GOODS & SERVICES TAX(GST)

Notes

Unit- 1

Constitutional provisions of GST:

The Constitution (One Hundred and Twenty-Second
Amendment) Bill, 2014 was introduced in the Lok Sabha by
Finance Minister Arun Jaitley on 19 December 2014, and
passed by the House on 6 May 2015. In the Rajya Sabha, the
bill was referred to a Select Committee on 14 May 2015. The
Select Committee of the Rajya Sabha submitted its report on
the bill on 22 July 2015. The bill was passed by the Rajya
Sabha on 3 August 2016, and the amended bill was passed by
the Lok Sabha on 8 August 2016. The tax came into effect from
July 1, 2017 through the implementation of One Hundred and
First Amendment of the Constitution of India by the Indian
government. The Jammu and Kashmir state legislature passed
its GST act on 7 July 2017, thereby ensuring that the entire
nation is brought under an unified indirect taxation system.

1. Clause 246A
The Legislature of every State shall have power to make laws
with respect to goods and services tax imposed by the Union or
by such State. Parliament will have 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.

2. Clause 269A

 Goods and services tax on supplies in the course of inter-State

trade or commerce shall be levied and collected by the
government of India and such tax shall be apportioned between
the Union and the States in the manner as may be provided by
Parliament by law on the recommendations of the Goods and
Services Tax Council.
 Supply of goods or services, or both in the course of import into
the territory of India shall be deemed to be supply of goods or
services, or both in the course of inter-state trade or commerce.
 Parliament may, by law, formulate the principles for determining
the place of supply, and when a supply of goods or of services, or
both takes place in the course of inter-state trade or commerce.

3. Clause 279A

The President shall, within sixty days from the date of

commencement of the Constitution (One Hundred and Twenty-
second Amendment) Act, 2014, by order, constitute a Council
to be called the Goods and Services Tax Council.

4. Clause 279A

The Goods and Services Tax Council shall make

recommendations to the Union and the States on-
1. 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;
2. the goods and services that may be subjected to, or exempted from
the goods and services tax;
3. model Goods and Services Tax Laws, principles of levy,
apportionment of integrated Goods and Services Tax and the
principles that govern the place of supply;
4. the threshold limit of turnover below which goods and services
may be exempted from goods and services tax;
5. the rates including floor rates with bands of goods and services
tax;
6. any special rate or rates for a specified period, to raise additional
resources during any natural calamity or disaster;
7. special provision with respect to the States of Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur; Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh and UttarAkhand

Supply:-
Under GST, Supply is considered a taxable event for charging tax. The
liability to pay tax arises at the ‘time of supply of goods or
services’. Thus, determining whether or not a transaction falls under
the meaning of supply, is important to decide GST’s applicability.

Supply includes sale, transfer, exchange, barter, license, rental, lease

and disposal. If a person undertakes either of these transactions
during the course or furtherance of business for consideration, it will
be covered under the meaning of Supply under GST.
Supply has two important elements:

 Supply is done for a consideration.

 Supply is done in course of furtherance of business.

Example:

1. Mr. A buys a table for Rs.10,000 for his personal use and sells it off
after 10 months of use to a dealer. This is not considered as supply
under CGST as this is not done by Mr A for the furtherance of
business.

2. Mrs. B provides free coaching to neighbouring students as a

hobby. This is not considered as supply as this act is not performed
for a consideration.

However, as specified in Schedule I of GST Act, certain activities are

considered as supply even if it is made without consideration.

Transactions between related persons and other activities of GST

Schedule I will be treated as supply even if made without any
consideration.

1. Transactions between Related Persons.

Persons shall be deemed to be related if they fall under any of the

categories below:

 Officer/ director of one business is the officer/ director of

another business

 Businesses are legally recognised as partners

 An employer and an employee

  Any person holds at least 25% of shares in another company
either directly or indirectly

 One of them controls the other directly or indirectly

 They are under common control or management

 The entities together control another entity

 They are members of the same family

Persons include a legal person who can be individuals, HUF,

company, firm, LLP, co-operative society, body of individuals, local
authority, government etc or an artificial juridical person. It also
includes entities incorporated outside India

when an entity makes an import of service from a related person or

establishment outside India (without consideration) but for
furtherance of business, it shall be considered as a supply.

