Goods and Service Tax

PROF.S.B.
KUMBAR (9036545313) ADVIK COMMERCE ACADEMY, VIJAYAPUR
Unit -1
Introduction to GST
Tax in India
To run a nation judiciously, the government needs to collect tax from the
eligible citizens; paying taxes to the local government is an integral part of
everyone’s life, no matter where we live in the world.
Now, taxes can be collected in any form such as state taxes, central
government taxes, direct taxes, indirect taxes, and much more. For your
ease, let’s divide the types of taxation in India into two categories, viz.
direct taxes and indirect taxes. This segregation is based on how the tax is
being paid to the government.
What is Tax and its Types?
A tax is a mandatory fee or financial charge levied by any government on an

individual or an organization to collect revenue for public works providing
the best facilities and infrastructure. The collected fund is then used to fund
different public expenditure programs.
If one fails to pay the taxes or refuses to contribute towards it will invite
serious implications under the pre-defined law.
Types of Taxes
Be it an individual or any business/organization, all have to pay the

respective taxes in various forms. These taxes are further subcategorized
into direct and indirect taxes depending on the manner in which they are
paid to the taxation authorities.
Let us delve deeper into both types of tax in detail:

Direct Tax
 The definition of direct tax is hidden in its name which implies that
this tax is paid directly to the government by the taxpayer
 The general examples of this type of tax in India are Income Tax and
Wealth Tax.
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Goods and Service Tax
PROF.S.B.KUMBAR (9036545313) ADVIK COMMERCE ACADEMY, VIJAYAPUR
 From the government’s perspective, estimating tax earnings from

direct taxes is relatively easy as it bears a direct correlation to the
income or wealth of the registered taxpayers.
Indirect Tax
 Indirect taxes are slightly different from direct taxes and the
collection method is also a bit different. These taxes are
consumption-based that are applied to goods or services when they
are bought and sold.
 The indirect tax payment is received by the government from the
seller of goods/services.
 The seller, in turn, passes the tax on to the end-user i.e. buyer of the
good/service.
 Thus the name indirect tax as the end-user of the good/service does
not pay the tax directly to the government.
 Some general examples of indirect tax include sales tax, Goods and
Services Tax (GST), Value Added Tax (VAT), etc.
Recent Reforms in Taxes
In the year 2017, the government introduced the Goods and Services Tax
(GST) which is considered the most revolutionary tax reform in
independent India to date.
Earlier also, governments levied various state and central taxes for availing
various services or buying different goods. The problem with the earlier
reforms was the taxation process was complex and the contradicting rules
enabled some people to evade taxes through loopholes in the system.
After the introduction of GST, a higher percentage of assessees was brought

under the taxation umbrella and it took a toll on evaders as escaping from
paying taxes became tougher.
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Difference between Direct and indirect Tax

Context Direct Tax Indirect Tax
Meaning Paid directly to the Paid to the government via

government intermediary
Levied on Profits and income Goods and services
Taxpayer Individuals, HUFs End-consumers of products, goods
and businesses and services.
Tax Rate Directly depends on Same for everyone
income and profits
Tax Burden Progressive Rate of tax is flat so tax burden is
regressive
Transfer of Not transferable Can be transferable
liability
Tax Complex Quite convenient
Collection
Types Income Tax and STT Goods and Services Tax (GST)
Evasion Possible Not possible
A Brief History of Indirect Taxation in India

When the British left India in 1947, they left India with a structure,
especially that of revenue, which hasn’t completely changed till now. Also
there were reasons why they implemented this structure.
With the advent of Industrial Revolution in the early 1800’s, European

markets were inundated with machine-made material with clothing fabric
being the most prominent. The inundation was so intense that selling
manufactured items was becoming impossible due to market saturation.
The British then came up with the idea of choosing India as their new
market. But India was already self-sufficient in clothing. As the British
introduced machine made clothes in India, prices became a major problem
for them as their product were costlier than Indian products due to obvious
reasons. This made them to come up with idea of imposing a tax known as
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“Excise Duty” on goods manufactured in India. This made the price of

imported goods to come at par with Indian goods and as expected Indian
Khadi industry suffered and incurred heavy losses. This led to widespread
“Swadeshi Movement” led by Gandhiji in the early 1900’s.
After India got independence in 1947, funds was a major problem for the
government. The whole network of governing officers required their
salaries for which funds were required. As a result “Excise Duty” was not
abolished but an additional tax known as “Customs Duty” was imposed on
imported goods to provide protection to Indian industries across various
sectors. But gradually in the 1960-1970’s it was observed that the Indian
Technology had become obsolete as compared to their foreign competitors.
The high customs duty had become a protective wall incentivizing low
production, obsolete technology although there were other reasons too like
license raj etc.
All the above scenarios led India ultimately to a scenario where India
doesn’t had Foreign Reserves even to support 3 weeks to imports.
International Monetary Fund (IMF) imposed liberalization as a pre-
requisite for providing a bail-out to India which was reflected in the Budget
presented by the then finance Minister Mr. Man Mohan Singh.
Liberalization measures also included reduction of import tariffs or
customs duty in the coming years which led to development of technology
within India. Currently the excise duty hovers around 12.5% and customs
duty averages around 11.9% with minimum of 0% to a maximum of 150%.
Ultimately this is seen to equalize for a highly competent economy.
Unit –II
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GST Frame Work

