PART2----GST AND CUSTOMS

1. INTRODUCTION 1.1-1.15

2. CHARGE OF GST 2.1-2.15

3. SUPPLY 3.1-3.22

4. COMPOSITION SCHEME 4.1-4.11

5. TIME OF SUPPLY 5.1-5.13

6. VALUE OF SUPPLY 6.1-6.10

7. REGISTRATION 7.1-7.16

8. RETURNS 8.1-8.11

9. PAYMENT OF TAX 9.1-9.11

10. INVOICE 10.1-10.13

11. INPUT TAX CREDIT 11.1-11.7

12. CUSTOMS 12.1-12.30

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RELEVANT ENTRIES OF UNION LIST AND STATE LIST (PRE- GST):

UNION LIST (LIST I) STATE LIST (LIST II)

Customs Duties State Level VAT
Entry 83: Duties of customs including Entry 54: Taxes on intro-state sale or
export duties purchase of goods (excluding
newspapers)

Central Excise Duties State Excise Duties

Entry 84: Duties of excise on tobacco and

other good manufactured or produced in
India

> Except alcoholic liquors for human Entry 51: Duties of excise on alcoholic
consumption, opium, Indian hemp and liquors for human consumption,
other narcotic drugs and narcotics. opium, Indian hemp and other
narcotic drugs and narcotics.
> But including medicinal and toilet
The entry does not include duties of
preparations containing alcohol/ excise on medicinal and toilet
opium/ Indian hemp/narcotic preparations containing
drugs/narcotics. alcohol/opium/Indian hemp/ narcotic
drugs/narcotics.
Central Sales Tax
Entry 92A: Taxes on sale or purchase of
goods
(other than newspapers) taking place
in the course of inter-state trade or
commerce.

Service Tax

Entry 97: Any other matter not enumerated

in List II or List III including any tax not
mentioned in either of those Lists.

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DEFICIENCIES IN EARLIER INDIRECT TAXES REGIME
> The earlier indirect taxes framework in India suffered from various shortcomings.
Although CENVAT (ie excise duty) and State-Level VAT were essentially value added
taxes, set-off of one against the credit of another was not possible as CENVAT was a
central levy and State-Level VAT was a State levy. Moreover, CENVAT was applicable
only at manufacturing level and not at distribution levels .
> Despite the introduction of the principles of value added taxation system in India (in the
form of CENVAT at the central level and in the form of State VAT at the state level), its
application remained piecemeal and fragmented. Businesses continued to face
multiple difficulties because of the shortcomings of the indirect tax mechanism
prevailing in India:
 No integration of VAT on goods with tax on services/manufacture.
 Continued imposition of Central Sales Tax (CST), which was non-creditable,
leading to cascading effect thereby adding to the cost of goods.
 Problems relating to distinguishing between goods and services had been a major
cause of concern as the distinction between the two was often blurred.
 Non-inclusion of several State and local levies in State VAT such as luxury tax,
entertainment tax, etc.
 Cascading effect of taxes as CENVAT on the goods remains included in the value of
goods taxed under State VAT.

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GST- A CURE FOR ILLS OF EXISTING INDIRECT TAX REGIME

> Before we proceed with the finer nuances of Indian GST, let us first understand the basic
concept of GST.

 VALUE ADDED TAX:

GST is a value added tax levied on manufacture, sale and consumption of goods and
services.

 CONTINUOUS CHAIN OF TAX CREDITS:

GST offers comprehensive and continuous chain of tax credits from the producer's
point/service provider's point upto the retailer's level/consumer’s level, thereby taxing
only the value added at each stage of supply chain.

 BURDEN BORNE BY FINAL CONSUMER:

The supplier at each stage is permitted to avail credit of GST paid on the purchase of goods
and/or services and can set-off this credit against the GST payable on the supply of goods
and services to be made by him. Thus, only the final consumers bear the GST charged by
the last supplier in the supply chain, with set-off benefits at all the previous stages.

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 NO CASCADING OF TAXES: Since, only the value added at each stage is taxed under
GST, there is no tax on tax or cascading of taxes under GST system. GST does not
differentiate between goods and services and thus, the two are taxed at a single rate.

> India has adopted a dual GST which is imposed concurrently by the Centre and States. In
the GST regime, the major indirect taxes have been subsumed within the ambit of GST. The
erstwhile concepts of manufacture or sale of goods or rendering of services are no longer
applicable since tax is now levied on "supply of goods and/or services".

> Introduction of GST at both centre and

state levels has intergrated taxes on
goods and services for the purpose of
set-off relief and ensure that both the
cascading effects of CENVAT and
service tax are removed and a
continuous chain set-off from the
original producer's point/service
provider's point up to the retailer's
level/consumer's level is established.

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BENEFITS OF GOODS SERVICES TAX

GST is a win-win Situation for the entire country. It brings benefits to all the stakeholders of
industry, government and the consumer, It is expected that with the introduction of GST in
India, the cost of goods and services will go down, thus giving a boost to the country and
making the products and services globally competitive. The significant benefits of GST are
as follows:
 CREATION OF UNIFIED NATIONAL MARKET:
GST aims to make India a common market with common tax rates and procedures and
remove the economic barriers thus paving the way for an integrated economy at the
national level.
 MITIGATION OF ILL EFFECTS OF CASCADING:

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By subsuming most of the central and state taxes into a single tax and by allowing a set-off of prior
stage taxes for the transactions across the entire value chain, it would mitigate the ill effects of
cascading, improve competitiveness and improve liquidity of the business.

 ELIMINATION OF MULTIPLE TAXES AND DOUBLE TAXATION:

GST will subsume majority of existing indirect tax levies at both central and state level into one tax.
This will make doing business easier and will also tackle the highly disputed issues relating to double
taxation of a transaction as both goods and services.

 BOOST TO 'MAKE IN INDIA' INITIATIVE :

GST will give a major boost to the 'Make in India' initiative of the government of India by making
goods and services produced in India competitive in the national as well as international market.

 BUOYANCY TO THE GOVERNMENT REVENUE:

GST is expected to bring buoyancy to the government revenue by widening the tax base and
improving the taxpayer compliance.

GOODS AND SERVICES TAX

to maximise ECONOMIC GAIN
& minimise COMPLIANCE PAIN

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GENESIS OF GOODS & SERVICES TAX

 The idea of a country-wide GST was first mooted by Kelkar Task Force in 2004. The
Task Force strongly recommended fully integrated GST on national basis.
 Subsequently, the then Union Finance Minister, Dr P. Chidambaram, while presenting
Union Budget for FY 2007-08 announced that GST would be introduced in India from
April 1, 2010. Since then, GST missed several deadlines and continued to be shrouded
by the clouds of uncertainty.
 The talks of ushering in GST gained momentum in 2014 when the NDA Government
tabled the Constitution (122" Amendment) Bill, 2014 on GST in the Parliament on 19th
December 2014. The Lok Sabha passed the Bill on 6th May 2015 and Rajya Sabha on
3rd August 2016.
 Once the Bill was ratified by more than 50% of states, the Constitution (122'
Amendment) Bill received the assent of the President on 8th September 2016 and
became Constitution (101' Amendment) Act, 2016 which paved the way for
introduction of GST in India.

CONSTITUTION (101st AMENDMENT) ACT, 2016

NEED FOR CONSTITUTIONAL AMENDMENT:

Introduction of GST required amendment in the Constitution of India so as to enable

integration of central excise duty including additional duties of customs, State VAT and
certain state specific taxes and service tax levied by the Centre into a comprehensive

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Goods and Services Tax and to empower both Centre and States to levy and collect it.
Consequently, Constitution (101st Amendment) Act was passed.

SIGNIFICANT AMENDMENTS MADE BY CONSTITUTION AMENDMENT ACT:

 ARTICLE 246A - POWER TO MAKE GST LAWS:

 Power to levy GST originates from Article 246A of the Constitution. Article 246A has an
over-riding effect over Article 246 of the Constitution.
 'Goods and Services Tax' has been defined under Article 366(12A) of the Constitution of
India to mean any tax on supply of goods, or services or both except taxes on supply of
alcoholic liquor for human consumption. Consequently, GST can be levied on supply of all
goods and services except alcoholic liquor for human consumption.
 Where supply of goods and/or services takes place in the course of inter-state trade or
commerce, the Parliament of India shall have the exclusive power to make laws with
respect to &ST on such supplies.
 Where supply of goods and/or services takes place in the course of intro-state trade or
commerce, the Parliament of India as well as the Legislature of every State shall have the
power to make laws with respect to GST on such supplies.
 In other words, Article 246A grants power to Central and State Governments to make
laws with respect to &ST imposed by Centre or such State. However, the Central
Government has the TION -- exclusive power to make laws with respect to GST in case of
inter-state supply.
 However, in respect of -the following goods, GST shall apply from a date to be
recommended by the 65T Council:

 Petroleum crude;
 High speed diesel;
 Motor spirit (commonly known as petrol);
 Natural gas; and
 Aviation turbine fuel.

ARTICLE 269A: LEVY AND COLLECTION OF GST ON INTER-STATE SUPPLY

 Article 269A stipulates that GST 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

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be apportioned between the Union and the States in the manner as may be provided by
the Parliament of India through a law made on the recommendations of GST Council
 In addition to above, import of goods and/or services into India will also be deemed to
be supply of goods and/or services in the course of inter-state trade or commerce. This
will give power to Central Government to levy IGST on the import transactions which
were earlier subject to countervailing duty under the Customs Tariff Act, 1975.

 RELEVANT ENTRIES OF UNION LIST AND STATE LIST (POST -65T):

UNION LIST (LIST I) STATE LIST (LIST II)

Customs Duties State Excise Duties
Entry 83: Duties of customs including export Entry 51: Duties of excise on alcoholic
duties liquors for human consumption, opium,
Indian hemp and other narcotic drugs and
Central Excise Duties narcotics .
Entry 84: Duties of excise on the following
goods manufactured or produced in India: The entry does not include duties of excise
on medicinal and toilet preparations containing
> Petroleum crude;
alcohol/opium/Indian hemp/ narcotic
> High speed diesel
drugs/narcotics.
> Motor spirit (ie petrol);
> Natural gas
State Level VAT
> Aviation turbine fuel; and
Entry 54: Taxes on intro-state sale of the
> Tobacco and tobacco products.
following goods:
> Petroleum crude;
Central Sales Tax
> High speed diesel;
Entry 92A: Taxes on sale or purchase of
> Motor spirit (ie petrol);
goods (other than newspapers) taking place
> Natural gas;
in the course of inter- state trade or
> Aviation turbine fuel;
commerce )
> Alcoholic liquor for human
consumption.

Illustration (Computation of GST Liability - RTP May 2018 Attempt)

Tirupati Traders, a registered supplier of goods, pays GST. (CGST & SGST or IGST, as the
case may be) under regular scheme. It has furnished the following particulars for a tax
period:

PARTICULARS AMOUNT (RS)

Value of intra-state supply of goods 12,000
Value of intra-state purchase of goods 10,000

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Compute the net GST payable by Tirupati Traders during the given tax period
assuming that there is no opening balance of input tax credit (ITC). Make suitable
assumptions wherever required.
NOTES:
 Rates of COST, SOST and IGST are 9%, 9% and 18% respectively.
 Both inward and outward supplies are exclusive of taxes, wherever applicable.
 All the conditions necessary for availing the input tax credit have been fulfilled.

ILLUSTRATION

Govind, a registered supplier, is engaged in providing services in the neighbouring states

from his registered office in Mumbai. He has furnished the following details in respect of
the inward and outward supplies made F during a tax period:
PARTICULARS AMOUNT (RS)
Inter-state supply of services 1,80,000
Receipt of goods and services within the state 1,00,000
Both inward and outward supplies are exclusive of taxes, wherever applicable. All the
conditions necessary for availing the input tax credit have been fulfilled. Assume the
rates of taxes to be as under:
Particulars Rate
CGST 9%
SGST 9%
IGST 18%

GOODS & SERVICES TAX (COMPENSATION TO STATES) ACT

The Goods and Services Tax (Compensation to States) Act, 2017 provides for a mechanism
to compensate states for a period of 5 years On account of loss of revenue which may arise
due to implementation of GST. The following are some of the important takeaways from
this Act:

 FY 2015-16 shall be taken as the base year and 14% p.a. shall be taken as the growth
rate of revenue for the purpose of calculating compensation amount payable to the states.
 A cess to be levied over and above normal &ST (named as &ST Compensation Cess) on
notified goods to compensate states for 5 years on account of revenue loss suffered by
them. The proceeds of such cess will be utilized to compensate states that warrant payment
of compensation.
> Some of the goods which have been notified for levy of GST Compensation Cess are:

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 Pan Masala;
 Aerated water;
 Tobacco & tobacco products;
 Motor vehicles;
 COAL ,ETC .

> 50% of the remaining amount unutilized in the fund at the end of the fifth year will be
transferred to the Centre and the balance 50% would be distributed amongst the State
and Union Territories in the ratio of total revenues from SGST/UTGST of the fifth year.
> GST Compensation Cess shall be levied on supplies of the above-mentioned goods
irrespective of the fact whether supply is an intro-state supply or an inter-state supply.
> GST Compensation Cess is not leviable on supplies made by a person who has opted for
composition levy. > ITC of GST Compensation Cess can be utilized only for payment of GST
Compensation Cess.

GOODS & SERVICES TAX COUNCIL ('GST COUNCIL')

(Article 279A of the Constitution of India)

COMPOSITION OF GST COUNCIL:

Article 279A of the Constitution of India empowers the President to constitute a joint
forum of Centre and States namely, Goods & Services Tax Council (GST Council).
Composition of GST Council has been discussed below:

> Union Finance Minister - Chairperson of GST

Council; > Union Minister of State in charge of
Revenue or Finance Member of GST Council; and
> Ministers in charge of Finance/Taxation or any
other Minister nominated by States/Union
Territories With State Legislature - Members of
GST Council,
SCOPE OF WORK OF GST COUNCIL:

GST Council shall make recommendations on the

following aspects:
> Taxes, cesses and surcharges levied by the Centre, the States and the local bodies which
may be subsumed under GST.

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Illustration (IGST Mechanism)

Mr X, located in Rajasthan, purchases goods worth Rs 20,000 locally from a vendor in

Rajasthan. The goods so purchased by Mr X are sold by him for Rs 30,000 to Mr Y, located
in Punjab. Mr Y further sells these goods locally to a customer in Punjab for Rs 50,000.

Compute the GST payable at all stages. Also make a statement showing revenue earned by
Central & State Governments. You may assume the rates of CGST, SGST and IGST to be 9%,
9% and 18% respectively.
> Goods/services which may be subjected to or exempted from GST;
> Date on which GST shall be levied on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel;
> Threshold limit of turnover below which goods/services may be exempted from GST;
> Tax rates on various goods/services:
> Special provisions with respect to North-East States, J&K, Himachal Pradesh and
Uttarakhand, and
> Any other matter relating to 65T, as the Council may decide.

DECISIONS OF GST COUNCIL:

> Every decision of the GST Council shall be taken by majority of not less than 3/4' of the
weighted votes of the members present and voting.
> The vote of the Central Government shall have a weightage of 1 /3"' of the votes cast and
the votes of all the State & government token together shall have a weightage of 2/3 rd of
the total votes cast in that meeting.

QUORUM FOR MEETINGS OF GST COUNCIL:

The quorum at the various meetings shall be constituted by one half of the total number of
members of the GST Council present and voting.

FRAMEWORK OF GST AS INTRODUCED IN INDIA

> DUAL GST:

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GST has been implemented in India on a dual structure basis, ie the Centre and the States
have concurrent powers to levy, collect and administer GST. GST extends to the whole of
India including the state of Jammu and Kashmir.

> CGST /SGST / UTGST / IGST:

 GST is a destination based tax applicable on all transactions involving supply of goods
and services for a consideration subject to exceptions thereof.
 In case of intra-state supplies of taxable goods and/or services, the following taxes are
leviable:

 Central Goods and Services Tax (‘CGST’) levied by central Government;

 State Goods and Services Tax (‘SGST’) levied by State Government/Union Territories
with State Legislatures; and
 Union Territory Goods and Service Tax (‘UTGST’) levied in case of Union Territories
without State Legislatures.

 Inter-state supplies of taxable goods and/or services are subject to Integrated Goods
and Services Tax (IGST). IGST is approximately the sum total of CGST and SGST/UTGST
and is levied by the Central Government on all inter-state supplies.

LEGISLATIVE FRAMEWORK
There are total 35 GST Acts in India:
 1 - The Central Goods and Services Tax Act. 2017 for levying CGST:
 31 - State Goods and Services Tax Act, 2017 for levying SGST;
 Tax Act, 2017 for levying CGST'; Act, 2017 for levying SGST-;

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CHAPTER 2 CHARGE OF GST

> Power to levy any tax is drawn from the Constitution of India.
Introduction of GST necessitated the amendment of Constitution of India to enable
integration of central excise duty including additional duties of customs, State VAT and
certain state specific taxes and service tax levied by the Central Government into a
comprehensive Goods Services Tax.

> The very basis for the charge of tax in any taxing statute is the taxable event, ie the point
of time at which the levy of tax gets attracted. Under the erstwhile indirect taxes regime,
each indirect tax levy had a separate taxable event (such as manufacture in case of excise,
provision of services in case of service tax, sale of goods in case of VAT/CST, etc). Under
the GST regime, the taxable event is supply of goods and/or services. The scope of the
word 'supply' has been discussed in detail in the next chapter.

EXTENT OF CGST ACT / SGST ACT / UTG5T ACT / IGST ACT

> Central Goods and Services Tax Act, 2017 extends to the whole of India including the
State of J&K.
> Integrated Goods and Services Tax Act, 2017 extends to the whole of India including the
State of J&K.
> State GST law of the respective State/Union Territory with State Legislature (ie Delhi
and Puducherry) extends to the whole of that State/Union Territory.
> Union Territory Goods and Services Tax Act, 2017 extends to the following Union
Territories of India where there is no State Legislature:
 the Andaman and Nicobar Islands;
 the Lakshadweep Islands;
 Dadra and Nagar Haveli;
 Daman and Diu; and
 Chandigarh.

INTRODUCTION

In order to understand the scope of any taxation law, the first and the foremost step is a
careful analysis of the charging section. Section 9 of CGST Act prescribes the charge of CGST

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on all intra-state supplies of taxable goods and/or services whereas Section 5 of IGST Act
prescribes the charge of IGST on all interstate supplies of taxable goods and/or services.

Along with CGST, SG5T/UTGST is also chargeable on all intra-state supplies of taxable goods
and/or services. However, analysis of any state specific law never forms a part of any
academic curriculum.
The basis for classifying any supply as intra-state supply or inter-state supply is articulated
u/s 7 & 8 of IGST Act, which have been discussed adequately in this chapter.

Section 9(1): Subject to the provision of sub-section (2), there shall be levied a tax 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.

Section 9(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.

Section 9(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 recipients of such goods or services or both and all the
provisions of this Act shall apply to such recipients as if he is the person liable for the
paying the tax in relation to supply of such goods or services or both.

Section 9(4): The government may, on the recommendations of the Council, by notification,
specify a class of registered persons who shall, in respect of supply of specified categories
of goods or services or both received from an unregistered supplier, pay the tax on reverse
charge basis as the recipient of such supply of 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 such supply of goods or services or both.

Section 9(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.

Provided that 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.

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Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also he does not have a representative in the said
territory such as 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.

LEVY & COLLECTION OF CGST/ IGST (Sections 9(1) & 9(2) of CGST Act (+)
SECTIONS(1) & 5(2) OF IGST ACT)

LEVY OF CGST / SGST UTGST

/IGST:
> Central Goods and Services Tax
(CGST) shall be levied on all intra-
state supplies of goods or services
or both.
> State Goods and Services Tax
(SGST) is levied on those intra-
state supplies of goods or services
or both where the transaction
takes place within a State/Union
Territory with State Legislature.
Union Territory Goods and Services
Tax (UTGST) is levied on those intra-
state supplies of goods or services
where the transaction takes place within a Union Territory without State Legislature

> Integrated Goods and Services Tax (IGST) shall be levied on all inter-state supplies of
goods or services or both

MEANING OF INTRA-STATE SUPPLY (Section 8 of IGST Act}

Where the location of the supplier and the place of supply of goods or services are in the
same State/Union Territory, the supply is treated as intra-state supply of goods or services.

MEANING OF INTER-STATE SUPPLY

(Section 7 of IGST Act)

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 Where the location of the supplier and the place of supply of goods or services are
in:
 two different States; or
 two different Union Territories; or
 a State and a Union Territory,
the supply is treated as inter-state supply of goods or services.

 Section 7 of IGST provides that the following supplies shall be deemed as inter-state
supplies:
 Supply of goods or services imported into the territory of India;
Supply of goods or services when the supplier is located in India and the place of supply is
outside India; and Supply of goods or services to or by a SEZ Developer/ SEZ Unit.

