SYLLABUS B.Com. (Hons.) GST AND CUSTOMS LAW Objective: To provide students with a working knowledge of principles 4,4 provisions of GST and Customs Law. UNIT I: Introduction ; Constitutional framework of Indirect Taxes before GST (Taxation Powers of Union and State Government); Concept of VAT: Meaning, Variants and Methods, Major Defects in the structure of Indirect Taxes prior to GST; Rationale for GST, Structure of GST (SGST, CGST, UTGST and IGS); GST Council, GST Network, State Compensation Mechanism, Registration. UNIT Il: Levy and Collection of GST Taxable event—“Supply” of Goods and Services; Place of Supply: Within state, Interstate, Import and Export; Time of supply; Valuation for GST—Valuation rules, texability of reimbursement of expenses; Exemption from GST: Small supplies and Composition Scheme; Classification of Goods and Services: Composite and Mixed Supplies. UNIT II: Input Tax Credit igible and Ineligible Input Tax Credit; Apportionments of Credit and Blocked Credits; Tax Credit in respect of Capital Goods; Recovery of Excess Tax Credit; Availability of Tax Credit in special circumstances; Transfer of Input Credit input Service Distribution); Payment of Taxes; Refund; Doctrine’ of unjust enrichment; TDS, TCS. Reverse Charge Mechanism, Job work. UNIT IV: Procedures Tax Invoice, Credit and Debit Notes, Retums, Audit in GST, Assessment: Self- Assessment, Summary and Scrutiny. UNIT V: Special Provisions Taxability of E-Commerce, Anti-Profiteering, Avoidance of dual control, E. bills, zero-rated supply, Offences and Penalties, Appeals. UNIT VI: Customs Law Basic Concepts, Territorial Waters, High Seas, Types of Custom Duties, Valuation, Baggage Rules and Exemptions. i-way Qoo0 (io) Scanned with CamScanner——] BASIC CONCEPTS OF INDIRECT TAXES ‘> 1.1 Background In any welfare state, it is the prime responsibility of the Government to fulfil the increasing developmental needs of the economy and its people by way of public expenditure. India, being a developing economy, has been striving to fulfil the obligations of a welfare state with its limited resources; the primary source of revenue being levy of taxes. Though the collection of tax is to augment as much tevenue as possible to the Government to provide public services, over the years it has been used as an instrument of fiscal Policy to stimulate economic growth. Taxes are collected to fulfil the socio-economic objectives of the Government. ‘> 1.2 Direct and Indirect Taxes Q.1. Differentiate between Direct and Indirect taxes. Ans. Direct Taxes. A Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid directly to the Government by the person (juristic or natural) on whom it is imposed. A direct tax is one that cannot be shifted by the taxpayer to someone else. A significant direct tax imposed in india is Income tax. Indirect Taxes. If the taxpayer is just a conduit and at every stage the tax- incidence is passed on till it finally reaches the consumer, who really bears the brunt Beata vet te An inv tax bone tht canbe shed bythe taxpayer to someone else. The significant indirect taxes that ‘were being levied in. India till June 2017 are excise duty, customs duty, service, ena sales x (CSN), val ax (VAT), octroi, entry tax, purchase tax and the Tike. th onder desea ith Pious Indirect Taxes, GST was introduced from " July 1, 2017. 4 ; SE Scanned with CamScannerSERIES 2. m SHIVA DELHI UNIVERSITY - of direct pitforent types of direc! and indirect taxes are presented in the figure; Direct taxes indi [ ts Services Income tax Other ] Goods Enaise duly | Servicetax | [Taxon income (On manufacture) ‘Customs duty (On imports/exports) csT (On inter-state sale) Sales tayVAT (On sales within the State) Other/Miscellancous (Octroi, Entry tax) Interest taxy Expenditure tax TAXES Direct Tax + The person paying the tax to the Government directly bears the incidence of the tax + Progressive in nature. Higher rate of taxes for people having. higher ability to pay, Burden of tax borne by the person himself Indirect Tax * The person paying the tax to the Government collects the same from the ultimate customer. Thus, incidence Of the taxis shifted to the other person. + Regressive in nature. All the consumers equally bear the burden, inrespective of their ability to pay. Burden of tax shifted to another person E Scanned with CamScannerwe 1.3 Constitutional Framework ©. 2. Which Government bodies indirect taxes in india? control and Administer India has ‘ ire foe a ate State Pasctiaeal federal structur st faxes and Government, the State Governments and the Loc: ®,comprisin Jevy taxes and duties is distributed amon, al Governments the Union sccondane nth the provisions of the Indie Chettee, 2 of ® The power to .e Constitution of India is ‘onstituti oVernment j 22 parts containing, aeaeae eee una mat To a“ iedules, . ists of a Prea, . ° mble, Constitution Ga Power to levy and collect taxes an n wheth ind Constitution of india. Incase any tx Eee eS in conformity with the Constitution it act, rule, notification or order is, an i legal and void. ion, it is called ultra vires the Constitution us, a study of thi i isi understanding the eee the various blleacbraiarane riecsrragrd! significant provisions ofthe Constitution seating eee . 4 ion are: f 1 Atte 265: Arie 265 of the Constitution of India prohibits arbitrary collection a cm a . nat ‘no tax shall be levied or collected except by authority of law". ee authority of law means that tax proposed to be levied must be within the seen competence of the Legislature imposing the fax. ae ‘Article 245: Part XI of the Constitution deals with relationship between the inion and States. The power for enacting the laws is. conferred on the Parliament and on the Legislature of a State by Article 245 of the Constitution. The said Article provides as under: (i) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. (ii) No law made by the Parliament shall be Heemed to be invalid on the ground that it would have extra-territorial operation. Scanned with CamScannerhority to Union and Sag ent may make laws for the na6: It gives the respective auth the State Legislature mn 3, Article ‘ Whereas Parliam evying taxes. Whe : Governments for eve of the territory of India, India or any par Fao oe whole or part of the State. Je to Article 246: It cont the Union and the State ains three lists which enumerate the make laws for whol Governments have the authority ¢, 4. Seventh Schedul matters under which make laws. List ik: CONCURRENT LIsT | ui STATELIST | List: UNION LIST Ttcontains the matters in respect of which both the Central and the State Governments have power to make laws, Tecontains the matters in respect of which the State Government has the exclusive right to make laws. Tecontains the matters in respect of which the Parliament (Central Government) has the exclusive right to make laws. Entries 82 to 92C of List I enumerate the subjects where the Central Government has power to levy taxes. Entries 45 to 63 of List II enumerate the subjects where the State Governments have the power to levy taxes. Parliament has a further power to make any law for any part of India not comprised in a State even if such matter is included in the State List. Q. 3. Write a short note on direct and indirect taxes lavied under various lists provided in Seventh schedule to the constitution of india. ‘Ans. The table given below enlists the significant direct as well as indirect taxes being levied in India under the various entries of the Union and State Lists. ‘There is no head of taxation in the Concurrent List (Union and the States have no concurrent power of taxation). S.No Union List (List 1) State List (List I) 1. | Income tax [Entry 82] State Level VAT [Entry 54] Taxes on income other than} Taxes on the sale or purchase of agricultural income. goods (excluding newspapers) except tax on inter state trade or - commerce. State Excise Duties [Entry 51) Duties of excise on alcoholic liquors for human consumption; opium, Indian hemp and other narcotic drugs and narcotics. The entry does not include duties of excise on medical and toilet preparations containing alcohol or opium/ Indian hemp/other narcotic drugs/ narcotics. 