Genesis of GST in India

Constitution ( 122nd Amendment ) Bill, 2014,received the assent of President

of India on 8th September,2016 and became Constitutional ( 101 ST
Amendment ) Act, 2016 which paved the way of GST in India. The power to
levy GST has been conferred by Article 246 A of the Constitution which was
introduced by the said Constitution (101st Amendment) Act, 2016.

The necessity for above Constitutional amendment to bring GST in India was
mainly due to the reason that prior to this amendment, the existing
Constitutional provisions had demarcated separate powers for the Centre and
the State to impose various taxes. The powers to levy various indirect taxes
were as under :

- The Centre levied excise duty on all goods manufactured or produced

in India. Further, Services were exclusively taxed by the Centre.
- The Centre also levied taxes on goods imported from outside India in
the form of basic customs duty and Additional duties of customs.
- The States levied VAT once the goods entered the stream of trade upon
completion of manufacture. In the case of inter-State sales, the Centre
had the power to levy a tax ( CST), but the tax was collected and
retained entirely by the States. Further, State Governments had the
powers to levy taxes like luxury tax, entertainment tax, entry taxes,
Lottery and Betting Taxes, OCtroi etc.
Now, to integrate existing central excise duty including additional duties of
customs, State VAT, service tax etc. into one comprehensive Goods and Services
Tax and to empower both Centre and the States to levy and collect the new
proposed tax –GST , the necessary amendment in the Constitution was
necessary and hence Constitution ( 101st Amendment Act), 2016 was passed.

With the passing of the abovementioned Constitution (101st Amendment)

Act, 2016, in September, 2016 , four bills were introduced in the Lok Sabha on
27th March,2017 namely Central Goods and Services Tax Bill,2017, Integrated
Goods and Services Bill, 2017, Union Territory Goods and Services Tax Bill,,2017
and Goods and Services Tax ( Compensation to States ) Bill,2017. The Lok Sabha
passed the above four bills on 29th March,2017 and then the bills were
enacted after getting the assent of the President of India on 12 th ,April,2017.

Central GST Act was enacted first and was followed by the enactment of the
State GST Laws by all State Legislative and 2 Union Territories ( Delhi &
Puducherry ) having their own legislature.

State GST - SGST Act was first passed by Telangana on 9.4.2017 followed by
other states. Assam passed State GST Act on 11 th May, 2017.
There has been a paradigm shift in the structure as well as functioning of
indirect taxes in India with the introduction of GST.

GST has subsumed multiple indirect taxes like excise duty, service tax, value
added tax, central sales tax, luxury tax, entertainment tax, etc.

Motivation for introducing GST in India

The deficiencies in the existing value added taxation has led to introduction of
GST which has the capacity to raise revenue in the most transparent and
neutral manner.

The major deficiencies in the earlier indirect tax regime have been briefly
discussed hereunder:

 The erstwhile sales tax regime in India was a combination of origin

based tax like Central Sales Tax on goods moving from one state to
another and destination based multipoint tax system in the form of
State-Level VAT on goods moving within the state.
 In the earlier indirect tax regime, a manufacturer of excisable goods
charged excise duty and VAT on sale of goods within the state. Again,
the VAT dealer on his subsequent sale of goods within the state
charged VAT on value comprising of basic value plus excise duty
charged by the manufacturer plus profit margin by the dealer.
For Example, when the goods were manufactured and sold by the
manufacturer, both central excise duty ( CENVAT) and State –Level
VAT were levied. Now, though CENVAT 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.

 In the earlier indirect tax regime there was no system of CENVAT after
manufacturing stage i.e. CENVAT was applicable only at manufacturing
level and not at distribution level.
 In respect of taxes on services, service tax was levied on all ‘services’
other than the Negative list of services or serviced otherwise
exempted. Further, double taxation of a transaction both as goods &
services was possible due to lack of clarity in applicable laws.
  In the earlier indirect tax regime, there was no system of integration of
VAT & Service Tax. However, credit across the service tax and the
central excise duty was integrated at the central level.
 State Governments were not empowered to levy taxes on provision of
services.
 Manufacturers/Dealers/ Service providers paying both central and
state taxes have to separately maintain proper accounts and submit
returns to both Central and State Governments.

All the above issues and many more created a need for one tax that will be
able to mitigate number of these problems to a large extent. Therefore, to
integrate existing central excise duty including additional duties of customs,
State VAT, State specific taxes, Service taxes and other indirect taxes levied
by the Central and State Governments into one comprehensive Goods and
Services Tax and to empower both Centre and the States to levy and collect
taxes, Goods and Services Taxes ( GST) was implemented in India on 1 st ,July,
2017. With the implementation of GST, twenty three taxes and seventeen
cesses have been subsumed in one GST.

Meaning & Feature of GST

GST means a value added tax levied on manufacture, Sale and consumption of
goods and service. It offers comprehensive as well as continuous chain of tax
credits on goods from the manufacture’s point up to the retailer’s level thereby
taxing only the value added at each stage of supply chain. Similarly, GST also
offers a chain of tax credits from the service provider’s point up to the
consumer’s level thereby taxing only the value added at each stage of supply
chain. Thus, only the final customer bears the GST burden charged by the last
supplier in the supply chain, with set-off benefits available to the supplier at all
the previous stages.

GST in India is a dual levy because Central Government will levy and collect
Central GST ( CGST)and the States/ Union Territories will levy and collect the
State GST/ Union Territory GST ( SGST/ UTGST) on intra-state/ union territory
supply of goods or services or both . The Central Government will levy and
collect Integrated GST (IGST) for inter-state supply of goods or services or both.

CGST is levied under CGST Act, 2017, SGST is levied under respective SGST Acts
of different states, UTGST is levied and collected by the UTs without state
legislatures, and IGST is levied under the IGST Act, 2017. Here, it is important to
note that Income from IGST shall be apportioned between the centre and
states on the recommendations of the GST Council

In the GST regime, the major indirect taxes have been subsumed in the ambit
of GST.

The list of various Central and State taxes subsumed in GST are:
 Central Levies subsumed – Central Excise Duty and Additional Excise
duties, Excise duty under medicinal & Toilet Preparation Act, Service tax,
CVD & Special CVD, CST, Central Surcharges and Cesses insofar as they
relate to Supply of Goods & Services.
State Levies Subsumed – VAT/Sales Tax, Luxury Tax, Entry Tax & Purchase
Tax, Taxes on Advertisements, Taxes on lottery, betting and gambling,
Entertainment Tax ( Except those levied by local authorities ), State
Surcharges and Cesses insofar as they relate to Supply of Goods &
Services.

It is important to note here that there are few levies like Customs Duty, Excise
Duty on Alcoholic liquor for human consumption, etc. which are still in force
even after the introduction of GST.

Benefits of GST

The major benefits which justify the introduction of GST in India are:

Benefits to the Government:

 GST is going to widening the tax base and improving the tax
payer compliance which will result in increase in Government
revenue.
 GST aim is to make India a common market with uniform tax
rates and procedures as well.
 The uniform SGST and IGST rates actually reduce the incentive
for Tax Evasion.
 GST will boost foreign investment and ‘Make in India’ campaign
in the long run
 The States will be benefited due to improvement in investment
cult in the country.
Benefits to Trade and Industry:

 GST leads to mitigation of ill effects of cascading in as much as it allows

a set- off of prior-stage taxes for the transactions across the entire
value chain.
 GST has lead to the development of a common national market
because of uniformity in tax rates.
 GST will boost exports because exports has been classified as Zero
rated supply.
Benefits to customer:
  There is a reduction in prices of goods and/or services mainly on
account of mitigation of cascading effect of tax. Further, GST is going
to result in the Widening of the tax base and improvement in the tax
payer compliance which will result in more tax collection for the
Government ( The benefit of buoyancy in Government Revenue will
ultimately benefit the final customer in terms of price reduction of
goods and/or services.
 The pricing structure is uniform through the country.

Framework of GST in India

GST in India comprises:

 In case of Intra-State supply:
CGST- levied and collected by Central Government, SGST- levied and
collected by State Governments. In case of Union Territories, which do
not have their own legislature, UTGST is levied in place of SGST.
Presently, Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli, Daman & Diu and Chandigarh are governed by UTGST
Act, 2017.
For Union Territories having its own legislative ( Delhi & Puducherry)
have their own GST legislation for levying SGST.
In case of Inter-State Supply: The inter- State supplies of taxable goods
and/or services are subject to Integrated Goods and Services Tax
( IGST ) called as Integrated Tax. IGST is approximately the sum total of
CGST and SGST/UTGST.
 Before imposing any tax, it must be established that the transaction
and the person on whom the tax is so imposed fall within the purview
of the charging section. For example, section 4 is the charging section
for income tax levy on a person. Similarly, in GST system, the charging
sections are framed as under which give power to impose GST on a
person:
 Section 5 is charging section for levying and collecting IGST by the
Central Government.
  Section 7 is charging section for levying and collecting UTGST by the
Central Government through the Administrator of the respective
UT
 Section 9 is charging section for levying and collecting CGST by the
Central Government.
Section 9 is the charging section for levying and collecting SGST
by the respective State Governments.