Introduction
GST is the most ambitious and remarkable indirect tax reform in India’s
post-Independence history. Its objective is to levy a single national uniform
tax across India on all goods and services. GST has replaced a number of
Central and State taxes, made India more of a national integrated market,
and brought more producers into the tax net. By improving efficiency, it
can add substantially to growth as well as government finances.
Implementing a new tax, encompassing both goods and services, by the
Centre and the States in a large and complex federal system, is perhaps
unprecedented in modern global tax history. GST is a tax on goods and
services with comprehensive and continuous chain of set-off benefits up to
the retailer level. It is essentially a tax only on value addition at each stage,
and a supplier at each stage is permitted to set-off, through a tax credit
mechanism, the GST paid on the purchase of goods and services. Ultimately,
the burden of GST is borne by the end-user (i.e. final consumer) of the
commodity/service. With the introduction of GST, a continuous chain of
set-off from the original producer’s point and service provider’s point up to
the retailer’s level has been established, eliminating the burden of all
cascading or pyramiding effects of an indirect tax system. This is the
essence of GST. GST taxes only the final consumer. Hence the cascading of
taxes (tax-on-tax) is avoided and production costs are cut down. As already
noted, prior to the introduction of GST, the indirect tax system of India
suffered from various limitations. There was a burden of tax-on-tax in the
pre-GST system of Central excise duty and the sales tax system of the
States. GST has taken under its wings a profusion of indirect taxes of the
Centre and the States. It has integrated taxes on goods and services for set-
off relief. Further, it has also captured certain value additions in the
distributive trade. There is now a continuous chain of set-offs which would
eliminate the burden of all cascading effects. Presently, services sector in
India constitutes a tax base with vast potential which has not been
exploited as yet. It is in this context that GST is justified as it has subsumed
under it almost all the services for the purpose of taxation. Since major
Central and State indirect taxes have got subsumed under GST, the
multiplicity of taxes has been substantially reduced which, in turn, would
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decrease the operating costs of the country’s tax system. The uniformity in
tax rates and procedures across the country will go a long way in reducing
compliance costs. In a nutshell, GST is a comprehensive indirect tax levy on
manufacture, sale and consumption of goods as well as services at the
national level. GST is an indirect tax for the whole of India to make it one
unified common market. GST is designed to give India a world class tax
system and improve tax collections. It would end the long-standing
distortions of differential treatment of manufacturing sector and services
sector. GST will facilitate seamless credit across the entire supply chain and
across all States under a common tax base.
Evolution of GST in India
In 2000, the Vajpayee Government started discussion on GST by setting up

an Empowered Committee, headed by Asim Dasgupta (West Bengal
Finance Minister) to design the GST model. Thereafter, the Task Force on
Implementation of the Fiscal Responsibility and Budget Management Act,
2003 (Chairman: Vijay Kelkar) recommended the removal of all inefficient
and distortionary taxes so that India obtains the efficiencies of a single
national tax, and suggested a comprehensive GST based on VAT principle.
The idea of moving towards a GST was proposed in 2005 by the then Union
Finance Minister, P. Chidambaram in his budget speech for the year 2005-
06 where he observed that the entire production-distribution chain should
be covered by a goods and services tax that encompasses both the Centre
and the States. He reiterated his idea in 2006-07 budget speech and
proposed April 1, 2010 as the date for introducing GST. Towards this
objective, an Empowered Committee (EC) of State Finance Ministers was to
work with the Central Government to prepare a roadmap for introduction
of GST. The final version of the report of EC was presented in the form of ‘A
Model and Roadmap for Goods and Services Tax in India’ on April 30, 2008.
After receiving comments on the report from Government of India and
concerned officials of the State Governments and taking into account their
recommendations, the EC released the First Discussion paper on Goods and
Services Tax in India on November 10, 2009 to obtain the inputs of
industry, trade bodies, and people at large. On 22nd March 2011, the
Constitution (115th Amendment) Bill was introduced in the Lok Sabha to
operationalize the GST and enable Centre and States to make laws for
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levying of GST. However, the Bill lapsed with the dissolution of the 15th
Lok Sabha. Thereafter, on 19th December, 2014 the Constitution (122nd
Amendment) Bill, 2014 was introduced in the Lok Sabha to address various
issues related to GST. It is noteworthy that the introduction of GST required
a Constitutional amendment as the Constitution did not vest express power
either in the Central Government or State Government to levy tax on the
‘supply of goods and services’. While the Centre was empowered to tax
services and goods up to the production stage, the States had the power to
tax sale of goods. Since the GST regime requires goods and services to be
simultaneously taxed by both the Central and State Governments, a
Constitutional amendment was needed. The Constitution (122nd
Amendment) Bill, 2014 was passed by the Lok Sabha on 6th May, 2015
after which the Rajya Sabha passed the Bill with 9 amendments on 3rd
August, 2016. The Lok Sabha then passed the modified Bill on 8th August,
2016. After getting approval of half of the States, it was sent to the
President for his assent which was given on 8th September, 2016. Thus the
road to GST rollout was cleared and the process of enactment was
completed.
Features of GST in India
1. Supply as the base: GST would be applicable on “supply” of goods or

services as against the erstwhile concept of tax on the manufacture of
goods or on sale of goods or on provision of services.
2. Destination-based tax: As opposed to the previous principle of origin-

based taxation, GST would be based on the principle of destination-
based consumption taxation.
3. Dual GST: The Centre and the States would simultaneously levy tax on a
common base. The GST to be levied by the Centre would be called
Central GST (CGST) and the GST to be levied by the States (including
Union territories with legislature) would be called State GST (SGST).
Union territories without legislature would levy Union territory GST
(UTGST).
4. Inter-State supply: An integrated GST (IGST) would be levied on inter-