2. | Customs Duties [Entry 83]. Duties of Customs including export duties. Scanned with CamScannerThe principal central and state level indirect 4 CHAI : APTER 1: BASC CONCEPTS OF DIRECT TA g tral Excise Duties [Entry 84] Duties of excise on tobacco and other goods manufactured or produced in india except alcoholic uors for human consumption, Cenl ligt opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or opium / Indian hemp / narcotic drugs / narcotics. __ Central Sales Tax [Entry 92A] Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-state trade or commerce. Service Tax [Entry 97] Any other matter not enumerated in List II or List II including any tax not mentioned in either of those Lists. Entry 92C: Tax on services with the relevant statutes are tabulated below: taxes being levied in India along “Particulars _ Tax Relevant Statute Excise Duty > Central Excise Act, 1944 | A tax on the manufacture or [Central Value | * Central Excise Tariff Act, production of goods in India Added Tax] 1985 imposed by the Central (CENV. Government. “ ic I rate: 12.5% Customs Act, 1962 «* Customs Tariff Act, 1975 duty imposed by the Central Government on ‘ds imported —_into/ exported out of India. Basic General Rate: 10% + ‘Additional duty of customs (CVD) equivalent to the excise duty levied on like ods prosiuced ined “+ Special additic qo ea @ 4%. duty of customs © 2°-——— Scanned with CamScanner6 SHIVA DELHI UNIVERSITY SERIES: V and VA of the} A tax imposed by theca, | ppepter A 1994 Government on the Servigg (except the services coy, in the negative list of sory, and exempted services) Rate: 14% ©5 Tax | Central Sales Tax Ace gee | A. he inter-state Central Sales Tax | Central Sales Tax Act, 1956 ‘ = ay noe “a Central Government by, appropriated by thy Service Tax originating state. Rate:2% Value Added Tax] VAT Acts of respectiveSiate| A tax on the intra-state sales governments of goods, imposed by the state governments. Rate generally at 5% and 12.5% /13.5% Besides these, there are other indirect taxes like entry tax, luxury tax, entertainment tax etc. levied by the State Governments, Municipal or local central excise, d service tax. The Board is the ‘ganizations, including Custom Departments of the Tespective states, ‘> 1.4 Concept of VAT | Q. 4. What is VAT? Explain it with the help of an example, Ans, Value Added Tax (VAT), as the term s igBests, is a tax on the value added to the commodity at each stage in products and ution chain. Tris conan fo coTlect the Tax On The Value atthe final or retail point of sale. VAT is a consumption tax because it is borne ultimately by the final consumer. “Tet us try to understand the concept of VAT with the help of an example. Supposé, for’ manufacturing a product A, the manufacturer purchases four types of commodities B, C, D and E and Pays excise duty on all of them. When ultimately he sells his manufactured product A, oe which he has to Scanned with CamScannera CHAPTER 1: BASIC. SONCERTS SEINOREST TANS ay secharge his liability towards excise, the exci ee on a tax base which tnelites stise leviable on such eesnufacturer on products B, C, D and E. Thus, the final luties paid by the ; bn duty, which inereases the cost of production as well sy 6a duty final product. ell a8 the price of the However, under VAT, the excise duties paid on commods are allowed to be set-off from the final duty liability 'modities B,C, D and E manufacturer avoids payment of duty on duty and a Product A. Thus, the reduced, ultimately benefitting the consumer, the cost of the product is ‘The above example is a case of value added tax way, there can be a value added tax in res on manufacture. In th a! : spect of trading i In the same | case of VAT on sales, the various taxes paid on aie incommodites also, In rurchased will be allowed as a credit and set off against the tax liabili abil commodity. In the same way, one can think of ae Of sales of the input and output services. The individual systems of manefneni ene ith turing, sales and services VAT are ultimately combined t and services known as Goods and servion Tae Tem of VAT on goods Q. 5. How does VAT operate? Ans. Value Added Tax (VAT) is levied as a proportion of the value added at a | k | each stage of production or distribution (i h ion (ic, sales mit ich i equivalent to wages plus interest, other costs and profits, Tolisieie cae of . »,a chart of transactions is given below: Manufacturer A Wholesaler B Sale Price = 7300 Sale Price = ao Gross VAT @ 12.5% = %37.50 | ————————® | Gross VAT @ 12.5% = 850 Net VAT = 221, i.e, Net VAT = 212.50, (837.50 ~ (712.50 + %4)] (@50- 83750) feces | Product X Product Y Retailer C Sale Price = 7100 Sale Price = 100 Sale Price = 2500 Gross VAT @ 125% += 06250 Gross VAT @ 12.5%] | Gross VAT@ 4% = 11250 ath = jet VAT = %4 Net VAT = 212.50, ie Net VAT = 212.50 Net tay For a manufacturer A, inputs are eae co Cee ee = i , In practice, their VAT impact is idered. Bisa wholesaler inputs. For example, & not consi However, for this example, and C is a retailer. The inputs X an is paid @ 125% 4-Y are purchased at £100 each on which tax is paid @ Scanned with CamScanner8 SHIVA DELHI UNIVERSITY SERIES After adding wage pd other manufactyy F inputs, Manufacturer A will also add his own py of inputs, ofall these costs his sale price is 300, the gre Ihe 297.50, As manufacturer A has alveady poy i tax (at the rate of 12.50%) would be 837.5 pod ey 5) + td = £16.50), Thee tax on £200, he would get credit for this tax (ie, €12.8 116.50) and because of thie his net VAT liability would be 221 only an a 9 is, he would take the cost of his inputs to be only %2 ee — Similarly, the sale price of ©1400 fixed by Whole e pelea te fa vat liability of £12.50, ic, (850 ~ £37.50) and the sale price 0 om by ale C Wo a also have net VAT liability of €12.50, ie,, (862.50 - €50). Thus, 6 ole da each stage of production and distribution process, and in principle Ie te burn falls on the final consumer, who does not get any tax etedit, Hence, VAT is a broad-based tax covering the value added by each party to the commodity during the various stages of production and distribution. ‘> 1.5 Variants of VAT Q. 6. Enlist and explain variants of VAT. Ans. Various types of variants of VAT: | ()) Gross Product Variant, The gross product variant allows deductions for taxes paid on all purchases of raw materials and components, but no deduction is allowed for taxes paid on capital inputs, (ii) Income Variant. The income variant of VAT on the other hand allows for deductions on the purchase of raw materials and components as well as depreciation on capital goods. ‘This method provides incentives. to classify purchases as current expenditure to claim set-off, (ii) Consumption Variant, This variant of VAT allows deduction for all business purchases including capital assets, Thu: Bross investment is deductible in calculating value added, It neither distinguishes between capital and current expenditures nor specifies the life of asset or depreciation allowances for different The consumption variant of VAT is the most widely used variant of the VAT, Several countries of Europe and other continent have adopted this variant as it does not affect decisions regarding investment because the tax on capital goods is also available for set-off against the VAT liability. Hence, the neutral in respect of techniques of production (labour or capital-inten ive). It also simplifies tax administration by obviating the need to distinguish between Purchases of inputs and capital goo In practice, therefore, most countries use the consumption variant. Also, most VAT countries include many services in the tax base, Since the busi off for the tax on services, it does not cause any cascading effect. ‘* 1.6 Methods of Computation of Tax Q.7. Write a note on different methods of computation of VAT. Ans. Methods of computation of VAT: ( Addition “method. This method aggregates all the factor payments salaries and 4% respectively expenses to the cos it Assuming that after the addition tem is tax gels set- Scanned with CamScannerCHAPTER 1: BASIC CONCEPTS OF! . {excluding value of material) including profits to arrive SCT TAVES wig addition on which the tax rate is applied to calculate th at the total value Xleulation is mainly used with income variant of V. i &ax. This type of this method is that it does not facilitate matching of invo; A drawback of evasion as tax liability is calculated periodically and note aeteeting (i) Invoice method. This is the most common and 10t invoic -e-wise, computing the tax liability under VAT system, Under ee method for imposed at each stage of sales on the entire sale value and ene eS the earlier stage (on purchases) is allowed as set-off Th the tax paid at differential tax is being paid. The most important aspect ef ano Be" that at each stage, tax is to be charged separately Hy ted this method is This method is very popular in western countries. i vee method was followed under the State Level VAT and the coke Law before the advant of GST. This method was also ealiey he Credit Method’ or ‘Voucher Method’, called the “Tax Example: Stage Particulars” "VAT | VAT” | Taxpaid fo Liability | Credit | Government | © | @-@r ws | = 125 1. | Manufacturer/First seller in the state sells the goods to distributor for %1,000. Rate of tax is 125%. Therefore, his tax will be 2125. He will not get any VAT credit, being the first seller. 