 GST is a destination based consumption tax applicable on all

transactions involving supply of goods and services and therefore, tax
revenue of SGST ordinarily accrues to the consuming states. The inter-
state supplier in the exporting state is allowed to set-off the available
credit of IGST, CGST AND SGST/UTGST ( in that order ) against the IGST
payable on inter-state supply made by him. Now, the buyer in the
importing state is allowed to avail the credit of IGST paid by him on
inter-state purchases. Hence, under the GST regime, there is a seamless
credit flow in case of inter-state supplies too.

 Under GST, tax would be levied on goods/ service based on place

where the supply of goods or service takes place which would generally
be as per the destination based principle i.e. GST will accrue to the
state of destination. Therefore, if the place of suppy is outside India, it
would not be liable to GST( called Zero rated export). In GST laws there
are separate provisions for identifying place of supply for goods and
place of supply for services. There are specific provisions to identify
‘Place OF Suply’.
 Point of Time (POT) is important to decide GST liability for a period. The
liability to pay GST on goods or services shall arise at the time of supply
as determined in terms of the provisions of the Act. After
determination of time of payment of GST as well as type of tax
( CGST/SGST/UTGST OR IGST ), the next question that arises is at which
value the tax is to be paid. Normally GST is to be paid on the
‘Transactional Value’. The method of computing transactional alue has
been clearly laid down in the Act. Section 15 of the CGST Act,2017
deals with value of taxable supply.
 The Central Government as well as the State Governments, on
recommendations of GST Council , have notified applicable rates of
 GST in respect of goods and services specified in different schedules.
The tax will apply on the value of supplies as determined under section
15 of the CGST/SGST Act.
For Goods
Rate Schedule CGST(%) SGST ( %) IGST ( %)
I 2.5 2.5 5
II 6 6 12
III 9 9 18
IV 14 14 28
V 1.5 1.5 3
VI 0.125 0.125 0.25

 The manner of utilization of Input Tax Credit ( ITC ) is as per table given
below:

IGST Credit can be CGST Credit can SGST UTGST

utilized against be utilized Credit Credit
only- against only- can be can be
utilized utilized
against against
only- only-
1. IGST 1. CGST 1.SGST 1.UTGST
1. CGST 2. IGST 2.UTGST 2.SGST
3. SGST 3.IGST 3.IGST
4. UTGST

 Goods and Service Tax Network (GSTN): GSTN is a company

incorporated under section 8 of the companies act, 2013. It has been
formed with the sole purpose of providing the IT backbone to
Government, pertaining to Goods and Services Tax Law. It manages the
entire IT system of the GST portal, which is the mother database for
everything in GST. This portal will be used by the government to track
every financial transaction, and will provide taxpayers with all services
–from registration to filing taxes and maintaining all tax details. GSTN
helps India fulfill its dream of paperless transactions where the
compliances related to GST can be performed digitally with maximum
provision of automation. It will establish a uniform interface for the
taxpayer and also create a common and shared infrastructure between
the Centre and States. GSTN maintains the website www.gst.gov.in and
 this Common GST Electronic Portal is accessible over Internet ( by
taxpayers and their representatives –CAs, Tax Consultants etc. and
Intranet by Tax Officials etc.. The portal is one single common portal for
all GST related services.

 GST Suvidha Providers (GSP): The GSTN has selected certain IT, ITeS and
financial technology companies to be called as GST Suvidha Providers
(GSPs). The function of GSPs is to develop applications to be used by
taxpayers for interacting with the GSTN. They facilitate the tax payers in
uploading invoices as well as filing of returns and act as a single stop
shop for GST related services. They customize products that address
the needs of different segment of users. GSPs may take the help of
Application Service Providers (ASPs) who act as a link between
taxpayers and GSPs
 Integrated tax ( Section 3(7) of the Customs Tariff Act) : Any article
which is imported into India shall, in addition, be liable to integrated
tax at such rate, not exceeding 40% as is leviable u/s 5 of IGST Act,2017
on a like article on its supply in India, on the value of the imported
article as determined under sub-section 8 or sub-section 8A.

 STATE COMPENSATION MECHANISM: The amendment made in the

Constitution provides that the Parliament may by law and with the
recommendation of GST council provide compensation to state on
account of implementation of GST. The period of compensation is
restricted up to 5 years. Accordingly Parliament has enacted “Goods
and Services Tax (Compensation to States) Act, 2017”. According to
section 2(d) of this Act, "compensation" means an amount, in the form
of goods and services tax compensation, as determined under section
7. As per section 7 of the Goods and Services Tax (Compensation to
States) Act, 2017, States and Union territories with legislatures have
to be compensated for revenue losses arising out of implementation
of GST during the five-year transition period beginning from the date
on which the SGST Act of the concerned State has come into force.
GST compensation cess is a compensation cess levied under section 8
 of the Goods and Services Tax (Compensation to States) Act, 2017. A
GST compensation cess would be applicable only on those supplies of
goods or services that have been notified by the Central Government.
Any article which is imported into India shall, in addition to GST, be
liable to GST compensation cess at such rate , as is leviable u/s 8 of
the Goods and Services Tax ( Compensation to States) Cess Act,2017
on a like article on its supply in India, on the value of the imported
article as determined under sub-section 10 or sub section 10A. As of
now, GST Compensation Cess at specified rate has been imposed on
the specified luxury items or demerit goods, like pan masala, tobacco,
aerated waters, motor cars etc. computed on value of taxable supply.
This Cess is leviable on intra-state supplies and inter-state supplies
with a view to provide for compensation to the States for the loss of
revenue arising on account of implementation of the GST.
 GST Council : Article 279 A of the Constitution empowers the
President to constitute a joint forum of the Centre and States namely
Goods and Services Tax Council ( GST Council ). GST Council is a joint
forum of the Centre and States to make recommendations to Union
and States relating to GST like rates of taxes, exempted goods and/or
services, principles of levy of taxes, apportionment of GST on inter-
State supplies, threshold limits of turnover below which Goods and
services may be exempted from GST, dispute resolution mechanism,
Any other matters which may be decided by the GST Council, etc.
Hence, GST Council is the apex constitutional authority to decide
policies of GST. The GST Council members are :The Union Finance
Minister as the Chairperson, The Union Minister of State in charge of
Revenue and Finance ,The Minister in charge of Finance or Taxation or
any other Minister nominated by each State Government .There will
also be a vice chairperson of GST Council elected by GST Council from
amongst its members.
 Apportionment of GST:
The Central Government has the exclusive power to make laws with
respect to GST in case of inter-State supply of goods and/ or services.
Such GST on supplies in the course of inter-State trade or commerce
 shall be levied and collected by Centre and then apportioned between
Union and States in manner as may be provided by the Parliament by
law as per the recommendation of GST Council.
 Import of goods or services from other countries will be deemed as in
the course of Inter-State trade or commerce. The CG is empowered to
levy IGST on import transactions (which were earlier subject to CVD
under Customs Tariff Act, 1975.

Goods outside the preview of GST

GST is levied on all goods and services, except alcoholic liquor for human
consumption and petroleum crude, diesel, petrol, ATF and natural gas. The
production of alcoholic liquor continues to be levied to State excise duty and
CST/VAT as applicable. Presently, petroleum crude, diesel, petrol, ATF and
natural gas are not subject to GST. These products will be levied to GST from a
date to be notified on the recommendations of the GST Council. Till such time,
central excise duty continues to be levied on manufacture/production of these
products and CST/VAT as applicable. Further, tobacco is one item which is
subject to both GST and central excise duty because the Union Government
has retained the power to levy excise duties on tobacco and tobacco products
manufactured in India.
 REGISTRATION UNDER GST

Introduction:

The registration legally recognizes a person as supplier of Goods and Services

and this registration also authorizes a person to collect taxes from his
customers and pass on the credit of such taxes paid to the purchasers of goods
or recipient of services. The registered person can claim the input tax credit (
ITC ) of taxes paid by him and also utilizes the same for payment of taxes due.

The registration of supplier means obtaining a Unique identification code from

the GST authorities which is a 15 digit Goods and Services TAX Identification
Number ( GSTIN). Under GST regime, there is a single registration for all the
taxes i.e. CGST, SGST/UTGST, IGST And Cesses. In a simple word, registration
under GST is not tax specific. With this unique GSTIN, the GST authorities
identify the tax payers and also check their compliance mechanism.

Advantages of Registration:

1. The supplier gets nation-wise legal recognition as a supplier of Goods

and/or services in India.
2. The registered supplier is legally authorized to collect taxes from his
customers in respect of goods or services supplied. He can also pass on
the credit of such taxes paid to the purchasers of goods or recipient of
services.
3. The registered supplier is entitled to claim the input tax credit ( ITC ) paid
on Inputs, Inputs Services, and Capital Goods. The ITC paid can be utilized
for payment taxes due on supplier of Goods or Services provided by him.
4. Seamless Flow of Funds: The registration allows the seamless credit of the
ITC from the manufacturer/ Importer as the case may be to the last
supplier in the chain.
Further, the registration also facilitates the seamless flow of funds from the
centre and states from where the goods/services are supplied and tax paid
to cross utilization of IGST credit and then to the consuming states of
goods and services.

