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Gateway Exam of CIMA, UK.
He is also qualified Diploma in IFRS (ACCA, UK), Diploma in Business
Finance, Certificate in Derivatives.
He is ex Top Management personnel of Multinational and Indian
companies with practical experience of GST implementation in Big
Corporate. He is ex-member of IMA CFO forum.
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S. ABC Page
Theme No. Particulars Example Q&A
Analysis No.
1 GST in India - An Introduction A 15 15 1
Door of 2 Supply under GST A 32 43 29
GST 3 Charge of GST A 4 39 54
4 Exemptions from GST B 0 33 82
5 Place of Supply A 71 19 122
Core of 6 Time of Supply A 14 22 148
GST 7 Value of Supply A 27 32 163
8 Input Tax Credit A 57 46 190
9 Registration A 18 24 246
10 Tax Invoice, Credit & Debit Notes B 3 10 277
11 Accounts & Records; E-way Bill B 4 26 296
Compli- 12 Payment of Tax B 9 7 315
ances, 13 Returns B 0 9 334
14 Import & Export under GST A 4 14 355
Proce-
15 Refunds A 4 15 368
dures
16 Job Work B 0 13 394
Aspects
17 Assessment & Audit A 2 20 398
18 Inspection, Search, Seizure and Arrest B 1 10 409
&
19 Demands & Recovery A 6 36 415
Miscellan 20 Liability to pay tax in certain cases B 2 7 434
eous 21 Offences & Penalties A 7 14 438
22 Appeals & Revisions A 5 34 452
23 Advance Ruling A 1 7 472
24 Miscellaneous Provisions C 0 4 476
Total 286 499 488
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All the sections & rules mentioned in this study notes, are CGST Act 2017 & CGST Rules 2017 until specified
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 Overall Structure of GST
Body of GST Law
Deficiency in the earlier Indirect Tax Regime
Benefits of GST
Framework of GST in India
Constitutional Provision
Selected Definitions Under Section 2 of CGST Act, 2017
Selected Definitions Under Section 2 of IGST Act, 2017

The implementation of Goods & Services Tax (GST) in India was historical move, as it marked a significant
indirect tax reform in the country.

World has moved towards Goods & Services Tax long ago. After 16 years of its opposition, India has moved
into GST on 1st July 2017 (in J & K, it was made applicable from 8th July 2017).

Earlier in India, with its federal structure, there were parallel systems of indirect taxation at the central and state
levels. The assignment in the Constitution, of power to tax, provided the framework for evolution of the taxation
system in India.

GST is a consumption-based tax. Origin based tax is one which is levied where goods/services are produced.
Conversely, a consumption-based tax is one which is levied where goods/services are consumed. Tax will
accrue to State where goods/services are ultimately consumed.

GST is based on value added tax concepts of allowing input tax credit of tax paid on inputs, inputs services and
capital goods, for payment of output tax. This will avoid cascading effect of taxes.

Genesis of GST in India

1
GST is a path breaking indirect tax reform which attempts to create a common national market. GST has
subsumed multiple indirect taxes like excise duty, service tax, VAT, CST, luxury tax, entertainment tax, entry
tax etc.

VAT and GST are often used inter-changeably. France was the first country to implement VAT in 1954.
Presently, more than 160 countries have implemented VAT/GST in some form or the other. Most of the
countries follow unified GST i.e., a single tax applicable throughout the country. However, Brazil and Canada,
a dual GST system is prevalent.

Under dual system, GST is levied by both the federal and the State Governments. India has adopted a dual
GST.
CA Final
Overall structure of GST Syllabus
CGST &
• Broadly there is 2 forms of GST in India: - IGST Act
➢ For supplies within the State or Union Territory –
a) Central Tax (Central GST i.e. CGST) is payable to Central Government and
b) State Tax (State GST i.e. SGST) or Union Territory Tax (Union Territory GST i.e. UTGST) is
payable to State Government or Union Territory. Area up to 12 nautical miles inside sea is part
of State or Union Territory which is nearest.

CGST Act, 2017 is the main Act which covers all important provisions relating to GST,
like tax liability, input tax credit, valuation for payment of tax, procedures, appeals
penalties, offences, transitory provisions etc.

SGST ACT of each State is mainly copy of CGST Act passed by Central Government.
Though there are multiple SGST legislations, the basic features of law, such as chargeability,
definition of taxable event and taxable person, classification & valuation of goods & services,
procedure for collection and valuation of goods and services, procedure for collection & levy of
tax and the like are uniform in all the SGST legislations, as far as feasible. This is necessary to
preserve the essence of dual GST.

➢ For inter-State supplies (supply from one State or Union Territory to another State or Union Territory),
Integrated Tax (Integrated GST i.e. IGST) is payable to Central Government. IGST is to basically
ensure seamless movement of goods across the country as taxes will move along with goods.

IGST is imposed under IGST Act. IGST is intermediary tax and revenue from IGST will be apportioned
among Union and States by Parliament on basis of recommendation of Goods & Service Tax Council.
IGST is unique concept nowhere else been tried in the world.

• In addition, GST Compensation Cess will be payable on pan masala, tobacco products, coal, aerated
waters, motor cars etc.
• The rates of IGST – NIL, 0.1% (DTA to Merchant Exporter), 0.25% (rough diamonds), 3% (gold & jewelry),
5%, 12%, 18% & 28%. In case of supply within State, CGST will be 50% of IGST Rates and SGST/UTGST
for supply within the State or Union Territory will be 50% of IGST rates.
IGST rate = CGST rate + SGST rate

2
• Though tax is payable to both Central Government and State Government/Union Territory Administration,
control will be exercised either by State Government/Union Territory Authorities or Central Government
Authorities. This will avoid dual control.
• Central Excise duty will continue on petroleum products i.e. petroleum crude, high speed diesel, motor
spirit (commonly known as petrol), natural gas and aviation turbine fuel. These products are outside the
purview of GST at present and will be brought under GST later.
• Alcoholic liquor for human consumption is subject to State duty. This product is outside the purview of
GST.
• Tobacco products will be subject to excise duty plus GST.
• Distinction between goods and services will be considerably reduced except in cases relating to place of
supply and time of supply. This will considerably reduce ambiguities and litigations.
• Check posts at State borders have been abolished, however road checks to check e-way bills have been
introduced.
• Under GST, a taxable person can establish hub and spoke approach for distribution of his final products.
He can maintain depots at few strategic locations in country and from those locations, he can distribute
goods to nearby States. This will be very cost-effective distribution network.

Body of GST Law

• Central Goods & Services Tax Act, 2017

• Integrated Goods & Services Tax Act, 2017
Acts • Union Territory Goods & Services Tax Act, 2017
• State Goods & Services Tax Acts 2017
• Goods & Services Tax (Compensation to States) Act, 2017
• Central Goods & Services Tax Rules, 2017
• Integrated Goods & Services Tax Rules, 2017
• Union Territory Goods & Services Tax Rules, 2017
Rules
• State Goods & Services Tax Rules, 2017
• Goods & Services Tax (Compensation to States) Rules, 2017
• GST Settlement of Funds Rules, 2017
➢ Central Tax Notifications [CT] – [Non-Tariff]
CGST
➢ Central Tax (Rate Notifications) [CT (Rate)] – [Tariff]
➢ Integrated Tax Notifications [IT] – [Non-Tariff]
IGST
➢ Integrated Tax (Rate) Notifications [IT (Rate)] [Tariff]
➢ Union Territory Tax Notifications [UTT] [Non-Tariff]
Notifications UTGST ➢ Union Territory Tax (Rate) Notifications [UTT (Rate)]
[Tariff]
➢ Compensation Cess Notifications [GST Compensation
Cess] [Non-Tariff]
GST Cess
➢ Compensation Cess (Rate) Notifications [GST
Compensation Cess (Rate)] [Tariff]
➢ CGST
➢ IGST
Circulars ➢ UTGST
➢ SGST
➢ GST Compensation Cess

3
Deficiency in the earlier Indirect tax regime

1. Non-inclusion of several levies in state VAT such as luxury tax, entertainment tax etc.;
2. Cascading effect of taxes on account of
(i) levy of Non-Vatable CST and
(ii) inclusion of CENVAT in the value for imposing VAT;
3. No Cenvat available after manufacturing stage;
4. Non-integration of VAT & Service Tax;
5. Certain items were subject to double taxation i.e. both goods & services.

Benefits of GST
1. Creation of Unified National Market;
2. Mitigating Cascading Effects;
3. Elimination of multiple taxes & double taxation;
4. Boost to Make in India initiative;
5. Increase in Revenue.

How GST Works (‘No Tax on Tax’ in GST)

Particulars Manufacturer Wholesaler Retailer
Purchase 100.00 110.00 120.00
Profit 10.00 10.00 10.00
Consideration 110.00 120.00 130.00
Add
CGST@ 9% 9.90 (110*9%) 10.80 (120*9%) 11.70 (130*9%)
SGST@ 9% 9.90 (110*9%) 10.80 (120*9%) 11.70 (130*9%)
Invoice Value 129.80 141.60 153.40
Output Tax Payable {A} 19.80 21.60 23.40
Input Tax {B} 0.00 19.80 21.60
Net Tax Payable {A-B} 19.80 1.80 1.80

Net Tax Payable = Value Addition * Tax Rate

For Wholesaler = 10 {Profit/Value Addition} * 18% = 1.80
For Retailer = 10 {Profit/Value Addition} * 18% = 1.80

Framework of GST in India

➢ Dual GST: - India has adopted a Dual GST model in view of the federal structure of the country. Centre &
States will simultaneously levy GST on taxable supply of goods or services or both, which takes place within
a State or Union Territory.

4
➢ CGST/SGST/UTGST/IGST:-

Central Goods & State Goods & Service Union Territory Goods & Integrated Goods &
Service Tax Act, 2017 Tax Act, 2017 Service Tax Act, 2017 Service Tax Act, 2017

CGST SGST UTGST IGST

Levied on Inter-State
Levied on Intra-State Supply Supply

➢ HSN (Harmonized system of nomenclature) code is used for classifying the goods, under the GST. HSN is
8 digits code. New Service Accounting codes (6 digits) has been devised to take care of services.

➢ Registration: - Threshold limit of aggregate turnover for exemption from registration and payment of GST
for suppliers of services would be Rs. 20 lakhs and Rs. 10 lakhs (for States of Manipur, Mizoram, Nagaland
and Tripura). Threshold limits of aggregate turnover for exemption from registration and payment of GST
for the suppliers of goods (exclusive) is increased to Rs. 40 lakhs (not applicable on all States) with effect
from 01.04.2019. (Please refer to registration chapter for details)

➢ Composition Scheme: -To provide relief to small businesses, composition scheme had been prescribed.

➢ Seamless flow of credit: - Since GST is destination-based consumption tax, revenue of SGST ordinarily
accrues to the consuming states. The revenue of inter-State sales doesn’t accrue to the exporting State.

➢ Compensation Cess: - A GST Compensation Cess at specified rate has been imposed under the Goods
& Services Tax (Compensation to States) Cess Act, 2017 on the specified luxury items or demerit goods,
like pan masala, tobacco, aerated waters, motor cars etc., computed on value of taxable supply.
Compensation Cess is leviable on intra-State & inter-State supplies

➢ GST Common Portal (www.gst.gov.in managed by GSTN)

Facilitating Forwarding Computation Matching of Providing various Providing analysis of

Registration the returns & settlement tax payment MIS reports to the taxpayers’ profile;
to Central & of GST details with Central & the and running the
State banking State Government matching engine for
Authorities network based on the matching, reversal
taxpayer return and reclaim of input
information tax credit

For the implementation of GST in the country, the Central & State Governments have jointly registered
Goods & Services Tax Network (GSTN) as a not-for-profit, non-Government Company to provide shared
IT infrastructure and services to Central & State Governments, tax payers and other stakeholders. The
key objectives of GSTN are to provide a standard and uniform interface to the taxpayers, and shared
infrastructure and services to Central and State/UT Governments.
GSTN has selected certain IT, ITeS & financial technology companies, to be called GST Suvidha
Providers (GSPs). GSPs 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 &
GSPs.

5
 ➢ GST-A Tax on goods & Services: - GST will be levied on all supply of goods & services except: -

➢ Taxes subsumed in GST: -

Central levies to be subsumed State levies to subsumed

• Central Excise Duty & Additional Excise Duties
• Service Tax
• Excise Duty under Medicinal & Toilet
Preparation Act
• CVD & Special CVD
• Central Sales Tax
• Central surcharges and cesses in so far as
they relate to supply of goods & services
• State surcharges and cesses in so far as they
relate to supply of goods & services
• Entertainment Tax (except those levied by
local bodies)
• Tax on lottery, betting and gambling
• Entry Tax (All Forms) & Purchase Tax
• VAT/ Sales tax
• Luxury Tax
• Taxes on advertisements

6
Constitutional Provision

Article 265 – As per Article 265 of Constitution of India ‘No Tax shall be levied or collected except by the
authority of law’. The term “authority of law” means that tax proposed to be levied must be within the legislative
competence of the Legislature imposing the tax.

Article 245 – Part XI of the Constitution deals with relationship between the Union and States. The power for
enacting the laws is conferred on the Parliament and on the Legislature of a State by Article 245 of the
Constitution. The said Article provides as under:
• Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of
the territory of India, and the legislature of a State may make laws for the whole or any part of the
State.
• No law made by the Parliament shall be deemed to be invalid on the ground that it would have extra-
territorial operation.

Article 246 – It gives the respective authority to Union & State Governments for levying tax. Whereas
Parliament may make laws for the whole of India or any part of the territory of India, the State Legislature may
make laws for whole or part of State. Seventh Schedule to Article 246 contain 3 lists which enumerate the
matters under which the Union and the State Governments have the authority to make laws.

List I Union List
It contains the matters in respect
of which the Parliament (Central
Government) has the
exclusive right to make laws.
Entries 82 to 91 of List I
enumerate the subjects where the
Central Government has power to
levy taxes.
Income tax is levied by virtue of
Entry 82 - Taxes on income other
than agricultural income and
Customs duty vide Entry 83 -
Duties of customs including
export duties of the Union List.
List II State List List III Concurrent List
It contains the matters in It contains the matters in
respect of which the State respect of which both the
Government has the Central & State Governments
exclusive right to make laws. have power to make laws.
Entries 45 to 63 of List II
enumerate the subjects where the
State Governments have the
power to levy taxes. Parliament
has a further power to make any
law for any part of India not
comprised in a State even if such
matter is included in the State
List.

7
Article 246A – Newly Inserted

The provisions of Article 246A are notwithstanding anything contained in Articles 246 and 254. Article 254 deals with
the supremacy of the laws made by Parliament.
Special provision w.r.t GST
► Grants power to Parliament and State Legislatures to make laws w.r.t GST.
► Exclusive power conferred on Parliament for making laws w.r.t GST, where the supply of goods, or of
services, or both takes place in the course of inter-State trade or commerce.
► Provisions of this Article shall apply with respect to GST on petroleum crude, high speed diesel (‘HSD’),
motor spirit, natural gas and aviation turbine fuel (‘ATF’) from the date recommended by GST Council.
► Parliament’s exclusive power to make laws on any matter not enumerated in Concurrent / State List shall
be subject to Article 246A.

Who can levy which tax

Central Government State Government

Taxes on alcoholic liquor for
human consumption
Taxes of petroleum crude, high
speed diesel, motor spirit
(commonly known as petrol),
natural gas, ATF
Taxes on Tobacco and Tobacco
Products
Other goods or services or both
Entertainment and amusements
Power to levy CST on inter State
sale (Entry No. 92A)
Power to levy excise duty (Entry
No. 84)
Power to levy CST on inter State
sale (Entry No. 92A)
Power to levy excise (Entry No.
84) and CGST (Article 246A)
Power to levy tax on supply of
goods or services of both (Article
246A)
Power to levy CGST
(Article 246A)
Power to levy both excise (Entry
No. 51) and sales tax on local
sale (Entry No. 54)
Power to levy sales tax on local
sale (Entry No. 54)
Power to levy SGST (Article
246A)
Power to levy tax on supply of
goods or services or both (Article
246A)
Power to levy SGST (Article
246A) Local authority shall also
have power to levy entertainment
tax (Entry No. 62)

Article 249 – Power of Parliament to legislate with respect to a matter in the State List in the national interest.

Article 250 – Power of Parliament to legislate with respect to any matter in the State List if a Proclamation of
Emergency is in operation.

Article 269A – Newly Inserted

Levy and collection of GST in course of inter-State trade or commerce

► GST on supplies in the course of inter-State trade or commerce shall be levied and collected by the
Government of India and apportioned between the Union and the States in the manner as may be
provided by Parliament by law on the recommendations of the GST Council.
► Supply of goods and/or services in the course of import shall be deemed to be supply in the course of
inter-State trade or commerce.
► Amount apportioned to a State shall not form part of Consolidated Fund of India.
► Where an amount collected as tax under this Article has been used for payment of the tax levied by a
State, such amount shall not form part of the Consolidated Fund of India.
► Where an amount collected as tax levied by a State has been used for payment of the tax levied
under this Article, such amount shall not form part of the Consolidated Fund of the State.
► Parliament may, by law, formulate the principles for determining the place of supply, and when a
supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.

8
Article 270 – Amendment

► Article 270 is amended to provide for distribution of the goods and service tax between the Centre
and the States, by order of the President after considering recommendations of the Finance
Commission.

Article 271 – Amendment

► Surcharge can be levied on certain duties and taxes for purposes of the Union except on GST under
Article 246A.

Article 279A – Newly Inserted (Very Very Important)

Goods and Service Tax Council

► President shall, within 60 days from the date of commencement of the Constitution (101st Amendment)
Act, 2016, by order, constitute a Council to be called the GST Council.

► GST Council shall consist of the following members:

Union Finance Minister (Chairperson);
Union Minister of State in charge of Revenue or Finance (Member);
Minister in charge of Finance or Taxation or any other Minister nominated by each State Government
(Members)
Members of the GST Council shall, as soon as may be, choose one amongst themselves to be the
Vice-Chairperson of the Council.
GST Council shall make recommendations to the Union and the States on the following:
✓ Taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be
subsumed in GST;
✓ Goods and services that may be subjected to, or exempted from GST;
✓ Model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of inter-
State trade or commerce under article 269A and the principles that govern the place of supply;
✓ Threshold limit of turnover below which goods and services may be exempted from GST;
✓ Rates including floor rates with bands of GST;
✓ Any special rate or rates for a specified period, to raise additional resources during any natural calamity
or disaster;
✓ Special provision with respect to the States of Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh, Uttarakhand and Jammu and Kashmir; and
✓ Any other matter relating to GST, as the Council may decide;

GST Council shall recommend the date on which GST be levied on petroleum crude, HSD, motor spirit
(commonly known as petrol), natural gas and ATF.

While discharging the functions conferred by this Article, GST Council shall be guided by the need
for a harmonized structure of GST and for the development of a harmonized national market for
goods and services.

1/2 of the total number of members of GST Council shall constitute the quorum at its meetings.

GST Council shall determine the procedure in the performance of its functions.

Every decision of GST Council shall be taken at a meeting, by a majority of not less than 3/4th of the
weighted votes of the members present and voting, in accordance with the following principles,
namely:
✓ Vote of the Central Government shall have a weightage of 1/3 rd (33.33%) of the total votes cast,
✓ Votes of all the State Governments taken together shall have a weightage of 2/3rd (66.67%) of the total
votes cast, in that meeting.
Thus, practically, Central Government has veto powers. Any decision in GST council cannot be taken
without consent of Central Government.

9
 No act or proceedings of GST Council shall be invalid merely by reason of—
✓ Any vacancy in, or any defect in, the constitution of the Council; or
✓ Any defect in the appointment of a person as a member of the Council; or
✓ Any procedural irregularity of the Council not affecting the merits of the case.
GST Council shall establish a mechanism to adjudicate any dispute—
✓ Between the Government of India and one or more States; or
✓ Between the Government and any State or States on one side and one or more other States on the
other side; or
✓ Between two or more States,
arising out of the recommendations of the Council or implementation thereof.

Article 286 – Amendment

Restrictions as to imposition of tax on the sale or purchase of goods

► The words “sale or purchase of goods where such sale or purchase takes place” are substituted with
“supply of goods or of services or both, where such supply takes place”

Article 368 – Amendment

Powers of Parliament to amend the Constitution and procedure thereof

► If amendment (2/3rd of majority in each house) seeks to make any change in Article 279A (relates to
GST Council) then it shall also require ratification by the Legislatures of not less than one-half of the
States by resolutions to that effect passed by those Legislatures before the Bill making provision for
such amendment is presented to the President for assent.

Seventh Schedule [Article 246] – Amendment

List I – Union List
► Entry No 84 to be substituted as under: -
Duties of excise on the following goods manufactured or produced in India, namely
✓ Petroleum crude;
✓ High Speed Diesel;
✓ Motor Spirit (Commonly known as petrol)
✓ Natural Gas
✓ Aviation Turbine Fuel; and
✓ Tobacco and tobacco products
► Earlier entry no 84 included duties of excise on tobacco and other goods manufactured or produced in
India excluding alcoholic liquor for human consumption, opium, Indian hemp and other narcotic drugs
and narcotics but including medicinal and toilet preparations containing alcohol or opium.
► Following entries shall be deleted:
Entry No 92 – Taxes on the sale or purchase of newspapers and on advertisements published therein
Entry No 92C – Taxes on services
List II – State List
► Entry No 54 to be substituted as under:
Taxes on the sale of petroleum crude, HSD, motor spirit (commonly known as petrol), natural gas,
ATF and alcoholic liquor for human consumption, but not including sale in the course of inter-State
trade or commerce or sale in the course of international trade or commerce of such goods.
Earlier it included taxes on the sale or purchase of goods other than newspapers, subject to the
provisions of entry 92A of List I.
► Entry No 62 to be substituted as under:
Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a
Municipality or a Regional Council or a District Council.
Earlier it included taxes on luxuries, including taxes on entertainments, amusements, betting and
gambling.
► Following entries shall be deleted:
Entry No 52 – Taxes on the entry of goods into a local area for consumption, use or sale therein.
Entry No 55 – Taxes on advertisements other than advertisements published in the newspapers and
advertisements broadcast by radio or television.

10
Section 2 of CGST Act, 2017 – Definitions under GST (below
number in ‘( )’ are clause of Section 2)
(1) “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property
Act, 1882;
Actionable claim represents a debt and the holder of the actionable claim enjoys the right to demand “action”
against any person. Acknowledgement of liability by a creditor to honor a claim, when made, does not
constitute actionable claim in the hands of such creditor
Example of actionable claims: - a right to recover insurance money, a partner’s right to sue for on account
of a dissolved partnership, a claim for arrear of rent, a right to credit in a provident fund account etc.
In GST, actionable claim has been included in the definition of goods.

(2) “address of delivery” means the address of the recipient of goods or services or both indicated on
the tax invoice issued by a registered person for delivery of such goods or services or both;
The address on which actual delivery of goods take place. This may be different from address on records.

(3) “address on record” means the address of the recipient as available in the records of the supplier;
The address mentioned on records/books maintained by the supplier.

(4) “adjudicating authority” means any authority, appointed or authorised to pass any order or decision
under this Act, but does not include the Central Board of Indirect Taxes and Customs, the Revisional
Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate
Authority, the Appellate Tribunal and the Authority referred to in sub section (2) of section 171;

(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent,
an auctioneer or any other mercantile agent, by whatever name called, who carries on the business
of supply or receipt of goods or services or both on behalf of another;
Agent can work purely on commission basis. Even e-commerce companies like Flipkart, Amazon and Uber
may be covered in some situations. But the relevance of being an agent is more pronounced while
examining whether a transaction between a principal and agent is itself a supply under para 3 of Schedule
I (Chapter 2 of this book). Very often, the word agent or agency is used without necessarily implying that
the transaction is one of agency as understood under Indian Contract Act such as, recruitment agency,
travel agency etc. Care must be taken to identify whether the parties intended to constitute an agency as
understood in law and nothing less.
Mercantile agents: These are appointed in customary course of business with an authority to sell goods, or
to consign goods or to raise money.
Brokers: He negotiates & makes contract for sale & purchase of goods & other property of which he is not
entrusted with possession or control in the ordinary course of business.
Auctioneer: He is an agent for the vendor to sell at any open sale.
Arhatia: A broker or middle man, especially one who has a shop, sometimes with considerable storage
accommodation, in ganj or emporium for the sale of grain. Hence, more generally, a business agent or
correspondent.
Del Credere Agent: Sales agent who guarantees that a buyer is trustworthy and, in case the buyer defaults,
he compensates the principal (the seller). To cover such risks, del credere agents charge higher than normal
commission rates.
Commission Agent: Those agents who only facilitates supply of goods or services.
Example 1: - If newspaper sells a unit of space worth Rs. 100 to advertisement agency for Rs. 85 (after a
trade discount of Rs. 15), the advertisement agency sells the same unit of space to client at Rs. 100,
newspaper would be liable to pay GST on Rs. 85 and the advertisement agency would be liable to
pay GST on full value, that is, Rs. 100.
On the other hand, if the advertisement agency sells space for advertisement as an agent of the newspaper
on commission basis, it would be liable to pay GST on the sale commission it receives from the
Newspaper.

(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of
inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and inter-State supplies of persons having the same
Permanent Account Number, to be computed on all India basis but excludes central tax, State tax,
Union territory tax, integrated tax and cess;

11
 The phrase “aggregate turnover” is widely used under the GST laws. Aggregate Turnover is an all-
encompassing term covering all the supplies effected by a person having the same PAN (all India basis).
It specifically excludes:
• Inward supplies effected by a person which are liable to tax under reverse charge mechanism; &
• Various taxes under the GST law, Compensation cess (let use the term “GST Family Taxes”).
Exempt supplies (definition is in this chapter 1 later) would cover: -
• Supplies that have a ‘Nil’ rate of tax;
• Supplies that are wholly exempted from GST; or
• Supplies that are not taxable under the Act.

(7) “agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of
land—
(a) by own labour, or
(b) by the labour of family, or
(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or
the personal supervision of any member of the family;
It would be relevant to highlight that for the purpose of undertaking cultivation, ownership of land is not
necessary. Acquisition under lease shall work evenly.
Further, cultivation must be carried out by an individual or HUF, which means any cultivation carried out
by any corporate body or co-operative societies under co-operative farming shall not be covered under
the ambit of this definition.

(8) “Appellate Authority” means an authority appointed or authorised to hear appeals as referred to in section
107;

(9) “Appellate Tribunal” means the Goods and Services Tax Appellate Tribunal constituted under section 109;

(11) “assessment” means determination of tax liability under this Act and includes self-assessment, re-
assessment, provisional assessment, summary assessment and best judgment assessment;

(12) “associated enterprises” shall have the same meaning as assigned to it in section 92A of the
Income-tax Act, 1961;
‘Associated enterprise’ is referred to only in the context of time of supply of services where the supplier is
an associated enterprise (located outside India) of the recipient {reverse charge attracted under sec 9(3)}.
It may be noted that in addition to associated enterprise, the Act also defines ‘related person’, the reference
to which is made in the context of deemed supply (Schedule I) and valuation.

(16) “Board” means the Central Board of Indirect Taxes and Customs constituted under the Central Boards of
Revenue Act, 1963;

The word ‘includes’ is often used in interpretation clauses in order to enlarge the
meaning of the words or phrases occurring in the body of the statute. When it is so
used, these words and phrases must be construed as comprehending not only such
things as they signify according to their nature and import, but also those things which
the interpretation clause declares that they shall include.

(17) “Business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar
activity, whether or not it is for a pecuniary benefit;
‘Trade’ primarily refers to exchanging goods for goods or money with a secondary meaning of being a
repeated activity carried on with a profit motive but in the context of GST, should also refer to the
provision of services and not merely goods.
‘Commerce’ refers to a larger volume of trade though there is no specific scale when a trade is
termed as commerce.
Education, charitable and religious activities also covered here in business. Salman khan running a
not for profit organisation still covered under business.
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

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 Sale of waste or scrap, unserviceable parts, sale of hypothecated or pledged goods by bank or sale of
repossessed goods by insurance company;
Activity of selling of old furniture by a trader of readymade garment shall get covered in this sub-clause
though he is not in the trade, adventure etc. of selling the furniture.
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transaction;
Akshay Kumar, an actor sells his biography once in his life time.
A trader of readymade garment makes a solitary transaction of providing consultancy ‘how to set-up
showroom for selling readymade garments’ to one of his friend’s son for a consideration shall get
covered in the definition of business.
(d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business;
Transaction of sale or purchase effected for commencement of business shall be treated as
undertaken in the course or furtherance of business. The person shall be eligible for ITC and shall be
liable to pay GST. Similar concept shall be applied in case of closure of business.
(e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members;
Restaurant, swimming pool facility, sports facility, library, open ground etc.
(f) admission, for a consideration, of persons to any premises;
Sale of tickets for admission to movie theatre, amusement parks, concert etc.
(g) services supplied by a person as the holder of an office which has been accepted by him in the
course or furtherance of his trade, profession or vocation;
If a practicing CA is appointed as an independent director of a company, it means that he accepts this
office of directorship in the course or furtherance of his professional practice. Any service provided by
him as an independent director to the company appointing him shall be regarded as business.
An advocate gets appointed as member of the Arbitration Tribunal will be covered in this sub-clause
and the consideration received by such advocate for acting as member of tribunal shall be liable to tax
under GST.
(h) activities of a race club including by way of totalisator or a license to book maker or activities of a
licensed book maker in such club; and
Meridian Turf Race Club is engaged in facilitating the wagering (betting) transactions on horses placed
through totalisator. For providing the service of facilitating wagering transactions, Meridian Turf Race
Club gets commission which is deducted and retained by the club from the total bet value. Said
services amount to supply as the activities of a race club are included in business.
(i) any activity or transaction undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities;
The term business has been defined in an inclusive manner. This definition is very wide and
covers all the transactions that were previously subjected to various taxes that are being subsumed
in the GST Laws.
This definition of business is important since levy is on supplies undertaken in the course or
furtherance of business.
Profit motive is irrelevant. Thus, occasional transactions are subject to GST.
Incidental or ancillary activities taxable i.e. sale of used car, sale of scrap, sale of old machinery,
sale of old furniture etc. is subject to GST, though normally the taxable person may not be in
business of selling cars, furniture or machinery.
‘Wager’ is also included in the definition of business to impose GST on betting transactions;
Government activities excluding sovereign functions are also subject to GST.

(19) “capital goods” means goods, the value of which is capitalised in the books of account of the
person claiming the input tax credit and which are used or intended to be used in the course or
furtherance of business;
An attempt has been made to align the meaning of capital goods to the generally accepted standards of
accounting of what is considered as revenue and what as capital.
Every person carries out certain activities regularly for running trade or commerce i.e. a photographer
carries out the activity of clicking photos, processing of films etc. These activities are essential for the
purpose of carrying out his activity. Therefore, such activities can be considered as performed in the
course of business. Businessman also has to continuously think of innovative ideas for the purpose of
expanding his business. Expansion of business can take place by various methods like carrying out
research and development activities, or acquiring company who are in similar business or carrying out new
activities in the same line of business. This can be elaborated by an example. Say Company Y is engaged

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 in the manufacturer of paint. It has been selling huge quantity of paints in Punjab, Haryana & Himachal
Pradesh. In view of the demand, it intends to acquire paint manufacturing unit in North-West of the country.
It appoints consultant Mr. X for searching unit in North-West of the country. Mr. X will evaluate various
units and short list prospective targets. He will make the presentation to Company Y for final selection of
the unit. It is possible that finally, none of the unit is found suitable for acquisition. But the activity carried
out by Mr. X is in furtherance of business of company Y.

(20) “casual taxable person” means a person who occasionally undertakes transactions involving
supply of goods or services or both in the course or furtherance of business, whether as principal,
agent or in any other capacity, in a State or a Union territory where he has no fixed place of
business;
Example, Mumbai registered taxable person participate in exhibition in ‘Delhi’.
The threshold limits for registration would not apply to casual taxable person and he would be
required to obtain registration irrespective of his turnover.

(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary course of business, one of which is a principal
supply;
Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply and supply of goods is a principal supply;
In this definition “taxable” term is being used but Section 8, which is for taxability of composite supply
(Chapter 2), “taxable” term missing.

(31) “consideration” in relation to the supply of goods or services or both includes––

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response
to, or for the inducement of, the supply of goods or services or both, whether by the recipient
or by any other person but shall not include any subsidy given by the Central Government or
a State Government;
Inducement means to gives something to a person so that he will do something else in return.
Consideration is not the amount that the recipient pays but the amount that the supplier collects whether
from the recipient or third Party.
Example 2: A football player is offered a car as an inducement for him to join the club. In this case,
the car offered is the consideration that induces the player to join the club to provide his football skills.
There is a direct link between the act of joining the club and the provision of the car.
Example 3: A restaurant owner offered ‘free’ meals to drivers of buses carrying passengers as an
inducement to bring potential customers to his business premise. Since the meals were not given to
drivers of empty buses, there is a direct link between the act of bringing passengers to the food outlet
and the provision of the free meals. The consideration here is the free meals provided.
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the
inducement of, the supply of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the Central Government or a State
Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not
be considered as payment made for such supply unless the supplier applies such deposit as
consideration for the said supply;
Forbearance means delaying the action for which compensation is charged.
Non-refundable deposit will be part of consideration.
Example 4: An amount paid as contractual penalty for non-supply of goods on timely basis could be
treated as “monetary value of forbearance” and therefore, may be considered as consideration for
applicability of GST.
Example 5: Penalty charges on early termination of an agreement could be treated as “monetary value
of any act” and therefore, may be considered as consideration.
Now, let understand “Non-monetary consideration” with examples. “Non-monetary consideration”
essentially means compensation in kind such as the following: -
• Supply of goods and services in return for provision of services i.e. if ABC agrees to dry clean
XYZ’s clothes and in return, XYZ agrees to click ABC”s photograph.
• Refraining or forbearing to do an act in return for provision of services i.e. if ABC agrees not to
open mobile shop in XYZ’s neighbourhood and in return, XYZ agrees not to open computer shop
in ABC’s neighbourhood.

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 • Tolerating an act or a situation in return for provision of services i.e. if ABC agrees to design XYZ’s
house and in return, XYZ agrees not to object to construction of ABC’s house in his neighbourhood.
• Doing or agreeing to do an act in return for provision of services i.e. if ABC agrees to construct 3
flats for XYZ on land owned by XYZ and in return, XYZ agrees to provide one flat to ABC without
any monetary consideration.

(32) “continuous supply of goods” means a supply of goods which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire,
cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or
periodic basis and includes supply of such goods as the Government may, subject to such
conditions, as it may, by notification, specify;
Example 6: Open purchase orders with an understanding of fortnightly billing.
Example 7: Supply of gases through pipeline with a weekly billing schedule.
Example 8: Supply of say, oil cans on an as and when required basis with a frequency of monthly billing
under a contract.

(33) “continuous supply of services” means a supply of services which is provided, or agreed to be
provided, continuously or on recurrent basis, under a contract, for a period exceeding three months
with periodic payment obligations and includes supply of such services as the Government may,
subject to such conditions, as it may, by notification, specify;
Example 9: Licensing of software or brand names, renting of immovable property etc.

(34) “conveyance” includes a vessel, an aircraft and a vehicle;

(39) “deemed exports” means such supplies of goods as may be notified under section 147;

(42) “drawback” in relation to any goods manufactured in India and exported, means the rebate of duty,
tax or cess chargeable on any imported inputs or on any domestic inputs or input services used in
the manufacture of such goods;
The definition of Drawback is relevant when refund of Input Tax Credit is claimed. The law provides
that refund of unutilized input tax credit will not be allowed if the supplier has availed drawback of
such tax.
.
(44) “electronic commerce” means the supply of goods or services or both, including digital products
over digital or electronic network;

(45) “electronic commerce operator” means any person who owns, operates or manages digital or
electronic facility or platform for electronic commerce;

(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods
and Services Tax Act, and includes non-taxable supply;
Exports and Deemed exports are not exempt supply.

(48) “existing law” means any law, notification, order, rule or regulation relating to levy and collection of
duty or tax on goods or services or both passed or made before the commencement of this Act by
Parliament or any Authority or person having the power to make such law, notification, order, rule or
regulation;
This covers all the existing Central & State Laws, relating to levy of tax on goods or services like
Central Excise Law, Service tax law, State VAT Laws etc. Therefore, laws that don’t levy tax or duty
on goods or services i.e. the Indian Stamp Act, 1899 would not be covered here.

(49) “family” means, ––

(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person;

(50) “fixed establishment” means a place (other than the registered place of business) which is
characterized by a sufficient degree of permanence and suitable structure in terms of human and
technical resources to supply services, or to receive and use services for its own needs;

15
 Temporary presence of staff in a place by way of a short visit to a place or so doesn’t make that
place a fixed establishment. Temporary location of a project site and any transit-warehouse will not be a
fixed establishment. The definition is relevant to determine where the taxable person should
obtain GST registration in particular State.
Example 10: An overseas business house sets up offices with staff in Mumbai to provide services to Indian
customers. Its fixed establishment is in India.
Example 11: A company with a business establishment abroad buys a property in India which it leases to
a tenant. The property by itself doesn’t create a fixed establishment. If the company sets up an office in
India to carry on its business by managing the property, this will create a fixed establishment in India.

(52) “goods” means every kind of movable property other than money and securities but includes
actionable claim, growing crops, grass and things attached to or forming part of the land which are
agreed to be severed before supply or under a contract of supply;
Term “movable property” is not defined anywhere in the Act but the same is defined in Section 3 (36) of the
General Clauses Act, 1897.
The item must be such that it is capable of being bought or sold. This is the test of ‘Marketability’. The
goods must be known in the market. Unless this test of marketability is satisfied, these will not be goods.
This view, expressed in judgements. It was held that to become ‘goods’ an article must be something
which can ordinarily come to market to be bought and sold.

Goods = Movable Property + Actionable Claims + Crops, grass & other things forming part of land
- Money - Securities

(56) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters,
seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any
other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic
Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters;

(59) “input” means any goods other than capital goods used or intended to be used by a supplier in the
course or furtherance of business;

(60) “input service” means any service used or intended to be used by a supplier in the course or
furtherance of business;
There is no requirement for “Input Services” to have direct relation with the outward supply, as required in
erstwhile regime.

(61) “Input Service Distributor” means an office of the supplier of goods or services or both which
receives tax invoices issued under section 31 towards the receipt of input services and issues a
prescribed document for the purposes of distributing the credit of central tax, State tax, integrated
tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both
having the same Permanent Account Number as that of the said office;
The law doesn’t provide any limit of offices to be registered as ISD.

(62) “input tax” in relation to a registered person, means the central tax, State tax, integrated tax or
Union territory tax charged on any supply of goods or services or both made to him and includes—
(a) the integrated goods and services tax charged on import of goods;
(b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
(c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated
Goods and Services Tax Act;
(d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective
State Goods and Services Tax Act; or
(e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union
Territory Goods and Services Tax Act,
but does not include the tax paid under the composition levy;
Input tax also includes reverse charge.
Input credit of cess can only be utilised for discharging the liability on such cess.

(63) “input tax credit” means the credit of input tax;

16
(67) “inward supply” in relation to a person, shall mean receipt of goods or services or both whether by
purchase, acquisition or any other means with or without consideration;

(68) “job work” means any treatment or process undertaken by a person on goods belonging to another
registered person and the expression “job worker” shall be construed accordingly;

(69) “local authority” means––

(a) a “Panchayat” as defined in clause (d) of article 243 of the Constitution;
(b) a “Municipality” as defined in clause (e) of article 243P of the Constitution;
(c) a Municipal Committee, a Zilla Parishad, a District Board, and any other authority legally entitled to,
or entrusted by the Central Government or any State Government with the control or management of
a municipal or local fund;
(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006;
(e) a Regional Council or a District Council constituted under the Sixth Schedule to the Constitution;
(f) a Development Board constituted under article 371 and article 371J of the Constitution; or
(g) a Regional Council constituted under article 371A of the Constitution;

(70) “location of the recipient of services” 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 receipt of
the supply; &
(d) in absence of such places, the location of the usual place of residence of the recipient;
Given that services are not tangible, the determination of the location of the recipient of service could
result in hitches. Thereby ‘location of the recipient of services’ is essential to determine whether the
supply is an inter-State or an intra-State supply.

(71) “location of the supplier of services” 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 provisions
of the supply; and
(d) in absence of such places, the location of the usual place of residence of the supplier;

(72) “manufacture” means processing of raw material or inputs in any manner that results in
emergence of a new product having a distinct name, character and use and the term
“manufacturer” shall be construed accordingly;
It is important for composition levy and maintenance of accounts. For deemed exports, one pre-
condition is that the goods in question must be manufactured in India.

(73) “market value” shall mean the full amount which a recipient of a supply is required to pay in order to
obtain the goods or services or both of like kind and quality at or about the same time and at the
same commercial level where the recipient and the supplier are not related;

(74) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof,
made in conjunction with each other by a taxable person for a single price where such supply does not
constitute a composite supply.
Illustration.— A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can
be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are
supplied separately;

(75) “money” means the Indian legal tender or any foreign currency, cheque, promissory note, bill of
exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic

17
 remittance or any other instrument recognised by the Reserve Bank of India when used as a
consideration to settle an obligation or exchange with Indian legal tender of another denomination
but shall not include any currency that is held for its numismatic value;
Money is out of the scope of taxation under GST.
Numismatic is the study or collection of currency, including coins, tokens, paper money, and related objects.
While numismatists are often characterized as students or collectors of coins. Numismatic value may be
used to refer to the value in excess of the monetary value conferred by law, which is known as the collector
value i.e. coin collection lying in a museum, any form of an art on currency notes etc.

(77) “non-resident taxable person” 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;
The law had not defined the word ‘occasionally’. This definition is very wide to cover all foreigners effecting
supplies in India. This could make room for GST officers to question foreign persons as to why they should
not take registration under the GST law once they come to India to render a part of a project i.e. foreign
consultant working from outside India but comes to India to give final presentation to board of directors.
Will such person require registration in India?

(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax
under this Act or under the Integrated Goods and Services Tax Act;
It includes petroleum products, alcoholic liquor for human consumptions.

(79) “non-taxable territory” means the territory which is outside the taxable territory;

(80) “notification” means a notification published in the Official Gazette and the expressions “notify” and
“notified” shall be construed accordingly;

(81) “other territory” includes territories other than those comprising in a State and those referred to in
sub-clauses (a) to (e) of clause (114);

(82) “output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable
supply of goods or services or both made by him or by his agent but excludes tax payable by him on
reverse charge basis;

(83) “outward supply” in relation to a taxable person, means supply of goods or services or both,
whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode,
made or agreed to be made by such person in the course or furtherance of business;
The phrase ‘outward supply’ can be applied to a supply only when such supply is made in the course
or furtherance of business i.e. business assets are put to personal use. In such a case, even the
transaction is deemed to be a supply (made without consideration), it can’t be treated as an ‘outward
supply’, since the application of the business asset for personal use was neither in the course nor
furtherance of business.
Supplies not qualifying as outward supplies would also be included for the purpose of computing the
‘aggregate turnover’.
Details of supplies on which tax is payable, but which do not amount to ‘outward supplier’ would also
have to be declared in the return for outward supplies (GSTR-1)

(84) “person” includes—

(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or
outside India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a
Government company as defined in clause (45) of section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;

18
 (j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;

(85) “place of business” includes––

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or
any other place where a taxable person stores his goods, supplies or receives goods or services
or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name
called;

(86) “place of supply” means the place of supply as referred to in Chapter V of the Integrated Goods
and Services Tax Act;

(88) “principal” means a person on whose behalf an agent carries on the business of supply or receipt
of goods or services or both;

(89) “principal place of business” means the place of business specified as the principal place of
business in the certificate of registration;

(92) “Quarter” shall mean a period comprising three consecutive calendar months, ending on the last
day of March, June, September and December of a calendar year.

(93) “recipient” of supply of goods or services or both, means—

(a) where a consideration is payable for the supply of goods or services or both, the person who is
liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are
delivered or made available, or to whom possession or use of the goods is given or made
available; and
(c) 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
goods or services or both supplied;

(94) “registered person” means a person who is registered under section 25 but does not include a
person having a Unique Identity Number;

(96) “removal’’ in relation to goods, means—

(a) despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf
of such supplier; or
(b) collection of the goods by the recipient thereof or by any other person acting on behalf of such
recipient;

(98) “reverse charge” means the liability to pay tax by the recipient of supply of goods or services or
both instead of the supplier of such goods or services or both under sub-section (3) or sub-section
(4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and
Services Tax Act;

(101) “securities” shall have the same meaning as assigned to it in clause (h) of section 2 of the
Securities Contracts (Regulation) Act, 1956;
Securities such as shares, scrips, stocks, bonds, debentures, debenture stock are neither treated
as goods nor as services, by way of a specific exclusion in the respective definitions. ITC is not
available for transactions in securities.

(102) “services” means anything other than goods, money & securities but includes activities relating to
the use of money or its conversion by cash or by any other mode, from one form, currency or

19
 denomination, to another form, currency or denomination for which a separate consideration is
charged;
Explanation.––For the removal of doubts, it is hereby clarified that the expression “services”
includes facilitating or arranging transactions in securities;
Though definition of ‘service’ can cover even immovable property, sale of land and sale of completed
building has been excluded from definition of goods or services.
The definition of ‘service’ is so broad that practically sky is the limit for imposing any tax by Union or
State Governments.
Securities were excluded from the definition of both goods and services. But it is to clarify that though
securities are excluded from definition of services but transaction in securities will be included.

Services = Anything – {Goods+ money + securities} +use of money or its conversion from one form,
currency or denomination to another

Whether Whether
Particulars
Goods? Services?
Every kind of movable property ✓ 
Growing crops, grass & things attached to or forming part of the land ✓ 
which are agreed to be severed before supply or under a contract of supply
Anything other than goods  ✓
Money  
Transaction in money {for conversion separate consideration is charged}  ✓
Actionable Claim {lottery, betting & gambling} ✓ 
Securities  
Facilitating or arranging transaction in securities  ✓
(103) “State” includes a Union territory with Legislature;
Delhi, Jammu and Kashmir and Puducherry have their own GST legislation for levying SGST.

(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said
goods or services or both and shall include an agent acting as such on behalf of such supplier in
relation to the goods or services or both supplied;

(107) “taxable person” means a person who is registered or liable to be registered under section 22 or
section 24;

(108) “taxable supply” means a supply of goods or services or both which is leviable to tax under this
Act;

(109) “taxable territory” means the territory to which the provisions of this Act apply;

(112) “turnover in State” or “turnover in Union territory” means the aggregate value of all taxable
supplies (excluding the value of inward supplies on which tax is payable by a person on reverse
charge basis) and exempt supplies made within a State or Union territory by a taxable person,
exports of goods or services or both and inter-State supplies of goods or services or both made
from the State or Union territory by the said taxable person but excludes central tax, State tax,
Union territory tax, integrated tax and cess;
The ‘turnover in State’ (including UT) is a reproduction of the expression ‘aggregate turnover’, but
‘turnover in State/UT’ is restricted to the turnover of a taxable person in particular State/UT, whereas
aggregate turnover is PAN-based (i.e., turnover of all taxable persons having the same PAN,
across States). It is important term for ‘composition scheme’, ‘ISD’ etc.

(113) “usual place of residence” means––

(a) in case of an individual, the place where he ordinarily resides;
(b) in other cases, the place where the person is incorporated or otherwise legally constituted;

(114) “Union territory” means the territory of—

(a) the Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli and Daman & Diu;

20
 (d) Ladakh;
(e) Chandigarh; and
(f) other territory.
Explanation. -For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f)
shall be considered to be a separate Union territory;

(117) “valid return” means a return furnished under sub-section (1) of section 39 on which self- assessed
tax has been paid in full;

(118) “voucher” means an instrument where there is an obligation to accept it as consideration or part
consideration for a supply of goods or services or both and where the goods or services or both to
be supplied or the identities of their potential suppliers are either indicated on the instrument itself
or in related documentation, including the terms and conditions of use of such instrument;
Loyalty points credited to digital wallet is not a supply of vouchers as no consideration is paid for the same.
It is only a form of discount which can be availed in future transaction. It is the form of actionable claim.

(119) “works contract” means a contract for building, construction, fabrication, completion, erection,
installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfers of property in goods (whether as
goods or in some other form) is involved in the execution of such contract;
This is limited to immovable property but contract must include transfer of property. A contract in
relation to movable property, however would be treated as a ‘composite supply’ of goods or
services depending on the principal supply.

21
Section 2 of IGST Act, 2017 – Definitions under GST (below
number in ‘( )’ are clause of Section 2)
(3) “continuous journey” means a journey for which a single or more than one ticket or invoice is
issued at the same time, either by a single supplier of service or through an agent acting on behalf of
more than one supplier of service, and which involves no stopover between any of the legs of the
journey for which one or more separate tickets or invoices are issued.
Explanation. - For the purposes of this clause, the term “stopover” means a place where a passenger
can disembark either to transfer to another conveyance or break his journey for a certain period in
order to resume it at a later point of time;

(5) “export of goods” with its grammatical variations and cognate expressions, means taking goods out
of India to a place outside India;
Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India.

(6) “export of services” means the supply of any service when, -

(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign
exchange or in Indian Rupees wherever permitted by the Reserve Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct
Person in accordance with Explanation 1 in section 8;

(10) ‘‘import of goods” with its grammatical variations and cognate expressions, means bringing goods
into India from a place outside India;

(11) ‘‘import of services” means the supply of any service, where––

(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;

(13) “intermediary” means a broker, an agent or any other person, by whatever name called, who
arranges or facilitates the supply of goods or services or both, or securities, between two or more
persons, but does not include a person who supplies such goods or services or both or securities
on his own account;

Circular No. 159/15/2021-GST dated 20th September 2021

Key essentials of Intermediary Services:-
• Minimum Requirement of three Parties– Supplier & recipient transacting in the supply of goods or
services or securities i.e main supply and the intermediary facilitating the same.
• Two Distinct Supplies– One is the ‘main supply’ between the principals and another is ‘ancillary
supply’ which is the supply of intermediary services.
• Character of agent, broker or any other similar person – The definition of intermediary under section
2(13) is not inclusive but exclusive to mean a ‘broker’, ‘an agent’ or ‘any other person’ similarly
situated. The role of the intermediary is subsidiary in nature i.e only to facilitate or arrange main
supply.
• Exclusion from dealing in main supply– An intermediary does not include persons undertaking main
supply on their own account either fully or partly.
• Exclusion of sub-contracting for services – Where the supplier of main service sub-contracts either
fully or partly the supply of such service; the sub-contractor dealing in main supply would not be
considered as an intermediary.

Example 12: ‘A’ is a manufacturer and supplier of a machine. ‘C’ helps ‘A’ in selling the machine
by identifying client ‘B’ who wants to purchase this machine and helps in finalizing the contract of
supply of machine by ‘A’ to ‘B’. ‘C’ charges ‘A’ for his services of locating ‘B’ and helping in
finalizing the sale of machine between ‘A’ and ‘B’, for which ‘C’ invoices ‘A’ and is paid by ‘A’ for
the same. While ‘A’ and ‘B’ are involved in the main supply of the machinery, ‘C’, is facilitating the
supply of machine between ‘A’ and ‘B’. In this arrangement, ‘C’ is providing the ancillary supply

22
 of arranging or facilitating the ‘main supply’ of machinery between ‘A’ and ‘B’ and therefore, ‘C’ is
an intermediary and is providing intermediary service to ‘A’.

Example 13: ‘A’ is a software company which develops software for the clients as per their
requirement. ‘A’ has a contract with ‘B’ for providing some customized software for its business
operations. ‘A’ outsources the task of design and development of a particular module of the
software to ‘C’, for which “C’ may have to interact with ‘B’, to know their specific requirements. In
this case, ‘C’ is providing main supply of service of design and development of software to ‘A’,
and thus, ‘C’ is not an intermediary in this case.

Example 14: An insurance company ‘P’, located outside India, requires to process insurance
claims of its clients in respect of the insurance service being provided by ‘P’ to the clients. For
processing insurance claims, ‘P’ decides to outsource this work to some other firm. For this
purpose, he approaches ‘Q’, located in India, for arranging insurance claims processing service
from other service providers in India. ‘Q’ contacts ‘R’, who is in business of providing such
insurance claims processing service, and arranges supply of insurance claims processing service
by ‘R’ to ‘P’. ‘Q’ charges P a commission or service charge of 1% of the contract value of insurance
claims processing service provided by ‘R’ to ‘P’. In such a case, main supply of insurance claims
processing service is between ‘P’ and ‘R’, while ‘Q’ is merely arranging or facilitating the supply
of services between ‘P’ and ‘R’, and not himself providing the main supply of services.
Accordingly, in this case, ‘Q’ acts as an intermediary as per definition of sub-section (13) of section
2 of the IGST Act.

Example 15: ‘A’ is a manufacturer and supplier of computers based in USA and supplies its goods
all over the world. As a part of this supply, ‘A’ is also required to provide customer care service to
its customers to address their queries and complains related to the said supply of computers. ‘A’
decides to outsource the task of providing customer care services to a BPO firm, ‘B’. ‘B’ provides
customer care service to ‘A’ by interacting with the customers of ‘A’ and addressing / processing
their queries / complains. ’B’ charges ‘A’ for this service. ‘B’ is involved in supply of main service
‘customer care service’ to ‘A’, and therefore, ’’B’ is not an intermediary.

(16) “non-taxable online recipient” means any Government, local authority, governmental authority, an
individual or any other person not registered and receiving online information and database access
or retrieval services in relation to any purpose other than commerce, industry or any other business
or profession, located in taxable territory.
Explanation. –For the purposes of this clause, the expression “governmental authority” means an
authority or a board or any other body, –
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government, with ninety per cent. or more participation by way of equity or
control, to carry out any function entrusted to a Panchayat under article 243 G or a municipality under
article 243W of the Constitution;

(17) “online information and database access or retrieval services” means services whose delivery
is mediated by information technology over the internet or an electronic network and the nature of
which renders their supply essentially automated and involving minimal human intervention and
impossible to ensure in the absence of information technology and includes electronic services
such as, –
(i) advertising on the internet;
(ii) providing cloud services;
(iii) provision of e-books, movie, music, software and other intangibles through telecommunication
networks or internet;
(iv) providing data or information, retrievable or otherwise, to any person in electronic form through
a computer network;
(v) online supplies of digital content (movies, television shows, music and the like);
(vi) digital data storage; and
(vii) online gaming;

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 Question & Answer
Q1. Explain with the help of examples how a particular transaction of goods and services is taxed
simultaneously under Central GST (CGST) and State GST (SGST)? (ICAI SM)
A. The Central GST and the State GST is levied simultaneously on every intra-State supply of goods or services
or both made by registered persons except the exempted goods and services as well as goods and services
which are outside the purview of GST. Further, both are levied on the same price or transaction value. The
same can be better understood with the help of following examples:
Example I: Suppose that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of steel
in Uttar Pradesh supplies steel bars and rods to a construction company which is also located within the same
State for, say Rs. 100, the dealer would charge CGST of Rs. 10 and SGST of Rs. 10 in addition to the basic
price of the goods. The CGST component will go into a Central Government account while the SGST portion
into the account of the concerned State Government (viz. U.P.). It is important to note that he might not actually
pay Rs. 20 (Rs. 10 + Rs. 10) in cash as he would be entitled to set-off this liability against the CGST or SGST
paid on his eligible purchases (inputs, input services and capital goods) assuming that all his purchases are
intra-State. However, for paying CGST, he would be allowed to use only the credit of CGST paid on his
purchases while for SGST he can utilize the credit of SGST alone. CGST credit cannot be used for payment of
SGST and vice versa.
Example II: Suppose, again the rate of CGST is 10% and that of SGST is 10%. When an advertising company
located in Mumbai supplies advertising services to a company manufacturing soap also located within the State
of Maharashtra for, let us say Rs. 100, the ad company would charge CGST of Rs. 10 as well as SGST of Rs.
10 at the basic value of the service. The CGST component will go into a Central Government account while the
SGST portion into the account of the Maharashtra Government. He might not actually pay Rs. 20 (Rs. 10+Rs.
10) in cash as it would be entitled to set-off this liability against the CGST or SGST paid on his eligible purchases
(say, of inputs such as stationery, office equipment, services of an artist etc.) assuming that all his purchases
are intra-State. However, for paying CGST, he would be allowed to use only the credit of CGST paid on its
purchase while for SGST, he can utilise the credit of SGST alone. CGST credit cannot be used for payment of
SGST and vice versa.

Q2. Why was the need to amend the Constitution of India before introducing the GST? (ICAI SM)
A. Earlier, the fiscal powers between the Centre and the States were clearly demarcated in the Constitution with
almost no overlap between the respective domains. The Centre had the powers to levy tax on the manufacture
of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States had the powers
to levy tax on the sale of goods. In the case of inter-State sales, the Centre had the power to levy the Central
Sales Tax but the tax was collected and retained entirely by the States. As for services, it was the Centre alone
that was empowered to levy service tax.
Introduction of the GST necessitated the amendments in the Constitution so as to simultaneously empower the
Centre and the States to levy and collect this tax. The Constitution of India was amended by the Constitution
(101st Amendment) Act, 2016 for this purpose. Article 246A of the Constitution introduced thereby empowered
the Centre and the States to simultaneously levy and collect the GST.

Q3. Discuss how GST resolved the double taxation dichotomy under previous indirect tax laws.
A.
• A comprehensive tax structure covering both goods and services viz. Goods and Service Tax (GST)
addresses these problems. Simultaneous introduction of GST at both Centre and State levels has
integrated taxes on goods and services for the purpose of set-off relief and ensures that both the

24
 cascading effects of CENVAT and service tax are removed and a continuous chain of set-off from the
original producer’s point/ service provider’s point upto the retailer’s level/ consumer’s level is
established.
• In the GST regime, the major indirect taxes have been subsumed in the ambit of GST. The erstwhile
concepts of manufacture or sale of goods or rendering of services are no longer applicable since the
tax is now levied on “Supply of Goods and/or services”.

Q4. Discuss the leviability of GST or otherwise on the following:

(a) Alcoholic liquor for human consumption
(b) Petroleum crude, diesel, petrol, Aviation Turbine Fuel (ATF) and natural gas
(c) Tobacco
(d) Opium, Indian hemp and other narcotic drugs and narcotics? (ICAI SM)
A.
(a) Alcoholic liquor for human consumption: is outside the realm of GST. The manufacture/production of
alcoholic liquor continues to be subjected to State excise duty and inter-State/intra-State sale of the same is
subject to CST/VAT respectively.
(b) Petroleum crude, diesel, petrol, ATF and natural gas: As regards petroleum crude, diesel, petrol, ATF and
natural gas are concerned, they are not presently leviable to GST. GST will be levied on these products from
a date to be notified on the recommendations of the GST Council. Till such date, central excise duty continues
to be levied on manufacture/production of petroleum crude, diesel, petrol, ATF and natural gas and inter-
State/intra-State sale of the same is subject to CST/ VAT respectively.
(c) Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on tobacco. However, Union
Government has also retained the power to levy excise duties on tobacco and tobacco products manufactured
in India. Resultantly, tobacco is subject to GST as well as central excise duty.
(d) Opium, Indian hemp and other narcotic drugs and narcotics: Opium, Indian hemp and other narcotic drugs
and narcotics are within the purview of GST, i.e. GST is leviable on them. However, State Governments have
also retained the power to levy excise duties on such products manufactured in India. Resultantly, Opium,
Indian hemp and other narcotic drugs and narcotics are subject to GST as well as State excise duties.

Q5. A dual GST has been implemented in India. Elaborate. (ICAI SM)
A. A dual GST has been implemented in India with the Centre and States simultaneously levying it on a
common tax base. The GST levied by the Centre on intra-State supply of goods and / or services is called the
Central GST (CGST) and that levied by the States/ Union territory is called the State GST (SGST)/ Union GST
(UTGST). Similarly, Integrated GST (IGST) is levied and administered by Centre on every inter-State supply
of goods and/or services.
India is a federal country where both the Centre and the States have been assigned the powers to levy and
collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to
perform according to the division of powers prescribed in the Constitution for which they need to raise
resources. A dual GST, therefore, keeps with the Constitutional requirement of fiscal federalism.

Q6. Is there any provision for cross empowerment of officers of State and Central Government under GST?
A. Yes. As per Section 6(1) of CGST Act, 2017, the officers appointed under the SGST / UTGST Act are
authorised to be the proper officers for the purposes of CGST/IGST Act, subject to such conditions as the
Government shall, on the recommendations of the Council, by notification, specify. Similar provisions in the
SGST/UTGST Act empower the central government officials to be the proper officers under the SGST/UTGST
Act.

25
Q7. ABC Furnisher, registered under GST, has been served a demand order under GST by Central GST
Officer. Does ABC Furnishers need to approach both the Central and State Appellate Authorities for
exercising its right of appeal?
A. GST law makes provisions for cross empowerment between CGST and SGST/UTGST officers so as to
ensure that if a proper officer of one Act (say CGST) passes an order with respect to a transaction, he will
also act as the proper officer of SGST for the same transaction and issue the order with respect to the CGST
as well as the SGST/UTGST component of the same transaction. The law further provides that where a
proper officer under one Act (say CGST) has passed an order, any appeal/review/ revision/rectification
against the said order will lie only with the proper officers of that Act only (CGST Act). Similarly, if any order is
passed by the proper officer of SGST, any appeal/review/revision/rectification will lie with the proper officer of
SGST only. Thus, ABC Furnishers is required to file an appeal only with the Central Tax Appellate Authority
[Section 6 of CGST Act].

