Training On GST - CAG - 20180221 PDF

Goods and Services Tax
(GST)
Anjani Kumar Khetan Page | 1

Prelude

Broad Framework of GST
1 2 3
Taxable Event When to Pay? Whom to Pay?
Supply Time of Supply Place of Supply
4 5
How much to pay? What compliances to be done?
Valuation • Registration
Rate of Tax; and • Returns
Input Tax Credit (ITC) • Payment

Levy and Collection of GST

Primary Literature Governing
Levy & Collection of GST

Literature Governing Levy & Collection of GST under CGST Act
Relevant Sections under CGST Act for Levy and Collection of GST
Section 7 Section 8 Section 9* Section 10 Section 11

1 2 3 4 5
Scope of Supply Tax Liability on Levy & Collection Composition Levy Power to grant
Composite Supplies of tax* exemption
r/w Schedule I
Schedule II & (Charging Section)* from tax
Schedule III Mixed Supplies
* Similar provisions under SGST Acts (s.9), UTGST Acts (s.7) & IGST Act (s.5) as well
Schedules
Schedule I Activities – to be treated as Supply, even if made without consideration (Deemed Supplies)
Schedule II Activities – to be treated as (a) Supply of Goods OR (b) Supply of Services
Schedule III Activities / Transaction – which shall be treated neither as Supply of Goods nor as Supply of Services

Charging Sections Governing Levy under GST Law
Charging Sections governing Levy under GST Laws
CGST Act SGST Act UTGST Act IGST Act
Section 9 Section 9 Section 7 Section 5

under CGST & SGST (or, UTGST) Acts

Charging Section – Section 9 of CGST* Act
Levy and collection of GST under CGST* Act
Levy and collection of GST under CGST * Act
GST on
GST on Reverse Charge on Reverse Charge on
Forward Charge Specified Services
Petroleum Products Specified Supplies URD Purchases
via e-Com Operators
Section 9(1) Section 9(2) Section 9(3) Section 9(4) Section 9(5)
Section 9(1) is GST on Reverse charge on Reverse charge on GST on
subject to Section 9(2) Petroleum Products** specified supplies purchase from e-Commerce Operators
to be levied of goods / services/ both unregistered dealers of specified services
• There shall be levied a tax
from
called CGST The government shall: The Central tax (CGST) in On specified categories of
a subsequent date
• on intra-state supply o Specify categories of respect of supply of : services (but not, goods)
goods / services / both taxable goods / services effected through an
• of goods / services / both ** These are:
o
/ both e-commerce operator,
o The tax on which shall
• excluding supply of alcoholic o Petrol (motor spirit) be paid on a reverse o by an un-registered the government may
liquor for human consumption o Diesel (HSD) charge basis supplier (on recommendation of GST
o ATF (Aviation Turbine Fuel) By the recipient of such o to a registered person Council)
• on a value determined u/s 15 Crude oil; and
o
goods / services / both specify that the
o SHALL BE
• at such rates – as notified by o Natural gas
tax shall be paid by
& o Paid by such registered such e-commerce operator
the Government – on person
Supply of the above All the provisions of the Act On a reverse charge basis
recommendation of the GST categories of petroleum shall apply to such
o &
Council &
products is also under GST recipient, as if he is the All the provisions of the Act
person liable for paying the All the provisions of the Act shall apply to such e-Com
• not exceeding 20% tax in relation to supply of shall apply to such recipient,
However, tax on these operator, as if he is the
• collected in the prescribed products is to be levied w.e.f. such goods / services / both as if he is the person liable for supplier liable to pay tax in
paying the tax in relation to
manner; and such date, as may be notified
supply of such goods /
relation to supply of
by the Govt. (on such services
• shall be paid by the recommendation by
services / both
taxable person # the GST Council )
# U/s 2(107) of CGST Act 2017, a taxable person means …. a person who is (a) either registered OR (b) is liable to be registered u/s 22 or 24 of CGST Act
Anjani Kumar Khetan * Similar provisions under SGST Acts (s.9) and under UTGST Acts (s.7) as well Page | 9
under IGST Act

Charging Section – Section 5 of IGST Act
Levy and collection of GST under IGST Act
Levy and collection of GST under IGST Act
GST on
GST on Reverse Charge on Reverse Charge on
Forward Charge Specified Services
Petroleum Products Specified Supplies URD Purchases
via e-Com Operators
Section 5(1) Section 5(2) Section 5(3) Section 5(4) Section 5(5)
s. 5(1) is subject to s. 5(2) GST on Reverse charge on Reverse charge on GST on
• Levy of IGST Petroleum Products* specified supplies purchase from e-Commerce Operators
• on inter-state supply to be levied unregistered dealers of specified services
• of goods / services / both from
• excluding supply of alcoholic a subsequent date
liquor for human consumption The government shall: The Central tax (CGST) in On specified categories of
• on a value determined u/s 15 of o Specify categories of respect of supply of : services (but not, goods)
the CGST Act goods / services / both o taxable goods / services effected through an
* These are: The tax on which shall / both e-commerce operator,
• at such rates – as notified by o
o Petrol (motor spirit) be paid on a reverse o by an un-registered the government may
the Government – on
o Diesel (HSD) charge basis supplier (on recommendation of GST
recommendation of the GST
ATF (Aviation Turbine Fuel) By the recipient of such o to a registered person Council)
Council o o
Crude oil; and goods / services / both specify that the
• not exceeding 40% o SHALL BE
o Natural gas
tax shall be paid by
• collected in the prescribed & o Paid by such registered such e-commerce operator
person
manner; and Supply of the above All the provisions of the Act o On a reverse charge basis &
• shall be paid by the categories of petroleum shall apply to such
&
taxable person products is also under GST recipient, as if he is the All the provisions of the Act
person liable for paying the All the provisions of the Act shall apply to such e-Com
Further, IGST on goods imported However, tax on these tax in relation to supply of shall apply to such recipient, operator, as if he is the
into India shall be levied and products is to be levied w.e.f. such goods / services / both as if he is the person liable for supplier liable to pay tax in
collected, as per Section 3 of such date, as may be notified paying the tax in relation to
relation to supply of
Customs Tariff Act – and on the supply of such goods /
by the Govt. (after GST services / both such services
value determined under that Act, at Council recommendation)
the point when Customs Duty are
levied on the said goods u/s 12 of
the Customs Act 1962

Scope of “Supply”
Including Schedules

How is “Supply” defined under GST?
Under CGST Act, “Supply” includes ……
1 2 3 4
Section 7(1)(a) Section 7(1)(b) Section 7(1)(c) Section 7(1)(d)
all forms of supply of goods Importation of services Deemed Supplies – Matters to be treated as:
/ services / both … specified in Schedule I (a) supply of goods OR
such as: (b) supply of services
as referred to in Schedule II
sale, transfer, barter,
exchange, license, rental,
lease, or disposal
made (or, agreed to be
made)
For a consideration For a consideration Without consideration
Whether or not - in the

In the course of
course of (or, in furtherance of)
(or, in furtherance of) business
business
The word ‘supply’ is all-encompassing, subject to exceptions carved out in the relevant provisions
In pursuance of Section 7(2), supply does not include the following:

• Activities specified in Schedule III (these activities are neither a supply of goods, nor a supply of services)
• Notified supplies - made by the Central Govt. / State Govt. / Local Authority – as public authority

Goods Section 2(52)
Goods means: Other than: but, includes:

every kind of • Money & • actionable claims
movable property • securities • growing crops
• grass and things attached to (or,
forming part of) land, which are agreed
to be severed before supply (or, contract
to supply)

Services Section 2(102)
Services means anything other than (a) goods, (b) money and (c) securities
However, services include:

the activities relating to:
the use of money; or
its conversion by cash or by any other mode, from one form, currency or
denomination, to another form, currency or denomination - for which a separate
consideration is charged
Note that:
Schedule II deems certain supply
to be that of services

Supply - Taxable Event under GST
What is covered in Supply (as deemed supplies)
Schedule I (Specific supplies without consideration)
even if supply is made without consideration?
Whether Supply is (a) of Goods or (b) of Services Schedule II
What is NOT treated as a Supply? Schedule III + Notified Government Services
Concept of Composite Supply Section 2(30) and Mixed Supply Section 2(74)
Powers of the Government u/s 7(3), CGST Act

U/s 7(3) – on recommendation of the GST Council, the Government may specify, by notification the
transactions that are to be treated as:
a supply of goods (and not, as a supply of services); or
a supply of services (and not, as a supply of goods)

Schedule I - Activities to be treated as “Supply” even if made without consideration
Activities treated as supply, even if made without consideration (Schedule I to CGST Act)
1 Permanent transfer / disposal of business assets, where ITC has been availed on such assets
Supplies^ between related persons*/ distinct persons** in the course of (or, in furtherance of) business
2
Proviso: Gifts of less than Rs. 50,000 in value in a FY by employer to employee – not to be treated as supply
Supply of goods by a principal to his agent (where agent undertakes to supply such goods on behalf of the
principal) OR
3
Supply of goods by an agent to his principal (where agent undertakes to receive such goods on behalf of the
principal)
Importation of service:
from a related person*; or
4 from any of his other establishments outside India
in the course or furtherance of business
^ of goods / services / both
* as defined in Explanation to Section 15(5) of the CGST Act – dealing with ‘Value of Taxable Supply’
** as defined in Section 25(4) of the CGST Act – dealing with ‘Procedure for Registration under GST’

Schedule II – Matters, to be treated as supply of goods / services
Sl # Matter Supply of
1 Transfer:
Any transfer of title in goods Goods
Any transfer of: Services
right in goods or
without the transfer of title thereof
undivided share in goods
Any transfer of title in goods at a future date, upon payment of full consideration, as agreed Goods
2 Land and Building:

Any lease, tenancy, easement, license - to occupy land Services
Any lease / letting-out of the building (including a commercial, industrial or residential complex) for business Services
or commerce - either wholly or partly
3 Treatment or Process:
Any treatment or process on another person’s goods (Job Work**) Services
** Job Work, u/s 2(68) of CGST Act, means:

any treatment/ process undertaken by a person
on goods belonging to another registered person
and the expression “job worker” shall be construed accordingly

Sl # Matter Supply of
4 Transfer of business assets:

Transfer / Disposal of goods forming part of business assets - whether or not for a consideration** Goods
Business assets – put to private use (or, for any purpose other than the business use) - whether or not Services
for a consideration**
On a person ceasing to be a taxable person, any goods forming part of assets of any business carried on Goods
by him shall be deemed to be supply in the course or furtherance of his business, immediately before
he ceases to be a taxable person, except when –
o Business is transferred, as a going concern to another person; or
o Business is carried on by a personal representative (who is deemed to be a taxable person)
** as defined in Section 2(31) of the CGST Act

Sl # Matter
5 Following to be treated as Supply of Services:

Renting of immovable property
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 before its first occupation, whichever is earlier
Temporary transfer (or, permitting the use or enjoyment) of any intellectual property right (IPR)
Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of
IT software
Agreeing to the obligation:
o to refrain from an act; or
o to tolerate an act or a situation; or
o to do an act
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
• The term “construction” includes additions, alterations, replacements or remodeling of any existing civil structure
…. Explanation to Section 17(5)(d) dealing with “Blocked Credit”

Sl # Matter
6 Following Composite Supplies to be treated as Supply of Services:

Works Contract** as per Section 2(119) of CGST Act
Restaurant or Catering Services:
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:
o by any unincorporated AOP or BOP
o to a member thereof
o for cash, deferred payment or other valuable consideration
shall be treated as supply of goods
** “Works Contract” - u/s 2(119) of CGST Act - means:

a contract
for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation,
alteration or commissioning
of any immovable property
wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract

Schedule III – Matters, not to be treated as supply of goods / services
Section 7(2) – Activities not to be treated as supply (neither of goods nor of services)
Section 7(2)(a) Section 7(2)(b)
Activities or transactions specified in Schedule III* Notified Supplies
Such activities or transactions
* Schedule III (Neither supply of ‘goods’ nor supply of ‘services’) undertaken by:
1. Services by an employee to the employer in the course of (or, in relation to) his employment - the Central Government, or
2. Services by any court** or Tribunal established under any law for the time being in force - a State Government, or
- any local authority
3. (a) Functions performed by the MPs, Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members of other local authorities in which they are engaged as
(b) Duties performed by any person, who holds any post in pursuance of the provisions of public authorities
the Constitution in that capacity; or
(as may be notified by the Government
(c) The duties performed by any person as a Chairperson or a Member or a Director in a on the recommendations of the GST
body - established by the Central Government/ a State Government/local authority and Council)
who is not deemed as an employee, before the commencement of this clause
4. Services of funeral, burial, crematorium or mortuary (including transportation of the deceased)
5. (a) Sale of land and (b) sale of building (subject to construction activity of Schedule II)
6. Actionable claims, other than lottery, betting and gambling
** The term ‘Court” for this purpose includes (a) District Court (b) High Court and (c) Supreme Court

Composite Supply Section 2(30)
Composite Supply Illustration

Section 2(30) Supply of a laptop with a carry case is an example of composite supply
“Composite supply” means: This is because – in the above case:
a supply a customer would not purchase the laptop to get the carry case
made by a taxable person in fact, a carry case with the same brand as the laptop is normally not available
to a recipient for independent purchase
comprising two or more (taxable) Accordingly, in this case, the predominant supply is laptop and ancillary supply
supplies of goods or services (or is carry case
any combination thereof)
which are naturally bundled; and
are supplied in conjunction with
each other in the ordinary course Additional insights
of business; and • If the ancillary supply were offered on a stand-alone basis, the same would
one of which is a principal activity not be accepted by the recipient.
Explanation: • Even if separate prices were assigned to each of the supplies involved, the one
The way the supplies are naturally that is ancillary would not become predominant
bundled must be examined • The end use test could be important for determination of composite supply.
Merely by conjointly supplying two • For instance, in case of supply of equipment and installation/
or more goods / services does not commissioning of the same – the principal / predominant supply is supply of
constitute composite supply equipment and the ancillary supply is its installation

Mixed Supply Section 2(74)
Mixed Supply
Section 2(74)
Illustration
“Mixed supply” means: Supply of a package consisting of Canned Food, Dry Fruits, Sweets,
and Chocolates - when supplied for a single price is a mixed supply
two or more individual supplies
of goods / services / any combination thereof
made in conjunction with each other The following factors need to be considered while determining –
by a taxable person whether the supply is a mixed supply:
for a single price Prices of each of the item supplied together can be identified and
Where the supply does not constitute a the supplier can supply them separately
composite supply The supplier supplying them conjointly by assigning a single
consolidated price without any indication of the allocation of the
total price to the individual supplies comprised in this supply
Explanation:
When two or more supplies that have individual Few other examples of mixed supply include the following:
identity and can be supplied separately, but are • Supply of Tooth paste and Brush and
deliberately supplied conjointly - by assigning a • Supply of Laptop and accessories etc
consolidated price, without any indication of
separate price for individual supply, it is
considered as a mixed supply
Mixed supply is a case, wherein the recipient
intends to acquire each of the supplies involved

Composite Supply vs. Mixed Supply
Guiding principle to decide if the supply is a composite supply or mixed supply
Description Composite Supply Mixed Supply
Naturally bundled Yes No
Supplied together Yes Yes
Can be supplied separately No Yes

One is predominant supply for recipient Yes No
Other supply is not ‘aim in itself’ of recipient Yes No
Each supply priced separately No No
• While, the above tests could be guiding principles in determining as to whether a supply is composite
or mixed supply, the end user test could be adopted as one of the criteria
• Every supply will have to be independently analysed

Tax liability for Composite Supply and Mixed Supply – Section 8
Section 8 - Tax liability on Composite Supply and Mixed Supply
Composite supply comprising of two or more goods • Is treated as a supply of such principal supply
and/or services – which are naturally bundled (and, • Accordingly, it is taxed @:
one of which is the principal supply) tax rate applicable to such principal supply
Mixed supply comprising of two or more goods • Is treated as a supply of that particular
and/or services – which are not naturally bundled goods/services, which is liable to tax at the
together highest rate of GST

Why important to decide whether the supply is goods or service?
Why important to decide, if supply is for ‘goods’ or for ‘service’ ….
Determining whether a ‘supply’ is goods or, service …. is crucial to determine
Time of Supply Place of Supply

under CGST Act What Tax rate
under IGST Act
to apply?
Section 12 to 14 Section 10 to 14
= When liable to pay GST? = Determine Inter-State or, Intra-State

Key takeaways and Practical Insights
Key takeaways on Supply, as envisaged u/s 7 of CGST Act
1 Section 7 has an ‘inclusive definition’ of supply. Hence, one has to understand the general meaning of supply
Oxford Dictionary Cambridge Dictionary Merriam Webster
Make (something needed or wanted) An amount of something that is To make (something)
available to someone available for use available to be used
2
The concept of ‘Supply’ is broader than that of a “sale” - supply does not require transfer of title
3
Supply does not requires presence of two persons for “taxable supply” – even self-supplies may be taxable under GST
4
Presence of ‘consideration’ is not a pre-requisite for a taxable supply under GST
Other Practical Insights

• Supply can arise on account of:
o Inter-branch service transfer
o Inter-state stock transfer
• Schedule II is not exhaustive, but specific
• No supply, no tax - but no input tax credit as well

Q&A
Thank You
(GST)

Time of Supply

Meaning and Importance of
Time of Supply

Meaning and Importance of Time of Supply
= Point of time, when a transaction is liable to be taxed under GST
Time of Supply (ToS)
Put differently, ToS is the Point of Taxation
Significance of Time of Supply Provision with respect to Time of Supply (ToS) have
• Time of Supply determines the point in time, when been discussed as follows:
the liability to pay GST arises Time of Supply for goods
• ToS determines: Time of Supply for services
(a) the tax rate applicable for a transaction; and
Time of Supply, when there is a change in the
(b) the due date for payment of tax effective rate of tax (as laid down in GST laws)
• It also indicates the point in time, when the supply
of goods / services is deemed to have been made
Time of Supply is NOT a ‘fact to be inquired into by the taxable person’, rather it is one that is…..
….. to be admitted as the time of supply appointed by the “will of legislature”
(as declared in s. 12, 13 and 14 of the CGST Act)
Time of Supply is “what is stated in the law” to be the time value of supply & nothing else

Literature Governing
Time of Supply

Primary Literature Governing Time of Supply
Relevant Sections for Time of Supply (ToS) under CGST Act
Section 12 Section 13 Section 14 Section 31
Time of Supply of Time of Supply of Change in Rate of Tax Relating, inter alia, to ….
Goods Services in respect of supply of Goods / Services Time Limit for Issue of
Tax Invoice

Time Limit for Issuing Invoice
Prelude to Time of Supply

Time Limit for Issue of Invoice – Section 31
Last Date for Issue of Invoice for Goods / Services u/s 31, CGST Act
For Goods For Services

u/s 31(1) of CGST Act u/s 31(2) of CGST Act
Supply involves
Any other case Before or After Provision of service
Movement of Goods
But, within the prescribed time u/s 31*
Before removal ^ of goods Before delivery of goods CGST Rule # 47
OR OR * Within 30 days from supply of service and
Within 45 days from supply of service (for Banks / NBFCs)
At the time of removal ^ of goods At the time of delivery of goods
P P The government may, on the recommendation of the

The government may, on the recommendation of the GST Council, issue notification
GST Council, issue a notification specifying the
specifying the categories of goods / supplies, in respect of which a tax invoice
categories of services, in respect of which:
shall be issued within such time and in such manner, as may be prescribed
• a tax invoice is not required OR
• Any other document issued in relation to the supply
shall be deemed to be a tax invoice
Anjani Kumar Khetan ^ as defined in s. 2(96) of CGST Act Page | 37

Time of Supply
of Goods

Time of Supply of Goods – Overview Section 12 of CGST Act
s. 12(1) of CGST Act

The liability to pay tax on goods shall arise at the time of supply (as determined in accordance with the provisions of this section, viz. s. 12)
Time of Supply of Goods u/s 12 of CGST Act

A B C D E
s. 12(2) s. 12(3) s. 12(4) s. 12(6)
s. 12(5)
In respect of In respect of In respect of In respect of
Forward Charge Reverse Charge # In any other case Late Fee / Interest / Penalty *
Issue of Vouchers
* for delayed payment
of consideration
Supply Supply
When Return When Return
is identifiable is NOT identifiable
is required is not required
at the time of at the time of
to be filed to be filed
issue of voucher issue of voucher
# that can be used to pay for goods
These have been detailed in Subsequent Slides