5. Transparent Accounting for Taxes : There are running electronic ledgers

maintained on the dashboard of a taxpayer by GSTN. These would be
updated in real time on an activity in connection with these ledgers by the
taxpayer. The main ledgers comprises of:
- Electronic cash ledger
- Electronic credit ledger
 - Electronic liability ledger

1.3 Types of Registration

A person who is registered or is liable to be registered under the law would be a taxable person in
GST.

A person would be liable to be registered under two categories:

1.Person liable to be registered compulsorily irrespective of threshold limit will include :

(i) Persons making any inter-State taxable supply of goods. However, registration is not compulsory
in case of exclusive inter-state supplies of Nil rated goods. It is important to note that in relation to
a inter-state service provider who has aggregate turnover below the threshold limits,
registration is not compulsory.

(ii) Casual taxable persons making taxable supply. A causal taxable person ( CTP) is a person who has
a registered business in some state or UT in India, but wants to supply from some other state/UT
( Where he does not have a place of business). So, he has to get himself compulsorily registered in
the state/UT from where he wants to supply as a CTP.

(iii) Persons who are required to pay tax under reverse charge. The Central Government has the
power to notify categories of supplies against which recipient has to discharge the tax liability.

(iv) Non- Resident Taxable Persons ( NRTP) making taxable supply. An NRTP means any person who
occasionally undertakes transactions involving supply of goods or services or both, whether as
principal or agent or in any other capacity, but who has no fixed place of business or residence in
India.

(v) Persons who are required to deduct tax under section 51, whether or not separately registered
under this Act. The Government has mandated GST Deduction at Source to be made by the
deductor @ 1% CGST & 1% SGST from payments made/ credited to a supplier provided the value
of supply exceeds Rs. 2,50,000. The persons called ‘Deductor’ liable to deduct GST at source are :

 A department/ establishment of the Central/ State Government; or local authority or

Government agencies .
 Such other person or category of persons as may be notified by the Government on the
recommendations of the GST Council.

Note: TDS to be deducted only in case of intra-state supply i.e. no deduction shall be made if
location of supplier and Place of Supply is different from the State of registration of the recipient.

(vi)Persons who make taxable supply of goods or services or both on behalf of other taxable
persons whether as an agent or otherwise. For Example, C&F Agent receive the goods on behalf of
the Principal. The C& F Agent then makes supply of goods to the customer as an agent of the
Principal. Such Agent will be liable to obtain registration.

(vii) Input Service Distributor (ISD) , whether or not separately registered under this Act. An ISD is a
person who receives the services and distributes the credit of such services received by him to
different locations. For Example, X Ltd. a software company with its registered/ head office at
Guwahati and three other registered business locations situated at Delhi, Mumbai, Kolkata, has
acquired right of use of a particular software from Y Ltd being the provider of software licenses.
Assume that Y Ltd. has raised the invoice on Guwahati head office but, the licensed software is used
in all four offices. Here, Input tax credit of entire input services can not be claimed at Guwahati. The
law treats Guwahati office on whom Y Ltd. Has billed as ISD to distribute the input credit to all four
locations by pro-rata apportionment method.

Note: This law of ITC does not apply to goods & capital goods.

(viii) Persons who supply goods or services or both, through such Electronic Commerce Operator
( ECO) who is required to collect tax at source under section 52. Section 5(5) of the IGST Act
provides power to the Government to specify the category of services supplied through ECO by
notification and the person liable to pay tax. The tax on services specified in notification will be
payable by the ECO and not by the supplier of service. Therefore, the ECO has to obtain registration
compulsorily. The first proviso further provides that if ECO is not located in a taxable territory , then
any person representing the ECO in taxable territory will be liable to pay tax.

(x) Every person supplying online information and data base access or retrieval services OIDAR.
OIDAR are services provided through IT over Internet LIKE Cloud services, E-Books, Online Gaming
etc.

(xii) Such other person or class of persons as may be notified by the Government on the
recommendations of GST Council.

Note : Section 24 relating to situations where compulsory registration is required shall always
override Section 22 which relates to requirements of registration in cases where aggregate turnover
exceeds threshold limit i.e. cases covered under section 24 requires mandatory registration
irrespective of turnover.

2. Person liable to be registered provided ‘Aggregate Turnover’ of supply of goods or services or

both exceeds threshold limit. The following important points must be kept in mind:

 He should be engaged in making Intra-state taxable supplies of goods or services or both

However, a person who exclusively supplies goods or services or both wholly exempt from
tax, he would not be required to be registered under the law, reason being that he is not
making any taxable supplies.
 His ‘Aggregate Turnover’ in a year should exceed the threshold limit as specified under the
Act. Threshold limit has been provided in GST at Rs.10 Lakh for the special category States
and Rs.20 Lakh for other States and Union territories. Therefore, if aggregate turnover of
all supplies made by a person under same PAN on an all India basis exceeds Rs.10 Lakh for
persons making supplies from Special Category States and Rs.20 Lakh for person making
supplies from other than Special Category States or Union territory, then such person
would be liable for registration under GST.
 The term ‘Aggregate Turnover’ means aggregate value of taxable supplies, exempt supplies,
export of goods or services or both and inter-State supplies of a person under same PAN
on an all India basis. Following persons are mandatorily required to be registered under the
GST irrespective of any threshold limit.

The threshold limit for person making taxable supplies of goods or service or both from special
category States and other States or Union territory, shall be, aggregate turnover of Rs. 10 Lakh in a
financial year.
Persons would not be required to be registered under GST:

(a) If any person is engaged exclusively in the business of supplying goods or services or both that
are wholly exempt or not liable to tax under GST.

(b) An agriculturist to the extent of supply of produce out of cultivation land.

3.Voluntary registration under GST

Despite not being required to be registered mandatorily under GST, a person still might get himself
registered voluntarily. Once he gets himself registered voluntarily, all provisions under the Act
would apply upon him as they apply to a registered person.

List of special category States where thresh-old Limit of aggregate turnover of Rs.10 Lakh is
applicable-

Special Category States as specified under sub-clause (g) of clause (4) of Article 279A to the
Constitution of India are as follows:

i. Arunachal Pradesh

ii. Assam,

iii.Jammu and Kashmir,

iv. Manipur,

v. Meghalaya,

vi Mizoram,

vii Nagaland,

viii. Sikkim,

ix.Tripura,

x. Himachal Pradesh and

xi Uttarakhand

Case Study on matters related to registration:

Mr. A has an office in Rajasthan and it makes supplies exclusively in Rajasthan and does not make
any inter-state taxable supply. The dealers liability to register in different situations will be :

(a) He has made supply of taxable goods of Rs.24 Lakh. He would be liable to be registered under
GST as his aggregate turnover exceeds Rs.20 Lakh.

(b) He has made supplies of taxable goods of 10 Lakh and exempted goods of Rs.12 Lakh. He
would be liable to take registration as his aggregate turnover has exceeded Rs.20 Lakh.

(c) He has made supply of exempted goods of Rs.24 Lakh. He would not be liable to take
registration as he is exclusively making supply of exempted goods.
(d) If a person makes taxable supply – intra-state supply of goods from Rajasthan of Rs.15 Lakh. He
would not be liable to be registered in Rajasthan. But, If he starts to make taxable supply of any
amount from a special category State, like Arunachal Pradesh, he would be required to be
registered both in Rajasthan and in Arunachal Pradesh because his aggregate turnover exceeds Rs.
10 lakhs. Here, his threshold limit will be considered limit which applicable to A.P

(e)Mr. Saumil, has offices in Rajasthan and Delhi which exclusively make local supplies in Rajasthan
and Delhi respectively and none of the above two offices make any inter- state taxable supplies. Let
us consider his liability to register in different situations:

(f) His Delhi Office has made a taxable supply of Rs.5 Lakh and Rajasthan Office has made a taxable
supply of Rs.10 Lakh. He would not be liable to be registered under the act as his aggregate
turnover at both the branches is Rs.15 Lakh and has not exceeded Rs.20 Laklh.

(g) His Delhi Office has made an exempted supply of Rs.5 Lakh and Rajasthan Office has made an
exempted supply of Rs.30 Lakh. He would not be liable to be registered under the Act as both his
branches are engaged in making supplies exempt from tax under the Act.

(h) His Delhi Office has made a taxable supply of Rs.5 Lakh and exempted supply of Rs.8 Lakh.
Rajasthan Office has made a taxable supply of Rs.10 Lakh. Although Turnover of each of the branch
is less than Rs.20 Lakh, however since his aggregate turnover on all India basis under common PAN
is Rs.23 Lakh ( exceeds Rs.20 Lakh). Therefore, he would be liable to be registered under the act
both in Rajasthan and Delhi.

(i) His Delhi Office has made an exempted supply of Rs.5 Lakh and Rajasthan Office has made a
taxable supply of Rs.30 Lakh. He would not be liable to be registered in Delhi as he is making
supplies exempted from tax under the Act but he would be required to be registered in Rajasthan
as he is making taxable supply from Rajasthan with his aggregate turnover at both the branches
being Rs.35 Lakh (in excess of Rs.20 Lakh). Further, If at any time he makes a taxable supply from
Delhi of any amount he would be required to be registered in Delhi as well.

