or

----- 12% ---- CERT ----- 18% ------

I S R
TOS

(ii) Where the invoice has been issued and payment is received before the change in rate of tax. the time of supply
shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or

----- 12% ---- CERT ----- 18% ------

I R S
TOS

----- 12% ---- CERT ----- 18% ------

R I S
TOS

(iii) Where the invoice has been issued after the change in rate of tax but the payment is received before the change in
rate of tax, the time of supply shall be the date of issue of invoice;

----- 12% ---- CERT ----- 18% ------

R C I
TOS

Provided that the date of receipt of payment shall be the date of credit in the bank account if such credit in the
bank account is after four working days from the date of change in the rate of tax.
Explanation: For the purposes of this section, "the date of receipt of payment" shall be the date on which the payment is
entered in the books of account of the supplier or the date, on which the payment is credited to his bank account,
whichever is earlier.
Comment:
1. Time of Supply where goods or services are supplied before change in rate of tax
S. N. Section Provision of Service Issue of Invoice Payment Time of Supply
1 14(1)(i) Before CERT After CERT After CERT
2 14(a)(ii) Before CERT Before CERT After CERT
3 14(a)(iii) Before CERT After CERT Before CERT

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Example: Date of CERT-1st Sept. 2017 (Supply of Service)
Change in Rate 12% to 18%
GOODS OR SERVICES SUPPLIED BY XYZ LTD. BEFORE CERT

S. N. Date of Date of Date of receipt of Time of Supply Applicable Rate Remark


Supply Invoice payment as per 14(a)
1 1-7-2017 11-7-2017 20-72017
2 4-8-2017 20-09-2017 10-09-2017
3 21-8-2017 03-09-2017 15-09-2017
4 25-8-2017 28-08-2017 15-09-2017
5 22-8-2017 15-09-2017 29-08-2017
6 20-8-2017 03-09-2017 15-11-2017

2. Time of Supply where goods or services are supplied After CERT


S. N. Section Provision of Service Issue of Invoice Payment Point of Taxation
1 14(b)(i) After CERT Before CERT After CERT
2 14(b)(ii) After CERT Before CERT Before CERT
3 14(b)(iii) After CERT After CERT Before CERT

Example: Date of CERT-1st Sept. 17 (Supply of Service)


Change in Rate 12% to 18%
GOODS OR SERVICES SUPPLIED BY XYZ LTD. AFTER CERT

S. N. Date of Supply Date of Date of receipt TOS as per Applicable Remark


Invoice of payment Sec. 14/13
1 25-09-2017 21-08-2017 10-09-2017
2 2509-2017 21-08-2017 15-11-2017
3 25-09-2017 01-08-2017 14-08-2017
4 25-09-2017 30-09-2017 12-08-2017
5 25-10-2017 30-10-2017 6-11-2017

Date of credit in Bank after 4 working days

Question-1: On the basis of following information, determine the ‘Time of Supply’ as per Sec. 14
S. N. Event Date
1 Commencement of providing of service 05-06-2016
2 Completion of service 10-10-2016
3 Invoice issued 20-10-2016
4 Amount credited in Bank A/c 25-10-2016
5 Service became taxable for the first time 01-07-2015

Question-2: Pillu & Co. provides its building on rental basis to Commercial Ltd. for a monthly rent of Rs. 1 Lakh. As per the
agreement, rent accrues at the on the last day of the relevant month. Hence, the service gets completed on the last day of
relevant month. For July 2017, Pillu & Co. has billed Rs. 1Lakh on 10.08.2017. Cheque is received from Commercial Ltd. on
29.07.2017, accounted in the books of Pillu & Co. on 30.07.2017, and deposited into Bank on the same day. However, it got
credited in the Bank Account on 03.08.2017 due to outstation clearance. Meanwhile, the Service Tax Rate is changed as
18% from 12% on 01.08.2017. Determine the TOS and the relevant rate applicable. Would your answer different if cheque
got credited in the bank account on 10.08.17.

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CONTINUOUS SUPPLY OF GOODS OR SERVICES

“Continuous Supply of Goods”


Section 2(32) “Continuous Supply of Goods” means a supply of goods which is provided, or agreed to be
Continuous Supply provided.
of Goods  Continuously or on recurrent basis,
 Under a contract,
 Whether or not by means of a wire, cable, pipeline or other conduit, and
 For which the supplier invoice the recipient on a regular or periodic basis and
 Includes supply of such goods as the Government may, subject to such conditions, as it may by
notification, specify.

Issue of Invoice Sec 31(4)


In case of continuous supply of goods, where successive statements of accounts or successive payments are involved, the invoice
shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.
Example: M/s Sheba Pvt ltd, a registered person issues invoice on 5th every month in respect of supplies made in previous
month. Following information is provided:-
 As on 111712017 Goods supplied worth Rs 45000
 As on 14/8/2017 Goods supplied worth Rs 30000
 As on 17/9/2017 advance amount of Rs 25000 received

Ans: - As the above case falls in the ambit of continuous supply of goods, thus the issue of invoice shall be before or on the
following dates as per section 31 (4) of CGST act i.e.:-
For goods supplied worth Rs45000 in the month of July, Invoice shall be issued on 5/8/2017
For goods supplied worth Rs 30000 in the month of August, Invoice shall be issued on 5/9/2017
And for advance receipt, M/s Sheba pvt ltd shall issue a receipt voucher as on 17/9/2017.

Time of Supply as per Sec 12


S. N. Date Date of Receipt of Payment Date of issue of Last date of issue of as per Time of Comments
of removal of voice Sec. 31(4) Invoice Supply
goods Statement of Successive
A/C payment
1 20.10.2017 to 25.10.2017 28.10.2017 25.10.2017 25.10.2017
25.10.2017
2 20.10.2017 to 25.10.2017 28.10.2017 23.10.2017 25.10.2017
24.10.2017
3 20.10.2017 to 25.10.2017 20.10.2017 20.10.2017 20.10.2017
24.10.2017

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Continuous Supply of Services

Section 2(33) “Continuous Supply of Goods” means a supply of Services which is provided, or agreed to be
Continuous Supply provided.
of Services  Continuously or on recurrent basis,
 Under a contract,
 For a period exceeding three months with periodic payment obligations and
 Includes supply of such goods as the Government may, subject to such conditions, as it may by
notification, specify.

Contractor 4th Floor


3rd Floor
2nd Floor
1st Floor
Plinth

Issue of Invoice Sec. 31(5)


In case of continuous supply of services
(a) Where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due date
of payment
Example: On1/10/2017ABCLtdentersintocontractwith Mr. Ha practicing CMA for supply of Cost Audit Services by the
said CMA for a period of one year. In terms of aforesaid contract the due date of payment is fifteenth day of every
month with effect from 15/11/2017. In the above case Mr. H shall be required to issue an invoice on or before fifteenth
day of every month
(b) Where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the time
when the supplier of service receives the payment;
Example: On 1/10/2017 ABC Ltd enters into contract with Mr. H a practicing CMA for supply of Cost Audit Services by
the said CMA for a period of one year. In the above case Mr. H receives the payment from ABC Ltd on 15/10/2017
hence he shall be required to issue an invoice on or before 15/10/2017
(c) Where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of
completion of that event.
Example: On 15/10/2017 Mr. R a builder enters into a contract with Mr. O a landlord for supplying construction
services for Rs. 50.00,000. In terms of the said contract Mr. O shall be required to make payment as per the following
details
1) Rs. 30,00,000 on completion of ground floor. The completion of the same takes place on 15/11/2017
2) Rs. 20,00,000 on completion of first floor. The completion of the same takes place on 15/12/2017. In the above
case Mr. R will issue invoice on or before
i) 15/11/2017
ii) 15/12/2017

Time of Supply (Sec 13)

Where there is continuous supply of services based on contract


M/s Nirmitee developers entered into a contract of 12 months for providing envelopment services to Asha housing society.
The following details are provided regarding the contract.

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S. N. Date of Date of payment Invoice Date of Receipt of payment Time of supply Comments
provision of Due as per contract issued
services In suppliers books Credit in Bank a/c
1 25.10.2017 10.11.2017 10.11.2017 18.11.2017 21.11.2017
2 24.11.2017 10.12.2017 09.12.2017 10.12.2017 10.12.2017
3 20.12.2017 10.01.2018 15.01.2017 16.01.2018 15.01.2018
4 19.01.2018 10.02.2018 10.02.2018 09.02.2018 10.02.2018
5 20.02.2018 10.03.2018 10.03.2018 25.02.2018 24.02.2018

Time of Supply is only on Invoice basis


N/n – 40/2017 C.T. dated 13 Oct. 2017

Registered person whose aggregate turnover in the The registered person whose aggregate turnover in the year in which
preceding financial year did not exceed Rs. 1.5 Cr such person has obtained registration is likely to be less than Rs. 1.5 Cr.
OR

AND
Who did not opt for the composition levy under section 10 of the said Act as the class of persons?
Who shall pay the central tax?
On the outward supply of goods at the time of supply as specified in clause (a) of sub-section (2) of section 12 of the
said Act.
Including in the situations attracting the provisions of section 14 of the said Act, and
Shall accordingly furnish the details and returns as mentioned in Chapter IX of the said Act and the rules made there under
and
The period prescribed for the payment of tax by such class of registered persons shall be such as specified in the said Act.

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(Chapter 6): VALUE OF SUPPLY


Section Description
Sec 15 Value of Taxable Supply

Rules Description (CGST Rules 2017)


27 Value of supply of goods or services where the consideration is not wholly in money
28 Value of Supply c f Goods or services or both between distinct or related persons, other than through an agent
29 Value of supply of goods made or received through an agent
30 Value of supply of goods or services or both based on cost
31 Residual method for determination of value of supply of goods or services or both
32 Determination of value in respect of certain supplies
33 Value of supply of services in case of pure agent
34 Rate of exchange of currency, other than Indian rupees, for determination of value
35 Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax

Introduction;
GST is payable on ad-volerem basis i.e. percentage of Value of supply of goods or services. Therefore, it is important to
know how to arrive value for payment of GST.
Provisions relating to 'value of supply' set out the mechanism to compute such value basis to which CGST and SGST/UTGST
(intrastate supply) and IGST (inter- State supply) should be paid.
Section IS of the CGST Act supplemented with the Chapter IV; determination of Value of Supply of CGST Rules3
prescribes the provisions for determining the value of goods and services.
Section IS of the CGST Act provides common provisions for determining the value of goods and services. It
provides the mechanism for determining the value of a supply which is made between unrelated persons and when price
and only the price is the sole consideration of the supply, then value cannot be determined under section IS, the same is
determined using Chapter IV; Determination of Value of Supply of CGST Rules.

Section 15: Value of Taxable Supply


1. The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or
payable for the said supply of goods or services or both
 Where the supplier and the recipient of the supply are not related and
 The price is the sole consideration for the supply.
Example for Goods: Mr. T trader in selling imitation jewellery charges Rs. 3,000 for necklace from his customer Miss. Y. In the
above case Rs. 3,000 charged by Mr. T is the Transaction Value as this is the amount paid by Miss Y where price is the sole
consideration for sale and suppliers and buyer are not related.

Example for Service: An Audit firm based in Delhi undertakes an audit assignment of his client based in Gurgaon. The
Contract mentioned about the audit fees of Rs. 100000. Thus here the price payable by the Client towards audit is Rs. 100000.

2. The value of supply shall include


(a) Taxes other than GST, if charged separately by the supplier
Any taxes, duties, cesses, fees and charges levied under any law for the time being in force
Other than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax Act
and the Goods and Services Tax (Compensation to States) Act, if charged separately by the supplier

How to determine value if amount charge is inclusive of GST?

AHOC CLASSES has charged a fee of Rs. 15,000 (inclusive of GST) to its students. GST applicable rate is 18%.
Calculate value and amount of GST.

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(b) Payments made to third parties by the recipient of behalf of the supplier in relation to the supply.
Any amount that the supplier is liable to pay in relation to such supply
But which has been incurred by the recipient of the supply and
Not included in the price actually paid or payable for the goods or services or both

Example for Goods


Isha Time Gallery has been appointed as an authorized center of Sony electronics, On sales of worth Rs. 20,00,000
electronic items. Sony electronics is liable to pay commission @ 10% on such sale i.e. Rs. 2,00,000 but such selling
commission to be paid by Sony electronics has been paid by Isha Time Gallery for the month of August. In this case
such expense shall be included in transaction value.

(c) Incidental expenses


Incidental expenses, including commission and packing, charged by the supplier to the recipient of a supply and
Any amount charged for anything done by the supplier in respect of the supply of goods or services or both
At the time of, or before delivery of goods or supply of services
Example for Goods 1: Mr. X goes to Haldiram outlet and buys Dryfruit worth Rs. 2000. Mr. X asks for the special
packing for which Rs. 500 is charged for packing. Here the transaction Goods value will be Rs. 2500. The amount for
special packing is separately payable by the recipient to the supplier.

Example for Goods 2: A company appoints an agent to procure order of goods from buyer. Agent procures an order @
Rs. 100 rupees. Now Seller company ask the buyer to pay only to supplier @ Rs. 98 only and pay Rs. 2 directly to the
agent. Here GST will be charged on full Rs. 100.

Example for Service: Joshi and Associates a CMA firm from Maharashtra is providing Cost Auditing Service to their
client XYZ Pvt Ltd located in Karnataka. Fee being Rs. 2,00,000. The travelling expense of Rs. 10,000 is borne by Joshi
and Associates on behalf of XYX Pvt Ltd. Here the transaction value will be Rs. 2,10,000 as the travelling expense is
incidental expense incurred for the provision of service.

Examples of additional recoveries by supplier


 Packing, labeling, designing etc
 Excise duty, Customs duty or other taxes except GST
 Royalty, warranty charges, etc.
 Insurance charges if goods are insured by the seller.
 Dharmada collected by the dealer
 Weightment charges.
 AII expenses before the delivery (loading, weighing and coolie)
 Freight shown separately in invoice
 Salesman commission
 Rental charges for durable and returnable packing
 Erection installation charges
 Pre Delivery Inspection Charges

(d) Interest or late fee or penalty for delayed payment of any consideration for any supply
Example for Goods
Mr. X has supplied goods to Mr. Y on credit of 30 days. The contract provides that interest will be charged at the rate of
18% for delay in making payment of supply. It is specifically provides that such interest will form part of consideration
and GST will be payable

Example for Service


Reliance telecommunication provides internet service to Mr. Y at a monthly charge of Rs. 500. The last date for
payment of the same is on the 5th of the following month. Late fee of Rs. 100 is charged is the payment of the bill is not

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made within the due date. Hence when Mr. Y makes a payment of Rs. 600, this shall be the transaction value and GST on
the same will be payable as per applicable rates

(e) Subsidy is by private enterprises


Subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments.

Subsidy to be added in Value


Example for Goods
Mr. X is a supplier of resisters and stationery. He is getting a subsidy of Rs 10 per register from charitable trust for their
supply to poor students. Mr. X has charged Rs. 30 per register to students. In this case value for GST is Rs. 40 as subsidy is
from a person other than government and directly link to the price.

Subsidy not be added in Value


Example for Goods
ADHOC CLASSES got a subsidy of Rs. 5 Lakhs to setup coaching classes in backward region from a private enterprise which
is not link with the fees charged to per student. Such subsidy is not includible in the value of goods.

Example for Goods


Sale of urea by the manufacturer at the recommended price by the Government (i.e. at cheaper price) to make urea at a
cheaper price. The supplier is paid the subsidy directly by the Government. Here the subsidy is not to be included in the
transaction value. Though it is related to the price but the same is provided by the Government therefore subsidy will not
be included in the transaction value.

Example for Service


Avalara Software Co based in Bangalore, Is engaged in providing cloud computing services to one of its client which is a
Micro, Small and Medium Enterprise (MSME) located in Tumkur. For provision of such services the Govt of Karnataka
offers a subsidy of Rs 20000. In the above case though the subsidy is linked to the service the same shall not be included in
transaction value as it is provided by the State Government.

3. Deduction of Discount
The value of the supply shall not include any discount which is given

(a) Discount given before or at the time of supply


Before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such
supply; and

Example for Goods: Discount shown in Invoice. Price of a car is Rs. 5 Lakh and a discount of 5% is given being the year
end sale. Here the transaction value will be Rs. 4.75 Lakh i.e. after discount which will not be included in transaction
value
Example for Service
An Ltd a registered company is providing services to B Ltd for development of a commercial property. The cost of
service is Rs. 20,00,000. A Ltd is giving a 5% discount to B Ltd. The same has been separately reflected in the invoice
before the providing the service. Hence in the above case the transaction value will be Rs. 19,00,000 as the discount is
given before supply and recorded in the invoice

(b) Discount given after the time of supply


After the supply has been affected, if-

i) Such discount is established in terms of an agreement entered into at or before the time of such supply and
specifically linked to relevant invoices; and
ii) Input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed
by the recipient of the supply.

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Example for Goods
Mr. A purchases an Air Conditioner from Mr. B for Rs. 20000 on credit on July 1, 2017. On August 1, 2017, Mr. A gives
discount of Rs. 5000 to Mr. B and Mr. B makes payment of Rs. 15000. Here if the discount is not known before or at the time
of supply, then transaction value will be Rs. 20000. But if discount is based on terms of contract or terms of payment then
transaction value will be Rs. 15000 only.

Example for Service


A Ltd a registered company is providing services to B Ltd for development of a commercial property. The cost of service is
Rs. 20,00,000. A Ltd is giving a 5% discount to B Ltd. The contract has been entered into by both the parties before the
provision of service which specifies the discount details and the same is reflected in the invoice as well. Even though the
discount is given after the provision of service the transaction value would be Rs. 19,00,000. Here it is to be noted that the
input tax credit pertaining to the discount issued by A Ltd must be reversed by B Ltd.

4. Where the value of the supply of goods or service or both cannot be determined under sub-section (1), the same shall
be determined in such manner as may be prescribed.

5. Notwithstanding anything contained in sub-section (1) sub-section (4), the value of such supplies as may be notified by
the Government on the recommendations of the Council shall be determined in such manner as may be prescribed.

Value of Supply under section 15


Supply to be valued as per
Chapter IV: Determination of
Whichever price is the sole Value of Supply of CGST Rules
consideration for supply

Whether supplier and the recipient


are related

Whether the supplier is a notified


supply u/s 15 (5)?

Assessable Value = Transaction


Value + certain elements specified
u/s 15(2) and 15(3)

Definition of Related person


Explanation
For the purposes of this Act,-
(a) Persons shall be deemed to be "related persons" if
i) Such persons are officers or directors of one another's businesses;
ii) Such persons are legally recognized partners in business;
iii) Such persons are employer and employee;
iv) Any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting
stock or shares of both of them;
v) One of them directly or indirectly controls the other;
vi) Both of them are directly or indirectly controlled by a third person;
vii) Together they directly or indirectly control a third person; or they are members of the same family;

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(b) The term "person" also includes legal persons;

(c) Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole
concessionaire, howsoever described, of the other, shall be deemed to be related.

Illustration 1-
Black and White Pvt. Ltd. has provided the following particulars relating to goods sold by it to Colorful Pvt. Ltd.
Particular Rs.
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000
CGST and SGST chargeable on the goods 10,440
Packing charges (not included in price above) 1,000

Black and White Pvt. Ltd. received Rs. 2000 as a subsidy from a NGO on sale of such goods. The price of Rs. 50,000 of the
goods is after considering such subsidy. Black and White Ltd. offers 2% discount on the list price of the goods which is
recorded in the invoice for the goods. Determine the value of taxable supply made by Black and White Pvt. Ltd.

Illustration 2-
Samriddhi Advertisers conceptualized and designed the advertising campaign for a new product launched by New Moon
Pvt Ltd. for a consideration of Rs. 5,00,000. Samriddhi Advertisers owed Rs. 20,000 to one of its vendors in relation to the
advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi Advertisers was discharged by New
Moon Pvt Ltd. New Moon Pvt Ltd. delayed the payment of consideration and thus, paid Rs. 15,000 as interest.
Determine the value of taxable supply made by Samriddhi Advertisers.

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Rules: Determination of Value of Supply


For the purposes of the provisions of this Chapter, the expressions-
(a) "open market value" of a supply of goods or services or both means the full value in money excluding the integrated
tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction,
 Where the supplier and the recipient of the supply are not related and
 The price is the sole consideration,
To obtain such supply at the same time when the supply being valued is made

(b) "Supply of goods or services or both of like kind and quality"


means any other supply of goods or services or both made under similar circumstances that, in respect of the
characteristics, quality, quantity, functional components, materials, and the reputation of the goods or services or both
first mentioned, is the same as, or closely or substantially resembles, that supply of goods or services or both.

Sec 2(5)"agent" means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or
any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services
or both on behalf of another;
Sec 2(88)"Principal" means a person on whose behalf an agent carries on the business of supply or receipt of goods or
services or both

CGST Rules 2017


Rule 27: Value of supply of goods or services where the consideration is not wholly in money-
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall
(a) Be the open market value of such supply
(b) If the open market value is not available under clause (a),
Be the sum total of consideration in money and any such further amount in money as is equivalent to the
consideration not in money if such amount is known at the time of supply
(c) If the value of supply is not determinable under clause (a) or clause (b)
Be the value of supply of goods or services or both of like kind and quality
(d) If the value is not determinable under clause (a) or clause (b) or clause (c),
Be the sum total of consideration in money and such further amount in money that is equivalent to
consideration not in money as determined by the application of rule 30 or rule 31 in that order.

Examples:
Open market Value Clauses (a)
Where a new Phone is supplied for Rs. 20,000 along with the exchange of an old phone and if the price of the new phone
without exchange is Rs. 24,000, the open market value of the new phone is Rs. 24,000
Where a laptop is supplied for Rs. 40,000 along with the barter of a printer that is manufactured by the recipient
and the value of the printer known at the time of supply is Rs. 4,000 but the open market value of the laptop is not known,
the value of the supply of the laptop is Rs. 44,000

Supply of like kind and quality Clause (c)


Question - An Architect designs the office of a CMA. Fee of the Architect is Rs. 22000, now in return CMA has filed his
returns and provided taxation services to the Architect. Value of service of like kind and quality is Rs. 30,000 assumed that
open market value and money value of consideration is not available State the value of supply of service with required
explanation.

Answer- As per the aforesaid Rule when there is supply of services wherein consideration is not wholly where the open
market value and money value of additional consideration is not available then value of supply of goods or services or both
of like kind and quality Hence, in the above case the value will be Rs. 30,000

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Rule 28: Value of supply of goods or services or both between distinct or related persons, other than
through an agent
The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section
25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall
(a) Be the open market value of such supply
(b) If the open market value is not available, be the value of supply of goods or services of like kind and quality
(c) If the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or
rule 31, in that order

Proviso: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option
of the supplier, be an amount equivalent to ninety percent of the price charged for the supply of goods of like kind
and quality by the recipient to his customer not being a related person Provided further that where the recipient
is eligible for full input

Proviso: Provided further that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be
deemed to be the open market value of the goods or services.

Examples:
Question 1 - Rajguru Industries stock transfers 1,00,000 units (costing Rs. 10,00,000) requiring further processing before
sale, from Bijapur in Karnataka to its Nagpur branch in Maharashtra.
The Nagpur branch (distinct person as having same PAN), apart from processing units of its own, engages in processing of
similar units by other persons who supply the same variety of goods, and thereafter sells these processed goods to
wholesalers. Goods of the same kind and quality are supplied in lots of 1,00,000 units each time, by another manufacturer
located in Nagpur. The price of such goods is Rs. 9,70,000. Examine the tax implications as in accordance with relevant
provisions of GST?
Answer:

Question 2 - M/s. Monalisa Painters owned by Vasudev is popularly known for painting the interiors of banquet halls.
Vasudev also owns M/s. Starry Night Painters which is engaged in painting machinery equipment. A factory contracts M/s.
Monalisa Painters for painting its machinery to keep it from corrosion, for a fee of Rs. 1,50,000. M/s. Monalisa Painters sub-
contracts the work to M/s. Starry Night Painters for Rs.1,00,000, and ensures supervision of the work performed by them.
Generally, M/s/ Starry Night Painters charge a fixed sum of Rs. 1,000 per hour to its clients; it spends 120 hours on this
project. State the value of supply of service with required explanation.
Answer:

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Question 3 - A Ltd. sold a product for Rs. 34,000 to Mr. X. Open Market price of the product is not available. Product of
same like kind & quality is also not available in the market. Mr. X is selling the same like kind of product to his consumer for
Rs. 60,000. Mr. X holds 30% share in A Ltd. Determine the value of supply for the purpose of levy of GST.
Answer:

Rule 29- Value of supply of goods made or received through an agent


The value of supply of goods between the principal and his agent shall
(a) Be the open market value of the goods being supplied, or
At the option of the supplier, be 90% of the price charged for the supply of goods of like kind and quality by the
recipient to his customer not being a related person, where the goods are intended for further supply by the said
recipient
(b) Where the value of a supply is not determinable under clause (a), the same
Shall be determined by the application of rule 30 or rule 31 in that order

Example:
Question - A principal supplies groundnut to his agent and the agent is supplying groundnuts of like kind and quality in
subsequent supplies at a price of five thousand rupees per quintal on the day of the supply. Another independent supplier
is supplying groundnuts of like kind and quality to the said agent at the price of four thousand five hundred and fifty rupees
per quintal. Determine the value of supply
Answer

Rule 30- Value of supply of goods or services or both based on cost-


Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter,
the value shall be 110% of
 The cost of production or manufacture or
 The cost of acquisition of such goods or
 The cost of provision of such services.

Example
Question 1: Treasure enterprises launched a Recycling machine upgrader as on 17/7/2017 in the market at Mumbai the
cost of production of such machine incurred by Treasure enterprises was Rs. 15,00,000. There are no other industries or
units in the neighboring area which are engaged in the same business as that of its Mumbai unit. Determine the value of
such exclusively designed recycling machine?

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Answer:

Question 2: Avlara Technologies ltd launched GST software service for providing information & compliance procedures
related to GST This was launched in the market of Bangalore as on 15.05.2017, the cost of provision of such service is Rs.
42,000/-. As on date there are no other service providers in the neighboring area engaged in supply of such services as that
of Avlara technologies, Bangalore. State the value of supply of service with required explanation.
Answer:

Rule 31 - Residual method for determination of value of supply of goods or services or both

Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same shall be determined
using reasonable means consistent with the principles and the general provisions of section 15 and the provisions of this
Chapter
Proviso: Provided that in the case of supply of services, the supplier may opt for this rule, ignoring rule 30.

Example:
Question 1: Mr. Husain is an artistic painter who recently exhibited his exclusive painting on Nature its beauty at an art
gallery in Pune. The value of such painting cannot be ascertained by means of open market value or by principles of goods
of like kind & quality or by cost plus method as it is an exclusive art executed by the artist. Determine the value of Supply.

Answer: In the given case as per aforesaid rule the value shall be determined using residual method i.e. using reasonable
means.

Question 2: Avlara Technologies ltd launched GST software service for providing information & compliance procedures
related to GST. This was la inched in the market of Bangalore as on 15.05.2017. For the provision of this service the
expertise knowledge of a number of engineer's and CMA's has been used. As on date there are no other service providers in
the neighboring area engaged in supply of such services as that of Avlara Technologies, Bangalore.
State the value of supply of service with required explanation.
Answer: In the above case the valuation cannot be done as per the earlier stated Rules namely due to non-availability of
open market value & also services of like kind & quality.
Calculating the cost of provision of service is a tedious process and hence the service provider can decide to determine the
value on reasonable basis as per proviso to Rule 31.

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Valuation in Special Cases

Rule 32- Determination of value in respect of certain supplies

1. Notwithstanding anything contained in the provisions of this Chapter, the value in respect of supplies specified
below shall, at the option of the supplier, be determined in the manner provided hereinafter.

Value of supply of services in relation to the purchase or sale of foreign currency

2. The value of supply of services in relation to the purchase or sale of foreign currency, including money changing,
shall be determined by the supplier of services in the following manner, namely:-
(a) Option 1
For a currency, when exchanged from, or to, Indian Rupees, the value shall be equal to the difference in the buying
rate or the selling rate, as the case may be, and the Reserve Bank of India reference rate for that currency at that time,
multiplied by the total units of currency
Proviso: Provided that in case where the Reserve Bank of India Proviso reference rate for a currency is not
available,
The value shall be 1% of the gross amount of Indian Rupees provided or received by the person changing the
money
Proviso: Provided further that in case where neither of the currencies exchanged is Indian Rupees,
The value shall be equal to 1 % of the lesser of the two amounts the person changing the money would have
received by converting any of the two currencies into Indian Rupee on that day at the reference rate provided
by the Reserve Bank of India.

Proviso: Provided also that a person supplying the services may exercise the option to ascertain the value in terms of
clause (b) for a financial year and such option shall not be withdrawn during the remaining part of that
financial year.

1) Example of Service
Case 1: RBI rate is available
US $ 1,000 is sold by a customer at the rate of Rupees 45 per US $. RBI reference rate for US $ is Rupees 45.50 for that day

Solution:
Particulars Amount
Value=(Buying Rate/Selling Rate-RBI) (45.50-45)*
Total units of currency (Value) 1000 Rs. 500

Case 2: RBI rate is not available


Siddhi Ltd exported some goods to Samson Inc of USA. It received US $ 9,000 as consideration for the same and sold the
foreign currency @ Rs. 61/US S

Solution:
Particulars Amount
Value= 1% (Gross amount of INR = 1%*(61*9,000)
Provided or received by the person changing the money) Rs. 5,490

Case 3: No INR involved


What would be the value of taxable service if US $ 9,000 are converted in Pound 4,500. RBI reference rate Rs. 63/US $ and
Rs. 101/£
Solution:

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Particulars Amount
Value = 1% (lesser of the two amounts when
converted to INR as per RBI rate) US $ to INR
$ 9,000 *Rs. 63
Rs. 5,67,000
UK Pound to INR €4,500*Rs.101
Rs. 4,54,500
Value 1% (4,54,500)
Rs. 4,545

(b) Option - 2
At the option of the supplier of services, the value in relation to the supply of foreign currency, including money
changing, shall be deemed to be
i) 1% of the gross amount of currency exchanged for an amount up to one Lakh rupees, subject to a minimum
amount of Rs. 250
ii) Rs. 1000 and 0.5% of the gross amount of currency exchanged for an amount exceeding one Lakh rupees and up to
ten Lakh rupees; and
iii) Rs. 5500 and 0.1% of the gross amount of currency exchanged for an amount exceeding ten Lakh rupees, subject to
a maximum amount of sixty thousand rupees.

Example: Exchange Rate 1$ = 45.50


Case : 1 Case : 2 Case : 3 Case : 4 Case : 5
Foreign Currency Exchange $ 100 $ 100 $ 10000 $ 100000 $ 5000000
Gross exchange value in Rs. 4,550 45,500 4,55,000 45,50,000 22,75,00,000
Calculation of GST

GST

3. Value of the supply of services in relation to booking of tickets for travel by air
The value of the supply of services in relation to booking of tickets for travel by air provided by an air travel agent shall
be deemed to be an amount calculated at the rate of
Domestic Booking GST = 5% x Basic Fare
International Booking GST = 10% x Basic Fare

Explanation:
The expression “basic fare” means that part of the air fare on which commission is normally paid to the air travel agent by
the airlines.

Example of Service
Mr. U is an air travel agent, who discharges his GST liability at special rates provided under the Valuation Rules, 2017.
Compute his tax liability with the help of following particular furnished by him.
Particulars Basic fare Other Charges Taxes Total Value of Tickets
Domestic Bookings 100,900 9,510 4,990 115,400
International Booking 316,880 20,930 15,670 353,480

Solution

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4. Value of supply of services in relation to life insurance business
The value of supply of services in relation to life insurance business shall be,-
(a) If saving amount separately intimated: the gross premium charged from a policy holder reduced by the amount
allocated for investment, or savings on behalf of the policy holder, if such an amount is intimated to the policy
holder at the time of supply of service
(b) In case of single premium annuity policies other than (a), 10% of single premium charged from the policy
holder; or
(c) In all other cases, 25% of the premium charged from the policy holder in the first year and 12,5% of the premium
charged from the policy holder in subsequent years:

Proviso: Provided that nothing contained in this sub-rule shall apply where the entire premium paid by the policy
holder is only towards the risk cover in life insurance.

Example:
Arihant Life Insurance Company Ltd (ALICL) has started its operations in the year 2017-2018. During the year 2017-18,
Arihant Life Insurance Company Ltd (ALICL) has charged gross premium of Rs 180 Lakh from policy holders with respect
to life insurance policies out of which Rs 100 Lakh have been allocated for investment on behalf of the policy holders
Compute Value of ALICL for the year 2017-18

i) If the amount allocated for investment has been intimated by ALICL to policy holders at the time of providing
service
ii) If the amount allocated for investment has not been intimated by ALICL to policy holders at the time of providing
the service and they are single premium annuity policies
iii) If the amount allocated for investment has not been intimated by ALICL and they are not single premium annuity
policies
iv) If the gross premium charged by ALICL from policy holders is only toward risk cover

Solution:

5. Buying and Selling of Second hand Goods


Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or
after such minor processing which does not change the nature of the goods and where no input tax credit has been availed
on the purchase of such goods.
The value of supply shall be the difference between the selling price and the purchase price and where the value of
such supply is negative, it shall be ignored:
Proviso: Provided that the purchase value of goods repossessed from a Proviso defaulting borrower, who is not registered,
for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of such goods by the
defaulting borrower reduced by 5% for every quarter or part thereof, between the date of purchase and the date
of disposal by the person making such repossession.

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Exemption (Notification No.1072017-Centrai Tax (Rate)


Intra-State supplies of second hand goods received by a registered person,
 Dealing in buying and selling of second hand goods and
 Who pays the central tax on the value of outward supply of such second hand goods as determined under sub-rule (5)
of rule 32 of the CGST Rules, 2017,
From any unregistered supplier.
Note: Similar exemptions are also there in respective SGST Acts.

For Instance:-
A company say M/s First Source Ltd, which deals in buying and selling of second hand cars, purchases a second hand
Maruti Celerio Car of March, 2014 make (Original price Rs. 5 lakhs) for Rs. 3 lakhs from an unregistered person and sells
the same after minor furbishing in July, 2017 for Rs. 3,50,000/-. The supply of the car to the company for Rs. 3 lakhs shall
be exempted and the supply of the same by the company to its customer for Rs. 3.5 lakhs shall be taxed and GST shall be
levied. The value for GST purpose shall be Rs. 50000/-, i.e. the difference between the selling and the purchase price of the
company.
In case any other value is added by way of repair, refurbishing, reconditioning etc., the same shall also be added to the
value of goods and be part of the margin.
If margin scheme is opted for a transaction of second hand goods, the person selling the car to the company shall not issue
any taxable invoice and the company purchasing the car shall not claim any ITC.
Press Release on Margin Scheme dt 15/07/2017
Doubts have been raised regarding the applicability of the margin scheme under GST for dealers in second hand goods in
general and for dealers in old and used bottles in particular. As per the clarification issued by press, The margin scheme can
be availed by any registered person dealing in buying and selling of second hand goods (including old and used empty
bottles) and who satisfies the conditions of Rule 32(5) of CGST Rules 2017.

6. Value of a token, or a voucher, or a coupon, or a stamp


The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is redeemable against a
supply of goods or services or both shall be equal to the money value of the goods or services or both redeemable against
such token, voucher, coupon, or stamp.

Example of Goods:
Pune Central has issued a voucher to its customer worth Rs. 1,000 for purchases made above Rs. 5,000. Here the value
shall be Rs. 1,000 which be redeemed against such voucher
Example of Services:
Question – Mr. & Ms. Sharma purchased 10 gift vouchers for Rs. 500 each from Crossword, and 5 vouchers from Four
Fountains Spa costing Rs. 1,000 each, and gives them as return gifts to children and their parents for their son's
birthday party. The vouchers from Four Fountains Spa had a special offer for couples - services for both persons at the
price chargeable to one.
State the value of supply of service with required explanation.
Answer- As per the aforesaid Rule the value of the supply would be the money value of the goods redeemable against
the voucher. Thus, in case of vouchers from Crossword, the value would be Rs. 5,000 (i.e., Rs. 500 * 10) and the value
of vouchers in case of Four Fountains Spa would be Rs. 10,000 (i.e., Rs. 1,000 * 2 * 5).

7. Valuation of Supply made to distinct person


The value of taxable services provided by
 Such class of service providers as may be notified by the Government, on the recommendations of the Council,
 As referred to in paragraph 2 of Schedule I of the said Act between distinct persons as referred to in section 25,
where input tax credit is available,
Shall be deemed to be NIL

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Value of supply of services in case of pure agent

33 Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier
as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are
satisfied, namely,-
(i) The supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party
on authorization by such recipient;
(ii) The payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the
invoice issued by the pure agent to the recipient of service; and
(iii) The supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in
addition to the services he supplies on his own account.
Example Legal Service:
The expenditure or costs incurred by the Legal Fees 1,00,000
service provider as a pure agent of the Representation Fees 10,000
recipient of service shall be excluded Lodging / Boarding/ 20,000
from the value of taxable service. Travelling 5000
Stamp duty 60,000
Value 1,95,000
Value for S.T. 1,35,000

Explanation: For the purposes of this rule, the expression "pure agent" means a person who-
(a) Enters into a contractual agreement with the recipient of supply to act as his pure agent to incur
expenditure or costs in the course of supply of goods or services or both;
(b) Neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure
agent of the recipient of supply;
(c) Does not use for his own interest such goods or services so procured; and
(d) Receives only the actual amount incurred to procure such goods or services in addition to the amount
received for supply he provides on his own account.
Example 1: X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement in television. Y
billed X including charges for Television advertisement and paid service tax on the total consideration billed.
In such a case, consideration for the service provided is what X pays to Y. Y does not act as an agent behalf of X when
obtaining the television advertisement even if the cost of television advertisement is mentioned separately in the invoice
issued by X. Advertising service is an input service for the estate agent in order to enable or facilitate him to perform his
services as an estate agent.
Example 2: In the course of providing a taxable service, a service provider incurs costs such as travelling expenses, postage,
telephone, etc., and may indicate these items separately on the invoice issued to the recipient of service.
In such a case, the service provider is not acting as an agent of the recipient of service but procures such inputs or input
service on his own account for providing the taxable service. Such expenses do not become reimbursable expenditure
merely because they are indicated separately in the invoice issued by the service provider to the recipient of service.
Example 3: A contracts with B, an architect for building a house. During the course of providing the taxable service, B incurs
expenses such as telephone charges, air travel tickets, hotel accommodation, etc., to enable him to effectively perform the
provision of services to A.
In such a case, in whatever form B recovers such expenditure from A, whether as a separately itemized expense or as part
of an inclusive overall fee, service tax is payable on the total amount charged by B. Value of the taxable service for charging
service tax is what A pays to B.