Time of Supply of Goods – Forward Charge
A
s. 12(2) of CGST Act Time of Supply of Goods in case of Forward Charge
Earliest of the following:
Basis: Issue of Invoice by Supplier Receipt of Payment by Supplier
Date of issue of Invoice (by the Supplier)

OR
Date of receipt of payment by the Supplier **
Last date on which invoice is
required to be issued by Supplier u/s 31(1) ^
E The supply shall be deemed to have been made – to the extent it is covered by (a) the invoice OR (b) the payment – as the case may be ##
P Where the supplier of taxable goods receives an amount E

up to Rs. 1000 in excess of the invoice amount, time of supply ** Earlier of: (a) date of entering payment in Supplier’s books and
for such excess amount would be date of issue of invoice (b) date of credit in Supplier’s bank account
relating to such excess payment (at the option of the supplier)
Invoice is to be raised before OR at the time of removal of goods
## For instance, if a tax payer receives an advance of Rs, 70,000 against a PO of Rs. 100,000 – ToS at the time of receipt of advance payment would arise only on Rs. 70,000; and
As per s. 31(3)(d) of CGST Act, where payment is received in advance, the Supplier shall issue a Receipt Voucher (and NOT, a Tax Invoice)
Also, refer to Notification No. 66/2017 CT dt. 15th Nov 2017 - (No GST on advances received against supply of goods – applicable to all registered persons (other than those under composition)

Time of Supply of Goods – Forward Charge
A
s. 12(2) of CGST Act Time of Supply of Goods in case of Forward Charge
Illustration Advance up to Rs. 1000 on Supply of Goods
Assume that:
CT Corp supplies water bottles to ABSPL
CT Corp issues an invoice for Rs. 1820 to ABSPL on 7th August 2017 for the month of July 2017
Against that invoice, ABSPL pays Rs. 2000 to CT Corp on 20th August 2017 (which is Rs 180 more than the invoice amount of Rs 1820)
Further on 7th September 2017 CT Corp issues an invoice for Rs. 1530 on ABSPL for the month of August 2017
Again, ABSPL pays Rs. 1350 against the invoice of Rs. 1530 dated 7th September 2017 (after adjusting excess of Rs. 180 paid last month)
In this case:
While discharging the liability for the month of August 2017, CT Corp has the option to pay tax only in respect of invoice issued for
Rs. 1820 (and, not on the entire amount of Rs. 2000 received); and
If CT Corp has opted for the same, then while discharging the liability for the month of September 2017, it shall pay tax in respect of
full invoice amount of Rs. 1530 (and not, Rs 1350 – that was actually received from ABSPL)
Also, refer to Notification No. 66/2017 CT dt. 15th Nov 2017 - No GST on advances received against supply of goods – applicable to all registered persons (other than those under composition)

Time of Supply of Goods – Reverse Charge
B
s. 12(3) of CGST Act Time of Supply of Goods in case of Reverse Charge
Basis: Date of receipt of goods Payment Date Deemed Date
Earlier of:
Date immediately following
Date of payment, as entered in Books of accounts 30 days from the
Date of receipt of goods of the recipient date of issue of invoice
by the Recipient
OR (or, any other document)
by the supplier
Date on which payment is debited to the recipient’s bank a/c
P
Where it is not possible to determine the Time of Supply (ToS) – on the basis of the above parameters:
Time of Supply = Date of recording of the Supply in the books of accounts of the recipient

Time of Supply of Goods – Issue of Vouchers
C
s. 12(4) of CGST Act Time of Supply of Goods in case of Issue of Vouchers #
that can be used to pay for goods
Supply is identifiable Supply is NOT identifiable

at the time of issue of voucher at the time of issue of voucher
Date of issue of vouchers Date of redemption of vouchers
# Under Section 2(118) of CGST Act, a “voucher” means:

• an instrument
• where there is an obligation
• to accept it
• as consideration (or, part consideration)
• for a supply of goods or services or both; and
• where the goods or services or both to be supplied OR the identities of their potential suppliers
• are either indicated on the instrument itself or in related documentation (including the terms and conditions of use of such instrument)

Time of Supply of Goods – Issue of Vouchers
C
s. 12(4) of CGST Act Time of Supply of Goods in case of Issue of Vouchers #
that can be used to pay for goods
Illustration
Unidentifiable Voucher Identifiable Voucher
Assume that Big Bazar issues a voucher for However, if Big Bazar issues the voucher for Rs. 5000 that
Rs. 5000 for the purchase of any item from Big Bazar can used only to buy juicer from its outlets, then
This will be a case of unidentifiable voucher This will be a case of an identifiable voucher
Accordingly, the ToS for the voucher will be: Accordingly, in this case, the ToS for the voucher will be:
= the date of redemption of the voucher = the date of issue of the voucher

Time of Supply of Goods – Any other case
D
s. 12(5) of CGST Act Time of Supply of Goods In any other case #
When Return is required to be filed When Return is NOT required to be filed
Date on which such Return is to be filed Date on which tax is paid
# This section is applied – if ToS can’t be determined by applying provisions of

any of the earlier Sections, viz. Section 12(2), 12(3) and 12(4)
and, not merely, when there is some difficulty in determining the facts sought under the other relevant provisions

Time of Supply of Goods – Late Fee / Interest / Penalty
E
s. 12(6) of CGST Act Time of Supply of Goods in case of Late Fee / Interest / Penalty
for delayed payment of consideration
=
Date on which the supplier
receives
such addition-in-value

Time of Supply of Goods – Summary Section 12 of CGST Act
Time of Supply of Goods u/s 12 of CGST Act

A B C D E
s. 12(2) s. 12(3) s. 12(4) s. 12(5) s. 12(6)
Forward Charge Reverse Charge Issue of Vouchers # Any Other Case Late Fee / Interest /
Penalty *
Earliest of the following: Earliest of the following:

Supply Supply
Date of receipt of goods When Return When Return
Date of is identifiable is NOT identifiable
Date of payment, as entered is required is not required Date on which the
issue of Invoice (by in Books of accounts of the at the time of at the time of
to be filed to be filed supplier receives
the Supplier) recipient OR date on which issue of voucher issue of voucher
addition-in-value
Last date on which payment is debited to
invoice is required recipient’s bank a/c
to be issued by Day immediately following 30 Date of Date of Date on Date of
Supplier u/s 31(1) ^ days from the date of issue of issue of redemption of which the payment of
Invoice by the Supplier
and voucher voucher Return tax * for delayed payment
(whichever is earlier)
is to be filed of consideration
Date of receipt of And, if - all the above events are
payment by the not determinable:
# that can be used to pay for goods
Supplier ** Date of recording of the Supply
See Note 1 below
in the Books of the Recipient
P Note 1
Where the supplier of taxable services receives an
amount up to Rs. 1000 in excess of the invoice
amount, time of supply for such excess amount
would be date of issue of invoice relating to such E ** Earlier of: (a) date of entering payment in Supplier’s books and
excess payment (at the option of the supplier) (b) date of credit in Supplier’s bank account

Time of Supply
of Services

Time of Supply of Services – Overview Section 13 of CGST Act
s. 13(1) of CGST Act

The liability to pay tax on services shall arise at the time of supply (as determined in accordance with the provisions of this section, viz. s. 13)
Time of Supply of Services u/s 13 of CGST Act

A B C D E
s. 13(2) s. 13(3) s. 13(4) s. 13(6)
s. 13(5)
In respect of In respect of In respect of In respect of
Forward Charge Reverse Charge # In any other case Late Fee / Interest / Penalty *
Issue of Vouchers
* for delayed payment
of consideration
Supply Supply
When Return When Return
is identifiable is NOT identifiable
is required is not required
at the time of at the time of
to be filed to be filed
issue of voucher issue of voucher
# that can be used to pay for services
These have been detailed in Subsequent Slides

Time of Supply of Services – Forward Charge
A
s. 13(2) of CGST Act Time of Supply of Services in case of Forward Charge
If invoice is issued within the If invoice is NOT issued within the When these two situations
time prescribed ^ u/s 31(2) time prescribed ^ u/s 31(2) don’t apply
Earlier of the following: Earlier of the following: Time of Supply (ToS) =

Date of issue of Invoice Date of provision of service Date on which the recipient
OR OR shows the receipt of services
Date of receipt of payment** Date of receipt of payment** in the books of accounts
P Where the supplier of taxable services receives an amount up to Rs. 1000 in excess of the invoice amount, time of supply
for such excess amount would be date of issue of invoice relating to such excess payment (at the option of the supplier)
E ** Earlier of: (a) date of entering payment in Supplier’s books and

(b) date of credit in Supplier’s bank account

A
Illustration – Invoice not raised within time prescribed u/s 31(2)
Assume that: Answer:
ANSR Ltd. provided management consulting It may be recalled that as per s. 13(2) of CGST Act, read with
services to GWG on 5th July 2017 s. 31(2) and rules thereof, in case, invoice is not raised within 30 days
from the date of completion of service:
ANSR raised an invoice of Rs. 120,000 on GWG for
ToS of Service = Date of completion of service (5th July 2017) OR
the aforesaid services on 10th August 2017
Date of receipt of payment (14th August 2017)
Thereafter, GWG made payment to ANSR on whichever is earlier
14th August 2017
Accordingly, in this case:
Given the above, determine the ToS of Service ToS of Service = 5th July 2017

A
Illustration Advance up to Rs. 1000 on Supply of Services
Assume that:
Telecom Company Airtel issues an invoice for Rs. 4537 to ABSPL on 7th August 2017 for the month of July 2017
Against that invoice, ABSPL pays Rs. 5000 to Airtel on 20th August 2017 (which is Rs 463 more than the invoice amount of Rs 4537)
Further on 7th September 2017 Airtel issues an invoice for Rs. 5787 on ABSPL for the month of August 2017
Again, ABSPL pays Rs. 5324 against the invoice of Rs. 5787 dated 7th September 2017 (after adjusting excess of Rs. 463 paid last month)
In this case:
While discharging the liability for the month of August 2017, Airtel has the option to pay tax only in respect of invoice issued for
Rs. 4537 (and, not on the entire amount of Rs. 5000 received); and
If Airtel has opted for the same, then while discharging the liability for the month of September 2017, it shall pay tax in respect of
full invoice amount of Rs. 5787 (and not, Rs 5324 – that was actually received)

Time of Supply of Services – Reverse Charge
B
s. 13(3) of CGST Act Time of Supply of Services in case of Reverse Charge

Basis:
Payment Date Deemed Date
Earlier of:
Date of payment, as entered in Books of accounts Date immediately following 60 days from
of the recipient the date of issue of invoice (or, any other document)
OR by the supplier
Date on which payment is debited to the recipient’s bank a/c
P Where it is not possible to determine the Time of Supply (ToS) – on the basis of the above parameters:
Time of Supply = Date of recording of the Supply in the books of accounts of the recipient
P
In case of supply by associated enterprises**, where the supplier of service is located outside India – the ToS shall be earlier of:
(a) date of recording the Supply in the books of accounts of the Recipient; and
(b) date of payment
** As per s. 2(12) of CGST Act – the term Associated Enterprises shall have the same meaning as assigned to it u/s 92A of the Income-tax Act, 1961

Time of Supply of Services – Reverse Charge
B
s. 13(3) of CGST Act Time of Supply of Services in case of Reverse Charge
Illustration – Associated Enterprises
Assume that: Answer:
GWG is an Indian company and it receives a It may be recalled that as per the proviso to s. 13(3) of CGST Act,
taxable supply of services from Putnam (a USA based in case of supply by associated enterprises, where the
Associated Enterprise) supplier of service is located outside India – the ToS shall be earlier of:
(a) date of recording the Supply in the books of accounts of the Recipient; and
On 1st Jan 2018, Putnam raised an invoice on GWG (b) date of payment
for $ 55000, but recorded the receivable from GWG
in its books of accounts on 10th Feb 2018 In this case, the recipient of Supply (GWG) has recorded the supply on
In turn, GWG recorded the payable to Putnam in its 25th Feb 2018 and made the payment on 25th March 2018
books of accounts on 25th Feb 2018 and made the
payment on 25th March 2018
Given the above, determine the Time of Supply. ToS in respect of Service from AE = 25th Feb 2018

Time of Supply of Services – Issue of Vouchers
C
s. 13(4) of CGST Act Time of Supply of Services in case of Issue of Vouchers #
that can be used to pay for services
Supply is identifiable Supply is NOT identifiable

at the time of issue of voucher at the time of issue of voucher
Date of issue of vouchers Date of redemption of vouchers
# Under Section 2(118) of CGST Act, a “voucher” means:

• an instrument
• where there is an obligation
• to accept it
• as consideration (or, part consideration)
• for a supply of goods or services or both; and
• where the goods or services or both to be supplied OR the identities of their potential suppliers
• are either indicated on the instrument itself or in related documentation (including the terms and conditions of use of such instrument)

Time of Supply of Services – Any other case
D
s. 13(5) of CGST Act Time of Supply of Services In any other case #
When Return is required to be filed When Return is NOT required to be filed
Date on which such Return is to be filed Date on which tax is paid
# This section applied – if ToS can’t be determined by applying provisions of

any of the earlier Sections, viz. Section 13(2), 13(3) and 13(4)

Time of Supply of Services – Late Fee / Interest / Penalty
E
s. 13(6) of CGST Act Time of Supply of Services in case of Late Fee / Interest / Penalty
for delayed payment of consideration
=
Date on which the supplier
receives
such addition-in-value
Illustration:
Assume that Airtel charges Rs. 100 as late fees from one of its customers on account of non-payment of Sep 2017 invoice
by its due date (which was 10th October 2017)
In this case, the ToS of such late fee will be = the date on which Airtel receives the amount of late fee from the customer

Time of Supply of Services – Summary Section 13 of CGST Act
Time of Supply (ToS) of Services$ u/s 13 of CGST Act

A B C D E
s. 13(2) s. 13(3) s. 13(4) s. 13(5) s. 13(6)
Forward Charge Reverse Charge Issue of Vouchers # Any Other Case Late Fee / Interest /
Earlier of the following: Penalty*
If Invoice Earlier of the following:
is issued Date of a) Earlier of: Supply is Supply is
within time issue of invoice Date of payment, as identifiable not identifiable When When
prescribed ^ entered in the Books of at the time of at the time of Return Return
Date of accounts of the Recipient Date on which the
u/s 31(2) issue of issue of is required is not required
receipt of payment ** OR to be filed to be filed
supplier receives such
voucher voucher
the date on which payment addition-in-value
If Invoice is Earlier of the following:
is debited to the
Recipient’s bank account
not issued Date of Date of Date of Date on Date on
within time provision of service b) Date immediately following issue redemption which which
prescribed ^ 60 days from the date of of of voucher Return is tax is paid
Date of issue of invoice by the supplier voucher to be filed
u/s 31(2) * for delayed payment
receipt of payment ** P
of consideration
Where it is not possible to determine, the
ToS by applying the above criteria, then
# that can be used to
When none Time of Supply = pay for services
of the ToS = Date of recording of Supply
The date, on which the in the Books of accounts of the Recipient
above two recipient shows the
P In case of supply by associated
situations receipt of services
apply in the books of accounts enterprises, where the supplier of
service is located outside India – the
P Where the supplier of taxable services receives ToS shall be earlier of:
an amount up to Rs. 1000 in excess of the invoice (a) date of recording of Supply in
amount, time of supply for such excess amount the books of the Recipient; and
would be date of issue of invoice relating to such E ** Earlier of: (a) date of entering payment in books and
(b) date of payment
excess payment (at the option of the supplier) (b) date of credit in bank
Anjani Kumar Khetan $ The liability to pay tax on services shall arise at the time of supply (as determined in accordance with the provisions of this section, viz. s.13) Page | 58
Change in Tax Rates
Section 14

Change in Tax Rates – Section 14
Section 14 Change in tax rate in respect of supply of goods / services ……….
Apply “2 out of 3 Rule”
Event # 1 Event # 2 Event # 3

Supply Issue of Invoice Receipt of Payment
of goods / service
If any 2 of the above 3 events occur BEFORE change in tax rate, apply Old Tax Rate
&
If any 2 of the above 3 events occur AFTER change in tax rate, apply New Tax Rate
This means that…

If there is any change in the tax rates, ToS shall be determined in accordance with s.14

Change in Tax Rates – Section 14
Section 14 Change in tax rate in respect of supply of goods / services ……….
Scenario 1: “Supply” happened BEFORE change in tax rate
Events that occurred Events that occurred
ToS = Apply
BEFORE tax rate changes AFTER tax rate changes
1 2 3
Supply Invoice Raised Payment Received Earlier of 2 OR 3 New Tax Rate
1 2 3
Supply Invoice Raised Payment Received Invoice Date Old Tax Rate
1 2 3
Supply Payment Received Invoice Raised Payment Date Old Tax Rate
Scenario 2: “Supply” happened AFTER change in tax rate

Events that occurred Events that occurred
ToS = Apply
BEFORE tax rate changes AFTER tax rate changes
1 2 3
Invoice Raised Supply Payment Received Payment Date New Tax Rate
1 2 3
Invoice Raised Payment Received Supply Earlier of 1 OR 2 Old Tax Rate
1 2 3
Payment Received Supply Invoice Raised Invoice Date New Tax Rate

Q&A
Thank You
(GST)

Place of Supply Rules

Place of Supply

Primary Literature Governing Place of Supply
Relevant Sections for Place of Supply (PoS) under IGST Act
Section 10 Section 11 Section 12 Section 13 Section 14
A B C D E
Place of Supply of Place of Supply of Place of Supply of Place of Supply of
Goods Goods Services Services Special Provisions
for payment of tax
Other than Where Where
Imported into by
goods imported into location of supplier location of supplier
or, Supplier of OIDAR
or, & &
Exported out
goods exported out recipient of service recipient of service
of India
of India is in India is outside India
Supply involves Goods imported into India Default Rule for PoS Default Rule for PoS
movement of goods
Goods exported out of India PoS for 12 specified services PoS for 10 specified services
Bill To, Ship To Supply (by reference to a Proxy) (by reference to a Proxy)
Supply doesn’t involve
movement of goods
Goods assembled /
installed at site
Goods supplied
on board a conveyance

Before we proceed further …..