Q8. What is GSTN and its role in the GST regime? Discuss functions of GSTN.
A. GSTN stands for Goods and Services Tax Network (GSTN). It is not-for profit company incorporated under
provisions of Sec 8 of Companies Act, 2013. GSTN has been set up to cater to the needs of GST. GSTN has
made up site/ portal which has been notified as common GST electronic portal (U/s 146 of CGST Act)
Thus, GSTN has provided IT infrastructure under GST law. GST portal developed by it is used by Central
Government as well as by the State Governments. GST portal is referred as ‘common portal’. This portal is
the taxpayer interface with the Government.

GSTN is providing facilities to taxpayers as well as Government. Following are some important functions
which are performed by GSTN :-
i. Facilitation of registration;
ii. Payment of GST;
iii. Returns filing;
iv. Maintenance of ledgers of taxpayers;
v. Running the matching engine for matching, reversal and reclaim of input tax credit;
vi. Providing analysis of tax payers’ profile;
vii. Sharing of information in taxpayers returns with Centre and State Governments / tax authorities;
viii. Providing various MIS reports to the Central and the State Governments based on the tax payer
return information;
ix. Computation and settlement of IGST (transfer of funds in between Central Tax Account, State Tax
Accounts and Integrated Tax Account);

Q9. Which are the commodities kept outside the purview of GST?
A. Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines the
Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of alcoholic
liquor for human consumption. So, alcoholic liquor for human consumption is kept out of GST by way of
definition of GST in constitution.
Five petroleum products viz. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation
turbine fuel have temporarily been kept out and GST Council shall decide the date from which they shall be
included in GST.

26
Q10. ITC Ltd. a company manufactures Cigarette and supply it to the distributor Mr. A for Rs. 2,00,000 on
which ITC Ltd. charged excise as well as GST. Mr. A further supplied to the retailer Mr. Z for Rs. 2,50,000 and
charged GST. Explain whether treatment by ITC Ltd. & distributor Mr. A is correct?
A. In case of Tobacco and Tobacco product manufacturing, it will be subject to GST & Central Excise Duty.
Therefore, treatment by ITC Ltd. on supply of the tobacco and tobacco product is correct. Since distributor Mr.
A is not involved in manufacturing; he can avail ITC only of GST. In case of further supply by Mr. A to the
retailer Mr. Z, it would be subject to GST only. Therefore Mr. A tax treatment is correct.

Q11. Determine whether the following activities fall under the ambit of ‘works contracts’.
i. Erection & installation of structural designs to the complex which involved material.
ii. Fabrication works relating to the structure of complex no material is involved.
iii. Assembling of units pertaining to movable property which involved material and goods.
A.
i. Yes, the given activity is in relation to an immovable property thus qualifies as a works contract.
ii. No, even though the given activity of fabrication is in relation to immovable property but material is not
involved. Thus, it is not works contract.
iii. No, the activity of assembling units will not qualify as works contract as it is in relation to a movable
property.

Q12. What is IGST?

A. Under the GST regime, an Integrated GST (IGST) would be levied and collected by the Centre on inter-
State supply of goods or services or both. Under Article 269-A of the Constitution, the GST on supplies in the
course of inter- State trade or commerce shall be levied and collected by the Government of India and such
tax shall be apportioned between the Union and the States in the manner as may be provided by Parliament
by law on the recommendations of the GST Council.

Q13. What would be the role of GST Council? (Important, came in exams)
A. For introduction of harmonized GST in India, GST Council was constituted in Sep, 2016. GST Council is a
constitutional authority constituted under Article 279-A of Constitution of India. GST Council comprises the
Union Finance Minister (who will be the Chairman of the Council), the Union Minister of State (Revenue) and
the State Finance/Taxation Ministers to make recommendations to the Union and the States on
i. the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be
subsumed under GST;
ii. the goods and / or services that may be subjected to or exempted from the GST;
iii. the date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit
(commonly known as petrol), natural gas and aviation turbine fuel;
iv. model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of
supply;
v. the threshold limit of turnover below which the goods and / or services may be exempted from GST;
vi. the rates of GST;
vii. any special rate or rates for a specified period to raise additional resources during any natural
calamity or disaster;
viii. special provision with respect to the North-East States, J&K, Himachal Pradesh and Uttarakhand; and
ix. any other matter relating to the GST, as the Council may decide.

27
Q14. Differentiate between a taxable supply & non-taxable supply under GST?
A.
Taxable Supply Non-Taxable Supply
➢ As per Section 2(108) of CGST Act, means ➢ As per Section 2(78) of CGST Act, means supply
supply of goods or services or both which is of goods or services or both which is not leviable
leviable to GST under this Act. to GST under this Act or under IGST Act.
➢ Falls under the purview of ‘supply’ as per ➢ Doesn’t fall under the purview of ‘supply’ as per
Section 7 of CGST Act. i.e. supply of Section 7 of CGST Act. i.e. supply of petrol or
computer, mobile etc. diesel

Q15. Discuss Article 246A which grants the power to make laws with respect to Goods and Services Tax.
(PAST EXAM JAN 2021)
A. Article 246A stipulates that Parliament, and, the Legislature of every State,have power to make laws with
respect to goods and services tax imposed bythe Union or by such State. Parliament has exclusive power to
make laws with respect to goods andservices tax where the supply of goods, or of services, or both takes
place inthe course of inter-State trade or commerce.
However, in respect to petroleum crude, high speed diesel, motor spirit(commonly known as petrol), natural
gas and aviation turbine fuel, theaforesaid provisions shall apply from the date to be notified by
theGovernment on the recommendations by the GST Council.

28
Section 7 Scope of Supply
Schedule I Activities to be treated as supply even if made without consideration
Schedule II Activities or Transactions to be treated as supply of goods or services
Schedule III Activities or Transactions which shall be treated neither supply of
goods nor a supply of services
Section 8 Tax Liability on Composite & Mixed Supply

Excise Service Tax VAT CST

Taxable Event in Manufacturing of Provision of On Sale of Goods On Inter State Sale
previous IDT laws Goods Services Intra State of Goods
Taxable Event in Supply of Goods or Services or Both
GST

Inclusive
Section 7: Scope of supply provision

Broad Category Section Particulars

7(1) For the purposes of this Act, the expression “supply” includes –
all forms of supply of goods or services or both such as sale, transfer,
Normal Supply
barter, exchange, licence, rental, lease or disposal made or agreed to be
of goods & 7(1)(a)
made for a consideration by a person in the course or furtherance of
services
business;
the activities or transactions, by a person, other than an individual, to its
members or constituents or vice-versa, for cash, deferred payment or other
valuable consideration.
Explanation.––For the purposes of this clause, it is hereby clarified that,
Supply to
7(1)(aa) notwithstanding anything contained in any other law for the time being in
members
force or any judgment, decree or order of any Court, tribunal or authority,
the person and its members or constituents shall be deemed to be two
separate persons and the supply of activities or transactions inter se shall
be deemed to take place from one such person to another;
Impact of Amendment:- It appears that the above amendment are made to overcome the difficulties
because of judgement of Honourable SC decision in the case of Calcutta Club Ltd., in which it was held that
club/association and its members are not Distinct Persons. In essence, the concept of mutuality doesn’t apply
in GST. Therefore, while supplying goods or services or both by a club, trust or such other
associations/organisations to its members/constituents or vice-versa for cash, deferred payment or other
valuable consideration, the supplier must charge applicable GST from the recipient.
However an individual doesn’t fall within the ambit of Section 7(1)(aa).
Import of import of services, for a consideration whether or not in the course or
7(1)(b)
Services furtherance of business, and
Supply without the activities specified in Schedule I, made or agreed to be made without a
7(1)(c)
consideration consideration.
Supply of goods where certain activities or transactions constitute a supply in accordance
v/s Supply of 7(1A) with the provisions of sub-section (1), they shall be treated either as supply
services of goods or supply of services as referred to in Schedule II.
Activities or 7(2) Notwithstanding anything contained in sub-section (1), -
transactions 7(2)(a) activities or transactions specified in Schedule III; or
treated neither such activities or transactions undertaken by the Central Government, a
7(2)(b)
as supply of State Government or any local authority in which they are engaged as

29
 goods nor public authorities, as may be notified by the Government on the
supply of recommendations of the Council,
services shall be treated neither as a supply of goods nor a supply of services.
Subject to the provisions of sub-sections (1), (1A) & (2), the Government
may, on the recommendations of the Council, specify, by notification, the
Power(s) of the transactions that are to be treated as —
7(3)
Government
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
First check sub-section (1) to see whether particular transaction is supply or not, then Schedule II
to finalize classification between goods or services

When word ‘includes’ or ‘such as’ is being used, it implies that the term doesn’t restrict itself to
those items that are being mentioned in there, and that those items mentioned, are just
indicative to much broader concepts of similar standing.

Notification No. 14/2017-Central Tax (Rate), dated 28th June 2017

In exercise of the powers conferred U/s 7(2), the Central Government, on the recommendations of the Council
hereby notifies that the following activities or transactions undertaken by the Central Government or State
Government or Union Territories or any local authority in which they are engaged as public authority, shall
be treated neither as a supply of goods nor a supply of service, namely:-
“Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the
Constitution or to a Municipality under article 243W of the Constitution.”

Notification No. 25/2019-Central Tax (Rate), dated 30th September 2019

Activities or transactions undertaken by the State Governments in which they are engaged as public
authorities, shall be treated neither as a supply of goods nor a supply of service, namely:
“Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee or
application fee or by whatever name it is called.”

Circular No. 121/40/2019 dated 11th October 2019

The license fee or application fee charged by the States for grant of Liquor licences to vendors, not a supply
and hence, not liable to GST.
(i) Services provided by the Government to business entities including by way of grant of privileges,
licences, mining rights, natural resources such as spectrum etc. against payment of consideration
in the form of fee, royalty etc. are taxable under GST. Tax is required to be paid by the business
entities on such services under reverse charge.
(ii) However, considering the agreement between the Central & State Government, with respect to the
liquor licences, the council has suggested to notify the service by way of grant of alcoholic liquor
licence, against consideration in the form of licence fee or others as neither a supply of goods nor a
supply of service.
(iii) Further, it is clarified that this special dispensation applies only to supply of service by way of grant
of liquor licenses by the State Governments.

Transferring the property in goods from one to another, upon valuable consideration i.e. buying
Sales
laptop.
Any transfer of goods or right in goods or undivided share in goods without transfer of title
Transfer thereof i.e. Head office sends the goods to its branch. It may be noticed that title is not
transferred by Head Office.

30
 To exchange one commodity/service for another without use of money i.e. CA provides tax
Barter
consultancy service in exchange of saloon services.
To swap, to part with, give or transfer for an equivalent with the use of money i.e. Mobile worth
Exchange
Rs. 25,000 in exchange of an old mobile Rs. 10,000. Balance paid in cash.
Permission granted by competent authority to exercise certain privileges, without such
License
authorization the activity would have constituted as an illegal act i.e. license of software.
Rental Periodical payment for the use of another’s property i.e. office on rent.
It is a contract by which an owner gives to some other person a right to use the goods for a
Lease
specified period in lieu of specified payments i.e. Government agency lease of industrial plot.
Disposal is an action or process of getting rid of something i.e. there may be a scenario where
employer provides laptop to employees during the course of employment. In this case, when
Disposal
employer doesn’t ask for the old laptop back from the employee then such permanent disposing
off of business asset might attract GST.

Example 1: Mr. A buy a car for his personal use and after a year sells it to a car dealer. Sale of car by Mr.
A to car dealer is not a supply under CGST Act because supply is not made by Mr. A in the course or
furtherance of business.

Example 2: Mrs. A sold (housewife)her old gold bangles and earrings to ‘ABC Jewellers’. Sale of old gold
jewellery by an individual to a jeweller will not constitute supply as the same cannot be said to be in the
course or furtherance of business of the individual.

Example 3: Salman, a famous actor, paints some paintings and sells them. The consideration from such
sale is to be donated to a Charitable Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as
supply even though it is a one-time occurrence.

Example 4: ABC Ltd. is engaged in the business of transmission of power across the Maharashtra.
Transmission of power is carried out through the networks of transmission lines and sub-stations
constructed by ABC Ltd. It has a market share of 50% transmission network in India. This is example of ‘in
the course of business’.
ABC Ltd. appointed consultants to increase market share from 50% to 60%. It can be organic or un-organic
route. This is example of ‘in the furtherance of business’.

Example 5: Import of free services from Google and Facebook, without any consideration, are not
considered as supply. It is important to note that downloading ‘Hollywood Movie’ from foreign website for
consideration for personal use would be a supply of service, even though same is not in the course or
furtherance of business.

Schedule I:- Activities to be treated as supply even if made without consideration

1. Permanent transfer or disposal of business assets where ITC has been availed on such assets.
(transfer of entire business as going concern is not subject to GST).
Example 6: A Ltd. (retail stores dealing in food items), gives food items to the poor children on the festival
of Diwali. In this case, transfer of business stock would amount to ‘supply’ if it had claimed input tax credit
on its purchase of the business assets.

Example 7: A laptop dealer permanently transfers furniture from his stock in trade, at his house. The
transactions will constitute a supply as it is a permanent transfer/disposal of business assets. If input tax

31
 credit is availed for such assets, then only such transfer amounts to supply.

Example 8: In case of cars purchased by the company for use by employees would not qualify for input tax
credit (you will understand in Chapter 8) and such input tax credit would therefore, could not have
been claimed. Such supply of business asset for permanent basis would not be treated as supply.

2. Supply between related persons or distinct persons, when made in the course or furtherance of business.
Gifts not exceeding Rs. 50,000 in value in a financial year by an employer to employee shall not be treated
as supply of goods or services or both. However, reversal of ITC shall be required.
In case any goods or services are provided to the employee by the employer & the same is mentioned in the
employment contract (e.g. mobile), then this shall not be covered under supply (it is going to be covered
under para 1 of Schedule III). Further if the value of gift exceeds Rs. 50,000 and is not mentioned in the
employment contract, then it shall be considered as supply.
Please note that cash gifts of any value given by the employer to employee shall not be considered as
‘Supply’, considering the fact that ‘transaction in money’ is not subject matter of supply.
Section 25 (4) & (5) of CGST Act categorize following as distinct person in GST: -
(a) Each registration of a person in one or more State/UT
(b) Each registration of a person in respect of establishments in or more State/UT.

Applicability of GST on intra-State branch/stock

transfers Applicability of GST on
Scenario Branches/Units with Single registration for inter-State
separate registration all branches/units in a branch/stock transfers
State/UT
Stock transfer under
GST ✓  ✓
Relevant Document Tax Invoice Delivery Challan Tax Invoice

Example 9: A Ltd. transfers 100 ACs & 100 Televisions from his factory located at Maharashtra to his retail
showroom in Delhi so that the same can be sold there. The factory and retail showroom are registered in
the states where they are located. Although no consideration is charged, supply of goods from factory at
Maharashtra to retail showroom at Delhi constitutes supply.

3. Supply of goods between principal & agents (whether principal supply to agents or agents supply to
principal).

Example 10: A Ltd. appoints B Ltd. as an agent. B Ltd. receives spare parts supplied by A Ltd. as and when
an order is received by A Ltd. from its dealers, an instruction will be sent to B Ltd. to supply the parts. Supply
of spare parts by A Ltd. to B Ltd. will qualify as supply even though B Ltd. has not paid any consideration.

Invoice in the name of agent:- Where the invoice for further supply is being issued by the agent in his name
then, any provision of goods from the principal to the agent would fall within the fold of Para 3 above.

Invoice in the name of principal:- However, it may be noted that in cases where the invoice is issued by
the agent to the customer in the name of the principal, such agent shall not fall within the ambit of Para 3.
above.
Similarly, where the goods being procured by the agent on behalf of the principal are invoiced in the name of
the agent then further provision of the said goods by the agent to the principal would be covered by Para 3
above.

32
Example 11: Mr. A appoints Mr. B to procure certain goods from the market. Mr. B identifies various suppliers
who can provide the goods as desired by Mr. A, and asks the supplier (Mr. C) to send the goods
and issue the invoice directly to Mr. A.
In this scenario, Mr. B is only acting as the procurement agent, and has in no way involved himself in the
supply or receipt of the goods. Hence, in accordance with the provisions of this Act, Mr. B is not an agent of
Mr. A for supply of goods in terms of Para 3 of Schedule I.

Example 12: M/s XYZ, a banking company, appoints Mr. B (auctioneer) to auction certain goods. The
auctioneer arranges for the auction and identifies the potential bidders.
The highest bid is accepted and the goods are sold to the highest bidder by M/s XYZ. The invoice for the
supply of the goods is issued by M/s XYZ to the successful bidder. In this scenario, the auctioneer is merely
providing the auctioneering services with no role played in the supply of the goods. Even in this scenario,
Mr. B is not an agent of M/s XYZ for the supply of goods in terms of Para 3 of Schedule I.

Example 13: Mr. A, an artist, appoints M/s B (auctioneer) to auction his painting. M/s B arranges for the
auction and identifies the potential bidders. The highest bid is accepted and the painting is sold to the highest
bidder. The invoice for the supply of the painting is issued by M/s B on the behalf of Mr. A but in his own
name and the painting is delivered to the successful bidder.
In this scenario, M/s B is not merely providing auctioneering services, but is also supplying the painting on
behalf of Mr. A to the bidder, and has the authority to transfer the title of the painting on behalf of Mr. A. This
scenario is covered under Para 3 of Schedule I.

Example 14: A C&F agent or commission agent takes possession of the goods from the principal and issues
the invoice in his own name. In such cases, the C&F commission agent is an agent of the principal for the
supply of goods in terms of Para 3 of Schedule I. The disclosure or non-disclosure of the name of the principal
is immaterial in such situations.

Example 15: Mr. A sells agricultural produce by utilizing the services of Mr. B who is a commission agent as
per the Agricultural Produce Marketing Committee Act (APMC Act) of the State. Mr. B identifies the buyers
and sells the agricultural produce on behalf of Mr. A for which he charges a commission from Mr. A.
As per the APMC Act, the commission agent is a person who buys or sells the agricultural produce on behalf
of his principal, or facilitates buying and selling of agricultural produce on behalf of his principal and receives,
by way of remuneration, a commission or percentage upon the amount involved in such transaction.
In cases where the invoice is issued by Mr. B to the buyer, the former is an agent covered under Para 3 of
Schedule I. However, in cases where the invoice is issued directly by Mr. A to the buyer, the commission
agent (Mr. B) doesn’t fall under the category of agent covered under Para 3.

Circular No. 73/47/2018-GST Dated 5-11-2018

Whether a Del-credere agent (DCA) falls
under the ambit of agent under Para 3 of
Schedule I of the CGST Act?
Whether the temporary short-term transaction
based loan extended by the DCA to the
As already clarified vide circular No. 57/31/2018-GST
Dated 4th September, 2018, whether or not the Del-
credere agent (DCA) will fall under the ambit of agent
under Para 3 of Schedule I of the CGST Act depends on
the following possible scenarios:
• In case where the invoice for supply of goods is
issued by the supplier to the customer, either
himself or through DCA, the DCA does not fall
under the ambit of agent.
• In case where the invoice for supply of goods is
issued by the DCA in his own name, the DCA
would fall under the ambit of agent.
In such a scenario following activities are taking place:

33
 recipient (buyer), for which interest is charged
by the DCA, is to be included in the value of
goods being supplied by the supplier
(principal) where DCA is not an agent under
Para 3 of Schedule I of the CGST Act?
Where DCA is an agent under Para 3 of
Schedule I of the CGST Act and makes
payment to the principal on behalf of the buyer
and charges interest to the buyer for delayed
payment along with the value of goods being
supplied, whether the interest will form a part
of the value of supply of goods also or not?
1. Supply of goods from supplier (principal) to
recipient;
2. Supply of agency services from DCA to the
supplier or the recipient or both;
3. Supply of extension of loan services by the DCA
to the recipient.
It is clarified that in cases where the DCA is not an agent
under Para 3 of Schedule I of the CGST Act, the
temporary short-term transaction based loan being
provided by DCA to the buyer is a supply of service by the
DCA to the recipient on Principal to Principal basis and is
an independent supply.
Therefore, the interest being charged by the DCA would
not form part of the value of supply of goods supplied (to
the buyer) by the supplier. It may be noted that vide
notification No. 12/2017-Central Tax (Rate) Dated 28th
June, 2017 (S. No. 27), services by way of extending
deposits, loans or advances in so far as the consideration
is represented by way of interest or discount (other than
interest involved in credit card services) has been
exempted.
In such a scenario following activities are taking place:
1. Supply of goods by the supplier (principal) to the
DCA;
2. Further supply of goods by the DCA to the
recipient;
3. Supply of agency services by the DCA to the
supplier or the recipient or both;
4. Extension of credit by the DCA to the recipient.
It is clarified that in cases where the DCA is an agent
under Para 3 of Schedule I of the CGST Act, the
temporary short-term transaction based credit being
provided by DCA to the buyer no longer retains its
character of an independent supply and is subsumed in
the supply of the goods by the DCA to the recipient. It is
emphasized that the activity of extension of credit by the
DCA to the recipient would not be considered as a
separate supply as it is in the context of the supply of
goods made by the DCA to the recipient.
It is further clarified that the value of the interest charged
for such credit would be required to be included in the
value of supply of goods by DCA to the recipient as per
Section 15 (2) (d) of the CGST Act.

4. Import of services by a person from a related person (will understand in Chapter 7 about related person) or
from any of his other establishments outside India, in the course or furtherance of business.
Import of services by entities which are not registered under GST (let take example, say they are only making
exempted supplies) but are otherwise engaged in business activities shall be liable to tax when received from
a related person or from any of their establishments outside India.
Services supplied by establishment of person in India to own establishments out of India is exempt, if place
of supply is out of India.

34
Taxability of import of services in GST – Snapshot {considering Section 7 (1) (b) & Schedule I Para 4}

Particulars From Related Person/Establishment outside From any other person

India
Consideration
✓  ✓
Purpose Personal or Business Business Personal or Business

Example 16: A Ltd. received software services from Holding company located in USA. The Holding
Company rendered the software services without any charge to its subsidiary. Since A Ltd. and its holding
company are related persons, software services received by A Ltd. will be considered as supply even
though the holding has not charged anything from it.

Example 17: Mr. A has taken legal advice with regard to his family dispute for free, from his brother who is
settled in USA. This would not constitute supply since this is not for furtherance of business. If suppose Mr.
A has taken this advice for his business dispute then also it wouldn’t be supply since brother is not
dependent on A {Recollect ‘family definition’}.

Schedule II :- Activities or transactions to be treated as supply of goods or services

To be To be
treated treated
Transaction Particulars
as as
goods service
1 Transfer (a) Transfer of the title of goods ✓
(b) Transfer of right in goods or of undivided share in ✓
goods without transfer of title thereof
This cover renting or operating lease of goods.
‘Undivided share’ means that exclusive possession
is not required to be transferred e.g. renting of locker
by bank, share taxi.
(c) Transfer of title in goods under an agreement which
stipulates that property in goods shall pass at a ✓
future date upon payment of full consideration as
agreed
This covers financial lease and hire purchase.
2 Land & (a) Lease, tenancy, easement, license to occupy land ✓
Building Let say, a company, giving its vacant land for
specified period to set up an IT park.
(b) Lease or letting out, either wholly or partly, of the ✓
building including a commercial, industrial or
residential complex for business or commerce
This cover renting or leasing of building. Even
renting of part of residential complex for business or
commerce will be subject to GST.
3 Treatment Treatment or process which is applied to another person’s ✓
or process goods e.g. job work, testing, repair etc.
4 Transfer of (a) Business assets are transferred/disposed of by the ✓
Business owner whether or not for consideration
Assets This clause needs to be co-related with clause 1 of
Schedule I. Such transfer will be subject to GST if ITC
was availed on such goods. This clause also has to be
read with clause 4 (c) of Schedule II. Further, services
by way of transfer of a going concern as a whole or an
independent part thereof is exempt from GST –

35
 Notification No. 12/2017-CT Rate & 9/2017-IT (Rate)
both Dated 28-6-2017. ✓
(b) The owner (person carrying on business) uses or allows
to use business assets for personal use, whether or not
for consideration
This covers use of property of taxable person like motor
vehicles, residential premises, guest house, telephone,
laptop etc. for private use of Director, Employees,
Partners etc. ✓
(c) Where any person ceases to be a taxable person, any
goods forming part of the assets of any business carried
on by him shall be deemed to be supplied by him in the
course or furtherance of his business immediately
before he ceases to be a taxable person, unless –
i. The business is transferred as a going
concern to another person; or
ii. The business is carried on by a personal
representative who is deemed to be a
taxable person
ABC transfers its business as going concern to a new
partnership firm. Any goods forming part of its business
will not be treated as a supply of goods.
ABC falls below the minimum threshold limit making it an
entity which can apply for cancellation of registration.
Then in such a case any goods forming part of its
business asset shall be deemed to be a supply of goods.
5 (a) Renting of immovable property ✓
Since lease of building and land is already covered in clause 2 (a)
and (b) above, this can cover renting of accommodation in any
hotel, Inn, Guest House etc.
(b) Construction of complex, building, 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 final occupation, whichever is earlier
This covers sale of flat in a residential complex before it is occupied.
If builder is selling, he will be exempt from GST only If he sales after
completion certificate is obtained (Schedule III). If first occupancy of
immovable property is proved before receiving any consideration,
then it would not be considered as supply of services and GST
would not be payable even if CC is not yet received.
But, determining first occupancy is a contentious issue.
(c) Temporary transfer or permitting the use or enjoyment of any ✓
intellectual property right
This cover allowing use of trade mark, copyright, design, patents.
(d) Development, design, programming, customization, adaptation, ✓
upgradation, enhancement, implementation of information
technology software
This covers development of software but not software itself in
physical forms. CBIC in their sectoral FAQs on IT/ITES has clarified
if a pre-developed or pre-designed software is supplied in any
medium/storage (commonly bought off-the-shelf) or made available
through the use of encryption keys, the same is treated as a supply
of goods.
(e) Agreeing to the obligation to refrain from an act, or to tolerate an act ✓
or a situation, or to do an act
Penalty on early termination of agreement, late delivery charges,
prepayment charges on early payment of loan installment,
demurrage charges paid to the port authorities etc.
(f) Transfer of the right to use any goods for any purpose (whether or ✓
not for a specified period) for cash, deferred payment or other
valuable consideration

36
 This is renting (e.g. car), where possession and control of goods is
transferred to recipient.
6 Following composite supplies –
(a) Works contract as defined in Section 2 (119) ✓
(b) Supply, by way of or as part of any service or in any other manner
whatsoever of goods, being goods or any other article for human ✓
consumption or any drink (other than alcoholic liquor for human
consumption), where such supply or service is for cash, deferred
payment or other valuable consideration.
This clause doesn’t say ‘in restaurant’. So, even home delivery of
cooked food will be covered, as it includes service. However, sale of
tinned food items is sale of goods as no ‘service’ element is
involved.
Sale of packed farsan or pre-prepared sweets or samosa/pakoda
across the counter is not ‘supply of service’. However, same item
supplied in restaurant or eating joint is ‘supply of service’.
7 Supply of goods by any unincorporated AOP or body of persons to a ✓
member there for cash, deferred payment or other valuable consideration

Schedule III :- Activities or transactions which shall be treated neither as a supply of goods nor a
supply of services

1.Services by an employee to the employer in the course of or in relation to his employment.

If it is part of employment letter, apply this para of Schedule III. Fringe benefits/Perquisites are not subject to
GST, clarified by the Government in press release.
If services such as membership of a club, health and fitness center etc. are provided free of charge to all the
employees by the employer, the same will not be subjected to GST.
Notice pay recovery is normally part of employment contract and hence GST liability shouldn’t be there.
However, there are certain issues under Service Tax provisions and same issues may arise under GST.
So, on safer side, registered person may treat this as taxable until any Judiciary order comes.

2. Services by any court (District/High/Supreme Court) or Tribunal established under any law for the
time being in force.
Fee paid by litigants in the Consumer Disputes Redressal Commission (National/ State/ District) are not
leviable to GST. Any penalty in cash imposed by or amount paid to these Commissions will also not attract
GST. {Circular No. 32/06/2018 GST Dated 12.02.2018}

3.
(a) the functions performed by the Members of Parliament, Members of State Legislature, Members of
Panchayats, Members of Municipalities and Members of other local authorities;
Example 18: Member of Parliament gets paid for coming in some television advertisement, the amount
received shall be liable to be taxed subject to the threshold limit for registration.
(b) the duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity (like Election Commission of India); or
(c) the duties performed by any person as a Chairperson or a Member or a Director in a body established
by the Central Government or a State Government or local authority and who is not deemed as an
employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
Remember, construction of a new building is subject to GST before completion certificate. Please also refer

37
 to Q & A for more clarity. Also note that sale of TDR (Transferable Development Right) is not sale of land. It
allows its owner additional construction area (FSI). Such sale of TDR shall be subject to GST.

6. Actionable claims other than lottery, betting and gambling

Example 19: Lottery ticket, Insurance policy, Claim for arrears of rent, Unsecured loans, Reward points
earned by customer on purchases made by him under loyalty programme. These are examples of
actionable claims but remember only lottery, betting and gambling are subject to GST.

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory
without such goods entering into India. Merchant trading.
Example 20: Mr. Amit purchased goods from China and sold it to Mr. John in Canada without bringing the
goods in India. This transaction is neither supply of goods nor supply of services.

8. (a) Supply of warehoused goods to any person before clearance for home consumption; In-bond sale.
Example 21: Mr. X imported some goods in India, but kept the goods in custom bonded warehouse without
clearing it for home consumption. In the meantime, Mr. X sold these goods to Mr. Y while they were in
warehouse. This transaction between Mr. X and Mr. Y is neither supply of goods nor supply of services.

(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods,
after the goods have been dispatched from the port of origin located outside India but before clearance for
home consumption. High Seas Sales.
For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as
assigned to it in the Customs Act, 1962.
Example 22: Mr. P of India imported some goods from Japan. While the goods were in high seas, Mr. P
sold the goods to Mr. Q in India by way of endorsement of documents of title of goods. This transaction
between Mr. P and Mr. Q is neither supply of goods nor supply of services.

Section 8: Composite & Mixed supply

Composite Supply [Sec. 2(30)]
Consist of 2 or more supplies
Naturally Bundled
In conjunction with each other
One is principal supply
Tax liability shall be rate of principal supply
Example:
23. Meals free with Rajdhani ticket.
24. Charger & Warranty with mobile.
25. A 5-star hotel booked for conference &
includes accommodation, breakfast, access
to business centre, tea & coffee during
conference, access to fitness room.
26. Goods are packed and transported with
insurance, packing materials etc.
. two different purposes is not naturally
Mixed Supply [Sec. 2(74)]
Consist of 2 or more supplies
Not Naturally Bundled
Independent of each other
Single Price
Tax liability will be the rate applicable to the supply
attracts highest rate of tax
Example:
27. Bucket free with detergent.
28. Gift pack of dry fruits, sweets etc.
29. Car check-up camps organized by Car
Workshop wherein along with standard
check-up, oil and filter are being charged at
a single price.
30. A house is given on rent, one floor of which
is to be used as residence and the other for
housing a printing press. Such renting for
bundled in the ordinary course of business.

38
 Particulars Composite Supply Mixed Supply
Naturally bundled Yes No
Supplied together Yes Yes
One is predominant supply for recipient Yes Yes/No
Other supply(ies) are ancillary or they are received Yes No
because of predominant supply
Each supply priced separately Yes/No No
All supplies can be goods Yes Yes
All supplies can be services Yes Yes
Some supplies can be goods and others can be services Yes Yes

Some important circulars

Trade practice is also relevant. A vehicle repair shop also supplies spare parts. However, the long practice
is to treat these two supplies separately. Hence, such activity is not ‘composite supply’. It is also not ‘mixed
supply’ as single price is not charged.
[Circular No. 47/21/2018 GST Dated 08.06.2018]
Artists give their work of art to galleries where it is exhibited for supply. However, no consideration flows from
the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not
a supply. It is only when a buyer selects a particular art work displayed at the gallery, that the actual supply
takes place and applicable GST would be payable at the time of such supply.
[Circular No. 22/22/2017 GST Dated 21.12.2017]
As per the Production Sharing Contract (PSC) between the Government and the oil exploration & production
contractors, in case of a commercial discovery of petroleum, the contractors are entitled to recover from the
sale proceeds all expenses incurred in exploration, development, production and payment of royalty. Portion
of the value of petroleum which the contractor is entitled to take in a year for recovery of these contract costs
is called “Cost Petroleum”. Cost petroleum is not a consideration for services to Government and is not
taxable.
[Circular No. 32/06/2018 GST Dated 12.02.2018]
Moulds and dies owned by Original Equipment Manufacturers (OEM) that are sent free of cost (FOC) to a
component manufacturer (the two not being related persons or distinct persons) does not constitute a supply
as there is no consideration involved.
[Circular No. 47/21/2018 GST Dated 08.06.2018]
Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable.
Further, services provided by outgoing tenant by way of surrendering the tenancy rights against consideration
in the form of a portion of tenancy premium is liable to GST. Grant of tenancy rights in a residential dwelling
for use as residence dwelling against tenancy premium or periodic rent or both is exempt.
[Circular No.44/18/2018 CGST Dated 02.05.2018]
JV being an unincorporated temporary association constituted for the limited purpose of carrying out a
specified project within a time frame, a comprehensive examination of the various JV agreements (at times,
there could be number of inter se agreements between members of the JV) holds the key to understanding
of the taxation of transactions involving taxable services between the JV and its members or inter-se between
the members of a JV.
Thus, whether a cash call is merely a transaction in money and hence not in the nature of consideration for
taxable service, would depend on the terms of the Joint Venture Agreement, which may vary from case to
case. ‘Cash calls’ are raised by an operating member of the joint venture on other members in proportion to
their participating interests in the joint venture (unincorporated) to meet the expenditure on the operations to
be carried out as per the approved work programmes and budget. Let us understand the taxability of cash
calls with the help of following examples:
Example 31: There are 4 members in the JV including the operating member and each one contributes Rs.
100 as part of their share. A total amount of Rs. 400 is collected. The operating member purchases machinery
for Rs. 400 for the JV to be used in oil production.

39
In above case, cash calls will not be subject to GST since the operating member is not carrying out an activity
for another for consideration. Here, the money paid for purchase of machinery is merely in the nature of
capital contribution and is therefore a transaction in money.
Example 32: There are 4 members in the JV including the operating member and each one contributes Rs.
100 as part of their share. A total amount of Rs. 400 is collected. The operating member thereafter uses its
own machine and performs exploration and production activities on behalf of the JV.
In above case, the operating member uses its own machinery and is therefore providing ‘service’ within the
scope of ‘supply’ because here operating member is recovering the cost appropriated towards machinery &
services from other JV members in their participating interest ratio.
[Circular No. 35/9/2018 GST Dated 05.03.2018]
Priority Sector Lending Certificates (PSLCs) are taxable as goods. GST payable on the certificates would be
available as ITC to the bank buying the certificates. It is further clarified that nature of supply of PSLC between
banks may be treated as a supply of goods in the course of inter-State trade or commerce. Accordingly, IGST
shall be payable on the supply of PSLC traded over e-Kuber portal of RBI.
[Circular No. 93/12/2019 GST Dated 08.03.2019]
Renewable Energy Certificates (RECs) and Priority Sector Lending Certificates (PSLCs) and other similar
documents are classifiable under heading 4907 and attract 12% GST. The duty credit scrips attract Nil GST
under S. No. 122A of Notification No. 2/2017- Central Tax (Rate).
[Circular No. 46/20/2018 GST Dated 06.06.2018]
Inter-State movement of various modes of conveyance, between distinct persons as specified in section 25(4)
of the CGST Act, including Trains, Buses, Trucks, Tankers, Trailers, Vessels, Containers, Aircrafts,
(a) carrying goods or passengers or both; or
(b) for repairs and maintenance,
[except in cases where such movement is for further supply of the same conveyance] is not regarded as
supply. However, applicable CGST/SGST/IGST, as the case may be, shall be leviable on repairs and
maintenance done for such conveyance.
[Circular No. 1/1/2017 IGST Dated 07.07.2017**]
**Above circular shall mutatis mutandis apply to inter-State movement of rigs, tools and spares, and all goods
on wheels [like cranes], [except in cases where movement of such goods is for further supply of the same
goods], such inter-State movement shall be treated ‘neither as a supply of goods or supply of service,’ and
consequently no IGST would be applicable on such movements. In this context, it is also reiterated that
applicable CGST/SGST/IGST, as the case may be, is leviable on repairs and maintenance done for such
goods. [Circular No. 21/21/2017-GST Dated 22.11.2017]

In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is
supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical
inputs including paper used for printing belong to the printer, supply of printing is the principal supply and
therefore such supplies would constitute supply of service falling under heading 9989 of the scheme of
classification of services.
In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling
under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using
physical inputs including paper belonging to the printer, predominant supply is that of goods. Supply of
printing of the content supplied by the recipient of supply is ancillary to the principal supply of goods and
therefore such supplies would constitute supply of goods falling under respective headings of Chapter 48 or
49 of the Customs Tariff. [Circular No. 11/11/2017-GST Dated 20.10.2017]

The supply of books shall be treated as supply of goods as long as the supplier owns the books and has the
legal rights to sell those books on his own account. [Circular No. 27/01/2018-GST Dated 04.01.2018]

In the case of bus body building there is supply of goods and services. Thus, classification of this composite
supply, as goods or service would depend on which supply is the principal supply which may be determined
on the basis of facts and circumstances of each case. [Circular No. 34/8/2018-GST Dated 01.03.2018

40
 In retreading of tyres, which is a composite supply, the pre-dominant element is the process of retreading
which is a supply of service. Rubber used for retreading is an ancillary supply. Supply of retreaded tyres,
where the old tyres belong to the supplier of retreaded tyres, is a supply of goods.
[Circular No. 34/8/2018-GST Dated 01.03.2018]

Question & Answer

Q1. What is meant by Taxable event in a Law?
A. A taxable event in the law is the event, happening of which triggers applicability of provisions of the law. For
e.g. under Income Tax Act, taxable event is earning of income. Thus, earning of income is the triggering point
and once a person earns any income, he is covered by the provisions of Income-tax Act, unless otherwise
excluded from the purview of the law or exempted from the levy of tax.
Take another example, under VAT Act, taxable event was sales. Sales was the triggering point and once a
transaction was covered under sale, provision of VAT used to apply unless the transaction was excluded from
the purview of the law or exempted from the levy of tax.
Similarly, under GST, supply is the triggering point and once any activity is covered under supply, all provisions
of the law are applicable unless the activity is excluded from purview of law i.e. alcohol for human consumption
or activity is exempted from levy of GST.

Q2. Mr. A buys a laptop for his personal use and after a year sells it to a laptop dealer. Will it constitute
supply?
A. As per section 7(1)(a), when any sale, transfer, barter etc. is made for a consideration in the course or
furtherance of business then it would be treated as supply & liable to GST. In the given case, sale of laptop by
Mr. A to a laptop dealer shall not be considered as supply, as such sale is not in course or furtherance of
business of Mr. A. Thus, it is not supply & not subject to GST.

Q3. State whether the following activities will be considered as a supply in relation to ‘Money’ in accordance
with GST Act.
i. Mr. A borrows an amount of Rs. 1 Lakh from one of his relative and agrees to repay the entire
amount after a year.
ii. Mr. A applied for loan from ICICI Bank against which a processing fees and interest is charged by
the bank.
iii. Mr. A exchanged Indian Rupees against purchase of US $ for which authorized dealer charged
commission.
A.
i. No, the activity of borrowing from a relative is without any charge of interest and hence it will be
considered as merely a transaction in money.
ii. Yes, the activity of borrowing loan amount for which a consideration in form of processing fee has been
charged by ICICI Bank shall be considered as a supply of service, as consideration in relation to use
of money. Interest is also supply but it is exempt (refer to Chapter 4 exemption list).
iii. Yes, the activity of exchange of currency for which a commission is charge will be considered as supply
of service.

Q4. A bank takes charge of the property of the borrower as per loan agreement. It then goes on to sell the
movable goods so taken over (inventory), How will this transaction be dealt in GST?

41
A. The transactions of sale of movable goods taken over by bank would be considered as taxable supply. The
loan taker must pay GST on such transaction treating it as supply of goods.

Q5. Whether stipend paid to article will be covered as supply?

A. No, Government has clarified through FAQ that stipend paid to article/interns will be considered as salary,
so it will be employer-employee transaction and thus will not be subject to GST.

Q6. Give example of distinct person as per the GST Act?

A. ABC Limited has 2 factories in Rajasthan, 1 in Delhi & 1 in Maharashtra. As per GST Act, ABC may have 1
registration for 2 factories in Rajasthan (ABC discretion), 1 for Delhi & 1 for Maharashtra. The factories at
Rajasthan, Delhi & Maharashtra will be treated as distinct person for any transactions since they have separate
registration but 2 factories in Rajasthan will not be treated as distinct person since they have 1 registration.

Q7. How to treat transaction of sale of land & building under the GST Act?
A. Sale of land and, subject to para 5 (b) of Schedule II, sale of building is neither supply of goods nor a supply
service as per para 5 of Schedule III of CGST Act.
Para 5 (b) of Schedule II of CGST Act covers supply of building before completion or before occupancy. Thus,
sale of completed building after completion certificate will not be subject to GST.

Q8. Each partner has received remuneration of Rs. 1 crore from the partnership firm. Whether it will be treated
as supply, and will GST be payable on the same by each partner by registering separately??
A. A partnership firm as such has no separate right of its own in the partnership assets and when one talks
of the firm’s property or firm’s assets all that is meant is property or assets in which all partners have a joint or
common interest.
A partnership firm and its partners are not separate from each other. Accordingly, neither of them can be treated
as a service provider or service recipient. In other words, renumeration paid to the partners is in the nature of
share of profits taken out by the partners from their partnership firm and cannot be treated as ‘supply’ under
section 7. Further, CBIC FAQ provides for exemption of GST on salary received by the partner from the
partnership firm. However, the said FAQ does not provide any reasoning for arriving such conclusion.
Thus, renumeration received by the partners from the partnership firm shall not be treated as supply under
section 7 and hence no GST is payable by the partner receiving remuneration from the partnership firm.

Q9. ABC Ltd. was amalgamated with DEF Ltd. On account of amalgamation Mr. A, shareholder received 10,000
shares of DEF Ltd. in exchange of 5000 shares of ABC Ltd. Can it be considered as supply?
A. Shares (Securities) are excluded from the definition of both goods as well as services. Hence, this transaction
can’t be considered as supply.

Q10. ABC Ltd. a banking company transfers bad loan (unsecured) to ARC Ltd. Can it be considered as supply?
A. Actionable claims are covered in definition of goods. However, schedule III excludes claims other than lottery,
gambling and betting from the scope of supply. So, above transfer can’t be considered as supply.

Q11. A Charitable trust, engaged in providing medical relief free of cost, donates books and stationery to
children living in slum area? Can it be considered as supply?
A. Section 7 of the CGST Act, provides that supply must be made for a consideration except the activities
specified in Schedule I and in course or furtherance of business. Since, both these elements are missing,
donation of books and stationery to children living in slum are would not amount to supply.

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Q12. A Taxable person, ceases to be a taxable person. What will be treatment for any goods forming part of
the assets?
A. Where any person ceases to be a taxable person, any goods forming part of the assets of any business
carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately
before he ceases to be a taxable person, unless – (a) the business is transferred as going concern to another
person; or (b) the business is carried on by a personal representative who is deemed to be a taxable person
{Transfer of entire business is not subject to GST. Only goods transferred are subject to GST}.

Q13. Decide whether following activities are supply or not: -

i. Free seminar to educate people for mutual fund.
ii. An individual buys a car for personal purpose and after a year, sells it to a car dealer.
iii. ABC Ltd. donated old office furniture to Charitable Hospital. ABC Ltd. has taken ITC on such office
furniture.
iv. Mr. A gift Rs. 75,000 to his son on his birthday.
v. Mr. A gave his flat on leave & license agreement to Mr. B.
vi. Employer has paid notice period amount to employee on termination.
vii. A local club supplies snacks to its members during AGM for a nominal amount.
viii. Mr. A gives computer (claimed ITC) brought for office use, to his friend on his birthday.
ix. ABC Ltd. give gift voucher of Rs. 1,00,000 to it employee Mr. A. If let say amount is Rs. 45,000 then
what will be your answer.
x. Mr. A has taken voluntarily registration. He sells computers.

A.
i. No, as per Section 7(1)(a) of CGST Act, 2017, supply includes supply of goods and services for a
consideration in the course or furtherance of business. In this case, there is no consideration, so it
cannot constitute a supply.
ii. No, as per Section 7(1)(a) of CGST Act, 2017, this is not in the course or furtherance of business. So,
it cannot constitute a supply.
iii. Yes, as per Section 7(1)(c) read with Schedule I of CGST Act, 2017 permanent transfer or disposal of
business assets where ITC has been availed shall be treated as supply even if made without
consideration. So, in current case even though ABC Ltd. donated old furniture to Charitable Hospital, it
shall be treated as supply.
iv. No, as per Section 7(1)(c) read with Schedule I of CGST Act, 2017 supply of goods or services between
related person is treated as supply even it is without consideration when made in course or furtherance
of business. Gift to son Rs. 75,000 will not qualify as supply since it is not made in course or furtherance
of business.
v. Yes, as per Section 7(1)(a) of CGST Act, 2017, leasing or renting out building including commercial,
industrial or residential complex for business or commerce would be treated as supply. In given case
Mr. A gave his residential house on leave & license agreement so it would constitute supply of service.
But, leasing for residential purpose is exempt under Entry 12 of Notification No. 12/2017- CT (Rate).
vi. No, as per Section 7(2) read with Schedule III of CGST Act 2017, services by an employee to employer
during his employment would not be regarded as supply. So, notice period amount are treated as
amount paid during the employment, so would not constitute supply.
vii. Yes, as per para 7 of Schedule II of CGST Act, 2017 supply of goods by any unincorporated association
or body of persons to a member thereof for cash, deferred payment or other valuable consideration
shall be treated a supply of goods. So, if a local club supplies snacks during AGM to its members for a
nominal payment would constitute supply of goods.
viii. Yes, as per section 7(1)(c) read with Schedule I, permanent transfer or disposal of business assets
where ITC credit has been availed on such assets qualifies as a supply even though made without
consideration. Such transaction will be treated as supply as ITC has been availed on computer.

43
 ix. Yes, as per Section 7(1)(c) read with Schedule I if CGST Act, 2017, supply of goods or services between
related person is treated as supply even it its without consideration. Employer & employee are related
person as per Section 15 of CGST Act, 2017. Thus, gift voucher of Rs. 1,00,000 will qualify as supply.
Gifts not exceeding Rs. 50,000 in value in a financial year by an employer to employee shall not be
treated as supply so if amount is Rs. 45,000 then it will not be treated as supply.
x. Yes, a taxable person is a person who is registered or liable to be registered U/s 22 or 24. Therefore,
even a person not liable to be registered but has taken voluntary registration, is also a taxable person.
Thus, selling of computer would be liable to GST.

Q14. ABC Ltd. is an authorized dealer of motor vehicles and is having registered office in Delhi. It is also running
authorized service station of motor vehicles registered in UP. Certain motor vehicles are taken from Delhi (show-
room) to UP (service-station) for repairs. Whether this inter-state movement of vehicles would amount to supply
of goods under GST?
A. As per given facts, registered supplier of motor vehicle has taken his motor vehicle for repairs at its other
registered premises (authorized service station in UP). Post-repair, ABC Ltd. will bring back goods to its
registered show-room in Delhi. This transaction of inter-state movement of vehicles for repairs will not amount
to supply within the meaning of Section 7 of CGST Act. [Circular No. 1/1/2017-IGST Dated 7-7-2017.]

Q15. State whether the following activities will be considered as a ‘Consideration’ in accordance with GST
Act.
i. Reliance Jio offers free mobile handset on payment of security deposit of Rs. 5,000. It is refundable after
3 years.
ii. ABC football club gift worth Rs. 3 Lakhs to Mr. A for joining ABC football club.
iii. ABC ltd. is manufacturing fertilizers used for agriculture purpose. State Government has given 30%
subsidy on sale of such fertilizer.
iv. ABC ltd. a trading concern, has supplied the product to Mr. A at subsidize rate of Rs. 1,00,000 (open
market value Rs. 1,25,000). Subsidy is given by XYZ organization.
A.
i. No, as the amount of deposit in the given case is not applied by the supplier towards the mobile handset
provided. It is not subject to GST.
ii. Yes, such gift is in response to an offer to join the football club, is subject to GST.
iii. As per section 2(31) of CGST Act, pertaining to ‘consideration’ clearly excludes the value of subsidy
received from the Central or State Government. Thus, in the given case the amount of subsidy shall be
excluded from the value of consideration.
iv. As per section 2(31) of CGST Act, pertaining to ‘consideration’ clearly excludes the value of subsidy
received from the Central or State Government. But in given case subsidy is given by person other than
the Central or State Government. Thus, subsidy is treated as consideration.

Q16. Tips music company charged a late fee as a penalty for late return of a DVD to its customer. Will the late
fee charged to its customer be considered as a part of consideration?
A. As per Section 2(102), service means anything other than goods, money & securities. Thus, late, fee, fine,
penalty charged by the supplier for any reason would be treated as supply for consideration & liable to GST.

Q17. Mr. A is the owner of a truck valued at Rs. 10,00,000. He transfers the right to operate the truck to Mr. B
for a consideration but the ownership of the truck is not transferred. Determine whether it will be considered as
a supply?

44
A. It is supply as per Section 7(1) as it is a transfer which involve consideration. It is transfer of rights in goods
without transfer of title, so it will be classified as supply of service according to Schedule II of CGST Act, 2017.

Q18. In respect of exchange of goods, let say gold chain for restaurant services, will the transaction be taxable
as two different supplies or will it be taxable only in the hands of the main supplier?
A. Yes, the transaction of exchange is specifically included in the scope of supply U/s 7. So, exchange could be
taxable both ways. (A different view can also be possible depending upon the facts of the case)

Q19. Please explain Importation of services for consideration with example?

A. Import of free services from Google and Facebook, without any consideration, are not considered as supply.
It is important to note that downloading ‘Hollywood Movie’ from foreign website for consideration for personal
use would be a supply of service, even though same is not in the course or furtherance of business.
Conclusion with exception of importing the service is supply – “Test of consideration” should be checked and
“Business Test” is not needed in this case.

Q20. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?
A. Title as well as possession both have to be transferred for a transaction to be considered as a supply of
goods. In case title is not transferred, the transaction would be treated as supply of service.
In some cases, possession may be transferred immediately but title may be transferred at a future date like in
the case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as
supply of goods.

Q21. ABC Ltd. is an aircraft operator operating pan-India air travel services. It has registered offices in
different states. It sent some parts and accessories of aircraft from its Delhi registered premise to Maharashtra
registered premise. Whether this transaction would amount to supply of goods under GST?
A. Under GST law, scope of supply has been defined under section 7 of CGST Act. Supply as defined U/s 7
covers, supply of goods between deemed distinct persons, i.e., different premises of same person which are
separately registered under GST law. Such transaction amounts to supply even in the absence of any
consideration. As per facts given, Delhi-registered premise has transferred goods (parts and accessories of
aircraft) to Maharashtra registered premise. Such stock transfer from Delhi-registered premise to Maharashtra
registered premise shall amount to supply of goods. Such stock-transfer being inter-State transfer shall be
treated as ‘inter-State supply’ and will attract IGST liability.

Q22. ABC is providing service of transportation of goods/passengers which is taxable under GST in hands of
ABC. It has registered offices in different states which are treated as deemed distinct persons under GST law.
Whether inter-state movement of any conveyance carrying goods/passengers from one registered premise to
another registered premise will amount to supply of such conveyance under GST law (e.g. Bus carrying
passenger from Mumbai, Maharashtra bus terminal to Bangalore, Karnataka bus terminal, dropping
passengers there and then picking passengers from Bangalore, Karnataka bus terminal to Mumbai,
Maharashtra bus terminal)? In this case, whether inter-statement movement of bus from Mumbai,
Maharashtra bus terminal to Bangalore, Karnataka bus terminal would amount to supply?
A. Under GST law, scope of supply has been defined under section 7 of CGST Act. Only transactions falling
within scope laid down in Sec 7 will amount to supply. As per given facts, ABC is registered supplier of
transportation services. During course of such service, conveyance moves from one registered premises to
another registered premise. This transaction of inter-state movement of vehicles is not involving any further

45
supply of such conveyance. Such inter-state movement will not amount to supply within the meaning of
Section 7 of CGST Act. This has been clarified through Circular No. 1/1/2017-IGST dated 7-7-2017.

Q23. Discuss whether the following activities constitute ‘Supply’ in accordance with Section 7 of CGST Act:
i. Mr. A sold electronic gadgets to ABC Co.
ii. ABC Ltd. entered into a hire purchase agreement with XYZ Ltd. for supply of a machine unit.
iii. Mr. A purchase a smart TV of 12 inch from LG store and in return gave away his old TV.
iv. ABC disposed scrap part of electric unit to a scrap dealer.
v. Supply of Beer Shampoo
A.
i. Yes, term ‘sale’ is included in ‘Supply’.
ii. Yes, it is supply as per Section 7(1) and it is classified as supply of goods as per section 7(1A)
read with Schedule II.
iii. Yes, as the above supply falls under barter (if money is also involved then ‘exchange’) transaction
which is also included under the scope of supply.
iv. If the disposal is in course or furtherance of business of ABC then it shall be considered as supply.
v. Yes, it is supply. Supply of alcoholic liquor for human consumption is out of the scope of GST.

Q24. Determine whether the following activities fall under the scope of business?
i. ABC is engaged in the manufacture of auto parts for industrial purpose.
ii. ABC acquired capital goods lying in stock of Mr. A as on takeover of business of Mr. A.
iii. ABC provides a free trekking camp to non-members of the club.
iv. Essel World charges Rs. 1000 as an entry fee for amusement park.
v. Goods sold in store maintained by the company for the welfare of the employees.
vi. Activities of Pune Race Club for horse race collected Rs. 5 Lakhs through licensed book marker
or totalizer or activities of licensed book marker in such a club.
A.
i. Yes, the given activity of manufacture has been included in the definition of business.
ii. Yes, as per the definition of business supply or acquisition of goods including capital goods and
services in connection with commencement or closure of business, included in business.
iii. No, as per the definition of business, provision of services to members as in return for
subscription fee, included in business. In given case, free trekking camp is being organized for
non-member of the club.
iv. Yes, as per the definition of business, admission for a consideration of person to any premises is
included in the definition of business.
v. Yes, turnover of goods sold in the store maintained by the company for the welfare of the
employees is incidental to main business.
vi. Yes, activities by a race club are cover in definition of business.

Q25. "Transaction in money, per se, is outside the ambit of GST." — Explain.
A. Transaction only in money do not constitute service and not chargeable to GST. However, the related
activity, for which a separate consideration is charged, is subject to GST.
For example, a foreign exchange dealer while exchanging one currency for another also charges a
commission (Often inbuilt in the difference between the purchase price and selling price of forex).
Similarly, allowing others to use money for consideration in form of interest is also a supply of service
transaction.

46
Q26. Discuss whether GST is applicable in the following transaction
i. Mr. A transfers 3,000 debentures of A Ltd. to Mr. B for a consideration of Rs. 3,00,000.
ii. Mr. A transfers a plot of land situated in Chennai to Mr. B for a consideration of Rs. 90 lakh.
Consideration is, however, payable in instalments.
iii. Mr. A, a registered person in GST, is a flower dealer in Kochi. He sells roses for decoration
purposes for Rs. 50,000 to an interior decorator.
A.
i. GST is applicable on supply of goods or services or both. Debentures are securities. Under GST
law, securities are neither 'goods' (as defined u/s 2(52)) nor 'services' (as defined u/sec 2(102)).
Thus, transfer of debentures (securities) is not subject to GST.
ii. Plot of land, being immovable property, is not 'goods' as defined u/s 2(52) of CGST Act. It is
covered by definition of 'service' as given u/s 2(102) of CGST Act. However, transaction of sale of
land are out of scope of supply under GST law {Sec 7(2) of CGST Act read with Schedule III of
CGST Act}. Thus, sale consideration is not subject to GST.
iii. "Flowers" are goods. It is subject to GST.

Q27. Examine whether the following activities would amount to supply under section 7 of the CGST Act
i. Mr. A, a proprietor, has received the architect services for his house in Orissa from an architect
located in Paris at an agreed consideration of $ 10,000.
ii. ABC Pvt. Ltd. received technical support services from its head office located in USA. The head office
has rendered such services free of cost to its branch office.
iii. Mr. A is an Electronic Commerce Operator in Kolkata (GST registered). His son who is settled in
Dubai is a well-known lawyer. Mr. A has taken legal advice from him free of cost with regard to his
family dispute.
iv. Would your answer be different in above case, if Mr. A has taken advice in respect of his business
unit in Kanyakumari?
A.
i. Supply of service by foreign architect to Mr. A (Indian service recipient), service received in India
constitutes 'import of service' as place of supply of such service is in India. Though such import is
not in course of or furtherance of business of Mr. A, this transaction of import of service will fall
within the scope of supply as defined U/s 7(1)(b) of CGST Act.
ii. Foreign Head Office situated at USA has provided technical support service to its Indian branch
office. Under GST law, foreign head office (establishment of a person outside India) and Indian
branch office (establishment of same person in India) shall be treated as 'deemed distinct persons
(establishment of distinct persons)' [Explanation to Sec 8 of IGST Act] Import of any service
without consideration amounts to supply in terms of Sec 7(1)(c) read with Schedule I (Para 4) if it
is in the course or furtherance of business. The import of service by ABC Pvt. Ltd. (whether
taxable person or not) from its other establishment outside India (which is deemed distinct entity)
which is in course or furtherance of business will constitute supply, even if no consideration has
been charged for such supply
iii. In the given case, Mr. A being ECO is a taxable person. It has received legal advice for his
personal matter and therefore this is not import of service in the course or furtherance of
business. It would not amount to supply though he has imported such service from his son, who is
a related person under GST law. Thus, such import of service will not fall within the scope of
supply under section 7 read with Schedule I of the CGST Act.

47
 iv. In the above case, if Mr. A has taken advice from his son (related person) with regard to his
business, then such import would be treated as supply under section 7 of the CGST Act read with
Schedule I (Para 4).

Q28. Examine whether the activity of import of service in the following independent cases would amount to
supply under section 7 of the CGST Act, 2017?
i. Mr. A received Vaastu consultancy services for his residence located at Hyderabad from Mr. B of
Washington. The amount paid for the said service is US $ 10,000.
ii. Mr. A received Vaastu consultancy services for his residence located at Hyderabad from his brother,
Mr. B residing in New York. Mr. A had not paid any money to Mr. B.
iii. Mr. A received Vaastu consultancy services for his business premises located at Hyderabad from his
brother, Mr. B residing in New York. Mr. A had not paid any money to Mr. B
A.
i. Import of service for Consideration not in the course or furtherance of business, would amount to
supply as per Sec 7(1)(b) of CGST Act
ii. Import of service without Consideration not in the course or furtherance of business, would not
amount to supply as per Sec 7(1)(c) of CGST Act read with Schedule I (para 4)
iii. Import of service without Consideration in the course or furtherance of business but not from related
person or from own establishment outside India, would not amount supply as per Sec 7(1)(c) of CGST
Act read with Schedule I (para 4). Mr. B, brother of Mr. A, is not considered as 'related person' under
GST law unless he is wholly dependent upon Mr. A.

Q29. Mr. A, an air-conditioner dealer in Ahmedabad, needs 4 ACs for his newly constructed house in Nadiad.
Therefore, he transfers 4 ACs [ITC availed] from its stock, for the said purpose. Examine whether the said
activity amounts to supply under section 7 of the CGST Act, 2017. Further, a Mr. B, approached Mr. A, to sell
an AC to Mr. A for Rs. 5,000. Mr. B had bought the said AC six months before, for his residence. Does sale of
the AC by Mr. B to Mr. A amount to supply under section 7 of the CGST Act, 2017
A. Section 7 defines the scope of 'supply'. In general, supply covers those transactions where goods or
services or both are supplied for consideration in course of or furtherance of business (Sec 7(1)(a)). Besides
that, scope of supply has been extended to cover certain specified transactions which are undertaken even
without any consideration {Sec 7(1)(c) read with Schedule 1}. One such transaction without consideration is
where business assets on which ITC has been availed are transferred or disposed of permanently. In view of
said provisions, the answer to given situations are as follows:
• Permanent transfer of ACs by Mr. A from its stock for personal use at its residence, though without
consideration, would amount to supply.
• Such sale will not qualify as supply under section 7 of the CGST Act, 2017 as although it is made for
a consideration, but it’s not in the course or furtherance of business.

