Indirect Tax

EAST WEST
INSTITUTE OF TECHNOLOGY
DEPARTMENT
OF
MBA & RESEARCH CENTRE
INDIRECT TAXATION
Subject Code: 18MBAFM403
DEVARAJU N, Assistant Professor

Indirect Taxation – (18MBAFM403)
Unit-1
Introduction to Goods and Services Tax (GST): Goods and Services Tax Act & Rules,
Need for GST in India, Dual GST Model - Central Goods and Services Tax Act, 2017
(CGST) State Goods and Services Tax Act, 2017 (SGST) Union Territory Goods and
Services Tax Act, 2017 (UTGST) Integrated Goods and Services Tax Act, 2017 (IGST)
Goods and Services Tax Network (GSTN), GST Council Guiding principle and Functions of
the GST Council. (Theory).
Introduction to Goods and Services Tax (GST):

Goods and Services Tax (GST) was first introduced in France in the year 1954. Within 62 years
of its introduction, about 160 countries across the world have adopted GST. Generally, GST is
popular for single model but Canada and Brazil also have dual model of GST. India has adopted
a dual GST, which will be imposed concurrently by centre and states.
Goods and Services Tax (GST) has been identified as one of the most important tax reforms in
India. GST is a path breaking indirect tax reform, which will create a common national market
by removing inter-state trade barriers. GST has subsumed (absorbed or include) multiple indirect
taxes imposed by central and state governments.
GST subsumed the following:
Central taxes State taxes
Central excise duty Sate VAT
Additional excise duty Entertainment tax
Service tax Entry tax
Surcharge and cess Luxury tax
Central sales tax Purchase tax
The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, seeks to amend the
Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the
country. The proposed amendments in the Constitution will confer powers to both the Parliament
and the State legislatures to make laws for levying GST on the supply of goods and services on
the same transaction.
Prof. DEVARAJU N, Assistant Professor, East West Institute of Technology, Bangalore. Page 2
GST in India:
• Goods and Services Tax (GST) is a new system of indirect taxation in India merging
most of the existing taxes into single system of taxation.
• GST would be a comprehensive indirect tax on manufacture, sale and consumption of
goods and services throughout India, to replace taxes levied by the central and state
governments.
• The GST is consumption based tax levied on the supply of Goods and Services which
means it would be levied and collected at each stage of sale or purchase of goods or
services based on the input tax credit method. This method allows GST-registered
businesses to claim tax credit to the value of GST they paid on purchase of goods or
services as part of their normal commercial activity.
• Taxable goods and services are not distinguished from one another and are taxed at a
single rate in a supply chain till the goods or services reach the consumer.
• GST can be termed as “One Tax, One Nation & One Market.”
Need for GST in India:

 Introduction of GST is considered to be a significant step in the reform of indirect
taxation in India. Amalgamating of various Central and State taxes into a single tax
would help mitigate the double taxation, cascading, multiplicity of taxes,
classification issues, taxable event, and etc., and leading to a common national
market.
 VAT rates and regulations differ from state to state. On the other hand, GST brings
in uniform tax system across all the states. Here, the taxes would be divided
between the Central and State government.
 On the other hand, GST brings in uniform tax laws across all the states spanning
across diverse industries. Here, the taxes would be divided between the Central and
State government based on a predefined and pre-approved formula. In addition, it
would become much easier to offer services and goods uniformly across the nation,
since there won’t be any additional state-levied tax.
 GST rollout missed several deadlines due to disagreement among many states over
certain important issues on the new tax reform.
Structure of GST:
1. GST is levied on supply of goods and services across India (including Jammu and
Kashmir). It is a single tax on the supply of goods and services, right from the
manufacturer to the consumer. Under GST credit of taxes paid at previous stages is
available as set-off from the output tax.
2. GST is destination based consumption tax. Benefit of tax (STCG/ UTGST) will
accrue to the consuming state.
3. Centre and states will impose tax on goods and services simultaneously. Centre now can
impose tax on sale of goods within State and States can impose tax on services.
(a) Intra-State supply of goods and services
 CGST-Payable to Central Government
 SGST/ UTGST-Payable to State Government/ Union Territory (as