State supply of goods or services. This would be collected by the Centre
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so that the credit chain is not disrupted. Imports of goods and services
would be treated as inter-State supplies and would be subject to IGST.
(This would be in addition to applicable customs duties).
5. Central taxes subsumed: GST would subsume the following taxes that
were levied and collected by the Centre: Central excise duty; Additional
duties of excise; Additional duties of customs (commonly known as
countervailing duty); special additional duty of customs (SAD); service
tax; and cesses and surcharges insofar as they relate to supply of goods
or services.
6. State taxes subsumed: GST would subsume the following taxes that
were levied and collected by the State: State VAT; Central Sales Tax;
purchase tax; luxury tax; entry tax; entertainment tax (except those
levied by the local bodies); taxes on advertisements; taxes on lotteries,
betting and gambling; and State cesses and surcharges insofar as they
relate to supply of goods or services.
7. Applicability: GST would apply to all goods and services except alcohol
for human consumption. GST on five specified petroleum products
(crude, petrol, diesel, aviation turbine fuel, natural gas) would be
applicable from a date to be recommended by the GST Council.
8. Threshold for GST: A common threshold exemption would apply to

both CGST and SGST. Taxpayers with an annual turnover of ` 20 lakh (`
10 lakh for special category States (except J&K) as specified in article
279A of the Constitution) would be exempt from GST. A compounding
option (i.e. to pay tax at a flat rate without credits) would be available to
small taxpayers (including to manufacturers other than specified
category of manufacturers and service providers) having an annual
turnover of up to ` 1 crore (` 75 lakh for special category States (except
J&K and Uttarakhand) enumerated in article 279A of the Constitution).
The threshold exemption and compounding scheme is optional.
9. Exports: All exports and supplies to Special Economic Zones (SEZs) and
SEZ units would be zero-rated.
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10. Input tax credit: Credit of CGST paid on inputs may be used only for
paying CGST on the output and the credit of SGST/UTGST paid on inputs
may be used only for paying SGST/ UTGST. In other words, the two
streams of input tax credit (ITC) cannot be cross utilized, except in
specified circumstances of inter-State supplies for payment of IGST. (For
details, see the Chapter on Input Tax Credit).
11. Electronic filing of returns: There will be electronic filing of returns

by different class of persons at different cut-off dates. Various modes of
payment of tax available to the taxpayer including internet banking,
debit/credit card and National Electronic Funds Transfer (NEFT)/Real
Time Gross Settlement (RTGS).
12. Tax deduction on payment made: While the provision for TDS has
not been notified yet, it is obligatory on certain persons including
government departments, local authorities and government agencies,
who are recipients of supply, to deduct tax at the rate of 1% from the
payment made or credited to the supplier where total value of supply,
under a contract, exceeds ` 2,50,000.
13. Tax collection at source by E-commerce operators: While the

provision for TCS has not been notified yet,it is obligatory for electronic
commerce operators to collect ‘tax at source’, at such rate not exceeding
2% of net value of taxable supplies, out of payments to suppliers
supplying goods or services through their portals.
14. Refund: Refund of tax can be sought by taxpayer or by any other

person who has borne the incidence of tax within two years from the
relevant date. Refund is to be granted within 60 days from the date of
receipt of complete application and interest is payable if refund is not
sanctioned within 60 days.
15. Anti-profiteering clause: An anti-profiteering clause has been

provided in order to ensure that business passes on the benefit of
reduced tax incidence on goods or services or both to the consumers.
Benefits of GST
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1. Dynamic common market: GST would make India a dynamic common

market and result in generation of positive externalities. By ensuring
uniformity of indirect tax rates across the country, it will substantially
improve the ease of doing business.
2. Elimination of cascading effect: Under GST, provision of seamless

input tax credit across transactions will avoid tax cascading, eliminate
double taxation and improve resource allocation.
3. Efficiency: Subsuming of all major indirect taxes will result in the

removal of inefficient taxes. With as single tax to be paid,
manufacturers will become more competitive and this could lead to
growth in exports.
4. Reduced compliance costs: Harmonisation of tax rates and laws along

with seamless input tax credits and a sound IT infrastructure is
expected to lead to reduced compliance costs. As all the taxpayer
services like registrations, payments, returns etc. will be available
online, the compliance process would become simpler.
5. Reduction in tax evasion: Uniform rates of taxation would reduce the

incentive for tax evasion by eliminating rate arbitrage opportunities
between neighbouring states and that between intra-State and inter-
State sales.
6. Improved collection efficiency: GST is also desirable from the point of

view of tax policy and collection. Even if the taxes are lowered, the
revenue of the Union and the states is expected to be buoyant due to
less evasion. A single rate across all goods and services will eliminate
classification disputes and make tax assessment more predictable.
Harmonisation of tax assessment, levy and collection procedures across
states will reduce compliance costs, limit evasion, enhance
transparency and improve collection efficiency.
7. Revenue generation: By controlling tax leakage from the system and