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34 Rate of exchange of currency, other than Indian rupees, for determination of value:-
(1) Supply of Goods: the rate of exchange for determination of value of; taxable goods shall be
 The applicable rate of exchange as notified by the Board under section 14 of the Customs Act, 1962
 For the date of time of supply of such goods in terms of section 12 of the Act.
Example:
Exchange Rate
CBEC RBI GAAP
Upto 15th Oct. 1$ = 63.20 IS = 62.80 1$ = 63.80
15th Oct.& onward 1$ = 63.80 1$ = 63.30 1$ = 64.30

S. N. Date of Date of Last date of Date of Receipt of Payment Time of Applicable


Removal of Invoice Invoice as per supply exchange (CBEC)
goods Section 3(1) In suppliers Credit in
book Bank a/c
1 20.10.2017 10.10.2017 20.10.2017 28.10.2017 30.10.2017
2 20.10.2017 20.10.2017 20.10.2017 28.10.2017 30.10.2017
3 20.10.2017 20.10.2017 20.10.2017 10.10.2017 13.10.2017

Supply of Service: The rate of exchange for determination of value of taxable services shall be
(2)  The applicable rate of exchange determined as per the generally accepted accounting principles
 For the date of time of supply of such services in terms of section 13 of the Act.
Example:
Exchange Rate
CBEC RBI GAAP
upto 15th Oct. 1$ = 63.20 1$ = 62.80 1$ = 63.80
15th Oct.& onward 1$ = 63.80 1$ = 63.30 1$ = 64.30

S. N. Date of Date of issue of 31st Date of Time of Applicable


Receipt of Invoice by day after Supply Exchange Rate
Goods supplier Invoice (CBEC)
Payment Payment
in books of debited in
recipient bank a/c
1 22.10.2017 20.10.2017 23.10.2017 25.10.2017
2 22.10.2017 15.10.2017 17.10.2017 18.10.2017
3 22.10.2017 10.10.2017 23.11.2017 25.11.2017

35 Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax.
Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax, Union territory
tax, the tax amount shall be determined in the following manner, namely,-
Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be,
CGST, SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)
Example of Goods:
Question: M/s BMR pvt ltd purchased goods worth Rs. 220000 inclusive of GST of 18% of which CGST is 9% and
SGST is 9%. What will be the amount of tax included in the value of supply?
Ans:- The tax amount paid by BMR pvt ltd shall be computed as per provisions of rule 35 i.e. Tax amount =
220000*18/118 i.e. Rs. 33560 of which amount of CGST will be Rs. 16780&SGST will be Rs. 16780.

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(Chapter 7): Exemption from GST


Introduction:
The Central or the State Governments are empowered to grant exemptions from tax, subject to the following conditions:
i) Exemption should be in public interest
ii) By way of issue of notification
iii) On recommendation from the Council
iv) Absolute I conditional exemption may be for any goods and / or services
v) Exemption by way of special order (and not notification) may be granted by citing the circumstances which are of
exceptional nature.
 The chapter of exemption deals with powers to grant exemption from tax under CGST/IGST act and provides a list
of services exempt from GST in detail and also a glimpse of goods exempt from tax.
 Order to determine the liability to pay tax on any supply of goods or services falling under the ambit of charging
section of GST, it is essential to identify whether such supply of goods I services are exempt from tax.
 Not all supply of goods/services are taxable", this is stated keeping in mind the exempt category of goods or
services. Exempt supply has been defined as supply of any goods or services or both which attracts 'Nil rate of tax'
or which may be wholly exempt from tax and includes non-taxable supply.
 Section II of CGST Act and section 6 of the IGST Act designates the power to grant exemption from GST also the
State GST Acts contain identical provisions granting power to exempt SGST.
 Unlike the earlier indirect Tax regime, where larger exemptions were enjoyed by the taxpayers now as under GST
the exemption list is compressed and also area based exemptions have been excluded.
 Based on the necessity and essentiality certain goods/ services have been exempted i.e. as follows:-
 Public consumption products/services have been exempted
 Daily needs goods like unbranded Aata/Maida/Besan, Milk, Curd, Lassi, fresh vegetables etc.
 Services like health care, education etc.

Section 11 - Power to grant exemption from tax (Sec of IGST Act)

1. General Exemption
Where the Governments satisfied that
It is necessary in the public interest so to do,
It may, on the recommendations of the Council, by notification, exempt generally,
 Either absolutely or subject to such conditions as may be specified therein,
 Goods or services or both of any specified description
 From the whole or any part of the tax leviable thereon
 With effect from such date as may be specified in such notification

2. Special Exemption
Where the Government is satisfied that
It is necessary in the public interest so to do,
It may, on the recommendations of the Council, by special order
 In each case,
 Under circumstances of an exceptional nature to be stated in such order,
 Exempt from payment of tax any goods or services or both on which tax is leviable.

3. Explanation to Exemption
The Government may if it considers necessary or expedient so to do
 For the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order
issued under sub-section (2),
 Insert an explanation in such notification or order, as the case may be, by notification

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 At any time within one year of issue of the notification under subsection (1) or order under sub-section (2). And
 Every such explanation shall have effect as if it had always been the part of the first such notification or order, as
the case may be.

Mandatory Exemption
Explanation - For the purposes of this section,
Where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been
granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the
effective rate, on such supply of goods or services or both.

GOODS EXEMPT FROM TAX


A list of items has been notified under section 11(1) of the CGST Act, 2017/section 6(1) of the IGST Act, 2017. These items
have been exempted from whole of the tax. Since GST is a tax for common man, everyday items used by the common man
have been included in the list of exempted items.
Items such as unbranded Aata/Maida/Besan, Unpacked Food Grains, Milk, Eggs, Curd, Lassi and fresh vegetables
are among the items exempted from GST
Some of the examples of the goods exempted from tax have been provided herein:

Live Fish Fresh Milk Potatoes

Grapes Indian National Flag Plastic Bangles

List of Services exempt from GST


Exemption Notification 12/2017,21/2017,25/2017, 26/2017, 30/2017 and 32/2017-CentraI Tax (Rate)

Exemption Related to Health Care

1. Health Care Services (Heading 9993)


(a) Health care services by
 A clinical establishment,
 An authorized medical practitioner or
 Paramedics.
(b) Services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.

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Definition as per Para 2(zg)
Health Care Services

Means Include Does not Include


Any service by way of diagnosis Services by way of  Hair transplant or
or treatment or care for illness,  Cosmetic or plastic surgery,
transportation of the Except when undertaken lo restore or to
injury, deformity, abnormality patient to and from a reconstruct anatomy or functions of body
or pregnancy in any recognized affected due to congenital defects,
clinical establishment,
system of medicines in India developmental abnormalities, injury or trauma.

2.2. Preservation of Stem cells (Heading 993)


Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such
preservation.

3. Treatment or disposal of bio-medical waste (Heading 9994)

Services provided by operators of the common bio-medical waste treatment facility to a clinical establishment by way of
treatment or disposal of bio-medical waste or the processes incidental thereto.

4. Health Care of Animals or Birds Services (Heading 9983)


Services by a veterinary clinic in relation to health care of animals or birds

Illustration 1:
Calculate the service tax amount payable in respect of following Health care services provided by a clinical establishment.
Particulars Rs.
Services rendered by a clinical establishment in respect of diagnosis for injuries 3,00,000
Plastic surgery services provided to restore the functions due to injury 10,00,000
Services provided in respect of transportation of patients to & from the clinical establishment 1,20,000
Hair transplantation undertaken not connected with any restoration or reconstruction of anatomy 4,00,000
Health & fitness service provided for physical well being 3,50,000

Solution:
Services rendered by a clinical establishment in respect of diagnosis for injuries
Plastic surgery services provided to restore the functions due to injury Services
provided in respect of transportation of patients to & from the clinical establishment
Hair transplantation undertaken not connected with any restoration or
reconstruction of anatomy
Health & fitness service provided for physical well being
Total taxable services
GST 18%

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Exemption Related to Charitable and Religious Sector

5. Charitable Activities (Chapter 99)


Service by an entity registered under section 12AAof the Income tax Act, 1961 by way of charitable activities

Definition as per Para 2(r)


"Charitable Activities" means activities relating to -
(i) Public health by way of-
(a) Care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons
afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs
or alcohol; or
(b) Public awareness of preventive health, family planning or prevention of HIV infection;

(ii) Advancement of religion or spirituality or Yoga.


Note: GST will not be payable on fee charged for yoga camps conducted by charitable trusts.

(iii) Advancement of educational programs or skill development relating to,-


(a) Abandoned, orphaned or homeless children;
(b) Physically or mentally abused and traumatized persons:
(c) Prisoners; or
(d) Persons over the age of 65 years residing in a rural area;

(iv) Preservation of environment including watershed, forests and wildlife.

6. Religious Activities (Heading 9963 or 9972 or 9995 or any other heading of Section 9)
“Services by a person by way of”
(a) Conduct of any religious ceremony

(b) Renting of precincts of a religious place meant for general public, owned or managed by an entity registered as
a charitable or religious trust under
 Section 12AAof the Income-tax Act, 1961
Or
 A trust or an institution registered under sec 10 (23C) (v)
Or
 A body or an authority covered under sec 10 (23BBA) of the Income-tax Act

Exemption under (b) is not available in following cases


Renting Exemption not available
Renting of Rooms Where charges are Rs. 1000 or more per day
Renting of Premises, Community halls, Kalyanmandapam or open area and the like Where charges are Rs. 10,000 or more per day
Renting of Shops or other spaces for business or commerce Where charges are Rs. 10,000 or more per month

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7. Service provided with respect to Kailash Mansarovar and Haj pilgrimage exempted (Heading 9991)

Services provided by a specified organization in respect of a religious pilgrimage facilitated by the Ministry of External Affairs
of the Government of India, under bilateral arrangement,
Para 2 (zzg) Specified organization means:
 Kumaon Mandal Vikas Nigam Limited, a Government of Uttarakhand Undertaking; or
 Haj Committee of India and State Haj Committees constituted under the Haj Committee Act, 2002, for making
arrangements for the pilgrimage of Muslims of India for Haj.

Question:
The Shirdi Sai Baba Trust is a religious trust under Section 12 AA of the Income Tax Act 1961. The trust has a number of
rooms, community halls and shops which it gives out on rent.
Calculate the value of taxable service taking into consideration the relevant notification.
For the month of June 2019 it furnishes the following details:
Sr. N. Particulars Amount in Rs.
1) Renting of Rooms Rs. 1,800
i) 2 Rooms were rented for Rs 900 each per day Rs. 5,500
ii) 5 Rooms were rented for Rs 1,100 each per day
2) Renting of Community Halls Rs. 75,000
i) 3 Community Halls for performance of wedding ceremonies for Rs 25,000 per day Rs. 8,000
ii) 1 Community Hall for performance of various religious ceremonies for Rs 8,000 per day
3) The trust has 5 shops located just across the temple which it has rented to individuals for Rs 75,000
running their business. These are retails mainly involved in selling goods required for
performing various religious ceremonies. Each has been rented for Rs 15,000 per month.
4) Meditation Hall provided on rent for Rs 100/day Rs. 3,000

Solution:
Sr. N. Particulars Amount in Rs.
1) Renting of Rooms [Note 1]
(i) 2 Rooms were rented for Rs 900 each per day
(ii) 5 Rooms were rented for Rs 1,100 each per day
2) Renting of Community Halls
(i) 3 Community Halls for performance of wedding ceremonies for Rs 25,000 per day
(ii) 1 Community Hall for performance of various religious ceremonies for Rs 8,000 per day
3) 5 Shops given on rent.
Each has been rented for Rs 15,000 per month.
4) Meditation Hall provided on rent for Rs 100/day
Value of supply of service

Exemption in Legal Sector

8. Legal Services (Heading 9982 or 9991)


(a) Services provided by an arbitral tribunal to -
i) Any person other than a business entity; or
ii) A business entity with an aggregate turnover up to 20 Lakh rupees (Ten Lakh Rupees in the case of special
category states) in the preceding financial year
Para 2(i) "arbitral tribunal" has the same meaning as assigned to it in clause (d) of section 2 of the Arbitration and
Conciliation Act, 1996

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(b) A partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal
services to-
i) An advocate or partnership firm of advocates providing legal services;
ii) Any person other than a business entity; or
iii) A business entity with an aggregate turnover up to 20 lakh rupees (ten lakh rupees in the case of special category
states) in the preceding financial year

Definition:
Para 2(zm)"LEGAL SERVICE" means any service provided -
 In relation to advice, consultancy o assistance
 In any branch of law, in any manner and
 Includes representational services before any court, tribunal or authority.

(c) A senior advocate by way of legal services to -


i) Any person other than a business entity or
ii) A business entity with an aggregate turnover up to 20 lakh rupees (ten lakh rupees in the case of special category
states) in the preceding financial year

Agriculture Services
MEANING OF RELEVANT TERMS/EXPRESSIONS
Agricultural Activity Para 2(d) "AGRICULTURA PRODUCE"
 The cultivation of plants and Any produce of agriculture on which
 Rearing of all life-forms of animals, for food, fiber,  Either no processing is done or
fuel, raw material or other similar products.  Such processing is done as is usually done by a cultivator or
 Except the rearing of horses, producer which does not alter its essential characteristics
but makes it marketable for primary market.

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Exemption Related to Agriculture Sector

9. Agricultural Services (Heading 9986)

Services relating to
 The cultivation of plants and
 Rearing of all life-forms of animals, for food, fiber, fuel, raw material or other similar products.
 Except the rearing of horses,
Or Agriculture Produce by Way of
(a) Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting,
threshing, plant protection or testing;
(b) Supply of farm labour;
(c) Processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning,
trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which
do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;
(d) Renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
(e) Loading, unloading, packing, storage or warehousing of agricultural produce;
(f) Agricultural extension services;
(g) Services b any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for
sale or purchase of agricultural produce.

IMPORTANT READING:
Following activities are covered within the scope of agriculture:
 Pisciculture-Breeding offish;  Sericulture-Rearing of silk worms;
 Floriculture - Cultivation of ornamental flowers;  Horticulture;
 Forestry.

10. Loading, unloading of rice (Heading 9967 OR 9985)


Services by way of loading, unloading, packing, storage or warehousing of rice

11. [Packing, Cooling etc. of Vegetable or Fruits (Heading 9988 or other heading of Section 8 and Section 9)
Services by way of
Pre-conditioning Pre-cooling Ripening Fruits and vegetables which do not change or alter the
Of
Waxing Retail packing Labeling essential characteristics of the said fruits or vegetables

12. Process of Job Worker (Heading 9986)


Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms
of animals, except the rearing of horses, for food, fiber, fuel, raw material or other similar products or agricultural produce.
Road Transport

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Rail Transport

Air Transport

Inland Waterway Vessel Transport

Cable Car or Ropeway Transport

Exemption Related to Transport Sector

13. Passenger Transport Service (Heading 9964)


Service of transportation of passengers, with or without accompanied belongings, by-
a) Railways in a class other than –
i) First class; or ii) An air conditioned coach;
b) Metro, monorail or tramway;
c) Inland waterways;
d) Public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and
e) Metered cabs, or auto rickshaws (including e-rickshaws)

14. Passenger Transport Service (Heading 9964)


Transport of passengers, with or without accompanied belongings, by -
(a) Air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;
(b) Non-air conditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism,
conducted tour, charter or hire; or
(c) Stage carriage other than air-conditioned stage carriage.

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Goods Transport Service by Road

Goods Transport Service by Rail

Goods Transport Service by Vessels/Aircraft from outside/into India

Goods Transport by Inland waterways

Goods Transport by Pipeline

15. Transportation of Goods by Road (Heading 9965)


Services by way of transportation of goods-
(a) By road except the services of-
(i) A goods transportation agency; (ii) a courier agency;
(b) By inland waterways

16. Transportation of Goods by an Aircraft (Heading 9965)


Services by way of transportation of goods by an aircraft from a place outside India upto the customs station of clearance in
India

17. Transportation by Rail, Vessel & GTA (Heading 9965)

(a) Agricultural produce


(b) Milk, Salt and food grain including flours pulses
(c) Organic manure
(d) Newspaper or magazines registered with the Registrar of Newspapers
(e) Relief materials meant for victims of natural or man-made disasters, calamities, Accidents or mishap
(f) Defense or military equipments

Additional Exemption for transportation of goods by Rail or Vessel


(a) Railway equipments or materials

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18. Service Provided by GTA (Heading 9965 or 9967)


Transportation of the following goods by a goods transport agency have been exempted from service tax
(b) Goods, where consideration charged for the transportation of goods on a consignment transported in a single carriage
does not exceed Rs. 1500
OR
Goods, where consideration charged for transportation of all such goods for a single consignee does not exceed Rs. 750

Illustration:
1) ADHOC CLASSES book complete truck for delivery of notes to its one of the franchisee in Nagpur. GTA has charge
freight as follows:
Case 1 Rs. 1100 Exempt
Case 2 Ra. 1700 Taxable

2) ADHOC CLASSES book complete truck for delivery of notes to its various franchisee.
GTA has charge freight as follows:
Jaipur Rs. 600 Exempt
Pail Rs. 700 Exempt
Jodhpur Rs. 900 Taxable
Kota Rs. 1200 Taxable

19. Service Provided by GTA to an unregistered person


Services provided by a goods transport agency to an unregistered person, including an unregistered casual taxable person,
other than the following recipients, namely: -
(a) Any factory registered under or governed by the Factories Act, 1948
(b) Any Society registered under the Societies Registration Act, 1860 or under any other law for the time being in force
in any part of India
(c) Any Co-operative Society established by or under any law for the time being in force
(d) Anybody corporate established, by or under any law for the time being in force
(e) Any partnership firm whether registered or not under any law including association of persons
(f) Any casual taxable person registered under the Central Goods and Services Tax Act or the Integrated Goods and
Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act.

Exemption Related to Renting of Immovable Property

20. Renting of Residential Dwelling (Heading 9963 or Heading 9972)


Services by way of renting of residential dwelling for use as residence

21. Renting of Hotel, Inn, etc. (Heading 9963)


Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having
declared tariff of a unit of accommodation below Rs. 1000 per day or equivalent.

Declared tariff
Included- Extra amenities Discount- For deciding declared tariff discount shall not be
Charges for all amenities provided in the unit of accommodation excluded but for valuation discount is allowed as deduction
like furniture, air-conditioner, refrigerators or any other amenities for calculation of GST
e.g. e.g. Exemption is not available
Declared Tariff 900 Declared Tariff 1500 as declared tariff is more
Extra bed 300 Discount (600) than Rs. 1000
Total 1200 Net 900
Exemption not available

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Exemption Related to Entertainment Sector

22. Classical or folk Artist (Heading 9996)


Services by an artist by way of a performance in folk or classical art forms of-
(a) Music, or
(b) Dance, or
(c) Theatre,
If the consideration charged for such performance is not more than Rs.1,50,000
Provided that the exemption shall not apply to service provided by such artist as a brand ambassador

23. Admission to Entertainment Event (Heading 9996)


Services by way of right to admission to-
(a) Circus, dance, or theatrical performance including drama or ballet;
(b) Award function, concert, pageant, musical performance or any sporting event other than a recognized sporting event
(c) Recognized sporting event,
Where the consideration for admission is not more than Rs. 250 per person as referred to in (a), (b) and (c) above

24. Admission to Museum, National Park etc (Heading 9996)


Services by way of admission to a Museum, National Park, Wildlife Sanctuary, Tiger reserve or ZOO

25. Service by way of Training or coaching in recreational activities (Heading 9996)


Services by way of training or coaching in recreational activities relating to-
(a) Arts or culture, or
(b) Sports by charitable entities registered under section 12AAof the Income-tax Act.

Exemption Related to Banking and Financial Sector

26. Banking & Financial Services (Heading 9971)


Services by way of—
(a) Extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount
(other than interest involved in credit card services);
(b) Inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst
banks and such dealers.

Commission on inter-se sale or purchase of foreign currency

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27. Services by an acquiring bank (Heading 9971)


Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single
transaction transacted through credit card, debit card, charge card or other payment card service.

Explanation- For the purposes of this entry, “acquiring bank” means any banking company, financial institution including
non-banking financial company or any other person who makes the payment to any person who accepts such card.

Education and Training

28. Education and Training (Heading 9992)


Service provided-
(a) BY an educational institution to its students, faculty and staff
(b) TO an educational institution, by way of
i) Transportation of students, faculty and staff
ii) Catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union
Territory
iii) Security or cleaning or house-keeping services performed in such educational institution
iv) Services relating to admission to, or conduct of examination by such institution; upto higher secondary
Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution
providing services by way of preschool education and education up to higher secondary school or equivalent

Definition of Educational Institute as per Para 2(y)

Educational Institutes means an institution providing services by way of


i) Pre-school education and education up to higher secondary school or equivalent
ii) Education as a part of a curriculum for obtaining a qualification recognized bylaw
iii) Education as a part of an approved vocational education course.

Education Preschool & Higher Secondary


School
It normally covered service provided by Colleges,
Universities or Institutes
As a part of a curriculum
Service Qualification must be recognized by Indian
By way Education  For obtaining a qualification
Law and not by foreign Law. Thus any Education
 Recognized by law; Service provided under qualification recognized
by foreign law is taxable

Approved vocational education


Education
course,

Note:
Para 2(h) "approved vocational education course" means,
i) A course run by an industrial training institute or an industrial training centre affiliated to the National Council for
Vocational Training or State Council for Vocational Training offering courses in designated trades notified under the
Apprentices Act, 1961 or
ii) A Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered
with the Directorate General of Training, Ministry of Skill Development and Entrepreneurship
iii) Education as a part of an approved vocational education course

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Transportation Education Service include


of students, following consideration
faculty and staff Exempt: Any 1) Tuition Fees
Service Students, 2) Exam Fees
faculty and staff 3) Lab charges
4) Annual function & Trip
Catering, including charges
any mid-day meals Educational institution 5) Transportation
6) Catering
scheme sponsored Pre-school or Higher or
7) Extra Classes
by the Government Secondary school
Taxable: Any
1) Placement services
other service
Colleges or universities 2) Renting of Auditorium for
Security or Conference
cleaning or house- or Institution providing 3) Renting for Hall for
keeping services education in qualification marriage function
recognized by law 4) Franchisee fees charge to
Approved Vocational other for operating the
courses school
Services relating to
admission to, or Taxable as a 1) Sale of Prospectus
Supply of 2) Sale of Uniforms
conduct or conduct
Goods 3) Sate of Books
or examination
4) Sate of Stationery

Important Comment: Only four services as stated above are exempt all other services provided to pre-school or Higher or Secondary
School are Taxable. Now all services provided to Colleges, University, Institutions or approved vocational courses are Taxable

Exemption in Sports Sector

29. Service Provided to Recognized Sport Body by Sportsman (Heading 9992 or Heading 9996)
Services provided TO a recognized sports body BY-
a) An individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a
recognized sports body;
b) Another recognized sports body;

Illustration: State in each of the following cases whether the services are subject to GS': or not.
a) Services provided by a recognized sports body to another recognized sports body
b) Services provided by Mr. X to Indian Olympic Association directly as an umpire
c) Services provided by Mr. Y as a team manager to an event organized by Sports Authority of India which is recognized
sports body.
d) Services of Mr. D as a selector to sports body
e) Services of Mr. E who is a player to an unrecognized sports body

30. Services provided by and to FIFA (chapter 99)


Services provided by and to Federation International de Football Association (FIFA) and its subsidiaries directly or indirectly related
to any of the events under FIFA U-17 World Cup 2017 to be hosted in India.

Provided that Director (Sports), Ministry of Youth Affairs and Sports certifies that the services are directly or indirectly related to any
of the events under FIFA U-17 World Cup 2017”

31. FIFA U-17 World Cup 2017 (chapter 9996)


Services by way of right to admission to the events organized under FIFA U-17 World Cup 2017

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32. Sponsorship of certain Sport Events (Heading 9985)


Services by way of sponsorship of sporting events organized -
a) By a national sports federation, or its affiliated federations, where the participating teams or individuals represent any
district. State, zone or Country;
b) By Association of Indian Universities, Inter-University Sports Board, School Games Federation of India, All India Sports
Council for the Deaf, Paralympics Committee of India or Special Olympics Bharat;
c) By the Central Civil Services Cultural and Sports Board;
d) As part of national games, by the Indian Olympic Association; or
e) Under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.

Exemption in Government Sector

33. Access to Road or bridge on Payment of toll (Heading 9967)


“Service by way of access to a road or a bridge on payment of toll charges”

34. Access to Road or bridge on Payment of Annuity (Heading 9967)


“Service by way of access to a road or a bridge on payment of Annuity”

35. Services by Reserve Bank of India (Heading 9971)


“Services by the Reserve Bank of India”

36. Services by Foreign Diplomatic Missions (Heading 9999)


“Service by a Foreign Diplomatic Mission Located in India”

Government Related Services

Let’s understand some important definitions

"Government" Governmental Authority Local Authority Government Entity


Sec2 (53) of CGST- As per Para 2(zf): Sec 2(69) Means A: As per Para 2(zfa)
"Government" means An authority or a board or any •Panchayat Means an authority or a board or any
other body •Municipality other body including a society, trust,
Central Government
(i) Set up by an Act of Parliament
•Municipal Committee corporation,
Sec2 (53) of SGST- or a State Legislature, or
(ii) Establish by Government, & District Board. (i) Set up by an Ad of Parliament or
"Government" means
with 90% or more participation •Cantonment Board, State Legislature; or
State Government
by way of equity or control, to • Regional Council and (ii) Established by any Govt. with 90
carry out any function entrusted •Development Board per cent, or more participation by
to a municipality under article way of equity or control, to carry
243W of the Constitution or to a out a function entrusted by the
Panchayat under Article 243G of Central Government, State
the Constitution. Government, Union Territory or a
local authority.

37. Service Provided by Govt. (chapter 99)


Services by the Central Government, State Government, Union territory or local authority excluding the following
services—
(a) Services by the Department of Posts by way of
 Speed post,

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 Express parcel post,
 Life insurance, and
 Agency services
Provided to a person other than the Central Government, State Government, and Union territory;
(b) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(c) Transport of goods or passengers; or
(d) Any service, other than services covered under entries (a) to (c) above, provided to business entities.

Note:
1. As per Para 2(n) business entity means any person carrying out business.

Services Provided by Department of Post


Taxable Non Taxable
 Speed Post: It provides time-bound and express delivery of letters,  Basic mail services known as postal services
documents and parcels across the nation and around the world. such as post card, inland letter, book post,
 Express parcel Post: Its fast and reliable service for sending parcels registered post provided exclusively by the
Department of Posts to meet the universal
upto 35 kg within India.
postal obligations.
 Life Insurance: Two schemes
(i) Postal Life Insurance  Transfer of money through money orders,
(ii) Rural Postal Life Insurance operation of savings accounts, issue of postal
 Agency Services: It includes distribution of mutual funds, bonds, orders, pension payments and other such
Passport application, and collection of telephone or electricity bills. services.

RCM FOR GOVERNMENT SERVICE


Services supplied by
 Central Govt. By To Business entity in Taxable territory is
 State Govt. Business entity in taxable liable
 Union Territory territory
 Local authority In following cases Government or local
Except authority is liable
(a) Renting of immovable property, and (a) Renting of immovable property, and
(b) (i) Services by the department of post by way (b) (i) Services by the department of post by
of speed post, express parcel post, life way of speed post, express parcel post, life
insurance, and agency services provided to a insurance, and agency services provided to a
person other than Central Government State person other than Central Government State
Government or Union Territory or local Government or Union Territory or local
authority. authority.
(ii) Services in relation to an aircraft or a vessel, (ii) Services in relation to an aircraft or a
inside or outside the precincts of a port or an vessel, inside or outside the precincts of a port
airport or an airport
(iii) Transport of goods or passengers (iii) Transport of goods or passengers

38. Service to Govt. of article 243W (chapter 99)


Services by a Central Government, State Government, Union Territory, Local Authority or Governmental Authority by way
of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution.

Note:
1. As per entry 2(zf) "Governmental authority" has the same meaning as assigned to it in the Explanation to clause (16} of section 2 of the
Integrated Goods and Services Tax Act, 2017

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39. Service provided by Govt to Business Entity where it’s T/O less than 20 lacks (chapter99)
Services provided by the Central Government, State Government, Union territory or local authority to a business entity
with an aggregate turnover of up to twenty lakh rupees (ten lakh rupees in case of a special category state) in the
preceding financial year.
Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable
to- (i.e. this exemption is not applicable in following cases)
a) Services-
(i) By the Department of Posts by way of speed post, express parcel post, life insurance, and agency services
provided to a person other than the Central Government, State Government, Union territory;
(ii) In relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) Of transport of goods or passengers; and
b) Services by way of renting of immovable property.

40. Service provided by Govt where consideration is less than 5000 (chapter 99)
Services provided by Central Government, State Government, Union territory or a local authority where the consideration
for such services does not exceed five thousand rupees:
Provided that nothing contained in this entry shall apply to- (i.e. this exemption is not applicable in following cases)
(i) Services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services
provided to a person other than the Central Government, State Government, Union territory;
(ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) Transport of goods or passengers:
Provided further that in case where continuous supply of service, as defined in sub-section (33) of section 2 of the Central
Goods and Services Tax Act, 2017, is provided by the Central Government, State Government, Union territory or a local
authority, the exemption shall apply only where the consideration charged for such service does not exceed five
thousand rupees in a financial year.

41. Government Services related to registration or Certification (Heading 9983 or 9991)


Services provided by the Central Government, State Government, Union territory or local authority by way of-
(a) Registration required under any law for the time being in force;
(b) Testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at
large, including fire license, required under any law for the time being in force.

42. Government Services Related to issue of Passport etc. (Heading 9991)


Services provided by the Central Government, State Government, Union territory or local authority by way of issuance of
passport, visa, driving licence, birth certificate or death certificate.

43. Government Services related to Radio Frequency Spectrum (Heading 9973 or Heading 9991)
Services provided by the Central Government, State Government, Union territory or local authority by way of allowing a
business entity to operate as a telecom service provider or use radio frequency spectrum during the period prior to the
1st April, 2016, on payment of licence fee or spectrum user charges, as the case may be.

44. Government Service for right to use natural resources for Agriculture (Heading 9991)
Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of
right to use natural resources to an individual farmer for cultivation of plants and rearing of all life forms of animals, except
the rearing of horses, for food, fiber, fuel, raw material or other similar products.

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45. Government Services for rights to use natural resources (Heading 9991 or Heading 9973)
Services provided by the Central Government, State Government, Union territory or local authority by way of assignment of
right to use any natural resource where such right to use was assigned by the Central Government, State Government,
Union territory or local authority before the 1st April, 2016:
Provided that the exemption shall apply only to tax payable on one time charge payable, in full upfront or in installments,
for assignment of right to use such natural resource.

46. Service Provided by Govt. Entity (Chapter 99)


Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any
person specified by Central Government, State Government, Union territory or local authority against consideration
received from Central Government, State Government, Union territory or local authority, in the form of grants.

47. Service provided by Govt to Govt (chapter 99)


Services provided by the Central Government, State Government, Union territory or local authority to another Central
Government, State Government, Union territory or ^ local authority:
Provided that nothing contained in this entry shall apply to services- (i.e. this exemption is not applicable in following
cases)
(i) By the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided
to a person other than the Central Government, State Government, Union territory;
(ii) In relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) Of transport of goods or passengers.

48. Government Services of MOT charges on Import/Export (Heading 9991)

Services provided by the Central Government, State Government, Union territory by way of deputing officers after office
hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment
of Merchant Overtime charges.

49. Liquidated Charges by Govt. (Heading 9991 or Heading 9997)


Services provided by the Central Government, State Government, Union territory or local authority by way of tolerating
non-performance of a contract for which consideration in the form of Fines or liquidated damages is payable to the
Central Government, State Government, Union territory or local authority under such contract.

Services Provided to Government

50. Services provided by Fair Price Shop (Heading 9961 or Heading 9962)
Service provided by Fair Price Shops to Central Government by way of sale of wheat, rice and coarse grains under Public
Distribution System(PDS) against consideration in the form of commission or margin.

51. Services provided by Fair Price Shop (Heading 9961 or Heading 9962)
Service provided by Fair Price Shops to State Governments or Union territories by way of sale of kerosene, sugar, edible oil,
etc. under Public Distribution System (PDS) against consideration in the form of commission or margin.

52. Services provided by GSTN (Heading 9984)


Services provided by the Goods and Services Tax Network to the Central Government or State Governments or Union
territories for implementation of Goods and Services Tax.

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53. Service to Govt, of article 243G (chapter 99)


Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the
Central Government, State Government or Union territory or local authority or a Governmental authority by way of any
activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to
any function entrusted to a Municipality under article 243W of the Constitution.

54. Service to Govt, of article 243W (chapter 99)


Services provided to the Central Government, State Government or Union territory or local authority or a Governmental
authority by way of any activity in relation to any function entrusted to a Municipality under article 243W of the
Constitution.

55. Insurance Scheme for Government Services (Heading 9971 OR 9991)


Services provided to the Central Government, State Government, and Union territory under any insurance scheme for
which total premium is paid by the Central Government, State Government, and Union territory.

56. Training Program for Government (Heading


9992)
Services provided to the Central Government, State Government, Union territory administration under any training
programme for which total expenditure is borne by the Central Government, State Government, and Union territory
administration.

57. Transport by Air to Central Government (Heading 9964)


Services provided to the Central Government, by way of transport of passengers with or without accompanied belongings,
by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of
viability gap funding:
Provided that nothing contained in this entry shall apply on or after the expiry of a period of one year from the date
of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation.

Other Government Sector

58. Services provided by Employees State Insurance Corporation (Heading 9971 OR 9991)
Services by the Employees' State Insurance Corporation to persons governed under the Employees State Insurance Act,
1948.

59. Services provided by Employees Provident Fund (Heading 9971)


Services provided by the Employees Provident Fund Organization to the persons governed under the Employees Provident
Funds and the Miscellaneous Provisions Act, 1952.

60. Service Provided by IRDA (Heading 9971)


Services provided by the Insurance Regulatory and Development Authority of India to insurers under the Insurance
Regulatory and Development Authority of India Act, 1999.

61. Service Provided by SEBI (Heading 9971)


Services provided by the Securities and Exchange Board of India set up under the Securities and Exchange Board of India
Act, 1992 by way of protecting the interests of investors in securities and to promote the development of, and to regulate,
the securities market

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62. Pension Scheme of State Government (Heading 9971 OR 9991)


Services by way of collection of contribution under any pension scheme of the State Governments.

63. Leasing of asset by Indian Railway (Heading 9973 or Heading 9991)


Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by the Indian Railways Finance
Corporation to Indian Railways

64. Service Provided by National Centre for Cold Chain Development (Heading 9988 or 9992)
Services provided by the National Centre for Cold Chain Development under the Ministry of Agriculture, Cooperation and
Farmer's Welfare by way of cold chain knowledge dissemination.

65. Services by way of Hire by road (Heading 9966 OR 9973)


Services by way of giving on hire -
(a) To a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or
(b) To a goods transport agency, a means of transportation of goods

Note:
Para 2(zzk) "state transport undertaking" has the same meaning as assigned to it in clause (42) of section 2 of the Motor
Vehicles Act, 1988 (59 of 1988)

66. Service by State Government Industrial Development Corporations (Heading 9972)

Upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable in respect of
service by way of granting of long term lease of thirty years, or more) of industrial plots or plots for development of
infrastructure for financial business, provided by the State Government Industrial Development Corporations or
Undertakings or by any other entity having 50 per cent, or more ownership of Central Government, State Government,
Union territory to the industrial units or the developers in any industrial or financial business area.

67. Transmission or Distribution of Electricity (Heading 9969)


"Transmission or distribution of electricity by an electricity transmission or distribution utility"

By Electricity Transmission or Distribution Utility (ETDU) Important Comments


An Electricity transmission or distribution utility’ has also been defined in Para 1) If charges are collected by a developer or a
2(z). It includes the following: housing society for distribution of electricity
 The Central Electricity Authority within a residential complex
 A State Electricity Board 2) Service provide by way installation of genets or
 The Central Transmission Utility (CTU) similar equipment by private contractor for
 A State Transmission Utility (STU) notified under the Electricity Act, 2003 distribution of electricity
 A distribution or transmission licensee licensed under the said or
 Any other entity entrusted with such function by the Central or State
Government.

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68. Collection of contribution under Atal Pension Yojana (Heading 9971 OR 9991)
Services by way of collection of contribution under the Atal Pension Yojana

69. Service Provider under SDI Scheme (Heading 9983, 9985 & 9992)
Services of assessing bodies empanelled centrally by the Directorate General of Training, Ministry of Skill Development and
Entrepreneurship by way of assessments under the Skill Development Initiative Scheme

70. Training Service under Deen Dayal Upadhyay Grameen Kaushalya Yojana (Heading 9992)
Services provided by training providers (Project implementation agencies) under" Deen Dayal Upadhyay Grameen
Kaushalya Yojana implemented by the Ministry of Rural Development, Government of India by way of offering skill or
vocational training courses certified by the National Council for Vocational Training.

71. Service Provided by Incubatee (Heading)


Services provided by an incubate up to a total turnover of fifty lakh rupees in a financial year subject to the following
conditions, namely:-
(a) The total turnover had not exceeded fifty Lakh rupees during the preceding financial year; and
(b) A period of three years has not elapsed from the date of entering into an agreement as an incubate.

Exemption in Construction Sector

72. Construction etc or Original Work to Pradhan Mantri Awas Yojna (heading 9954)

Service provided by By way of


Way of pure labour Construction Installation Repair Maintenance
contracts of Erection Completion Renovation or
Commissioning Fitting out Alteration of
 Civil structure or
 Any other original works
Pertaining to the beneficiary-led individual house construction or enhancement under the Housing for All
(Urban) Mission or Pradhan Mantri Awas Yojana

73. Construction etc or Original Work to Single Residential Unit (Heading 9954)

Service By way of
Pure labour contracts of Construction Of Original Work
Erection pertaining to
Commissioning
Installation

A single residential unit otherwise than as a part of a residential complex

Exemption in Life/ General Insurance Sector

74. Service of life Insurance Business (Heading 9971 or 9991


Service of life insurance business provided by way of annuity under the National Pension System regulated by the Pension
Fund Regulatory and Development Authority of India under the Pension Fund Regulatory and Development Authority Act,
2013.

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Note:
Pg; 2(zn) "life Insurance business" has the same meaning as assigned to it in clause (11) of section 2 of the Insurance Act. 1938
(4 of 1938);

75. Service of Life Insurance Business (Heading 9971 oR9991)


Services of life insurance business provided or agreed to be provided by the Army, Naval and Air Force Group Insurance
Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central
Government.

76. Specified General Insurance Scheme (Heading 9971 or (9991)


Services of general insurance business provided under following schemes-
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as integrated Rural Development
Programme);
(c) Scheme for Insurance of Tribal’s;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pump set and Failed Well Insurance;
(g) Premia collected on export credit insurance;
(h) Weather Based crop Insurance scheme approved by the Government of India and implemented by the Ministry of
Agriculture;
(i) Jan Arogya Bima Policy;
(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana)
(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha Bima Yojna;
(q) Niramaya Health Insurance Scheme implemented by the Trust considered under the Provisions of the National Trust
for the welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of
1999).

77. Service Provided by Incubatee (Heading 9971 OR 9991)


Services of life insurance business provided under following schemes-
(a) Janashree Bima Yojana;
(b)Aam Aadmi Bima Yojana;
(c) Life micro-insurance product as approved by the Insurance Regulatory and Development Authority, having maximum
amount of cover of fitty thousand rupees;
(d) Varishtha Pension Bima Yojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yojana;
(g) Pradhan Mantri Vaya Vandan Yojana.

78. Transfer of a going Concern (Chapter 99)


Services -
 By way of transfer of a going concern,
 As a whole or an independent part thereof;

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79. Organization of Business Exhibition outside India (Heading 9984)


Services by an organizer to any person in respect of a business exhibition held outside India.

80. Service by an unincorporated Body or a Non-Profit Entity (Heading 9995)


Service by an unincorporated body or a non- profit entity registered under any law for the time being in force, to its own
members by way of reimbursement of charges or share of contribution -
(a) As a trade union;
(b) For the provision of carrying out any activity which is exempt from the levy of Goods and service Tax; or
(c) Up to an amount of five thousand rupees per month per member for sourcing of goods or services from a third person
for the common use of its members in a housing society or a residential complex.

81. Service Provided by IIM (Heading 9992)


Services provided by the Indian Institutes of Management, as per the guidelines of the Central Government, to their
students, by way of the following educational programmers, except Executive Development Programme: -
(a) Two year full time Post Graduate Programmers in Management for the Post Graduate Diploma in Management, to
which admissions are made on the basis of Common Admission Test (CAT) conducted by the Indian Institute of
Management;
(b) Fellow programme in Management;
(c) Five year integrated programme in Management.

82. Intermediary Service (Heading 9971 OR 9985)


Services by the following persons in respective capacities -
(a) Business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch
(b) Any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned
in entry (a); or
(c) Business facilitator or a business correspondent to an insurance company in a rural area.