APPLICATION FOR REGISTRATION

A person can obtain a single registration in each State or a Union territory on a single Permanent Account
Number. One person would be allotted a single registration in a State or Union territory. However, there is
an exception to the said provision which provides that if a person is having multiple business verticals in a
State or Union territory, he may be granted separate registration for each business vertical. A person who
has obtained or is required to obtain more than one registration in one State or Union territory or more
than one State or Union territories under the same PAN would be treated as distinct/separate persons
under GST.

From above it is clear that GST registration is state/UT specific.

Particulars Requirement for Registration

Branches in multiple state
Branches in same state
Separate registration in each state is compulsory.
There is no centralized registration under GST.
Single registration if one place is declared as principal place
of business and other branches as additional place of business
Further, a person has the option to obtain multiple registration
If his business entity is having separate business vertical
though being in the same state.
Supply of goods or services or both between person having separate registrations under common PAN in
the same State/Union territory or different States/Union territories: All these businesses registered
separately whether in same State or Union territory or different States or Union territories would be
treated as distinct/separate persons under GST and would have to charge tax on the supply of goods or
services or both amongst themselves, in the same manner as tax is charged by them on supply of goods or
services or both to a third person.

Time limit for submission of application for registration: An application for registration has to be
submitted within thirty days from the date on which the person becomes liable to registration. However,
person who is a non-resident taxable person or casual taxable person shall apply for registration at least
five days prior to the date of commencement of business.

Consequences of submission of application of registration beyond the period of thirty days from the
date on which the person becomes liable for registration or otherwise : He will not be allowed benefit of
Input Tax Credit in respect of inputs held in stock and inputs contained in semi-finished or finished goods
held in stock as on the date when he became liable for registration.

The Act only provides for the allowability of Input Tax Credit in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock, for person applying for registration within
thirty days from the date on which he becomes liable for registration or person applying for voluntary
registration.

Any approval/rejection of registration under one Act say CGST Act shall be deemed to be
approval/rejection under other Acts say SGST Act and vice versa.

Format of Goods and Services Identification Number to be assigned to a registered person

Goods and Services Tax Identification Number would be of 15 Characters and such characters would be
assigned in following format:

(a) Two characters for the State Code;

(b) Ten characters for the PAN or the Tax Deduction and Collection Account Number;

(c) Two characters for the entity Code; and

(d) One checksum character.

Effective date of registration for a person applying for new registration:

(a) Application for registration has been submitted within thirty days from the date on which the person
becomes liable for registration: The registration shall be effective from the date on which the person
becomes liable for registration.

(b) Application for registration has been submitted after thirty days from the date on which the person
becomes liable for registration: The registration shall be effective from the date of grant of registration.

Time limit after expiry of which a person who has applied for registration shall be deemed to have been
granted registration : A person who has applied for registration and who does not receive any
communication regarding deficiency within a period of three working days from the date of submission of
application for registration, shall be deemed to have been granted registration after the expiry of that
period.
Document to be submitted by a person liable to be registered under the Act because the person has
liability to deduct tax under section 51 of the CGST Act : A person, who is required to obtain registration
under CGST Act and is required to deduct tax under section 51 of the CGST Act may provide Tax Deduction
and Collection Account Number in lieu of Permanent Account Number issued under Income-tax Act,
1961, in order to be eligible for grant of registration.

CANCELLATION OF REGISTRATION

The registered person has to submit an application electronically for cancellation of registration
containing following details:

(a) Inputs held in stock or inputs contained in semi-finished or finished goods held in stock and capital
goods on the date from which cancellation of registration is sought.

(b) Tax due to be paid on Inputs held in stock or inputs contained in semi-finished or finished goods
held in stock and on capital goods.

(c) Details of the payment, if any, made against such liability.

(d) Relevant documents in support of the application for cancellation of registration.

Registration may be cancelled by proper officer on an application filed by the registered person in
following scenarios:

a) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(e) the taxable person, other than the person registered under sub-section (3) of section 25, is no
longer liable to be registered under section 22 or section 24.

Under following situations, proper officer can cancel the registration of the registered person on his
own motion:

(a) a registered person has contravened such provisions of the Act or the rules made thereunder as
may be prescribed; or

(b) a person paying tax under section 10 has not furnished returns for three consecutive tax periods; or

(c) any registered person, other than a person specified in clause (b), has not furnished returns for a
continuous period of six months; or

(d) any person who has taken voluntary registration under subsection (3) of section 25 has not
commenced business within six months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts; or

(f) the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
(g) there is any change in the constitution of the business; or

(h) the taxable person, other than the person registered under sub-section (3) of section 25, is no
longer liable to be registered under section 22 or section 24.

A person who has applied for registration voluntarily under the Act, can apply for cancellation of
registration after the expiry of a period of one year from the effective date of registration.

Any cancellation of registration under one of the Act say CGST Act shall be deemed to be cancellation
of registration under other Acts say SGST Act.

A person whose registration has been cancelled by the proper officer suo motu can apply for
revocation of cancellation of registration and such application has to be submitted within thirty days
from the date of service of cancellation order.
 Supply Under GST
GST revolves around supply. Any person makes taxable supplies from a State or a Union Territory, then he
would be required to be registered under the law subject to fulfilment of other conditions. Therefore,
under GST, taxable activity would not be selling or manufacturing of goods or providing service but key
activity would be supply of goods or services or both.

The definition of supply is a very wide definition. Under section 7 (1) of the CGST Act,2017, 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 a consideration by a taxable person in the course or
furtherance of business [Section 7(1) (a) ]

(b) Import of services ( not goods ) for a consideration whether or not in the course or furtherance of
business [ Section (1) (b) ]

(c) The activities specified in Schedule I, made or agreed to be made without consideration
[ Section 7 (1) (c) ]

(d) The activities to be treated as supply of goods or supply of services as referred to in Schedule Ⅱ.

Examples of Supply in GST are as follows:

Example 1: A goes to a Hotel of B and books room for Rs. 10,000 per day. Under the present law, it was
treated as luxury being provided by B to A. Itwould be treated as Service has been supplied by B to A.

Example 2: A went to a movie hall of B and purchased tickets worth Rs.500 for watching a movie. Under
present scenario, it was treated as entertainment being provided to A. However, under GST it would be
treated as service has been supplied by B to A.

Example 3: A constructed house for B. Under the present system, works contract was sale of goods up till
when the goods were incorporated in the building and provision of services to the extent labour was
involved. The issue was always what is the value of goods involved and what's the value of services
involved. The law makers also provided fixed percentages for arriving at the value of labour and material.

Under GST, Works contract would be treated as supply of service and it would be treated that Services
have been supplied by A to B.

GST would replace multiple taxes levied by multiple governments in supply chain with a single levy on
supply of goods or services. It would be simple that if any activity falls within the supply chain i.e. sales,
service, manufacturing etc., one tax would be levied i.e. GST.
The following table would clearly highlight how major taxes and their taxable events in present scenario
would merge into one taxable event i.e. supply and one tax i.e. GST;

Taxes Taxable Event in pre-GST System Taxable Event in Levy of Tax in

GST GST

State VAT Sale of goods within the

State
Excise Duty Manufacturing of goods

Central Sales Tax Sale of goods between Two States

Additional Customs Duty Import of Goods

Supply One Tax
Special Additional Duty Import of Goods
in the
Entry Tax Entry of Goods into Local Area name of
GST
Service Tax Provision of Service would be
levied on
Entertainment Tax Provision of Entertainment supply of
goods or
Luxury Tax Provision of Luxury
services

Activities without consideration but considered as supply :

Not all activities without consideration would be treated as supplies under GST. Only those activities
which have been specified under Schedule I would be treated as supplies. Following activities made or
agreed to be made without consideration, have been specified in Schedule I:

(a) Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets.

This would cover instances where there is permanent transfer of business asset or disposal of business
asset without consideration to any person. This is a deemed provision inserted to cover situations, wherein
Input Tax Credit has been availed by a person and there is permanent transfer or disposal of business
assets without consideration.

The term permanent transfer or disposal would not include any instance wherein asset has been
destroyed by any natural act. Further, it would not include any temporary handing over of the business
asset to any person. For Example, a furniture dealer gifts furniture set from his business stock to one of his
friend. Here, there is a gift of business asset and it would amount to supply if the dealer has claimed Input
tax credit on purchases of furniture.

(b) Supply of goods or services or both between related persons or between distinct persons as specified
in section 25, when made in the course or furtherance of business.

The first condition to be identified is whether supply of goods or services or both has taken place between
related persons or distinct persons without consideration. Upon satisfaction of the condition, next
condition to be satisfied is whether supply is in the course or furtherance of business. If both the
conditions are satisfied, then such supply would be covered under Schedule I to CGST Act, 2017. If any one
of the condition is not satisfied, then such supply would not be covered under this Schedule.

However, gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.

