GST

(GOODS AND
SERVICES TAX)
…
 UNIT-1
INTRODUCTION
OVERVIEW OF GST:
The Goods and Services Tax (GST) was introduced in India to remove the multiplicity of
taxes levied, thereby reducing the complexity and tax cascading. The GST subsumed
all previous taxes that were levied on the sale of goods or provision of services by either
Central or State Government.
GST – Implemented from July 1st 2017
GST is launched on the basis of VAT
Incidence and Impact on Different persons
Subsumation of large number of taxes and other levies will now allow free flow of larger
pool of tax credits at both Central and State level.
Following taxes would be subsumed under GST:

1) Central taxes: Taxes currently levied and collected by the Centre:

a. Central Excise duty
b. Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Central Surcharges and Cesses so far as they relate to supply of go ..
CONTINUE…

2) State taxes: State taxes that are subsumed under the GST are:
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (all forms)
e. Entertainment and Amusement Tax (except when levied by the local bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses so far as they relate to supply of goods and services.
Introduction to GST:

It is a comprehensive, multi-stage, destination based tax, which will be levied on every

value addition. It is touted to be the biggest tax reform and will simplify the current
taxation system. It will replace all indirect taxes (like service tax, value addition tax,
central sales tax, excise duty) levied on goods and services in India.
ADVANTAGES OF GST
Possible reduction in prices.
Increase in government revenues.
Less compliance and procedural cost.
Removal of current cascading effect.
There are two types of GST structure in the world. These are:
i. Single GST
ii. Dual GST
India has adopted the DUAL GST system whereby a CGST and SGST will be levied on
the taxable value of every transaction of supply of goods and services. It is the
Canadian model of Dual GST (central and state) implemented in 1991 that the Indian
model of the indirect tax reform finds similarities with.
The government has decided 5 different tax slab rates- 0%, 5%, 12%, 18%, 28%. The
government has categorized 1211 items under tax slabs.
While the implementation of the tax reform in India may be historic for the scale of
change that it envisages, India is not the first country to move to a unified indirect
taxation system. France was the first country to adopt GST in 1954.
A differentiation chart to understand
better:
GST

Single Dual

Non-concurrent Concurrent
Goods and services are divided Both Central and state have
between Central, state and levy right to levy on Goods and
Individually. Services.
Canada; India
Former tax structure:
New tax structure:
CGST: CGST refers to Central Goods and Service Tax. It is levied on the intrastate
movement of goods and services. The revenue collected under CGST is for the central
government. However, Input tax credit on CGST is given partly to the centre and partly
to the states as it will be utilized against the payment of both CGST and IGST.
SGST: SGST refers to State goods and service tax. SGST falls under State Goods and
Service Tax Act 2016. The revenue collected under SGST is collected State
Government. The State Government levies it on the intrastate movement of goods and
services.
IGST: IGST refers to Integrated goods and service tax. It is levied on the interstate
movement of goods and services. Integrated GST will be collected by the centre. IGST
will also be applicable on the import of goods.
FOR EXAMPLE:
CASE: Suppose person “A” from Maharashtra sells goods to person “B” in Maharashtra
for 10,000. Further person “B” sells goods to person “C” in Punjab for 17,500. Finally,
person “C” sells goods to person “D” in Punjab for 30,000. GST @18% comprises of SGST
@9% and CGST@9%?
SOLUTION:
Value added tax(VAT):
Taxation refers to the process of an authority levying certain charges on goods, services
and transactions. It is one of the foremost powers held by the government of any
country. Various types of taxes are applicable at various stages of sale of goods and
services. VAT is one such tax.
Example
Suppose Ram owns a restaurant and spends Rs.50,000 towards obtaining raw materials.
Input tax is 10%, so input tax becomes 10% of Rs.50,000 = Rs.5,000
Now after selling the food made by using the purchased raw materials, Ram was able
to make Rs.1,00,000. Supposing 10% output tax, output tax becomes Rs.10,000
So, final VAT payable by Ram comes out to be Rs.10,000 – Rs.5,000 = Rs.5,000
Continue:
ADVANTAGES OF VAT:
• Eliminates the deficiencies of Sales Tax like- Multiple Taxation and Cascading effect.
• Self-assessment under VAT
• Fall in price
• Transparency
• Simple calculation
• Fairness in Taxation system
• Higher revenue growth
• Less chances of Tax Evasion
• Self- policing mechanism
• Road Map of Central Levy VAT
DISADVANTAGES OF VAT:

• No ITC for Interstate purchases

• Bogus invoice
• Missing trader fraud
• More paper work
COMPONENTS OF GST:
CGST
SGST
IGST
UGST
GST Compensation Cess
FEATURES OF GST:

GST is a consumption based tax

Concurrent Dual GST
Components of GST
Legislative framework of GST council
GST rate structure
Taxes to be subsumed under GST
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ITC chain
Taxable event in GST
Common portal
Threshold limit
Self-assessment
Composition scheme
NOTE: Threshold limit- 20lakhs turnover for hilly and north eastern states. 10lakhs for
goods traders. 50lakhs turnover for services providers.
Special category states
Arunachal Pradesh, Assam, Jammu& Kashmir, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarkhand.
Benefits of GST:
Creation of unified National market.
Elimination of multiple Taxes and Double Taxation.
Boost to make in India initiative.
Free flow of trade throughout the country.
Mitigation of Ill effects of cascading.
Uniformity in rates reduces Tax evasion.
Reduction of prices.
Simplified and Automated process.
Easy compliance.
Single and Transparent Tax.
Fair treatment to Indigenous Industries..
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Simple and easy to administer.