2. Supply of Goods via Agent. Any supplies between agent and

principal will be liable to GST. Both agent and principal will be
liable to pay GST jointly & severally. The person paying GST can
later claim input tax credit.
3. Taxable Person Importing Services From a Related
Person. Import of services by a taxable person from a
related person or from any of his other establishments
outside India, for business purposes, will be treated as
supply.
4. Permanent Transfer of Business Assets where ITC
has Been Availed on Such Assets. Permanent transfer or
sale of business assets on which input tax credit has been
 availed will also be treated as supply even if there is no
consideration received. GST is applicable to the sale of business
assets only. It does not apply to the sale of personal
land/building and other personal assets.
“Permanent transfer” means transfer without any intention of
receiving the goods back.

Second Schedule (II) to CGST Act 2017: Activities or Transactions to

be treated as Supply of Goods or Services.
 Composite Supply & Mixed Supply:

This is a new concept introduced in GST which will cover

supplies made together whether the supplies are related or
not. Supplies of two or more goods or services can be either
‘composite supply’ or ‘mixed supply’. The concept of composite
supply in GST regime is similar to the concept of naturally
bundled services under Service Tax Law. However, the concept
of mixed supply is entirely new.

Composite supply means a supply is comprising two or more

goods/services, which are naturally bundled and supplied in
with each other in the ordinary course of business, one of
which is a principal supply.
It means that the items are generally sold as a combination.
The items cannot be supplied separately.

A supply of goods and/or services will be treated as composite

supply if it fulfills the following criteria:
 Supply of 2 or more goods or services together AND
 It is a natural bundle, i.e., goods or services are usually
provided together in the normal course of business.
 They cannot be separated.

The tax rate of the principal supply will apply on the entire supply.

Example :- 1. Goods are packed and transported with insurance. The

supply of goods, packing materials, transport and insurance is a
composite supply. Insurance, transport cannot be done separately if
there are no goods to supply. Thus, the supply of goods is the
principal supply.

2. Booking a Rajdhani train ticket which includes meal and insurance

also.

3. A 5 star hotel in Mumbai providing a stay package with breakfast.

This will be a Composite Supply as the package of accommodation
facilities and breakfast is a natural combination in the ordinary
course of business for a hotel.

Mixed Supply:-

 Mixed supply under GST means a combination of two or more

goods or services made together for a single price.

 Each of these items can be supplied separately and is not

dependent on any other.

Under GST, a mixed supply will have the tax rate of the item
which has the highest rate of tax.

For example-

A Diwali gift box consisting of canned foods, sweets,

chocolates, cakes, dry fruits, aerated drink and fruit juices
supplied for a single price is a mixed supply. All are also sold
separately. Since aerated drinks have the highest GST rate of
28%, aerated drinks will be treated as principal supply and 28%.

Person & Taxable Person :

 The term “person” has been defined in Section 2(73) of the GST
Act as follows:

 An Individual

 A Hindu Undivided Family

 A Company

 A Partnership Firm

 A Limited Liability Partnership

 An Association of Persons or a Body of Individuals, whether

incorporated or not, in India or outside India

 Any Corporation Established by or under any Central, State or

Provincial Act, or a Government Company

 Any body corporate incorporated by or under the laws of a

country outside India

 A co-operative society registered under any law relating to

cooperative societies

 A local authority

 Government

 Society as defined under the Societies Act, 1860

 Trusts Artificial judicial person, not falling within any of the

above categories

A ‘taxable person’ under GST, is a person who carries on any

business at any place in India and who is registered or required
to be registered under the GST Act. Any person who engages in
 economic activity including trade and commerce is treated as
taxable person.

Registration:
Under the new GST regime, all entities involved in buying or
selling goods or providing services or both are required to
register for GST. Entities without GST registration would not be
allowed to collect GST from a customer or claim an input tax
credit of GST paid and/or could be penalised. Further,
registration under GST is mandatory once an entity crosses the
minimum threshold turnover of starts a new business that is
expected to cross the prescribed turnover.
There are various types of GST registration and some types of entities
like casual taxable persons, non-resident taxable persons or persons
supplying through e Commerce operators are required to mandatorily
obtain GST registration irrespective of turnover limit. The GST
turnover limit for regular GST registration for service providers and
goods supplier is provided below.
Service Providers: Any person or entity who provides service of
more than Rs.20 lakhs in aggregate turnover in a year is required to
obtain GST registration. In special category states, the GST turnover
limit for service providers has been fixed at Rs.10 lakhs.
Goods Suppliers: As per notification No.10/2019 any person who is
engaged in the exclusive supply of goods whose aggregate turnover
crosses Rs.40 lakhs in a year is required to obtain GST registration.

To be eligible for the Rs.40 lakhs turnover limit, the supplier must
satisfy the following conditions:

 Should not be providing any services.