Nature of Supply
under IGST Act

Nature of Supply – Inter-State vs. Intra-State
Exports
are … zero rated
Place of Supply
Place of Supply
CGST + SGST
Imports
Location of Supplier treated as inter-state supply ….
(BCD + IGST) apply

Importance of
Place of Supply

Place of Supply – Why important?
Location of Supplier (of goods/ services) Place of Supply
Same State Different State

Pay Pay
Wrongly paid, one tax
CGST + SGST IGST
Instead of, another
Pay the correct tax; and

Claim refund of the tax wrongly paid
Key takeaway:
• Place of supply is crucial to determine whether the supply is a inter-state supply or intra-state supply
• Accordingly tax to be levied

A
Place of Supply
for Goods
(other than goods imported / exported)
Section 10, IGST Act

Place of Supply – for Goods (other than goods imported / exported)
Place of Supply – for Goods (other than goods imported / exported) Section 10, IGST
Section 10(1)(a) Section 10(1)(c) Section 10(1)(b) Section 10(1)(d) Section 10(1)(e) Section 10(2)
Supply involves Supply Goods delivered Goods Goods supplied Any other case
movement of goods does not involve on the direction assembled / on board
movement of goods of a third person installed a conveyance
Whether by supplier at site
or the recipient
POS POS POS POS POS POS
Location of Goods Location of Goods Principal Place of Location where By law made by
where the Place of Business* installation / the goods are the Parliament
at the time of
movement of the 3rd Person assembly
delivery taken on board along with
terminates
to the recipient the conveyance suggestions from
for delivery GST Council
to the recipient
Section 10(2) - Where none of the above rules can be applied, place of supply would be determined in the manner,
to be prescribed
* Principal place of business = place of business, specified as the principal place of business in the certificate of registration

Place of Supply – For Goods (other than goods imported/ exported)
Section 10(1)(a) Supply involves movement of goods …
Where the supply involves movement of goods (whether by the supplier or the recipient or by any other person), the place of supply of
such goods shall be the location of the goods at the time, at which the movement of goods terminates for delivery to the recipient
1 2
Supplies LED Lights
Wholesaler Supplies Split AC Distributor Manufacturer on ex-factory Basis Wholesaler
in Karnataka in Orissa in Maharashtra Wholesaler declares his
in Rajasthan
GSTN
and
the destination of the
goods to the
manufacturer
Place of Supply is Orissa, where the movement of Place of Supply is Rajasthan, where the movement
goods terminate for delivery to the recipient of goods terminate for delivery to the recipient
In these cases, as per Section 10(1)(a) - Place of Supply is:

the location of goods at the time at which movement terminates for delivery to recipient

Section 10(1)(b) Supply involves movement of goods and delivered to a person
on the instruction of a third person …
Where the goods are delivered by the supplier to a recipient or any other person - on the direction of a third person (whether acting as
an agent or otherwise), before or during movement of goods - either by way of transfer of documents of title to the goods or otherwise - it shall be
deemed that the said third person has received the goods and the place of supply of such goods shall be the
principal place of business* of such person
Movement of goods takes place from Punjab to Bihar
Manufacturer Wholesaler (in UP) asks the Wholesaler Retailer

in Punjab manufacturer (in Punjab) to supply in UP in Bihar
directly to retailer (in Bihar)
Place of Supply is Uttar Pradesh Place of Supply is Bihar

= the principal place of business of the Wholesaler = the address of the retailer
* Principal place of business = place of business, specified as the principal place of business in the certificate of registration
Section 10(1)(c) Supply does not involve movement of goods …
Where the supply does not involve movement of goods - whether by the supplier or the recipient - the place of supply shall be
the location of such goods at the time of the delivery to the recipient
1 2
Supplies a Recipient purchases the
Retail Outlet bottle of perfume Customer Godown godown – in as is Recipient
to the customer
in Karnataka @ Showroom
from Orissa of the supplier condition, along with in Rajasthan
furniture in the godown
in Maharashtra
Customer does not In this case, the
declare his address to supply of furniture
the retailer doesn’t involve
movement of goods
Place of Supply is Karnataka Place of Supply is Maharastra

= the location of the goods at the time of delivery to the recipient = the location of the goods at the time of delivery to the recipient
In these cases, as per Section 10(1)(c) - Place of Supply is:

the location of goods at the time of delivery to recipient
Section 10(1)(d) Supply of goods assembled/ installed at site …..
Where the goods are assembled or installed at site, the place of supply shall be the place of such installation / assembly
Makes the furniture in Punjab

A and Office of the Customer
assembles it in customer’s office in Bihar
modular furniture maker in Bihar
in Punjab
Place of Supply is Bihar

= the place of assembly or installation of the furniture
In this case, as per Section 10(1)(d) - Place of Supply is:

the place of installation / assembly

Section 10(1)(e) Goods are supplied on board a conveyance …..
Where the goods are supplied on board a conveyance (including a vessel, an aircraft, a train or a motor vehicle), the place of supply shall be
the location at which such goods are taken on board
One stop-over flight (Ahmedabad to Hyderabad via Mumbai)
Ahmedabad Mumbai Hyderabad
Food taken on board in Mumbai

for sale during the flight
Place of Supply is Mumbai

= the place where goods were taken on board the conveyance
In these cases, as per Section 10(1)(e) - Place of Supply is:

the location at which such goods are taken on board (the conveyance)
B
Place of Supply
for goods imported / exported

Place of Supply – for goods imported/ exported
Section 11 of IGST Act
U/S 11 of IGST Act, Place of Supply of goods imported into / exported from India will be as follows:
Place of Supply – for Export / Import of Goods
For Goods imported* into India For Goods Exported# from India
POS POS
= Location of the Importer = Location outside India
* Import of goods means …. Bringing goods into India, from a place outside India s. 2(10) of IGST Act
# Export of goods means …. Taking goods out of India, to a place outside India s. 2(5) of IGST Act
Note that:
• Section 5 provides that IGST shall be levied on goods imported into India, as per Section 3 of Customs Tariff Act
• Point of taxation for import of goods = When custom duties are levied on the said goods
• Value on which tax would be levied = As determined under the Customs Act

Place of Supply – For goods imported/ exported
Section 11(a) and 11(b) of IGST Act
Illustration Section 11(a) and 11(b) Place of supply for import and export of goods …..
1 2
Crockery maker Supplies crockery Crockery Jute Exporter Exports Jute Bag dealer
from China jute bags to USA
in China dealer in in Kolkata in USA
Orissa
Place of Supply is Orissa Place of Supply is USA

= the location of importer = location outside India
U/s 11(a), Place of Supply for goods imported is: the location of the importer
Import of goods means …. Bringing goods into India, from a place outside India
U/s 11(b), Place of Supply for goods exported is: the location outside India
Export of goods means …. Taking goods out of India, to a place outside India

Place of Supply – For goods imported/ exported
Key ingredients / conditions of “Export of Services” and “Import of Services”
Particulars Export of Services Import of Services
1 Location of Supplier India Outside India
2 Location of Recipient Outside India India
3 Place of Supply Outside India India
4 Manner of Payment In convertible foreign exchange -
5 Relationship between: Not merely….. -

Supplier and Recipient establishments of distinct persons
** Explanation 1 to s.8 of IGST Act:

For the purpose of this Act, when a person has:
An establishment in India and any other establishment outside India
An establishment in a State or, Union Territory and any other establishment outside India
An establishment in a State or, Union Territory and any other establishment (being a business vertical registered within that State or, UT)
then, such establishments shall be treated as establishments of distinct persons

C
Place of Supply for Services

Where both supplier and recipient are in India

C1
Key Concepts & Definition


Place of Supply – Key Concepts
Location of Supplier of Service means ….. Section 2(15), IGST
Where Where Where In absence of

Supply is made from Supply is made from Supply is made from such places
a place of business, a place, other than more than one establishment –

where registration is the place of business, for which whether it is the Place of Business
obtained registration has been obtained or, Fixed Establishment
(e.g. a fixed establishment
elsewhere)
Location of Location of Location of Location of

Place of Business Such Fixed Establishment the establishment, most directly the usual place of
concerned with the residence of the
provision of supply Supplier

Illustration Location of Supplier of Service Section 2(15), IGST
Assume that:
A Chartered Accountant is based out of Delhi and is registered under GST in Delhi
The Delhi-based CA has got an assignment for conducting stock audit at four locations of the client, viz. Delhi, Hyderabad, Bangalore and Mumbai
The CA sends four different teams from Delhi, to each of these locations for conducting the stock audit at the client location
Food for thought:
o Whether the CA is required to obtain registration in all the other three locations, viz. Hyderabad, Bangalore and Mumbai
o What is the Location of Supplier in this case? - In this case, the location of supplier of service will continue to Place of Business of the CA, which is Delhi
Assume further in the above case that:

The Delhi-based Chartered Accountant has two more offices viz., in Bangalore and Mumbai, apart from Delhi head office
Accordingly, in GST era it has taken registration in the three states concerned, viz. Delhi, Karnataka and Maharashtra
Assume further that in lieu of sending teams from Delhi, the assignment is completed by local staff from each of the respective locations viz. Bangalore and
Mumbai
In this case:
o The location of supplier of service will be = Each of the respective locations, viz. Delhi, Bangalore and Mumbai

Place of Business
Where the
business is ordinarily carried on Where a taxable person
Where a taxable person
(including warehouse, godown or any is engaged in business
maintains books of accounts
other place where goods are stored, through an agent
provided or received)
A fixed establishment is:

a place, other than a place of business
Fixed characterized by:
Establishment o a sufficient degree of permanence; and
o suitable structure in terms of human and technical resources
to supply or to receive or to use the services for its own needs

Location of Recipient of Service means ….. Section 2(14), IGST
Where Where Where In absence of

Supply is received Supply is received Supply is received such places
at a place of business, at a place, other than at more than one establishment –

where registration is the place of business, for which whether it be the Place of Business
obtained registration has been obtained or, Fixed Establishment
(e.g. a fixed establishment
elsewhere)
Location of Location of Location of Location of

Place of Business Such Fixed Establishment the establishment, most directly the usual
concerned with the receipt of supply Place of Residence
of the recipient

C2

Section 12(2) , IGST Act

Place of Supply – For services (Both supplier and recipient are in India)
The provisions of this section shall apply to determine the place of supply of services where:
(a) the location of supplier of services and (b) the location of the recipient of services is in India
Place of Supply of Services (when both the supplier and recipient are in India)
In respect of 12 specific category of services,

For rest of the services (other than 12 categories of services stated above),
Place of Supply of Services
Place of Supply is determined by applying the
is determined
Default Rule for services u/s 12(2) (detailed on subsequent slide)
with reference to a Proxy

General Rule Section 12(2)(a) and 12(2)(b)
Recipient is a Recipient is a
registered person (B2B) under GST unregistered person (B2C) under GST
Section 12(2)(a) Section 12(2)(b)
Place of Supply will be: Place of Supply will be:

General Location of the recipient • Location of the recipient
Rule (if the recipient’s address is available in Supplier’s records)
• Location of the supplier (if the address is not available)
Key takeaway:
• Place of supply is crucial to determine whether the supply is a inter-state supply or intra-state supply
• Accordingly tax to be levied

Illustration Supply made to a Registered Person …..
Supplier of Service Recipient of Service

Provides consultancy services
(e.g. a Chartered Accountant) in Orissa
in Mumbai (a Registered Person)
Place of Supply of service is Orissa

= the location of the registered recipient
Other Practical Insights

• The supply in the above case will continue to remain as inter-state supply of service, even if the Orissa client takes
the consultancy in the Mumbai office of the Chartered Accountant
• This is so because of the operation of the default rule for a registered person (u/s 12(2) of IGST Act)
Location of Supplier = Mumbai
Place of Supply = Orissa (because the supply is to a registered person)

Illustration Supply made to a Unregistered Person (and, address of the recipient exists with Supplier) …..
Supplier of Service Provides consultancy services

Recipient of Service
in Mumbai in Lucknow (UP)
(an Unregistered Person)
Address of the Recipient Bangalore

exists
in the records of the Supplier, which is ….
Place of Supply of service will be as follows:

(a) Supplier is not aware of the actual place of receipt of the supply address on record
(b) Supplier has been communicated on the location of the recipient Lucknow

Illustration Supply made to a Unregistered Person (and, address of the recipient doesn’t exist with Supplier) …..
Supplier of Service Provides consultancy services

Recipient of Service
in Mumbai in Chennai
(an Unregistered Person)
Address of the Recipient

doesn’t exist
in the records of the Supplier
?
Place of Supply of service is Mumbai
= the location of the supplier

Illustration Supply made to a Person who does not have a Place of Business …..
Supplier of Service Recipient of Service

in Mumbai
Provides consultancy services in Chandigarh
(does not have a
Place of Business)
Place of Supply of service is Chandigarh

= the location of the usual residence of the recipient

Illustration Supply made to more than one establishment of the Recipient …..
Recipient at Kolkata
Recipient at Bihar
Provides
Supplier of Service Recipient at UP
Audit Services
in Mumbai to multiple offices
of a Company
Recipient at Mumbai HO
Most directly concerned with the
receipt of supply
Place of Supply of service is: Mumbai (Maharashtra)

= the location of the establishment most directly concerned with the receipt of supply

C3


1
Section 12 (3)
Supply of services in relation to immovable property (including hotel accommodation), viz. services in respect of:
(a) Immovable Property* OR Right to use immovable property OR Carrying-out / coordination of construction work
(b) Lodging accommodation by a hotel, inn, guest house, homestay etc. (incl. any house boat or any other vessel)
(c) Accommodation in any immovable property for organizing any marriage / reception OR official, cultural, religious, social functions etc.
(d) Ancillary services to any of the above services
Place of Supply of service will be:

• Location of the immovable property, boat, vessel
(as the case is)
P
If the location of the immovable property / boat / vessel is located (or, intended to be located) outside India, then the place of supply
shall be the location of the recipient
E
If Immovable property/ boat/ vessel is located in more than one State (or, Union territory), the supply of services is treated as made
in each of the States/UT - in proportion to the value of services collected / determined in term of contract OR in absence of such
contract, on such other basis as may be prescribed
Anjani Kumar Khetan * including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents Page | 98
Illustration on s. 12(3): PoS in respect of supply of service in relation to Immovable Property
Assume that:
Mr. A is an architect who is registered in Delhi and Mr. B is his client, who is also registered in Delhi
The client is opening a new office in Mumbai and in that connection the architect is providing designing services to Mr. B (for office to be constructed in Mumbai)
Determine: (a) Is the transaction intra-state or, inter-state (in the hands of the supplier-architect Mr. A)
Solution:
o In this case:
The location of supplier (the architect) is = Delhi
Place of Supply will be = Location of the immovable property (i.e. Mumbai Maharashtra)
o Hence, it will be an inter-state transaction and accordingly, IGST will be applicable
Architect
Mr. A
Client
Mr. B

Assume that:
Mr. A is an architect who is registered in Delhi and Mr. B is his client, who is also registered in Delhi
The client is opening a new office in Dubai (and not, in Mumbai) and in that connection the architect is providing designing services to Mr. B (for office to be constructed
in Dubai)
Determine: (a) Is the transaction intra-state or, inter-state (in the hands of the supplier-architect Mr. A)
Solution:
o In that case, the Proviso to s.12(3) will apply – which states that:
If the location of the immovable property / boat / vessel is located (or, intended to be located) outside India, then the place of supply shall be the
location of the recipient
Accordingly, in the changed scenario, the Place of Supply will be = Location of the recipient (i.e. Delhi)
o Hence, it will be an intra-state transaction and accordingly, CGST and Delhi SGST will be applicable
Dubai Office
Architect
Mr. A
Client
Mr. B

Assume that:
Mr. Sajjan is a builder who is registered in Delhi and Mr. B is his client, who is also registered in Delhi
The client has given Mr. Sajjan, a contract for construction of a road from Delhi to Mumbai, which will pass through five different states
Solution:
o In this case:
Place of Supply will be = Location of the immovable property (which will be all the five states involved)
However, the contract value need to be dividend between the States in reasonable proportion (by the supplier and the recipient)
Builder
Sajjan
Client
Mr. B

C4


Place of Supply of Services for the following ….. (when both the supplier and recipient are in India)
2
Certain Performance-based Services Section 12(4)
Restaurant and Catering Personal Grooming Fitness Beauty Treatment Health Services
Including Cosmetic & Plastic

Surgery
Place of
Supply =
of service
• Location where the services are actually performed

PoS of certain Performance-based Services Section 12(4)
Consider the following situation:
Mr. A is a Delhi-based person and is registered in Delhi

Clients of Mr. A
Mr. A Mr. A throws a dinner party for its customers
in a Mumbai Hotel Hotel Marriott
Hotel raises a bill of Rs. 400,000 on Mr. A

Location of Supplier = Maharashtra
PoS = Location where services are actually performed
Hence, PoS = Mumbai (Maharashtra)
Hotel will charge CGST + Maharashtra SGST

Mr. A is based out of Delhi

Patient
Mr. A
He comes to Mumbai for plastic surgery
in a Mumbai Hospital
Hospital raises an invoice of Rs. 500,000 on Mr. A

Location of Supplier = Mumbai (Maharashtra)
Hence, PoS = Mumbai (Maharashtra)
Hospital will charge CGST + Maharashtra SGST

Mrs. S Hussain is a Mumbai-based beautician,

registered under GST in Maharashtra
A Mumbai-based Beautician
Mrs. S Hussain
Renders beauty treatment services
to the star cast of …..
Mumbai-based Dharma Productions …..
@ the shooting location in Ooty, Tamilnadu
In the above case:

Location of Supplier (S Hussain) = Mumbai (Maharashtra)
Hence, PoS = Ooty (Tamilnadu)
The supplier will charge IGST

C5

Section 12(5) of IGST Act

3
Training and Performance Appraisal Services Section 12(5)
Supply made to a Supply made to a

Registered Person Unregistered Person
POS POS
= Location of the = Location where services are

Registered Person actually performed

PoS for Training & Performance Appraisal Services Section 12(5)
Mr. A is a registered person, based out of Delhi
He approaches, Mr. B (who is in Mumbai) Mr. B

Client Chartered Accountant
Mr. A for training its finance team in GST
Training Venue - Hotel Marriott, Mumbai
Mr. B – the Chartered Accountant - raises an invoice of Rs. 800,000 on Mr. A

Location of Supplier = Mumbai (Maharashtra)
PoS = Location of the Registered Person (and not, where services are actually performed), u/s 12(5)
Hence, PoS = Delhi
Hence, transaction is an inter-state transaction & accordingly, Mr. B will charge IGST

PoS for Training & Performance Appraisal Services Section 12(5)
GST training classes for various professionals spread across India

Mr. A is a registered person, based out of Delhi
Mr. A
Chartered Accountant
Professionals from
various locations
In this case:
Mr. A – the Chartered Accountant – is providing services from Delhi
As per s.12(5) of IGST Act, for unregistered persons (B2C) – PoS for training & performance appraisal services is the place where services are actually performed
Location of Supplier = Delhi
PoS u/s 12(5) = Location where services are actually performed, which is Delhi, in this case
Hence, this B2C transaction is an intra-state transaction & accordingly, Mr. A will charge CGST + Delhi SGST

C6


4
Services in respect of admission to an event Section 12(6)
Cultural Artistic Sporting Scientific Educational Entertainment Amusement Or, any other
Event Event Event Event Event Event Park place
+ services ancillary thereto …
Place of
Supply = Place where such event is held OR where the park / such other place is located
of service

PoS in respect of admission to an event Section 12(6)
Assume that PHD Chamber of Commerce is registered under GST in Delhi
Participants in the
The PHD Chamber of Commerce is organizing a GST program in Mumbai GST Program
The GST program is being conducted at a venue in Mumbai; and
The Chamber charges entry fee from participants attending this program
What is the PoS relating to admission to this event (& not, for organizing this event, which is covered in the next section) ?
As per s. 12(6), Place of supply (PoS) for admission to an event = Place where the event is held
The fact that the recipient is registered or, not does not change the PoS (which continues to remain as ‘the place where the event is held’)
In this case, the Location of Supplier (being PHD Chamber of Commerce) is = Delhi; &
Place of Supply (PoS) = Location where the event is actually held, which in this case is = Mumbai, Maharashtra
Hence, this transaction will be inter-state transaction (in the hands of the PHD Chamber of Commerce) & therefore it will charge IGST

C7


5
Services in relation to Organizing and arranging + Sponsorship of …. Section 12(7)
Cultural Artistic Sporting Scientific Educational Entertainment Amusement Or, any other
Event Event Event Event Event Event Park places
this will also include …

(Supply of services in relation to) Conference, Fair, Exhibition, Celebration or similar events
Supply made to a Supply made to any person other than Registered Person
Registered Person
Event held Event held
in India outside India
Place of
Supply Location
= of the registered person Place where the Location
of service event is held of the Recipient
E Where the event is held in more than one State (or, Union territory), and a consolidated amount is charged for the supply of services relating to
such event, the PoS of such services shall be taken as each of the respective States/UT - in proportion to the value of services
collected / determined in term of contract OR in absence of such contract, on such other basis as may be prescribed

PoS in respect of organising and arranging an event etc. Section 12(7)
Assume that PHD Chamber of Commerce is registered under GST in Delhi
The PHD Chamber of Commerce is organizing a GST program in Mumbai
The GST program is being conducted at a venue in Mumbai; and

For this purposes, the Chamber has hired an event management company (“Phase I”) – registered in Mumbai
What is the PoS relating to organizing this event (& not, for admission to this event, which was covered in the last section) ?
As per s. 12(7), Place of supply (PoS) for organizing an event = Location of the Registered Person (viz. location of the “Chamber” in this case)
In this case, the Location of Supplier (being “Phase I” of Mumbai) is = Mumbai (Maharashtra); &
PoS = Location of the Registered person, which in this case is = Delhi
Hence, this transaction will be inter-state transaction (in the hands of the event organizer “Phase I”) & therefore it will charge IGST

C8


6
Service for Transportation of Goods Section 12(8)
(Including goods transportation by mail or, courier)
Supply made to a Supply made to any person

Registered Person other than a registered Person
POS POS
=Location of the =Location at which such goods are

Registered Person handed over for their transportation

PoS in respect of service for transportation of goods (Incl. goods transport by mail / courier) Section 12(8)
Vijay Transport
Customer
Mr. Surendra
Assume that Vijay Transport is a GTA, which is registered under GST in Delhi
Mr. Surendra is a customer of Vijay Transport and is registered under GST in Maharashtra
The customer wants the GTA (Vijay Transport) to pick up goods from ‘Location A’ in Delhi, to be delivered to ‘Location B’ in Delhi itself
Assume that the transaction does not fall under reverse charge; rather the transaction is subject to forward charge (wherein GTA pays tax)
Determine whether the transaction is intra-state or, inter-state
As per s. 12(8), Place of supply (PoS) for B2B transaction for transportation of goods = Location of the Registered Person (viz. location of “Surendra” in this case)
In this case, the Location of Supplier (being Vijay Transport) is = Delhi; &
Place of Supply (PoS) = Location of the Registered person, which in this case is = Maharashtra
Hence, this transaction will be inter-state transaction (in the hands of the GTA “Vijay Transport”) & therefore it will charge IGST

PoS in respect of service for transportation of goods (Incl. goods transport by mail / courier) Section 12(8)
Vijay Transport
Customer
Mr. Surendra
Assume that Vijay Transport is a GTA, which is registered under GST in Delhi
Mr. Surendra is a customer of Vijay Transport from Maharashtra but is not registered under GST
The customer wants the GTA (Vijay Transport) to pick up goods from Location A in Delhi, to be delivered to a location in Maharashtra
Assume that the transaction does not fall under reverse charge; rather the transaction is subject to forward charge (wherein GTA pays tax)
As per s. 12(8), Place of supply (PoS) for B2C transaction for transportation of goods = Location where such goods are handed over for transportation
In this case, the Location of Supplier (being Vijay Transport) is = Delhi; &
Place of Supply (PoS) = Location where such goods are handed over for transportation, which in this case is also = Delhi
Hence, this transaction will be intra-state transaction (in the hands of the GTA “Vijay Transport”) & therefore it will charge CGST + Delhi SGST

C9


7
Service for Transportation of Passengers Section 12(9)
P
Supply made to a Supply made to any person Right to passage given for future use
Registered Person other than a registered Person but point of embarkation not known
at the time of issue of right to passage
POS POS POS
=Location of the = Location where the passenger = POS to be determined as per the
Registered Person embarks on the conveyance General rule u/s 12(2) of IGST Act
for a continuous journey**
E
For the purposes of s.12(9), the return journey shall be treated as a separate journey, even if the right to passage
for onward and return journey is issued at the same time
** As per s.2(3) of IGST Act - “continuous journey” means a journey for which a single / more than one ticket (or, invoice) is issued at the same time - either by a single supplier of service or through
an agent acting on behalf of more than one supplier of service - and which involves no stopover between any of the legs of the journey for which one / more separate tickets or invoices are issued.
Further, the term “stopover” means a place where a passenger can disembark either to transfer to another conveyance or break his journey for a certain period in order to resume it at a later point of time.