Some of the instances are as follows:

(i)Supply of goods between one branch situated in Rajasthan and another branch situated in Maharashtra
of the same person.

(ii) Services provided by a supplier to any related person in the course or furtherance of business.

Case Study: A is a registered person in Maharashtra and has obtained two separate registrations in
Maharashtra in respect of multiple business verticals. The two separate registrations obtained in
Maharashtra would be deemed to be distinct persons for the purpose of this Act.

(ii) Establishment of a person in another State or Union territory would be treated as distinct person in GST
even though such establishment is not registered in that State or Union territory.

(c) Supply or receipt of Goods by an agent on behalf of the Principal:

This condition covers two situations:

(i ) Supply of Goods by an agent on behalf of principal

(ii) Receipt of Goods by an agent on behalf of principal.

Under both transactions as categorized above, agent represents the principal in the transaction before the
third party. A principal although personally not present himself, in the transaction between the third party
and agent, but, he is represented in the transaction by agent. The agent enters into the transaction to
supply the goods or receive the goods from the third party on behalf of the principal.

The fact that agent represents principal in the transaction before the third party, tantamount to a
consequential transaction between the principal and the agent. This consequential transaction between
the agent and the principal is sought to be taxed by Schedule I:

 Supply of Goods by the principal to his agent: Supply of goods by principal to his agent would be
deemed as a supply wherein agent undertakes to supply such goods on behalf of principal to the
third party.
 Supply of Goods by an agent to his principal: Supply of goods by agent to his principal would be
deemed as a supply wherein agent undertakes to receive such goods on behalf of principal from
the third party.

For example, X Ltd. engages Y Ltd. as an agent to sell air-conditioners on its behalf and accordingly X Ltd.
has supplied say 125 Air conditioners to the showroom of Y Ltd. located in Jorhat. This is a case of supply
of goods even if made without consideration.

(d) Import of services by a taxable person from a related person or from any of his other establishments
outside India without consideration, in the course or furtherance of business shall be treated as supply.

Section 7(1)(b) covers importation of services for a consideration whether or not in the course or
furtherance of business.
However, this section i.e. section 7(1) (c) covers services which have been imported by a taxable person
from a related person from any establishment outside India without any consideration, in the course or
furtherance of business.

Provisions of law to identify whether a particular supply is supply of goods or supply of service. Supply
of goods or supply of services

Section 7(1) (d) read with schedule II covers cases of deemed supply. Schedule II lays down as to what
would be held as service and what would be held as goods. This would lead to a clear recognition in the
minds of the people regarding which set of rules would be applicable for determination of place of supply
and time of supply on the given transactions.

Few cases :

Major Heading Sub-Heading Treated as Supply

Of Goods/Services
Transfer Any transfer of the title in goods Supply of Goods
Any transfer of right in goods or of Supply of Services
Undivided share in goods without
the transfer of title thereof
Any transfer of title in goods under Supply of Goods
an agreement which stipulates that
property in goods shall pass at a
future date upon payment of full
consideration as agreed
Land and Building Any lease, tenancy, easement, Supply of Services
licence to occupy land
Any lease or letting out of the Supply of Services
building including a commercial,
industrial or residential complex for
business or commerce, either wholly
or partly,
Supply of service Construction of a complex, building Supply of services
civil structure or a part thereof, including a complex or
building intended for sale to a buyer, wholly or partly, except
where the entire consideration has been received after
issuance of completion certificate, where required, by the
competent authority or after its
first occupation, whichever is
earlier. Explanation-For the
purposes of this
clause-
(1) the expression “competent
authority” means the Government
or any
authority authorised to issue
completion
certificate under any law for the
time
begin in force and in case of non-
requirement of such certificate
from such
authority, from any of the following,
namely:-
(i)an architect registered with the
Council
of Architecture constituted under the
Architects Act,1972;
or
(ii)a chartered engineer registered with
the Institution of Engineers(India);
or
(iii)a licensed surveyor of the respective
local body of the city or
town or village or development or
planning authority;
(2)the expression “construction” includes
Additions, alterations, replacements or
Remodelling of any existing civil
structure

Heading Treated as Supply

Of Goods/Services
Temporary transfer or permitting the use Supply of Services
or enjoyment of any intellectual property
right
Development, design, programming, Supply of services
customisation, adaptation, upgradation,
enhancement, implementation of
information technology software

Agreeing to the obligation to refrain from Supply of Services

an act or a situation, or to do an act

Composite Works contract as defined in clause

Supply (119) of section 2
Supply, by way of or as part of any
service or in any other manner
whatsoever, of goods, being food or
any other article any drink(other Supply of
than alcoholic liquor for human Services
consumption), where such supply
or service is for cash, deferred
payment or other valuable
consideration.

Case Study 1: A sold the goods to B. The property of the goods has been transferred from A to B. Thus, it is
a transaction of supply of goods.

Case Study 2: A has provided goods to B on rent. A has not transferred the title of the goods to B but has
only provided him the right to use the goods. Thus this would be treated as supply of Service.

Case Study 3 : A enters into an agreement with B on 15th January 2017 that he would effect a sale of 100
Kg Soyabean on 15th March 2017 at Rs.500 Kg. This is an agreement to sale. This would be treated as
supply of goods when in pursuance of the said agreement to sale the property in the goods is transferred
to B.

Case Study 4: A has given land on lease to B for 10 Years on annual rent of Rs.500000 per Annum with an
annual increase of 10% every year over the previous years rent. This transaction would be treated as
Supply of Service.

Case Study 5 : A has let out premises to B. The factory consists of building wherein there are residential
quarters for the labourers and Factory premises for manufacturing operations. Thus, it would be treated as
supply of service.

Case Study 6: A provides wood to B. He asks to cut wood into even pieces and carve out various pictures
on the wood. B cuts wood into small pieces and carves out pictures on wood. This would be covered under
supply of service.

Exclusions from supply u/s 7(2) - Negative List

 Section 7(2) read with Schedule III to CGST Act, 2017 specifies transactions which would neither be
treated as supply of service nor as supply of goods.

Situation Details

Situation I Services rendered by an employee to the employer in the course of or

in relation to employment.

Situation II (a)Services rendered by any court or tribunal. Such Court or Tribunal shall be
establishment under any law for the time being in force

Schedule III Functions performed by the

(a)Members of Parliament,
(b)Members of State Legislature,
(c)Members of Panchayats,
(d)Members of Municipalities; and
(e)Members of other local authorities
Section IV Duties performed by any person who holds any post in pursuance of the
Provisions of the Constitution in that capacity
Section V Duties performed by any person as a
(a)Chairperson or a Member, or
(b)Director in a body established by the Central Government or a State
Government or local authority and
(c)Who is not deemed as an employee before the commencement of this clause.
Section VI Services of
(a)funeral,
(b)burial,
(c)crematorium or
(d)mortuary including
(e)transportation of the deceased.

Section VII (a)Sale of Land, and

(b)Sale of Building (subject to clause (b) of paragraph 5 of Schedule II)
Section VIII Actionable Claims, other than lottery, betting and gambling

Composite Supply
Basic features of a composite supply are as follows:

Condition Particulars

Condition 1 It should be a supply made by a taxable person to a recipient

Condition 2 Such supply should comprise of two or more taxable supplies of goods or services or
both, or any combination thereof
Condition 3 Such combination of two or more supplies of goods or services should be naturally
Bundled
Condition 4 Such Naturally bundled goods or services should be supplied in conjunction with each
other in the ordinary course of business

Condition 5 One of two naturally bundled supply should be a principal supply.

Condition 6 Composite Supply shall be treated as the supply of principal supply and the
applicable tax rate on the entire transaction would be the tax rate applicable on the
Principal supply.

The point to be emphasized here is that combination of two or more supplies of goods or services or both
should be naturally bundled and should be supplied in conjunction with each other i.e. they should be
occurring in the same point in time and space. However, one of them should be the principal supply. The
term Principal supply would mean supply which forms the predominant element of the composite supply
and other parts of the supply are only ancillary or supportive to that predominant part.

Case Study: Where a person takes 50 People on tour and charges a fix amount for stay, travel and food.
Supply of Service is in the form of Tour. Stay and food is composite supply with the main supply which is
tour.

Mixed supply

A mixed supply has the following features:

Condition Particulars
Condition 1 It should be a supply made by a taxable person to a recipient for a single price.
Condition 2 Such supply should comprise of two or more individual supplies of goods or
services, or any combination thereof. None of the supply is a principal supply.
Condition 3 Such supply of goods or services should be supplied in conjunction with each other.

Condition 4 The supply should not constitute composite supply.

Condition 5 A mixed supply shall be treated as supply of that particular supply which attracts
highest tax rate.
The essence of the definition is that there should be supply of two or more individual goods or services or
any combination thereof, in conjunction with each other. The word Individual needs special emphasis
because, in case of mixed supplies, goods or services which are supplied to the recipient for one price can
be supplied Individually. It's not that they cannot be supplied individually in the normal course of business.
They can be supplied but they have not been supplied individually.