Seamless flow of credit.
To enable state Government to levy taxes on Services.
Technology backup of GST.
What are the major chronological events
that have led to the introduction to GST?
 GST is being introduced in the country after a 13 year long journey since it was first
discussed in the report of the Kelkar Task Force on indirect taxes. A brief chronology
outlining the major milestones on the proposal for introduction of GST in India is as
follows:
In 2003, the Kelkar Task Force on indirect tax had suggested a comprehensive Goods
and Services Tax (GST) based on VAT principle.
A proposal to introduce a National level Goods and Services Tax (GST) by April 1, 2010
was first mooted in the Budget Speech for the financial year 2006-07.
Since the proposal involved reform/restructuring of not only indirect taxes levied by the
Centre but also the States, the responsibility of preparing a Design and Road Map for
the implementation of GST was assigned to the Empowered Committee of State
Finance Ministers (EC).
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Based on inputs from Govt of India and States, the EC released its First Discussion Paper
on Goods and Services Tax in India in November, 2009.
In order to take the GST related work further, a Joint Working Group consisting of
officers from Central as well as State Government was constituted in September, 2009.
In order to amend the Constitution to enable introduction of GST, the Constitution
(115th Amendment) Bill was introduced in the Lok Sabha in March 2011. As per the
prescribed procedure, the Bill was referred to the Standing Committee on Finance of
the Parliament for examination and report.
Meanwhile, in pursuance of the decision taken in a meeting between the Union
Finance Minister and the Empowered Committee of State Finance Ministers on 8th
November, 2012, 'Committee on GST Design', consisting of the officials of the
Government of India, State Governments and the Empowered Committee was
constituted.
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This Committee did a detailed discussion on GST design including the Constitution (115th)
Amendment Bill and submitted its report in January, 2013. Based on this Report, the EC
recommended certain changes in the Constitution Amendment Bill in their meeting at
Bhubaneswar in January 2013.
The Empowered Committee in the Bhubaneswar meeting also decided to constitute three
committees of officers to discuss and report on various aspects of GST as follows:- (a)
Committee on Place of Supply Rules and Revenue Neutral Rates; (b) Committee on dual
control, threshold and exemptions; and (c) Committee on IGST and GST on imports.
The Parliamentary Standing Committee submitted its Report in August, 2013 to the Lok
Sabha. The recommendations of the Empowered Committee and the recommendations of
the Parliamentary Standing Committee were examined by the Ministry in consultation with
the Legislative Department. Most of the recommendations made by the Empowered
Committee and the Parliamentary Standing Committee were accepted and the draft
Amendment Bill was suitably revised.
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 The final draft Constitutional Amendment Bill incorporating the above stated changes were sent to the
Empowered Committee for consideration in September 2013.
 The EC once again made certain recommendations on the Bill after its meeting in Shillong in November
2013. Certain recommendations of the Empowered Committee were incorporated in the draft
Constitution (115th Amendment) Bill. The revised draft was sent for consideration of the Empowered
Committee in March, 2014.
 The 115th Constitutional (Amendment) Bill, 2011, for the introduction of GST introduced in the Lok Sabha
in March 2011 lapsed with the dissolution of the 15th Lok Sabha.
 In June 2014, the draft Constitution Amendment Bill was sent to the Empowered Committee after
approval of the new Government.
 Based on a broad consensus reached with the Empowered Committee on the contours of the Bill, the
Cabinet on 17.12.2014 approved the proposal for introduction of a Bill in the Parliament for amending
the Constitution of India to facilitate the introduction of Goods and Services Tax (GST) in the country. The
Bill was introduced in the Lok Sabha on 19.12.2014, and was passed by the Lok Sabha on 06.05.2015. It
was then referred to the Select Committee of Rajya Sabha, which submitted its report on 22.07.2015.
 Lok Sabha and Rajya Sabha has unanimously passed the 122nd Constitutional Amendment Bill in August,
2016 which later got the assent of the President.
Amendments in “Constitution of
India” for Implementation of GST:
Main provision:

Constitution (101st Amendment) Act, 2016 was enacted on 8th September,

2016.

Significant amendments made by Constitution (101st Amendment) Act, 2016

are as follows:-
1.) In Article 366 of the Constitution,

New clause (12A) has been inserted to provide the definition of GST.
 Article – 366(12A):-
“Goods and Services Tax” means any tax on Supply of Goods or Services or both except
taxes on the supply of the alcoholic liquor for human consumption.
2.)The tax shall be levied as dual GST separately by the Union and States. For this, Article-246A
has been inserted
Article – 246A:- Special provision with respect to Goods and Services Tax
Clause – 1
Notwithstanding anything contained in Article 246 and 254. Parliament, and, subject to
clause – 2, the legislature of every state, have power to make laws with respect to goods and
services tax imposed by the union or by such state.
Clause – 2
Parliament has exclusive power to make laws with respect to goods and services tax where
the supply of goods, or of services, or both takes place in the course of inter-state trade or
commerce.
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Explanation:-
The provision of this article, shall, in respect of goods and services
tax referred to in clause-5 of Article – 279A, takes effect from the
date recommended by the Goods and Services tax council.
In Simple words,
For the implementation of GST, Article 246 and 254 has been
overruled. First we have to understand what Article-246 and 254
explain.
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Article-246:- Subject matter of laws made by parliament and laws made by legislature
of States
In Crux:-
 Matters enumerated in List-I (VIIth Schedule of Constitution)- Parliament has exclusive
power to make laws.
Matters enumerated in List-II (VIIth Schedule of Constitution)- State legislature has
exclusive power to make laws.
Matters enumerated in List-III (VIIth Schedule of Constitution)- Parliament and
legislature of any state have power to make laws.
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Article-254:- Inconsistency between laws made by parliament and laws made by

legislature of States
In Crux: – It provides that laws made by parliament shall prevail over law made by
legislature of the state.
These both articles have been overruled with respect to Goods and Services Tax and
power to levy GST empower to parliament and legislature of every state.
For levy Integrated Goods and Services Tax (IGST), Parliament has exclusive power to
make laws.
As per Article–279A (5), GST Council shall recommend the date on which GST shall be
levied on following Goods which are as follows:-
√ Petroleum Crude,
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√ High Speed Diesel,