7
Mr. A is a registered person, based out of Bangalore
Mr. A (who is registered under GST in Karnataka) is travelling from Mumbai to Gujarat
Mr. A He walks-in to Indigo Airlines booking counter at Mumbai and books the ticket for travel to Baroda (Gujarat)
Mr. A also provides his GSTIN number at the time of booking the ticket
In this case:
Location of Supplier (Indigo Airlines) = Mumbai (Maharashtra)
PoS u/s 12(9) = Location of the Registered Person
Hence, PoS = Location of the Registered Person = Karnataka
Hence, transaction is an inter-state transaction & accordingly, the airlines will charge IGST

7
Mr. A is based out of Bangalore, but is not registered under GST
Mr. A (who is based out of Karnataka, but is not registered under GST) is travelling from Mumbai to Gujarat
Mr. A He walks-in to Indigo Airlines booking counter at Mumbai and books the ticket for travel to Baroda (Gujarat)
In this case:
Location of Supplier (Indigo Airlines) = Mumbai (Maharashtra)
PoS u/s 12(9) = Location where the passenger embarks on the conveyance for a continuous journey
Hence, PoS = Mumbai, Maharashtra
Hence, transaction is an intra-state transaction & accordingly, the airlines will charge CGST & Maharashtra SGST

7
This case is covered by s.12(9) of IGST Act

Accordingly, if the person is a registered person, the PoS = Location of the Recipient; &
If a person travels from Mumbai to Delhi and
then back to Mumbai, what is the PoS for the If the person is not registered, the PoS will be as follows:
o For the forward journey to Delhi: PoS = Mumbai (the place of embarkation)
supply of passenger transportation service? o For the return journey to Mumbai: POS = Delhi
This is because – in view of Explanation to s. 12(9) of IGST Act, the return journey is
treated as a separate journey
In this case, the place of embarkation will NOT be available at the time of issue of invoice by
Assume that Indigo Airlines issues a pass to Indigo Airlines – since the right to passage is for future use
Mr. Surendra for “anywhere travel in India”. Accordingly, the PoS in this case can’t be the place of embarkation
In this case, what will be the PoS? In these cases – as clarified by the Proviso to s. 12(9) of IGST Act – PoS will be determined by
applying the Default Rule u/s 12(2)

C10


8
Services provided onboard a Conveyance** like …. Section 12(10)
Vessel Aircraft Train Motor vehicle
Place of
Supply =
of service
• Location of the first scheduled point of departure of that conveyance
** As per s.2(34) of CGST Act - “conveyance” includes a vessel, an aircraft and a vehicle

PoS in respect of services provided onboard a Conveyance Section 12(10)
Assume that Indian Railways is registered under GST in Delhi
Assume further that the trains starts from Delhi and the final destination is Mumbai, Maharashtra
Mr. Surendra – who is registered in Noida (Uttar Pradesh) – boards the train from Delhi
Mr. Murali of Noida (Uttar Pradesh) – also board the train from Delhi, but he is not registered under GST
As a value added service, Indian Railways provides video game facility on board, on payment basis
Both Surendra and Murali start playing video game after the stopover in Jaipur (Rajasthan), on payment of required fees/payment
As per s. 12(10), Place of supply (PoS) for services supplied onboard a conveyance = Location of the 1st schedule point of departure of that conveyance
The above rule apply – irrespective of whether the recipient is a registered person or, an unregistered person
In this case, the Location of Supplier (being Indian Railways) is = Delhi; &
Place of Supply (PoS) = Location of the 1st schedule point of departure of that conveyance, which in this case is also = Delhi
Hence, this transaction will be intra-state transaction (in the hands of “Indian Railways”) & therefore it will charge CGST + Delhi SGST

C11


Place of Supply of Services (when both the supplier and recipient are in India) …… Section 12(11)
9
including data transfer, broadcasting,
(a) Services of fixed telecommunication

Supply of telecommunication services
line, leased circuits, internet leased Location where line / device is installed
circuit, cable or dish antenna
DTH, cable etc.
(b) Post-paid mobile connection for

Location of billing address of the recipient on record
telecommunication and internet services*
(c) Pre-paid mobile connection for Through internet: Location of recipient on record
telecommunication, internet services*, Through selling agents: Location of selling agent on record of supplier
and DTH Television Services Though others: Location where pre-payment received / vouchers sold
* In cases not covered in (b) and (c) above, address of recipient on records shall be the place of supply; and
where no address of the recipient is available in records, location of the supplier shall be the place of supply

C12

Section 12(12), 12(13) and 12(14) of IGST Act

Supply of:
10 11 12
Section 12(12) Section 12(13) Section 12(14)
Banking and Other Insurance Services Advertisement Services
Financial Services to Government, etc.
incl. Stock Broking Services
Location of recipient Registered recipient: Place of Supply is:

in suppliers records Location of the recipient
Place of State of dissemination
Unregistered recipient:
Supply = (If not available, in proportion
location of the supplier) Location of the recipient
of service
in the supplier’s records

D

Where either supplier or recipient is outside India

Place of Supply – For services (Either supplier or recipient is outside India)
Prelude
In respect of 10 specific category of services

For rest of the services (other than 10 categories of
covered u/s 13(3) through s. 13(13)
services stated above), Place of Supply
Place of Supply is determined
is determined by applying the
with reference to a
Default Rule for services
Proxy
Detailed in subsequent slides
Section 13 (1) The requirements of section 13 shall apply for determination of Place of Supply (PoS) of services where:
Either the location of the supplier of services or the location of the recipient of services is outside India
Section 13 (2) The default rule for Place of Supply of Services, when either supplier of recipient is outside India – is given in s.13(2)
As per s.13(2), the Place of Supply of services - except for services specified u/s 13(3) through s. 13(13) – shall be:
= the location of the recipient of services
P
However, where the location of the recipient of services is not available in the ordinary course of business, the place of supply shall be:
= the location of the supplier of services

Place of Supply of Services (when either the supplier or the recipient is outside India)
Place of Supply for Services Section 13(2)
Where location of the Recipient Where location of the Recipient

is available in the is not available in the
ordinary course of business ordinary course of business
General Place of Supply will be: Place of Supply will be:

Rule Location of the recipient • Location of the supplier

Section 13 : Place of Supply of Services (when either the supplier or the recipient in outside India)
1 s. 13(3) 2 s. 13(4) 3 s. 13(5) 4 s. 13(8) 5 s. 13(9)
Services when goods Services supplied Transportation of
Service by way of Banking services to
required to be made directly in relation to admission to / goods (other than by
physically available immovable property account holders, way of mail / courier)
organising an event, intermediary services,
by recipient or (including etc. and ancillary hiring of means of
requiring physical hotel accommodation) services transport (other than
presence of receiver / aircraft and vessels)
person acting on his up to 1 month
behalf
Location of such
immovable Place where the
Location where Location of Destination of
property (or event is
services actually supplier the goods
where it is actually held
performed
intended to be
located)
1 to 3 above When supplied at more than one location (including India) Deemed location in India.
1 to 3 above When supplied from more than one state / UT In proportion to the value of
services
Section 13 : Place of Supply of Services (when either the supplier or the recipient in outside India)
6 s. 13(10) 7 s. 13(11) 8 s. 13(12) 9 s. 13(2) 10 s. 13(13)
To prevent double
Passenger Service provided on Online information Residuary taxation/ non-
transportation service board a conveyance and database access or taxation, or for the
retrieval services uniform application of
rules, CG has power
to notify services/
circumstances
Location of the
Place where First scheduled recipient;
passenger embarks point of Place of effective
Location of If not available in
on the conveyance departure of that use and
recipient the ordinary
for a continuous conveyance for course of business, enjoyment of a
journey that journey location of service
supplier

E
Place of Supply for OIDAR

(Online Information Database Access Retrieval)

Place of Supply – for OIDAR
Section 14 of IGST Act
In case of, Online Information and database Access or Retrieval (OIDAR) services Section 14(1)
By
Any person located in a non-taxable territory

To
A non-taxable online recipient
The supplier of services, who is located in a non-taxable territory shall be liable for paying IGST
&
However, in cases where a person located Further, if such OIDAR supplier does not have a
For payment of the applicable IGST – referred to in s.14(1)
in the taxable territory is representing physical presence (or, does not have a representative
the supplier of such OIDAR services shall take such supplier of OIDAR services – then for any purpose) in the taxable territory, then he may
a single registration under the that representative of the supplier appoint a person in the taxable territory for the
Simplified Registration Scheme (to be notified by the shall get itself registered under GST & purpose of paying IGST and then the person
Government)
pay IGST on behalf of the OIDAR supplier so appointed shall be liable for payment of such tax

Q&A
Thank You
(GST)

Valuation under GST
Section 15

Valuation

Primary Literature Governing Valuation
Section under CGST Act
Sec 15 Value of Taxable Supply
CGST Rules for Valuation

Rule 27 Valuation – when consideration is NOT wholly in money
Rule 28 Valuation – when Supply is between related persons / distinct persons (other than an agent)
Rule 29 Valuation – when Supply of goods is made or received through an agent
Rule 30 Valuation – based on (Cost +10%)
Rule 31 Valuation – using a “reasonable means” (Residual Method)
Rule 32 Valuation – in respect of certain specific supplies
Rule 33 Valuation – in respect of supply of services as a pure agent
Rule 34 Exchange rate for determination of “Value”
Rule 35 Value of supply inclusive of Integrated Tax, Central Tax, State Tax or, Union Territory Tax

Value of Taxable Supply
Section 15 of CGST Act

Value of a taxable supply – Section 15
Value of a “Supply” Transaction Value*, which is =

the price actually paid / payable for the supply of goods / services / both
of goods / services / both
Provided
u/s 15(1) The supplier and the recipient are not related; and
The price is the sole consideration for the supply
* Transaction Value is subject to certain inclusions and exclusions as per Section 15(2) and 15(3)
Where the value of supply can’t be determined as above, it shall be determined

in such manner as may be prescribed, viz. by applying Valuation Rules s.15(4) of CGST Act
Value of such supplies – as notified by the Government, on the recommendation of the GST Council –
shall be determined in such manner as may be prescribed s.15(5) of CGST Act

Value of a taxable supply – Section 15
Value of supply u/s 15
Whether price is the No

sole consideration for the supply?
Yes
Supply is to be valued
Yes as per Valuation Rules
Whether the supplier & recipient are related?
(under Chapter IV of CGST Rules 2017)
No
Yes
Whether the supply is a notified supply u/s 15(5)?
No
Assessable Transaction Certain Inclusions & Exclusions

= +
Value Value u/s 15(2) and 15(3)

Transaction Value
How Determined?

Amount
to be included
in Computing Transaction Value

Transaction Value – How determined?
Section 15(2) Amount includible in computing “Transaction Value” ……….
Transaction Value u/s 15

which is
s.15(1) s.15(2)(a) s.15(2)(b) s.15(2)(c) s.15(2)(d) s.15(2)(e)
Any Amount paid Incidental Interest / Late

Subsidies
Price tax, duty etc. by the Expenses * Fee / Penalty
directly
Paid / recipient charged by for delayed
linked to
Payable Other than on behalf of supplier to payment of
Price **
GST the supplier the recipient consideration
Note 1 Note 2 Note 3
Note 1 If charged separately by the supplier e.g. if toll tax charged by a taxi operator in the bill, GST to be charged on value including toll tax
Note 2 Representing the amount that the supplier is liable to pay, but has been incurred by the recipient and is not included in the price
e.g. In case of transportation of goods from Mumbai to Bangalore – cost of Petrol is incurred by the recipient and not included in price
Note 3 This will also include any amount charged by the supplier to the recipient – for anything done by the supplier in respect of the ‘supply’ –
at the time of (or, before the delivery of) goods / services / both e.g. Out of pocket expenses, charge for special safe packing etc.
* Including commission and packing charges
Anjani Kumar Khetan ** However, subsidies provided by CG / SG – not to be included in transaction value Page | 150
Amount liable to be paid by supplier (CA in this example), but incurred by recipient (client in this example)
Section 15(2)(b)
Any amount that the
supplier is liable to pay in
relation to such supply but
which has been incurred by
the recipient of the supply
and not included in the
price actually paid or
payable for the goods or
&
services or both
Provides professional opinion
for Rs. 200,000
GST, to be paid on Rs. 210,000 (being Rs. 200,000 + Rs. 10,000)

Incidental Expenses incurred in respect of Supply of Goods / Services
Section 15(2)(c)
Incidental expenses (Including Manufacturer Customer
commission and packing),
Supply of goods for Rs. 500,000
charged by the supplier to
the recipient of a supply
&
any amount charged
for anything done
by the supplier
in respect of the supply of
goods / services / both
at the time of or before
Freight charge of Rs. 30,000
delivery of (charged to the customer)
goods or supply of services
For instance: GST, to be paid on Rs. 530,000 (being Rs. 500,000 + Rs. 30,000)
Out of pocket expenses
Charge for special safe packing etc.

Interest / Late Fee / Penalty for delayed payment of consideration
Section 15(2)(d)
Interest / late fee /penalty Raises invoice of Rs. 1000 on 7th Dec 2017
for delayed payment
of any consideration Payment is to be made by 20th Dec 2017
for any supply failing which, late payment fee of Rs. 100 to be charged
Payment including late fee actually received on 2nd Jan 2018
Late fee of Rs. 100 will be includible in the Value of Supply
Time of Supply
for the late fee Date of payment
(as per s. 12(6)

Subsidies directly linked to the price (excl. subsidies provided by CG / SG)
Section 15(2)(e)
E
Subsidies directly linked to the price (excluding subsidies provided by the Central Government and State Governments)
Not includible
is in the
Value of Supply
Provided by Central Government / State Government
Subsidy Supplier

Amount
to be excluded
in Computing Transaction Value

Section 15(3) Transaction Value shall NOT include ……….
Any discount given Any discount given

BEFORE or AT THE TIME & AFTER the Supply has been effected
of Supply
IF 1
IF
Such discount is duly recorded in the Such discount is established in terms of an
invoice issued in respect of such supply agreement, entered into by the supplier and
the recipient:
(a) at or before the time of such supply; and
(b) is specifically linked to relevant invoices
&
2
ITC, attributable to such discount has been
reversed by the recipient (on the basis of
document like credit note issued by the supplier)

Treatment of Pre-supply and Post-supply Discount u/s 15(3) ……….

Discount given …..
u/s 15(3)(a) u/s 15(3)(b)
At the time of Before the
Supply Supply
After the Supply
Discount shown on the invoice …..

Discount is in terms of the agreement that existed at the time of supply
Yes No Discount can be linked to the relevant invoices; and
Proportionate ITC is reversed by the recipient (of supply)
Don’t include discount Include discount
in the value of supply in the value of supply Yes No
Don’t include discount Include discount

in the value of supply in the value of supply

Valuation Rules

Valuation Rules – An Overview
Rule 27 Valuation – where consideration is NOT wholly in money
Rule 28 Valuation – Supply between Distinct Persons / Related Persons (other than through agent)
Rule 29 Value of supply of goods – made or, received – through an “agent ”
Rule 30 Valuation, based on (Cost + 10%)

Valuation
Rules Rule 31 Valuation, using “Reasonable Means” - Residual Method
Rule 32 Valuation in respect of certain specific supplies (at the option of the supplier)
under
CGST Act Rule 33 Value of supply of services, in case of a “pure agent”
Rule 34 Exchange Rate for currencies other than INR (for determination of Value)
Tax computation, when value of supply is inclusive of Integrated Tax, central Tax, State
Rule 35
tax, Union Territory Tax etc.

Valuation Rules – Broad Principles
Broad Valuation Principles
E “Open market value” of a supply of goods or services or both means:

the full value in money (excluding the integrated tax, central tax, State tax, Union
territory tax and the cess) payable by a person in a transaction, where:
(a) the supplier and the recipient of the supply are not related; and
(b) price is the sole consideration, to obtain such supply at the same
time when the supply being valued is made
E The expression “supply of goods / services / both of like kind and quality” means:
any other supply of goods / services / both - made under similar circumstances - that is
the same (or, closely or substantially resembles) as the first mentioned supply of goods
or services or both (in respect of the characteristics, quality, quantity, functional
components, materials, and the reputation of the goods or services or both)

Valuation Rules – Rule 27
Rule 27 In cases, where consideration is NOT wholly in money, determine Value of Supply …..
Basis Illustration 1 (Exchange Transaction)
1 Assume that a new mobile phone is supplied for Rs. 20,000 –
Open Market Value (OPV)* of such supply along with exchange of an old mobile phone
Else If the price of the new phone (without exchange) is Rs. 24,000 –
2
the OMV of the new phone is Rs. 24,000
Consideration Amount equivalent to Illustration 2 (Barter Transaction)
in money consideration which is not in money Assume that a laptop is supplied for Rs. 40,000 – along with a
If such amount is known at the time of supply 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 –
Else but the OMV of the laptop is not known
3
Value of goods / services / both of like kind and quality $ In this case, the Value of the supply of laptop will be:
Rs. 44,000 (being Rs. 40,000 plus Rs. 4,000)
Else
4 E $ Note that the expression “supply of goods / services / both of like kind
Consideration Amount equivalent to and quality” means any other supply of goods / services / both - made
consideration which is not in money under similar circumstances - that is the same (or, closely or substantially
in money resembles) as the first mentioned supply of goods or services or both (in
By applying Rule 30# or Rule 31&, in that order respect of the characteristics, quality, quantity, functional components,
materials, and the reputation of the goods or services or both)
E * “Open market value” of a supply of goods or services or both means the full value in money (excluding the integrated tax, central tax, State tax, Union
territory tax and the cess) payable by a person in a transaction, where (a) the supplier and the recipient of the supply are not related and
(b) price is the sole consideration, to obtain such supply at the same time when the supply being valued is made
Anjani Kumar Khetan # On the basis of (Cost + 10%) & Residual Method, viz. Reasonable Means Page | 161
Rule 28 Valuation in respect of Supply between Distinct Persons / Related Persons (other than through agent)
In the above case (where supply is between distinct persons / related persons), determine Value of Supply …..
Basis
1 P
Open Market Value (OPV) of such supply However, in cases where goods are intended for
Else further supply as such by the recipient (who is a
2 distinct person / related person) – the supplier may
Value of goods / services / both of like kind and quality opt to consider value of supply :
Else
= 90% of the price charged for the supply of goods of
3
Determination of .... Value of Supply ……. like kind and quality by the recipient to his
will be …….. final customer (not being a related person)
By applying Rule 30# or Rule 31&, in that order
P
Further, in cases where the recipient (who is a distinct person / related person) – is eligible for full Input Tax Credit (ITC),
the value declared in the invoice shall be deemed to be the Open Market Value (OMV) of the goods / services
Value of supply of goods (but not, services) – made or, received – through an “agent ”
Rule 29
viz. Value of supply of goods between Principal and Agent
If supply of goods (but not, services) is between the Principal and an agent, determine Value of Supply …..
Basis
Open Market Value (OPV) of such supply
OR at the option of the Supplier …..
@ 90% of the price charged for the supply of goods

1 of like kind and quality by the recipient to his final customer (not
being a related person) – if the goods are intended for
further supply by the said recipient
Principal Agent (Unrelated) Customer
Rs. 90 Rs. 100
Else
Value of Supply shall be determined ……..