 The supplier should not be engaged in making intra-state
(supplying goods within the same state) supplies in the
 States of Arunachal Pradesh, Manipur, Meghalaya,
Mizoram, Nagaland, Puducherry, Sikkim, Telangana,
Tripur and Uttarakhand.
 Should not be involved in the supply of ice cream, pan
masala or tobacco.

If the above conditions are not met, the supplier of goods would be
required to obtain GST registration when the turnover crosses Rs.20
lakhs and Rs.10 lakhs in special category states.

Special Category States: Under GST, the following are listed as

special category states - Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand.

Aggregate turnover is calculated based on the PAN. Hence, even if

one person has multiple places of business, it must be summed to
arrive at the aggregate turnover.

. Voluntary GST Registration

Any person or entity irrespective of business turnover can obtain GST
registration at any-time. Hence, GST registration is obtained by many
businesses in spite of not reaching the aggregate turnover limit. Some
of the main reasons for obtaining voluntary GST registration are:

 To improve the business credibility

 To satisfy the requirements of B2B customers
 To claim input tax credit benefits.

GST Registration
Responsibilities
Entities registered under GST have various responsibilities and
compliance requirements from time to time. Failure to comply with
the GST regulations or compliance requirements can lead to penalties
and revocation of GST registration by the authorities. Some of the
main responsibilities of a person registered under GST include:
  Collecting and remitting GST amount from customers
 Issuing proper GST invoice as per the GST rules and
regulations
 Filing GST returns whenever due based on turnover -
even if there is no turnover or business activity
 FiIling annual GST return
 Maintaining all records pertaining to GST for a period of 8
years.

GST Registration must be completed by the below-mentioned

individuals and businesses:
 Individuals who have registered under the tax services before
the GST law came into effect.
 Non-Resident Taxable Person and Casual Taxable Person
 Individuals who pay tax under the reverse charge
mechanism
 All e-commerce aggregators are required to register for GST
 Businesses who have a turnover that exceeds Rs.40 lakh.
In the case of Uttarakhand, Himachal Pradesh, Jammu &
Kashmir, and North-Eastern states, the turnover of the
business should exceed Rs.10 lakh.
 Input service distributors and agents of a supplier
 Individuals who supply goods through an e-commerce
aggregator.
 Individuals who are providing database access and online
information from outside India to people who live in India
other than those who are registered taxable personS must
complete GST Registration.

GST Registration Process

The GST Registration looks like this:
 1. The applicant needs to submit his PAN, Mobile number and E-
mail address in Part A of Form GST REG-01 on GSTN
Portal.
2. The PAN is then verified on the GSTN Portal while the Mobile
number and the E-mail address are verified through an OTP
(One-time-password). An acknowledgment will be issued to
the applicant in the Form GST REG-02.
3. The Applicant then needs to fill the Part B of Form GST REG-
01 and specify the application reference number. The form
can be submitted after attaching the required documents. The
authentication would be done by signature through DSC or E-
Signature.
4. If any additional information is required, Form GST REG-
03 will be issued. The Applicant needs to respond in
Form GST REG-04 with the required information within 7
working days from the date of the receipt of Form GST REG-
03.
5. If applicant has provided all the required information via
Form GST REG-01 or Form GST REG-04, the registration
certificate in Form GST REG-06 for the principal place of the
business as well as for every additional place of business will
be issued. If, however, the details submitted are not
satisfactorily, the registration application will be rejected using
Form GST REG-05.
6. The applicant who is required to deduct TDS or
collect TCS shall, however, submit an application in
Form GST REG-07 for the purpose of registration.

Composition Scheme
Composition Scheme is a simple and easy scheme under GST for
taxpayers. Small taxpayers can get rid of tedious GST formalities
and pay GST at a fixed rate of turnover. This scheme can be opted
by any taxpayer whose turnover is less than Rs. 1.5 crore*

A taxpayer whose turnover is below Rs 1.5 crore* can opt for

Composition Scheme. In case of North-Eastern states and
Himachal Pradesh, the limit is now Rs 75* lakh.
As per 32nd GST Council Meeting held on 10th Jan 2019, Service
Providers can opt into the Composition Tax Scheme, and the
Government has set the threshold turnover for service providers at
Rs. 50 lakhs to be eligible for this scheme.