2. | Distributor sells the goods toa | 150 | 125 3 dealer for %1,200 @ 12.50% and will get set-off of the tax paid at earlier stage ie, %125. Thus, the tax payable by him will be 825. _|_18750_| 150 37.50 3. | Wholesale dealer sells the goods to a retailer at %1,500. Here again, he will have to pay the tax on 1,500. He will get credit of tax aid at earlier stage of %150. The rsrso| 6250 Bx payable by him will be 337.50. |_250 to 4. | Retailer sells the goods consumers at %2,000. Again, he ‘000. He 6250 250 will have to pay tax on S200 1° | 7250 | il dit for tax pal will get ee of 2187.50. The tex tarlier stage of €187.50. Te payable by i be = vm i ice of £2,000. pon the final retail sale Price ON, Thus, the Government will get t different stages: At Sq in instalments at However, the tax will be paid in instal Scanned with CamScanner10 SHIVA DELHI UNIVERSITY SERIES ale price and credit is also», stage, tax liability is worked ont on can voice the Bret sell 3 lite beak Of is Chard a eons ra oats materials, etc, whi" manufacturer, he gets the credit of tax pi id are used in the manufacturing, that under this method, tax ce From the above illustration, itis clear tha jure invoie bred cannot be claimed unless and until the purchase i ieptout Ge de a a result, in a chain, if at any stage the transaction is kept eee i still there is no loss of revenue. The Government can rec ; el | ‘ull tay at the next stage. Thus, the possibility of tax evasion, if not entire] ly Tuled out, is reduced to a minimum. However, proper measures are Tequired to prevent the production of fake invoices to claim credit of tax paid at an earlier stage. . It is said He in this method, the beneficiary is the trade and indus} because in the above example, the total tax collection at all the stages is 712.50 whereas tax received by the State is only %250. (iii) Cost subtraction method: Under this method, tax is charged only on the value added at each stage of the sale of goods. Since the total value of goods sold is not taken into account, the question of grant of claim for set-off or tax credit does not arise. Further, under this method tax cannot be shown separately in invoice and tax liability can only be calculated Periodically. Since, tx payable on a product is not known, end-use based exemption cannot be given under this method, For imposing tax, value added is simply taken as the difference between sales and purchases, Tax is calculated by the formula = T x R/100+R Taxable Turnover and R = ‘Tax Rate Example: Stage Particulars Taxable Tax Tumover @ 12.50% : @) @ 1. | First seller sells the goods to a| 395 125 distributor at %1125 inclusive of tax. _ Distributor sells the goods to a | whole-saler at 71,350. Here, taxable turnover will be €1,350 - 21,125, Wholesaler sells the goods to a retailer at 21,687.50. Here, taxable | turnover will be 21,687.50 - %1,350, Retailer sells the goods at %2,250. Taxable turnover will be 22,250 - 1687.50. Scanned with CamScannertax on the vever, this ‘ method: Howering consumables and services, added at all the stoges oy distribution. If the rates are not common, then the final tax by the all inputs, production, i: method js suitable + this system rice to the consumer remains the same as in the inves HAPTER 1: BASIC CONCEPTS OF INDIRECT TAXES "wi 44 for gross product variant. also, tax is charged at each stage and the incidence of holds good till the time the same rate of tax is attracted on prod nods may differ. This is explained through the examples given below: All Inputs taxable at ONE Rate Invoice method Particulars Invoice | Material VAT | Input | Net value (%) | value (8) (@) | tax (@) | VAT (=) Inputs for A Panduct X @ 12.50% 260 231 29 = 29 Product Y @ 12.50% 450 400 50 = 50 710 631 79 79 A sells goods to B 1125 1000 125 79 46 B sells goods to C 1800 1600 200 125 7 C sells goods to D 2250 2000 250. 200 50 D sells goods to E 2700 2400 300 250 50 FINAL, 2700 2400 300 = 300 Substraction method j Particulars Invoice value | Purchase price | Value (=) | VAT Inputs for A 710 = = 79 A sells goods to B 1125 710 415 46 B sells goods to C 1800 1125 675 75 C sells goods to D 2250 1800 450 50 D sells goods to E 2700 2250 450 50 FINAL 2700 = a 300, All Inputs taxable at DIFFERENT Rates Invoice method Particulars Invoice | Material value (%) | value (2)\ Inputs for A Z 10 Product X@4% 260 250 Ae = a Product Y 12.5% 450 400 = 7 710 oN ee) io & A sells goods to B 1125 4 a pe B B sells goods to C 1800 3000 Es 260 2 C sells goods to D bod 5400 300 250 D sells goods to E a0 300 = 300 2700 FINAL Scanned with CamScanner12M SHIVA DELHI UNIVERSITY SERIES Substraction method i i i er Particule Invoice value | Purchase price | Val 3 ee z @ (2) _| Added (py | ~ _ 60 : 710 Ae 1125 710 415 46 Bin 1800 1125 675 B CtoD 2250 1800 450 50 DtoE 2700 2250 450 50 FINAL 2700 _ _ pa (0, under invoice method, VAT works Thus, on the same consumer price of 7270 : out to be %300 whereas under the substraction method it works out to be %28], Therefore, this method is not considered as a good method. ‘* 1.7 Major Defects In The Structure of Indirect Taxes Q. 8. What are the demerits of indirect system of taxes? Ans. Demerits of VAT System: oo (i) Cascading effect. The system of multiple levies distributed between Centre and States results into cascading effect (ie, tax on tax). For instance, no credit of State VAT is allowed against Central Tax. CST credit paid in the originating State is also not allowed in the receiving State. This results in the increase in the overall burden of tax in the hands of end consumer and creates distortion in the market. (i) Exemptions & Concessions, Under the VAT system, businesses enjoyed many kinds of exemptions and concessions under different levies which broke the chain of VAT and thus created distortion. Also these kinds of benefits do not create a level playing field especially when the same commodity is taxed at different rates in different jurisdictions. (iii) Lack of transparency. Under excise and service tax law, there was no mechanism to cross verify the claim of CENVAT credit made by the manufacturer/service provider. Even under State VAT laws, all the States in India did not have the mechanism to cross verify the credits. (iv) Lack of uniformity in provisions and rates. The VAT structure across the States lacked uniformity which was not restricted only to the rates of tax but also the credit provisions as well as procedures. (0) Multiple points of taxation. Under the VAT system there were multiple points of taxation. Excise was levied when goods manufactured were cleared from the factory premises irrespective of the fact that the clearance was on account of sale or otherwise. State VAT was levied on the sale of goods. Entry tax was levied on the entry of goods in a particular State. (vi) Complexity in determining the nature of transaction—Goods vs. Services. The distinction between goods and services found in the Indian Constitution has become more complex. Today, goods and services are being packaged as composite bundles and offered