Q30. ABC Ltd. (GST registered FMCG manufacturer) has started canteen services exclusively for its
employees. The canteen running expenses were recovered from its employees without any profit margin.
Yours opinion is sought as to whether recovery of food expenses from employees for the canteen services
provided by the it will be taxable under GST law.
A. ABC Ltd. is GST registered FMCG manufacturer. Now, it has started canteen services for its employee. It
is providing food on cost-to-cost basis. Further, provisioning of food is not under contract of employment, i.e.,
it is not paid towards cost of employee to company (it is not payment of salary in kind). Such activity will
amount to supply for following reasons:

48
 • Such supply is in the course or furtherance of business. ‘Business’ has been defined U/s 2(17) to
include activities incidental or ancillary to main business. Thus, provisioning of food to employee
merits treatment of business, it being an incidental or ancillary activity to main business of FMCG
manufacturing of ABC Ltd.
• Business activity may be carried out on cost-to-cost basis.
• Supply of food/ catering services if being done for consideration, such transaction falls under scope of
supply as per Sec 7(1)(a) of CGST Act.
Thus, recovery of food expenses from the employees for the canteen services provided by ABC Ltd. would be
taxable as a supply of service under GST. {This is ruling given by AAR}

Q31. Mr. Amit is CFO of Sodexho. For the financial year 2018-19, CTC of Mr. Amit (as per appointment letter)
is as follows —
Salary Rs. 1,00,00,000
Residential accommodation worth Rs. 12,00,000
Conveyance & others reimbursement Rs. 3,00,000
On January 1, 2019, Sodexho gifts a new car to Mr. Amit (worth Rs 18 Lakhs). Gift of car is not covered in
appointment letter.
Mr. Amit owns a commercial premise. He has given on rent to Sodexho @ monthly rent being Rs. 2,00,000.
Determine the amount of GST liability: -
i. Salary received including Residential accommodation, conveyance & other reimbursements
provided by Sodexho to Mr. Amit
ii. Rent received on account of renting of commercial flat by Mr. Amit to Sodexho
iii. Gift of car by Sodexho to Mr. Amit
A. Taxability in hands of Mr. Amit: -
i. Supply of employment services by Mr. Amit to Sodexho is out of scope of supply {Sec 7(2) of
CGST Act read with Schedule III of CGST Act}. Thus, it will not attract any GST liability. This
includes residential accommodation, conveyance & other reimbursements provided to Mr. Amit
ii. Transaction of renting services by Mr. Amit to Sodexho falls within the scope of supply, renting
being a commercial activity undertaken by Mr. Amit (Sec 7(1)(a) of CGST Act). Thus, it will attract
GST liability.
iii. Gift of car is not covered by employment contract. Though Sodexho has not charged anything
from Mr. Amit, but still transaction will fall within the scope of supply as it being related party
transaction {Sec 7(1)(c) read with Schedule I (Para 2)}. Further, the value of car being in excess
of Rs. 50,000, such gift will attract GST on full value of car.

Q32. Discuss whether GST is applicable in the following transactions :-

i. Mr. A owns a house in a residential colony. It is given on rent to A Ltd. for Rs. 2,00,000 p.m. As
per the written agreement. A Ltd. can use the property for commercial purposes.
ii. Mr. A gives his vacant plot of land situated in a residential colony in Hyderabad to ABC Ltd. ABC
Ltd. is a car distributor and plot of land is used by it for parking unsold cars.
iii. Mr. A owns an agricultural land. It is given rent to Mr. B uses the land for agricultural activities.
A.
i. Renting of immovable property constitutes 'supply of service'. It attracts levy of GST. Though,
renting of residential dwelling units for use as residence is exempt, that exemption is not
applicable to this case since A Ltd. use the property for commercial purposes. Thus, rent is
chargeable to GST. (Refer Chapter 4)

49
 ii. Renting of immovable property constitutes 'supply of service'. It attracts levy of GST. Though,
renting of residential dwelling units for use as residence is exempt, that exemption is not
applicable to this case since it is being used as car parking (not for use as residence). Thus, rent
is chargeable to GST. (Refer Chapter 4)
iii. Renting of immovable property constitutes 'supply of service'. It attracts levy of GST. However,
renting of agriculture land for agricultural activities has been exempted from GST. (Refer Chapter
4)

Q33. Mr. Sumit (GST registered trader) is in the business of selling electronic goods. He closes down his
business on March 31, 2019. Value of unsold stock of electronic goods on that date is Rs. 10 lakhs. Discuss
the applicability of GST on this unsold stock.
A. In terms of Section 7(1A) read with Schedule II (para 4(c)) of CGST Act, a person ceasing to be a taxable
person (i.e., getting de-registered) is deemed to have made supply of goods lying with him as closing stock.
Mr. Sumit is registered under GST. He closes his business on March 31, 2019. At the time of transfer, he has
closing stock Rs. 10 lakhs. Mr. Sumit shall be deemed to have supplied such unsold stock immediately before
he ceases to be a taxable person.

Q34. Whether software is regarded as supply of goods or services in GST?

A. In terms of Section 7(1A) read with Schedule II of CGST Act (Para 5), development, design, programming,
customization, adaptation, upgradation, enhancement, implementation of information technology software and
temporary transfer or permitting the use or enjoyment of any intellectual property right are treated as services.
But, if a pre-developed or pre-designed software is supplied in any medium/storage (commonly bought off-the
shelf), the same is treated as a supply of goods classifiable under heading 8523.

Q35. State whether the following activities are covered within scope of supply or not:
i. Supply of services by Court for which it charges fees;
ii. Supply of services by Income Tax Appellate Tribunal for which it charges fees;
iii. Supply of services by Arbitral Tribunal for which it charges fee from business entity who is seeking
arbitration of his business dispute through it;
A.
i. It is excluded from scope of supply – Sec 7(2) read with Schedule III of CGST Act (Para 2)
ii. It is excluded from scope of supply – Sec 7(2) read with Schedule III of CGST Act (Para 2)
iii. It is not excluded from scope of supply since Arbitral Tribunal is not a tribunal which has been
established under any law (the party seeking arbitration creates it for their own personal
purposes). Services of arbitral tribunal fall within the scope of supply and attracts charge of GST.

Q36. Mr. A is owner of ABC Printing press. Discuss GST treatment of following activities carried out by Mr. A:-
i. Purchase of paper & other printing materials, printing calendars by using such paper and other
materials & supplying calendars in market. The consideration received from such supply is Rs.
10,00,000.
ii. Purchase of paper & other printing materials, printing books for Taxongo Ltd. (the content of book
belongs to Taxongo Ltd.) and supplying books after printing to Taxongo Ltd. The consideration
received from such supply is Rs. 10,00,000.
A. According to CBIC’s Circular No. 11/11/2017-GST dated 20.10.2017, GST treatment of given activities
shall be as follows:

50
 i. Purchase of paper & other printing materials, printing calendars thereon and supplying calendars
in market. The consideration received is Rs. 10,00,000. It is case of manufacture of calendars and
sale thereof. Thus, it is simple case of supply of goods.
ii. Purchase of paper & other printing materials, printing books for Taxongo Ltd. (the content of book
belongs to Taxongo Ltd) and supplying same to Taxongo Ltd. The consideration received is Rs.
10,00,000. ABC Printing press cannot be said to be have made out sale of books as they are not
owning the content of book. ABC Printing press is carrying out printing activity on paper
belonging to it. Thus, this supply is composite supply {supply of paper (goods) and supply of
printing (service)}. Printing service being principal service, the composite supply shall be treated
as ‘supply of service’ (Sec 8 of CGST Act).

Q37. Answer the following questions:-

i. S.S. Associates, a registered supplier, disposes the computers owned by the business without
consideration and it has not claimed input tax credit on such computers.
Examine whether the disposal of computers by S.S. Associates qualifies as deemed supply under
Schedule I of the CGST Act.
ii. ABC Enterprises appoints XYZ to procure certain goods from the market. XYZ identifies various
suppliers who can provide the goods as desired by ABC Enterprises, and asks a supplier – MNO
Manufacturers to send the goods and issue the invoice directly to ABC Enterprises.
You are required to determine whether XYZ can be considered as an agent of ABC Enterprises in
terms of Schedule I of the CGST Act.
A.
i. As per section 7(1)(c) read with Schedule I of the CGST Act, permanent transfer or disposal of
business assets is treated as supply even though the same is made without consideration. However,
this provision would apply only if input tax credit has been availed on such assets. Therefore, the
disposal of computers by S.S. Associates is not a supply as the input tax credit has not been availed
on the same.
ii. As per section 7(1)(c) read with Schedule I of the CGST Act, supply of goods by an agent to his
principal where the agent undertakes to receive such goods on behalf of the principal qualifies as
supply even if the same is made without consideration. Further, Circular No. 57/31/2018 GST dated
04.09.2018 clarifies that principal-agent relationship falls within the ambit of the Schedule I only where
the goods being procured by the agent on behalf of the principal are invoiced in the name of the
agent. In that case, further provision of the said goods by the agent to the principal without
consideration, would be covered in Schedule I and thus would qualify as supply.
In the given case, XYZ is only acting as the procurement agent, and has in no way involved himself in
the supply or receipt of the goods. The invoice is being issued in the name of ABC Enterprises and
not XYZ. Hence, XYZ is not an agent of ABC Enterprises for the supply of goods in terms of Schedule
I of the CGST Act.

Q38. Rahul is a salaried employee and is planning to invest in stocks. He has opened a trading account with
SMS Brokers. During the month, Rahul undertook future contracts (without a physical delivery option, but are
cash settled on the expiry of the contract date), amounting to Rs. 50,00,000. Rahul needs your advice
whether such future contracts undertaken by him amount to supply and are liable to GST.
A. For a transaction to fall within the purview of supply, it must be a supply of either goods or services or both.
The definitions of the terms “goods” and “services” specifically exclude “securities” from their purview. Further,
‘derivatives’ are included in the definition of ‘securities’. As ‘derivatives’ fall in the definition of securities, they
are neither goods nor services and hence, are not liable to GST.

51
Future contracts are in the nature of financial derivatives, the price of which is dependent on the value of
underlying stocks or index of stocks or certain approved currencies and the settlement happens normally by
way of net settlement with no actual delivery. Since future contracts are in the nature of derivatives, these
qualify as ‘securities’ and thus, are not subject to GST. In view of the above discussion, it can be inferred that
since the future contracts undertaken by Rahul are in the nature of derivatives, these qualify as ‘securities’
and do not qualify as supply and thus, are not subject to GST.

Q39. ARC Private Ltd. is engaged in the business of distribution of construction material. As an incentive,
ARC Private Ltd. pays an amount of Rs. 75,000 to its employees upon achieving a specified sales target. The
incentive is part of the salary of the employees and applicable tax is deducted at source as per relevant
income tax provisions. ARC Private Ltd. is of the view that GST is not leviable on such incentive paid to the
employees. Whether the view taken by ARC Private Ltd. is correct?
A. Yes, ARC Private Ltd.’s view is correct. In terms of section 7(2) read with Schedule III of the CGST Act,
services by an employee to employer in the course of or in relation to his employment shall not be treated as
supply under GST. Further, the amount paid as incentive by ARC Private Ltd. is not in the nature of gift, and
thus, is not covered under Schedule I of the CGST Act. In fact, in the given case, the incentive is part of the
salary and is directly linked to the sales target. Therefore, the services provided by the employees in return of
the incentive given to them shall not be treated as a “supply”. In the light of above discussion, GST is not
leviable on the incentive paid by ARC Private Ltd. to employees.

Q40. Nandeeshwar Manufacturers sends certain category of yarn for processing to the job worker. The job
worker undertakes the processing work on the yarn as per the requirement of Nandeeshwar Manufacturers.
During the process, the job worker uses his own material also. The processed yarn is sold by Nandeeshwar
Manufacturers directly from the job worker premises. Balance quantity of yarn and waste material is sent back
by the job worker to Nandeeshwar Manufacturers. The job worker is of the opinion that he is using his own
material also in the processing and hence the supply to Nandeeshwar Manufacturers is in the nature of supply
of goods as well as services. Do you agree with the opinion of job worker? (MTP- NOV 2021)
A. No, the opinion of the job worker is not fully correct. Section 7(1A) provides that when certain activities or
transactions constitute a supply in accordance with the provisions of section 7(1), they shall be treated either
as a supply of goods or supply of services as referred to in Schedule II of the CGST Act. Any processing
activity carried on any other person’s goods is treated as supply of service in terms of Schedule II. The job
worker, in addition to the goods received from the principal, can use his own goods for providing the services
of job work. These goods are not supply per se, but being used in the processing activity carried out by it.
Thus, the activity undertaken by the job worker, in the given case, squarely falls within the purview of
Schedule II and shall be considered as supply of service by the job worker to Nandeeshwar Manufacturers.

Q41. Mohandas International entered into a transaction for import of goods from a vendor located in Italy.
Due to financial issues, Mohandas International was not in a situation to clear the goods upon payment of
import duty. Mohandas International sold the goods to Radhakrishnan Export House by endorsement of
title to the goods, while the goods were in high seas. The agreement further provided that Mohandas
International shall purchase back the goods in future from Radhakrishnan Export House. Discuss the
taxability of transaction(s) involved, under the GST law. (MTP- NOV 2021)
A. As per Schedule III of the CGST Act, high seas sale transactions i.e. supply of goods by the consignee to
any other person, by endorsement of documents of title to the goods, after the goods have been dispatched
from the port of origin located outside India but before clearance for home consumption shall not be

52
considered as supply under GST. Thus, the sale of goods by Mohandas International to Radhakrishnan
Export House in high seas shall not be liable to GST.
Further, the import duty including IGST shall be payable by Radhakrishnan Export House at the time of
clearance of goods at port of import. In case the goods are sold back by Radhakrishnan Export House to
Mohandas International at a subsequent point of time, the same shall be treated as normal domestic sale
transaction and GST shall be applicable on the same subject to other conditions prescribed under GST Law.

Q42. Mr. Zombi, a supplier registered in Hyderabad (Telangana), procures goods from China and directly
supplies the same to a customer in US. With reference to the provisions of GST law, examine whether the
said activity of supply of goods by Mr. Zombi to customer in US is taxable under GST. If yes, determine the
place of supply of the same. (RTP NOV 2019)
A. Schedule III to the CGST Act specifies transactions/ activities which shall be neither treated as supply of
goods nor supply of services. One of such activity/transaction is supply of goods from a place in the non -
taxable territory to another place in the non - taxable territory without such goods entering into India.
Thus, it seeks to exclude from the tax net such transactions which involve movement of goods, caused by
a registered person, from one non - taxable territory to another non -taxable territory.
Therefore, in view of the above - mentioned provisions, the said activity is not a supply. Hence, it is not
leviable to GST since “supply” is the taxable event for chargeability of GST. Therefore, since the transaction is
not leviable to GST, the question of place of supply does not arise in the given case.

Q43. Whether the amount received as insurance claim on account of destroyed stock/capital asset is taxable
under GST? (ICAI Practical FAQ)
A. Under the GST law, every kind of movable property other than money or securities but including actionable
claims is covered within the definition of ‘goods’ under section 2(52).
All forms of supply of goods or services or both are covered within the scope of supply under section 7.
However, certain activities or transactions are treated neither as a supply of goods nor a supply of service as
mentioned in Schedule III. As per para 6 of Schedule III, actionable claims, other than lottery, betting and
gambling are treated as neither supply of goods nor supply of services. In other words, GST will not be
applicable on actionable claims other than lottery, betting and gambling. ‘Actionable claim' has been defined
to have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882).
As per section 3 of the Transfer of Property Act, ‘Actionable claim means a claim to any debt, other than a
debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to
any beneficial interest in movable property not in possession, either actual or constructive, of the claimant,
which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be
existent, accruing, conditional or contingent.’ Besides the above, in Union of India v. Sarada Mills [(1972) 2
SCC 877, 880], the Apex Court has held that, “an actionable claim would include a right to recover insurance
money or a partner's right to sue for an account of a dissolved partnership or the right to claim the benefit of a
contract not coupled with any liability”.
Hence, actionable claim includes an amount due under a policy of insurance. An insurance claim received on
account of damage of stock/ capital asset will be an actionable claim and therefore it is treated neither as a
supply of goods nor a supply of service, thereby not taxable under GST.

53
Section 7 of IGST
Section 8 of IGST
Section 9 of IGST
Section 9 of the CGST
Section 5 of IGST
Section 10 of CGST
Inter State supply
Intra State supply
Supplies in Territorial Water
Levy & Collection of CGST
Levy & Collection of IGST
Composition Scheme

Section 7 Inter-State supply (IGST Act)

7 (1) – Goods 7 (3) Services 7 (2) – Goods 7 (4) Services 7 (5)

Supply of Goods is
subject to Section
10 & Services is
subject to 12 of IGST
Act

54
Other Points: -

✓ As per section 7(2), supply of goods imported into the territory of India, till they cross the customs
frontiers of India, shall be treated as supply of goods in the course of inter-State trade or commerce,
✓ In case of import of services, keep in mind that as per section 2 (11) of the IGST Act: -
• the supplier of service is located outside India;
• the recipient of service is location in India;
• the place of supply of service is in India.

Section 8 Intra-State supply (IGST Act)

These supply of
goods or services are
not Intra-State

These supplies of
goods are not Intra-
State

Other Points: -
✓ Where a person has,
1. an establishment in India & any other establishment outside India;
(ABC Ltd., a company incorporated in Delhi, is having its branch in Dubai)
2. an establishment in a State/UT and any other establishment outside that State/UT; or
(ABC Ltd., a company incorporated in Delhi, is having branch office in Rajasthan)
3. an establishment in a State/UT and any other establishment registered within that State/UT
then such establishments shall be treated as establishments of distinct person.
(ABC Ltd., a company incorporated in Delhi, is having one of its branch office is in Greater Kailash
and other branch office in Ashok Vihar)

A person carrying on a business through a branch or an agency or a representational office in any territory
shall be treated as having an establishment in that territory.

55
Section 9 Supplies in Territorial Waters (IGST Act)
Notwithstanding anything contained in this Act-
(a) where the location of the supplier is in the territorial waters, the location of such supplier; or
(b) where the place of supply is in the territorial waters, the place of supply,
shall, for the purposes of this Act, be deemed to be in the coastal State or Union Territory where the
nearest point of the appropriate baseline is located.

Section 9 Levy & Collection of CGST

Section 9(1)
Subject to the provisions
of sub-section (2), there
shall be levied a tax called
the CGST on all intra-State
supplies of goods or
services or both, except on
the supply of alcoholic
liquor for human
consumption, on the value
determined U/s 15 and at
such rates, not exceeding
20%
Seciton 9(2)
CGST on the supply of
petroleum crude, high speed
diesel, motor spirit, natural
gas and aviation turbine fuel
shall be levied with effect
from such date as may be
notified by the Government
on the recommendations of
the Council
Section 9(3)
The Government may, on
the recommendations of
the Council, by notification,
specify categories of supply
of goods or services or
both, the tax on which shall
be paid on reverse charge
basis by the recipient of
such goods or services or
both

Section 9(4)
The Government may, on
the recommendations of
the Council, by notification,
specify a class of registered
persons who shall, in
respect of supply of
specified categories of
goods or services or both
received from an
unregistered supplier, pay
the tax on reverse charge
basis as the recipient of
such supply of goods or
services or both
Section 9(5)
The Government may, on
the recommendations of
the Council, by notification,
specify categories of
services the tax on intra-
State supplies of which shall
be paid by the electronic
commerce operator if such
services are supplied
through it, and all the
provisions of this Act shall
apply to such electronic
commerce operator as if he
is the supplier liable for
paying the tax in relation to
the supply of such services

56
Section 5 Levy & Collection of IGST (IGST Act)

Section 5(1)
Subject to the Seciton 5(2)
provisions of sub- Section 5(3)
IGST on the supply of
section (2), there shall petroleum crude, high speed The Government may, on
be levied a tax called diesel, motor spirit, natural the recommendations of
the IGST on all inter- gas and aviation turbine fuel the Council, by notification,
shall be levied with effect specify categories of supply
State supplies of goods of goods or services or both,
or services or both, from such date as may be
notified by the Government the tax on which shall be
except on the supply of on the recommendations of paid on reverse charge basis
alcoholic liquor for the Council by the recipient of such
human consumption, goods or services or both
on the value
determined U/s 15 of
CGST Act and at such
rates, not exceeding
40%

Provided that IGST on Section 5(5)

Section 5(4)
goods imported into
India shall be levied The Government may, on
the recommendations of
and collected as per the Council, by notification,
Section 3 of the Custom specify a class of registered
Tariff Act, 1975 on the persons who shall, in
value as determined respect of supply of
under the said Act at specified categories of
goods or services or both
the point when duties received from an
of customs are levied unregistered supplier, pay
on the said goods U/s the tax on reverse charge
12 of the Customs Act, basis as the recipient of
1962 such supply of goods or
services or both
The Government may, on
the recommendations of
the Council, by notification,
specify categories of
services the tax on inter-
State supplies of which shall
be paid by the electronic
commerce operator if such
services are supplied
through it, and all the
provisions of this Act shall
apply to such electronic
commerce operator as if he
is the supplier liable for
paying the tax in relation to
the supply of such services

57
 Out of
Syllabus
Categories of goods subject to Reverse Charge {U/s 9(3)}
Goods like cashew nuts [not shelled/peeled], bidi wrapper leaves, tobacco leaves, supply of lottery, silk yarn,
used vehicles, seized and confiscated goods, old and used goods, waste and scrap, raw cotton, etc. are
taxable under reverse charge.

Categories of Services subject to Reverse Charge {U/s 9(3)}

Sr. Category of supply of services Recipient of services

No.
Reverse Charge applicable under CGST / IGST
1 Goods Transport Agency (GTA) Factory, society, co-operative
If GTA charges GST in his invoice and pays 6% CGST & 6% society, taxable person, body
SGST/UTGST (12% IGST), the recipient is not liable to pay GST corporate {defined under 2(11)
under reverse charge. There is no restriction on availing ITC on of the Companies Act and
goods and services used in supplying GTA service by GTA. includes a company
If GTA is unregistered or doesn’t charge GST in invoice, recipient incorporated outside India},
is liable to pay reverse charge. partnership firm whether
registered or not under any law
Provided that nothing contained in this entry shall apply to including AOP, casual taxable
services provided by a goods transport agency, by way of person located in taxable
transport of goods in a goods carriage by road, to, - territory.
(a) a Department or Establishment of the Central Government or
State Government or Union territory; or The person who pays or is
(b) local authority; or liable to pay freight for the
(c) Governmental agencies, transportation of goods, shall
which has taken registration under the Central Goods and pay reverse charge.
Services Tax Act, 2017 only for the purpose of deducting tax Reverse Charge @ CGST
under section 51 and not for making a taxable supply of goods or 2.5%+ SGST 2.5% = IGST 5%
services.
Reverse charge not applicable:-
• Supply of services to
non-specified person
(see specified person
GTA means any person who provides service in relation to above) or unregistered
transport of goods by road and issues consignment note, by person or unregistered
whatever name called. casual taxable person
• When GTA opts to pay
Individual truck/tempo operators who do not issue any tax under forward
consignment note are not covered within the meaning of the charge
term GTA.
• When GTA services
supplied to Government
department or agencies
or local authority, which
has taken registration
only for the purpose of
deducting TDS
2 Services supplied by an individual advocate including a senior Any business entity located in
advocate or firm of advocates by way of legal services, directly the taxable territory.
or indirectly. The business entity located in
the taxable territory who is

58
 “Legal service” means any service provided in relation to advice, litigant, applicant or petitioner,
consultancy or assistance in any branch of law, in any manner as the case may be, shall be
and includes representational services before any court, tribunal treated as the person who
or authority. receives the legal services.
3 Services by an Arbitral tribunal Any business entity located in
the taxable territory.
4 Services of Sponsorship Any body corporate or
(Note that it is not the advertisement, it is sponsorship) partnership located in taxable
territory
“body corporate” or “corporation” includes a company incorporated outside India, but does not include—
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii) any other body corporate (not being a company as defined in this Act), which the Central
Government may, by notification, specify in this behalf;
5 Services supplied by the Central Government, State Government, Any business entity located in
UT or local authority to a business entity excluding: - the taxable territory.
1. Renting of immovable property
2. (i) services by the Departments of posts by way of speed post,
express parcel post, life insurance, and agency services provided
to a person other than Central, State, Union or Local authority
(ii) services in relation to an aircraft or a vessel, inside or outside
the precincts of a port or an airport
(iii) transport of goods or passengers
5A Services supplied by the Central, State, Union or local authority Any person registered under the
by way of renting of immovable property to a person registered CGST Act, 2017
under the CGST Act, 2017
“renting of immovable property” means allowing, permitting or
granting access, entry, occupation, use or any such facility,
In case of unregistered person, then
wholly or partly, in an immovable property, with or without the
CG,SG, UT or local authority have to
transfer of possession or control of the said immovable property
pay GST as forward charge
and includes letting, leasing, licensing or other similar
arrangements in respect of immovable property.
5B Services supplied by any person by way of transfer of Promoter
development rights or Floor Space Index (FSI) (including
additional FSI) for construction of a project by a promoter.
5C Long term lease of land (30 years or more) by any person against Promoter
consideration in the form of upfront amount (called as premium,
salami, cost, price, development charges or by any other name)
and/or periodic rent for construction of a project by a promoter.
• The term “apartment” shall have the same meaning as assigned to it in clause (e) under section 2 of
the Real Estate (Regulation and Development) Act, 2016.
• the term “promoter” shall have the same meaning as assigned to it in clause (zk) under section 2 of
the Real Estate (Regulation and Development) Act, 2016.
• the term “project” shall mean a Real Estate Project (REP) or a Residential Real Estate Project
(RREP);
• “the term “Real Estate Project (REP)” shall have the same meaning as assigned to it in in clause (zn)
of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016).
• The term “Residential Real Estate Project (RREP)” shall mean a REP in which the carpet area of the
commercial apartments is not more than 15 per cent. of the total carpet area of all the apartments in
the REP.
• “floor space index (FSI)” shall mean the ratio of a building’s total floor area (gross floor area) to the
size of the piece of land upon which it is built.

59
 6 Services supplied by a director of a company or a body corporate The company or a body
to the said company or the body corporate. Corporate, located in the
taxable territory
Circular No. 140/10/2020 – GST dated 10th June 2020

a. Independent directors or directors who are not an employee: - Remuneration paid to directors who
are not employees of the company, shall be subject to levy of GST in the hands of the company
under the reverse charge mechanism.
b. Directors who are also an employee (Whole Time Director/MD etc.) of the company: -
• Remuneration on which tax is deducted at source under section 192 (TDS on salary) of the
Income-tax Act, GST is not leviable as the said remuneration is paid in the course of or in
relation to an employment contract.
• Remuneration which is paid over and above salaries and on which tax is deducted at
source under section 194J (TDS on fees for professional or technical services) of the
Income-tax Act, GST is payable on such remuneration by the company under the reverse
charge mechanism.
7 Services supplied by an insurance agent to any person carrying Any person carrying on
on insurance business insurance business, located in
the taxable territory
8 Services supplied by a recovery agent to a banking company or A banking company or a FI or a
FI or NBFC NBFC, located in the taxable
territory
9 Supply of services by a music composer, photographer, artist or Music company, producer or the
the like by way of transfer or permitting the use or enjoyment of a like, located in the taxable
copyright covered under section 13(1)(a) of the Copyright Act, territory
1957 relating to original dramatic, musical or artistic works to a
music company, producer or the like.
9A Supply of services by an author by way of transfer or permitting Publisher located in the taxable
the use or enjoyment of a copyright covered under section territory.
13(1)(a) of the Copyright Act, 1957 relating to original literary
works to a publisher.
Reverse charge not applicable if:
Provided that nothing contained in this entry shall apply where, -
(i) the author has taken registration under the CGST Act, 2017, and filed a declaration, in prescribed
form, within the time limit prescribed therein, with the jurisdictional CGST or SGST commissioner,
as the case may be, that he exercises the option to pay IGST / CGST / SGST on the service
specified in column (2), under forward charge in accordance with Section 5(1) of the IGST Act, or
9(1) of CGST Act under forward charge, and to comply with all the provisions of the said Act as they
apply to a person liable for paying the tax in relation to the supply of any goods or services or both
and that he shall not withdraw the said option within a period of 1 year from the date of exercising
such option;
(ii) the author makes a declaration, as prescribed in Annexure II on the invoice issued by him in Form
GST Inv-I to the publisher.
10 Supply of Services by the members of overseeing committee to RBI
RBI
11 Supply of services by individual Direct Selling Agent (DSAs) other Banking company or NBFC
than a body corporate partnership or LLP to bank or NBFC located in the taxable territory
12 Services provided by business facilitator (BF) to a banking A banking company, located in
company the taxable territory
13 Services provided by an agent of business correspondent (BC) to A business correspondent,
business correspondent (BC) located in the taxable territory

60
 14 Security services (services provided by way of supply of security A registered person located in
personnel) provided to a registered person: the taxable territory
Provided that nothing contained in this entry shall apply to, -
(i) (a) a Department or Establishment of the Central
Government or State Government or Union territory; or
(b) local authority; or A registered person receiving security
(c) Governmental agencies; which has taken registration services from any person other than a
under the Central Goods and Services Tax Act, 2017 body corporate (like individual, firm,
only for the purpose of deducting tax under section 51 of AOP etc.) is required to pay GST on
the said Act and not for making a taxable supply of goods reverse charge basis
or services; or
(ii) a registered person paying tax under section 10
(composition scheme) of the said Act.
15 Services provided by way of renting of any motor vehicle Any body corporate located in
designed to carry passengers where the cost of fuel is included in the taxable territory.
the consideration charged from the service recipient, provided to
a body corporate.
(Supplier of services: - Any person, other than a body corporate
who supplies the service to a body corporate and does not issue
an invoice charging central tax at the rate of 6% to the service
recipient)

Sr. Supplier of Recipient of GST Rate RCM Person liable

Remarks
No. Service Service Charged Applicable to pay GST
Body Supplier of ITC
1 Any recipient 12% No
Corporate Service available
Body Supplier of Restricted
2 Any recipient 5% No
Corporate Service ITC
Body Supplier of ITC
3 12% No
Corporate Service available
Body Recipient of
4 5% Yes NA
Non-body Corporate Service
Corporate Non-body Supplier of ITC
5 12% No
Corporate Service available
Non-body Supplier of Restricted
5% No
Corporate Service ITC

16 Services of lending of securities (supplier of service-Lender) Borrower i.e. a person who

under Securities Lending Scheme, 1997 (“Scheme”) of Securities borrows the securities under the
and Exchange Board of India (“SEBI”), as amended Scheme through an approved
intermediary of SEBI.
Circular No. 119/38/2019-GST dated 11th October 2019
GST is payable on the lending fees received by lender for the lending of securities under “Securities Lending
Scheme, 1997”
• Under the Scheme, lender of securities lends to a borrower through an approved intermediary under
an agreement for a specified period with the condition that the borrower will return equivalent
securities of the same type or class at the end of the period along with the corporate benefits
accruing on the securities borrowed.
• The lenders earn lending fee for the same.
• The activity of lending of securities is not a transaction in securities as it does not involve disposal of
securities and therefore is not excluded from the definition of services.

61
 • The supply of lending of securities under the scheme is classifiable under heading 997119 and is
leviable to GST@18% under Sl. No. 15 (vii) of Notification No. 11/2017-CT (Rate).
Provision of reverse charge notification, in so far as they apply to Central & State Governments, shall also
apply to the Parliament and State Legislatures.
Reverse Charge applicable under IGST Act
17 Any service supplied by any person who is located in a non- Any person located in the
taxable territory to any person other than non-taxable online taxable territory other than non-
recipient. taxable online recipient
18 Services supplied by a person located in non-taxable territory by Importer, in relation to any
way of transportation of goods by a vessel from a place outside goods at any time between their
India up to the customs station of clearance in India importation and the time when
they are cleared for home
consumption, includes any
owner, beneficial owner or any
person holding himself out to be
the importer [Section 2(26) of
the Customs Act, 1962].
If the value of ocean freight not
available, it shall be 20% of CIF
Value.
IGST is payable by importer
under reverse charge even if
customs duty and IGST paid on
CIF value {Bahi Paper Mills Ltd.
– AAR (Uttarakhand}

Amendments in GST in real estate sector including RCM U/s 9(4)

Earlier, the effective rate of GST on real estate sector was 8%/12% with ITC. With effect from
01.04.2019, the effective rates of GST for the new projects have been brought down to a large extent.

However, the promoters/builders have been given a one-time option to continue to pay tax at the old
rates on ongoing projects (buildings where construction and actual booking both have started before
01.04.2019) which have not been completed by 31.03.2019.
Highlighted in grey,
is out of syllabus
New effective rates of GST for the new projects by promoters are as follows:

(i) New rate of 1% without ITC on construction of affordable houses (area 60 sqm in metros/ 90 sqm
in non-metros and value upto Rs. 45 lakh).
(ii) New rate of 5% without ITC shall be applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real estate project (RREP)
in which the carpet area of commercial apartments is not more than 15% of total carpet area
of all apartments.

Conditions: Above tax rates shall be available subject to following conditions:

(a) Input tax credit shall not be available.

(b) 80% of inputs and input services [other than services by way of grant of development rights, long
term lease of land (against upfront payment in the form of premium, salami, development charges

62
 etc.) or FSI (including additional FSI), electricity, high speed diesel, motor spirit, natural gas], used
in supplying the service shall be purchased from registered persons.

However, if value of inputs and input services purchased from registered supplier is less than 80%, promoter
has to pay GST on reverse charge basis, under section 9(4) of the CGST Act, at the rate of 18% on all such
inward supplies** (to the extent short of 80% of the inward supplies from registered supplier). This RCM is to
paid at the end of financial year.

Further, where Cement falling in chapter heading 2523 in the first schedule to the Customs Tariff Act, 1975 is
received from an unregistered person, the promoter shall pay tax on supply of such cement on reverse charge
basis, under section 9(4) of the CGST Act, at the applicable rate which is 28% (CGST 14% + SGST 14%) at
present {from unregistered supplier even for Rs. 1 & RCM is to be paid every month}.

GST on capital goods shall be paid by the promoter on reverse charge basis, under section 9(4) of the CGST
Act at the applicable rates {from unregistered supplier even for Rs. 1 & RCM is to be paid every month}.

[Notification No. 07/2019 CT (R) Dated 29.03.2019/ Notification No. 07/2019 IT (R) Dated 29.03.2019]

Example 1: -
Purchase of input and input services
Particulars Purchase from Value in a FY Percentage
Cement Registered person 4,000 20%
Inputs or input services Registered person 5,000 25%
Inputs or input services Unregistered person 11,000 55%
Total 20,000 100%

Since there is purchase of more than 20% from unregistered person then RCM u/s 9(4) becomes payable. In
this case it is 35%.
Value on which RCM u/s 9(4) is payable is 35% of 20,000 = 7,000 Amount payable is 18% of 7,000 = 1,260.

Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer exempt from
GST

Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer have been exempted
subject to the condition that the constructed flats are sold before issuance of completion certificate and tax is
paid on them.

Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats sold after issue of
completion certificate, but such withdrawal shall be limited to 1% of value in case of affordable houses and 5%
of value in case of other than affordable houses. This will achieve a fair degree of taxation parity between
under construction and ready to move property.

The liability to pay tax on TDR, FSI, long term lease (premium) has been shifted from land owner to builder
under the reverse charge mechanism {U/s 9 (3) prescribed services).

63
Provision related to E-Commerce Operator
Proviso to
Section 9(5) of
CGST Act/ 5(5)
of IGST Act

For e-commerce aggregators providing services which are notified under section 9(5) under CGST
Act, 2017 & section 5(5) IGST Act, 2017
Such persons are required to pay GST as if such services are supplied through it. As the e-commerce
operator himself is liable for collection and deposit of GST, there is no question of TCS U/s 52.
Services notified in section 9(5) under CGST Act & Section 5(5) IGST Act, 2017 are:-

(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor
cycle, motor cycle, omnibus or any other motor vehicle i.e. Ola, Uber.

(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or
other commercial places meant for residential or lodging purposes, except where the person
supplying such service through electronic commerce operator is liable for registration under
section 22(1) of CGST Act, 2017 {it includes homestay or guest house services};

(iii) services by way of house-keeping, such as plumbing, carpentering etc., except where the
person supplying such service through ECO is liable for registration under section 22(1) of the
said CGST Act, 2017.

It means that except above (i), if person is liable to register then he/she is responsible for payment of tax
otherwise ECO is responsible for payment of tax.

(iv) supply of restaurant service other than the services supplied by restaurant, eating joints etc. located
at specified premises. Here, specified premises would mean premises providing hotel accommodation
service having declared tariff of any unit of accommodation above Rs. 7,500 per unit per day or
equivalent.

Circular No. 167/23/2021-GST dated 17 December 2021

• As ECOs are already registered as supplier of goods or services, there is no requirement to obtain
separate registration for payment of tax on restaurant service.

64
 • ECO will be liable to issue invoice and pay GST on any restaurant service supplied through it
including by an unregistered person.
• Aggregate turnover of restaurant will include value of supply made through ECO for threshold
consideration or any other purpose.
• ECO is not required to reverse input tax credit on account of restaurant services on which it pays tax.
Further, the tax liability needs to be discharged in cash only. ECO shall pay the entire GST liability in
cash (No ITC could be utilized for payment of GST on restaurant service supplied through ECO).
• On any supply other than restaurant service, the liability to pay GST continues on the supplier and
ECO shall continue to collect tax at source on such supplies.
• ECO may also furnish the details of restaurant supplies in Table 4A (registered customers) or Table
7A(1) (unregistered customers) of GSTR-1.
• On the other hand, restaurant will report such supplies in Table 8 of GSTR-1 and Table 3.1(c) of
GSTR-3B, for the time being. The said tables deal with nil rated and exempt supply.

Section 10 Composition Scheme (CGST Act)

1. Objective of Scheme: To bring Simplicity and reduce the compliance
cost for the small tax payers
2. Eligibility: - As per Section 10(1), A registered person whose aggregate turnover in
the previous financial year did not exceed 1.5 crore. The limits for
special category states (i) Arunachal Pradesh (ii) Uttarakhand (iii) Manipur (iv)
Meghalaya (v) Mizoram (vi) Nagaland (vii) Sikkim (viii) Tripura, remains 75 lakhs.

As per second proviso of Section 10, a person who opts to pay tax as a
Manufacturers, Suppliers making supplies referred to in clause (b) of paragraph 6 of
Schedule II [e.g. Restaurant service], in case of Other Suppliers (e.g. Traders) may
supply services (other than those referred to in clause (b) of paragraph 6 of Schedule
II), of value not exceeding ten percent of turnover in a State or Union territory in the
Composition preceding financial year or five lakh rupees, whichever is higher.
Scheme for
Example 2: - Mr. A has opted for composition scheme in the financial year 2019-2020.
Supplier of His turnover in a State in FY 2018-19 is Rs. 60 lakh. In FY 2019-2020, he can supply
Goods U/s services [other than restaurant services] upto a value of not exceeding:
(a) 10% of Rs. 60 lakh, i.e. Rs. 6 lakh. or
10(1) of (b) Rs. 5 lakh,
CGST Act, whichever is higher.
Thus, he can supply services upto a value of Rs. 6 lakh in FY 2019-2020.
2017
3. Rates of Tax:
Person % of the turnover State/UT
Manufacturers, other than manufacturers CGST 0.50% + SGST/UTGST
of such goods as may be notified by the 0.50%
Government, i.e. Ice cream and other edible {Tax is payable even on exempted
ice - whether or not containing cocoa, Pan supply}
masala, Aerated Water, Tobacco and
manufactured tobacco substitutes, Fly ash
bricks or fly ash aggregate with 90 per cent.
or more fly ash content; Fly ash blocks,
Bricks of fossil meals or similar siliceous

65
 earths, Building bricks, Earthen or roofing
tiles
Suppliers making supplies referred to in CGST 2.50% + SGST/UTGST
clause (b) of paragraph 6 of Schedule II 2.50%
[e.g. Restaurant service] {Tax is payable even on exempted
supply}
In case of other suppliers (e.g. Traders) CGST 0.50% + SGST/UTGST
0.50%
(on turnover of taxable supplies of
goods and services)
Note: Along with CGST, equivalent amount of SGST/UTGST is also payable by the
taxable person.
The registered person shall be eligible to opt under sub-section (1), if:—
(a) save as provided in sub-section (1), he is not engaged in the supply of services;
(b) he is not engaged in making any supply of goods or services which are not
Eligibility to opt for leviable to tax under this Act (non-taxable supply);
composition (c) he is not engaged in making any inter-State outward supplies of goods or services;
scheme {As per (d) he is not engaged in making any supply of goods or services through an electronic
Section 10(2)} commerce operator who is required to collect tax at source under section 52;
(e) he is not a manufacturer of such goods as may be notified by the Government on
Trader the recommendations of the Council; and
can opt (f) he is neither a casual taxable person nor a non-resident taxable person.
Provided that where more than one registered persons are having the same Permanent
Account Number (issued under the Income-tax Act, 1961), the registered person shall
not be eligible to opt for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under that sub-section.
Registered persons who are ineligible U/s 10(1) and 10(2) i.e. Service providers and
manufacturers/traders providing services in excess of the aforementioned threshold
limits (value not exceeding ten percent of turnover in a State or Union territory in the
preceding financial year or five lakh rupees, whichever is higher) can opt for this
scheme.
The threshold limit of aggregate turnover for opting for the scheme is Rs. 50 Lakhs (if it
exceed Rs. 50 Lakhs then not eligible) in the preceding financial year (for all states).
Composition The tax rate is 6% (3% CGST + 3% SGST/UTGST) of the of the turnover of supplies
of goods and services in the State or Union territory.
Scheme for
Supplier of Registered person ineligible for scheme, if:-
(a) engaged in making any supply of goods or services which are not leviable to tax
Services under this Act;
U/s 10(2A) (b) engaged in making any inter-State outward supplies of goods or services;
(c) engaged in making any supply of goods or services through an electronic
of CGST commerce operator who is required to collect tax at source under section 52;
Act, 2017 (d) a manufacturer of such goods or supplier of such services as may be notified by
the Government on the recommendations of the Council; and
(e) a casual taxable person or a non-resident taxable person:
Provided that where more than one registered persons are having the same Permanent
Account Number (issued under the Income-tax Act, 1961), the registered person shall
not be eligible to opt for the scheme under sub-section (1) unless all such registered
persons opt to pay tax under this sub-section.

• As per Section 10(3), the option availed of by a registered person under sub-
Other conditions
section (1) or sub-section (2A), as the case may be, shall lapse with effect from

66
 the day on which his aggregate turnover during a financial year exceeds the
limit specified U/s 10 (1) or U/s 10 2A), as the case may be;
• As per Section 10 (4), a taxable person to whom the provisions of Section 10(1)
or as the case may be Section 10(2A) apply, shall not collect any tax from the
recipient on supplies made by him nor shall he be entitled to any credit of input
tax.
Person despite As per Section 10(5), if the proper officer has reasons to believe that a taxable person
not eligible, has paid tax U/s 10(1) or U/s 10(2A), as the case may be, despite not being eligible,
opted for such person shall, in addition to any tax that may be payable by him under any other
composition provisions of this Act, be liable to a penalty and the provisions of Section 73 or Section
74 shall, mutatis mutandis, apply for determination of tax and penalty.
scheme
Tax Tax
Rate of Rate of
Composition scheme the Composition scheme the
U/s 10 (1) turnover U/s 10 (2A) turnover
in a in a
State/UT State/UT
Let Compare Manufacturer 1% For those suppliers who are
both the Restaurant/Caterers* 5% ineligible for composition
Others (Traders) 1% (on scheme U/s 10(1) i.e.
Composition
taxable Service providers other than
Schemes supply) restaurant/ caterers or
*other service providers are traders/ manufacturers who
not eligible for composition are providing services 6%
scheme U/s 10(1) except for exceeding 10% of the
services allowed to be turnover in the state in
provided up to the threshold preceding FY or Rs.
limits as above 5,00,000 whichever is
higher

Aggregate Turnover shall include the value of supplies made by such person from 1st
day of April of a financial year upto the date when he becomes liable for registration
Explanation for under this Act, but shall not include the value of exempt supply of services provided by
way of extending deposits, loans or advances in so far as the consideration is
calculating
represented by way of interest or discount.
Aggregate
Turnover in a State/UT shall not include the value of following supplies, namely:-
Turnover & i. Supplies from the first day of April of a financial year upto the date when such
Turnover in a person becomes liable for registration under this Act; and
State/UT ii. Exempt supply of services provided by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or
discount.
Aggregate Turnover and Turnover in a State/UT shall not include the interest/discount
earned on the exempted service of advancing deposits/loans.
Aggregate Turnover shall be determined for the previous financial year and current
Special Point financial year as well.
with respect to Aggregate Turnover for previous financial year is for determining eligibility of opting for
Aggregate the scheme in the current financial year.
Turnover & Aggregate Turnover for current financial year is for determining up to which date can a
Turnover in a person pay tax under composition scheme.
State/UT Turnover in the State/UT is only relevant for determining the amount of tax which has to
be paid by the composition taxpayer. Also, this is important to determine the amount up
to which services can be rendered by a person opting for composition scheme U/s 10
(1).

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 Example 3: - Mr. A is not a registered person during Financial Year 2019-20. From 1st
April 2020, new financial year commences. Upto September 2020, he achieves the
aggregate turnover of Rs. 20 Lakhs and is liable for registration under GST Laws w.e.f.
1st October 2020. From October 2020 to December 2020, he made outward supply of
Rs. 30 Lakhs. And, from January 2021 to March 2021, he made outward supply of Rs.
15 lakh.
His turnover of Rs 50. Lakh for recognising his benefit U/s 10 (2A) will be counted from
1st April 2020. However, tax under this scheme shall be payable only for the supplies
made during October 2020 to December 2020 (i.e. on Rs. 30 lakhs).
As the limit of Rs. 50 Lakhs under this scheme exhausted till 31st December 2020 (i.e.
Rs. 20 Lakhs before registration and Rs. 30 Lakhs after registration), hence, from 1st
January 2021 onwards, tax shall be payable under normal provisions of GST as
applicable for regular dealers.
1. Option to pay composite tax along with application for registration –
Intimation for composition scheme [Rule 3 (2)]: - Any person who applies for
registration may give an option to pay tax under composition scheme in
Part B of Form GST REG – 01, which shall be considered as an intimation
to pay tax under this scheme.
Intimation for Effective Date: -From the date of Registration as per Rule 4 of CGST Rules, 2017
Composition 2. Filing of intimation before the beginning of financial year [Rule 3(3)]: -
Levy (Rule 3 & Registered person shall electronically file an intimation in Form GST
4) CMP – 02. Duly signed or verified through electronic verification code, on the
common portal, prior to commencement of the FY.
He shall furnish the statement in prescribed form within a period of 60 days
from the commencement of the relevant FY.
Effective Date: -From the beginning of FY as per Rule 4 of CGST Rules, 2017
3. One intimation applicable for all places in case of same PAN [Rule 3 (5)]
1. The person opting for the scheme must neither be a casual taxable person nor a non-
resident taxable person.
2. The goods held in stock by him have not been purchased from an unregistered
supplier and where purchased, he pays the tax under section 9(4).
3. He shall pay tax U/s 9(3)/(9(4) on inward supply of goods or services or both.
Conditions and 4. He shall mention the words “composition taxable person, not eligible to collect tax on
restrictions for supplies” at the top of the bill of supply issued by him.
composition levy 5. Mandatory display of the words “Composition Taxable Person” on every notice and
(Rule 5) signboard displayed at a prominent place.
6. Not to be engaged in manufacturer of specified goods during the preceding FY

The registered person paying tax under section 10 may not file a fresh intimation every
year and he may continue to pay tax under the said section subject to the provisions of
the Act and these rules.
1. Validity of Scheme: As long as the prescribed conditions are met, the option exercised
by a Registered Person to pay tax U/s 10 shall remain valid.
2. Duties of the Person when Scheme becomes invalid or mandatory cessation of
composition levy on violation of conditions:
(a) Liable to pay tax under normal scheme
Validity of
(b) Shall issue tax invoice for every taxable supply
Composition
(c) within 7 days of occurrence of such event, shall file an intimation for withdrawal in
levy (Rule 6) Form GST CMP – 04
Example 4: - Aggregate turnover of a composition taxpayer U/s 10(2A) exceeds Rs. 50
Lakhs on 20/02/2021. He shall issue a tax invoice for each supply from thereon and also
file a CMP-04 within 7 days i.e. 27/02/2021 to intimate the department that he has opted
out of the scheme.

68
 3. The registered person who intends to withdraw from the composition scheme shall,
before the date of such withdrawal, file an application in Form GST CMP-04.
4. Show Cause Notice shall be given by the Proper officer if he has reasons to believes
that the registered person was not eligible to pay tax U/s 10 or has contravened the
provisions of the Act or Rules. Response to this notice should be furnished by taxable
person within 15 days.
5. Acceptance/Refusal by the Proper Officer: Upon receipt of reply to the show cause
notice from the registered person, the Proper Officer shall issue an order within 30
days of receipt of such reply, either accepting the reply, or denying the option to pay
tax u/s 10.
6. Details of Stocks to be furnished by: Person who has furnished an intimation, or filed
an application for withdrawal, or order of withdrawal of option has been passed by the
proper officer shall file a statement containing details of stock within 30 days, from the
date from which the option is withdrawn or from the date of order passed. He shall be
entitled to avail input tax credit in respect of the stock of inputs and inputs contained in
semi-finished or finished goods held in stock by him and on capital goods held by him
on the date of withdrawal.
7. Withdrawal applies to all units under same PAN.
➢ Composition taxable person can import goods or services.
Other Points
➢ Composition taxable person is not entitled to export goods.
It is clarified that in a case where the taxpayer has sought withdrawal from the composition
scheme, the effective date shall be the date indicated by him in his intimation/application
filed in FORM GST CMP-04 but such date may not be prior to the commencement of the
financial year in which such intimation/application for withdrawal is being filed. If at any
stage it is found that he has contravened any of the provisions of the CGST Act or the
CGST Rules, action may be initiated for recovery of tax, interest and penalty.
In case of denial of option by the tax authorities, the effective date of such denial shall be
Circular No. from a date, including any retrospective date as may be determined by tax authorities, but
77/51/2018 shall not be prior to the date of contravention of the provisions of the CGST Act or the
Dated CGST Rules. In such cases, as provided under sub-section (5) of section 10 of the CGST
31.12.2018 Act, the proceedings would have to be initiated under the provisions of section 73 or
section 74 of the CGST Act for determination of tax, interest and penalty for the period
starting from the date of contravention of provisions till the date of issue of order in FORM
GST CMP-07. It is also clarified that the registered person shall be liable to pay tax under
section 9 of the CGST Act from the date of issue of the order in FORM GST CMP-07.
Provisions of section 18(1)(c) of the CGST Act shall apply for claiming credit on inputs
held in stock, inputs contained in semi-finished or finished goods held in stock and on
capital goods on the date immediately preceding the date of issue of the order.

69
 Question & Answer
Q1. XYZ Ltd. is a manufacturing concern in Mumbai. In FY 18-19 total value of supplies including inward
supplies taxed under reverse charge basis are Rs. 1,55,00,000, please see below break up?
Particulars Amount
Intra State Supplies 60,00,000
Intra State Supplies made which are subject to 0% CGST 60,00,000
Intra State Supplies which are wholly exempt 30,00,000
Value of inward supplies which is payable under RCM 5,00,000
Explain whether XYZ Ltd. is eligible to opt for composition scheme U/s 10(1) in FY 19-20?
A. As per Section 2(6) of the CGST Act, 2017, “aggregate turnover” doesn’t include value of inward supplies
on which reverse charge is applicable so aggregate turnover is computed as under: -
Particulars Amount
Intra State Supplies 60,00,000
Intra State Supplies made which are subject to 0% CGST 60,00,000
Intra State Supplies which are wholly exempt 30,00,000
Value of inward supplies which is payable under RCM NIL
Total 1,50,00,000
Since, aggregate turnover doesn’t exceed Rs. 1,50,00,000 during the FY 18-19, so XYZ Ltd. is entitled for
composition scheme U/s 10(1).

Q2. XYZ Ltd. is a manufacturing concern in Mumbai. It opted for composition U/s 10(1) in FY 18-19. Total
value of supplies including inward supplies taxed under reverse charge basis are Rs. 90,00,000, please see
below break up?
Particulars Amount
Intra State Supplies @ 5% 40,00,000
Intra State Supplies @ 12% 10,00,000
Intra State Supplies made which are subject to 0% CGST 20,00,000
Intra State Supplies which are wholly exempt 10,00,000
Value of inward supplies which is payable under RCM @ 5% 10,00,000
Compute composition tax liability and total tax liability?
A.
Particulars Amount
Intra State Supplies @ 5% 40,00,000
Intra State Supplies @ 12% 10,00,000
Intra State Supplies made which are subject to 0% CGST 20,00,000
Intra State Supplies which are wholly exempt 10,00,000
Value of inward supplies which is payable under RCM @ 5% NIL
Aggregate Turnover 80,00,000
Rate of Tax @ 1% (CGST+SGST) 80,000
XYZ Ltd. has to pay tax under reverse charge section 9(3) of CGST Act, 2017 Rs. 50,000 (10,00,000*5%).
Total Tax Liability is Rs. 80,000+Rs. 50,000 = Rs. 1,30,000

Q3. XYZ Ltd. had opted for payment of tax under composition scheme U/s 10(1) during 2018-19. Its turnover
during 18-19 was as follows: -
(a) Supply of manufactured goods Rs. 20 Lacs
(b) Supply of traded goods Rs. 10 Lacs

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(c) Supply of service Rs. 10 Lacs
(d) Export of goods Rs. 15 Lacs
On all these supplies SGST @ 6% & CGST rate is 6%. Calculate the tax liability.
A. Composition Scheme is not available if a taxable person is exporting goods. Hence, he is liable to pay tax on
Rs. 40 Lacs (20+10+10) as follows – SGST @ 6% = Rs. 2,40,000 and CGST @ 6% = Rs. 2,40,000.
He can make export of goods without payment of tax (student will understand this in Chapter 14).

Q4. Please discuss provision related to alcoholic liquor for human consumption & for industrial consumptions.
A. The constitutional amendment put alcoholic liquor for human consumption out of the purview of GST i.e. this
product will continue to fall under the ambit of State Excise Duty. It should be noted that alcoholic liquor for
industrial consumption and non-alcoholic beverages are covered within the gamut of GST.

Q5. What happens if a taxable person who has opted to pay taxes under the composition scheme crosses the
threshold limit during the year?
A. In such case, from the day the taxable person crosses the threshold, the permission granted earlier is deemed
to stand withdrawn, and he shall be liable to pay taxes under the regular scheme i.e. section 9, from such day.

Q6. A hotel provided accommodation in Himachal Pradesh, through an electronic commerce operator –
Makemyyatra.com. The hotel is not liable to get registered as per the provisions of Section 22(1) of the CGST
Act. Who is the person liable to pay GST in this case? Will your answer be different if the Electronic
Commerce operator Makemyyatra.com does not have a physical presence in India?
A. As per Section 9(5) of the CGST Act, 2017, person liable to pay GST in this case is the Electronic Commerce
Operator (ECO) i.e. Makemyyatra.com. All the provisions of the GST Law shall apply to such ECO as if he is
the supplier liable for paying the tax in relation to the supply of such services. If Makemyyatra.com does not
have a physical presence in India, person liable to pay tax is the person representing Makemyyatra.com.

Q7. Who is responsible to pay taxes?

A. The persons responsible for payment of taxes are as under –
1. Supplier: The person effecting taxable supplies is liable to pay taxes.
2. Recipient – Reverse Charge: Section 9(3) of the CGST Act, 2017 inter alia provides that, the
Government may, on the recommendations of the council, by notification specify categories of supply
of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of
such goods or services or both.
In terms of Section 9(4), specified registered recipient for inward supply of specified categories of goods
or services or both is liable to pay tax under reverse charge in the event supplier is not registered.
3. E-Commerce Operator: U/s 9(5) of CGST Act, 2017, categories of services have been notified by the
Government on the recommendation of the Council, the tax on which is paid by the electronic commerce
operator as if such services are supplied through it.

Q8. ABC Ltd., a manufacturing concern is affecting intra-State taxable supply and inter-State supply. The
company wants to opt for composition scheme U/s 10(1). Please advise ABC Ltd. whether they can opt for
composition scheme U/s 10(1) or not?
A. As per provisions of Section 10 of CGST Act, 2017, a manufacturer can opt for composition scheme U/s
10(1) if he is not engaged in making any inter-State outward supplies of goods. In this case, since ABC Ltd. has
affected interstate taxable supply of goods, hence it cannot opt for composition scheme.

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Q9. What are the consequences, if a taxable person violates the conditions prescribed for composition scheme?
A. Following are the consequences for non-compliance with the conditions specified for composition scheme:
a. Shall be liable to pay additional taxes at the rates applicable to regular taxable person;
b. Shall be liable to pay penalty; and
c. The amount of tax and penalty shall be recovered in terms of Section 73 or 74 of the CGST Act, 2017.

Q10. ABC Ltd. a trading concern in Rajasthan has opted for composition scheme U/s 10(1) furnishes you with
the following information for Financial Year 2019-20. It required you to determine its tax liability. The details
are: -
Particulars Amount
Intra State Supplies of Goods ‘A’ (Tax Rate @ 5%) 10,00,000
Intra State Supplies of Goods ‘B’ (Tax Rate @ 12%) 35,00,000
Intra State Supplies which are wholly exempt 20,00,000
Intra State Supplies of Services ‘A’ (Tax Rate @ 18%) 10,00,000
Value of inward supplies on which tax payable under RCM (Tax Rate 18%) 10,00,000
A.
Particulars Amount
Intra State Supplies of Goods ‘A’ (Tax Rate @ 5%) 10,00,000
Intra State Supplies of Goods ‘B’ (Tax Rate @ 12%) 35,00,000
Intra State Supplies which are wholly exempt (No tax for composition trader) NIL
Intra State Supplies of Services ‘A’ (Tax Rate @ 18%) 10,00,000
Aggregate Turnover 55,00,000
CGST @ 0.5% & SGST @ 0.5% = 1% [A] 55,000
Tax payable as reverse Charge (Rs. 10,00,000*18%) [B] 1,80,000
Total Tax Liability [A+B] 2,35,000
Note: Previous year figure are not given so it is assumed that ABC Ltd. is eligible for composition scheme.

Q11. Comment on chargeability of following transaction: -

i. ABC Ltd. availed service of XYZ Ltd. (Goods Transport Agency) for transportation of goods by road
from Pune to Mumbai.
ii. ABC Ltd. paid Rs. 1,00,000 towards legal services provided by partnership advocate firm AZB.
iii. ABC Ltd. paid Rs. 1,00,000 to independent director.
iv. Government has provided Business support services to ABC Ltd. for Rs. 1,00,000.
v. ABC Ltd. paid Rs. 1,00,000 towards sponsorship of exhibition. If Mr. A has paid Rs. 1,00,000 towards
sponsorship of exhibition then whether your comment will differ.
vi. Government has given commercial property on monthly rent for Rs. 1,00,000.
vii. ABC Insurance company pay Rs. 1,00,000 commission to Mr. A whose turnover is lesser than threshold
limit for registration.
viii. ABC Ltd. has availed Manpower services from XYZ Ltd. Will your answer differ if service provider is Mr.
A.
ix. Works contract services provided by ABC Ltd. to XYZ Ltd.
x. Security services by Mr. A to ABC Ltd (registered in GST).
xi. Insurance company selling insurance policies through an ECO and paying commission to ECO.
A.
i. In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9(3) since it is liable to pay freight
for transportation of goods so ABC Ltd. shall be treated as recipient of service. If GTA has paid GST
under forward charge @ 12% then it is not subject to reverse charge.
ii. In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9(3). Services provided by an
individual advocate including a senior advocate or firm of advocates by way of legal services, directly

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 or indirectly, are subject to reverse charge except where legal services provided to business entity
whose aggregate turnover is upto Rs. 20 Lacs are exempt, vide Entry No. 45 Notification No. 12/2017-
CT (Rate) and Entry no. 47 of Notification No. 9/2017-IT (Rate).
iii. In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9(3). Services supplied by a
director of a company or a body corporate to the said company or the body corporate, are subject to
reverse charge.
iv. In this case GST shall be paid by ABC Ltd. under reverse charge U/s 9(3). Services supplied by the
Central Government, State Government, Union Territory or local authority to a business entity, are
subject to reverse charge.
v. In this case sponsorship is received by ABC Ltd. so they are subject to reverse charge U/s 9(3). If it is
provided to Mr. A then GST will be payable by supplier of service. Service provided by way of
sponsorship to anybody corporate or partnership firm are subject to reverse charge.
vi. It is subject to reverse charge U/s 9(3).
vii. In this case ABC Insurance company will be liable to pay GST under reverse charge basis U/s 9(3). It
cannot claim exemption since it is recipient of service.
viii. XYZ Ltd. is liable to pay GST. Even if it is provided by Mr. A, treatment remain same i.e. service provider
Mr. A, is liable to pay GST.
ix. ABC Ltd. is liable to pay GST as service provider.
x. ABC Ltd. is liable to pay GST as a reverse charge.
xi. ‘ECO’ shall not be termed as ‘insurance agent’ unless such ‘ECO’ is licensed under Section 42 of
Insurance Act. Unless ‘ECO’ can be termed as ‘insurance agent’, RCM shall not be applicable.