LEVY & COLLECTION OF IGST {SECTION 5 OF IGST ACT}

 Section 5(1):Subject to the provisions of sub-section (2), there shall be levied a

tax called the integrated goods and services tax on all inter-state of goods or services or
both; except on the supply of alcoholic liquor for human consumption, on the value
determined under section 15 of central Goods and Services Tax Act and at such rates,
not exceeding forty 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.

Provided that the integrated tax on goods imported into India shall be levied and
collected with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as
determined under the said Act at the point when duties of customs are levied on the said
goods under section 12 of the Customs 1962.

 Section 5 2 : The integrated 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.
 Section 5 (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.

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 Section 5(4): The Government may, on the recommendations of the Council, by
notification, specify a class of registered persons who shall, in respect of supply of specified
categories of goods or services or both received from an unregistered supplier, pay the tax
on reverse charge basis as the recipient of such supply of 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 such supply of goods or services or both.

 Section 5(5): The government may, on the recommendations of the Council, by

notification, specify categories of services, the tax on inter-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.
Provided that 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 also 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.

GOODS PERMANENTLY EXCLUDED FROM THE PURVIEW OF GST LAW:

Supply of alcoholic liquor for human consumption is outside the purview of CGST as well as
IGST law.

GOODS TEMPORARILY EXCLUDED FROM THE PURVIEW OF GST LAW

(To Be Taxed Under GST At A Later Point of Time):

 Presently, CG5T/SGST/UTG5T/IG5T is not applicable on the supply of the following

items:
U Petroleum crude;
U High speed diesel;
U Motor spirit (commonly known as petrol);
U Natural gas; and
U Aviation turbine fuel.
 The above-mentioned products shall be brought under the ambit of GST law with
effect from such date as may be notified by the Government on the recommendations of the
GST Council.

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VALUE FOR LEVY OF CGST/IGST: Transaction Value u/s 15 of CGST Act

RATES OF CGST/IGST:

 IGST is approximately the sum total of CGST and SGST/UTGST. Maximum rate of CGST
is 20% whereas maximum rate of IGST is 40%.
 Multi-tier rate structure has been introduced under GST. The following are the different
types of
GST rates which are applicable presently {These rates are the sum total of CGST (+) SGST
/UTGST in case of intro-state supplies}:
U 0% (Exempted Supplies)
U 5%
U 12%
U 18%
U 28%

Note: GST rate of 0.25% has been prescribed for supply of raw/unprocessed precious
stones. GST rate of 3% has been prescribed for supply of gold, gold jewellery, precious
metals, etc.

REVERSE CHARGE ON NOTIFIED GOODS/SERVICES

{Section 9(3) of CGST Act (+) Section 5(3) of IGST Act)

 Generally, the supplier of goods or services is liable to pay GST. However, in

specified cases like imports and other notified supplies, the liability may be cast on the
recipient under the reverse charge mechanism. Reverse charge means the liability to pay
tax is on the recipient of supply of goods or services instead of the supplier of such goods or
services in respect of notified categories of supply. There are two type of reverse charge
scenarios provided in GST law:
„ First is dependent on the nature of supply and/or nature of supplier. This scenario is
covered by Section 9(3) of CGST Act and Section 5(3) of IGST Act.
„ The second scenario is covered by Section 9(4) of CGST Act and Section 5(4) of IGST Act
where specified supplies by any unregistered person to a registered person are covered.

Section 9(3) of CGST Act and Section 5(3) of IGST Act empowers the Government to notify,
on the recommendations of the G5T Council, specific 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 supply and all the provisions of GST law shall apply to such recipient as if he is the
person liable for paying tax in relation to the supply of such goods or services or both.

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SUPPLIES OF SERVICES UNDER REVERSE CHARGE MECHANISM (AS NOTIFIED):
In exercise of the powers conferred u/s 9(3) of CGST Act and 5(3) of IGST Act, the following
transactions have been notified from time to time where GST will be payable by the
recipient of services under reverse charge:

S.NO. Description Of Supply Of Services Supplier Of Services Recipient Of Services

1 Sponsorship services Any person Any body-corporate
or partnership firm
located in the taxable
territory
2 Services supplied by a director of a A director of a A company or a body-
company or a body-corporate to the company or a body- corporate located in
said company or the body-corporate corporate the taxable territory

3 Services supplied by an insurance agent An insurance agent Any person carrying

to any person carrying on insurance on insurance
business business located in
the taxable territory
4 Services supplied by a recovery agent A recovery agent A banking company or
to a banking company or a financial a financial institution
institution or a NBFC or a NBFC located in
the taxable territory
5 Supply of services by an author, music Author or music Publisher, music
composer, photographer, artist or the composer, company, producer or
like by way of transfer or permitting photographer, the like located in the
the use or enjoyment of a copyright artist, or the like taxable territory
relating to original literary, dramatic,
musical or artistic works to a
publisher, music company, producer or
the like
6 Supply of services by the members of Members of Overseeing Reserve Bank of India
Overseeing Committee to Reserve Committee
Bank of India constituted by the
Reserve Bank of
INDIA

S.NO. Description Of Supply Of Services Supplier Of Services Recipient Of Services

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7 GTA Services Goods Transport Any of the following
Agency which has not persons located in
paid CGST @ 6% taxable territory: >
Factory
> Co-operative society
> Person registered
under GST law >
Body-corporate >
Partnership firm
> Casual taxable
person

8 Legal services An individual Any business entity

advocate, including located in the taxable
a senior advocate or territory
a firm of advocates

9 Services supplied by an arbitral tribunal Arbitral tribunal Any business entity

to a business entity located in the taxable
territory
10 Central Government, Any business entity
Any service supplied by CG/SG/ Union State Government, located in the taxable
Territory/Local Authority to a business Union Territory or territory
entity excluding: Local Authority
> renting of immovable property;
> services by the Department of Posts
by way of speed post, express parcel
post, life insurance and agency
services provided to a person other
than CG/SG/Union Territory or
Local Authority;
> Services in relation to an aircraft or
a
vessel, inside or outside the
precincts of a port or an airport;
and > Transport of goods or
11 passengers.
Services supplied by CG/SG/ Union Central Government, Any person registered
Territory/Local Authority by way of State Government, under GST law
renting of immovable property to any Union Territory or
person registered under GST law Local Authority

12 Any service supplied by any person who Any person located in Any located in taxable
is located in a non-taxable territory to non-taxable territory territory

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any person located in taxable territory

13 Services supplied by a person located in A person located in a Importer located in the

non-taxable territory by way of non-taxable territory taxable territory
14 transportation
Services supplied of goods by a vesselDirect
by Individual from Individual Direct (Meaning
A bankingof importer
company or
a placeAgents
Selling outside(DSAs)
India upto the customs Selling Agents (DSAs) atoNBFC
be borrowed from
located in the
15 station of clearance
Services providedin India
by a business other
A than afacilitator
business body Section
taxable
A banking2(26) of the
territory
company
facilitator to a banking company corporate, partnership CustomsinAct,
located the1962)
taxable
16 Services provided by an agent of or LLP firm
A agent of business territory
A business
business correspondent to business correspondent correspondent located
correspondent in the taxable territory

State the person liable to pay GST in the following independent cases provided the
recipient is located in the taxable territory:

a) Services provided by an arbitral tribunal to any business entity.

b) Sponsorship services provided by a company to an individual.

c) Services by way of renting of immovable property provided by CG to a business entity

registered under GST law.

Answer

a) GST on services provided or agreed to be provided by an arbitral tribunal to any

business entity located in the taxable territory is payable under reverse charge.
Therefore, in the given case, GST is payable by the recipient, i.e. the business entity.
b) GST on sponsorship services provided by any person to any body-corporate or
partnership firm located in the taxable territory is payable under reverse charge. Since
services have been provided to on individuals, reverse charge provisions will not apply.
Thus, G5T is payable under forward charge by the supplier (i.e. the company).
c) GST on services by way of renting of immovable property provided by Central
Government, State Government, Union Territory, or local authority to any person
registered under GST law is payable under reverse charge. Thus, reverse charge
provisions will get attracted and the recipient would be liable to pay GST.

SUPPLIES OF GOODS UNDER REVERSE CHARGE MECHANISM (AS NOTIFIED):

In exercise of the powers conferred u/s 9(3) of CGST Act and 5(3) of IGST Act, the following
transactions have been notified from time to time where GST will be payable by the recipient
of goods under reverse charge. However, ICAI has excluded this topic for examination

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purposes and the same has been incorporated in the book just for the sake of knowledge of
the students.

S NO. Description Of Supply Of Goods Supplier Of Goods Recipient Of Goods

1 > Unshelled/Unpeeled Cashew Nuts Agriculturist Any Registered
> Bidi Wrapper Leaves (Tendu) Person
> Tobacco Leaves
> Raw Cotton

2 Supply Of Lottery State Government, Lottery

Union Territory Or Distributor Or
Any Local Authority Selling Agent
3 Silk Yarn Any person Who Any Registered
Manufactures Silk Yarn Person
Form Raw Silk Or Silk
Worn Cocoons For
Supply Of Silk Yarn
4 Used Vehicles; Old & Used Goods; Seized Central Government, Any Registered
& Confiscated Goods; Waste & Scrap State Government, person
Union Territory Or
Any Local Authority

REVERSE CHARGE ON SUPPLIES BY UNREGISTERED PERSONS

{Section 9(4) of CGST Act (+) Section 5(4) of IGST Act}

> The initial version of Section 9(4) of CGST Act and Section 5(4) of IGST Act which was
drafted at the time of introduction of GST law provided that where a supply of taxable
goods or services or both is made by an unregistered person to a registered person, tax on
such transaction shall be paid by the registered recipient on reverse charge basis and all
the provisions of GST law shall apply to such recipient as if he is the person liable for
paying tax in relation to the supply of such goods or services or both. Accordingly, as per
the initially introduced law, whenever a registered person procures supplies from an
unregistered supplier, he needs to pay GST on reverse charge basis.

> However, to minimize inconvenience in case of low value transactions, supply of taxable
goods or services or both by an unregistered supplier to a registered person were

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exempted from GST provided the aggregate value of such supplies of goods and/or services
received by a registered person from any or all the unregistered suppliers does not exceed
Rs 5,000 in a day. This benefit was available since the introduction of GST on intra-state
supplies as well as inter-state supplies. For giving effect to this benefit, separate
notifications were issued under CGST Act as well as IGST Act.

> With the introduction of GST, it became very apparent that the above-mentioned
provisions casted a lot of burden on registered persons because a lot of their suppliers had
not got themselves registered under GST law. After considering numerous representations
filed by the industry and trade, the GST Council, in its 22nd meeting held on 6th October
2017, decided to suspend the reverse charge mechanism u/s 9(4) of CGST Act and 5(4) of
IGST Act.

> However, in order to reduce the scope of this provision and finally make it effective, an
amendment has been carried out recently. The objective behind this is to empower the
Central Government to notify classes of registered persons to pay the tax on reverse charge
basis in respect of receipt of supplies of certain specified categories of goods or services or
both from unregistered suppliers.

TAXATION OF ELECTRONIC COMMERCE OPERATORS

{Section 9(5) of CGST Act (+) Section 5(5) of IGST Act)

INTRODUCTION:

> Electronic Commerce Operators ('ECO') display products as well as services on their
electronic portal which are actually supplied by some other person to the consumer. The
consumers buy such goods/services through these portals.

> On placing the order for a particular product/service, the actual supplier supplies the
selected product/service to the consumer. The price/consideration for the
product/service is collected by the ECO from the consumer and passed on to the actual
supplier after the deduction of commission by the ECO.

LIABILITY OF ECO TO PAY GST:

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> The Government may notify specific categories of services, on the recommendations of
the GST Council, the tax on which shall be paid by the ECO if such services are supplied
through it .
> The following services have been notified by the Government in this regard and thus in
case of
the following notified services, the provisions of GST law shall apply to such ECO as if he is
the supplier liable for paying tax in relation to the supply of such services:

> Services by way of transportation of passengers by a radio -taxi, motorcab, maxicab and
motor cycle; and

> Services by way of providing accommodation in hotels, inns, guest houses, clubs,
campsites or other commercial places meant for residential or lodging purposes, except
where the person supplying such service through Electronic Commerce Operator is liable
for registration u/s 22(1) of CGST Act.

> Services by way of house-keeping such as plumbing, carpentering, etc except where the
person supplying such service through Electronic Commerce Operator is liable for
registration u/s 22(1) of CGST Act.

PERSON LIABLE TO PAY GST FOR ABOVE SPECIFIED SERVICES WHEN SUPPLIED
THROUGH ECO:

> If the Electronic Commerce Operator is located in India, tax is to be paid by the Electronic
Commerce Operator.
> If the Electronic Commerce Operator does not have any physical presence in the taxable
territory, tax is to be paid by the Electronic Commerce Operator's representative located in
the taxable territory.
> If the Electronic Commerce Operator neither has physical presence nor any representative
in the taxable territory, the Electronic Commerce Operator would be required to appoint a
person in India who would discharge tax liability on its behalf.

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CHAPTER 3 SUPPLY UNDER GST

> The incidence of tax is the foundation stone of any taxation system. It determines the point
at which tax would be levied (ie, the taxable event). The earlier framework of taxable
event across various areas of indirect taxes was subject to varying interpretations
resulting in endless litigation since decades.

> Broadly, the controversies related to issues like whether a particular process amounted to
manufacture or not, whether a particular transaction was sale of goods or rendering of
services, etc. The GST laws resolve these issues by laying down one comprehensive
taxable event, ie 'supply of goods or services or both'.

> GST law, by levying tax on the 'supply of goods and/or services', departs from the
historically understood concepts of 'taxable event' under the erstwhile indirect tax laws
(ie sale under state VAT lows, manufacture under excise laws and provisioning of
service under service tax laws).
> For a better understanding of this topic, it is imperative to understand the meaning of a
few important terms which have been explained in the ensuing paragraphs.

Introduction

The concept of 'supply' is the key stone of the GST architecture. In the GST regime, the entire
value of supply of goods and/or services is taxed in an integrated manner, unlike the earlier
indirect taxes, which were charged independently either on manufacture or sale of goods,
or on rendering of services.

Supply has been defined in an inclusive manner to include all forms of supply of goods or
services or both such as sale, transfer, barter, exchange, license or disposal made or
agreed to be made for consideration in the course or furtherance of business.
Sections 7 & 8 of CGST Act read along with Schedules I, II & III given under the said Act
explain the meaning and scope of supply, By virtue of Section 20 of IGST Act, these
provisions have also been made applicable for IGST law.

> 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;

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 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:

 The expression 'services' has been defined to mean anything other than goods, money
and securities.

 The expression 'services' includes activities relating to the use of money or its conversion
of money by cash or by any other mode, from one form, currency or denomination to
another form, currency or denomination for which a separate consideration is charged. It
has been further provided that the expression 'services' would also include facilitating or
arranging transaction in securities.

MEANING OF 'CONSIDERATION' Section 2 31 of CGST Act}

 The scope of the word 'consideration' in relation to the supply of goods or services
or both would include.

 any payment made or to be made, whether in money or otherwise, by the

recipient or by any other person; and
 the monetary value of any act or forbearance by the recipient or by any other
person.
 Any subsidy given by Central Government or State Government shall not be
treated as a part of consideration.
 A deposit given in respect of supply of goods or services or both shall not be
considered as payment made for such supply unless the supplier applies the
deposit as consideration for the said supply.

MEANING OF 'MONEY' (Section 2(75) of CGST Act):

 Money means Indian legal tender or any foreign currency, cheque, promissory note, bill
of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or
electronic remittance or any other instrument recognised by the Reserve Bank of India
when used as a consideration to settle an obligation or exchange with Indian legal
tender of another denomination.
 However, money shall not include any currency that is held for its numismatic value.

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MEANING OF 'BUSINESS' {Section 2(17) of CGST Act):

Business includes:

a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other
similar activity, whether or not it is for a pecuniary benefit;
b) Any activity or transaction in connection with or incidental or ancillary to (a) above;
c) Any activity or transaction in the nature of (a) above, whether or not there is volume,
frequency, continuity or regularity of such transaction;
d) Supply or acquisition of goods including capital assets and services in connection with
commencement or closure of business;
e) Provision by a club, association, society, or any such body (for a subscription or any
other consideration of the facilities or benefits to its members, as the case may be;
f) Admission, for a consideration, of persons to any premises;
g) Services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation;
h) Activities of a race club including by way of totalisator or a licence to book maker or
activities of a licenses book maker in such club; and
i) Any activity or transaction undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities.

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);

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 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 family; 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 purpose of this Act, the expression “supply” includes:

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange,
licence, rental, lease or disposal made or agreed to be made for consideration by a person
in the course or furtherance of business;
b) Import of services for a consideration whether or not in the Course or furtherance of
business; and
c) The activities specified in schedule I, made or agreed to be made without a consideration.

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 Section 7(1A): Where certain activities or transactions, constitute a supply in
accordance with the provisions of sub-section (1), they shall be treated either as supply
of goods or supply of services as referred to in Schedule II
 Section 7(2); Notwithstanding anything contained in sub-section (1),

a) Activities or transactions specified in schedule III; or

b) 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), (1A) and (2), the Government
may, on the recommendations of the Council, specify, by notification, the transactions that
are to be treated as:

a) a supply of goods and not as a supply of services; or

b) a supply of services and not as a supply of goods.

OVERVIEW OF SUPPLY:

INCLUSIONS EXCLUSIONS

Activities to Be Treated Neither As Supply Of

„ Supply for Consideration in Course or Goods Nor Supply Of Services {Section 7(2) +
Furtherance of Business (Section 7(1) (a)} Schedule III}

„ Importation of Services for Consideration

`Whether Or Not in Course or Furtherance of
Business {Section 7(1) (b)}

„ Supply Without Consideration {Section

7(1)(c) + Schedule I}

„ Activities to Be Treated As Supply Of Goods

Or Supply Of Services {Section 7(1A) +
Schedule II}

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SUPPLY FOR CONSIDERATION IN COURSE OR FURTHERANCE OF

BUSINESS
{Section 7(1) (a) of CGST Act)

Section 7(1) (a) of CGST Act provides that a supply of goods/services should be carried out
for consideration in the course or furtherance of business,

MODES OF SUPPLY:
>Section 7(1)(a) of CGST Act 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 consideration in the course or furtherance of business

> Sale and Transfer:

Earlier, VAT was levied by State Governments on sale of goods within their respective
states wherein 'sale' was defined to mean transfer of property in goods for
consideration Under CGST Act, sale has been treated as a form of supply leviable to
GST,
> Barter and Exchange:
 Barter transactions involve only exchange of goods or services whereas exchange
may cover a situation where the goods are partly paid for in goods and partly in
money.

 When there is a barter of goods or services, same activity constitutes supply as well
as consideration. By making a specific inclusion in the definition of supply, all barters
and exchanges have been made liable to GST.

> Licence, Lease, Rental etc:

 Licences, leases and rentals of goods were earlier treated as services where the
goods were transferred without transfer of right to use (effective possession and control
over the goods) and were treated as sales where the goods were transferred with
transfer of right to use.
TAXABILITY OF ART WORKS SENT BY ARTISTS TO GALLERIES FOR
EXHIBITION:

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 Artists gives their art works to galleries where it is exhibited for supply However,
no consideration flows from the gallery to the artist when the art works are sent to the
gallery for exhibition and therefore, the same is not a supply
 It is only when a buyer selects a particular art work displayed at the gallery, that
the actual supply takes place and applicable GST would be payable at the time of such
supply.

Illustration

State the necessary elements for a supply to be chargeable to GST.

Answer

The fallowing elements are required to be satisfied for a supply to be chargeable to GST:

> The activity involves supply of goods or services or both;

> The supply is for a consideration unless otherwise specifically provided for;
> the supply is made in the course or furtherance of business;
> the supply is a taxable supply; and
> the supply is made by a taxable person,
 Under the GST regime, such licences, leases and rentals of goods with or without
transfer of right to use are covered under the scope of 'supply of services' because
there is no transfer of title in such supplies. Such transactions are specifically treated
as 'supply of services' under Schedule II of CGST Act.

CONSIDERATION:

> One of the essential conditions for the supply of goods and/or services to fall within
the ambit of GST is that the supply should have been made for a consideration.

> However, consideration does not always mean money. It covers anything
which might be possibly done, given or made in exchange for something
else.

> Further, consideration need not always flow from the recipient of the supply. It can
also be made by a third person.

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IN THE COURSE OR FURTHERANCE OF BUSINESS:

> GST is essentially a tax on only commercial transactions. Hence, only those
supplies which are made in the course or furtherance of business qualify as
'supply' under GST.

> Resultantly, any supplies made by an individual in his personal capacity do not
come under the ambit of GST unless they fall within the definition of business.

> Example: Rishabh buys a car for his personal use and after a year sells it to a car
dealer. Sale of car by Rishabh to car dealer is not a supply under CGST Act because
supply is not made by Rishabh in the course or furtherance of business.