√ Motor Spirit (Commonly known as Petrol),
√ Natural Gas,
√ Aviation Turbine Oil.
Taxes on entertainments and amusements to the extent levied and collected by a
panchayat or a municipality or a regional council or district Council shall not be
subsumed (included) under GST.
3.) Article – 269A:- Levy and Collection of Goods and Services Tax in course of Inter-
state trade or Commerce
Clause – 1
Goods and Services Tax on supplies in the course of Inter-state Trade or Commerce
shall be levied and collected by the Government of India and such tax shall be
apportioned between union and states in the manner as may be provided by the
parliament by laws on the recommendations of the GST Council.
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Explanation:-

For the purpose of this Clause, supply of Goods and Services or both in the course of
import into territory of India shall be deemed to be supply of goods, or services, or both
in the course of inter-state trade or commerce.
In Simple words,
Government of India (GoI) levy IGST.
IGST shall be apportioned between Union and States as per manner provided by the
Parliament.
IGST will be imposed in case of import, i.e. IGST will be charged in case of Import of
Goods or Services or both in addition to Custom duty.
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Clause – 5
Parliament may, by law, formulate the principles for determining
Place of supply, and
When a supply of Goods, or of Services, or both takes place in the course of inter-state
trade or commerce.
4.) Compensation to States for loss of revenue on account of introduction of Goods
and Services Tax:-
Parliament may, on the recommendation of GST council, compensate to the states for
loss arising because of implementation of Goods and Services Tax (GST) but for a
maximum period of 5 years.
Composition of GST Council:
GST Council is a federal forum with both centre and states in India on board. It is made of:
The Union Finance Minister (as Chairman),
The Union Minister of State in charge of Revenue or Finance, and
The Minister in charge of Finance or Taxation or any other Minister, nominated by each state
government.
The decisions of the GST Council are made by three-fourth majority of the votes cast. The
centre has one-third of the votes cast, and the states together have two-third of the votes
cast. Each state has one vote, irrespective of its size or population.
Apart from the above:
The Secretary (Revenue) will be appointed as the Ex-officio Secretary to the GST Council.
The Chairperson, Central Board of Excise and Customs (CBEC), will be included as a
permanent invitee (non-voting) to all proceedings of the GST Council.
One post of Additional Secretary to the GST Council in the GST Council Secretariat (at the
level of Additional Secretary to the Government of India) will be created.
Four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to
the Government of India) will also be created.
Functions of GST Council:
As per Article 279A (4), the Council will make recommendations to the Union and the
States on important issues related to GST, like
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.
GST rates will include the floor rates with bands, special rates for raising additional
resources during natural disasters / calamities, special provisions for certain States, etc.
UNIT-2
GST
GST principles and models of:
Australian Model of GST:
Implemented in 2000
Introduced by Howard Government
Single Model
Flat rate 10%
Threshold limit A$75,000
Penalty- 1/11th of income along with fine in case of default
No GST on exports
CONITNUE:

Canadian model of GST:

Similar to Indian context, it is only Canada that follows Dual GST.
In Canada the GST replaced manufactures sales tax (MST) and came into force in 1991
by the Prime Minister Brian Mulroney and the Finance Minister Michael Wilson.
Features of Canadian model:
• Dual GST is levied.
• GST is levied on supply of goods or services in Canada.
• There are two rates of GST i.e., GST and HST (Harmonized sales tax)
• Input tax credit can be availed by the dealer.
• When a supplier makes zero rated supply he is eligible to recover ITC.
• When a supplier makes the supply of exempted goods, he is not eligible of ITC.
• Imports are subject to GST.
• A person whose business activities exceed C$30,000 is liable to get himself registered.
Kelkar-shah model of GST:
The concept of GST was mooted by Dr. Vijay Kelkar former finance Secretary 2004.
Kelkarshah model is a unified model of GST which is based on Grand Bargain to merge
the central excise, Service Tax, and State VAT to make it a common base of GST.
As per this model, two different rates of taxes are to be levied by the centre and the
state. At centre 6%, 12% and 20% of tax used to be levied. At state 4%, 8% and 14%
were levied.
This model is similar to the HST model in Canada.
The model proposed that the centre shall collect tax revenue from the big industries
and states will collect from the smaller industries.
Imports to be leviable both centre and state GST.
Kelkarshah model suggested implementation of GST in stages
Arrow diagram for GST:
Stage I: Establishing a robust IT system.
Stage II: Building Central GST
Stage III: Political efforts for agreeing upon Grand Bargain.
Stage IV: Interaction with the states
Bagchi model of GST:
This model is quite similar to Kelkarshah model regarding the Grand Bargain and it also
clearly envisages that a constitutional amendment shall be necessary to bring the
taxing powers on Goods and Services between centre and the state.
Features:
GST shall be levied both Centre and State.
Single rate of GST of 6% is proposed to be levied.
If more than one rate then two rate system to be adopted comprising the standard
rate and the lower rate.
 Transactions covered under GST:
GST levied on supply of Goods or Services or both.