applicable) where they are consumed
(b) Inter-States Supply of goods and services
 IGST - Payable to Central Government
4. Centre will levy and administer CGST and IGST while respective States/ UTs will
levy and administer SGST/UTGST.
5. Import will be treated as inter-States supply and IGST will be chargeable along with
basic Customs duty.
6. However, in GST Export will be treated as Zero rated supplies and no IGST is payable.
7. The rates of GST are 0.5%, 3%, 5%, 12%, 18% and 28%. In addition , compensation
cess will be payable on pan masala, coal, aerated water and motor cars (Sin cess). There
is no education cess or Swach Bharat cess or Krishi Kalyan cess on GST.
8. GST will be calculated on value of supply of goods and services, which is transaction
value. (subject to some exceptions)
9. Under GST, every suppliers who have made taxable supply shall required to get himself
registered under GST Law.
10. A registered person is entitled to take credit (deduction) of input tax paid from the
output tax (if any) subject to following restriction:
(a) Utilisation of IGST : first utilized for the payment of IGST then the balance may be
utilized towards payment of CGST and SGST/UTGST
(b) Utilisation of CGST: first utilized for the payment of CGST then the balance may be
utilized towards payment of IGST.
(c) Utilisation of SGST/UTGST: first utilized for the payment of SGST/ UTGST
then the balance may be utilized towards payment of IGST.
11. Under GST regime there is a seamless (without any obstruction) credit flow in case of
inter-state supplies, which was not possible in pre GST period. No credit was available
for CST paid by the buyer. Under GST regime the seamless credit will flow as follows:
(a) The inter-state supplier in exporting state is allowed to set off the available credit in
IGST, CGST and SGST/UTGST against the IGST payable on inter-state supply
made by him.
(b) The buyer of importing state in inter-state supply can avail the credit of IGST
paid on purchase from the output tax payable.
(c) The exporting state transfers to the centre the credit of SGST/ UTGST utilised
for the payment of IGST.
(d) The Centre transfers to the importing state the credit of IGST used in payment of
SGST/UTGST.
12. A common portal or platform is needed which could act as a clearing house and verify
the claims and inform the respective government to transfer the funds. This is
possible with the help of a strong IT infrastructure. Accordingly Government has
established common GST Electronic Portal (www.gst.gov.in), a website managed by
Goods and Services Network (GSTN) for the tax payer and common IT infrastructure
for Central and States. Primarily, GSTN provides three services to taxpayers.
(a) Facilitating Registration.
(b) Forwarding the returns to Central and States authorities.
(c) Computation and settlement of IGST.
(d) Matching of tax payment details with banking network.
(e) Providing analysis of taxpayers’ profile.
What is GST?
 GST (Goods and Services Tax) is a indirect tax levied on goods and services.
 GST is a single tax on the supply of goods and services.
 GST improve overall economic growth of the nation.
 GST is a comprehensive indirect tax levy on manufacture, sale and consumption of goods
as well as services at the national level.
 It will replace all indirect taxes levied on goods and services by states and Central.
Definition of GST:
Goods and services tax (GST) is a tax on goods and services with value addition at each stage
having comprehensive and continuous chain of set of benefits from the producer’s / service
provider’s point up to the retailers level where only the final consumer should bear the tax.
Objectives / Purpose of GST:

 One country – one tax
 Consumption based tax instead of manufacturing
 Uniform GST registration, payment
 To eliminate cascading effect of indirect taxes/ doubling tax/ tax on tax
 Subsume all indirect taxes at centre and state level
 Reduce tax evasion and corruption
 Increase productivity
 Increase Tax to GDP and revenue surplus
Salient Features of GST:

 Dual GST Model
 Destination based consumption tax
 Taxes to be subsumed
 Central tax – central excise duty
 service tax
 Surcharges and cess
 State tax – VAT
 Entertainment tax
 Luxury tax
 Taxes on lottery, betting
 Octroi – entry tax
 GST on Export and Import
 Computation of GST on the basis of invoice credit method
 Payment of GST - CGST and SGST are paid through GST
Advantages / Benefits of implementation of GST in India

 Advantages of GST to Citizens:
 Simpler tax system
 Reduction in prices of goods and services due to elimination of cascading
 Uniform prices throughout the country
 Transparency in taxation system
 Increase in employment opportunities
 Advantages of GST to Trade/Industry:

 Reduction in multiplicity of taxes
 Mitigation of cascading/double taxation
 More efficient neutralization of taxes especially for exports
 Development of common national market
 Simpler tax regime-fewer rates and exemptions
 Advantages of GST to Central / State Governments:
 A unified common national market to boost Foreign Investment and “Make in India”
campaign
 Boost to export/manufacturing activity, generation of more employment, leading to
reduced poverty and increased GDP growth
 Improving the overall investment climate in the country which will benefit the
development of states
 Uniform SGST and IGST rates to reduce the incentive for tax evasion
 Reduction in compliance costs as no requirement of multiple record keeping
 Simpler tax system
 Broadening of tax base

 Improved revenue collections
 Efficient use of resources
Dual GST:
Many countries in the world have a single unified GST system i.e. a single tax applicable
throughout the country.
However, in federal countries like Brazil and Canada, a dual GST system. In India, a dual GST
is proposed whereby a Central Goods and Services Tax (CGST) and a State Goods and Services
Tax (SGST) will be levied on the taxable value of every transaction of supply of goods and
services.
Benefits of Dual GST:
 Reduction in the number of taxes at the Central and State level
 Decrease in effective tax rate for many goods
 Removal of the current cascading effect of taxes
 Reduction of transaction costs of the taxpayers through simplified tax compliance
 Increased tax collections due to wider tax base and better compliance
 Better for business
 Good balance between centre and states
 Better for business
 Least changes, most benefits
Extent of CGST Act/ SGST Act/ UTGST Act/ IGST Act:
 The Central Goods and Service Tax Act, 2017 for imposing CGST on intra- state
supply of goods and services, extends whole of India including Jammu and Kashmir.
 Respective State Goods and Service Tax Act, 2017 for imposing SGST by respective
state on intra-state supply of goods and services, extends whole of that state/ Union
territory having state legislature (Delhi and Puducherry).
 The Union Territory Goods and Services Tax Act, 2017 for levying UTGST in 5 Union
Territories without State Legislatures on intra-Territory supply of goods and services.
(Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and
Diu and Chandigarh)

 The Integrated Goods and Service Tax Act, 2017 for levying IGST and whole of India
including Jammu and Kashmir.
Applicability of GST in India:
 Territory of India (i.e. entire landmass of India including states and union territory)
 Indian territorial waters, seabed, and sub-soil underlying such waters, continental shelf,
excluding Special Economic Zone (SEZ) and any other notified maritime zone.
 The air space above its territory and territorial waters.
SALIENT FEATURES OF CGST ACT, 2017:

1. A state-wise single registration for a taxpayer for filing returns, paying taxes, and to fulfil
other compliance requirements.
2. Most of the compliance requirements would be fulfilled online.
3. A taxpayer has to file one single return state-wise to report all his supplies, whether made
within or outside the state or exported out of the country and pay the applicable taxes on
them.
4. A business entity with an annual turnover of upto Rs 20 lakh would not be required to
take registration in the GST regime.
5. A business entity with turnover upto Rs 50 lakh can avail the benefit of a composition
scheme under which it has to pay a much lower rate of tax
6. The Composition Scheme is available for all traders, select manufacturing sectors and for
restaurants in the services sector.
Levy and collection as per CGST Act, 2017:
(a) U/s 9(1) of CGST Act, 2017 there shall be levied a tax –
 Called the Central Goods and Services Tax(CGST);
 On all the intra-state supplies of goods or services or both, except on supply of
alcoholic liquor for human consumption;
 On the value determined u/s 15; and
 At such a rate (maximum 20%,) as notified by the Central Government on
recommendation of GST Council; and
 Collected in such a manner as may be prescribed; and

 Shall be paid by the taxable person.
(b) U/s 9(2) of CGST Act 2017, the CGST of following supply shall be levied with the effect
from such date as notified by the Central Government on recommendation of GST
Council-
 Petroleum crude
 High speed diesel
 Motor spirit (commonly known as petrol)
 Natural gas
 Aviation turbine fuel
(c) U/s 9(3), CGST is to be paid on reverse charge basis by the recipient on notified goods/
services or both (liability to pay tax by the recipient of supply of goods / services rather
than supplier of goods/ services under forward charge)
(d) U/s 9(4), CGST on taxable supply of goods/ services to registered supplier from
unregistered supplier is to be paid on reverse charge basis by the recipient.
(e) U/s 9(5), E-Commerce operator is liable to pay CGST on notified intra-state supplies.
SALIENT FEATURES OF SGST ACT, 2017:

