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A Commitment to Success
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.
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.
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.
(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
If you read article 265 carefully, then it said for levy of any tax ‘Authority’ of law is needed..
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.
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”
1. Property Tax & Stamp Duty 2. Electricity Duty 3. Excise Duty on Alcohol
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
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.
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
.
(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.
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.
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:
1st 2nd
1. CGST CGST IGST
1st 2nd
2. SGST SGST IGST
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.
Chapter – 2
(Charge of Tax & Application of CGST & IGST Laws)
Central Goods and Service Tax Act, 2017
Sec 9 Levy & collection of CGST
(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
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.
Shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.
(4) Reverse Charge – when supply of goods or services by unregistered person to registered person
The central tax in respect of the
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
E-Commerce Operator
Involving an aggregator
Payment of GST in Any manner
SR
SP
GPS System
Payment of GST
Buyer
Seller
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
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.
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.
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
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.
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
CGST
SGST Supply
IGST
=
Person, Supplier & Recipient
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.
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.
Business Activities
1. Sale of Scrap
5. Weger
Business:
Normally every supply is liable to GST only if it is mode in the course or furtherance of business.
(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.
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)
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.
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
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
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.
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.
SCHEDULE –I [SEC 7]
Example: Happy Ltd provides management services without charge to Joy Ltd. having common directors - it qualify as
a supply and GST is payable.
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)
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
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.
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.
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
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
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
(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:
(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.
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’
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
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
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,
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.
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.
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
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.
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.
\
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.
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 .
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.
6. Services supplied
By To
Director of a Company or Body Said Company or Body Corporate Company or Body Corporate is liable
Corporate
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
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
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
Exemption N/N 8/2017 – CT (Rate) + N/N 8/2017-UTT (W.e.f. 1st July, 2017)(Rate) – 28th June, 2017
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
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.
Definition
Sec 2(45): E Commerce Operator - means any person who owns, operates or manages digital or electronic facility or
platform for electronic commerce.
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.
Aggregate Aggregate
Turnover Turnover
20 L 75 L
`
Includes Excludes
CGST
All Taxable Supplies
SGST
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
Legal Provision
(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.
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
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.
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.
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.
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.
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.
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.
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.
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
OR
(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.
Solution:
Whichever
is higher?
OR
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
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.
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.
(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
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
Solution:
(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:
Hint: Time of supply shall be as on 30.09.2017 as per proviso to Sec. 13(3) of CGST Act.
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
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
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
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
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
I R S
TOS
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;
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
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.
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.
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.
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.
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.
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.
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.
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.
(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
3. Deduction of Discount
The value of the supply shall not include any discount which is given
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
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.
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.
(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.
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
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
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
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:
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
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?
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.
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.
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
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
(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.
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
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:
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.
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).
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.
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
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.
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
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.
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.
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%
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
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
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.
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.
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.
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
Air Transport
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
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
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.
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
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
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
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”
Note:
1. As per Para 2(n) business entity means any person carrying out business.
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
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.
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.
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.
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.
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.
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.
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.
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)
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.
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.
72. Construction etc or Original Work to Pradhan Mantri Awas Yojna (heading 9954)
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
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).
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.
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
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 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
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:
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,
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.
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.?
(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
(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,
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:-
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.
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
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)
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
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.
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
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.
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.
(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.
(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;
(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
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:
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
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.
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
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.
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:
(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
(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.
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.
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;
(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
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
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 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:
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?
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;
“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.
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
(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.
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) .
(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;
(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;
(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.
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
(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.
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
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. -
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.
GSTIN Format
Sate Code PAN Entity Code Check sum character
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)
(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
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.
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
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.
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
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.
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)
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:
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.
(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;
(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;
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;
(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;
(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.
(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 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.
(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.
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
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
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
(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.
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?
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.
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:
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.
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
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.
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.
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
(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
(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
(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
(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.
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.
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 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.
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:
(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.
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
CONTENTS OF GSTR-2
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
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.
(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.
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.
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.
(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 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.
CONTENTS OF GSTR-4
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.
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
(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
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.
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.
(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.
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.
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
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.
(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.
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.
(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 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.
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.
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.
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.
(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 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.
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.
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
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.
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 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?
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).
(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.
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
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.
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:
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
(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
(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 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.
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.
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.
(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
(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
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.
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 - - - - - -
(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:
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.