83. Service recognized by Biotechnology Industry Research Assistance Council


(Heading 9983 or any other Heading Chapter 99)
Taxable services provided or to be provided, by a Technology Business Incubator or a Science and Technology Entrepreneurship Park
recognized by the National Science and Technology Entrepreneurship Development Board of the Department of Science and Technology,
Government of India or bio-incubators recognized by the Biotechnology industry Research Assistance Council, under the Department of
Biotechnology, Government of India.

84. News Services (Heading 9984)


Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India

85. Public Library Service (Heading 9984)


Services of public libraries by way of lending of books, publications or any other knowledge-enhancing content or material

86. Slaughtering of Animal (Heading 9988)


Services by way of slaughtering of animals.,

87. Public Service (Heading 9994)


Services by way of public conveniences such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets

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88. Exempting Supply of Services associated with Transit Cargo to Nepal & Bhutan (Chapter 99)
Supply of services associated with transit cargo to Nepal and Bhutan (landlocked countries).

Exempt Certain Supplies to NPCIL


Exemption for intra state supply of heavy water and nuclear fuels falling in Chapter 28 of the First Schedule to the Customs Tariff Act, 1975
by the Department of Atomic Energy to the Nuclear Power Corporation of India Ltd from the whole of the central tax leviable thereon under
section 9 of the Central Good and Services Tax Act, 2017.

Exemption in Training Sector

89. Service by NSDC etc. (Heading 9992, 9983 & 9991)


Any services provided by,-
(a) The National Skill Development Corporation set up by the Government of India;
(b) A Sector Skill Council approved by the National Skill Development Corporation;
(c) An assessment agency approved by the Sector Skill Council or the National Skill Development Corporation;
(d) A training partner approved by the National Skill Development Corporation or the Sector Skill Council, in relation to-
i) The National Skill Development Programme implemented by the National Skill Development Corporation; or
ii) A vocational skill development course under the National Skill Certification and Monetary Reward Scheme; or
iii) Any other Scheme implemented by the National Skill Development Corporation.

Exemption Notification No.(9/2017- Integrated Tax (Rare)

90. Exemption for services wherein location of service provider is in a non-taxable territory (Chapter 99)
Services received from a provider of service located in a non- taxable territory by -
(a) The Central Government, State Government, Union territory, a local authority, a governmental authority or an individual in
relation to any purpose other than commerce, industry or any other business or profession;
(b) An entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) for the purposes of providing charitable
activities; or
(c) A person located in a non-taxable territory:
Provided that the exemption shall not apply to -
i) Online information and database access or retrieval services received by persons specified in entry (a) or entry (b); OR
ii) Services by vi/ay of transportation of goods by a vessel from a place outside India up to the customs station of clearance
in India received by persons specified in the entry.

91. Service Received by RBI from outside India (Heading 9971)


Services received by the Reserve Bank of India, from outside India in relation to management of foreign exchange reserves.

92. Service provided by a tour operator (Heading 9985)


Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.

Exemption from Integrated Tax to SEZ -N/N 15/2017-IT


Exemption for goods or services or both imported by a unit or a developer in the Special Economic Zone, From the whole of the
integrated tax leviable thereon under sub-section (7) of section 3 of the Customs Tariff Act, 1975 for authorized operations.
IGST Exemption to SEZ’s on lmport7of`Se'rvices by a Unit/Developer in an SEZ - N/N 18/2017-IT
Exemption of services imported by a unit or a developer in the Special Economic Zone for authorized operations, from the whole of the
integrated tax leviable thereon under section 5 of the Integrated Goods and Service Tax Act, 2017.
Exempt Certain supplies to NPCIL - N/N 26/2017 IT
Exemption for inter-state supply of heavy water and nuclear fuels falling in Chapter 28 of the First Schedule to the Custom Tariff Act,
1975 (51 of 1 975) by the Department of Atomic Energy to the Nuclear Power Corporation of India Ltd from the whole of the integrated
Goods and Services Tax Act, 2017

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(Chapter 8): INPUT TAX CREDIT


Introduction:
“Input Tax” In relation to a taxable person, means the Goods and Services Tax charged on any inward supply of goods /
services which are used or are intended to be used, during or in furtherance of his business.
Fulfillment of Input Tax Credit under GST and conditions to claim is one of the most critical activities for every business to
settle its tax liability, Input Tax Credit (ITC) is the backbone of the GST regime as due to:-
 These provisions of Input Tax Credit makes GST a value added taxable. Collection of tax at all points after allowing
credit for the inputs.
 ITC has been defined as credit of /GST/CGST/SGST charged on any supply of goods and or services used or intended to
be used in the course or furtherance of business and include tax payable under reverse charge.

Section Description
Section 16 Eligibility & conditions for taking input tax credit
Section 17 Apportionment of credit & blocked credits
Section 18 Availability of credit in special circumstances
Section 19 Taking input tax credit in respect of inputs & capital goods for job work
Section 20 Manner of distribution of credit by Input Service Distributor
Section 21 Manner of recovery of credit distributed in excess

CGST rules pertaining to Input tax credit


Rule No. Description
36 Documentary requirements and conditions for claiming input tax credit
37 Reversal of input tax credit in case of non-payment of consideration
38 Claim of credit by a banking company or a financial institution.
39 Procedure for distribution of input tax credit by input Service Distributor
40 Manner of claiming credit in special circumstances
41 Transfer of credit on sale, merger, amalgamation, lease or transfer of a business
42 Manner of determination of input tax credit in respect of inputs or input services and reversal thereof
43 Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases
44 Manner of reversal of credit in special circumstances
45 Conditions and restrictions in respect of inputs and capital goods sent to the job worker

Relevant ETC forms pertaining to input Tax Credit:


Sr. No Form No Description
1 GST ITC – 01 Declaration for claim of input tax credit under sub - section (1) of section 18
2 GST ITC – 02 Declaration for transfer of ITC in case of sale, merger, demerger, amalgamation, lease or
transfer of a business under sub section (3) of section 18
3 GST ITC – 03 Declaration for intimation of ITC reversal on inputs, inputs contained in semi -finished and
finished goods in stock under sub-section (4)01 section 18
4 GST ITC – 04 Details of goods/capital goods sent to job worker and received back

Important definitions:
Sec 2(59) “Input”
Means any goods used other than capital goods used or intended to be used by supplier in course or furtherance of
business.

Sec 2(60) “Input service”


Means any Service used or intended to be used by a supplier in the course or furtherance of business

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Sec 2(19) “Capital goods”
Means goods, the value of which is capitalized in the books of account of the person claiming the input tax credit and
which are used or intended to be used in the course or furtherance of business

Sec 2(62) “Input Tax”


In relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any
supply of goods or services or both made to him and includes
(a) In integrated goods and services tax charged on import of goods
(b) The tax payable under the provision of section 9(3) and 9(4)
(c) The tax payable under the provisions of sections 5(3) and 5(4) of the integrated Goods and Services Tax Act
(d) The tax payable under the provisions of sections 9(3) and 9(4) of the respective State Goods and Services Tax Act: or
(e) The tax payable under the provisions of sections 7(3) and 7(4) of the Union Territory Goods and Services Tax Act, but
does not include the tax paid under the composition levy

Sec 2(63) “Input Tax Credit”


Means the credit of input tax -

Sec 2(46) “Electronic credit ledger”


Means the electronic credit ledger as referred in section 49(2) i.e., The input tax credit as sell- assessed in return of
registered person shall be credited to electronic credit ledger in accordance with section 41 , to be maintained in the
manner as may be prescribed.

Sec 2(67) “Inward supply”


In relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any other with
or without consideration.

Sec 2(47) “Exempt Supply”


Means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the IGST Act, and includes non-taxable supply.

Sec 16(1) of IGST Act “Zero-Rated Supply”


Means an of the following supplies of goods or services or both namely-
(a) Export of goods or services or both; or
(b) Supply of goods or services or both to a Special Economic Zone (SEZ) developer or a Special Economic Zone unit

Sec 16: Eligibility and condition for taking input tax credit.
1. Eligibility Criteria: - Every registered person shall, subject to such conditions and restrictions as may be prescribed
and in the manner specified in section 49,
 Be entitled to take credit of input tax charged on any supply of goods or services or both to him
 Which are used or intended to be used in the course or furtherance of his business
And they said amount shall be credited to the electronic credit ledger of such person.

2. Conditions for availment of ITC: - Notwithstanding anything contained in this section, no registered person shall be
entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless.
a) He is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other
taxpaying documents as may be prescribed.
b) He has received the goods or services or both.

Explanation: Bill to Ship to Model: For the purposes of this clause, it shall be deemed that the registered person has
received the goods where the goods are delivered
 By the supplier to a recipient or
 Any other person on the direction of such registered person, whether acting as an agent or otherwise

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 Before or during movement of goods,
 Either by way of documents of title to goods or otherwise
Mr. Raj located in Pune supplied raw material to Mr. Sane of Goa on 23-11-2017. During the movement of the
goods from Pune to Goa, Mr. Sane directed Mr. Raj to supply the raw material to his agent Mr. Ravi, located in Hubli
(Karnataka) on 25-11 -2017. Accordingly, Mr. Raj delivered raw material to Mr. Ravi on 27-11-2017.

Rule 36: Documentary requirements and conditions for claiming input tax credit.
(1) The input tax credit shall be availed by a registered person, including the input Service Distributor, on the basis of
any of the following documents, namely,-
(a) An invoice issued by the supplier of goods or services or both.
(b) an invoice issued by recipient (receiving goods and/or services from unregistered supplier) along with proof
of payment of tax (in case of reverse charge)
(c) A debit note issued by a supplier
(d) A bill of entry or any similar document prescribed under the Customs Act, 1962 for the assessment of
integrated tax on imports;
(e) Revised invoice
(f) Documents issued by input service distributor.

(2) Input tax credit shall be availed by a registered person only if all the applicable particulars as specified in the
provisions of Chapter VI are contained in the said document, and the relevant information, as contained in the said
document, is furnished in FORM GSTR-2 by such person.

c) Subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the
Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and

Example: Mr. Vishal purchased spare parts worth Rs. 75000 as on 01/8/2017 on which CGST @ 9% i.e. Rs. 6750 &
SGST @ 9% i.e. Rs. 6750 were charged, thus total amount payable against such purchases is Rs. 88500/-. The
consignment is received on same date explain the eligibility of ITC of Mr. Vishal ii supplier is failed to make the
payment of GST to Government.
Ans:

d) He has furnished the return under section 39:


Analysis
Jan, 2018 Feb, 2018 Mar, 2018
Status of GSTR-3 Filed Not Filed Cannot be filed unless return for tax period is filed Sec 39(10)
ITC allowed ITC not allowed ITC not allowed
Provided that where the goods against an invoice are received in lots or installments, the registered person shall be entitled
to take credit upon receipt of the last lot or installment

Example: M/s Asha Trading Co purchased certain goods from Venus traders, Mumbai who agreed to deliver the goods in
following installments:-
Date Installment Value of goods
10.6.2017 1st Rs. 15000
10.7.2017 2nd Rs. 35000
10.8.2017 Last Rs. 42000
Total Rs.92000

The above goods are be charged GST @ 5 %. Consequently the ITC of Rs. 4600/-(92000*5%) shall be available only after
receipt of last installment of goods i.e after10.8.2017
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on
which tax is payable on reverse charge basis,

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 The amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty
days from the date of issue of invoice by the supplier,
 An amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with
interest thereon, in such manner as may be prescribed:

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount
towards the value of supply of goods or services or both along with tax payable thereon

Rule 37, Reversal of input tax credit in the case of non-payment of consideration-
(1) A registered person, who has availed of input tax credit on any inward supply of goods or services or both,
but fails to pay to the supplier thereof, the value of such supply along with the tax payable thereon, within the time
limit specified in the second proviso to sub-section (2) of section 16,
Shall furnish the details of such supply, the amount of value not paid and the amount of input tax credit availed of
proportionate to such amount not paid to the supplier in FORM GSTR-2 for the month immediately following the period of
one hundred and eighty days from the date of the issue of the invoice:
Provided that the value of supplies made without consideration as specified in Schedule i of the said Act shall he
deemed to have been paid for the purposes of the second proviso to subsection (2) of section 16.

(2) The amount of input tax credit referred to in sub-rule (1) shall be added to the output tax liability of the registered
person for the month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate notified under sub-section (1) of section 50 (i.e.18%
PA.) for the period starting from the date of availing credit on such supplies till the date when the amount added to the
output tax liability.
(4) The time limit specified in sub-section (4) of section 16 (i.e, payment within 180 days) shall not apply to a claim for re
availing of any credit, in accordance with the provisions of the Act or the provisions of this Chapter, that had been
reversed earlier

Example 1: Girija automobiles a recipient of auto parts submits the following information:-
i. Value of invoice dated 11.07.2017 Rs. 75000
ii. CGST levied on the above value @ 9% Rs. 6750
iii. SGST levied on the above value @ 9% Rs. 6750
iv. Total amount payable Rs. 88500
If Girija automobiles as made the payment on 15-2-2018 to supplier for Rs .88,500. Explain the implication of ITC

Example 2: Due to a quality dispute, PZP Ltd withheld payment on a machine supplied by a vendor till it could be rectified.
Over 180 days went by in this dispute. The credit taken by PZP on the invoice got added to the output tax liability of PZP
and thus, it had to pay back the credit. Only after the vendor rectified the machine and PZP released the payment, could PZP
take the credit again.

3. No ITC depreciation is claimed in Tax component of C.G.


Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and
machinery under the provisions of the income-tax Act, 1961,
The input tax credit on the said tax component shall not be allowed.

Example: AK pvt ltd purchased machinery as on 20.07.2017 for its unit in Nashik, worth Rs. 12, 50,000 & GST @ 12% was
levied .i.e. Rs.1, 50,000 thus total cost of machinery including taxes was Rs. 14, 00,000. The machinery was put to use as on
26.07.2017. AK pvt ltd has capitalized the value of machinery including its tax component amounting to Rs. 1,50,000 and
claim the depreciation on Rs. 40,00,000 under income tax Act, 1962. Can AK Pvt. Ltd. take ITC on C.G.?

4. Time limit for availing ITC

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A registered person shall not be entitled to take input tax credit in respect Of any invoice or debit note for supply of goods
or services or both
 After the due date of furnishing of the return under section 39 for the month of September following the end of
financial year to which such invoice or invoice relating to such debit note pertains, or
 furnishing of the relevant annual return,
Whichever is earlier?
Example: Hercules Machinery delivered a machine to XYZ in January 2018 under invoice no. 49 dated 28th January, 2018
for Rs. 4,15,000 plus GST, and under took trial runs and calibration of the machine as per the requirements of XYZ. The
amount chargeable for the post delivery activities was covered in a debit note raised in April 2018 for Rs. 50,000 plus GST.
Hercules Machinery did not file its annual return till
October, 2018.

Sec 17(5): Blocked credits.


Non eligibility of Credit: Input tax credit shall not be available in respect of the following, namely
(a) Motor vehicles and other conveyances except when they are used
i) For making the following taxable supplies, namely
A. Further supply of such vehicles or conveyances or
B. Transportation of passengers or
C. Imparting training on driving, flying, navigating such vehicles or conveyances
Example 1: SRS Cars Pvt Ltd, a car manufacturer, purchased a tempo Traveler for the transport of its employees
within the factory premises. SRS Cars Pvt Ltd cannot avail ITC on the Tempo Traveler as it has not been used for the
above activities.
Example 2: Kesari tours & Travels, a tour operator, purchased a Tempo Traveler for the purpose of transporting\
tourist’s passenger during their package tours. Here, Kesari Tours & Travels can avail ITC on the Tempo Traveler, as
it is used for transporting passengers - a business activity for Kesari Tours & Travels.

ii) for transportation of goods


Example 1: Katraj dairy uses tempo service for delivery of its milk products. In this case as supply of milk products
is in corse of business, thus here ITC will be allowed.
Other Examples
Car used by a Call Center for brings his employees to work
A taxable person is in the business of information technology, he buys a motor vehicle for use of his Executive Directors

(b) The following supply of goods or services or both


(i)
 Food and beverages,
 Outdoor catering,
 Beauty treatment,
 Health services,
 Cosmetic and plastic surgery
Except where an inward supply of goods or services or both of a particular category is used by a registered person for
making an outward taxable supply of
 The same category of goods or services or both or
 As an element of a taxable composite or mixed supply

(ii) Membership of a club, health and fitness centre


Example 1: Smart pvt ltd takes an annual membership of a fitness centre Hi Fi, for the use of its employees. Here,
Smart pvt ltd cannot avail ITC on the GST paid on membership charges.

(iii) Rent-a-cab, life insurance and health insurance except where

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(A) The Government notifies the services which are obligatory for an employer to provide to its employees under
any law for the time being in force or
(B) Such inward supply of goods or services or both of a particular category is used by a registered person for
making
 An outward taxable supply of the
 Same category of goods or services or both or
 As part of a taxable composite or mixed supply; and
Other Examples:
Inward Supply of rent-a-cab service to ADHOC CLASSES
Inward Supply of Life insurance services by ADHOC CLASSES for their employees
Inward Supply of life insurance/health insurance services to A ltd. running a factory employing 600 workers

(iv) Travel benefits extended to employees on vacation such as leave or home travel concession
Example 1: VB Ltd reimburses its senior employees on travel expenses as part of LTA (Leave Travel Allowance). VB
Ltd cannot avail ITC on the GST component of the travel fare reimbursed.

(c) Works contract services when supplied for construction of an immovable property (other than plant and machinery)
Except where it is an input service for further supply of works contract service

(d) Goods or services or both received by a taxable person for construction of an immovable property (other than
plant or machinery)
 On his own account
 Including when such goods or services or both are used in the course or furtherance of business.

Explanation 1:
For the purposes of clauses (c) and (d), the expression “construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said immovable property

Explanation 2:
For the purposes of this Chapter and Chapter VI, the expression “plant and machinery” (means apparatus, equipment, and
machinery)
 Fixed to earth by foundation or structural support
 That are used for making outward supply of goods or services or both and
Includes such foundation and structural supports
But excludes
(i) Land, building or any other civil structures
(ii) Telecommunication towers; and
(iii) Pipelines laid outside the factory premises

(e) Goods or service or both on which tax has been paid under section 10

(f) Goods or services or both received by a non-resident taxable person except on goods imported by him

(g) Goods or services or both used for personal consumption

(h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
Example 1: ABC pvt ltd is an electronic goods dealer. On 1st Nov, 2017, purchased 20 computers @ Rs. 25,000 each from
the manufacturer. GST charged is Rs. 90,000 @ 18%. On 2nd Nov, 2017, while on transit 1 of the computer gets destroyed
completely and cannot be used any more. Thus ABC pvt ltd cannot avail the ITC on a computer which is destroyed in transit
i.e., Rs. 4,500.
(i) Any tax paid in accordance with the provisions of sections 74, 129 and 130,

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Sec 74 IT deals with recovery of tax not paid or short paid by reason of fraud, willful misstatement or suppression Tax paid is not
of facts eligible as ITC
Sec 129 It deals with detention, seizure and release of goods in transit which had been removed in contravention of Tax paid is not
legal provisions eligible as ITC
Sec 130 It deals with confiscation of goods in certain circumstances Tax paid is not
eligible as ITC

Question 1: ABC Co. Ltd. is engaged in the manufacture of heavy machinery. lt procured the following items during the
month of July.
Sr No. Items GST Paid (Rs.)
1. Electrical transformers to be used in the manufacturing process 5,20,000
2. Trucks used for the transport of raw material 1,00,000
3. Raw material 2,00,000
4. Confectionery items for consumption of employees working in the factory 25,000
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving necessary explanations for
treatment of various items.
Note:
i) All the conditions necessary for availing the ITC have been fulfilled.
ii) ABC Co. Ltd. is not eligible for any threshold exemption.
Solution:

Question 2: XYZ Ltd is engaged in manufacture of taxable goods. Compute the ITC available with XYZ Ltd. for the month of
October. 2018 from the following particulars:-

Sr. No. Inward supplies GST (Rs.) Remarks


1. Input ‘A’ 1,00,000 One invoice on which GST payable was 10,000 is missing
2. Input ‘B’ 50,000 Inputs are to be received in two installments. First installment has been
received in October, 2018.
3. Capital Goods 1,20,000 XYZ Ltd. has capitalized the capital goods at full invoice value inclusive of GST
as it will avail depreciation on the full invoice value.
4. Input Services 2,25,000 One invoice dated 20.01.2018 on which GST payable was Rs. 50,000 has been
received in October, 2018.
Note: -
i) All the conditions necessary for availing the ITC have been fulfilled.
ii) ABC Co. Ltd. is not eligible for any threshold exemption.
iii) The annual return for the financial year2017-18 was filed on 15th September, 2018.
Solution:

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Sec 17: Apportionment of credit (Sec 17(1) to Sec 17(4)


1. Where the goods or services or both are used by the registered person
Partly for the purpose of any business and partly for other purpose,
The amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business.

Example: Mr. Raju a trader owning a bakery provides the following information for the month of September 2017:-
a) Total ITC in respect of bakery products received Rs 70000
b) Bakery product sold in the course of business 70%
c) Bakery product used in the function of his brother 30%

Ans:- In the above case, Mr. Raju shall be entitled to take credit of 49000 (70000*70%) in terms of provisions of
section 17 (1) of CGST act.

2. Where the goods or services or both are used by the registered person (partly for effecting taxable suppliers
including zero-rated supplies under this Act or IGST Act and partly for effecting exempt supplies under said Acts)
The amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies.

Example 1: Ms Reena, a registered person provides the following information relating to the supplies made during the
month of July 2017:-
a) Eligible ITC in respect of taxable services Rs. 155000
b) Taxable supplies Rs. 356000
c) Exports (zero rated supplies) Rs. 300000
d) Exempted supplies of agricultural tools Rs. 150000
e) Supplies under reverse charge u/s 9(3) Rs. 170000
f) Total supplies b+c+d+e Rs. 1131000
g) % of taxable supplies including zero rated supplies to total supplies 58%
(656000/1131000*100)
Thus in above case Ms Reena shall be entitled to take input tax credit of Rs. 89900/-.
(Rs. 155000*58%) as per section 17(2) of CGST act

Example 2: A technical testing agency tests and certifies each batch of machine tools before dispatch by B Ltd. Some of
these tools are dispatched to a unit in a SEZ without payment of GST as theses supplies are not taxable. The finance
personnel of BMT Ltd. want to know whether they need to carry out reversal of ITC on the testing agencies services to
the extent attributable to the SEZ supplies. Give your Comments.
Answer:

3. The value of exempt supply under sub-section (2) shall be such as maybe prescribed, and
Shall include
 Supplies on which the recipient is liable to pay tax on reverse charge basis
 Transactions in securities,
 Sale of land and,
 Subject to cause (b) of paragraph 5 of Schedule II, sale of building.

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Rule 42: Manner of determination of input tax credit in respect of inputs of input services and reversal thereof
(1) The input tax credit in respect of inputs or input services, which attract the provisions of section 17(1) or section 17(2)
being
 Partly used for the purposes of business and partly for other purpose or
 Partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies,
Shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-
Steps 1- Compute common credit
(a) Total input tax involved on inputs & input services in a tax period (T)
(b) Less: Input tax on inputs & input services that are intended to be used exclusively for non-business (T1)
purposes
(c) Less: input tax on inputs & input services that are intended to be used exclusively for exempt supplies (T2)
(d) Less: input tax on inputs & input services which are ineligible for credit [blocked credits- see discussion (T3)
under point (ii)]
(e) ITC credited to Electronic Credit Ledger [C1 = T- (T1+T2+T3)] (C1)
(f) Less: ITC on inputs & input services that are intended to be used exclusively for taxable supplies (T4)
including zero rated supplies
(g) ‘T1’, ‘T2’, 'T3' and ‘T4’ shall be determined and declared by the registered person at the invoice level in
FORM GSTR 2;
(h) Common ITC available for apportionment [C2 = C1- T4] (C2)

Step 2 - Compute credit attributable able to exempt; supplies (ineligible credit) by apportionment of common
credit;
(i) The amount of input tax credit attributable towards exempt supplies D1= (E-F) x C2 (D1)
where,
‘E' is the aggregate value of exempt supplies during the tax period, and ‘F’ is the total turnover in the
State of the registered person during the tax period:
Proviso: Provided that where the registered person does not have any turnover during the said tax period or the aforesaid
information is not available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and ‘F’ of the last tax period
for which the details of such turnover are available, previous to the month during which the said value of ‘E/ F' is to
be calculated;

Explanation: For the purpose of this clause, it is hereby certified that the aggregate value of exempt supplies and the total turnover
shall exclude the amount of any duty or tax levied under entry 84 of List l of the Seventh Schedule to the Constitution
and entry 51 and 54 of List II of the said Schedule;
(j) The amount of credit attributable to non-business purposes if common inputs and input services are (D2)
and partly for non business purposes [D 2 = 5% of C2]
(k) The remainder of the common credit shall be the eligible input tax credit attributed to the purposes of (C3)
business and for effecting supplies other than exempted supplies but including zero rated supplies
[C3 = C2 (D1+D2)]
(l) The amount 'C3' shall be computed separately for input tax credit of Central tax, State tax, Union territory
tax and integrated tax
(m) The amount equal to aggregate of ‘D1’ and 'D2' shall be added to the output tax liability of the registered
person

Calculation of final ITC


(2) The input tax credit determined under sub-rule (1) shall be calculated finally for the financial year before the due date
for furnishing of the return for the month of September following the end of the financial year to which such credit
relates, in the manner specified in the said sub-rule and-
(a) Where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the
amounts determined under sub-rule (1) in respect of ‘D1’and ‘D2',

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Such excess shall be added to the output tax liability of the registered person in the month not later than
the month of September following the end of the financial year to which such credit relates and the said person
shall be liable to pay interest on the said excess amount at the rate specified in sub-section (1) of section 50 (18%
PA.) for the period starting from the first day of April of the succeeding financial year till the date of payment; or
(b) Where the aggregate of the amounts determined under sub-rule ( 1) in respect of ‘D1‘ and ‘D2’ exceeds the
aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’,
Such excess amount shall be claimed as credit by the registered person in his return for a month not later
than the month of September following the end of the financial year to which such credit relates.

Example on how to arrive at the amount of common credit


Making an assumption that Hawai slippers are exempted, take a case of Eezee Footwear, manufacturer of two varieties of
Hawai slippers and five varieties of other sandals and shoes. Dyes are used in the manufacture of all footwear However
bright pink is used only for one of the Hawai varieties, and black is used only for the sandals and shoes. Blue and yellow are
used for all the varieties. Brown is used for non-business purposes.
In inward supplies during the month -
Input tax on brown dye: Rs. 10,000 (This is T1,)
Input tax on bright pink dye: Rs. 90,000. (This is T2)
Input tax on black dye: Rs. 40,000. (This is T4)
Input tax on blue dye: Rs. 1,00,000
Input tax on yellow dye: Rs.15,000
Total input tax: Rs. 2,55,000 (This is T)
Total input tax reduced by (T1+T2 +T4, i.e., by Rs. 1,40,000) is Rs. 1,15,000.
Amount of common credit (C2) is Rs. 1,15,000. This has to be apportioned as given below in Step 2.

Example on how to apportion common credit into credit attributable to exempt supplies
Eezee Footwear, which manufactures two varieties of exempt Hawai slippers and five varieties of taxable sandals and
shoes, has the following turnover in October and has Rs.1,15,000 common credit that has to be apportioned:
Turnover of Hawai 1 plus Hawai 2: Rs. 3 crores (This is ‘E’)
Turnover of all varieties of taxable shoes and sandals: Rs. 2 crores
Total turnover of all footwear during the month: Rs. 5 crores (This is ‘F’)
No inputs/input services are used for non-business purposes.
(3,00,00,000 /5,00,00,000) x 1 ,15,000=Rs. 69,000 is the input tax that pertains to exempt supply (D1).
 Compute credit attributable to non-business purposes D2 as under
D2 = 5% of C2 (common credit)

Step 3 - Compute eligible credits


Compute C3 attributable to business purposes and taxable supplies including zero rated supplies as under:
C3 = C2 – (D1+D2)

Step 4 - Restrict ineligible credits


Add D1 + D2 to the output tax liability.

IIIustration 1: Apportionment of Credit on input and input services: X Ltd. providers taxable as well as exempted services.
Turnover of X Ltd. during the month of October, 2017 is as under:

Particulars Rs.
Value of exempted supply of services 15,00,000
Value of taxable supply of services 32,00,000
Value of Zero rated taxable Supply of services 8,00,000
Supply of services made for personal use 5,00,000
Total 60,00,000

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Details of Input tax Credit for the months of October, 2017 are as under:
Particulars CGST(Rs.) SGST(Rs.) IGST(Rs.)
Total input tax credit available 1,08,000 1,08,000 54,000
The above input tax credit on input services includes the following:
(i) Credit on input services exclusively used for supplying exempted services 18,000 18,000 7,200
(ii) Credit on input services exclusively used for supplying taxable services 54,000 54,000 3,600
(including Zero rated supplies)
(iii) Credit availed on inputs which are not eligible under section 17(5) 18,000 18,000 6,300
(iv) Credit on input services exclusively used for supplying services for personal use 10,800 10,800 5,400
What would be the entitlement of input tax credit of X Ltd. for month of October, 2017 under Rule 42 of the CGST Rules and
also calculate the amount to be added to output tax liability of X Ltd.

IIIustration 2: Distribution of Input tax credit when value of exempt supply is not known for the tax period:
PQR Ltd., a registered supplier, supplied taxable as well as exempted goods. The information regarding the exempted goods
supplied by it during the month August 2018 is not available. These exempted goods include the goods taxed at nil rate
worth Rs. 9,00,000. Besides this, turnover of supply of goods during the month of August, 2018 includes.
Particular Rs.
Value of taxable supply of goods 50,00,000
Value of Zero rated taxable Supply of goods 14,00,000
Supply of goods made for personal use 10,00,000
Total 74,00,000
Details of Input tax credit for the month of August, 2018 are as under:
Particulars CGST(Rs.) SGST(Rs.) IGST(Rs.)
Total input tax credit available 1,80,000 1,530,000 2,16,000
The above input tax credit on input / input services includes the following:
(i) Credit on input goods exclusively used for supplying exempted goods 45,000 45,000 72,000
(ii) Credit on input services exclusively used for supplying taxable goods (including 63,000 63,000 23,400
Zero rated supplies)
(iii) Credit availed on inputs which are ineligible under section 17(5) 42,000 42,000 48,000
(iv) Credit on input goods exclusively used for supplying goods for personal use 22,500 22,500 60,000
During the month of July, 201 8, the value of supply of taxable goods was Rs. 65,00,000 and value of supplies of exempted goods
was Rs. 10,00,000. What would be the input tax credit entitlement of PQR Ltd. for month of August, 2018 and also determine
the amount, if any, to be added to output tax labiality of PQR Ltd. during August, 2018

Rule 43: Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain
cases:-
(1) Subject to the provisions of section16 (3), the input tax credit in respect of capital goods which attract the provisions of
sections 17(1) and 17(2),
 Being partly used for the purposes of business and partly for other purposes, or
 Partly used for effecting taxable supplies including zero rated supplies and partly for effecting exempt supplies,
Shall be attributed to the purposes of business or for effecting taxable supplies in the following manner, namely,-
(i) The amount of input tax in respect of capital goods used or intended to be used exclusively for non-business
purposes or used or intended to be used exclusively for effecting exempt supplies
 Shall be indicated in FORM GSTR-2 and
 Shall not be credited to his electronic credit ledger.
(ii) The amount of input tax in respect of capital goods used or intended to be used exclusively for effecting supplies
other than exempted supplies(i.e. taxable supply) but including zero-rated supplies
 Shall be indicated in FORM GSTR-2 and
 Shall be credited to the electronic credit ledger.

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(iii) The amount of input tax in respect of capital goods not covered under clauses (a) and (b), denoted as ‘A’,
 Shall be credited to the electronic credit ledger and
 The useful life of such goods shall be taken as five years from the date of the invoice for such goods:

Proviso: Provided that where any capital goods earlier covered under clause (a) subsequently covered under
clause (c) The value of A shall be arrived at by reducing the input tax at the rate of five percentage points
for every quarter or part thereof and the amount ‘A’ shall be credited to the electronic credit ledger.

Explanation: An item of capital goods declared under clause (a) on its receipt shall not attract the provisions of
sub-section (4) of section 18, if it is subsequently covered under this clause.

(iv) The aggregate of the amounts of ‘A’ credited to the electronic credit ledger under clause (c), to be denoted as ‘Tc’,
shall be the common credit in respect of capital goods for a tax period:
Proviso: Provided that where any capital goods earlier covered under clause (b) is subsequently covered under
clause (c), the value of ‘A’ arrived at by reducing the input tax at the rate of five percentage points for every quarter
or part thereof shall be added to the aggregate value ‘TC’;

(v) The amount of input tax credit attributable to a tax period on common capital goods during their useful life, be
denoted as ‘Tm’ and calculated as-
Tm= Tc : 60
(vi) The amount of input tax credit, at the beginning of a tax period, on all common capital goods whose useful life
remains during the tax period, be denoted as ‘Tr’ and shall be the aggregate of ‘Tm’ for all such capital goods;

(vii) The amount of common credit attributable towards exempted supplies, be denoted as ‘T1’and calculated as-
T1= (E : F) x Tr
Where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover of the registered person during the tax period:
Proviso: Provided that where the registered person does not have any turnover during the said tax period or the
aforesaid information is not available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and ‘F’ of the
last tax period for which the details of such turnover are available, previous to the month during which the
said of ‘E/F’ is to be calculated;

Explanation: For the purposes of this clause, it is hereby clarified that the aggregate value of exempt supplies and the
total turnover shall exclude the amount of any duty or tax levied under entry 84 of List l of the Seventh Schedule to the
Constitution and entry 51 and 54 Q of List II of the said Schedule;

(viii) The amount Te along with the applicable interest shall, during every tax period of the useful life of the concerned
capital goods, be added to the output tax liability of the person making such claim of credit.

(2) The amount Te shall be computed separately for central tax, State tax, Union territory tax and integrated tax.

IIIustration 1: Mr. A purchased three machines i.e. Machine 1, Machine 2 and Machine 3 in April 2018. Machine 1 is
exclusively used for effecting exempted supplies. Machine 2 is exclusively used for making taxable supply and Machine 3 is
used for exempted as well as taxable supplies. Further. Aggregate value of supplies including exempt supplies during April
2018 is Rs. 2500000. Additionally, value of exempt supplies during April 2018 is Rs. 1000000 Necessary details of three
machines are as follows:
Product Machine 1 Machine 2 Machine 3
Date of Purchase 01-04-2018 01-04-2018 01-04-2018
Price 3,00,000 4,00,000 5,00,000
IGST @12% 36,000 48,000 60,000
Invoice Value 2,36,000 4,48,000 5,60,000

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IIIustration 2: Continuing the above example w.e.f. 1st April 2018, Mr. A started using Machine 1 & 2 also for effecting
taxable as well as exempt supplies Aggregate value of supplies including exempt supplies during April 2018 is Rs. 3500000
Value of exempt suppliers during April 2018 as Rs. 2,000,000

IIIustration 3: Distribution of input tax credit on capital goods:


M. Ltd. a register supplier, supplying taxable as well as exempted goods, provides following Turnover details during the
month of August, 2018.
Particulars Rs.
Value of taxable supply of goods 12,00,000
Value of Zero rated taxable Supply of goods 5,50,000
Value of Exempted Supply of goods 5,00,000
Supply of goods made for non business use 50,000
Total 23,00,000

Details of Input tax paid on Capital Goods for the month of August, 2018 are as under:
Particular CGST@9% Rs. CGST@9% Rs. CGST@9% Rs.
The Input tax credit on Capital goods is as follows:
(i) Credit on capital goods exclusively used for supplying exempted goods 10,800 10,800 21,600
(ii) Credit on capital goods exclusively used for supplying taxable goods
(including Zero rated supplies) 45,000 45,000 90,000
(iii) Credit on capital goods exclusively used for supplying goods for non 11,700 11,700 23,400
business use

Capital goods used for both supply of taxable as well as exempt goods:
Capital Value Of inward Supplies CGST @9% SGST @9% Date of inward
Goods (exclusive of CGST & SGST) (Rs.) (Rs.) Supplies
A 5,60,000 50,400 50,400 12-01-2018
B 2,56,000 23,040 23,040 21-04-2018
A 4,56,000 41,040 25-08-2018
41,040
Total 1,14,480 1,14,480
Determine the credit on capital goods attributable for tax period of August, 2018.

Sec 17(4): Special option of ITC to banking and financial institutions


A banking company or a financial institution including non-banking financial company, engaged in supplying services by way
of accepting deposits, extending loans or advances
Shall have the option
 To either comply with the provisions of sub-section (2), or
 Avail of, every month, an amount equal to 50% of the eligible input tax credit on inputs, capital goods and
input services in that month and the rest shall lapse:
Proviso: Provided that the option once exercised shall not be withdrawn during the reaming in part of the financial year:
Proviso: Provided further that the restriction of fifty per cent, shall not apply to the tax paid on supplies made by one
registered person to another registered person having the same Permanent Account Number. (i.e 100% ITC is
available)

Rule 38: Claim of credit by a banking company or a financial institution.-


A banking company or a financial institution, including a non-banking financial company, engaged in the supply of services by
way of accepting deposits or extending loans or advances
that chooses not to comply with the provisions of sub-section (2) of section 17, in accordance with the option
permitted under sub-section (4) of that section, shall follow the following procedure, namely,-
(a) The said company or institution shall not avail the credit of,-
(i) The tax paid on inputs and input services that are used for non-business purposes; and

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(ii) The credit attributable to the supplies specified in sub-section (5) of section 17, in FORM GSTR-2;
(b) The said company or institution shall avail the credit of tax paid on inputs and input services referred to in the second
proviso to sub-section (4) of section 17 and not covered under clause (a); [i.e. non used for business purpose or block credit]
(c) Fifty per cent. of the remaining amount of input tax shall be the input tax credit admissible to the company or the
institution and shall be furnished in FORM GSTR2;
(d) The amount referred to in clauses (b) and (c) shall, subject to the provisions of sections 41, 42 and 43, be credited to
the electronic credit ledger of the said company or the institution.

IIIustration 1: HDFC Bank provides the following information for the month of November, 2017
Particulars CGST Paid(Rs) SGST Paid(Rs)
Inputs received (eligible for ITC) 18,000 18,000
Inputs services availed (eligible for ITC) 11,340 11,340
Value of taxable supply of services (GST rate is 18%)=10,00,000
Value of exempted supply of services (interest on loan & advances = 9,00,000
Determine the amount of ITC available fewer than 50% credit option Sec 17(4) and 17(2)

IIIustration 2: Baroda Bank, having a branch in Pune engaged in supply of service by way of accepting deposits and
extending loans opted for Section 17(4), Its head office is in Gujarat and branch in Mumbai. ITC (CGST St SGST) available for
the month August, 2017.
Particular CGST Paid(Rs) SGST Paid(Rs)
(1) Services availed from Mumbai Branch (deemed distinct person under GST law) 18,000 18,000
(2) Motor vehicle lying in stock supplied by head office in Gujarat to Pune Branch for recovery 10,000 10,000
(3) Outdoor catering services received for its employees 9000 9000
(4) Auditing Services 5000 5000
(5) Food and beverages 2000 2000
(6) Other input and input services eligible for ITC 60,000 60,000
(7) Capital Goods 40,000 40,000
Determine the amount of admissible ITC for Baroda Bank, Pune Branch.

Sec 18: Availability of credit in special circumstances


1. Subject to such conditions and restrictions as may be prescribed—
(a) A person who has
 Applied for registration under this Act within thirty days from the date on which he becomes liable to registration and
 Has been granted such registration
Shall be entitled to take credit of input tax in respect of
 Inputs held in stock and
 Inputs contained in semi-finished or
 Finished goods held in stock
On the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this
Act;
Example: XYZ pvt ltd a manufacturer of apparel has crossed the threshold limit for registration on 1st October
2017. As on date stock of raw materials worth Rs.4,50,000 on this GST @ 18% (Rs. 81 ,000) has been paid.
XYZ pvt ltd shall ensure to apply for registration within 30 days from 1st October 2017. It not, he will lose
the eligible ITC of Rs. 81,000 on the raw materials in stock as per section 18(1) (a) of CGST act.