Q12. Whether a Restaurant is supplying liquor/alcohol is eligible for Composition Scheme U/s 10(1)?
A. A Restaurant is supplying liquor/alcohol is not eligible for Composition Scheme because according to the
provisions of the Act, composition scheme cannot be availed on those goods and services on which GST is not
levied and liquor/alcohol are out of the scope of GST. Person has no choice to go to Composition Scheme;
rather he has an only window of regular scheme which is mandatory if he falls under the criteria of aggregate
turnover.

Q13. Mr. A, a retailer who keeps on inventories, presents the following expected information for the year –
Purchase of goods: Rs. 60 Lacs (GST @ 5%)
Sales (at fixed selling price inclusive of all taxes): Rs. 72 Lacs (GST @ 5%)
Discuss whether he should opt for composition scheme U/s 10 (1) if composite tax is 1% of turnover.
Expenses of keeping detailed statutory records required under the GST Laws will be Rs. 1,44,000 p.a., which
shall get reduced to Rs. 60,000 if composition scheme is opted for. Other expenses are Rs. 3,60,000 p.a.
A: The cost to the ultimate consumer under two schemes is as under –

Normal GST Composition

Scheme Scheme*
Cost of goods sold (*No credit under compositions scheme, 60,00,000 63,00,000
hence, cost of goods sold will be higher)
Add: Costs of Maintaining records 1,44,000 60,000
Add Normal Expenses 3,60,000 3,60,000
Total Costs 65,04,000 67,20,000
Sales (inclusive of taxes) 72,00,000 72,00,000
Less Tax (GST = 72,00,000* 5/105); Composition Tax = 3,42,857 72,000
(72,00,000*1%)
Sales (Net of Taxes) 68,57,143 71,28,000

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 Profit 3,53,143 4,08,000
Since profit under composition scheme is higher so dealer should opt for composition scheme.

Q14. Will a taxable person be eligible to opt for composition scheme only for 1 out of 3 registrations?
A. No. Composition scheme would become applicable for all the registrations which are separately held by the
person with same PAN.

Q15. Can composition scheme be availed if the taxable person has inter-State inward supplies?
A. Yes. Composition scheme is applicable subject to the condition that the taxable person does not engage in
making inter-state outward supplies, while there is no restriction on making any inter-State inward supplies.

Q16. How to compute ‘aggregate turnover’ to determine eligibility for composition scheme?
A. The methodology to compute aggregate turnover is given in Section 2(6). However, since composition
scheme is applicable only to suppliers making intra-state supplies, ‘aggregate turnover’ means ‘Value of all
taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge
basis), exempt supplies (except interest income or discount as discussed), exports of goods or services or both
or inter-state supplies of a person having the same PAN (i.e., across India) excluding CGST, IGST, SGST,
UGST and cess.

Q17. Can a person paying tax under composition scheme make supplies to SEZ?
A. No. Supplies to SEZ from domestic tariff area (DTA) will be treated as inter-State supply. A person paying
tax under composition scheme cannot make inter-State outward supply. Thus, for making supplies to an SEZ
unit, a person needs to take registration as a regular taxpayer. The supplies to SEZ will be zero rated and the
supplier will be entitled to make supplies without payment of tax or if he pays tax, he will be entitled to refund of
tax so paid.

Q18. Mr. A is a whole-time director of ABC Ltd. Salary is Rs. 5,00,000 per month. Besides he gets fringe benefits
of Rs. 1,00,000 according to employment contract. Find out GST liability if any.
A. Mr. A being whole time director is an employee of company. The remuneration received by him (including
fringe benefit) is in the course of employment contract. Supply of such services is out of scope of supply in view
of provisions laid down in Sec 7(2) of CGST Act read with Schedule III of CGST Act. Thus, GST is not applicable
to the transaction.

Q19. Mr. A has written a book which is published by ABC Ltd. of Mumbai. You are required to find the following:
(a) who is liable to pay GST? (b) Rework, if publisher is located in Paris, then who is liable to pay GST?
A. (a) ABC Ltd. of Mumbai being recipient of service is liable to pay GST under RCM. RCM not applicable in
case Mr. A, has taken registration and filed a declaration in prescribed form, that he exercises the option to pay
GST under forward charge.
(b) RCM shall not be applicable in this case as recipient is not located in taxable territory. Thus, Mr. A shall be
liable to pay GST. However, such supply will qualify as ‘export of service’ provided payment received in
convertible foreign currency or in INR wherever permitted by RBI. Such supply of service shall be zero-rated
(as per provisions of Sec 16 of IGST Act, 2017). In that event, Mr. A shall be entitled to supply such service
without payment of IGST.

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Q20. A tourist from USA visits India and purchases a handicraft wooden item in Mumbai. How it is going to be
taxed under GST?
A. In terms of proviso to section 8(1), supplies made to a foreign tourist shall not be treated as intra-state supply
even when location of the supplier and the place of supply of goods are in the same State or same Union
territory.
In terms of sec 7(5)(c) of IGST Act, 2017, where supply of goods or services or both is in the taxable territory,
not being an intra-State supply and not covered elsewhere in this section, shall be treated to be a supply of
goods or services or both in the course of inter-State trade or commerce.
In this case, even though the place of supply and location of supplier are in the same State, it will be treated as
inter-State transaction and will be liable to IGST.

Q21. What happens if the receiver of goods and/or services is required to pay tax under Reverse Charge but is
not a registered dealer?
A. All taxpayers required to pay tax under reverse charge have to register for GST and the threshold of Rs 20
Lakhs is not applicable to them.

Q22. Is Input Tax Credit allowed under Reverse Charge?

A. Tax paid on reverse charge basis will be available for input tax credit if such goods and/or services are used,
or will be used, for business. The recipient (i.e., who pays reverse tax) can avail input tax credit.

Q23. AB & Co. is a firm of advocates (partners are A and B), having equal profit sharing ratio. Find out the GST
liability
a) Legal professional services provided to X, an advocate of Bombay High Court (gross receipts of X is
always more than Rs. 50,00,000 per annum): Rs. 8,00,000
b) Legal professional services provided to B & Co. (a firm of 10 advocates) : Rs. 32,00,000.
c) Legal professional services provided to C (an Employee) (this service is provided to C in a personal
legal matter) : Rs. 6,00,000.
d) Legal professional services provided to D Ltd., Delhi based company (turnover of D Ltd. of the preceding
financial year is Rs. 6,00,000) : Rs. 11,00,000.
e) Legal professional services provided to E Ltd., Delhi based company (turnover of E Ltd. of the preceding
financial year is Rs. 50,00,000) : Rs. 5,00,000.
Above figures are exclusive of GST. Please analyze each case and give your answer mentioning forward charge
or reverse charge. {Do this question after completing Chapter 4}
A.
a) Services provided to X, shall be exempt as provided to individual advocate via entry no. 45.
b) Services provided to B & Co., shall be exempt via entry no. 45
c) Services provided to C, shall be exempt since provided to non-business entity
d) Services provided to D Ltd., shall be exempt as provided to business entity having turnover not
exceeding Rs 20,00,000
e) This will be subject to reverse charge & E Ltd. has to pay reverse charge @ 18% i.e. Rs. 90,000.

Q24. Would GST be payable on goods not intended to be sold, taken out for participation in overseas exhibitions
and trade fairs and brought back into India as these goods are meant for exhibition only ?
A. GST is not payable in such cases. Exporters will need exhibition participation letter and no foreign exchange
involved letter from the concerned bank for the purpose of exchange control requirements. At the time of re-
import, identity of goods imported with export goods needs to be established to seek exemption from import

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duty in accordance with Customs provisions. IGST will be exempted at the time of re-import in view of
exemptions granted under Customs.

Q25. Whether IGST on import of goods would be levied under IGST Act or under Customs Act?
A. As per Section 7(2) of IGST Act, import of goods is Inter-State Supply. Thus, IGST will be levied on import
of goods also. However as per Section 5:
✓ IGST on goods imported into India shall be levied and collected in accordance with the provisions of
section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act
✓ Value shall be ‘Value determined as per Sec 14 of Customs Act, 1962 (please refer Valuation chapter
in Custom Book)

Q26. Exploration site is at 150 nautical miles from base line. Some minerals explored (not petroleum etc.) and
sent to refinery in Maharashtra, the nearest State. Whether this will attract IGST or CGST and SGST?
A. Exploration site is location of supplier. Location of site in 150 NM is beyond territorial waters but still within
Indian territory (as for purposes of GST law, definition of India covers area upto exclusive economic zone). Such
site shall be treated as located in ‘other territory’ which is also ‘a union territory’ as defined under Sec 2(114) of
CGST Act. Exploration Site is supplying goods to refinery in Maharashtra. Thus, place of supply of goods is
falling into Maharashtra State.
Since location of supplier is union territory and place of supply is Maharashtra, it is inter-state supply in terms
of Sec 7(1) of IGST Act. Thus, aforesaid supply shall attract charge of IGST under section 5 of IGST Act.

Q27. Whether CGST & SGST/UTGST is applicable on import of goods or service or both?
A. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both is shall be treated to be a
supply in the course of inter-State trade or commerce. Accordingly, tax under the provisions of IGST Act, 2017
(i.e. IGST) shall apply on import of goods or services or both.
• Import of Goods: IGST leviable U/s 5 of IGST Act. However, it is collected in the manner specified under
Customs Tariff Act, 1975. Valuation of such transaction is also as per provisions of Customs Tariff Act.
• Import of Services: IGST leviable U/s 5 of IGST Act. However, it is collected as per provisions of GST
law (i.e. as per time of supply of such transaction). Valuation of such transaction is also as per provisions
of GST law.

Q28. Will withdrawal intimation for composition scheme in any one place be applicable to all places of business?
A. Yes. Any intimation or application for withdrawal in respect of any place of business in any State or Union
territory, shall be deemed to be an intimation in respect of all other places of business registered on the same
Permanent Account Number.

Q29. ABC Associates a recovery agent taken on board by XYZ Bank, Mumbai. The following service supplied
by ABC Associates in the month of January 2018:
i. Fee of Rs 10,00,000 for supply of services in relation to recovery of dues from the defaulting
Borrowers.
ii. Supply of services with regard to demand for recovery or taking possession of the security from
defaulting Borrowers, for which separate fee charged from the bank Rs. 5,00,000.
Answer the following:
(a) Is it supply of service?
(b) If so, who is liable to pay GST?
(c) What is the GST liability if tax rate is 18%?

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A. (a) Yes. It is taxable supply of service.
(b) XYZ Bank being recipient of service is liable to pay GST under RCM.
(c) GST liability = Rs. 2,70,000 [(Rs. 10,00,000 + 5,00,000) x 18%]

Q30. Salim Khan a renowned writer and author of novels transferred the copyright of his one published novel
to Yashraj Publishers for a consideration. Examine the tax implications as per GST Act?
A. As per section 9(3) of CGST Act read with relevant notifications, services supplied by an author by way of
transfer or permitting the use or enjoyment of copyright covered under sec. 13(1)(a) of the Copyright Act, 1957
relating to original literary works to a publisher, reverse charge shall be applicable. Thus, in the given case the
liability to pay GST shall be upon Yashraj Publishers as it is the recipient of service. RCM not applicable in case
author has taken registration and filed a declaration in prescribed form, that he exercises the option to pay GST
under forward charge.

Q31. Mr. A is a senior advocate in Calcutta High Court. During October 2018, he provides legal service to ABC
associates (a firm of advocates in Mumbai) for a fee of Rs. 5,00,000. Turnover of ABC associates for preceding
financial year is Rs. 36 lakh.
A. Legal services provided by senior advocate to a business entity is exempt if aggregate turnover in previous
year of such business entity is upto Rs. 20 lakhs. In aforementioned case, the recipient advocate firm is a
business entity with aggregate turnover exceeding Rs. 20 lakhs. Thus, services to such advocate firm is not
exempt. GST shall be payable in given situation.
However, such service are subject to reverse charge where client of advocate firm shall be deemed to be the
recipient of such service (he being the actual litigant/applicant/ petitioner) and hence, shall be liable to pay GST
on services of senior advocate.

Q32. Panini Private Limited agrees to sponsor a sports event organized by Pink City Club in Jaipur. Panini
Private Limited has paid an amount of Rs. 50,00,000 for such sponsorship of the sports event. Consequently,
said event was named after the brand name of Panini Private Limited. Examine who is the person liable to
pay tax in the given case. (ICAI SM)
A. Notification no 13/2017 CT (R) dated 28.06.2017 as amended (hereinafter referred to as reverse charge
notification), provides that sponsorship services provided by any person to a body corporate or partnership
firm located in the taxable territory, shall be liable to GST under reverse charge in the hands of recipient.
In the present case, Pink City Club is the supplier of sponsorship services which is receiving the consideration
in the form of sponsorship fee of Rs. 5,00,000 from Panini Private Limited, against the provision of sponsorship
service. Since the recipient of sponsorship services- Panini Private Limited is a body corporate, the tax on said
services is payable by the recipient - Panini Private Limited, under reverse charge.

Q33. Arpan Singhania is a director in Narayan Limited. The company paid him the sitting fee amounting to Rs.
25,000, for the month of January. Further, salary was paid to Arpan Singhania amounting to Rs. 1.5 lakh for
the month of January on which TDS was also deducted as per applicable provisions under Income-tax law.
Tapasya & Associates, in which Arpan Singhania is a partner, supplied certain professional services to
Narayan Limited in the month of January for an amount of Rs. 2 lakh. Discuss the person liable to pay tax in
each of the supplies involved in the given case. (ICAI SM)
A. Sitting fee paid to director – As per reverse charge notification, tax on services supplied by a director of a
company/ body corporate to the said company/ body corporate, located in the taxable territory, is payable under
reverse charge. Hence, in the present case, the sitting fee amounting to Rs. 25,000, payable to Arpan Singhania

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by Narayan Limited, is liable to GST under reverse charge and thus, recipient of service - Narayan Limited – is
liable to pay GST on the same.
Salary paid to director - As per Circular No.140/10/2020 GST dated 10.06.2020, the part of director’s
remuneration which is declared as salary in the books of a company and subjected to TDS under section 192
of the Income-tax Act, are not taxable being consideration for services by an employee to the employer in the
course of or in relation to his employment in terms of Schedule III. Therefore, in the given case, the salary
received by Arpan Singhania of Rs. 1.5 lakh is not liable to GST.
Services provided by Tapasya & Associates – Tapasya & Associates have rendered certain professional
services to Narayan Limited. The fact that Arpan Singhania is a partner in Tapasya & Associates and a director
in Narayan Limited does not have any impact on the taxability of the professional services supplied by Tapasya
& Associates to Narayan Limited. The professional services provided by Tapasya & Associates to Narayan
Limited are liable to GST under forward charge and thus, supplier - Tapasya & Associates – is liable to pay GST
on the same.

Q34. Suvidha Technologies is in the business of development of e-commerce platforms for various customers.
Chennai Creations obtained the ownership rights of an e-commerce platform developed by Suvidha
Technologies by paying a specified amount against ownership rights of said portal. Chennai Creations also
entered into an annual maintenance contract with Suvidha Technologies for technical maintenance of the
said portal. Chennai Creations supplies its own goods and services through the said portal to ultimate
customers. Examine who is the e-commerce operator in the given case as per the provisions of the GST law.
(ICAI SM)
A. As per section 2(44), electronic commerce means the supply of goods or services or both, including digital
products over digital or electronic network. Further, as per section 2(45), electronic commerce operator
means any person who owns, operates or manages digital or electronic facility or platform for electronic
commerce.
In the given transaction, the e-commerce platform is developed by Suvidha Technologies. However, the
ownership of the electronic platform is sold by Suvidha Technologies to Chennai Creations. Thus, Chennai
Creations is the owner of the e-commerce platform and is also operating/managing the said platform for
supply of its own goods and services. In view of the definition of e-commerce operator, it is Chennai Creations
which owns, operates or manages digital or electronic facility or platform for electronic commerce. Suvidha
Technologies is merely providing the annual management services for the electronic platform, but the
ownership rights lie with Chennai Creations. Thus, Suvidha Technologies cannot be termed as electronic
commerce operator in the given case and Chennai Creations is the e-commerce operator.

Q35. Examine whether the suppliers are eligible for composition levy under section 10 in the following
independent cases in the beginning of the current financial year.
(a) Technology Enterprises, registered in Jalandhar, Punjab, is engaged in manufacturing computer systems.
Its aggregate turnover in the preceding financial year is Rs. 125 lakh. Technology Enterprises supplies the
computer systems manufactured by it within the State of Punjab only. With a view to expand its business
operations, it will also start providing the repairing services of computer systems in the current financial year.
(b) M/s. Siddharth & Sons, registered in Delhi, owns a restaurant ‘Tasty Foods’ with a turnover of Rs. 112 lakh
in the preceding financial year. In view of the growing customer demand, it will also start intra-State trading of
juices in Delhi.
(c) Sitaram Associates, registered in Sikkim, is engaged in running a food chain ‘Veg Kitchen’ in the State. It
has a turnover of Rs. 73 lakh in the preceding financial year. In the current financial year, it decides to shut
down the food chain owing to huge losses being incurred in the said business. Instead, it will start providing
intra-State architect services.

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(d) Deepti Services Ltd., registered in Uttarakhand, is exclusively providing hair styling services. It has turnover
of Rs. 34 lakh in the preceding financial year. Will your answer be different, if Deepti Services Ltd. also start
supplying beauty products alongwith providing hair styling services in the current financial year?
(RTP NOV 2020)
A. As per section 10(1), the following registered persons, whose aggregate turnover in the preceding financial
year did not exceed Rs. 1.5 crore, may opt to pay tax under composition levy:
(i) Manufacturer,
(ii) Persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II (restaurant
services), and
(iii) Any other supplier eligible for composition levy.
The composition scheme under sub-sections (1) and (2) of section 10 can essentially be availed in respect of
goods and only one service namely, restaurant service. However, the scheme permits supply of other marginal
services for a specified value along with the supply of goods and restaurant service, as the case may be. Such
marginal services can be supplied for a value up to 10% of the turnover in the preceding year or Rs. 5 lakh,
whichever is higher. Further, the registered person should not be engaged in making any inter-State outward
supplies of goods.
Furthermore, newly inserted section 10(2A) provides an option to a registered person, who is not eligible to pay
tax under section 10(1) and 10(2), of paying tax @ 6% (CGST-3% and SGST/UTGST-3%) provided his
aggregate turnover in the preceding financial year is upto Rs. 50 lakh. Said person can pay tax @ 6% of the
turnover in State or turnover in Union territory up to an aggregate turnover of Rs. 50 lakh, subject to specified
conditions. One of such conditions is that the registered person should not be engaged in making any inter-
State outward supplies of goods or services. In view of the above-mentioned provisions, the answer to the given
independent cases is as under:-
(a) The turnover limit for being eligible for composition scheme under under sub-sections (1) and (2) of section
10 for Jalandhar (Punjab) is Rs. 1.5 crore in the preceding financial year. Thus, Technology Enterprises can opt
for said composition scheme as its aggregate turnover is less than Rs. 1.5 crore in the preceding financial year
and it is making intra-State supplies. Further, since the registered person opting for composition scheme can
also supply services (other than restaurant services) for a value up to 10% of the turnover in the preceding year
or Rs. 5 lakh, whichever is higher. Thus, Technology Enterprises can supply repair services up to a value of Rs.
12.5 lakh [10% of Rs.125 lakh] in the current financial year.
(b) In the given case:-
(i) the turnover in the preceding year is less than the eligible turnover limit under composition scheme under
sub-sections (1) and (2) of section 10 for Delhi, i.e. Rs. 1.5 crore.
(ii) the supplier is engaged in providing restaurant service which is an eligible supply under said composition
scheme.
(iii) the supplier wants to engage in trading of goods which is also an eligible supply under said composition
scheme. Thus, M/s. Siddharth & Sons is eligible for composition scheme under sub-sections (1) and (2) of
section 10.
(c) The turnover limit for being eligible for composition scheme under sub-sections (1) and (2) of section 10 for
Sikkim is Rs. 75 lakh in the preceding financial year. However, a registered person who is exclusively engaged
in supplying services other than restaurant services are not eligible for said composition scheme. Thus, Sitaram
Associates cannot opt for composition scheme under sub-sections (1) and (2) of section 10. However, the
benefit of composition scheme under section 10(2A) is available in case of a registered person who is not
eligible to pay tax under sub-sections (1) and (2) of section 10 provided its aggregate turnover in the preceding
financial year does not exceed Rs. 50 lakh. Thus, in view of the above-mentioned provisions, Sitaram

79
Associates cannot avail the benefit of composition scheme under section 10(2A) also as its aggregate turnover
in the preceding financial year is more than Rs. 50 lakh.
(d) A service provider can opt for the composition scheme under sub-sections (1) and (2) of section 10 only if
he is engaged in supply of restaurant services. Said scheme permits supply of marginal services for a specified
value, but only when the same are supplied along with goods and/ or restaurant service. Since Deepti Services
Ltd.is exclusively engaged in supply of services other than restaurant services, it is not eligible for composition
scheme sub-sections (1) and (2) of section 10 even though its turnover in the preceding year is less than Rs.
75 lakh, the eligible turnover limit for Uttarakhand. However, since Deepti Services Ltd. is not eligible to opt for
composition scheme under sub-sections (1) and (2) of section 10 and its aggregate turnover in the preceding
financial year does not exceed Rs. 50 lakh, Deepti Services Ltd.is entitled to avail benefit of composition scheme
under section 10(2A) in the current financial year. Further, the answer will remain the same even if Deepti
Services Ltd. also start supplying beauty products alongwith providing hair styling services in the current
financial year since it fulfils the conditions laid down for availing the benefit of composition scheme under section
10(2A) of the CGST Act. It can avail the benefit of composition scheme under section 10(2A) till the time its
aggregate turnover in the current year doesn’t exceed Rs. 50 lakh.

Q36. Mr. Prem is running a restaurant in New Delhi. In the preceding financial year, it has an aggregate
turnover of Rs. 120 lakh from the restaurant services. In the current financial year, apart from restaurant
service, he also wants to provide food delivery services to other small restaurants. He estimated the
turnover of such services is upto Rs. 5 lakh.
Mr. Prem wishes to opt for composition scheme under sub-sections (1) and (2) of section 10 in the current
financial year. You are required to advise him for same. (ICAI SM)
A. As per section 10(1) read with Notification No.14/2019 CT dated 07.03.2019, a registered person, whose
aggregate turnover in the preceding financial year did not exceed Rs. 1.5 crore, may opt to pay, in lieu of the
tax payable by him, an amount calculated at the specified rates if, inter alia, he is not engaged in the supply of
services other than restaurant services. However, the scheme permits supply of other marginal services for a
specified value along with the supply of goods and restaurant service, as the case may be. Such marginal
services can be supplied for a value up to 10% of the turnover in the preceding year or Rs. 5 lakh, whichever
is higher. In the present case, since the aggregate turnover of Mr. Prem was Rs. 120 lakh in preceding
financial year (i.e. it did not exceed Rs. 1.5 crore), he is eligible for composition scheme in the current financial
year. Further, in the current financial year, he can also supply services other than restaurant services for a
value upto Rs. 12 lakh (10% of Rs. 120 lakh) or Rs. 5 lakh, whichever is higher. Thus, till the time his turnover
from food delivery services does not exceed Rs. 12 lakh, he is eligible for the scheme.

Q37. M/s Heeralal and Sons, registered in Karnataka, has opted to avail the benefit of composition scheme
under sub-sections (1) and (2) of section 10. It has furnished the following details for the quarter ended on
30th June.
S. No. Items Rs.
(i) Taxable turnover of goods within the State 15,00,000
(ii) Exempted turnover of goods within the State 17,00,000
Total Turnover 32,00,000
Using the above information, calculate tax to be paid by the firm for quarter ended on 30th June in following
independent situations:
(i) M/s Heeralal and Sons is a manufacturer
(ii) M/s Heeralal and Sons is a trader (MTP- NOV 2021)

A.

80
(i) If M/s Heeralal and Sons is a manufacturer: Tax is to be paid @ 1% (½% CGST+ ½% SGST) of the
turnover in the State as under: 1% of Rs. 32,00,000 [Rs. 15,00,000 + 17,00,000]
= Rs. 32,000 [CGST = Rs. 16,000 and SGST = Rs. 16,000]

(ii) If M/s Heeralal and Sons is a trader: Tax is to be paid @ 1% (½% CGST + ½%SGST) of the turnover of
taxable supplies of goods and services in the State as under: = 1% of Rs. 15,00,000 = Rs. 15,000 [CGST =
Rs. 7,500 and SGST = Rs. 7,500]

Q38. Harishchandra of New Delhi makes a request for a motor cab to "Super ride" for travelling from New
Delhi to Gurgaon (Haryana). After Harishchandra pays the cab charges using his debit card, he gets details of
the driver - Jorawar Singh and the cab's registration number. "Super ride" is a mobile application owned and
managed by Perry India Ltd. located in India. The application "Super ride" facilitates a potential customer to
connect with the persons providing cab service under the brand name of "Super ride". Perry India Ltd. claims
that cab service is provided by Jorawar Singh and hence, he is liable to pay GST. With reference to the
provisions of IGST Act, 2017, determine who is the person liable to pay GST in this case? (MTP- NOV 2021)
A. Section 5(5) of the IGST Act, 2017 provides that tax on inter-State supplies of specified services notified by
Government shall be paid by the electronic commerce operator (ECO) located in taxable territory if such
services are supplied through it. Services by way of transportation of passengers by a motor cab supplied
through ECO is one of the notified service. Electronic commerce operator (ECO) means any person who
owns, operates or manages digital or electronic facility or platform for supply of goods or services or both
[Section 2(45)]. Since Perry India Ltd. owns and manages a mobile application in the name of “Super ride”, to
facilitate supply of passenger transportation service in motor cabs over a digital network, it is an ECO. Thus,
Perry India Ltd., an ECO located in India, is liable to pay GST in the given case.

Q39. Mr. ABC is engaged in selling footwear and providing catering services within the State under the same
PAN. Can he opt for composition scheme if the total turnover from both businesses does not exceed Rs. 50
lakhs?
A. Section 10 (1) provides an option to a registered person to opt for composition scheme. In order to be
eligible to opt for composition scheme. He has to satisfy the conditions prescribed under section 10(2) read
with rule 5. Caterers are eligible to opt for composition scheme as they squarely fall within para 6(b) of the
Schedule II. On the other hand, selling footwear amounts to sale of goods. Further all supplies are intra-State
supplies. Both are eligible for composition as per section 10(1). Since the combined turnover is within the
threshold limit, Mr. ABC may opt for the composition scheme.

81
Sec. 11 of CGST/Sec. 6 of IGST Power to Grant Exemption from Tax
Notification No. 12/2017 – CT- List of Services Exempt Under CGST & IGST Memorize
Rate/Notification No. 9/2017-IT- this
Rate

Section 11 Power to Grant Exemption from Tax (Section 6 of IGST Act)

Explanation
inserted will
have effect
from first
date of
notification
i.e.
retrospectiv
ely

82
List of services exempt from CGST (Notification No. 12/2017 – CT
(R) Dated 28-06-2017 / Notification No. 9/2017-IT (R) Dated 28-06-
2017 {Sr. No. is of CGST Notification} Memorize
this

Sr.
No. Description of Services Remarks
1 Services by an entity registered under section 12AA or 12AB of the Income-tax If such entity provides any
Act, 1961 by way of charitable activities. other services other than
charitable activity then it
1. Any services provided by entity registered under Section 12AA or 12AB of is subject to GST i.e.
the Income Tax Act, 1961 by way of advancement of religion, spirituality or renting of commercial
yoga are exempt. property owned by such
2. Any fee or consideration charged in any other form from the participants for entity/trust.
participating in a religious, Yoga or meditation programme or camp meant The term ‘charitable
for advancement of religion, spirituality or yoga shall be exempt. activities’ mean activities
3. Any Residential programmes or camps where the fee charged includes cost relating to 1) Public health
of lodging and boarding shall also be exempt. However, if charitable or e.g. care or counselling of
religious trusts merely or primarily provide accommodation or serve food terminally ill, people
and drinks against consideration in any form including donation, such afflicted with HIV or AIDS
activities will be taxable. etc., public awareness of
4. Similarly, activities such as holding of fitness camps or classes such as preventive health etc. 2)
those in aerobics, dance, music etc. will be taxable. Advancement of Religion,
{Circular No. 66/40/2018 Dated 26th October 2018} spirituality or yoga 3)
Advancement of
Hostel accommodation services provided by trusts to students do not fall within Educational
the ambit of charitable activities. However, accommodation service in hostels Programmes/Skill,
including such services provided by trusts having value of supply below Rs. relating to
1,000 per day is exempt under Sr. No. 14 of the Notification. abandoned/orphaned
{Circular No. 32/06/2018-GST Dated 12.02.2018] children, prisoners,
physically or mentally
abused and traumatized
persons, persons over
the age of 65 years
residing in a rural area
4) Preservation of
environment including
watershed, forests &
wildlife.
Circular No. 116/35/2019-GST dated 11th October 2019

Individual donors provide financial help or any other support in the form of donation or gift to institutions such as
religious institutions, charitable organisations, schools, hospitals, orphanages, old age homes etc. The recipient
institutions place a name plate or similar such acknowledgement in their premises to express the gratitude.
Displaying the name of the Donors (Individuals) by the recipient of the Donation is not a supply, subject to the following
conditions:
✓ The gift or donation is made to a charitable organization; The clarification is
specific for the
✓ The payment has the character of gift or donation;
Individual donors
✓ The purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement.

Examples: -
(i) “Good wishes from Mr. Rajesh” printed underneath a digital blackboard donated by Mr. Rajesh to a charitable
The clarification is
Yoga institution.
specific for the
“Donated by Smt. Malati Devi in the memory of her father” written on the door or floor of a room or any Individual
part of adonors
temple complex which was constructed from such donation.

83
Sr.
No.
Description of Services Remarks
2 Services by way of transfer of a going concern, as a whole or an
independent part thereof.
3 Pure services (excluding works contract service or other composite supplies
involving supply of any goods) provided to the Central Government, State
Government or Union territory or local authority or a Governmental authority or
a Government entity by way of any activity in relation to any function entrusted
to a panchayat under article 243G of the Constitution or in relation to any
function entrusted to a municipality under article 243W of the Constitution.
3A Composite supply of goods and services in which the value of supply of goods
constitutes not more than 25 per cent of the value of the said composite supply Important term
provided to the Central Government, State Government or Union territory or is
local authority or a Governmental authority or a Government Entity by way of Municipality/
any activity in relation to any function entrusted to a panchayat under article Panchayat
243G of the Constitution or in relation to any function entrusted to a municipality
under article 243W of the Constitution.

Circular No. 153/09/2021-GST dated 17th June, 2021

Entry No. 3A would apply to composite supply of milling of wheat and

fortification thereof by miller, or of paddy into rice, provided that value of goods
supplied in such composite supply (goods used for fortification, packing material
etc) does not exceed 25% of the value of composite supply.
4 Services by governmental authority by way of any activity in relation to any
function entrusted to a municipality under article 243 W of the Constitution.
5 Services by governmental authority by way of any activity in relation to any
function entrusted to a panchayat under article 243 G of the Constitution.
6 Services by the Central Government, State Government, Union territory or Let take example of post
local authority excluding the following services— office services which are
(a) services by the Department of Posts by way of speed post, subject to GST: -
express parcel post, life insurance, and agency services provided to a 1. Rural postal life
person other than the Central Government, State Government, Union insurance services
territory; 2. Speed post & Express
(b) services in relation to an aircraft or a vessel, inside or outside the precincts post parcel
of a port or an airport; 3. Collection of telephone
(c) transport of goods or passengers; or and electricity bill
(d) any service, other than services covered under entries (a) to (c) above, 4. Distribution of mutual
provided to business entities. funds, bonds and
passport application etc.
Services provided by State Government by way of general insurance (managed
by government) to employees of the State government/Police personnel,
employees of Electricity Department or students of colleges/private schools etc.
wherein the total premium for insurance policy is paid by employees, students
etc. are exempt.
[Circular No. 16/16/2017 GST Dated 15.11.2017]
7 Services provided by the Central Government, State Government, Union
territory or local authority to a business entity with an aggregate turnover of up
to such amount in the preceding financial year as makes it eligible for exemption
from registration under the Central Goods and Services Tax Act, 2017.
Explanation.- For the purposes of this entry, it is hereby clarified that the
provisions of this entry shall not be applicable to- Co-relate with reverse
(a) services,- charge specified U/s 9 (3)
(i) by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central
Government, State Government, Union territory;
(ii) in relation to an aircraft or a vessel, inside or outside the precincts of a

84
Sr.
No.
Description of Services Remarks
port or an airport;
(iii) of transport of goods or passengers; and
(b) services by way of renting of immovable property.
8 Services provided by the Central Government, State Government, Union
territory or local authority to another Central Government, State Government,
Union territory or local authority:
Provided that nothing contained in this entry shall apply to services-
(i) by the Department of Posts by way of speed post, express parcel
post, life insurance, and agency services provided to a person other than
the Central Government, State Government, Union territory;
(ii) in relation to an aircraft or a vessel, inside or outside the precincts of a
port or an airport;
(iii) of transport of goods or passengers.
9 Services provided by Central Government, State Government, Union
territory or a local authority where the consideration for such services
does not exceed five thousand rupees:
Provided that nothing contained in this entry shall apply to-
(i) services by the Department of Posts by way of speed post, express parcel
post, life insurance, and agency services provided to a person other than the
Central Government, State Government, Union territory;
(ii) services in relation to an aircraft or a vessel, inside or outside the precincts
of a port or an airport;
(iii) transport of goods or passengers:

Provided further that in case where continuous supply of service, as defined in

sub-section (33) of section 2 of the Central Goods and Services Tax Act, 2017,
is provided by the Central Government, State Government, Union territory or a
local authority, the exemption shall apply only where the consideration
charged for such service does not exceed five thousand rupees in a financial
year.
9A Services provided by and to FIFA and its subsidiaries directly or indirectly Director (Sports), Ministry
related to any of the events under FIFA U 17 World Cup 2017 to be hosted in of Youth Affairs and
India are exempt. Sports certifies that the
services are
directly/indirectly related
to any of the events under
FIFA U-17 world cup
2017.
9AA Services provided by and to Fédération Internationale de Football Association Provided that Director
(FIFA) and its subsidiaries directly or indirectly related to any of the events (Sports), Ministry of Youth
under FIFA U-17 Women's World Cup 2020 to be hosted in India, whenever Affairs and Sports
rescheduled. certifies that the services
are directly or indirectly
related to any of the
events under FIFA U-17
Women's World Cup
2020.
9AB Services provided by and to Asian Football Confederation (AFC) and its Provided that Director
subsidiaries directly or indirectly related to any of the events under AFC (Sports), Ministry of Youth
Women's Asia Cup 2022 to be hosted in India. Affairs and Sports
certifies that the services
are directly or indirectly
related to any of the
events under AFC
Women's Asia Cup 2022.
9B Supply of services associated with transit cargo to Nepal and Bhutan
(landlocked countries) are exempt

85
Sr.
No.
Description of Services Remarks
9C Supply of service by Government Entity to Central Government, State
Government, Union Territory, local authority or any person specified by Central
Government, State Government, Union Territory or local authority against
consideration received from Central Government, State Government, Union
Territory or local authority, in the form of grants is exempt
9D Services by an old age home run by Central Government, State Government or
by an entity registered under section 12AA or 12AB of the Income-tax Act, 1961
to its residents (aged 60 years or more) against consideration upto twenty five
thousand rupees per month per member, provided that the consideration
charged is inclusive of charges for boarding, lodging and maintenance.
10 Services provided by way of pure labour contracts of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance,
renovation, or alteration of a civil structure or any other original works
pertaining to the beneficiary-led individual house construction or enhancement
under the Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana.
10A Services supplied by electricity distribution utilities by way of construction,
erection, commissioning, or installation of infrastructure for extending electricity
distribution network upto the tube well of the farmer or agriculturalist for
agricultural use.
11 Services by way of pure labour contracts of construction, erection,
commissioning, or installation of original works pertaining to a single residential
unit otherwise than as a part of a residential complex.
11A Service provided by Fair Price Shops to Central Government, State
Government or Union territory by way of sale of food grains, kerosene, sugar,
edible oil, etc. under Public Distribution System against consideration in the
form of commission or margin.
12 Services by way of renting of residential dwelling for use as residence. Giving for entertainment,
hotel, religious body or
Grant of tenancy rights in a residential dwelling for use as residence dwelling any other commercial
against tenancy premium or periodic rent or both is exempt activity etc. is subject to
[Circular No.44/18/2018 CGST Dated 02.05.2018] GST.
13 Services by a person by way of-
(a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for general public, owned
or managed by an entity registered as a charitable or religious trust under
section12AA or 12 AB of the Income-tax Act, 1961 (hereinafter referred to
as the Income-tax Act) or a trust or an institution registered under sub
clause (v) of clause (23C) of section 10 of the Income-tax Act or a body
or an authority covered under clause (23BBA) of section 10 of the
said Income-tax Act:

Provided that nothing contained in entry (b) of this exemption shall apply to,-
(i) renting of rooms where charges are one thousand rupees or more per day;
(ii) renting of premises, community halls, kalyanmandapam or
open area, and the like where charges are Rs. 10,000 or more per day;
(iii) renting of shops or other spaces for business or commerce where charges
are ten thousand rupees or more per month.
14 Services by a hotel, inn, guest house, club or campsite, by whatever name
called, for residential or lodging purposes, having value of supply of a unit
of accommodation below or equal to one thousand rupees per day or
equivalent.
15 Transport of passengers, with or without accompanied belongings, by –
(a) air, embarking from or terminating in an airport located in the state of
Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, or Tripura or at Bagdogra located in West Bengal;
(b) non-airconditioned contract carriage other than radio taxi, for transportation

86
Sr.
No.
Description of Services Remarks
of passengers, excluding tourism, conducted tour, charter or hire; or
(c) stage carriage other than air- conditioned stage carriage.
Provided that nothing contained in items (b) and (c) above shall apply to
services supplied through an electronic commerce operator, and notified under
sub-section (5) of Section 9 of the Central Goods and Services Tax Act, 2017.
Elephant/camel joy rides are not classified as transportation services and will
attract GST @ 18% with threshold exemption being available to small service
providers. (Circular No. 32/06/2018-GST dt. 12-2-2018)
16 Services provided to the Central Government, by way of transport of
passengers with or without accompanied belongings, by air, embarking from or
terminating at a regional connectivity scheme airport, against consideration in
the form of viability gap funding:
Provided that nothing contained in this entry shall apply on or after the
expiry of a period of three years from the date of commencement of operations
of the regional connectivity scheme airport as notified by the Ministry of Civil
Aviation.
17 Service of transportation of passengers, with or without accompanied AC carriage is taxable
belongings, by—
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;
(b) metro, monorail or tramway;
(c) inland waterways;
(d) public transport, other than predominantly for tourism purpose, in a
vessel between places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).
Provided that nothing contained in item (e) above shall apply to services
supplied through an electronic commerce operator, and notified under sub-
section (5) of Section 9 of the Central Goods and Services Tax Act, 2017.
18 Services by way of transportation of goods-
(a) by road except the services of—
(i) a goods transportation agency; (ii) a courier agency;
(b) by inland waterways.
19 Services by way of transportation of goods by an aircraft from a place outside
India upto the customs station of clearance in India.
19A Services by way of transportation of goods by an aircraft from customs station Nothing contained in this
of clearance in India to a place outside India. serial number shall apply
after the 30th day of
September, 2021 2022
19B Services by way of transportation of goods by a vessel from customs station of Nothing contained in this
clearance in India to a place outside India. serial number shall apply
after the 30th day of
September, 2021 2022
19C Satellite launch services supplied by Indian Space Research Organisation,
Antrix Corporation Limited or New Space India Limited.
20 Services by way of transportation by rail or a vessel from one place in India to All the transportation are
another of the following goods – not exempt i.e. transport
(a) relief materials meant for victims of natural or man-made disasters, of postal mails and bags,
calamities, accidents or mishap; household items,
(b) defence or military equipments; petroleum product,
(c) newspaper or magazines registered with the Registrar of Newspapers; alcoholic beverages etc.
(d) railway equipments or materials;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.
21 Services provided by a goods transport agency, by way of transport in a Entry No. 20 & 21 are
goods carriage of – identical.

87
Sr.
No.
Description of Services Remarks
(a) agricultural produce;
(b) goods, where consideration charged for the transportation of goods on a In case of Entry No. 21 –
consignment transported in a single carriage does not exceed one GTA, (b) & (c) are extra
thousand five hundred rupees; exempt.
(c) goods, where consideration charged for transportation of all such goods
for a single consignee does not exceed rupees seven hundred and fifty; In case of Entry No. 20 –
(d) milk, salt and food grain including flour, pulses and rice; Rail or Vessel, (d) is extra
(e) organic manure; exempt.
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters,
calamities, accidents or mishap; or
(h) defence or military equipments.
21A Services provided by a goods transport agency to an unregistered person, Co-relate with reverse
including an unregistered casual taxable person, other than the following charge specified U/s 9(3).
recipients, namely:- Key word is “unregistered
(a) any factory registered under or governed by the Factories Act, 1948; or person & unregistered
(b) any Society registered under the Societies Registration Act, 1860 or under casual taxable person”.
any other law for the time being in force in any part of India; or
(c) any Cooperative Society established by or under any law for the time being
in force; or
(d) any body corporate established, by or under any law for the time being in
force; or
(e) any partnership firm whether registered or not under any law including
association of persons;
(f) any casual taxable person registered under the CGST Act or the IGST Act or
the SGST Act or the UTGST Act.
21B Services provided by a goods transport agency, by way of transport of goods in Co-relate with Reverse
a goods carriage, to, - Charge list
(a) a Department or Establishment of the Central Government or State
Government or Union territory; or
(b) local authority; or
(c) Governmental agencies,
which has taken registration under the Central Goods and Services Tax Act,
2017 only for the purpose of deducting tax under Section 51 and not for making
a taxable supply of goods or services.
22 Services by way of giving on hire –
(a) to a state transport undertaking, a motor vehicle meant to carry more
than twelve passengers; or
(aa) to a local authority, an Electrically operated vehicle meant to carry more
than twelve passengers; or
(b) to a goods transport agency, a means of transportation of goods.
(c) motor vehicle for transport of students, faculty and staff, to a person
providing services of transportation of students, faculty and staff to an
educational institution providing services by way of pre-school education and
education upto higher secondary school or equivalent.

According to Circular No. 164/20/2021-GST, as recommended by the GST

Council, it is clarified that the expression “giving on hire” in Sl. No. 22 of the
Notification No. 12/2017-CT (Rate) includes renting of vehicles. Accordingly,
services where the said vehicles are rented or given on hire to State Transport
Undertakings or Local Authorities are eligible for the said exemption irrespective
of whether such vehicles are run on routes, timings as decided by the State
Transport Undertakings or Local Authorities and under effective control of State
Transport Undertakings or Local Authorities which determines the rules of
operation or plying of vehicles .
23 Service by way of access to a road or a bridge on payment of toll charges. Commission earned on
toll receipt is taxable

88
Sr.
No.
Description of Services Remarks
CBIC had clarified via Circular No. 164/20/2021-GST that overloading charges
at toll plazas would get the same treatment as given to toll charges.
23A Service by way of access to a road or a bridge on payment of annuity is exempt.

CBIC has issued Circular No. 150/06/2021-GST dated 17th June, 2021.
Certain representations have been received requesting for a clarification
regarding applicability of GST on annuities paid for construction of road where
certain portion of consideration is received upfront while remaining payment is
made through deferred payment (annuity) spread over years.
CBIC has clarified that Entry 23A of notification No. 12/2017-CT(R) does not
exempt GST on the annuity (deferred payments) paid for construction of roads.
24 Services by way of loading, unloading, packing, storage or warehousing of rice.
24A Services by way of warehousing of minor forest produce.
24B Services by way of storage or warehousing of cereals, pulses, fruits, nuts and
vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as
cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu
leaves, coffee and tea.
25 Transmission or distribution of electricity by an electricity transmission or
distribution utility.
The services provided by DISCOMS against recovery of charges from
consumers are taxable in GST e.g. application fee for releasing connection of
electricity, rental charges against metering equipment, testing fee for
meters/transformers, capacitors etc., labour charges from customers for shifting
of meters or shifting of service lines, charges for duplicate bill etc.
[Circular No. 34/8/2018-GST Dated 01.03.2018]
26 Services by the Reserve Bank of India.
27 Services by way of— Since going by “Service”
(a) extending deposits, loans or advances in so far as the consideration is definition sky is limit.
represented by way of interest or discount (other than interest involved in Government has
credit card services); exempted interest in this
(b) inter se sale or purchase of foreign currency amongst banks or authorised clause.
dealers of foreign exchange or amongst banks and such dealers. Any processing fees or
service fees will be
The service provided by CG/SG to any business entity by way of guaranteeing subject to GST
the loans taken by them from financial institutions against consideration in any
form including Guarantee Commission is taxable.
[Circular No. 34/8/2018-GST Dated 01.03.2018]
The services provided by Asian Development Bank (ADB) and International
Finance Corporation (IFC) are exempt from GST. The exemption will be
available only to the services provided by ADB and IFC and not to any entity
appointed by or working on behalf of ADB or IFC.
[Circular No. 83/02/2019- GST Dated 01.03.2019]
27A Services provided by a banking company to Basic Saving Bank Deposit (BSBD)
account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY)
28 Services of life insurance business provided by way of annuity under the
National Pension System regulated by the Pension Fund Regulatory and
Development Authority of India under the Pension Fund Regulatory and
Development Authority Act, 2013 (23 of2013).
29 Services of life insurance business provided or agreed to be provided by
the Army, Naval and Air Force Group Insurance Funds to members of the Army,
Navy and Air Force, respectively, under the Group Insurance Schemes of the
Central Government.
29A Services of life insurance provided or agreed to be provided by the Naval Group
Insurance Fund to the personnel of Coast Guard under the Group Insurance
Schemes of the Central Government.
29B Services of life insurance provided or agreed to be provided by the Central
Armed Police Forces (under Ministry of Home Affairs) Group Insurance Funds

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Description of Services Remarks
to their members under the Group Insurance Schemes of the concerned Central
Armed Police Force.
30 Services by the Employees’ State Insurance Corporation to persons
governed under the Employees’ State Insurance Act, 1948.
31 Services provided by the Employees Provident Fund Organisation to the
persons governed under the Employees Provident Funds and the
Miscellaneous Provisions Act, 1952.
31A Services by Coal Mines Provident Fund Organisation to persons governed by
the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948.
31B Services by National Pension System (NPS) Trust to its members against
consideration in the form of administrative fee.
32 Services provided by the Insurance Regulatory and Development Authority
of India to insurers under the Insurance Regulatory and Development Authority
of India Act, 1999.
33 Services provided by the Securities and Exchange Board of India set up under
the Securities and Exchange Board of India Act, 1992 by way of protecting the
interests of investors in securities and to promote the development of, and to
regulate, the securities market.
34 Services by an acquiring bank, to any person in relation to settlement of an
amount upto two thousand rupees in a single transaction transacted through
credit card, debit card, charge card or other payment card service.
Explanation.— For the purposes of this entry, “acquiring bank” means any
banking company, financial institution including non-banking financial company
or any other person, who makes the payment to any person who accepts such
card.
34A Services supplied by Central Government, State Government, Union territory to
their undertakings or Public Sector Undertakings(PSUs) by way of guaranteeing
the loans taken by such undertakings or PSUs from the banking companies and
financial institutions.
35 Services of general insurance business provided under following schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swaranjayanti Gram Swarozgar Yojana (earlier
known as Integrated Rural Development Programme);
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;
(h) Weather Based Crop Insurance Scheme or the Modified National
Agricultural Insurance Scheme, approved by the Government of India and
implemented by the Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);
(k) Pilot Scheme on Seed Crop Insurance;
(l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha Bima Yojna;
(q) Niramaya Health Insurance Scheme implemented by the Trust constituted
under the provisions of the National Trust for the Welfare of Persons with
Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act,
1999.
(r) Bangla Shasya Bima
36 Services of life insurance business provided under following schemes- The Key is Social welfare.
(a) Janashree Bima Yojana;

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Description of Services Remarks
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product as approved by the Insurance Regulatory and
Development Authority, having maximum amount of cover of two lakhs
rupees;
(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti Bima Yojana;
(f) Pradhan Mantri Jan Dhan Yogana;
(g) Pradhan Mantri Vaya Vandan Yojana.
36A Services by way of reinsurance of the insurance schemes specified in serial
number 35 or 36 or 40.
37 Services by way of collection of contribution under the Atal Pension
Yojana.
38 Services by way of collection of contribution under any pension
scheme of the State Governments.
39 Services by the following persons in respective capacities – “Business facilitator or
(a) business facilitator or a business correspondent to a banking company with Business Correspondent”
respect to accounts in its rural area branch; means an intermediary
(b) any person as an intermediary to a business facilitator or a business appointed under the
correspondent with respect to services mentioned in entry (a); or business facilitator model
(c) business facilitator or a business correspondent to an insurance company in or the business
a rural area. correspondent model by a
company or an insurance
As per CBIC Circular No. 86/05/2019- GST, Dated 1st January, 2019, the company under the
services provided by a BF/BC to a banking company in their respective guidelines issued by the
individual capacities should fall under the Heading 9971 (Financial and related RBI. Rural area is
services) and such services should be with respect to accounts in a branch normally village which is
located in the rural area of the banking company. not notified as urban area
The criteria for classification of branch of a bank as located in rural area and the and also doesn’t come
services which can be provided by BF/BC, is governed by the RBI guidelines. under any municipality.
Therefore, classification adopted by the bank in terms of RBI guidelines in this
regard should be accepted.
39A Services by an intermediary of financial services located in a multi services SEZ
with International Financial Services Centre (IFSC) status to a customer located
outside India for international financial services in currencies other than Indian
rupees (INR).
Explanation.- For the purposes of this entry, the intermediary of financial
services in IFSC is a person,-
(i) who is permitted or recognised as such by the Government of India or any
Regulator appointed for regulation of IFSC; or
(ii) who is treated as a person resident outside India under the Foreign
Exchange Management (International Financial Services Centre)
Regulations, 2015; or
(iii) who is registered under the Insurance Regulatory and Development
Authority of India (International Financial Service Centre) Guidelines, 2015
as IFSC Insurance Office; or
(iv) who is permitted as such by Securities and Exchange Board of India (SEBI)
under the Securities and Exchange Board of India (International Financial
Services Centres) Guidelines, 2015.
40 Services provided to the Central Government, State Government, Union
territory under any insurance scheme for which total premium is paid by the
Central Government, State Government, Union territory.

General Insurance policies provided to employees of the State Government/

Police personnel, employees of Electricity Department or students of
colleges/private schools etc. wherein the total premium for insurance policy is
paid by the Central Government, State Government, Union territory are exempt
[Circular No. 16/16/2017-GST Dated 15.11.2017]

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41 Upfront amount (called as premium, salami, cost, price, development charges or
by any other name) payable in respect of service by way of granting of long
term lease of 30 years, or more of industrial plots or plots for development of
infrastructure for financial business, provided by the State Government
Industrial Development Corporations or Undertakings or by any other entity
having 20% or more ownership of Central Government, State Government,
Union territory to the industrial units or the developers in any industrial or
financial business area.
Explanation.- For the purpose of this exemption, the Central Government, State
Government or Union territory shall have 20% or more ownership in the entity
directly or through an entity which is wholly owned by the Central Government,
State Government or Union territory.

Provided that the leased plots shall be used for the purpose for which they are
allotted, that is, for industrial or financial activity in an industrial or financial
business area:
Provided further that the State Government concerned shall monitor and
enforce the above condition as per the order issued by the State Government in
this regard:
Provided also that in case of any violation or subsequent change of land use,
due to any reason whatsoever, the original lessor, original lessee as well as any
subsequent lessee or buyer or owner shall be jointly and severally liable to pay
such amount of central tax, as would have been payable on the upfront amount
charged for the long term lease of the plots but for the exemption contained
herein, along with the applicable interest and penalty:
Provided also that the lease agreement entered into by the original lessor with
the original lessee or subsequent lessee, or sub- lessee, as well as any
subsequent lease or sale agreements, for lease or sale of such plots to
subsequent lessees or buyers or owners shall incorporate in the terms and
conditions, the fact that the central tax was exempted on the long term lease of
the plots by the original lessor to the original lessee subject to above condition
and that the parties to the said agreements undertake to comply with the same.

It is hereby clarified that GST exemption on the upfront amount (called as

premium, salami, cost, price, development charges or by any other name)
payable for long term lease (of thirty years, or more) of industrial plots or plots
for development of infrastructure for financial business, is admissible
irrespective of whether such upfront amount is payable or paid in one or more
installments, provided the amount is determined upfront.
{Circular No. 101/20/2019-GST Dated 30-04-2019}
41A Supply of TDR, FSI, long term lease (premium) of land by a landowner to a
& developer have been exempted subject to the condition that the constructed
41B flats are sold before issuance of completion certificate and tax is paid on them.

Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case
of flats sold after issue of completion certificate, but such withdrawal shall be
limited to 1% of value in case of affordable houses and 5% of value in case of
other than affordable houses. This will achieve a fair degree of taxation parity
between under construction and ready to move property
42 Services provided by the Central Government, State Government, Union
territory or local authority by way of allowing a business entity to operate as a
telecom service provider or use radio frequency spectrum during the period
prior to the 1st April, 2016, on payment of licence fee or spectrum user
charges, as the case may be.
43 Services of leasing of assets (rolling stock assets including wagons, coaches,
locos) by the Indian Railways Finance Corporation to Indian Railways.
44 Services provided by an incubatee up to a total turnover of fifty lakh

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Description of Services Remarks
rupees in a financial year subject to the following conditions, namely:-
(a) the total turnover had not exceeded fifty lakh rupees during the
preceding financial year; and
(b) a period of three years has not elapsed from the date of entering into an
agreement as an incubatee.
45 Services provided by- “Legal Services” means
(a) an arbitral tribunal to – any service provided in
(i) any person other than a business entity; or relation to advice,
(ii) a business entity with an aggregate turnover up to such amount in the consultancy or assistance
preceding financial year as makes it eligible for exemption from registration in any branch of law, in
under the Central Goods and Services Tax Act, 2017; any manner and includes
(iii) the Central Government, State Government, Union territory, local authority, representational services
Governmental Authority or Government Entity; before any court, tribunal
or authority.
(b) a partnership firm of advocates or an individual as an advocate
other than a senior advocate, by way of legal services to- This need to be co-related
(i) an advocate or partnership firm of advocates providing legal services; with services notified
(ii) any person other than a business entity; or under Reverse Charge
(iii) a business entity with an aggregate turnover up to such amount in the under section 9 (3) of
preceding financial year as makes it eligible for exemption from registration CGST Act, 2017. Please
under the Central Goods and Services Tax Act, 2017; refer to Chapter 3 for this.
(iv) the Central Government, State Government, Union territory, local authority,
Governmental Authority or Government Entity;

(c) a senior advocate by way of legal services to-

(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in the
preceding financial year as makes it eligible for exemption from registration
under the Central Goods and Services Tax Act, 2017;
(iii) the Central Government, State Government, Union territory, local authority,
Governmental Authority or Government Entity.
46 Services by a veterinary clinic in relation to health care of animals or birds.
47 Services provided by the Central Government, State Government, Union
territory or local authority by way of-
(a) registration required under any law for the time being in force;
(b) testing, calibration, safety check or certification relating to protection or
safety of workers, consumers or public at large, including fire
license, required under any law for the time being in force.

Seed testing and certification is a multi-stage process, the charges for which are
collected from the seed producers at different stages. Supply of seed tags to the
seed producer is nothing but an element of the one integrated supply of seed
testing and certification. All the above charges, including those for issue of seed
certificates/tags by the Seed Certification Agency of Tamil Nadu and
Uttarakhand to the seed producing organization/ companies are collected for
the composite supply of seed testing and certification, which is exempt under
Notification No. 12/2017-Central Tax (Rate) Sl. No. 47 (services by
Central/State Governments by way of testing/certification relating to safety of
consumers and public at large, required under any law). This clarification would
apply to supply of seed tags by seed testing and certification agencies of other
states also following similar seed testing and certification procedure.

However, the State Governments/Seed Certification Agencies may get the tags
used in seed certification printed from other departments/ manufacturers
outside. Supply of seed tags by the other departments/manufacturers to the
State Government/Seed Certification Agencies is a supply of goods liable to tax.
Whether such tags would be classified under Chapter 49 as tags made of paper

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 Sr.
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Description of Services Remarks
or in Textile chapters as tags made of textile would depend upon the
predominant material used in the tags.
{ Circular No. 100/19/2019-GST Dated 30-04-2019}
47A Services by way of licensing, registration and analysis or testing of food
samples supplied by the Food Safety and Standards Authority of India (FSSAI)
to Food Business Operators.
48 Taxable services, provided or to be provided, by a Technology Business
Incubator or a Science and Technology Entrepreneurship Park
recognised by the National Science and Technology
Entrepreneurship Development Board of the Department of Science
and Technology, Government of India or bio- incubators recognised by
the Biotechnology Industry Research Assistance Council, under the
Department of Biotechnology, Government of India.
49 Services by way of collecting or providing news by an independent
journalist, Press Trust of India or United News of India.
50 Services of public libraries by way of lending of books, publications or
any other knowledge-enhancing content or material.
51 Services provided by the Goods and Services Tax Network to the Central
Government or State Governments or Union territories for implementation of
Goods and Services Tax.
52 Services by an organiser to any person in respect of a business exhibition held
outside India.
53 Services by way of sponsorship of sporting events organised –
(a) by a national sports federation, or its affiliated federations, where the This need to be co-related
participating teams or individuals represent any district, State, zone or with services notified
Country; under Reverse Charge
(b) by Association of Indian Universities, Inter-University Sports Board, School under section 9 (3) of
Games Federation of India, All India Sports Council for the Deaf, CGST Act, 2017. Please
Paralympic Committee of India or Special Olympics Bharat; refer to Chapter 3 for this.
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
53A Services by way of fumigation in a warehouse of agricultural produce.
54 Services relating to cultivation of plants and rearing of all life forms of “Agricultural extension”
animals, except the rearing of horses, for food, fibre, fuel, raw material means application of
or other similar products or agricultural produce by way of— scientific research and
(a) agricultural operations directly related to production of any agricultural knowledge to agricultural
produce including cultivation, harvesting, threshing, plant protection or practices through farmer
testing; education or training
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending, pruning, “Agricultural produce
cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, marketing committee or
curing, sorting, grading, cooling or bulk packaging and such like operations Board” means any
which do not alter the essential characteristics of agricultural produce but committee or board
make it only marketable for the primary market; constituted under a state
(d) renting or leasing of agro machinery or vacant land with or without a law for regulating the
structure incidental to its use; marketing of agricultural
(e) loading, unloading, packing, storage or warehousing of agricultural produce; produce
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing Committee or Board or “Agricultural produce”
Refer services provided by a commission agent for sale or purchase of agricultural means any produce out of
Sr. No. produce. cultivation of plants and
24B (h) services by way of fumigation in a warehouse of agricultural produce. rearing of all life forms of
new animals, except the
amen GST rate on loading, unloading, packing, storage or warehousing of agricultural rearing of horses, for
dment produce is Nil. So, processed products such as tea (i.e. black tea, white tea food, fibre, fuel, raw
etc.), processed coffee beans or powder, pulses (dehusked or split), jaggery, material or other similar

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Description of Services Remarks
processed spices, processed dry fruits, processed cashew nuts etc. fall outside products, on which either
the definition of agricultural produce and thus exemption from GST is not no further processing is
available to their loading, packing, warehousing etc. done or such processing
(Circular No. 16/16/2017-GST Dated 15-11-2017) is done as is usually done
Fertilizers supplied for direct use as fertilizers or supplied for use in the by a cultivator or producer
manufacturing of other complex fertilizers for agricultural use will attract GST. which does not alter its
(Circular No. 54/28/2018-GST Dated 09-08-2018) essential characteristics
but makes it marketable
for primary market.
Remember warehousing
other than agriculture
produce is subject to tax
i.e. Cadbury chocolate,
cotton fabrics etc.
55 Carrying out an intermediate production process as job work in relation to
cultivation of plants and rearing of all life forms of animals, except the rearing
of horses, for food, fibre, fuel, raw material or other similar products or
agricultural produce.
Milling of paddy into rice is not eligible for exemption
(Circular No. 19/19/2017-GST Dated 20-11-2017)
55A Services by way of artificial insemination of livestock (other than horses).
56 Services by way of slaughtering of animals.
57 Services by way of pre-conditioning, pre-cooling, ripening, waxing, retail
packing, labelling of fruits and vegetables which do not change or alter
the essential characteristics of the said fruits or vegetables.
58 Services provided by the National Centre for Cold Chain Development under
the Ministry of Agriculture, Cooperation and Farmer’s Welfare by way of cold
chain knowledge dissemination.
59 Services by a foreign diplomatic mission located in India.
60 Services by a specified organisation in respect of a religious pilgrimage
facilitated by the Government of India, under bilateral arrangement.
61 Services provided by the Central Government, State Government, Union
territory or local authority by way of issuance of passport, visa, driving licence,
birth certificate or death certificate.
61A Services by way of granting National Permit to a goods carriage to operate
through-out India / contiguous States.
62 Services provided by the Central Government, State Government, Union
territory or local authority by way of tolerating non-performance of a contract for
which consideration in the form of fines or liquidated damages is payable to the
Central Government, State Government, Union territory or local authority under
such contract.
63 Services provided by the Central Government, State Government, Union
territory or local authority by way of assignment of right to use natural
resources to an individual farmer for cultivation of plants and rearing of all life
forms of animals, except the rearing of horses, for food, fibre, fuel, raw
material or other similar products.
64 Services provided by the Central Government, State Government, Union
territory or local authority by way of assignment of right to use any natural
resource where such right to use was assigned by the Central Government,
State Government, Union territory or local authority before the 1st April,
2016:
Provided that the exemption shall apply only to tax payable on one time
charge payable, in full upfront or in installments, for assignment of right to
use such natural resource.
65 Services provided by the Central Government, State Government, Union
territory by way of deputing officers after office hours or on holidays for

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Sr.
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Description of Services Remarks
inspection or container stuffing or such other duties in relation to import export
cargo on payment of Merchant Overtime charges.
65A Services by way of providing information under the Right to Information Act,
2005 (22 of 2005).
65B Services supplied by a State Government to Excess Royalty Collection
Contractor (ERCC) by way of assigning the right to collect royalty on behalf of
the State Government on the mineral dispatched by the mining lease holders.