The following people cannot opt for the scheme-

 Manufacturer of ice cream, pan masala, or tobacco

 A person making inter-state supplies
 A casual taxable person or a non-resident taxable person
 Businesses which supply goods through an e-commerce
operator

The following conditions must be satisfied in order to opt for

composition scheme:

 No Input Tax Credit can be claimed by a dealer opting for

composition scheme
 The dealer cannot supply GST exempted goods
 The taxpayer has to pay tax at normal rates for transactions
under the Reverse Charge Mechanism
 If a taxable person has different segments of businesses
(such as textile, electronic accessories, groceries, etc.) under
the same PAN, they must register all such businesses under
the scheme collectively or opt out of the scheme.
 The taxpayer has to mention the words ‘composition taxable
person’ on every notice or signboard displayed prominently at
their place of business.
 The taxpayer has to mention the words ‘composition taxable
person’ on every bill of supply issued by him.

A composition dealer cannot issue a tax invoice. This is

because a composition dealer cannot charge tax from their
customers. They need to pay tax out of their own pocket.
Hence, the dealer has to issue a Bill of Supply.
The casual taxable person is required to furnish only one return i.e.
GSTR-4 on a quarterly basis and an annual return in FORM GSTR-
9A.

Levy & Charge of GST:

To determine whether Central Goods & Services Tax (CGST), State
Goods & Services Tax (SGST) or Integrated Goods & Services Tax
(IGST) will be applicable in a taxable transaction, it is important to
first know if the transaction is an Intra State or an Inter-State supply.

 Intra-State supply of goods or services is when the location

of the supplier and the place of supply i.e., location of the
buyer are in the same state. In Intra-State transactions, a
seller has to collect both CGST and SGST from the buyer.
The CGST gets deposited with Central Government and
SGST gets deposited with State Government.

 Inter-State supply of goods or services is when the location

of the supplier and the place of supply are in different states.
Also, in cases of export or import of goods or services or when
the supply of goods or services is made to or by a SEZ unit,
the transaction is assumed to be Inter-State. In an Inter-State
transaction, a seller has to collect IGST from the buyer.

Let’s suppose Rajesh is a dealer in Maharashtra who sold goods to

Anand in Maharashtra worth Rs. 10,000. The GST rate is 18%
comprising of CGST rate of 9% and SGST rate of 9%. In such case,
the dealer collects Rs. 1800 of which Rs. 900 will go to the Central
Government and Rs. 900 will go to the Maharashtra Government.

Under GST, IGST is a tax levied on all Inter-State supplies of goods

and/or services and will be governed by the IGST Act. IGST will be
applicable on any supply of goods and/or services in both cases of
import into India and export from India.
 Unit-2

Time of supply means the point in time when goods/services are

considered supplied’. When the seller knows the ‘time’, it helps him
identify due date for payment of taxes.
Place of supply is required for determining the right tax to be
charged on the invoice, whether IGST or CGST/SGST will apply.
Value of supply is important because GST is calculated on the
value of the sale. If the value is calculated incorrectly, then the
amount of GST charged is also incorrect.

Time Of Supply:
Time of supply means the point in time when goods/services are
considered supplied’. When the seller knows the ‘time’, it helps him
identify due date for payment of taxes.
CGST/SGST or IGST must be paid at the time of supply. Goods
and services have a separate basis to identify their time of supply.
Let’s understand them in detail

A. Time of Supply of Goods

Time of supply of goods is earliest of:
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment*.
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was
issued on 15th January. The payment was received on 31st
January. The goods were supplied on 20th January.
Time of supply is earliest of –
1. Date of issue of invoice = 15th January
2. Last date on which invoice should have been issued = 20th
January
Thus the time of supply is 15th January.
What will happen if, in the same example an advance of Rs 50,000
is received by Mr. X on 1st January?
The time of supply for the advance of Rs 50,000 will be 1st
January(since the date of receipt of advance is before the invoice is
issued). For the balance Rs 50,000, the time of supply will be 15th
January.

B. Time of Supply for Services

Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within
prescribed period).
Mr. A provides services worth Rs 20000 to Mr. B on 1st January.
The invoice was issued on 20th January and the payment for the
same was received on 1st February.
In the present case, we need to 1st check if the invoice was issued
within the prescribed time. The prescribed time is 30 days from the
date of supply i.e. 31st January. The invoice was issued on 20th
January. This means that the invoice was issued within a
prescribed time limit.
The time of supply will be earliest of –
1. Date of issue of invoice = 20th January
2. Date of payment = 1st February
This means that the time of supply of services will be 20th January.