> Example: Radhika sold her old gold bangles and earrings to 'Bhola Jewellers'. Sale of
old gold
jewellery by an individual to a jeweller will not constitute supply as the same
cannot be said to be in the course or furtherance of business of the individual.

> In order to understand the term 'in the course or furtherance of business', we need to
understand the term 'business'. Business has been defined u/s 2(17) of CGST Act to
include, inter-alia, any trade, commerce, manufacture, profession, vocation etc
whether or not undertaken for a monetary benefit. Business also includes any
activity or transaction which is incidental or ancillary to the afore-mentioned listed
activities.

IMPORT OF SERVICES FOR CONSIDERATION {Section 7(1)(b) of CGST Act)

> Section 7(1)(b) of CGST Act expands the scope of the term 'supply' by including
importation of services for a consideration within its ambit irrespective of the fact
whether such importation is in the course or furtherance of business or not

> Section 7(1) (b) of CGST Act (ie importation of services for consideration) is
the only exception to the condition of supply being in the course or furtherance
of business.
Example: Mr M, a proprietor, has received designing services for his house from an
architect located in New York at an agreed consideration of US $5,000. The import of
services by Mr M shall be treated as a supply u/s 7(1) (b) of CGST Act even though it is
not in the course of or furtherance of business.

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Illustration (RTP May 2018 Attempt)

Sahab Sales, an air-conditioner dealer in Janakpuri, Delhi, needs 4 air-conditioners for

his newly constructed house in safdarjung Enclave. Therefore, he transfers 4 air-
conditioners (on which ITC has already been availed by it) from its stock for the said
purpose. Examine whether the said activity amounts to supply u/s 7 of CGST Act, 2017.

Further, a janakpuri resident, Aakash, approached Sahab Soles. He sold an air-

conditioner to Sahab Sales for Rs 5,000. Aakash had bought the said air-conditioner six
months before for his residence. Does sale of the air-conditioner by Aakash to Sahab
Sales amount to supply u/s 7 of CG5T Act, 2017?

Illustration
Modest Ltd, registered in Delhi, dealing in supply of electronic items transferred some of
its stock to its another unit located in Haryana (inter-state transfer). Whether such self-
supplies are taxable under GST?
SUPPLY WITHOUT CONSIDERATION - DEEMED SUPPLY {Section 7(1)(c) of
CGST
Act (+) Schedule I of CGST ACT}

As a general rule, for an activity to qualify as supply, the some should have been
provided for consideration. However, Section 7(1)(c) of CGST Act read along with
Schedule I of CGST Act lists down the following four cases where existence of
consideration is not a pre-requisite for an activity to qualify as supply:

1. PERMANENT TRANSFER/DISPOSAL OF BUSINESS ASSETS:

 Transfer/disposal of business assets by an entity on permanent basis without

consideration shall be regarded as supply if input tax credit has
been availed on procurement of such assets.

 This clause is wide enough to cover transfer of business assets from holding to
subsidiary company or vice versa without consideration.
 Example: Donation of old laptops to charitable schools by XYZ & Co at the time of
purchase of new laptops will qualify as supply provided input tax credit has been
availed by XYZ & Co on such laptops.

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 Example: A cloth retailer gives clothes from his business stock to his friend free of
cost. In this case, transfer of business stock would amount to supply if he had
claimed input tax credit on his procurement of such business stock.

2. SUPPLY BETWEEN RELATED PERSONS / DISTINCT PERSONS:

Transactions involving supply of goods/services/both without consideration between

related persons or distinct persons as specified u/s 25 of CGST Act will qualify as supply
provided such supply has been made in the course or furtherance of business.

(The meaning of 'related persons' has been discussed earlier in this topic whereas the
concept of 'distinct persons' has been discussed in detail under 'Chapter 9 - Registration`)

TAXABILITY OF STOCK TRANSFERS / BRANCH TRANSFERS:

 Under the earlier law, no tax was applicable on stock transfers/branch transfers since
such transaction do not involve transfer of property in goods. However, under the GST
regime, stock transfers/branch transfers between different locations (with separate GST
registrations) of same legal entity will qualify as 'supply'.

Example: Raghubir Fabrics transfers 1,000 shirts from his factory located in Lucknow to
his retail showroom in Delhi so that the same can be sold from there. The factory and
retail showroom of Raghubir Fabrics are registered in the states where they are located.
Although no consideration is charged, supply of goods from factory to retail showroom
constitutes supply.

PARA 3 OF SCHEDULE I -SUPPLY OF GOODS BETWEEN PRINCIPAL &

AGENT:
 Section 7(1)(c) of CGST Act read along with Schedule I of CGST Act lists down four
cases where existence of consideration is not a pre-requisite for an activity to
qualify as supply.
 In other crucial point is whether or not the agent as the authority to pass or receive
the title of the goods on behalf of the principal.

„ Where the invoice for further supply is being issued by the agent in his name then, any
provision of goods from the principal to the agent would fall within the ambit of Para
3 of Schedule I would be regarded as 'supply'.

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„ Where the invoice is issued by the agent to the customer in the name of the principal,
such agent does not fall within the ambit of Para 3 of Schedule I and thus the transaction
would not be regarded as 'supply'.

 Similarly, where the goods being procured by the agent on behalf of the principal
are invoiced in the name of the agent, then further provision of the said goods by the agent
to the principal would be covered by Para 3 of Schedule I
.
 The above clarification can be understood with the help of following examples:

Example: Mr A appoints Mr B to procure certain goods from the market. Mr B identifies

various suppliers who can provide the goods as desired by Mr A, and asks the supplier (Mr
C) to send the goods and issue the i invoice directly to Mr A. In this scenario, Mr B is only
acting as the procurement agent, and has in no way involved himself in the supply or receipt
of the goods. Hence, in accordance with the provisions of this Act, Mr B is not an agent of Mr
A for supply of goods in terms of Para 3 of Schedule I.

Example: M/s XYZ, a banking company, appoints Mr B (auctioneer) to auction certain

goods. The auctioneer arranges for the auction and identifies the potential bidders. The
highest bid i sold to the highest bidder by M/s XYZ. The invoice for the supply of the goods
is issued by M/S XYZ to the successful bidder. In this scenario, the auctioneer is merely
providing the auctioneering services with no role played in the supply of the goods. Even in
this scenario, Mr B is no agent of M/s XYZ for the supply of goods in terms of Para 3 of
Schedule I.

Example: Mr A, an artist, appoints M/s B (auctioneer) to auction his painting. B arranges

for the auction and identifies the potential bidders. The highest bid is accepted and the
painting sold to the highest bidders the invoice for the supply of the painting issued by M/s
B on the behalf of Mr A but in his own name and the painting is delivered to the successful
bidder. In this scenario, M/s B is not merely providing auctioneering services, but is also
supplying the painting on behalf of Mr A to the bidder, and has the Schedule I. authority to
transfer the title of the painting on behalf of Mr A. This scenario is covered under Para 3 of
Schedule I.

 Para 3 of Schedule I provides that supply of goods by a principal to his agent, without
consideration, when agent undertakes to supply such goods on behalf of the principal
is considered as supply. Similarly, Supply of goods by an agent to his principal,

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without consideration, where the agent undertakes to receive such goods on behalf of
the principal is also considered as supply.

 In order to determine whether a particular principal-agent relationship falls within the

ambit of Para 3 of Schedule I, the deciding factor is whether the invoice for the further
supply of goods on principal is being issued by the agent or not.

EMPLOYER-EMPLOYEE TRANSACTIONS:

 The definition of 'related persons' covers employer-employee relationship within its

scope. Accordingly, all employer-employee transactions should be regarded as
supply irrespective of the fact whether consideration is involved or not.
 However, Schedule I of CGST Act provides that gifts given by an employer to
an employee shall not be treated as supply if the amounts of gifts given during a
financial year does not exceed Rs 50,000. However, gifts exceeding Rs 50,000
shall be subject to GST.

 Moreover, Schedule III of CGST Act clearly states that services provided by an
employee to the employer in the course of or in relation to his employment shall
not be treated as supply of services. Therefore, any kinds of benefits given by an
employer to his employee in terms of contractual agreement entered into between
the employer and the employee will not be subject to GST.

 Example: Where an employer provides free housing to his employee, when the same
is provided in terms of the contract between the employer and employee and is part
and parcel of the employee's remuneration package, no GST implications should arise
on such free housing.

3. SUPPLY OF GOODS BETWEEN PRINCIPAL & AGENT:

Supply of goods by a principal to his agent, without consideration, where the agent
undertakes to supply such goods on behalf of the principal is considered as supply.
Similarly, supply of goods by an agent to his principal, without consideration,
where the agent undertakes to receive such goods on behalf of the principal is also
considered as supply.

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Example: ABC Manufacturers Ltd engages Raghav & Sons as an agent to sell goods
on its behalf. For this purpose, ABC Manufacturers Ltd has supplied the goods to
Raghav & Sons. Supply of goods by ABC Manufacturers Ltd to Raghav & Sons will
qualify as supply even though no consideration has been recovered from Raghav &
Sons.

4. IMPORT OF SERVICES FROM RELATED PERSONS LOCATED OUTSIDE

INDIA:

Import of services by a person from a related person or from any of his

establishments located outside India in the course or furtherance of business shall
be treated as supply irrespective of the presence of consideration.

Example: ABC Associates received legal consultancy services from its head office
located in Malaysia. The head office has rendered such services free of cost to its
branch office. Since ABC Associates and the branch office are related persons,
services received by ABC Associates will qualify as supply even though the head
office has not charged anything from it.

Example: Sumit, a proprietor registered in Delhi, has sought architect services

from his brother located in US, with respect to his newly constructed house in
Delhi. Although services have been received by Sumit without consideration from
a related person, the transaction will still not qualify as supply since the same has
not been received in the course or furtherance of business.

TAXABILITY OF TENANCY RIGHT/PAGADI UNDER GST:

 In Pagadi system, the tenant acquires tenancy rights in the property against
payment of tenancy premium (pagadi) The landlord may be owner of the
property, but the possession of the same lies with the tenant. The tenant Pays'
periodic rent to the landlord as long as he occupies the property. The tenant also
usually has the option to sell the tenancy right of the said property and in such a
case has to share a percentage of the proceeds with the land, as laid down in
their tenancy agreement. Alternatively, the landlord pays to tenant the

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prevailing tenancy owner of premium to get the property vacated. Such
properties in Maharashtra are governed by Maharashtra Rent C Act, 1999.

 Pagadi system, ie transfer of tenancy rights against tenancy premium, is

prevalent in some states. The activity of transfer of tenancy right against
consideration (ie, tenancy premium) is squarely covered under supply of
service liable to GST. It is a form of lease or renting of property and such activity
has been specifically declared to be a service as per Schedule II of CGST Act.

 Although stamp duty and registration charges have been levied on such transfer
of tenancy rights, it shall be still subject to GST since merely because a
transaction/supply involves execution of documents which may require
registration and payment of registration fee and stamp duty, it would not
preclude them from the 'scope of supply' and from payment of GST.

 To sum up, transfer of tenancy rights to a new tenant against consideration in

the form of tenancy premium is taxable. Further, services provided by
outgoing tenant by way of surrendering the tenancy rights against
consideration in the form of a portion of tenancy premium is liable to GST.

Illustration:

State Government has exclusive power to notify a transaction to be supply of goods

or services. Discuss the correctness of the statement.

Answer:

The said statement is not correct. State Government can notify a transaction to be supply
of goods or services but only on the recommendations of the GST Council. Further,
Central Government or State Government, both on the recommendations of the GST
Council, can notify an activity to be the supply of goods and not supply of services or
supply of services and not supply of goods or neither a supply of goods nor a supply of
services.

Illustration:

ABC Consultancy, registered in Mumbai, supplies technical consultancy services to its

clients. It has been providing technical services to XY Ltd, Mumbai since past two years.

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Consideration is settled by XY Ltd assignment-wise. XY Ltd paid Ps 45 lakhs to ABC
Consultancy on 10th January 2018 on ABC Consultancy agreeing to not provide similar
technical services to any other business entity in India or abroad for a period of 8 years.
ABC Consultancy is of the view that Rs 45 lakhs is not chargeable to GST.

You are required to examine whether the view taken by ABC Consultancy is valid in law.
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS/SERVICES {Section 7(1
A) of
CGST Act (+) Schedule II of CGST Act)

 Section 7(1A) of CGST Act read along with Schedule II of CGST Act enlists various
matters/transactions which are to be treated as supply of either goods or services,
 The matters listed under Schedule II are primarily those which had been entangled in
litigation in the earlier regime owing to their complex nature and susceptibility to double
taxation.

S.No. Nature Of Transaction Nature Of

Supply
a) Transfer of title in goods Supply of Goods
b) Transfer of right in goods/undivided share in goods Supply of Services
without transfer of title in goods
1
c) Transfer of title in goods under an agreement which stipulates Supply of Goods
that property shall pass at a future date

 Lease, tenancy, easement, license to occupy land Supply of Services

 Lease or letting out of the building including a commercial,
2 industrial or residential complex for business or commerce,
either wholly or partly

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Any treatment or process which is applied to another person's Supply of Services
3 goods Example: Job work performed by a job worker like dyeing
of fabric in various colours
a) Goods forming part of business assets are transferred or disposed- Supply of Goods
off by/under directions of person carrying on the business so as no
longer to form part of those assets, whether or not for consideration

b) Goods held/used for the purposes of the business are put to Supply of Services
any private use or are made available to any person for use, for
any purpose other than business, by or under the direction of a
person carrying on a business, whether or not for consideration
4 Example: A director using company's car for personal travels
c) Goods forming part of assets of any business carried on by a Supply of Goods
person who ceases to be a taxable person, shall be deemed to
be supplied by him, in the course or furtherance of his business,
immediately before he ceases to be a taxable person
EXCEPTIONS:
3/4 Business is transferred as a going concern to another person; or
3/4 Business is carried on by a personal representative who is
deemed to be a taxable person
5  Renting of immovable property Supply of
 Construction of a complex, building, civil structure or a part Services
thereof, including a complex or building intended for sale to
a buyer before its completion provided some part of the
consideration is received before the issuance of completion
certificate.
 Temporary transfer or permitting the use or enjoyment of
any intellectual property right.
 Development, design, programming, customization,
adaptation, upgradation, enhancement, implementation of
information technology software.
 Agreeing to the obligation to refrain from an act, or to tolerate
an act or a situation, or to do an act
 Transfer of right to use any goods for any purpose (whether or
not for a specified period) for cash, deferred payment or other
valuable consideration

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FOLLOWING COMPOSITE SUPPLIES:

Supply of
Services
6 a) Works Contract {Works contract has been defined u/s 2(119) of
fgr:
CGST Act to mean a contract for building, construction,
fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation,
alteration or commissioning of any immovable property wherein
transfer of property in goods (whether as goods or in some other
form) is involved in the execution of such contract}
b) Supply of food or any other article for human consumption or
any drink by way of or as part of any service or in any other Supply of Goods
manner whatsoever
7
7 Supply of goods by any unincorporated association or body SUPPLY OF
of persons to a member thereof for cash, deferred payment GOODS
or other valuable consideration.

Supply of goods by any unincorporated association or body of persons

to a member thereof for cash, deferred payment or other valuable
ACTIVITIES TO BE TREATED NEITHER AS SUPPLY OF GOODS NOR AS
consideration.
SUPPLY OF SERVICES {Section 7(2) of CGST Act (+) Schedule III of CGST
Act)

Section 7(2)(a) - ACTIVITIES COVERED UNDER SCHEDULE III:

Following activities covered under Schedule III of CGST Act can be termed as
'Negative List' under the GST regime as such activities are neither to be treated as a
supply of goods nor a supply of services.
1. Services By An Employee To His Employer In The Course Of Or In Relation To His
Employment Services provided by an employee to his employer during the course of
employment are not taxable under GST law.

Services provided outside the course of employment for a consideration would

qualify as a supply and thus liable to GST.

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Example: If an employee provides private coaching to his employer's children,
such services would not get covered under the above exclusion and would be liable
to GST.

Amounts paid by the employer to the employee for premature termination of a

contract of employment are treated as amounts paid in relation to services provided
by the employee to the employer in the course of employment. Thus, such amount
would not be liable to GST.

Nature of Transaction Whether regarded as 'services carried out during the course of
employment'?

Services provided by a Yes. These are services provided by the worker in the course of
casual worker to employer employment.
who gives wages on daily
basis to the worker

In case the casual
workers are employed by
a contractor, like a
building contractor or
security agency services,
who deploys them for
execution of a contract or
for provision of security
services
 Yes. Services provided by the casual workers to the contractors are
in the course of employment.
 However, services provided by the contractor to his client by
deploying such workers would not be a service provided by the
workers to the client in the course of employment. The consideration
received by the contractor would therefore be taxable if other
conditions of taxability are present.

Services provided on No. Services provided on contract basis (ie principal-to-principal

contract basis by a person basis) are not services provided in the course of employment.
to another

2. Services by Any Court or Tribunal Established Under Any Law for the Time Being In
Force.

3. Functions/Duties Performed By Following Persons:

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 the functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and Members of other
local authorities;
 the duties performed by any person who holds any post in pursuance of the
provisions of the Constitution in that capacity; or
 the duties performed by any person as a Chairperson or a Member or a Director
in a body established by the Central Government or a State Government or local
authority and who is not deemed as an employee before the commencement of this
clause,

4. Services of Funeral, Burial, Crematorium or Mortuary Including Transportation of The

Deceased

5. Sale of Land (+) Sale of Building Subject To Paragraph 5(b) Of Schedule II

6. Actionable Claims, Other Than Lottery, Betting and Gambling

7. Supply of Goods from A Place in the Non-Taxable Territory To Another Place In The
Non-Taxable Territory Without Such Goods Entering Into India

8. (a) Supply Of Warehoused Goods To Any Person Before Clearance For Home
Consumption

(b) Supply Of Goods By The Consignee To Any Other Person, By Endorsement Of

Document Of Title To The Goods, After The Goods Have Been Dispatched From The Port
Of Origin Located outside india but before clearance for home consumption.

DETERMINATION OF NATURE OF SUPPLY

(SUPPLY OF GOODS /SUPPLY OF SERVICES)

S.No. Particulars Nature of Transaction (Supply

Of Goods/Supply Of Services)
1 Servicing of cars involving supply of both goods
(spare parts) and services (labour) where the value of
goods and services are shown separately

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Printing of books, pamphlets, brochures, annual

reports, and the like, where only content is supplied
2 by the publisher or the person who owns the usage
rights to the intangible inputs while the physical inputs
including paper used for printing belong to the printer

Supply of printed envelopes, letter c boxes, tissues,

napkins, wallpaper, etc by the printer using its
3 physical inputs including paper to print the design, of
goods logo etc supplied by the recipient of goods.

4 Retreading of tyres

Supply of retreaded tyres, where the old tyres

5 belong to the supplier of retreaded tyres

Section 7 (2) (b) ACTIVITIES NOTIFIED BY GOVERNMENT:

Section 7(2)(b) of CGST Act provides that activities undertaken by Central Government,
State Government or Local Authority in which they are engaged as public authorities, as
may be notified by the Government on the recommendations of the GST Council, shall be
treated neither as supply of goods nor as supply of services.

 In terms of the above provision, services by way of any activity in relation

to a function entrusted to a Panchayat under Article 243G of the Constitution has
been notified.
 Further, CBIC has also clarified that following activities/transactions shall
be treated neither as supply of goods nor as supply of services:

 Inter-State Movement Of Various Modes Of Conveyance: Inter-state movement

of various modes of conveyance (such as trains, buses, trucks, tankers, trailers,
vessels, containers, aircrafts, etc) carrying goods or passengers or both or for
repairs and maintenance, shall be treated 'neither as a supply of goods nor a supply
of services' and therefore not be leviable to IGST. However, applicable
CGST/SGST/IGST, as the case may be, shall be leviable on repairs and
maintenance done for such conveyance.

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 Inter-State Movement Of Rigs, Tools And Spares, And All Goods On Wheels
(Like Cranes): Inter-state movement of rigs, tools and spares, and all goods on
wheels (except in cases where movement of such goods is for further supply of the
same goods), such inter-state movement shall be treated 'neither as a supply of
goods or supply of service,' and consequently, no IGST would be applicable on
such movements.

TAXABILITY OF COMPOSITE AND MIXED

SUPPLIES
{Section 8 of CGST Act}

 GST is payable on supply of goods/services at the rates notified by the government

for the
respective goods/services. Determination of applicable rate of tax poses no problem
if the supply is of individual goods/individual services which are clearly identifiable.

 However, some of the supplies are a combination of goods/combination of

services/combination of both goods and services wherein each individual component
of such supplies may attract a different rate of tax.
 In such cases, determination of the applicable rate of tax to be levied on such
supplies may be a challenge. To address this problem, the GST law categorizes such
supplies into composite supplies and mixed supplies, thereby providing certainty in
respect of tax treatment under GST for such supplies.