for sale to customers under a variety of supply-chain arrangements. Under the division of Scanned with CamScannerCHAPTER 43 BASIC CONGR —_ ‘ PTS OF WOIREGY TSW 4 taxation powers in the Constitution, Neither the ¢, tre no, a apply the tax to such bundles in a Seamless manner, That States can could tax only parts of the bundle, cr g erry eating overlays, (vil) Narrow base. Due to different thresty a a the tation } io holds under different fay, numerous exemptions and concessions the so, base under indi was narrow as compared to other countries . (cit) Multiple administrations, required to visit different tax his business. This increase would lead unnece: Under the system, offices according to ‘d the ‘ssary complexity, usinesses and ‘> 1.8 Rationale of GST Q. 9. Discuss the rationale of GST, Ans. Rationale of GST: (i) GST is a value added tax levie d e ind consumpti of goods and services. GST offers comprehensive and continuous aa of tax credits from the producer's Point/service provid retailer's level/consumer’s } level trent ler’s point upto the ereby taxing only the value each stage of supply chain, Bony the value aided a (ii) The supplier at each Stage is permitted to avail Purchase of goods and/or services and can s © supply of goods and s only the final consumer in the supply chain, with set (iii) Since, only the value added tax on tax or cascad differentiate between single rate. don Manufacture, sale al I credit of GST paid on the et off this credit against the ervices to be made by him, bears the GST charged by the lat supplier off benefits at all the previous stages, at each Stage is taxed under GST, there is no ing of taxes under GST system. GST does not Soods and services and thus, the two are taxed ata “> 1.9 Structure of GST (SGST, CGST, UTGST & IGST) Q. 10. Explain briefly the structure of GST. Ans. Structure of GST: 1. Dual GST, India has adopted a dual GST which is imposed concurrently by the Centre and States, i d i \d States simultaneously tax goods an a tate sales é& States are empowered to Services. Centre has the Power to tax intra-stat erie aes end lax services. GST extends to whole of India including the State hin i ll ares: STi ination based tax applicable on a destination mx applicnbls ono See eT oan aan ation subject to a err i of goods and services for a consider. | ‘ansactions invol ipply © eee e eo raets thereol CST in ice tax (COST)—levied and collected by Cent (i) Central Goods and Service Ta: ican See d and co Government. ice Tax (SGST)— levied and naa ii) SI Sere th Stale Legislatures, (iy Sate See ‘or Union Territories with Sta ove Scanned with CamScanner14m SHIVA DELHI UNIVERSITY SERES Union Territory Goods and Service Tay (U1 by Union Territories without State Legislatures, axable goods and/or servic (i) Integrated Goods and Servi of taxable s and, CCST and 5 supplies. 1) levied and cotlecteg on intra-state supplies of P) levied on Inter-state supplies ervices. IGST is approximately the sum total of P and is levied by Centre on alll inter-state ST Act, 2017 for islatures [Andaman, ‘cobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Dig and Chandigarh] are governed by UTCST Act, 2017 for levying UTGST, States and Union territories with their own legislatures [Delhi and Puducherry] have their own GST legislation for levying $ | nultiple SGST legislations, the basic features of law, such as detinition of taxable event and taxable person, classification and valuation of goods and services, procedure for collection and levy of tax and the like are uniform in all the SGST legislations, as far as feasible. Thi Preserve the essence of dual GST. 4 Classification of Goods and Services. HSN (Harmonised System of Nomenclature) code is used for classifying the goods under the GST. A new Scheme of Classification of Services has been devised wherein the services of various descriptions have been classified under various sections, headings and groups. Each group consists of various Service Codes (Tariff). Chapters referred are the Chapters of the First Schedule to the Customs Tariff Act, 1975, 5. Composition Scheme. In GST regime, tax (i., CGST and SGST/UTGST for intra-state supplies and IGST for inter-state supplies) is payable by every taxable Person and in this regard provisions have been prescribed in the law. However, for providing relief to small businesses making intra-state supplies, a simpler method of paying taxes and accounting thereof is also prescribed, known as Composition Levy. ‘* 1.16 GST Council ry) Write a short note on GST Council, » As per Article 279A (1) of the Amended Constitution, the GST Council was to be constituted by the President within 60 days of the commencement of Article 279A. The notification for bringing into force Article 279A with effect from 12*% September, 2016 was issued on 10!h September, 2016, As per Article 279A of the Amended Constitution, the GST Council which will bea eine forum of the Centre and the States, shall consist of the following mbers: his is necessary to * Union Finance Minister— Chairperson Z, The Union Minister of Sta The Minister j vernment — Members As per Article 2794 (4), the Council will make recommendations to the Union Scanned with CamScannerCHAPTER 1? BASIC CONCERTS OF INoiRECT and the States on important issues related to GST, lik ae may be subjected or exempted from cat met e the goods and services that govern Place of Supply, threshold limits, CST men ones bands, special rates for raising additi disasters, special provisions for certain States, etc ‘The Union Cabinet under the Chairmanchin a; ind : Modi approved setting up of GST Council ane Minister Shri Narendra setting up its Secretariatas per the following details: ” O18 and also * Creation of thi i Seraee e GST Council as per Article 279A of the amended * Creation of the GST Council Secretariat, with its offi : ; : ice at New Delhi; Appointment of the Secretary (Revenue) as the Ex-officio Secretary to the * Inclusion of the Chairperson, Central Board of Excise and Customs roe 2 Permanent invitee (non-voting) to all proceedings of the * Create one post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India), and four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India). The Cabinet also decided to provide for adequate funds for meeting the recurring and non-recurring expenses of the GST Council Secretariat, the ‘entire cost for which shall be borne by the Central Government. The GST Council Secretariat shall be manned by officers taken on deputation from both the Central and State Governments. > 1.11 GST Network Q. 12. Write a short note on the structure of GSTN. Ans. The Goods and Service Tax Network (or GSTN) is a non-profit, non- government organization. It will manage the entire IT system of the tal, which is the mother database for everything under GST. This portal will be used by the government to track every financial ‘transaction, and_will vide tax- payers with all-services— from registration to filing taxes and maintaining all tax Structure of GSTN: Private players own 51% share in the GSTN and the rest is owned by the Government. The authorized capital of the GSTN is Toston (US $1.6 million), of which 49% of the shares are divided equally between the Central and State governments, and the remaining is with private banks. The GSTN has also been approved for a non-recurring grant of %315 crores. The contract for developing this vast_technological_backend was awarded to Infosys in September 2015. . we < The GSTN is chaired-by Mr. Navin Kumar, an Indian Administrative Service servant (1975 batch Who served in many senior positions with the Government of Bihar, and the Central Government. Scanned with CamScanner46 m SHVADSLHI UNIVERSITY SERIES: ient features of GSTN? ee seers ofthe OS GSTN is a complex IT initiative. It will and also create a common and . What real Salient features of the GSTN: The establish a uniform interface for a eal ae chared IT infrastructure between the Centre and States. sted Natio oem eae National Information Utility. The omnis a rated ne Information Utility (NIU) providing reliant iB ae = backbone for the smooth functioning of GST in India. (ji) Handles Complex Transactions. GST is a destination beset adjustment