However, at the end of the contract period, ERCC shall submit an account to
the State Government and certify that amount of GST deposited by mining
lease holders on royalty is more than GST exempted on the service provided by
State Government to the ERCC of assignment of right to collect royalty and
where such amount of GST paid by mining lease holders is less than the
amount of GST exempted, the exemption shall be restricted to such amount as
is equal to the amount of GST paid by the mining lease holders and the ERCC
shall pay the difference between GST exempted on the service provided by
State Government to the ERCC of assignment of right to collect royalty and
GST paid by the mining lease holders on royalty.

Explanation- Mining lease holder means a person who has been granted mining
lease, quarry lease or license or other mineral concession under the Mines and
Minerals (Development and Regulation) Act, 1957, the rules made thereunder
or the rules made by a State Government under section 15(1) of the Act.
66 Services provided – College Hostel Mess
(a) by an educational institution to its students, faculty and staff; Services
(aa) by an educational institution by way of conduct of entrance examination
If Catering services are
against consideration in the form of entrance fee;
provided by an eligible
(b) to an educational institution, by way of,- educational institution to its
(i) transportation of students, faculty and staff; students, faculty and staff
(ii) catering, including any mid-day meals scheme sponsored by the Central then the same is exempt.
Government, State Government or Union territory;
(iii) security or cleaning or house- keeping services performed in such If the catering services, i.e.,
educational institution; supply of food or drink in a
(iv) services relating to admission to, or conduct of examination by, such mess or canteen, is provided
institution; by anyone other than the
(v) supply of online educational journals or periodicals (this service is exempt educational institution, i.e.
the institution outsources the
from IGST on import also): activity to an outside
Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall contractor, then it is a supply
apply to an educational institution other than an institution providing services by of service to the concerned
way of pre-school education and education up to higher secondary school or educational institution and
equivalent. attracts GST**.
Provided further that nothing contained in sub-item (v) of item (b) shall apply to
an institution providing services by way of,- (i) pre-school education and **Note: It may be noted that
education up to higher secondary school or equivalent; or (ii) education as a said services when provided
to an educational institution
part of an approved vocational education course.
providing pre-school
“Educational Institution” means an institution providing services by way of,- education or education up to
(i) Pre-school education and education up to higher secondary school or higher secondary school or
equivalent; equivalent are exempt from
(ii) Education as a part of a curriculum for obtaining a qualification tax.
recognized by any law for the time being in force;
(iii) Education as a part of an approved vocational education course (a Educational Institute
course run by an industrial training institute or an industrial training includes conduct of degree
centre affiliated to the National/State Council for Vocational Training; or courses by colleges,
a modular employable skill course, approved by the National Council of universities or institutions
which lead grant of
Vocational Training, run by a person registered with the Directorate qualifications recognized by
General of Employment & Training, Ministry of Skill Development and law would be covered.
Entrepreneurship).

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The Central and State Educational Boards shall be treated as Educational Boarding Schools (entire
Institution for the limited purpose of providing services by way of conduct of lodging, boarding, food etc.)
examination to the students. are exempt considering
composite supply U/s 8.
Since principal supply is
Vocational training provided by private ITIs in designated trades (notified under education & renting for
Apprenticeship Act, 1961) are exempt from GST whereas vocational training residence (which are not
provided by private ITIs in respect of other than designated trade would be taxable), hence entire
liable to pay GST. package would be exempt.
Services provided by a private ITI by way of conduct of entrance examination GST is payable on:-
against consideration in the form of entrance fee in case of designated trades ➢ Private tuition
will be exempt from GST whereas in case of other than designated trades in ➢ Obtaining a
private ITIs, GST shall be payable. qualification
Vocational training and examinations conducted by Government ITIs is exempt recognized by law
of a foreign country
as these are in the nature of services provided by the Central Government or ➢ Fees form
State Government to individuals {Entry 6}. Such exemption in relation to prospective
services provided by Government ITI would cover both - vocational training and employers for
examinations conducted by these Government ITls. campus interview
(Circular No. 55/29/2018-GST Dated 10-8-2018) ➢ Renting of flats for
temporary stay to
different persons

As per CBIC Circular No. 82/01/2019-GST Dated 1 January 2019, With effect from 31 January 2018 i.e., the date
from which the IIM Act, 2018 came into effect, all the Indian Institutes of Management (IIMs) will qualify as
‘educational institutions’ as defined under Notification No. 12/2017-Central Tax (Rate).
With effect from 31 January 2018, all IIMs are eligible for exemption benefit under GST. Thus, the courses which are
offered on or after 31 January 2018 are eligible for exemption under Sl. No. 66 of the said notification.
However, so far as short duration courses are concerned, where IIMs issue participation certificate to executives/
professionals (participants), the same are not exempt and attract GST @ 18%.
All long duration programs (one year or more) conferring degree/ diploma as recommended by Board of Governors
as per the power vested in them under the IIM Act, 2017 including one- year Post Graduate Programs for Executives
– Exempt
All short duration executive development programs or need based specially designed programs (less than one year)
which are not a qualification recognized by law - Not exempt from GST

As per CBIC Circular No. 117/36/2019-GST dated 11th October 2019, the Maritime Institutes are educational
institutions under GST Law and the courses conducted by them are exempt from levy of GST. The exemption is
subject to meeting the conditions specified at Sl. No. 66 of the NN 12/ 2017- Central Tax (Rate) dated 28.06.2017.

As per CBIC Circular No. 149/05/2021-GST dated 17th June 2021, serving of food to anganwadi shall also be
covered, whether sponsored by government or through donation from corporates.

CBIC has clarified via Circular No. 151/07/2021-GST dated 17th June 2021:-
❖ GST is exempt on services provided by Central or State Boards (including the boards such as National
Board of Examination - NBE) by way of conduct of examination for the students, including conduct of
entrance examination for admission to educational institution [under S. No. 66 (aa) of notif No. 12/2017-
CT(R)]. Therefore, GST shall not apply to any fee or any amount charged by such Boards for conduct of
such examinations including entrance examinations.
❖ GST is also exempt on input services relating to admission to, or conduct of examination, such as online
testing service, result publication, printing of notification for examination, admit card and questions papers
etc, when provided to such Boards [under S. No. 66 (b) (iv) of notif No. 12/2017- CT(R)].
❖ GST at the rate of 18% applies to other services provided by such Boards, namely of providing accreditation
to an institution or to a professional ( accreditation fee or registration fee such as fee for FMGE screening
test ) so as to authorise them to provide their respective services.
67 Services provided by the Indian Institutes of Management, as per the guidelines
of the Central Government, to their students, by way of the following educational
programmes, except Executive Development Programme: –
(a) two year full time Post Graduate Programmes in Management for the Post
Graduate Diploma in Management, to which admissions are made on the

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Description of Services Remarks
basis of Common Admission Test (CAT) conducted by the Indian Institute of
Management;
(b) fellow programme in Management;
(c) five year integrated programme in Management.
68 Services provided to a recognised sport body by- Receipts from IPL are
(a) an individual as a player, referee, umpire, coach or team manager for subject to GST.
participation in a sporting event organised by a recognized sports body; Receipts from acting as
(b) another recognised sports body. brand ambassador for
corporate client, is subject
to GST.
69 Any services provided by, _
(a) the National Skill Development Corporation set up by the Government of
India;
(b) a Sector Skill Council approved by the National Skill Development
Corporation;
(c) an assessment agency approved by the Sector Skill Council or the
National Skill Development Corporation;
(d) a training partner approved by the National Skill Development Corporation or
the Sector Skill Council, in relation to-
(i) the National Skill Development Programme implemented by the National
Skill Development Corporation; or
(ii) a vocational skill development course under the National Skill Certification
and Monetary Reward Scheme; or
(iii) any other Scheme implemented by the National Skill Development
Corporation.
70 Services of assessing bodies empanelled centrally by the Directorate General of
Training, Ministry of Skill Development and Entrepreneurship by way of
assessments under the Skill Development Initiative Scheme.
71 Services provided by training providers (Project implementation agencies)
under Deen Dayal Upadhyaya Grameen Kaushalya Yojana implemented by the
Ministry of Rural Development, Government of India by way of offering
skill or vocational training courses certified by the National Council for
Vocational Training.
72 Services provided to the Central Government, State Government, Union
territory administration under any training programme for which 75% or more of
the total expenditure is borne by the Central Government, State Government,
Union territory administration.
As per Circular No. 164 /20 /2021-GST, it is clarified that services provided by
any institutions/ NGOs under the central scheme of “Scholarships for students
with Disabilities” where total expenditure is borne by the Government is covered
under entry 72 and hence exempt from GST.
73 Services provided by the cord blood banks by way of
preservation of stem cells or any other service in relation to such preservation.
74 Services by way of- Healthcare services
(a) health care services by a clinical establishment, an authorised medical doesn’t include hair
practitioner or para-medics; transplant or cosmetic or
(b) services provided by way of transportation of a patient in an ambulance, plastic surgery except
other than those specified in (a) above. when undertaken to
restore or to reconstruct
Room rent in hospitals provided to in-patients is exempt. anatomy or functions of
(Circular No. 27/01/2018-GST dt 4-1-2018) body affected due to
congenital defects,,
Healthcare services provided by senior doctors/consultants/technicians hired by developmental
the hospitals, whether employees or not are exempt. The entire amount abnormalities, injury or
charged by hospitals from patients including the retention money and the trauma. Healthcare
fees/payments made to the doctors are exempt. Food supplied to the patients is services can be provided
a part of composite supply and not separately taxable whereas other supplies of at patient’s home.

98
Sr.
No.
Description of Services Remarks
food by a hospital to patients (not admitted) or their visitors are taxable. ITC not Naturopathy, ayurvedic
available to Hospital since it is exempt. treatment is allowable.
(Circular No. 32/06/2018-GST dt 12-2-2018) Pranic healing services is
not recognized service so
Services provided by PSPs to the State Governments by way of transportation subject to GST.
of patients on behalf of the State Governments against consideration in the form
of fee or otherwise charged from the State Government would be exempt under
Notification No. 12/2017- Central Tax (Rate) Dated 28.06.2017
SI No.3 if it is a pure service and not a composite supply involving supply of any
goods
SI No. 3A if it is a composite supply of goods and services in which the value of
supply of goods constitutes not more than 25 per cent of the value of the said
composite supply.
(Circular No. 51/25/2018-GST dt 31-7-2018)
74A Services provided by rehabilitation professionals recognised under the
Rehabilitation Council of India Act, 1992 (34 of 1992) by way of rehabilitation,
therapy or counselling and such other activity as covered by the said Act at
medical establishments, educational institutions, rehabilitation centers
established by Central Government, State Government or Union territory or an
entity registered under section 12AA or 12AB of the Income tax Act, 1961.
75 Services provided by operators of the common bio-medical waste treatment
facility to a clinical establishment by way of treatment or disposal of bio-medical
waste or the processes incidental thereto.
76 Services by way of public conveniences such as provision of facilities of
bathroom, washrooms, lavatories, urinal or toilets.
77 Service by an unincorporated body or a non- profit entity registered under any
law for the time being in force, to its own members by way of reimbursement of
charges or share of contribution –
(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the levy of
Goods and service Tax; or
(c) up to an amount of seven thousand five hundred rupees per month
per member for sourcing of goods or services from a third
person for the common use of its members in a housing society or a
residential complex.
Circular No. 109/28/2019-GST dated 22nd July 2019
1.
Annual turnover of RWA Monthly maintenance charge Whether exempt?
More than Rs. 20 Lakhs More than Rs. 7500/- No
Rs. 7500/- or less Yes
Rs. 20 lakhs or less More than Rs. 7500/- Yes
Rs. 7500/- or less Yes
2. RWAs are entitled to take ITC of GST paid by them on capital goods (generators, water pumps, lawn
furniture etc.), goods (taps, pipes, other sanitary/hardware fillings etc.) and input services such as repair and
maintenance services.
3. A person owns two or more flats in the housing society or residential complex: As per general business
sense, a person who owns two or more residential apartments in a housing society or a residential complex
shall normally be a member of the RWA for each residential apartment owned by him separately. The ceiling
of Rs. 7500/- per month per member shall be applied separately for each residential apartment owned by
him i.e. if a person owns two residential apartments in a residential complex and pays Rs. 15000/- per
month as maintenance charges towards maintenance of each apartment to the RWA (Rs. 7500/- per month
in respect of each residential apartment), the exemption from GST shall be available to each apartment.
4. The exemption from GST on maintenance charges charged by a RWA from residents is available only if
such charges do not exceed Rs. 7500/- per month per member. In case the charges exceed Rs. 7500/- per
month per member, the entire amount is taxable. For example, if the maintenance charges are Rs. 9000/-
per month per member, GST @18% shall be payable on the entire amount of Rs. 9000/- and not on [Rs.
9000 - Rs. 7500] = Rs. 1500/-.

99
Sr.
No.
Description of Services Remarks
77A Services provided by an unincorporated body or a non-profit entity registered
under any law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural labour or farmers;
or
(ii) promotion of trade, commerce, industry, agriculture, art, science, literature,
culture, sports, education, social welfare, charitable activities and protection of
environment,
to its own members against consideration in the form of membership fee upto
an amount of one thousand rupees (Rs 1,000/-) per member per year.
78 Services by an artist by way of a performance in folk or classical art
forms of-
(a) music, or (b) dance, or (c) theatre,
if the consideration charged for such performance is not more than one lakh
and fifty thousand rupees:
Provided that the exemption shall not apply to service provided by such
artist as a brand ambassador.
79 Services by way of admission to a museum, national park, wildlife
sanctuary, tiger reserve or zoo.
79A Services by way of admission to a protected monument so declared under the
Ancient Monuments and Archaeological Sites and Remains Act 1958 or any of
the State Acts, for the time being in force.
80 Services by way of training or coaching in recreational activities relating to-
(a) arts or culture, or
(b) sports by charitable entities registered under section 12AA or 12AB of the
Income-tax Act.
81 Services by way of right to admission to-
(a) circus, dance, or theatrical performance including drama or ballet;
(b) award function, concert, pageant, musical performance or any sporting event
other than a recognised sporting event;
(c) recognised sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places as
referred to in items (a), (b), (c) or (d) above is not more than Rs. 500 per
person.
82 Services by way of right to admission to the events organized under FIFA U-17
World Cup 2017 are exempt.
82A Services by way of right to admission to the events organised under FIFA U-17
Women's World Cup 2020 are exempt.
82B Services by way of right to admission to the events organised under
AFC Women's Asia Cup 2022

100
 Exemption under IGST
1 Services received from a provider of service located in a non-taxable territory by
(a) the Central Government, State Government, Union territory, a local
authority, a governmental authority or an individual in relation to any
purpose other than commerce, industry or any other business or profession
(b) an entity registered under section 12AA of the Income-Tax Act, 1961 for
the purpose of providing charitable activities
(ba) way of supply of online educational journals or periodicals to an
educational institution other than an institution providing services by way of-
(i) pre-school education and education up to higher secondary school or Co-relate with provisions
equivalent; or of reverse charge U/s 5
(ii) education as a part of an approved vocational education course; (3) of IGST Act, 2017.
(c) a person located in a non-taxable territory are exempt.
However the exemption shall not apply to:-
(i) online information and database access or retrieval services received by
persons specified in entry (a) or entry (b); or
(ii) Services by way of transportation of goods by a vessel from a place outside
India up to the customs station of clearance in India received by persons
specified in the entry.
2 Services provided by an intermediary when location of both supplier and Following documents
recipient of goods is outside the taxable territory. shall be maintained for a
minimum duration of five
years:
1) Copy of Bill of Lading
2) Copy of executed
contract between
Supplier/Seller and
Receiver/Buyer of goods
3) Copy of commission
debit note raised by an
intermediary service
provider in taxable
territory from service
recipient located in non-
taxable territory
4) Copy of certificate of
origin issued by service
recipient located in non-
taxable territory
5) Declaration letter from
an intermediary service
provider in taxable
territory on company letter
head confirming that
commission debit note
raised relates to contract
when both supplier and
receiver of goods are
outside the taxable
territory.
3 Services received by RBI from outside India in relation to management of
Foreign Exchange Reserves.
4 Services provided by a tour operator to a foreign tourist in relation to a tour
conducted wholly outside India are exempt.
5 Services supplied by an establishment of a person in India to any establishment Provided the place of
of that person outside India, which are treated as establishments of distinct supply of the service is
persons in accordance with Explanation 1 in section 8 of the Integrated Goods outside India in
and Services Tax Act, 2017. accordance with section
13 of Integrated Goods

101
 and Services Tax Act,
2017.
6 Import of services by United Nations or a specified international organisation for
official use of the United Nations or the specified international organisation.
Explanation. - For the purposes of this entry, unless the context otherwise
requires, “specified international organisation” means an international
organisation declared by the Central Government in pursuance of section 3 of
the United Nations (Privileges and Immunities Act) 1947 (46 of 1947), to which
the provisions of the Schedule to the said Act apply.
7 Import of services by Foreign diplomatic mission or consular post in India, or
diplomatic agents or career consular officers posted therein. shall be exempt
from IGST, subject to the conditions, -
(i) that the foreign diplomatic mission or consular post in India, or
diplomatic agents or career consular officers posted therein, are
entitled to exemption from integrated tax, as stipulated in the certificate
issued by the Protocol Division of the Ministry of External Affairs,
based on the principle of reciprocity;
(ii) that the services imported are for official purpose of the said foreign
diplomatic mission or consular post; or for personal use of the said
diplomatic agent or career consular officer or members of his or her
family.
(iii) that in case the Protocol Division of the Ministry of External Affairs, after
having issued a certificate to any foreign diplomatic mission or consular
post in India, decides to withdraw the same subsequently, it shall
communicate the withdrawal of such certificate to the foreign diplomatic
mission or consular post;
(iv) that the exemption from the whole of the integrated tax granted to the
foreign diplomatic mission or consular post in India for official purpose
or for the personal use or use of their family members shall not be
available from the date of withdrawal of such certificate.
Other Exemptions
1 Intra-State supplies of goods or services or both received by a deductor under
section 51, from any unregistered supplier, is exempt from the whole of the
central tax leviable thereon under section 9(4), subject to the condition that the
deductor is not liable to be registered otherwise than under section 24(vi).
2 All services imported by a unit/developer in the Special Economic Zone (SEZ)
for authorised operations are exempt from the whole of the integrated tax
leviable thereon under section 3(7) of the Customs Tariff Act, 1975 read with
section 5 of the IGST Act, 2017.
3 Central Government’s share of profit petroleum exempted from CGST
Intra-State supply of services by way of grant of license or lease to explore or
mine petroleum crude or natural gas or both, has been exempted from so
much of CGST as is leviable on the consideration paid to the Central
Government in the form of Central Government’s share of profit petroleum as
defined in the contract entered into by the Central Government in this behalf.
Parallel exemption from IGST has been extended to inter-State supply of such
services.
4 IGST exempted to the extent it is paid on the consideration attributable to
royalty and license fee included in transaction value under rule 10(1)(c) of
Customs Valuation (Determination of value of imported Goods) Rules, 2007
IGST leviable on import of services in relation to temporary transfer or
permitting the use or enjoyment of any intellectual property right has been
exempted to the extent of the aggregate of the duties of customs leviable under
section 3(7) of the Customs Tariff Act, 1975, on the consideration declared
under section 14(1) of the Customs Act, 1962 towards royalties and license
fees included in the transaction value as specified under rule 10(1)(c) of the
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
on which the appropriate duties of customs have been paid.

102
 Since students get bored in Chapter 4, below answer are given for quick
assessment, that’s why relevant provisions have not been written in answer. In
exam in case of descriptive question, please quote respective provisions.

Question & Answer

Q1. With reference to the CGST Act, 2017, discuss the following activities relating to a bank?
a. Bank Extended housing loan of Rs. 50 Lacs to Mr. Namit.
b. Bank received processing fees of Rs. 50,000 from Mr. Namit.
c. Bank received Rs. 2 Lacs interest from Mr. Namit.
A. In accordance with the provisions of CGST Act, 2017 the taxability of activities is: -
a. The same is transaction in money, therefore not regarded as service as per Sec 2(102) of CGST
Act, 2017.
b. The loan processing fees received by bank will be liable for GST.
c. Rs. 2 Lacs received as interest on loan won’t be liable for GST as the same is exempt vide Sr. No.
27 of Notification No. 12/2017- CT (Rate).

Q2. State with reasons whether the following are liable to GST?
a. Services by way of training or coaching in recreational activities relating to arts, culture or sports.
b. Services provided by a player to a franchisee which is not a recognized sports body.
c. Pre-school education and education up to higher secondary school or equivalent.
d. Services by a veterinary clinic in relation to health care of animals or birds.
e. Services by way of public conveniences such as provision of facilities of washrooms.
A. The liability as well as reason: -
a. Services by way of training or coaching in recreational activities relating to arts, culture or sports
are exempt as it is specifically exempt vide Sr. No. 80 of Notification No. 12/2017-CT (Rate)..
b. Service of a player to a franchisee which is not a recognized sports body is taxable as it
doesn’t get covered under Sr. No. 68 of Notification No. 12/2017-CT (Rate).
c. Pre-School education and education up to higher secondary school or equivalent is not liable to
GST as it is specifically exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate).
d. Services by a veterinary clinic in relation to health care of animals or birds is not liable to GST as
it is specifically exempt vide Sr. No. 46 of Notification No. 12/2017- CT (Rate).
e. Services by way of public conveniences such as provision of facilities of washrooms are not liable
to GST as it is specifically exempt vide Sr. No. 76 of Notification No. 12/2017-CT (Rate).

Q3. Please comment whether below instances are subject to tax or no?
a. Services of transportation of passenger by vessels in National waterways.
b. Services of transportation of passenger by AC Stage carrier.
c. Services of transportation of non AC Stage carrier.
d. Services of transportation of passengers by contract carriage for tourism.
e. Services of transportation of passenger Kolkata to Chennai in a vessel and such service is not for
tourism purpose.
f. Services of transportation of passengers in Non-AC contract carriages.
g. Services of transportation of passengers in AC contract Carriages.
A. Our comments: -
a. This is exempt under Sr. No. 17 of Notification No. 12/2017-CT (Rate).
b. This is liable to GST.
c. This is exempt under Sr. No. 15 of Notification No. 12/2017-CT (Rate).
d. This is liable to GST.
e. This is exempt under Sr. No. 17 of Notification No. 12/2017-CT (Rate).
f. This is exempt under Sr. No. 15 of Notification No. 12/2017-CT (Rate).

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g. This is liable to GST.

Q4. Please comment whether below instances are subject to tax or no?
a. Transportation of postal mails and postal bags via rail.
b. Transportation of household effects via rail.
c. Transportation of petroleum products via rail.
d. Transportation of relief material to flood affected areas, transport of defense & military equipment
& transport of organic manure via rail.
e. Transportation of newspapers and milk via rail.
f. Transportation of tea & sugar via rail.
g. Transportation of fruits via Goods Transport Agency.
i. Freight charges collected for transporting small consignment for persons who paid less than
Rs. 750 for each consignment.
j. Freight charges collected for transporting goods in small vehicle for persons who paid less than
Rs. 1500 for each trip.
A. Our comments: -
a. This is liable to GST.
b. This is liable to GST.
c. This is liable to GST.
d. This is exempt under Sr. No. 20 of Notification No. 12/2017-CT (Rate).
e. This is exempt under Sr. No. 20 of Notification No. 12/2017-CT (Rate).
f. This is liable to GST.
g. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate).
i. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate).
j. This is exempt under Sr. No. 21 of Notification No. 12/2017-CT (Rate).

Q5. Please comment whether below instances are subject to tax or no?
a. Renting of immovable property to higher secondary school.
b. Transportation services provided to students of higher secondary school.
c. Outdoor catering services provided to educational institutions running approved vocational
courses.
d. Security services provided to Pre-Nursery School.
e. Housekeeping and cleaning services in college providing recognized graduation degree.
f. Conducting of examination of ICAI.
g. Development of course content of ICAI.
h. Training of Staff of Higher Secondary School.
A. Our comments: -
a. This is liable to GST.
b. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate).
c. This is liable to GST.
d. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate).
e. This is liable to GST.
f. This is exempt under Sr. No. 66 of Notification No. 12/2017-CT (Rate).
g. This is liable to GST.
h. This is liable to GST.

Q6. Please comment whether below instances are subject to tax or no?
a. Monthly subscription Rs. 7,501 collected by Resident Welfare Association from member families.
b. Electricity charges levied by State Electricity Board collected by Resident Welfare Association

104
 and deposited with Electricity Board.
c. Common area electricity charges collected by Resident Welfare Association..
d. Rs. 100 collected for entertainment program organized by Resident Welfare Association
e. Other Services to non-members.
A. Our comments: -
a. If per month per member contribution of any or some members of Resident Welfare Associations
is higher than Rs. 7,500, then such amount is subject to GST (>7,500, paying
members).
b. This is pure agency services so not subject to GST.
c. This isn’t pure agency contract since common are charges would be in the name of Resident
Welfare Association so it is subject to tax.
d. This is exempt under Sr. No. 81 of Notification No. 12/2017-CT (Rate) -Lesser then Rs. 500.
e. This is liable to GST.

Q7. With reference to the provisions of CGST Act, 2017 examine whether GST is leviable in the
following situations?
a. Government of Rajasthan has provided services to ABC Ltd. of Rajasthan in the month of
Nov’17 for a consideration of Rs. 1,00,000. The Turnover of ABC Ltd. in FY 16-17 is 11 Lacs.
b. Government of Rajasthan has provided services to ABC Ltd. in the month of Oct’17 for a
consideration of Rs. 5,000. The turnover of ABC Ltd in FY 16-17 was Rs. 25 Lacs.
c. Jaipur Municipal corporation has awarded a contract for construction of road to ABC Ltd. failed
to perform the contract and paid liquidated damages amounting Rs. 50 Lacs in accordance with
the terms of contract.
d. ABC Ltd. has applied for registration under Companies Act, 2013 to ROC, Rajasthan and has
paid registration charge of Rs. 10 Lacs.
e. Delhi Government has charged Rs. 40 Lacs from ABC Ltd. for allocation of natural resources for
agricultural purposes in the month of Nov’17.
f. ABC Ltd. has paid to customs department Rs. 1 Lac on account Merchant Overtime Charges for
deputing officers after office hours or on holidays for inspection or container stuffing or such other
duties in relation to import export cargo.
g. ABC Ltd. has made an upfront payment of Rs. 1 crore to Rajasthan Government on account of
assignment of right to use minerals in the State of Bihar.
A. Our comments: -
a. Services provided by the Central Government, State Government, Union Territory or local
authority to a business entity with an aggregate turnover of upto Rs. 20 Lacs in the preceding
financial year are exempt vide Sr. No. 7 Notification No. 12/2017-CT (Rate).
b. Services provided by Central Government, State Government, Union Territory or a local authority
where the consideration for such services doesn’t exceed Rs. 5,000 are exempt vide Sr. No. 9 of
Notification No. 12/2017 CT (Rate).
c. Services provided by the Central Government, State Government, Union Territory or local
authority of tolerating non-performance of a contract for which consideration in the form of fines
or liquidated damages is payable to the Central Government, State Government, Union Territory
or local authority under such contract are exempt vide Sr. No. 62 of Notification No. 12/2017-CT
(Rate).
d. It is exempt vide Sr. No. 47 of Notification No. 12/2017.
e. Services by way of allocation of natural resources to an individual farmer for the purposes of
agriculture have been exempted vide Sr. No. 63 of Notification No. 12/2017-CT (Rate). Such
allocations/auctions to categories of persons other than individual farmers would be leviable to
GST. Hence, ABC Ltd. will be liable to pay GST.

105
f. Services provided by the Central Government, State Government, Union Territory by way of
deputing officers after office hours or on holiday for inspection or container stuffing or such other
duties in relation to import export cargo on payment of Merchant Overtime charges are exempt
from GST vide Sr. No. 65 of Notification No.. 12/2017 CT (Rate).
g. ABC Ltd. will be liable to pay GST on assignment of rights to use minerals in the State of Bihar.

Q8. State the difference between General & Special Exemption.

A.
General Exemption
• It is given by Government in public interest
by notification in official gazette
• It is applicable to all members of a
particular section
• It is generally in public interest
• Covered U/s 11 (1)
Special Exemption
• It is given by Government in public interest
by special order
• It is applicable in each case i.e. applicable
to that person to whom the order is given
• It is given in exceptional nature i.e.
charitable purpose, goods of strategic
nature etc. It is also generally in public
interest.
• Covered U/s 11 (2)

Q9. Jain hostel trust registered U/s 12 AA of Income Tax Act 1961, provides hostel accommodation facility to
students and charges Rs. 900 per day. Determine whether such service of accommodation is covered under
the ambit of charitable activity and also its taxability in GST Act?
A. This is exempt. As per Circular No. 32/06/2018-GST, the aforesaid service doesn’t fall within the ambit of
charitable activities (Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017). However,
accommodation service in hostels including such services provided by trusts having “Value of Supply” below
or equal to Rs. 1,000 per day is exempt under Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-
2017.

Q10. Siddhivinayak Charitable trust is a registered religious trust U/s 12 AA of Income Tax Act 1961. Discuss
the treatment of following transaction under GST law:-
i. Deluxe room rent Rs. 900 per day & Super Deluxe room rent Rs. 1,000;
ii. Renting of small community hall for Rs. 9,000 per day & Renting of large community hall for Rs.
12,000
iii. Trust has rented shop for Rs. 15,000 p.m. to sell goods required for performing various religious
ceremonies.
iv. Meditation Hall provided on rent for Rs. 100 per day.
v. Amount received for yoga camps organized for elderly people - Rs. 1,00,000.
vi. Amount received for activities relating to preservation of forests and wildlife – Rs. 50,000
vii. Payment made for services received from a service provider located in USA, for the purposes of
providing ‘charitable activities’ – Rs. 5,00,000
viii. Amount received for advancement of educational programmes relating to abandoned, orphaned or
homeless children – Rs. 1,00,000
ix. Renting of residential dwelling for use as a residence – Rent Rs. 25,000 p.m.
x. Renting of residential dwelling for commercial activity – Rent Rs. 50,000 p.m.
xi. Grant of tenancy rights in a residential dwelling for use as residential dwelling against tenancy
premium of Rs. 10,00,000. What will be your answer if it is commercial dwelling?

106
A.
i. Deluxe room rent is exempt. Exemption is available for renting of rooms wherein the rent charged is
less than Rs. 1,000 per day (Sr. No. 13 of Notification No. 12-2017-CT (R) Dated 28-06-2017).
Since Super Deluxe room rent is Rs. 1,000 per day, it is not exempt.
ii. Renting of small community hall for Rs. 9,000 per day is exempt. Exemption is available for renting of
community halls wherein the rent charged is less than Rs. 10,000 per day (Sr. No. 13 of Notification
No. 12-2017-CT (R) Dated 28-06-2017).
Since Renting of large community hall is more than Rs. 10,000 per day, it is not exempt.
iii. It is not exempt. Exemption is available to renting of shops wherein the rent charged is less than Rs.
10,000 p.m. (Sr. No. 13 of Notification No. 12-2017-CT (R) Dated 28-06-2017).
iv. It is exempt. Meditation hall falls under the purview of precincts of the religious place.
v. It is exempt vide Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017
vi. It is exempt Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017
vii. This is exempt. Service recipient is liable to pay GST in case of a taxable service provided by any
person located in a non-taxable territory and received by any person located in the taxable territory.
However, services received from a provider of service located in a non-taxable territory by an entity
registered U/s 12 AA of the Income-Tax Act, 1961 for the purposes of providing charitable activities
are exempt from vide Sr. No. 10 of Notification No. 9/2017-IT (R) Dated 28-06-2017.
viii. It is exempt Sr. No. 1 of Notification No. 12-2017-CT (R) Dated 28-06-2017
ix. It is exempt. Exemption is available for renting of residential dwelling for use as a residence vide Sr.
No. 12 of Notification No. 12-2017-CT (R) Dated 28-06-2017).
x. It is not exempt since it is used for commercial activity. Only residential use is exempt.
xi. It is exempt vide Circular No. 44/18/2018 CGST Dated 02.05.2018. If it is commercial dwelling then it
is not exempt.

Q11. Orchid Hotel provides the following information relating to their services for the month of January 2019:
The hotel has 50 rooms, out of which 30 rooms are Super Deluxe rooms with a declared tariff of Rs. 2,000 per
day, 10 rooms are Deluxe rooms with a declared tariff of Rs. 1,200 per day, rest is Semi Deluxe with a
declared tariff of Rs. 800 per day.
The hotel has practice of giving 25% discount on Super Deluxe & Deluxe room.
In January 2019 occupancy was 80%.
Please calculate value of taxable supply.
A.
Particulars Amount (in
INR)
Renting of Super Deluxe rooms {30 rooms * 31 days * Rs. 1,500 (after considering 11,16,000
discount of 25% on Rs. 2,000)*80%}
Renting of Deluxe rooms. After discount room rent per day is Rs. 900. NIL
This is exempt vide Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-2017.
Services by a hotel, inn, guest house, club or campsite, by whatever name called, for
residential or lodging purposes, having value of supply of a unit of accommodation
below or equal to one thousand rupees per day or equivalent
Renting of Semi Deluxe rooms. The per day Room rent is Rs. 800 per day so it is NIL
exempt vide Sr. No. 14 of Notification No. 12-2017-CT (R) Dated 28-06-2017
Value of Taxable Supply for the month of January 2019 11,16,000

107
Q12. Discuss the treatment of following transaction under GST law:-
i. Mr. A, a sole proprietor has transferred all assets and liabilities of his business carried on under the
name and style of ABC Interiors as a going concern to XYZ Limited.
ii. Mr. A, has provided labour services for construction of a community park to a Panchayat.
iii. The State Government has built a burial ground in a village from the funds received by Government
from public.
iv. ABC Enterprise had turnover of Rs. 15 lakhs during FY 2017-2018. ABC enterprise has taken testing
service from Central Government department.
v. ABC transit provides services of loading, unloading and transporting cargo which is imported by M/s
XYZ Enterprises of Kathmandu to be shipped to Nepal.
vi. ABC Ltd. provides training for improvement of procedures in government companies and government
bodies for which it receives grants for its functioning.
vii. ABC Enterprises provided labour services for construction of housing flats, under the Housing for All
(Urban) Mission or Pradhan Mantri Awas Yojana.
viii. Mr. A gets his house constructed on a vacant land & Mr. Y gets modifications in a house.
ix. Amit runs a fair price shop and earns Rs. 1,00,000 as consideration received from government for
sale of food grains during the month of January 2019.
x. Mr. A, a priest, charged Rs. 11,000 for services provided to Mr. B for conducting his marriage
ceremony at Temple.
xi. ABC Pvt. Ltd. providing services of air transportation has received Rs. 1 crore as viability funding
under regional connectivity scheme from Central government for operation of air travel services.
xii. Amit has transported wheat to APMC by road to another city.
xiii. George has a business in Germany and sent goods by aircraft to India. Goods are being cleared at
customs stations in India. What is your view on transportation of goods by aircraft.
xiv. Vandana an owner of a motor vehicle gives his vehicle to a goods transport agency for hiring and
transportation of goods.
xv. NHAI pays annuity to ABC Ltd, a concessionaire who constructed the road.
xvi. IRDA Charged Rs. 1,00,000/- from ICICI General Insurance (Insurer) in lieu of grant of registration
certificate.
xvii. SEBI Charged Rs. 5,00,000/- as a regulatory fee from ABC Co. (Stock Exchange).
xviii. Rohit an organizer has provided services related to business exhibition in Australia.
xix. Krishna a farmer provides services relating to cultivation of seeds.
xx. Vijay deals in services by way of pre-conditioning and pre-cooling of fruits and vegetables for
refrigerated transport.
xxi. Government of India recovers Rs. 25 Crores as damages for not completing construction of a flyover
within the time specified in the contract from the Jaguar Limited.
xxii. Central Government has provided services in relation to import export cargo on payment of Merchant
Overtime charges.
xxiii. PVR cinemas charges Rs. 200. per person as admission charges for exhibition of cinematographic
films. What will be your answer if ABC circus charges Rs. 200 per person as admission charges for
circus show.
xxiv. Columbia Hospital charged Mr. A who availed in-patients service Rs. 1,00,000 towards treatment
including room rent and in patient food. They paid Rs. 40,000 to Doctor towards his professional fees.
Whether both are subject to GST?
xxv. Columbia Hospital has outsourced catering to Sodexo. Sodexo provides catering service to patient
who admitted in Columbia Hospital according to Dietician suggestion and also serve food to visitor

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 and patient’s relative. Sodexo bill Columbia Hospital for in-patient food services & collect directly from
others.
A.
i. This sale is exempt vide S. No. 2 of Exemption Notification No. 12/2017-Central Tax (Rate).
ii. This service is exempt vide S. No. 3 of Exemption Notification No. 12/2017-Central Tax (Rate).
iii. This service is exempt vide S. No. 4 of Exemption Notification No. 12/2017-Central Tax (Rate).
iv. The supply of services by government are exempt vide S. No. 7 of Exemption Notification No.
12/2017-Central Tax (Rate) and no GST is payable on such services by ABC Enterprise on reverse
charge.
v. This is exempt vide S. No. 9B of Exemption Notification No. 12/2017-Central Tax (Rate).
vi. This is exempt vide S. No. 9C of Exemption Notification No. 12/2017-Central Tax (Rate).
vii. It is exempt vide S. No. 10 of Exemption Notification No. 12/2017-Central Tax (Rate).
viii. This is exempt. Mr. A gets his house constructed on a vacant land, such construction would qualify as
Original work vide S. No. 11 of Exemption Notification No. 12/2017-Central Tax (Rate).
However, Mr. Y modifications would not qualify as Original works. So it is taxable.
ix. Such consideration is exempt from GST vide S. No. 11A of Exemption Notification No. 12/2017-
Central Tax (Rate) as amended by Notification No. 21/2017-Central Tax (Rate) and 47/2017-Central
Tax (Rate).
x. Service by any person by way of conduct of any religious ceremony would be exempt from GST vide
S. No. 13 of Exemption Notification No. 12/2017-Central Tax (Rate).
xi. This is exempt vide S. No. 16 of Exemption Notification No. 12/2017-Central Tax (Rate).
xii. It is exempt from tax vide S. No. 18 of Exemption Notification No. 12/2017-Central Tax (Rate).
xiii. Such transportation services shall be exempt vide S. No. 19 of Exemption Notification No. 12/2017-
Central Tax (Rate).
xiv. Such services shall be considered as exempt services vide S. No. 22 of Exemption Notification No.
12/2017-Central Tax (Rate).
xv. This would be exempt from GST vide S. No. 23A of Exemption Notification No. 12/2017-Central Tax
(Rate), amended by Notification No. 32/2017-Central Tax (Rate) Dated 13.10.2017.
xvi. This would be exempt from GST vide S. No. 32 of Exemption Notification No. 12/2017-Central Tax
(Rate).
xvii. This would be exempt from GST vide S. No. 33 of Exemption Notification No. 12/2017-Central Tax
(Rate).
xviii. Such services shall be exempt vide S. No. 52 of Exemption Notification No. 12/2017-Central Tax
(Rate).
xix. This is exempt vide S. No. 54 of Exemption Notification No. 12/2017-Central Tax (Rate).
xx. This would be exempt from tax vide S. No. 57 of Exemption Notification No. 12/2017-Central Tax
(Rate).
xxi. In this case as the tolerating of a non-performance of an act is specifically covered under the S. No.
62 of Exemption Notification No. 12/2017-Central Tax (Rate), no GST would be leviable on such
damage recovered from the erring party.
xxii. These services would be exempt from GST vide S. No. 65 of Exemption Notification No. 12/2017-
Central Tax (Rate).
xxiii. GST would be leviable on the same even though admission charges are less than Rs. 500 since
exhibition of cinematographic films is not covered in the exemptions under GST Act.
In case of Circus, it is exempt vide S. No. 81 of Exemption Notification No. 12/2017-Central Tax
(Rate).

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xxiv. Columbia charges to Mr. A is exempt vide S. No. 74 of Exemption Notification No. 12/2017-Central
Tax (Rate). Even services provided by Doctor to Hospital is also exempt. It is immaterial whether
Doctor work as employees of hospital or not. It is clarified by Circular No. 32/06/2018-GST.
xxv. Sodexo catering services to in-patients is taxable since Sodexo is billing Columbia Hospital. Columbia
Hospital billing to in-patients is although exempt.
Sodexo catering services to visitor & patient’s relative is also subject to GST.

Q13. Mr. A, the owner of a residential building in a commercial locality, furnishes the following information
relating to his residential building for the month of January 2019:-
Floor No. Usage
Ground Floor 5 Shops & 1 godown for goods storage for monthly rent of INR
5,00,000
1st Floor Residential dwelling for monthly rent of INR 50,000
2nd Floor Self-Occupied by Mr. A for residential purpose
Vacant land in the backyard Given to nearby restaurant for parking for monthly rent of INR
1,00,000
Terrace Given to XYZ mobile company for maintaining tower for monthly
rent of INR 1,00,000
Compute the value of taxable supply.
A.

Particulars Amount (in

INR)
Rent received for 5 Shops & 1 godown for goods storage 5,00,000
Residential dwelling for monthly rent of INR 50,000 is exempt vide Sr. No. 12 of NIL
Notification No. 12-2017-CT (R) Dated 28-06-2017)

Self-Occupied property. Firstly no consideration and it is also used for residence NIL
Given to nearby restaurant for parking 1,00,000
Given to XYZ mobile company for maintaining tower 1,00,000
Value of Taxable Supply for the month January 2019 7,00,000

Q14. Columbia Hospital has received the following amounts in the month of January 2019 in lieu of various
services rendered by it in the same month. You are required to determine its taxable value for January 2019
from the details furnished below:-
Particulars Amount (in
INR)
Services provided by cord blood bank unit of the nursing home by way of preservation 30,00,000
of stem cells
Hair transplant services 15,00,000
Naturopathy treatments 20,00,000
Plastic surgery to restore anatomy of a child affected due to an accident 30,00,000
Pranic healing treatments 15,00,000
Mortuary Services 10,00,000
Compute the value of taxable supply.

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A.
Particulars Amount (in
INR)
Services provided by cord blood bank unit of the nursing home by way of preservation NIL
of stem cells is exempt vide S. No. 73 of Exemption Notification No. 12/2017-Central
Tax (Rate)
Hair transplant services. It is excluded from exemption vide S. No. 74 of Exemption 15,00,000
Notification No. 12/2017-Central Tax (Rate)
Naturopathy treatment is exempt vide S. No. 74 of Exemption Notification No. NIL
12/2017-Central Tax (Rate)
Plastic surgery to restore anatomy of a child affected due to an accident is exempt NIL
vide S. No. 74 of Exemption Notification No. 12/2017-Central Tax (Rate)
Pranic healing treatments. It is excluded from exemption vide S. No. 74 of Exemption 15,00,000
Notification No. 12/2017-Central Tax (Rate)
Mortuary Services is neither supply of goods nor supply of services under Schedule III NIL

Value of Taxable Supply for the month January 2019 30,00,000

Q15. ‘ABC Farmers Association’ is engaged in providing services relating to agriculture. You are required to
determine its taxable value for January 2019 from the details furnished below:-
Particulars Amount (in
INR)
Cultivation of ornamental flowers 30,00,000
Packing of tomato & chili ketchup 15,00,000
Warehousing of potato chips 20,00,000
Sale of tea on commission basis 30,00,000
Packaging of pulses in 1 KG retail packing 15,00,000
Training of farmers on use of scientific tools and agro machinery 10,00,000
Leasing of vacant land to a stud farm (rearing of horses) 30,00,000
Grading of wheat according to its quality 15,00,000
Testing of samples from plants for pest detection 20,00,000
Rearing of silk worms 30,00,000
Breeding of fish 15,00,000
Supply of farm labour 10,00,000
Leasing of vacant land to a poultry farm 5,00,000
Renting of Agro-machinery 4,00,000
Compute the value of taxable supply.
A.

Particulars Amount (in

INR)
Cultivation of ornamental flowers is exempt vide S. No. 54 of Exemption Notification NIL
No. 12/2017-Central Tax (Rate)
Packing of tomato & chili ketchup (Not an agriculture produce) 15,00,000
Warehousing of potato chips (Not an agriculture produce) 20,00,000
Sale of tea on commission basis 30,00,000
Packaging of pulses in 1 KG packing (it is not necessary to pack pulses for making it 15,00,000
marketable)

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 Training of farmers on use of scientific tools and agro machinery is exempt. Agriculture NIL
extension services are exempt vide S. No. 54 of Exemption Notification No. 12/2017-
Central Tax (Rate)
Leasing of vacant land to a stud farm (rearing of horses) – Rearing of horses is 30,00,000
specifically kept out from exemption
Grading of wheat according to its quality is exempt. Grading which doesn’t alter the NIL
essential characteristics of the agriculture produce but makes it only marketable for
the primary market is exempt vide S. No. 54 of Exemption Notification No. 12/2017-
Central Tax (Rate)
Testing of samples from plants for pest detection is exempt. Agricultural operations NIL
directly related to production of any agriculture produce is exempt vide S. No. 54 of
Exemption Notification No. 12/2017-Central Tax (Rate)
Rearing of silk worms is exempt vide S. No. 54 of Exemption Notification No. 12/2017- NIL
Central Tax (Rate)
Breeding of fish is exempt vide S. No. 54 of Exemption Notification No. 12/2017- NIL
Central Tax (Rate)
Supply of farm labour is exempt vide S. No. 54 of Exemption Notification No. 12/2017- NIL
Central Tax (Rate)
Leasing of vacant land to a poultry farm is exempt. Agriculture means the rearing of all NIL
forms of animals other than rearing of horses. Renting of vacant land is exempt when
used for agriculture purpose vide S. No. 54 of Exemption Notification No. 12/2017-
Central Tax (Rate)
Renting of Agro-machinery vide S. No. 54 of Exemption Notification No. 12/2017- NIL
Central Tax (Rate)
Value of Taxable Supply for the month January 2019 1,10,00,000

Q16. You are required to determine value of taxable supply for January 2019 from the details furnished
below:-
Particulars Amount (in
INR)
Transportation of passengers by inland waterways 15,00,000
Transportation of goods by in inland waterways 20,00,000
Transportation of passengers by air terminating in Mizoram and Meghalaya 30,00,000
Passenger travelling by air from Assam to Kolkata 15,00,000
Passenger travelling by air from Kolkata to Pune 10,00,000
Air Freight related to goods imported into India 16,00,000
Freight relating to domestic transport of goods in India by Air 45,00,000
Vessels Freight relating to goods imported into India 20,00,000
GTA Freight charges for transport of food grain and pulses 30,00,000
GTA Freight charges for transporting small consignment for persons who paid less 15,00,000
than Rs. 750 for each consignment
GTA Freight charges for transporting goods in small vehicles for person who paid less 10,00,000
than Rs. 1,500 per trip
Charges for Elephant/camel joy rides 25,00,000
Compute the value of taxable supply.

112
A.
Particulars Amount (in
INR)
Transportation of passengers by inland waterways is exempt vide S. No. 17 of NIL
Exemption Notification No. 12/2017-Central Tax (Rate)
Transportation of goods by in inland waterways is exempt vide S. No. 18 of Exemption NIL
Notification No. 12/2017-Central Tax (Rate)
Transportation of passengers by air terminating in Mizoram and Meghalaya is exempt NIL
vide S. No. 15 of Exemption Notification No. 12/2017-Central Tax (Rate)
Passenger travelling by air from Assam to Kolkata is exempt vide S. No. 15 of NIL
Exemption Notification No. 12/2017-Central Tax (Rate)
Passenger travelling by air from Kolkata to Pune 10,00,000
Air Freight related to goods imported into India is exempt vide S. No. 19 of Exemption NIL
Notification No. 12/2017-Central Tax (Rate)
Freight relating to domestic transport of goods in India by Air 45,00,000
Vessels Freight relating to goods imported into India 20,00,000
GTA Freight charges for transport of food grain and pulses is exempt vide S. No. 21 of NIL
Exemption Notification No. 12/2017-Central Tax (Rate)
GTA Freight charges for transporting small consignment for persons who paid less NIL
than Rs. 750 for each consignment is exempt vide S. No. 21 of Exemption Notification
No. 12/2017-Central Tax (Rate)
GTA Freight charges for transporting goods in small vehicles for person who paid less NIL
than Rs. 1,500 per trip is exempt vide S. No. 21 of Exemption Notification No. 12/2017-
Central Tax (Rate)
Charges for Elephant/camel joy rides (Elephant/camel joy rides are not classified as 25,00,000
transportation services and will attract GST @ 18% -Circular No. 32/06/2018-GST)

Value of Taxable Supply for the month January 2019 1,00,00,000

Q17. ABC Ltd. Is engage in providing various service to educational institutional and furnishes you with the
following information for the month of January 2019. You are required to determine the value of taxable supply
and GST payable thereon if all charges are exclusive of GST.
Particulars Amount (in
INR)
Renting of immovable property to higher secondary school 12,00,000
Renting of immovable property to commercial coaching center 2,00,000
Transportation service provided to students of higher secondary school 30,00,000
Outdoor catering service provided to educational institutions running approved 5,00,000
vocational courses
Security services provided to pre-nursery school 10,00,000
Housekeeping and cleaning service in college providing recognized graduation degree 6,00,000
Conduct of examination of ICSI 5,00,000
Placement service provided to ICAI 12,00,000
Development of course contain of ICMA 2,00,000
Training of staff of higher Secondary School 1,50,000
Compute the value of taxable supply.

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A.
Particulars Amount (in
INR)
Renting of immovable property to higher secondary school 12,00,000
Renting of immovable property to commercial coaching center 2,00,000
Transportation service provided to students of higher secondary school is exempt vide NIL
S. No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate)
Outdoor catering service provided to educational institutions running approved 5,00,000
vocational courses
Security services provided to pre-nursery school is exempt vide S. No. 66 of Exemption NIL
Notification No. 12/2017-Central Tax (Rate)
Housekeeping and cleaning service in college providing recognized graduation degree 6,00,000
Conduct of examination of ICSI is exempt vide S. No. 66 of Exemption Notification No. NIL
12/2017-Central Tax (Rate)
Placement service provided to ICAI 12,00,000
Development of course contain of ICMA 2,00,000
Training of staff of higher Secondary School 1,50,000
Value of Taxable Supply for the month January 2019 40,50,000

Q18. XYZ Ltd., providing educational services, furnishes you with the following information for the various
service provided by it. It has collected an aggregate sum of Rs. 30 lakhs during the month January 2019 as
under:
Particulars Amount (in
INR)
Receipts of ‘Gyan Vijay’ an industrial training institute (ITI) affiliated to the National 1,20,000
council for vocational Training (NCVT)
Receipts for running a Boarding School 1,00,000
Receipts of ‘GE Educare’ a vocational educational provider affiliated to sector Skill 1,80,000
Council formed under National Skill Development Corporation (NSDC)
Receipts of ‘Kalyan Skill Centre’ an industrial training centre (ITC) affiliated to the state 2,00,000
Council for vocational Training, Rajasthan
Receipts of ‘Scintech a Commercial Coaching institute providing commercial coaching 80,000
in the field of arts and science (no certificate was issued on completion of the training)

Receipts of ‘Commerce concepts’ a Commercial coaching institute providing coaching in 1,20,000

the field of commerce (a certificate was awarded to each trainee after completion of the
training)
Receipts of Gurukul school providing education upto higher secondary 6,00,000
Receipts of ‘Play Kids’ school providing educational upto primary level (such receipts 11,00,000
includes receipts from renting of premises to commercial coaching centre: Rs. 3 lakhs)
Compute the value of taxable supply.
A.
Particulars Amount (in
INR)
Total Receipt 30,00,000
Less:-
Receipts of ‘Gyan Vijay’ an industrial training institute (ITI) affiliated to the National council (-) 1,20,000
for vocational Training (NCVT) is exempt vide S. No. 66 of Exemption Notification No.
12/2017-Central Tax (Rate)

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 Receipts for running a Boarding School is exempt vide S. No. 66 of Exemption Notification (-)
No. 12/2017-Central Tax (Rate) 1,00,000
Receipts of ‘GE Educare’ a vocational educational provider affiliated to sector Skill Council (-) 1,80,000
formed under National Skill Development Corporation (NSDC) is exempt vide S. No. 69 of
Exemption Notification No. 12/2017-Central Tax (Rate)
Receipts of ‘Kalyan Skill Centre’ an industrial training centre (ITC) affiliated to the state (-) 2,00,000
Council for vocational Training, Rajasthan is exempt vide S. No. 66 of Exemption
Notification No. 12/2017-Central Tax (Rate)
Receipts of Gurukul school providing education upto higher secondary is exempt vide S. (-) 6,00,000
No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate)
Receipts of ‘Play Kids’ school providing educational upto primary level is exempt vide S. (-) 8,00,000
No. 66 of Exemption Notification No. 12/2017-Central Tax (Rate). However, receipts from
renting of premises by the school to commercial coaching center shall be liable for GST

Value of Taxable Supply for the month January 2019 10,00,000

Q19. Axis IDFC Bank Ltd. furnishes following information relating to services provided during the month of
January 2019. Compute the value of taxable supply from following information :
Particulars Amount (in
INR)
Amount of commission received for debt collection service 10,00,000
Discount earned on LC discounted 7,00,000
Dealing in sale and purchase of forward contract 20,00,000
Charges received on credit card and debit card facilities extended 4,00,000
Penal interest recovered from the customers for the delay in repayment of loan 11,00,000
Commission received for service rendered to Government for GST collection 7,00,000
Margin earned on reverse repo transactions 4,00,000
Interest on credit card 1,00,000
Administrative charges & Folio charges collected 10,000
Charges for ATM card transactions 5,00,000
Commission received for DD, pay order and cheque collection 4,00,000
A.
Particulars Amount (in
INR)
Amount of commission received for debt collection service Banking services are 10,00,000
provided by way of extending deposits, loans or advances in so far as represented by
interest are exempt. Commission received in not covered in exemption
Discount earned on LC discounted is exempt vide S. No. 27 of Exemption Notification NIL
No. 12/2017-Central Tax (Rate)
Dealing in sale and purchase of forward contract. Forward contract comes under the NIL
purview of “Securities” as per Section 2 (101) of CGST Act, 2017. Securities is excluded
from the definition of Goods U/s 2 (52) & Services U/s 2 (102) respectively. Thus, the
same would not be liable to GST
Charges received on credit card and debit card facilities extended 4,00,000
Penal interest recovered from the customers for the delay in repayment of loan 11,00,000
Commission received for service rendered to Government for GST collection 7,00,000
Margin earned on reverse repo transactions. These are financial instruments of short NIL
term call money market that are normally used by banks to borrow from or lend money to
RBI. The margins, called the repo rate or reverse repo rate in such transactions are
nothing but interest charged for lending or borrowing money. Also interest earned on
reverse repo transactions are exempt from GST

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 Interest on credit card 1,00,000
Administrative charges & Folio charges collected 10,000
Charges for ATM card transactions 5,00,000
Commission received for DD, pay order and cheque collection 4,00,000
Value of Taxable Supply for the month January 2019 42,10,000

Q20. Please comment, whether the following services are exempt under GST or not:
Particulars Amount (in
INR)
Services provided to a recognized sports body by an individual as a player 10,00,000
Services provided to a recognized sports body by an individual as a referee 5,00,000
Services provided to a recognized sports body by an individual as a umpire 2,00,000
Services provided to a recognized sports body by an individual as a coach 1,00,000
Services of a player to IPL Franchisee 7,00,000
Services by a recognized sports body to another recognized sports body 5,00,000
Services provided to a recognized sports body by an individual as a selector 2,00,000
Services provided to a recognized sports body by an individual as a commentators 1,00,000
Services provided to a charitable body by an individual as a player in subsidized fees 50,000
A.
Particulars Taxable
Amount (in
INR)
Services provided to a recognized sports body by an individual as a player is exempt vide NIL
S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)
Services provided to a recognized sports body by an individual as a referee is exempt NIL
vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)
Services provided to a recognized sports body by an individual as a umpire is exempt NIL
vide S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)
Services provided to a recognized sports body by an individual as a coach is exempt vide NIL
S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)
Services of a player to IPL Franchisee. It is not recognized sports body 7,00,000
Services by a recognized sports body to another recognized sports body is exempt vide NIL
S. No. 68 of Exemption Notification No. 12/2017-Central Tax (Rate)
Services provided to a recognized sports body by an individual as a selector 2,00,000
Services provided to a recognized sports body by an individual as a commentators 1,00,000
Services provided to a charitable body by an individual as a player in subsidized fees. It 50,000
is not recognized sports body

Q21. An individual acts as a referee in a football match organized by Sports Authority of India. He has also
acted as a referee in another charity football match organized by a local sports club, in lieu of a lump sum
payment. Discuss whether he is required to pay any GST? (ICAI Module)
A. Services provided to a recognized sports body by an individual inter alia as a referee in a sporting event
organized by a recognized sports body is exempt from GST.
Since in the first case, the football match is organized by Sports Authority of India, which is a recognized sports
body, services provided by the individual as a referee in such football match will be exempt.
However, when he acts as a referee in a charity football match organized by a local sports club, he would not
be entitled to afore-mentioned exemption as a local sports club is not a recognized sports body and thus, GST
will be payable in this case.

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Q22. RXL Pvt. Ltd. manufactures beauty soap with the brand name ‘Forever Young’. RXL Pvt. Ltd. has
organized a concert to promote its brand. Ms. Ahana Kapoor, its brand ambassador, who is a leading film
actress, has given a classical dance performance in the said concert. The proceeds of the concert worth Rs.
1,20,000 will be donated to a charitable organization. Whether Ms. Ahana Kapoor will be required to pay any
GST? (ICAI Module)
A. Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii) dance, or (iii)
theatre are exempt from GST, if the consideration charged for such performance is not more than Rs. 1,50,000.
However, such exemption is not available in respect of service provided by such artist as a brand ambassador.
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap manufactured by RXL Pvt. Ltd., the
services rendered by her by way of a classical dance performance in the concert organized by RXL Pvt. Ltd. to
promote its brand will not be eligible for the above-mentioned exemption and thus, be liable to GST. The fact
that the proceeds of the concert will be donated to a charitable organization will not have any bearing on the
eligibility or otherwise to the above-mentioned exemption.

Q23. Shiva Medical Centre, a Multi-speciality hospital, is a registered supplier in Mumbai. It hires senior
doctors and consultants independently, without entering into any employer-employee agreement with them.
These doctors and consultants provide consultancy to the in-patients - patients who are admitted to the
hospital for treatment – without there being any contract with such patients. In return, they are paid the
consultancy charges by Shiva Medical Centre. However, the money actually charged by Shiva Medical Centre
from the in-patients is higher than the consultancy charges paid to the hired doctors and consultants. The
difference amount retained by the hospital, i.e. retention money, includes charges for providing ancillary
services like nursing care, infrastructure facilities, paramedic care, emergency services, checking of
temperature, weight, blood pressure, etc. The Department took a stand that senior doctors and consultants
are providing services to Shiva Medical Centre and not to the patients. Hence, their services are not the
health care services and must be subject to GST. Further, GST is applicable on the retention money kept by
Shiva Medical Centre. You are required to examine whether the stand taken by the Department is correct.
(RTP NOV 2018)
A. No, the stand taken by the Department is not correct. Services by way of health care services by a clinical
establishment, an authorised medical practitioner or para-medics are exempt from GST vide exemption
notification. Health care services have been defined to mean any service by way of diagnosis or treatment or
care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and
includes services by way of transportation of the patient to and from a clinical establishment, but does not
include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to reconstruct
anatomy or functions of body affected due to congenital defects, developmental abnormalities, injury or trauma.
Circular No. 32/06/2018 GST dated 12.02.2018 has clarified that the entire amount charged by the hospitals
from the patients including the retention money and the fee/payments made to the doctors etc., is towards the
healthcare services provided by the hospitals to the patients and is exempt from GST. In view of the same, GST
is not applicable on the retention money kept by Shiva Medical Centre. The circular also clarifies that services
provided by senior doctors/ consultants/ technicians hired by the hospitals, whether employees or not, are also
healthcare services exempt from GST. Hence, services provided by the senior doctors and consultants hired
by Shiva Medical Centre, being healthcare services, are also exempt from GST.