having a wider base, GST would generate more tax revenues for both
the Central and State Governments.
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8. Encourages savings and investment: As GST is a tax on consumption

and not on income, so the tax system inherently encourages savings
and investments instead of consumption. Further, input tax credit
would lead to a decrease in the cost of capital goods and provide boost
to investments.
9. Improved efficiency of logistics : Due to GST implementation, the

restriction on inter-State movement of goods is likely to be lessened
and the logistics sector is anticipated to start consolidating warehouses
across the country. In the erstwhile indirect tax structure, decisions
related to logistics and distribution centres were based on tax
considerations as opposed to operational efficiency. With GST in place,
these decisions will now be based on operational efficiency and
warehouses would be set up at locations that would help in reaching
customers faster and reduce costs.
10. Regulation of the unorganized sector : For a large unorganized

sector that exists in business, GST has provisions for online
compliances and payments, and availing of input credit only when the
supplier has accepted the amount, thereby bringing accountability and
regulation to these businesses.
11. Export competitiveness: With GST in place, the export industry in

India would be able to have internationally competitive prices due to
the smooth process of claiming input tax credit and the availability of
input tax credit on services. The exports of goods or services would be a
zero rated supply under GST implying that GST would not be levied on
export of goods or services. All this, in turn, would provide a push to
government’s ‘Make in India’ campaign.
12. Higher threshold for registration: As per the current VAT

structure, any business with a turnover of more than ` 5 lakh (in most
states) is liable to pay VAT (different rates in different states). Similarly,
for service tax, service providers with turnover less than ` 10 lakhs are
exempted. Under GST this threshold has been increased to ` 20 lakhs
thus exempting many small traders and service providers.
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13. Composition scheme for small businesses: The composition

scheme under the GST regime is a method of levy of tax designed for
small taxpayers whose turnover is up to ` 1 crore (` 75 lakhs in case of 9
Special Category States). Those who opt for this scheme can file returns
on a quarterly basis unlike the others who have to file returns on a
monthly basis. Under the scheme, small businesses, manufacturers and
restaurants will be subject to a GST rate of 0.5%, 1% and 2.5%
respectively on turnover. The Composition scheme has been designed
to simplify and reduce the burden of compliance for smaller taxpayers.
14. Benefits to consumers: The final price of goods is expected to be

lower due to seamless flow of input tax credit between the
manufacturer, retailer and supplier of services. Average tax burden on
companies is likely to come down which is expected to reduce prices
and hence benefit the consumer.
Concerns Regarding GST

1. Lack of preparedness: The understanding of the provisions of GST is
still at a nascent stage for many people engaged in business. They are
still trying to assess the mandated GST compliance provisions that their
relevant functional departments (such as IT Department, Legal
department) need to adhere to.
2. Compliance related issues: Businesses need to file multiple returns
which may increase manifold in accordance with business models.
Clients will need to ensure timely compliance by registered suppliers to
ensure there is no loss of input credit. This will necessitate correct data
and reports to fill accurate GST returns.
3. Increased costs due to software purchase: Businesses have to either

update their existing accounting or ERP software to a GST-compliant
software or buy a GST software so that they can keep their business
going. Both the options lead to increased cost of software purchase and
training of employees for an efficient utilization of the new billing
software.
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4. Small businesses: Small and medium-sized enterprises (SMEs) who

have not yet signed for GST have to quickly grasp the nuances of the GST
tax regime. They will have to issue GST-complaint invoices, be compliant
to digital record-keeping, and of course, file timely returns. This means
that the GST-complaint invoice issued must have mandatory details such
as GSTIN, place of supply, HSN codes, and others.
5. Lack of skilled resources and re-skilling existing workforce: As GST

has been introduced recently, skilled staff with complete and updated
subject knowledge of GST is not easily available. This has resulted in an
urgent need for adequate skilled human resources wellversed with GST
to ensure swift implementation. In addition, businesses will need to re-
train their employees in GST compliance, further increasing their
overhead expenses.
6. Multiple rate structure: The GST presently has a four slab structure
with tax rates kept at 5%, 12%, 18% and 28%. The multiple tax
structure has been justified on the ground that necessary items of mass
consumption should be taxed at a lower rate while luxury items should
be taxed at higher rates. However, multiple rates are likely to increase
administrative complexity as well as create classification disputes. Such
a system makes it difficult to evaluate the overall effects of the tax
design.
Structure of GST
There are four categories of indirect taxes under GST:
1. Central Goods and Services Tax (CGST).
2. State Goods and Services Tax (SGST).
3. Union Territory Goods and Services Tax (UTGST).
4. Integrated Goods and Services Tax (IGST).
1. Central Goods and Services Tax or CGST
Just like State GST, the Central Goods and Services Tax of CGST is a tax
under the GST regime that is applicable on intrastate (within the same
state) transactions. The CGST is governed by the CGST Act. The revenue
earned from CGST is collected by the Central Government.
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As mentioned in the above instance, if a trader from West Bengal has