(b) A person who takes registration under sub-section (3) of section 25


Shall be entitled to take credit of input tax in respect of
 Inputs held in stock and
 Inputs contained in semi-finished or
 Finished goods held in stock
On the day immediately preceding the date of grant of registration;

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Example: Sony Pvt Ltd a dealer of electronic products who due to their business operations, has voluntarily
applied for registration, even though the threshold limit has not been crossed.
Sony Pvt Ltd was granted registration on 10th September 2017 and as on date electronic products worth
Rs. 5,00,000 in stock, on which GST @ 18% (Rs. 90,000) has been paid.
Thus, Sony pvt ltd shall avail the ITC of 2* 90,000 on the electronic products in stock as on 9th September2017.

(c) Where any registered person ceases to pay tax under section 10 (composition scheme)
He shall be entitled to take credit of input tax in respect of
 Inputs held in stock
 Inputs contained in semi-finished or
 Finished goods held in stock and
On capital goods on the day immediately preceding the date from which he becomes liable to pay tax
under section 9:
Proviso: Provided that the credit on capital goods shall be reduced by such percentage points as may be
prescribed;

(d) Where an exempt supply of goods or services or both by a registered person becomes a taxable supply,
Such person shall be entitled to take credit of input tax in respect of
 Inputs held in stock and
 Inputs contained in semi-finished or
 Finished goods held in stock relatable to such exempt supply and
 On capital goods exclusively used for such exempt supply
On the day immediately preceding the date from which such supply becomes taxable:
Proviso: Provided that the credit on capital goods shall be reduced by such percentage points as may be
prescribed.

Rule 40: Manner of claiming credit in special circumstances.-


(1) The input tax credit claimed in accordance with the provisions of sub-section (1) of section 18
 On the inputs held in stock or inputs contained in semi-finished or finished goods held in stock,
OR
 The credit claimed on capital goods in accordance with the provisions of clauses (c) and (d) of the said sub-section,
Shall be subject to the following conditions, namely,-
(a) The input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of section 18,
Shall be claimed after reducing the tax paid on such capital goods by five percentage points per quarter of
a year or part thereof from the date of the invoice or such other documents on which the capital goods were
received by the taxable person.

(b) The registered person shall within a period of thirty days from the date of becoming eligible to avail the input tax
credit under sub-section (1) of section 18, or shall make a declaration, electronically, on the common portal in
FORM GST ITC-01 to the effect that he is eligible to avail the input tax credit as aforesaid:
(c) The declaration under clause (b) shall clearly specify the details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or as the case may be, capital goods–
(i) On the day immediately preceding the date from which he becomes liable to pay tax under the provisions of
the Act, in the case of a claim under clause (a) of sub-section (1) of section 18;
(ii) On the day immediately preceding the date of the grant of registration, in the case of a claim under clause (b)
of sub-section (1) of section 18;
(iii) On the day immediately preceding the date from which he becomes liable to pay tax under section 9, in the
case of a claim under clause (c) of sub-section (1) of section 18;
(iv) On the day immediately preceding the date from which the supplies made by the registered person becomes
taxable, in the case of a claim under clause (d) of sub-section (1) of section 18;

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(d) The details furnished in the declaration under clause (b) shall be duly certified by a practicing chartered
accountant or a cost accountant if the aggregate value of the claim on account of central tax, State tax, Union
territory tax and integrated tax exceeds two lakh rupees;
(e) The input tax credit claimed in accordance with the provisions of clauses (c) and of sub-section (1) of section 18
shall be verified with the corresponding details furnished by the corresponding supplier in FORM GSTR-1 or as the
case may be, in FORM GSTR- 4, on the common portal.

(2) The amount of credit in the case of supply of capital goods or plant and machinery, for the purposes of sub-section (6)
of section 18, shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for
every quarter or part thereof from the date of the issue of the invoice for such goods.

Question: Vinay Steel Ltd. is a manufacturing of iron & steel. It procures raw materials and inputs such as iron ore,
chemicals, gases, etc, and capital goods including plant & machinery, for the manufacture of such iron & steel in this
example, it has been assumed that iron & steel (which is the outward supply of Vinay Steels Ltd) is exempt from payment of
taxes until 31- Mar-2020. Iron & steel become taxable with effect from 01-Apr-2020. The method of availment of input tax
credits on inputs contained in stock and capital goods as on 31-Mar-2020 is covered by this illustration
Particulars Amount
Value of input in stock on 31-Mar-2010 1,00,000
IGST @ 18% 18,000
All input ware procured after 01-Jul-2019
Value of input contained in semi-finished goods held in 31-Mar-2020 4,00,000
CGST @ 6% 24,000
SGST @ 6% 24,000
All inputs contained in semi-finished goods were procured after 1-May-2019
Value of inputs contained in finished goods held in stock on 31-Mar-2020 50,000
CGST @ 6% 3,000
SGST @ 6% 3,000

Only input worth Rs. 40,000 in finished goods were procedure after 01 Apr 2019
Value of capital goods used exclusively in relation to exempted goods held in 31-Mar-2020 20,00,000
IGST @ 18% 3,60,000

Sec 18(3): Transfer of Credit on Sale, merger, amalgamation etc.


(3) Where there is a change in the constitution of a registered person on account of
 Sale
 Merger
 Demerger
 Amalgamation
 Lease or transfer of the business
With the specific provisions for transfer of liabilities,
The said registered person shall be allowed to transfer the input tax credit which remains unutilized in his
electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as
may be prescribed.

Rule 41: Transfer of credit on sale, merger, amalgamation, lease or transfer of a business.-
1. Furnishing of Details: A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or
transfer or change in the ownership of business for any reason, furnish the details of sale, merger, de-merger,
amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the common portal along with a
request for transfer of unutilized input tax credit lying in his electronic credit ledger to the transferee:

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Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the value of assets of the
new units as specified in the demerger scheme

2. Certified if CA/CMA: The transferor shall also submit a copy of a certificate issued by a practicing chartered
accountant or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of business
has been done with a specific provision for the transfer of liabilities.

3. Acceptance of details furnished by transferor: The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the un-utilized credit specified in FORM GST ITC-02 shall be
credited to his electronic credit ledger.

4. Duly Accounting of Goods: The inputs and capital goods so transferred shall be duly accounted for by the transferee
in his books of account.

Example: Vijay sales pvt Ltd sold its business to Rahul Trading Co Pvt Ltd. At the time of sale, Vijay Pvt Ltd had
unutilized ITC of Rs.2,50,000. In the sale agreement, it was agreed that all liabilities and assets of Vijay sales pvt ltd will
be transferred to Rahul Trading Private Ltd. In this case, Vijay sales Private Ltd can transfer the unutilized ITC of Rs.
2,50,000 to Rahul trading Co Private Ltd.

Example: Synergy Ltd. is engaged in supplying taxable goods to its customers within the state and it is not liable for
registration under Section 22 of CGST Act, 2017. From 18-11-2018 onwards, it started inter stale supply of taxable
goods hence it applied for registration on 25-11-2018 and same has been granted to him.
CGST, SGST and IGST liability for the month of November, 2018 is Rs. 20,500, Rs. 20,500 and Rs. 41,000
respectively and Synergy Ltd. has to make e-payment of tax on the due date 20-12-2018.
Synergy Ltd. has provided the following details of stock of input held on 18-11-2018 and tax paid thereon.
Particulars CGST (Rs.) SGST (Rs.)
Inputs received on 18-07-2018(Invoice dated 17-07-2018) lying in Stock 5,600 5,600
Inputs received on 20-102018 (invoice dated 20-10-2018) lying in semi finished goods 9,500 9,500
Inputs received on 10-06-2017 (invoice dated 10-06-2017) contained in finished goods 11,600 11,600
Determine tax payable by Synergy Ltd. in Cash

Sec 18(4): Reversal of Credit under special circumstances


(4) Where any registered person who has availed of input tax credit
 Opts to pay tax under section 10 or,
 Where the goods or services or both supplied by him become wholly exempt

He shall pay an amount, by way of debit in the electronic credit ledger or electronic cash ledger, equivalent to the
credit of input tax in respect of
 Inputs held in stock and
 Inputs contained in semi-finished or
 Finished goods held in stock and
 On capital goods, reduced by such percentage points as may be prescribed,
On the day immediately preceding the date of exercising of such option or, as the case may be, the date of
such exemption:
Proviso: Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic
credit ledger shall lapse.

(5) The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be calculated in such
manner as may be prescribed.

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Rule 44: Manner of reversal of credit under special circumstances.-
1. Reversal of ITC: The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished and
finished goods held in stock, and capital goods held in stock shall, for the purposes of sub-section (4) of section 18 or
sub-section (5) of section 29, be determined in the following manner, namely,-
(a) For Inputs: For inputs held in stock and inputs contained in semi-finished and finished goods held in stock, the
input tax credit shall be calculated proportionately on the basis of the corresponding invoices on which credit had
been availed by the registered taxable person on such inputs;
(b) For capital goods: For capital goods held in stock, the input tax credit involved in the remaining useful life in
months shall be computed on pro-rata basis, taking the useful life as five years.
Illustration: Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months= 5 months ignoring a part of the month Input tax credit taken on such capital
goods= C
Input tax credit attributable to remaining useful life= C multiplied by 5/60

2. Separate determination for IGST and CGST: The amount, as specified in sub-rule (1) shall be determined separately
for input tax credit of central tax, State tax, Union territory tax and integrated tax.

3. Tax invoice of input not available: Where the tax invoices related to the inputs held in stock are not available, the
registered person shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods on the
effective date of the occurrence of any of the events specified in subsection (4) of section 18 or, as the case may be, sub-
section (5) of section 29.

4. Furnishing of details of credit: The amount determined under sub-rule (1) shall form part of the output tax liability
of the registered person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount
relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such amount relates to the
cancellation of registration.

5. Detail certified by CA/CMA to be furnished: The details furnished in accordance with sub-rule (3) shall be duly
certified by a practicing chartered accountant or cost accountant.

6. Determination of amount of credit in relation to capital goods: The amount of input tax credit for the purposes of
sub-section (6) of section 18 relating to capital goods shall be determined in the same manner as specified in clause (b)
of sub rule (1) and the amount shall be determined separately for input tax credit of central tax, State tax, Union
territory tax and integrated tax:
Provided that where the amount so determined is more than the tax determined on the transaction value of the capital
goods, the amount determined shall form part of the output tax liability and the same shall be furnished in FORM GSTR-1.
Example: Aspire Ltd. a registered person supplying taxable goods in Gujarat has opted to pay tax on composition
scheme under Section 10 with effect from 01-04-2018. It provides following information relating to balance of input
tax credit lying as on 31-03- 2018:
i) Inputs lying in stock as such valued at Rs. 2,50,000 (inclusive of CGST & SGST@12%)
ii) Inputs contained in finished goods where tax invoice is not available relating to such inputs (The market price of
such inputs (inclusive of CGST 8=SGST @ 12%) on 31-O3-2018 is Rs. 1,20,000)
iii) Input tax on capital goods purchased on 25-10-2017 is Rs. 75,000
iv) Balance in Electronic credit ledger is Rs.1,30,000.
Decide whether Aspire Ltd. is eligible for input tax credit lying on 31-03-2018

Sec 18(6): Supply of Capital Goods or Plant & Machinery on which ITC taken
(6) In case of supply of capital goods or plant and machinery
On which input tax credit has been taken, the registered person shall pay an amount equal to

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 The input tax credit taken on the said capital goods or plant and machinery reduced by such percentage points as
may be prescribed or
 The tax on the transaction value of such capital goods or plant and machinery determined under section 15,
whichever is higher:

Proviso: Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable person
may pay tax on the transaction value of such goods determined under section 15.

Applicable CGST Rule:


Rule 40 (2): Manner of claiming credit in Special Circumstances
The amount of credit in the case of supply of capital goods or plant and machinery, for the purposes of sub-section (6) of
section 18
shall be calculated by reducing the input tax on the said goods at the rate of five percentage points for every quarter
or part thereof from the date of the issue of the invoice for such goods.

Rule 44(6): Manner or reversal of credit under Special Circumstances


The amount of input tax credit for the purposes of sub-section (6) of section 18 relating to capital goods shall be
determined in the same manner as specified in clause (b) of sub rule (1) and the amount shall be determined separately for
input tax credit of central tax, State tax, Union territory tax and integrated tax:
Proviso: Provided that where the amount so determined is more than the tax determined on the transaction value of the
capital goods, the amount determined shall form part of the output tax liability and the same shall be furnished in
FORM GSTR-1.
Example: S Ltd provides the following information
Particulars Date/Amount
Date of invoice in respect of purchase of plant and machinery 10-01-2017
Value of Plant and Machinery excluding GST 1500000
GST charged in respect of Plant and Machinery @12% 180000
Date of supply of Plant and Machinery as second hand machinery 12-10-2018
Value of supply of Plant and Machinery 900000
Determine GST payable or reversal at the time of supply?
Example: R Ltd provides the following information
Particulars Date/Amount
Date of invoice in respect of purchase of mould and dies 10-01-2017
Value of Moulds and Dies excluding GST 400000
[GST charged in respect of Moulds and Dies @ 5% 20000
Date of supply of Moulds and Dies 12-192013
Value of supply of Moulds and Dies 100000

Sec 19: Taking input tax credit in respect of inputs and capital goods sent for job
work.
(1) The principal shall, subject to such conditions and restrictions as may be prescribed, are allowed input tax credit on
inputs sent to a job worker for job work.
(2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16(Goods are received by Supplier)
The principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker
for job work without being first brought to his place of business.
(3) Receipt back of Inputs: Where the inputs sent for job work
 Are not received back by the principal after completion of job work or otherwise or
 Are not supplied from the place of business of the job worker in accordance with clause (a) or clause (b) of sub-section
(1) of section 143
Within one year of being sent out, it shall be deemed that such inputs had been supplied by the principal to the job
worker on the day when the said inputs were sent out:

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Proviso: Provided that where the inputs are sent directly to a job worker, the period of one year shall be counted from
the date of receipt of inputs by the job worker.
(4) The principal shall, subject to such conditions and restrictions as may be prescribed, are allowed input tax credit on
capital goods sent to a job worker for job work.

(5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, (Goods are received by Supplier)
The principal shall be entitled to take credit of input tax on capital goods even if the capital goods are directly sent to
a job worker for job work without being first brought to his place of business.

(6) Received back of Capital Goods: Where the capital goods sent for job work are not received back by the principal
within a period of three years of being sent out,
It shall be deemed that such capital goods had been supplied by the principal to the job worker on the day when the
said capital goods were sent out:
Proviso: Provided that where the capital goods are sent directly to a job worker, the period of three years shall be
counted from the date of receipt of capital goods by the job worker.
(7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and fixtures, or tools sent
out to a job worker for job work.
Explanation: - For the purpose of this section, “principal” means the person referred to in section 143.

Rule 45: Conditions and restrictions in respect of inputs and capital goods sent to the job worker.-
1. Removal under the cover of Challan: The inputs, semi-finished goods or capital goods shall be sent to the job worker
under the cover of a Challan issued by the principal, including where such goods are sent directly to a job-worker.
2. The Challan issued by the principal to the job worker shall contain the details specified in rule 55.
3. The details of Challan in respect of goods dispatched to a job worker or received from a job worker or sent from one
job worker to another during a quarter shall be included in FORM GST ITC-04 furnished for that period on or before
the twenty-fifth day of the month succeeding the staid quarter
Proviso: Provided that any extension of the time limit notified by the Commissioner of State tax or the Commissioner of
Union territory tax shall be deemed to be notified by the Commissioner.
4. Deemed supply of Goods if not returned within 1 or 3 year and declaration in GSTR 1: Where the inputs or
capital goods are not returned to the principal within the time stipulated in section 143,
It shall be deemed that such inputs or capital goods had been supplied by the principal to the job worker on the
day when the said inputs or capital goods where send out and
The said supply shall be declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with
applicable interest.
Explanation.- For the purposes of this Chapter,-
(1) The expressions “capital goods” shall include “plant and machinery” as defined in the Explanation to section 17;
(2) for determining the value of an exempt supply as referred to in sub-section (3) of section 17-
(a) The value of land and building shall be taken as the same as adopted for the purpose of paying stamp duty; and
(b) The value of security shall be taken as one per cent. of the sale value of such security.

IIIustration- Nilkamal Manufacturers received some inputs on 15-07-2017 and immediately availed input tax credit of the
CGST and SGST of Rs. 1,32,000 paid on those inputs. On 20-07-2017it send the inputs to a worker outside its factory for
carrying out machining on the input and same were received by the job worker on 22-07 2017. The Job worker returned
the inputs on 05-07-2018 after carrying out the machining work on the inputs.
Discuss whether Nilkamal Manufacturers is required to take any further action with respect to the input tax credit availed
by it.

What would your answer be if such inputs were received back from Job worker on 05-08-2018

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Sec 2(61): “Input Service Distributor”


Means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the
receipt of input services and issues a prescribed document for the purposes of distributing the credit of
 Central tax
 State tax
 Integrated tax or
 Union territory tax paid on the said services
To a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office;

Sec 20: Manner of distribution of credit by Input Service Distributor.


(1) The Input Service Distributor shall distribute the credit of
Central Tax as Central Tax or Integrated Tax
And
Integrated Tax as Integrated Tax or Central Tax,
As per SGST Act
State Tax as State Tax or Integrated Tax of the state
By way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:––
(a) The credit can be distributed to the recipients of credit against a document containing such details as may be
prescribed;
(b) The amount of the credit distributed shall not exceed the amount of credit available for distribution;
(c) The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that
recipient;
(d) The credit of tax paid on input services attributable to more than one recipient of credit-
Shall be distributed amongst such recipients to whom the input service is attributable and such distribution
shall be pro rata on the basis of
To the aggregate of the turnover of all such recipients to whom such
The turnover in a State or turnover in a Union To input service is attributable and which are operational in the current
territory of such recipient, during the relevant period,
year, during the said relevant period;

(e) The credit of tax paid on input services attributable to all recipients of credit
Shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of

The turnover in a State or turnover in a Union To the aggregate of the turnover of all recipients and which are
To
territory of such recipient, during the relevant period operational in the current year, during the said relevant period.

Explanation: - For the purposes of this section,–


a) The “relevant period” shall be––
(i) If the recipients of credit have turnover in their States or Union the said financial year; or
territories in the financial year preceding the year during which
credit is to be distributed,
(ii) If some or all recipients of the credit do not have any turnover in the last quarter for which details of such turnover of all the
their States or Union territories in the financial year preceding recipients are available, previous to the month during which credit
the year during which the credit is to be distributed, is to be distributed;

b) The expression “recipient of credit” means the supplier of goods or services or both having the same Permanent
Account Number as that of the Input Service Distributor;

c) The term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods
not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under
entry 84 of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.

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Example: A Ltd. as an ISD has input service credit of Rs. 35 lakhs used by more than one location, to be distributed among
recipient's locations X, Y and Z. The turnover of X, Y, Z in preceding financial year, is Rs. 10 crores, Rs. 15 crores and Rs. 5
crores respectively. The credit of Rs. 5 lakhs pertains to input service received only by Z. The credit attributable to X, Y, Z is
as follows:-
Sr. No Particulars Amount (in Rs.)
1. Total Credit to be distributed as ISD 35 lakhs
2. Credit of service used only by Z unit 5 lakhs
3. Credit available for distribution for all units 30 lakhs
4. Credit distributable to X unit 10 crores/ 30 crores * 30 Lakhs 10 lakhs
5. Credit distributable to Y unit 15 crores /30 crores * 30 Lakhs 15 lakhs
6. Credit distributable to Z unit 5 crores/ 30 crores * 30 Lakhs 5 Lakhs Credit 10 lakhs
directly attributable to Z unit 5 Lakhs

Rule 39: Procedure for distribution of input tax credit by Input Service Distributor.-
(1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the following conditions,
namely,-
(a) Distribution in same month: The input tax credit available for distribution in a month shall be distributed in the
same month and the details thereof shall be furnished in FORM GSTR-6 in accordance with the provisions of
Chapter VIII of these rules;
(b) Ineligible and eligible ITC to be distributed separately: The Input Service Distributor shall, in accordance with
the provisions of clause (d), separately distribute the amount of ineligible input tax credit (ineligible under the
provisions of sub-section (5) of section 17 or otherwise) and the amount of eligible input tax credit;

(c) CGST/SGST/UTGST/IGST credit to be distributed separately: The input tax credit on account of central tax,
State tax, Union territory tax and integrated tax shall be distributed separately in accordance with the provisions of
clause (d);

(d) Distribution of credit in the basis of turnover: The input tax credit that is required to be distributed in
accordance with the provisions of clause (d) and (e) of sub-section (2) of section 20 to one of the recipients ‘R1’,
whether registered or not, from amongst the total of all the recipients to whom input tax credit is attributable,
including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any
reason, shall be the amount, “C1”, to be calculated by applying the following formula -
C1 = (T1÷T) × C
Where,
“C” is the amount of credit to be distributed,
“T1” is the turnover, as referred to in section 20, of person R1 during the relevant period, and
“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is
attributable in accordance with the provisions of section 20;
(e) ITC of IGST to be distributed as IGST: The input tax credit on account of integrated tax shall be distributed as
input tax credit of integrated tax to every recipient;

(f) The input tax credit on account of central tax and State tax or Union territory tax shall-
(i) In respect of a recipient located in the same State or Union territory in which the Input Service Distributor is
located, be distributed as input tax credit of central tax and State tax or Union territory tax respectively;
(ii) In respect of a recipient located in a State or Union territory other than that of the Input Service Distributor, be
distributed as integrated tax and the amount to be so distributed shall be equal to the aggregate of the amount
of input tax credit of central tax and State tax or Union territory tax that qualifies for distribution to such
recipient in accordance with clause (d);
(g) Insurance of Invoice: The Input Service Distributor shall issue an Input Service Distributor invoice, as prescribed
in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of input tax credit;

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(h) Credit note to be issued in reduction of credit distributed: The Input Service Distributor shall issue an Input
Service Distributor credit note, as prescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax
credit already distributed gets reduced for any reason;
(i) Additional ITC to be distributed in above manner: Any additional amount of input tax credit on account of
issuance of a debit note to an Input Service Distributor by the supplier shall be distributed in the manner and
subject to the conditions specified in clauses (a) to (f) and the amount attributable to any recipient shall be
calculated in the manner provided in clause (d) and such credit shall be distributed in the month in which the debit
note is included in the return in FORM GSTR-6;
(j) Any input tax credit required to be reduced on account of issuance of a credit note to the Input Service Distributor
by the supplier shall be apportioned to each recipient in the same ratio in which the input tax credit contained in
the original invoice was distributed in terms of clause (d), and the amount so apportioned shall be-
(i) Reduced from the amount to be distributed in the month in which the credit note is included in the return in
FORM GSTR-6; or
(ii) Added to the output tax liability of the recipient where the amount so apportioned is in the negative by virtue
of the amount of credit under distribution being less than the amount to be adjusted.

(2) If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for any other reason for
any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process
specified in clause (j) of sub rule (1) shall apply, mutatis mutandis, for reduction of credit.

(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the Input Service Distributor credit note
specified in clause (h) of sub-rule (1), issue an Input Service Distributor invoice to the recipient entitled to such credit
and include the Input Service Distributor credit note and the Input Service Distributor invoice in the return in FORM
GSTR-6 for the month in which such credit note and invoice was issued.

Example 1: K Ltd is registered as an input service distributor. In respect of the July, 2019 it has credit of tax paid on
Advertisement Services of Rs 50 Lakhs which is attributable to all recipients of credit located at Delhi, Haryana and
Punjab. All branches are operational during the current year20i9-2020

Particulars Amount (Rs. in Crores)


Turnover in preceding financial year 2018-2019
Delhi
Haryana
Punjab
Total

Example 2: Above mentioned Problem 1 is slightly amended and it is given that credit of Advertisement Services is
attributable only to Delhi and Punjab branches. Further, both the aforesaid branches are operational during the current
year 2019-20. In this situation how the credit of tax paid on input services is be distributed?

Example 3: ADHOC Ltd. a registered supplier of goods having Head Office at Pune, also registered as ISD, furnishes the
following information for month of July, 2018 and asks you to distribute the credit to various units:
Input Service Particulars CGST SGST IGST Total
"Training" Used exclusively in Unit-III 29,000 29,000 - 58,000
“Advertisement” Used in Unit-I, II and III - 29,000 48,000 77,000
"Auditing" Used in Unit-I, II, III and IV 14,600 14,600 - 29,200
“Tour Operator" Used in Unit-I (Input service is 1,280 - 2,560
1,280
availed for employee on vacation
during the month to its Unit l)
Total Amount Credit 44,880 73,880 48,000

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Total Turnover of the units for year ending 31st March, 2018 is as under:
Unit-I -- 30,00,000
Unit-II -- 20,00,000
Unit-III Not registered as exclusively engaged in supply of exempt goods 75,00,000
Unit-IV 60,00,000
Total Turnover of ADHOC Ltd. 1,65,00,000

All units are operational during the current year.


Unit I am located in Pune whereas units II, III and IV are located in Mumbai, Delhi and Gujarat respectively.
Compute credit attributable to each of the units.

Example: What would your answer be if in IIIustration 1, Unit IV started its operations in April, 2018 and following details
of Turnover of units forApril,201 8 to June, 201 8 are as follows:
Unit -I --- 2,55,000
Unit-II --- 3,89,000
Unit-III Not registered as exclusively engaged in supply of exempt goods 6,10,000
Unit-IV --- 4,12,000
16,66,000

Sec 21: Manner of recovery of credit distributed in excess


Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 20
resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be
recovered from such recipients along with interest, and the provisions of section 73 or section 74, as the case may be, shall,
mutatis mutandis, apply for determination of amount to be recovered.

Sec 41: Claim of input tax credit and provisional acceptance thereof
1. Every registered person shall, subject to such conditions and restrictions as may be prescribed,
Be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a
provisional basis to his electronic credit ledger.
2. The credit referred to in sub-section (1) shall be utilised only for payment of self assessed output tax as per the return
referred to in the said sub-section.

Question 1: A garment factory receives a Government order for making uniforms for a, commando unit. This supply is
exempt from tax under a special notification. The fabric is separately procured for the supply, but thread and lining
material for the collars are the ones which are used for other taxable products of the factory.
The turnover of the other products of the factory and exempted uniforms in July is Rs. 4 crores and Rs 1 crores
respectively, the ITC on thread and lining material procured in July is Rs. 15000 and Rs. 15000 respectively.
Calculate the eligible ITC on thread and lining material.
Answer:

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Question 2: Mr. A, a registered person was paying tax under Composition Scheme up to 30th July. However w.e,f. .31st July,
Mr. A becomes liable to pay tax under regular scheme. Is he eligible ITC?
Answer:

Question 3: Genie Engineers had a mould delivered directly to a job worker from the supplier for making certain precision
parts for use in the factory of Genie Engineers. As per agreement, the mould was to remain with the job worker as long as
work was being sent to him.
After four years a departmental audit team that visited the job worker noticed the mould and traced it to Genie Engineers,
GST was demanded from Genie Engineers for taking ITC without receiving the mould and furthermore for not bringing the
mould back after three years of delivery to the job worker.
How should they respond to this?

Question 4: Q.4: Ceramity Ltd. has following units:


A: Factory' in Hassan, Karnataka; closed from 2017-18 onwards, no turnover.
B: Factory in Tumkur, Karnataka; turnover of Rs. 27 crores in 2017-18;
C: Service centre in Hyderabad, Telangana; turnover of 1 crores in 2017-18;
D: Service centre in Chennai, Tamil Nadu; turnover of 2 crores in 2017-18;
Ceramity Ltd.’s corporate office functions as ISD. It has to distribute ITC of Rs. 9 lakh for December, 2018. Of this, an invoice
involving tax of Rs. 3 lakh pertains to technical consultancy for Tumkur unit.
What should be the distribution of the credit?

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(Chapter 9): REGISTRATION


Section Description
Section 22 Persons liable for registration
Section 23 Persons not liable for registration
Section 24 Compulsory registration in certain cases
Section 25 Procedure for registration
Section 26 Deemed registration
Section 27 Special provisions relating to casual taxable person & nonresident taxable person
Section 28 Amendment of registration
Section 29 Cancellation of registration
Section 30 Revocation of cancellation of registration

GST rules pertaining to Registration


Rule No. Description
8 Application for registration
9 Verification of the application and approval
10 Issue of registration certificate
11 Separate registration for multiple business verticals within a State or a Union territory
12 Grant of registration to persons required to deduct tax at source or to collect tax at
13 Grant of registration to non-resident taxable person
14 Grant of registration to a person supplying online information and database access or retrieval services
from a place outside India to a non- taxable online recipient
15 Extension in period of operation by casual taxable person & non-taxable person
16 Suo moto registration
17 Assignment of Unique Identity Number to certain special entities
18 Display of registration certificate & Goods & Services tax identification number on the name board
19 Amendment of registration
20 Application for cancellation of registration
21 Registration to be cancelled in certain cases
22 Cancellation of registration
23 Revocation of cancellation of registration
24 Migration of persons registered under the existing law
25 Physical verification of business premises in certain cases
26 Method of authentication

Important Definition
2(108): “Taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;
2 (78): “Non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the
Integrated Goods and Services Tax Act;
2 (26): “Common portal” means the common goods and services tax electronic portal referred to in section 146;
2 (85): “Place of business” (a) A place from where the business is ordinarily carried on, and includes a warehouse, a godown or any
other place where a taxable person stores his goods, supplies or receives goods or services or both; or
(b) A place where a taxable person maintains his books of account; or
(c) A place where a taxable person is engaged in business through an agent, by whatever name called;
2 (10): “Appointed day” means the date on which the provisions of this Act shall come into force;
2 (47): “Exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly
exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and
includes non-taxable supply;

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2 (50): “Fixed establishment” means a place (other than the registered place of business) which is characterized by a sufficient degree
of permanence and suitable structure in terms of human and technical resources to supply services, or to
receive and use services for its own needs;
2 (89): “Principal place of means the place of business specified as the principal place of business in the certificate of registration;
business”
2 (94): “Registered person” means a person who is registered under section 25 but does not include a person having a Unique
Identity Number;
2 (106): “Tax period” means the period for which the return is required to be furnished;
2 (109): “taxable territory” means the territory to which the provisions of this Act apply;
(107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24;

Sec 22: Persons liable for registration


(1) THRESHOLD LIMIT FOR REGISTRATION
Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special
category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a
financial year exceeds twenty lakh rupees:
Proviso: Provided that where such person makes taxable supplies of goods or services or both from any of the special
category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
Special category state in GST are Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand

Aggregate Turnover (Section 2(6)

“Aggregate Turnover”
Means aggregate value of
 All taxable supplies (excluding the value of inward supplies on which tax is payable by a person non reverse charge
basis).
 Exempt supplies,
 Exports of goods or services or both and
 Inter-State supplies of persons having the same Permanent Account Number,
To be computed on all India basis
But excludes central tax, State tax, Union territory tax, integrated tax and cess

Important Comments:
1. Aggregate turnover to include total turnover of all branches with same PAN
Example- A dealer 'X' has two offices - one in Delhi and another in Haryana. The aggregate turnover of both the offices
is 25 lakh, Determine Whether Mr. X requires a registration under GST?
Ans.- As per section 22(1) of CGST Act, In order to determine whether 'X' is liable for registration, turnover of both the
offices would be taken into account and only tithe same exceeds Rs. 20 lakh, X is liable for registration.
Thus in the given case as the aggregate turnover of both the offices exceeds 20 lakh it requires to obtain registration.

2. Value of exported goods/services, exempted goods /services, inter-State supplies between distinct persons
having same PAN to be included in aggregate turnover.
Example- Rohan Oils, Punjab, is engaged in supplying machine o as well as petrol. Supply of petrol is not leviable to
GST but supply of machine oil is taxable. Examine whether Rohan Oils is required to obtain a registration under GST?
Ans. - As per the definition of aggregate turnover value of exported goods/services, exempted goods/ services, inter-
State supplies between distinct persons having same PAN to be included in aggregate turnover thus in the given case in
order to determine whether Rohan Oils is liable for registration, turnover of both the supplies - non-taxable as well as
taxable would be taken into account and if the same exceeds 20 lakh, Rohan Oils is liable for registration.

3. Aggregate turnover to include all supplies made by the taxable person, whether on his own account or made
on behalf of all his principals.

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Example- Mohini Enterprises has appointed M/s Best fords & Associates as its agent. All the supplies of goods are
made by Mr. Best fords Associates as agent of Mohini Enterprises. Examine whether such supplies shall be included in
computation of aggregate turnover in order to determine the liability to get registered under GST? _
Ans. - Aggregate turnover to include all supplies made by the taxable person, whether on his own account or made on
behalf of all his principals.
Thus in the above case all the supplies of goods made by M/s Best fords & Associates as agent of Mohini
Enterprises will also be included in the aggregate turnover of M/s Best fords &Associates and it exceeds Rs. 20 lakh it
shall be liable to obtain registration.

Registration required only for a place of business from where taxable supply takes place
A person is required to obtain registration with respect to his each place of business in India from where a taxable
supply has taken place. However, a supplier is not liable to obtain registration it his aggregate turnover consists
exclusively of goods or services or both which are not taxable under GST

(2) MIGRATION OF REGISTRATION


Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an
existing law, shall be liable to be registered under this Act with effect from the appointed day.
Taxpayers registered under earlier indirect tax laws required to migrate
 All the taxpayers who were registered under various earlier indirect tax laws are liable to be registered under GST
with effect from the appointed day [when the CGST Act came into force, i.e. 22nd June, 2017].
 Such taxpayers have been issued a Provisional ID and password by their respective tax Departments to logon on
GST Common Portal (https://vvvvvv.gst.gov.in/) to till up the required details and upload the supporting
documents.
After they provided the requisite details, an ARN (Application Reference Number) is communicated to them.

(3) TRANSFER OF BUSINESS


Where a business carried on by a taxable person registered under this Act is transferred, whether on account of
succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall
be liable to be registered with effect from the date of such transfer or succession.

(4) PERSON LIABLE FOR REGISTRATION IN CASE OF TRANSFER OF BUSINESS BY ORDER OF COURT
Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme
or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order
of a High Court, Tribunal otherwise, the transferee shall be liable to be registered, with effect from the date on
which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court
or Tribunal.
Explanation– For the purposes of this section,––
(i) The expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own
account or made on behalf of all his principals;
(ii) The supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of
goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate
turnover of the registered job worker;
(iii) The expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article
279A of the Constitution.

Sec. 23 - Persons not liable for registration.


(1) The following persons shall not be liable to registration, namely:–
(a) Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or
wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;

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(b) An agriculturist, to the extent of supply of produce out of cultivation of land.
(2) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may
be exempted from obtaining registration under this Act.

Sec 24: Compulsory registration in certain cases


Compulsory registration: Notwithstanding anything contained in sub-section (1) of section 22, the following categories of
persons shall be required to be registered under this Act,––
(i) Persons making any inter-State taxable supply;
Exemption from Registration:
1. Exemption to Inter State of Service (N/N 10/2017) - Persons making Inter-State supplies of taxable services
and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of Rs. 20 lakhs (for
special category of state 10 Lakhs except Jammu & Kashmir) in a financial year as the category of person;
Exempted from obtaining registration under the said Act

2. Exemption to Handicraft goods supplier (N/N 8/2017) - Person making Inter-State taxable supplies of
handicraft goods as the category of persons exempted from obtaining registration under the aforesaid Act if
aggregate turnover, to be computed on all India basis, not exceeding an amount of Rs. 20 lakhs (for special
category of state Rs. 10 Lakhs except Jammu & Kashmir) in a financial year
Conditions -
a) Person required obtaining PAN
b) Generate e-way bill with the provision of Rule 138

3. Exemption to Job worker (N/N 7/2017) – The job workers engaged in making inter- State supply of services to a
registered person as the category of persons exempted from obtaining registration under the said Act.
Exemption not applicable (Registration is required) in following cases
a) Who is liable to be registered under sub-section (1 ) of section 22 or who opts to take registration voluntarily
under sub-section (3) of section 25 of the said Act; or
b) Who is involved in making supply of services in relation to the goods mentioned against serial number 151 in
the Annexure to rule 138 of the CGST Rules, 2017 (e-way bill) .

(ii) Casual taxable persons making taxable supply;


a) Exemption to Handcraft goods supplier as a casual taxable person (N/N 32/2017)- Casual taxable person
making taxable supplies (including interstate supply) of handicraft goods as the category of persons exempted
from obtaining registration under the aforesaid Act if aggregate turnover, to be computed on all India basis, not
exceeding an amount of Rs. 20 lakhs( for special category of stateRs.10 Lakhs except Jammu & Kashmir) in a
financial year
Conditions-
1. Person required obtaining PAN
2. Generate e-way bill with the provision of Rule 138

(iii) Persons who are required to pay tax under reverse charge;

(iv) Person who are required to pay tax under sub-section (5) of section 9;

(v) Non-Resident taxable persons making taxable supply;

(vi) Persons who are required to deduct tax under section 51, whether or not separately registered under this Act.

(vii) Persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as
an agent or otherwise;

(viii) Input Service Distributor, whether or not separately registered under this Act;

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(ix) Persons who supply goods or services or both, other than supplies specified under sub-section (5) of section
9, through such electronic commerce operator who is required to collect tax at source under section 52;

(x) Every electronic commerce operator;

(xi) Every person supplying online information and database access or retrieval services from a place outside
India to a person in India, other than a registered person; and

(xii) Such other person or class of persons as may be notified by the Government on the recommendations of the
Council.

Sec 25: Procedure for registration


Where and by when to apply for registration [Section 25(1)]
Particulars Where When
Person who is liable to be registered In every such State/ UT in Within 30 days from the date on which
under section 22 or section 24 which he is so liable he becomes liable to registration
A causal taxable person or a non- At last 5 days prior to the
resident taxable person commencement of business

Example: Suhana Services Ltd. is engaged in taxable supply of services in Maharashtra. The turnover of Suhana Services
Ltd. exceeded Rs.20 lakh on 1st November. It is liable to get registered by 1st December in the State of Maharashtra

State-wise registration [Section 25(2) read with rule 11]


(A) One registration per State
Registration needs to be taken State-wise, i.e. there are no centralized registrations under GST. A business entity having its
branches in multiple States will have to take separate State-wise registration for the branches in different States. Further,
within a State, an entity with different branches would have single registration wherein it can declare one place as principal
place of business (PPoB) and other branches as additional place of business (APOB).

(B) Separate registration for different business verticals within a State/UT may be granted
Although a taxpayer having multiple business verticals in one State is not mandatorily required to obtain separate
registration for each such vertical in the State, he has an option to obtain independent registration with respect to each
such separate business vertical.
Separate registration for each business vertical shall be granted provided all separately registered business verticals pay
tax on supply of goods/services/both made to another registered business vertical, of such person and issue a tax invoice
for such supply. Separate registration application needs to be filed for each business vertical.

(c) Registration under composition levy


If one of the business verticals of a taxable person is paying tax under normal levy [Section 9], no other business vertical
shall be granted registration to pay tax under composition levy [Section 10].
If one of the business vertical [separately registered] becomes ineligible to pay tax under composition levy, all other
business verticals would also become so ineligible.
The provisions of rules 9 and 10 relating to verification and grant of registration shall mutatis mutandis apply to an
application submitted under this rule.

Business vertical means a distinguishable component of an enterprise that is engaged in the Supply of individual goods or
services or a group of related goods or services which is subject to risks and returns that are different from those of the
other business verticals.

Explanation – For the purposes of this clause, factors that should be considered in determining whether goods or services
are related include-
(a) The nature of the goods or services

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(b) The nature of the production processes
(c) He type or class of customers for the goods or services
(d) The methods used to distribute the goods or supply of service and
(e) The nature of regulatory environment (wherever applicable) bank including Insurance, or public utilities [Section 2
(18) of the CGST Act].