Q24. Vedanta Hospital, Gurgaon has its own restaurant – Annapurna Bhawan - in the basement which
supplies food to its in-patients (patients admitted in the hospital) as per the advice of the doctor/nutritionist.
Annapurna Bhawan also supplies food to other patients (who are not admitted) or their attendants or visitors.
The food is prepared by the employees of the hospital and nothing is outsourced to any third-party vendors.

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Vedanta Hospital is of the view that all services provided by a clinical establishment are exempt from GST and
thus, it is not liable to pay any tax. You are required to test the correctness of the view taken by Vedanta
Hospital. (ICAI SM)
A. Services by way of health care services by a clinical establishment, an authorised medical practitioner or
para-medics are exempt from GST vide exemption notification. Circular No. 32/06/2018 GST dated 12.02.2018
has clarified that food supplied by the hospital canteen to the in-patients as advised by the doctor/nutritionists
is a part of composite supply of healthcare services and is not separately taxable. Thus, it is exempt from GST.
However, other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are
taxable.
In view of the same, GST is not applicable on the food supplied by Annapurna Bhawan to in-patients as
advised by doctors/nutritionists while other supplies of food by it to patients (not admitted) or their
attendants/visitors are taxable.

Q25. India Corporations Ltd., a Public Sector Undertaking (PSU), has taken loan from a banking company -
Wellness Bank. The loan was guaranteed by the Central Government. India Corporations Ltd. defaulted in the
repayment of such loan. Examine whether the services of guaranteeing of loan by the Central Government, in
the given case, is liable to GST. (ICAI SM)
A. Services supplied by Central Government, State Government, Union territory to their undertakings or Public
Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the
banking companies and financial institutions are exempt from GST vide exemption notification.
In the present case, Central Government has guaranteed the loan taken by India Corporations Ltd. [a PSU],
from Wellness Bank, [a banking company]. Consequently, services provided by the Central Government, in the
form of guarantee of loan, are exempt from tax.

Q26. British High Commission, chief diplomatic mission of the United Kingdom in India, is providing advisory
services to the students willing to travel to UK for further studies. The mission has organized a seminar for
such students and a registration fee of Rs. 5,000 per student has been charged from the students for the
same. You are required to determine whether the advisory services provided by British High Commission are
liable to GST. (ICAI SM)
A. Services by a foreign diplomatic mission located in India are exempt from GST vide exemption notification.
Hence, in the given case, advisory services by British High Commission located in Delhi to the students are
exempt from GST.

Q27. Determine whether GST is payable in respect of each of the following independent services provided by
the registered persons:
(1) Fees charged from office staff for in-house personality development course conducted by Mungerilal
College providing education as part of a curriculum for obtaining a qualification recognised by Indian law - Rs.
10,000.
(2) Bus fees collected from students by Rosemary College providing education as part of a curriculum for
obtaining a qualification recognised by Indian law - Rs. 2,500 per month.
(3) Housekeeping service provided by M/s. Clean Well to Himavarsha Montessori school, a play school, for
cleaning its playground and classrooms - Rs. 25,000 per month.
(4) Info link supplied ‘Tracing Alphabets’, an online educational journal, to students of UKG class of Sydney
Montessori School - Rs. 2,000. (MTP NOV 2019) (ICAI SM)
A. (1) Services provided by an educational institution to its students, faculty and staff are exempt from GST vide
exemption notification. Educational Institution has been defined to mean, inter alia, an institution providing

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services by way of education as a part of a curriculum for obtaining a qualification recognised by any law for the
time being in force. Since Mungerilal College provides education as part of a curriculum for obtaining a
qualification recognised by Indian law, the services provided by it to its staff by way of conducting personality
development course would be exempt from GST.
(2) Since Rosemary College provides education as a part of a curriculum for obtaining a qualification recognised
by Indian law, the transport services provided by Rosemary College to its students are exempt from GST.
(3) Services provided to an educational institution, by way of, inter alia, house-keeping services performed are
exempt from GST vide exemption notification where such services are performed in such educational institution.
However, such exemption is available only when the said services are provided to a pre-school education and
a higher secondary school or equivalent. In view of the above discussion, house-keeping services provided to
Himavarsha Montessori Play School are exempt from GST since housekeeping services have been performed
in such play school itself.
(4) Services provided to an educational institution by way of supply of online educational journals or periodicals
is exempt from GST vide exemption notification. However, such exemption is available only when the said
services are provided to an educational institution providing education as a part of a curriculum for obtaining a
qualification recognised by any law for the time being in force. Therefore, supply of online journal to students of
UKG class of Sydney Montessori School is not exempt from GST.

Q28. Vividh Pvt. Ltd. is a supplier of goods and services at Bangalore, registered in the State of Karnataka,
having turnover of Rs. 200 lakh in the last financial year. It has furnished the following information for the
month of June.
Particulars Amount (Rs.) excluding
GST
Services provided by way of a labour contract for repairing a single residential 1,30,000
unit otherwise than as a part of residential complex
Fee received from students of a competitive exam training academy run by 5,40,000
Vividh Pvt. Ltd.
4 buses each with a seating capacity of 72 passengers given on hire to State 6,00,000
Transport Undertaking
Rent paid to Local Municipal Corporation for premises taken on rent for 2,50,000
competitive exam training academy
Goods transport services received from GTA, tax is payable on such services @ 1,80,000
12%
Compute gross GST liability (ignoring ITC provisions) of Vividh Pvt. Ltd. for the month of June assuming that
the above amounts are exclusive of GST and rate of GST, wherever applicable, is 18% unless otherwise
mentioned. (ICAI SM)
A.
Particulars Value of supply GST @ 18%
(Rs.) (Rs.)
Services provided by way of labour contracts for repairing a single 1,30,000 2,34,000
residential unit otherwise than as a part of residential complex [Services
by way of pure labour contracts of construction, erection,
commissioning, or installation of original works pertaining to a single
residential unit otherwise than as a part of a residential complex are
exempt vide exemption notification. Labour contracts for repairing, are
thus, taxable.]
Fee received from students of competitive exam training academy [Fee 5,40,000 97,200
received from students of competitive exam training academy is taxable

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 as it is not an educational institution since competitive exam training
does not lead to grant of a recognized qualification]
Buses each with seating capacity of 72 passengers given on hire to 6,00,000 Nil
State Transport Undertaking [Services by way of giving on hire to a state
transport undertaking (STU), a motor vehicle meant to carry more than
12 passengers, are exempt from GST vide exemption notification.]
Services on which tax is payable under reverse charge:
Rent paid to Local Municipal Corporation [GST is payable under reverse 2,50,000 45,000
charge in case of renting of immovable property services supplied by a
local authority to a registered person.]
GTA services availed [Since GTA is paying tax @ 12%, tax is payable 1,80,000 Nil
under forward charge by GTA only and not by Vividh Pvt. Ltd.]
Gross GST Payable 3,76,200

Q29. Rahul Agri Millers Ltd., located in Haryana, is engaged in customs milling of paddy into rice. It does not
pay GST on the same as it is of the view that the process of milling of paddy into rice is exempt under GST
since is an intermediate production process in relation to cultivation of plants. However, Department demands
tax on said activity contending that it is not eligible for said exemption. You are required to determine the
veracity of the Department’s contention. (MTP MAY 2019)
A. Yes, the contention of the Department is correct. As per Notification No. 12/2017 CT (R) dated 28.06.2017,
carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all
life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or
agricultural produce is exempt under GST.
Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a process
carried out after the process of cultivation is over and paddy has been harvested. Further, processing of paddy
into rice is not usually carried out by cultivators, but by rice millers. Milling of paddy into rice also changes its
essential characteristics.
Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to
cultivation of plants for food, fibre or other similar products or agricultural produce. In view of the above, it is
clarified by CBIC that milling of paddy into rice is not eligible for exemption under said notification. Thus, GST
is payable on the said activity.

Q30. Whether interest on late payment will form part of value to be considered for exemption limit of Rs.
7,500/- when debit note for the same has been raised especially since the interest is taxable only when the
same is received? e.g., monthly service charges billed by society is Rs. 6,500 and interest on outstanding
dues is Rs. 1,500. Since, interest is taxable on receipt basis as per time of supply provision then no GST is
leviable on Rs. 6,500 which is below exemption limit of Rs. 7500/- even though tax invoice is of Rs. 8,000/-
(Rs. 6,500 being maintenance or service charges and Rs. 1,500 interest is due to outstanding maintenance
charges.
A. Determination of value is one of the most important factors in the judicious levying of indirect taxes. It is
apparent from the Goods and Services Tax (GST) law that a sincere endeavour has been made to do away
with the contentious valuation issues that emerged particularly under the erstwhile Service Tax and Central
Excise laws. One such aspect is interest/penalty/late fee for delayed payment of consideration for any supply
which has to be specifically included in the value of supply of good or service, as the case may be. As per
section 15(2)(d), the value of supply shall include interest or late fee or penalty for delayed payment of any
consideration for any supply. Thus, in the given case since the principal supply is exempted, the interest for
belated payment of consideration should also be exempted as it is to be added to the value of the principal
supply and interest cannot be treated as a separate supply. Since, interest is to be included in the value of

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supply, in the second scenario the supply value is Rs. 8000 which exceeds the exempt limit of Rs. 7500, and
hence the entire sum of Rs. 8000 is taxable.

Q31. Services by way of classical music performance for consideration upto Rs. 1,50,000/- is exempt from
GST. Whether the same is exempt in case of classical music performance on digital platform?
A. Entry no. 78 of NN 12/2017-CTR-28.06.2017 does not specifically exclude performance on digital platform,
classical music performance is exempt where the consideration charged for such performance is not more than
Rs. 1,50,000/- subject to the condition that the artist does not provide the service as a brand ambassador.

Q32. Whether the service rendered by senior advocate to advocate or firm of advocate is taxable under GST?
A.
(a) When a senior advocate is providing his legal services, directly or indirectly, including where contract for
provision of such service has been entered through another advocate or a firm of advocates, or by a firm of
advocates, to a business entity, such services will be subject to RCM provisions.
(b) When a senior advocate is providing his legal services, to any person other than a business entity, or a
business entity having aggregate turnover up to Rs. 20 Lakhs, then such services would be exempt from tax.
(c) When a senior advocate is providing his legal services to an advocate or a firm of advocates, other than
the situations at (a) or (b) above, then the recipient would be a business entity; hence such supply of services
would again be subject to RCM.

Q33. Hotels are getting bookings through online platforms like Booking.com. These platforms have no place
of business in India. Hotels pay commission to these platforms for such bookings. It may be noted that
(a) Service receiver is registered under GST in India (b) Service provider has no place of business in India
and is providing service from outside India. Whether hotels availing these services are liable to pay GST
under RCM on the commissions paid to such booking portals.
A. As regards commission paid to intermediaries, the place of supply is dictated by section 13(8)(b) of the
IGST Act and when place of supply is outside India, GST on reverse charge basis is not applicable on the
hotel in India.
Online portals operate on different business models and not always on commission basis. Online portal
collects the entire amount from the customer and pay the hotel tariff after deducting their charges or fee.
When commission is paid by hotel to online portal, total cost of accommodation must be known to the
customer. When total cost of accommodation is not known to the customer, online portal cannot claim to be a
commission agent. RCM will not apply only when the online portal acts as a commission agent (intermediary)
and the hotel in India records gross tariff as income and books commission paid as expense.
When the hotel receives ‘net tariff’, online portal will not be an intermediary. It will provide services of booking
accommodation to customers in India and hotel will provide accommodation services to online portal. Place of
supply of services provided by online portal to customers will be in India resulting in importation of services by
the customers thereby triggering reverse charge liability in case of customers using the said service in the
course or furtherance of business. Place of supply of services provided by hotel will also be in India and the
hotel will be liable to pay tax thereon under forward charge.

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 Section 10 of Place of Supply of Goods other than Supply of Goods Imported into, or
IGST Act, 2017 Exported from India
Section 11 of Place of Supply of Goods Imported into, or Exported from India
IGST Act, 2017
Section 12 of Place of Supply of Services where location of supplier of service and
IGST Act, 2017 the location of the recipient of service is in India
Section 13 of Place of Supply of Services where location of supplier or location of
IGST Act, 2017 recipient is outside India

Section 10 (IGST Act, 2017) Place of Supply of Goods other than

Supply of Goods Imported into, or Exported from India

Provision of Section 10 override provision of Section 7 (1) of IGST Act, 2017 {supply of goods}.

Provision Place of Supply Remarks

Sec. 10(1)(a)
Movement of goods is involved Location of goods The location of the goods is a question of
Whether by – where delivery fact to be ascertained by observing the
- Supplier terminates to the journey which the goods supplied make
- Recipient recipient from their origin from supplier and
- Any other person terminate with recipient.
Example 1: A Ltd., Mumbai (supplier) supply to B Ltd, Delhi (recipient). The place of supply will be Delhi
whether supplier supply to recipient or recipient take delivery from supplier’s place or recipient engaged
transporter to take delivery on his behalf.
Example 2: Mr. A working in Mumbai, while his official visit to Delhi purchased a laptop from electronic
showroom in Delhi. He immediately took delivery of laptop in showroom. The POS may be considered as
‘Delhi’ (CGST & SGST) where supplier mention address for delivery in his invoice as ‘Delhi’. The POS may
be also considered as ‘Mumbai’ (IGST) where supplier mention address for delivery in his invoice as
‘Mumbai’.
In terms of clause (e) of rule 46 of CGST Rules, a tax invoice issued by registered person is required to
contain, name and address of the recipient and the address of delivery, along with the name of the State
and its code, if such recipient is unregistered and where the value of the taxable supply is Rs. 50,000 or
more.
Sec. 10(1)(b)
If the goods are delivered to – Principal place of It is important to identify the two supplies
- Any person, on the direction of a business of such – by supplier to third party and by third
third person, before or during third person party to recipient.
movement of goods, it shall be This provision deals only with the first
deemed that the said person limb of supply {Second limb according to
has received the goods. Section 10(1)(a)}, that is, supply by
Irrespective of: - supplier to third party.
- Whether such person acting as This is also called “Bill to Ship to” model.
an agent or otherwise, **Let say supplier raise invoice on
- Whether transfer made by way 15.05.2019 on third person and remove
of transfer of documents of title the goods for delivery. The third person
of the goods or otherwise also need to raise invoice on same day

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 according to provisions of Section
31(1)(a).
Supplier & his Buyer & his Recipient & his Place of supply Place of supply
Location Location location (first limb) (second limb)
A Ltd., Mumbai B Ltd. Mumbai C Ltd. Delhi Mumbai Delhi
A Ltd., Mumbai B Ltd. Chennai B Ltd. Mumbai Chennai Mumbai
A Ltd., Mumbai B Ltd. Kolkata C Ltd. Delhi Kolkata Delhi
A Ltd., Mumbai B Ltd. Chennai C Ltd. Delhi Chennai Delhi
Sec. 10(1)(c) It is not a case where there is difficulty in
Movement of goods is not involved Location of goods movement of the goods, but this is goods
at the time of the ought not to move and when their
delivery to the delivery to the recipient will stand
recipient complete
Example 4: A Ltd., Mumbai bought office in Delhi with pre-installed office furniture & fixtures. The purchase
of office is outside the purview of GST (Schedule III) but office furniture & fixtures will be liable to GST.
Since there is no movement of furniture & fixtures, the place of supply is their location i.e. Delhi.
Example 5: Mr. Amit of Delhi has rented an electric generator to Mr. Namit of Jaipur. The electric generator
has been installed in the factory of Mr. Namit which is situated in Indore. Later on Mr. Namit purchased the
electric generator from Mr. Amit. POS = Indore.
Sec. 10(1)(d) Please note that in the case of assembly
Goods are assembled or installed Place of such or installation, it is a supply that is not
installation or ‘works contract’. This is because works
assembly contracts, in GST, are treated as supply
of service and that too only if the resultant
is an immovable property. The provisions
of this section do not apply to works
contracts.
Supplier & his Recipient & his Place of Place of Supply Tax Leviable
location location installation/assembly
A Ltd., Mumbai B Ltd. Mumbai Delhi Delhi IGST
A Ltd., Mumbai B Ltd. Chennai Indore Indore IGST
A Ltd., Mumbai B Ltd. Kolkata Guwahati Guwahati IGST
A Ltd., Mumbai B Ltd. Chennai Mumbai Mumbai CGST/SGST
Sec. 10(1)(e) The place of supply appointed under this
Goods supplies on board a conveyance Location as which sub-section is the supply by the operator
i.e. vessel, an aircraft, a train or a motor such goods are of the conveyance or someone else
vehicle taken on board during journey to the passenger
Example 7: A Ltd. Mumbai entered into contract with the ABC airlines for the supply of food to the
passenger on Mumbai – Delhi route. The goods were loaded in Kolkata (previous journey leg), so in this
case place of supply is Kolkata.
Example 8: A boarded Rajdhani train from Mumbai along with food items. He sold all the food items
between Mumbai to Delhi journey. The place of supply is Mumbai where food items loaded.
Example 9: A is travelling from Delhi to Guwahati via train. He ordered dinner to pantry person. Food items
were loaded in Kanpur and delivered to him in Allahabad. The place of supply is Kanpur.
Example 10: Mr. X of Delhi has supplied watches to Airlines at Delhi airport. Such watches were further
supplied to passenger during their journey from Mumbai to Kolkata. There are 2 transactions. Transaction
between Mr. X & Airlines, POS is going to be Delhi according to Section 10(1)(a). Transaction between
Airlines & passenger, POS is going to be Delhi according to Section 10(1)(e).
Sec. 10(2) However, as of now no such peculiar
Where place of supply cannot be As determined in circumstances has come for which
determined the manner separate provisions for POS has been
prescribed prescribed.

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Section 11 (IGST Act, 2017) Place of Supply of Goods Imported
into, or Exported from India
Type Place of Supply
Sec. 11(a) Goods imported in India Location of the importer
Sec. 11(b) Goods exported from India Location outside India

IGST will be payable, at the time of import of goods from custom.

IGST will be payable on value determined under section 3 of Customs Tariff Act on value determined under
said Act at the point where duties of customs are levied on the said goods under section 12 of Customs Act,
1962 – proviso to section 5 (1) of IGST Act.

Example 11: A Ltd., Delhi imported goods from B Ltd., China. Location of supplier is China. Place of supply is
Delhi (taxable territory). It will be subject to IGST.

Example 12: A Ltd., Delhi exported goods to B Ltd., China. Location of supplier is Delhi (taxable territory).
Place of supply is China (outside India). It will be treated as exported.

Example 13: A Ltd., Delhi received order from B Ltd., to deliver goods in USA. A Ltd. sourced these goods
from UK & delivered this in USA. The transactions will not be considered as import as the goods being sold
have not been brought into India (not crossed custom barrier) even though both the supplier & recipient are in
India (Para 7 of Schedule III).

Example 14: A Ltd., Delhi received order from B Ltd., China to deliver goods at Maharashtra. As per section 2
(5), export of goods means taking goods out of India to a place outside India. A Ltd., Delhi is in India &
delivering goods in India i.e. Maharashtra. This will be considered as Inter-State supply and will be subject to
IGST. Goods has not been taken out as per section 2 (5), so will not be considered as export.

Example 15: ABC Ltd. of Madhya Pradesh imported 100 kg of goods from XYZ Pte. ltd. of Singapore. The
goods are received at JNPT, Mumbai. If

✓ Goods are cleared from customs and brought back to place of business at Madhya Pradesh of ABC
Ltd., POS shall be the location of importer i.e. Madhya Pradesh;
✓ Goods are cleared from customs and directly supplied to customer in Maharashtra. This transaction
for supply of goods of ABC Ltd. of Madhya Pradesh to customer in Maharashtra will be treated as
inter-State supply of goods & IGST shall be levied.
✓ Goods are cleared from customs but are stored in ABC Ltd.’s warehouse in Maharashtra for supply
to made later. According to definition of ‘place of business’ U/s 2 (85) of the CGST Act, includes ‘a
warehouse’. Thus ABC Ltd. will be required to take registration in Maharashtra. Later while supplying
goods from Maharashtra warehouse to customer in Maharashtra, the transaction will be treated as
intra-State supply of goods.
✓ Goods are cleared from customs and sent to job-worker in Tamil Nadu. This is not supply so will be
delivered with delivery challan and e-way bill.

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Section 12 (IGST Act, 2017) Place of Supply of Services where
location of supplier & recipient are in India
Provision of Section 12 override provision of Section 7 (3) of IGST Act, 2017 {supply of
services}.
Provision
Sec. 12(1)
This section deals with the situation
where supplier of services and location
of the recipient of service, both are in
India.
Sec. 12(2)
This sub-section applies except the
services specified in Sec. 12(3) to Sec.
12(14).
Example 16: ABC & Co., a tax professional firm based in Ahmedabad rendering professional services to
XYZ Ltd. a company registered in GST for their office in Mumbai. The POS shall be Mumbai.
Let say in above example, if tax manager of XYZ Ltd., visit Ahmedabad to discuss tax matter, still POS
shall be Mumbai.
Sec. 12(3)(a)
Directly in relation to an immovable
property, including services provided by
architects, interior decorators,
surveyors, engineers and other related
experts or estate agents, any service
provided by way of grant of rights to use
immovable property or for carrying out
or co-ordination of construction work.
This includes any services ancillary as
per section 12(3)(d).
Sec. 12(3)(b)
By way of lodging accommodation by a
hotel, inn, guest house, home stay, club
or campsite, by whatever name called,
an including a house boat or any other
vessel. This includes any services
ancillary as per section 12(3)(d).
Sec. 12(3)(c)
By way of accommodation in any
immovable property for organizing any
marriage or reception or matters related
thereto, official, social, cultural, religious
or business function including services
provided in relation to such function at
Place of Supply Remarks
It looks like sub-section (2) is a
residual sub-section. Sub Section
(3) to sub section (14) is a
specific section which determines
place of supply on specific
If person is registered then transactions. Hence, it may be
Place of supply will be concluded that, to determine
location of such person. Place of Supply, we need to first
Person is other than a refer to sub-section (3) to sub
registered person then if section (14) first, then if the
address on record exists transaction doesn’t fall in any of
then location of recipient sub-section, then place of supply
otherwise location of shall be decided by sub-section
supplier (2)
➢ General – Location *Proportion to the value for
at which it is located services separately collected or
or intended to be determined in terms of the
located contract or agreement entered
➢ If located outside into in this regard or, in the
India, Place of absence of such contract or
supply = Location of agreement, on such other basis
recipient as may be prescribed.
➢ If located in more
than one As per Section 7(5)(b) of IGST
State/Union Act, supply of goods or services
Territory then place or both to SEZ unit or SEZ
of supply will be developer is inter-State supply.
proportionate* This is specific provision and
hence will prevail over general
provision as contained in section
12(3)(c) of IGST Act. Hence, in
case of supply of such services,
IGST will be payable and not
CGST and SGST/UTGST. If such
supply is for authorized
operations, IGST will be refunded
if paid or ITC refund can be
obtained if supplied under
LUT/Bond subject to
125
 Provision Place of Supply Remarks
such property. This includes any endorsement of specified officer
services ancillary as per section of SEZ.
12(3)(d). [Circular No. 48/22/2018 Dated
14.06.2018]
Example 17: A company in Kolkata contracts with a Delhi based architect to design a structure in Mumbai.
POS is place of immovable property i.e. Mumbai.
Example 18: A from Mumbai, goes on official trip to Bangalore and stay in hotel for one night. POS is
Bangalore.
Example 19: A from Jaipur, arranged his son wedding in Resort at Ooty, Tamil Nadu. The POS is Ooty,
Tamil Nadu.
Example 20: A Mumbai based builder provides construction services to Chennai based company in respect
of construction of its factory in South Africa. POS will be Chennai.
Example 21: Let say an interior decorator is engaged by a retail chain to design a common décor for all its
store in India, this service would not be directly related to immovable property. The default provision i.e.
Section 12 (2) of the IGST Act will apply in this case.
Circular No. 103/22/2019-GST dated 28th June 2019
As per section 12(3) of IGST Act, in case of services supplied in relation to immovable property, place of
supply will be the location of such immovable property. Services provided by port:
✓ Some of the services provided by port in relation to cargo handling are as under:
• service in respect of arrival of wagons at port;
• haulage of wagons inside port area up to place of unloading;
• siding of wagons inside the port;
• unloading of wagons;
• movement of unloaded cargo to berth;
• shipment/ loading of vessel.
It is clarified that the above services are ancillary or related to cargo handling services and are not related
to immovable property. Accordingly, place of supply of such services shall be determined as per section
12(2) or section 13(2) of IGST Act, as the case may be, depending upon contractual terms between the
supplier and recipient.
Rule 4 of IGST Rules
Where such immovable property or boat or vessel is located in more than one State or Union territory, shall
be taken as being in each of the respective States or Union territories, and in the absence of any contract
or agreement between the supplier of service and recipient of services for separately collecting or
determining the value of the services in each such State or Union territory, as the case maybe, shall be
determined in the following manner namely:-
(i) in case of services provided by way of lodging accommodation by a hotel, inn, guest house, club or
campsite, by whatever name called (except cases where such property is a single property located
in two or more contiguous States or Union territories or both) and services ancillary to such
services, the supply of services shall be treated as made in each of the respective States or Union
territories, in proportion to the number of nights stayed in such property;
(ii) in case of all other services in relation to immovable property including services by way of
accommodation in any immovable property for organising any marriage or reception etc., and in
cases of supply of accommodation by a hotel, inn, guest house, club or campsite, by whatever
name called where such property is a single property located in two or more contiguous States or
Union territories or both, and services ancillary to such services, the supply of services shall be
treated as made in each of the respective States or Union territories, in proportion to the area of the
immovable property lying in each State or Union territory;
(iii) in case of services provided by way of lodging accommodation by a house boat or any other vessel
and services ancillary to such services, the supply of services shall be treated as made in each of
the respective States or Union territories, in proportion to the time spent by the boat or vessel in
each such State or Union territory, which shall be determined on the basis of a declaration made to
the effect by the service provider.

126
 Provision Place of Supply Remarks
Example 22: A hotel chain X charges a consolidated sum of Rs. 30,000/- for stay in its two establishments
in Delhi and Agra, where the stay in Delhi is for 2 nights and the stay in Agra is for 1 night. The place of
supply in this case is both in the Union territory of Delhi and in the State of Uttar Pradesh and the service
shall be deemed to have been provided in the Union territory of Delhi and in the State of Uttar Pradesh in
the ratio 2:1 respectively. The value of services provided will thus be apportioned as Rs. 20,000/- in the
Union territory of Delhi and Rs. 10,000/- in the State of Uttar Pradesh .

Example 23: There is a piece of land of area 20,000 square feet which is partly in State S1 say 12,000
square feet and partly in State S2, say 8000 square feet. Site preparation work has been entrusted to T.
The ratio of land in the two states works out to 12:8 or 3:2 (simplified). The place of supply is in both S1 and
S2. The service shall be deemed to have been provided in the ratio of 12:8 or 3:2 (simplified) in the States
S1 and S2 respectively. The value of the service shall be accordingly apportioned between the States.

Example 24: A company C provides the service of 24 hours accommodation in a houseboat, which is
situated both in Kerala and Karnataka in as much as the guests board the house boat in Kerala and stay
there for 22 hours but it also moves into Karnataka for 2 hours (as declared by the service provider). The
place of supply of this service is in the States of Kerala and Karnataka. The service shall be deemed to
have been provided in the ratio of 22:2 or 11:1 (simplified) in the states of Kerala and Karnataka,
respectively. The value of the service shall be accordingly apportioned between the States.
Sec. 12(4)
Restaurant & catering services, Location where the services Only listed are covered here. Let
personal grooming, fitness, beauty are actually performed say if photography services, then
treatment, health service including it is not covered here.
cosmetic and plastic surgery
Example 25: Mrs. A from Mumbai, went to Udaipur and availed Beauty Parlour services. The POS is
Udaipur.
Sec. 12(5)
Services in relation to Training and
performance appraisal to –
➢ A registered person ➢ Location of such
person
➢ A person other than registered ➢ Location where the
person services are
actually performed
Example 26: ABC Ltd., Delhi has entered into a contract with XYZ Ltd., Chennai for training and
performance appraisal of their employees. Training was conducted at Pune, Maharashtra. In case ABC
Ltd. is registered then POS will be Delhi. In case ABC Ltd. is not registered then services where it is
actually performed i.e. Pune, Maharashtra.
Sec. 12(6)
Services provided by way of admission Place where the event is
to a cultural, artistic, sporting, scientific, actually held or where the
educational, entertainment event or park or such other place is
amusement park or any other place and located
services ancillary thereto
Example 27: Mr. A from Mumbai, did online booking for Kaziranga National Park, Assam and hired a cab to
be taken around. The place of supply is Kaziranga National Park, Assam and hiring a cab is ancillary
service since it is being taken to make trip more convenient. The POS remain same.
Sec. 12(7)
Services provided by way of, -
(a) organization of a cultural, artistic,
sporting, educational or entertainment
event including supply of services in

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 Provision Place of Supply Remarks
relation to a conference, fair, exhibition,
celebration or similar events; or

(b) services ancillary to organization of

any of the events or services referred to
in clause (a), or assigning of
sponsorship to such events, -
➢ A registered person ➢ Location of such
person
➢ A person other than registered
person
-If event is held in India ➢ Place where event
is actually held
-If event is held outside India ➢ Location of the
recipient
If located in more than one
State/Union Territory then
place of supply will be
proportionate*
This sub-section mainly
deals with the
organization of events
& not the admission to
the events which is
specifically covered &
discussed in Section
12(6) of IGST Act
*Proportion to the value for
services separately collected or
determined in terms of the
contract or agreement entered
into in this regard or, in the
absence of such contract or
agreement, on such other basis
as may be prescribed.

Example 28: ABC Ltd., Mumbai held exhibition event in USA. ABC Ltd. hires these services from XYZ Ltd.,
Delhi. The POS is Mumbai assuming that ABC Ltd. is registered. If ABC Ltd. is unregistered then POS is
again Mumbai. If let say this exhibition had been held at Ahmedabad, Gujarat then POS is place of
exhibition i.e. Ahmedabad (considering ABC Ltd. unregistered).
Example 29: Taxongo, a registered firm in Delhi, hired ABC & Associates registered in Mumbai for
conducting Taxation seminar in Marriot Hotel in Kolkata. Further, Bharat Ltd. registered in Kolkata offered
to sponsor the entire seminar. Mr. Amit from Delhi (unregistered person) registered himself for the seminar.
Services Supplier Recipient POS Remarks
Supplied
Organization of ABC & Associates Taxongo Delhi As the recipient is registered,
taxation seminar (registered in (registered in therefore POS is the location of
Mumbai) Delhi) registered recipient {Section
12(7)}
Sponsorship Taxongo Bharat Ltd. Kolkata As the recipient is registered,
Services (registered in (registered in therefore POS is the location of
Delhi) Kolkata) registered recipient {Section
12(7)}
Admission to Taxongo Mr. Amit from Kolkata POS is location where the event
taxation seminar (registered in Delhi actually held {Section 12(6)}
Delhi) (unregistered
person)
Rule 5 of IGST Rules
Where the services are supplied to a person other than a registered person, the event is held in India in
more than one State or Union territory and a consolidated amount is charged for supply of such services,
shall be taken as being in each of the respective States or Union territories, and in the absence of any
contract or agreement between the supplier of service and recipient of services for separately collecting or
determining the value of the services in each such State or Union territory, as the case maybe, shall be
determined by application of the generally accepted accounting principles.

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 Provision Place of Supply Remarks
Example 30: An event management company E has to organise some promotional events in States S1
and S2 for a recipient R. 3 events are to be organised i.e. one in S1 and 2 events in S2. They charge a
consolidated amount of Rs.10,00,000 from R. The place of supply of this service is in both the States S1
and S2. Say the proportion arrived at by the application of generally accepted accounting principles is 3:2.
The service shall be deemed to have been provided in the ratio 3:2 in S1 and S2 respectively. The value of
services provided will thus be apportioned as Rs. 6,00,000/- in S1 and Rs. 4,00,000/- in S2 .
Sec. 12(8)
Services by way of transportation of POS shall be decided on the
goods, including by mail or courier to, - basis of who is paying freight i.e.
➢ A registered person ➢ Location of such supplier or recipient.
person
➢ A person other than registered ➢ Location at which
person such goods are
Provided that where the transportation handed over for
of goods is to a place outside India, the their transportation
place of supply shall be the place of
destination of such goods.
Example 31: ABC Ltd., Mumbai is a registered company. It sends courier to Delhi through XYZ courier
company. Since ABC Ltd. is registered the place of supply is Mumbai. If suppose ABC Ltd. is unregistered
and his representative sends courier from Bangalore to Chennai then POS is Bangalore.
Example 32: The registered person (‘XYZ’) in India has to export certain goods to China. The contract to
transport goods by road (‘GTA service’) has been entered with the goods transport agency (‘supplier’)
located in India. In light of the amended provision, the place of supply of service provided by the supplier
shall be the destination of goods i.e. China. The place of supply shall neither be the location of XYZ nor the
location of the supplier in India.
Sec. 12(9)
Passenger transportation service to,
➢ A registered person ➢ Location of such The return journey shall be
person treated as a separate journey,
➢ A person other than registered ➢ Place where the even if the right to passage for
person passenger embarks onward and return journey is
on the conveyance issued at the same time.
for a continuous
journey
Where the right to passage is given for
future use and the point of embarkation
is not known at the time of issue of right
to passage, the POS of such service
shall be determined in the manner
specified in sub-section (2), i.e. the
default provision.
Example 33: Mr. A, Mumbai (registered person) travels from Bangalore to Chennai by Jet Airways. He
bought this ticket from Jet Airways, Kolkata. The POS is Mumbai.
Example 34: Mr. A, Mumbai (unregistered person) travels from Bangalore to Chennai to Kochi (continuous
journey) by Jet Airways. He bought this ticket from Jet Airways, Bangalore. The POS is Bangalore (CGST).
If suppose, Mr. A also booked return flight along with this then this will be separate journey & the POS is
Kochi & it will be subject to IGST.
Sec. 12(10)
Services on board a conveyance, Location of the first
including a vessel, an aircraft, a train or scheduled point of
a motor vehicle, departure of that
conveyance for the journey

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 Provision
Example 35: Mr. A, Mumbai travels from Nepal-Kolkata-Mumbai. During Kolkata-Mumbai leg, he has
ordered movie on demand. Since his first scheduled point of departure is Nepal which is outside the taxable
territory, so it is not liable to tax.
Sec. 12(11)
Telecommunication services including
data transfer, broadcasting, cable and
direct to home television services to any
person shall-
(a) Fixed telecommunication line,
leased circuits, internet leased circuit,
cable or dish antenna,
(b) Mobile connection and Internet on
post-paid basis
(c) Mobile connection, Internet
connection, DTH provided on pre-
payment basis through a voucher or
any other means –
(i) through a selling agent or a re-seller
or a distributor of subscriber identity
module card or re-charge voucher
Place of Supply Remarks
Where the leased circuit is
installed in more than one State
or UT and a consolidated amount
is charged for supply of services
➢ Place of installation relating to such circuit, the POS
of such services shall be taken as
being in each of the respective
States or UT in proportion to the
➢ Billing Address on value for services separately
the record of collected or determined in terms
supplier of services of the contract or agreement
entered into in this regard or, in
the absence of such contract or
agreement, on such other basis
as may be prescribed.
➢ Address of the
selling agent/re-
seller/distributor as
per the record of the
supplier at the time
of supply

(ii) by any person to the final subscriber, ➢ Location where pre-

payment received
or such vouchers
are sold
If such pre-paid service is availed or the ➢ Location of the
recharge is made through internet recipient of services
banking or other electronic mode of on the record of the
payment supplier of services

(d) in other cases,

(i) if address of the recipient as per the ➢ Address of the
records of the supplier of services is recipient as per the
available records of the
supplier of services

(ii) where such address is not available ➢ Location of supplier

of services
Example 36: Mr. A, Mumbai has connection of fixed line in Mumbai with billing address Kolkata. The POS is
Mumbai.
Example 37: Mr. A, Mumbai has postpaid mobile connection with billing address Kolkata. The POS is
Kolkata.
Example 38: Mr. A, Mumbai has prepaid mobile connection and he has bought prepaid voucher online. His
address in mobile company is Kolkata. The POS is Kolkata.
Example 39: Mr. A, Mumbai has bought prepaid card from seller in Delhi. The POS is Delhi.

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 Provision Place of Supply Remarks
Rule 6 of IGST Rules
In the absence of any contract or agreement between the supplier of service and recipient of services for
separately collecting or determining the value of the services in each such State or Union territory, as the
case maybe, shall be determined in the following manner, namely:-

(a) The number of points in a circuit shall be determined in the following manner:
(i) in the case of a circuit between two points or places, the starting point or place of the circuit and the
end point or place of the circuit will invariably constitute two points;
(ii) any intermediate point or place in the circuit will also constitute a point provided that the benefit of
the leased circuit is also available at that intermediate point;
(b) the supply of services shall be treated as made in each of the respective States or Union territories, in
proportion to the number of points lying in the State or Union territory.

Example 40: A company T installs a leased circuit between the Delhi and Mumbai offices of a company C.
The starting point of this circuit is in Delhi and the end point of the circuit is in Mumbai. Hence one point of
this circuit is in Delhi and another in Maharashtra. The place of supply of this service is in the Union territory
of Delhi and the State of Maharashtra. The service shall be deemed to have been provided in the ratio of
1:1 in the Union territory of Delhi and the State of Maharashtra, respectively.
Example 41: A company T installs a leased circuit between the Chennai, Bengaluru and Mysuru offices of
a company C. The starting point of this circuit is in Chennai and the end point of the circuit is in Mysuru.
The circuit also connects Bengaluru. Hence one point of this circuit is in Tamil Nadu and two points in
Karnataka. The place of supply of this service is in the States of Tamil Nadu and Karnataka. The service
shall be deemed to have been provided in the ratio of 1:2 in the States of Tamil Nadu and Karnataka,
respectively.
Example 42:: A company T installs a leased circuit between the Kolkata, Patna and Guwahati offices of a
company C. There are 3 points in this circuit in Kolkata, Patna and Guwahati. One point each of this circuit
is, therefore, in West Bengal, Bihar and Assam. The place of supply of this service is in the States of West
Bengal, Bihar and Assam. The service shall be deemed to have been provided in the ratio of 1:1:1 in the
States of West Bengal, Bihar and Assam, respectively.
Sec. 12(12)
Banking and other financial services, ➢ Location of the
including stock broking services to any recipient of services
person as per the records
of the supplier
If the location of recipient of services is ➢ Location of the
not on the records of the supplier supplier of services

Example 43: Mr. A, Mumbai registered person buys shares from a broker in Delhi on NSE (Mumbai). The
POS is Mumbai (location of recipient of services as per record of supplier of services).
Example 44: Mr. A, Mumbai avail some services from SBI, Chennai. If the service is linked with account
then the POS is location of recipient of supplier i.e. Mumbai. If it is not available in record then Chennai.
Sec. 12(13)
Insurance services, -
(a) to a registered person ➢ Location of such
person
(b) to a person other than a registered ➢ Location of the
person recipient of services
on the records of
the supplier of
services.
Example 45: Mr. A, Mumbai is an unregistered person, take travel insurance policy from Delhi to Kolkata
flight. The POS is Mumbai.

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 Provision Place of Supply Remarks
Sec. 12(14)
Advertisement services to the Central Place of supply shall be Value of such supplies specific to
Government, a State Government, a taken as being in each of each State or UT shall be in
statutory body or a local authority meant such States or Union proportion to :
for the States or Union territories Territories • Amount attributable to
identified in the contract or agreement services provided by way
of dissemination in the
respective States or UT
as may be determined in
terms of the contract or
agreement entered into in
this regard or,
• In the absence of such
contract or agreement,
on such other basis as
may be prescribed.
Example 46: Gujarat Government gives an advertisement contract to an advertising agency (registered in
Ahmedabad) to promote Gujarat tourism throughout the country. The place of supply is in all the States and
Union Territories of India.
Example 47: Delhi Government gives an advertisement contract to an advertising agency registered in
Delhi to promote its ‘Every Child Can Read’ campaign in Delhi. The place of supply is Delhi.

If both supplier & recipient of service are in India, GST may be payable even if service is provided outside
India, if the services falls under residual category i.e. tour operator in India providing service to Indian tourist
outside India will be liable to pay GST {Para 5.8-2 of CBE&C ‘Taxation of Services : An Education Guide’
published on 20-6-2012 had given this illustration}

Rule 3 (IGST Rules 2017) Supply of advertisement services to the Central Government, a State
Government, a statutory body or a local authority (Notification No. 12/2017 Integrated (Rate) Dated 15-
11-2017)
Under section 12(14) of the IGST Act, 2017 in the absence of any contract between the supplier of service
and recipient of services, valuation shall be determined in following manner:-

Rule In case of Value of supply will be

3(a) Newspaper and On the basis of number of editions in each State/UT
publications
Example 48: ABC Government agency, release order to a DEF newspaper (Head office is in Delhi) for an
advertisement ‘Beti Bachao Beti Padhao’ to be published in the edition of Delhi, Pune, Mumbai, Lucknow
and Jaipur. So place of supply will be Delhi, Maharashtra, UP & Rajasthan and invoice needs to be raised
on the basis of ratio of editions in above State.
3(b) Printed material like On the basis of number of such material in each State/UT
pamphlets, leaflets,
diaries, calendars, T-
Shirts etc.
3(c)(i) Hoardings other than Hoardings located in each State/UT
those on trains
3(c)(ii) Advertisements placed on Ratio of the length of the railway track in each State/UT for that
trains train
Example 49: ABC places an order on KL for advertisements to be placed on a train with regard to the
‘Janani Suraksha Yojana’. The length of a track in a State will vary from train to train. Thus, for

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advertisements to be placed on the Hazrat Nizamuddin Vasco Da Gama Goa Express which runs
through Delhi, Haryana, Uttar Pradesh, Madhya Pradesh, Maharashtra, Karnataka and Goa, KL may
ascertain the total length of the track from Hazrat Nizamuddin to Vasco Da Gama as well as the length of
the track in each of these States and Union territory from the website www.indianrail.gov.in.
The place of supply of this service is in the Union territory of Delhi and States of Haryana, Uttar Pradesh,
Madhya Pradesh, Maharashtra Karnataka and Goa. The value of the supply in each of these States and
Union territory attributable to the dissemination in these States will be in the ratio of the length of the track
in each of these States and Union territory. If this ratio works out to say 0.5:0.5:2:2:3:3:1, and the amount
to be paid to KL is Rs. 1,20,000, then KL will have to calculate the State-wise and Union territory-wise
breakup of the value of the service, which will be in the ratio of the length of the track in each State and
Union territory.
In the given example, the State-wise and Union territory-wise breakup works out to Delhi (Rs. 5,000),
Haryana (Rs. 5,000), Uttar Pradesh (Rs. 20,000), Madhya Pradesh (Rs. 20,000), Maharashtra
(Rs. 30,000), Karnataka (Rs. 30,000) and Goa (Rs. 10,000). Separate invoices will have to be issued
State-wise and Union territory-wise by KL to ABC indicating the value pertaining to that State or Union
territory.
3(d)(i) Advertisements on the Bills pertaining to consumers having billing addresses in each
back of utility bills of oil State/UT
and gas companies etc.
3(d)(ii) Advertisements on railway Ratio of the number of railway stations in each State/UT
tickets
Example 50: ABC has issued a Purchase order to MN for display of advertisements relating to the “Ujjwala
scheme” on the railway tickets that are sold from all the stations in the States of MP & Chhattisgarh.
• The place of this service is in MP and Chhattisgarh.
• The value of advertisement service attributable to these 2 States will be in the ratio of the number
of railway stations in each State as ascertained from the Railways or from the website
www.indianrail.gov.in.
• Let us assume that this ratio is 713:251 and the total bill is Rs. 9,640. The breakup of amount
between MP and Chhattisgarh in this ratio works out to Rs. 7130 and 2510 respectively.
• Separate invoice will have to be issued State wise by MN to ABC indicating the value pertaining to
that State.
3(e) Advertisements over radio The amount payable to such radio station, which by virtue of its
stations name is part of a State/UT
Example 51: For an advertisement on ‘Pradhan Mantri Ujjwala Yojana’, to be broadcast on a FM radio
station OP, for the radio stations of OP Kolkata, OP Bhubaneswar, OP Patna, OP Ranchi and OP Delhi,
the release order issued by ABC will show the breakup of the amount which is to be paid to each of these
radio stations.
The place of supply of this service is in West Bengal, Odisha, Bihar, Jharkhand and Delhi. The place of
supply of OP Delhi is in Delhi even though the studio may be physically located in another State. Separate
invoices will have to be issued State-wise and Union territory-wise by MN to ABC based on the value
pertaining to each State or Union territory.
3(f) Advertisements on TV Value of service in each State/UT = Total Amount payable for
Channels such service * Ratio of viewership of such channel in concerned
State/UT.
Viewership shall be calculated in the following manner:-
i. State/UT-wise figure for that channel published by
Broadcast Audience Research Council;
ii. Figures published in last week of preceding quarter shall
be used for succeeding quarter;
iii. If channel viewership figures relate to a region comprising
of more than one State/UT, then, viewership figures for a
State/UT = Viewership figure for region * Ratio of

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 populations of that State/UT, as determined in the latest
census.
Example 52: ABC issues a release order with QR channel for telecasting an advertisement relating to the
‘Pradhan Mantri Kaushal Vikas Yojana’ in the month of November, 2017. In the first phase, this will be
telecast in the Union territory of Delhi, States of Uttar Pradesh, Uttarakhand, Bihar and Jharkhand.
The place of supply of this service is in Delhi, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand. In order
to calculate the value of supply attributable to Delhi, Uttar Pradesh, Uttarakhand, Bihar and Jharkhand,
QR has to proceed as under —
I. QR will ascertain the viewership figures for their channel in the last week of September 2017 from
the Broadcast Audience Research Council. Let us assume it is 1,00,000 for Delhi and 2,00,000 for
the region comprising of Uttar Pradesh and Uttarakhand and 1,00,000 for the region comprising of
Bihar and Jharkhand.
II. Since the Broadcast Audience Research Council clubs Uttar Pradesh and Uttarakhand into one
region and Bihar and Jharkhand into another region, QR will ascertain the population figures for
Uttar Pradesh, Uttarakhand, Bihar and Jharkhand from the latest census.
III. By applying the ratio of the populations of Uttar Pradesh and Uttarakhand, as so ascertained, to
the Broadcast Audience Research Council viewership figures for their channel for this region, the
viewership figures for Uttar Pradesh and Uttarakhand can be calculated. Let us assume that the
ratio of the populations of Uttar Pradesh and Uttarakhand works out to 9:1. When this ratio is
applied to the viewership figures of 2,00,000 for this region, the viewership figures for Uttar
Pradesh and Uttarakhand work out to 1,80,000 and 20,000 respectively.
IV. In a similar manner, the breakup of the viewership figures for Bihar and Jharkhand can be
calculated. Let us assume that the ratio of populations is 4:1 and when this is applied to the
viewership figure of 1,00,000 for this region, the viewership figure for Bihar and Jharkhand works
out to 80,000 and 20,000 respectively.
V. The viewership figure for each State works out to Delhi (1,00,000), Uttar Pradesh (1,80,000),
Uttarakhand (20,000), Bihar (80,000) and Jharkhand (20,000). The ratio is thus 10:18:2:8:2 or
5:9:1:4:1 (simplification).
VI. This ratio has to be applied when indicating the breakup of the amount pertaining to each State.
Thus, if the total amount payable to QR by ABC is Rs. 20,00,000, the State-wise breakup is Rs.
5,00,000 (Delhi), Rs. 9,00,000 (Uttar Pradesh), Rs. 1,00,000 (Uttarakhand), Rs. 4,00,000 (Bihar)
and Rs. 1,00,000 (Jharkhand). Separate invoices will have to be issued State-wise and Union
territory-wise by QR to ABC indicating the value pertaining to that State or Union territory.
3(g) Advertisements at cinema The amount payable to a cinema hall or screens in a multiplex, in
halls a State/UT
3(h) Advertisements over Value of service in each State/UT = Total amount payable for
internet the service shall such service * Ratio of No. of internet subscribers in concerned
be deemed to have been State/UT.
provided all over India. No. of internet subscribers shall be calculated in the following
Thus, the value of such manner:-
service will be apportioned i. State/UT-wise figures published by TRAI;
amongst all States and ii. Figures published for last quarter of preceding FY shall be
UTs, of India in the used for succeeding FY;
manner prescribed. iii. If figure of No. of internet subscribers relates to a region
comprising of more than one State or UT, then, No. of
internet subscribers in a State or UT = No. of subscribers
for region * Ratio of populations of that State or UT, as
determined in the latest Census;
Example 53: ABC issues a Purchase order to WX for a campaign over internet regarding linking Aadhar
with one’s bank account and mobile number. WX runs this campaign over certain websites.
• In order to ascertain the State wise breakup of the value of this service which is to be reflected in
the invoice issued by WX to ABC, WX has to first refer to the TRAI figures for quarter ending
March 2017, as indicated on their website www.trai.gov.in. These figures show the service area

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 wise internet subscribers. There are twenty two service areas. Some relate to individual States
some to 2 or more States and some to part of one State and another complete State. Some of
these areas are metropolitan areas.
• In order to calculate the State wise breakup, first the State wise breakup of the number of internet
subscribers is arrived at. (In case figures of internet subscribers of one or more States are
clubbed, the subscribers in each State is to be arrived at by applying the ratio of the respective
populations of these States as per the latest census). Once the actual number of subscribers for
each State has been determined.
• The second step for WX involves calculating the State wise ratio of internet subscribers. Let us
assume that this works out to 8:1:2…and so on for Andhra Pradesh, Arunachal Pradesh,
Assam…and so on.
• The third step for WX will be to apply these ratio to the total amount payable to WX so as to arrive
at the value attributable to each State.
• Separate invoices will have to be issued State wise and Union territory wise by WX to ABC
indicating the value pertaining to that State or Union territory.
3(i) Advertisements through Value of service in each State/UT = Total amount payable for
SMS such service * Ratio of No. of telecom subscribers in concerned
States or UTs.
No. of telecom subscribers shall be calculated in the following
manner, namely:-
i. State/UT-wise figures published by TRAI;
ii. Figures published for preceding quarter shall be used for
succeeding quarter;
iii. If figure of No. of telecom subscribers relates to a telecom
circle comprising of more than one State or UT, then, No.
of telecom subscribers in a State or UT = No. of
subscribers for telecom circle * Ratio of populations of
State or UT, as determined in the latest Census;

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Section 13 (IGST Act, 2017) Place of Supply of Services where
location of supplier or location of recipient is outside India
The place of supply of services provisions do not make any mention about receipt or payment in foreign
exchange or in Rupees. Thus, payment or receipt in foreign exchange or rupees is not at all relevant to
determine, place of supply of services. That is relevant to determine whether the service is ‘export of service’.
Often, provisions of place of supply of service and export of service provisions are mixed up, which causes
confusion.

Location of Service Provider Location of Service Recipient Applicable section for POS
In India In India Section 12 of IGST
In India Outside India Section 13 of IGST
Outside India In India Section 13 of IGST

Provision Place of Supply Remarks

Sec. 13(1)
This section deals with the situation
where supplier of services or location of
the recipient of services, is outside India.
Sec. 13(2)
Sub-section 13(2) applies except the
services specified in Sec. 13(3) to Sec.
13(13)

Location of the recipient available in the Location of the recipient

ordinary course of business

Location of the recipient is not available Location of the supplier of

in the ordinary course of business services

Sec. 13(3)
(a) Services supplied in respect of Location where the services
goods which are required to be made are actually performed
physically available by the recipient of
services to the supplier of services, or to
a person acting on behalf of the supplier
of services in order to provide the
services.

From remote location through electronic Location where goods are

means.
Goods temporarily imported into India
for repairs or for any other treatment or
process and are exported back after
such repairs or treatment or process
without being put to any other use in
India, other than that which is required
for such repairs or treatment or process.
situated at the time of supply
of services.
Provisions of section 13(3)(a)
will not be applicable and
place of supply shall be
determined as per section
13(2)

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 Provision Place of Supply Remarks
(b) Services supplied to an individual Location where the services
either as recipient or acting on behalf of are actually performed.
others, where his physical presence is
required with supplier
Example 54: ABC Ltd., Mumbai imports a machine from China for being installed in its factory at Pune. To
install such machine, respective engineer came from China. The POS is Pune.
Example 55: ABC Ltd., Mumbai provide service to XYZ Ltd., USA through electronic means i.e. fixing bugs
in software. The POS is USA.
Example 56: ABC Ltd., Mumbai exported a machine to China. It came back for repairing. ABC Ltd., fixed
the issue under warranty terms and sent machine back to China. The POS is China.
Example 57: Mr. A singer, Mumbai singer travel to Singapore for Music concert. The POS is Singapore.
Example 58: ABC Ltd., got gold & diamond from XYZ, USA for certain treatment and it exported back after
such treatment. The POS shall be USA.
Example 59: A modelling agency (Chennai) contracts with a beauty parlor from USA for beauty treatment of
20 models. Here is a situation where the modelling agency is the receiver of the service, but the service is
rendered to the models. This transaction will also quality to be covered U/s 13 (3) (b) of the IGST Act and
POS shall be the location where the services are actually performed.
Circular No. 103/22/2019-GST dated 28th June 2019
Doubts have been raised about the place of supply in case of supply of various services on unpolished
diamonds such as cutting and polishing activity which have been temporarily imported into India and are
not put to any use in India?
It is clarified that in case of cutting and polishing activity on unpolished diamonds which are temporarily
imported into India and are not put to any use in India, the place of supply shall be determined as per
section 13(2) of IGST Act and not as per section 13(3)(a) of IGST Act.

Circular No. 118/37/2019-GST dated 11th October 2019

Determination of place of supply in case of supply of software/design services by a supplier located in
taxable territory to a service recipient located in non-taxable territory by using the sample hardware kits
provided by the service recipient.
It is stated that a number of companies that are part of the growing Electronics Semiconductor and Design
Manufacturing (ESDM) industry in India are engaged in the process of developing software and designing
integrated circuits electronically for customers located overseas.
In contracts where service provider is involved in a composite supply of software development and design
for integrated circuits electronically, testing of software on sample prototype hardware is often an ancillary
supply, whereas, chip design/software development is the principal supply of the service provider. The
service provider is not involved in software testing alone as a separate service. The testing of
software/design is aimed at improving the quality of software/design and is an ancillary activity. The entire
activity needs to be viewed as one supply and accordingly treated for the purposes of taxation. Artificial
vivisection of the contract of a composite supply is not provided in law. These cases are fact based and
each case should be examined for the nature of supply contracted.
Therefore, it is clarified that the place of supply of software/design by supplier located in taxable territory to
service recipient located in non-taxable territory by using sample prototype hardware / test kits in a
composite supply, where such testing is an ancillary supply, is the location of the service recipient as per
Section 13(2) of the IGST Act. Provisions of Section 13(3)(a) of IGST Act do not apply separately for
determining the place of supply for ancillary supply in such cases.
Sec. 13(4)
Services relating to immovable property Place where the immovable Includes, hotel, right to use
property is location or intended immovable property,
to be located construction work including
architects or interior
decorations, estate agents
etc.

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 Provision Place of Supply Remarks
Example 60: Mr. A, Mumbai provides services to Mr. Z, Singapore for the property located in Chennai. The
POS is Chennai.
Example 61: A US based company has been awarded mineral exploration contract in respect of specific
sites in South Africa by Mumbai based company. The POS will be South Africa.
Example 62: A company in Singapore contracts with a Delhi based tax professional to provide his general
opinion with respect to capital gains tax liability arising from the commercial property in Delhi. Here, the
service of tax professional is basically an advice on taxation in general even though it is related to
immovable property. Thus, POS is Singapore according to default provision i.e. Section 13 (2) of the IGST
Act.
Sec. 13(5)
Services relating to events Place where the event is Conference, sporting, cultural,
actually held fair, exhibition etc.
Example 63: ABC pte., Singapore organizes circus in Mumbai. The POS is Mumbai.
Sec. 13(6)
Services provided at more than one Location in the taxable territory
location including location in taxable
territory for services referred in Sec.
13(3), 13(4) & 13(5)

Example 64: ABC Ltd., Mumbai organizes a training event for XYZ pte., Singapore in Sri Lanka, Singapore
& Mumbai India. The POS is Mumbai.
Sec. 13(7)
Services provided at more than one Place of supply shall be taken Value of such supplies
State/UT for services referred in Sec. as being in each of such specific to each State or Union
13(3), 13(4) & 13(5) States or Union territories territory shall be in proportion
to:
➢ Value of services
separately collected
or determined in terms
of the contract or
agreement entered
into in this regard
➢ In the absence of
such contract or
agreement, on such
other basis as may be
prescribed
Rule 7 of IGST Rules
The supply of services attributable to different States or Union territories, under subsection (7) of section 13
of the said Act, in the case of services supplied in respect of goods which are required to be made
physically available by the recipient of services to the supplier of services, or to a person acting on behalf of
the supplier of services, or in the case of services supplied to an individual, represented either as the
recipient of services or a person acting on behalf of the recipient, which require the physical presence of the
recipient or the person acting on his behalf, where the location of the supplier of services or the location of
the recipient of services is outside India, and where such services are supplied in more than one State or
Union territory, shall be taken as being in each of the respective States or Union territories, and the
proportion of value attributable to each such State and Union territory in the absence of any contract or
agreement between the supplier of service and recipient of services for separately collecting or determining
the value of the services in each such State or Union territory, as the case maybe, shall be determined in
the following manner, namely:-
(i) in the case of services supplied on the same goods, by equally dividing the value of the service
in each of the States and Union territories where the service is performed;

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 Provision Place of Supply Remarks
(ii) in the case of services supplied on different goods, by taking the ratio of the invoice value of goods
in each of the States and Union territories, on which service is performed, as the ratio of the value
of the service performed in each State or Union territory;
(iii) in the case of services supplied to individuals, by applying the generally accepted accounting
principles.

Example 65: A company C which is located in Kolkata is providing the services of testing of a dredging
machine and the testing service on the machine is carried out in Orissa and Andhra Pradesh. The place of
supply is in Orissa and Andhra Pradesh and the value of the service in Orissa and Andhra Pradesh will be
ascertained by dividing the value of the service equally between these two States.

Example 66: A company C which is located in Delhi is providing the service of servicing of two cars
belonging to Mr. X. One car is of manufacturer J and is located in Delhi and is serviced by its Delhi
workshop. The other car is of manufacturer A and is located in Gurugram and is serviced by its Gurugram
workshop. The value of service attributable to the Union Territory of Delhi and the State of Haryana
respectively shall be calculated by applying the ratio of the invoice value of car J and the invoice value of
car A, to the total value of the service.

Example 67: A makeup artist M has to provide make up services to an actor A. A is shooting some scenes
in Mumbai and some scenes in Goa. M provides the makeup services in Mumbai and Goa. The services
are provided in Maharashtra and Goa and the value of the service in Maharashtra and Goa will be
ascertained by applying the generally accepted accounting principles.

Rule 8 of IGST Rules

The proportion of value attributable to different States or Union territories, under sub-section (7) of section
13 of the said Act, in the case of supply of services directly in relation to an immovable property, including
services supplied in this regard by experts and estate agents, supply of accommodation by a hotel, inn,
guest house, club or campsite, by whatever name called, grant of rights to use immovable property,
services for carrying out or co-ordination of construction work, including that of architects or interior
decorators, where the location of the supplier of services or the location of the recipient of services is
outside India, and where such services are supplied in more than one State or Union territory, in the
absence of any contract or agreement between the supplier of service and recipient of services for
separately collecting or determining the value of the services in each such State or Union territory, as the
case maybe, shall be determined by applying the provisions of rule 4, mutatis mutandis.

Rule 9 of IGST Rules

The proportion of value attributable to different States or Union territories, under subsection (7) of section
13 of the said Act, in the case of supply of services by way of admission to, or organisation of a cultural,
artistic, sporting, scientific, educational or entertainment event, or a celebration, conference, fair, exhibition
or similar events, and of services ancillary to such admission or organisation, where the location of the
supplier of services or the location of the recipient of services is outside India, and where such services are
provided in more than one State or Union territory, in the absence of any contract or agreement between
the supplier of service and recipient of services for separately collecting or determining the value of the
services in each such State or Union territory, as the case maybe, shall be determined by applying the
provisions of rule 5, mutatis mutandis.
Sec. 13(8)
(a) Services supplied by a banking Location of the supplier of
company, or a financial institution or a services
NBFC, to account holders

(b) Intermediary services Location of the supplier of

services

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 Provision Place of Supply Remarks
(c) Services consisting of hiring of Location of the supplier of
means of transport, including yachts but services
excluding aircrafts and vessels, up to a
period of one month
Example 68: Mr. A, Mumbai books a tour of famous cultural cities in India for a Singapore resident. The
POS is Mumbai.