2 By applying Rule 30# or Rule 31&, in that order
Illustration on subsequent slide ……..
Illustration …….. Rule 29 Value of supply of goods – made or, received – through an “ agent ” …..
Assume that:
A principal supplies groundnut to his agent
The agent is supplying groundnuts of like kind and quality in subsequent supplies (to customers, who are not related persons) at a price of
Rs. 5,000 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 Rs. 6,000 per quintal
Principal
In this case, as per Rule 29, the Value of Supply will be:
Rs. 6000 per quintal (being the OMV)

Agent Sells @ Rs. 6000 per Quintal Independent Supplier OR
At the option of the Supplier …..

Sells @ Rs. 5000 per Quintal
Rs. 4500 per quintal (being 90% of Rs. 5000)
(Unrelated)
Customer

Rule 30 Valuation, based on (Cost + 10%)
If the value of a supply of goods / services / both is NOT determinable, by applying any of the earlier Rules, (viz. Rule # 27, 28 or 29) – the
taxable value shall be:
o 110% of cost of production / manufacture / cost of acquisition of such goods
OR
o 110% of cost of provision of such service
when Rule 27 Rule 28 Rule 29
Practical Insights
When any of the more specific methods prescribed are unavailable (for specific reasons), this rule may be applied
Put differently, although this method appears simple, it can be applied only when it is established that the other more specific rule and
the specific methods under those rules are unable to yield an acceptable value for the supply under inquiry
This rule applies to both goods and services supplied
Cost Accounting Standards may be relied upon to determine “cost”, for purposes this rule

Rule 31 Valuation, using “Reasonable Means” - Residual Method
If the value of a supply of goods / services / both can’t be determined, by applying any of the earlier Rules, (viz. Rule # 27 to Rule # 30) –
the taxable value shall be determined using:
o Reasonable means, consistent with:
(a) the principles u/s 15 (dealing with valuation) and
(b) the general provisions of Section 15 (dealing with valuation) and the provisions of this chapter
when Rule 27 Rule 28 Rule 29 Rule 30
P
However, in case of supply of services, a supplier may opt to apply this rule, ignoring Rule 30
Practical Insights
Where the taxable value cannot be determined by any other method, this rule authorizes the use of ‘reasonable means’ - to arrive at
the taxable value
However, these ‘reasonable means’ must be commensurate with the principles of section 15 (dealing with valuation)
This rule applies to both goods and services supplied

In respect of specific supplies specified under this Rule, the Supplier has an option to determine the value of taxable supply, as
specified in this Rule. This will be irrespective of anything else contained in the provisions of this chapter (dealing with ‘valuation’)
The specific supplies, whose valuation is covered under this Rule, are as follows:
A. Services for purchase / sale of a foreign currency (including money changing)
B. Services provided by an air travel agent, for booking air travel tickets
C. Services in relation to life insurance business
D. Buying and selling of second hand goods
E. Value of a token / a voucher / a coupon / a stamp (other than postage stamp) – redeemable against a supply of goods / service/ both
F. Value of taxable services, provided by such class of service providers as may ne notified by the Government, on the
recommendation of GST Council

A Services for purchase / sale of a foreign currency (including money changing)

Option 1
One of the currencies exchanged is INR P

Neither of the currencies exchanged is INR
viz. Foreign currency is exchanged for INR e.g. USD for INR
viz. Foreign currency is exchanged for Foreign Currency
e.g. USD for GBP
RBI RR is available RBI RR is not available
P = 1% * [ first currency exchanged * RBI RR& ]

Taxable = (SR# or, BR$) minus RR& * Units = 1% of the gross amount of INR OR
Value See illustration below provided or received by the person 1% * [ second currency exchanged * RBI RR& ]
changing the money
whichever is lower
P However, a person supplying the above services may exercise the option to ascertain the taxable value, as given in
Option 2 of the next slide
Assume that Rs. 70,000 is changed into GBP and the exchange rate offered is Rs. 70 , thereby giving the customer GBP 1000 (for exchange of Rs. 70,000)
Assume further that the RBI reference rate for GBP on that date is Rs. 69
In this case, the taxable value shall be = Rs. 1000 [ being (70 – 69) * 1000 ]
# SR = Selling Rate $ BR = Buying Rate & RR = RBI Reference Rate Page | 168
Anjani Kumar Khetan
A
Services for purchase / sale of a foreign currency (including money changing)
Option 2 (at the option of the Supplier of the above service)
The person supplying the service may also exercise the following option to ascertain the taxable value
Amount of currency Value of service, as per slab Condition

exchanged
Rs. 250 to Rs. 1,00,000 1% of the gross amount of currency exchanged Minimum Rs. 250
Rs. 1,00,001 to Rs. 10,00,000 Rs. 1,000 + 0.50% (of the amount exchanged in excess of Rs 1 lac up to Rs. 10 lacs)
Above Rs. 10,00,000 Rs. 5,000 + 0.10% (of the amount exchanged in excess of Rs 10 lacs) Maximum Rs. 60,000
Once this option is opted for, it cannot be withdrawn during the remaining part of the financial year

B
Services Provided by Air Travel Agent (for booking air travel tickets)
Domestic Booking International Booking
Taxable = 5% of Basic Fare* = 10% of Basic Fare*

Value
E * Basic Fare means that part of air fare, on which commission is normally paid to the air travel agent by the airlines
It should be noted that the commission to the travel agent may flow from (a) the passenger OR (b) from the airline OR (c) from any other person
&
the taxable value determined here (as mentioned above) - will be for all the sources of commission

C
Services in relation to Life Insurance Business
for for in
Gross Premium Charged* Single Premium Annuity Policy All Other Cases
Amount allocated Year 1:

Gross = 10% of Single Premium Charged
Taxable = less for investment / = 25% of Premium Charged
Premium
Value savings
of Supply Subsequent Years:
If intimated to the policyholder
= 12.50% of Premium Charged
at the time of supply of service
P
The above rule shall not apply, where the entire premium is only towards the risk cover in life insurance
* Gross amount charged for: (a) Risk Premium + (b) Investment Policy (if such amount is intimated)

D
Taxable Services provided by Person dealing in Buying & Selling of Second Hand Goods*
Gross Profit from the trading activity

Taxable
Value OR
of Supply
( Selling Price less Purchase Price $ )
However, if the value of supply is negative (i.e. SP < Purchase Price), it shall be ignored
P $ In case, where goods have been re-possessed (for the purpose of recovery of a loan / debt) from a defaulting borrower, who is not registered:
Value of goods shall be deemed to be = the purchase price of such goods by the defaulting borrower
less: 5% of every quarter or, part thereof – between:
(a) the date of purchase and
(b) the date of disposal by the person, making such repossession
o Note that ‘used goods’ are not the same as “pre-owned goods which
have not been put to use”. For instance, a motor car that is registered
* For this purpose, “second hand goods” means: with an RTO - even if left unused for long time - will still be
a. ‘used goods’ as such; or considered as an “used goods”. Similarly, if the odometer reading of
b. ‘used goods’ after minor processing, which does not change the nature of the goods a car shows ‘0 kms’ but the car is duly registered with a RTO – it will
still be considered as “used”
& o Also, this rule not only applies to ‘supply of second-hand goods’ but
where no ITC has been availed on the purchase of such goods also to supply of services of person dealing in second-hand goods

E
Value of a token / voucher / coupon / a stamp (other than postage stamp)
which is redeemable against a supply of goods / services / both
Taxable
Value Money value of the goods / services / both, redeemable against such token, voucher etc.
Assume that Mr. Surendra availed membership of a hotel

The hotel provides:
o 20 vouchers of aroma body massage and hair spa services costing Rs. 2500 each ; and
o 5 gift vouchers of Rs. 800 each
In this case, the taxable value of the vouchers shall be = Rs. 54,000 [ being (20 * 2500) + (5 * 800) ]

F
Value of services (but not goods) between related persons*/ distinct persons** in the course of (or, in furtherance of) business
Proviso: Gifts of less than Rs. 50,000 in value in a FY by employer to employee – not to be treated as supply
Value of taxable services (but not, goods) provided by

such class of service providers, as may be notified by the Government
(on the recommendation of GST Council) – Shall be
deemed to be
as referred to in paragraph 2 of Schedule I (dealing with Deemed Supplies Nil
without consideration) - between distinct persons
where ITC is available
* as defined in Explanation to Section 15(5) of the CGST Act – dealing with Valuation, viz. ‘Value of Taxable Supply’
** as defined in Section 25(4) of the CGST Act – dealing with ‘Procedure for Registration under GST’

Rule 33 Value of supply of services, in case of a “pure agent”
So far as valuation under GST is concerned, “agency supplies” are different from ‘pure agent’
This rule applies only to supply of services (and, not to ‘goods’)
The Rule provides for the exclusion from valuation of any supply of certain costs and expenses if and only if certain conditions are satisfied (as
mentioned below)
As per Rule 33, the expenditure / 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, viz.
1. 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)
2. 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
3. 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
The question is: Who is a ‘Pure Agent’? Refer to the next slide

Rule 33 Value of supply of services, in case of a “pure agent”
E Meaning of “Pure Agent” Illustration
For the purpose of this rule, “Pure Agent” means a person who: Assume that:
enters into an agreement with the recipient of supply - to act M/s ANSR Inc. is engaged to handle the legal work pertaining to the
as his pure agent to incur expenditure / costs - in the course of incorporation of ABSPL
supply of goods/ services / both
Other than its service fees, ANSR also recovers from ABSPL,
neither holds (nor, intends to hold) any title to the goods / services / registration fee and approval fee for the name of the company paid to
both so procured / supplied as pure agent of the recipient of supply the Registrar of Companies (ROC)
does not use - such goods / services so procured - for his The fees charged by the ROC for the registration and approval of the
own interest and name are compulsorily levied on ABSPL and that ANSR is merely
acting as a pure agent in the payment of those fees
receives only the actual amount incurred to procure such goods or
services, in addition to the amount received for supply he provides In the above case, ANSR’s recovery of such expenses is a disbursement
on his own account and not part of the value of supply made by ANSR to ABSPL

Rule 34 Exchange Rate to be used for currencies other than INR (for determination of Value)
Note that:
Transactions undertaken in foreign currency must be translated into Indian Rupees
Accordingly, for the determination of the value of taxable goods / services / both, rate of exchange shall be the applicable RBI reference rate
for that currency as on the date of time of supply in respect of such supply of goods / service (as contemplated u/s 12 or u/s 13, as the case is)
For the purpose of determination of Shall be Applicable RBI Reference Rate for that currency
value of taxable goods / services / both - On the date of “time of supply” of such supply of goods/services
the rate of exchange (of currency other than INR) u/s 12 or u/s 13 (as the case is)

Tax computation, when value of supply is inclusive of Integrated Tax, central Tax, State tax, Union
Rule 35
Territory Tax etc.
Where the value of supply is inclusive of integrated tax, central tax, State tax, Union territory tax - as the case may be -
the tax amount shall be determined in the following manner ….
Tax Value of Supply (inclusive of taxes) % age tax rate included in the Value of Supply
X
Amount (100 + %age tax rate included in the Value of Supply)
Illustration:
Assume that the value of a taxable supply (inclusive of IGST of 18%) is Rs. 590
In this case, tax amount (included in the value of supply) will be Rs. 90 - as computed below:
Rs. 590 18
Tax Amount = x
(100 + 18)

Q&A
Thank You
(GST)

Input Tax Credit (ITC)
under GST

Literature Governing ITC

Primary Literature Governing Input Tax Credit (ITC)
Relevant Sections for Input Tax Credit (ITC) under CGST Act
Section 16 Section 17 Section 18 Section 19 Section 20 Section 21

1 2 3 4 5 6
Eligibility Apportionment of Credit Availability of ITC ITC for Manner of Manner of Recovery
& & in Inputs & Capital Goods Distribution of ITC of ITC
Conditions Blocked Credit u/s 17(5) sent for
Special by ISD Distributed in Excess
for taking ITC Circumstances Job Work by the ISD
r/w Rule 36, 37 r/w Rule 38, 42, 43 r/w Rule 40, 41, 44 r/w Rule 45 r/w Rule 39
CGST Rules for ITC

Rule 36 Documentary requirements and conditions for claiming ITC
Rule 37 Reversal of ITC in case of non-payment of consideration
Rule 38 ITC for a banking company or, a financial institution
Rule 39 Procedure for distribution of ITC by ISD (Input Service Distributor)
Rule 40 Manner of claiming input tax credit in special circumstances
Rule 41 Transfer of credit on sale, merger, amalgamation, lease or, transfer of business
Rule 42 Manner of determination of ITC in respect of input & input services and reversal thereof
Rule 43 Manner of determination of ITC in respect of capital goods and reversal thereof in certain cases
Rule 44 Manner of reversal of input tax credit under special circumstances
Rule 45 Conditions and restrictions in respect of inputs and capital goods sent to job worker

Detailed mapping of Sections & Rules relating to Input Tax Credit
Section 16 Eligibility & Conditions for taking ITC
• Components of ITC s. 2(19), (59), (60), (62) and (63)
• Eligibility for claiming ITC s. 16(1)
• Conditions for claiming ITC (Incl. time limit for making payment to Suppliers) s. 16(2) + Rule 36 and Rule 37
• ITC on Capital Goods s. 16(3)
• Maximum time allowed for claiming ITC (Before 20th Oct of next FY) s. 16(4)
Other sections relevant
Section 17 Apportionment of Credit & Blocked Credit for ITC
• Business vs. Non-Business and Taxable vs. Exempt Supplies s. 17(1) to 17(3) + Rules 42 + Rule 43
• ITC for Banking, Financial Institutions and NBFCs s. 17(4) and Rule 38 s. 42 & s. 43
• Blocked Credit (or, In-eligible Credit) s. 17(5)
Matching, Reversal and
Section 18 ITC in Special Circumstances Reclaim of:
• Input Tax Credit (ITC) and
• ITC on Stocks (on the date of registration) s. 18(1) to 18(2) + Rule 40 • Output Tax Liability
• Transfer of Credit in case of sale, amalgamation, merger etc. s. 18(3) and Rule 41
• Reversal of ITC (if Composition is opted / registration cancelled) s. 18(4) and Rule 44
Section 19, 20, 21 Other sections dealing with ITC

• ITC on goods sent for job work s. 19 + Rule 45
• Manner of distribution on ITC by Input Service Distributor (ISD) s. 20 + Rule 39
• Manner of recovery of ITC, distributed in excess by the ISD s. 21

Basic Concepts in respect of Claiming ITC

Key concepts in respect of Input Tax Credit (ITC)
Input Tax Credit (ITC)
Section 2(63) Input Tax Credit (ITC) means credit of input tax
Input Taxes that are Eligible for Credit … Components of Input Tax Credit (ITC)
Input Tax u/s 2(62) Input u/s 2(59) Input Services u/s 2(60)
Input tax, in relation to a RTP *, means: Under Section 2(59), Input means: U/S 2(60), Input Services means:
IGST ** , CGST, SGST & UTGST Any goods (other than capital goods) used / Any service used / intended to be used by a
charged on intended to be used by a supplier – in the course supplier – in the course / furtherance of
any supply of goods / services / both – of (or, in furtherance of) business business
made to him
Input tax:
includes:
o Tax paid on reverse charge basis; and
o IGST charged on import of goods
Capital Goods u/s 2(19)
BUT does not include:
tax paid u/s 10 (under Composition Levy) Section 2(19) Capital Goods means:
Goods, the value of which is capitalized in the books of account of the person, claiming
the input tax credit and which are used / or intended to be used in the course /
* Registered Taxable Person furtherance of business
** Including that on import of goods
Input Tax Credit (ITC) can be utilised for payment of Output Tax Liability under GST

Mechanism of Input Tax Credit (ITC)
Payment towards:
Deposit made by a person: • tax
Credited to Electronic • interest
• By internet banking or, & can be used for
Cash Ledger • penalty
• By using debit / credit cards or, • fees
• By NEFT or RTGS • any other amount
payable under the Act
Input tax charged on

any supply of goods / services / both, Credited to Electronic (Only for) payment of output tax …..
& can be used ….
which are used (or, intended to be used) Credit Ledger in the following order:
in the course (or, furtherance) of business
Output Tax Type Output Tax Type Output Tax Type Output Tax Type
1. IGST 1. CGST 1. SGST 1. UTGST

ITC Pool of ITC Pool of ITC Pool of ITC Pool of
2. CGST 2. IGST 2. IGST 2. IGST
IGST 3. SGST
CGST 3. SGST
SGST 3. CGST
UTGST 3. CGST
4. UTGST 4. UTGST 4. UTGST 4. SGST
* The numbers in the above table represent the order of utilization of credit

ITC Related Provisions
Section 16, CGST Act

Section 16 – an overview
Section 16 Eligibility & Conditions for taking ITC
1 • Eligibility for claiming ITC s. 16(1)
2 • Conditions for claiming ITC (Incl. time limit for making payment to Suppliers) s. 16(2) + Rule 36 and Rule 37
3 • ITC on Capital Goods s. 16(3)
4 • Maximum time allowed for claiming ITC (Before 20th Oct of next FY) s. 16(4)

1
Eligibility for Claiming ITC

Section 16(1), CGST Act

Eligibility for claiming Input Tax Credit (ITC) – Section 16(1)
Who can claim ITC ?
1 Every registered person
Section 2 shall be entitled to take credit of input tax

16(1) 3 charged to him - on any supply of goods or services or both
of 4 which are used (or, intended to be used)
CGST Act 5 in the course or furtherance of his business; and

6 the said amount will be credited to electronic credit ledger of such person
Claim for ITC is subject to:
such terms and restrictions as may be prescribed (CGST Rules 36 to 45); and
Manner of claiming ITC specified u/s 49 (dealing with Payment of tax, interest, penalty and other
amounts)
o Section 17(5) provides for a list of input supplies which are not eligible for ITC ...
o ITC pertaining to these supplies is termed as ‘Blocked Credit’ (discussed in subsequent slides)
Section 16 Section 49 CGST Rules 36 to 45

Eligibility & Conditions for taking ITC Payment of Tax, Interest, Penalty & Other Amounts

2
Conditions for Claiming ITC


Conditions for claiming ITC – Section 16(2)
Conditions to be satisfied before claiming ITC ……
- No registered person
Section
16(2) - will be entitled to take credit of any input tax
of - in resect of any supply of goods or services or both – to him
CGST Act
- unless he satisfies all the following conditions (cumulative conditions) …..
1 2 3 4
Tax on such supply

