Levy of and Exemption from Tax

Participant’s note:

Article 265 of the Constitution empowers to levy Tax under Section 9 (1) of the
CGST Act, 2017 and Section 5(1) of the IGST Act, 2017. Charging Section is a must
in any taxing statute for the purpose of levy and collection of tax. No one can be
taxed by implication.

Under Clause (1) of Article 246A both the Parliament and State Legislatures have
power to make laws with respect to GST imposed by the Union or by such State.
However, Clause (2) of Article 246A restricts the powers of the State Legislatures
by giving exclusive power to the Parliament to make laws with respect to GST
where the supply of goods, or of services, or both takes place in the course of
inter-State. Thus, Clause (2) sanctions the Parliament’s control and ascendancy
over the States in inter-State trade or commerce.

Incidence of tax:

Incidence of Tax will be on supply of goods or services and not on sale or

manufacture or rendering of service.

GST is a destination based tax: Goods, includes all materials, commodities and
articles and Service: Means anything other than goods.

Levy of SGST/CGST:

 In the hands of the supplier – on the supply of goods and / or services

 In the hands of the recipient (under reverse charge mechanism)– on receipt

of goods and / or services

 CGST/SGST shall be paid by every taxable person on all intra-State supplies

of goods or services or both except on the supply of alcoholic liquor for
human consumption
Levy of IGST:

 On all supplies of goods or services or both made in the course of inter

state trade or commerce & on all goods or services imported into India
 Where a supply involves both, goods and services, the law provides that
such supplies would classifiable either as, wholly goods or wholly services.

Concept of supply:

supply includes––

(a) all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business;

(b) import 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; and

(d) the activities to be treated as supply of goods or supply of services as referred

to in Schedule II.

Concept of Composite and Mixed Supply:

Where a supply involves multiple (more than one) goods or services, or a

combination of goods and services, the treatment of such supplies would be as
follows

(a) a composite supply comprising two or more supplies, one of which is a

principal supply, shall be treated as a supply of such principal supply; and

(b) a mixed supply comprising two or more supplies shall be treated as a supply of
that particular supply which attracts the highest rate of tax.
Taxable person:

Taxable person means a person who is registered or liable to be registered under

Act.

Where a supplier makes a taxable supply of goods or services or both, if his

aggregate turnover in a financial year exceeds twenty lakh rupees in the state or
union territory and exceeds ten lakh rupees in special category States shall be
liable to be registered under this Act.

Following are also taxable persons without considering threshold limit:

1. Persons making any inter-State supply.

2. Casual taxable persons.
3. Persons who are required to pay tax under reverse charge.
4. Persons who are required to pay tax under sub section (5) of section 9
(electronic commerce operators)
5. Non-resident taxable persons.
6. Persons who are required to deduct tax under section 51 (i.e. TDS).
7. Who supply goods and/or services on behalf of other persons whether as
an agent or otherwise.
8. ISDs (Input Service Distributors).
9. Persons who supply goods or services or both through electronic commerce
operator who is collected tax at source
10. Every electronic commerce operator
11. Every person supplying online information and database access or retrievel
services from a place outside India to a person in India, other than a
registered person; and
12. Such other persons or class of persons as may be notified by the
Government on the recommendation of the Council

Non Taxable Person:

Following are not taxable person

 any person who provides services as an employee to his employer.

  Any person engaged in the business of exclusively supplying goods and/or

services that are not liable to be taxed under the Act.

 Person whose aggregate turnover is below threshold limit

Composition levy:

A registered person, whose aggregate turnover in the preceding financial year did
not exceed 1.5 crore rupees, may opt to pay under composition levy as followed

 Traders – 1% (0.5% for CGST & 0.5% for SGST)

 Manufacturer – 2% (1 % for CGST & 1 % for SGST)
 Restaurant Services –5% (2.5% for CGST & 2.5% for SGST)

Registered person shall not collect any tax nor shall be entitled for any credit of
input tax credit.

Eligibility for option of Composition:

The registered person shall be eligible to opt for composition, if the person is

 Not engaged in the supply of services other than supplies by restaurant/hotel

 Not engaged in making any supply of goods which are not leviable to tax
 Not engaged in making any inter-State outward supplies of goods
 Not engaged in making any supply of goods through an e- commerce
operator
 Not a manufacturer of such goods as may be notified by the Government on
the recommendations of the Council
 Where more than one registered person are having the same PAN, the
registered person shall not be eligible to opt for the scheme unless all such
registered persons opt for composition

The option of composition availed by a registered person shall lapse with effect
from the day on which his aggregate turnover during a financial year exceeds the
limit specified.
Power to grant exemption from tax:
 Such exemptions are to be notified in public interest on the recommendation
of the G.S.T. Council by the Central or a State Government
 Section 11(1) of the CGST Act empowers Government to exempt any goods
or services by issuing notification.
 Section 6 (1) of the IGST Act empowers Government to exempt any goods
or services by issuing notification
General exemptions:
 Exemptions can be absolute or partial
 The exemptions can be subject to specified conditions as well
Specific Exemptions:
 By a special order in each case by central/state government
 Under circumstances of an exceptional nature
 Exceptional nature to be stated in such order
 Any goods and/or services on which tax is leviable.

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.