Voluntary registration [Section 25(3)]


A person who is not liable to be registered under section 22 or section 24 may registered voluntarily. In case of voluntary
registration, all provisions of this Act, as are applicable to a registered person, shall apply to voluntarily registered person.
Voluntary registration is advantageous for the persons who supply of goods or services or both to registered persons. The
reason for the same is that by virtue of section 9(4) of the CCST Ag, in case of supplies received from unregistered supplier
by registered recipient, recipient has to pay the tax under reverse charge. Therefore, business units would prefer receiving
supplies from the registered persons only. Thus, voluntary registration enables a supplier of goods or services of both to
enhance its B2B [Business to Business] transactions.
However, once a person obtains voluntary registration, he has to pay tax even though his aggregate turnover does not
exceed Rs. 20 lakh Rs. 10 lakh.

Benefits of Voluntary Registration-


1. In case of inverted tax structure [i.e. output tax rate is lower than in input tax rate], its beneficial to get registered
and pay tax liability and avail ITC
2. Customers may prefer, or even insist on, dealing only with other registered business. This particularly when
customer is GST registered as such customer will fall under reverse charge if his vendor/supplier is unregistered.
3. Some business such as contractors may decide to register to avoid an embarrassment caused by revealing that
their annual taxable supply is below the threshold (Threshold limit is 20 lakhs generally).

Distinct Persons/ establishments ot distinct persons [Section 25(4) & (5)]


A person who has obtained/ is required to obtain more than one registration, whether in one State/ Union territory or
more than one State/Union territory shall, in respect of each such registration, be treated as distinct persons.
Further, where a person who has obtained or is required to obtain registration in a State or Union territory in
respect of an establishment, has an establishment in another State or Union territory, then such establishments shall be
treated as establishments of distinct persons.
Example: Mohan, a Chartered Accountant, has a registered head office in Delhi. He has also obtained registration in the State
of West Bengal in respect of his newly opened branch office. Mohan shall be treated as distinct persons in respect of
registrations in West Bengal and Delhi.

PAN must for obtaining registration [Section 25(6) & (7)]


A Permanent Account Number is mandatory to be eligible for grant of registration.
A Non-Resident Taxable Person (NRTP) may be granted registration on the basis of other prescribed documents [Discussed
later on].

Unique identity Number (UIN) [Section 25(9) at (10) read with rule 17]
 Any specialized agency of the United Nations organization or
 Any Multilateral Financial institution and organization as notified under the United Nations
 Consulate or embassy of foreign countries and
 Any/other person notified by the Commissioner.
is required to obtain a UIN from the GSTN portal.
This UIN is needed for claiming refund of taxes paid on notified supplies of goods and/or services received by them, and for such
other purpose as may be notified.
Such person shall tile an application in a different prescribed form. UIN shall be assigned and registration certificate shall be
issued within 3 working days from the date of submission of application. -

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Suo-motu registration by the proper officer [Section 25(8) read with rule 16]
Where, pursuant to any survey, enquiry, inspection, search or any other proceedings under the Act, the proper officer finds
that a person liable to registration under the Act** has failed to apply for such registration, such officer may register the
said person on a temporary basis and issue an order in prescribed form.

Such person shall either:


(i) Submit an application for registration in prescribed form within 90 days from the date of grant of temporary
registration, or
(ii) File an appeal against such temporary registration.
In case (ii), if the Appellate Authority upholds the liability to registration, application for registration shall be
submitted within 30 days from the date of issuance of such order of the Appellate Tribunal.

Provisions relating to verification and issue of registration certificate [as contained in rules 9 and 10] [discussed in
subsequent paras] shall, mutatis mutandis, apply to such application submitted by the person granted temporary
registration. GSTIN there after granted shall be effective from the date of order of proper officer granting temporary
registration.

Procedure for registration [Section 25 read with rules 8,9 & 10]
Provisions relating to procedure for application for registration, verification of the application and approval & issue of
registration certificate are contained in the rules 8, 9 and 10 of the CGST Rules 2017 respectively. The same have to be read
in conjunction with section 25 provisions.
General procedure lay down under Rule 8, 9 & 10 Special Procedure
read with Section 25
It is applicable to following Cases It is applicable to following cases
1. All taxable people required to register under GST 1. Non-resident taxable person
Act 2. A person required to deduct tax at source under section 51
2. Person under composition Scheme (local authority)
3. Person applied for voluntary registration 3. A person required to collect tax at source under section 52
4. Casual Taxable person (ECO)
Such persons- shall apply for registration in Form 4. A- Person supplying online information and database access or
GSTREG 01. The application for registration in GST retrieval services (OID/AR) from a place outside India to a non-
Form REG 01 is divided into two parts –Part A and taxable online recipient referred to in section 14 of IGST Act
Part B. who is liable to be registered under section 25(1)

Physical verification of business premises in certain cases after grant of registration [Rule 25]
Where the proper officer is satisfied that the physical verification of the place of business of a registered person is required
after grant of registration, he may get such verification done and the verification report along with other documents,
including photographs, shall be uploaded in the prescribed form on the GST Common Portal, within 15 working days
following the date of such verification.

Issuance of registration certificate [Rule 10]


Where the application for grant of registration has been approved, a certificate of registration [duly signed or verified
through EVC by the proper officer] in FORM GST REG-O6 showing the principal place of business (PPOB) and additional
place(s) of business (APoB) is made available to tire applicant on the Common Portal and a Goods and Services Tax
identification Number (hereinafter referred to as “GSTIN”) i.e. the GST registration no. is communicated to applicant, within
3 days after the grant of registration.

GSTIN Format
Sate Code PAN Entity Code Check sum character

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Display of registration certificate and GSTIN on the name board [Rule 18]
Every registered person shall display his registration certificate in a prominent location at his PPOB and at every APOB.
Further, his GSTIN also has to be displayed on the name board exhibited at the entry of his PPOB and at every APoB.

Effective date of registration [Rule 10]


Where an applicant submits application for registration Effective date of registration is
Within 30 days from the date he becomes liable to registration to registration The date on which he becomes liable
After 30 days from the date he becomes liable to registration Date of grant of registration

Special provisions for grant of registration in case of Non-Resident Taxable Person (NRTP) and Casual Taxable
Person (CTP) [Sections 25 & 27 read with rules 13 & 15]
Before going into the registration provisions of CTP and NRTP, let us first understand the two terms. The two terms have
been defined in the CGST Act as follows:
Casual Taxable Person (CTP): [Section 2(20)]: means a person who occasionally undertakes transactions involving
supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other
capacity in a State/UT where he has no fixed place of business

Non-Resident Taxable Person (NRTP): [Section 2(77)]: means any person who occasionally undertakes transactions
involving supply of goods or services or both, whether as principal or agent or in any other capacity but who has no fixed
place of business or residence in India.

Difference
Casual Taxable Person (CTP) - Sec 2(20) Non-Resident Taxable Person (NTRP)-Sec 2(77)
Meaning Supplier who does not have any fixed place of Supplier who does not have any fixed place of business or
business in that taxable territory in which it residence in India
undertakes taxable supply
Registratio  Compulsory registration u/Sec 24 0f CGST Act  Compulsory registration u/Sec 24 of CGST Act
n provisions  Registration before commencement of business  Registration before Commencement of business and
and with advance payment of tax with advance payment of tax
 Normal Registration Application : GST REG-  Separate simplified Registration Application: GST
01 REG-09
 PAN based GST Registration granted  GST Registration granted without PAN
Threshold Not available Not available
Exemption
Composition  It is not available to Causal taxable person  It is not available to Non-Resident taxable person
Scheme
Return Normal Monthly Returns: GSTR-1, GSTR-2, and  Separate Simplified Return: GSTR 5
provision GSTR-3  Also, Annual Return is not required to be filed
ITC  Can claim ITC of all inward supplies (be it  Can claim ITC only in respect of goods- imported by him
Provisions domestic/imported inputs, capital goods or [All other credit blocked for him-sec 17(5) of CGST]
input services)

Registration Procedure for CTP & NRTP


(A) Both CRTP and NRTP have compulsorily got registered under GST irrespective of the threshold limit, at least 5
days prior to commencement of business.

(B) As per Section 25(6), every person must have a PAN to be eligible for registration. Since NRTP will generally
not have a PAN OF India, he may be granted registration on the basis of other prescribed documents.
He has to submit a self-attested copy of his valid passport along with the application signed by his authorized
signatory who is an Indian Resident having valid PAN. However, in case of a business entity incorporated or

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established outside India, the application for registration shall be submitted along with its tax identification number or
unique number on the basis of which the entity is identified by the Government of that country or it’s PAN, if available.
Application will be submitted by NRTP in a different prescribed 'form whereas CTP will submit the application for
registration in the normal form for application for registration i.e. Form GST REG 01 and his registration of CTP will be a
PAN based registration.

(C) Period of validity of registration certificate granted to CTP/NRTP


Registration Certificate granted to CTP/NRTP will be valid for:
(i) Period specified in the registration application, or
(ii) 90 days from the effective date of registration [can be extended CTP & NRTP will make taxable
further by a period not exceeding 90 days by making an application supplies only after the insurance
before the end of the validity of registration granted to him**] of the certificate of registration
Whichever is earlier?
Provisions relating to verification of application and grant of registration [under rules 9 and 10] will apply mutatis
mutandis, to an application for registration filed by NRTP.
**Where extension of time is sought, such registered taxable person will deposit an additional amount of tax equivalent to the
estimated tax liability of such person for the period for which the extension is sought.

(D) Advance deposit of tax


At the time of submitting the registration application, CTP/NRTP are required to make an advance deposit of tax in an
amount equivalent to the estimated tax liability of such person for the period for which the registration is sought.
Such person will get a TRN for making an advance deposit of tax which shall be credited to his electronic cash ledger. An
acknowledgment of receipt of application tor registration is issued only after said deposit.

Sec 26 - Deemed Registration


Registration under GST is not tax specific, which means that there is single registration tor all the taxes i.e. CGST,
SGST/UTGST, IGST and cesses.
Grant of registration/UN under any SGST Act/ UTGST Act is deemed to be registration/U/N granted under CGST Act
provided application for registration has not been rejected under CGST Act.
Further, rejection of application for registration/U|N under SGST Act/UTGST Act is deemed to be rejection of application for
registration under CGST Act.

Sec 28 – Amendment of Registration


The provisions relating to amendment of registration are contained in section 28 read with rule 19 of CGST Rule, 2017. The
significant aspects or the same are discussed hereunder:
 Application for Amendments: Where there is any change in the particulars furnished in registration application/U/N
application registered person shall submit an application in prescribed manner within 15 days of such change along
with document relating to such change at the Common Portal.
 Amendment of core fields of information: In case of amendment of core fields of information, the proper officer may,
on the basis or information furnished or as ascertained by him, approve or reject amendments in the registration
particulars in the prescribed manner. Such amendment shall take effect from the date of occurrence of event
warranting such amendment.
 Amendment of noncore fields of information: However, where change relates to non-core fields of information,
registration certificate shall stand amended upon submission of the application for amendment on the Common Portal.

 Change in the constitution of any business: Where a change in the constitution of any business results in change of
PAN of a registered person, the said person shall apply for fresh registration. The reason for the same is that GSTIN is
PAN based. Any change in PAN would warrant a new registration.

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Permission of proper officer required if


change relate to core fields of information

Legal Name of Business Address of PPoB/APoB Addition, deletion or retirement of partners or directors,
Karta, Managing, Committee, Board of Trustees, chief,
Executive Officer, or equivalent, responsible for day to
day affairs of the business

Change does not warrant cancellation of


Registration under section 29

Change of such particulars shall be applicable for all registration of a


registered person obtained under provisions of this Chapter in same PAN.

Mobile no./e.-mail address of authorized signatory can be


amended only after online verification through GST portal

Sec 29 & 30 – Cancellation of Registration and Revocation of cancellation


The provisions relating to cancellation of registration and its revocation are contained in sections 20 & 30 respectively read
with rules 20 to 23 of the CGST Rules, 2017:

Voluntary registration Where the registered person


no more requires it
Cancellation of
registration
Where proper office considers
Suo-motu registration the registration liable to
cancellation in view of certain
details
Circumstances where registration is liable to be cancelled [Section 29(1) & (2)]
Circumstances when the registration can be cancelled either Suo Motu by proper officer or on; an application of the
registered person or his legal heirs (in case death of such person)

 Business discontinued  Change in the constitution  Taxable person (other


 Transferred fully for any reason of the business than voluntarily
including death of the proprietor registered person) who
 Amalgamated with other legal entity is no longer liable to be
 Demerged or registered under section
 Otherwise disposed of 22 or section 24

Circumstances when the proper officer can cancel registration on his own
In the following cases, registration can be cancelled by the proper office from such date including any retrospective date, as
he may deem fit:
1. Following contraventions done by the registered person:
(i) He does not conduct any business from the declared place of business, or
(ii) He issues invoice/bill without supply of goods/ services in violation of the provisions of this Act, or the rules made
there under.
(iii) If he violates the provisions of section 171 of the CGST Act*
Section 171 of the CGST Act, 2017 contains provisions relating to antiprofeetering measure.

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2. Not filing of Return:
 A registered person has not filed returns for continuous 6 months.
Note: 3 consecutive tax periods in case of a person who opted for composition levy

3. Voluntarily registered person has not commenced the business within 6 months from the date of registration

4. Registration by fraud etc: Registration was obtained by means of fraud, willful misstatement or suppression of facts

Procedure for cancellation of registration


 Application for Cancellation: A registered person seeking cancellation of registration shall electronically submit the
application for cancellation of registration in prescribed form within 30 days of occurrence of the event warranting
cancellation.
 Details of ITC of inputs in Stock and Capital Goods: He is required to furnish in the application the details of inputs
held in stock or inputs contained in semi-finished/finished goods held in stock and of capital goods held in stock on the
date from which cancellation of registration is sought, liability thereon, details of the payment, if any, made against
such liability and may furnish relevant documents thereof.
 Cancellation order by proper officer: Where a person who has submitted an application for cancellation of his
registration is no longer liable to be registered, proper officer shall issue the order of cancellation of registration within
30 days from the date of submission of application for cancellation.
 Suo-motu Cancellation by proper officer: Where the proper officer cancels the registration Suo-Motu, he shall not
cancel the same without giving a show cause notice and without giving a reasonable opportunity of being heard, to the
registered person. The reply to such show cause notice (SCN) has to be submitted within 7 days of service of notice.
It reply to SCN is satisfactory, proper officer shall drop the proceedings and pass an order in prescribed form.
Where registration of a person is liable to be cancelled, proper officer shall issue the order of cancellation of
registration within 30 days from the date of reply to SCN.
 Effective Date of Cancellation: The cancellation of registration shall be effective from a date to be determined by the
proper officer. He will direct the taxable person to pay arrears of any tax, interest or penalty including the amount
liable to be paid under section 29(5) [as discussed in the next Para].

Reversal of credit [Section 29(5) & (6)]


 A registered person whose registration is cancelled will have to debit the electronic credit or cash ledger by an amount
equal to
(i) Input tax credit (ITC) in respect of:
 Stock of inputs and inputs contained in semi-finished/finished goods’ stock or
 Capital goods or plant and machinery
On the day immediately preceding the date of cancellation, or

(ii) The output tax payable on such goods


Whichever is higher, calculated in such manner as may be prescribed.
 However, in case of capital goods or plant and machinery, the taxable person shall pay an amount equal to the input tax
credit taken on the said capital goods or plant and machinery, reduced by such percentage points as may be prescribed
or the tax on the transaction value of such capital goods or plant and machinery under section 15, whichever is higher.

Other Important Point


1. A voluntarily registered person cannot seek cancellation before the expiry of a period of 1 year from the effective date of
registration [Proviso to rule 20]
2. A person to whom a UIN has been granted under rule 17 cannot apply for cancellation of registration [Rule 20]
3. The cancellation of registration will not affect liability of registered person to pay tax and other dues under the Act for any
period prior to the date of cancellation [Section 29(3)]
4. The cancellation of registration under either SGST Act/UTGST Act shall be deemed to be a cancellation of registration
under CGST Act [ Section 29(4)]

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Revocation of cancellation of registration [Section 30 read with rule 23]
 Where the registration of a person is cancelled Suo-Motu by the proper officer, such registered person may apply for
revocation of the cancellation to such proper officer, within 30 days from the date of service of the order of cancellation
of registration, at the GST Common Portal in the prescribed manner.
 However, in case registration was cancelled for failure of registered person to furnish returns, before applying for
revocation the person has to make good the defaults (by filing all pending returns, making payment of all dues in terms
of such returns along with interest, penalty, late fee, etc.) for which the registration was cancelled by the officer.
 If the proper officer is satisfied that there are sufficient grounds for revocation of cancellation, he may revoke the
cancellation of registration, by an order within 30 days of receipt of application and communicate the same to
applicant.
 Otherwise, he may reject the revocation application. However, before rejecting the application, he has to first issue SCN
to the applicant who shall furnish the clarification within 7 working days of service of SCN. The proper officer shall
depose the application (accept/reject the same) within 30 days of receipt of clarification.
 The revocation of cancellation of registration under the SGST Act/ UTGST Act, as the case may be, shall be deemed to be
a revocation of cancellation of registration under CGST Act.

Application for registration by Special Economic Zone (SEZ) [Proviso to rule 8(1) of the CGST Rules, 2017]:
A person having unit in SEZ/SEZ developer will make a separate application for registration as a business vertical distinct
from his other units located outside SEZ. Thus, there may be a case where two units of a tax payer are located in same State
- one in SEZ and another outside SEZ. Separate registrations have to be obtained for each of the two units as separate
business vertical.

A Sunaina industry is engaged in manufacturing activities in Maharashtra. It has two manufacturing units in UP - one in SEZ and another
outside SEZ. Under GST, one registration per State is required. However, since in this case, one of the two units of Sunaina industries is
located in SEZ, it will make a separate application for registration as a business vertical distinct from unit located outside SEZ.

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(Chapter 10): Tax Invoice


Section Description Section 31 Description
Sec 2(94) Registered Person (1) In normal case of supply of goods
Sec 2(108) Taxable Person (2) In normal case of supply of Services
Sec 2(96) Removal (3)(a) Issue a Revised Invoice
Sec 2(105) Supplier (3)(b) No invoice or Bill of Supply to be Issued
Sec 2(93) Recipient (3)(c) Situation in which Bill of Supply shall be issue
Sec 2(66) Invoice or Tax Invoice interest of a Tax Invoice
Sec 2(32) Continuous Supply of Goods (3)(d) Issue of a Receipt Voucher
Sec 2(33) Continuous Supply of Services (3)(e) Issue of a Refund Voucher
(3)(f) Issue of Invoice by a Registered person liable to
CGST Rules, 2017 pay Tax Under Reverse Charge
Rules Description (3)(g) Issue of a Payment Voucher by a Registered
Person Liable to Pay Tax Under Reserve Charge
46 Tax Invoice
(4) In case of continues supply of goods
47 Time Limit of issuing tax invoice for Supply of Service
(5) In case of continues supply of Service
48
(6) In case where the supply of service ceases under
49 Bill of Supply
a contract before the completion of supply
50 Receipt Voucher
(7) In case of Goods Sent or Taken on Approval for
51 Refund Voucher
Sale or Return
52 Payment Voucher
Section 32 Prohibition of unauthorized collection of Tax
53 Revised Tax Invoice
Section 33 Amount of tax to be indicated in tax invoice and
54 Tax Invoice input service Distributor
other documents.
55 Transportation of goods without issue of invoice
Section 34 Credit and Debit notes.

Provision application to Supply of Goods Provision application to Supply of Services


Sec 31(1) In normal case of Supply of Goods Sec 31(2) In normal case of Supply of Services
Sec 31(4) In Case if continuous Supply of Goods Sec 31(5) In Case if continuous Supply of Service
Sec 31(7) In case of Goods Sent or Taken on Approval Sec 31(6) In case where the supply of services ceases under
for Sale or Return a contract before the completion of supply

Provision application to both Supply of Goods & Supply of Service


Sec 31(3) (a) Issue of Revise invoice
Sec 31(3) (b) or No Invoice or Bill of Supply Shall be Issued Instant of a Tax Invoice
proviso to 31(3)(c)
Sec 31(3) (c) Situation in which Bill of Supply Shall be Issued instead of a Tax Invoice
Sec 31(3) (d) Issue of a Receipt Voucher
Sec 31(3) (e) Issue of a Refund Voucher
Sec 31(3) (f) Issue of Invoice by a Registered Person Liable to Pay Tax Under Reserve Charge
Sec 31(3) (g) Issue of a Payment Voucher by a Registered Person Liable to Pay Tax Under Reverse Charge

Importance of Tax Invoice in GST regime


1) Invoice is very crucial documents which ensure tax compliances in Indirect Tax regime
2) It is an commercial instrument issued by supplier of goods or services
3) It ensures the transparency in transaction
4) Tax invoice acts as a document evidencing the payment of the value of goods or services both include tax thereon.
5) Invoice matching has great relevance under GST for claiming ITC & for that Significance of invoices has enhanced
manifolds under GST regime.

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Q.1: Whether “Invoice” and ‘Tax Invoice’ has two different meaning under GST Regime?
Ans: No, as per Sec 31, under GST regime on ‘Invoice’ or “Tax Invoice” mean Tax Invoice i.e. both has same meaning _

Q.2: Is it necessary that every supplier of goods or services issue tax Invoice Bill of Supply under GST?
Ans: It is not necessary every person supplying Goods or Services need to issue Tax invoice. The GST law mandates that
any registered shall issue a Tax invoice.

Q.3: Only supplier’s issue a “Tax Invoice” under GST regime is this statement is valid?
Ans: No, the GST law mandates that any registered person buying goods or services from an unregistered person needs to
issue a payment voucher as well as Invoice [reverse charge u/s 9(4)

Section 2(96): Removal


“Removal” in relation to goods, means -
(a) Dispatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or
(b) Collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient

Section 2(105): Supplier


“Supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both
and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied;

Section 2(105): Supplier


“Recipient” of supply of goods or services or both, means—
(a) Where a consideration is payable for the supply of goods or services or both,- the person who is liable to pay that
consideration;
(b) Where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made
available, or to whom possession or use of the goods is given or made available; and
(c) Where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any
reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and
shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

Section 31: Tax Invoice


(1) A registered person supplying taxable goods shall, before or at the time of,—
(a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) Delivery of goods or making available thereof to the recipient, in any other case,

Issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and such
other particulars as may be prescribed:
Proviso: Provided that the Government may, on the recommendations of the Council, by notification, specify the
categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as
may be prescribed.

(2) A registered person supplying taxable services shall, before or after the provision of service but within a
prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other
particulars as may be prescribed:
Rule 47: Time limit for issuing tax invoice.- (CGST Rule 2017)
Situations Time limit for issuing tax invoice
1 In normal Case (Taxable supply of Service) shall be issued within a period of thirty days from the
date of the supply of service:

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2 In case of insurer or a banking company or a financial institution, Shall be issue within a period of 45 days from the
including a non-banking financial company, date of the supply of service:
3 An insurer or a banking company or a financial institution, including a May issue the invoice before or at the time such
non-banking financial company, or a telecom operator, or any other supplier records the same in his books of account or
class of supplier of services as may be notified by the Government on before the expiry of the quarter during which the
the recommendations of the Council, making taxable supplies of supply was made.
services between distinct persons as specified in section 25,

Proviso: Provided that the Government may, on the recommendations of the Council, by notification and subject to
such conditions as may be mentioned therein, specify the categories of services in respect of which––
(a) Any other document issued in relation to the supply shall be deemed to be a tax invoice; or
(b) Tax invoice may not be issued.

(3) Notwithstanding anything contained in sub-sections (1) and (2)–


(a) Revised Invoice: A registered person may, within one month from the date of issuance of certificate of
registration and in such manner as may be prescribed,
issue a revised invoice against the invoice already issued during the period beginning with the effective
date of registration till the date of issuance of certificate of registration to him;

(b) A registered person may not issue a tax invoice if the value of the goods or services or both supplied is less than
two hundred rupees subject to such conditions and in such manner as may be prescribed;

(CGST Rule 2017)

Rule 47: Time limit for issuing tax invoice.-


Proviso: Provided also that a registered person may not issue a tax invoice in accordance with the provisions of clause
(b) of sub-section (3) of section 31 subject to the following conditions, namely,-
(a) The recipient is not a registered person; and
(b) The recipient does not require such invoice, and shall issue a consolidated tax invoice for such supplies at the close of
each day in respect of all such supplies.

(c) Bill of Supply for Composition Scheme: A registered person supplying exempted goods or services or both or
paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such
particulars and in such manner as may be prescribed:
Provided that the registered person may not issue a bill of supply if the value of the goods or services or both supplied
is less than two hundred rupees subject to such conditions and in such manner as may be prescribed;

Rule 49: Bill of supply.-

Proviso: Provided that the provisos to rule 46 shall, mutatis mutandis, apply to the bill of supply issued under this rule:
Provided further that any tax invoice or any other similar document issued under any other Act for the time being
in force in respect of any non-taxable supply shall be treated as a bill of supply for the purposes of the Act
(d) Receipt Voucher for Advance Payment: A registered person shall, on receipt of advance payment with respect to
any supply of goods or services or both, issue a receipt voucher or any other document, containing such particulars
as may be prescribed, evidencing receipt of such payment;

Rule 50: Receipt voucher.-

Proviso: Provided that where at the time of receipt of advance,-


(i) The rate of tax is not determinable, the tax shall be paid at the rate of 19%
(ii) The nature of supply is not determinable; the same shall be treated as inter-State supply.

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(e) Refund Voucher: Where, on receipt of advance payment with respect to any supply of goods or services or both
the registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice is issued in
pursuance thereof, the said registered person may issue to the person who had made the payment, a refund
voucher against such payment;

Rule 51: Refund voucher

(f) Tax Invoice under Reserve Charge: A registered person who is liable to pay tax under sub-section (3) or sub-
section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the
supplier who is not registered on the date of receipt of goods or services or both;

Rule 46: Tax invoice.-

Particulars of Tax Invoice –discussed later


Proviso: Provided further that where an invoice is required to be issued under clause (f) of sub-section (3) of section
31, a registered person may issue a consolidated invoice at the end of a month for supplies covered under sub-section
(4) of section 9, the aggregate value of such supplies exceeds rupees five thousand in a day from any or all the
suppliers:

(g) A registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue a
payment voucher at the time of making payment to the supplier.

Rule 52: Payment Voucher-

(4) In case of continuous supply of goods, where successive statements of accounts or successive payments are involved,
the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such
payment is received.

(5) Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,––
(a) Where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the due
date of payment;
(b) Where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at the
time when the supplier of service receives the payment;
(c) Where the payment is linked to the completion of an event, the invoice shall be issued on or before the date of
completion of that event.
(6) Cancellation of Supply of Service: In a case where the supply of services ceases under a contract before the
completion of the supply, the invoice shall be issued at the time when the supply ceases and such invoice shall be
issued to the extent of the supply made before such cessation.

(7) Notwithstanding anything contained in sub-section (1), where the goods being sent or taken on approval for sale or
return are removed before the supply takes place, the invoice shall be issued before or at the time of supply or six
months from the date of removal, whichever is earlier.
Explanation.–For the purposes of this section, the expression “tax invoice” shall include any revised invoice issued by the
supplier in respect of a supply made earlier.

Section 32: Prohibition of unauthorized collection of tax.


(1) A person who is not a registered person shall not collect in respect of any supply of goods or services or both any
amount by way of tax under this Act.

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(2) No registered person shall collect tax except in accordance with the provisions of this Act or the rules made there
under.

Section 33: Amount of tax to be indicated in tax invoice and other documents.
Notwithstanding anything contained in this Act or any other law for the time being in force, where any supply is made for a
consideration, every person who is liable to pay tax for such supply shall prominently indicate in all documents relating to
assessment, tax invoice and other like documents, the amount of tax which shall form part of the price at which such
supply is made.

Section 34: Credit and debit notes.


(1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in
that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods
supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient,
the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note
containing such particulars as may be prescribed.

Rule 53: Credit and Debit Notes


Particulars of Credit and Debit Notes

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the
details of such credit note in the return for the month during which such credit note has been issued but not later than
 September following the end of the financial year in which such supply was made, or
 The date of furnishing of the relevant annual return, whichever is earlier, and
The tax liability shall be adjusted in such manner as may be prescribed:
Proviso: Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and
interest on such supply has been passed on to any other person.
(3) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in
that tax invoice is found to be less than the taxable value or tax payable in respect of such supply,
the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note
containing such particulars as may be prescribed.
(4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall declare the
details of such debit note in the return for the month during which such debit note has been issued and the tax liability
shall be adjusted in such manner as may be prescribed.
Explanation.–For the purposes of this Act, the expression “debit note” shall include a supplementary invoice.

Invoice – Provisions application to supply of Goods


Provision application to Supply of Goods
Section 31(1) In normal case of supply of goods
Section 31(4) In case of continues supply of goods
Section 31(7) On case of Goods Sent or Taken on Approval for sale or Return

Q. 4: What is the time limit for issuance of Invoice for supply of goods? [Sec 31(1)]
Ans: As per sec 31 a registered person supplying taxable goods shall, before or at the time of
(a) Removal of goods for supply to the recipient, where the supply involves movement of goods; or
(b) Delivery of goods or making available thereof to the recipient, in any other case

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Movement of Goods cause by Supplier
Dispatch by the supplier himself X pvt ltd of Bangalore receives an order from ABC pvt ltd of Mysore 30 mobile handsets on
10/07/2017. X pvt ltd dispatches the mobile handset for delivery to ABC pvt ltd as on 15/07/2017. In
this case, X pvt ltd to raise the invoice on or before 15/07/2017.
Dispatch by any person acting VB electronics located at Pune, appointed Mr. D as an agent to deliver 5 TV sets to Raj & co located at
on behalf of the supplier (By Nagpur as on 12/05/2017. The ordered units of TV were received by Raj & co as on 16/05/2017. In
agent or representative) this case as the goods were removed on 12/05/2017, thus invoice shall be issued to Raj & co as on
12/05/2017.

Movement of Goods cause by Recipient


Collection by the recipient Mr. Raj visited VB electronics showroom at Pune and purchased 5 units of Laptop as on 07/07/2017
himself 81 also agrees to take delivery himself from Pune to Nagpur at his place. In this case, VB electronics
has to issue the invoice before or at the time of delivery of laptop i.e. on 07/07/2017.
Collection by any person acting M/s Sany pvt ltd co, Pune placed an order of 1000 units of spare parts of automobile from Exide
on behalf of the recipient (By automobiles, Mumbai as on 10/6/2017 for collecting this order from Exide automobiles, M/s Sany
agent or representative) pvt ltd appointed Mr Raj as an agent to collect this order. Mr Raj collected this order from Exide
automobiles as on 17/6/2017 7 delivers it to M/s Sany pvt ltd. In this case invoice shall be issued as
on 17/6/2017 i.e. the date of removal.

Where supply involves no movement of goods


1. Rex Cars, whose registered place of business is Chennai, Tamil Nadu, opens a showroom in Mysore,- Karnataka. They
purchase a pre-installed generator at the premises from Rohan Generators in Mysore, Karnataka as on 18/7/2017.
Here the supply of generator does not involve movement. Hence, the invoice shall be issued on 18/7/2017.

2. Mr. A sold the goods kept in public warehouse to Mr. B. Mr. B also keeping the goods in same warehouse without
causing any movement.

3. ABO Pvt. Ltd. has erected and installed mobile tower (movable) on building for BSNL and made available to the
recipient on 12-07-2017. Hence invoice shall be issued on 12July 2017.

Case Study 1: Sultan Industries Ltd., Delhi, entered into a contract with Prakash Delhi, for supply of spare parts of a
machine on 7th September.
The spare parts ware to be delivered 30th September. Sultan Industries Ltd. removed the finished spare parts from its
factory on 29th September. Determine the date by which invoice must be issued by Sultan Industries Ltd. under GST law.

Q 5: What do you mean by Continuous Supply of Goods & explain the provision of Invoice
Ans: Section 2(32) “Continuous Supply of Goods”
“Continuous Supply of Goods” means a supply of goods which is provided, or agreed to be provided, ,
 Continuously or on recurrent basis,
 Under a contract,
 Whether or not by means of a wire, cable, pipeline or other conduit, and
 For which the supplier in voices the recipient on a regular or periodic basis and
 Includes supply of such goods as the Government may subject to such conditions, as it may by notification, specify

Issue of invoice for continuous supply of goods (Sec 31(4))


In case of continuous supply of goods,
 Where successive statements or accounts; or
 Successive payments are involved,
the invoice shall be issued before or at the time
 Each such statement is issued or; as the case may be,
 Each such payment is received.
Example: M/s Sheba Pvt ltd, a registered person issues invoices on 5th every month in respect of supplies made in previous
month. Following information is provided:-

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As on 11/7/2017 Goods supplied worth Rs 45000
As on 14/8/2017 Goods supplied worth Rs 30000
As on 17/9/2017 advance amount of Rs 25000 received
Ans:

Invoice - Provisions applicable to Supply of Service


Provisions applicable to Supply of Service
Sec 31(2) In normal case of supply of services
Sec 31 (5) In case of continuous supply of Service
Sec 31 (6) In case where the supply of services ceases under a contract before the completion of supp yr

Q 6: What is the Time limit for issuance of Invoice for supply of Service [Sec. 31(2) & Rule 47]?
Ans: A registered person supplying taxable services shall, before or after the provision of service but within a prescribed
period as following, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as
may be prescribed:
Situation Time Limit for Issue of Invoice
1 In normal Case (taxable supply of Service) Shall be issued within a period of 30 days
from the date if the supply of service
2 In case of insurer or a banking company or a (financial institution, Shall be issued within a period of 45 days
including a non-banking financial company, from the date if the supply of service
3  A banking company or May issue the invoice before or at the time
 A financial institution,  Such supplier records the same in his
 Anon-banking financial company, or books of account or
 A telecom operator, or
 Before the expiry of the quarter during
 Any other class of supplier of services as may be notified by the
which the supply was made.
Government on the recommendations of the Council,
Making taxable supplies of services between distinct persons as
specified in section 25

Issue of Invoice Sec 31(5)


In case of continuous supply of service
(a) Where the due date of payment is ascertainable from the contract, the invoice shall be issued on or before the
due date of payment
Example: On 1/10/2017 ABC Ltd enters into contract with Mr. H a practicing CMA for supply of" Cost Audit Services by
the said CMA for a period of one year. In terms of aforesaid contract the due date of payment is if fifteenth day of every
month with effect from 15/11/2017. In the above case Mr. H shall be required to issue an invoice on or before fifteenth
day of every month

(b) Where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or at
the time when the supplier of service receives the payment;
Example: On 1/10/2017ABC Ltd enters into contract with Mr. H a practicing CMA for supply of Cost Audit Services by
the said CMA for a period of one year. In the above case Mr. H receives the payment from ABC Ltd on 15/10/2017
hence he shall be required to issue an invoice on or before 15/ 10/2017

(c) Where the payment is linked to the completion of an event, the invoice shall be or before the date of completion of that
event.

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Example: On 15/10/2017 Mr. R a builder enters into a contract with Mr. O a landlord for supplying construction services
for Rs. 50,00,000. In terms of the said contract Mr. O shall be required to make payment as per the following details
1) Rs. 30,00,000 on completion of ground floor. The completion of the same takes place on 15/11/2017
2) Rs. 20,00,000 on completion of first floor. The completion of the same takes place on 15/12/2017. In the above case
Mr. R will issue invoice on or before
i) 15/11/2017
ii) 15/12/2017

Q 7: When to issue invoice if supply of services ceases before its completion [Sec 31(6)]?
Ans: In a case where the supply of services ceases under a contract before the completion of the supply, the invoice shall be
issued at the time when the supply ceases and such invoice shall be issued to the extent of the supply made before such
cessation.
Case Study 2: MBM Caretakers, a registered person, provides the services of repair and maintenance of electrical
appliances. On April 1, it has entered into an annual maintenance contract with P for its Air Conditioner and Washing
Machine. As per the terms of contract maintenance services will be provided on the first day of each quarter of the relevant
financial year and payment for the same will also be due on the date on which service is rendered. During the year, it
provided the services on April 1, July 1, October 1, and January 1 in accordance with the terms of contract. When should
MBM Caretakers issue the invoice for the services rendered?

Common Provision of Invoice for supply of goods or service


Q 8: What is the effective date of registration, when revised invoice to be issued Under GST Law? [Sec 31(3) & Rule 53]
Ans:
i) Person shall issue a revised invoice during the period beginning with the effective date of registration till the date of
issuance of certificates of registration to him
ii) It shall be issued within 1 month from the date of issuance of certificates of registration and in such a manner as
prescribed.
iii) The expression “Tax Invoice” shall include any revised invoice issued by the supplier in respect of supply made earlier
Example: Laluprasad Private Ltd. commenced business of supply of goods on 1st April in Delhi. Its turnover exceed Rs.
20,00,000 on 3rd September. Thus it became liable to registration on 3rd September. It applied for registration on 29th
September and granted registration certificate on 5th Oct. Since it applied for registration within 30 days of becoming liable
to registration, it was granted registration with effect from 3rd September. Laluprasad Private Ltd. may issue Revised Tax
invoice in respect of taxable supplies affected between 3rd September and 5th October.

Case Study 3: The aggregate turnover of Sangri Services Ltd. exceeded Rs. 20 lakh on 12th August. He applied for
registration on 3rd September and was granted the registration certificate on 6th September. You are required to advice
Sangri Services Ltd. as to what is the effective date of registration in its case. It has also sought your advice regarding period
for issuance of Revised Tax Invoices.

Consolidated revised tax invoice


Registered person may issue a consolidated revised tax invoice
1. In respect of all taxable supplies made to a recipient who is not registered under the Act during such period:
2. In the case of Inter-State Suppliers, where the value of a supply does not exceed two lakh and fifty thousand rupees, to
unregistered person
Example 1: Mr. Amul applied for registration was issued to Mr. Amul. In the period between above two dates there had
been supply of goods of which 2 invoices were issued to Mr. X an unregistered person & one invoice to Miss Priya a
registered person.
Ans:- As per rule 53 of CGST rules and provisions of section 31 (3)(a) a revised tax invoice shall be issued to miss Priya who
is a registered person & a consolidated revised tax invoice in respect of taxable supplies made to Mr. X, an unregistered
person.

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Example 2: Mr. K has applied for registration on 09/10/2017. Date of Issuance of certificate of registration Mr. K is
21/10/201 7. Inter-State supply of services to Mr. Aof Punjab Rs. 40,000. Inter-State supply of services to Mr. B of Punjab
Rs. 1,00,000. For invoices issued to unregistered recipient between the periods of the above two dates he may issue a
consolidated revised tax invoice of Rs. 1,110,000 State-wise

Q 9: Explain the particulars to be stated in Tax invoice [Rule 46]?


Ans: There is no format prescribed for an invoice, but rules make it mandatory for an invoice to have the following fields
(only applicable fields are to be filled)

Particulars of Tax invoice (Sections 31(1) &92) read with Rule 46)
(a) Name, address and GSTIN of the supplier;
(b) A consecutive serial number not exceeding 16 characters, in one or multiple containing alphabets/numerals/special
characters hyphen or dash and slash, and any combination thereof, unique for a FY;
(c) Date of its issue;
(d) If recipient is registered - Name, address and GSTIN or UIN of recipient
(e) If recipient is unregistered and value of supply is Particulars of invoice
Rs. 50,000 or more Name and address of the recipient and the address of
delivery, along with the name of State and its code
less than Rs. 50,000 Unregistered recipient may still request the aforesaid
details to be recorded in the tax invoice
(f) HSN code tor goods or services;
(g) Description of goods or services;
(h) Quantity in case of goods and unit or Unique Quantity Code thereof;
(i) Total value of supply of goods or services or both;
(j) Taxable value of supply of goods or services or both taking into account discount or abatement, if any:
or abatement, if any;
(k) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(l) (l) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union
territory tax or cess);
(m) Place of supply along with the name of State, in case of a supply in the course or inter-State trade or commerce;
(n) Address of delivery where the same is different from the place of supply;
(o) Whether the tax is payable on reverse charge basis; and
(p) Signature or digital signature of the supplier or his authorized representative

Q 10: What is the special detail required in case of Export of Goods or services?
Ans: In the case of the export of goods or services, the invoice shall carry an endorsement
“SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DELOPER FOR AUTHORISED OPERATIONS ON PAYMENT OF
INTEGRATED TAX”
OR
“SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT OR SEZ DEVELOPER F0R AUTHORISED OPERATIONS UNDER BOND
OR LETTER OF UNDERTAKING INITHOUT PAYMENT OF INTEGRATED TAX”
As the case may be, and shall,
In lieu of the details specified in clause (e), contain the following details, namely,
i) Name and address of the recipient
ii) Address of delivery and
iii) Name of the country of destination.