Place Of Supply:
GST is a destination based tax, i.e., the goods/services will be
taxed at the place where they are consumed and not at the
origin. So, the state where they are consumed will have the
right to collect GST.
Example 1- Intra-state sales
Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of
Nagpur, Maharashtra
The place of supply is Nagpur in Maharashtra. Since it is the same
state CGST & SGST will be charged.
Example 2-Inter-State sales
Mr. Raj of Mumbai, Maharashtra sells 30 TV sets to Mr. Vinod
of Bangalore, Karnataka
The place of supply is Bangalore in Karnataka. Since it is a different
state IGST will be charged.
Example 3- Deliver to a 3rd party as per instructions
Anand in Lucknow buys goods from Mr. Raj in Mumbai
(Maharashtra). The buyer requests the seller to send the goods
to Nagpur (Maharashtra)
In this case, it will be assumed that the buyer in Lucknow has
received the goods & IGST will be charged.
Place of supply: Lucknow (UP)
GST: IGST
Usually, in case of goods, the place of supply is where the goods
are delivered.
So, the place of supply of goods is the place where the ownership
of goods changes.
What if there is no movement of goods. In this case, the place of
supply is the location of goods at the time of delivery to the
recipient.
For example: In case of sales in a supermarket, the place of supply
is the supermarket itself.
Place of supply in cases where goods that are assembled and
installed will be the location where the installation is done.
For example, A supplier located in Kolkata supplies machinery to
the recipient in Delhi. The machinery is installed in the factory of the
recipient in Kanpur. In this case, the place of supply of machinery
will be Kanpur

B. Place of Supply for Services

Generally, the place of supply of services is the location of the
service recipient.
In cases where the services are provided to an unregistered dealer
and their location is not available the location of service provider will
be the place of provision of service.
Special provisions have been made to determine the place of
supply for the following services:

 Services related to immovable property

 Restaurant services
 Admission to events
 Transportation of goods and passengers
 Telecom services
 Banking, Financial and Insurance services.
Value Of Supply:
Value of supply between related persons (other than where the
supply is made through an agent) is determined as below:

Open market value of such supply- Open market value is the value of
the supply between two unrelated entities. When a supply is
between two related entities, there is a high possibility that the
prices will be influenced by their relationship.
The value of supply under GST shall include:

1. Any taxes, duties, cess, fees, and charges levied under any
act, except GST. GST Compensation Cess will be excluded if
charged separately by the supplier.
2. Any amount that the supplier is liable to pay which has been
incurred by the recipient and is not included in the price.
3. The value will include all incidental expenses in relation to
sale such as packing, commission etc.
4. Subsidies linked to supply, except Government subsidies will
be included.
5. Interest/late fee/penalty for delayed payment of consideration
will be included.

Cases where Consideration is

Not Wholly in Money
Businesses operate in a dynamic model and we have witnessed
innovative schemes wherein a buyer is required to pay the partial
amount in cash and the rest in kind, such as when exchanging used
goods for a new product.
As a general principal, value of supply will be the amount of
consideration received in money from the buyer. However, there
can be cases when partial consideration is in money and the rest` is
in kind. In such scenario, the value of supply shall be:
 1. Open Market Value of such supply. OMV will be the amount
which is fairly available in open market.
2. If the open market value is not available, the value of supply
will be the sum of the total of consideration in money and any
such further amount in money as is equivalent to the
consideration not in money if such amount is known at the
time of supply. In simple words the monetary value of partial
consideration will be added to monetary consideration, to sum
up to total consideration.

Example:
1. Where a new TV is supplied for Rs. 20,000 along with the
exchange of an old TV and if the price of the new TV without
exchange is Rs. 24,000 the open market value of the new TV
is Rs. 24,000.
2. Where a laptop is supplied for Rs. 40,000 along with a barter
of 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 laptop is Rs. 44,000.

GST will be levied on the value of supply. In other words to levy

GST, correct value of supply is required. What can be part of the
value of supply or what does not form part of the value of supply is
very important to levy GST.

In general meaning, Value of Supply means consideration charged

for the supply from recipient.
Example: Mr. X is selling a product for Rs. 1,000 to Mr. B. In this
example value of supply will be consideration charged i.e. Rs.
1,000.
The value of a supply of goods or services or both shall be
the transaction value, which is the price actually paid or
payable for the said supply of goods or services or both where
the supplier and the recipient of the supply are not
related and the price is the sole consideration for the supply.

Input Tax Credit – ITC

Input credit means at the time of paying tax on output, you can
reduce the tax you have already paid on inputs and pay the
balance amount.
When you buy a product/service from a registered dealer you
pay taxes on the purchase. On selling, you collect the tax. You
adjust the taxes paid at the time of purchase with the amount of
output tax (tax on sales) and balance liability of tax (tax on
sales minus tax on purchase) has to be paid to the government.
This mechanism is called utilization of input tax credit.
Example- you are a manufacturer:
Tax payable on output (FINAL PRODUCT) is Rs 450 . Tax
paid on input (PURCHASES) is Rs 300. You can claim INPUT
CREDIT of Rs 300 and you only need to deposit Rs 150 in
taxes.