Case Study: Supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated
drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be
supplied separately and is not dependent on any other.
Case Study: Car check up camps organized by a Car Workshop wherein along with standard check up, oil
and fuel filter are being changed at a single price. The supply of fuel filter and oil filter for a single price is
an example of mixed supply as the supply of fuel filter and oil filter is not a naturally bundled service but
can be supplied individually.

Determination of Supply in the course of inter-state trade or intra-state trade

To determine whether a supply of goods or services or both is a Supply in the course of Inter-State
Trade or Intra-State , two critical factors must be clearly understood:

1. Place of Supply : Revenue in GST accrues to the place where the goods or services
are consumed. Therefore, determination of the ‘Place of Supply’ where the goods
or services are consumed holds utmost importance in GST. The relevant provisions
relating to ‘Place of Supply’ for Goods are contained in section 10 and 11 of the
IGST Act. Section 10 contains provisions relating to cases Where Supply of Goods
is within India. Similarly, section 11 contains provisions relating to Import and
Export.
And for Services the provisions are contained in section 12 and 13 of the IGST Act.
Section 12 contains provisions relating to cases where supply of services is within
India. Similarly, section 13 contains provisions relating to import and export of
services.
2. Location of Supplier: Location of Supplier determines the place from where the
supply of goods or services or both has been made by the person. The registration
under the Act, Filing of returns, Payment of Taxes, and other compliances by a
taxable person under GST law are attached with the location of the supplier from
where the taxable supply is made.

The relevant provisions relating to ‘Place of Supply’ is discussed herein below:

Place of Supply of Goods

1. When Supply of goods is within India:

Few sections
Section Supply
10(1) Supply involves movement of goods, whether by the
(a) supplier or the recipient or by any other person.
10(1)(b) Goods are delivered by the supplier to a recipient or
any other person on the direction of a third person,
whether acting as an agent or otherwise , before or
during movement of goods , either by way of transfer
of documents of title to the goods or otherwise
10 (1) (c) Supply does not involve movement of goods ,
Whether by the supplier or the recipient
Place of Supply ( POS ) case study
POS shall be the location of the goods at the time at 1
which the movement of goods terminates for delivery
to the recipient.
It shall be deemed that the said third person has 2
received the goods and the POS of such goods
shall be the principal place of business of such person.
POS shall be the location of such goods at 3
the time of the delivery to the recipient

Case study 1: Mr. X from Delhi order washing machine, to ABC Ltd. Mumbai. The machine has been ordered for his new
showroom in Mumbai. What shall be POS in case ABC Ltd. delivers the goods from Mumbai to Mr.X’s Mumbai showroom.

Answer: Since the movement of washing machine is involved and movement has started from Mumbai ad also terminates at
Mumbai. Hence, POS shall be Mumbai, and supply is intra-state.
Case study2: M/s Ambu Cements Ltd. of Delhi has received an order of supply of 25 M.T of cements from Star cements of Delhi.
Star cements directs M/S Ambu Cements Ltd. to deliver the goods to Ram & co. a small trade located in Nagaon , Assam. What
shall be POS?

Answer: Here, M/S Ambu delivers goods to Ram & co, Nagaon. But, in view of section 10 (1) (b) , POS of the above goods shall be
deemed to be the location of the person , who directed to deliver the goods i.e. Star cements , Delhi. Hence POS will not be place
of termination of movement of goods i.e. Nagaon in Assam but, POS will be deemed to be location of third person i.e. Star
cements, Delhi who directed to deliver goods. Supply is considered as intra-state & CGST + SGST will be levied.

Case 3: A comes to Indore and selects the goods , pays the price for the goods and then book the goods in his own name to
transport the goods to Delhi. What will be POS?

Answer: POS would be Indore as delivery is completed in Indore. It is immaterial that A sends the goods to a place elsewhere after
taking delivery in Indore of the said goods purchased by him. Hence, supply is considered as intra-state & CGST + SGST will be
levied.

Place of Supply for Import & Export:

Sect. Supply Place of Supply ( POS) Case Study

11 Goods Imported into India Location of the Importer 1

(a)
11 Goods Exported from India Location outside India 2
(b)

Case 2: X Ltd. located in Delhi exports goods to M Inc. USA.

Answer: POS is USA. Exports are zero rated supplies, therefore, no GST applicable.

Case 1: X Ltd. located in Delhi imports goods from YLtd. of Germany.

Answer: POS is India. Imports are chargeable to IGST.

Place of Supply of Services:

 Recipient of supply of services is identified from definition given in section 2(93). According to this section
recipient of supply of services means-

(a) Where a consideration is payable for the supply of a service, the person who is liable to pay that
consideration;
(b) Where no consideration is payable for the supply of a service, the person to whom the service is
rendered,

and any reference to a person to whom a supply is made shall be construed as a reference to the
recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to
the services supplied.

After understanding clearly the meaning of recipient of service, again it is important to understand
about the location of ‘Supplier of Service’ and also about the location of ‘Recipient of Service’.

Section 2(15) defines the above two terms as under:

“Location of Supplier of Service” means –

(a) Where a supply is made from a place of business for which the registration has been obtained, the
location of such place of business;
(b) Where a supply is made from a place other than the place of business for which registration has
been obtained ( a fixed establishment elsewhere ) , the location of such fixed establishment;
(c) Where a supply is made from more than one establishment , whether the place of business or
fixed establishment , the location of the establishment most directly concerned with the provision
of the supply; and
(d) In absence of such places, the location of the usual place of residence of the supplier.

“Location of Recipient of Service” means –

(a) Where a supply is received at a place of business for which the registration has been obtained, the
location of such place of business;
(b) Where a supply is received at a place other than the place of business for which registration has
been obtained ( a fixed establishment elsewhere ) , the location of such fixed establishment;
(c) Where a supply is received at more than one establishment , whether the place of business or
fixed establishment , the location of the establishment most directly concerned with the provision
of the supply; and
(d) In absence of such places, the location of the usual place of residence of the recipient.

1. When Supply of services is within India: Section 12 of the IGST Act provides for the determination of
place of supply of services when the location of supplier of service and the location of the recipient of the
service both are in India. Section 12 (3) to section 12 ( 14 ) ( called Specific Provisions) provides for
determining the place of supply of services but, if a particular service is not covered under sub section (3)
to (14), then in that case l provisions laid down in section 12(2) ( a) & section 12(2) (b) ( called General
Provisions ) shall apply.
Few sections:

SPECIFIC PROVISIONS COVERED U/S 12(3) TO 12(14) OF IGST ACT,2017 ARE:

Section Supply of services Place of Supply ( POS)
12 (3)
12(4) Restaurants, Catering, grooming- health services including of Place where such services are actually performed.
Cosmetic and plastic surgery
12(5) Training & Performance Appraisals Location of recipient if the recipient is registered person,
And for unregistered person POS will be where services are
actually performed.
12(12) Banking & Financial Services ( including stock broking) Location of the recipient of the services
else, location of supplier
12(13) Insurance services For B2B( Registered Recipient ) - Location of the recipient
For B2C- Location of recipient on records of the supplier
12(14) Advertisements services to Government Location of the State of Advertisement.

Place of supply for Import and Export of Services : Section 13 of the IGST Act provides for the
determination of place of supply of services when either the location of supplier of service or the location
of the recipient of service is outside India. Section 13 (3) to section 13 ( 13 ) provides for determining the
place of supply of services ( called Specific Provisions ) but, if a particular service is not covered under sub
section (3) to (13), then in that case section general provisions laid down in section 13(2) ( called General
Provisions) shall apply.

According to the General Provisions, the place of supply of service shall be the location of the Recipient of
Services but, if the location of the Recipient of Services is not available, then the place of supply of service
shall be the location of the supplier of Services.

SPECIFIC PROVISIONS COVERED U/S 12(3) TO 12(14) OF IGST ACT,2017 ARE:

Section Supply of services Place of Supply ( POS)
13 (3)
13(4) Services in relation to immovable property Location of such immovable property or location where it is
intended to be located.
13 (10) Transportation of Passengers Place from where passengers embarks the journey
13(11) Services on board a conveyance First scheduled point of departure of conveyance.

TIME OF SUPPLY
TIME OF SUPPLYOF GOODS: The point of time (POT) when tax would be payable under a transaction would
be with reference to the provisions of time of supply as provided under GST Law. Time of supply of goods
in GST has been linked with issue of Invoice. Hence, the liability to pay tax under GST is different from the
pre-GST indirect tax environment. In the pre-GST system of taxation, the liability to pay sales tax was
generally arising when transfer of ownership of goods takes place from the seller to the buyer. Again, in the
pre-GST system, Excise duty were leviable on the manufacturing of goods and tax was payable at the time
of removal of goods from factory or warehouse.