sold goods to a customer in West Bengal worth Rs.5,000, then the GST
applicable on the transaction will be partly CGST and partly SGST. If the
rate of GST charged is 18%, it will be divided equally in the form of 9%
CGST and 9% SGST. The total amount to be charged by the trader, in this
case, will be Rs.5,900. Out of the revenue earned from GST under the
head of CGST, i.e. Rs.450, will go to the Central Government in the form
of CGST.
2. State Goods and Services Tax or SGST
The State Goods and Services Tax or SGST is a tax under the GST
regime that is applicable on intrastate (within the same state)
transactions. In the case of an intrastate supply of goods and/or
services, both State GST and Central GST are levied.
However, the State GST or SGST is levied by the state on the goods
and/or services that are purchased or sold within the state. It is
governed by the SGST Act. The revenue earned through SGST is solely
claimed by the respective state government.
For instance, if a trader from West Bengal has sold goods to a customer
in West Bengal worth Rs.5,000, then the GST applicable on the
transaction will be partly CGST and partly SGST. If the rate of GST
charged is 18%, it will be divided equally in the form of 9% CGST and
9% SGST. The total amount to be charged by the trader, in this case, will
be Rs.5,900. Out of the revenue earned from GST under the head of
SGST, i.e. Rs.450, will go to the West Bengal state government in the
form of SGST.
3. Union Territory Goods and Services Tax or UTGST

The Union Territory Goods and Services Tax or UTGST is the
counterpart of State Goods and Services Tax (SGST) which is levied on
the supply of goods and/or services in the Union Territories (UTs) of
India.
The UTGST is applicable on the supply of goods and/or services in
Andaman and Nicobar Islands, Chandigarh, Daman Diu, Dadra, and
Nagar Haveli, and Lakshadweep. The UTGST is governed by the UTGST
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Act. The revenue earned from UTGST is collected by the Union Territory
government. The UTGST is a replacement for the SGST in Union
Territories. Thus, the UTGST will be levied in addition to the CGST in
Union Territories.
4. Integrated Goods and Services Tax or IGST
The Integrated Goods and Services Tax or IGST is a tax under the GST
regime that is applied on the interstate (between 2 states) supply of
goods and/or services as well as on imports and exports.
The IGST is governed by the IGST Act. Under IGST, the body responsible
for collecting the taxes is the Central Government. After the collection of
taxes, it is further divided among the respective states by the Central
Government.
For instance, if a trader from West Bengal has sold goods to a customer
in Karnataka worth Rs.5,000, then IGST will be applicable as the
transaction is an interstate transaction. If the rate of GST charged on the
goods is 18%, the trader will charge Rs.5,900 for the goods. The IGST
collected is Rs.900, which will be going to the Central Government.
Difference between Types of GST
Types of Authority which is Priority Who is it Transactions which

GST benefitted of Tax collected by? are applicable (Goods
Credit and Services)
use
CGST Central CGST Central Within a single state,
Government IGST Government i.e. intrastate
SGST State Government SGST State Within a single state,
IGST Government i.e. intrastate
IGST Central IGST Central Between two different
Government and CGST Government states or a state and a
State Government SGST Union Territory, i.e.
interstate
UTGST/ Union Territory UTGST Union Territory Within a single Union
UGST (UT) Government IGST (UT) Government Territory (UT)
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Meaning of Supply
In the GST system, a taxable event is called a Supply. For an event to be

considered as a supply by the government, it should have the following
characteristics.
 Supply should be of goods or services.
 Supply should be taxable.
 Supply should be made by a taxable person.
 Supply should be made within a taxable territory.
 Supply should be made in exchange for cash or reward
(consideration).
 Supply should be made in the course of business or in the interest of
growing a business.
Scope of Supplies under GST
The scope of supply defined by the GST Act is as below:
 Consideration is the primary basis for supply.
 Business entrepreneurs should consider supply as a means to further
business activities.
 A taxable person should ensure adherence to supply.
 Supply must be taxable and made within feasible boundaries.
Following are the 6 different types of supply as defined in the Act:

1. Sale: It refers to the transfer of property irrespective of its
specifications. In terms of consideration, the sale may include cash or
deferred payments. Basically, it is defined as a transfer of property in
goods for cash or transfer of rights to use any good.
2. Transfer: It normally refers to the transfer of property by which an
individual can convey his property in any given time period to other
individuals or to himself.
3. Barter: This involves the exchange of one commodity for another. It
also includes swapping, parting ways with or transferring for an
equivalent amount of cash, etc.
4. Exchange: This refers to commodity exchanges, and the GST value is
calculated on the original price or valuation of the goods and not the
remaining amount after exchange.
5. Licence: When business entities obtain special privileges like
licences, mining rights, and natural resource extraction rights against
payment of fees or royalties, it is considered a licence.
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6. Rental: Rental income consists of payments for renting out

commercial or residential complexes. Normally, the GST Act states
that no GST shall be calculated on rent.
Components of Supply Under GST
A supply under GST has three attributes that are used to calculate the tax
owed for that transaction: place, value, and time.
1. Place of Supply - This component determines whether a transaction
is an intra-state supply, an inter-state supply, or an external trade,
which determines the type of GST that will be associated with it.
2. Value of Supply - This component decides the taxable value of
supply made, and thus the amount of tax that needs to be paid for it.
3. Time of Supply - This component determines when the associated
taxes and GST returns are due.
Types of Supply
Under the GST, supply of goods and/or services can be classified into two
major categories - Taxable supplies and Non-taxable supplies. These are
further classified into different types based on the nature of supply made.
1. Taxable Supplies - These refer to supply of goods and/or services that
are taxable under GST. Registered taxpayers can claim refunds on tax
paid during purchases (in other words, they are eligible for ITC).
a) Regular taxable supplies - Whenever you supply an item or
service which attract a GST rate greater than 0% within India, it
becomes a regular taxable supply.
b) Nil-rated supplies - Whenever you supply goods which attract
0% GST by default, such supplies are known as nil rated supplies.
c) Zero-rated supplies - Whenever you make exports, supplies to a
SEZ unit or deemed exports, the GST associated with the items or
services involved becomes 0 even though the same would attract a
GST rate greater than 0% when sold within India. Such supplies
are deemed as zero rated supplies
2. Non Taxable Supplies
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a) Exempt Supplies - The supply of exempt goods or services do not