ABC Limited purchased rubber from a registered supplier for

Rs 40,000 exclusive of GST at a rate of 12.5%.
Thus, the GST paid on inward supply is Rs 5000.
ABC Limited now sells the tyres manufactured by it for Rs
80,000, exclusive of GST at a rate of 12.5%, making the total
selling price Rs 90,000 (Rs 80,000 + Rs 10,000).
Thus, the GST that ABC Limited owes to the government =
Output tax – Input Tax
Rs 10,000 – Rs 5,000 = Rs 5,000.
Rules for Input Tax Credit Utilisation :

The New Law on Order of ITC Set-Off -Vide circular no.

98/17/2019-GST dated April 23, 2019,
Rule 88A. Order of utilization of input tax credit.- Input tax credit
on account of integrated tax shall first be utilised towards
payment of integrated tax, and the amount remaining, if any,
may be utilised towards the payment of central tax and State
tax or Union territory tax, as the case may be, in any order:
Provided that the input tax credit on account of central tax,
State tax or Union territory tax shall be utilised towards
payment of integrated tax, central tax, State tax or Union
territory tax, as the case may be, only after the input tax credit
available on account of integrated tax has first been utilised
fully.

The newly inserted rule 88A in the CGST Rules allows

utilisation of input tax credit of integrated tax towards the
payment of Central tax and State tax, or as the case may be,
Union Territory tax, in any order subject to the condition that the
entire input tax credit on account of integrated tax is completely
exhausted first before the input tax credit on account of Central
tax or State/Union Territory tax can be utilised.
With the new rules in place, it is mandatory to utilise the entire IGST
available in electronic credit ledger before utilising ITC on CGST or
SGST. The order of setting off ITC of IGST can be done in any
proportion and any order towards setting off the CGST or SGST
output after utilising the same for IGST output.
Comparison Between Old and
New Law on GST ITC Set-Off
As per the old set-off rules, the following is the order and priority for
ITC utilisation–

From July 2019 onwards the below mode of off-set functionality has
been made available, the following is the order and priority for ITC
utilisation:
*The order of utilisation of IGST credit post offset to IGST liability
can be in any order or proportion between CGST/SGST but the only
pre-condition is exhausting IGST completely before using other
credits.
Hence, from the above table for new rules, it can be concluded that
any taxpayer must begin with set-off process starting with ITC of
IGST and utilise it completely before proceeding to utilise the ITC of
CGST or ITC of SGST.

Illustrations on How GST Set-Off

Works

Mr X has the following GST liabilities and GST inputs.

As per the existing system, the set-off takes place as follows-
You can see that CGST or SGST payable needs to be paid first
with CGST credit or SGST credit respectively.

However, as per the new procedure of set-off, the IGST credit

available will need to be set-off and the following are the three
possible ways in which this can be done-

Scenario 1: Set off of unutilised IGST credit completely

towards CGST
Scenario 2: Set off of unutilised IGST credit completely
towards SGST

Scenario 3: Set-off of unutilised IGST credit partly towards

CGST & SGST liability in an equal proportion.
*Note:In this illustration, we came up with only three scenarios,
whereas the law does not place any strict rule of attributing entire
unutilised IGST credit to CGST or SGST liability. A taxpayer can
utilise IGST credit in any proportion and in any order, but the
condition is to completely utilise the IGST credit before using CGST
or SGST credit.
So as you can see in the example, IGST credit has been utilised
first as per the new system of set-off, only after which, can CGST or
SGST/UTGST be set-off.
To optimise credit utilisation it is advisable to follow Scenario 3.

Tax Invoice:
As a GST registered dealer, you are required to provide GST
Invoices, also known as bills to your clients.
A tax invoice is generally issued to charge the tax and pass on
the input tax credit. A GST Invoice must have the following
mandatory fields-

(a) Name, Address and GSTIN of the supplier.

(b) A consecutive serial number, in one or multiple series,

containing alphabets or numerals or special characters hyphen or
dash and slash symbolised as "-" and "/" respectively, and any
combination thereof, unique for a financial year.