“Incidence of tax under GST arises on supply of goods which make it necessary to determine the time of
supply of goods”. Section 12 of the CGST Act, 2017 makes necessary provisions for determining the time
of supply of goods which are tabulated below:
Section
In case of Time of Supply
12 ( 2)
Goods under forward charge basis The date of issue of invoice by the supplier;
OR
last date on which he is required, under section
31(1)to issue the invoice with respect to the supply

12 ( 3)
Goods under Reverse Charge basis
12(4)Goods supplied through Vouchers
12(5)Residuary cases(not covered in above sub-sections
to section 12
Earliest date out of three dates mentioned below:
1.Date on which goods are received
2.Date on which payment is recorded in the books
of the recipient entity that receives the goods OR
Date on which payment is debited from the
Recipient entity’s bank account.
3.The date immediately following thirty days from
the date of issue of invoice or any other document
by the supplier
Time of supply of vouchers exchangeable for goods
is—Date of issue of the voucher, if the supply that
the voucher covers identifiable at that point,
OR
Date of redemption of the voucher by the holder
of the voucher.
1.Where a periodical return has to be filed by the
Supplier under GST law ,then the due date of filing
of the periodical return.
2.In other cases, date of payment of GST.
 TIME OF SUPPLY OF SERVICES
Section
In case of Time of Supply
13 Services under forward charge basis 1.If, invoice is issued within time prescribed u/s 31(2),then
(2) earliest of the following two dates:
(i)Date when invoice was issued
OR
(ii) Date when the payment was received by supplier.
2.If, invoice is not issued within time prescribed in31(2),then
(i) Date of provision of service
( taken as completion of service)
OR
(ii)Date when the payment is received by the supplier.

13 Services under Reverse Charge basis Earliest date out of the following:
(3) 1.The date of payment as entered in the books of account of
the recipient OR the date on which the payment is debited in
his bank account, whichever is first;
2.The date immediately after 60 days from date of issue of
Invoice or any other valid document by the supplier
Proviso to section 13 (3) provides that where it is not possible
to determine the time of supply as per point 1 or 2 above,
the time of supply shall be the date of entry in books of account
of the recipient of supply.
13 Services supplied through Vouchers Time of supply of vouchers exchangeable for goods
(4) is—Date of issue of the voucher, if the supply that
the voucher covers identifiable at that point,
OR
Date of redemption of the voucher by the holder
of the voucher.
13 Residuary cases(not covered in above sub-sections 1.Where a periodical return has to be filed by the
(5) to section 13 Supplier under GST law ,then the due date of filing
of the periodical return.
2.In other cases, date of payment of GST.
 VALUE OF SUPPLY
Transactional value as agreed between supplier and recipient would be the value of supply of goods or services or
both provided that parties are not related to each other and the price is the sole consideration. However, if the twin
conditions stated above namely transactions shall happen between unrelated parties and price shall act as the sole
consideration in the said transaction are not satisfied, then rules need to be notified to really identify as well as
quantify factors which had a direct impact on the arms length price of supply of goods or services or both. Such rules
shall be used to determine the fair market value of the goods or services.

The law lays down the condition that in case transaction of supply takes place between two related parties, the value
of supply between them would always be worked out by alternative mechanism and value of supply as agreed by
them would be cross verified with the value of supply of similar goods or similar kind between two unrelated parties.

Section 15 (1) of the CGST Act, 2017 makes provision for the purpose of determining the ‘transaction value’ of supply
of goods or services or both in different circumstances. As per this section “The value of a supply of goods or services
or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or
services or both, where the supplier and the recipient of the supply are not related and the price is the sole
consideration for the supply”. To solve the problems relating to determination of value in case of transactions taking
place between related parties and the price is not the sole consideration for supply, the government has inserted
necessary provisions under section 15(4) and also framed ‘Valuation Rules’ to act as an alternative mechanism in
such cases of transactions between related parties.

Section 15 (2) explains the manner in which ‘Transaction value’ is to be computed and lays down the following items
to be included in value:

(a) Any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this
Act. Therefore, IGST,CGST,SGST,UTGST and the Goods and service tax ( compensation to States) Act, if these
taxes are charged separately in the invoice or other relevant document by the supplier will not be included
for determination of value of goods or services or both.
(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 but, excluding subsidies provided by the governments.

Further, section 15(3) lays down the following items not to be included in transaction value:

(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 which is given after the supply has been effected, if :
(i) Such discount is established in terms of an agreement entered into 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
that has been reversed by the recipient of the supply.

Section 15(4) says that where the value of the supply of goods or services or both cannot be determined under
section 15(1) as discussed hereinbefore, the same shall be determined in such manner as may be prescribed. As per
this section read with Valuation Rules [Rule 27 to Rule 35], transaction value shall be determined in the following
manner:

Few Rules:
Rule Cases covered
27 Value of supply of goods or services where the consideration is not wholly in money then, the following process need to
be followed( in serial order) :
1.If open market value of supply is available, value shall be the open market value.
2. If open market value of supply is not available, value shall be calculated based on market value of components of the
transaction at the time of supply .
3.value of supply of like kind and quality
4.Apply Rule 30 or Rule 31 in that order.
28 Value of supply of goods or services or both between distinct or related persons, other than through an agent.
In this case the following rule is to be followed (in serial order) :
1. if open market value of supply is available, value shall be the open market value.
2.if open market value is not available, then value of supply of like kind and quality
3. apply Rule 30 or Rule 31 in that order.
4. if goods are intended to be supplied further by the recipient, “AS SUCH”, then ,the value shall be equal to 90% of value
of like kind and quality.

29 Value of supply of goods made or received through an agent. The value of supply of goods or services between principal
and agent shall be:
1.The open market value of the goods being supplied, or at the option of the supplier, be 90% of the price charged for
the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the
goods are intended for further supply by the said recipient. It is to be noted that the option of using 90% method is
not applicable if the customers are related persons and the person concerned should not consume the goods himself.
Further, if the agent does not opt for determination of value on the basis of 90% of the price charged for supply of goods
Of like kind and quality, value will be determined on the basis of price at which like kind and quality of goods is sold.
30 Value of supply of goods or services or both based on cost. Under this rule the value shall be taken @110% of the
cost of production or manufacture or cost of acquisition of such goods or the cost of provision of such service. It is to be
noted that cost of production or manufacture OR cost of providing services shall be determined according to
Cost Accounting Standard4 ( CAS 4)
31 Residual method for determining of value of supply of goods or services or both. Under this rule if value cannot be
determined by above rules i.e. rule 27 to 30, then in that case the value shall be determined by using reasonable means
Consistent with the principles and general provisions of section 15 and the provisions of other rules under this valuation
Chapter.
Further, where a supplier of service is supplying services which is subject to valuation then he may opt for Rule 31
directly i.e. ignoring provisions of Rule30.However, the service provider can opt Rule31 only if value of services cannot be
determined under Rule 27 to Rule 29 under this valuation chapter

32 Value in case of certain supply are determined as per rule 32 (2) to 32 (7)
Few Rules :

Rule 32 : Determination of value in respect of certain specific supplies:

Rule Cases covered
32(2) The value of supply of services in relation to purchase/sale of foreign currency, including money changing, shall be
determined by the supplier of services in the following manner prescribed in (i) or (ii) at the option of supplier:
(i)Where any of the currency exchanged from or to Indian Rupees, then value of supply shall be the difference between
Buying rate and selling rate, as the case may be , and reference rate provided by RBI for that currency. But, in case RBI
Reference rate is not available, then the value of supply shall be 1% of the gross amount of Indian Rupees received or paid
By the person changing the money. Further, in case where neither of the currency exchanged is Indian Rupees, then value
of supply shall be 1% of the lesser value arrived by converting any of the two currencies in Indian Rupees at reference rate
provided by RBI on that day.
(ii)Where the person supplying the service of money exchange has opted for this option for a financial year, then such
Option shall be valid for that financial year for which it is opted. Under this clause value of supply shall be as per the given
range :
Range -1 : 1% of the gross amount of currency exchanged for an amount up to Rs. 1 lakh, subject to a minimum amount
of Rs. 250.
Range-2:Rs. 1,000 and 0.5% of gross amount of currency exchanged for an amount exceeding Rs. 1 lakh upto Rs.10 lakh .
Range-3:Rs. 5,500 and 0.10% of the gross amount of currency exchanged for an amount exceeding Rs. 10 lakh,
subject to a maximum amount of Rs. 60,000.

32(3) The value of supply of services in relation to booking of tickets for travel by air provided by an air travel agent, shall be
deemed to be calculated at the rate of 5% of basic fare in case of domestic booking and @10% in case of foreign booking.

32(4)
The value of supply of services in relation to life insurance business shall be determined by the supplier of services
in the following manner prescribed:
i)Where the policy amount allocated towards investments is already intimated to policyholder, then value of supply will
be equal to the difference between gross premium charged minus amount allocated towards investment.
(ii) In case of single premium annuity policy, value of supply shall be deemed to be 10% of single premium charged
(iii) In any other case, value of supply shall be equal to 25% of the premium charged from policy holder in the first year ,
and 12.5% of the premium charged from policyholder in subsequent years.
Note: This rule shall not apply to pure risk cover policy.

Note 1: Under section 15(5) , the Government has the power to lay down the manner of determination of value in
certain cases of supply via notifications brought by it from time to time on recommendations of the GST Council
and such notified supplies will be valued accordingly and nothing contained in section 15(1) or 15(4) shall apply in
respect of notified supplies of goods or services or both. For Example, Government may take value as ‘value based on
MRP’

COMPOSITION SCHEME UNDER GST

Small manufacturers / Traders has been provided with an option whereby they can avail to pay GST at a
fixed percentage of their turnover and also enjoys certain relief in terms of compliances of the provisions
of law. The relevant provisions are contained in section 10 of the CGST Act,2017 read with CGST
Rules,2017.