Possession of Receipt of Furnishing of
has been paid
Tax-paying Goods or Services Return by the
by Supplier OR
document or Both@ Recipient u/s 39
the Recipient (who is claiming ITC)
(in case of Reverse Charge)
Like: Goods are deemed to be received • Either, in cash; OR U/s 39 of CGST Act
a tax invoice u/s 31 OR a debit note u/s 34 by a taxable person, when the • Through utilization of ITC dealing with
issued by a supplier (registered under the Act) supplier delivers the goods to the Thereupon, ITC shall be credited on Furnishing of Returns
OR recipient/ any other person, on the a Provisional Basis as per s.41
direction provided by the taxable
Such other tax paying documents, (Section 41 deals with Claim of ITC
person to the supplier
as may be prescribed (under r.36 of CGST Act) and its Provisional Acceptance)
@ Where the goods against an invoice are received in lots or instalments, the registered person shall be entitled
to take credit upon receipt of the last lot or instalment

Conditions for claiming ITC – Section 16(2)
Other conditions for claiming ITC (in certain specific situations) …
Proviso to Section 16(2), CGST Act
P P
Where the goods against an invoice are Where a recipient fails to pay to the supplier **
received in lots or instalments, the amount towards the value of supply & tax payable thereon
the registered person shall be entitled to take ITC within a period of 180 days from the date of issue of invoice by the supplier,
upon receipt of the last lot or instalment an amount equal to the ITC availed by the recipient shall be added to his
output tax liability (along with interest thereon)
- Payment not made to the supplier within 180 days of the invoice
** other than supplies, on which tax is payable on a reverse charge basis

Conditions for claiming ITC – Rule 36, CGST Act
Documentary requirements and conditions for claiming ITC ……
1 2 3
ITC shall be availed ITC shall be availed No ITC shall be availed
by a registered person by a registered person
by a registered person (including the ISD)
only if in respect of
on the basis of the following documents:
all the applicable particulars any tax that has been paid
An invoice (raised u/s 31) as prescribed in in pursuance of
An invoice issued u/s 31(3)(f) (viz. invoice issued Chapter VI (Invoice Rules) any (assessment) order, where
under Reverse Charge) – provided the tax under RCM
are any demand has been raised
has been paid
contained in the said document on account of:
A Debit Note (issued u/s 34)
& (a) any fraud,
A Bill of Entry (or, similar document) prescribed the relevant information (b) willful misstatement; or
under the Customs Act, 1962 or Rules made
thereunder for the assessment of IGST on imports is furnished in Form GSTR-2 (c) suppression of facts
by such person
An ISD Invoice or, ISD Credit Note and any
document issued by an ISD in accordance with
Rule 54(1)

Conditions for claiming ITC – Rule 37, CGST Act
Reversal of ITC in case of “non-payment of consideration” ……
1 2 3 4
Rule 37(1) Rule 37(2) Rule 37(3) Rule 37(4)
A registered person, who The amount of input tax credit (ITC) The registered person shall be The time limit specified
has availed of input tax credit (ITC),
but fails to pay to the supplier thereof referred to in Rule 37(1) liable to pay interest in section 16(4) ** shall not apply
the value of such supply (along with the shall be added at the rate notified under s. 50(1) to a claim for
tax payable thereon) within 180 days,
shall furnish: to the output tax liability [currently @18% p.a.] for the period re-availing of any ITC, in accordance
• the details of such supply; and of the registered person with the provisions of the Act or
starting from the date of availing ITC
• the amount of ITC availed of for the month in which the Rules (i.e. provisions of this Chapter), that
on such supplies
the details [as required under r. 37(1)] had been reversed earlier
in FORM GSTR-2
are furnished till the date when the amount added to
for the month immediately following
the output tax liability [as mentioned in
the period of 180 days from
Rule 37(2)] is paid
the date of issue of invoice
** s. 16(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both:
o after the due date of furnishing of the return u/s 39 (dealing with returns under GST) for the month of September following the end of
financial year, to which such invoice or such debit note pertains (which is 20th Oct) OR
o st
furnishing of the relevant annual return (by 31 Dec)
whichever is earlier

3
ITC in case of Capital Goods


Input Tax Credit (ITC) in case of Capital Goods – Section 16(3)
Where the registered person has claimed
depreciation on the tax component of the
cost of the capital goods and plant and
machinery under the provisions of the
Income-tax Act, 1961
the input tax credit on the said tax

component shall not be allowed
Example:
o Assume that CT Corp purchases a P&M for Rs. 1000 and pays GST of Rs. 180 (viz. 18% of Rs. 1000)
o In this case, if CT Corp claims depreciation under the Income-tax Act, on the GST component of Rs. 180, then it can’t claim ITC of Rs. 180
Capital Goods – u/s 2(19) – means:

Goods, the value of which is capitalized in the books of account of the person, claiming the input tax credit and which are
used / or intended to be used in the course / furtherance of business

4
Maximum Time Permitted for Claiming ITC


Time Limit for claiming ITC – Section 16(4)
A registered person shall not be
entitled to take input tax credit
in respect of:
any invoice or debit note
for supply of goods or services
or both
after the due date of furnishing
of the return u/s 39 (dealing with
returns under GST) for the month of
September following the end of by 20th Oct by 31st Dec of next FY
financial year, to which such

invoice or such debit note
pertains (which is 20th Oct) Example:
OR o Assume that CT Corp has an invoice pertaining to FY 2017-18, on which ITC has not yet been taken
furnishing of the relevant o Assume further that CT Corp files its annual return for FY 2017-18 on 20th Aug 2018, then CT Corp is entitled
annual return (by 31st Dec) to take ITC for FY 2017-18 till 20th Aug 2018 (being date of filing of Annual Return for FY 2017-18)
o However, if CT Corp files the said annual return on 30th Oct 2018, it shall be entitled to take ITC up to 20th Oct 2018
whichever is earlier (being the last date for filing return for the month of Sep-2018)


Section 17 Apportionment of Credit & Blocked Credit
5 • Business vs. Non-Business and Taxable vs. Exempt Supplies s. 17(1) to 17(3) + Rules 42 + Rule 43
6 • ITC for Banking, Financial Institutions and NBFCs s. 17(4) and Rule 38
7 • Blocked Credit (or, In-eligible Credit) s. 17(5)

5
Apportionment of ITC
Section 17(1) to 17(3), CGST Act

Apportionment of ITC (ITC Based on Use of Inputs) – Section 17
Proportionate Credit u/s 17 CGST Act - An Overview
Use of goods / services / both by the registered person ……
Partly for Business Purposes Partly for Other Purposes

For For For
Taxable Zero-rated Exempt

Supplies Supplies Supplies*
ITC Eligible Eligible Not Eligible Not Eligible

Eligibility
* Exempt supplies for this purposes includes the following:

(a) Supplies on which the recipient is liable to pay tax on reverse charge basis
(b) transactions in Securities
(c) Sale of land and
(d) Sale of (completed) Building – subject to paragraph 5(b) of Schedule II

Proportionate Credit - Section 17(1) CGST Act
s. 17(1)
If the goods or services or both are used by the registered person:
partly for the purpose of any business purpose; and
partly for other purposes
then, the amount of input tax credit will be restricted to only that portion of the input tax that is attributable to
business purposes
Note
Attribution of ITC to be made,
as per the manner prescribed
in the ITC Rules
Business purchased
goods / services

Proportionate Credit - Section 17(2) and 17(3) CGST Act
s. 17(2)
Business purchased
goods / services (See note 1 below)
Note 1 s. 17(3) further provides that the value of exempt supply shall include the following:
o Supplies on which the recipient is liable to pay tax on a reverse charge basis
o Transaction in securities@
o Sale of land**
o Sale of building** [subject to Clause (b) of paragraph 5 of Schedule II]
@ As per Explanation to Rule 45, for the purpose of determining value of the exempt supply u/s 17(3) – the value of security shall be taken as 1% of the sale value of such security
** As per Explanation to Rule 45, for the purpose of determining value of the exempt supply u/s 17(3) – the value of land and building shall be taken as the same, as adopted for the purpose of paying stamp duty

Section 17(2) of CGST Act: If the goods or services or both are used by the registered person:
partly for effecting taxable supplies (including zero-rated supplies); and
partly for effecting exempt supplies
then, the amount of input tax credit will be restricted to only that portion of the input tax that is attributable to the
said taxable supplies (including zero-rated supplies)
Use of input tax credit:

Partly for
Note
Attribution of
Taxable Zero-rated Non-taxable Exempt Nil-rated ITC to be made,
Supplies Supplies Supplies Supplies Supplies as per the
manner
prescribed in the
ITC ITC ITC ITC ITC ITC Rules
Available Available not available not available not available
Alternative to apportionment between taxable and exempt supplies in case of banking companies and financial institutions:
• Yearly option to avail a standard rate of 50% of eligible ITC on inputs, capital goods and input services on a monthly basis
• 50% shall not be applied on tax paid on supplies made by one registered person to another registered person having same PAN

How to Compute ITC for Inputs & Input Services?
ITC Rule 42 of CGST Rules

Manner of determination of ITC and reversal thereof – Rule 42
Input Tax Input Tax

Input Tax Input Tax
related to related to
Total
supplies meant related to related to
Input Tax
for Taxable
Involved Common
Exempt Ineligible Supplies
Non-business Supplies Supplies (incl. zero-rated Input Tax
purposes supplies)
This portion of the equation represents: For

Input Tax Credit (ITC) credited to Electronic Credit Ledger Taxable Supplies
Out of above common input tax pool, arrive at the following two sums (which are ineligible tax credit, out of common pool)
proportionate input tax credit, attributable to exempt supplies
5% of the common pool in respect of input tax attributable to non-business purposes (only when inputs are:
(a) partly used for business and (b) partly for non-business purposes)
The balance amount (viz. Total common pool less above two items) – represents eligible input tax, out of the common pool
Refer to the illustration in subsequent slides
Total ITC T
Non-business Exempted Blocked Credit Business + Taxable Common ITC

purposes Supplies u/s 17(5) purposes
C2 = T – (T1 + T2 + T3 + T4)
T1 T2 T3 T4
Exempted Common ITC

D1 =
attributable to exempt supplies
Exempt turnover
= C2 * ------------------------
Total turnover
Non-business D2 = 5% of the Common ITC, viz. C2
Balance C3 = C2 – (D1 + D2)

Illustration - Reversal of Input Tax Credit for Non-Business Use and Exempt Supplies
Consider the following scenario:
Assume that CT Corp is a supplier of taxable good – “T” and exempt good – “E” and is registered under GST in Karnataka
During the month December 2017 - total turnover of CT Corp was Rs 50 lakh, which consisted of the following:
o Taxable turnover (including zero–rated supplies) Rs. 30 lakh; and
o Exempted turnover Rs. 20 lakh
During Dec 2017, the Company received inputs and input services amounting to Rs. 16 lakh (excluding Input Tax paid aggregating to
Rs. 2 lakh) – as shown in the below table: Amount in INR
Particulars CGST IGST SGST Total
1. Input tax attributable to inputs and input services intended to be used: 3,500 6,000 3,500 13,000
exclusively for purposes other than business
2. Input tax attributable to inputs and input services intended to be used: 2,500 4,000 2,500 9,000
exclusively for effecting exempt supplies (including supplies, for which the
recipient is liable to pay GST on reverse charge)
3. Amount of input tax in respect of inputs on which credit is not available u/s 17(5) 4,000 10,000 4,000 18,000
(Ineligible credits like those on motor vehicles etc.)
4. Amount of input tax credit attributable to inputs and input services used 5,000 20,000 5,000 30,000
exclusively in (or in relation) to taxable supplies, including zero rated supplies
5. Input tax credit left after attribution of input tax credit as above 35,000 60,000 35,000 130,000
known as common credit
6. Total Input Tax involved on Inputs and Input Services in December, 2017 50,000 100,000 50,000 200,000
Calculate how much ITC credit CT Corp is eligible for Dec 2017

Summary Solution for conceptual understanding
Given the information on the last slide, the composition of various categories of ITCs is shown below:
13,000 ; 6%
Composition of Total ITC
9,000 ; 5%
18,000 ; 9%
30,000 ; 15%
Exclusively for non-business purposes
Exclusively for exempt supplies

1,30,000 ; 65%
ITC in respect of blocked credit u/s 17(5)
Exclusively for taxable supplies incl. zero-rated supplies
For inputs etc. used for common (unidentified purposes)

Summary Solution for conceptual understanding … contd. from last slide
In this example, we need to identify admissible ITC – especially out of “ITC attributable for common purposes (i.e. unidentifiable)”
Out of the total common ITC of Rs. 130,000, ITC attributable for exempt supplies shall be calculated as follows:
ITC attributable for common purposes (unidentifiable) Exempt Sales
= ----------------------------------------------------------------------------- x
Total Sales
130,000 20 lacs
= --------------- x
50 lacs
= Rs. 52,000
Likewise, out of total common ITC of Rs. 130,000, ITC attributable for non-business purposes shall be calculated @ 5% of total common ITC pool:
= 5% of total common ITC pool (of Rs. 130,000)
As required under rule 42, CGST Rules
= Rs. 6,500
Hence, Total ITC admissible = ITC attributable to taxable supplies (incl. zero-rated supplies) + Eligible ITC attributable for common usage
= Rs. 30,000 + (Rs. 130,000 less Rs. 52,000 less Rs. 6,500)
= Rs. 30,000 + Rs. 71,500
= Rs. 101,500

Detailed Step-by-step Solution
Based on the information given in the earlier slide, CT Corp would be entitled to ITC of Rs. 101,500 (as shown below):
Amount in INR
Particulars Notation CGST IGST SGST Total
A. Total Input tax involved (for the month of Dec-2017) T 50,000 1,00,000 50,000 2,00,000
B. Input tax attributable to inputs and input services intended to be used: T1 3,500 6,000 3,500 13,000
exclusively for purposes other than business i.e. non-business purposes
C. Input tax attributable to inputs and input services intended to be used: T2 2,500 4,000 2,500 9,000
exclusively for effecting exempt supplies
(including supplies, for which the recipient is liable to pay GST on RCM)
D. Amount of input tax in respect of inputs on which credit is not available u/s 17(5) T3 4,000 10,000 4,000 18,000
(Ineligible credits like those on motor vehicles etc.) viz. Blocked Credit
E. Input Tax Credit credited to the Electronic Credit Ledger Being A - (B + C+ D) C1 = T - (T1 + T2 + T3) 40,000 80,000 40,000 1,60,000
F. Amount of input tax credit attributable to inputs and input services used T4 5,000 20,000 5,000 30,000
exclusively in (or in relation) to taxable supplies, including zero rated supplies See note below
35,000 60,000 35,000 1,30,000
G. Input Tax Credit left after attribution called Common Credit Being ( E - F) C2 = T - (T1 + T2 + T3) + T4
Note: T1, T2, T3 and T4 will be determined, as above and declared in GSTR-2
If the registered person does not have any turnover for Dec-2017, then the value of T and E shall be considered for the
last tax period, for which such details are available
Concluded on next slide

Detailed Step-by-step Solution … contd. from last slide
Please see the rest of the computation in the below table:
Amount in INR
Particulars Notation CGST IGST SGST Total
H. Total Value of Exempt Supplies in Dec-2017 See note 1 & 2 below 2,000,000
Given in the problem
viz. all supplies, other than (taxable supplies+ zero-rated supplies)
I. Total Turnover for Dec-2017 See note 2 below Given in the problem 5,000,000
J. Input Tax Credit (ITC) attributable towards Exempt Supplies D1 = (C2 / I) * H 14,000 24,000 14,000 52,000
See note 3 below
K. Input Tax Credit (ITC) attributable to Non–Business purposes See note 2 below D2 = (C2 * 5% ) 1,750 3,000 1,750 6,500
L. Amount to be added to the Output Tax Liability Being ( J + K ) D1 + D2 15,750 27,000 15,750 58,500
C3 = C2 - (D1 + D2 ) 19,250 33,000 19,250 71,500

M. Eligible Input Tax Credit - attributed to the purposes of business and
for effecting taxable supplies including zero-rated supplies Being ( G - L )
N. Net (or, Total) ITC eligible Being ( F + M ) T4 + C3 24,250 53,000 24,250 101,500
O. Net ITC not eligible = (A - N) 25,750 47,000 25,750 98,500

- The above calculation is made every month for each component of tax, viz. IGST, CGST, SGST, UTGST etc.
- This is followed by Annual Calculation (explained in subsequent slides)
Notes: 1. Total value excludes taxes
2. As per ITC Rules - if common inputs and input services are used partly for business and partly for non-business purposes, the amount of
ITC (input tax credit) attributable to non-business purposes shall be equal to 5% of Common Credit Pool C2 (viz. it will be = 5% of the ITC left
after attribution)
3. D1 represents proportionate common credit pertaining to exempt turnover
4. D2 represents proportionate common credit pertaining to non-business purpose usage

Annual Calculation ……
The ITC determined under rule 42(1) – as explained in earlier slides – shall be calculated finally for the financial year, before the
“due date for furnishing return for the month of September following the end of the financial year to which such ITC relates”
(and this annual calculation is also performed exactly in the same manner as prescribed under r. 42(1), explained earlier)
&
Where the aggregate of the final amounts so calculated in Where the aggregate of the final amounts so calculated in
respect of D1 (common credit pertaining to exempt turnover) and respect of D1 (common credit pertaining to exempt turnover) and
D2 (common credit pertaining to non-business usage) exceeds the D2 (common credit pertaining to non-business usage) is lower than
aggregate amount of D1 and D2 determined under r. 42(1) – the aggregate amount of D1 and D2 determined under
such excess: r. 42(1) – such shortfall:
• shall be added to the output tax liability of the registered • shall be claimed as input tax credit (ITC) by the registered
person in the month not later than the month of person in his month not later than the month of
September, following the end of the financial year to which OR September, following the end of the financial year to which
such ITC relates to; and such ITC relates to
• The said person shall be liable to pay interest on the said
excess amount at the rates specified u/s 50(1) – currently
18% p.a. – for the period (a) starting from the 1st day of
April of the succeeding financial year and (b) till the date
of payment

How to Compute ITC for Capital Goods?
ITC Rule 43 of CGST Rules

Computation of ITC (Input Tax Credit) for Capital Goods – Rule 43
ITC Eligibility on Capital Goods
Only for effecting “Taxable Supply” Full ITC
Partly for “Business Purposes “

Capital Goods & Claim Full ITC
Partly for “Other (non-business) Purposes”
&
put to use Reverse on a pro-rata basis
Partly for “Taxable Supplies” for every tax period with interest
by the
&
registered person Partly for “Exempt Supplies”
……
Only for (a) non-business or, (b) Exempt Supply No ITC
Useful life of capital goods with common credit is 60 months

Proportionate reversal in every tax period along with interest

Rule 43 - Computation of ITC in case of Capital Goods
Assume that the following details relate to ITC in respect of capital goods procured by CT Corp:
Date of purchase Details Amount of Tax Paid (Rs.)
2nd March 2018 Capital goods # 1 used for non-business purposes 10,000
3rd March 2018 Capital goods # 2 used for taxable supplies 25,000
12th August 2017 Capital goods # 3 earlier used for non-business purposes – is put to use 20,000
for common purposes after 8-months of procurement
2nd August 2017 Capital goods # 4 earlier used for taxable supplies – is put to use 10,000
for common purposes after 8-months of procurement
For the month March 2018, total turnover and exempted turnover of CT Corp was Rs 10 lakh and Rs. 2 Lakh respectively
Calculate the eligible ITC on capital goods for the month of March 2018