Example 69: ABC contractors provide a service of hiring of a fleet of cars to a company on an annual
contract. If suppose fixed establishments of ABC contractors is located in New Delhi & the company is
located in Singapore, then Section 13 (8) of the IGST Act, covers situations where the hiring is for a period
of upto one month. Then in this case, POS shall be determined in terms of Section 13 (2) of the IGST Act
i.e. receiver’s location which in this case is Singapore.
Sec. 13(9)
Services of transportation of goods, Place of destination of goods
other than by way of mail or courier
Example 70: A shipping line, Mumbai, Maharashtra transports a shipment of flowers from Mumbai to Paris,
for an event management company based in Paris. The POS is Paris.
Sec. 13(10)
Passenger transportation services Place where the passenger
embarks on the conveyance
for a continuous journey
Example 71: Mr. A, a foreign tourist, has booked a ticket for New Delhi-Sri Lanka flight from an airline
registered in New Delhi for a continuous journey without any stopover. The POS is New Delhi.
Sec. 13(11)
Services provided on board a First scheduled point of
conveyance during the course of a departure of that conveyance
passenger transport operation, including for the journey
services intended to be wholly or
substantially consumed while on board
Sec. 13(12)
The place of supply of online information Location of the recipient of It is difficult to determine the
and database access or retrieval services location of the recipient in
services case of OIDAR as such
recipients normally access the
services online and not
required to disclose the
location. On satisfying any two
(2) non-contradictory
conditions out of such seven
(7) conditions, the service
recipient is deemed to be
located in the taxable territory
i.e. India: -
1. the recipient gives an Indian
address through internet.
2. the payment is settled by an
Indian credit card/debit
card/other card.
3. the recipient has an Indian
billing address.

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 Provision Place of Supply Remarks
4. the computer used by the
recipient has an Indian IP
address.
5. the recipient uses an Indian
bank account for payment.
6. the country code of the
subscriber identity module
card used by the recipient of
services is of India
7. the recipient receives the
service through an Indian
fixed line.
Sec. 13(13)
In order to prevent double taxation or non-taxation of the supply of a service, or for the uniform application
of rules, the Government shall have the power to notify any description of services or circumstances in
which the place of supply shall be the place of effective use and enjoyment of a service.

Notification No. 04/2019- IT, dated 30th September 2019

The Central Government, on being satisfied that it is necessary in order to prevent double taxation or non-
taxation of the supply of a service, or for the uniform application of rules, on the recommendations of the
Council, hereby notifies following description of services or circumstances as specified below, in which the
place of supply shall be the place of effective use and enjoyment of a service as specified in the
corresponding entry in Column “Place of Supply”, namely:-

Description of services or circumstances Place of Supply

Supply of research and development services
related to pharmaceutical sector (Integrated
discovery and development, Integrated
development, Evaluation of the efficacy of new
chemical/ biological entities in animal models of
disease, Evaluation of biological activity of novel
chemical/ biological entities in in-vitro assays, Drug
metabolism and pharmacokinetics of new chemical
entities, Safety Assessment/ Toxicology, Stability
Studies, Bio-equivalence and Bioavailability
Studies, Clinical trials, Bio analytical studies) by a
person located in taxable territory to a person
located in the non-taxable territory.
Supply of maintenance, repair or overhaul service
in respect of aircrafts, aircraft engines and other
aircraft components or parts supplied to a person
for use in the course or furtherance of business.
Supply of maintenance, repair or overhaul service
(hereinafter referred to as MRO service) in respect
of ships and other vessels, their engines & other
components or parts supplied to a person for use
in the course or furtherance of business
The place of supply of services shall be the
location of the recipient of services subject to
fulfilment of the following conditions: -
(i) Supply of services from the taxable
territory are provided as per a contract
between the service provider located in
taxable territory and service recipient
located in non-taxable territory.
(ii) Such supply of services fulfils all other
conditions in the definition of export of
services, except sub- clause (iii) provided
at clause (6) of Section 2 of Integrated
Goods and Services Tax Act, 2017.
The place of supply of services shall be the
location of the recipient of service.
The place of supply of services shall be the
location of the recipient of service.
An Indian shipping company has received MRO
service in respect of a ship/vessel from a foreign
supplier, place of supply of such service is in India
(location of recipient being in India) and said
service would qualify as an ‘import of service’.
Resultantly, GST is payable under reverse charge.

• No GST on transhipment of goods at customs station in India for further transport

out of India {clarification in respect of service tax law but applies to GST also}
• Agency fees paid to foreign banks for arranging finance is liable to GST –
according to judgement under service tax law Tata Steel v. CST (2015) 141
Clarification on supply of satellite launch services by Antrix Corporation Ltd. [Circular No. 2/1/2017
IGST Dated 27.09.2017]

Place of supply of satellite launch services supplied by ANTRIX Corporation Limited to international
customers would be outside India in terms of section 13(9) of IGST Act, 2017 and such supply which meets
the requirements of section 2(6) of IGST Act, thus constitutes export of service and shall be zero rated in
accordance with section 16 of the IGST Act. Where satellite launch service is provided by ANTRIX
Corporation Limited to a person located in India, the place of supply of satellite launch service would be
governed by section 12(8) of the IGST Act and would be taxable under CGST Act, UTGST Act or IGST Act,
as the case may be.

CBIC had further clarified via Circular No. 164 /20 /2021-GST, it is clarified that as the satellite launch services
supplied by New Space India Limited (NSIL) are similar to those supplied by ANTRIX Corporation Ltd, the
said circular No. 2/1/2017-IGST dated 27.09.2017, is applicable to them.

Question & Answer

Q1. Determine Place of Supply of service for the following case:-
a) Mega Events, an event management company at New Delhi, organizes an award function for Shah
Diamond Merchants of Ahmedabad (registered in Gujarat), at Mumbai.
b) Mega Events, an event management company at New Delhi, organizes an award function for Shah
Diamond Merchants of Ahmedabad (registered in Gujarat), at Mauritius.
c) Grand Wedding Planners (Chennai) is hired by Mr. Ramesh (unregistered person based in
Hyderabad) to plan and organise his wedding at New Delhi.
d) Grand Wedding Planners (Chennai) is hired by Mr. Ramesh (unregistered person based in
Hyderabad) to plan and organise his wedding at Seychelles. (ICAI Question)
A. As per section 12(7) of IGST Act, the place of supply provision is:-

Nature of Supply Place of Supply

Recipient is registered Recipient is unregistered
Organisation of events or
services ancillary to the same or
assigning of sponsorship to such Location where the event is held
events Location of recipient
Organisation of events outside
Location of recipient
India
a) Since the recipient is a registered person, the place of supply is the location of the recipient, i.e.,
Ahmedabad.
b) Since the recipient is a registered person, the place of supply is the location of the recipient, i.e.,
Ahmedabad.
c) The recipient being an unregistered person, the place of supply is the location where the event is
held i.e., New Delhi.
d) The recipient being an unregistered person and the event held outside India, the place of supply is
the location of the recipient i.e., Hyderabad and not the location where the event is held i.e.,
Seychelles.

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Q2. A person from Kolkata travels by Air India flight from Mumbai to Delhi and gets his travel insurance done
in Mumbai. What will be the place of supply?
A. The location of the recipient of services on the records of the supplier of insurance service shall be the
place of supply. So, Kolkata shall be the place of supply.

Q3. Software Ltd., a company based out of Pune, awards online maintenance contract of its servers located in
Hyderabad office to ABC, a company based out of France, and as per the terms of the online maintenance
ABC shall be required to perform regular maintenance from France using Internet. What will be POS?
A. The place of supply of maintenance services shall be Hyderabad.

Q4. Software Ltd., gets an order from a French Bank, based out of Paris, to monitor transactions on the
servers located in Paris using internet facilities. What will be POS?
A. The place of supply of such monitoring services shall be at Paris.

Q5. Bookmyticket.com, a company based out at Pune providing online ticketing services for admission to
various events, sells online tickets for IPL tournament to be held across India. What will be POS?
A. The place of supply of services for admission to each cricket match shall be the location where the match is
actually played.

Q6. Mr. A of Mumbai, orders a mobile from Flipkart to be delivered to his mother in Kolkata. ABC Ltd.
(registered online seller in Indore) processes the order and Mr. A is billed by Flipkart. What will be POS?
A. It will be assumed that the buyer in Mumbai has received the goods & IGST will be charged.

Q7. In case of ambiguity, how is place of supply of goods determined U/s 10?
A. In case of any ambiguity where place of supply cannot be determined as provided in Section 10(1)(a) to
10(1)(e) of the IGST Act, 2017, the place of supply of goods will be determined in the manner as will be
prescribed.

Q8. In case of import of goods into India what is the place of supply of goods?
A. The location of the importer is the place of supply of goods in case of import of goods into India. It may be
noted that importer has not been defined in the IGST Act, 2017. Therefore, the meaning given under Customs
Act, 1962 will have to be taken. As per Section 2(26) of the Customs Act, 1962 "importer", in relation to any
goods at any time between their importation and the time when they are cleared for home consumption,
includes any owner or any person holding himself out to be the importer.

Q9. In case of export of goods from India, what is the location of supply of goods?
A. The location of supply of goods exported from India shall be the location outside India.

Q10. What is the place of supply of services by way of transportation of goods (Section 12 & 13)?
A. Section 12(8) of the IGST Act, 207 provides that services by way of transportation of goods provided to a
registered person shall be the location of registered person. Such services if provided to a person other than a
registered person, shall have place of supply and the location at which such goods are handed over for their
transportation. Example, if Express limited, a goods transport company based out of Chennai, provides
transportation services to Cars Limited, an automobile company based out of Bangalore, for movement of
their cars from the warehouse of Cars Limited at Silvassa to Delhi, then the place of supply of transportation
services shall be Bangalore if Cars Limited is a registered person. If Cars Limited is not a registered person,

143
then the place of supply of transportation services shall be Silvassa (location at which such goods are handed
over).
As per Section 13(9) of the IGST Act, 2017 the place of supply of services of transportation of goods, other
than by way of mail or courier will be the place of destination of the goods. Example: If PQ shipping Co.
located in India charges ocean freight charges for transport of goods to Germany for a customer located in
India, the place of supply of service will be Germany.

Q11. XZ Ltd. (Mumbai, Maharashtra) opens a new branch office at Gurugram, Haryana. It purchases a
building for office from KTS Builders (Gurugram). It also enters into a separate contract with KTS Builders for
purchase of pre-installed office furniture and fixtures in the building. Determine Place of Supply. (ICAI
Example).
A. As per Section 10(1)(c), If the supply does not involve movement of goods, the place of supply is the
location of goods at the time of delivery to the recipient. Though there will be no GST liability on purchase of
building, office furniture and fixtures will be liable to GST. Since there is no movement of office furniture and
fixtures, the place of supply of such goods is their location at the time of delivery to the recipient (XZ Ltd.) i.e.,
Gurugram.

Q12. Determine Place of Supply of service for the following case:-

a) M/s XYZ Pvt. Ltd. is a registered company in New Delhi. It sends its courier to Pune through M/s
Brue Air Courier Service.
b) Mr. Y, an unregistered person, of New Delhi sends a courier to his brother in Amritsar, Punjab.
c) PR Pvt. Ltd., a Goods Transportation Agency based in Kanpur, Uttar Pradesh, is hired by Hajela
Enterprises (registered supplier in Kanpur) to transport its consignment of goods to a buyer in New
Delhi.
d) ST Pvt. Ltd., a Goods Transportation Agency based in Noida, Uttar Pradesh, is hired by Chhaya
Trade Links (registered supplier in New Delhi) to transport its consignment of goods to a buyer in
Kanpur, Uttar Pradesh.
e) Mr. Srikant, a manager in a Bank, is transferred from Bareilly, Uttar Pradesh to Bhopal, Madhya
Pradesh. Mr. Srikant’s family is stationed in Kanpur, Uttar Pradesh. He hires Goel Carriers of
Lucknow, Uttar Pradesh (registered in Uttar Pradesh), to transport his household goods from
Kanpur to Bhopal. (ICAI Question)
A. As per section 12(8) of IGST Act, the place of supply of services by way of transportation of goods,
including by mail or courier, etc. provided to a registered person, is the location of such person. However,
where such services are provided to an unregistered person, the place of supply is the location at which such
goods are handed over for their transportation.
Provided that where the transportation of goods is to a place outside India, the place of supply shall be the
place of destination of such goods.
a) The recipient being registered person, the place of supply is the location of recipient i.e., New Delhi.
b) The recipient being unregistered person, the place of supply is the location where goods are
handed over for their transportation i.e., New Delhi.
c) The recipient being registered, the place of supply is the location of recipient i.e., Kanpur.
d) The recipient being registered, the place of supply is the location of recipient i.e., New Delhi.
e) The recipient being unregistered person, the place of supply is the location where goods are
handed over for their transportation i.e., Kanpur.

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Q13. The place of supply in relation to immovable property is the location of immovable property. Suppose a
road is constructed from Delhi to Mumbai covering multiple states.
What will be the place of supply of construction services? (MTP NOV 2019)
A. Where the immovable property is located in more than one State, the supply of service is treated as made
in each of the States in proportion to the value for services separately collected or determined, in terms of the
contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such
other reasonable basis as may be prescribed in this behalf [Explanation to section 12(3) for domestic
supplies].
In the absence of a contract or agreement between the supplier and recipient of services in this regard, the
proportionate value of services supplied in different States/Union territories (where the immovable property
is located) is computed on the basis of the area of the immovable property lying in each State/ Union
territories [Rule 4 of the IGST Rules].

Q14. RST Inc., a corn chips manufacturing company based in USA, intends to launch its products in India.
However, the company wishes to know the taste and sensibilities of Indians before launching its products in
India. For this purpose, RST Inc. has approached ABC Consultants, Mumbai, (Maharashtra) to carry out a
survey in India to enable it to make changes, if any, in its products to suit Indian taste. The survey is to be
solely based on the oral replies of the surveyees; they will not be provided any sample by RST Inc. to taste.
ABC Consultants will be paid in convertible foreign exchange for the assignment. With reference to the
provisions of GST law, determine the place of supply of the service. Also, explain whether the said supply will
amount to export of service? (ICAI SM) (MTP JULY 2021) (MTP MAY 2020)
A. As per section 13(2), in case where the location of the supplier of services or the location of the recipient of
services is outside India, the place of supply of services except the services specified in sub-sections (3) to
(13) shall be the location of the recipient of services. Sub-sections (3) to (13) provide the mechanism to
determine the place of supply in certain specific situations.
The given case does not fall under any of such specific situations and thus, the place of supply in this case
will be determined under sub-section (2) of section 13. Thus, the place of supply of services in this case is the
location of recipient of services, i.e. USA.
As per section 2(6), export of services means the supply of any service when,–
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the supplier of service in convertible foreign exchange
or in Indian rupees wherever permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely establishments of a distinct person in
accordance with Explanation 1 in section 8.
Since all the above five conditions are fulfilled in the given case, the same will be considered as an export of
service.

Q15. Asha Enterprises, supplier of sewing machines, is located in Kota (Rajasthan) and registered for
purpose of GST in the said State. It receives an order from Deep Traders, located in Jalandhar (Punjab) and
registered for the purpose of GST in the said State. The order is for the supply of 100 sewing machines with
an instruction to ship the sewing machines to Jyoti Sons, located in Patiala (Punjab) and registered in the said
State for purpose of GST. Jyoti Sons is a customer of Deep Traders. Sewing machines are being shipped in a
lorry by Asha Enterprises.
Briefly explain the following:

145
(a) the place of supply;
(b) the nature of supply:- whether inter-State or intra-State and
(c) whether CGST/SGST or IGST would be applicable in this case. (ICAI SM) (MTP- NOV 2021)
A. The supply between Asha Enterprises (Kota, Rajasthan) and Deep Traders (Jalandhar, Punjab) is a bill to
ship to supply where the goods are delivered by the supplier [Asha Enterprises] to a recipient [Jyoti Sons
(Patiala, Punjab)] on the direction of a third person [Deep Traders].
In case of such supply, it is deemed that the said third person has received the goods and the place of supply
of such goods is the principal place of business of such person [Section 10(1)(b)]. Thus, the place of supply
between Asha Enterprises (Rajasthan) and Deep Traders (Punjab) will be Jalandhar, Punjab.
Since the location of supplier and the place of supply are in two different States, the supply is an inter-State
supply in terms of section 7, liable to IGST.
This situation involves another supply between Deep Traders (Jalandhar, Punjab) and Jyoti Sons (Patiala,
Punjab). In this case, since the supply involves movement of goods, place of supply will be the location of the
goods at the time at which the movement of goods terminates for delivery to the recipient, i.e. Patiala, Punjab
[Section 10(1)(a)].
Since the location of supplier and the place of supply are in the same State, the supply is an intra-State supply
in terms of section 8, liable to CGST and SGST.

Q16. M/s Joinder Drills of Australia exports rough rock cutting diamonds to M/s Ankit Enterprises of India, a
registered supplier in the State of Haryana. M/s Ankit Enterprises is expected to process them into tools and
export the same to the supplier in Australia. The process does not involve any sophisticated process other
than cutting, polishing and finishing. M/s Ankit Enterprises requests M/s Joinder Drills for use of such tools for
his business in India for 3 months, which is agreed to by the supplier. It then exports it to the Australian
supplier, invoicing it for ₹ 12,00,000 for processing it into the required tool. M/s Ankit Enterprises is of the
assumption that it is an export transaction and therefore, it is entitled to treat it as a zero-rated supply and
decides that no tax is payable under LUT although the rate applicable to such services for domestic supplies
is CGST - 9%, SGST - 9% and IGST - 18%. State the provisions relating to the above supply of service and
explain whether the stand taken by M/s Ankit Enterprises is correct and also determine the tax, if applicable,
as the goods are now moving out of Haryana. (PAST EXAM NOV 2020)
A. One of the conditions for a supply of service to qualify as export of service is that the place of supply of
said service must be outside India. The place of supply of services supplied in respect of the goods which are
temporarily imported into India for any other treatment/process and are exported after such
treatment/process without being put to any use in India, other than that which is required for such
treatment/process, is the location of recipient of such service [Second proviso to section 13(3)(a) of the IGST
Act, 2017].
In view of the above, in the given case, the place of supply of the services provided by M/s Ankit Enterprises
is the place where the services are actually performed, i.e., in India as the tools to be exported have been
used in India for 3 months before their export. Resultantly, the supply of services by M/s Ankit Enterprises do
not qualify as export of service.
Since the recipient is outside India, the place of supply is governed by section 13 and hence, the supply is not
an intra-State supply in terms of section 8(2) of the IGST Act, 2017. [In case where the place of supply
(determined under section 13 of the IGST Act, 2017) and the location of supplier are in the same State, CBIC
FAQs on ‘Banking, Insurance and Stock Brokers Sector’ have taken a view that such supplies will be treated
as intra-State supply.]
Therefore, since the place of supply is in India and the supply is not an intra -State supply, the same is an
inter -State supply [in terms of section 7(5)(c) of the IGST Act, 2017] of services and not of goods. Thus, the

146
same is liable to IGST of ₹ 1,83,051 (₹ 12,00,000/118 x 18). [It has been assumed that the amount of ₹
12,00,000 is inclusive of IGST.

Q17. Dobriyal Technocrats Ltd., registered in Gurgaon, Haryana, is engaged in manufacturing heavy steel
machinery. It enters into an agreement with Mindsharp Associates, registered in Delhi, for imparting
motivational training to the top management of Dobriyal Technocrats Ltd. in a 5-day residential motivational
training programme at an agreed consideration of ₹ 20,00,000. Mindsharp Associates books the conference
hall alongwith the rooms of Hotel Chumchum, Neemrana (registered in Rajasthan) for the training programme,
for a lump sum consideration of ₹ 12,00,000. You are required to determine the place of supply in respect of
the supply(ies) involved in the given scenario. (RTP NOV 2021)
A. In the given situation, two supplies are involved:
(i) Services provided by Mindsharp Associates to Dobriyal Technocrats Ltd. by way of providing motivational
training to its top management.
(ii) Services provided by Hotel Chumchum to Mindsharp Associates by way of accommodation in said hotel
for organizing the training programme.
The place of supply in respect of each of the above supplies is determined as under:
(I) As per the provisions of section 12(5)(a) of the IGST Act, 2017, the place of supply of services provided in
relation to training and performance appraisal to a registered person, shall be the location of such person.
Therefore, the place of supply of services supplied by Mindsharp Associates to the registered recipient -
Dobriyal Technocrats Ltd. by way of providing motivational training to its top management is the location of
Dobriyal Technocrats Ltd., i.e. Gurgaon, Haryana.
(ii) As per the provisions of section 12(3)(c) of the IGST Act, 2017, the place of supply of services, by way of
accommodation in any immovable property for organizing, inter alia, any official/ business function including
services provided in relation to such function at such property, shall be the location at which the immovable
property is located.
Therefore, the place of supply of services supplied by Hotel Chumchum to Mindsharp Associates by way of
accommodation of conference hall alongwith the rooms of Hotel Chumchum for the training programme shall
be the location of the Hotel Chumchum, i.e. Neemrana, Rajasthan.

Q18. A property is located in Kolkata and the owner of such property is located in Jaipur. He has no place of
business in Kolkata. Whether renting of such immovable property liable to GST? If yes, whether CGST and
SGST or IGST is to be charged?
A. The place of supply of the service in present case, being renting of immovable property, as per section
12(3) of the IGST Act shall be Kolkata. Location of the supplier of services is defined under section 2(15) of
the IGST Act and as per clause (a) of this definition the location of supplier of service is Jaipur.
As per section 7 of the IGST Act, when the location of the supplier and place of supply are in two different
States, the transaction would be termed as inter-State supply and IGST shall be charged on this transaction.

Q19. If an unregistered freight vendor ABC having place of business in Maharashtra, provides transport
services from Tamil Nadu, whether IGST or CGST and SGST is to be charged on such GTA services? Also
state whether GST is to be paid under RCM?
A. In this case the location of the supplier of service, i.e., GTA is in Maharashtra and the location of the
recipient of services, let us assume is in any State other than Maharashtra, then IGST would be chargeable,
else, CGST/ SGST and RCM would be applicable.

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Section 31 Issue of Tax invoice under GST (Extract)
Section 12 Time of Supply of Goods
Section 13 Time of Supply of Services
Section 14 Change in rate of tax in respect of supply of goods or services

Section 31 Issue of Tax Invoice under GST (Extract)

Goods
Section 31(1)
A registered taxable person shall issue a tax invoice
showing descriptions, quantity and value of goods,
tax charged thereon and other prescribed particulars,
before or at the time of
a. Removal of goods for supply to the recipient,
where supply involves movement of goods or
b. Delivery of goods or making available thereof to
the recipient in other cases.
Services
Section 31(2)
A registered person supplying taxable services
shall, before or after the provision of service but
within a prescribed period, issue a tax invoice,
showing the description, value, tax charged thereon
and such other particulars as may be prescribed.
Provided that the Government may, on the
recommendations of the Council, by notification,-
(a) specify the categories of services or supplies in
respect of which a tax invoice shall be issued,
within such time and in such manner as may be
prescribed;
(b) subject to the condition mentioned therein,
specify the categories of services in respect of
which-
(i) any other document issued in
relation to the supply shall be
deemed to be a tax invoice; or
(ii) tax invoice may not be issued.
Note: As per Rule 47 of CGST Rules, Invoice should
be issued within 30 days from the date of provision
of Services.
In case of Insurance, Banks or Financial Institution
& NBFC’s the above limit is extended to 45 days.
An insurer or a banking company or a financial
institution, including a NBFC, or a telecom
operator, making taxable supplies of services
between distinct persons as specified in section 25,
may issue the invoice before or at the time such
supplier records the same in his books of account
or before the expiry of the quarter during which the
supply was made.

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Example 1: Amit Manufacturers, Delhi supplies goods to Kavita Electronics Mumbai. The goods were
removed from its factory in Delhi on 30 th September. Amit Manufacturers needs to issue a tax invoice on or
before 30th September.

Example 2: Gagan Ltd. provides security services to ABC Ltd. for exhibition to be organized on 5 th November
2017. Gagan Ltd. needs to issue a tax invoice within 30 days of supply of services i.e. 5th December 2017.

Example 3: ABC Ltd. entered into an AMC contract for pest control with XYZ Ltd. for one financial year. As
per the contract for AMC contract payment had to be made by 7 th April 2018. However, XYZ Ltd. paid payment
by 15th April 2018. ABC Ltd. has to issue invoice by 7th April 2018.

Example 4: ABC Bank rendered banking services to XYZ Ltd. a company registered in GST for their office in
Mumbai on 10.11.2018. ABC bank can raise the invoice any time before or after the provision of services,
but within 45 days from the date of supply of services i.e. till 25.12.2018.

Example 5: Mumbai branch of ABC bank rendered banking services to its Chennai branch on 10.11.2018.
The transaction was recorded in books of account of Mumbai branch of ABC bank on 12.11.2018. Mumbai
branch of ABC bank can raise invoice either:
• On or before 12.11.2018 i.e. when entry was made in books of account; or
• Before 31.12.2018 i.e. before the close of quarter during which the supply was made.
Section 31(4) Section 31(5)
In case of continuous supply of goods, where In case of continuous supply of services
successive statements of accounts or successive (a) if due date is ascertainable from the
payment are involved, the invoice shall be issued contract, invoice shall be issued on or
before or at the time each such statement is issued before such due date of payment;
or, as the case may be, each such payment is (b) where the due date is not ascertainable,
received. the invoice shall be issued before or at the
time of receiving payment
(c) where the payment is linked to the
completion of an event, the invoice shall be
issued on or before the date of completion
of that event.

Section 31(7) Section 31(6)

The goods being sent or taken on approval for sale
or return are removed before the supply takes place,
the invoice shall be issued before or at the time of
supply or six months from the date of removal,
whichever is earlier.
Section 12 must be read with section 31, which
prescribes in detail the date on which tax invoice
must be issued in various situations.
In a case where the supply of services ceases
under a contract before the completion of the
supply, the invoice shall be issued at the time when
the supply ceases and such invoice shall be issued
to the extent of the supply made before such
cessation.
Section 13 must be read with section 31 and rule
47, which prescribes in detail the date on which tax
invoice must be issued in various situations.

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Section 12 Time of Supply of Goods & Section 13 Time of Supply of
Services
Time of supply of Goods (Sec. 12) Time of supply of Services (Sec.13)
Time of supply of goods [Sec. 12(2)] Time of supply of services [Sec. 13(2)]
The time of supply of goods shall be the earlier of the The time of supply of services shall be the earlier
following – of-
(a) Date of issue of invoice by the supplier or the (a) Invoice issued U/s 31 (as prescribed):
last date of which he is required U/s 31 to issue Date of issue of invoice by the supplier, or
the Invoice with respect to the supply, the date of receipt of payment, whichever
Or is earlier, or
(b) Date of receipt of payment by the supplier (b) Invoice not issued U/s 31 (as prescribed):
with respect to the supply** Date of provision of service or
the date of receipt of payment, whichever is
** Notification No. 66/2017-Central Tax, Dated earlier, or
15/11/2017 (a supplier of goods needs not to pay tax (c) Date of which recipient shows the receipt
on advances). So time of supply of goods shall be of services in his books of account, in
earlier of Date of issue of invoice or last date of issue case where the provision of (a) or (b) as
of invoice. above do not apply.
This notification is not applicable on registered person
who opted for composition levy U/s 10 of CGST Act,
2017. A composition supplier has to pay, in lieu of tax
payable by him, an amount calculated at the
prescribed rate applied on his ‘turnover in the
State/Union Territory’ for a quarter. Therefore, the
composition supplier is not required to pay any tax on
advance received as the same does not form part of
taxable supplies and, in turn, also does not form part of
the ‘turnover in a State/Union Territory’ at the end of
the quarter (tax period).
Example 6: Normal supply of goods:
Last date to invoice Date of Invoice Date of receipt of payment Time of Supply (TOS)
12.06.2018 12.06.2018 50% advance on 30.05.2018 & 12.06.2018
balance on 01.07.2018
12.06.2018 30.05.2018 50% advance on 30.05.2018 & 30.05.2018
balance on 01.07.2018
12.06.2018 02.07.2018 50% advance on 30.05.2018 & 12.06.2018
balance on 01.07.2018

Example 7: Continuous Supply of goods:

Date of issue of Last date to issue Date of Invoice Date of receipt of Time of Supply
statement of invoice payment (As per (TOS)
accounts (As per contract 5th of
contract 2nd of successive month)
successive month)
02.02.2019 02.02.2019 02.02.2019 05.02.2019 02.02.2019
02.02.2019 02.02.2019 31.01.2019 05.02.2019 31.01.2019
02.02.2019 02.02.2019 01.03.2019 05.02.2019 02.02.2019
02.02.2019 02.02.2019 02.02.2019 31.01.2019 02.02.2019

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Example 8: Normal supply of services:
Date of Date of Invoice Date on which Time of Supply Remarks
provision of payment
service received
15.06.2019 10.07.2019 15.07.2019 10.07.2019 Invoice issued within 30 days
and before receipt of payment
15.06.2019 10.07.2019 05.07.2019 05.07.2019 Invoice issued within 30 days
but payment received before
invoice
15.06.2019 10.07.2019 05.07.2019 05.07.2019 & Invoice issued within 30 days.
(Part) and 10.07.2019 Part payment received before
30.07.2019 invoice and remaining
(remaining payment after invoice.
15.06.2019 10.07.2019 06.06.2019 06.06.2019 & Invoice issued within 30 days.
(Part) and 05.07.2019 Part Payment (in the form of
05.07.2019 advance) received before
(remaining issue of invoice and remaining
payment received after
completion of service
15.06.2019 25.07.2019 25.08.2019 15.06.2019 Invoice not issued within 30
days and payment received
after completion of service
15.06.2019 25.07.2019 05.06.2019 05.06.2019 Invoice not issued within 30
(part) and and days. Part payment received
25.08.2019 15.06.2019 as advance before completion
(remaining) of service and remaining
payment received
subsequently
15.06.2019 25.07.2019 05.06.2019 05.06.2019 Invoice not issued within 30
(part) and and days. Part payment received
20.07.2019 15.06.2019 as advance before completion
(remaining) of service and remaining
payment received
subsequently but before issue
of invoice
Not yet 05.07.2019 30.06.2019 30.06.2019 Payment received as advance
provided

Example 9: Continuous supply of services (ICAI BGM):

Mr. X is getting construction services from a developer against buying of an under-construction flat for the
period 01/07/2017 to 31/03/2018 for Rs. 150,00,000. The transactions are structured as follows:

Situation 1: Equal instalments to be paid at the end of every quarter

Periodic completion of Date of Invoice Actual payment dates Value
service
30-09-2017 03-10-2017 15-10-2017 50,00,000
31-12-2017 02-12-2017 03-02-2018 50,00,000
31-03-2018 10-04-2018 20-03-2018 50,00,000
Situation 2: Payment to be made as per mutual understanding
Periodic completion of Date of Invoice Actual payment dates Value
service
31-12-2017 04-01-2018 12-01-2018 90,00,000

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 31-03-2018 22-04-2018 02-04-2018 60,00,000

Situation 3: 40% payment on 40% completion and balance payment on 100% completion
Periodic completion of Date of Invoice Actual payment dates Value
service
01-10-2017 29-09-2017 05-10-2017 60,00,000
31-03-2018 24-04-2018 28-04-2018 90,00,000

A. This is a case of continuous supply of services. The first question that should be determined in these
cases is whether the invoice is issued within the prescribed time period. If issued within the prescribed time
period, the time of supply will be the date of issue of invoice or the date of receipt of payment whichever is
earlier. If the invoice is issued after the prescribed period, then the time of supply will be the date of
completion of service or the date of receipt of payment whichever is earlier.

Situation 1: In this situation, the due date of payment can be ascertainable from the contract. So, the last
date of issuance of invoice will be the due date of payment. The due date of payment will be end of each
quarter. So, the time of supply will be determinable as follows:
Periodic Date of Invoice Actual payment Value Invoice Time of
Completion of dates issued within Supply
service time limit
30-09-2017 03-10-2017 15-10-2017 50,00,000 No 30-09-2017
31-12-2017 02-12-2017 03-02-2018 50,00,000 Yes 02-12-2017
31-03-2018 10-04-2018 20-03-2018 50,00,000 No 20-03-2018

Situation 2: In this situation, due date of payment is not ascertainable from the contract. So, the invoice is to
be issued before or at the time when the supplier of services receives the payment. So, the time of supply
will be determinable as follows:
Periodic Date of Invoice Actual payment Value Invoice Time of
Completion of dates issued within Supply
service time limit
31-12-2017 04-01-2018 12-01-2018 90,00,000 Yes 04-01-2018
31-03-2018 22-04-2018 02-04-2018 60,00,000 No 31-03-2018

Situation 3: In this situation, the payment is linked to the completion of event. The invoice should be raised
on or before the completion of that event (i.e. 40% or 100% completion as the case may be). So, the time of
supply will be as follows:
Periodic Date of Invoice Actual payment Value Invoice Time of
Completion of dates issued within Supply
service time limit
01-10-2017 29-09-2017 05-10-2017 60,00,000 Yes 29-09-2017
31-03-2018 24-04-2018 28-04-2018 90,00,000 No 31-03-2018

Date of receipt of payment shall be the date on which the payment is entered in his books of account or the
date on which the payment is credited to his bank account, whichever is earlier

Where amount received is in excess of invoice with amount upto Rs. 1,000, supplier has option to choose
time of supply as date of issue of fresh invoice for the said excess amount.
Example 10: ABC enterprises, raised Rs. 49,500 invoice on 14.02.2018. Recipient made round off payment
of Rs. 50,000 on 02.03.2018. In this case, time of supply for Rs. 49.500 will be 14.02.2018. But for balance
Rs. 500, time of supply shall at the option of supplier.

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Reverse Charge [Sec. 12(3)]
The time of supply in case of reverse charge, shall be
the earliest of the following dates:
(a) the date of receipt of the goods, or
(b) the date of payment, or
(c) the date immediately following thirty days (31st
day) from the date of issue of invoice or any
other document, by whatever name called,
in lieu thereof by the supplier.
If it is not possible to determine the time of supply
under clause (a), (b) or (c) above, the time of supply
shall be the date of entry in the books of account of
the recipient of supply.
This proviso will bear its impact on provisional entries
passed on month end or year-end closing i.e.
provision of expenses made for those vendors who
do not submit their bills.
Date of self-invoicing by the recipient will not hold any importance in arriving at the TOS for reverse charge
cases. For determining TOS under reverse charge, date of invoice of supplier or any other document
issued by the supplier, by any name whatsoever (whether registered or unregistered) will be relevant.
Supply of Voucher [Sec. 12(4)]
In case of supply of vouchers by a supplier, the time
of supply shall be:
(a) the date of issue of voucher, if supply is
Identifiable at that point; or
(b) the date of redemption of voucher, in all the
other cases.
Residual Supply [Sec. 12(5)]
Where it is not possible to determine the time of
supply under the provisions of sub-section (2) or sub- supply under the provisions of sub-section (2) or
section (3) or sub-section (4), the time of supply shall: sub-section (3) or sub-section (4), the time of
(a) in a case where a periodical return has to
be filed, be the date on which such return is
to be filed; or
(b) in any other case, be the date on which the
tax is paid.
Example 11: Investigation reveals clandestine
(secretively) removal of goods by a supplier who is
not registered under GST. The evidence is in the form
of noting, often undated, and some corroborative
material. The supplier voluntarily pays tax during the
investigation, to close the case. The time of supply
will be the date on which the tax is paid, as being
unregistered, the supplier is not required to file
periodical returns.
Additional consideration like interest, fee &
penalty [Sec. 12(6)]
Date on which supplier receives such additional
value.
Reverse Charge [Sec. 13(3)]
The time of supply shall be the earlier of the
following dates:
(a) the date of payment, or
(b) the date immediately following sixty days (61st
day) from the date of issue of invoice or any
other document, by whatever name called,
in lieu thereof by the supplier.
If it is not possible to determine the time of supply
under clause (a), or (b) above, the time of supply
shall be the date of entry in the books of account of
the recipient of supply.
In case of supply by ‘associated enterprises’,
where the supplier of service is located outside
India, the time of supply shall be the date of entry
in books of account of the recipient of supply or the
date of payment, whichever is earlier.
Supply of Voucher [Sec. 13(4)]
In case of supply of vouchers by a supplier, the
time of supply shall be:
(a) the date of issue of voucher, if supply is
Identifiable at that point; or
(b) the date of redemption of voucher, in all the
other cases.
Residual Supply [Sec. 13(5)]
Where it is not possible to determine the time of
supply shall:
(a) in a case where a periodical return has to
be filed, be the date on which such return is
to be filed; or
(b) in any other case, be the date on which the
tax is paid.
Additional consideration like interest, fee &
penalty [Sec. 13(6)]
Date on which supplier receives such additional
value.
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Section 14 Change in rate of Tax in respect of supply of goods or
services
Section 12 & 13 has been over-ruled by this section i.e. in case of change in rate of tax, time of supply of
goods or service or both shall be determined under this section: -

Taxable goods or services or both has been Taxable goods or services or both has been
supplied before the change in rate of Tax supplied after the change in rate of Tax
Invoice issued – Before Change Invoice issued – Before Change
Receipt of payment – After Change Receipt of payment – After Change
Time of Supply – Date of Invoice Time of Supply – Date of payment
Invoice issued – After Change Invoice issued – Before Change
Receipt of payment – After Change Receipt of payment – Before Change
Time of Supply – Date of Invoice or payment, Time of Supply – Date of Invoice or payment,
Whichever is earlier Whichever is earlier
Invoice issued – After Change Invoice issued – After Change
Receipt of payment – Before Change Receipt of payment – Before Change
Time of Supply – Date of payment Time of Supply – Date of invoice
Date of receipt of payment shall be the date on which the payment is entered in his books of account or the
date on which the payment is credited to his bank account, whichever is earlier. However, the date of
receipt of payment shall be the date of credit in the bank account if such credit in the bank account is after 4
working days from the date of change in the rate of tax.
Example 12: Date of change in rate of tax is 15th June 2017. Earlier rate of tax was 15% and the same has
been changed to 18%
Invoice issued – 10th June 2017 Invoice issued – 10th June 2017
Receipt of payment – 20 June 2017
th
Receipt of payment – 20th June 2017
Time of Supply – 10th June 2017 (15%) Time of Supply – 20th June 2017 (18%)
Invoice issued – 20 June 2017
th
Invoice issued – 5th June 2017
Receipt of payment – 25 June 2017
th
Receipt of payment – 25th May 2017
Time of Supply – 20th June 2017 (18%) Time of Supply – 25th May 2017 (15%)
Invoice issued – 20 June 2017
th
Invoice issued – 20th June 2017
Receipt of payment – 10 June 2017
th
Receipt of payment – 10th June 2017
Time of Supply – 10 June 2017 (15%)
th
Time of Supply – 20th June 2017 (18%)
Example 13: Mr. A buy a motor car from a car dealer. Mr. A has made payment and car dealer has issued
an invoice on 25th December 2017. The car was to be delivered on new year i.e. 1 st Jan’18. The applicable
rate of car is changed upward on 26th December 2017. As per section 14 (b) (ii), the time of supply is earlier
of the two events namely, issuance of invoice or receipt of payment, both of which are before the change in
rate of tax, and thus, the old rate of tax remains applicable.

Example 14: Payment is credited in books of accounts on 29 th April. Payment is credited in the bank
account on 8th May. Date of change in tax rate is 1st May. In this scenario, date of payment shall be treated
as 8th May as the actual credit in the bank account has occurred after more than 4 working days. If suppose
payment is credited in bank account on 3 rd May then date of payment shall be treated on 29 th April (credited
in books of accounts)

154
 Question & Answer
Q1. A Machine has to be supplied at site. It is done by sourcing various components from vendors and
assembling the machine at site. The details of the various events are:
17th September Purchase order with advance of Rs. 50,000 is received for goods worth Rs. 12 Lacs
and entry duly made in the seller’s books of account
20th October The machine is assembled, tested at site, accepted by buyer
rd
23 October Invoice raised
4th November Balance payment of Rs. 11.50 Lacs received
Determine the time of supply(ies) in the above scenario?
A. The time of supply of goods is 20th October 2017 which is the date on which the goods were made
available to the recipient as per section 12(2)(a) and the invoice should have been issued on this date
[Section 31(1)(b)].

Q2. Determine the time of supply from the given information.

May 4 Supplier invoices goods taxable on reverse charge basis to Bridge & Co. (30 days
from the date of issuance of invoice elapse on June 3)
May 12 Bridge & Co receives the goods
May 30 Bridge & Co makes the payment
A. Here, May 12 will be the time of supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance of invoice [Section 12(3)]. (Here,
date of invoice is relevant only for calculating thirty days from that date.)

Q3. Determine the time of supply from the given information.

May 4 Supplier invoices goods taxable on reverse charge basis to Pillar & Co. (30 days
from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 3 Payment made for the goods
A. Here, June 4 will be the time of supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance of invoice [Section 12(3)].

Q4. ABC Ltd. sells food coupons to a company, which gives these to its employees as part of the agreed
perquisites. The coupons can be redeemed for purchase of any item of food/provisions in the outlets that are
part of the program.
A. As the supply against which the coupon will be redeemed is not known on the date of the sale of the
coupon, the time of supply of the coupon will be on the date on which the employee redeems it against
food/provision items of his choice.

Q5. With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a
voucher for Rs. 20 which will be redeemable till 5 Jan for a small pizza.
A. As the supply against which the voucher will be redeemed is known on the date of the sale, the time of
supply is the date of issue of the voucher.

Q6. Determine the time of supply from the given information.

6th May Booking of convention hall, sum agreed Rs. 15,000, advance of Rs. 3,000 received
15th September Function held in conventional hall
27th October Invoice issued for Rs. 15,000, indicating balance of Rs. 12,000 payable
3rd November Balance payment of Rs. 12,000 received

155
A. As per Section 31 read with rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of supply
of service. In the given case, the invoice is not issued within the prescribed time limit. As per section 13(2)(b),
in a case where the invoice is not issued within the prescribed time, the time of supply of service is the date of
provision of service or receipt of payment, whichever is earlier.
Therefore, the time of supply of service to the extent of Rs. 3,000 is 6th May as the date of payment of Rs.
3,000 is earlier than the date of provision of service. The time of supply of service to the extent of the balance
Rs. 12.000 is 15th September which is the date of provision of service.

Q7. Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an apartment
complex, for which the Apartment Owners’ Association showed a payment in cash on 4th April to them against
work of this description. The dates of the work are not clear from the records of ABC & Co. ABC & Co have not
issued invoice or entered the payment in their books of account.
A. The time of supply cannot be determined vide the provisions of clauses (a) and (b) of section 13(2) as
neither the invoice has been issued nor the date of provision of service is available as also the date of receipt
of payment in the books of supplier is also not available. Therefore, the time of supply will be determined vide
clause (c) of section 13(2) i.e., the date on which the recipient of service shows receipt of the service in his
books of account.
Thus, time of supply will be 4th April, the date on which the Apartment Owner’s Association records the receipt
of service in its books of account.

Q8. Determine the time of supply from the given information (assuming that service being supplied is taxable
under reverse charge).

May 4 The supplier of service issues invoice for service provided. There is as dispute
about amount payable, and payment is delayed.
August 21 Payment made to the supplier of service.
A. Here, July 4 will be the time of supply, being the earliest of the two stipulated dates namely, date of
payment and date immediately following 60 days since issue of invoice.

Q9. Determine the time of supply from the given information

May 4 A Germany company issues email informing its associated company ABC Ltd., of
the cost of technical services provided to it.
July 2 ABC Ltd. transfers the amount to the account of the German company.
A. As there is no prior entry of the amount in the books of account of ABC Ltd, July 2 will be the time of
supply, being the date of payment in terms of second proviso to section 13(3).

Q10. A supplier of services received an advance when rate of tax on services was 18%. However, while
raising the invoice, tax rate on service was reduced to 5%. How will the invoice be raised?
A. As per provision of section 14 of CGST Act, 2017, in case wherein service has been supplied after change
in rate of tax and invoice has also been issued after change in rate of tax but payment is received before
change in rate of tax, time of supply shall be date of issue of invoice.
Therefore, in the instant cases assuming as service has been supplied after change in rate of tax and invoice
has also been issued after change in rate of tax, therefore tax rate applicable at the time of raising of invoice
for supply of service would be 5%. Excess tax collected at the time of receipt of advance can be adjusted
against future liabilities.

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Q11. What is the time of supply in case of addition in value by way of Interest, late fees or penalty for delayed
payment of any consideration?
A. The time of supply in case of addition in value by way of Interest, late fees or penalty for delayed payment
of any consideration would be the date on which the supplier receives such addition in value.
Example: Mr. A had supplied services to Mr. B for Rs.1,00,000 on 1st March. Mr. B had to make the payment
to Mr. A within one month of the supply otherwise interest was chargeable at the rate of 15%. Mr. B fails to
make the payment within one month and makes the payment after a delay of one month i.e. by 30th April. Mr.
A raises a debit note against Mr. B for the interest on delayed payment of Rs. 1,250 on 10th May. Mr. B
makes the payment of the Interest of Rs. 1,250 on 15th June.
The time of supply in such case would not be the date of raising of debit note i.e. 10th May but it would be the
date when Mr. B makes the payment of the interest to Mr. A i.e. 15th June.

Q12. Time of supply of services under reverse charge mechanism where the supplier of service is
associated enterprises?
A. In case of associated enterprises located within India, the time of supply in terms of Section 13(3) shall be
the earliest of the following:
(a) Date of payment as per books of accounts of the recipient; or
(b) Date on which payment is debited in the bank account of the recipient; or
(c) Sixty days from the date of issuing invoice or any other document, by whatever name called, in lieu
thereof by the supplier; or
If it is not possible to determine the time of supply under the aforesaid clauses, the time of supply shall be the
date of entry in the books of account of the recipient of supply. Thus, the same provisions as applicable to a
supplier who is not associated enterprise will apply for services provided by associated enterprises located in
India.
Where associated enterprises is located outside India, the time of supply shall be the earliest of the following
dates:
(a) Date of entry in the books of accounts of the recipient; or
(b) Date of payment.

Particulars Non-associated Associated

enterprises Enterprises
Date on which payment is entered in September 14, 2018 September 14, 2018
books of accounts
Date on which payment is debited to September 17, 2018 September 17, 2018
bank account
Date of issuance of invoice September 10, 2018 September 10, 2018
Sixty days from the date of issuing November 10, 2018 November 10, 2018
invoice
Date of entry in the books of September 10, 2018 September 10, 2018
accounts of the recipient
Time of supply September 14, 2018 September 10, 2018

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Q13. Time of supply where services are supplied online?
A. The CGST Act, 2017 does not provide separate provisions for ascertaining the time of supply of service
where such services are supplied online and hence the same provisions for services will apply for services
supplied online.

Q14. From the following information determine the time of supply of goods where supply involves movement
of goods:
Invoice Date Removal of goods Delivery of goods Receipt of payment Remarks
16-11-2018 10-11-2018 16-11-2018 16-11-2018
01-12-2018 01-12-2018 04-12-2018 20-11-2018 Rs. 5,00,000 is
10-12-2018 received as
advance and
balance payment
Rs. 6,20,000
received on 10-12-
2018

A.
Invoice Date Removal of Delivery of Receipt of Time of Supply Remarks
goods goods payment
16-11-2018 10-11-2018 16-11-2018 16-11-2018 10-11-2018
01-12-2018 01-12-2018 04-12-2018 20-11-2018 01-12-2018 Time of supply
10-12-2018 is date of issue
of invoice.
Advance
received is not
liable to be
taxed at the
time of receipt
vide notification
no. 66-2017
Dated 15-11-
2017

Q15. From the following information determine the time of supply if goods are supplied on approval basis:
Removal of goods Issue of Invoice Accepted by recipient Receipt of payment
01-12-2017 15-12-2017 05-12-2017 25-12-2017
01-12-2017 25-07-2018 25-07-2018 20-07-2018

A.
Removal of Issue of invoice Accepted by Receipt of Time of Supply Remarks
goods recipient payment
01-12-2017 15-12-2017 05-12-2017 25-12-2017 05-12-2017 Time of supply
shall be the
date of
acceptance by
the recipient as
invoice was
issued after that
date.

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 01-12-2017 25-07-2018 25-07-2018 20-07-2018 02-06-2018 Time of supply
shall be date
after expiry of 6
months from the
date of removal.

Q16. Determine the time of supply in each of the following independent cases in accordance with provisions
of CGST Act, 2017:
Date of Actual provision of Date of Invoice Date on which payment
services received
10-11-2017 30-11-2017 15-12-2017
10-11-2017 30-11-2017 15-11-2017
10-11-2017 30-11-2017 15-11-2017 and 10-12-2017
10-11-2017 30-11-2017 06-11-2017 and 09-11-2017
10-11-2017 30-11-2017 06-11-2017 and 16-11-2017
10-11-2017 12-12-2017 30-04-2018
10-11-2017 12-12-2017 05-11-2017 and 25-12-2017
10-11-2017 22-12-2017 12-12-2017
A.
Date of Actual provision Date of Invoice Date on which payment Time of Supply
of services received

10-11-2017 30-11-2017 15-12-2017 30-11-2017

10-11-2017 30-11-2017 15-11-2017 15-11-2017
10-11-2017 30-11-2017 15-11-2017 and 10-12- 15-11-2017 and 30-11-
2017 2017 for the respective
amounts

10-11-2017 30-11-2017 06-11-2017 and 09-11- 06-11-2017 and 09-11-

2017 2017 for the respective
amounts
10-11-2017 30-11-2017 06-11-2017 and 16-11- 06-11-2017 and 16-11-
2017 2017 for the respective
amounts
10-11-2017 12-12-2017 30-04-2018 10-11-2017
10-11-2017 12-12-2017 05-11-2017 and 25-12- 05-11-2017 and 10-11-
2017 2017 for the respective
amounts
10-11-2017 22-12-2017 12-12-2017 10-11-2017

Q17. Determine the time of supply in each of the following independent cases in accordance with provisions
of CGST Act, 2017:
Date of Actual Date of Invoice Payment entry in Credit in bank Remarks
provision of supplier’s book account
services
20-10-2017 21-10-2017 26-10-2017 30-10-2017
20-10-2017 30-10-2017 24-10-2017 22-10-2017
16-11-2017 26-12-2017 28-01-2018 29-01-2018

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 01-12-2017 30-10-2017 30-10-2017 30-10-2017 Rs, 5,00,000 is
30-10-2017 06-12-2017 08-12-2017 received in
advance on 30-
10-2017 and
balance amount
Rs. 6,80,000 is
received on 06-
12-2017
A.
Date of Actual Date of Invoice DOP- earlier of the Time of Supply Remarks
provision of services date of payment is
entered in books
or credited in bank
account
20-10-2017 21-10-2017 26-10-2017 21-10-2017
20-10-2017 30-10-2017 22-10-2017 22-10-2017
16-11-2017 26-12-2017 28-01-2018 16-11-2017
01-12-2017 30-10-2017 30-10-2017 30-10-2017 Rs, 5,00,000 is
30-10-2017 06-12-2017 30-10-2017 received in
advance on 30-
10-2017 and
balance amount
Rs. 6,80,000 is
date of invoice

Q18. Determine the time of supply in each of the following independent cases in accordance with provisions
of CGST Act, 2017 if recipient is liable to pay tax on reverse charge basis:
Date of Invoice Date of receipt of goods Date of payment in Date when payment
Books debited in bank account
01-10-2017 05-10-2017 10-10-2017 12-10-2017
01-10-2017 15-10-2017 10-10-2017 12-10-2017
01-10-2017 15-10-2017 12-10-2017 10-10-2017
01-10-2017 15-11-2017 18-11-2017 20-11-2017
A.
Date of Invoice Date of receipt of Date of payment in Date when Time of Supply
goods Books payment debited in
bank account

01-10-2017 05-10-2017 10-10-2017 12-10-2017 05-10-2017

01-10-2017 15-10-2017 10-10-2017 12-10-2017 10-10-2017
01-10-2017 15-10-2017 12-10-2017 10-10-2017 10-10-2017
01-10-2017 15-11-2017 18-11-2017 20-11-2017 01-11-2017

Q19. Determine the time of supply in the following cases assuming that GST is payable under reverse charge:

Date of payment by recipient of services Date of issue of invoice by

supplier of services
10-10-2017 29-08-2017
10-10-2017 01-08-2017
Part payment made on 30-08-2017 and balance amount paid on 01-11- 29-08-2017
2017

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 Payment is entered in the books of account on 28-08-2017 and debited in 01-08-2017
recipient’s bank account on 30-08-2017
Payment is entered in the books of account on 30-08-2017 and debited in 29-08-2017
recipient’s bank account on 26-08-2017

A.
Date of Invoice Date immediately Date of payment by Time of supply of services (earlier
issued by supplier following 60 days recipient of services of Date immediately following 60
of services from invoices days from invoice or Date of
payment by recipient of services)
29-08-2017 29-10-2017 10-10-2017 10-10-2017
01-08-2017 01-10-2017 10-10-2017 01-10-2017
29-08-2017 29-10-2017 Part payment made on 30-08-2017 for part payment and
30-08-2017 and balance 29-10-2017 for balance amount
amount paid on 01-11-
2017
01-08-2017 01-10-2017 Payment is entered in the 28-08-2017 (i.e. when payment is
books of account on 28- entered in the books of account of
08-2017 and debited in the recipient)
recipient’s bank account
on 30-08-2017
29-08-2017 29-10-2017 Payment is entered in the 26-08-2017 (i.e. when payment is
books of account on 30- debited in the recipient’s bank
08-2017 and debited in account)
recipient’s bank account
on 26-08-2017

Q20. Mehra Sons, a registered supplier, is a wholesale supplier of ready-made garments located in Bandra,
Mumbai. On 5th September, 20XX, Subhadra, owner of Aura Boutique located in Dadar, Mumbai, approached
Mehra Sons for supply of a consignment of customised dresses for ladies and kids.
Mehra Sons gets the consignment ready by 2nd December, 20XX and informs Subhadra about the same. The
invoice for the consignment was issued the next day, 3rd December, 20XX. Due to some reasons, Subhadra
could not collect the consignment immediately. So, she collects the consignment from the premises of Mehra
Sons on 18th December, 20XX and hands over the cheque for payment on the same date. The said payment
is entered in the accounts on 20th December, 20XX and amount is credited in the bank account on 21st
December, 20XX. You are required to determine the time of supply of the readymade garments supplied by
Mehra Sons to Subhadra elaborating the relevant provisions under the GST law.
(CA Inter – MTP- May 2018)
A. Given transaction is supply transaction involving movement of goods. Sec 31 requires supplier of goods to
issue invoice upto the time of removal of goods which includes even collection of goods by the recipient. In
given case, date of removal (collection by buyer) is 18.12.XX while invoicing has been done on 03.12.XX.
Thus, given case is one where the supplier has issued invoice upto time of removal of goods. For purposes
of determination of time of supply, the date of payment is considered to be earlier of the date of receipt of
payment in bank account (21.12.XX) or date of entry in books of accounts (20.12.XX). Thus, in instance case,
the date of receipt of payment is 20.12.XX.
As per Sec 12 read with Notification No. 66/2017 CT Dated 15.11.2017, Time of Supply for the supplier of the
goods shall be the date of invoice (03.12.XX) or the last date on which invoice is required to be issued
(18.12.XX). Thus, Time of Supply for the given supply transaction shall be 03.12.XX.

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Q21. Chiku Traders is a registered supplier of plastic goods. On 10th April, 20XX, Chiku Traders received an
order from Neelu Traders for supply of a consignment of plastic goods. Chiku Traders gets the consignment
ready by 15th April, 20XX. The invoice for the consignment was issued the next day, 16th April, 20XX. Nee lu
Traders collects the consignment from the godown of Chiku Traders on 25th April, 20XX and hands over the
cheque towards payment on the same date. The said payment is entered in the books of accounts of Chiku
Traders on 26th April, 20XX and amount is credited in their bank account on 27th April, 20XX. Determine the
time of supply of the plastic goods supplied by Chiku Traders to Neelu Traders as per the provisions of CGST
Act, 2017. (PAST EXAM NOV 2018) (MTP MAY 2020)
A. In terms of section 12(2) of the CGST Act, the time of supply of goods is the earlier of the date of issue of
invoice/last date on which the invoice is required to be issued or date of receipt of payment. However,
Notification No. 66/2017 CT dated 15.11.2017 specifies that a registered person (excluding composition
supplier) has to pay GST on the outward supply of goods at the time of supply as specified in section 12(2)(a)
of the CGST Act, 2017, i.e. date of issue of invoice or the last date on which invoice ought to have been
issued in terms of section 31. As per section 31(1), the invoice in case of supply of goods needs to be issued
either before or at the time of removal/delivery of goods. In this case, the invoice is issued before the removal
of the goods and is thus, within the time limit prescribed under section 31(1).

Therefore, time of supply is the date of issue of invoice, which is 16th April, 20XX.

Q22. Dhruv & Co. sends certain textile products for dyeing to Bhanushali Manufacturers on job work basis on
16th August. On 18th August, Dhruv & Co. credited 100% of the job work charges to the bank account of
Bhanushali Manufacturers in advance and recorded it in its books of accounts on the same date. Bhanushali
Manufacturers issues the invoice for the same in first week of September. Assuming that inputs are received
back by Dhruv & Co. after job work in the month of October (i.e. within time limit prescribed under section 143
of the CGST Act, 2017), determine the time of supply for such job work done by Bhanushali Manufacturers.
(RTP NOV 2021)
A. As per Schedule II of the CGST Act, 2017, the activity by way of any treatment or process which is applied
to another person's goods is a supply of services. Hence, job work is squarely covered within the purview of
supply of services. Accordingly, the time of supply shall be determined as per section 13 of the CGST Act,
2017. As per section 13, time of supply of services where invoice has been issued within 30 days of provision
of services is:

(a) date of issuance of invoice, or

(b) date of recording the payment in the books of accounts of the supplier, or

(c) date on which payment is credited in the bank account of the supplier,

whichever is earlier.

In the present case, the service charges for job work are paid as advance at the time of sending inputs to job
worker. Hence the time of supply of job work services shall be triggered at the time of payment of advance by
Dhruv & Co., i.e. 18th August.

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Section 15 Value of Taxable Supply
Rule 27 Value of supply of goods or services where the consideration is not
wholly in money
Rule 28 Value of supply of goods or services or both between distinct or related
persons, other than through an agent
Rule 29 Value of supply of goods made or received through an agent
Rule 30 Value of supply of goods or services or both based on cost
Rule 31 Residual method for determination of value of supply of goods or
services or both
Rule 31A Value of supply in case of lottery, betting, gambling and horse racing
Rule 32 Determination of value in respect of certain supplies
Rule 33 Value of supply of services in case of pure agent
Rule 34 Rate of exchange of currency, other than INR, for determination of
value
Rule 35 Value of supply inclusive of IGST, CGST, SGST & UTGST

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Section 15 Value of Taxable Supply
Meaning [Sec. 15(1)]

1. The value of a supply of goods and/or services shall be the Transaction Value.
2. Transaction value applicable: -
• Where the supplier and the recipient of the supply The price actually paid or payable
are not related and for the said supply of goods and/or
• Price is sole consideration for the supply services.
3. Free Supply: - No GST: When no consideration is received (either in monetary or non-monetary form) for a
taxable supply, then there is no value, consequently no GST as well (except Schedule I activities).
4. Power of Government to notify manner of valuation [Sec. 15(4) & (5)]: When the value of the supply of goods
or services or both cannot be determined U/S 15(1), Government on the recommendation of the GST
Council, notify the manner of determination of value of such supplies.

Inclusions [Sec. 15(2)]:

The value of supply includes –
(a) Any Taxes, Duties, Cesses, Fees and Charges separately charged by the supplier other than
GST Tax (CGST, IGST, SGST/UTGST, Cess).
The CBIC vide circular No. 76/50/2018-GST Dated 31.12.2018, has clarified that for the purpose of
determination of value of supply under GST, Tax collected at source (TCS) under the provisions of the
Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of tax.
Central excise duty continues to be levied on tobacco along with GST, then Central excise duty will be
included in the transaction value for supply of tobacco for the chargeability of GST.
(b) Any amount that the supplier is liable to pay in relation to such supply, but which has been actually,
incurred by the recipient and which is not included in the price.
Example 1: ABC contractor got supply contract at Rs. 10 Lacs + GST for constructing shed. However,
recipient supplied cement and paint (amounting to Rs. 1 Lac) on “Free of cost – FOC” basis to ABC
contractor. ABC Ltd. will raise invoice of Rs. 9 lacs + GST on Rs. 10 Lacs (Value of supply Rs. 9 Lacs +
Rs. 1 Lacs), so total invoice value shall be Rs. 9 Lacs + Rs. 1.80 Lacs (Rs. 10 Lacs * 18%) = Rs. 10.80
Lacs.
(c) Incidental expenses i.e. commission, packing etc. charged by the supplier. Thus, expenses like
weighment, loading in factory, inspection, testing before supply will be includible in ‘value’. Design charges
incurred before supply will be also included. Any amount charged for anything done by the supplier in
respect of the supply of goods or services, 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 supply.
(e) Subsidies directly linked to the price excluding subsidies provided by the Central Government and State
Government.