• Levied by the States for all the transactions of goods and services made for a
consideration.
• State GST would be paid to the accounts of the respective State.
• Exceptions would be exempted goods and services, goods kept out of GST and
transactions below prescribed threshold limits.
• Basic features of law such as chargeability, taxable event, measure, valuation,

classification would be uniform across the State.
SALIENT FEATURE OF IGST ACT, 2017:
• IGST equals to CGST+SGST. IGST model that the centre will levy tax at a rate
approximately equal to CGST+SGST on Inter-State supply of goods & services.
• It is a destination based tax and will accrue to importing state.
• It will lower tax burden by taxing Inter-State transaction only once.
• B2B transactions – tax will flow to the State where Purchaser claims Input Tax Credit.
• B2C transactions – tax will flow to the State of Consumer, otherwise tax will remain in
the State of Seller.
Levy and collection as per IGST Act, 2017:
1. U/s 5(1) of IGST Act, 2017 there shall be levied a tax –
 Called the Integrated Goods and Services Tax (IGST);
 On all the inter-state supplies of goods or services or both, except on supply

of alcoholic liquor for human consumption;
 On the value determined u/s 15 of CGST Act, 2017; and
 At such a rate (maximum 40%,) as notified by the Central Government on

recommendation of GST Council; and
 Collected in such a manner as may be prescribed; and
 Shall be paid by the taxable person.
Provided further that IGST will be imposed on goods/ services imported into India.
2. U/s 5(2) of IGST Act, 2017, the CGST of following supply shall be levied with the
effect from such date as notified by the Central Government on recommendation of
GST Council-
 Petroleum crude
 High speed diesel
 Motor spirit (commonly known as petrol)
 Natural gas
 Aviation turbine fuel
3. U/s 5(3), IGST is to be paid on reverse charge basis by the recipient on notified goods/
services or both (liability to pay tax by the recipient of supply of goods / services rather
than supplier of goods/ services under forward charge).
4. U/s 5(4), IGST on taxable inter-state supply of goods/ services to registered supplier
from unregistered supplier (agriculturist) is to be paid on reverse charge basis by the
recipient.
5. U/s 5(5), E-Commerce operator is liable to pay CGST on notified inter-state supplies.
Goods and Services Tax Network (GSTN):

The Goods and Service Tax Network (GSTN) is a non-profit, non-government organization,
which manages the entire IT system of the GST portal. The Goods and Service Tax Network
(or GSTN) is a non-profit, non-government organization.
GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called
the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT
infrastructure and services to Central and State Governments, taxpayers and other stakeholders
for implementation of GST.
The functions of the GSTN would, include:
(i) Facilitating registration;
(ii) Forwarding the returns to Central and State authorities;
(iii) Computation and settlement of IGST;
(iv) Matching of tax payment details with banking network;
(v) Providing various MIS reports to the Central and the State Governments based on the
taxpayer return information;
(vi) Providing analysis of tax payers’ profile; and
(vii) Running the matching engine for matching, reversal and reclaim of input tax credit.
The GSTN is developing a common GST portal and applications for registration, payment,
return and MIS/ reports. The GSTN would also be integrating the common GST portal with the
existing tax administration IT systems and would be building interfaces for tax payers. Further,
the GSTN is developing back-end modules like assessment, audit, refund, appeal etc. for 19
States and UTs (Model II States).
GSTN FORMAT
GST Council:
The GST council, the key decision-making body that will take all important decisions regarding
the GST, will have representation from the central government as well as all the state
governments.
The Goods & Services Tax Council {GST Council} has been created in September 2016 under
Article 279-A of the Constitution of India. The main objective of GST is to develop a
harmonized national market of goods and services. It has its Secretariat office in New Delhi.
Functions of GST Council:
 Taxes, cesses, and surcharges to be subsumed under the GST;
 Goods and services which may be subject to, or exempt from GST;
 The threshold limit of turnover for application of GST;
 Rates of GST
 Model GST laws, principles of levy, apportionment of IGST and principles related to
place of supply
 Special provisions with respect to the eight north eastern states, Himachal Pradesh,
Jammu and Kashmir, and Uttarakhand; and
 Other related matters.
Quorum and Decision – Making of GSTC:

 For a valid meeting of the members of GST Council, at least 50 percent of the total
number of the member should be present at the meeting.
 Every Decision made during the meeting should be supported by at least 75 percent
majority votes of the members who are present and voting at the meeting. vote cast
between Central Government and State Government:-
o The vote of Central Government shall have the weighted of one-third of the total
votes
o The votes of State Government shall have the weighted of two third of the total
votes, cast in the meeting
Action plan of GST:
 List number of Taxes, cesses, and surcharges to be subsumed under GST
 Preparation of list of goods and services subject to, or exempt from GST
 Determination of threshold limit of turnover for application of GST
 Fixation of rates
 Preparation of model GST Laws, principles of levy, apportionment of tax benefits
 Firming up Place of supply Rules
 Recommend on Compensation to states losing on revenue post implementation of GST,
subject to maximum time limit of 5 years.
 Passage of SGST laws by all State legislatures
 Recommendation of Model GST Rules by GST Council
 Notification of GST Rules
 Recommendation of GST Tax rates by GST Council
 Establishment and up gradation of IT framework
 Meeting implementation challenges
 Effective coordination between Centre & State tax administrations
 Reorganization of field formations
 Training of Officials
 Outreach programs for all stakeholders including Trade & Industry.
Unit - 2
Levy and Collection of Tax: Scope of Supply, Composite and Mixed Supplies , Levy and Collection,
Composition Levy , Exemptions Person Liable to pay GST, Exemption from tax. (Simple problems on
calculation of value of taxable supply and GST Levy). (Theory and Problems).
Definition of important terms:

Meaning of ‘Goods’ {Section 2 (52) of CGST Act}:
‘Goods’ means every kind of movable property other than money and securities but includes:
 actionable claim;
 Growing crops, grass and things attached to/forming part of the land which are
agreed to be severed before supply or under a contract of supply.
Meaning of ‘Services’ {Section 2(102) of CGST Act}:
A service means anything other than goods, money, and securities. Services include activities
relating to the use of money or its conversion of money by cash or by any other mode, from one
form of currency or denomination to another form, currency or denomination for which a separate
consideration is charged.
Meaning of ‘Person’ {Section 2(84) of CGST Act):
Person includes:
 an individual (i.e. a natural human being);
 a Hindu Undivided Family (‘HUF’) (The meaning of HUF has not been given under
the tax laws. As per the Hindu law, it means a family which consists of all persons
lineally descended from a common ancestor including their wives and daughters.
Married daughters are no longer treated as a member of HUF after they get married
in other families):
 a firm;
 a limited liability partnership firm;
 a company; a trust;
 a body -corporate incorporated by or under the laws of a country outside India;
 an association of persons (AOP), whether incorporated or not (an AOP refers to a

situation where two or more persons join hands to carry on any business);
 a body of individuals (BOI), whether incorporated or not (a BOI is similar to AOP;
however, all the participants of BOI are only individuals whereas in case of AOP, one
or more participant is a non-individual);
 government (Central Government as well as State Government);
 a local authority (ie, panchayat, municipality, cantonment board, etc); and
 a co-operative society registered under any law relating to cooperative societies;
 a society as defined under the Societies Registration Act, 1860;
 a corporation established by/under any Central, State or Provincial Act or

Government company as defined u/s 2(45) of Companies Act, 2013;
 every artificial juridical person not covered above (artificial juridical persons are
entities which are not natural persons but are separate entities in the eyes of law. Though
they may not be sued directly in a court of law, but they can be sued through persons
managing them. Examples are universities, ICAI, ICSI, etc);
Meaning of ‘Related Persons’ {Explanation to Section 15 of CGST Act}

Persons shall be deemed to be ‘related persons’ if:
 such persons are officers or directors of one another’s businesses;
 such persons are legally recognised partners in business;
 such persons are employer & employee;
 a third person directly or indirectly owns, controls or holds 25% or more of the
outstanding voting stock or shares of both of them;
 one of them directly or indirectly controls the other;
 both of them are directly or indirectly controlled by a third person;
 together they directly or indirectly control a third person;
 they are members of the same person; or
 one of them is the sole agent, sole distributor or sole concessionaire of the other.
Scope of Supply {Section 7 of CGST Act}:

Section 7(1): For the purposes of this Act, the expression “supply” includes:
 all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business;
 import of services for a consideration whether or not in the course or furtherance of
business;
 the activities specified in Schedule I, made or agreed to be made without a
consideration; and
 the activities to be treated as supply of goods or supply of services as referred to in
Schedule II.
Section 7(2): Notwithstanding anything contained in sub-section (1),
 activities or transactions specified in Schedule III; or
 such activities or transactions undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public authorities, as may
be notified by the Government on the recommendations of the Council, shall be
treated neither as a supply of goods nor a supply of services.
Section 7(3): Subject to the provisions of sub-sections (1) and (2), the Government may, on the
recommendations of the Council, specify, by notification.
Composite Supply and Mixed Supply

GST is payable on supply of goods/ services at a rate notified by the government. In case of
supply of single goods/ services poses no problem for determination of applicable GST rate, if they
are clearly identifiable. However, some of the supplies are a combination of goods/combination of
services/ combination of services and goods wherein each individual component of such supply
attracts a different rate of tax. In such cases, determination of applicable rate of tax to be levied
on such supplies may be a challenge. To address this issue, the GST law categorises such
supplies into composite supplies and mixed supplies.
Composite Supply
U/s 2(30) of CGST Act, 2017 Composite supply means a supply –
 Made by a taxable person
 to a recipient
 consisting of two or more taxable supplies of goods or services or both, or any
combination thereof,
 which are naturally bundled, and
 supplied in conjunction with each other in ordinary course of business,
 and out of all supplies, one of which is principal supply. (Principal supply means
predominant element of composite supply for which other supplies forming part of
composite supply play an ancillary role)
Condition for Composite Supply
Any supply of goods or services will be treated as composite supply if it satisfies the following
conditions simultaneously:
 supply of two or more taxable supply
 it is naturally bundled i.e., goods or services are usually provided together in normal
course of business. They cannot be separated.
 One of the supplies must be principal supply.
Tax liability for Composite Supply
As per Sec. 8 of CGST Act, 2017 a Composite Supply, comprising two or more supplies, one of
which is a principal supply, shall be treated as a supply of such principal supply. Accordingly the
tax rate applicable for the goods or services which is treated as principal supply is the rate of tax
for Composite Supply.
Mixed Supply
As per Sec. 2(74) mixed supply means –
 Two or more individual supplies of goods or services or any combination thereof,

 Made in conjunction with each other
 By a taxable person
 For a single price
 Where such supply does not constitute a composite supply.

Condition for Mixed Supply
Any supply of goods or services will be treated as mixed supply if it satisfies the following
conditions simultaneously:
 Supply of two or more individual supply
 It is not naturally bundled i.e., goods or services are usually not provided together in
normal course of business. They can be separated.
 None of the supplies is principal supply.
Levy and Collection:

As per article 265 of The Constitution of India no tax shall be imposed or collected except by the
authority of any Law. The charging section is the must in any Taxing Law for levy (impose)
and collection (payment) of taxes. Under the GST regime, the taxable event is supply of goods or
services or both.
Levy and Collection of GST under CGST Act, IGST Act and UTGST Act. CGST and SGST
shall be levied on all intra-state supplies of goods and/or services and IGST shall be levied on all
inter-state supplies of goods and/or services respectively.
1. Subject to the provisions of sub-section (2), there shall be levied a tax called the central
goods and services tax on all intra-State supplies of goods or services or both, except on
the supply of alcoholic liquor for human consumption, on the value determined under
section 15 and at such rates, not exceeding twenty per cent., as may be notified by the
Government on the recommendations of the Council and collected in such manner as
may be prescribed and shall be paid by the taxable person.
2. The central tax on the supply of petroleum crude, high-speed diesel, motor spirit
(commonly known as petrol), natural gas, and aviation turbine fuel shall be levied with
effect from such date as may be notified by the Government on the recommendations of
the Council.
3. The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on
reverse charge basis by the recipient of such goods or services or both and all the
provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.
4. The central tax in respect of the supply of taxable goods or services or both by a supplier,
who is not registered, to a registered person shall be paid by such person on reverse
charge basis as the recipient and all the provisions of this Act shall apply to such recipient
as if he is the person liable for paying the tax in relation to the supply of such goods or
services or both.
5. The Government may, on the recommendations of the Council, by notification, specify
categories of services the tax on intra-State supplies of which shall be paid by the
electronic commerce operator if such services are supplied through it, and all the
provisions of this Act shall apply to such electronic commerce operator as if he is the
supplier liable for paying the tax in relation to the supply of such services:
 If where an electronic commerce operator does not have a physical presence
in the taxable territory, any person representing such electronic commerce
operator for any purpose in the taxable territory shall be liable to pay tax.
 Provided further that where an electronic commerce operator does not have
a physical presence in the taxable territory and he does not have a
representative in the said territory, such electronic commerce operator shall
appoint a person in the taxable territory for the purpose of paying tax and
such person shall be liable to pay tax.
Composition Levy:
The composition levy is an alternative method of levy of tax designed for small taxpayers. The
objective of composition scheme is to bring simplicity and to reduce the compliance cost for the
small taxpayers. Moreover, it is optional and the eligible person opting to pay tax under this
scheme can pay tax at a prescribed percentage of his turnover every quarter, instead of paying
tax at normal rate.
The composition levy is an alternative method of levy of tax designed for small taxpayers whose
turnover is up to Rs. 75 lakhs ( Rs. 50 lakhs in case of few States).
Need of GST Composition Scheme:

Composition scheme under the law is for small businesses. This is to bring relief to small
businesses so that they need not be burdened with the compliance provisions under the law.
Thus, an option has been provided where they can opt to pay a fixed percentage of turnover as
fees in lieu of tax and be relieved from the detailed compliance of the provisions of law.
Composition levy would be generally opted by persons who are supplying goods & services or
both to the end consumer.
Advantages of composition scheme:
 Lesser compliance (returns, maintaining books of record, issuance of invoices)
 Limited tax liability
 High liquidity as taxes are at a lower rate.
Disadvantages of composition scheme:
 A limited territory of business. The dealer is barred from carrying out inter-state
transactions
 No Input Tax Credit available to composition dealers
 The taxpayer will not be eligible to supply exempt goods or goods through an e-
commerce portal.
Rate of Composition Levy in GST:
The rate of Composition Levy in lieu of tax would be prescribed but it would not be exceed:
a) 1% of the turnover in State or turnover in Union Territory in case of a manufacturer.
b) 2.5% of the turnover in State or turnover in Union Territory in case of persons engaged in
making supplies. This entry covers the registered persons making supply of food or any other
article for human consumption or any drink (other than alcoholic liquor for human consumption.
For e.g. Restaurants or Hotels.
c) 0.5% of the turnover in State or turnover in Union Territory in case of other suppliers.
However, the above rates are only in respect of CGST Act, Equivalent Rates would be
prescribed under SGST/UTGST Act. Thus, effective rates would be 2% for manufacturers, 5%
for persons making supply of food etc., and 1% in case if other suppliers.
Eligibility for GST Composition Scheme:

Getting registered under composition scheme is optional and voluntary. Any business which has
a turnover less than Rs.50 Lakh can opt for this scheme but on any given day, if turnover crosses
the above-mentioned limit, then he becomes ineligible and has to take registration under the
regular scheme.
There are certain conditions that need to be fulfilled before opting for composition levy. They are
as follows:
 Any assessee who only deals in supply of goods can opt for this scheme that means
this provision is not applicable for service providers. However, restaurant service
providers are excluded.
 There should not be any interstate supply of goods that means businesses having
only intra state supply of goods are eligible.
 Any dealer who is supplying goods through electronic commerce operator will be
barred from being registered under composition scheme.
 Dealers are not allowed to collect composition tax from the recipient of supplies,
and neither are they allowed to take Input Tax Credit.
 If the person is not eligible under composition scheme, tax liability shall be TAX +
INTEREST and PENALTY which shall be equal to the amount of tax.
 Dealers who collect Tax at source u/s 56.
Value of Supply:
GST is payable on suply of goods or services for a considertion in the course or furtherance of
business.
GST = value of supply X Rate of GST
Sections of CGST Act prescribe the mechanism for the determining the value of a supply
Provided.
 Supply is made between unrelated persons;
 Price is the sole consideration for supply.
Where value of a supply can’t be determined u/s 15 of CGST Act, the same has to be
determined as per relevant to the provision of ‘Chapter IV-Determination of value of supply’ of
CGST Rules.
Section 15(1) of CGST Act provides that the taxable value of any Supply of goods or services or
both shall be the transaction value, which is the price actually paid or payable for the said Supply
of goods or services or both. However, Section 15(1) of CGST can’t be adopted where,
 transaction of Supply takes place between two related persons
 price charged is not the sole consideration
 supply is made for non-monetary consideration
Section 15(2) of CGST Act lists down various itmes which are to be charged or added with
transaction value of a Supply as follows:
 Any types of taxes, cess, duties, fees and charged levied by other laws (irrespective
of the fact whether they have charged seperately or not) other than GST [SGST,
CGST, UTGST, IGST, GST compensation cess].
 Any amount which is payable by supplier in relation to such supply but paid by
recipient of supply and not included in the price of the goods or services or both.
 Incidental expenses including commission, packing etc. charged by the supplier or
anything else done by the supplier in relation to the supply at the time of or before
the delivery of goods or supply of services.
 The value of taxable supply shall include not only the base price but also the charges
for delay in payment, like, interest, late fine, penalty etc.
 Subsidies directly related to the price of supply are the part of taxable value,
provided, it is not paid by Central Government or State Government.
Section 15(3) of CGST Act lists down item, which are to be excluded while calculating
transaction value of supply as follows:
1. Discount, which are allowed before or at the time of supply are allowed to be deducted
from the value of supply if such discount has been shown properly in the invoice.
2. Discount allowed after supply are allowed to be deducted from the value of supply if all
the following conditions are satisfied:
o Such discount is allowed in terms of an agreement that existed at the time of
supply.
o Such discount has been worked out invoice-wise.