Goods Sec 2(52) of CGST Act:

Goods means every kind of
 Moveable property.
Other than money and securities.
 But includes actionable claims.
 Growing crops, Grass and things attached to, or forming, part of the land which are agreed to be
severed before or after the contract of supply
 Services Sec 2(102) of CGST Act:
 Services are defined as follows:
 Anything other than Goods, Money and Securities; and
 Includes activities relating to the use of money or its conversion by cash from one form or
denomination to another form for which a separate consideration is charged.
 Service is an economic activity resulting in value addition which can be perceived but cannot be
seen as it is intangible.
Scope of supply:
• Only taxable supplies shall be levied with tax under GST.
• Supply for consideration in course of business or furtherance of business U/S 7(1)(a).
• Importation of Services U/S 7(1)(b): It provides that importation of service for consideration
whether for business or not is considered as supply.
• Supply without consideration U/S 7(1)(c) + Schedule I clause C of sec 7(1) specifies activities
as supply even when they are made without consideration by a taxable person. The
activities mentioned in schedule I are
• Permanent transfer/Disposal of business assets where input tax credit is availed.
• Supply between related persons or distinct persons.
• Principal and agent.
• Deemed to be supply of goods or services U/S 7(1)(d) + Schedule II.
• Section 7(2) and transactions covered in Schedule III are exclusions from supply- Negative
list. It shall be considered as negative list under GST.
• Section 7(3) Power of central Government to specify the activities as supply of goods or
services.
Supply Sec 7 of CGST Act:

Essentials of Supply:
Supply can be of Goods or Services or both.
Supply must be for consideration.
Supply must be for business or furtherance of business.
Supply must be made by a taxable person.
Supply must be a taxable supply.
Supply includes Sale, Transfer, Barter, Exchange License, Lease, Rent, Disposal
 UNIT-3
TAXES AND DUTIES
TAXES AND DUTIES SUBSUMED UNDER GST AND OUTSIDE
THE PURVIEW OF GST
Entry No. 84 List I of Schedule VIII of constitution
 It empowers the Central Government to levy duty on manufactue of goods and it is
read as follows
Duties of excise on Tobacco and other goods manufactured and produced in India
except-
1. Alcoholic Liquor for human consumption.
2. Opium, Indian Hemp and other Narcotic Drugs
but including Medicinal & Toilet preparation containing Alcohol.
After the amendment:
Entry No. 84 reads as follows
 Duties on following goods manufactured or produced in India namely
1. Petroleum Crude
2. High Speed Diesel
3. Motor Spirit
4. Natural Gas
5.Aviation Turbine Fuel and
6. Tobacco and Tobacco products
 Power to levy duty on goods manufactured will be only to the Central Government.

Entry No. 54 List II of Schedule VII of Contribution

 Entry No. 54 prior to Amendment is as follows
Taxes on the sale or purchase of goods other than Newspapers subject to the provision of
Entry 92 of List I.
After the amendment:
Taxes on the sale of Petroleum Crude, High Speed diesel, Motor Spirit, Natural Gas, Aviation
Turbine Fuel and Alcoholic Liquor for Human Consumption but not including a sale in the
course of inter state trade or commerce or international trade or commerce.
Thus power to impose tax on sale of various petroleum products is still provided to state.
GST Council will recommend the date from which GST is to be imposed on these products.
Once GST is imposed, no sales tax will be levied.
Other Duties and Taxes Outside the purview of GST
According to the ministry of finance, States are allowed to collect the following taxes and
duties:
1. Electricity Duties
2. Mandap fee
3. Property tax
4. State Stamp Duty
CONTINUE:

The Centre shall continue to collect the following

1. Tax on Income
2. Wealth/Gift Tax
3. Clean Environment Cess
4. Excise on Tobacco & Tobacco Products
5. Taxes on Railway Fares
GOODS OUTSIDE THE PURVIEW OF
GST:
1. Petroleum Products (Petrol Crude, High Speed Diesel, Natural Gas, Aviation
Turbine Fuel)------Excise Duty, State Sales Tax, Central Sales Tax
2. Alcoholic Liquor for Human Consumption ---- Excise Duty, State Sales Tax,
Central Sales Tax
3. Tobacco Products----Excise + 28% GST+ CESS
4. Services (Imports)-----Customs Duty + IGST
Treatment of Specific Goods:( Outside the purview of GST)
1.Tax on Supply of Alcoholic Liquor for Human Consumption:
• The Supply of alcoholic liquor for human consumption will be out of GST, and would
continue to be exclusively taxed by the states.
• Since the GST bill specifically excludes alcoholic products from the ambit of GST
bringing it within GST at a future day would require another constitutional amendment.
• Excise duty which is presently levied on the maunfacture of alcohol will also continue to
be levied by the state excise duty.
CONTINUE:

2. Tax on Petroleum Products:

• Excise duty on manufacture of petroleum products mainly
1. Petroleum Crude
2. High Speed Diesel
3. Motor Spirit
4. Natural Gas
5.Aviation Turbin Fuel
• shall be continued to be levied by the central government.
• However the GST Council shall recommend the date on which the above mentioned
products will eb included in the purview of GST.
• Sales Tax shall be imposed on Intra State and Inter State Supply of petroleum products
mentioned above.
CONTINUE:

3. Tax on Tobacco Products:

• Excise duty is charged on the manufacture of cigarettes, bidis and other chewing
tobacco products at different rates like
• Bidi @ 22%
• Cigarettes @ 64%
• Chewing Tobacco Products @ 81%
• Under GST there will be an additional CESS on tobacco related products over and
above the GST which is charged @ 28%.
• Additional CESS around 112% is being levied upon tobacco products.
CONTINUE:

4. Taxation of Services:

• GST shall be levied on supply of services on both intra state and intra UT and on inter
state supply of services.
• For 2 UTs, i.e., Delhi & Pondicherry, their respective SGST will only apply because both
these UTs have separate legislature.
• For interstate, UT or supply from one state to UT, IGST shall be levied.
• For Importation of Services SGST shall be levied and customs duty shall also be levied.
UNIT-4
IGST
Introduction:
IGST is payable in cause of interstate trade or commerce and
CGST and SGST is payable in case of intrastate supply of good
and services. Whether the goods and services supplied are
intrastate or intrastate is determined as per the place of supply as
specified under Sec5 (in case of goods) and Sec 6 (incase if
services) of thee model of IGST law.
Salient Features Integrated GST:

On inter-state and cross border transactions

Centre would levy and collect IGST in lieu of CGST and
To be shared between Centre / States
Single IGST rate
IGST would be levied on all inter-State transactions of taxable goods and services with
appropriate provision for consignment or stock transfer of goods and services.
Inter-State dealer will pay IGST after adjusting available, input IGST, CGST and SGST on
purchase
Advantages of IGST model:
The major advantages of IGST Model are:
(a) Maintenance of uninterrupted ITC chain on inter-State transactions.
(b) No upfront payment of tax or substantial blockage of funds for the inter-State seller
or buyer.
(c) No refund claim in exporting State, as ITC is used up while paying the tax.
(d) Self monitoring model.
(e) Level of computerization is limited to inter-State dealers and Central and State
Governments should be able to computerize their processes expeditiously.
(f) As all inter-State dealers will be e-registered and correspondence with them will be
by e-mail, the compliance level will improve substantially.
(g) Model can take ‘Business to Business’ as well as ‘Business to Consumer’ transactions
into account.
IGST Illustration:
• Maharashtra seller selling to Karnataka buyer for Rs.1,00,000/-.
• IGST payable assuming an 8% rate is Rs.8,000/-.
• 8,000/- can be paid by adjusting
• Inter-State purchases (IGST) Rs.3,000/-
• Local purchases (CGST) Rs.1,500/-
• Local purchases (SGST) Rs.1,500/-
• Since dealer has used SGST of Maharashtra to the extent of Rs.1,500/-, Centre has to transfer
Rs.1,500/- to Maharashtra Government.
• IGST of Rs.8,000/- is availed as credit by Karnataka buyer.
• Karnataka dealer sells the goods at Rs.2,00,000/- attracting CGST of say Rs.16,000/- and SGST
of Rs.16,000/-.
• If IGST of Rs.8,000/- is used to pay the SGST then Karnataka Government has to transfer
Rs.8,000/- to the Centre.
 UNIT-5
TIME OF SUPPLY
Introduction:
Now it is time for us to decide when to charge these taxes and on what.
For determining the time of supply in case of goods and services,
The date of issuance of invoice or,
Date of receipt of payment
Whichever is earlier.
Further, for item (b) above, the date of receipt of payment shall be,
The date of credit in bank account or,
Date at which the receiver actually entered the payment in his books of accounts,
Whichever is earlier.
Where the amount received is in excess of the invoice, and then time of supply shall be
treated from the date of issuance of invoice for that extra amount.
Value of supply:
After determining what and when of GST, it is time to determine “How much” of GST is to be paid.
The value of supply has been defined as the “transaction value” of the goods and services transacted
between un-related parties. The value of supply shall include the following:
Basic consideration for the goods and services
Any taxes, cess, duties, fees and charges under any Act
Any amount payable by the supplier for the recipient
All ancillary or incidental expenses like packing, commission, etc.
Subsidies, not Central or State Government subsidies
Interest, penalty or late fee charged for delayed payment
Any discounts that are given for the supply of goods and services, which were not known earlier.
Other discounts, which are linked to specific invoices or were agreed upon at the time of entering into a
contract, shall be allowed as a deduction from transaction value.
Thus, after ravaging through all the above provisions, it is clear for a taxpayer to identify when to pay tax,
how much tax is to be paid and who will finally bear the tax burden. As such, place of supply, time of
supply and the value of supply, knit together, determine the total tax liability that needs to be cleared as
per schedule.
Understanding place of supply:
GST is set to float its wings across India, and it is high time that we start adapting to it’s
rules and provisions. Under GST, special attention is given to the reporting structure of all
transactions, irrespective of the fact that it is of goods or for services. There are three
types of taxes under GST, CGST, SGST and IGST. All these taxes are leviable whenever
there is a movement of goods or services.
Movement of goods and services can be of 2 types:
Within the State i.e. Intra-State
Between Two States i.e. Inter-State
Intra-State movement attracts Centre GST and State GST whereas Inter-State
movement attracts Integrated GST.
In order to determine the levy of taxes based on Place of Supply,the following two
things are considered:
Location of Supplier: It is the registered place of business of the supplier.
Place Of Supply: It is the registered place of business of the recipient.
Time of supply:

Sec-12 of CGST Act. Signifies the terms and conditions for the point of taxation where the liability of tax arises
Sec-12(1) of CGST Act, the liability to pay tax on goods shall arise at the time of supply determined in accordance
with the provisions.
Sec-12(2) of CGST act, time of supply will be the earliest of the following dates.
12(2)(a) – The date of issue of invoice or last date of issue of invoice in accordance to sec- 31(1)
Sec-31(1)- when the supply involves movement of goods before or at the time of removal of goods
If no movement of goods, then before or at the time of delivery of goods
Sec-12(2)(b)- The date on which supplier receives the payment
NOTE= The payment rate might be the earliest among the date in which the amount is Entered in the books of
accounts or the date on which the amount is credited in the bank
12(2)(a) – point of taxation – supply of goods.
Earliest of – date of invoice or sec 31(1)
Sec 31(1) – movements of goods – before/ Time of removal.
Movements of goods – before / Time of delivery.
12(2)(b) – payments date earliest of.
-credited in banks.
-entered in books of accounts.
Problems:
Q. Date of removal of goods - 08/9/2017 , 10/04/2018
Date of issue of invoice - 12/9/2017 , 08/04/2018
Date of receipt of payments- 05/4/2018 , 05/03/2018
point of taxation – 08/09/2017
point of taxation - 05/03/2018

TIME OF SUPPLY ON REVERSE CHARGE BASIS:

Sec 12 (3) : Reverse charge is the situation where the recipient is charged to tax or liable to tax as he has received the
supply of goods from an unregisterd dealer (where receipient of goods pays tax is called as reverse charge).
Point of taxation in this circumstance will be the earliest of the following
1)receipt of goods
2)date of payment as entered in books of accounts
3)date immediately following 30 days from the date of issue of invoice/ any other documents

Q. Receipt of goods on 24/6/18

Date of payment 30/6/18
Invoice date 29/4/18
POT- 30/5/2018
Continue:

Receipt of goods on 24/6/18

Date of payment 30/6/18
Invoice date 29/4/18
POT- 30/5/2018

SUPPLY OF VOCHERS:
Whenever there is a supply of vouchers in two kinds,
Sec 12(4) gives the point of taxation.
If thee voucher is identifiable
If the voucher is not identifiable called as redemption vouchers

IF THE VOUCHER IS IDENTIFIABLE: Time of supply will be the date on which it is utilized.