Q 11: Explain the particulars to be stated in revised Tax Invoice [Rule 53]?
Ans:

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(a) The word “Revised Invoice”, wherever applicable, indicated prominently
(b) Name, address and GSTN of the supplier;
(c) Nature of the document;
(d) A consecutive serial number not exceeding i6 characters, in one or multiple series containing alphabets or numerals
or special characters -hyphen or dash and slash and any combination thereof, unique for a FY;
(e) Date of issue of the document;
(f) Name, address and GSTN or UIN, if registered, of the recipient;
(g) Name and address of the recipient and the address of delivery, along with the name of State and its code, if such
recipient is un-registered;
(h) Serial number and date of the corresponding tax invoice or, as the case may be, bill of supply;
(i) Value of taxable supply of goods or services, rate of tax and the amount of the tax credited/debited to the recipient
(j) Signature/digital signature of the supplier/his authorized representative.

Q 12: What is HSN Code? Is it mandatory to state HSN in Invoice?


Ans: HSN is harmonized system of nomenclature based on International coding system.
HSN code is mandatorily to be stated in Invoice.
But board may, on the recommendations of the Council, by notification, specify-
1. The number of digits of HSN code for goods or services, that a class of registered persons shall be required to mention,
for such period as may be specified in the said notification.
2. The class of registered persons that would not be required to mention the HSN code for goods or services, for such
period as may be specified in the said notification.
In this regard, Notification No.12/201 7 CT dated 28.06.2917 has notified the following:
S. No. Annual Turnover in the Preceding Financial Year Number of Digits
of HSN Code
(1) (2) (3)
1. Upto rupees one crore fifty lakhs Nil
2. More than rupees one crore fifty lakhs and upto rupees five crores 2
3. More than rupees five crores 4
Above provisions are also applicable to Bill of Supply

Q 13: Explain the manner of issuing Tax Invoice [Rule 46]?


Ans:

Bill of Supply (Sec 31(3)(c) & Rule 49)


Q 14: When Bill of supply to be Issued instead of Tax Invoice?
Ans: In following cases registered person has to issue Bill of Supply instead of Tax Invoice.
(1) Person supplying exempted goods or services or both
(2) Person paying tax under composition levy.

Q 15: Explain Particulars of bill of supply?


Ans: In case of composition levy or exempted supply, it is not expected to connect tax from recipients as there is no tax
implication.
Since no tax is collected from the recipient by a registered person Bill of supply issued by such reasons does not contain the
details pertaining to
- Rate of Tax
- Amount of Tax
Further, value to be mentioned in the bill of supply is not also taxable value.

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Content of Bill of Supply
(a) Name, address and GSTIN of the supplier
(b) A consecutive serial number not exceeding 16 characters, in one or more multiple series, containing alphabets or
numerals or special characters -hyphen or dash and slash and any combination thereof, unique for a FY
(c) Date of its issue;
(d) Name, address and GSTIN or UIN, if registered, of the recipient
(e) HSN Code for goods or services
(f) Description of goods or services or both All
(g) Value of supply of goods or services or both taking into account discount/abatement, if any; and
(h) Signature/ digital signature of supplier/his authorized representative.

Note: Any tax invoice or any other similar document issued under any other Act for the time being in force in respect of any
non-taxable supply shall be treated as bill of supply for the purposes of the Act.

Q 16: How to issue the Invoice, if register person is supplying taxable as well as exempted supply?
Ans: Where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered
person, a single “Invoice-cum-bill of supply" may be issued for all such supplies.

Receipt Voucher (Sec 31(3)(d) & Rule 50)


Q 17: What are the contents of receipt voucher?
Ans: A registered person shall, on receipt of advance payment with respect to any supply of goods or services or both, issue
a Receipt voucher evidencing receipt of such payment.

Particulars of Receipt Voucher


(a) Name, address and GSTIN of the supplier;
(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or
special characters -hyphen or dash and slash and any combination thereof, unique for a FY
(c) Date of its issue;
(d) Name, address and GSTIN or UIN, if registered, of the recipient;
(e) Description of goods or services;
(f) Amount of advance taken;
(g) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union territory tax
or cess);
(i) Place of supply along with the name of State and its code, in case of a supply in the course of inter-State trade or
commerce;
(j) Whether the tax is payable on reverse charge basis; and
(k) Signature/digital signature of supplier/his authorized representative

Q 18: What if at the time of receipt of advance rate of tax/nature of supply is not determinable [Rule 50]?
Ans:
Where at the time of receipt of advance
(i) Rate of tax is not determinable Tax shall be paid at the rate of 18%
(ii) Nature of supply is not determinable same shall be treated as inter-State supply

Refund Voucher (Sec 31(3)(e) 8. Rule 51)


Q 19: What are the contents of refund voucher?
Ans: Where on receipt of advance payment with respect to any supply of goods or services or both the registered person
issues a Receipt Voucher, but subsequently no supply is made and tax invoice is issued in pursuance thereof, the said
registered person may issue to the person who had made the payment, a Refund Voucher against such payment.

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Particulars of Receipt Voucher
(a) Name, address and GSTIN of the supplier;
(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or
special characters -hyphen or dash and slash and any combination thereof, unique for a FY
(c) Date of its issue;
(d) Name, address and GSTIN or UIN, if registered, of the recipient;
(e) Number and date of Receipt Voucher issued
(f) Description of goods/services in respect of which refund is made
(g) Amount of refund made;
(h) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(i) Amount of tax paid in respect of such goods or services (Central Tax, State Tax, integrated tax, Union territory tax or
cess)
(j) Whether the tax is payable on reverse charge basis; and
(k) Signature/digital signature of supplier/his authorized representative

Issue of Invoice & Payment Voucher under RCA (Sec 31(3) (f)/(g) & Rule 46 & 52)
Q 20: Is a registered person liable to pay tax under reverse charge under section 9(3)/9(4} of the CGST Act
required to issue an invoice and payment voucher ’? Discuss the relevant provision.
Ans: A registered person who is liable to pay tax under reverse charge [under section 9(3)/9(4) of the CGST Act] shall issue
an Invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of
receipt of goods or services or both.
Thus, a recipient liable to pay tax by virtue of section 9(3) has to issue invoice only when supplies have been received
from an unregistered supplier
It is important to note here that intra-State supplies of goods and/or services received by a registered person from an
unregistered supplier are exempt till 31st March 2018[Sec 9(3)].

Besides, a registered person who is liable to pay tax under reverse charge [under section 9(3)/9(4) of the CGST Act] shall
issue a Payment Voucher at the time of making payment to the supplier.

Particulars of Receipt Voucher


(a) Name, address and GSTIN of the supplier if registered;
(b) A consecutive serial number not exceeding 16 characters, in one or multiple series, containing alphabets or numerals or
special characters -hyphen or dash and slash and any combination thereof, unique for a FY
(c) Date of its issue;
(d) Name, address and GSTIN recipient;
(e) Description of goods or Services;
(f) Amount Paid;
(g) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
(h) Amount of tax paid in respect of such goods or services (Central Tax, State Tax, integrated tax, Union territory tax or
cess)
(i) Place of Supply along with the name of State and its code, in case of a supply in the course of inter-State trade or
commerce; and
(j) Signature/digital signature of supplier/his authorized representative

Tax invoice in special cases (Rule 54)


Suppliers of taxable Document in lieu of the tax invoice

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services Optional information Mandatory information
Insurance /Banking  Serial number Other information as prescribed tor a Tax Invoice, under rule 46
company/ Financial  Address of the recipient of Such document may be issued/made available, physically/electronically
institution, including NBFC taxable service
Goods Transport Agency Note: It is important to note here that keeping in view the large number of transactions in banking, insurance
(GTA) supplying services in and passenger transportation section, and taxpayers need not mention the address of the customer and the
relation to transportation serial number in their invoices.
of goods by road in a goods Gross weight of the consignment
carriage Name of the consignor and the consignee
Registration number of goods carriage in which the goods are transported
Details of goods transported
Details of place of origin and destination
GSTIN of the person liable for paying tax whether as consignor, consignee
or GTA
Other information as prescribed for a tax invoice, under rule 46
Supplier of passenger  Serial number Other information as prescribed for a tax invoice, under rule 46
transportation service  Address of the recipient of Tax invoice shall include ticket in any form, by whatever name
taxable service called.
Rule 54: Tax invoice Input Service Distributer
(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor credit note issued by an
Input Service Distributor shall contain the following details:-
(a) Name, address and Goods and Services Tax Identification Number of the Input Service Distributor;
(b) A consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or
numerals or special characters hyphen or dash and slash symbolized as- “-”, “/” respectively, and any combination
thereof, unique for a financial year;
(c) Date of its issue;
(d) Name, address and Goods and Services Tax Identification Number of the recipient to whom the credit is distributed;
(e) Amount of the credit distributed; and
(f) Signature or digital signature of the Input Service Distributor or his authorized representative:

Proviso: Provided that where the Input Service Distributor is an office of a banking company or a financial institution,
including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever
name called, whether or not serially numbered but containing the information as mentioned above.

Delivery Challan/Invoice for Transportation of Goods (Rule 55)

Q 21: Explain provision of delivery Challan where removal of goods does not involve supply?
Ans: Rule 55 specifies the cases where at the time of removal of goods, goods may be removed on Delivery Challan and
invoice may be issued after delivery. These are provided in the following table:
Nature of supply Deliver Challan to be issued Particulars of Delivery Challan
(1) Supply of liquid gas where the  Serially numbered not Date and number of the delivery Challan
quantity at the time of removal exceeding 16 characters Name, address and GSTIN of the consigner, if registered
from the place of business of the  In one or multiple series Name, address and GSTIN or UIN of the consignee, if registered
supplier is not known,  At the time of removal of HSN code and description of goods,
(2) Transportation of goods for job goods for transportation Quantity (provisional. where the exact quantity being supplied
work is not known)
(3) Transportation of goods for Taxable value
reasons other than by way of Tax rate and tax amount- central tax, state tax, integrated lax,
supply, or union territory tax or cess, where the transportation is for
(4) Such other supplies as may be supply to the consignee
notified by the Board Place of supply, in case of inter-state movement
Signature

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Electronic Way Bill
Q 22: Explain the provisions relating to inspection of goods movement?
Ans: Inspection of goods in movement [Section 68]: The relevant provisions are discussed as under-
(1) Carrying of e-way bill [Section 68(1)]: The Government may require the person in charge of a conveyance carrying
any consignment of goods of value exceeding such amount as may be specified to carry with him such documents and
such devices as may be prescribed.
(2) Validation of e-way bill [Section 68(2)]: The details of documents required to be carried under section 68(1) shall be
validated in such manner as may be prescribed.
(3) Transit check of e-way bill [Section 68(3)]: Where any conveyance referred to in Section 68(1) is intercepted by the
proper officer at any place, he may require the person in charge of the said conveyance to produce the documents
prescribed under the said sub-section and devices for verification, and the said person shall be liable to produce the
documents and devices and devices and also allow the inspection of goods.

Goods Transported in SKD/CKD Condition (Rule 55)

Q 23: Explain the provision of Goods transported in SKD/CKD condition?


Ans: Where the goods are being transported in a semi knocked down or completely knocked down condition,
(1) The supplier shall issue the complete invoice before dispatch of the first consignment.
(2) The supplier shall issue a delivery challan for each of the subsequent consignments, giving reference to the invoice
(3) Copies of the corresponding delivery challan shall accompany each consignment along with a duly certified copy of the
invoice and
(4) The original copy of the invoice shall be sent along with the last consignment.

Sec 34: Credit Notes & Debit Not


Q 24: Explain the provisions relating to issuance of Credit and debit notes?
Ans: Credit and debit notes [Sec 34]: The relevant provisions are discussed as under
(1) Issuance of Credit Note [Section 34(1)]: Where a tax invoice has been issued for supply of any goods or services or
both and
 The taxable value or tax charged in that tax invoice is found to exceed the taxable Value or tax payable in respect of
such supply, or
 Where the goods supplied are returned by the recipient, or
 Where goods or services or both supplied are found to be deficient
The registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such
particulars as may be prescribed.
(2) Details of credit note to be given in return [Section 34(2)]: Any registered person who issues a credit note in
relation to a supply of goods or services or both shall declare the details of such credit note
 In the return for the month during which such credit note has been issued but not later than September following
the end of the financial year in which such supply was made, or
 The date of furnishing of the relevant annual return,
Whichever is earlier, and the tax liability shall be adjusted in such manners may be prescribed.
Output Tax Liability of the supplier not to be reduced-If tax incidence passed on: No reduction in output tax liability of the
supplier shall be permitted, if the incidence of tax and interest on such supply has been passed on to any other person.

(3) Issuance of Debit note [Section 34(3)]: Where a tax invoice has been issued for supply of any goods or services or
both and

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 The taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in
respect of such supply,
 The registered person, who has supplied such goods or services or both
 Shall issue to the recipient a debit note containing such particulars as may be prescribed

(4) Details of debit note to be given in return [Section 34(4): Any registered person who issues a debit note in relation
to a supply of goods or service or both shall declare the details of such debit note in the return for the month during
which such debit note has been issued and the tax liability shall be adjusted in such manner as may be prescribed.
Explanation: The expression “debit note” shall include a supplementary invoice

Sec 32& 33 Prohibition of Unauthorized Collection of Tax


Q 25: Write notes on the following?
(a) Prohibition of unauthorized collection of Tax.
(b) Amount of tax to be indicated in tax invoice and other documents.
Ans: The relevant provisions are discussed as under-
(a) Prohibition of unauthorized collection of Tax [Section 32]
i) Unregistered person not to collect tax [Section 32(1)]: A person who is not a registered person shall not collect
in respect of any supply of goods or service or both any amount byway of tax under this Act
ii) Registered person to collect tax as per Act [Section 32(2)]: No registered person shall collect tax except in
accordance with the provisions of this Act or the rules made there-under.

(b) Amount of tax to be indicated in tax invoice and other documents [Section 33]: Notwithstanding anything
contained in this Actor any other law for the time being in force, where any supply is made for a consideration, every
person who is liable to pay tax for such supply shall prominently indicate in all documents relating to assessment, tax
invoice and other like documents, the amount of tax which shall form part of the price at which such supply is made

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(Chapter 11): RETURNS


Section Description
Section 37 Furnishing details of outward supplies
Section 38 Furnishing details of inward supplies
Section 39 Furnishing of returns
Section 40 First return
Section 41 Claim of input tax credit and provisional acceptance thereof
Section 42 Matching, reversal and reclaim of input tax credit
Section 43 Matching, reversal and reclaim of reduction in output tax liability.
Section 44 Annual return
Section 45 Final return
Section 46 Notice to return defaulters
Section 47 Levy of late fee
Section 48 Goods and services tax practitioners

CGST Rules Pertaining to Returns


Rule Description
59 Form and manner of furnishing details of outward supplies
60 Form and manner of furnishing details of inward supplies
61 Form and manner of submission of monthly return
62 Form and manner of submission of quarterly return by the composition supplier
63 Form and manner of submission of return by - nonresident taxable person
64 Form and manner of submission of return by person providing online information and database access or
retrieval services
65 Form and manner of submission of return by an Input Service Distributor
66 Form and manner of submission of return by a personal required to deduct tax at source
67 Form and manner of submission of statement of supplies through an e-commerce operator
68 Notice to non-filers of returns
69 Matching of claim of input tax credit
70 Final acceptances of input tax credit and communication thereof
71 Communication and rectification of discrepancy in claim of input tax credit and reversal of claim of input tax
credit
72 Claim of input tax credit on the same invoice more than once
73 Matching of claim of reduction in the output tax liability
74 Final acceptance of reduction in output tax liability and communication thereof
75 Communication and rectification of discrepancy in reduction in output tax liability and reversal of claim of
reduction
76 Claim of reduction in output tax liability more than once
77 Refund of interest paid on reclaim of reversals
78 Matching of details furnished by the E-Commerce operator with the details furnished by the supplier
79 Communication and rectification of discrepancy in details furnished by the E-commerce operator and the
supplier
80 Annual returns
81 Final returns
82 Details of inward supplies of persons having Unique Identity Number
83 Provisions relating to a goods and services tax practitioner
84 Conditions for purposes of appearance

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Important Definitions
Section Title Description
2(6) “Outward-Supply" In relation to a taxable person, means supply of goods or services or both, whether by sale,
transfer, barter, exchange licence, rental, lease or disposal or any other mode, made or
agreed to be made by such person in the course or furtherance of business
2(77) “Non-resident taxable Means any person who occasionally undertakes transactions taxable, person" involving
person” supply of goods or services or both, whether as principal or agent or in any other capacity,
but who has no, fixed place of business or residence in India
2(97) “Return” Means any return prescribed or otherwise required to be furnished by or under this Act or
the rules made there under
2(107) "Taxable Person" Means a person who is registered or liable to be under section 22 or section 24
2(67) “Inward Supply” In relation to a person, shall mean receipt of goods or services or both whether by
purchase, acquisition or any, other means with or without consideration
2(106) “Tax Period” Means the period for which the return is required to be furnished
2(94) "Registered Person” Means a person who is registered under section 25 but does not include a person having a
Unique Identity Number
2(92) “Quarter” Shall mean a period comprising three consecutive calendar months, ending on the last day
of March, June, September and December of a calendar year
2(114) “Union territory” Means the territory-
(a) The Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli;
(d) Daman and Diu;
(e) Chandigarh; and y
(f) Other territory. 5
Explanation.- For the purposes of this Act, each of the territories specified in sub-clauses
(a) to (i) shall be considered to be a separate Union territory
2(45) “Electronic commerce Means any person who owns, operates or manages digital or electronic facility or platform
operator” for electronic commerce
2(26) “Common portal” Means the common goods and services tax electronic portal referred to in section 146
2(25) “Goods & Services tax Means any person who has been approved under section 48 to act as such practitioner
practitioner”

Basics of Return under GST Law


Q 1: What do you mean by Return?
Ans: Under GST laws, a taxpayer is required to estimate his Tax liability on “self-assessment” basis and deposit the Tax. The
term “return” ordinarily means statement of information (facts) furnished by the tax payer to tax Government, at regular
intervals.
The information to be furnished in the return generally comprises of the details pertaining
 To the nature of activities/business operations forming the subject matter of taxation
 The measure of taxation such as sale price, turnover, or value
 Deductions and exemptions; and
 Determination and discharge of tax liability for a given period

Q 2: Why is tiling of Return necessary?


Ans: The returns serve the following purposes:
a) Mode for transfer of information to tax administration
b) Compliance verification program of tax administration
c) Finalization of the tax liabilities of the taxpayer within stipulated period of limitation
d) Providing necessary inputs for taking policy decision
e) Management of audit and anti-evasion programs of tax administration

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Q 3: State the important features of Return under GST mechanism?


Ans: The basic features of the return mechanism in GST include
 Electronic filing of returns,
 Uploading of invoice level information and auto-population of information relating to ITC from returns of supplier
to that of recipient,
 Invoice-level information matching and auto-reversal of ITC in case of mismatch.
The returns mechanism is designed to assist the taxpayer to file returns and avail ITC

Q 4: Whether E-filing of Return is mandatory?


Ans: All the returns under GST laws are to be filed electronically. Taxpayers can file the statements and returns by various
modes.
Firstly, they can file their statement and returns directly on the GST common portal online.
However, this may be tedious and time consuming for taxpayers with large number of invoices. For such taxpayers, offline
utilities have been provided by GSTN that can be used for preparing the statements offline after downloading the auto
populated details and uploading them on the common portal.
GSTN has also developed an ecosystem of GST Suvidha Providers (GSP) that will integrate with the common
portal.

Q 5: What do you mean by B2B and BZC supply?


Ans: 1) B2B means business to business transaction. ln such type of transactions, the recipient is also a registered supplier
and hence, takes ITC.
2) BZC means business to consumer transaction. In such type of transactions, the recipient is consumer or
unregistered and hence, will not take or cannot take ITC.

Sec 37: Furnishing details of outward supplies (Bare Text)

(1) TIME LIMIT FOR FURNISHING DETAILS


Every registered person,
 Other than an Input Service Distributor,
 A non-resident taxable person and
 A person paying tax under the provisions of section 10 or
 Section 51 or section 52,
Shall furnish, electronically, in such form and manner as may be prescribed, the details of outward supplies of goods or
services or both effected during a tax period on or before the tenth day of the month succeeding the said tax period and
such details shall be communicated to the recipient of the said supplies within such time and in such manner as may be
prescribed (GSTR-2A).
Proviso: Provided that the registered person
 Shall not be allowed to furnish the details of outward supplies during the period
 From the eleventh day to the fifteenth day of the month
 Succeeding the tax period:

Proviso: EXTENSION OF TIME LIMIT


Provided further that the Commissioner may, for reasons to be recorded in writing, by notification, extend the
time limit for furnishing such details for such class of taxable persons as may be specified therein:

Proviso: DEEMED EXTENSION


Provided also that any extension of time limit notified by the Commissioner of State tax or Commissioner of Union
territory tax shall be deemed to be notified by the Commissioner

(2) ACCEPTANCE OF DETAILS BY SUPPLIER

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Every registered person who has been communicated the details
 Under sub-section (3) of section 38 or
 The details pertaining to inward supplies of Input Service Distributor under sub-section (4) of section 38,
 Shall either accept or reject the details so communicated,
 On or before the seventeenth day,
 But not before the fifteenth day, of the month succeeding the tax period and
 The details furnished by him under sub-section (1) shall stand amended accordingly.

(3) RECTIFICATION OF ERRORS


Any registered person, who has furnished the details under sub-section (1) for any tax period and which have
remained unmatched under section 42 or section 43, shall,
 Upon discovery of any error or omission therein,
 Rectify such error or omission in such manner as may be prescribed,
and shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission,
in the return to be furnished for such tax period:

Proviso: TIME LIMIT FOR RECTIFICATION


Provided that no rectification of error or omission in respect of the details furnished under sub-section
 Shall be allowed after furnishing of the return under section 39 for the month of September following the end
of the financial year to which such details pertain, or
 Furnishing of the relevant annual return, whichever is earlier.
Explanation.– For the purposes of this Chapter, the expression “details of outward supplies” shall include details of
invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during any tax period.

Rule 59: Form and manner of furnishing details of outward supplies.


(1) Every registered person, other than a person referred to in section 14 of the Integrated Goods and Services Tax Act,
2017, required to furnish the details of outward supplies of goods or services or both under section 37, shall furnish
such details in FORM GSTR-1 electronically through the common portal, either directly or through a Facilitation Centre
notified by the Commissioner.

(2) The details of outward supplies of goods or services or both furnished in FORM GSTR-1 shall include the–
a) Invoice wise details of all -
(i) Inter-State and intra-State supplies made to the registered persons; and
(ii) Inter-State supplies with invoice value more than two and a half lakh rupees made to the unregistered persons;
b) Consolidated details of all -
(i) Intra-State supplies made to unregistered persons for each rate of tax; and
(ii) State wise inter-State supplies with invoice value upto two and a half lakh rupees made to unregistered persons
for each rate of tax;
c) Debit and credit notes, if any, issued during the month for invoices issued previously.

(3) The details of outward supplies furnished by the supplier shall be made available electronically to the concerned
registered persons (recipients) in
Part A of FORM GSTR- 2A,
In FORM GSTR-4A and
In FORM GSTR-6A
through the common portal after the due date of filing of FORM GSTR-1.

(4) The details of inward supplies added, corrected or deleted by the recipient in his FORM GSTR-2 under section 38 or
FORM GSTR-4 or FORM GSTR-6 under section 39 shall be made available to the supplier electronically in FORM GSTR-
1A through the common portal and such supplier may either accept or reject the modifications made by the recipient
and FORM GSTR-1 furnished earlier by the supplier shall stand amended to the extent of modifications accepted by
him.

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Sec 37: Furnishing details of outward suppliers
Q 1: Who is required to furnish details of outward supplies and what is the form and due date? (Sec 37 (1)
Ans: Person required furnished details of outward supplies: The details outward supplies of both goods and services are
required to be furnished by every registered person including casual registered person except the following:
 Input service distributor (ISD)
 Non-resident taxable person
 Person paying tax under composition scheme
 Person deducting tax at source
 Person collecting tax at source i.e., e-commerce operator (ECO), not being an agent
 A supplier of online information and database access or retrieval services (OIDAR)
Form for submission of details of outward supplies
The details of outward supplies are required to be furnished, electronically, in Form GSTR-1.

Due date of submission of GSTR-1


GSTR-1 for a particular month is filed on or before the 10th day of the immediately succeeding month.

Q 2: Whether tax payer can tile GSTR-1 before the end of the current tax period?
Ans: No, A tax payer cannot file GSTR-1 before the end of the current tax period.
However, following are the exceptions to this rule:
a) Casual taxpayers, after the closure of their business
b) Cancellation of GSTIN of a normal taxpayer
A taxpayer who has applied for cancellation of registration will be allowed to tile GSTR-1 after confirming receipt of the
application.

Q 3: What kinds of details of outward supplies are required to be furnished in GSTR-1?


Ans: The registered person is required to furnish details of invoices and revised invoices issued in relation to supplies
made by him to registered and unregistered persons during a month and debit notes and credit notes in GSTR-1 in the
following manner:
Invoice-wise details of ALL
1) Inter-State and Intra -State supplies made to registered persons
2) Inter-State supplies made to unregistered persons with invoice value exceeding Rs. 2,50,000
Consolidated details of ALL
1) Intra-State supplies made to unregistered persons for each rate of tax
2) Inter-State supplies made to unregistered persons with invoice value upto Rs. 2,50,000 for each rate of tax separately for
each State
Debit and credit notes
1) Issued during the month for invoices issued previously
2) Issued during the month for invoices issued previously

Q 4: What are the contents of GSTR-1?


CONTENTS OF GSTR-1

Basic & Other Detail Details of Outward Suppliers


 GSTIN  B2B
 Legal name and Trade name  B2C
 Aggregate turnover in previous year  Zero fated and deemed exports
 Tax period  Debit/ Credit notes issued
 HSN-wise summary of outward supplies
 Nil rated/ Exempted/ Non GST
 Details of documents issued
 Advances received/advances adjusted  Amendments for prior period

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Information to be given in tables
GSTR-1 first requires the general details of the registered person like GSTIN, legal name, trade name, and aggregate
turnover in the preceding financial year, relevant financial year and the month for which the GSTR-1 is being filed
The other specific contents of GSTR-1 are to be given in tables. The broad contents of such tables are given below.

Table 4 Invoice-wise details of Taxable outward supplies made to registered persons excluding supplies covered by
Table 6
Table 5 Invoice-wise details of taxable outward inter-State supplies to unregistered persons where the invoice value
is more than Rs. 2.5 lakh
Table 6 Invoice-wise details of zero rated supplies and deemed exports
Table 7 Consolidated details of taxable supplies (intra-state supplies and inter-state supplies of invoice value up to
Rs. 2.5 lakh, net of debit notes and credit notes) to unregistered persons
Table 8 Nil rated, exempted and non GST outward supplies
Table 9 Amendments to taxable outward supply details furnished in returns for earlier tax periods in Tables 4, 5 & 6
Table 10 Amendments to taxable outward supply to unregistered persons furnished in returns for earlier tax periods
in Table 7
Table 11 Consolidated statement of advances received/advance adjusted in the current tax period/Amendments of
information furnished in earlier tax period. In cases, where assessee has received advance in one tax period
and invoice is issued in subsequent tax period, the liability on account of such advances and adjustment
thereof against subsequent tax period is required to be shown separately in the return.
Table 12 HSN-wise summary of outward supplies
Table 13 Documents issued during the tax period Serial no. of invoices for outward supply and inward supply from
unregistered persons, revised invoices, debit and credit notes, receipt, payment and refund vouchers,
delivery challan for job work, supply on approval etc. issued during tire period including the cancelled ones
need to be given under this point.

Q 5: Explain the importance of GSTR-1 to recipient of supply?


As per Sec 37(2) (read with rule 59(3) and 59(4)) of CGST Act-
i) The details of outward supplies for a month furnished by the supplier are communicated and made available
electronically (auto populated) to the respective recipient(s) in Part/A of Form GSTR- 2A/ Form GSTR-4 A (in case of
registered person opting for composition levy) through the common portal after the 10th day of the succeeding month
(due date of filing of GSTR-1).
ii) The recipient is provided an opportunity to add, correct or delete such details in a two-way communication process.
After such modifications, recipient tiles the details of inward supplies in Form GSTR-2 by 15th day of that month.
iii) The details of inward supplies added, corrected or deleted by the recipient in Form GSTR-2/Form GSTR-4 (quarterly
return for registered person opting for composition levy) are made available to the supplier electronically in Form
GSTR-1Athrough the common portal.
iv) The supplier may either accept or reject the modifications made by the recipient between 15 th day and 17th day of that
month.
v) If supplier accepts the modifications made by the recipient, GSTR-1 furnished earlier by him gets amended accordingly.

Q 6: How are the details of outward supply furnished in prior periods amended? [Section 37(3)]
(a) Scope of amendment/ correction entries
The supplier can make amendments in the particulars furnished in GSTR-1h|ed by him for the prior periods if he
agrees to the mismatch report communicated to him by the system every month, after the processing of the return.
The details of original debit notes/ credit notes/ refund vouchers issued by the tax-payer in the current tax period as
also the revision in the debit notes/ credit notes / refund vouchers issued in the earlier tax periods are required to be
shown in Table 9 of the GSTR-1.
Ordinarily in Amendment Table the suppler is required to give details of original invoice (No and Date), the particulars
of which have been wrongly entered in GSTR-1 of the earlier months a now sought to be amended.

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However, it may happen that, a supplier altogether forgets to include the entire original invoice while furnishing the
GSTR-1 for a particular month. In such cases also, he would be required to Show the details of the said missing invoice
which was issued in earlier month in the Amendment Table only, as such type of errors would also be regarded as data
entry error.

(b) Time limit for rectification


Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 for the month of October, 2017
then he can make such amendments in the subsequent periods.
However, the maximum time limit within which such amendments are permissible is earlier of the following dates: -
 Date of filing of monthly return u/s 39 for the month of September following the end of the financial year to which such
details pertain or
 Date of filing of the relevant annual return

Case Study 1: Mr. Raj tiled his GSTR-1 for the month of August 2017 as on 10th September 2017 and the consolidated
return u/s 39 pertaining to the month of August; 2017 was filed on 20th September, 2017. The said return is processed in
the month of Oct. 2017 and errors discovered during matching are communicated to the supplier in the mismatch report in
the month of October, 2017. Explain the rectification process to be followed by the supplier?
Ans:

Case Study 2: With reference to above example also determine the time limit for rectification that shall be available to the
supplier?
Ans:

Q 7: State the special features of GSTR-1 return filing?


Ans:
 GSTR-1 needs to be filed even if there is no business activity (Nil Return) in the tax period.
 Filing of GSTR-1 for current month is possible only when GSTR-1 for the previous month has been tiled.
 All values like invoice value, taxable value and tax amounts in GSTR-1 are to be declared up to 2 decimal digits. The
rounding off of the self-declared tax liability to the nearest rupee will be done in GSTR 3.
 Taxpayer opting for voluntary cancellation of GSTIN will have to tile GSTR-1 for active period.
 In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR 1 will be
available for “filing only tor the period during which the taxpayer was registered as normal taxpayer. The GSTR 1 for
the staid period, even it filed with delay would accept invoices for the period prior to conversion.

Sec 38: Furnishing details of inward supplies


(1) VALIDATION OF DETAILS BY RECIPIENT
Every registered person, other than
 An Input Service Distributor or
 A non-resident taxable person or
 A person paying tax under the provisions of section 10 or

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 Section 51 or section 52,
shall verify, validate, modify or delete, if required, the details relating to outward supplies and credit or debit notes
communicated under sub-section (1) of section 37
to prepare the details of his inward supplies and credit or debit notes and may include therein, the details of
inward supplies and credit or debit notes received by him in respect of such supplies that have not been declared by the
supplier under sub-section (1) of section 37.
(2) TIME LIMIT FOR FURNISHING DETAILS
Every registered person, other than
 An Input Service Distributor or
 A non-resident taxable person or
 A person paying tax under the provisions of section 10 or
 Section 51 or section 52,
shall furnish, electronically,
 The details of inward supplies of taxable goods or services or both,
 Including inward supplies of goods or services or both on which the tax is payable on reverse charge basis
under this Act and
 Inward supplies of goods or services or both taxable under the Integrated Goods and Services Tax Act or
 On which integrated goods and services tax is payable under section 3 of the Customs Tariff Act, 1975, and
 Credit or debit notes received in respect of such supplies during a tax period
 After the tenth day but on or before the fifteenth day of the month
 Succeeding the tax period in such form and manner as may be prescribed:

Proviso: EXTENSION OF TIME LIMIT


Provided that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit
for furnishing such details for such class of taxable persons as may be specified therein:

Proviso: DEEMED EXTENSION


Provided further that any extension of time limit notified by the Commissioner of State tax or Commissioner of
Union territory tax shall be deemed to be notified by the Commissioner

(3) COMMUNICATION TO SUPPLER (CHANGE IN DETAILS)


The details of supplies modified, deleted or included by the recipient and furnished under sub-section (2) shall be
communicated to the supplier concerned in such manner and within such time as may be prescribed.

(4) COMMUNICATION TO SUPPLIER (CHANGE IN RETURNS)


The details of supplies modified, deleted or included by the recipient in the return furnished under sub-section (2) or
sub-section (4) of section 39 shall be communicated to the supplier concerned in such manner and within such time as
may be prescribed.

(5) RECTIFICATION OF ERRORS


Any registered person, who has furnished the details under sub-section (2) for any tax period and which have
remained unmatched under section 42 or section 43, shall, upon discovery of any error or omission therein,
 Rectify such error or omission in the tax period during which such error or omission is noticed in such manner as
may be prescribed, and
 Shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error or omission, in
the return to be furnished for such tax period:

Proviso: TIME LIMIT RECTIFICATION


Provided that no rectification of error or omission in respect of the details furnished under sub-section (2) shall
be allowed after furnishing of the return under section 39 for the month of September following the end of the
financial year to which such details pertain, or furnishing of the relevant annual return, whichever is earlier.

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Rule 60: Form and manner of furnishing details of inward supplies.-
(1) Every registered person, other than a person referred to in section 14 of the Integrated Goods and Services Tax Act,
2017, required to furnish the details of inward supplies of goods or services or both received during a tax period under
sub-section (2) of section 38 shall, on the basis of details contained in Part A, Part Band Part C of FORM GSTR-2A,
prepare such details as specified in sub-section (1) of the said section and furnish the same in FORM GSTR-2
electronically through the common portal, either directly or from a Facilitation Centre notified by the Commissioner,
after including therein details of such other inward supplies, if any, required to be furnished under sub-section (2) of
section 38.

(2) Every registered person shall furnish the details, if any, required under sub-section (5) of section 38 electronically in
FORM GSTR-2.
(3) The registered person shall specify the inward supplies in respect of which he is not eligible, either fully or partially, for
input tax credit in FORM GSTR-2 where such eligibility can be determined at the invoice level.
(4) The registered person shall declare the quantum of ineligible input tax credit on inward supplies which is relatable to
non-taxable supplies or for purposes other than business and cannot be determined at the invoice level in FORM GSTR 2.
(4A) The details of invoices furnished by an non-resident taxable person in his return in FORM GSTR-5 under rule 63 shall
be made available to the recipient of credit in Part A of FORM GSTR-2A electronically through the common portal and
the said recipient may include the same in FORM GSTR-2.

(5) The details of invoices furnished by an Input Service Distributor in his return in FORM GSTR-6 under rule 65 shall be
made available to the recipient of credit in Part B of FORM GSTR 2A electronically through the common portal and the
said recipient may include the same in FORM GSTR-2.

(6) The details of tax deducted at source furnished by the deductor under sub-section (3) of section 39 in FORM GSTR-7
shall be made available to the deductee in Part C of FORM GSTR-2A electronically through the common portal and the
said deductee may include the same in FORM GSTR-2.

(7) The details of tax collected at source furnished by an e-commerce operator under section 52in FORM GSTR-8 shall be
made available to the concerned person in Part C of FORM GSTR-2A electronically through the common portal and
such person may include the same in FORM GSTR-2.

(8) The details of inward supplies of goods or services or both furnished in FORM GSTR-2 shall include the-
(a) Invoice wise details of all inter-State and intra-State supplies received from registered persons or unregistered
persons;
(b) Import of goods and services made; and
(c) Debit and credit notes, if any, received from supplier.

Furnishing details of inward supplies [Sec 38]


Q 8: What is the form for submission of details of inward supplies?
Ans: The details of inward supplies are required to be furnished, electronically, in Form GSTR-2. Such details can be
furnished through the Common Portal, either directly or from a notified Facilitation Centre.

Q 9: Who is required to furnish details of inward supplies?


Ans: The details of inward supplies of both goods and services and credit or debit notes received are required to be
furnished by every registered person except the following:
 ISD
 Non-resident taxable person
 Composition taxpayer
 Person deducting tax at source
 ECO (not being an agent)
 Supplier of OIDAR services
Thus, the registered persons who tile details of outward supplies are also required to tile the details of inward supplies.

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Q 10: What is the due date of submission of GSTR-2?
Ans: GSTR-2 for a particular month is filed after the 10th day but on or before the 15th day of the immediately succeeding
month. The due date of filing GSTR-2 may be extended by the Commissioner/Commissioner of State GST/Commissioner of
UTGST for a class of taxable persons by way of a notification.

Example: A registered person has to file details of his inward suppliers for the month of Nov. 2017, and then he shall furnish
such detail in his GSTR-2 between 11th Dec. to 15th Dec.,

Q 11: What kinds of details of inward supplies are required to be furnished in GSTR-2?
Ans: The details of inward supplies of goods or services or both furnished in GSTR- 2 include the -
(a) Invoice wise details of all inter-State and intra-State supplies received from registered persons or unregistered
persons including inward supplies taxable under reverse charge;
(b) Import of goods and services made; and
(c) Debit and credit notes, if any, received by the registered person from suppliers in respect of above supplies

Q 12: Explain the Contents ofGSTR-2?


Ans: The details of GSTR-2 are contained in two parts which are as follows:
Auto-populated and non-auto populated information. The information in GSTR-2 with respect to inward supply is
broadly divided into 2 Parts. The first part deals with particulars which are auto-populated to the extent they are
accepted/modified are reflected in GSTR- 2A namely,
(i) Inward supplies received from registered persons including inward supplies taxable under reverse charge,
(ii) Amendments to details of inward supplies received in earlier tax periods,
(iii) Details of credit/debit notes
(iv) Amendment to details of credit/debit notes of earlier tax periods
The second part deals with particulars which are not auto-populated.
Few examples of such type of particulars are:
(i) Outward supplies which are not entered by the supplier in his GSTR-1
(ii) Details relating to claim of ITC, which the recipient has to decide on the basis of his self-assessment
(iii) Goods/services imported from out of India which attract IGST.
These details are to be entered by the importer manually.