o Input tax credit as is attributed to the discount based on document issue by the
supplier has been reversed by the recipient of the supply.

Indirect Tax

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EAST WEST

DEVARAJU N, Assistant Professor

Introduction to Goods and Services Tax (GST):

Need for GST in India:

 CGST-Payable to Central Government

 SGST/ UTGST-Payable to State Government/ Union Territory (as

 IGST - Payable to Central Government

(a) Facilitating Registration.

(b) Forwarding the returns to Central and States authorities.

(c) Computation and settlement of IGST.

(d) Matching of tax payment details with banking network.

(e) Providing analysis of taxpayers’ profile.

Objectives / Purpose of GST:

Salient Features of GST:

Advantages / Benefits of implementation of GST in India

 Advantages of GST to Trade/Industry:

 Broadening of tax base

Extent of CGST Act/ SGST Act/ UTGST Act/ IGST Act:

Diu and Chandigarh)

SALIENT FEATURES OF CGST ACT, 2017:

 Collected in such a manner as may be prescribed; and

 High speed diesel

 Motor spirit (commonly known as petrol)

 Aviation turbine fuel

SALIENT FEATURES OF SGST ACT, 2017:

• State GST would be paid to the accounts of the respective State.

• Basic features of law such as chargeability, taxable event, measure, valuation,

SALIENT FEATURE OF IGST ACT, 2017:

• It is a destination based tax and will accrue to importing state.

• It will lower tax burden by taxing Inter-State transaction only once.

Levy and collection as per IGST Act, 2017:

1. U/s 5(1) of IGST Act, 2017 there shall be levied a tax –

 Called the Integrated Goods and Services Tax (IGST);

 On all the inter-state supplies of goods or services or both, except on supply

 At such a rate (maximum 40%,) as notified by the Central Government on

 Shall be paid by the taxable person.

 Aviation turbine fuel

Goods and Services Tax Network (GSTN):

The functions of the GSTN would, include:

(i) Facilitating registration;

(ii) Forwarding the returns to Central and State authorities;

(iii) Computation and settlement of IGST;

(iv) Matching of tax payment details with banking network;

(vi) Providing analysis of tax payers’ profile; and

Quorum and Decision – Making of GSTC:

Definition of important terms:

Meaning of ‘Services’ {Section 2(102) of CGST Act}:

Meaning of ‘Person’ {Section 2(84) of CGST Act):

 an individual (i.e. a natural human being);

 a limited liability partnership firm;

 a body -corporate incorporated by or under the laws of a country outside India;

 an association of persons (AOP), whether incorporated or not (an AOP refers to a

 a local authority (ie, panchayat, municipality, cantonment board, etc); and

 a co-operative society registered under any law relating to cooperative societies;

 a society as defined under the Societies Registration Act, 1860;

 a corporation established by/under any Central, State or Provincial Act or

Meaning of ‘Related Persons’ {Explanation to Section 15 of CGST Act}

 such persons are officers or directors of one another’s businesses;

 such persons are legally recognised partners in business;

 such persons are employer & employee;

 both of them are directly or indirectly controlled by a third person;

 together they directly or indirectly control a third person;

 they are members of the same person; or