PART 1: COMPOSITE SUPPLIES

MEANING OF 'COMPOSITE SUPPLY’ {Section 2(30) of CGST Act}:
A transaction of supply is said to be a 'composite supply' if all the following conditions are
fulfilled:

 Such transaction comprises of two or more taxable supplies of goods/services/both

or any combination thereof;
 Various supplies involved in the transaction are naturally bundled and supplied in
conjunction with each other in the ordinary course of business; and
 Out of all supplies, one of the supplies should be a principal supply.

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In other words, in a composite supply, goods or services or both are bundled owing
to natural necessities. The elements in a composite supply are dependent on the
'principal supply'.

MEANING OF PRINCIPAL SUPPLY {Section 2(90) of CGST Act}:

Principal supply refers to the predominant element of a composite supply for which other
supplies forming part of such composite supply play an ancillary role.

DETERMINATION OF TAX LIABILITY OF COMPOSITE SUPPLIES: A composite supply

comprising of two or more supplies, one of which is a principal supply, shall be treated as a
supply of such principal supply.

Example: Suvarna Manufacturers entered into a contract with XYZ Ltd for supply of
readymade shirts packed in designer boxes at XYZ Ltd.’s outlet. Further, Suvarna
Manufacturers would also get them insured during transit. In this case, supply of goods,
packing materials, transport & insurance is a composite supply wherein supply of goods is
principal supply.

Example: When a consumer buys a television set and he also gets warranty and a
maintenance contract with the TV, this supply is a composite supply. In this example, supply
of television is the principal supply whereas warranty and maintenance services are
ancillary.

Example: A travel ticket from Mumbai to Delhi may include services of food being served
on board, free insurance and use of airport lounge. In this case, transport of passengers
constitutes the pre-dominant element of composite supply and is treated as the principal
supply and all other supplies are ancillary.

GUIDELINES TO ASCERTAIN WHETHER SUPPLIES ARE NATURALLY

BUNDLED IN THE ORDINARY COURSE OF BUSINESS:
Determination of the fact whether supplies of individual goods/services are bundled in the
ordinary course of business or not would depend upon the normal or frequent practices
followed in the area of business to which such supplies relate. Such normal and frequent
practices adopted in a business can be ascertained from several indicators some of which
are listed below:

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PERCEPTION OF CONSUMERS/RECIPIENTS OF SUPPLY:
If large number of recipients of such bundle of supplies reasonably expects such services to
be provided as a package, then such a package could be treated as naturally bundled in the
ordinary course of business.

PERCEPTION OF SUPPLIERS:
Where a majority of suppliers in a particular area of business provide similar bundle of
supplies, such supplies are to be treated as naturally bundled in the ordinary course of
business.
Example: Catering on board during the course of transportation of passengers by air is a
bundle offered by a majority of airlines.
NATURE OF SUPPLIES:
Nature of individual supplies in a bundle of supplies also helps in determining whether
supplies are bundled in the ordinary course of business or not. If the nature of supplies is
such that one of the supplies is the main supply and the other supplies combined with such
supply are in the nature of incidental or ancillary supplies which help in better enjoyment of
the main supply, the entire bundle of supplies shall be regarded as naturally bundled in the
ordinary course of business.
Example: Services of stay in hotels is often combined with a service or laundering of 3-4
items of clothing free of cost per day. Such service is an ancillary service to the provision of
main service of hotel accommodation and the resultant package would be treated as
services naturally bundled in the ordinary course of business.

OTHER ILLUSTRATIVE INDICATORS:

Other illustrative indicators, not determinative but indicative of bundling of services in the
ordinary course of business, are:

 There is a single price or the customer pays the same amount, no matter how much
package they actually receive or use;
 T h e e l e m e n t s ar e n o r m a l l y ad v e r t i s ed a s a p ac k ag e ;
 T h e d i f f e r e n t e l e m e n t s a r e no t av a i l a b l e s e p ar a t e ly ;
 T h e d i f f e r e n t e l e m e n t s a r e i nt eg r a l t o o n e ov e r a l l s u p p l y . I f o n e o r
m o r e is r e m o v e d , t h e n a t u r e o f t h e s u p p ly w ou l d b e a f f ec t ed , et c .

CONCLUSION:

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A thumb rule cannot be laid down to determine whether a service is naturally bundled in
the ordinary course of business or not. Each case has to be individually examined in the
backdrop of several factors some of which are outlined above. The above principles can be
adopted to determine whether a particular supply constitutes a composite supply under G5T
and if so what constitutes the principal supply so as to determine the right classification and
rate of tax of such composite supply.

PART 2: MIXED SUPPLIES

MEANING OF 'MIXED SUPPLY' {Section 2 (74) of CGST Act}:

 A transaction involving two or more individual supplies of goods/ services/both or

any combination thereof, made in conjunction with each other for a single price is said to
be a 'mixed supply' if the individual supplies are independent of each other and are not
naturally bundled.
 In other words, where a transaction consists of supplies which are not naturally
bundled in the ordinary course of business. then such transaction does not qualify as a
'composite supply' and should therefore be regarded as a 'mixed supply'.

DETERMINATION OF TAX LIABILITY OF MIXED SUPPLIES:

A mixed supply comprising of two or more supplies shall be treated as supply of that
particular supply which attracts highest rate of tax.

Example: A supply of a package consisting of canned foods, sweets, chocolates, cakes,

dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed
supply if the package has been customized on the basis of customer's preferences.
Since each of these items can be supplied separately and its supply is not dependent on
any other, the supply of the entire package shall be regarded as a mixed supply.

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CHAPTER 4

COMPOSITION SCHEME

The GST law casts a lot of compliance and procedural burden on assessees on regular basis which
increases the compliance cost of the assessees. Some of the
procedural hassles have been listed hereunder:

INTRODUCTION
Ascertaining the correct classification of
goods/services for correctly determining the applicable Every tax system requires compliance with
rate of tax; statutory provisions in a time bound
Determining the correct value of supply on which tax has to manner such as periodic tax payments,
be paid;
filing of returns, maintenance of prescribed
Raising proper invoice for each transaction; records, etc. which many a time pose a
Maintaining proper records for availing credit of taxes paid challenge to small businesses. Provisions
on inward supplies, to protect the interest of such small
Ensuring that credit has been availed and utilized as per the businesses are often found in the taxing
manner prescribed under the law; statutes. Under the GST law, this benefit
Discharging the applicable tax liability on monthly basis; for small businesses has been in the form
Filing applicable returns on monthly basis, etc. of composition scheme.

Section 10 of CGST Act read along with

Such cumbersome procedures are not in the bests interests of ‘Chapter II–Composition Rules’ of CGST
small taxpayers as the corresponding increase in compliance Rules prescribe the regulations governing
cost may not always be commensurate with the benefits taxation of persons opting for composition
received. Resultantly, an alternative manner for discharging scheme.
tax liability has to be prescribed keeping in mind the interests
of small taxpayers. The GST law seeks to simplify the
compliance procedures for small taxpayers through
composition scheme.

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The objective of composition scheme is to bring simplicity and to reduce the compliance cost for
small taxpayers. Suppliers opting for composition levy need not worry about the classification of
their goods or services, the rate of tax applicable on the same, etc. They are not required to raise any
tax invoice, but simply need to issue a 'Bill of Supply' wherein no tax will be charged from the
recipient At the end of a quarter, the composition dealer is required to pay a specified percentage of
his turnover for the quarter as tax without availing the benefit of input tax credit.
Illustration

Pepper & Salt Ltd, registered in Madhya Pradesh, has a turnover amounting to Rs 80 lakhs in FY 2018-
19. It wants to avail the benefit of composition scheme in FY 2019-20. You are required to advise Pepper
and Salt Ltd regarding the availability of composition scheme in FY 2019-20.

Will your answer change, if Pepper di Salt Ltd is registered in Arunachal Pradesh?

INTRODUCTION TO COMPOSITION SCHEME

Section 10 of CGST Act prescribes a 'composition scheme' for small dealers wherein they are freed
from a large number of compliances and procedures which a regular taxpayer is otherwise expected to
comply with
Composition scheme is an alternative option allowed to small taxpayers whose turnover is within the
limits prescribed u/s 10 of CGST Act. A dealer opting for composition levy is required to pay the
following amounts as composition tax.
Category Of
Registered Persons Total GST

Manufacturers Eligible 1% Of Aggregate Turnover

For Composition Levy

Supplier of Restaurant/ 5 % Of Aggregate Turnover

Catering Services

Any Other Supplier Eligible 1% Of Taxable

For Composition Levy (i.e. Turnover
Traders)

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PERSONS ELIGIBLE TO OPT FOR COMPOSITION SCHEME

ELIGIBILITY CRITERIA:
A person who does not get covered under any of the disqualifications discussed later in this chapter can
opt for composition scheme if his turnover during the preceding financial year doesn't exceed Rs 1.5
crore.
However, in case of EIGHT STATES (i.e. Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim,
Nagaland, Tripura and Uttarakhand), the limit of Rs 75 lakhs shall apply instead of Rs 1.5 crore.

CALCULATION OF AGGREGATE TURNOVER:

Aggregate turnover of preceding financial year is the determining factor for ascertaining whether a
dealer is eligible for composition scheme or not. Therefore, it becomes important to know the items
which are to be included/excluded at the time of computation of aggregate turnover.

Turnover of all the entities which are registered under a common Permanent Account Number ('PAN')
across India has to be aggregated to determine the eligibility of an assessee to opt for composition
scheme.

Example: A dealer has two offices in Delhi. In order to determine whether he is eligible to avail
composition scheme or not, turnover of both the offices would be taken into account and if the same does
not exceed Rs 1.5 crore, only then the dealer can opt to avail the composition levy (subject to fulfilment
of other prescribed conditions).

Illustration (MTP May 2018 Attempt)

Ramaswamy, a registered supplier, is an interior decorator. His registered office is located in Gujarat and
he is not engaged in making any inter-state supply of services. His aggregate turnover in FY 2018-19 is
Rs 90 lakhs. With reference to the provisions of CGST Act, 2017, examine whether Ramaswamy can opt
for composition scheme in FY 2019-20?

Will your answer be different if Ramaswamy is engaged in supplying restaurant services and procures food
items required for his restaurant from neighbouring state of Maharashtra?

INCLUSIONS EXCLUSIONS

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Value of all outward supplies -- CGST / SGST / UTGST / IGST / CESS

-- Value of inward supplies on which tax is

payable under reverse charge
 TAXABLE SUPPLIES
 EXEMPT SUPPLIES
 EXPORTS
 INTER – STATE SUPPLIES
Of persons having the same
PAN be computed on all
India basis

Illustration Trend Footwear, a registered supplier in Jaipur dealing in local supply of loafers and
wedges, wants to opt for composition scheme with effect from April 1, 2019. Its aggregate turnover in the
preceding financial year is Rs 78 lakhs. Besides dealing in supply of loafers and wedges, he also has a
rental income of Rs 1,35,000 per month from the basement of a commercial building located in Jaipur.
You are required to discuss, whether Trend Footwear can opt for composition scheme?

Illustration

Determine whether the suppliers in the following cases are eligible for composition levy provided their
turnover in preceding year does not exceed Rs 1.5 crore:
a) Mohan is engaged in providing legal services in Rajasthan and is registered in the same State.

b) Sugam Manufacturers has registered offices in Punjab & Haryana and supplies goods in
neighbouring States.

All kinds of outward supplies (taxable as well as exempt) made during the preceding financial year
have to be considered at the time of computation of aggregate turnover. It is immaterial whether tax is
payable under forward charge or reverse charge on such supplies.

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Vide Order No 01/2017-Central Tax Dated October 13, 2017, CBEC has clarified that
while computing aggregate turnover in order to determine the eligibility for
composition scheme, value of supply of any exempt services including services by way
of extending deposits, loans or advances in so far as the consideration is represented by
way of interest or discount shall not be taken into account.

However, any tax chargeable under GST law as well as value of inward supplies on which tax is
payable by the registered person under reverse charge shall be excluded at the time of computation of
aggregate turnover.

PERSON NOT ELIGIBLE TO OPTION FOR COMPOSITION SCHEME

The following persons cannot opt for composition scheme and therefore, such persons are required to
discharge their tax liability, if any, in the normal manner:
Supplier of any taxable services other than supplier of restaurant/catering services;
Supplier of goods which are not taxable under the CGST/SGST/UTG5T/IGST Act;
Supplier of inter-state outward supplies of goods (However, it should be noted that a composition
supplier is free to procure goods from inter-state suppliers);
Person supplying goods through an electronic commerce operator;
Manufacturer of goods notified u/s 10(2) (e), i.e. ice cream, pan masala, tobacco and other
manufactured tobacco substitutes; and
Causal taxable person as well as non-resident taxable person

Vide Order No 01/2017-Central Tax Dated October 13, 2017, CBEC has clarified that a supplier
of any exempt services including services by way of extending deposits, loans or advances in so
far as the consideration is represented by way of interest or discount shall be eligible to opt for
composition scheme.

 A recent amendment allows supplier of goods to supply taxable services upto 10% of
turnover of preceding financial year or Rs 5,00,000, whichever is higher and still be eligible to
claim the benefit of composition scheme.

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Composition Scheme Taxpayers permitted to render services other than RESTAURANT SERVICES
(referred to in clause (b) of paragraph 6 of Schedule !! of the CGST Act) up to a specified limit
Under the erstwhile provisions, only a supplier of restaurant service was eligible for composition
scheme. A person engaged in the supply of any service other than restaurant service was not eligible
for composition scheme.
However, there are cases where a manufacturer/ trader is also engaged in supply of services other than
restaurant service though the percentage of such supply of services is very small as compared to the
supplies of goods. There may also be cases where a restaurant service provider is also engaged in
supplying a small percentage of other services.
(a) 10% of the turnover in a State / UT in the preceding F/Y or
(b) 5,00,000
whichever is higher.
Example: Ramsewak has opted for composition scheme in the financial year 2019-20. His aggregate turnover in
F/Y 2018-19 is 60 lakh. !n F/Y 2019-20, he can supply services [other than restaurant services] up to a value of
not exceeding:
(a) 10% of 60 lakh, i.e. 6 lakh or (b) 5 lakh, whichever is higher. Thus,
he can supply services up to a value of 6 lakh in F/Y 2019-20.
Consequently, eligibility to opt for composition scheme as contained in section 10(2)(a) has also been
amended to provide that the registered person shall be eligible to opt for the composition scheme
provided:
(i) either he is not at all engaged in supply of services other than restaurant services or
(ii) in case he supplies services other than restaurant services, value of such services does not exceed
10% of the turnover in a State/UT in the preceding F/Y or 5 lakh, whichever is higher.

Illustration (MTP May 2018 Attempt)

Examine whether the following statements are true or false giving brief reasons:

a) It is mandatory to issue a tax invoice in case a registered person has opted for composition levy
scheme.

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b) A composition tax payer, who has not rendered any taxable supply during a quarter, is
not required to file any return.

Illustration

Mohan Enterprises has two registered business verticals in Delhi. Its aggregate turnover for the preceding
year for both the business verticals was Rs 70 lakhs. It wishes to pay tax under composition levy for one
of the vertical in the current year while under normal levy for the other vertical. You are required to
advice Mohan Enterprises whether he can do so?

RESTRICTIONS IMPOSED ON A COMPOSITION SUPPLIER

Multiple restrictions have been imposed on a person who opts for composition levy which have been
described below:

> The goods held in stock by a composition dealer should have been purchased from a registered supplier.
Where any goods have been purchased from an unregistered supplier, the composition supplier should
have paid the applicable tax under reverse charge u/s 9(4) of CGST Act;

> Where the composition dealer is required to pay tax under reverse charge u/s 9(3) and 9(4) of CGST
Act on any inward supply of goods or services or both, the composition dealer should have paid the
same,

> A dealer opting for composition levy should not have been engaged in manufacture of goods notified
u/s 10(2) (e) of CGST Act. Presently, the following goods have been notified u/s 10(2)(e): Ice
cream and other edible ice, whether or not containing cocoa;
Pan Masala; and
Tobacco and other manufactured tobacco substitutes.

> A composition dealer shall mention the words "COMPOSITION TAXABLE PERSON, NOT
ELIGIBLE TO COLLECT TAX ON SUPPLIES" at the top of every bill of supply issued by him;

> A compositing dealer shall mention the words "COMPOSITION TAXABLE PERSON" on every
notice or signboard displayed at a prominent place at his principal place of business and at every
additional place or places of business;

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> Composition scheme has to be adopted uniformly by all the registered persons having the same
Permanent Account Number (PAN). If one such registered person opts for normal scheme, others
become ineligible for composition scheme.

Example: A dealer 'X' has two offices in Delhi and is eligible for composition levy, If 'X' opts for
composition scheme, both the offices would have to pay tax under composition scheme and abide by
all the conditions as may be prescribed for the composition scheme,

> A taxable person opting for composition scheme shall not collect any tax from the recipient on
supplies made by him. It implies that a composition scheme supplier cannot issue a tax invoice. A
composition dealer is required to issue a bill of supply instead of a tax invoice in respect of any
supply made by him (Provisions relating to bill of supply have been discussed under 'Chapter 10:-
Documentation Under GST');

> A taxable person opting for composition scheme is not entitled to any credit of input tax.
Illustration

A person availing composition scheme in Haryana during a financial year crosses the turnover of Rs 1.5
crore during the course of the yew, i.e. he crosses the turnover of Rs 1.5 crore in December. Will he be
allowed to pay tax under composition scheme for the reminder of the year, i.e. till 31st March?

Answer

> The option to pay tax under composition scheme lapses from the day on which the aggregate turnover
of the person availing composition scheme during the financial year exceeds the specified limit (Rs 1.5
crore in the existing case).

Therefore, the person cannot claim the benefit of composition scheme once his turnover has crossed Rs
1.5 crore in December. He is required to file an intimation for withdrawal from the scheme in prescribed
form within 7 days from the day on which the threshold limit has been crossed.

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TAX PAYMENTS & RETURN FILING PROCEDURES

> A dealer who has opted for composition scheme is required to pay tax and furnish a statement on
quarterly basis containing the details of payment of such self-assessed tax till the 18th day of the
month succeeding such quarter.

> Further, the composition dealer is required to furnish a return for every financial year in FORM
GSTR-4 on or before the 30th day of April following the end of such financial year.

INTIMATION OF OPTING FOR COMPOSITION LEVY

Unregistered Person Opting For Composition Levy (ie New Assessee):

> Any person who is not registered under GST law and who wishes to register himself under
composition scheme shall indicate the same in Part B of the registration form (ie GST REG-01)

> As and when registration is granted to the applicant, it shall be deemed that he has given an
intimation to pay tax under composition levy and his option to pay tax under composition levy
shall be effective from the date from which registration is effective.

Regular Tax Paying Person Opting For Composition Levy (ie Existing Assessee):
> A registered person who opts to pay tax under composition levy scheme shall electronically file an
intimation in prescribed form on the common portal prior to the commencement of the financial
year for which said option is exercised.
> Section 18(4) of CGST Act requires reversal of input tax credit when a registered person who has
availed ITC switches to composition levy. The details of input tax credit reversed by such a person
are required to be furnished in a prescribed form within 90 days from the Commencement of the
relevant financial year. (To be studied in detail under Chapter 7 -Input Tax Credit)

> Any intimation in respect of any place of business in a State/Union Territory shall be deemed to be an
intimation in respect of all other places of business registered on the same PAN,

> The option to pay tax under composition levy shall be effective from the beginning of the financial year
for which intimation has been filed.

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VALIDITY OF COMPOSITION LEVY

> The option exercised by a registered person to pay tax under composition scheme shall remain valid till
the time he satisfies all the conditions mentioned u/s 10 and the supporting law.

> The option to pay tax under composition scheme shall lapse from the day on which the aggregate
turnover during the current financial year exceeds the specified limit (Rs 75 lakhs/Rs 1.5 crore)
Example: A person availing composition scheme in Delhi during a financial year crosses the
turnover of Rs 1.5 crore on 9th of December. The option availed shall lapse from the day on which
his aggregate turnover during the financial year exceeds Rs 1.5 crore, ie 9 th December in this case

> Such person has to pay normal tax from the day he ceases to satisfy any of the conditions prescribed for
composition levy. He shall issue tax invoice for every taxable supply made thereafter

> Further, he is required to file an intimation for withdrawal from the scheme in prescribed form within 7
days of the occurrence of such event.

> Further, ITC shall be allowed in respect of the stock of inputs and inputs contained in semi - finished
or finished goods held in stock by him and on capital goods held by him on the date of withdrawal.
For availing such credit, a statement has to be furnished within 30 days of withdrawal of option in
prescribed form on GSTN portal containing the details of such stock held

Illustration

Mr Zaid, registered in Himachal Pradesh is engaged in making inter-state outward supplies of apparels.
The aggregate turnover of Mr Zaid in FY 2018-19 is 70 Iakhs. He opted for composition levy in FY
2019-20 and paid tax for the quarter ending June 2019 under composition Levy. The proper officer has
levied penalty on Mr Zaid in addition to the tax payable by him. You are required to examine the validity
of the action taken by proper officer.