of IGST (for inter-state trade) at the government en and various states) will be extremely complex, considering ie ne volume of transactions all over India. A rapid settlement — amongst the States and the Centre will be possible only when there is 2 strong IT infrastructure and service backbone which captures, processes and exchanges information. | (iii) AIL information will be secure. The government will have strategic control over the GSTN, as it is necessary to keep the information of all taxpayers confidential and secure. The Central Government will have control over the composition of the Board, mechanisms of Special Resolution and Shareholders Agreement, and agreements between the GSTN and other state governments. Also, the shareholding pattern is such that the Government shareholding at 49% is far more than that of any single private institution. (iv) Expenses will be shared. The user charges will be paid entirely Central Government and the State Governments in equal proportion 50:50) on behalf of all the users. The state share will be then apportioned to individual states, in proportion to the number of taxpayers in the state. Q.14. Write down the functions of GSTN. . Ans. Functions of GSTN. GSTN is the ba is the interface between the taxpayers and the i interface bet government. The entir: f cor : online starting from registration to the filing of returns ee tt has to support about 3 billion invoices ‘ bsequ return filing for 65 to 70 lakh tax payers, Bieeie ana the subsequent The GSTN will handle: * Invoices * Various returns * Registrations * Payments and Refunds, -12 State Compensation Mechanism 15. Write a short note on Si Ans. The Goods and Services Tax oreianschanism under GST. , \ (Compensati . introduced in Lok Sabha on March 27, 2017, The Bil ovine Bile 2017 was ‘Dantes for any Joss in revenue due to the impl nation of Coy ae + Compensation wil PFOVICE to a state for eriod of fi the date on which the state brings its State GST Ace meet 0 for ‘ckbone of the Common Portal which Scanned with CamScanner PittsCHAPTER 1: BASIC CONCEPTS OF INDIRECT TAXES 17 « For the purpose of calculating the compensation amount in any financial year, year 2015-16 is taken as the base year, from which revenue will be projec ted. The growth rate of revenue for a state during the five-year period is assumed to be 14% per annum. « The pase year tax revenue shall consist of the state’s tax revenues from: Ue State Value Added Tax (VAT), S(7/Central Sales Tax, fit) Entry Tax, Octroi, Local Body Tax, (fof Taxes on Luxuries, “46 Taxes on Advertisements, ete. However, any revenue among these taxe: arising related to supply of— x alcohol for human consumption, and q\aycertain petroleum products will not be accounted as part of the base year revenue. + The compensation payable to a state has to be pro and released at the end of every two month: calculation of the total revenue will be undertaken, by the Comptroller and Auditor General of India. + GST Compensation Cess may be levied on the supply of certain goods and services, as recommended by the C Council. The receipts from the cess will be deposited to GST Compensation Fund, ‘The receipts will be used for compensating states for any loss due to the implementation of GsT. + The cess will be capped at: (i) 135% for Pan masala, (ii) 2400 per tonne for Coal, (iii) %4,170 + 290% per 1,000 stic! (iv) 15% for all other goods and se aerated water. + Any unutilised mone in the Compensation Fund at the end of the compensation period will be distributed in the following manner: {i) 50% of the fund to be shared between the states in proportion to revenues of the states, and (ii) the remaining 50% will be part of the centre's divisible pool of taxes. = 1.13 Registration Who is required to be registered for GST? ANS. Every supplier of goods and/or services is required to obtain registration in the State/UT from where he makes the taxable supply if his aggregate “However, the limit of €20 Takh will be reduced to %10 lakh if the person is carrying out business in the Special Catego: States—11 Special Category States are specified in Article 279A@)(g) of the Constitution (tates of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya Mizoram, Nagaland, Sikkim, ‘Fipura, Himachal Pradesh aed Uttarakfend). an Nagaland, oe jonally calculated Further, an annual which will be audited s of Tobacco, and including motor cars and Scanned with CamScanner48m SHIVA DELHI UNIVERSITY SERIES s that are required to get registered unde turnover are as follows: ae (EF son who is registered under the Pre-GST laws (ie, Excise, VAT, Service Tax et Pn (ii) When a business which is registered has been transfer at someone, the transferee shall take registration with effect from the date of transfer. (iii) Persons making any inter-state taxable (iv) Casual taxable persons. (o) Non-Resident taxable persons making taxable supply. (oi) Agents of a supplier. ; (vii) Those paying tax under the Reverse Charge mechanism. (viii) Input service distributors. (ix) E-commerce operators or aggregators. (x) Person who supplies via e-commerce aggregator. (xi) Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person. (xii) Other persons/class of persons as notified by the government. (xiii) Persons who are required to deduct tax at source u/s 51 (TDS deductor). Q.17. Who is not liable to get registered under GST. Ans, Following persons are not liable to get registered under GST: Ai) Any person engaged exclusively, in the business of supplying goods or ff acens that are not liable to tax or wholly exempt from tax. an agriculturs to the extent of supply of produce out of cultivation of eS Describe the process of getting registered under GST? “Application for registration: 1. Filing of form GST REG-O1 (Part A). Every person (other than a non- resident taxable person, @ Person required to deduct tax at source und Section 51, a person required to collect tax at source under Section 52 ond 2 Person supplying online information and database access or manny eee from a place outside India to a nontaxable online recipient) whe rater ee registered and every person who is not liable to be sexe no ible to be voluntary registration (hereafter in this Chapter referred tnt et Seeking shall, before applying for registration, declare his PAN, mole @ epee) address, State or Union territory in Part A of FORM ex ile number, e-mail comraon portal, either directly or through a Facilitation a REG-O1 on the Conumissioner: ‘entre notified by the * Provided that a person having a unit(s) in a Speci . ; Special i being a Special Economic Zone developer shut ame ean application for registration as a business vertical distin ce a oie units located outside the Special Economic Zone, st 0™ his 0! Provided further that every person being an Inpuit Service Distributor GST irrespective of their Busine supply of goods. Scanned with CamScannerCHAPTER 4: BASIC CONCEPTS OF INDIRECT TAGS = 19” shall make a separate application for registration as such Input Service Distributor. ; 2, Validation of PAN, Mobile no. and e-mail address — * The Permanent Account Number shall be validated online. by the common portal from the database maintained by the Central Board of Direct Taxes. + The mobile number shall be verified through a one-time password sent to the said mobile number; and + The e-mail address declared shall be verified through a separate one- time password sent to the said e-mail address. 3, Generation of Reference number. On successful verification of the PAN, mobile number and e-mail address, a temporary reference number shall be generated and ‘communicated to the applicant on the said mobile number and e- mail address. ‘4. Filing of Form GST REG-01 (Part B). Using the reference number generated, the applicant shall electronically submit an application in Part B of ORM GST REG-1, duly signed or verified through electronic verification code, along with the documents specified in the said Form at the common portal, either directly or through a Facilitation Centre notified by the Commissioner. 5, Issuance of Acknowledgement. On receipt of an application, an ‘Acknowledgement shall be issued electronically to the applicant in FORM GST REG-02. 