Rule 43 - Computation of ITC in case of Capital Goods
Given the information on the earlier slide, eligible ITC on capital goods for the month of March-2018 will be as follows:
Capital goods # 1 ITC on capital goods used for non-business purposes is disallowed Hence, ITC = Zero
Capital goods # 2 ITC on capital goods used for taxable supplies is fully allowed Hence, ITC = Rs. 25,000
Capital goods # 3 ITC on capital goods, earlier used for non-business purposes and subsequently Hence, ITC = Rs. 17,000
put to use for common purposes – shall be reduced by 5% per quarter (or, part thereof) As computed below
and shall be calculated as follows:
ITC transferred to Common ITC = ITC arrived at after reducing 5% per quarter (or, part thereof)
= Rs. 20,000 less (Rs. 20,000 * 5% * 3 quarters)
= Rs. 20,000 less Rs. 3,000
= Rs. 17,000
Capital goods # 4 ITC on capital goods, earlier used for taxable supplies and subsequently put to use Hence, ITC = Rs. 8,500
for common purposes – shall be reduced by 5% per quarter (or, part thereof) As computed below
and shall be calculated as follows:
ITC transferred to Common ITC = ITC arrived at after reducing 5% per quarter (or, part thereof)
= Rs. 10,000 less (Rs. 10,000 * 5% * 3 quarters)
= Rs. 10,000 less Rs. 1,500
= Rs. 8,500
Hence, Eligible ITC on Capital Goods = Total ITC less Common ITC Exempt Supply x Residual Period, out of 60 months
---------------------- x ---------------------------------------------
Total Supply 60 months (of useful life)
= Rs. (25,000 + 17,000 + 8,500) less (17,000 + 8,500) Rs. 2 lac 52
x x -----
----------------------
Rs. 10 lac 60
= Rs. 50,500 less Rs. 4,420
Anjani Kumar Khetan OR, Rs. 46,080 Page | 220

6
ITC for Banks, FIs and NBFCs


Apportionment of ITC (Input Tax Credit) – Banks, FIs & NBFCs
Proportionate Credit u/s 17(4) CGST Act (for Banks, FIs & NBFCs) - An Overview
Input Tax Credit by Banks, FIs, NBFCs ……
Option 1 Option 2
Apportionment of ITC Avail benefit of s.17(4)

For For For
Taxable Zero-rated Exempt Avail every month

Supplies Supplies Supplies 50% of eligible ITC
on
• Inputs;
• capital goods; and
• input services
ITC Eligible Eligible Not Eligible in that month
Eligibility

s. 17(4)
As per s. 17(4) – a banking company or, a financial institution (incl. a NBFC) – engaged in supplying services by way of accepting deposits,
extending loans / advances, shall have the option to:
(a) either comply with the provisions of s. 17(2) – i.e. segregating inputs used into those used for taxable and exempt output etc.
(b) or, to avail of, every month, an amount equal to 50% of the eligible ITC on inputs, input services and capital goods – in that month
& the balance ITC shall lapse (explained in subsequent slides)
Business purchased
goods / services

Proportionate Credit for Banks, FIs & NBFCs - Section 17(4) CGST Act
s. 17(4)
Segregate inputs used into those used for taxable and exempt output
Avail 50% of eligible ITC (on inputs, input services and capital goods) every month
Business purchased
goods / services
P P However, the restriction of 50% shall not apply to the tax paid on
Once an option is chosen (viz. Option 1 vs. 2), it
supplies made by one registered person to another registered person
can’t be withdrawn for the having the same PAN (that is, in case of transactions between the same
remaining part of the financial year legal entity, with different GST registration)

Rule 38 - Claim of ITC by a Banking Company / a Financial Institution (Incl. a NBFC)
As alluded to earlier, a banking company or, a financial institution (incl. a NBFC) engaged in supply of services by way of
accepting deposits or, extending loans / advances – may, in view of the provisions of s. 17(4), choose not to comply with
the provisions of s. 17(2) (explained in earlier slides), rather it may choose to go for Option 2 (i.e. for availing of 50% of the eligible credit
every month)
Such banking companies or, financials institutions incl. NBFCs shall follow the following procedures, as required under r. 38:
a. They shall not avail of the credit of:
Tax paid on inputs and input services that are used for non-business purposes; and
The credit attributable to supplies specified in s. 17(5) (viz. blocked credit) in Form GSTR-2
b. They shall avail of the credit of taxes paid on inputs and input services referred to in the 2nd Proviso to s. 17(4)
and not covered under Clause (a) above (This is detailed in note 1 below)
c. 50% of the remaining input tax shall be the input tax credit (ITC) admissible to them and shall be furnished in
Form GSTR-2
d. The amount referred to in Clauses (b) and (c) above shall - subject to the provisions of section 41 (Claim of ITC and
Provisional acceptance),
section 42 (Matching of ITC etc.) and section 43 (Matching of reduction in Output Tax Liability etc.) – be credited to
their electronic credit ledger
Note 1
The restriction of 50% of the eligible ITC (under 2nd option … for banks/ FIs / NBFCs) shall not apply to:
the tax paid on supplies made by one registered person to another registered person having the same PAN (that is, in case of
transactions between the same legal entity, with different GST registration)

Illustration - Proportionate Credit for Banks, FIs and NBFCs
Assume that ABC Bank is a banking company registered under GST, only in the state of Karnataka.
During the month December, 2017, ABC Bank received inputs and input services amounting to Rs. 50 crore
(excluding the Input Tax paid, which amounted to Rs 5 crore), as shown in the below table:
The following table illustrates the computation of ITC that will be available to ABC Bank (in terms of the provisions of
Section 17(4) of CGST Act, read with r. 38 under the CGST Act):
Amount in Rs. Lakh
Input Tax Paid Input Tax Credit (ITC) Admissible
Particulars %age of CGST IGST SGST Total CGST IGST SGST Total
credit
available
1. Input tax paid on inputs and input services that are used for non-business purposes 0% 35 60 35 130 0 0 0 0
2. Input tax attributable to inputs on which credit is not available u/s 17(5) 0% 25 70 25 120 0 0 0 0
(Ineligible credits like those on motor vehicles etc.)
3. Tax paid on inputs and input services - supplied by another registered person 100% 40 100 40 180 40 100 40 180
having the same PAN (and not covered above)
4. Balance amount of input tax paid, remaining after attribution of ITC, as above 50% 20 30 20 70 10 15 10 35
5. Total Input Tax involved on Inputs and Input Services in December, 2017 120 260 120 500 50 115 50 215

7
Blocked Credit

Restriction on ITC – Blocked Credits – Section 17(5)
Motor Vehicles A Specific List Immovable Property

Works Contract
(Exceptions apply) (Exceptions apply) (Own Account)
(Exceptions apply)
Composition Scheme Personal Consumption Non-existent Goods Fraud / Error

1 Motor Vehicles and Other Conveyances@
ITC for Transportation of goods** , or

Motor Vehicles Except
& when Making the following taxable services, viz.:
Other Conveyances@ they are i. Further supply of such vehicles / conveyances, or
will ii. Transportation of passengers, or
NOT
used for
iii. Training for driving / flying / navigating such
be available vehicles or, conveyances
Note: Where any amount has been paid on goods and / or services, in lieu of tax, under composition scheme, no ITC
on such amount would be allowed
@ As per s. 2(34), Conveyance includes:

- a vessel;
- an aircraft; and
- a vehicle
** ITC is allowed even if transportation of goods does not give rise to revenue (say, the transportation
of goods could be transporting goods from one area to another area in the factory)

2 Supply of goods and services, being the following ………
ITC is Allowed ONLY if goods /

Cosmetic and services of a particular category
Food and Outdoor Beauty Health
Plastic are used towards making taxable
Beverages Catering Treatment Services
Surgery outward supplies of the same
category
ITC is Allowed ONLY if:

(A) these are notified by the government, as obligatory for an
Life Insurance or, employer to provide an employee
Rent-a-cab
Health Insurance OR
(B) services of a particular category are used towards making
taxable outward supplies of the same category
Membership Membership of Travel Benefits

NEVER allowed
of Club Health & Fitness Centre to employees like LTC

2(i) Supply of goods and services, being the following ………

2(ii) Supply of goods and services, being the following ………
Life and Health Insurance Rent-a-cab
ITC will be AVAILABLE, ONLY if:

(A) these are notified by the government, as obligatory for an employer to provide an employee
OR
(B) services of a particular category are used towards making taxable outward supplies of the same category

2(iii) Supply of goods and services, being the following ………
Travel Benefits to EEs

Membership of Club Health & Fitness Centre on vacation (e.g. Leave
Travel Concession)
ITC NEVER allowed

3 Works Contract Services for construction** of Immovable Property (other than P&M@)
General Rule : ITC not allowed on Works Contract services for immovable property
ITC is not allowed if works contract relates to immovable properties – whether on own account or, not
ITC is allowed on works contract….
If a Works Contractor ITC can be claimed by service receiver

provides services to on such input services
another Works Contractor
E
** Construction includes re-construction, renovation, additions or alterations or repairs - to the extent of capitalisation to the
said immovable property
Anjani Kumar Khetan @ For meaning of P&M for this purposes, refer to the explanation on the next slide Page | 234
4 Construction** of Immovable Property on Own Account (other than plant and machinery@)
Input Tax Credit (ITC) is NOT allowed in respect of supplies (viz. goods or services) used by a taxable person in
construction** of an immovable property on his own account (like factory, office building for own use) – even if
such immovable property is used in course or furtherance of business
However, ITC is allowed in respect of supplied used for construction of P&M@
E
** Construction includes re-construction, renovation, additions or alterations or repairs - to the extent of capitalisation to the
said immovable property
E @ For this purpose, the expression “plant and machinery” means:
o 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
o and includes such foundation and structural supports
o but does not include, (a) land, building or any other civil structures (b) telecommunication towers; and (c) Pipelines
laid outside the factory premises

5 Other restrictions on claiming ITC
Input Tax Credit (ITC) will NOT be available on the following ……
1 Goods or services or both, on which tax has been paid u/s 10 (viz. under Composition Levy)
2 Goods or services or both - used for personal consumption
3 Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
4 Goods or services or both - received by a non-resident taxable person
However, ITC will be available in case of import of goods by non-resident taxable person
5 Any tax paid in accordance with the provisions of sections 74, 129 and 130
Section 74 (in respect of) Section 129 (in respect of) Section 130 (in respect of)
• Tax not paid / short paid / erroneously refunded Detention, seizure and release of Confiscation of goods or
etc. by reason of fraud etc. goods and conveyances in transit conveyances and levy of penalty
• ITC wrongly availed / utilized by reason of fraud,
wilful misstatement or suppression of fact


Section 18 ITC in Special Circumstances
8 • ITC on Stocks (on the date of registration) s. 18(1) to 18(2) + Rule 40
9 • Transfer of Credit in case of sale, amalgamation, merger etc. s. 18(3) and Rule 41
10 • Reversal of ITC (if Composition is opted / registration cancelled) s. 18(4) and Rule 44
11 • Reversal of ITC in case of sale of capital goods and P&M s. 18(6) and Rule 40(2) + Rule 44(6)

8
ITC on Stocks on the Date of Registration

Section 18(1) and 18(2), CGST Act

ITC in special circumstances – Section 18(1) & 18(2) - (r/w Rule 40)
1 2 s. 18(1)(b) 3 4
s. 18(1)(a) s. 18(1)(c) s. 18(1)(d)
Registration Voluntary Registration From From
on crossing exemption limit without crossing of exemption limit Composition to Regular Scheme Exempt Supply to Taxable Supply
Person who has applied for
Registered person
registration within 30 days of Person applied for Exempt supplies
ceases to pay tax
becoming liable voluntary registration by a registered person
under Composition Scheme
& u/s 25(3) of CGST Act becomes a taxable supply
(u/s 10 of CGST Act)
has been granted such registration
ITC allowed for: ITC allowed for: ITC allowed for: ITC allowed for:
Inputs held-in-stock Inputs held-in-stock Inputs held-in-stock Inputs held-in-stock
Inputs contained in: Inputs contained in: Inputs contained in: Inputs contained in:
o Semi-finished goods o Semi-finished goods o Semi-finished goods o Semi-finished goods
o Finished Goods o Finished Goods o Finished Goods o Finished Goods
and, held in stock and, held in stock and, held in stock & and, held in stock &
Capital Goods ** Capital Goods **
on the day immediately On the day immediately On the day immediately On the day immediately
preceding the date from which preceding the date of preceding the date from which preceding the date from which
he becomes liable to pay tax registration he becomes liable to pay tax such supply becomes taxable
The above is subject to such conditions and restrictions, as may be prescribed (Rule 40 of CGST Act)
u/s 18(2) … the above ITC is restricted to all invoices which are not more than 1 year old
** the credit on capital goods shall be reduced by such percentage points, as may be prescribed
viz. 5% per quarter (whole or, part) – calculated from the date of invoice Page | 240
Anjani Kumar Khetan
In special circumstances u/s 18(1) and 18(2) …. ITC allowed on which components?
Special Situation covered u/s 18(1) and 18(2) Inputs # Capital Goods ** Input Services
1 s. 18(1)(a) Person who has applied for
registration within 30 days of
Registration becoming liable
on crossing exemption limit &
has been granted such registration
2 s. 18(1)(b) Person applied for
Voluntary Registration voluntary registration
without crossing of exemption limit u/s 25(3) of CGST Act
3 s. 18(1)(c) Registered person **

ceases to pay tax
From
under Composition Scheme
Composition to Regular Scheme
(u/s 10 of CGST Act)
4 s. 18(1)(d) Exempt supplies **
From by a registered person
Exempt Supply to Taxable Supply becomes a taxable supply
u/s 18(2) … the above ITC is restricted to all invoices which are not more than 1 year old
# Held in …. (a) stock (b) Semi-finished Goods (viz. WIP) and (c) Finished Goods
** the credit on capital goods shall be reduced by such percentage points, as may be prescribed
viz. 5% per quarter (or, part thereof) – calculated from the date of invoice
Procedural Requirements under Rule 40 of CGST Rules
Requirements of Rule 40 of CGST Rules Requirements of s. 18(2)
ITC on capital goods, where eligible under the special situations covered u/s 18(1)(c) or 18(1)(d) – is to be reduced by: ITC to be allowed for four special
5% per quarter (whole or part) – calculated from the data of invoice (or, such other document on which the cases u/s 18(1) is restricted to
capital goods were received by the taxable person) invoices, which are not older
than 1 year
Declaration in Form GST ITC - 01 – to be filed electronically on the Common Portal - within 30 days of
becoming eligible for ITC under the four special cases u/s 18(1)(a) / (b) / (c) / (d) – as detailed in earlier slides
The aforesaid Declaration shall clearly specify the details relating to the (i) inputs held in stock or (ii) inputs
contained in semi-finished goods or, finished goods held in stock or (iii) the capital goods – as the may be
Further, the above Declaration is to the effect that he is eligible to avail ITC, as aforesaid
The details in the aforesaid Declaration is to be certified by a practicing CA or, a Cost Accountant, if the:
Total ITC Claim (for IGST, CGST, SGST and UTGST) is > Rs. 2 Lakhs
Details in the Declaration filed in accordance with s. 18(1)(c) and s. 18(1)(d) – will be verified with the
corresponding details in:
GSTR - 1 (Return for Outward Supplies); and
GSTR - 4 (Return applicable for Composition Dealers)
as the case may be

9
Transfer of ITC…. in case of

Change in Constitution of Business

Change in constitution of a registered person – Section 18(3) – r/w Rule 41
The said registered person

On account of:
Where there is a • Sale shall be allowed
change in the • Merger to transfer the ITC , which
• Demerger remain unutilized in the
constitution
• Amalgamation Electronic Credit Ledger,
of a registered • Lease; or
person • Transfer of the business to such sold, merged,
with specific provision for transfer of liabilities demerged, amalgamated,
leased or transferred business
The above is subject to such conditions and restrictions, as may be prescribed (Rule 41 of CGST Act)

Change in constitution of a registered person – Section 18(3) – r/w Rule 41
Requirements of Rule 41 of CGST Rules
In case of a change in constitution of a business by way of sale, merger, demerger, amalgamation, lease, transfer or change in ownership of the business –
for any reason:
o The registered person shall furnish the details of such sale, merger, demerger etc. – electronically on the Common Portal in Form GST ITC - 02
o The registered person shall also file a request for transfer of unutilized ITC lying in his Electronic Credit Ledger to the transferee
The transferor shall also submit a copy of a certificate issued by a practicing CA or, cost accountant – certifying that the sale, merger, demerger etc. of
the business has been done with a specific provision for transfer of liabilities
On the Common Portal, the transferee, is required to accept the details, so furnished by the transferor
Upon such acceptance by the transferee, the unutilized ITC specified in Form GST ITC – 02 shall be credited to the Electronic Credit Ledger of
the transferee
The transferee is then required to duly account for the inputs and capital goods – so transferred in his books of accounts
P
Further, as per Proviso to CGST Rule 41(1), in case of a demerger, the ITC shall be apportioned in the ratio of value of assets of the new units,
as specified in the demerger scheme

10
Reversal of ITC
Opt to Composition / Output Becomes Exempt /
Cancellation of Registration

Reversal of ITC in case of the following change in tax status …..
Regular Tax to Composition OR Taxable to Exempt – Section 18(4) r/w Rule 44
In cases:
In respect of credit of input tax included in:
Where a registered person, who The registered person (a) inputs held in stock;
has availed of ITC in the past and (b) inputs contained in semi-finished goods or finished goods; &
now opts to pay tax u/s 10 shall be liable (c) capital goods, as reduced by such %age points (as may be prescribed)
(Composition Scheme) to pay tax =
Such tax would be payable on the day immediately preceding:
OR • the date of exercising of such option; OR
• The date of such exemption
Where the goods / services / both – as the case may be
supplied by the registered person
has become wholly exempt (which The above tax can be paid by way of:
was earlier “taxable” under GST) Debit in the Electronic Credit Ledger; or
Debit to the Electronic Cash Ledger
Further, as per proviso to Section 18(4), where after payment of such tax amount, if there is any surplus balance in the input tax credit, lying in the
Electronic Credit Ledger, it shall lapse
The above is to be read with Rule 44 of CGST Rules

Requirements of Rule 44 of CGST Rules
r. 44(1) The amount of ITC relating to (a) inputs held in stock (b) inputs contained in semi-finished goods or finished goods held in stock and (c) capital goods held in stock
– for the purposes of s. 18(4) as above OR s. 29(5) relating to cancellation of registration shall be determined in the following manner as per r. 44(1):
Components of ITC Manner of Determination of ITC under Rule 44 of CGST Rules
For: ITC shall be calculated proportionately, on the basis of corresponding invoices, basis which ITC was
(a) inputs held in stock and availed by the registered taxable person on such inputs
(b) inputs contained in semi-finished goods and
finished goods held in stock
For capital goods held in stock ITC applicable for the remaining useful life (in months) shall be computed, on a pro-rata basis – taking
the useful life as 5 years.
For instance:
• If the capital goods have been in use for 4 years, 6 months and 15 days – the remaining useful
life (in months) will be = 5 months (ignoring a part of the month)
• Accordingly, ITC attributable to the remaining useful life =
[ Total ITC taken on such capital goods multiplied by 5/60 ]
r. 44(2) The ITC – determined under r. 44(1), as above – shall be determined separately for IGST, CGST, SGST and UTGST
r. 44(3) Further, if tax invoices related to inputs in stock are not available, the registered person shall estimate the amount under r. 44(1) – based
on the prevailing market price of goods on the effective date of occurrence of any of the events specified in:
s. 18(4) (viz. Regular to Composition OR Taxable to Exempt) OR
s. 18(5) viz. Cancellation of Registration
as the case may be
Requirements of Rule 44 of CGST Rules … Contd.
r. 44 (4) The amount determined under r. 44(1) shall form part of the Output Tax Liability of the registered person
&
The details of the amount of such Output Tax Liability shall be furnished:
o in Form GST ITC – 03 where such amount relates to any event specified in s. 18(4) (viz,. Regular to Composition OR, Taxable to Exempt); and
o in Form GST ITC – 10 where such amount relates to cancellation of registration
r. 44(5) The details furnished in accordance with r. 44(3) - as detailed in the earlier slide – shall be duly certified by a practicing CA or, a Cost Accountant

11
Reversal of ITC
Sale of Capital Goods and P&M

Sale of capital goods on which ITC was claimed – Section 18(6)
In case of ITC taken on the said capital goods / P&M