PENALTY ON WRONG AVAILMENT OF COMPOSITION SCHEME

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> Where a taxable person pays tax under composition scheme even though he was not eligible for the
scheme, the person would be liable to pay penalty. The amount of penalty and differential tax payable by
him shall be determined in the manner prescribed u/s 73 and 74 of CGST Act.

> Further, where the proper officer has reasons to believe that the registered person was not eligible to
pay tax under composition levy or has contravened any provisions of GST law, he may issue a show
cause notice to such person in prescribed form.

> The proper officer shall consider the reply filed by such person and thereafter shall pass an order in
prescribed form within 30 days of receipt of such reply. Where the proper officer is not satisfied with
the reply submitted by the assessee, the order passed by the officer shall deny the option to pay tax
under composition levy from the date of the option or from the date of the event concerning such
contravention, as the case may be.

SIMPLIFIED SCHEME FOR SMALL SERVICE PROVIDERS

> A simplified scheme has been introduced with effect from 1st April 2019 for small service providers
(and those who are supplier of goods as well as services) whose aggregate turnover during preceding
financial year doesn't exceed Rs 50 lakhs. This scheme has been introduced vide Notification No
2/2019-CT (Rate) dated 7th March 2019.

> The taxable person opting for this scheme is required to pay GST @ 6% on supplies made on or after
1st April 2019 (3% CGST + 3% SGST).

> A person who has opted to pay under this scheme is required to issue a bill of supply for supplies made
instead of tax invoice. On the top of each bill of supply, the following words need to be added
"Taxable person paying tax in terms of Notification No 2/2019 - CT (Rate) dated 7th March 2019;
not eligible to collect tax on supplies".

> Various conditions are required to be fulfilled by a dealer who opts for composition scheme as
prescribed u/s 10 of CGST Act, 2017. Such conditions shall also apply where a dealer opts to pay tax
under this scheme.

Conditions:
(1) Supplies are made by a registered person who is:
 Not engaged in making any supply which is not leviable to tax under the said Act.
 Not engaged in making any inter-State outward supply – neither of goods nor of services.

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 Neither a casual taxable person (CTP) nor a non-resident taxable person (NRTP).
 Not engaged in making any supply through an ECO who is required to collect tax at source u/s.
52.
 Not engaged in making supplies of notified goods, namely, ice cream and other edible ice,
whether or not containing cocoa [2105 00 00], Pan masala [2106 90 20] and all goods of
Chapter 24, i.e. Tobacco and manufactured tobacco substitutes.

Effective date for composition levy [Rule 4]

(1) The option to pay tax under section 10 shall be effective from the beginning of the financial year, where
the intimation is filed under sub-rule (3) of rule 3 and the appointed day where the intimation is filed under
sub-rule of the said rule.
The intimation under sub-rule (2) of rule 3, shall be considered only after the grant of registration to the
applicant and his option to pay tax under section 10 shall be effective from the date fixed under sub-rule
(2) or of rule 10.

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TIME OF SUPPLY
TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER FORWARD CHARGE
TIME OF SUPPLY OF GOODS [SECTION
12(2)]
Earliest of the following:
(a) Date of issue of invoice by the supplier
or the last date on which he is required
under section 31, to issue the invoice
with respect to the supply
(b) Date on which the supplier receives the
payment (entering the payment in books of
account or crediting of payment in bank
account, whichever is earlier) with respect to
the supply
No GST on advances received for supply
of goods: In case of supply of goods by a
registered person (excluding composition supplier),
GST is to be paid on the outward supply of goods on
the date of issue of invoice or the last date on which
invoice ought to have been issued in terms of
section 31 [Notification No. 66/2017 CT
dated 15.11.2017].
CA SURAJ SATIJA
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TIME OF SUPPLY OF SERVICES [SECTION
13(2)]
(a) Invoice issued within the time
period prescribed under section 31
Earliest of thefollowing:
 Date of issue of invoice by the
supplier
 Date of receipt of payment
(entering the payment in books of
account or crediting of payment in
bank account, whichever is earlier)
(b) Invoice not issued within the time
period prescribed under section 31
Earliest of thefollowing:
 Date of provision of service
 Date of receipt of payment (entering
the payment in books of account or
crediting of payment in bank
account, whichever is earlier)
(C)When the above events are
unascertainable
 date on which the receipient
shows the receipt of services
in his books of accounts
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GENERAL TIME LIMIT FOR RAISING INVOICES

Supply of goods [Section 31(1)] Supply of services [Section 31(2)]

Before or at the time of,- Before or after the provision of

(a) removal of goods for supply to the
recipient, where the supply
involves movement of goods,or
(b) delivery of goods or making
available thereof to the
recipient, in any othercase
service
but within 30 days [45 days in case of
insurance companies/banking and
financial institutions including NBFCs]
from the date of supply of services

TIME OF SUPPLY WHERE TAX IS PAYABLE UNDER REVERSE CHARGE

Time of supply of goods [Section Time of supply of services

12(3)] [Section 13(3)]

Earliest of the following: Earliest of the following:

(a) Date of receipt of goods, or
(b) Date of payment as entered in the
books of account of the recipient or
the date on which the payment is
debited from his bank account,
whicheveris earlier, or
(c) 31st day from the date of issue
of invoice by the supplier
(a) Date of payment as entered in the
books of account of the recipient or
the date on which the payment is
debited from his bank account,
whichever is earlier, or
(b) 61st day from the date of issue of
invoice by the supplier

Where the above events are not ascertainable, the time of supply shall be
the dateof entry in the booksof account of the recipient of supply

- Import of service from associated

enterprise Dateof entry in the
books of account of the recipient or
the date of payment,whichever is
earlier

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TIME OF SUPPLY OF VOUCHERS EXCHANGEABLE FOR GOODS AND

SERVICES
Supply of vouchers exchangeable for goods and services [Sections 12(4) and 13(4)]

(a) Supply of goods or services is identifiable at the time of issue of voucher

Date of issue of the voucher
(b) Other cases
Date of redemption of the voucher

TIME OF SUPPLY OF GOODS AND SERVICES IN RESIDUAL CASES

Supply of goods and services in residual cases [Sections 12(5) and 13(5)]

(a) Where a periodical return is required to be filed

Due date of filing such return
(b) Other cases
Date of payment of tax

TIME OF SUPPLY FOR ADDITION IN VALUE BY WAY OF INTEREST/ LATE

FEE/PENALTY FOR DELAYED PAYMENT OF CONSIDERATION

Time of Supply : Date on which the supplier receives such addition in

value

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The provisions relating to time of supply of goods as contained in section 12
time of supply
of goods
under reverse
charge

Date of issue/ Date of

due date of issue receipt of Date of issue of
of tax invoice goods voucher, if the
under supply is
section31 identifiable at
that time
Date of recording
Date of
the payment in the
recording the books of accounts of
the recipient
payment in the Date of
books of redemption of
accounts of the voucher
supplier Date on which in other cases
payment is debited
from the bank
Date on which account of the
payment is recipient
credited in the
bank account of
the supplier
31st day from
supplier’s
invoice
whichever is
earlier

whichever is earlier

No GST on advances
received for supply of
goods: GST to be paid on
date of issue/due date of
issue of tax invoice under
section 31
If the above events are
UNASCERTAINABLE
Time of supply = Date of entry of
good in books of account of
recipient of goods

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Residual case (If

all of the above Where a periodical return is
do not work for a to be filed, due date of such
situation) return OR
In any other case, the date on
which tax is paid .

Addition in value Date on which the supplier

by way of interest, receives such addition in
late fee/penalty for value
delayed payment of
consideration for
services .

provisions relating to time of supply of services as contained in section 13 are

summarised in the diagram given below

Time of supply of
Time of supply services under
of Time of supply
services under forward time of supply of
forward charge charge when the of services vouchers
when invoice is not exchangeable
under reverse for services
the invoice is issued charge
issued within the time
within the time
specified u/s 31

date of recording date of issue of

date of the payment in the voucher if the
date of issue of
provision of books of accounts supply is
tax invoice
service of the recipient of identifiable at
services that point

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date of recording date of recording date on which
the payment in payment is date of
the payment in
debited from the redemption of
the books of the books of
accounts of the bank account of voucher in other
accounts of the
supplier the receipient of cases
supplier
services

date on which date on which

payment is payment is
61st day from the
credited in the credited in the
suppliers invoice
bank account of bank account of
the supplier the supplier

whichever is earlier whichever is earlier

whichever is earlier

If the above events are UNASCERTAINABLE if the above events are

Time of supply =date of receipt of services in UNASCERTAINABLE
the books of account of the receipient of TIME OF SUPPLY =date of entry of
supply services in books of account of the
recipient of supply

where a periodical return is to be filed, due date

of such return
residual case (if all the above do
time of supply or
not work for a situation)
in any other case, the date on which tax is paid

addition in value by way of

interest,late fee/penalty for
delayed payment of time of supply date on which the supplier receives payment
consideration for services

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Time of Supply in case of change in rate of tax [Section 14 of CGST Act,
2017]

Section 14 of the CGST Act, 2017 defines the time of supply, where there is a change
in the rate of tax in respect of goods or services or both.

Section 14(a): In case the goods or services or both have been supplied before the change
in rate of tax, the time of supply can be determined as follows:
1) where the invoice for the same has been issued and the payment is also received after
the change in rate of tax, the time of supply shall be the date of receipt of payment or
the date of issue of invoice, whichever is earlier; or
2) where the invoice has been issued prior to the change in rate of tax but payment is
received after the change in rate of tax, the time of supply shall be the date of issue of
invoice; or
3) where the payment has been received before the change in rate of tax, but the invoice
for the same is issued after the change in rate of tax, the time of supply shall be the
date of receipt of payment.
Section 14(b): In case the goods or services or both have been supplied after the change in
rate of tax, the time of supply can be determined as follows:

1) where the payment is received after the change in rate of tax but the invoice has been
issued prior to the change in rate of tax, the time of supply shall be the date of receipt
of payment; or
2) where the invoice has been issued and payment is received before the change in rate
of tax, the time of supply shall be the date of receipt of payment or date of issue of
invoice, whichever is earlier; or
3) where the invoice has been issued after the change in rate of tax but the payment is
received before the change in rate of tax, the time of supply shall be the date of issue
of invoice:
Provided that the date of receipt of payment shall be the date of credit in the bank
account if such credit in the bank account is after four working days from the date of
change in the rate of tax.
ILLUSTRATION Supply was made on 10th May, 2018. From the following particulars,
find out the rate of GST applicable.
Event Date of event Rate applicable
Change of rate 31st May, 2018 Rate changed from 18% to
Issue of Invoice 5th June, 2018 12%
12%
Payment received 6th July, 2018 12%
Applicable rate is 12%. i.e. which is applicable on earlier of the two events, date of invoice
and date of receipt of payment which in this case would be 5th June, 2018.

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Illustration
Supply was made on 10th May, 2018. From the following particulars, find out the rate of
GST applicable.
Answer: Applicable rate is 18%. i.e. date of invoice i.e. 5th June, 2018 because it is earlier
than the date of receipt of payment.
Event Date of event Rate applicable
Change of rate 30th June, 2018 Rate changed from 18% to
Issue of Invoice 5th June, 2018 12%
18%
Payment received 6th July, 2018 12%
Note: When supply is made before change in rate, the principle of ‘whichever is earlier’ is
followed. Similarly, where supply is made after the change in rate, ‘whichever is later’
principle is followed
Forward Charge Mechanism
Illustration
ABC Ltd. supplied goods to XYZ Ltd., under a contract for the goods to be delivered to the
factory of XYZ Ltd *Date of payment not to be considered – notification no. 66/2017 CT
DATED 15.11.2017

The goods were removed from the factory of ABC Ltd. on 9th September, 2018 and the
goods were delivered to the factory of XYZ on 15th September, 2018.
The invoice was issued on 18th September, 2018 and the payment was credited to ABC’s
a/c on 20th October, 2018 although the entry in the books was made on 19th September,
2018 when the cheque was received.
Please advise on the time of supply.
In the above case, the dates are as under:
 Date of issue of invoice: 18th September, 2018
 Due date for issue of invoice: 9th September, 2018 (as the supply involved movement of
goods)
 Date of receipt of payment: 19th September, 2018 (earlier of the entry in the books
and the credit in the bank a/c) [Date of payment not to be considered - Notification No.
66/2017 - CT dated 15.11.2017]
Hence, the time of supply will be the earliest of the above dates, i.e., 9th September, 2018.
Illustration
A supplier delivers consignments of bricks on a continuous supply basis to various
contractors. With respect to one of the supplies, the following details are available:

Invoice Date Statement of Account Receipt of Payment Time of Supply

(Due Date) Date
1st November 5th November 1st November 1st November

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11th December 5th December 11th December 5th December
1st January 5th January 1st January 1st January

Illustration
X Ltd. receives payment of INR 100,000 in advance while the invoice was issued for INR
99,000.
Advise the treatment on the excess payment.
In this case, the INR 1000/- for which the invoice would be subsequently issued, the time of
supply can be taken to be the date of the issue of the next invoice, for this amount, even
though the payment was received earlier.

Reverse Charge Mechanism

Illustration
Mr.A, an agriculturist supplies raw cotton (under reverse charge) to Mr. B who
manufactures cotton shirts.
The date wise turnout of events is given below:
01.04.2019- Mr.B approaches Mr.A and places an order for 1 ton of cotton
10.05.2019- Mr.B receives the goods
15.05.2019- Mr.A issues an invoice
20.05.2019- Mr.B makes a payment by cheque and accordingly records it in his books of
accounts.
25.05.2019- The payment gets debited from Mr.B’ s bank account
In this case, the time of supply shall be the earlier of the following dates:
a. the date of receipt of goods i.e. 10.05.2019
b. the date of payment as recorded in the books of Mr. B i.e. 20.05.2019 or the date when
the payment gets debited in the books of the recipient i.e. 25.05.2019 whichever is
earlier c. the date immediately following thirty days from the date of issue of invoice, i.e.
15.05.2019+30days+1day=15.06.2019
Therefore, the time of supply will be 10.05.2019.

Vouchers
Illustration
ABC Ltd., enters in to an arrangement with “Hush Puppies”, buys the vouchers, these
vouchers were issued on 14th December, 2018. The Company then distributes these
vouchers with denomination INR 4,000/- to all its employees on 24th December, 2018
valid until 31st January, 2019, so that they can use these vouchers for buying shoes of

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their choice. The employees make the most of it and redeem these vouchers on the New
Year’s, i.e., on 1st January, 2019.
In this case, the supply is identifiable at the point of issue of the voucher and hence the time
of supply would be construed as 14th December, 2018.
Illustration
Nisha buys a voucher from Shoppers Stop for INR 10,000 and gifts itto Tarun on 14th
February. The voucher was valid until 29th February. Tarun redeems the vouchers at the
nearby Shoppers Stop store on 29th February.
In this case, the supply was not identifiable at the point of issue of the voucher as Tarun
was open to purchase anything from Shoppers’ Stop, therefore the time of supply would be
construed as the date of redemption of the voucher, that is 29th February.
All other instances
In all other instances, the time of supply as per Section 12(5) is fixed as under:
a) Due-date for filing periodic returns or
b) In other cases, the date of payment of GST

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Q1. Determine the time of supply in the following cases assuming that GST is payable under
reverse charge:

S. Date of payment by the recipient for Date of issue of invoice by

No. supply of services the supplier of services
(1) (2)
(i) August 10 June 29
(ii) August 10 June 1
(iii) Part payment made on June 30 and June 29
balance amount paid on September 1
(iv) Payment is entered in the books of June 1
account on June 28 and debited in
recipient’s bank account on June 30
(v) Payment is entered in the books of June 29
account on June 30 and debited in
recipient’s bank account on June 26

Q2. An order is placed on Ram & Co. on 18th August for supply of a consignment of customized
shoes. Ram & Co. gets the consignment ready and informs the customer and issues the invoice
on 2nd December. The customer collects the consignment from the premises of Ram & Co. on
7th December and electronically transfers the payment on the same date, which is entered in the
accounts on the next day, 8th December.
What is the time of supply of the shoes for the purpose of payment of tax?

ANSWERS:
(1) DO YOURSELF.
(2) As per Notification No. 66/2017 CT dated 15.11.2017, a registered person (excluding
composition supplier) has to pay GST on the outward supply of goods at the time of supply as specified in
section 12(2)(a), i.e. date of issue of invoice or the last date on which invoice ought to have been issued in
terms of section 31.
In this case, the invoice is issued before the removal of the goods and is thus, within the time limit prescribed
under section 31(1). Therefore, the time of supply for the purpose of payment of tax is the date of issue of
invoice, which is 2nd December.

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VALUE OF SUPPLY
VALUE OF TAXABLE SUPPLY [SECTION 15 OF THE CGST ACT 2017]
Section 15 of the CGST Act when read in conjunction with Chapter IV: Determination of
Value of Supply of the CGST rules, states that the value of taxable supply under GST is
the transaction value. Transaction value is defined as the price actually paid or payable
for the said supply of goods or services or both, where the supplier and the recipient of
the supply are not related, and the price is the sole consideration for the supply.
[Section 15(1)]

price actually paid where supplier the price is the sole

/payable for supply of and receipient of consideration for the
goods/services or both supply not related supply
and

Section 15 is applicable to interstate supplies under IGST also.

Transaction value means

INCLUSIONS IN DETERMINATION OF VALUE OF SUPPLY [Section 15(2)]

(a) any taxes, duties, cess, fees and charges levied under any law for the time being in
force other than this Act, the State Goods and Services Tax Act, the Union Territory
Goods and Services Tax Act and the Goods and Services Tax (Compensation to
States) Act, if charged separately by the supplier;
(b) any amount that the supplier is liable to pay in relation to such supply but which
has been incurred by the recipient of the supply and not included in the price
actually paid or payable for the goods or services or both;
(c) incidental expenses, including commission and packing, charged by the supplier
to the recipient of a supply and any amount charged for anything done by the
supplier in respect of the supply of goods or services or both at the time of, or
before delivery of goods or supply of services;
(d) interest or late fee or penalty for delayed payment of any consideration for any
supply; and
(e) subsidies directly linked to the price excluding subsidies provided by the
Central Government and State Governments

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Note: Interest or late fee or penalty for delayed payment of any consideration for any
supply was not taxable under Central Excise or Sales Tax laws. Now they are all part of
value.

EXCLUSIONS IN DETERMINATION OF VALUE OF SUPPLY [SECTION

15(3)]
a) Any discount which is given before or at the time of the supply if such discount has
been duly recorded in the invoice issued in respect of such supply; and
b) any discount given after the supply has been affected, if –
i) such discount was known and agreed at the time of supply, that is, established in
terms of an agreement entered into at or before the time of such supply and
specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by
the supplier has been reversed by the recipient of the supply.
Where the value of the supply of goods or services or both cannot be determined under
sub-section (1), the same shall be determined in such manner as may be prescribed.
[Section 15(4)]
Notwithstanding anything contained in sub-section (1) or sub-section (4), the value of
such supplies as may be notified by the Government on the recommendations of the
Council shall be determined in such manner as may be prescribed. [Section 15(5)]
For the purposes of this Act persons shall be deemed to be “related persons” if–
(i) such persons are officers or directors of one another’s businesses;
(ii) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or
more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family;
The term “person” also includes legal persons and persons who are associated in the
business of one another in that one is the sole agent or sole distributor or sole
concessionaire, howsoever described, of the other, shall be deemed to be related
VALUATION RULES : CHAPTER IV, CGST RULES 2017
RULE 27: VALUE OF SUPPLY OF GOODS OR SERVICES WHERE THE
CONSIDERATION IS NOT WHOLLY IN MONEY

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Where the supply of goods or services is for a consideration not wholly in money, the
value of the supply shall-
(a) be the open market value of such supply;
(b) if the open market value is not available under clause (a), 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;
(c) 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;
(d) if the value is not determinable under clause (a) or clause (b) or clause (c), be
the sum total of consideration in money and such further amount in money that
is equivalent to consideration not in money as determined by the application of
rule 30 or rule 31 in that order.
For example :
(1) Where a new phone is supplied for twenty thousand rupees along with the
exchange of an old phone and if the price of the new phone without exchange is
twenty-four thousand rupees, the open market value of the new phone is
twenty-four thousand rupees.
(2) Where a laptop is supplied for forty thousand rupees along with the barter of a
printer that is manufactured by the recipient and the value of the printer known at
the time of supply is four thousand rupees but the open market value of the laptop
is not known, the value of the supply of the laptop is forty-four thousand rupees.