Conditions for availing the scheme:

 This scheme is applicable for goods only and not for services except for Restaurants supplying food
and non-alcoholic beverages which is classified as a service under the Act.
 The registered person opting for the scheme is not engaged in making any inter-state outward
supplies of goods.
 The registered person opting for the scheme is not a manufacturer of such goods as may be
notified by the Government on the recommendations of the GST Council.
 The scheme is not applicable to CTP and NRTP.

 If a taxable person has multiple business verticals and he has taken separate GST registrations for
each such vertical , composition scheme shall be applicable for all business verticals and it cannot
be applied for select verticals only.
 The registered taxable person opting for the scheme must not have an aggregate turnover of more
than Rs.100 lakh ( Rs.75 lakh for special category states except J &K and Uttrakhand) in the
preceding financial year. The term ‘Aggregate Turnover’ has been defined in section 2(6) of the
CGST Act,2017 to mean the aggregate value of all taxable supplies ( excluding the value of inward
supplies on which tax is payable by him on reverse charge basis) , exempt supplies, exports of
goods or services or both , and inter-state supplies of persons having the same PAN, to be
computed on all India basis but excludes Central tax, State tax, UT tax, Integrated tax and Cess.
 Rate of tax payable on supplies chargeable under RCM will be regular rates and not the
composition rate.
 The tax has to be paid on quarterly basis.
 The taxpayer has to file a simple quarterly return in FORM GSTR-04.
 The taxable person opting this scheme cannot issue tax invoice under GST Law and can neither
collect GST from his customers nor can claim input tax credit on his purchases. He has to issue a
Bill of supply.
 Option to avail Composition Scheme lapses with effect from the day on which his aggregate
turnover during a financial year exceeds the limit prescribed. The option exercised by a registered
person to pay composition tax shall remain valid so long as he satisfies all the conditions
mentioned under section 10 and rule 3 to Rule 5 of the CGST Rules. Thus, a person shall be liable
to pay regular tax under section 9 (1) from the day he ceases to satisfy the conditions mentioned
in section 10 or Rule 3 to Rule5.

Category of registered Tax Rate (%)

Person
Manufacturers( excluding 1 ( 0.5 CGST + 0.5 SGST)
manufacturers of such
goods as may be notified
by the Government )
Supplies by Restaurant 5 ( 2.5 CGST + 2.5 SGST)
Traders 1 ( 0.5 CGST + 0.5 SGST)
 Reverse Charge Mechanism

GST is imposed on the supplier who makes supply of goods or services or both but, there are few
cases within the four corners of the law whereby liability to pay tax would not be on the supplier of
goods or services or both but on the recipient of such goods or services or both. Therefore, under
the GST laws when GST is imposed on recipient of goods or services or both, such a tax levy
mechanism is called Reverse Charge Mechanism ( RCM)

The main reasons for introducing RCM are as under:

 GST is a multi-point tax system wherein tax would be levied on the value addition done at
each stage of production and distribution i.e. there is a trail of the transaction from the
start of the supply chain to the end point of the supply chain. However, if an unregistered
person supplies goods or services or both to a registered person, he breaks the trail of
supply chain as he would not be liable to declare ( through the filing of tax returns ) the
details of the person from whom he has received goods or services or both and the person
to whom he has supplied goods or services or both. To solve this issue, law requires the
registered person to pay tax on such supply received from unregistered person and then
take the benefit of tax paid in the same way as he would have taken the benefit of the
credit of tax paid, had he received the goods or services or both from a registered person.

Case Study:

A purchases goods from B for Rs.10,000/-. A is a registered person and B is an unregistered person.
The goods supplied by B are taxable goods at the rate of 28%. However, as B is an unregistered
person and is not entitled to collect taxes, he would not be entitled to collect any taxes from A. In
such case, A would pay the taxes under reverse charge and would deposit the taxes and claim credit
of the taxes paid which was to be paid by B , had he been a registered person.

 Supplier of the goods or services or both located in non-taxable territory:

GST is a destination based tax. Therefore, if the supplier is located in a non-taxable territory
and cannot collect and deposit taxes from the recipient then the recipient himself is made
liable to deposit tax under reverse charge mechanism. This helps similar level of taxes on
goods or services whether they are imported from outside the taxable territory or
produced/ rendered within the taxable territory. Due to this provision there is no benefit
on the goods or services imported from outside the taxable territory on account of lower
rate of taxes. Suppose, services received from a service provider in India is charged with
GST at the rate of say 28% and the same services procured from a service provider outside
India is not taxed in India, it would then create a proposition wherein people would avail
services from outside India rather than from a service provider in India. Thus, to ensure
that neutrality in taxation is maintained, tax is made payable by the service recipient on
reverse charge system.
 Sometimes, taxes are levied on reverse charge system on certain goods or services or both
wherein many people fall under the unorganized sector. The cost of administering and
collecting tax from such unorganized sector would be too high. Again, it could also be that
the persons working in the sector might be many but their aggregate turnover is very less.
Under these circumstances, it would not be possible for each of them to be registered
under the law as the majority here would be below the threshold limit of aggregate
turnover. Therefore, in such cases, if the goods or service supplied by persons in an
unorganized sector happens to be a B2B Supply, then law might provide levy of tax on
 reverse charge basis on the business which is receiving goods or services or both from such
source. For example, Car aggregators like Ola and Uber are required to pay tax under
reverse charge basis because the cab drivers happen to be from an unorganized sector
and the majority of them are small cab drivers running a single taxi. The Government
thought it fit to levy GST on Ola and Uber treating them as aggregators who receive
supplies in one form or the other, from such cab drivers.
 Government may, on the recommendation of the Council, would notify categories of
supplies of goods or services or both on which tax would be payable on reverse charge
basis. The Liability to pay tax on the goods or services or both notified under the reverse
charge mechanism would be on the recipient of the goods or services or both and he
would be treated as the person liable to pay tax on such goods or services or both. Supplier
of goods or services or both would not be the person liable to pay tax on such supplies .
 Legislature may exempt specific goods or services or both from levy of the tax but
indirectly tax is levied on that sector under reverse charge mechanism whereby the
recipient of such goods or services or both has to deposit tax. For example, tax is payable
by a business entity receiving services in a taxable territory from individual advocate or
firm of advocates under reverse charge mechanism. The business entity receiving such
services in a taxable territory has to deposit tax under reverse charge mechanism although
no tax is collected by the service provider.

Other important provisions relating to RCM:

 A person required to pay tax under RCM has to compulsorily get himself registered under
GST. There is no threshold limit for registration.
 Reverse charge liability cannot be discharged by using input tax credit. However, after
paying due tax under RCM, credit of the same can be taken against output tax liability.

 Supplies of goods covered under RCM are ( A few cases only )

ITEMS SUPPLIER OF GOODS RECEIPIENT OF GOODS

Cashew nuts Agriculturist Any registered person
(not shelled or peeled )
Bidi wrapper leaves Agriculturist Any registered person
( tendu)
Tobacco Leaves Agriculturist Any registered person
Silk Yarn Any person who Any registered person.
manufactures silk yarn
From raw silk or
silk worm cocoons for
supply of silk yarn.

 Few examples of Supplies of services under RCM:

 ITEMS SUPPLIER OF SERVICES RECEIPIENT OF SERVICES
Goods Transport Agency GTA who has not paid tax Any factory, body corporate,
( GTA) Services Partnership firm, society,
Cooperative society, CTP

Legal services by Advocate An individual advocate Any business entity located

Including a senior advocate in the taxable territory
Or firm of advocates

EXEMPTIONS FROM GST

GST is levied on the supply of goods or services or both but certain supplies of goods or services are
exempt from tax under different provisions of GST Law.

“ Exempt supply” has been defined u/s 2(47) of the CGST Act,2017 as under:

1.Supplies which attract zero rate of tax; or

2. Supplies which may be wholly exempt from tax u/s 11 of this Act, or u/s 6 of the IGST Act. Section
11(1) of CGST Act and section 6(1) of the IGST Act authorises Central Government to grant General
Exemptions by issuing notification. Further, section 11(2) of the CGST Act and section 6(2) of the
IGST Act authorises Central Government to grant exemption in public interest, in exceptional
circumstances by a special order after recommendations of GST Council.

3. Non-taxable supply which has been defined u/s 2(78) as “ supply of goods or services or both
which are not charged to tax under CGST Act or under IGST Act.

Schedule III contains a list of goods or services or both which will not be chargeable to GST i.e.
Schedule III lists non-taxable supply. Further, activities notified by Government u/s 7(2) of the CGST
Act are also treated as non-taxable supply.

Note : 1.Please download the list from GST site.

2. The above materials are for conceptual knowledge only. Further,
discussions will be done by me in due course of time.
3. You are expected to have serious study of above so that later on
practical problems and cases can be better discussed,