attract GST even though they are within the purview of GST. That
said, the registered taxpayer cannot claim ITC on inputs used for
making such supplies.
b) Non-GST supplies - This refers to supply of items which are
outside the purview of the GST law.
List of exempted goods under GST in India:

1. Food
Cereals, edible fruits and vegetables (not frozen or processed), edible
roots and tubers, fish and meat (not packaged or processed), tender
coconut, jaggery, tea leaves (not processed), coffee beans (not
roasted), seeds, ginger, turmeric, betel leaves, papad, flour, curd,
lassi, buttermilk, milk, and aquatic feeds, and supplements.
2. Raw materials
Raw silk, silk waste, wool (not processed), khadi fabric, cotton used
for khadi yarn, raw jute fiber, firewood, charcoal, and handloom
fabrics.
3. Tools/Instruments
Hearing aids, hand tools (such as spades and shovels), tools used for
agricultural purposes, handmade musical instruments, and aids and
implements used by physically challenged people.
4. Miscellaneous
Books, maps, newspapers, journals, non-judicial stamps, postal
items, live animals (except horses), beehives, human blood,
semen, bangles, chalk sticks, contraceptives, earthen pots, props used
in pooja (including idols, bindi, kumkum), kites, organic manure, and
vaccines.
List of exempted services under GST in India:

1. Agricultural services
This includes all services related to agriculture except the rearing
of horses. Exempt services include cultivation, harvesting, supply of
farm labor, fumigation, packaging, renting or leasing of machinery for
agricultural purposes, warehouse activities, and services
18
by an Agricultural Produce Marketing Committee or Board that is

provided by an agent for the sale or purchase of agricultural produce.
2. Transportation services
a) Transportation service by road or bridge on payment of
toll; transportation of goods by road (except when carried out
by transportation agency or courier agency).
b) Transportation of goods by inland waterways.
c) Transportation of passengers by air (in the states of Manipur,
Meghalaya, Assam, Arunachal Pradesh, Nagaland, Sikkim, Tripura,
and Bagdogra).
d) Transportation by non-AC horse or contract carriages;
transportation of agricultural produce, milk, salt,
newspapers, or woodgrains.
e) Transportation of goods where the gross amount charged is less
than Rs. 1500.
f) Hiring services provided to any state transport undertaking,
including motor vehicles with a capacity to carry more than 12
passengers; services provided to goods transport agencies.
3. Services provided by the government and diplomatic missionaries
a) Services by any foreign diplomatic mission located in India.
b) Services provided by the Reserve Bank of India.
c) Services by the Government or any local authority except the
following services:
 Services by the Department of Posts via speed post, express
parcel post, life insurance, and agency services provided to
any individual other than the government.
 Services related to an aircraft/vessel within or beyond the
boundaries of a port or airport.
 Transportation of goods or passengers.
 Any other service, except those that come under (a) and (b),
that is provided to business entities.
d) Services provided to diplomats, including the United Nations.
e) Life insurance services provided under the National Pension System;
life insurance provided by the Army, Naval and Air Force Groups.
4. Judicial services
a) Services provided by an arbitral tribunal (i.e., services provided by
the court or a judge) to any individual other than a business entity
19
or to a business entity with a turnover up to Rs. 20 lakhs (Rs. 10

lakhs for special category states) in the preceding financial year.
b) Services provided by a partnership firm of advocate(s) to: an
advocate or partnership firm of advocates, any individual that is not
a business entity, or a business entity with a turnover up to Rs. 20
lakhs (Rs. 10 lakhs for special category states) in the preceding
financial year.
c) Services provided by a senior advocate (legal services) to any
individual other than a business entity or to a business entity with
a turnover up to Rs. 20 lakhs (Rs. 10 lakhs for special category
states) in the preceding financial year.
5. Educational services
a) Transportation of students and faculty, mid-day meal catering
services, admission, examination services, and security and
housekeeping services.
b) Services provided by Indian Institutes of Management
(except the Executive Development Programme).
c) Coaching services provided by institutions and NGOs under the
central sector scheme of ‘Scholarships for students with
Disabilities’.
6. Medical services
a) Services provided by a veterinary clinic; health-care services
provided by clinics or paramedics.
b) Services provided by ambulances, charities, and organizations
facilitating religious pilgrimage.
7. Services provided by organizers
a) Services provided by organizers for business exhibitions held
outside India.
b) Services provided by tour operators to foreign tourists (this
includes tours that are conducted completely outside India).
8. Miscellaneous services
a) Transmission or distribution of electricity by authorized personnel.
b) Services provided by recognized sports bodies.
c) Services provided by journalists, Press Trust of India, or United
News of India. This includes the collection and provision of news.
d) Services provided by slaughterhouses.
e) Services provided by libraries.
20
f) Services provided for public conveniences, such as washrooms,

lavatories, urinals, and toilets.
g) Renting out vehicles by State Transport Undertakings and Local
Authorities.
h) Overloading charges at a toll plaza.
i) Services provided for conducting religious ceremonies, including
renting the premises of any religious place.
GST Terminologies and Definitions