RULE 28: 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
(a) be the open market value of such supply;
(b) if the open market value is not available, be the value of supply of goods or
services of like kind and quality;
(c) if the value is not determinable under clause (a) or (b), be the value as
determined by the application of rule 30 or rule 31, in that order
Provided that where the goods are intended for further supply as such by the recipient,
the value shall, at the option of the supplier, be an amount equivalent to ninety percent
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:

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Provided further that 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 the goods or
services.

RULE 29: VALUE OF SUPPLY OF GOODS MADE OR RECEIVED THROUGH

AN AGENT
The value of supply of goods between the principal and his agent shall
(a) be the open market value of the goods being supplied, or at the option of the
supplier, be ninety percent. 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.
(b) For example: 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 five thousand
rupees per quintal on the day of the supply. Another independent supplier is supplying
groundnuts of like kind and quality to the said agent at the price of four thousand
five hundred and fifty rupees per quintal. The value of the supply made by the
principal shall be four thousand five hundred and fifty rupees per quintal or where he
exercises the option, the value shall be 90 per cent of five thousand rupees i.e., four
thousand five hundred rupees per quintal.
(c) where the value of a supply is not determinable under clause (a), the same shall be
determined by the application of rule 30 or rule 31 in that order.

RULE 30: 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 of this Chapter, the value shall be one hundred and ten percent of
the cost of production or manufacture or the cost of acquisition of such goods or the
cost of provision of such services.

RULE31: 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 27 to 30, the same shall be determined using reasonable means consistent with
the principles and the general provisions of section 15 and the provisions of this
Chapter:
Provided that in the case of supply of services, the supplier may opt for this rule,
ignoring rule 30.

RULE 31A: VALUE OF SUPPLY IN CASE OF LOTTERY, BETTING,

GAMBLING AND HORSE RACING

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(1) Notwithstanding anything contained in the provisions of this Chapter, the value in
respect of supplies specified below shall be determined in the manner provided
hereinafter.
(2) (a) The value of supply of lottery run by State Governments shall be deemed to be
100/112 of the face value of ticket or of the price as notified in the Official Gazette by
the organising State, whichever is higher.
(b) The value of supply of lottery authorised by State Governments shall be deemed to be
100/128 of the face value of ticket or of the price as notified in the Official Gazette by the
organising State, whichever is higher.
Explanation: – For the purposes of this sub-rule, the expressions-
(a) “lottery run by State Governments” means a lottery not allowed to be sold in any
State other than the organizing State;
(b) “lottery authorised by State Governments” means a lottery which is authorised
to be sold in State(s) other than the organising State also; and
(c) “Organising State” has the same meaning as assigned to it in clause (f) of sub-
rule (1) of rule 2 of the Lotteries (Regulation) Rules, 2010.
(3) The value of supply of actionable claim in the form of chance to win in
betting, gambling or horse racing in a race club shall be 100% of the face value of
the bet or the amount paid into the totalisator.

RULE 32: DETERMINATION OF VALUE IN RESPECT OF CERTAIN

SUPPLIES
(1) Notwithstanding anything contained in the provisions of this Chapter, the value
in respect of supplies specified below shall, at the option of the supplier, be
determined in the manner provided hereinafter
(2) The value of supply of services in relation to the purchase or sale of foreign
currency, including money changing, shall be determined by the supplier of
services in the following manner, namely: -
(a) for a currency, when exchanged from, or to, Indian Rupees, 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 reference rate for that currency at that time, multiplied by the
total units of currency:
Provided that in case where the Reserve Bank of India reference rate for a currency is
not available, the value shall be one per cent of the gross amount of Indian Rupees
provided or received by the person changing the money:
Provided further that in case where neither of the currencies exchanged is Indian
Rupees, the value shall be equal to one per cent of the lesser of the two amounts the
person changing the money would have received by converting any of the two

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currencies into Indian Rupee on that day at the reference rate provided by the Reserve
Bank of India.
Provided also that a person supplying the services may exercise the option to ascertain
the value in terms of clause (b) for a financial year and such option shall not be
withdrawn during the remaining part of that financial year.
(b) at the option of the supplier of services, the value in relation to the supply of
foreign currency, including money changing, shall be deemed to be
(i) one per cent. 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 and half of a per cent of the gross amount of currency
exchanged for an amount exceeding one lakh rupees and up to ten lakh rupees; and
(iii)five thousand and five hundred rupees and one tenth of a per cent of the gross
amount of currency exchanged for an amount exceeding ten lakh rupees, subject to a
maximum amount of sixty thousand rupees.
(3) The value of the 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 five percent of the basic fare in the case of domestic bookings, and at the rate of ten
per cent of the basic fare in the case of international bookings of passage for travel by
air.
Explanation. - For the purposes of this sub-rule, the expression “basic fare” means that
part of the air fare on which commission is normally paid to the air travel agent by the
airlines.
(4) 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 an 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), ten per cent. of single
premium charged from the policy holder; or
(c) in all other cases, twenty-five per cent. of the premium charged from the policy
holder in the first year and twelve and a half per cent. of the premium charged from
the policy holder in subsequent years:
Provided that nothing contained in this sub-rule shall apply where the entire premium
paid by the policy holder is only towards the risk cover in life insurance
(5) 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 the purchase of
such goods, the value of supply shall be the difference between the selling price and the
purchase price and where the value of such supply is negative, it shall be ignored:

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Provided that the purchase value of goods repossessed from a defaulting borrower, who is
not registered, for the purpose of recovery of a loan or debt shall be deemed to be the
purchase price of such goods by the defaulting borrower reduced by five percentage points
for every quarter or part thereof, between the date of purchase and the date of disposal by
the person making such repossession.
(6) 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.
(7) The value of taxable services provided by such class of service providers as may
be notified by the Government, on the recommendations of the Council, as referred to
in paragraph 2 of Schedule I of the said Act between distinct persons as referred to in
section 25, where input tax credit is available, shall be deemed to be NIL.

RULE 33: VALUE OF SUPPLY OF SERVICES IN CASE OF PURE AGENT

Notwithstanding anything contained in the provisions of this Chapter, the expenditure
or costs incurred by a supplier as a pure agent of the recipient of supply shall be
excluded from the value of supply, if all the following conditions are satisfied, namely, -
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes
the payment to the third party on authorization by such recipient;
(ii) the payment made by the pure agent on behalf of the recipient of supply has
been separately indicated in the invoice issued by the pure agent to the recipient
of service; and
(iii) the supplies procured by the pure agent from the third party as a pure agent of
the recipient of supply are in addition to the services he supplies on his own
account.
Explanation. - For the purposes of this rule, the expression “pure agent” means a
person who
(a) enters into a contractual agreement with the recipient of supply to act as his
pure agent to incur expenditure or costs in the course of supply of goods or
services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so
procured or supplied as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in
addition to the amount received for supply he provides on his own account.
For example: Corporate services Firm A is engaged to handle the legal work pertaining
to the incorporation of Company B. Other than its service fees, A also recovers from B,
registration fee and approval fee for the name of the company paid to the Registrar of
Companies. The fees charged by the Registrar of Companies for the registration and

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approval of the name are compulsorily levied on B. A is merely acting as a pure agent in
the payment of those fees. Therefore, A’s recovery of such expenses is a disbursement
and not part of the value of supply made by A to B.

RULE 34: RATE OF EXCHANGE OF CURRENCY, OTHER THAN INDIAN

RUPEES, FOR DETERMINATION OF VALUE
(1) The rate of exchange for determination of value of taxable goods shall be the
applicable rate of exchange as notified by the Board under section 14 of the
Customs Act, 1962 for the date of time of supply of such goods in terms of
section 12 of the Act.
(2) The rate of exchange for determination of value of taxable services shall be the
applicable rate of exchange determined as per the generally accepted
accounting principles for the date of time of supply of such services in terms of
section 13 of the Act.

RULE 35: VALUE OF SUPPLY INCLUSIVE OF INTEGRATED TAX, CENTRAL

TAX, STATE TAX, UNION TERRITORY TAX
Where the value of supply is inclusive of integrated tax or, as the case may be, central
tax, State tax, Union territory tax, the tax amount shall be determined in the following
manner, namely, –
Tax amount = (Value inclusive of taxes X tax rate in % of IGST or, as the case may be,
CGST, SGST or UTGST) ÷ (100+ sum of tax rates, as applicable, in %)
Explanation. - For the purposes of the provisions of this Chapter, the expressions
(a) “open market value” of a supply of goods or services or both means the full value
in money, excluding the integrated tax, central tax, State tax, Union territory tax
and the cess payable by a person in a transaction, where the supplier and the
recipient of the supply are not related and the price is the sole consideration, to
obtain such supply at the same time when the supply being valued is made;
(b) “supply of goods or services or both of like kind and quality” means any other
supply of goods or services or both made under similar circumstances that, in
respect of the characteristics, quality, quantity, functional components,
materials, and the reputation of the goods or services or both first mentioned, is
the same as, or closely or substantially resembles, that supply of goods or
service or both .
Illustration
Isha Enterprises had made supplies of INR 750,000 to Tee Kay Services. There was a tax
levied by Municipal Authorities on such sale of INR 75,000/-. CGST and SGST chargeable
on the supply was 37500/-. Packing charges, not included in the price above amounted
to INR 15,000.

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Isha Enterprises received a subsidy of INR 30000/- from an NGO on the sale of such
goods, and the price mentioned above is after taking in to account the subsidy.

Discount offered is @ 1% and that’s

mentioned on the Invoice. Determine the
Value of Supply.

Price Charged 7,50,000

Add: Tax charged by Municipal Authorities 75,000
Packing Charges 15,000
Subsidy from NGO 30,000
Total after all inclusions 8,70,000
Less: Discount @ 1% 7,500
Notes
1. CGST and SGST is not included in the determination of value of supply, rather
taxed post determination on the same
2. Subsidy since received from a non-governmental body is added back to determine
the value of supply
3. Discount on basic price is an exclusion

QUESTION 1. Crunch Bakery Products Ltd sells biscuits and cakes through its dealers,
to whom it charges the list price minus standard discount and pays GST accordingly.
When goods remain unsold with the dealers, it offers additional discounts on ihe stock
as an incentive to push the sales.Can this additional discount he reduced from the price
at which the goods were sold and concomitant tax adjustments made?

Answer: The discounts were not known or agreed at the time of supply of goods to the
dealers. Therefore, such discounts cannot be reduced from the price on which tax had
been paid in terms of section 15(3).
QUESTION2. Black and White Pvt. Ltd. has provided the following particulars relating
to goods sold by it to Colourful Pvt. Ltd.

Particulars Rs.

List price of the goods (exclusive of taxes and discounts) 50,000

Tax levied by Municipal Authority on the sale of such goods 5,000

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Packing charges (not included in price above) 1.000

Black and White Pvt. Ltd. received Rs.2000 as a subsidy from a NGO on sale of such
goods. The price of Rs.50,000 of the goods is after considering such subsidy. Black and
White Ltd. offers 2% discount on the list price of the goods which is recorded in the
invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd. and also
amount of GST payable if Rate of CGST @ 10% and SGST Ca: 10%.
Answer:

Computation of value of taxable supply

Particulars Rs.

List price of the goods (exclusive of taxes and discounts) 50.000

Tax levied by Municipal Authority on the sale of such goods 5,000

[Includible in the value as per section 15]

Packing charges [Includible in the value as per section 15] 1.000

Subsidy received from a non-Government body 2,000

[Since subsidy is received from a non-Government body, the same is

included in the value in terms of section 15]

Total 58,000

Less: Discount @ 2% on Rs.50,000 [Since discount is known at the time (1,000)

of supply,

it is deductible from the value in terms of section 15]

Value of taxable supply 57,000

CGST @10% 5,700

SGST@ 10% 5,700

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REGISTRATION

BENEFITS OF REGISTRATION:

Under any taxation law, the first compliance that a taxpayer is required to fulfil is to get
himself registered with the appropriate tax
authorities. All taxpayers are identified from INTRODUCTION
the unique number allotted to them by the
concerned tax authorities at the time of Registration is the most prime requirement
obtaining registration. A formal registration under any tax system for identification of
with the concerned tax authorities confers taxpayers undertaking tax compliances in
the following benefits to a taxpayer: the economy. Without registration, a person
can neither collect tax from his customers
 Completion of registration procedures
nor claim any credit of tax paid by him.
formally recognizes a taxpayer as supplier
of goods/services; Sections 22 to 30 of CGST Act combinedly
read along with 'Chapter III - Registration'
 A registered taxpayer is formally entitled of CGST Rules prescribe the provisions
to collect taxes from his customer and pass governing registration of a person under
on the credit of such taxes to the GST law. By virtue of Section 20 of IGST Act,
purchaser/recipient on goods/ services these provisions have also been made
supplied to them; applicable for IGST law.
 the intention of government to allow
seamless flow of input tax credit from
suppliers to recipients at pan-India level
can be achieved only if the concerned taxpayers have got themselves
Registered formally

REGISTRATION REQUIREMENTS UNDER ERSTWHILE INDIRECT TAXES

LAW :

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Name of Tax Format of Registration Number

Premises-wise registration if aggregate 15-Digit Alpha-Numeric STP

Service Tax turnover of taxable services of a person Number
exceeded
lakhs Rs 9of centralized registration was
(Option > First 10 Digits - PAN;
available under service tax laws) > Next 2 Digits - ST;
> Next 3 Digits - 001,002,003
and so on

Excise Duty Factory-wise registration if turnover of a person 15-Digit Alpha-Numeric

exceeded Rs 150 lakhs Number
> First 10 Digits-PAN
> Next 2 Digits - XM;
> Next 3 Digits - 001,002,003
and so on

State VAT Laws State-wise registration if turnover of a dealer 11- Digit Numeral TIN
exceeded the threshold limit prescribed under (Taxpayer's Identification
the respective VAT law (Rs 10 lakhs in Number)
maximum states)

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THERESOLD LIMIT FOR EXEMPTION FROM REGISTRATION UNDER GST

States with threshold limit

States with threshold
of RS 10 lakh for both goods
limit of RS 20 lakh for both
& services
goods and services
Manipur
Arunachal Pradesh
Mizoram
Meghalaya
Nagaland
Sikkim
Tripura
Uttarakhand
States with threshold limit of RS 20
Puducherry
lakh for services and RS 40 lakh for
TELANGANA
goods**

Jammu & Kashmir

Assam

Himachal Pradesh

Others

**persons engaged exclusively in

supply of goods

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Supplier engaged Aggregate Applicable Whether liable to
turnover threshold obtain registration?
Prithivi of exclusively in supply of shoes limit for registration
r 22 lakh r40 lakh X
Assam
exclusively in supply of pan
r 22 lakh r20 lakh √
masala
exclusively in supply of taxable
r 22 lakh r20 lakh √
services
in supply of both taxable goods r 22 lakh r20 lakh √
and services
Shiv of
exclusively in supply of toys r 22 lakh r20 lakh √
Telangana
exclusively in supply of ice r 22 lakh r20 lakh √
cream
exclusively in supply of taxable
r 22 lakh r20 lakh √
services
in supply of both taxable goods &
r 22 lakh r20 lakh √
services
Ashok of
exclusively in supply of paper r 12 lakh r10 lakh √
Manipur
exclusively in supply of tobacco r 12 lakh r10 lakh √

exclusively in supply of taxable

r 12 lakh r10 lakh √
services
in supply of both taxable goods &
r 12 lakh r10 lakh √
services

PERSONS LIABLE FOR REGISTRATION {Section 22 of CGST Act)

Section 22 Persons liable for registration

Sub-section Particulars

(1) Every supplier shall be liable to be registered under this Act in the
State or Union territory, other than special category States, from
where he makes a taxable supply of goods or services or both, if his

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aggregate turnover in a financial year exceeds twenty lakh rupees.
Provided that where such person makes taxable supplies of goods
or services or both from any of the special category States, he shall
be liable to be registered if his aggregate turnover in a financial year
exceeds ten lakh rupees.
Provided further that the Government may, at the request of a
special category State and on the recommendations of the
Council, enhance the aggregate turnover referred to in the
first proviso from ten lakh rupees to such amount, not
exceeding twenty lakh rupees and subject to such conditions
and limitations, as may be so notified.

(2) Every person who, on the day immediately preceding the appointed
day, is registered or holds a license under an existing law, shall be
liable to be registered under this Act with effect from the appointed
day.

(3) Where a business carried on by a taxable person registered under

this Act is transferred, whether on account of succession or
otherwise, to another person as a going concern, the transferee or
the successor, as the case may be, shall be liable to be registered
with effect from the date of such transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3),

in a case of transfer pursuant to sanction of a scheme or an
arrangement for amalgamation or, as the case may be, de-
merger of two or more companies pursuant to an order of a High
Court, Tribunal or otherwise, the transferee shall be liable to be
registered, with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.

Explanation––For the purposes of this section, ––

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(i) the expression “aggregate turnover” shall include all

supplies made by the taxable person, whether on his

own account or made on behalf of all his principals

the expression “special category States” shall mean the

States as specified in sub-clause (g) of clause (4) of
article 279A of the Constitution except the State of
Jammu and Kashmir and States of Arunachal
Pradesh, Assam, Himachal Pradesh, Meghalaya,
Sikkim and Uttarakhand.

CALCULATION OF AGGREGATE TURNOVER:

 Aggregate turnover is the determining factor for ascertaining whether a

dealer is liable for registration or not. Therefore, it becomes important to know
the items which are to be included/excluded at the time of computation of
aggregate turnover.

Turnover of all branches across India having a common Permanent Account

Number (PAN') has to be aggregated to determine whether a dealer is liable for
registration or not.

Example: A dealer 'X' has two offices - one in Delhi and another in Haryana. In order to
determine whether X is liable for registration or not, turnover of both the offices would be
taken into account and only if the same exceeds Rs 40 lakhs, Mr X is liable for registration.

IMPORTANT NOTE: Where a person having multiple places of business across

different states of India has one branch in any of the specified states for which lower
limits have been prescribed, the threshold limit for GST registration will be reduc ed
to the lower limit.

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All kinds of outward supplies (taxable as well as exempt) made during the financial year have to be
considered at the time of computation of aggregate turnover. It is immaterial whether tax is payable under
forward charge or reverse charge on such supplies.

Example: Rohan Oils, Punjab, is engaged in supplying machine oil as well as petrol. Supply of petrol is
not leviable to GST, but supply of machine oil is liable to GST. In order to determine whether Rohan Oils
is liable for registration, turnover of taxable as well as non-taxable supplies would be taken into account
and if the same exceeds Rs 40 lakhs, Rohan Oils is liable for registration.

 However, any tax chargeable under GST law as well as value of inward supplies on which tax is
payable by the person under reverse charge shall be excluded at the time of computation of aggregate
turnover .

INCLUSIONS EXCLUSIONS
Following Outward Supplies Made By All Entities 1. CGST
Registered Under Same PAN across India: 2. SGST/UTGST
3. IGST
1. Non-Taxable Supplies (Goods) 4. GST Compensation Cess
2. Exempt Supplies (Goods/Services) 5. Value of Inward Supplies on Which Tax Is
3.Taxable Supplies (Goods/Services) Payable By the Person under Reverse Charge
4. Export supplies (goods/servces)

PERSONS NOT LIABLE FOR REGISTRATION

(Section 23 of CGST Act)

Person engaged
Agriculturist limited to
exclusively in supplying
supply of produce out of
goods /services/both not
liable to tax / wholly cultivation of land
exempt from tax
Persons making inter state
taxable supplies of notified
handicraft goods upto 20
lakhs Casual Taxable persons
Persons making inter making inter state
state supplies of
taxable supplies of
taxable services upto notified handicraft
20 lakhs
goods upto 20 lakhs

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COMPULSORY REGISTRATION IN CERTAIN CASES
{Section 24 of CGST Act}

Person receiving
Casual taxable supplies on which tax is
Inter - state person payable by recipient on
Supplier reverse charge basis

A person who
Person/class supplies on behalf
Non-resident taxable of persons
persons of some other
notified by the taxable person (i.e.
Central/State an Agent of some
Government Principal)

PROCEDURE FOR REGISTRATION

(Section 25 of CGST Act)

TIME LIMIT FOR OBTAINING REGISTRATION:

> Every person who is liable for registration has to apply within 30 days from the date on
which he becomes liable for registration, in such manner and subject to such
conditions, as may be prescribed.
> Further, every person who makes a supply from the territorial waters of India shall
obtain registration in the coastal State/Union Territory where the nearest point of the
appropriate base line is located.
Example: Sugam Services Ltd is engaged in taxable supply of services in Madhya Pradesh.
The turnover of Sugam Services Ltd exceeded Rs 20 lakhs on 1st November .the effective
date of registration of Sugam Services Ltd shall be 1st November. It is liable to get itself
registered by December in the State of Madhya Pradesh.