6. Application by casual taxable person. A person applying for registration as ‘a casual taxable person shall be given a temporary reference number, by the common portal for making advance deposit of tax in accordance with the provisions of Section 27 and the acknowledgement shall be issued electronically only after the said deposit. Q. 19. Write a short note on the following: (a) Verification of the application and approval [Rule 9] @) Issue of registration certificate [Rule 10] (C) Separate registration for multiple business verticals within a State or a Union territory [Rule 11] (d) Grant of registration to person: collect tax at source [Rule 12] (c) Grant of registration to non-resident taxable person [Rule 13] () Grant of registration to a person supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient [Rule 14] (g) Extension in period resident taxable person [Rule 15] ‘Suo moto registration [Rule 16] (J Assignment of Unique Identity Number to certain special entities [Rule 17] (@) Display of registration certificate and Goods and Services Tax Identification Number on the name board [Rule 18] {k) Amendment of registration [Rule 19} s required to deduct tax at source or to of operation by casual taxable person and non- Scanned with CamScanner20 i SHIVA DELHI UNIVERSITY SERIES: Ans. (a) Verification of the application a () The application shall be forwarded to th examine the application and the accompanying documents and approve the grant of registration to the applicant within a period of 3 working days from the date of submission of the application, if the same are found to be in order. _. (i) Where the application submitted under Rule 8 is found to be deficient, either in terms of any information or any document required to be furnished under the said rule, or where the proper officer requires any clarification with regard to any information or documents, he may issue ‘a notice to the applicant electronically in FORM GST REG-03, within a period of 3 working days from the date of submission of the application and. the applicant shall furnish such clarification, information or documents electronically, in FORM GST REG-04, within a period of 7 working days from the date of the receipt of such notice. (iii) Where the proper officer is satisfied with the clarification, documents furnished by the applicant, he may approve the grant of registration to the applicant within a period of 7 working days from the date of the receipt of such clarification or information or documents. (jv) Where no reply is furnished by the applicant in response to the notice issued or where the proper officer is not satisfied with the clarification, — information or documents furnished, he shall, for reasons to be recorded in writing, reject such application and inform the applicant electronically in FORM GST REG-05. (2) If the proper officer fails: (@) within a period of three working days from the date of submission of the application; or : (@ within a period of seven working days from the date of the receipt ' at 7 or documents furnished by the The appiation for grant of registration shall be deemed to have been (b) Issue of registration certificate [Rule 10}: () Subject to the provisions of Section 25(12), where the application for grant of registration has been approved under Rule 9, a certificate of registration in FORM GST REG-06 showing the principal place of business and additional place or places of business shall be made available to the applicant on the common portal and a 15-digit Goods and Services Tax Identification Number (GSTIN) shall be assigned subject to the following characters, namely: * two characters for the State code; * ten characters for the Permanent Account Number or the Tax Deduction and Collection Account Number; « two characters for the entity code; and * one checksum character. nd approval [Rule 9 to the proper officer who shalt information or ee Scanned with CamScannerCHAPTER 1: BASIC CONCEPTS OF INDIRECT TAXES @ 24 (ii) The registration shall be effective from the date on which the erson, becomes liable to registration where the application for registration has iii here an application i i ie applicant after ths eae thin days a ra suomi by the Tee I ys from the date of his becoming, egistration, the effective date of registration shall be the date of jhe grant of registration under Sub-rule (1) or Sub-rule (3) or Sub-rule (5) of (iv) Every certificate of registration shall be duly signed or verified through electronic verification code by the proper officer under the Act. (o) Where the registration has been granted under Sub-rule (5) of Rule 9, the applicant shall be communicated the registration number, and the certificate of registration under Sub-rule (1), duly signed or verified through electronic verification code, shall be made available to him on the common portal, within a period of three days after the expiry of the period specified in Sub-rule (5) of Rule 9. (c) Separate registration for multiple business verticals within a State or a Union territory [Rule 11]: ( Any person having multiple business verticals within a State or a Union territory, requiring a separate registration for any of its business verticals under sub-section (2) of Section 25 shall be granted separate registration in respect of each of the verticals subject to the following conditions, namely: * such person has more than one business vertical as defined in clause (18) of Section 2; . the business vertical of a taxable person shall not be granted registration to pay tax under Section 10 if any one of the other business verticals of the same person is paying tax under Section 9; all separately registered business verticals of such person shall pay tax under the Act on supply of goods or services or both made to another registered business vertical of such person and issue a tax invoice for such supply. = _ Explanation: For the purposes of clause (b), it is hereby clarified that where any business vertical of a registered person that has been granted a separate registration becomes ineligible to pay tax under Sertion 10, al other business verticals of the said person shall become ineligible to pay __ tax under the said setter pain separate registration for business (ii) A registered person eligi! Separate ERM GST REG-01 in Verticals may submit a separate application in such vertical. a sue 2.1 Taxable Event The concept of ‘supply’ is the key stone of the GST architecture. The provisions | relating to meaning and scope of supply are contained in Chapter III of the CGST _ Act read with various Schedules given under the said Act. Therefore, following shall be discussed in this chapter: Section 7 [Meaning and scope of wipply Section 8 _| Taxabilty of composite and mixed supplica Schedule 1_| Matters to be treated as supply even if ma Schedule H | Matiers to be treated as supply of ‘go services. Schedule III | Matters or transactions which shall be Ganiaj a of goods nor as supply of serviewy, eed Helther as oe Q.1. Briefly explain the meaning of supply. - Ans. Meaning of Supply [Section 7(1)]: | \) all forms of supply of goods or services or both such as sale, exchange, licence, rental, lease or disposal made or agreed consideration by a person in the course or furtherance or \0) importation of services, for a consideration whether or or furtherance of business, Wb the activities specified in Schedule I, made or agreed to be made without a consideration, g the activities to be treated as supply of goods or supply of services as or as supply transfer, barter, to be made for a business, not in the course referred to in Schedule II. Scanned with CamScannerE ze SLE ANS COLLECTON OF OST #97 [section 70)] Notwithstanding anything contained in sub-section PPA tna (a) activities or transactions specified in Schedule III; or H) (0) 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 sub-sections (1) & (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as— + a supply of goods and not as a supply of services; or + a supply of services and not as a supply of goods. The meaning and scope of supply taxable under GST can be understood in terms of the following parameters, which can be adopted to characterize a