GST, the new genre taxation module is imbibed with numerous new terms
and nomenclatures, which you should be aware of gst important terms.
The article aims to apprise you of all the important terms of GST, their
broad definitions under GST act and their applicability and important
definitions under GST.
Following are the major terms related to GST, some of the Important
Terms of GST you may have heard until now or may encounter soon:
GST
Goods and Services Tax, commonly known as GST, is a single, indirect,

multi-stage, destination based consumption tax, which will replace almost
all the existing Central and State taxes, including but not limited to
CENVAT, Octroi, Sales Tax and Excise Duty etc. It is the one of the most
common definitions of GST. It has replaced all existing direct and indirect,
Central and State taxes, from 1st July, 2017. This is basic GST terminology,
now there are other GST related terms that you’ll know about and you’ll
also know about the GST terms and definitions by authors and GST terms
and conditions.
GSTIN
GSTIN, i.e. Goods and Services Tax Identification Number is a business’s

legal and unique identity with the government of India in the GST
regime. GSTIN is a 15 alphanumeric character, PAN based distinctive
number, allotted state-wise to GST glossary.
21
CGST, SGST and IGST
The important terms in GST consist of three major taxes – Central GST, i.e.
CGST, State GST i.e. SGST and Integrated GST i.e. IGST.
The different terms under GST would enable the tax payers to take credit
against each other, enhancing ease and transparency in the taxation cycle.
CGST:
Central GST [CGST] is the GST, to be levied by the Centre, on intra-state

businesses.
SGST:
State GST [SGST] is the GST, to be levied by the State, on intra-state

businesses.
IGST:
Integrated GST [IGST] is the GST, to be levied by the Centre, on inter-state

businesses and imports.
Reverse Charge
Reverse Charge is a mechanism and supervisory arrangement to monitor

and increase the tax coverage, compliance, synchronization and track-
ability amongst unorganized, partly organized and fully organized sectors.
Generally, the supplier of goods or services is liable to pay GST. However, in
specified cases like imports and other notified supplies, the liability may
switch to the recipient under the reverse charge mechanism. Reverse
charge means the liability to pay tax rests on the recipient of supply of
goods or services instead of the supplier, however only on special
categories of supply.
Mixed Supply
A mixed supply is a combination of two or more individual supplies of

goods or services or any other arrangement of goods or services made by a
GST payer for a single price. The components of the mixed supply are not
22
organically bundled but it is an intentional fusion from business

perspective.
A mixed supply could be a gifting set comprising of a pen, a tie, a wallet and
a key ring.
Composite Supply
A composite supply is an organic combination of two or more individual

supplies of goods and services or any other natural arrangement of goods
or services made by a GST payer for a single price.
A composite supply is further broken into two parts:
 Principal Supply: The major and the foremost element in the

Composite Supply of goods or services.
 Dependent Supply: This is the depending element and rests on the
Principal Supply.
A composite supply could be a breakfast coupled with the stay package in a

hotel, which would be seen as a natural blend. In this case, stay package is
the Principal Supply and the breakfast is a Composite Supply.
Continuous Supply
A continuous supply is a supply, when the goods and / or services are

supplied at a specific interval [fortnight / monthly] and the payments are
also received in the same manner.
A composite supply could be the services provided by a telecom operator.
ITC
Input tax credit [ITC] is the credit manufacturers receive for paying input
taxes towards inputs used in the manufacture of products. Likewise, a
dealer is entitled to input tax credit, if he has purchased goods for resale.
To avoid double taxation on items used as inputs to make other items,
credit of taxes paid on the inputs can be taken by the maker of the next
item while paying tax on the output. If the tax paid on inputs is higher than
the tax on the output, the excess can be claimed as a refund.
23
Input Tax Credit is not generic for PAN India, differs state-wise and does
not apply to the composite tax payers.
GSTR
GSTR, i.e. GST Return is a document capturing the details of the income,
which a tax payer is supposed to file with the authorities to calculate his tax
liability. There are total eleven types of GST returns, starting from GSTR-1
to GSTR-11, capturing and catering to different forms of tax payers.
A GST primarily includes:
 Sales data
 Purchase data
 Output GST [Derived from Sales]
 Input Tax Credit [ GST paid on purchases]
GST Compliance Rating
GST Compliance Rating is primarily a numerical value and a score between