EFFECTIVE DATE OF REGISTRATION:

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If an application for registration is submitted within the prescribed time period of 30 days,
the effective date of registration shall be the date on which he becomes liable for
registration.
Example: Sugam Services Ltd is engaged in taxable supply of services in Madhya Pradesh.
The turnover of Sugam Services Ltd exceeded Rs 20 lakhs on 1 November, If an application
for registration is made on 28 November (ie within the prescribe period of 30 days), the
effective date of registration of Sugam Services Ltd shall be 1st November.

 If an application for registration is submitted after the prescribed time period of 30

days, the effective date of registration shall be the date of grant of registration
Example: If in the above example sugam services ltd applies for registration on 3rd
December (ie after the prescribed time of 30 days)and registration certificate is granted on
10th December ,the effective date of registration of Sugam services ltd shall be 10 th
December.
Where and by when to apply for registration?

Person who is liable to be registered A casual taxable person or a non-

under section 22 or section 24
• in every such State/UT in which he is
so
liable
• within 30 days from the date on
which he becomes liable to
registration
resident taxable person
• in every such State/UT in which he is so
liable
• at least 5 days prior to the
commencementofbusiness

STATE-WISE REGISTRATION
ONE REGISTRATION PER STATE:
 Under GST, there is no concept of centralized registration as registration needs to be
taken state-wise. A business entity having its branches in multiple states will have to take
separate state-wise registration for all it’s branches.
 However, if an entity has multiple branches within a particular state, a single
registration can be obtained wherein one branch has to be declared as principal place of
business whereas the other branches can be declared as additional places of business.

DISTINCT PERSONS / ESTABLISHMENTS OF DISTINCT PERSONS:

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Where a person has obtained/is required to obtain registration in any State/Union
Territory in respect of an establishment and such person has another establishment in any
other State/Union Territory, such establishments shall be treated as establishments of two
distinct persons for the purposes of GST law and both the establishments shall be required
to be registered separately.

Example: A businessman has a head office in Delhi and he has a branch office in Mumbai
and goods are supplied to various customers from the head office as well as the branch
office. In such a situation, both the head office and the branch office are to be registered
separately under the Delhi SGST & Maharashtra SGST law respectively.

SEPARATE REGISTRATION FOR MULTIPLE PLACES OF BUSINESS

WITHIN A STATE /UNION TERRITORY:
 Generally, only a single registration is required for one State/Union Territory.
However, Section 25 of CGST Act provides a dealer an option to obtain separate
registrations for each place of business within a State/Union Territory.
 Any person having multiple places of business within a State or a Union Territory,
requiring a separate registration for any such place of business shall be granted separate
registration in respect of each such place of business subject to the following conditions:
 Such person shall not pay tax under composition scheme provided u/s 10 for any
of his places of business if he is paying tax as per regular scheme for any other place of
business_

 All separately registered places of business of such person shall pay tax on supply of
goods or services or both made to another registered place of business of such
person and issue a tax invoice or a bill of supply, as the case may be, for such supply.
 Where any place of business of a registered person that has been granted a separate
registration becomes ineligible to pay tax as per composition scheme, all other
registered places of business of the said person shall also become ineligible to pay
tax as per composition scheme.

REGISTRATION - SPECIAL CASES:

REGISTRATION UNDER COMPOSITION LEVY:
Already Discussed Under 'Chapter 4 - Composition Scheme'

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VOLUNTARY REGISTRATION:
Person not liable to be registered under sections 22/24 may get himself registered voluntarily.

UNIQUE IDENTITY NUMBER (UIN):

• In respect of supplies to some notified agencies of United Nations organisation, multinational
financial institutions and other organisations, a UIN is issued.
• The proper officer may, upon submission of an application in prescribed form or
after receiving a recommendation from the Ministry of External Affairs, Government of
India, assign a UIN to the said persons and issue registration certificate within 3 working
days from the submission of application.

SUO-MOTO REGISTRATION BY PROPER OFFICER:

 Where, pursuant to any survey, enquiry, inspection, search or any other
proceedings under CGST Act, the proper officer finds that a person liable to registration
under the Act has failed to apply for such registration, such officer may suo-moto
register the said person on a temporary basis and issue an order in prescribed form.

Such person shall either:

 submit an application for registration in prescribed form within 90 days from the
date of grant of temporary registration: or
 file an appeal against such temporary registration (If the appellate authority rejects
the appeal so filed, application for registration shall be submitted within 30 days from
the date of issuance of such order).
REGISTRATION OF SEZ DEVELOPER / SEZ UNITS:
 SEZ is a geographically bound zone where the economic laws relating to export and
import are more liberal as compared to other parts of the country. SEZ is considered
to be a place outside India for all tax purposes.
 SEZ Developer/SEZ Units are required to make a separate application for
registration as a business vertical distinct from their other units located outside SEZ.

Example: Suvarna Industries is engaged in manufacturing activities in Uttar Pradesh. It has

two manufacturing units in Uttar Pradesh - one in SEZ and another outside SEZ. Under GST,
one registration per state is required. However, since in this case, one of the two units of
Suvarna Industries is located in SEZ, it will make a separate application for registration as a
business vertical distinct from unit located outside SEZ.

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STEPS INVOLVED IN OBTAINING REGISTRATION CERTIFICATE:
Step 1: Every person liable to get registered and a person seeking voluntary registration
shall, before applying for registration, declare his Permanent Account Number (PAN),
mobile number, e-mail address, State/UT in Part A of Form GST REG-01 on GST Common
Portal (www,gst,gov.in).

Step 2: Verification Of PANE-mail Address & Mobile Number:

 E-mail address and mobile number declared by the person shall be verified through
an OTP.
 PAN declared by the person shall be validated online through CBDT
database.

Once the above-mentioned particulars are verified, a Temporary Reference Number (TRN')
is generated and communicated to the applicant on the validated mobile number and e-
mail address,
Step 3: The applicant shall make use of the TRN so generated to electronically submit
application in Part B of Form GST REG-01 on GST Common Portal, along with specified
documents.
Step 4: On receipt of such application, an acknowledgement in the prescribed form shall be
issued to the applicant electronically, Thereafter, the application shall be forwarded to the
proper officer.

Step 5: The proper officer shall examine the application and accompanying documents and
if the some are found in order, he shall approve the application within 3 working days from
the date of submission of application and grant registration certificate in FORM GST REG-
06.

Step 6: If the proper officer is of the opinion that the documents areincomplete/inaccurate,
he shall issue a notice electronically within 3 working days from the date of receipt of
application seeking clarification, information or documents from the applicant.

 Where the applicant furnishes requisite clarification/information/documents to the

satisfaction of the proper officer within 7 working days from the date of receipt of
notice, the proper officer shall approve the application and grant registration certificate
in FORM GST REG-06 within 7 working days from the date of receipt of
information/clarification/documents.
 Where the applicant fails to furnish requisite clarification/information/documents
within 7 working days from the date of receipt of notice or

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clarification/information/documents furnished by him are not found to be satisfactory,
the proper officer shall reject the application for reasons to be recorded in writing.
 Where the proper officer fails to take any action:
 within 3 working days from the date of submission of the application; or
 within 7 working days from the date of receipt of clarification, information or
documents furnished by the applicant,
the application for grant of registration shall be deemed to have been approved.

Special procedure for registration of CTD and NRTD

CASUAL TAXABLE PERSON NON RESIDENT TAXABLE PERSON

A Casual taxable person is one who has a
registered business in some State in India, but
wants to effect supplies from some other State
in which he is not having any fixed place of A Non Resident Taxable person is one who
business. is a foreigner and occasionally wants to
effect taxable supplies from any state in
Such person needs to register in the State India and for that he needs GST registration.
from where he seeks to supply as a Casual
taxable person.

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Cancellation or suspension of registration and revocation of

cancellation of registration

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Procedure for cancellation

Where the registered person Where the proper officer cancels

applies for cancellation the registration

Revocation of cancellation

**Period and manner of suspension of registration

Further, w.e.f. 01.02.2019, new rule 21A of the CGST Rules, 2019 has been inserted vide NNo.
03/2019

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CT dated 29.01.2019 which lays down the period and manner of suspension of registration
as follows:
(1) Where registered person has applied for cancellation of registration: Where a
registered person has applied for cancellation of registration, the registration
shall be deemed to be suspended from:
(a) the date of submission of the application or
(b) the date from which the cancellation is sought,
whichever is later, pending the completion of proceedings for cancellation of
registration.
(2) Where cancellation of the registration has been initiated by the Department on
their own motion: Where the proper officer has reasons to believe that the
registration of a person is liable to be cancelled, he may, after affording the said
person a reasonable opportunity of being heard, suspend the registration of such
person w.e.f. a date to be determined by him, pending the completion of the
proceedings for cancellation of registration.
(3) A registered person, whose registration has been suspended as above: I shall not
make any taxable supply during the period of suspension and I shall not be
required to furnish any return under section 39.
(4) The suspension of registration shall be deemed to be revoked upon completion of
the cancellation proceedings by the proper officer. Such revocation shall be
effective from the date on which the suspension had come into effect.

Amendment of Registration

(c)

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RETURNS

Modes of filing returns

All the returns are to be filed online.
Modes of filing return

LIST OF STATEMENTS / RETURNS UNDER GST

RETURN PERIODICITY/DESCRIPTIO WHO FILES? DATE FORFILING

N
Monthly Statement of Registered person 10th of the next
Outward supplies of with annual aggregate month
goods and/or services turnover greater than
` 1.5 crore
GSTR-1
th
Quarterly Statement of Registered person 10 of the month
Outward supplies of with annual aggregate succeeding the
goods and/or services turnover up to ` 1.5 quarter
crore
Monthly return for a Registered person 20th of the next
GSTR-3B
normal taxpayer month

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Return for a financial Registered person 18TH of the
year paying tax under month
composition scheme/ succeeding the
GSTR-4
Notification quarter
No.2/2019 CT (R)
dated 07.03.2019
GSTR-5 Monthly return Non-resident Taxpayer 20th of the next
month or within
7 days after
expiry of
Registration,
whichever is
earlier.
GSTR-9 Annual return Registered person 31st December
other than an ISD, of the next
tax deductor/tax financial year
collector, casual
taxable person and a
non-resident
taxpayer
GSTR-10 Final return Taxable person Within three
whose registration months of the
has been date of
surrendered or Cancellation or
date of order of
cancelled cancellation,
whichever is
later.

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DUE DATE OF PAYMENT OF TAX

 Payment should be made on or before 20th of

Due date
every month
of
payment  for registered persons paying tax under
composition scheme/Notification CT(R) dated
of tax
07.03.2019, payment for a quarter should be made
on or before 18th of the month succeeding the
quarter.

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Annual return

Annual Return

Revision of returns

There is no mechanism of filing revised returns for

any correction of errors / omissions.

The rectification of errors / omissions is allowed in

the subsequent returns .

However, no rectification is allowed after the due date for

furnishing the return for the month of September following the
end of financial year to which such details pertain or furnishing of
the relevant annual return whichever is earlier.

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Late fee for delay in filing of returns

Any registered person

who fails to furnish is liable to pay subject to a maximum
statements, returns u/s a late fee of of 5000 under CGST
39 and final return by 100 per day Act
the due dates

subject to a

Any registered person maximum of

shall be liable
who fails to furnish the 0.25% of his
to pay a late
annual return by the turnover in the
fee of 100 per
due date state / union
day.
territory, under
the CGST Act.

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Who is required to furnish the details of outward supplies?

all registered
PERSONS persons
REQUIRED including
TO FILE casual
GSTR-1 registered
person

What is the form for submission of details of outward supplies?

The details of outward supplies are required to be furnished electronically,
Form GSTR-1. Such details can be furnished through the common portal, either
directly or from a notified Facilitation Centre.

What is the due date of submission of GSTR-1?

AS MENTIONED ABOVE CHART.

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What are the contents of GSTR-1?

CONTENTS OF GSTR-1

BASICS AND OTHER DETAILS DETAILS OF OUTWARD SUPPLIES

• GSTIN
• Legal name and Trade
• B2B
name
• Aggregate turnover in • B2C
previous year ZERO RATED AND
• Tax period DEEMED EXPORTS
• HSN-wise summary • DEBIT/CREDIT NOTE
of outward ISSUED
supplies
• NIL RATED /EXEMPTED/
• Details of documents
issued NON GST

• Advances • AMENDMENTS FOR PRIOR

adjusted PERIOD

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What kind of details of outward supplies are required to be
furnished in GSTR-1?

SR. NO INVOICE WISE CONSOLIDATED DEBIT AND

DETAILS DETAILS OF ALL CREDIT NOTES

(i) Inter-State and Intra-State Issued during the

Intra-State supplies made to month for
supplies made to unregistered invoices issued
registered persons for each previously
persons rate of tax
(ii) Inter state Inter state
supplies made supplies made
to unregistered to unregistered
persons with persons with
invoice value invoice value
exceeding upto 2,50,000
2,50,000 for each rate
of tax
separately for
each state.
Indication of HSN details

Annual turnover in the preceding Number of Digits

financial year of HSN Code

Upto ` 1.5 core NIL

More than ` 1.5 crore and upto ` 5 crore 2

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More than 5 crore 4

Communication of details of GSTR-1 to the recipient of supply

The details of outward supplies for a month furnished by the supplier are
communicated and made available electronically (auto populated) to the respective
recipient(s) in Part A of Form GSTR- 2A/ Form GSTR-4A (in case of registered person
opting for composition levy/Notification No. 2/2019 CT(R) dated 07.032019)
through the common portal after the 10th day of the succeeding month (due date
of filing of GSTR-1).

How are the details of outward supply furnished in prior periods amended?
[Section 37(3)]

(a) Scope of amendment/ correction entries

Tables 9, 10 and 11(II) of GSTR-1 provide for amendments in details of taxable outward supplies
furnished in earlier periods (hereinafter referred to as “Amendment Table”). The details of original
debit notes/ credit notes / refund vouchers issued by the tax-payer in the current tax period as also
the revision in the debit notes/ credit notes / refund vouchers issued in the earlier tax periods are
required to be shown in Table 9 of the GSTR-1.

Ordinarily, in Amendment Table, the suppler is required to give details of original invoice (No and Date),
the particulars of which have been wrongly entered in GSTR-1 of the earlier months and are now
sought to be amended. However, it may happen that, a supplier altogether forgets to include the
entire original invoice while furnishing the GSTR- 1 for a particular month.

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In such cases also, he would be required to show the details of the said missing invoice which was issued
in earlier month in the Amendment Table only, as such type of errors would also be regarded as data
entry error.

by way of

GSTR-1
of GSTR-1 of

periods

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(b) Rectification of errors
If the supplier discovers any error or omission, he shall rectify the same in the tax period during which
such error or omission is noticed, and pay the tax and interest, if any, in case there is short payment,
in the return to be furnished for such tax period.

(c) Time limit for rectification

Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 for the
month of October then he can make such amendments in the subsequent periods.

However, the maximum time limit within which such amendments are permissible is
earlier of the following dates:
Date of filing of monthly return u/s 39 for the month of September following
the end of the financial year to which such details pertain or
Date of filing of the relevant annual return .

Basic Details Other details relating to

supplies
GSTIN Summarised details of outward
Legal name of the supplies and inward supplies
liable to reverse charge
registered person
Summarised details of inter-
Tax period State supplies made to
unregistered
composition taxable persons
and UIN holders
Eligible ITC
Values of exempt, nil-rated and
non-GST inward supplies
Payment of tax
TDS/TCS credit

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CONTENTS OF GSTR- 4

Details regarding Inward and

Basic & Other Details
Outward Supplies

GSTIN Invoice-wise details of all

Legal name and Trade name inward supplies (i.e., intra and
TDS/TCS credit received inter-State supplies and from
[Table 7] registered and unregistered
Tax, interest, late fee persons) including reverse
payable and paid [Table 8] charge supplies and import of
Refund claimed from services [Table 4]
Summary of self assessed
Electronic cash ledger
liability as per GST CMP-08
[Table 9] (Net of advances, credit & debit
notes and any other
adjustments due to
amendments etc.) [Table 5]
Tax rate wise details of outward
up nw
reverse charge (Net
of advances,, credit & debit
notes and any other
adjustments due to
amendments etc.) -
Consolidated details of outward
supplies [Table 6]

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Time limit for making rectification

account
of
ion in

activities

Maximum time limit for rectification

DUE date for filing return for
September of next FY

OR

Whichever is earlier

The maximum time limit within which the rectification of errors/omissions is permissible is earlier
of the following dates:
Due date of filing of return for the month of September following the end of the financial
year [i.e., 20th October of next financial year] or
Actual date of filing of the relevant annual return.

The last date of filing of annual return for a financial year is 31st December of next financial year. Hence, if annual
return for the year 2017-18 is filed before 20th October 2018, then no rectification of errors/omissions in
returns pertaining to FY 2017-18 would be permitted thereafter.

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PAYMENT OF TAX

DEFINITIONS OF CERTAIN KEY TERMS

Output
Tax

excludes

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Payments to be made in GST regime

For Intra-state supply

For Inter-state supply

Wherever applicable

Key Features of Payment process

Electronically generated challan from GSTN common portal in all modes of
payment and no use of manually prepared challan;
Facilitation for the tax payer by providing hassle free, anytime,
anywhere mode of payment of tax;
Convenience of making payment online;
Logical tax collection data in electronic format;
Faster remittance of tax revenue to the Government Account;
Paperless transactions;
Speedy Accounting and reporting;
Electronic reconciliation of all receipts;

Simplified procedure for banks;

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warehousing digital challan
What are E-Ledgers/register?

Electronic Ledgers or E-Ledgers are statements of cash and input tax credit in
respect of each registered taxpayer. In addition, each taxpayer shall also
have an electronic tax liability register.

Types of Electronic ledgers/register

ELECTRONIC
CASH LEDGER

ELECTRONIC
LEDGERS

ELECTRONIC ELECTRONIC
LIABILITY CREDIT
LEDGER LEDGER

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A. Electronic Cash Ledger

Modes of Deposit in Electronic Cash Ledger

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Major and Minor Heads of Payment

OF THESE MAJOR HEADS

HAVE THE FIVE
FOLLOWING MINOR
MAJOR HEADS
HEADS
IGST MINOR HEADS
CGST  TAX
SGST/UTGST  INTEREST
CESS  PENALTY
 FEES
 OTHERS

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Date of deposit of tax dues

Which date is considered as date of depositof tax dues ?

1 Date of presentation of cheque ×

2 Date of payment ×

3 Date of credit of amount in the account of √

government

A. Electronic credit ledger

Order of utilisation of input tax credit available in electronic credit
ledger

ITC Order of utilisation

(1) (2)

IGST IGST CGST/SGST/UTGST- any proportion

ITC of IGST to be completely exhausted mandatorily

CGST CGST IGST

ITC of CGST has been utilized fully

SGST/UTGST SGST/UTGST IGST

The CGST credit cannot be utilized for payment of SGST/UTGST. The

SGST/UTGST credit cannot be utilized for payment of CGST.

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Electronic liability register

Manner of making payment

Through debit of Electronic In cash, by debit in the

Credit ledger Electronic cash ledger

Through debit of Credit Ledger Payment can be made in cash, by debit in

of the tax payer maintained on the Cash Ledger of the tax payer
the Common portal – ONLY Tax can maintained on the common portal.
be paid.

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E-Ledgers/Register

ELECTRONIC CASH 
LEDGER

ELECTRONIC 
CREDIT LEDGER


ELECTRONIC
LIABILITY LEDGER

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Interest on delayed payment of tax [Section 50]

Payment of Tax via Electronic Ledger

A. Electronic Cash Ledger

(Assume it as an account statement provided by bank, for easy understanding)

Debit Amount (DR) Credit Amount (CR)

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 Credit amount of this ledger may be  Any deposit made towards tax,
used for payment of tax, interest, interest, penalty, late fee
fees etc. etc. via internet banking,
 Remaining credit balance amount after RTGS, fund transfer etc.
payment of above tax etc. will be  TDS/TCS claimed
refunded to taxable person.

Electronic Credit ledger

Debit Amount (DR) Credit Amount (CR)

 Credit amount of this ledger may  Input Tax credit as self-

be used for payment of output assessed in the return in the
tax viz IGST, CGST, SGST, form of IGST, CGST, SGST,
UTGST in the prescribed order. UTGST

Electronic Liability Register

Debit Amount (DR) Credit Amount (CR)

 Amount payable towards tax,

interest, fees etc.
 Tax or interest payable  Electronic cash ledger

 Any other dues

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 Amount payable towards output tax  Electronic credit ledger

Transfer of input tax credit [Section 53 of CGST Act & section 18 of IGST Act]

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USED FOR
PAYMENT
OF CGST

USED FOR
PAYMENT
OF UTGST

ITC OF IGST

Amount
equivalent to
USED FOR
ITC so used is
PAYMENT
transferred by
OF SGST
CG from IGST
account to the
respective
SGST amount
of state
government.