IF THE VOUCHER IS NOT IDENTIFIABLE: Time of supply will be the date on which it is redeemed.
Continue:

Purchase of raw material 60000

Inclusions
Consultation fee – 8,000
Storage cost – 4,000
Transportation cost – 6,000
Labour cost – 12,480

Transaction value - 90,480

GST payable@10% (intrastate supply)
CGST @5% 4524
SGST @5% 4524
Total GST payable 9048
An example:
Maruti Enterprises issued invoice to Telga Informatics on 30th May 2017. Telga made a payment to Maruti on
2nd June 2017 and further, Maruti credited the entry in their books on 3 rd June 2017. In the above example, time
of supply shall be 30th May 2017.
Further, in case of reverse charge, things are a little bit different for goods and services. The time of supply shall
be earlier of the following:
Date of payment or
Date of receipt of goods or
Date immediately 30 days from the date of issue of invoice in case of goods (60 days in case of services)
If is still not possible to determine the correct date from the above options, then time of supply shall be the date
at which recipient makes an entry in his books of accounts.
Similarly, to determine the time of supply in case of receipt vouchers, it shall be,
The date on which the voucher is issued or
If the above cannot be ascertained, then the date on which the voucher is redeemed.
In all other cases, where it is not possible to determine the time of supply with the help of above provisions, then
the time of supply shall be either date of filing periodical returns or payment of CGST/SGST as the case may be.
TRANSACTION VALUE:
Currently, GST will be charged on the ‘transaction value’. Transaction value is the price
actually paid(or payable) for the supply of goods/services between un-related parties
(i.e., price is the sole consideration)
The value of supply under GST shall include:
Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.
Any amount that the supplier is liable to pay which has been incurred by the recipient
and is not included in the price.
The value will include all incidental expenses in relation to sale such as packing,
commission etc.
Subsidies linked to supply, except Government subsidies will be included.
Interest/late fee/penalty for delayed payment of consideration will be included.
CONTNUE:

Example
Let us consider an example of ABC, a manufacturer, selling tools and hardware like drills,
polishers, spades etc. It sells a power drill to XYZ a wholesaler. The MRP is Rs. 5,500 but
ABC sells it for Rs. 3,000.
Currently, the invoice will look like-
Power Drill 3,000
Add: Excise @ 12.5% 375
Subtotal 3,375
Add: VAT @14.5% (on subtotal) 490
Total 3,865
Transaction value under GST:

The value of goods &/or services supplied is the transaction value, i.e. the price
paid/payable, which is Rs 3,000 in the example. Assuming CGST=9% and SGST= 9%
Power Drill 3,000
Add: CGST @9% 270
Add: SGST @9% 270
Total 3,540
DISCOUNT & Valuation of supply
when a transaction is not in INR:

Discounts will be treated differently under GST . Discounts given before or at the time of
supply will be allowed as a deduction from transaction value. Discounts given after
supply will be allowed only if certain conditions are satisfied.
When exports are made the invoice may be raised by the taxpayer in Foreign
Currency. The IGST (if any) charged in the invoice will be converted using RBI Exchange
Rate. The exchange rates are available on the RBI Website.
RBI exchange rates are to be used in case of imports too. When reverse charge is
applicable on imported supplies the invoice amount has to be converted using the RBI
Exchange Rate.
Valuation Rules:
GST is a tax payable on ad-valorem basis i.e percentage of value of the supply of goods or services. Section 15 of
the CGST Act and Determination of Value of Supply, CGST Rules, 2017 contain provisions related to valuation of
supply of goods or services made in different circumstances and to different persons:
1. Value of supply of goods or services where the consideration is not wholly in money:
Where the supply of goods or services is for a consideration not wholly in money, the value of the supply shall,
be the open market value of such supply;
(I) if open market value is not available, be the sum total of consideration in money and any such further amount
in money as is equivalent to the consideration not in money if such amount is known at the time of supply;
(II) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or
services or both of like kind and quality;
(III) if value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration
money.
For Example:
(i) Where a new phone is supplied for Rs. 20000 along with the exchange of an old phone and if the price of the
new phone without exchange is Rs. 24000, the open market value of the new phone is Rs. 24000.
(ii) Where a laptop is supplied for Rs. 40000 along with a barter of printer that is manufactured by the recipient and
the value of the printer known at the time of supply is Rs. 4000 but the open market value of the laptop is not
known, the value of the supply of laptop is Rs. 44000.
2. Value of supply of goods or services or both between distinct or related persons, other
than through an agent:
The value of the supply of goods or services or both between distinct persons as
specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are
related, other than where the supply is made through an agent, shall,- be the open
market value of such supply;
if open market value is not available, be the value of supply of goods or services of like
kind and quality;
if value is not determinable under clause (a) or (b), be the value as determined by
application of rule 4 or rule 5, in that order:
Provided where the recipient is eligible for full input tax credit, the value declared in the
invoice shall be deemed to be the open market value of goods or services.
3. Value of supply of goods made or received through an agent:

The value of supply of goods between the principal and his agent shall,-
be the open market value of the goods being supplied, or
at the option of the supplier, be 90% of the price charged for the supply of goods of like
kind and quality by the recipient to his customer not being a related person, where the
goods are intended for further supply by the said recipient;
For Example:
(i) Where a principal supplies groundnut to his agent and the agent is supplying
groundnuts of like kind and quality in subsequent supplies at a price of Rs. 5000 per
quintal on the day of supply. Another independent supplier is supplying groundnuts of
like kind and quality to the said agent at the price of Rs. 4550 per quintal. The value of
the supply made by the principal shall be Rs. 4550 per quintal or where he exercises the
option the value shall be 90% of the Rs. 5000 i.e. is Rs. 4500 per quintal.
4. Value of supply of goods or services or both based on cost:

Where the value of a supply of goods or services or both is not determinable by any of
the preceding rules, the value shall be one hundred and ten percent of the cost of
production or manufacture or cost of acquisition of such goods or cost of provision of
such services.
5. Residual method for determination of value of supply of goods or services or both:
Where the value of supply of goods or services or both cannot be determined under
rules 1 to 4, the same shall be determined using reasonable means consistent with the
principles and general provisions of section 15 and these rules. Provided that in case of
supply of services, the supplier may opt for this rule, disregarding rule 4. This is a general
residual rule, to be used as a last resort. This is again open ended and refers to
principles and general provisions as per law and other rules.
6. Determination of value in respect of certain supplies:

The value in respect of supplies specified below shall be determined in the manner provided
hereinafter.
Rule-32(2) Purchase/ Sale of Foreign Currency – The value of supply of services in relation to
purchase or sale of foreign currency, including money changing, shall be determined by the
supplier of service in the following manner:-
(i) For a currency, when exchanged from, or to, Indian Rupees (INR), the value shall be equal to
the difference in the buying rate or the selling rate, as the case may be, and the Reserve Bank of
India (RBI) reference rate for that currency at that time, multiplied by the total units of currency.
(ii) At the option of supplier of services, the value in relation to supply of foreign currency, including
money changing, shall be deemed to be
(i) 1 % of the gross amount of currency exchanged for an amount up to one lakh rupees, subject
to a minimum amount of two hundred and fifty rupees;
(ii) one thousand rupees(1,000) and half of a per cent (0.5%) of the gross amount of currency
exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and
(iii) five thousand rupees (5,000) and one tenth of a per cent (0.10%) of the gross amount of
currency exchanged for an amount exceeding ten lakh rupees, subject to maximum amount of
sixty thousand rupees.
Continue:

Rule-32(3) Air Travel Agent – The value of supply of services in relation to booking of
tickets for travel by air provided by an air travel agent shall be deemed to be an
amount calculated at the rate of 5% of the basic fare in the case of domestic
bookings, and at the rate of 10% of the basic fare in the case of international bookings
of passage for travel by air.
Rule-32 (4) Life Insurance Business- The value of supply of services in relation to life
insurance business shall be:
(a) the gross premium charged from a policy holder reduced by the amount allocated
for investment, or savings on behalf of the policy holder, if such amount is intimated to
the policy holder at the time of supply of service;
(b) in case of single premium annuity policies other than (a), 10% of single premium
charged from the policy holder; or
(c) in all other cases, 25% of the premium charged from the policy holder in the first
year and 12.5% of the premium charged from policy holder in subsequent years:
 Continue:

Rule- 32(5) Buying and Selling of Second Hand Goods- Where a taxable supply is
provided by a person dealing in buying and selling of second hand goods i.e. used
goods as such or after such minor processing which does not change the nature of the
goods and where no input tax credit has been availed on purchase of such goods,
Value of Taxable Supply = S.P – C.P.
If the selling price is less than Purchase/ Cost price, then Value of Taxable supply = Zero
Rule-32(6) Redeemable Vouchers/ Coupons: The value of a token, or a voucher, or a
coupon, or a stamp (other than postage stamp) which is redeemable against a supply
of goods or services or both shall be equal to the money value of the goods or services
or both redeemable against such token, voucher, coupon, or stamp.
Rule-32(7) service provided by one Distinct person to another distinct person: The value
of taxable services provided by such class of service providers as may be notified by
the Government between distinct persons as referred to in section 25, other than those
where input tax credit is not available shall be deemed to be NIL.
7. Value of supply of services in case of pure agent:

Notwithstanding anything contained in these rules, the expenditure or costs incurred by the
supplier as a pure agent of the recipient of supply of services shall be excluded from the
value of supply, if all the following conditions are satisfied, namely:-
the supplier acts as a pure agent of the recipient of the supply, when he makes payment to
the third party for the services procured;
the recipient of supply uses the services so procured by the supplier service provider in his
capacity as pure agent of the recipient of supply;
the recipient of supply is liable to make payment to the third party;
the recipient of supply authorizes the supplier to make payment on his behalf;
the recipient of supply knows that the services for which payment has been made by the
supplier shall be provided by the third party;
the payment made by the supplier on behalf of the recipient of supply has been separately
indicated in the invoice issued by the supplier to the recipient of service;
the supplier recovers from the recipient of supply only such amount as has been paid by him
to the third party; and
the services procured by the supplier from the third party as a pure agent of the recipient of
supply are in addition to the supply he provides on his own account.
Where supply involves a movement
of goods:
2) Where the supply involves a movement of goods, on the direction of a third party,
whether as an agent or otherwise, the place of supply shall be the principle place of
business of such third party, irrespective of the place of delivery of goods.
For e.g. A dealer in Mumbai, Maharashtra sells products to a customer in Delhi. Delhi-
based customer directs the Mumbai seller to send the materials to Kolkata-based
customer. Although the place of delivery is Kolkata, since Delhi-based seller had
directed such movement, then the place of supply shall be the principle place of
business, i.e. Delhi and thus, charge IGST on such movement.
3) Where the supply does not involve any movement of goods, then place of supply
shall be the location of such goods at the time of final delivery.
For e.g. A Ltd has its registered office in Hyderabad, Telangana, opens a branch in
Bengaluru, Karnataka, and purchases workstations from B Ltd. Whose office is in
Bengaluru, Karnataka. Even though the same is, a supply of goods but there is no
movement of goods. Since the movement is intra-state, it will attract CGST and SGST.
Where supply includes installation of
goods:
4) Where the supply includes installation of goods at site, then place of supply shall be the place of such
installation.
For e.g. Installation of telephone towers or lift in an office building.