(c) Date of its issue

(d) Name, Address of the recipient and the address of delivery,

along with the name of State and its code, if such recipient is
unregistered and where the value of taxable supply is fifty thousand
rupees or more
(e) Name, Address and GSTIN or UIN, if registered of the recipient

(f) HSN code of goods or Accounting Code of 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

(k) Rate of tax (Central tax, State tax, Integrated tax, Union
territory tax or cess)

(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 of inter-State trade or commerce

(n) Address of delivery where the sane us different from the place
of supply

(o) Whether the tax is payable on reverse charge basis

(p) Signature or digital signature of the supplier or his authorized

representative

(q) HSN Code (for the class of persons as may be required)

 If the recipient is not registered AND the value is more than
Rs. 50,000 then the invoice should carry:
i. name and address of the recipient,
ii. address of delivery,
iii. state name and state code.

A. Bill of Supply
A bill of supply is similar to a GST invoice except for that bill of
supply does not contain any tax amount as the seller cannot charge
GST to the buyer.
A bill of supply is issued in cases where tax cannot be charged:

 Registered person is selling exempted goods/services,

 Registered person has opted for composition scheme.

Debit Note:
Debit note can be issued by the supplier of the goods or services or
both, to the recipient, when subsequent to the issue of tax invoice he
comes to know that taxable value or tax charged in that tax invoice
is less than the taxable value or tax payable with respect to such
supply.

A debit note in GST, is a document issued by the supplier in the following

cases:

 Increase in Taxable Value -When a supplier requires to increase the

taxable value of a supply, he/she has to issue debit note to the recipient.
 Increase in GST charged in invoice - When a supplier requires to
increase the rate or value of GST charged in an invoice, he/she has to issue
debit note to the recipient.

Details of debit notes issued should be furnished in Form GSTR-1 for the
month in which the debit note is issued. These details will be made available
to the recipient in Form GSTR-2A, post which the recipient has to accept the
details and submit in Form GSTR-2.
Please note that a debit note can be raised by a recipient also, when the
goods received are returned, damaged in transit, taxable value shown in the
invoice is more than the actual or tax charged is more than the actual.
However, under GST, debit note furnished by a supplier only will be
considered for revision in the values of an invoice. The same has to be
accepted by the recipient for corresponding impact on input tax credit on the
supply.

Credit Note:
A credit note in GST, is a document issued by the supplier in the following
cases:

 Supplies are returned or found to be deficient by the recipient - When

goods supplied are returned by the recipient or goods/services supplied are
found to be deficient by the recipient, the supplier should issue a Credit
Note. The credit note serves the purpose of reducing the value of the
original supply.
 Decrease in taxable value - When a supplier requires to decrease the
taxable value of a supply, he/she has to issue a credit note to the recipient.
 Decrease in GST charged in invoice - When a supplier requires to
decrease the rate or value of GST charged in an invoice, he/she has to
issue a credit note to the recipient.

The details of credit notes issued in a month should be furnished by

suppliers in Form GSTR-1. The recipient of the supply will receive these
details in Form GSTR-2A, post which the recipient has to accept the
details and submit in Form GSTR-2. A point to note here is, that a
supplier will be allowed to reduce his tax liability via a credit note only if
the recipient of the supply accepts the credit note details in Form GSTR-
2. Once this is done, the recipient’s input tax credit will be reversed to
the extent of the credit note and the supplier’s tax liability will also be
correspondingly reduced.the extent of the credit note and the supplier’s
tax liability will also be correspondingly reduced.

Accounts and Records Under GST:

Every taxpayer registered under GST must maintain all records at

his principal place of business.
Every registered person shall keep and maintain, in addition to the
particulars mentioned in sub-section (1) of section 35, a true
and correct account of the goods or services imported or exported
or of
supplies attracting payment of tax on reverse charge along with the
relevant documents, including invoices, bills of supply, delivery
challans, credit notes, debit notes, receipt vouchers, payment
vouchers and
refund vouchers.

Who must maintain accounts under GST?

It is the responsibility of the following persons to maintain specified
records-

 The owner
 Operator of warehouse or godown or any other place used for
storage of goods
 Every transporter.

Every registered person whose turnover during a financial year

exceeds the prescribed limit (2 crore) will get his accounts audited
by a chartered accountant or a cost accountant.
Every registered person must maintain records of:

 Production or manufacture of goods

 Inward and outward supply of goods or services or both
 Stock of goods
 Input tax credit availed
 Output tax payable and paid and
 Other particulars as may be prescribed.

For example, under GST, a trader has to maintain the following a/cs
(apart from accounts like purchase, sales, stock) –

 Input CGST a/c

 Output CGST a/c
 Input SGST a/c
 Output SGST a/c
 Input IGST a/c
 Output IGST a/c
 Electronic Cash Ledger (to be maintained on Government
GST portal to pay GST.