transaction as supply: Supply should be of goods or services. Supply. of anything other than goods or services like money, securities etc. does not attract GST. + Supply should be made for a consideration + Supply should be made in the course or + Supply should be made by a taxable person. + Supply Should be a taxable Supply— Let us analyse the terms goods and services as defined under the Act: Scanned with CamScanner28 ® SHIVA DELHI UNIVERSITY SERIES i foods and services is outside the scope of Anything supplied other than 5 ‘ strative modes of supply mentioned supply. Now, we will analyse the various illus in Section 7(1)(a): I. Sale and Transfer. Earlier, VAT was levi vd by the State on the sale of goods which was defined under most State VA'T laws ay transfer of property in goods for consideration. Under the COST Act, although has been treated as a form of supply leviable to GST, the definition of ‘sale’ has not been provided. Further, the term ‘transfer’, which has also been inc supply, is also not defined. IL. Barter and Exchange. While barter may deal with a transaction v/hich only includes an exchange of goods/services, 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 exchange would be leviable to GST. Example of Exchange. When a new car worth %5,00,000 is purchased in exchange of an old car alongwith the monetary consideration of %4,00,000 paid for the said purchase. Example of Barter. When a doctor provides medical consultancy to a barber then Medical Consultancy is a supply of Doctor and when the barber cuts Doctor's hair, it is a con for the hair cut by the barber. IM. Licence, Lease, Rental etc. Licenses, 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. Under the GST regime, such licenses, leases and rentals of goods with or without transfer of right to use are covered under the supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule II of CGST Act. IV. Consideration. One of the essential conditions for the supply of goods and/or services to fall within the ambit of GST is that a supply is made for a consideration. However, consideration does not always means money. It covers anything which might be possibly done, given or made in exchange for something else. Further, a consideration need not always flow from the recipient of the supply. It can also be made by a third person. Y, In Course or furtherance of Business. GST is essentially a tax only on commercial transactions. Hence, only those supplies that are 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 unde: the ambit of GST unless they fall within the definition of business. athe eluded 4 forin of Scanned with CamScannerCHAPTER @: LEVY AND COLLECTION OF GST m@ 29 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 the car dealer is not a supply under CGST Act because supply is not made by him in the course or furtherance of business, Any activity undertaken in course/for furtherance of business would constitute a supply. Since ‘business’ includes vocation, sale of goods or service even as a vocation is a supply under GST. Example: Amitabh Bachchan, a famous actor, paints some paintings and sells them. The consideration from such sale is to be donated to a Charitable Trust—‘Kind Human’. The sale of paintings by the actor qualifies as supply even though it is a one-time occurrence. Example: A Resident Welfare Association provides the service of depositing the electricity bills of the residents in lieu of some nominal charges. Provision of service by a club or association or society to its members is treated as supply as this is included in the definition of ‘business’. VI. Supply by a Taxable Person. A supply to attract GST should be made by a taxable person. Hence, a supply between two non-taxable persons does not constitute taxable supply under GST. The restriction of being a taxable person is only on the supplier whereas the recipient can be either taxable or non-taxable. Further, there is no ‘condition that supply needs to be made fo another person ie,, supplies made to self are also taxable. \\ Ri Mo AOL, Tama Q. 2. Who is a taxable person? \uuit war bx Ans. A “taxable person” is a person who is registered or liable to be registered under Section 22 or Section 24. Hence, even an unregistered person who is liable to be registered is a taxable person. Similarly, a person not liable to be registered, but has taken voluntary — registration and got himself registered is also a taxable person. ~@3. What is taxable supply? Ans. Taxable supply. For a supply to attract GST, the supply must be taxable. Taxable supply has been broadly defined and means any supply of goods or services or both, which is leviable to tax under the GST Law- Exemptions may be provided to the specified goods or services or to a specified category of persons/ entities making supply. © 22 Place of Supply (POS) Q.4, Briefly explain the concept of place of Supply. Ans. In GST, the concept of a place of supply has been made relevant not only for the supply of services but also for the transaction of goods. Which tax is to be levied (IGST or CGST and SGST/UTGST) will depend on Whether a particular transaction is an Inter-state supply or Intra-state supply. Hence, every transaction will have to go through the test of provisions relating to the place of supply in order to determine which tax is to be levied. Scanned with CamScanner30. ® SHIVA DELHI UNIVERSITY SERIES The purpose of the place of supply provisions is two-fold: ; 1. In case of cross-border transactions, to determine whether tax is to b levied on a particular transaction. , 2. In the case of domestic transactions, to determine whether a Particula, transaction is an inter-state supply or an intra-state supply. Place of Supply (POS) for Imports and Exports (Section 11): + Imports. The place of supply of goods imported into India shall be the location of the importer. + Exports. The place of supply of goods exported from India shall be the location outside India. Transactions other than Tinport or Export (Section 10) 1. Movement of Goods. Section 10(1)(a) states that “where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient”. This implies that place of supplier or receiver is of no consequence to determine the place of supply when it comes to those transactions which involve the movement of goods. The place where delivery terminates ie, where the ownership is passed on shail be critical to determine the place of supply. Let us understand this with few examples: Example: Rathi Limited of Rajasthan sells 50 cell phones to Shah Traders in) Gujarat. Rathi Limited delivers the product to Shah Traders in its warehouse _ in Ahmedabad, Place of supply, in this case, will be Ahmedabad and IGST , will be levied as it is an Inter-State transaction } 2. Supply on behalf of another (Bill fo Ship To Transactions). Section 10(1)(b) states “where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during the movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person”. When goods are delivered to a party on the direction of a third person the place_of supply will be the location of such third person and not where the delivery terminates. | (Example: Hanuman Traders, a dealer in furniture, locatéa in’ Maharashtra, ) "receives an order from Ram Traders, also located in Maharashtra. ‘The order | for the supply of 50 Tables, with an instruction to ship the Tables to Prime fraders. Hanuman Traders is the supplier of Tables and Ram Traders the buyer. Accordingly, Hanuman Traders bills the transaction to_ aut bw | | | } Scanned with CamScannerCHAPTER @: LEVY AND COLLECTION OF GST @ 314 + The second part of the transaction— between Ram Traders and Prime Hardwares. Ram Traders is the supplier, and Prime Hardwares is the buyer. Ram Traders bills the transaction to Prime Hardwares, and endorses the lorry receipt (goods shipped in a lorry by Hanuman Traders) in favour of Prime Hardwares, This lorry receipt (LR) will enable Prime Hardwares to take the delivery of the goods. Over here, on the instruction from Ram Traders, Hanuman Traders ships the tabies to Prime Hardwares located in Tamil Nadu. Here, Ram Traders is deemed as the third person. Therefore, the place of supply will be the principal place of