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TAX INVOICE , CREDIT / DEBIT NOTE , E-WAY BILL
WHO CAN RAISE A TAX INVOICE ?
1) SUPPLYING TAXABLE GOODS OR SERVICES

2) RECEIVING TAXABLE GOODS OR SERVICES FROM UNREGISTERED SUPPLIER

Time limit for issuance of invoice

TAXABLE
SUPPLY

SERVICES
GOODS

SALE OR WITHIN 30
INVOLVING NO
RETURN DAYS FROM
MOVEMENT MOVEMENT
SUPPLIES SUPPLY OF
OF GOODS OF GOODS
SERVICES

AT THE AT THE BEFORE OR AT

THE TIME INSURANCE,BANK
TIME OF TIME OF
DELIVERY SUPPLY OR ING - 45 DAYS
REMOVAL
WITHIN 6
MONTHS FROM
THE REMOVAL,
WHICHEVER IS
EARLIER
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IN CASE OF
• before/at the time each
CONTINUOUS
successive statements of
SUPPLY OF accounts is issued or
GOODS each successive payment
is received

due date of payment is

on/before due date of
ascertainable from the
payment
contract

IN CASE OF
CONTINUOUS
SUPPLY OF before/at the time of
not so ascertainable
SERVICES receipt of payment

payment is linked to the on/before the date of

completion of an event completion of that event

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Important contents of tax invoice

Consecutive
Serial Name and
GSTIN of address of
GSTIN of Number &
receipient,if receipient,
supplier date of issue
registered if not
registered

DESCRIPTION
HSN OF GOODS QUANTITY TOTAL
OR SERVICES IN CASE VALUE OF
OF SUPPLY
GOODS

TAXABLE TAX RATE-

VALUE OF CENTRAL
SUPPLY AMOUNT
TAX AND PLACE OF
OF TAX
STATE TAX SUPPLY
CHARGED
AND
INTEGRATED
TAX,CESS

ADDRESS
OF TAX SIGNATURE
DELIVERY PAYABLE OF
WHERE ON AUTHORISED
DIFFERENT REVERSE SIGNATORY
THAN CHARGE
PLACE OF BASIS
SUPPLY

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MANNER OF ISSUING THE INVOICE

Supply of Goods Supply of services

Triplicate Duplicate
Original copy for recipient Original copy for recipient; and
Duplicate copy for transporter; and Duplicate copy for supplier
Triplicate copy for supplier

The serial number of invoices issued during a month / quarter shall be

furnished electronically in FORM GSTR-1.

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Revised Tax
Revised Tax Invoices to be issued in respect of taxable
supplies effected during this period

Date of issuance of
certificate of registration

Consolidated Revised Tax Invoice (CTRI) may be issued in respect of taxable supplies made to
an unregistered recipient during this period

In case of inter-State supplies, CTRI cannot be issued in respect of all unregistered recipients if
the value of a supply exceeds 2,50,000 during this period.

PARTICULARS OF DEBIT AND CREDIT NOTE ARE ALSO SAME AS REVISED TAX INVOICE

CONSOLIDATED TAX INVOICE

TAX INVOICE IS NOT REQUIRED TO

VALUE OF SUPPLY < 200 CONSOLIDATED TAX

INVOICE SHALL BE
ISSUED FOR SUCH
SUPPLIES AT THE CLOSE
BE ISSUED

RECIPIENT IS UNREGISTERED OF EACH DAY IN

RESPECT OF ALL SUCH
SUPPLIES

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RECEIPIENT DOES NOT
REQUIRED SUCH INVOICE

Reverse Charge Mechanism

A registered person, who is liable to pay tax under the Reverse Charge Mechanism, shall issue an
invoice in respect of the goods / services so received by him from the supplier, who is not
registered on the date of receipt of goods / services / both, and he shall issue a payment voucher
at the time of making payment to such supplier.

BILL OF SUPPLY

SUPPLYING EXEMPTED GOODS

OR SERVICES OR BOTH
REGISTERED PERSON

TAX BILL OF
INVOICE SUPPLY
PAYING TAX UNDER
COMPOSITION LEVY

PAYING TAX UNDER

CONCESSIONAL RATE UNDER
NOTIFICATION NO.02/2019
CT(R)

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RECEIPT VOUCHER

Advance payment

Receipt Voucher

Where at the time of receipt of advance, rate of tax/ nature of supply is not determinable

Where at the time of receipt of

advance

(i) rate of tax is not tax shall be paid at the rate of

determinable 18%

(ii) nature of supply is not same shall be treated as inter-

determinable State supply

REFUND VOUCHER

Advance payment

Receipt Voucher
Supply

Tax Invoice
Refund Voucher

Credit / Debit Notes

Under Section 2(37) of Central goods & Services tax Act, 2017, “credit note” means a document issued
by a registered person under sub-section (1) of section 34.

Under Section 2(38) of Central goods & Services tax Act, 2017, “debit note” means a document issued by
a registered person under sub-section (3) of section 34.

Where a tax invoice has been issued for supply of goods / services / both, and where the taxable value in the
invoice is greater than the taxable value of supply; the tax charged per invoice is greater than the tax payable in

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respect of such supply; OR where the goods so supplied have been returned by the recipient OR where the goods
/ services have been found to be deficient; in these cases, the registered supplier may issue a credit note to the
recipient.

Where a tax invoice has been issued for supply of goods / services / both, and where the taxable value in
the invoice is less than the taxable value of supply; the tax charged per invoice is less than the tax
payable in respect of such supply; the registered supplier may issue a debit note to the recipient.

Declaration

Any registered person who has issued a credit note, in relation to supply of goods / services / both, must declare
the details of such credit note, in the return for the month during which such credit note was issued, but not later
than:

a) September following the end of Financial Year in which the supply was made OR
b) Date of furnishing the relevant annual
return whichever is earlier.
No reduction in tax liability of the supplier shall be permitted, if the incidence of tax on such supply has
been passed on to any other person.

Any registered person who has issued a debit note, in relation to supply of goods / services / both, must
declare the details of such debit note, in the return for the month during which such debit note was
issued. The tax liability can be adjusted upwards appropriately.

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CREDIT NOTE

or
both

found to be
deficient

Registered Supplier
of goods or services
or both credit notes for
supplies made in a
FY

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DEBIT NOTE

services or both

Registered Supplier may issue one or more

of goods or services debit notes for
or both supplies made in a
FY

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ELECTRONIC WAY BILLS [SECTION 68 OF CGST ACT, 2017]

Meaning of e-way E-way bill is an electronic document generated on the GST

bill and why is it portal evidencing movement of goods.
required? Section 68 mandates that the Government may require the
person in charge of a conveyance carrying any consignment
of goods of value exceeding such amount as may be
specified to carry with him such documents and such
devices as may be prescribed. Rule 138 of CGST Rules, 2017
prescribes e-way bill as the document to be carried for the
consignment of goods in certain prescribed cases.

E-way Bill is mandatory in case of movement of goods of

When is required to
consignment value exceeding ` 50,000.
be generated?
Movement should be:
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,
Registered person causing movement of goods shall furnish
the information relating to the said goods in Part A of Form GST
EWB-01 before commencement of such movement.

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Exceptions to minimum consignment value of `

50,000
 Inter-State transfer of goods by principal to job- worker
 Inter-State transfer of handicraft goods by a person
exempted from obtaining registration

Details of conveyance In case of intra-State movement of goods upto 50 km

may not be furnished distance:
 from place of business (PoB) of consignor to PoB of
in Part- B
transporter for further transportation or
 from PoB of transporter finally to PoB of the
consignee.

Transfer of goods to In such cases, the transporter or generator of the e-way bill
another conveyance shall update the new vehicle number in Part B of the EWB
before such transfer and further movement of goods.

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Consolidated E-way After e-way bill has been generated, where multiple
consignments are intended to be transported in one
Bill in case of road
conveyance, the transporter may indicate the serial number of
transport e-way bills generated in respect of each such consignment
electronically on the common portal and a consolidated e-way bill
in Form GST EWB-02 may be generated by him on the said
common portal prior to the movement of goods.
Where the consignor/consignee has not generated the e- way bill in
Form GST EWB-01 and the aggregate of the consignment value of
goods carried in the conveyance is more than ` 50,000, the
transporter shall generate individual Form GST EWB-01 on the
basis of invoice or bill of supply or delivery challan and may also
generate a consolidated e-way bill in Form GST EWB-02
prior to the movement of goods [This provision is not yet
effective].

Cancellation of e- E-way bill can be cancelled if either goods are not

way bill transported or are not transported as per the details
furnished in the e-way bill. The e-way bill can be
cancelled within 24 hoursfrom thetime of generation.

Validity period of e- SR.NO. DISTANCE WITHIN VALIDITY PERIOD

COUNTRY FROM RELEVENT
way DATE
bill/consolidated e-
way bill 1. Upto 100 km Onedayincasesother
than Over Dimensional
Cargo**

2. FOR EVERY 100 KM Oneadditionaldayin

OR PART THEREOF cases other than Over
THEREAFTER Dimensional Cargo

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3. Upto 20 km One day in case of
Over Dimensional
Cargo
4. For every 20 km One additional
or part thereof day in case of Over
thereafter Dimensional
Cargo
Acceptance/rejection The person causing movement of goods shall generate the
of e-way bill e-way bill specifying the details of other person as a
recipient who can communicate the acceptance or
rejection of such consignment specified in the e-way bill. If the
acceptance or rejection is not communicated within 72hours
from the time of generation of e-way Bill orthe time of
delivery of goods whichever is earlier, it will be deemed
that he has accepted the details.

Documents/ devices  invoice or bill of supply or delivery challan

to be carried by a
person-in-charge of a  copy of the e-way bill in physical form or the e-way bill
conveyance number in electronic form or mapped to a RFID**
embedded on to the conveyance
Verification of Commissioner or an officer empowered by him in this behalf
documents and may authorise the proper officer to intercept any

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conveyances

Inspection and
verification of goods

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INPUT TAX CREDIT

INPUT TAX CREDIT

 Taxes paid on inward supply of inputs,
capital goods and services are called input
taxes.
 These may be Integrated GST, Central
GST, State GST or Union Territory GST.
Taxes paid under reverse charge
mechanism are also input taxes.
 The credit of the above taxes is called input
tax credit, that is, the taxes paid on inputs
Introduction
are available as a set off against the taxes
payable on outward taxable supplies.
 An unregistered person is not eligible to
take the benefit of ITC.
 Where any person claims that he is eligible
for input tax credit under this Act, the
burden of proving such claim shall lie on
such person.

ELIGIBILITY AND CONDITIONS FOR TAKING INPUT TAX CREDIT (

SECTION 16)

To be used in • Every registered person shall, subject to such conditions and

the course & restrictions as may be prescribed and in the manner specified in
furtherance section 49, be entitled to take credit of input tax charged on any
of his supply of goods or services or both to him which are used or
business intended to be used in the course or furtherance of his business.
and the said amount shall be credited to the electronic credit
in ledger of such person.
or
of

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Possession A registered person shall be entitled to the credit of any input tax in respect
invoice of any supply of goods or services or both to him if
 he is in possession of a tax invoice or debit note issued by a supplier
registered under this Act, or such other tax paying documents as may be
prescribed;
Goods of • he has the
Where received
goodsthe goodsanorinvoice
against services
areorreceived
both. in lots or instalments, the
received in
registered person shall be entitled to take credit upon receipt of the last
installments lot or installment.

Payment not • Where a recipient fails to pay to the supplier of goods or services or both,
made by other than the supplies on which tax is payable on reverse charge basis,
recipient the amount towards the value of supply along with tax payable thereon
within a period of one hundred and eighty days from the date of
issue of invoice by the supplier, an amount equal to the input tax
credit availed by the recipient shall be added to his output tax liability,
along with interest thereon, in such manner as may be prescribed:

• Provided also that the recipient shall be entitled to avail of the credit of
input tax on payment made by him of the amount towards the value of
supply of goods or services or both along with tax payable thereon.
No ITC if • Where the registered person has claimed depreciation on the tax
depreciation component of the cost of capital goods and plant and machinery under the
claimed provisions of the Income-tax Act, 1961, the input tax credit on the said tax
component shall not be allowed.

last date for A registered person shall not be entitled to take input tax credit in respect of
availing ITC
any invoice or debit note for supply of goods or services or both after
Section 16(4)
the due date of furnishing of the return under section 39 for the month of
September following the end of financial year to which such invoice or
invoice relating to such debit note pertains or
Date of furnishing of the relevant annual return,
whichever is earlier.

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Documents for
claiming ITC The input tax credit shall be availed by a registered person, including the
Input Service Distributor, on the basis of any of the following documents
(a) an invoice issued by the supplier of goods or services or both in
accordance with the provisions of section 31;
(b) an invoice issued under reverse charge
(c) a debit note;
(d) a bill of entry
(e) an Input Service Distributor invoice or Input Service Distributor credit
note.

Fraud etc.
No input tax credit shall be availed by a registered person in respect of any
tax that has been paid in pursuance of any order where any demand has been
confirmed on account of any fraud, wilful misstatement or suppression of facts.

Utilisation of IGST 1.IGST

ITC 2.CGST
3.SGST
CGST 1.CGST
2.IGST
SGST 1.SGST
2.IGST

1. The CGST shall not be utilised towards payment of SGST or UTSGT, and
2. The SGST/UTGST Tax shall not be utilised towards payment of CGST.
3. SGST /UTGST Credit shall be utilised towards payment of IGST, only when
the balance of the input tax credit on account of CGST is not available for
payment of integrated tax.
4. ITC of CGST & SGST/UTGST should be utilized for payment of IGST, CGST,
SGST/UTSGST only after the credit of IGST has been fully utilized towards
such payment.

APPORTIONMENT OF CREDIT AND BLOCKED CREDITS (Section 17)

Goods or services used

partly for the purpose of Where any such goods or services are partly used in the course
any business and or furtherance of the business and partly used for other purpose,
partly for other purposes. only proportionate credit to the extent used for the purpose of

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.
Goods or services used
partly for effecting
taxable supplies and partly
for exempt supplies.
Section 17 (4) Special
options for Banking
companies etc.
Section 17 (5) Blocked
Credits- Cases when ITC
shall not be allowed
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business shall be available
Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and
Services Tax Act and partly for effecting exempt supplies under
the said Acts, the amount of credit shall be restricted to so much
of the input tax as is attributable to the said taxable supplies
including zero-rated supplies.
Banking company or a financial institution including a non-banking
financial company, engaged in supplying services by way of
accepting deposits, extending loans or advances shall have the
option to either comply with the provisions of sub-section (2), or
avail of, every month, an amount equal to fifty per cent. of the
eligible input tax credit on inputs, capital goods and input services
in that month and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn
during the remaining part of the financial year:
Provided further that the restriction of fifty per cent shall not
apply to the tax paid on supplies made by one registered person to
another registered person having the same Permanent Account
Number.
Motor vehicles used to transport persons, having a seating
capacity of less than or equal to 13 persons (including the
driver) and Services of general insurance, servicing, repair and
maintenance of aforesaid motor vehicles except when they are
used––
(i) for making the following taxable supplies, namely:
(a) further supply of such vehicles; or
(b) transportation of passengers; or
(c) imparting training and driving of such vehicles;
(d) for transportation of goods.
Vessels and Aircraft including leasing, renting or hiring thereof.
Services of general insurance, servicing, repair and maintenance of
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aforesaid vessels and aircrafts. except when they are used––
for making the following taxable supplies, namely:
(a) further supply of such vessels or aircrafts ; or
(b) transportation of passengers; or
(c) imparting training on driving, flying, navigating such vessels or
aircrafts
(d) for transportation of goods.

the following supply of goods or services or both:

(a) food and beverages, outdoor catering, beauty treatment,
health services, cosmetic and plastic surgery except where an
inward supply of goods or services or both of a particular category
is used by a registered person for making an outward taxable

supply of the same category of goods or services or both or as an

element of a taxable composite or mixed supply;
(b) membership of a club, health and fitness centre;
(c) rent-a-cab, life insurance and health insurance except where:
the Government notifies the services which are obligatory for an
employer to provide to its employees under any law for the time
being in force; or
such inward supply of goods or services or both of a particular
category is used by a registered person for making an outward
taxable supply of the same category of goods or services or both
or as part of a taxable composite or mixed supply; and

(d) travel benefits extended to employees on vacation such as

leave or home travel concession;

works contract services when supplied for construction of an

immovable property (other than plant and machinery) except
where it is an input service for further supply of works contract
service;

goods or services or both received by a taxable person for

construction of an immovable property (other than plant or
machinery) on his own account including when such goods or
services or both are used in the course or furtherance of business.

goods or services or both on which tax has been paid under

section 10;(Composition Supply Scheme)

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goods or services or both received by a non-resident taxable
person except on goods imported by him;
goods or services or both used for personal consumption;
goods lost, stolen, destroyed, written off or disposed of by way
of gift or free samples.
Any tax paid in accordance with the provisions of sections 74
(Tax not / short paid due to fraud etc), 129 (Detention , seizure
and release of goods and conveyance in transit) and 130
(confiscation of goods or conveyance and levy of penalty

AVAILABILITY OF CREDIT IN SPECIAL CIRCUMSTANCES [SECTION 18]

Sec. Persons eligible Goods entitled as on Conditions

18(a) Person who has applied He can claim the ITC on inputs ITC must be availed
for registration within 30 held in the form of Raw within one year from
days from the date on Materials /WIP the date of issue of tax
which he becomes liable / Finished Goods as on the day invoice by the supplier
to registration, and has immediately preceding the date
been granted such from which he becomes liable to
registration pay tax

18(b) Person who isn‘t liable to
Register as per prescribed
section,but obtains
voluntary registration
He can claim the ITC on inputs ITC must be availed
held in the form of Raw within 1 year from the
Materials/ WIP/ Finished Goods as date of issue of tax
on the day immediately preceding invoice by the supplier
the date of registration

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18(c) Registered person who He can claim the ITC on inputs ITC on Capital Goods
ceases to be held in the form of Raw
under will be reduced by 5%
Materials/ WIP / Finished Goods &
composition levy and Capital Goods as on the day per quarter of year /
switches to the regular immediately preceding the date part thereof of usage
scheme
from which he becomes liable to from the date of
pay tax under the regular scheme
invoice.

18(d) Registered person whose He can claim the ITC on inputs ITC on Capital Goods
exempt supplies held in the form of
become will be reduced by 5%
Raw Materials/WIP/ Finished Goods
taxable per quarter of year /
& Capital Goods relatable to such
exempt supply as on the day part thereof of usage
immediately preceding the date from the date of
from which the supply becomes
taxable invoice.

1 Sec. 18 GST ITC – 01 Declaration for claim of ITC

2 Sec. 18 GST ITC – 02 Declaration for transfer of ITC in case of sale, merger,
demerger, amalgamation, lease or transfer of a
3 Sec. 18 GST ITC – 03 business
Declaration for intimation of ITC reversal/payment of
tax on inputs held in stock, inputs contained in semi-
finished and finished goods held in stock and capital
4 Sec. 19 GST ITC – 04 goods
Details of goods/capital goods sent to job worker and
received back

ILLUSTRATION 1
Mr. A orders 30000 tonnes of goods which are to be delivered by the supplier via 3 lots of
10000 each. The lots are sent under a single invoice with the first lot and the payment is
made by the recipient for Value of Supply plus GST and the supplier has also deposited the
tax with the Government.

11.7
 INPUT TAX CREDIT
CA SURAJ SATIJA
SSGURU
The 3 lots are supplied in May, June and July 2018. The ITC is available to Mr. A only after
the receipt of the 3rd lot. The reason is simple, one of the conditions to avail ITC is the
receipt of goods which is completed only after the last lot is delivered.
ILLUSTRATION 2
For an Invoice dated 31st July 2018, the same pertains to the financial year 2018-19.
Hence the return for month of September following the end of the financial year to which
such invoice relates is due on 20th October, 2019.
Let’s say that the annual return is filed on 12th August, 2019.
The ITC therefore needs to be claimed within 12th August, 2019, which is the earlier of the
two dates.

ILLUSTRATION 3
Mr. C acquired a Capital Asset on 1st April, 2017 and used it for production of exempt
supplies only. Now, in November 2018, his supplies become taxable. The cost of the asset
was INR 250,000 and GST 18% was charged on it.
Hence the ITC applicable is INR 250,000*18%, which is INR 45,000.
Now, number of quarters of usage that have elapsed between April 2017 to
November 2018 are: seven. Hence, there would be a reduction of 5% per quarter for
7 quarters, that is 35%.
Therefore, ITC available would be as under.
Total ITC 4500
Less: Redn for 7 0
1575
quarters
Net ITC available 0
2925
0
Note that this ITC would be available from the date immediately preceding the date from
which the supply becomes taxable.
Rule 40(2) of CGST RULES, 2017, states that the amount of credit shall be calculated by
reducing the input tax @ 5% for every quarter or part thereof. It shall be calculated from
the date of issue of invoice for the capital goods

11.8