CONTENTS OF GSTR-2

Basic & Other Detail Details of Inward Suppliers


 GSTIN  B2B supplies under forward charge
 Year  Supplies under reverse charge
 Tax period  Import of inputs and capital goods
 Legal name & Trade name  Debit Credit notes
 HSN summary of inward supplies
 Nil rated/ Exempted/ Non GST
 ISD Credit/ TDS Credit/ TCS Credit
 Advances paid/advances adjusted  Supplies from composition taxable person and
 Addition/reduction in output tax due to mismatch Nil rated/ exempted/ Non GST supplies

Information to be given in tables


The broad contents of GSTR-2 in the various tables are given below.
Table 3 Inward supplies received from a registered person other than the supplies attracting reverse charge (invoice-wise details)
Table 4 Inward supplies on which tax is to be paid on reverse charge (invoice-wise details)
Table 5 Inputs/capital goods received from overseas or from SEZ units on a bill of entry (bill of entry-wise details)
Table 6 Amendments to details of inward supplies furnished in returns for earlier tax periods in Tables 3, 4 and 5 [including debit
notes/credit notes issued and their subsequent amendments]
Tame 7 Supplies received from composition taxable person and other exempt/Nil rated/ Non GST supplies received [Information
pertaining to such inward supplies can be given in a consolidated manner (i.e., not invoice wise)]

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Table 8 ISD credit received
Table 9 TDS and TCS Credit received
Table 10 Consolidated statements of advances paid/advance adjusted on account of receipt of supply
Table 11 Input tax credit reversals / reclaim
Table 12 Addition and reduction of amount in output tax for mismatch and other reasons
Table 13 HSN summary of inward supplies

Q 13: Can a recipient feed information in his GSTR-2 which has been missed by the supplier?
Ans: Yes, the recipient can himself feed the invoices not uploaded by his supplier.
The credit on such invoices will also be given provisionally but will be subject to matching. On matching, if the invoice is not
uploaded by the supplier, both of them will be intimated. The following is an analysis of procedural part.
On matching of invoice

Mismatch Yes Provisional credit will be confirmed


Rectified No Amount will be added to the output, tax liability of recipient in Return for the month subsequent to
the month in which such discrepancy was communicated

Example: Mr. Akash (supplier) has filed his return GSTR-1 for the month of November by 10th of next month i.e., by 10th
December. The details of GSTR-1 are then made available to recipient in GSTR-2A. The recipient can then accept, reject or
modify or add details of such inward supplies which are not reflected in GSTR-2A and file return of inward supplies for the
month of November in GSTR-2 by 15th December.
Thereafter, details of inward supplies added, corrected, or deleted by the recipient are made available to supplier
in GSTR-1A. lf such additional / modified/deleted information is accepted by Mr. Akash between 15th December and 17th
December, then GSTR-1 filed by him for the month of November gets amended accordingly, and GSTR-3 for the month of
November is generated based on amended information.
All entries added by the recipient which are not accepted by Mr. Akash in GSTR-1A remain in mismatched category and will
reflect in mismatch report.

Q 14: How are the details of inward supply furnished in prior periods amended?
Ans: Any errors /omission discovered in GSTR-2 on matching shall be affected in GSTR-2 of the month in which such
error/omission is discovered.
For any amendments in GSTR-2 entitles the recipient of make the rectifications for particulars furnished in GSTR-2
pertaining to prior periods.
These amendments are to be made by the recipient only if he agrees to the mismatch report communicated to him by the
system every month, after the processing of the return. Tax and interest, if any, arising out of such rectification will be paid
by the person responsible for filing the return of inward supplies.
On such amendments if any tax & interest arises then it shall be paid by person responsible for fling of inward supplies
return.

Time limit for such amendment shall be -


The maximum time limit within which such rectification is permissible is earlier of the following dates:
 Date of filing of monthly return for the month of September following the end of the financial year to which such details
pertain or
 Date of filing of the relevant annual return.

Sec 39: Furnishing of returns


(1) REGISTERED PERSON
Every registered person, other than
 An Input Service Distributor or
 A non-resident taxable person or
 A person paying tax under the provisions of section 10 or

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 Section 51 or section 52
shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return,
electronically,
 Of inward and outward supplies of goods or services or both,
 Input tax credit availed, tax payable, tax paid and
 Such other particulars as may be prescribed,
on or before the twentieth day of the month succeeding such calendar month or part thereof.
(2) COMPOSOTION LEVY
A registered person paying tax under the provisions of section 10 shall, for each quarter or part thereof, furnish,
in such form and manner as may be prescribed, a return, electronically, of turnover in the State or Union territory,
inward supplies of goods or services or both, tax payable and tax paid within eighteen days after the end of such
quarter.
(3) TAX DEDUCTION AT SOURCE
Every registered person required to deduct tax at source under the provisions of section 51 shall furnish, in such form
and manner as may be prescribed, a return, electronically, for the month in which such deductions have been made
within ten days after the end of such month.
(4) INPUT SERVICE DISTRIBUTOR
Every taxable person registered as an Input Service Distributor shall, for every calendar month or part thereof,
furnish, in such form and manner as may be prescribed, a return, electronically, within thirteen days after the end of
such month.
(5) NON-RESIDENT TAXABLE PERSON
Every registered non-resident taxable person shall, for every calendar month or part thereof, furnish, in such form
and manner as may be prescribed, a return, electronically, within twenty days after the end of a calendar month or
within seven days after the last day of the period of registration specified under sub-section (1) of section 27,
whichever is earlier.
(6) EXTENTION OF TIME LIMIT
The Commissioner may, for reasons to be recorded in writing, by notification, extend the time limit for furnishing the
returns under this section for such class of registered persons as may be specified therein:
Proviso: Provided that any extension of time limit notified by the Commissioner of State tax or Union territory tax shall be
deemed to be notified by the Commissioner.
(7) RETURN TO BE FILE WITHIN DUE DATE
Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3)
or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is
required to furnish such return.
(8) NIL RETURN
Every registered person who is required to furnish a return under sub-section (1) or sub-section (2) shall furnish a
return for every tax period whether or not any supplies of goods or services or both have been made during such tax
period.
(9) RECTOFICATION
Subject to the provisions of sections 37 and 38, if any registered person after furnishing a return under sub-section (1)
or sub-section (2) or sub-section (3) or sub-section (4) or sub-section (5) discovers any omission or incorrect
particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax authorities, he
shall rectify such omission or incorrect particulars in the return to be furnished for the month or quarter during
which such omission or incorrect particulars are noticed, subject to payment of interest under this Act:
Proviso: Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due date for
furnishing of return for the month of September or second quarter following the end of the financial year, or the actual date of
furnishing of relevant annual return, whichever is earlier

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(10) NOT ALLOWED TO FURNISH RETURN
A registered person shall not be allowed to furnish a return for a tax period if the return for any of the previous tax
periods has not been furnished by him.

Rule 61: Form and manner of submission of monthly return.-


(1) Every registered person other than a person referred to in section 14 of the Integrated Goods and Services Tax Act,
2017 or an Input Service Distributor or a non-resident taxable person or a person paying tax under section 10 or
section 51 or, as the case may be, under section 52 shall furnish a return specified under sub-section (1) of section 39
in FORM GSTR-3 electronically through the common portal either directly or through a Facilitation Centre notified by
the Commissioner.

(2) Part A of the return under sub-rule (1) shall be electronically generated on the basis of information furnished through
FORM GSTR-1, FORM GSTR-2 and based on other liabilities of preceding tax periods.

(3) Every registered person furnishing the return under sub-rule (1) shall, subject to the provisions of section 49,
discharge his liability towards tax, interest, penalty, fees or any other amount payable under the Act or the provisions of
this Chapter by debiting the electronic cash ledger or electronic credit ledger and include the details in Part B of the return
in FORM GSTR-3.

(4) A registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of
sub-section (6) of section 49, may claim such refund in Part B of the return in FORM GSTR-3 and such return shall be
deemed to be an application filed under section 54.

(5) Where the time limit for furnishing of details in FORM GSTR-1 under section 37 and in FORM GSTR-2 under section 38
has been extended and the circumstances so warrant, return in FORM GSTR-3B in lieu of FORM GSTR-3, may be
furnished in such manner and subject to such condition as may be notified by the Commissioner.

Rule 62: Form and manner of submission of quarterly return by the composition supplier.-
(1) Every registered person paying tax under section 10 shall, on the basis of details contained in FORM GSTR-4A, and
where required, after adding, correcting or deleting the details, furnish the quarterly return in FORM GSTR-4
electronically through the common portal, either directly or through a Facilitation Centre notified by the
Commissioner.

(2) Every registered person furnishing the return under sub-rule (1) shall discharge his liability towards tax, interest,
penalty, fees or any other amount payable under the Act or the provisions of this Chapter by debiting the electronic
cash ledger.
(3) The return furnished under sub-rule (1) shall include the-
(a) Invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and
(b) Consolidated details of outward supplies made.
(4) A registered person who has opted to pay tax under section 10 from the beginning of a financial year shall, where
required, furnish the details of outward and inward supplies and return under rules 59, 60 and 61 relating to the
period during which the person was liable to furnish such details and returns till the due date of furnishing the return
for the month of September of the succeeding financial year or furnishing of annual return of the preceding financial
year, whichever is earlier.
Explanation.– For the purposes of this sub-rule, it is hereby declared that the person shall not be eligible to avail of input tax credit on
receipt of invoices or debit notes from the supplier for the period prior to his opting for the composition scheme.

(5) A registered person opting to withdraw from the composition scheme at his own motion or where option is
withdrawn at the instance of the proper officer shall, where required, furnish the details relating to the period prior to
his opting for payment of tax under section 9 in FORM GSTR- 4 till the due date of furnishing the return for the
quarter ending September of the succeeding financial year or furnishing of annual return of the preceding financial
year, whichever is earlier.

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Rule 63: Form and manner of submission of return by non-resident taxable person.-
 Every registered non-resident taxable person shall furnish a return in FORM GSTR-5
 Electronically through the common portal, either directly or through a Facilitation Centre notified by the
Commissioner,
 Including therein the details of outward supplies and inward supplies and
 Shall pay the tax, interest, penalty, fees or any other amount payable under the Act or the provisions of this Chapter
 Within twenty days after the end of a tax period or within seven days after the last day of the validity period of
registration, whichever is earlier.

Rule 64: Form and manner of submission of return by persons providing online
Information and database access or retrieval services.-Every registered person providing online information and data base
access or retrieval services from a place outside India to a person in India other than a registered person shall file return in
FORM GSTR-5A on or before the twentieth day of the month succeeding the calendar month or part thereof.

Rule 65: Form and manner of submission of return by an Input Service Distributor.
Every Input Service Distributor shall, on the basis of details contained in FORM GSTR-6A, and
where required, after adding, correcting or deleting the details, furnish electronically the return in FORM GSTR-6,
containing the details of tax invoices on which credit has been received and those issued under section 20, through the
common portal either directly or from a Facilitation Centre notified by the Commissioner.

Rule 66: Form and manner of submission of return by a person required to deduct tax at source.-
(1) Every registered person required to deduct tax at source under section 51 (hereafter in this rule referred to as
deductor) shall furnish a return in FORM GSTR-7 electronically through the common portal either directly or from a
Facilitation Centre notified by the Commissioner.

(2) The details furnished by the deductor under sub-rule (1) shall be made available electronically to each of the suppliers
in Part C of FORM GSTR-2A and FORM-GSTR-4 A on the common portal after the due date of filing of FORM GSTR-7.

(3) The certificate referred to in sub-section (3) of section 51 shall be made available electronically to the deductee on the
common portal in FORM GSTR-7A on the basis of the return furnished under sub-rule (1).

Rule 67: Form and manner of submission of statement of supplies through an ecommerce operator.-
(1) Every electronic commerce operator required to collect tax at source under section 52 shall furnish a statement in
FORM GSTR-8 electronically on the common portal, either directly or from a Facilitation Centre notified by the
Commissioner, containing details of supplies effected through such operator and the amount of tax collected as
required under sub-section (1) of section 52.

(2) The details furnished by the operator under sub-rule (1) shall be made available electronically to each of the suppliers
in Part C of FORM GSTR-2A on the common portal after the due date of filing of FORM GSTR-8.

Rule 68: Notice to non-filers of returns.-


A notice in FORM GSTR-3A shall be issued, electronically, to a registered person who fails to furnish return under section
39 or section 44 or section 45 or section 52.

Q 15: Explain the different kinds of return u/s 39?


Ans:

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Extension of Due Date


The due date of filing returns GSTR-3 /GSTR-4/GSTR-5 may be extended by the commissioner/commissioner of the State
GST or UTGST for class of taxable person by way of notification

Q 16: What is the due date of payment of GST? (Sec 39(7)


Ans: Due dates for payment of tax in respect of the persons required to file GSTR- 3, GSTR-4 and GSTR-5 are linked with
the due dates for filing of such returns i.e., the last dates (due dates) of filing such returns are also the due dates for
payment of tax in respect of persons required to file such returns.
However, non-resident taxable persons (NRTP) or casual taxable persons (CTP) are required to make advance deposit
of tax of an amount equivalent to the estimated tax liability of such person for a period for which registration is sought or
extension of registration is sought in terms of section 27(2),

Q 17: If a return has been filed, how can it be revised if some changes are required to be made? State exceptions if any?
Ans:
 In GST since the returns are built from details of individual transactions, there is no requirement for having a revised
return.
 Any need to revise a return may arise due to the need to change a set of invoices or debit/credit notes. Instead of
revising the return already submitted, the system allows changing the details of those transactions (invoices or
debit/credit notes) that are required to be amended.
 They can be amended in any of the future GSTR~ l /2 in the tables specifically provided for the purposes of amending
previously declared details.

Exception
It is important to note that section 39(9) does not permit rectification of error or omission discovered on account of
scrutiny, audit, inspection or enforcement activities by tax authorities.
Hence, assesse may not be able to pass on the ITC to the receiver in respect of tax payments made by him in pursuance of
account of any of the aforementioned situations.

Q 18: Explain the relevance and manner of submission of monthly return i.e. GSTR-3?
Ans:
(1) E-furnishing of monthly return [Rule 61 (1)]: Every registered person other than
(a) Supplier of OIDAR services
(b) Composition taxpayer
(c) Non-resident taxable person
(d) ISD
(e) Person deducting tax at source
(f) ECO
shall furnish a return specified under section 39(1) in FORM GSTR-3 electronically through the common portal either directly
or through a Facilitation Centre notified by the Commissioner

(2) Auto population of information [Rule 61 (2)]: Part A of the return under sub-rule (1) shall be electronically
generated on the basis of information furnished through FORM GSTR-1, FORM GSTR-2 and based on other liabilities of
preceding tax periods.

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(3) Payment of tax, interest, etc.[Rule 61(3)]: Every registered person furnishing the return under rule 61(1) shall,
subject to the provisions of Section 49, discharge his liability towards tax, interest, penalty, fees or any other amount
payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger or electronic credit ledger
and include the details in Part B of the return in FORM GSTR-3

(4) Refund to be claimed in return [Rule 61 (4)]: A registered person, claiming refund of any balance in the electronic
cash ledger in accordance with the provisions of Section 49(6), may claim such refund in Part B of the return in FORM
GST-3 and such return shall be deemed to be an application tiled under section 54.
(5) Extension of time [Rule 61(5)]: Where the time limit for furnishing of details in FORM GSTR-1 under return in FORM
GSTR-3B, in lieu of FORM GSTR-3 may be furnished in such manner and subject to such conditions as may be notified
by the Commissioner.

Q 19: Explain the relevance and manner of submission of GSTR-3B?


Ans: GSTR-3B is a simple return containing summary of outward and inward supplies liable to reverse charge, eligible ITC,
payment of tax etc. Thus, GSTR-3B does not require invoice-wise data of outward supplies.
FORM GSTR-SB is notified as the form for return by the Commissioner when the due dates for furnishing GSTR-1 and GSTR-2 get
extended. It can be submitted electronically through the common portal, either directly or through a notified Facilitation Centre.

Q 20: Can GSTR-3B be filed after the due date for furnishing of GSTR-2?
Ans: Yes, GSTR-SB can be furnished after the due date for furnishing GSTR-2 the following particulars shall be reflected:
(a) Part A of GSTR-3 is auto populated on the basis of information furnished through GSTR-1, GSTR-2 and based on other
liabilities of preceding tax periods. Part B of the GSTR-3 is electronically generated on the basis of the return in GSTR-3B
furnished in respect of the tax period
(b) The registered person can modify Part B of GSTR-3 based on the discrepancies, if -any, between GSTR-3B and GSTR-3 and
discharge his tax and other liabilities, it any
(c) Where the amount of ITC in GSTR-3 exceeds the amount of ITC in terms of GSTR-3B, the additional amount gets credited to
the electronic credit ledger of the registered person.

Q 21: Whether GST Return filled without sign be considered as a valid return?
Ans:
 A taxpayer needs to electronically sign the submitted returns otherwise it will be considered not- filed.
 Taxpayers can electronically sign their returns using
 A DSC (mandatory for all types of companies and LLPS),
 E-sign (Aadhaar-based OTP verification), or
 EVC (Electronic Verification Code sent to the registered mobile number of the authorized signatory).

Q 22: State the benefits of filing GST Return using offline tool?
Ans:
 The GSTR 1 Excel worksheet can be used to prepare data for GSTR 1 without connecting to Internet in offline mode.
 Taxpayer can upload invoices in GSTR 1, more than once, at any time during the day/week/month.
 Offline tool also performs certain computations and validation to minimize errors in return preparation.
 Can fill in invoices data up to 19,000 line items using excel utility in offline mode.

Sec 39 - Special Returns (Composition Levy)


Q 23: Explain the manner of submission of return by composition supplier is and also state the contents of GSTR-4?
Ans: Composition supplier is required to file a quarterly return GSTR-4 electronically though Common portal, form and
manner of submission of return shall be as follows:
(1) Every registered person paying tax under section 10 shall, on the basis of details contained in FORM GSTR-4A, and
where required, after adding, correcting or deleting the details, furnish the quarterly return in FORM GSTR-4
electronically through the common portal, either directly or through a Facilitation Centre notified by the
Commissioner.

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(2) Every registered person furnishing the return under sub-rule (1) shall discharge his liability towards tax, interest,
penalty, fees or any other amount payable under the Act or the provisions of this Chapter by debiting the electronic
cash ledger.
(3) The return furnished under sub-rule (1) shall include the -
(a) Invoice wise inter-State and intra-State inward supplies received from registered and un-registered persons; and
(b) Consolidated details of outward supplies made.
(4) Switching from normal to Composition Levy: A registered person who has opted to pay tax under section 10 from
the beginning of a financial year shall, where required,
 Furnish the details of outward and inward supplies and
 Return under rules 59, 60 and 61 relating to the period during which the person was liable to furnish such details
and returns till the due date of
 Furnishing the return for the month of September of the succeeding financial year or
 Furnishing of annual return of the preceding financial year,
Whichever is earlier?
(5) Switching from Composition to Normal Levy : A registered person opting to withdraw from the composition scheme at
his own motion or where option is withdrawn at the instance of the proper officer shall, where required, furnish the
details relating to the period prior to his opting for payment of tax under section 9 in FORM GSTR-4 till the due date of
 Furnishing the return for the quarter ending September of the succeeding financial year or
 Furnishing of annual return of the preceding financial year,
Whichever is earlier?

CONTENTS OF GSTR-4

Basic & Other Detail Details of Inward Suppliers


 GSTIN  Invoice-wise details of all inward supplies (i.e., intra and inter-State
 Legal name & Trade name supplies and from registered and unregistered persons) including reverse
 TDS Credit Received [Table 9] charge supplies [Table 4]
 Tax Payable and Paid [Table 10]
 Tax on outward supplies (net of advances & goods returned) -
 Interest, late fees payable and paid [Table 11]
 Refund claimed from Electronic cash legal Consolidated details outward supplies [Table 6]
[Table 12]  Consolidated statement of advances paid/adjusted on receipt of supply
 Debit entries in electronic cash ledger for [Table 8]
tax/interest payment [Table 13]  Amendments pertaining to inward and outward supplies for earlier tax
period [Tables 5 and 7]

Q 24: State the cases when registration of a composition supplier can be cancelled?
Ans: As per section 29(2), a proper officer is empowered to cancel registration of taxable person if;
(a) A person paying tax under composition scheme has not furnished his GSTR-4 for3 consecutive tax periods (i.e., 3
consecutive quarters)
(b) Any other taxable person has not furnished returns for consecutive period of 6 months.

Sec 39 - Special Returns (NRTP)


Q 25: Explain the return filing procedure as applicable to non-resident taxable person?
Ans: Non-Resident Taxable Persons (NRTPs) are those suppliers who do not have a business establishment in India and
have come for a short period to make supplies in India. They would normally import their products into India and make
local supplies.
A. Monthly return: A registered NRTP is not required to file separately the Statement of Outward Supplies, Statement of
inward Supplies and Return for a normal tax payer.
In place of the same, a simplified monthly tax return has been prescribed in Form GSTR-5 for NRTP for every calendar
month or part thereof. NRTP shall incorporate the details of outward supplies and inward supplies in GSTR-5.

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B. Last date of filing return:
The details in GSTR-5 should be furnished
 Within 20 days after the end of the calendar month or
 Within 7 days after the last day of validity period of the registration,
Whichever is earlier?

C. Payment of interest, penalty, flees or any other amount payable: NRTP shall pay the tax, interest, penalty, fees or
any other amount payable under the CGST Act or the provisions of the Returns Chapter under CGST Rules, 201 7 till the
last date of filing return.
Note: A NRTPIS not required filing an annual return

Sec 39 - Special Returns (Parson having UIN)


Q 26: Persons having Unique Identity Number (UIN) are required to furnish details of inward supplies? Explain.
Ans: Details of inward supplies to be furnished along with refund claim [Rule 82]: Every person who has been issued
a Unique Identity Number and claims refund of the taxes paid on his inward supplies, shall furnish the details of such
supplies of taxable goods or services or both electronically in FORM GSTR-ii, along with application for such refund claim,
through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

(2) Furnishing of details off inward supplies even if no refund is claimed [Rule 82(1)]: Every person who has been
issued a Unique Identity Number for purposes other than refund of taxes paid shall furnish the details of inward supplies of
taxable goods or services or both as may be required by the proper officer in Form GSTR -11

First Return and precaution for Returns


Q 27: Explain the provisions pertaining tirst return & to whom is it applicable?
Ans: As per Sec 40 of CGST Act, Every registered person who has made outward supplies in the period between the date on
which he became liable to registration till the date on which registration has been granted shall declare the same in the nrst
return furnished by him after grant of registration.
During the intervening period, such person might have made the outward supplies, so in order to enable such person to
declare the taxable supplies made by him for the period between the dates on which he becomes liable till the date of grant
of registration. Thus first return is to be filed so that ITC can be availed by recipient on such supplies.

Example: Mr. R is a supplier of goods located in New Delhi and provides the following facts in relation to his business
Date on which Mr. R became liable for registration under GST 06/08/2017
Date of filing of application for registration 15/08/2017
Date of grant of registration certificate 18/08/2017
Effective date of registration-Date on which Ramesh became liable as application
filed within 30 days of becoming liable for registration 06/08/2017
Due date of filing of First Return after seeking registration i.e. Return Pertaining to
tax period August 201 7 20/09/2017

Mr. R shall, besides declaring the details of taxable supplies affected after 18/08/2017, also declare the details of outward
supplies affected during the period 06/08/2017 to 18/08/2017 in 5 his First Return to be furnished by 20/09/2017

Q 28: What are the precautions that a taxpayer is required to take for a hassle free compliance under GST?
Ans:
1) One of the most important things under GST is the timely uploading of the details of outward supplies in GSTR-1 by
10th of next month.
2) If the number is small, the taxpayer can upload all the information in one go. However if the number of invoices is large,
the invoices (or debit/ credit notes) should be uploaded on a regular basis.
3) GST common portal allows regular uploading of invoices even on a real time basis. Therefore it would always be
beneficial for the taxpayers to regularly upload the invoices.

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4) To ensure that taxpayers follow up on uploading the invoices of their inward supplies by their suppliers. This would be
helpful in ensuring that the ITC is available without any hassle and delay.

Sec 41: Claim of input tax credit and provisional acceptance thereof.
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the
credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his
electronic credit ledger.
(2) The credit referred to in sub-section (1) shall be utilized only for payment of self assessed output tax as per the return
referred to in the said sub-section.

Sec 42: Matching, reversal and reclaim of input tax credit


(1) MATCHING
The details of every inward supply furnished by a registered person (hereafter in this section referred to as the
“recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be matched––
(a) With the corresponding details of outward supply furnished by the corresponding registered person (hereafter in
this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period;
(b) With the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods
imported by him; and
(c) For duplication of claims of input tax credit.

(2) ACCEPTANCE
The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details
of corresponding outward supply or with the integrated goods and services tax paid under section 3 of the Customs
Tariff Act, 1975 in respect of goods imported by him shall be finally accepted and such acceptance shall be
communicated, in such manner as may be prescribed, to the recipient.

(3) DISCREPANCY
Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the
supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy
shall be communicated to both such persons in such manner as may be prescribed.

(4) DUPLICATION OF CLAIMS


The duplication of claims of input tax credit shall be communicated to the recipient in such manner as may be
prescribed.

(5) LIBILTY OF RECIPIENT


The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by
the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output tax
liability of the recipient, in such manner as may be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.
(6) LIBILTY OF RECIPIENT
The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added
to the output tax liability of the recipient in his return for the month in which the duplication is communicated.

(7) REDUCTION IN LIBILTY OF RECIPIENT


The recipient shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5), if the
supplier declares the details of the invoice or debit note in his valid return within the time specified in sub-section (9)
of section 39.
(8) LIBILTY OF RECIPIENT
A recipient in whose output tax liability any amount has been added under sub-section (5) or sub-section (6), shall be
liable to pay interest at the rate specified under sub-section (1) of section 50 on the amount so added from the date of
availing of credit till the corresponding additions are made under the said sub-sections.

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(9) REFUND TO RECIPIET
Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8)
shall be refunded to the recipient by crediting the amount in the corresponding head of his electronic cash ledger in
such manner as may be prescribed:

Proviso: Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid by the
supplier.
(10) REDUCTION IF FOUND INCORRECT
The amount reduced from the output tax liability in contravention of the provisions of sub-section (7) shall be added to
the output tax liability of the recipient in his return for the month in which such contravention takes place and such
recipient shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.

Rule 69: Matching of claim of input tax credit-


The following details relating to the claim of input tax credit on inward supplies including imports, provisionally
allowed under section 41, shall be matched under section 42 after the due date for furnishing the return in FORM
GSTR-3-
(a) Goods and Services Tax Identification Number of the supplier;
(b) Goods and Services Tax Identification Number of the recipient;
(c) Invoice or debit note number;
(d) Invoice or debit note date; and
(e) Tax amount
Proviso: Provided that where the time limit for furnishing FORM GSTR-1 specified under section 37and FORM GSTR-2
specified under section 38 has been extended, the date of matching relating to claim of input tax credit shall also be
extended accordingly:

Provided further that the Commissioner may, on the recommendations of the Council, by order, extend the date of
matching relating to claim of input tax credit to such date as may be specified therein

Explanation.- For the purposes of this rule, it is hereby declared that –


(i) The claim of input tax credit in respect of invoices and debit notes in FORM GSTR-2 that were accepted by the recipient
on the basis of FORM GSTR-2A without amendment shall be treated as matched if the corresponding supplier has
furnished a valid return;
(ii) The claim of input tax credit shall be considered as matched where the amount of input tax credit claimed is equal to
or less than the output tax paid on such tax invoice or debit note by the corresponding supplier.

Rule 70: Final acceptance of input tax credit and communication thereof.-
1. The final acceptance of claim of input tax credit in respect of any tax period, specified in sub-section (2) of section
42, shall be made available electronically to the registered person making such claim in FORM GST MIS-1 through
the common portal.
2. The claim of input tax credit in respect of any tax period which had been communicated as mismatched but is
found to be matched after rectification by the supplier or recipient shall be finally accepted and made available
electronically to the person making such claim in FORM GST MIS-1 through the common portal.

Rule 71: Communication and rectification of discrepancy in claim of input tax credit and reversal of claim of
input tax credit.-
(1) Any discrepancy in the claim of input tax credit in respect of any tax period, specified in sub-section (3) of section
42 and the details of output tax liable to be added under sub-section (5) of the said section on account of
continuation of such discrepancy, shall be made available to the recipient making such claim electronically in
FORM GST MIS-1 and to the supplier electronically in FORM GST MIS-2 through the common portal on or before
the last date of the month in which the matching has been carried out.

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(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of outward supplies to be furnished for the month in which the discrepancy is made available.
(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of inward supplies to be furnished for the month in which the discrepancy is made available.

(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy
shall be added to the output tax liability of the recipient in his return to be furnished in FORM GSTR-3 for the
month succeeding the month in which the discrepancy is made available.

Explanation.- For the purposes of this rule, it is hereby declared that -


(i) Rectification by a supplier means adding or correcting the details of an outward supply in his valid return so as to match the details
of corresponding inward supply declared by the recipient;
(ii) Rectification by the recipient means deleting or correcting the details of an inward supply so as to match the details of
corresponding outward supply declared by the supplier.

Rule 72: Claim of input tax credit on the same invoice more than once.-
Duplication of claims of input tax credit in the details of inward supplies shall be communicated to the registered
person in FORM GST MIS-1electronically through the common portal.

Sec 43: Matching, reversal and reclaim of reduction in output tax liability
(1) MATCHING
The details of every credit note relating to outward supply furnished by a registered person (hereafter in this section
referred to as the “supplier”) for a tax period shall, in such manner and within such time as may be prescribed, be
matched–
(a) With the corresponding reduction in the claim for input tax credit by the corresponding registered person
(hereafter in this section referred to as the “recipient”) in his valid return for the same tax period or any
subsequent tax period; and
(b) For duplication of claims for reduction in output tax liability.
(2) ACCEPTANCE
The claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in the
claim for input tax credit by the recipient shall be finally accepted and communicated, in such manner as may be
prescribed, to the supplier.

(3) DISCREPANCY
Where the reduction of output tax liability in respect of outward supplies exceeds the corresponding reduction in the
claim for input tax credit or the corresponding credit note is not declared by the recipient in his valid returns, the
discrepancy shall be communicated to both such persons in such manner as may be prescribed.
(4) DUPLICATE OF CLAIMS
The duplication of claims for reduction in output tax liability shall be communicated to the supplier in such manner as
may be prescribed.
(5) ADDITION IF NOT RECTIFIED
The amount in respect of which any discrepancy is communicated under sub-section (3) and which is not rectified by
the recipient in his valid return for the month in which discrepancy is communicated shall be added to the output tax
liability of the supplier, in such manner as may be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.
(6) REDUCTION ON ACCOUNT
The amount in respect of any reduction in output tax liability that is found to be on account of duplication of claims
shall be added to the output tax liability of the supplier in his return for the month in which such duplication is
communicated.

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(7) REDUCTION
The supplier shall be eligible to reduce, from his output tax liability, the amount added under sub-section (5) if the
recipient declares the details of the credit note in his valid return within the time specified in sub-section (9) of section
39.

(8) INTEREST
A supplier in whose output tax liability any amount has been added under sub-section (5) or sub-section (6), shall be
liable to pay interest at the rate specified under sub-section (1) of section 50 in respect of the amount so added from
the date of such claim for reduction in the output tax liability till the corresponding additions are made under the said
sub-sections.

(9) REFUND
Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8)
shall be refunded to the supplier by crediting the amount in the corresponding head of his electronic cash ledger in
such manner as may be prescribed:

Proviso: Provided that the amount of interest to be credited in any case shall not exceed the amount of interest paid
by the recipient.

(10) CONTRAVENTION
The amount reduced from output tax liability in contravention of the provisions of sub-section (7) shall be added to
the output tax liability of the supplier in his return for the month in which such contravention takes place and such
supplier shall be liable to pay interest on the amount so added at the rate specified in sub-section (3) of section 50.

Rule 73: Matching of claim of reduction in the output tax liability.-


The following details relating to the claim of reduction in output tax liability shall be matched under section 43 after
the due date for furnishing the return in FORM GSTR-3, namely:-
(a) Goods and Services Tax Identification Number of the supplier;
(b) Goods and Services Tax Identification Number of the recipient;
(c) Credit note number;
(d) Credit note date; and
(e) Tax amount:
Proviso: Provided that where the time limit for furnishing FORM GSTR-1 under section 37and FORM GSTR-2 under
section 38 has been extended, the date of matching of claim of reduction in the output tax liability shall be extended
accordingly:
Proviso: Provided further that the Commissioner may, on the recommendations of the Council, by order, extend the
date of matching relating to claim of reduction in output tax liability to such date as may be specified therein

Explanation.- For the purposes of this rule, it is hereby declared that –


(i) The claim of reduction in output tax liability due to issuance of credit notes in FORM GSTR-1 that were accepted by
the corresponding recipient in FORM GSTR-2 without amendment shall be treated as matched if the said recipient
has furnished a valid return.
(ii) The claim of reduction in the output tax liability shall be considered as matched where the amount of output tax
liability after taking into account the reduction claimed is equal to or more than the claim of input tax credit after
taking into account the reduction admitted and discharged on such credit note by the corresponding recipient in
his valid return.

Rule 74: Final acceptance of reduction in output tax liability and communication thereof.-
(1) The final acceptance of claim of reduction in output tax liability in respect of any tax period, specified in sub-
section (2) of section 43, shall be made available electronically to the person making such claim in FORM GST MIS-
1 through the common portal.

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(2) The claim of reduction in output tax liability in respect of any tax period which had been communicated as mis-
matched but is found to be matched after rectification by the supplier or recipient shall be finally accepted and
made available electronically to the person making such claim in FORM GST MIS-1 through the common portal.

Rule 75: Communication and rectification of discrepancy in reduction in output tax liability and reversal of
claim of reduction.-
(1) Any discrepancy in claim of reduction in output tax liability, specified in sub-section (3) of section 43, and the
details of output tax liability to be added under sub-section (5) of the said section on account of continuation of
such discrepancy, shall be made available to the registered person making such claim electronically in FORM GST
MIS- 1 and the recipient electronically in FORM GST MIS-2 through the common portal on or before the last date of
the month in which the matching has been carried out.

(2) A supplier to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of outward supplies to be furnished for the month in which the discrepancy is made available.

(3) A recipient to whom any discrepancy is made available under sub-rule (1) may make suitable rectifications in the
statement of inward supplies to be furnished for the month in which the discrepancy is made available.

(4) Where the discrepancy is not rectified under sub-rule (2) or sub-rule (3), an amount to the extent of discrepancy
shall be added to the output tax liability of the supplier and debited to the electronic liability register and also
shown in his return in FORM GSTR-3 for the month succeeding the month in which the discrepancy is made
available.

Explanation- For the purposes of this rule, it is hereby declared that –


(i) Rectification by a supplier means deleting or correcting the details of an outward supply in his valid return so as to
match the details of corresponding inward supply declared by the recipient;
(ii) Rectification by the recipient means adding or correcting the details of an inward supply so as to match the details
of corresponding outward supply declared by the supplier.

Rule 76: Claim of reduction in output tax liability more than once.-
The duplication of claims for reduction in output tax liability in the details of outward supplies shall be communicated
to the registered person in FORM GST MIS-1 electronically through the common portal.

Rule 77: Refund of interest paid on reclaim of reversals.-


The interest to be refunded under sub-section (9) of section 42 or sub-section (9) of section 43 shall be claimed by the
registered person in his return in FORM GSTR-3 and shall be credited to his electronic cash ledger in FORM GST PMT-
05 and the amount credited shall be available for payment of any future liability towards interest or the taxable person
may claim refund of the amount under section 54.

Sec 41: Claim of input tax credit and provisional acceptance thereof
Q 29: Explain the concept of provisional input tax credit?
Ans: As per Sec 41 of CGST Act, Every registered person shall, subject to such conditions and restrictions as may be
prescribed,
be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a
provisional basis to his electronic credit ledger.
The credit referred to in sub-section (1) shall be utilized only for payment of self-assessed output tax as per the
return referred to in the said sub-section.

Sec 42: Matching, reversal and reclaim of input tax credit


Q 30: Explain the concept of matching of claim of Input Tax Credit?
Ans: Matching of ITC is one of the core features of GST. As GST is “One Nation One Tax” matching of ITC should allow full
credit of taxes paid across State boundaries, making it a truly national tax while keeping the federal structure intact.

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The process of matching of claim is as follows:
(1) Details to be matched: The details of every inward supply furnished by a registered person (hereafter in this section
referred to as the “recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be
matched-
 With the corresponding details of outward supply furnished by the corresponding registered person (hereafter in
this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period
 With the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods
imported by him; and
 For duplication of claims of input tax credit
(2) Time of Matching:
 The details relating to claim of ITC which has been taken provisionally u/s 41 shall be matched u/s 42.
 Such matching shall be done after the due date for furnishing the return in FORM GSTR-3 (i.e. after20th of the
month following the month to which return relates).
The provisions pertaining to this concept are as per Sec 42 read with Rule 69.
(3) Information to be matched: The following details relating to the claim of input tax credit on inward supplies
including imports, provisionally allowed under section 41, shall be matched under section 42 after the due date for
furnishing the return in FORM GSTR-3:
(a) Goods and Services Tax Identification Number of the supplier
(b) Goods and Services Tax Identification number of the recipient
(c) Invoice or debit note number
(d) Invoice or debit note date and
(e) Tax amount

(4) Acceptance if return furnished - Deemed respect of invoices and debit notes in FORM GSTR-2 that were accepted by
the basis of FORM GSTR-2A without amendment shall be treated as matched if the corresponding supplier has
furnished a valid return.

(5) ITC claimed is less than or equal to output tax of supplier Deemed matching : The claim of input tax credit claimed
shall be considered as matched where the amount of input tax credit claimed is equal to or less than the output tax paid on
such tax INVOICE or debit note by the corresponding supplier.

(6) Extension in time limit for furnishing GSTR-1/GSTR-2 Deemed extension for matching: Where the time limit for
furnishing FORM GSTR-1 specified under section 37 and FORM GSTR-2 specified under Section 38 has been extended,
the date of matching relating to claim of input tax credit shall also be extended accordingly.

(7) The final acceptance of ITC claim if ITC is matched: The final acceptance of ITC claim in respect of any tax payer
shall be made available electronically to the registered person making such claim in FORM GST MIS-1 through the GST
common portal.

Q 31: Specify the cases where there is a Mismatched of ITC Credit?


(1) Duplication of invoices: Where there is duplication of ITC claimed by the recipient.
(2) Discrepancies in ITC claim
ITC claim is considered as mismatched in the following two cases:
 Where ITC claimed by a recipient in respect of an inward supply more than tax declared by the supplier from the
same supply by the supplier in his valid returns or
 Where the outward supply is not declared by the supplier in his valid returns

Q 32: State the cases when duplication of ITC claim may occur & its treatment? [Sec 44(4) and (6) read with Sec 72]
Ans:
(i) Claim of ITC on the same invoice more than once and communication thereof:
The recipient might have wrongly claimed ITC more than once on the same invoice. The duplication of ITC claims in the details of
inward supplies shall be communicated to the recipient in FORM GST MIS-1 electronically through the common portal.

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(ii) Addition of excess ITC claimed on account of duplication of ITC claims:
The amount claimed as ITC that is found to be in excess on account of duplication of claims shall be added to the output
tax liability of the recipient in his return for the month in which the duplication is communicated.
Recipient shall liable to pay interest on amount so added
Rate of interest: Rate specified under section 50(1). i.e. 18% p.a.
Time period: Interest shall be computed from the date of availing of credit till the corresponding additions are made
under the aforesaid sub-sections.
Case Study: Gangaram is the supplier of services who rendered services to Katappa on which GST paid is Rs. 9,700 this shall be available
as ITC to Katappa. Gangaram -the supplier furnishes Form GSTR-1 pertaining to July on 10th August. Katappa - the recipient - furnishes
Form GSTR-2 pertaining to July on 15th August and wrongly claims the ITC claim of Rs. 9,70U twice. Both the parties furnish their return
GSTR-3 pertaining to July on 20th August. Explain the practical aspect of mismatch and its effect in returns.