Electronic Cash and Credit

Ledger
Every registered taxpayer will have 3 ledgers under GST which will
be generated automatically at the time of registration and will be
maintained electronically.

o Electronic Cash Ledger- This ledger will serve as an

electronic wallet. The taxpayer will have to deposit
money into his cash ledger (add money to the wallet).
The money will be utilized to make the payment.

o Electronic Credit Ledger- The input tax credit on

purchases will be reflected here under three categories
 i.e IGST, CGST & SGST. The taxpayer will be able to
utilize the balance shown in this account only for
payment of tax (not for interest, penalty etc.)

o E-Liability Ledger: This ledger will show the total tax

liability of a taxpayer after netting off for the particular
month. This ledger will be auto-populated.

Period for Retention of Accounts

under GST
As per the GST Act, every registered taxable person must maintain
the accounts books and records for at least 72 months (6 years).
The period will be counted from the last date of filing of Annual
Return for that year.
The last date of filing the Annual return is 31st December of the
following year.

For example:
For the year 2017-2018, the due date of filing the annual return is
31.12.2018. The books & records of 2017-2018 must be maintained
for 6 years, i.e., 31.12.2023.

Consequences of Not Maintaining

Proper Records
If the taxpayer fails to maintain proper records in respect of
goods/services, then the proper officer shall treat such unaccounted
goods/services as if the taxpayer had supplied them. The officer will
determine the tax liability on such unaccounted goods.
The taxable person will be required to pay the tax liability calculated
along with penalty.

Job work
Job work means processing or working on raw materials or semi-
finished goods supplied by the principal manufacturer to the job
worker. This is to complete a part or whole of the process which
results in the manufacture or finishing of an article or any other
essential operation.

For example, big shoe manufacturers (principals) send out the half-
made shoes (upper part) to smaller manufacturers (job workers) to
fit in the soles. The job workers send back the shoes to the principal
manufacturer.

As per GST Act, job work means any treatment or process

undertaken by a person on goods belonging to another registered
person. The person doing the job work is called job worker.

ITC on goods sent for job work

The principal manufacturer will be allowed to take credit of tax
paid on the purchase of goods sent on job work.
However, there are certain conditions.
A. Goods can be sent to job worker:

1. From principal’s place of business

2. Directly from the place of supply of the supplier of such goods

ITC will be allowed in both the cases.

B. Effective date for goods sent depends on place of business:
 1. Sent from principal’s place of business- Date of goods sent
out
2. Send directly from the place of supply of the supplier of such
goods- Date of receipt by job worker

Effective date is important because it will help to determine the

point of taxation if the goods are not returned back within the
specified time (see point C below)
C. The goods sent must be received back by the principal
manufacture within the following period:

1. Capital Goods- 3 years

2. Input Goods- 1 year

D. In case goods are not received back within the period

mentioned above, such goods will be treated as supply from
the effective date and tax will be payable by the prinicpal.
For more details, please refer our article on Input Credit on Job
Work and ITC-04.

Accompanying documents
Accounts & records
The responsibility for keeping proper accounts for the inputs or
capital goods shall lie with the principal.

Challan
 All goods sent for job work must be accompanied by a challan.
 The challan will be issued by the principal.
 It will be issued even for the inputs or capital goods sent
directly to the job-worker.
 The details of challans must be shown in FORM GSTR-1.
  Details of challans must also be filed through Form GST ITC –
04.

The challan issued must include the following particulars:

1. Date and number of the delivery challan

2. Name, address and GSTIN of the consigner and consignee
3. HSN code, description and quantity of goods
4. Taxable value, tax rate, tax amount- CGST, SGST, IGST,
UTGST separately
5. Place of supply and signature.

Form ITC-04
FORM GST ITC-04 must be submitted by the principal every
quarter. He must include the details of challans in respect of the
following-

 Goods dispatched to a job worker or

 Received from a job worker or
 Sent from one job worker to another

It must be furnished on or before 25th day of the month succeeding

the quarter. For example, for Oct-Dec quarter, the due date is
25th Jan.
ITC will be allowed in both the cases.

The principal manufacturer must receive the goods back within the
following period:

1. Capital Goods- 3 years from effective date

2. Input Goods- 1 year from effective date

In case goods are not received within the period as mentioned

above, such goods will be deemed as supply from effective
date. The principal manufacturer will have to pay tax will on
such deemed supply.
The challan issued will be treated as an invoice for such
supply.