Less: Such %age point*, as may be prescribed**
Supply of The registered person
OR
Capital Goods / P&M shall be liable Tax on the transaction value of such capital
goods / P&M, determined u/s 15 (dealing with value
to pay tax = of taxable supply)
on which ITC was taken
in the past whichever is higher
However, as per proviso to Section 18(6), where the following are supplied as scrap – the taxable person may pay tax on the transaction value of
such goods, determined u/s 15 (dealing with value of taxable supply):
(a) Refractory bricks (b) Moulds and dies (c) Jigs and fixtures
The above is to be read with Rule 40(2) and Rule 44(6)$ of CGST Act
* As per r. 40(2), for the purposes of s.18(6), the amount of ITC shall be calculated by reducing the input tax @5% per quarter (or, part thereof) from the invoice date
$ Further, as per r. 44(6), for the purposes of s.18(6), the amount of ITC involved in the remaining useful life of the capital goods shall be computed:
on a pro-rata basis (on a monthly basis, and not on quarterly basis – as described earlier) taking the useful life as 5 years
Anjani Kumar Khetan ** which is nothing but = Remaining ITC on the capital goods Page | 251
Sale of capital goods on which ITC was claimed – Section 18(6)
Illustration
Consider a scenario, wherein:
CT Corp has availed of ITC of Rs. 180,000 on capital goods
After use of 4 years, 6 months and 15 days (viz. 55 months for GST purposes) – the capital goods is sold by CT Corp for a sale consideration of Rs. 80,000
GST tax rate applicable for such sale of capital goods = 18%
Compute tax liability of CT Corp on sale of capital assets
In the above case:

CT Corp will have to pay GST on sale of capital goods – which is higher of the following two amounts:
o Remaining ITC on the capital goods (taking useful life of 60 months) = Rs. 15,000 (Being 180,000 / (60 months * 55 months)
o GST @ 18% on the transaction value of Rs. 80,000 = Rs. 14,400 (Being 18% of Rs. 80,000)
Accordingly, CT Corp will need to pay GST of Rs. 15,000
Other points to note:

The above sum of Rs. 15,000 is not a reversal of ITC – and hence, not to be shown in Table No. 11 of GSTR-1
The computation of tax liability (similar to Rs. 15,000 in the above case) – needs to be done for each type of tax, viz,. IGST, CGST, SGST, UTGST
The details of sale of capital goods needs to be furnished in Table No. 4 of GSTR-1


ITC for Inputs & Capital Goods
Sent for Job Work
Section 19, 143 of CGST Act

ITC on Inputs and Capital Goods Sent for Job Work
Job Worker Principal
Section 2(68) of CGST Act: Section 2(88) of CGST Act:
“Job work” means any treatment or process undertaken by a A “principal” means a person on whose behalf, an agent
person on goods belonging to another registered person and the carries on the business of supply/ receipt of goods or services
expression “job worker” shall be construed accordingly or both;
Summarized Job Work Procedure – Section 19 & 143 of CGST Act
Customer
Supply without payment of tax Supply of goods

on
payment of tax
Supply of goods Supply of goods

Principal Job Worker 1 Job Worker 2
Without payment of tax Without payment of tax
Supply of goods Export of goods

on without
payment of tax payment of tax
Customer
Export

ITC for Inputs and Capital Goods Sent for Job Work
ITC for Inputs and Capital Goods sent for Job Work - u/s 19 and 143 of CGST Act
Key Provisions relating to Inputs:
A registered person (hereafter referred to as the “principal”) may, under intimation, send any inputs or capital goods - without payment of
tax - to a job worker (for job-work) …. Section 143
However, the principal must declare the place of business of the job-worker as his additional place of business, except in the
following situations (where the principal is not required to declare the job worker’s place of business as his additional place of business):
o where the job worker is registered under section 25; or
o where the principal is engaged in the supply of such goods as may be notified by the Commissioner
The principal shall be allowed input tax credit on inputs sent to a job-worker (for the job-work)
Inputs may be directly sent to the job worker
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
Inputs are required to be returned back within 1 year to any of the place of business of the principal
If not received within 1 year, it will be considered as a deemed supply from the date it was originally sent to the job worker
Goods may be sold on payment of tax directly from place of job worker
Goods may be exported from place of job worker
Waste & scrap may be cleared by Job worker/Principal after payment of taxes
The above is subject to such conditions and restrictions as may be prescribed – refer to Rule 45 of CGST

ITC for Inputs and Capital Goods Sent for Job Work
ITC for Inputs and Capital Goods sent for Job Work - u/s 19 and 143 of CGST Act
Key Provisions relating to Capital Goods:
A registered person (hereafter referred to as the “principal”) may, under intimation, send any inputs or capital goods - without payment of
tax - to a job worker (for job-work) …. Section 143
Capital goods may be directly sent to the job worker
Inputs are required to be returned back within 3 years to any of the place of business of the principal
o The time limit of 3 years does not apply to (a) moulds and dies (b) jigs and fixtures or (c) tools
If not received within 3 years, it will be considered as a deemed supply from the date it was originally sent to the job worker
The above is subject to such conditions and restrictions as may be prescribed – Refer rule xxx


Manner of Distribution of ITC by ISD

Manner of Distribution of ITC by Input Service Distributor (ISD)
Who is an Input Service Distributor (ISD)?
Section 2(61) of CGST Act:
“Input Service Distributor” means:
an office of the supplier of goods or services or both
which receives tax invoices issued under section 31
towards the receipt of input services; & (only services, but not goods OR capital goods)
issues a prescribed document
for the purposes of distributing the credit of Central tax, State tax, Integrated tax or Union territory tax
paid on the said services
to a supplier of taxable goods / services / both - having the same PAN (Permanent Account Number) as that of the said office

Why ISD ?
Consider a scenario, wherein:
Corporate office of CT Corp is located at New Delhi
CT Corp has business locations (of selling and servicing of goods) at New Delhi, Chennai, Mumbai and Kolkata
Assume further that it uses a software license that is used at all the locations and invoice indicating CGST and SGST is
received at Corporate Office
Since the software is used at all the four locations, 100% of the input tax credit cannot be claimed at New Delhi; the same
needs to be distributed to all four locations
For that reason, the Delhi Corporate office has to act as ISD - to distribute the credit

Conditions for distributing credit by ISD u/s 20(2)

Section 20 Conditions for distributing credit by ISD u/s 20(2)
Section 20(1) of CGST Act: Section 20(2) of CGST Act:
The Input Service Distributor The Input Service Distributor shall distribute the credit subject to the following conditions:
shall distribute the credit of:
1. The credit can be distributed to recipients of credit$ against a document containing such
Central tax as: details, as may be prescribed
Central tax; OR
Integrated tax 2. The amount of the credit distributed shall not exceed the amount of credit available for
distribution
&
Integrated tax as: 3. The credit of tax paid on input services attributable to recipient of credit shall be distributed
Integrated tax; OR only to that recipient
Central tax 4. The credit of tax paid on input services attributable to more than one recipient of credit shall
be distributed amongst such recipient(s) to whom the input service is attributable and such
This should be done by way distribution shall be pro rata, on the basis of:
of issue of a document the turnover in a State / a Union Territory of such recipient, during the relevant period, to
containing the amount of the aggregate of the turnover of all such recipients to whom such input service is
input tax credit being attributable and which are operational in the current year, during the said relevant period
distributed, in such manner as
may be prescribed 5. 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 / a Union Territory of such recipient, during the relevant period, to
the aggregate of the turnover of all recipients and which are operational in the current
year, during the said relevant period
E
$ The expression “recipient of credit” means…. The supplier of goods / services / both having the same PAN Number, as that of the Input Service Distributor (ISD)

What is Relevant Period?
Scenarios ….. Relevant Period is ….
1 Where the recipients of credit have turnover$ The said financial year
- in their States / Union Territories
- in the financial year preceding the year during which credit is to be distributed
2 Where some or all recipients of the credit do not have any turnover$ The last quarter, for which details of
- in their States or Union Territories such turnover of all the recipients
- in the financial year preceding the year during which the credit is to be distributed are available, previous to the month
during which credit is to be distributed
What … if no turnover is available?
$ The term “turnover” means…. The value of turnover, as reduced by the amount of any duty / tax levied under Entry 84 of List I and Entry 51 & 54 of List II
of the Seventh Schedule to the Constitution

Summarized Rules for Attribution of ITC
Distribute credit to Distribute credit to Distribute credit to

only this recipient only these recipient all the recipient
on Pro-rata Basis on Pro-rata Basis

Attribution Rule – Only one Recipient

Attribution Rule – More than one Recipient
Turnover in a State
= _________________
Aggregate Turnover of
all these recipients

Attribution Rule – for ALL Recipients
Turnover in a State
= _________________
Aggregate Turnover of
all these recipients

Procedure to be followed for distributing credit by ISD – Rule 39, CGST Act
Rule 39 of CGST Act:
1. The input tax credit available for distribution in the month shall be distributed in the same month
2. The details of ITC available for the month and so distributed shall be furnished in Form GSTR - 6 by 13th of the next month
3. The ISD shall separately distribute the amount of:

(a) eligible input tax credit; and
(b) ineligible input tax credit as specified in Section 17(5) (like those on motor vehicles, club membership etc.)
4. Central tax, State tax, union territory tax and the integrated tax shall be distributed separately
5. Manner of distribution of Input Tax Credit - as specified in Section 20(2)(d) and Section 20(2)(e) - would be as under:
C1 = ( t1 / T ) * C
where, C = is the total amount of ITC, to be distributed
t = is the turnover in the state
T = is the aggregate turnover of all the states, to whom the ITC is to be distributed

Illustration 1
Consider a scenario wherein …..
ABSPL Ltd has its head office in Mumbai, for which it additionally has an ISD registration
The company has 12 units across India (including its head office in Mumbai)
It receives an invoice in the name of the ISD at Mumbai, for the month of October 2017 – the details in respect of which are as
follows:
o Invoice # 1 amounting to Rs. 100,000, on which Rs. 18,000 has been charged as IGST, was issued by the vendor
HPL Ltd. (which is registered in Uttar Pradesh)
o The invoice relates to repairs executed at three of ABSPL’s units, viz. at Bangalore, Kolkata, Gurgaon
o Note that Gurgaon location is not registered – since it is engaged in making only exempt supplies
Given the above, how ISD credit should be distributed?
Solution to Illustration 1
Given the above information, ISD credit should be distributed, as explained in the below table:
Amount in Rs. Crore
Particulars Mumbai Bangalore Kolkatta Gurgaon Others Total
1. Turnover 1 1 1 1 8 12
2. Pro-rated ratio (of turnover of units, to which invoice relates) 33% 33% 33% 100%
3. Total IGST - to be distributed 18,000
4. Attributable Credit - IGST 6,000 6,000 6,000 18,000

Illustration 2
ABSPL Ltd has its head office in Mumbai, for which it additionally has an ISD registration
The company has 12 units across India (including its head office in Mumbai)
It receives an invoice in the name of the ISD at Mumbai, for the month of October 2017 – the details in respect of which are as follows:
o Invoice # 2 amounting to Rs. 300,000, on which Rs. 27,000 is charged as CGST and Rs. 27,000 as SGST, was issued by the vendor Quit Ltd.
(which is registered in Pune, Maharashtra)
o The invoice relates to repairs executed at three of ABSPL’s units, viz. at Mumbai, Bangalore and Kolkata
Amount in Rs. Crore
Distributed
Particulars Mumbai Bangalore Kolkatta Gurgaon Others Total
Credit Type
1. Turnover 1 1 1 1 8 12
2. Pro-rated ratio (of turnover of units, to which invoice relates) 33% 33% 33% 100%
3. Total tax - to be distributed:
CGST 27,000 SGST 27,000 54,000
4. ISD Credit will be distributed as follows:

CGST Credit of Rs. 27,000 - to be distributed as CGST CGST 9,000 9,000 9,000 27,000
SGST Credit (Total Rs. 27,000) - to be distributed as SGST for Maharastra units SGST 9,000 9,000
SGST Credit (Total Rs. 27,000) - to be distributed as IGST for non-Maharastra units IGST 9,000 9,000 18,000
18,000 18,000 18,000 54,000
Total

Illustration 3
CT Corp has its head office in Delhi, for which it additionally has an ISD registration
The company has 3 units across India (including its head office in Delhi)
Turnover for the 3 units are …. (a) Delhi … Rs. 7 lakh (b) Mumbai … Rs. 8 Lakh and (c) Bangalore … Rs. 25 Lakh Total Turnover Rs. 40 Lakhs
ITC in respect of Delhi and Mumbai units are as follows: CGST SGST IGST Total
o Eligible Credit 12,000 12,000 15,000 39,000
o Blocked Credit u/s 17(5) 3,000 3,000 6,000 12,000
Solution on the next slide …..

Amount in Rs.
Particulars Delhi Mumbai Bangalore Total
1. Turnover 7,00,000 8,00,000 25,00,000 40,00,000

2. Pro-rated ratio (of turnover of units, to which invoice relates) 47% 53% 100%
Amount in Rs.
Particulars CGST SGST IGST Total
1. ITC related to Delhi & Mumbai Units - to be distributed:

- Eligible credit 12,000 12,000 15,000 39,000
- Blocked credit u/s 17(5) 3,000 3,000 6,000 12,000
2. ITC - to be distributed to Delhi unit (47% of applicable credit - as computed above)
- Eligible credit 5,600 5,600 7,000 18,200
Since the unit is in the same state of Delhi, ITC to be distributed as …… CGST SGST IGST
3. ITC - to be distributed to Mumbai unit (53% of applicable credit - as computed above)

- Eligible credit 6,400 6,400 8,000 20,800
Since the unit is in different state from HO in Delhi, ITC to be distributed as …… IGST IGST IGST

Manner of Recovery of ITC, distributed in excess

Manner of Recovery of ITC distributed in excess
Recovery of Excess Credit Distributed by ISD - Section 21
Section 21 of CGST Act
Where the ISD distributes the credit in contravention of the provisions contained in section 20, resulting in excess
distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from
such recipients along with interest, in manner specified in Section 73 or 74

Manner of Utilization of ITC

Principles / Rules for utilization of Input Tax Credit (ITC)
U/s 49(5) of CGST Act, the utilization of ITC (Input Tax Credit) in Electronic Credit Ledger would be as follows:
Output Tax Type Output Tax Type Output Tax Type Output Tax Type
1. IGST 1. CGST 1. SGST 1. UTGST

ITC Pool of ITC Pool of ITC Pool of ITC Pool of
2. CGST 2. IGST 2. IGST 2. IGST
IGST 3. SGST
CGST 3. SGST
SGST 3. CGST
UTGST 3. CGST
4. UTGST 4. UTGST 4. UTGST 4. SGST
* The numbers in the above table represent the order of utilization of credit

Scenario 1
Vendor Sale of inputs of Rs. 100

Manufacturer Sale of Finished Goods Rs. 300
Wholesaler
Seller of Inputs Producer of Finished Goods Buyer of Finished Goods
CGST Rs. 9 + SGST Rs. 9 CGST Rs. 27 + SGST Rs. 27
State A State A State A
Output Tax Type
1. CGST In the above case, the manufacturer in State A has:

ITC Pool of
CGST
2.
3.
IGST
SGST
• Input tax credit of Rs. 9 CGST & Rs. 9 SGST ; and
• Output tax liability of Rs. 27 CGST & Rs. 27 SGST
4. UTGST
• Input tax credit of Rs. 9 each of CGST and SGST
1. SGST
can be used against
ITC Pool of
SGST
2.
3.
IGST
CGST
• Output tax liability of Rs. 27 each for CGST and SGST
and, the balance output tax liability will be paid in cash
4. UTGST

Scenario 2

Wholesaler
CGST Rs. 9 + SGST Rs. 9 IGST Rs. 54
State A State A State B
Output Tax Type
1. CGST In the above case, the manufacturer in State A has:

ITC Pool of
CGST
2.
3.
IGST
SGST
• Input tax credit of Rs. 9 CGST & Rs. 9 SGST; and
• IGST output tax liability of Rs. 54
4. UTGST
1. SGST • Input tax credit of Rs. 9 each of CGST and SGST
ITC Pool of
SGST
2.
3.
IGST
CGST
can be used against
• IGST output tax liability; and
the balance output tax liability will be paid in cash
4. UTGST

Scenario 3

Wholesaler
IGST of Rs. 18 CGST Rs. 27 + SGST Rs. 27
State A State B State B
In the above case, the manufacturer in State B has:

Output Tax Type
• IGST Input tax credit (ITC) of Rs. 18; and
• CGST and SGST output tax liability of Rs. 27 each
1. IGST
ITC Pool of
IGST
2. CGST
3.
4.
SGST
UTGST
• IGST Input tax credit of Rs. 18
can be used against
• CGST and SGST output tax liability; and
the balance CGST & SGST output tax liability to be paid in cash

Scenario 4

Wholesaler
IGST of Rs. 18 IGST of Rs. 54
State A State B State C
In the above case, the manufacturer in State B has:

Output Tax Type • IGST Input tax credit (ITC) of Rs. 18; and
ITC Pool of
1.
2.
IGST
CGST
• IGST output tax liability of Rs. 54
IGST Accordingly, in this case:

3. SGST • IGST Input tax credit of Rs. 18
4. UTGST can be used against
• IGST output tax liability; and
the balance IGST output tax liability to be paid in cash

Illustration 1
IGST ITC = Rs. 500,000 Output Tax Type
1. IGST
Output Tax Liability: ITC Pool of
2. CGST
IGST Rs. 300,000 IGST 3. SGST
CGST Rs. 100,000
SGST Rs. 200,000 4. UTGST
Particulars IGST ITC Output IGST Output CGST Output SGST

ITC - IGST 500,000
1st IGST output liability (300,000) 300,000
2nd CGST output liability (100,000) 100,000
3rd SGST output liability (100,000) 100,000
Balance output tax liability of SGST … of Rs. 100,000 – is to be paid in cash

Illustration 2
Output Tax Type
CGST ITC = Rs. 500,000
1. CGST
2. IGST
IGST Rs. 300,000 CGST 3. SGST
CGST Rs. 100,000
Particulars CGST ITC Output IGST Output CGST Output SGST

ITC - CGST 500,000
1st CGST output liability (100,000) 100,000
2nd IGST output liability (300,000) 300,000
3rd SGST output liability Not allowed
Balance output tax liability of SGST … of Rs. 200,000 – is to be paid in cash; and
CGST ITC of Rs. 100,000 (being 5 lacs – 1 lacs – 3 lacs) will be carried forward

Illustration 3
Output Tax Type
SGST ITC = Rs. 500,000
1. SGST
2. IGST
IGST Rs. 300,000 SGST 3. CGST
CGST Rs. 200,000
Particulars SGST ITC Output IGST Output CGST Output SGST

ITC - SGST 500,000
1st SGST output liability (100,000) 100,000
2nd IGST output liability (300,000) 300,000
3rd CGST output liability Not allowed
Balance output tax liability of CGST … of Rs. 200,000 – is to be paid in cash; and
SGST ITC of Rs. 100,000 (being 5 lacs – 1 lacs – 3 lacs) will be carried forward

ITC Funnel
Summary

ITC Funnel - Summary

Q&A
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Goods and Services Tax

Anjani Kumar Khetan Page | 1

Anjani Kumar Khetan Page | 2

Taxable Event When to Pay? Whom to Pay?

Supply Time of Supply Place of Supply

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Anjani Kumar Khetan Page | 5

Section 7 Section 8 Section 9* Section 10 Section 11

Anjani Kumar Khetan Page | 6

Charging Sections governing Levy under GST Laws

CGST Act SGST Act UTGST Act IGST Act

Section 9 Section 9 Section 7 Section 5

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taxable person # the GST Council )

Anjani Kumar Khetan Page | 10

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For a consideration For a consideration Without consideration

Whether or not - in the

In pursuance of Section 7(2), supply does not include the following:

Anjani Kumar Khetan Page | 13

Goods means: Other than: but, includes:

Anjani Kumar Khetan Page | 14

However, services include:

Anjani Kumar Khetan Page | 15

Whether Supply is (a) of Goods or (b) of Services Schedule II

What is NOT treated as a Supply? Schedule III + Notified Government Services

Powers of the Government u/s 7(3), CGST Act

Anjani Kumar Khetan Page | 16

^ of goods / services / both

Anjani Kumar Khetan Page | 17

2 Land and Building:

** Job Work, u/s 2(68) of CGST Act, means:

Anjani Kumar Khetan Page | 18

4 Transfer of business assets:

** as defined in Section 2(31) of the CGST Act

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5 Following to be treated as Supply of Services:

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6 Following Composite Supplies to be treated as Supply of Services:

** “Works Contract” - u/s 2(119) of CGST Act - means:

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Composite Supply Illustration

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Can be supplied separately No Yes

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Determining whether a ‘supply’ is goods or, service …. is crucial to determine

Time of Supply Place of Supply

= When liable to pay GST? = Determine Inter-State or, Intra-State

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Other Practical Insights

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Section 12 Section 13 Section 14 Section 31