Q 33: How discrepancies would be communicated to supplier and recipient?


Any discrepancy shall be communicated electronically through common portal on/before the last date of the month in
which the matching has been carried out. Forms in which recipient and supplier shall be communicated:

Recipient IN FORM GST MIS-1

Supplier IN FORM GST MIS-2

Q 34: Briefly state the process of rectifications of discrepancy by Supplier & Recipient?
Ans:
Rectification by Supplier Rectification by Recipient
Supplier may make suitable rectifications in the Statement of Recipient may make suitable rectifications in the Statement of
Outward Supplies to be furnished for the month in which the Inward Supplies to be furnished for the month in which the
discrepancy is made available. discrepancy is made available.
Rectification by supplier means: Rectification by recipient means:
 Adding or correcting the details of an outward supply in his  Deleting or correcting the details of an inward supply**
valid return*  So as to match the details of corresponding outward supply
 So as to match the details of corresponding inward supply
declared by the supplier
declared by the recipient.

Note:
*Supplier shall pay tax and interest on such rectification of error/omission, if any, in case there is a short payment of tax on
account of such error/omission, in the return to be furnished for such tax period [Section 37(3)].
**Recipient shall pay tax and interest on such rectification of error/omission, if any, in case there is a short payment of tax
on account of such error/omission, in the return to be furnished for such tax period [Section 38(5)].
Case Study: Mr. Babulal supplies goods to Gajodhar for on which GST paid is Rs. 5,680 available as ITC to Gajodhar. Babuial -the supplier -
furnishes Form GSTR-1 pertaining to July on 10th August. Gajodhar -the recipient -furnishes Form GSTR-2 pertaining to July on 15th August
and mistakenly claims the ITC of Rs. 5,700. Both the parties furnish their return GSTR-3 pertaining to July on 20th August. Discuss the manner
and procedure of communication and rectification of such discrepancy.

Q 35: How to communicate to supplier and recipient if discrepancies are rectified?


Ans: Where the discrepancy in ITC claim has been rectified by the supplier or recipient and resultantly ITC claim matches,
ITC claim shall be finally accepted. Recipient shall be communicated electronically in Form GST MIS-1 through GST
common portal.

Q 36: State the consequences on non rectification of discrepancy?


Ans: Where the discrepancy in ITC claim is not so rectified after communication through GST common portal such an
amount of discrepancy shall be added to the output tax liability of the recipient in his return to be furnished in FORM GSTR-
3 for the month succeeding the month in which the discrepancy is made available or communicated.

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 The details of output tax liability to be added on account of continuation of such discrepancy shall be made
available to the recipient making such claim electronically in FORM GST MIS-1.
 And to the supplier electronically in FORM GST MIS-2 through the common portal on/before the last date of the
month in which such matching has been carried out.
 Along with the output tax liability and interest amount shall also be added as per Sec 42(8).
The amount of interest shall be computed from the date of availing the credit till the corresponding addition are
made under the aforesaid Sub-Sections
In case of non rectification of discrepancy of ITC claim- interest is payable by recipient for a minimum period of
approximately 2 months.
In case of duplication of claim- interest is payable for a minimum period of approximately 1 month by the recipient

Discrepancy in ITC claim not Excess ITC claimed on account of


rectified - Added to output tax duplication of claims- Added to
liability of recipient output tax liability of recipient

Recipient shall be liable


to pay interest on the
amount so added

Rate of interest: Rate specified under section 50(1) i.e. 18% p.a.
Time period: Interest shall be computed from the date of availing of credit till the corresponding additions are made under
the aforesaid sub-sections.

Q 37: Explain the consequences that may arise due to contravention of provisions of reduction of output tax liability?
Ans: Where any reduction in output tax liability is in contravention of the provisions of section 42(7), such amount shall
again be added to the output tax liability of the recipient in his return for the month in which such contravention takes
place.
Interest: Further, such recipient shall be liable to pay interest on the amount so added.
Rate of interest: Rate specified under section 50(3) i.e. 24% pa.

Q 38: Whether the amount added as output tax liability to recipient can be reduced on rectification? Can the recipient
also claim refund of amount paid as interest?
Ans: 1) Reduction of output tax liability
 When any discrepancy in ITC claim is not rectified, an amount to the extent of discrepancy is added to the output tax
liability of the recipient in his GSTR-3 return to be furnished for the month succeeding the month in which the
discrepancy is made available/communicated.
 However, subsequently, when the supplier rectifies such discrepancy he may declare the details of the invoice/ debit
note in his valid return within the specified time.
 After such rectification the recipient shall be eligible to reduce, from his output tax liability, the amount to the extent of
discrepancy that where earlier added as per Section 42(5).
 The supplier needs to declare the details of the invoice/ debit note in his valid return** within the time specified in
Section 39(9).
Time stipulated under section 39(9) is as follows:
(i) Due date of tiling return for the month of September/second quarter following the end of the financial year to which
such details pertain
(ii) Actual date of furnishing of relevant annual return whichever is earlier.
**Note: Supplier shall pay tax and interest on such rectification of error/omission, if any in case there is a short payment of tax
on account of such error/omission, in the return to be furnished for such tax period as per Section 37(3)
2) Refund of interest as per Section 42(9) read with rule 77

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 Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8)
shall be refunded.
 Such amount shall be refunded to the recipient by crediting the amount in the corresponding head of his Electronic
Cash Ledger. The interest to be so refunded shall be claimed by the recipient in his return in Form GSTR-3
 However, the amount of interest to be credited in any case shall not exceed the amount of interest paid by the supplier
 The amount so credited shall be available for payment of any future liability towards interest or the taxable person
may claim refund of such amount under section 54.

Case Study: Mr. X a registered supplier, supplied services valuing Rs. 500,000 plus GST @ 12% to Mr. Y on 9/10/2017, incorporating
these supplies in the details of outward supplies furnished for the month of October 2017 on 10/11/2017. Mr. Y recorded the said
supplies as his inward supplies and accordingly claimed input tax credit on said inward supplies and furnished his return. There was a
disagreement regarding the quality of service and Mr. X issued a credit note on 15/12/2017 in favor of Mr. Y amounting Rs. 100000 and
reduced his output tax liability amounting Rs. 12,000 in the return furnished for the month of December 2017 on 20 th January 2018.
However, Mr. Y did not reverse his input ax credit amounting Rs. 12,000 in the return furnished for the month of December, 2017. On
matching being carried out the discrepancy was noticed and the same was communicated to both the parties on 31/01/2018. The said
discrepancy was not corrected by Mr. Y in the return furnished for the month of January 2018. In whose tax liability this mismatch will
be added and also discuss the remedial action that can be taken.
Solution:

Sec 43: Matching, Reversal and reclaim of reduction in output tax liability
Q 39: When the claim for reduction in output tax liability be considered as matched?
Ans:
The claim for reduction in output tax liability of the supplier shall be considered as matched provided:
(a) Credit notes in Form GSTR-1 were accepted by the corresponding recipient in Form GSTR-2 without amendment
provided said recipient has furnished a valid return.
(b) Where the amount of output tax liability after taking into account the reduction claimed 2 ITC claim after taking into
account the reduction admitted and discharged on such credit note by the corresponding recipient in his valid return.

Q 40: Explain the process of final acceptance of reduction in output tax liability?
Ans: The claim for reduction in output tax liability by the supplier that matches with the corresponding reduction in ITC
claim by the recipient shall be finally accepted. Such acceptance in respect of any tax period is made available electronically,
to the supplier making such claim, in FORM GST l\/llS-1 through the GST common portal.

Q 41: What do you mean Discrepancy in reduction in output tax liability as per Section 43(3), (5) read with rules 742)
and 75?
Ans:
(i) Discrepancy in reduction in claim for output tax liability as per Section 43(3)
Discrepancy in claim for reduction in output tax liability implies mismatch of claim for reduction in output tax liability
in respect of any tax period.
Claim for reduction in output tax liability is considered as mismatched in the following two cases:
 Where reduction in output tax liability in respect of outward supplies > Corresponding reduction in ITC claim by
recipient in his valid return or
 Where the corresponding credit note is not declared by the recipient in his valid returns.

(ii) Communication of discrepancy to supplier and recipient [Rule 75(1)]

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Any discrepancy in claim for reduction in output tax liability shall be communicated to recipient and supplier electronically
through the common portal on/before the last date of the month in which the matching has been carried out.
Forms in which recipient and supplier shall be communicated:

Recipient IN FORM GST MIS-1

Supplier IN FORM GST MIS-2

Q 42: Briefly state the process s of rectification of discrepancy in outward supplies by supplier and recipient?
Rectification by Supplier Rectification by Recipient
Supplier may make suitable rectifications in the Statement of Recipient may make suitable rectifications in the Statement of
Outward Supplies to be furnished for the month in which the Inward Supplies to be furnished for the month in which the
discrepancy is made available. discrepancy is made available.
Rectification by a supplier means: Rectification by recipient means:
 Deleting or correcting the details of an outward supply in his  Adding or correcting the details of an inward supply**
valid return*  So as to match the details of corresponding outward supply
 So as to match the details of corresponding inward supply declared by the supplier.
declared by the recipient.

*Supplier shall pay tax and interest on such rectification of error/omission, if any, in case there is a short payment of tax
on account of such error/omission, in the return to be furnished for such tax period [Section 37(3)].
"Recipient shall pay tax and interest on such rectification of error/omission, if any, in case there is a short payment of tax
on account of such error/omission, in the return to be furnished for such tax period [Section 38(5)].
Case Study: Santa returns the goods supplied by Banta on which GST of Rs. 5,680 is paid. Banta -the supplier - issues a credit note and
furnishes the same in his Form GSTR-1. Santa -the recipient- reduces the corresponding ITC claim in his GSTR-2 by Rs. 5,600. Both the parties
furnish their return GSTR-3 after which the mismatch report is generated and discrepancy to the effect that Santa has claimed excess tax
credit of Rs. 80 is communicated to Banta and Santa in Form GST MIS-1 and Form GST MIS-2 respectively. Discuss the relevant action to be
taken.
Ans:

Q 43: What will happened if


(a) Discrepancy rectified
(b) Discrepancy not rectified
Ans:
(a) Where the discrepancy in claim for reduction in output liability has been rectified by the supplier or recipient
and Supplier shall be communicated electronically in Form GST MIS-1 through GST common portal.
(b) Where the discrepancy is not so rectified an amount to the extent of discrepancy
 Shall be added to the output tax liability of the supplier,
 Debited to the Electronic Liability Register and
 Also shown in his return to be furnished in FORM GSTR-3 for the month succeeding the month in which the
discrepancy is made available/communicated.
Also interest is payable @ 18% p.a. and it shall be calculated from the date of availing such claim for reduction in the
output tax liability till the corresponding additions are made under the GSTR-3

Q 44: Whether the amount added as output tax liability to recipient can be reduced on rectification? Can the recipient
also claim refund of amount paid as interest?

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Ans: 1) Reduction of output tax liability
Where any discrepancy in claim for reduction in output tax liability is not rectified, an amount to the extent of discrepancy
is added to the output tax liability of the supplier in his GSTR-3 return to be furnished for the month succeeding the month
in which the discrepancy is made available/communicated.

However, subsequently, the recipient may declare the details of the credit note in his valid return within the specified time.
In that case, the supplier shall be eligible to reduce, from his output tax liability, the amount to the extent of discrepancy
[earlier added under sub-section (5) of section 43).

Time stipulated under section 39(9) is as follows:


(i) Due date of tiling return for the month of September/second quarter following the end of the financial year to which
such details pertain
(ii) Actual date of furnishing of relevant annual return whichever is earlier.
** Recipient shall pay tax and interest on such rectification of error/omission, if any in case there is a short payment of tax on account of
such error/omission, in the return to be furnished for such tax period [Section 38( 5) ].

2) Refund of interest as per Section 42(9) read with rule 77


 Where any reduction in output tax liability is accepted under sub-section (7), the interest paid under sub-section (8)
shall be refunded.
 Such amount shall be refunded to the supplier by crediting the amount in the corresponding head of his Electronic
Cash Ledger. The interest to be so refunded shall be claimed by the recipient in his return in Form GSTR-3
 However, the amount of interest to be credited in any case shall not exceed the amount of interest paid by the
recipient.
 The amount so credited shall be available for payment of any future liability towards interest or the taxable person
may claim refund of such amount under section 54.

Sec 44: Annual Return (Bare Text)


(1) TIME LIMIT
Every registered person, other than an
 Input Service Distributor,
 A person paying tax under section 51 or section 52,
 A casual taxable person and
 A non-resident taxable person,
shall furnish an annual return for every financial year electronically in such form and manner as may be prescribed on or
before the thirty-first day of December following the end of such financial year.

(2) AUDIT
Every registered person who is required to get his accounts audited in accordance with the provisions of sub-section
(5) of section 35 shall furnish, electronically, the annual return under sub-section (1) along with a copy of
 The audited annual accounts and a
 Reconciliation statement,
 Reconciling the value of supplies declared in the return furnished for the financial year with the audited annual
financial statement, and such other particulars as may be prescribed.

Q 45: Who are required to furnish Annual Return and what is the due date? [Section 44(1) read with rule 80]
Ans: All taxpayers filing return in GSTR-1 to GSTR-3, are required to file an annual return. However, following persons are
not required to tile annual return:
(i) Casual Taxable Persons.
(ii) Non- resident taxable person
(iii) Input Service Distributor 1 and
(iv) Persons authorized to deduct/collect tax at source under section 51 /522.
This return needs to be filed by 31st December of the next Financial Year.

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Q 46: What is the prescribed form for Annual Return? [Section 44(1) read with rule 80(1)]
Ans: Annual Return is to be riled electronically in Form GSTR-9 through the common portal.
Composition scheme supplier: A person paying tax under composition scheme is required to tile the Annual Return in
FORM GSTR-9A.

Q 47: Who is required to furnish a Reconciliation Statement? [Section 44(2) read with section 35(5) and rule 80(3)]
Ans:
(i) Every registered person must get his accounts audited by a Chartered Accountant or a Cost Accountant if his aggregate
turnover during a FY exceeds Rs. 2 crores.
(ii) Such registered person is required to furnish electronically through the common portal along with Annual Return a
copy of
 Audited annual accounts
 A Reconciliation Statement, duly certified, in prescribed form
Reconciliation Statement will reconcile the value of supplies declared in the return furnished for the financial year with
the audited annual financial statement and such other particulars, as may be prescribed

Sec 45: Final Return (Bare Text)

Every registered person who is required to furnish a return under sub-section (1) of section 39 and whose registration has been
cancelled shall furnish a final return within three months of the date of cancellation or date of order of cancellation, whichever
is later, in such form and manner as may be prescribed.

Rule 81: Final return.-


Every registered person required to furnish a final return under section 45, shall furnish such return electronically in FORM
GSTR-10 through the common portal either directly or through a Facilitation Centre notified by the Commissioner.

Q 48: Who are required to furnish Final Return [Section 45 read with rule 81]
Ans: Every registered person who is required to furnish return u/s 39(1) and whose registration has been surrendered or
cancelled shall file a Final Return electronically in from GSTR-10 through the common portal.

Q 48: What is the time limit for furnishing Final Return? [Section 45]
Ans: Final Return has to be filed within 3 months of the:
(i) Date of cancellation or
(ii) Date of order of cancellation whichever is later:

Sec 46 & 47 DEFAULT IN FURNISHING RETURNS (Bare


Text)
Sec 46: Notice to Return Defaulters
Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a notice shall be issued
requiring him to furnish such return within fifteen days in such form and manner as may be prescribed.

Sec 47: Lavy of late fee


(1) AMOUNT FOR LATE FEE
Any registered person who fails to furnish the details of outward or inward supplies required under section 37 or
section 38 or returns required under section 39 or section 45 by the due date shall pay a late fee of one hundred rupees
for every day during which such failure continues subject to a maximum amount of five thousand rupees.

(2) AMOUNT FOR LATE FEE – ANNUAL RETURN


Any registered person who fails to furnish the return required under section 44 by the due date shall be liable to pay a
late fee of one hundred rupees for every day during which such failure continues subject to a maximum of an amount
calculated at a quarter percent of his turnover in the State or Union territory.

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Q 50: What are the consequences if return is not filed withing due date? [Section 46 read with section 52 and rule 68]
Ans: Notice to return defaulters: A notice in prescribed form shall be issued, electronically, to a registered people who fail
to furnish return under
 Section 39 [Normal Return] or
 Section 44 [Annual Return] or
 Section 45 [Final Return] or
 Section 52 [TCS Statement]
Such notice shall require such registered person him to furnish such return within 15 days.

Q 51: What is the Late fee levied for delay in filing return? [Section 47(1)]
Ans: Any registered person who fails to furnish following by the due date:
(A) Statement of Outward Supplies [Section 37]
(B) Statement of Inward Supplies [Section 38]
(C) Returns [Section 39] _
(D) Final Return [Section 45]
shall pay a late fees of Rs.100 for every day during which such failure continues subject to maximum amount of Rs. 5000.
Late fees for annual return: Any registered person who fails to furnish the annual return required under section 44 by
the due date shall be liable to pay a late fee of Rs. 100 for every day during which such failure continues subject to a maximum
of an amount calculated at a quarter percent of his turnover in the State or Union territory

Sec 48: Goods and services tax practitioners


(1) COMDITION
The manner of approval of goods and services tax practitioners, their eligibility conditions, duties and obligations,
manner of removal and other conditions relevant for their functioning shall be such as may be prescribed.

(2) AUTHORIZATION
A registered person may authorize an approved goods and services tax practitioner to furnish the details of outward
supplies under section 37, the details of inward supplies under section 38 and the return under section 39 or section
44 or section 45 in such manner as may be prescribed.

(3) RESPONSIBILITY
Notwithstanding anything contained in sub-section (2), the responsibility for correctness of any particulars furnished
in the return or other details filed by the goods and services tax practitioners shall continue to rest with the registered
person on whose behalf such return and details are furnished.
Relevant CGST Rule 83

Q 52: Explain the concept of GST Practitioners?


Ans: A registered person may authorize an approved GSTP to furnish information, on his behalf, to the Government.
GSTN will provide separate user ID and Password to GSTP to enable him to work on behalf of his clients without asking for
their user ID and passwords. They can do all the work on behalf of taxpayers as allowed under GST Law.
A taxpayer may choose a different GSTP by simply unselecting the previous one and then choosing a new GSTP on the GST
portal.

Q 53: What are the activities which can be undertaken by a GSTP?


Ans: A GSTP can undertake any/all of the following activities on behalf of a registered person, if so authorized by him: A
(1) Furnish details of outward and inward supplies A
(2) Furnish monthly, quarterly, annual or final return
(3) Make deposit for credit into the electronic cash ledger
(4) File an application for registration amendment/ cancellation and File a claim for refund for that Confirmation from the
registered person shall be sought

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(5) Also allowed to appear as authorized representative before any officer of Department, Appellate Authority or Appellate
Tribunal, on behalf of such a registered person provided he is enrolled as GSTP under rule 83.

Q 54: What is the eligibility criterion for GSTP?


Ans: GSTP shall apply for registration in FORM PCT-01 electronically on common portal following are the eligibility
criteria:
(i) He is a citizen of India (ii) He is a person of sound mind
(iii) He is not adjudicated as insolvent (iv) He has not been convicted by court
also satisfied the following condition
(a) That he is a retired officer of the Government had worked in a post not lower than the rank of Group-B gazette officer
for a period of not less than two years; or
(b) That he has enrolled as a sales tax practitioner or tax return preparer under the existing law for a period of not less
than five years
(c) He has passed,
(i) A graduate of postgraduate degree or its equivalent examination having a degree in Commerce, Law, Banking
including Higher Auditing, or Business Administration or Business Management from any Indian University
established by any law for the time being in force; or
(ii) A degree examination of any Foreign University recognized by any Indian University as equivalent to the degree
examination mentioned in sub-clause (i); or

(iii) Any other examination notified by the Government, on the recommendation of the Council, for this purpose; or
(iv) Has passed any of the following examination namely:
a) Final examination of the Institute of Chartered Accountants of India; or
b) Final examination of the Institute of Cost Accounts of India; or
c) Final examination of the Institute of Company Secretaries of India.

Q 55: What is the procedure for enrolment as GSTP?


Ans: The procedure for enrolment of GSTP has been depicted in the following diagram:
(i) An application in prescribed form may be made electronically through the common portal for enrolments GSTP.
(ii) The application shall be scrutinized and GST practitioner certificate shall be granted in the prescribed form.
(iii) In case, the application is rejected, proper reasons shall have to be given.
(iv) The enrolment once had done remains valid till it is cancelled.
(v) No person enrolled as a GSTP shall be eligible to remain enrolled unless he passes such examination conducted at such
periods and by such authority as may be notified by the Commissioner on the recommendations of the Council.
(vi) Any person who has been enrolled as GSTP by virtue of him being enrolled as a Sales Tax Practitioner or Tax Return
Preparer under the earlier Indirect Tax law shall remain enrolled only for a period of 1 year from the appointed date
unless he passes the said examination within the staid period of 1 year.

Q 56: Whether GST Fee is responsible for correctness of any particulars furnished in the return on the behalf of
register person?
Ans: When a registered person opts to furnish his return through GSTP, such registered person:
(i) Gives his consent in prescribed form to any GSTP to prepare and furnish his return
(ii) Before confirming submission of any statement prepared by GSTP, ensure that the facts mentioned in the return are
true and correct.
Thus, the responsibility for correctness of any particulars furnished in the return or other details filed by the GST practitioners
shall continue to rest with the registered person on whose behalf such return and details are furnished.
The registered person before confirming should ensure that the facts mentioned in the return are true and correct before
signature. However, failure to respond to request for confirmation shall be treated as deemed confirmation.

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Other Important comments for GSTP
 Any registered person may give consent and authorize a GST practitioner in the prescribed form by listing the
authorized activities in which he intends to authorize the GST practitioner
 The registered person authorizing a GSTP shall have to authorize in the prescribed form and the GST practitioner will
have to accept the authorization in Part B of the same form,

 The GST practitioner shall be allowed to undertake only such tasks as indicated in the prescribed form. The registered
person may, at any time, withdraw such authorization in the prescribed form.

 Any statement furnished by the GST practitioner shall be made available to the registered person on the GST Common
Portal. For every statement furnished by the GST practitioner, a confirmation shall be sought from the registered
person over email or SMS.

 The GST practitioner shall prepare all statements with due diligence and affix his digital signature on the statements
prepared by him or electronically verify using his credentials.

 If the GST practitioner is found guilty of misconduct, his enrolment will be liable to be cancelled. A show cause notice
would be issued to him in the prescribed form.

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(Chapter 12): Payment of Tax


Section Description
Section 49 Payment of tax, interest, penalty and other amounts
Section 50 Interest on delayed payment of tax
Section 51 Tax deduction at source
Section 52 Collection of tax at source

CGST rules pertaining to Payment of Tax


Rule No. Description
85 Electronic Liability Register
86 Electronic Credit Ledger
87 Electronic Cash Ledger
88 Identification number for each transaction

Introduction:
As per Section 9 of CGST Act, the tax is required to be paid on supply of goods or services at the specified rates. The tax payable
by the supplier of goods or services,. The common portal will compute the tax payable by the taxable person on the basis of
information of outward supply furnished by him. The tax payable under reverse charge by the taxable person will be computed
on the basis of information of outward supply declared by the supplier of such goods or services. Similarly, the amount of tax
payable on exports including deemed exports of goods or services will be computed based on the declaration of outward
supply.

The common portal will compute the tax liability which is required to be paid by the taxable person. Section 49 makes
provision for payment of tax, interest, penalty and other amounts. Section 50 provides for payment of interest on delayed
payment of taxes. Section 51 pertains to Tax Deduction at Source whereas Section 52 pertains to Collection of Tax at Source.
Lastly, Section 53 pertains to Transfer of Input Tax Credit.

Concepts pertaining to Reliability ledger, E-cash ledger & E-credit ledger which taxpayer can see on their dashboard once they
login to GSTN portal will also be discussed in detail in this chapter.

Sec 49: Payment of tax, interest, penalty and other amounts


(1) Deposit of Amount in electronic cash ledger
Every deposit made towards tax, interest, penalty, fee or any other amount by a person by
 Internet banking or
 By using credit or debit cards or
 National Electronic Fund Transferor _
 Real Time Gross Settlement or
by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the
electronic cash ledger of such person to be maintained in such manner as may be prescribed
Sec 2(14) Authorized Bank: Shall mean a bank or a branch of a bank authorized by the Government to collect the tax
or any other amount payable under this Act
(2) Amount assessed in Electronic credit ledger
The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger,
in accordance with section 41, to be, maintained in such manners may be prescribed
(3) Utilization of Electronic cash ledger
The amount available in the electronic cash ledger may be used for making any payment towards
 Tax,
 Interest,

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 Penalty,
 Fees or
 Any other amount payable under the provisions of this Act or the rules made there under
in such manner and subject to such conditions and within such time as may be prescribed

(4) Utilization of Electronic credit ledger


The amount available in the electronic credit ledger may be used for making any payment to wards
Output tax under this Act or under the Integrated Goods and Services Tax Act
in such manner and subject to such conditions and within such time as may be prescribed

(5) Manner of utilization of Electronic credit ledger


The amount of input tax credit available in the electronic credit ledger of the registered person on account of-
(a) Integrated tax snail first be utilized towards payment of integrated tax and the amount remaining, if any, may be
utilized towards the payment of central tax and State tax, or as the case may be, Union territory tax, in that order

(b) The central tax shall first be utilized towards payment of central tax and the amount remaining, it any, may be
utilized towards the payment of integrated tax

(c) The State tax shall first be utilized towards payment of State tax and the amount remaining, it any, may be utilized
towards payment of integrated tax
(d) The Union territory tax shall first be utilized towards payment of Union territory tax and the amount remaining, if
any, may be utilized towards payment of integrated tax
(e) The central tax shall not be utilized towards payment of State tax or Union territory tax; and
(f) The State tax or Union territory tax shall not be utilized towards payment of S central tax

(6) Return
The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, tee or any
other amount payable under this Act or the rules made there under may be refunded in accordance with the provisions
of section 54

(7) Electronic Liability Register


All liabilities of a taxable person under this Act shall he recorded and maintained in an electronic liability register in such
manner as may be prescribed

(8) Every taxable person shall discharge his tax and other dues under this Act or the rules made there under in the
following order, namely:-
(a) Self-assessed tax, and other dues related to returns of previous tax periods
(b) Self-assessed tax, and other dues related to the return of the current tax period
(c) Any other amount payable under this Act or the rules made there under including the demand determined under
section 73 or section 74
Explanation: The expression,-
(i) “Tax dues” means the tax payable under this Act and does not include interest, fee and penalty; and
(ii) “Other dues” means interest, penalty, fee or any other amount payable under this Act or the rules made there
under

(9) Passing Including of Tax


Every person who has paid the tax on goods or service or both under this Act shall, unless contrary is proved by him,
be deemed to have passed on the full the full incidence of such tax to the recipient of such goods or services or both

Rule 87: Tax Payment Challan-


 Any person, or a person on his behalf, shall generate a challan in FORM GST PMT-06 on the common portal and enter
the details of the amount to be deposited by him towards tax, interest, penalty, fees or any other amount:

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Permissible modes for making deposits into E-Cash Account
Modes Bank Involved Monetary Limitation, if Any
Internet (Authorized Bank No Limit
Banking only)
Debit Card/ Credit (Authorized Bank No Limit
Card only)
NEFT/RTGS (Any Bank) No Limit
OTC (over the (Authorized Bank Rs. 10,000 per challan per tax period However, no limit for deposit made by
counter payment) only) (a) Government Departments or persons as may be notified by the Commissioner in this
by cash, cheque, behalf
DD (b) PO or any other officer authorized to recover outstanding dues from any person,
whether registered or not, including recovery made through attachment or sale of
movable or immovable properties
(c) PO or any other officer authorized for the amounts collected by way of cash, cheque or
demand draft during any investigation or enforcement activity or any ad hoc deposit.

 E- Challan validity is for 15 days. The commission for making payment through e-challan has to be borne by the person
making the payment.
 Any unregistered person has to make payment on the basis of temporary identification number generated through common
portal.
 The mandate form obtained after making NEFT/RTGS payment has to be submitted in the Bank. The validity of the mandate
form is 15 days.
 On successful credit of amount in the concerned (Central/State) Government Account maintained in the authorized bank, a
Challan Identification Number (CIN) will be generated by the collecting bank which will be indicated in the challan.
 The ‘deposit’ made by one of the modes and in the prescribed manner will be credited to the Electronic Cash Ledger of the
taxable person.
 On receipt of the CIN from the collecting bank, the said amount is credited into the electronic cash ledger of the person on
whose behalf the deposit is made and the common portal will generate a receipt to this effect.
 lf CIN is not generated even after making payment and submission of mandate form or when after generation, it has not
reflected in the common portal, the person making the deposit or the person on whose behalf the deposit has been made, can
make a representation in FORM GST PMT07 through the common portal ore-gateway through which the payment has been
made.
 Date of credit into the treasury of the State Government/Central Government is deemed to be the date of deposit and not the
actual date of debit to the amount of the taxable person.
 Any amount deducted under section 51 or collected under section 52 and claimed in FORM GSTR-02 by the registered
taxable person from whom they said amount was deducted or, as the case may be, collected shall be credited to his electronic
cash ledger in accordance with the provisions of rule 87.
 Where a person has claimed refund of any amount from the electronic cash ledger, the said amount shall be debited to the
electronic cash ledger.
 If the refund so claimed is rejected, either fully or partly, the amount debited under sub-rule (10), to the extent of rejection,
shall be credited to the electronic cash ledger by the proper officer by an order made in FORM GSTPMT-03
 In case any discrepancy is noticed in electronic cash ledger, the registered person shall communicate the same to the officer
exercising jurisdiction in the matter, through the common portal in prescribed form.

Rule 87: Electronic Cash Ledger.-


The electronic cash ledger under sub-section (1) of section 49 shall be maintained in FORM GST PMT-05 for each person,
liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the amount
deposited and debiting the payment there from towards tax, interest, penalty, fee or any other amount.
Debit Amount (DR) Credit Amount (CR)
 Credit Amount of this ledger may be used for payment  Any deposit made towards tax, internet banking, RTGS,
of tax, interest fees etc. fund transfer etc.
 Remaining credit balance amount after payment of  TDS/TCS claimed
above tax etc. will be refunded to taxable person.

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The amount available in the Electronic Cash Ledger can be utilized for payment of any liability for the respective major and
minor heads. For example, liability for the tax under SGST/UTGST can be settled only from the available amount of cash
under SGST/UTGST Major head.
Is transfer of funds between the major heads permissible for discharging liabilities?
Amount available less than one major head (SGST/UTGST, CGST, IGST or CESS) cannot be utilized for discharging the
liability under any other major head. For example, amount available in SGST/UTGST cannot be utilized for discharging
liabilities under CGST, IGST, or CESS and vice versa

Other Aspects relating to Challan


Are manual Challan applications as allowed earlier under the VAT regimes?
 Manual or physical Challan are not allowed under the GST regime. It is mandatory to generate Challan online on the
GST Portal
How many types of Challan are prescribed for various taxes and payments to be paid under the GST regime?
 There is single Challan prescribed for all taxes, fees, penalty, interest, and other payments to be made under the GST
regime.
What is CPIN?
1. CPIN Stands for Common portal Identification Number
2. It is created for every Challan successfully generated by the taxpayer.
3. It is a 14-digitunique number to identify the challan.
4. CPIN remains valid for a period of 15 days.

What is CIN?
1. If stands for Challan Identification number (CIN)
2. It is generated by authorized bank/RBI when payment is actually received by such authorized banks or RBI & credited
in the relevant Govt. A/c
3. It is indication of successful payment of account
4. CIN is communicated by authoresses bank to taxpayer as well as to GSTN
5. It is 17 digit numbers that is 14 digits CPIN plus 3 digit Bank code.

What is BRN?
It is a bank reference number is the transaction number given by the bank for a payment against a Challan

What is E-FPB?
Stands for Electronic Focal Point Branch. These are branches of authorized bank which are authorized to collect payment of
GST. Each authorized bank will nominate only one branch as its E-FPB for pan India transaction.

The E-FPB will have to open accounts under each major head for all governments. Any amount received by such E-FPB
towards GST will be credited to the appropriate account held by such E-FPB towards GST will be credited to the
appropriate account held by such E-FPB. For NEFT/RTGS Transactions, RBI will act as E-FPB.

Illustration:
M/s ADHOC pvt ltd has deposited the following amounts in its E-Cash ledger under its major heads (Tax) by creating
challan on GST portal & apart from tax amount has also disposed certain amount under its minor heads after which the
position of hid E- Cash ledger for the month of Aug, 2017, is as follows:-
Major Head Minor Head
Tax Interest Penalty Fee Other Total
IGST 25,000 4,000 - - - 29,000
CGST 15,000 2,000 - - - 17,000
SGST 20,000 2,000 - - - 22,000
Cess - - - - - -

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For the month of Aug 2017, His E-Challan ledger shows the gross amount and balance left after utilization of input tax credit
which is as follows:-
INPUT TAX CREDIT BALANCE
Output Taxes Gross Tax IGST CGST SGST Net Tax Liability
IGST 52,000 30,000 - - 22,000
CGST 24,000 - 4,000 - 20,000
SGST 24,000 - - 4,000 20,000
Determine whether M/s ADHOC pvt ltd can utilizing the balance amount available in the major head against the payment of
minor head belonging to the same major head?

Rule 86 - Electronic Credit Ledger


Debit to Ecr Ledger: The electronic credit ledger shall be maintained in FORM GST PM-02 for each registered person
eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the Act shall be
credited to the said ledger.
Credit to Ecr Ledger: The electronic credit ledger shall be debited to the extent of discharge of any liability in accordance
with the provisions of section 49.
Refund from Ecr Ledger: Where a registered person has claimed refund of any unutilized amount from the electronic
credit ledger in accordance with the provisions of section 54, the amount to the extent of the claim shall be debited in the
said ledger.
Rejection of Refund: If the refund so filed is rejected, either fully or partly, the amount debited under sub rule (3), to the
extent of rejection, shall be re-credited to the electronic credit ledger by the proper officer by an order made in FORM
GSTPMT-03.
No Direct Entry in Ecr ledger: Save as provided in the provisions of this Chapter, no entry shall be made directly in the
electronic credit ledger under any circumstance.
Communication of Discrepancy in Ecr Ledger: A registered person shall, upon noticing any discrepancy in his electronic
credit ledger, communicate the same to the officer exercising jurisdiction in the matter, through the common portal in
FORM GST PMT-04.

Rule 85: Electronic Liability Register.-


(1) The electronic liability register specified under subsection (7) of section 49 shall be maintained in FORM GST PMT-01
for each person liable to pay tax, interest, penalty, late fee or any other amount on the common portal and all amounts
payable by him shall be debited to the said register.

(2) DEBIT TO ELECTRONIC LIABILITY REGISTER.-


The electronic liability register of the person shall be debited by-
(a) The amount payable towards tax, interest, late fee or any other amount payable as per the return furnished by the
said person;
(b) The amount of tax, interest, penalty or any other amount payable as determined by a proper officer in pursuance of
any proceedings under the Act or as ascertained by the said person;
(c) The amount of tax and interest payable as a result of mismatch under section 42 or section 43 or section 50; or
(d) Any amount of interest that may accrue from time to time.

(3) CREDIT TO ELECTRONIC LIABILITY REGISTER.-


Subject to the provisions of section 49, payment of every liability by a registered person as per his return shall be made
by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule
87 and the electronic liability register shall be credited accordingly.

(4) CERTAIN LIABILITY ONLY TO BE DISCHARGE THROUGH CASH:


 The amount deducted under section 51, or the amount collected under section 52, or
 The amount payable on reverse charge basis, or

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 The amount payable under section 10,
 Any amount payable towards interest, penalty, fee or any other amount under the Act
shall be paid by debiting the electronic cash ledger maintained as per rule 87 and the electronic liability
register shall be credited accordingly.

(5) REDUCTION IN E-LIABILITY REGISTER, ON RELIEF GIVEN IN APPEAL, ETC.


Any amount of demand debited in the electronic liability register shall stand reduced to the extent of relief given by the
appellate authority or Appellate Tribunal or court and the electronic tax liability register shall be credited accordingly.

(6) REDUTION IN PENALTY


The amount of penalty imposed or liable to be imposed shall stand reduced partly or fully, as the case may be, if the
taxable person makes the payment of tax, interest and penalty specified in the show cause notice or demand order and
the electronic liability register shall be credited accordingly.
(7) COMMUNICATION OF DISCREPANCY IN E-LIABILITY REGISTER
A registered person shall, upon noticing any discrepancy in his electronic liability ledger, communicate the same to the
officer exercising jurisdiction in the matter, through the common portal in FORM GST PMT-04.

Rule 88: Identification number for each transaction.-


(1) A unique identification number shall be generated at the common portal for each debit or credit to the electronic cash
or credit ledger, as the case may be.

(2) The unique identification number relating to discharge of any liability shall be indicated in the corresponding entry in
the electronic liability register.

(3) A unique identification number shall be generated at the common portal for each credit in the electronic liability
register for reasons other than those covered under sub-rule (2).

IIIustration
Mr. A, a trader dealing in kitchenware has a registered place of business in Mumbai (Maharashtra). He purchases
kitchenware worth Rs. 2000 from Mr. B who is based in Chennai (Tamil Nadu). Mr. A also purchases kitchenware from Mr.
C who is based in Pune (Maharashtra) worth Rs. 1000,.
Mr. A sold goods to Mrs. P on one month’s credit worth Rs. 3000 who took delivery of the goods in Bangalore (Karnataka).
Mr. A also sold goods worth Rs. 1500 on credit to Mrs. Q who took the delivery of the goods in Nashik (Maharashtra).
Pass the relevant journal entries and show the balance remaining in GST payable (Liability) A/c.
Solution:

Compiled By: Nakul Shriwastav, ADHOC CLASSES Cont: +91 9098301850


191
A Commitment to Success

Sec 50: Interest on delayed payment of tax


(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but
fails to pay the tax or any part thereof to the Government within the period prescribed,
shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate,
not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.
(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding
the day on which such tax was due to be paid.

(3) A taxable person who makes an


 Undue or excess claim of input tax credit under sub-section (10) of section 42 or
 Undue or excess reduction in output tax liability under sub-section (10) of section 43,
shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such
rate not exceeding twenty-four per cent., as may be notified by the Government on the recommendations of the Council.

When interest is Payable?


Interest is payable in following 3 circumstances:-
 Delay in payment of tax, in full or in part within the prescribed period
 Undue or excess claim of input tax credit under section 42(10)
 Undue or excess reduction in output tax liability under section 43(10)

Rate of interest
The rate of interest shall be notified by the Government on the basis of recommendation of the Council. However, such rate
to be notified shall not exceed
(a) 18% in case of belated payment of tax i.e. on failure to pay tax (or part of tax) to the Governments account. Notification
No. 13/2017 CT dated 28.06.2017 has notified the rate of interest as 18% per annum.
(b) 24% on undue or excess claim of ITC or on such undue or excess reduction in output tax liability. Notification No.
13/2017 CT dated 28.06.2017 has notified the rate of interest as 24% per annum.

Other relevant points relating to interest


 The term "tax" here means the tax payable under the Act or Rules made there under.
 The payment of interest in case of belated payment of tax should be made voluntarily i.e. Even without a demand.
 The interest payable under this section shall be debited to the Electronic Liability Register,
 The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but not with balance in
electronic credit ledger.

Sec 170: Rounding off of tax, etc


 The amount of tax, interest, penalty, fine or any other sum payable, and
 The amount of refund or
 Any other sum due
 The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger

Under the provisions of this Act


shall be rounded off to the nearest rupee
 If such part is fifty paisa or more, it shall be increased to one rupee and
 If such part is less than fifty paisa it shall be ignored.

Compiled By: Nakul Shriwastav, ADHOC CLASSES Cont: +91 9098301850

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