business of the third person, ie,, Maharashtra. Accordingly, Hanuman Traders charges CGST and SGST on billing to Ram. Traders. The second part of the transaction between Ram Traders and Prime Hardwares will be inter-state, and IGST will be charged. Example: Chamunda Traders in Maharashtra receives an order from Queens _ Associates in London to deliver 100 cell phones at Maheshwari Dealers in Maharashtra. On application of Section 10(1)(b) place of supply will be London. Now the question arises if this transaction will be taxed even if the place of supply is London? : There will be two parts to this transaction as well: ened + Between Chamunda Traders and Queens Associates. First, we need to understand whether the transaction between Chamunda Trad and Queens Associates will be considered as Export? As per Se 16, export of goods is a “Zero Rated Supply” and tax need levied on the same. As per Section 2(), “export of goods” faking goods out of India to a place outside India. In our case, as goo’ are not moving out of India hence it cannot be termed as exports. Section 7(5)(a) states that supply of goods or services or both, wl supplier is located in India and the place of supply is outside India, | shali be treated to be a supply of goods or services or both in the of inter-state trade or commerce. Above section applies to the present case, supplier (Chamunda Traders) is located in India and place of supply (London) is outside India. Hence, the transaction between Chamunda Traders and Queens Associates will be considered as an inter-state supply, and IGST shall be levied on it. “eee Between Queens Associates and Maheshwari Dealers. The transaction between Queens Associates and Maheshwari Dealers cannot be considered as the import of goods as according to Section. 2(11) “import of goods” means bringing goods into India from a place outside India. on This transaction will be covered under Section 7(5)(c) which states thai supply of goods or services or both in the taxable territory, not being an intra-state supply and not covered elsewhere in Section 7 shall’ Scanned with CamScanner2 @ SHIVA DELHI UNIVERSITY SERIES: treated to be a supply of goods or services or both in t inter-state trade or commerce. In the present case, the supply of g00' taxable (Mahareshtsa), it is not an intra-state supply as the supplier (Queens Associates) is located outside the taxable territory and such a situation is not covered elsewhere in Section 7. Hence, transaction etween, Queens Associates and Maheshwari Dealers is also an inter-state transaction and IGST will have to be paid by Maheshwari Dealers under reverse charge mechanism [Section 5(4)]. 3, No Movement of Goods. Section 10(1)(c) states that “where the supply does not involve movement of goods, whether, by the supplier or the recipient, the place of the recipient. When goods are of such nature Ww’ equi jovernent, place of supply shall be the location of such goods. Example: Bharat Limited registered in Maharashtra sold its pre-installed transmission tower (electric tower) located at Madhya Pradesh to Hindustan Limited registered in Delhi. : In this case, the location of the supplier is Maharashtra, but the place of supply will be Madhya Pradesh. Hence, IGST will be levied. the course of ds is in the taxable territory {| Example: Rathi Limited of Rajasthan gets an order of 100 cell phones from Patil Electronics in Maharashtra. Patil Electronics informs Rathi Limited that they will take the delivery of the cell phones from the factory of Rathi Limited at Jaipur. Here the location of the supplier is Rajasthan and location of the receiver is Maharashtra. However, Patil Electronics has agreed to take the delivery from Rathi Limited’s Jaipur factory. This implies that the termination of the movement of the cell phones to Patil Electronics takes place at the factory of eo ie, in Jaipur. Hence, the place of supply is Jaipur in- This is an intra-state transaction and, CGST and, i 3 Rathi Limited. It should be noted that Rathi Lend Gi tac. ey and CGST in Rajasthan, the credit of which shall not be available’ 4 Patil Electronics in Maharashtra. Hence, there will be a loss of credit : Alternatively, if Patil Electronics would have asked Rathi Limited to deliver | goods at its factory in Maharashtra it would have become an inter-state _ transaction and IGST would have been levied. The credit of IGST would: have been available to Patil Electronics. Many experts have an alternate view on this topic. It says as the transaction involves the movement of goods by the buyer it should be covered under ‘Section 10(1)(a) and not 10(1)(c). Which implies that place of supply should ~ | be Maharashtra and IGST shall be levied on the transaction. GEA Scanned with CamScanner rentamesenerpen gerne isisureeires seacene aeCHAPTER 2: LEVY AND COLLECTION OF GST = 33 4, When Goods are Installed. Section 10(1)(d) states “where the goods are assed or installed at site, the place of supply shall be the place of such installation or assembly, Example: Bharat Limited registered in Maharashtra opens a new office in Delhi. It purchases 10 ACs to be installed at its Delhi office from Patil electronics in Maharashtra. In this case, the location of the supplier i : : plier is Maharashtra, but the place of supply will be Delhi. Hence, IGST will be levied. a 5. Goods on Board a conveyance, Section 10(1)(e) states “where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle, the place of supply shall be the location at which such oods are taken on board.” This provision includes those purchases which are done while travelling on a conveyance. Example: Mr. Mehta is travelling on a cruise liner from Mumbai to Goa. He purchases a notebook from the in-house store in the cruise liner. These notebooks were on-board from Mumbai. Registered place of business of the notebook shop is in Mumbai. Place of supply, in this case, will be Mumbai. This is an intra-state supply, and CGST and SGST will be charged. > 2.3 Time of Supply Q. 5. For the purpose of paying tax liability, point of taxation is required. Time of supply is nothing but point of taxation. Briefly explain the concept of time of supply. n is the point of time when goods are deemed to be Ans. Point of taxatio supplied or services are deemed to be provided. It helps to determine value, rate of tax and due date for tax payment. Under GST, the liability to pay tax arises at the time when goods or services are supplied. Thus, time of supply is nothing but point of taxation. There are some gen determining time of supply. specific provisions are app. provisions are irrelevant. some specific provisions for fferent for goods and services. If general eral provisions and Time.of supply is dii lied to determine the time of supply then Scanned with CamScanner84m SHIVA DELHI UNIVERSITY SERIES a To determine time of supply of goods and services, four categories are provideg as below: L Time of Supply of Goods & Services under Forward Charge: Time of Supply of Goods and Services Incase of Goods— In case of Services — Earlier of the following: Earliest of the following: Date of issue of Invoice Date of issue of Invoice by the supplier or the by the supplier last date by which he is required to issue the invoice Date of Provision of service if invoice is not issued within the Date on which the prescribed period 1 supplier receives the payment Date on which the L_| supplier receives the payment Date on receipt of payment shall be earlier of: Date on which Date on which _ payment is entered payment is credited into books of accounts| to bank account 1. Date of Issue of Invoice for Goods: () When movement of goods is involved in supply, then before or at the time of removal of goods. . (i When no movement of goods is involved in supply, then before or at the time of delivery of goods or making available to the recipient. (ii) If continuous supply of goods (Example, Supply of Oil), then earliest of the following: * Time when each statement is issued. « Time when each payment is received. (jo) If goods are sent for approval then earlier of the following: ‘ Time when it becomes known that supply has taken place. * Six months from the date of removal. Scanned with CamScanner