[0 -10] assigned by the government to all the tax payers, which speaks
about being their GST compliance. The rating is assigned to all the GSTIN
and GSTUIN holders based on a number of factors including but not limited
to your return filing habits on time, accuracy of your fed data etc. among
many others.
Though the actual rating format is still to be announced, however it should
be similar to having a 0-10 scale, where zero accounts for the lowest score
and 10 denotes a cent percent compliance.
To avail the ITC and also keep it flowing seamlessly, the rating would be a
critical factor. If the ITC is not available smoothly, the working capital will
also be impacted adversely. The rating will also impact the legitimate
buyers to avail the input tax credit, if the suppliers is not complying up to
the mark.
24
Unit 3
Time, Place and Value of Supply
After ascertaining whether a transaction falls under the definition of

supply, we come to the next pertinent issue, the date of the charging event
i.e. the date when the liability of the tax arises which is covered by the
provisions of Time of Supply under GST
Under the CGST act Sections 12, 13 & 14 deals with the provisions related
to time of supply and by virtue of section 20 of the IGST Act, 2017, these
provisions are applicable to inter-State supplies leviable to IGST.
Time of supply means the point in time when goods/services are
considered to be supplied. It is the time when the supply has been made. It
enables the registered person to understand when the liability of tax
payment has arisen, basically the point of taxation.
For ease in understanding, let’s divide our Write-up into 4 concepts
namely:
1. Time of supply for Goods [Section 12]
2. Time of Supply for Services [Section 13]
3. Time of supply under Reverse Charge[Section 12(3) & 13(3)]
4. Residual Issues
25
TIME OF SUPPLY OF GOODS UNDER FORWARD CHARGE

Time of Supply of goods shall be earliest of: [u/s 12(2)]
a) The date of Issue of Invoice (or the last date by which invoice should
have been issued u/s 31 i.e. removal or making available the goods
for delivery or as the case maybe)
b) The date of receipt of payment
Date of Receipt of payment means earliest of:
a) Date on which payment was entered in books
b) Date on which payment was credited in bank account
For example:
Mr Narendra sold goods worth Rs 5000 on 31.01.2020. He entered
payment in his books on 02.02.2020 while his bank account was credited
with the payment on 05.02.2020. What shall be the Time of Supply in this
case?
Date of payment is earlier of :
a) Date of entry in books of accounts -02.02.2020
b) Date on which bank account is credited-05.02.2020
So, this will be 02.02.2020.
While time of supply is earlier of :
a)Date of Issue of invoice -31.01.2020
b)Date of Payment-02.02.2020
So time of supply shall be 31.01.2020.
26

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PROF.S.B.

KUMBAR (9036545313) ADVIK COMMERCE ACADEMY, VIJAYAPUR

A tax is a mandatory fee or financial charge levied by any government on an

Be it an individual or any business/organization, all have to pay the

Let us delve deeper into both types of tax in detail:

 From the government’s perspective, estimating tax earnings from

After the introduction of GST, a higher percentage of assessees was brought

Difference between Direct and indirect Tax

Meaning Paid directly to the Paid to the government via

A Brief History of Indirect Taxation in India

With the advent of Industrial Revolution in the early 1800’s, European

“Excise Duty” on goods manufactured in India. This made the price of

GST Frame Work

Evolution of GST in India

In 2000, the Vajpayee Government started discussion on GST by setting up

Features of GST in India

1. Supply as the base: GST would be applicable on “supply” of goods or

2. Destination-based tax: As opposed to the previous principle of origin-

4. Inter-State supply: An integrated GST (IGST) would be levied on inter-

8. Threshold for GST: A common threshold exemption would apply to

11. Electronic filing of returns: There will be electronic filing of returns

13. Tax collection at source by E-commerce operators: While the

14. Refund: Refund of tax can be sought by taxpayer or by any other

15. Anti-profiteering clause: An anti-profiteering clause has been

1. Dynamic common market: GST would make India a dynamic common

2. Elimination of cascading effect: Under GST, provision of seamless

3. Efficiency: Subsuming of all major indirect taxes will result in the

4. Reduced compliance costs: Harmonisation of tax rates and laws along

5. Reduction in tax evasion: Uniform rates of taxation would reduce the

6. Improved collection efficiency: GST is also desirable from the point of

7. Revenue generation: By controlling tax leakage from the system and

8. Encourages savings and investment: As GST is a tax on consumption

9. Improved efficiency of logistics : Due to GST implementation, the

10. Regulation of the unorganized sector : For a large unorganized

11. Export competitiveness: With GST in place, the export industry in

12. Higher threshold for registration: As per the current VAT

13. Composition scheme for small businesses: The composition

14. Benefits to consumers: The final price of goods is expected to be

Concerns Regarding GST

3. Increased costs due to software purchase: Businesses have to either

4. Small businesses: Small and medium-sized enterprises (SMEs) who

5. Lack of skilled resources and re-skilling existing workforce: As GST

1. Central Goods and Services Tax or CGST

As mentioned in the above instance, if a trader from West Bengal has

2. State Goods and Services Tax or SGST

3. Union Territory Goods and Services Tax or UTGST

Difference between Types of GST

Types of Authority which is Priority Who is it Transactions which

In the GST system, a taxable event is called a Supply. For an event to be

Following are the 6 different types of supply as defined in the Act:

6. Rental: Rental income consists of payments for renting out

Components of Supply Under GST

a) Exempt Supplies - The supply of exempt goods or services do not

List of exempted goods under GST in India:

List of exempted services under GST in India:

by an Agricultural Produce Marketing Committee or Board that is

or to a business entity with a turnover up to Rs. 20 lakhs (Rs. 10

f) Services provided for public conveniences, such as washrooms,

GST Terminologies and Definitions

Goods and Services Tax, commonly known as GST, is a single, indirect,

GSTIN, i.e. Goods and Services Tax Identification Number is a business’s

CGST, SGST and IGST

Central GST [CGST] is the GST, to be levied by the Centre, on intra-state

State GST [SGST] is the GST, to be levied by the State, on intra-state