5) Where the goods are being supplied on board a vehicle, vessel, aircraft, or a train, i.e. on board a
conveyance, then place of supply shall be the first location at which the goods are boarded.
For e.g. Howrah to New Delhi Rajdhani starts its journey from Howrah, West Bengal and passes through
many states before ending its journey in New Delhi. The food served on board the train shall be
considered as supply of goods. Thus, place of supply shall be Howrah since it is the first location of the
goods.

6) Any other cases not covered above will be determined further as per recommendations from the GST
council (yet to be finalised)
The above rules are defined for goods. The place of supply of services is separate and specific in nature.
They go as follows:
:
Transportation of goods: If the recipient is registered, then his location and if unregistered, then
location of the goods from where they started for being delivered
Passenger Transportation: If the recipient is registered, then his location and if unregistered,
then location from where the passenger embarks on his journey
Supply of services on board a conveyance, vehicle, vessel, train or aircraft: The first point of
departure for that journey
Telecommunication Services :-
Fixed leased line, Internet leased line, cable or dish antenna: Place of installation
Postpaid Mobile or Internet Connection: Billing Address of the recipient of service
Prepaid Mobile or Internet Connection: Location where such pre-payment was made or
vouchers are sold
Note: When such a recharge is made through Internet Banking or E-Wallets, then the place of
supply of service shall be the address of the recipient as on the record with the service
provider.
:
Banking or Financial Institutions to account holders: Location of the recipient of the
services as per record of the provider
Banking or Financial Institutions to non-account holders: Location of the supplier of
service
Insurance: If the person is registered, then his location or if the person is unregistered,
then the location of the recipient as per records of the service provider.
Restaurant, catering, personal grooming, beauty treatment, fitness and health services,
cosmetic or plastic surgery: Location where the service is provided
In all the above cases, where the location of the recipient cannot be identified, which is
generally the fixed establishment or registered office of the recipient, then the usual
place of residence of the recipient shall be treated as the location of receipt.
Section 2(56) of CGST Act-input tax
credit:
Output IGST to be paid - 215000
Input IGST credited in electronic credit ledger – 210000
So what is the net taxable GST payable, If CGST is 4000.
Output IGST 15000
(-) Input GST 10000
5000
(-)Input CGST 4000
Net payable GST 1000
Cross utilization of input tax credit:
IGST accumulated as credit during invoice supply shall be set off against IGST for
outward supply shall be set off against IGST for outward supply. CGST for outward supply
& SGST for outward supply.
Accumulated input CGST credit can be utilised for paying first, the CGST for outward
supplies and then only IGST for outward supply.
Accumulated input SGST/UGST credit can be utilised for paying first the SGST/UGST for
outward supplies and then only IGST for outward supply.
Sums:
• Q. Ajith. Ltd situauted in Pune has purchased raw material within the state for
• 60,000
• Consultation fee – 8,000
• Storage cost – 4,000
• Transportation cost – 6,000
• Labour cost – 12,480
• What is the transaction value and GST payable assume (GST@10%)

• Purchase of raw material 60000

• Inclusions
• Consultation fee – 8,000
• Storage cost – 4,000
• Transportation cost – 6,000
• Labour cost – 12,480
>
Transaction value - 90,480
GST payable@10% (intrastate supply)
CGST @5% 4524
SGST @5% 4524
Total GST payable 9048
Q. Compute the transaction value of goods and amount of GST payable
from the invoice prepared below.
Price of goods (excluding CGST @9% & SGST @9%) - 5,00,000
Items not included in the above price
Selling expenses - 30000
Publicity charges - 40000
Advt. charges - 50000
Loading& handling charges - 11000
Freight & insurance - 22000
Discount @10% on price of goods is shown in invoice.
Inclusions SOL: Price of goods (excluding GST) - 500000
Selling expenses - 30000
Publicity charges - 40000
Advt. charges - 50000
Loading & amp; handling charges - 11000
Freight & amp; insurance - 22000
653000
(-) Discount @10% shown in invoice - 50000
Transaction value - 603000
GST payable @18% (intrastate supply)
CGST 9% - 54270
SGST 9% - 54270
GST payable - 108540
Problems to solve:
>
Continue: Q. Mr. Suman purchased goods for 150000 from outside the state. He sold goods for 150000 locally
again, he sold 10000 worth of goods outside the state.

He paid telephone bill - 5000

Purchased A.C for office - 12000(locally)

If CGST is 18% & SGST is 18% calculate net CGST payable.

Calculation of net GST payable

Particulars IGST CGST SGST

Output tax

Intra state -

CGST @18% on 1.5L 27000

SGST @18% on 1.5L 27000

Inter state

IGST @36% on 1L 36000

Input tax credit

Inter state

IGST @36% on 1.5L 54000

18000 18000

Intra state

CGST @18% on 1719 3060

SGST @18% on 1719 3060

Net tax payable - 5940 23940

Total - 29880
Q. Compute the transaction value of goods and amount of GST payable
from the invoice prepared below.

Price of goods (excluding CGST @9% &SGST @9%) - 5,00,000

Items not included in the above price
Selling expenses - 30000
Publicity charges - 40000
Advt. charges - 50000
Loading&handling charges - 11000
Freight & insurance - 22000
Discount @10% on price of goods is shown in invoice.
Sol:
Price of goods (excluding GST) - 500000

Selling expenses - 30000

Publicity charges - 40000
Advt. charges - 50000
Loading&handling charges - 11000
Freight & insurance - 22000
653000
(-) Discount @10% shown in invoice - 50000
Transaction value - 603000
GST payable @18% (intrastate supply)
CGST 9% - 54270
SGST 9% - 54270
GST payable - 108540
Thank you
Subject taught by :Mrs. Kanchana