Exclusions [Sec. 15(3)]:

(a) Before or at the time of the supply: Such discount has been duly recorded in the invoice issued in
respect of such supply.
(b) After the supply has been effected:
(i) Such discount is established in terms of an agreement entered into at or before the supply and
specifically linked to relevant invoices, and
(ii) Input tax credit has been reversed by the recipient of the supply as it is attributable to the
discount on the basis of document issued by the supplier.
Thus, discount after supply is permissible as deduction only if it was known before or at the time of supply.

In some cases, goods are packed in returnable packing, like gas cylinder, drums etc. In such case, tax is payable
only on consideration received for the supply. {S No. 61 of Tweet FAQ released by CBIC on 26-6-2017}. Thus,
it is not required to add amortized cost of durable and returnable packing.

164
In case of FOR basis contracts, the supplier arranges transport. In that case, he pays GST under reverse charge
on outward freight. He then charges outward freight in the tax invoice. In such case, the outward freight charged
is part of value of goods and GST is payable on value including outward freight. Similarly, packing charges,
weighment charges and other charges are includible in value of levy of GST. The GST rate is same as applicable
to goods, as this is a composite supply as per section 2(30) of CGST Act. It is not correct to charge freight
separately and charge GST @ 5% as the service of supplier of goods is not GTA services at all.

Where the Value of Supply cannot be determined by the u/s 15(1), then the Value shall be determined as per
the CGST Rules. Such valuation may be required in following situations: -
• The consideration, whether paid or payable, is not in money, wholly or partly.
• The supplier and the recipient of the supply are related.

Related Person, shall be: -

1. They are officers or directors of one another's businesses;
2. Legally recognized partners in business;
3. Employer and employee;
4. Any person directly or indirectly owns, controls or holds twenty five per cent or more of the outstanding
voting stock or shares of both of them;
5. One of them directly or indirectly controls the other; The term “person”
6. Both of them are directly or indirectly controlled by a third person; includes legal
7. Together they directly or indirectly control a third person; or persons
8. Members of the same family
9. Persons who are associated in the business of one another in that one is the sole agent or sole distributor or
sole concessionaire, however described, of the other, shall be deemed to be related.

This has been copied from Rule 2(2) of Customs Valuation (Determination of Value of Imported Goods) Rules,
2007 and Rule 2(2) of Customs Valuation (Determination of Value of Export Goods) Rules, 2007, except that in
clause (4) mentioned above, the percentage shareholding has been increased from 5% to 25%.

Example 2: The selling price of a notebook is Rs. 50. For notebooks sold to students in Government Schools,
a company uses its CSR funds to pay the seller Rs. 30, so that the students pay only Rs. 20 per notebook. The
taxable value of the notebook will be Rs. 50, as this is a non-government subsidy. If the same subsidy is paid
by the Central Government or State Government, the taxable value of the notebook would be Rs. 20.
Example of discount deductible from value of supply
Example 3: ABC gives a discount of 30% on the list price to its distributors. Thus, for a carton of Krack bisk, in
the invoice in the list price is mentioned as Rs. 200, on which a discount of 30% is given to arrive at the final
price of Rs. 140. The taxable value is Rs. 140, as the discount is allowed at the time of supply and shown in the
invoice.
Example 4: The agreement of ABC with its dealers is that sale of rice cookers over 100 pieces in the Diwali
month will entitle them to discount of 5% per cooker sold in the next month. The next month’s stock has already
been dispatched when the sales figures for the Diwali month are worked out. However, as the agreement was
in existence at the time of supply, and the discount can be worked out for each invoice, the taxable value will
be billed price minus 5%. The dealer must reverse the proportionate input tax credit on the relevant stock to
bring it in line with the reduced tax.

165
Example of non- deductible discount
Example 5: A company announces turnover discounts after reviewing dealer performance during the year. The
discounts are based on performance slabs and are given as cash-back. As these discounts were not known at
the time of supply of the goods, they will not be deducted from taxable value of those goods.
Example of Related Parties
Example 6:
(i) Mr. A is holding shares having voting rights of 25% or more in ABC Ltd. and XYZ Ltd., then both ABC
Ltd. and XYZ Ltd. shall be deemed to be related persons in GST.
(ii) Mr. B is a major shareholder of ABC Ltd. and Mr. A is a major shareholder of XYZ Ltd. If Mr. A is
appointed as an officer/director in ABC Ltd., and Mr. B is appointed as officer/director in XYZ Ltd., then
ABC Ltd. & XYZ Ltd. will be treated as related persons in GST.
(iii) ABC Ltd. plays significant role in policy decisions, quality control, HR planning of XYZ Ltd. it may be
said that ABC Ltd. controls XYZ Ltd., and hence to be treated as related persons in GST.
(iv) If ABC Ltd. and MNO Ltd. together controls XYZ Ltd., then ABC Ltd. and MNO Ltd., shall be treated as
related persons in GST.
(v) If ABC enterprises is sole distributor of goods manufactured by XYZ Ltd., then ABC enterprises and
XYZ Ltd., shall be treated as related persons in GST.

Rule 27 Value of supply of goods or services where the consideration is not wholly in money: -

A
•Open Market Value of such supply
Rule 27 (a) P
P
L
•If Open Market Value is not available then sum of total consideration in money & Y
money equivalent to consideration not in money (if such amount is known at the time
Rule 27 (b) of supply) I
N

T
•If the value of supply is not determinable under clause (a) & (b) above then the value H
of supply of goods or services or both of like kind and quality I
Rule 27 (c) S

O
•Residuary option if value not determinable under clause (a), (b) & (c) above then the R
sum of total of consideration in money and such further amount in money that is
equiavalent to consideration not in money as determined by the applicable of rule 30 D
Rule 27 (d) or rule 31 in that order. E
R

Open Market Value, is the full value in money (excluding taxes) payable by an unrelated party as sole
consideration of such supply at the same time when supply being valued, is made.

“Supply of goods or services or both of like kind and quality” means:-

• Any other supply of goods or services or both;

166
 • Made under similar circumstances i.e. value of a product in Delhi may be higher than the value of
the product in Salem (Tamilnadu) due to different circumstances prevailing. Therefore, it is provided
that supply under similar circumstances shall be prevailed;
• That, in respect of the characteristics, quality, quantity, functional components, materials, and the
reputation of the goods or services or both first mentioned, is the same as, or closely or substantially
resembles, that supply of goods or services or both i.e. hotel prices differ hugely due to their
reputation.

Example 7: Where a new phone is supplied for Rs. 20,000 along with exchange of an old phone and if the price
of the new phone without exchange is Rs. 24,000, the open market value of the new phone is Rs. 24,000.
Example 8: ABC Ltd. supplies a customised laptop for Rs. 1,00,000 along with exchange of old laptop to Mr. A.
Similar type of customised laptop in terms of configuration, quality, functional components etc., was supplied to
another customer Mr. B few days back (without exchange) for Rs. 1,25,000. Thus, value of customized laptop
supplied to Mr. A shall also be Rs. 1,25,000.
Example 9: Where a laptop is supplied for Rs. 40,000 along with the barter of a printer that is manufactured by
the recipient and the value of the printer known at the time of supply is Rs. 4,000 but the open market value of
the laptop is not known, the value of the supply of the laptop is Rs. 44,000.
Example 10: Mr. A supplied goods to Mr. B for consideration of Rs. 5,00,000 (excluding taxes). Mr. B also gave
some material to Mr. A as consideration for supply whose value was Rs. 20,000 (excluding taxes). Mr. A has
supplied the same goods to another person at price of Rs. 5,10,000.
In this case it will be open market value i.e. 5,10,000 as per Rule 27 (a)
If suppose above open market is not available then as per Rule 27 (b), it is Rs. 5,00,000+Rs. 20,000 = Rs.
5,20,000
If suppose even open market value is also not available but at the time of supply of goods, identical goods have
been supplied at value of Rs. 5,25,000 then as per Rule 27 (c), it is Rs. 5,25,000.

Rule 28 Value of supply of goods or services or both between distinct or related persons, other than
through an agent: - A
P
P
L
Y
•Open Market Value of such supply
I
Rule 28(a)
N

T
•If Open Market Value is not available then the value of supply of goods or services H
Rule 28 (b) or both of like kind and quality I
S

O
•If the value of supply is not determinable under clause (a) & (b) above then the value R
as determined by the application of rule 30 or rule 31, in that order
Rule 28 (c) D
E
R

167
Note: -
• If goods are intended for further supply as such by the recipient, value shall, at the option of supplier be
equivalent to 90% of price charged for LIKE KIND AND QUALITY by the recipient to his customer (they
should not be related)
• Where recipient is eligible for ITC, value declared in invoice shall be deemed to be open market
value. This is very sensible provision as when the recipient can take entire ITC, there cannot be any
intention to evade tax.

Example 11: ABC Ltd. manufactures a customized product in Maharashtra and supplies it to its another
establishment, located in West Bengal (distinct person). The contracted sale price is Rs. 10,00,000. The cost
of production is Rs. 12,00,000. ABC Ltd. is the sole manufacturer of this product.
The value of supply is to be determined as per Rule 28 (c) read with Rule 30 or CGST Rules, 2017 i.e. 110%
of the cost of production (12,00,000*110%) = Rs. 13,20,000.
If suppose West Bengal unit is eligible for full ITC, then value declared in invoice i.e. Rs. 10,00,000, will be taken
as per Rule 28.
Example 12: ABC Ltd. was the only Indian company making and selling a customize product to companies.
However, the international prices of this product dropped and the companies began to import rather than buying
from ABC Ltd. The promoters of ABC Ltd. then set up another company, which had a manufacturing unit that
could use ‘A’ with common directors and senior management for better integration of functionality. ABC Ltd.
started suppling to this unit at low margins. This unit is not eligible for full ITC.
As per provision of Rule 28, the invoice value could not be the basis of valuation for a supply made to a related
person if the recipient is not eligible for full ITC. Under rule 28 (a), the open market value of this product should
be value of taxable supply i.e. imported price plus custom duties should be adopted for valuation after excluding
the component of IGST on import.

Rule 29 Value of supply of goods made or received through an agent (this rule is applicable only for
supply of goods): -

•Open Market Value of such supply, 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
Rule 29 (a) recipient.

•If the value of supply is not determinable under clause (a) above then the
value as determined by the application of rule 30 or rule 31, in that order
Rule 29 (b)

Rule 28 is applicable wherever there is supply of goods or services or both between distinct or related persons.
But this rule is not applicable when such supplies are made through an agent. Meaning thereby reference to
Rule 29 has to be made for all cases of supply of goods made or received between principal & agent and vice
versa even if they are related person.

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Example 13: P (principal) supplies groundnuts to A (agent). A in turn sells groundnuts at Rs. 5,000 per
quintal. Another independent supplier sells groundnuts at Rs. 4,550 per quintal.
Thus, the open market value of groundnut is Rs. 4,550 per quintal. 90% of A’s selling price in the normal course
of trade is Rs. 4,500 per quintal.
P has the option to adopt the open market price (Rs. 4,550) or 90% of A’s onward selling price (Rs. 4,500) as
the taxable value of the groundnuts supplied by him to A.

Rule 30 Value of supply of goods or services or both based on cost: -

Where the value of supply of goods or services or both is not determinable by any of the preceding rules of
this Chapter, the value shall be 110% of the
• cost of production or manufacture; or
• cost of acquisition of such goods; or
• cost of provision of such services.

Service providers have the option to directly move to rule 31 bypassing rule 30.

Rule 31 Residual method for determination of value of supply of goods or services or both: -

Where the value of supply of goods or services or both cannot be determined under rules 27 to 30, the same
shall be determined using reasonable means consistent with the principles and the general provisions of section
15 and the provisions of this Chapter.

Service providers have the option to directly move to rule 31 bypassing rule 30.

Example 14: ABC Ltd. furnish the following expenditure incurred by them and want you to find the assessable
value for the purpose of paying GST. Determine the cost of production in terms of Rule 30.
Particulars Amount Calculation
under Rule 30
Direct Material (cost per unit inclusive of GST at 10%) Rs. 880 Rs. 800
Direct Wages Rs. 250 Rs. 250
Other Direct Expenses Rs. 100 Rs. 100
Indirect Materials Rs. 75 Rs. 75
Factory Overheads Rs. 200 Rs. 200
Administrative Overhead (25% relating to production capacity) Rs. 100 Rs. 25
Selling & Distribution Expenses Rs. 150 -
Quality control Rs. 25 Rs. 25
Sale of scrap realized Rs. 20 Rs. (-) 20
Actual profit margin 15%
Cost of Production Rs. 1,455
Add: 10% on Rs. 1,450 Rs. 145.50
Assessable Value for GST Rs. 1600.50

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Rule 31A Value of supply in case of lottery, betting, gambling and horse racing: -

• The value of supply of lottery shall be deemed to be

100/128 of the face value of ticket or of the price as
notified in the Official Gazette by the Organising State,
Rule 31A whichever is higher.
(2)

•the value of supply of actionable claim in the form of

chance to win in betting, gambling or horse racing in
a race club shall be 100% of the face value of the
Rules 31A bet or the amount paid into the totalisator.
(3)

Example 15: Government of Manipur has organized a lottery:

• The face value of the tickets issued by Manipur is Rs. 250 Lacs. Price notified in official gazette is Rs.
256 lacs. So higher of Face Value or Notified Price i.e. Rs. 256 Lacs. Value 100/128 of 256 Lacs
= Rs. 200 Lacs

Example 16: Mr. A has placed an amount of Rs. 100 lacs into the totalisator on Horse No. 9. If he wins, he gets
10 times the amount. The value of such supply = 100% of the amount paid into the totalisator = Rs. 100 Lacs.

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

Rule Provision
• This rule provides the valuation methods for five specific supplies.
• This rule overrides other rules of valuation. Thus, the supplies prescribed in this rule need not be
valued by sequentially following rule 27 to 31.
• The valuation methods prescribed under this rule are optional; the supplier can use them if he so
desires. He can also opt to value his supplies in accordance with other valuation rules.
32(2) Value of Supply of services in relation to the purchase or sale of foreign currency, including
money changing, is determined by either of two methods: -

(a)
Case 1: Transaction where one of the currencies exchanged is INR
Where Currency exchanged from/to INR
The value of supply, shall be computed by the following method : -
Value= {Difference between Buying or Selling Rate and RBI Reference rate} *
Total units of currency
Where RBI reference rate is not available, value shall be 1% of Gross amount of INR
provided/received by the person changing the money.
Example 17: On 10th May, Mr. Doshi converted US $ 100 into Rs. 6,400 @ Rs. 64 per US $
through Eastern Money Changers. RBI reference rate on 10th May for US $ is 63. The value of
supply in this case is (Rs. 63-Rs. 64) * US $ 100 = Rs. 100 and GST will be levied on this amount.

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 If the RBI reference rate is not available, then 1% of Rs. 6,400 i.e. Rs. 64 will be the value of
supply of service.

Case 2: Transaction where neither of the currencies exchanged is INR

The value of supply is 1% of the lesser of the two amounts the person changing the money
would have received by converting (at RBI reference rate) any of the 2 currencies in INR
Example 18: US $ 9,000 are converted into UK pound 4,500. RBI reference rate at that time for
US $ is Rs. 63 per US $ and for UK pound is Rs. 82 per UK pound. In this case, neither of the
currencies exchanged is INR.
Hence in the given case, value of taxable service would be 1% of the lower of the following: -
(a) US dollar converted into INR = US $ 9,000* Rs. 63 = Rs. 5,67,000
(b) UK pound converted into INR = UK Pound 4,500 * Rs. 82 = Rs. 3,69,000
Value of taxable service = 1% of Rs. 3,69,000 = Rs. 3,690

(b) The person supplying the service may also exercise the following option (based on
slab rates) to ascertain the value of service, however, once opted he cannot
withdraw it during the remaining part of the financial year:
Currency Exchanged Value of Supply
Upto Rs 1 lacs 1% of Gross Amount of currency exchanged,
min Rs 250/-
Above 1 lacs and upto 10 Lacs Rs. 1,000 + 0.50% of the gross amount of
currency exchanged for an amount
exceeding 1 Lacs & upto 10 Lacs
Above 10 Lacs Rs 5,500 +0.1% of amount exceeding Rs 10
lac, subject to maximum amount of Rs.
60,000
Example 19: Mr. X, a money changer, has exchanged US $ 10,000 to INR @ Rs. 65 per US $.
Mr. X wants to value the supply in accordance with rule 32 (2) (b) of CGST Rules.
Determine the value of supply made by Mr. X.
Value of currency exchanged in INR [Rs. 65 * US $ 10,000] = Rs. 6,50,000
Upto 1,00,000 = Rs. 1,000
For Rs. 5,50,000 = Rs. 2,750
Value of Supply = Rs. 3,750
32(3) Value of service provided by the air travel agent, in case of booking of air ticket shall be
calculate as follow: -
Nature of Travel Value
Domestic Travel 5% of Basic Fare
International Travel 10% of Basic Fare
Basic fare means that part of air fare on which commission is normally paid to air travel agent
by the airlines.
Example 20:
Particulars Basic Fare Other Charges & Taxes Total Value of
Fee tickets
Domestic Booking 1,00,900 10,000 5,000 1,15,900
International Booking 3,16,880 20,000 16,000 3,52,880
Value of Supply: -
Domestic Booking Rs. 1,00,900*5% = Rs. 5,045
International Booking Rs. 3,16,880*10%= Rs. 31,688

Example 21:
Basic Air Fare collected for domestic booking of tickets 70,00,000
Basic Air Fare collected for international booking of tickets 50,00,000
Commission received from the airline 10,00,000

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 As per Section 15 of the CGST Act 2017, the GST is payable on the transaction value of
services. As per these provisions, only the commission received by the air travel agent from
the airline is included in the value of taxable service. The air fare collected by the air travel
agent in respect of the service provided by him doesn’t form part of the value of taxable
service. Accordingly, the GST liability would be computed as under: -
• Value of Taxable Supply i.e. commission received from airlines Rs. 10,00,000
• However, if we apply Rule 32 then {(Rs. 70,00,000*5%)+(Rs. 50,00,000*10%)} = Rs.
8,50,000.
• So, it is beneficial to opt for Rule 32 of CGST Rules 2017.
32(4) Value of supply in relation to life insurance business shall be: -
(a) The gross premium charged from a policy holder reduced by the amount allocated
for investment, or savings on behalf of the policy holder, if such an amount is
intimated to the policy holder at the time of supply of service
(b) In case of single premium annuity policies, value shall be 10% of single premium
charged from the policy holder [other than covered in (a)]
(c) In all other case, 25% of premium charged from the policy holder for 1st year and
12.5% from subsequent year.
If policy with only risk cover then entire premium charged from the policy will be taxable value.
Example 22: ABC Life Insurance Company Ltd. (ALICL) has charged gross premium of Rs. 180
Lacs from policy holders with respect to life insurance policies in the 2017-18, out of which Rs.
100 Lacs have been allocated for investment on behalf of the policy holders.
Amount allocated for investment intimated to policy holder at the time of supply of service then
value of service = Rs. 180 Lacs – Rs. 100 Lacs = Rs. 80 Lacs
If it is Single Premium Annuity policy then taxable value Rs. 180 * 10% = Rs. 18 Lacs.
Amount allocated for investment not intimated to policy holder at the time of supply of service
then value of service = 25% of Rs. 180 Lacs = Rs. 45 Lacs.
If premium is only towards risk cover then value of service Rs. 180 Lacs.
32(5) Value of supply in case of second hand goods shall be the difference in selling price and
purchase price, subject to ITC is not availed. If the value so arrived is negative, then it shall be
ignored (Intra- State supplies of second hand goods by an unregistered supplier to registered
second hand goods dealer exempt from GST)
Further, purchase value of goods repossessed from defaulting borrower (who is not registered),
shall be the purchase value as reduced by 5% points per quarter or part thereof, between the
date of purchase and date of disposal.

The provision applies to all taxable persons dealing in second hand goods, including old and
used empty bottles. {PIB press release, Dated 15-7-2017 15:35 IST – CBIC press release No.
79/2017, Dated 15-7-2017}

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 Example 23: A company X Ltd, which deals in buying and selling of second hand cars, purchases
a second hand Maruti Alto Car of March, 2014 for Rs. 3 Lacs from an unregistered person and
sells the same after minor furbishing for Rs. 3.5 Lacs. The supply of the car to the company for
Rs. 3 Lacs shall be exempted and the supply of the same by the company to its customer shall
be taxed at (Rs. 3.5 Lacs – Rs. 3 Lacs) = Rs. 50,000 shall be taxed.
If margin scheme is opted for a transaction of second hand goods, the person selling the car to
the company shall not issue any taxable invoice and the company purchasing the car shall not
claim any ITC.
Example 24: Mr. A purchased a motor car on 1st October 2017 for Rs. 20,00,000. 80% of the
purchase price of car was finance by ABC Finance Ltd. The loan was payable in 60 monthly
installments beginning with 1st November 2017. Mr. A defaulted in repayment of loan and ABC
Finance Ltd. repossessed the car on 15th May 2018. The car was disposed on 10 th December
2018 for Rs. 15,50,000. So, number of quarter is 5 (total percentage 25%). So, purchase value
of car is Rs. 15,00,000. Sale price of car is Rs. 15,50,000 and Purchase value of car is Rs.
15,00,000 so value of taxable supply is Rs. 50,000.
32(6) Value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is
redeemable against a supply of goods or services or both shall be equal to the money value of
the goods or services or both redeemable against such token, voucher, coupon or stamp.
Example 25: ABC Coupons Ltd. sells coupons that are redeemable against specified luxury food
products at retail outlets. Each coupon has a face value of Rs. 900 but it redeemable for supplies
worth Rs. 1,000. In terms of rule 32 (6) of the CGST rules relating to valuation, the value of a
coupon is the money value of goods redeemable against it. Therefore, though the coupon is
sold for Rs. 900, its value is Rs. 1,000.
32(7) The value of taxable services provided by such class of service providers as may be notified by
the Government, on the recommendations of the Council, as referred to in paragraph 2 of
Schedule I of the said Act between distinct persons as referred to in Section 25, where ITC is
available, shall be deemed to be NIL.

Rule 33 Value of supply of services in case of pure agent: -

Value of supply in case of services provided by the pure agent shall exclude the expenditure or cost incurred
by the him, if: -
(i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to
the third party on authorization by such recipient.
(ii) Payment made by pure agent and the same has been shown separately on his invoice.
(iii) Supplies procured by the pure agent from the third party are in addition to the supplies on his
own account.

Who is a pure Agent?

A person who -
1. Enters into a contract to act as a pure agent to incur expenditure or cost in course of supply of goods
or services or both
2. Neither intends nor hold any title of goods or services or both
3. Doesn’t use his own interest on goods/service procured
4. Receives only the actual amount incurred (100% reimbursement)

Example 26: Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of
Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name
of the company paid to the Registrar of Companies. The fees charged by the registrar of Companies for the
registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the
payment of those fees. Therefore, A’s recovery of such expenses is a disbursement and not part of the value
of supply made by A to B.

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Example given in Service Tax Law
Example 27: X contracts with Y, a real estate agent to sell his house and thereupon Y gives an advertisement
in television. Y billed X including charges for television advertisement and paid service tax on the total
consideration billed. In such a case, consideration for the service provided is what X pays to Y. Y does not act
as an agent on behalf of X when obtaining the television advertisement even if the cost of television
advertisement is mentioned separately in the invoice issued by X. Advertising service is an input service for the
estate agent in order to enable or facilitate him to perform his services as an estate agent.
This illustration clearly shows distinction between payments made as ‘pure agent’ and payment made as
‘Principal’.

Rule 34 Rate of exchange of currency, other than Indian rupees, for determination of value: -

Applicable rate shall be: -

Rate of Exchange For Applicable Rate

Taxable Goods Rate notified by Board under Sec 14 of Customs Act, 1962 for the date of time
of supply of such goods in terms of section 12 of the Act.
Taxable Services Rate as per generally accepted accounting principles for the date of supply of
such services in terms of section 13 of the Act.

Rule 35 Value of supply inclusive of integrated tax, central tax, State tax, Union territory tax: -

Where value of supply includes tax amount, i.e. Integrated tax, central tax, State tax or union territory tax, then
tax amount shall be calculated by following method :-
Tax Amount = (Value inclusive of Tax * Tax Rate in %) / (100+ sum of tax rate in %)

Note that the provision applies only the value of supply included GST. The rule doesn’t say that the value is
deemed to be inclusive of GST.

Circular No. 47/21/2018 GST Dated 8th June 2018

It has been clarified that while calculating the value of the supply made by the component manufacturer
using moulds and dies owned by Original Equipment Manufacturers (OEM) sent free of cost (FOC) to him,
the value of such moulds and dies shall not be added to the value of supply made by him because the cost
of moulds/dies was not to be incurred by the component manufacturer and thus, does not merit inclusion in
the value of supply in terms of section 15(2)(b).
However, if the contract between OEM and component manufacturer was for supply of components made
by using the moulds/dies belonging to the component manufacturer, but the same have been supplied by
the OEM to the component manufacturer on FOC basis, the amortised cost of such moulds/dies shall be
added to the value of the components.

Circular No. 86/05/2019 GST dated 1st January 2019

Issue: What is the value to be adopted for the purpose of computing GST on services provided by BF/BC to a
banking company?

Clarification: As per RBI’s Circular and subsequent instructions on the issue (referred to as ‘guidelines’
hereinafter), banks may pay reasonable commission/fee to the BC, the rate and quantum of which may be
reviewed periodically. The agreement of banks with the BC specifically prohibits them from directly charging
any fee to the customers for services rendered by them on behalf of the bank. On the other hand, banks (and
not BCs) are permitted to collect reasonable service charges from the customers for such service in a

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transparent manner. The arrangements of banks with the BCs specify the requirement that the transactions
are accounted for and reflected in the bank's books by end of the day or the next working day, and all
agreements/contracts with the customer shall clearly specify that the bank is responsible to the customer for
acts of omission and commission of the BF/BC.

Hence, banking company is the service provider in the BF model or the BC model operated by a banking
company as per RBI guidelines. The banking company is liable to pay GST on the entire value of service
charge or fee charged to customers whether or not received via BF or BC.

Circular No. 92/11/2019-GST dated 7th March 2019

Free samples and gifts

• It is a common practice among certain sections of trade and industry, to provide free samples and gifts.
For example, pharmaceutical companies often provide drug samples to their stockists, dealers, medical
practitioners, etc., without charging any consideration.
• Samples which are supplied free of cost, without any consideration, do not qualify as ‘supply’ under
GST (except where the activity falls within the ambit of Schedule I of the CGST Act).
• ITC shall not be available on the inputs, input services and capital goods to the extent they are used
in relation to the gifts or free samples distributed without any consideration.
• However, where the activity of distribution of gifts or free samples falls within the scope of supply in
terms of the provisions contained in Schedule I of the CGST Act, the supplier of gifts/ free samples
would be eligible to avail ITC.

Buy one, get one free offer (BOGO)

• Sometimes, companies announce offers like ‘Buy One, Get One free’. It may appear at first glance that in
case of offers like ‘Buy One, Get One Free’, one item is being supplied free of cost without any
consideration. Let say, “buy one soap and get one soap free”.
• In fact, it is not an individual supply of free goods but a case of two or more individual supplies where a
single price is being charged for the entire supply.
• Taxability of such supply will depend upon whether it is a composite or a mixed supply and the rate of
tax shall be determined accordingly.
• ITC shall be available with respect to inputs, input services and capital goods used in relation to supply
of goods or services as a part of such offers.

Discounts including ‘Buy more, save more’ offers

• Sometimes, the supplier offers staggered discount to the customers (i.e. increase in discount rate with
increase in purchase volume). Such discounts are shown on the invoice itself.
• Some suppliers also offer periodic/ year ending discounts to their stockists, etc. Such discounts are
not shown on the invoice as the actual quantum of such discount gets determined after the supply has
been effected, generally at the year end. However, such discounts are established in terms of an
agreement entered into at or before the time of supply. Further, the discount is passed on by supplier
through credit notes.
• Such discounts offered by the suppliers to customers (including staggered and post supply discounts)
shall be excluded to determine the value of supply provided they satisfy the parameters laid down in
Section 15(3) of the CGST Act.4

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 • Further, the supplier shall be entitled to avail the ITC on inputs, input services and capital goods used
in relation to such supply of goods or services at discount.

Get 10 % discount for purchases above Rs. 5,000/-, 20% discount for purchases above Rs. 10,000/- and 30%
discount for purchases above Rs. 20,000/-.

Secondary Discounts

• These are the discounts which are not known at the time of supply or are offered after the supply is
already over.
• In such cases, financial / commercial credit notes can be issued by the supplier for passing of discount,
even if the conditions mentioned in Section 15(3)(b) of the CGST Act are not satisfied.
• However, such discounts shall not be excluded while determining the value of supply as such discounts
are not known at the time of supply and the conditions laid down in Section 15(3)(b) of the CGST Act
are not satisfied.
• In this case, there will be no impact on availability of ITC in the hands of supplier.

Circular No. 102/21/2019 GST dated 28th June 2019

Under GST, as per Sr. No. 27 of NN 12/2017-CT (R) dated 28.06.2017, “Services by way of extending deposits,
loans or advances in so far as the consideration is represented by way of interest or discount (other than interest
involved in credit card services), is exempt”.

Further, the term ‘interest’ has been defined to mean interest payable in any manner in respect of any moneys
borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include
any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit
facility which has not been utilized. The circular clarifies GST implication on additional/ penal interest with
respect to following arrangements:

Vendor providing an option to pay consideration in installments: -

• X sells a mobile phone to Y, the cost of which is INR 40,000. X gives Y an option to pay in
installments of INR 11,000 each over next four months. In case there is delay in payment of
installment, Y would be liable to pay INR 500 per month for the delay.
• In some cases, separate invoicing may be done by X for cost of the product (INR 40,000) and service
of providing loan facility (consideration for which is interest of 2.5% per month and an
additional/penal interest of INR 500 for delay in payment).
• In this case, the additional or penal interest charged for delay in payment of installments would be
included in value of supply of mobile, irrespective of the manner of invoicing. Hence, GST would be
applicable on such additional/penal interest.

Loan facility extended by third party: -

• X sells mobile phone to Y for INR 40,000. For purchase of mobile, Y has an option to avail loan at
interest of 2.5% per month from M/s ABC Ltd.
• The terms of loan allow Y a period of 4 months to repay the loan. Additional/penal interest will be
charged at 1.25% per month for any delay in payment.
• In the above case, value of supply of mobile shall be INR 40,000.

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 • Penal interest is charged for a transaction between Y and M/s ABC Ltd. and will be covered under
the definition of interest. Thus, the same would be exempt from GST.
• Further, any service fee or other charges levied by M/s ABC Ltd. in respect of the transaction related
to extending deposits, loans or advances does not qualify as ‘interest’ and the same will not be
exempt.

As per entry 5(e) of Schedule II of CGST Act, agreeing to the obligation to refrain from an act, or to tolerate an
act or a situation, or to do an act is a supply of services. Thus, Circular also clarifies that levy of additional/
penal interest could not be regarded as consideration received for agreeing to the obligation to refrain from an
act, or to tolerate an act or a situation, or to do an act.

Circular No. 115/34/2019 GST dated 11th October 2019

User Development Fee (UDF) & Passenger Service Fee (PSF) being charges levied by airport operator for
services provided to passengers, are collected by the airlines as an agent and is not a consideration for any
service provided by the airlines. Thus, airline is not responsible for payment of GST on UDF or PSF, provided
the airline satisfies the conditions prescribed for a pure agent under Rule 33 of the CGST Rules. It is the
licensee, that is the airport operator (AAI, DIAL, MIAL etc.) which is liable to pay ST/GST on UDF and PSF.

Accordingly, the airline acting as pure agent of the passenger should separately indicate actual amount of PSF
and UDF and GST payable on such PSF and UDF by the airport licensee, in the invoice issued by airlines to its
passengers. The airline shall not take ITC of GST payable or paid on PSF and UDF. The airline would only
recover the actual PSF and UDF and GST payable on such PSF and UDF by the airline operator. The amount
so recovered will be excluded from the value of supplies made by the airline to its passengers. The registered
passengers, who are the ultimate recipient of the airport services, may take ITC of GST paid on PSF and UDF
on the basis of pure agent’s invoice issued by the airline to them.

The airport operators shall pay GST on the PSF and UDF collected by them from the passengers through the
airlines. Since, the airport operators are collecting PSF and UDF inclusive of GST, there is no question of their
not paying GST collected by them to the Government.

The collection charges (airline collecting on behalf of airport operator so they levy collection charges INR 5 to
airport operator) paid by airport operator to airlines are a consideration for the services provided by the airlines
to the airport operator (AAI, DAIL, MAIL etc.) and airlines shall be liable to pay GST on the same under forward
charge. ITC of the same will be available with the airport operator.

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 Question & Answer
Q1. ABC suppliers Ltd. Mumbai has issued following invoices on 22th July 2017:
(a) XYZ Ltd. Ahmedabad, Value of goods Rs. 20,000. Packing charges Rs. 800, Outward Freight
Charges Rs. 1,200.
(b) CDE Ltd. Pune, Value of goods Rs. 50,000, weighment charges Rs. 1,600, discount for prompt
payment Rs. 1,200.
(c) Brain cert, USA – FOB value Rs. 40,000.
The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.
A. (a) Tax is payable on value plus packing plus outward freight i.e. Rs. 22,000. Since customer is
from out of state, IGST is payable @ 18%. Hence IGST payable is Rs. 3,960.
(b) Tax is payable on 50,000+1,600-1,200 = Rs. 50,400. The supply is within the State. Hence,
tax payable is as follows, SGST @ 9% = Rs. 4,536 & CGST @ 9% = Rs. 4,536
(c) Since the goods are exported, IGST is not payable assuming ABC has LUT.

Q2. A taxable person engaged in trading of second hand cars has given following information for Sept’17:
(a) Purchased second hand car at Rs. 4,00,000 and sold at Rs. 5,00,000.
(b) Purchased second hand car at Rs. 3,00,000 and sold at Rs. 2,90,000.
(c) Purchased second hand car at Rs. 7,00,000. He could not sale in that month.
The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%, Compensation Cess 3%.
A. The taxable person can pay under margin scheme as follows:
(a) Value Rs. 1,00,000 [5,00,000-4,00,000], CGST @ 14% Rs. 14,000, SGST @ 14% Rs. 14,000 &
Compensation Cess @ 3% 3,000. Total Rs. 31,000.
(b) No tax payable as value of supply is negative.
(c) No tax as the car is not sold.

Q3. A CA in Mumbai supplied service relating to incorporation of a company to Mr. Amit in Kolkata. He charged
fees as follows:
(a) Professional fees for incorporate of company Rs. 1,00,000.
(b) Filing fees and registration charges paid to ROC Rs. 90,000.
(c) Reimbursement of Travelling and out of pocket expenses Rs. 10,000.
The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.
A. Rs. 90,000 are received as pure agent. So, this is not includible in value. The travelling & out of pocket
expenses are part of value of supply and includible in value. Hence tax is payable on Rs. 1,10,000. Since the
recipient is out of State, IGST is payable @ 18% = Rs. 1,10,000*18% = Rs. 19,800.

Q4. A in Kolkata supplied machinery of Rs. 2,00,000 to B in Kolkata in July 2017. He charged Rs. 24,000 as
charges for erection and commissioning of the machinery and Rs. 20,000 as machine design charges. As per
payment terms, the payment was to be made within 30 days. However, B did not pay within 30 days. Hence A
recovered Rs. 6,000 as interest for late payment in Sept’17.
The tax rates were as follows: - CGST 9%, SGST 9%, IGST 18%. Calculate the tax liability in each case.
A. Tax is payable on Rs. 2,00,000+ Rs. 24,000+ Rs. 20,000 + Rs. 6,000 = Rs. 2,50,000. Tax payable CGST @
9% of Rs. 2,50,000 = Rs. 22,500. SGST @ 9% = Rs. 22,500 (refer TOS provision for tax payment due date on
additional consideration).

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Q5. A manufacturer of drugs from Ahmedabad sales the product @ Rs. 5,000 for a box of medicines to
wholesalers in Gujarat in Oct’17. He is sending to same goods to his consignment agent in Delhi in Oct’17.
The consignment agent is selling the box of medicines @ Rs. 5,300 per box. Calculate the GST payable.
The tax rates were as follows: - CGST 2.5%, SGST 2.5%, IGST 5%. Calculate the tax liability in each case.
A. (a) for sale to wholesales in Gujarat the tax is as follows –
CGST @ 2.5% of Rs 5,000 = Rs. 125. SGST @ 2.5% = Rs. 125.
(b) for supplies to consignment agent in Delhi he can charge tax on 90% of the sale price in Delhi i.e. 90% of
5,300 = Rs. 4,770. IGST @ 5% of Rs. 4,770 = Rs. 238.50

Q6. A manufacturer of refrigerators from Punjab sales the refrigerator Rs. 50,000 to wholesalers in Punjab. He
is sending to same refrigerators to his depot in Karnataka. He is selling the refrigerators in Karnataka
Rs. 46,000 due to heavy competition. The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%.
Calculate the tax liability for supply to Karnataka.
A. Since the entire tax paid in Punjab will be available as ITC in Karnataka, the tax can be paid on any value
while sending goods from Punjab.

Q7. An AC manufacturer in Chennai has made an exchange offer. As per terms of offer, if you return your old
AC of any make, you will get new AC of specified high capacity for Rs. 56,000, excluding taxes. The normal
price of the new air conditioner of that capacity is Rs. 68,000, excluding taxes. You made enquiry with dealers
of second hand AC and they are willing to purchase your AC for Rs. 7,000. You are staying at Chennai.
The tax rates were as follows: - CGST 14%, SGST 14%, IGST 28%. Calculate the tax payable.
A. Tax is payable on Rs. 68,000. Tax payable – CGST @ 14% Rs. 9,520, SGST @ 14% Rs. 9,520.

Q8. How value of supply to be arrived at in case of supply of goods or services between related persons?
A. Let’s understand it with an example wherein Mr. A who is brother of Mr. B, comes to the shop of Mr. B. He
selects goods worth Rs. 50,000 from the shop. The following would be the steps to find out the value of supply
between Mr. A and Mr. B: -
(a) If the open market value of the goods or services supplied by the supplier is known then open market
value of the goods or services supplied would be the value of supply.
Example: Mr. A who is brother of Mr. B, comes to the shop of Mr. B. He selects goods worth Rs 50,000
on the shop and asks how much he has to pay for it. Mr. B asks Mr. A to pay Rs 40,000. In this
transaction, as Mr. B is brother of Mr. A, Mr. B has charged lesser price from Mr. A. Thus, the open
market price in the given case would be Rs. 50,000.
(b) If open market value is not available, it will be the value of supply of goods or services of like kind and
quality.
Example: Mr. A who is brother of Mr. B, comes to the shop of Mr. B. Supposedly, goods selected by
him have been imported for the first time from outside the country and no price has been specified on
such goods. Mr. B asks Mr. A to pay Rs. 40,000. In this transaction, as Mr. B is brother of Mr. A and the
open market value is not available, price of goods with similar features would be the value of supply of
the goods. Supposedly, similar goods are available for Rs. 45,000 in the market, therefore value of
supply would be Rs. 45,000.
(c) If value is not determinable under either of the two methods above, value of supply would be the value
as determined by application of Rule 30 or Rule 31 of Central Goods and Services Tax Rules, 2017, in
that order.

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 (d) Where the goods are intended for further supply as such by the recipient, the value at the option of the
supplier, be an amount equivalent to ninety per cent of the price charged for the supply of goods of like
kind and quality by the recipient to his customers not being his related person.
(e) If the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to
be open market value of the goods or services.

Q9. Is GST Leviable on Securities Transaction Tax and Stamp Duty?

A. The liability to pay STT and Stamp Duty on purchase or sale of share is that of either purchaser or seller and
not of stock broker. The stock broker collects and deposits the same on behalf of the purchaser or seller and in
the capacity of the pure agent. Thus, GST is not payable on STT and Stamp Duty as long as the sub – broker
satisfies the conditions of pure agent as specified in Rule 33 of the CGST Rules, 2017.

Q10. Admission to ABC Theater is Rs. 100 per ticket for a Kannada Movie as well as for a Hindi Movie plus
entertainment tax 10% on Kannada Movie and 20% on other languages. In the month of November, ABC
Theater sold 2000 tickets of Kannada Movie and 2000 tickets of Hindi Movie. Find the value of taxable supply
of service. Applicable rate of GST 18%. Find the GST liability if any?
A. For GST law add all other taxes (other than part of GST family i.e. CGST, SGST, IGST etc.) in value of
supply. So, entertainment tax shall be part of assessable value.
Kannada Movie total collection = 2000*110 {100+(100*10%)}= Rs. 2,20,000
Hindi Movie total collection = 2000*120 {100+(100*20%)}= Rs. 2,40,000
GST Tax Liability
CGST = Rs. 4,60,000*9%= Rs. 41,400
SGST = Rs. 4,60,000*9%= Rs. 41,400

Q11. ABC Gas sells cooking gas cylinders. Subsidy directly transferred to the account of the customer whose
account are linked with Aadhar card. Selling price per cylinder is Rs. 900. Customer received subsidy Rs. 300
directly from Government to his bank account. Net outflow of the buyer is Rs. 600. Find the value of supply of
goods (per cylinder) in the hands of ABC Gas. Calculate assessable value to levy tax.
A. Supplier is liable to pay GST on transaction value which shall be exclusive of subsidy received from
government. However, exclusion of subsidy is applicable if Government is paying that to the supplier for making
the supply.
In this case, Government has not paid subsidy to the supplier, rather it has been paid to the buyer directly.
Supplier is not impacted by such subsidy. He shall be liable to pay whatever transaction value he has charged
to buyer.
Hence, transaction value is Rs. 900 per cylinder.

Q12. ABC owns a coaching institute in Pune. The institute charges Rs. 18,000 per student for giving training in
international taxation. However, this training programmes is subsidized by different institutions as follows – State
Government of Maharashtra : Rs. 500 per student, XYZ Charitable Trust : Rs. 200 per student and Government
of USA: Rs. 200 per student. Calculate tax liability assuming CGST & SGST @ 9% each.
A. In this case, subsidies given by different institutions are directly linked to the price charged by ABC. State
Government subsidy can be excluded but subsidy paid by others will be included in taxable value.
Value of taxable supply = Rs. 18,000 – Rs. 500 (subsidy from Government of Maharashtra) = Rs. 17,500
GST Tax Liability
CGST = Rs. 17,500*9%= Rs. 1,575
SGST = Rs. 17,500*9%= Rs. 1,575

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Q13. ABC has provided the following details relating to goods sold:-
Particulars Amount
List price of the goods (excluding of taxes, subsidy and discounts) 50,000
Tax levied by Municipal Authority 5,000
Packing charges (not included in the price above) 2,000
Subsidy received from NGO 2,500
Trade discount offered @ 2% on list price
Recipient pay 10% brokerage on list price at the request of supplier
Recipient pay freight & insurance charges on behalf of supplier 5,000
Calculate the value of taxable supply.
A.
Statement showing calculation of value of taxable supply
Particulars Amount
List price of the goods (excluding of taxes and discounts) 50,000
Add:-
Tax levied by Municipal Authority {included in the value as per section 15(2)(a)} 5,000
Packing Charges {included in the value as per section 15(2)(c)} 2,000
Subsidy received from NGO {since subsidy is received from a non-government body, 2,500
the same is included in the value of terms of section 15(2)(e)}
Recipient pay 10% brokerage on the request of supplier {included in the value as per 5,000
section 15(2)(b)}
Recipient pay freight & insurance charges on behalf of supplier {included in the value as 5,000
per section 15(2)(b)}
Total 69,500
Less: Trade discount {since discount is known at the time of supply, it is deductible from 1,000
the value of terms of section 15(3)(a)}
Value of Taxable Supply 68,500

Q14. ABC buys the ‘Super Motor’ in Rajasthan from XYZ. Both agreed for the below conditions:
Value of Motor (including GST @ 5%) Rs. 3,00,000
Taxes (other than GST) paid - Not included in above value Rs. 5,000
Below items are being paid by recipient though supplier is liable to pay
Freight Expenses Rs. 3,500
Consultancy charges for erection Rs. 2,000
Testing Charges Rs 500
Insurance Charges Rs 4,500
Other details:-
Subsidy received from Rajasthan Government (deducted from value) Rs. 10,000
Subsidy received from manufacturer for supply of power generator (deducted from
value) Rs. 25,000
Trade discount shown in Invoice Rs. 2,000
Cash discount due to instant payment Rs. 5,500
If such supply is inter-State supply, calculate the value of taxable supply and GST.
A.
Sr. Action Particulars Amount Remarks
No.
1 Value of Motor 3,00,000
2 Add Taxes (other than GST) paid 5,000 Section 15(2)(a) – Value of
supply shall include any

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 taxes, duties, cesses, fees
and charges levied under
any law other than GST
3 Add Freight Expenses 3,500 Section 15(2)(b) – Any
4 Add Consultancy charges for erection 2,000 amount that the supplier is
5 Add Testing Charges 500 liable to pay in relation to
6 Add Insurance Charges 4,500 such supply but which has
been incurred by the
recipient of supply.
7 Add Subsidy received from manufacturer 25,000 Section 15(2)(e) – Value
shall include subsidies
directly linked to the price
excluding subsidies
provided by the CG/SG.
8 Less Trade Discount - 2,000 Section 15(3)(a) – Value of
the supply shall not include
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.
9 Less Cash Discount -5,500 Section 15(3)(b) – Value of
the supply shall not include
any discount which is given
after the supply has been
effected, if such discount is
established in terms of an
agreement entered into at
or before the time of such
supply and specifically
linked to relevant invoices.
10 Total Value (including GST Value) 3,33,000
11 Less IGST @ 5% {Rs. 3,33,000*5/105) 15,857 Inter-State supply
12 Net Taxable Value 3,17,143

Q15. ABC footwear, a registered supplier of Kanpur, has a non-moving stock worth Rs. 10,00,000 of a
particular variety of shoes that are out of fashion. It has not been able to find market in spite of huge discount
offered. It was able to sell this stock at a very low price of Rs. 2,00,000 to a retailer in Maharashtra with a
condition that the retailer would display hoardings of ABC footwear in all their retail outlets in the State.
Determine the taxable value of supply.
A. In this case the supplier and recipient are not related persons. Although a condition is imposed on the
recipient on effecting the sale, such a condition has no bearing on contract price. This is a case of distress
sale, and in such a case, it cannot be said that the supply is lacking ‘sole consideration’. Therefore, the price
of Rs. 2,00,000 will be accepted as value of supply.

Q16. ABC is facing serious liquidity problems and requests XYZ to pay within 2 days. It offers additional 1%
cash discount. XYZ agrees and pays.
A. As per section 15(3)(b), this discount was not known at the time of supply, and so it cannot be claimed as a
deduction from the transaction value for GST calculation.

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Q17. ABC Ltd. is a registered manufacturer of pendrive. It sells its pendrive exclusively through distributors
appointed across the country. The MRP printed on package of a pendrive is Rs. 1,000. ABC Ltd. sells the
pendrives to distributors at Rs. 700 per pendrive (exclusive of GST). The applicable rate of GST is 18%.
The stock is dispatched to the distributors on quarterly basis – stock for a quarter being dispatched in the second
week of the month preceding the relevant quarter. However, additional stock is dispatched at any point of the
year if the company receives a requisition of that effect from any of its distributors. The company charges Rs.
100 per pendrive from distributors (excluding all charges and taxes).
The company has a policy of offer a discount of 10% on pendrive supplied to the distributors for a quarter, if the
distributors sell 500 pendrives in the preceding quarter. The discount is offered on the price at which the pendrive
are sold to the distributors (excluding all charges and taxes).
The company appoints XYZ Ltd. as a distributor on 1st April and dispatches 750 pendrives on 8th April as stock
for the quarter April-June. XYZ Ltd. places a purchase order of 1000 pendrives with the company for the quarter
July-September. The order is dispatched by the company on 10th June and the same is received by the
distributor. The distributor reports sale of 700 pendrives for the quarter April-June and 850 pendrives for the
quarter July-September.
Compute the taxable value for the quarter July-September in respect of transaction between ABC & XYZ Ltd.
A. As per section 15(3)(b), the value of supply shall not include any discount which is after the supply has been
affected, if
i. such discount is established in terms of an agreement entered into at or before the time of such supply
and specifically linked to relevant invoices, and
ii. ITC as is attributable to the discount on the basis of document issued by the supplier has been reversed
by the recipient of the supply.
XYZ Ltd. is entitled to 10% discount on pendrives supplied by ABC Ltd. for the quarter July-September as it has
sold more than 500 pendrives in the preceding quarter. However, since the entire stock for the quarter July-
September has already been dispatched by ABC Ltd. in the month of June, the discount on the pendrives
supplied to XYZ Ltd. for the quarter July-September will be post-supply discount. This discount shall be
allowable since the discount policy was known before the time of such supply and the discount can be
specifically linked to relevant invoices provided XYZ Ltd. reverses the ITC attributable to the discount on the
basis of credit note issued by ABC Ltd.

Value of Taxable Supply (Amount in INR):-

Price at which the pendrives are supplied to XYZ Ltd. 700
Add: Packing Charges {incidental expenses need to be added as per section 15 (2) 100
(c)}
Less: Discount {As explained above all the conditions specified in section 15 (3) (b) -70
have been satisfied, so the post-supply discount will be allowed, subject to reversal
of ITC by XYZ Ltd.}
Value of Taxable supply of one unit of pendrive 730
Value of Taxable supply of 1000 units supplied for the quarter July-September (Rs. 7,30,000
730*1000)

Note:-XYZ Ltd. need to reverse ITC = Rs. 70 discount * 1000 * 18% = Rs. 12,600.

Q18. ABC provides management consultancy to a group of companies for annual retainership fees of Rs. 22
Lakhs. It is given an office cabin in head office of the group for its exclusive use. ABC pays GST on the amount
of Rs. 22 Lakhs. Is the value for the service provided by ABC, correct under GST laws? Please explain.

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A. The value of Rs. 22 Lakhs for the service provided by ABC, is not correct under GST laws. ABC gets an
office cabin free of cost, which is an additional non-monetary consideration for its services. The market value of
the rent of the room must be added to the fees (Rs. 22 Lakhs) in order to arrive at the value of the taxable
service provided by ABC, as per Rule 27 of CGST Rules 2017.

Q19. Mr. A located in Pune purchases 2,000 parker pen for Rs. 2,00,000 from ABC Ltd. (wholesaler) located in
Indore. Mr. A’s son is an employee in ABC Ltd. The price of each parker pen in the open market is Rs. 120. The
supplier additionally charges Rs. 5,000 for delivering the goods to the recipient’s place of business.
A. Mr. A and ABC Ltd. would not be treated as related persons merely because the son of the recipient is an
employee of the supplier, although such son and the supplier would be treated as related persons (employer
and employee relationship).
Therefore, the transaction value will be accepted as the value of the supply. Transaction value will be Rs.
2,00,000+Rs. 5,000 = Rs. 2,05,000. IGST will be leviable since it is inter-State transaction.

Q20. ABC Ltd. owned by XYZ Ltd. is popularly known for assembly of large machines. PQR Ltd. (also owned
by XYZ Ltd.) is engaged in fabrication of small machines. A factory contracts ABC Ltd. of its machinery, for a
fee of Rs. 6,00,000. ABC Ltd. sub-contracts the work to PQR Ltd. for Rs. 4,00,000 and ensures supervision of
the work performed by them. Generally, PQR Ltd. charges a fixed sum of Rs. 1,200 per man hour to its clients;
its spends 400 hours on this project. Determine taxable value of supply.
A. Since ABC Ltd. & PQR Ltd. is controlled by XYZ Ltd., the two companies will be treated as related persons.
Therefore, Rs. 4,00,000 being the sub-contract price will not be accepted as transaction value. The value of the
service shall be open market value being Rs. 4,80,000 (Rs. 1,200*400).

Q21. ABC Ltd. (Mumbai) has 10 agents located across Maharashtra (except Mumbai). The stock of water
purifier is dispatched on Just in time basis from ABC Ltd., to the location of the agents, based on receipt of
orders from various dealers, on a fortnightly basis. ABC Ltd. is also engaged in wholesale supply of water purifier
in Mumbai. An agent places an order for dispatch of 20 water purifier on 10-12-2017. ABC Ltd. had sold 20
water purifier to a retailer in Mumbai on 8-12-2017 for Rs. 1,30,000. The agent effects the sale of the 20 units
to a dealer who would affect the sale on MRP basis i.e. Rs. 7,000- per unit. Calculate taxable value of supply.
A. The law deems these supplies between the principal and agent to be supplies for the purpose of GST.
Therefore, the transfer of goods by the principal (ABC Ltd.) to its agent for him to effect sales on behalf of the
principal would be deemed to be a supply although made without consideration. The value would be either the
open market value, or 90% of the price charged by the recipient of the intended supply to its customers, at the
option of the supplier. Thus, the value of the supply by ABC Ltd. to its agent would be either Rs. 1,30,000 or
Rs. 1,26,000 (i.e. 90% * 7,000 * 20), based on the option chosen by ABC Ltd.

Q22. ABC Insurance provides you the following information for the month of September, 2018. You are required
to compute value of taxable supply of services under Rule 32 (4) of Determination of value of supply Rules,
2017.
1. General policies: Total premiums collected Rs. 12,000 Lakhs (out of which 1st year premium is Rs.
5,000 Lakhs)
2. Single premium annuity policies : Premium collected Rs. 850 Lakhs
3. Only risk cover policies : Premium collected Rs. 500 Lakhs
4. Life micro-insurance policies where insured amount does not exceed Rs. 2,00,000 : Premium collected
Rs. 10 Lakhs.

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 5. Variable Insurance Policies : Premium collected Rs. 8,000 Lakhs. (80% of the amount is allocated for
investments on behalf of policy holder for which policy holder is given separate break up in premium
receipts).
A. Computation of value of taxable supply of services (Rs. In Lakhs):
Particulars Amount Rate Taxable
Value
General policies:
(i) First year premium 5,000 25% 1,250
(ii) Subsequent years i.e. policies issued in earlier
years 7,000 12.5% 875
Single premium annuity policies 850 10% 85
Only Risk cover policies since the entire premium is for
risk cover, hence, the option under Rule 32 (4) is not 500 100% 500
available.
Life micro-insurance policies {Exempt vide Entry 36 of 10 Exempt -
Notification no. 12/2017-Ct (Rate)}
Variable Insurance Policies [Gross Premium – Amount 8,000 - 1,600
allocated towards investment]
Total Taxable Value 4,310

Q23. Will the Section 15 read with Chapter IV of the CGST Rules, 2017 apply to IGST payable on import of
goods? How valuation will be done in case of import of services?
A. No. As per Proviso to Sec. 5(1) of IGST Act, Customs Law will be applicable for valuation of imported
goods. U/s 15 read with Chapter IV of the CGST Rules, 2017 will apply for valuation of import of services.

Q24. Is reference to the CGST Rules required in all cases?

A. No. Reference to the CGST Rules, 2017 is required only when the supply is between related persons
(including different registrations of the same PAN and principal-agent supplies), or where the consideration
payable is not wholly in money. However, in specific cases where the categories of goods and services are
notified in this regard (such as money-changing), the CGST Rules,2017 must be referred to, irrespective of
the fact that the supplier and recipient are unrelated, and price is the sole consideration.

Q25. If related persons transact at arm’s length price, can the valuation still be questioned?
A. The law mandates a reference to the CGST Rules where the supply is between related persons. However,
since the supply is at “arm’s length price”, the fact that the price assigned to the transaction is an ‘open market
value’ should be established.

Q26. What is the meaning of the term “Price is not the sole consideration”?
A. Under the GST law, consideration can be in “money or otherwise”, and includes the monetary value of an
act or forbearance, in relation to a supply. Consideration may also flow from any person other than the recipient.
In cases, where the money received in respect of the supply is not the sole consideration, the “price is not the
sole consideration”. E.g. Buyer of capital goods discharges the loan of seller, goods purchased on exchange
offer, etc.

Q27. A pharmaceutical company supplies a drug intermediate to its own unit in another State for conversion
into formulations. The product is exclusive to this company, and there is no market sale in India of this drug
intermediate. Goods of like kind and quality are also not available. How will the value of the supply of this drug
intermediate be determined under GST law? (ICAI SM)

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A. Since the supply is made to a distinct person, the same will be valued in accordance with rule 28 relating to
valuation.
There is no open market value of the drug intermediate as also there are no like goods. Therefore, value of
supply of such drug intermediate will be determined in terms of clause (c) of rule 28 i.e., by using rule 30. Thus,
the value of supply of such drug intermediate will be 110% of its cost of production or manufacture. However, if
the recipient unit is eligible for full ITC, the value declared in the invoice will be deemed to be the open market
value of the drug intermediate and thus, the invoice value will be the value of taxable supply.

Q28. Rolly Polly Manufacturers Ltd., registered in Mumbai (Maharashtra), is a manufacturer of footwear. It
imports a footwear making machine from USA. Rolly Polly Manufacturers Ltd. enters into a contract with Rudra
Logistics, a licensed customs broker with its office at Ahmedabad (Gujarat), to meet all the legal formalities in
getting the said machine cleared from the customs station. Apart from this, Rolly Polly Manufacturers Ltd.
authorises Rudra Logistics to incur, on its behalf, the expenses in relation to clearance of the imported machine
from the customs station and bringing the same to the warehouse of Rolly Polly Manufacturers Ltd. which shall
be reimbursed by Rolly Polly Manufacturers Ltd. to Rudra Logistics on the actual basis in addition to agency
charges. Rudra Logistics provided following details:
S. No. Particulars Amount (Rs.)
(i) Agency Charges 5,00,000
(ii) Unloading of machine at Kandla port, Gujarat 50,000
(iii) Charges for transport of machine from Kandla port, Gujarat to its Rudra 25,000
Logistics’ godown in Ahmedabad, Gujarat
(iv) Charges for transport of machine from Rudra Logistics’ Ahmedabad godown 28,000
to the warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra
(v) Prepared and submitted of Bill of Entry and paid customs duty 5,00,000
(vi) Dock dues paid 50,000
(vii) Port charges paid 50,000
(viii) Hotel expenses 45,000
(ix) Travelling expenses 50,000
(x) Telephone expenses 2,000
Compute the value of supply made by Rudra Logistics with the help of given information.
Would your answer be different if Rudra Logistics has charged Rs. 13,00,000 as a lump sum consideration for
getting the imported machine cleared from the customs station and bringing the same to the warehouse of Rolly
Polly Manufacturers Ltd.? (RTP MAY 2020) (MTP JULY 2021) (MTP MAY 2019)
A. As per explanation to rule 33, a “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure
or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure
agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount
received for supply he provides on his own account.
The supplier needs to fulfil all the above conditions in order to qualify as a pure agent.
In the given case, Rudra Logistics has entered into a contractual agreement with recipient of supply, Rolly Polly
Manufacturers Ltd., to incur, on behalf of such recipient, the expenses mentioned in S. No. (ii) to (vii) incurred
in relation to clearance of the imported machine from the customs station and bringing the same to the
warehouse of the recipient. Further, Rudra Logistics does not hold any title to said services and does not them
use for his own interest. Lastly, Rudra Logistics receives only the actual amount incurred to procure such
services in addition to agency charges. Thus, Rudra Logistics qualifies as a pure agent. Further, rule 33

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stipulates that notwithstanding anything contained in the provisions of Chapter IV – Determination of Value of
supply, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be
excluded from the value of supply, if all the following conditions are satisfied, namely-
(I) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party
on authorisation by such recipient;
(II) the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in
the invoice issued by the pure agent to the recipient of service; and (III) the supplies procured by the pure agent
from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his
own account. Since conditions (I) to (III) mentioned above are satisfied in the given case, expenses (ii) to (vii)
incurred by Rudra Logistics as a pure agent of Rolly Polly Manufacturers Ltd. shall be excluded from the value
of supply.
Accordingly, value of supply made by Rudra Logistics is as follows:
Particulars Amount (Rs.)
Agency charges 5,00,000
Add: Unloading of machine at Kandla port, Gujarat Nil
Charges for transport of machine from Kandla port, Gujarat to its godown in Ahmedabad, Nil
Gujarat
Charges for transport of machine from Rudra Logistics’ Ahmedabad godown to the Nil
warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra
Customs duty Nil
Dock charges Nil
Port charges Nil
Hotel expenses 45,000
Travelling expenses 50,000
Telephone expenses 2,000
Value of supply 5,97,000

Yes, the answer would be different. If lump sum amount of Rs. 13,00,000 is paid then the value of supply shall
be Rs. 13,00,000 and tax shall be charged on value of supply since individual cost are not given.

Q29. Rustagi & Co. manufactures customized products at its unit situated in Madhya Pradesh. Cost of
production for Rustagi & Co. for 1000 products is Rs. 20,00,000. These products require further processing
before sale, and for this purpose products are transferred from its Madhya Pradesh unit to its another unit in
Himanchal Pradesh. The value declared on the invoice for such transfer is the cost of production of such
products.
The Himanchal Pradesh unit, apart from processing its own products, engages in processing of similar products
of other persons who supply the products of the same kind and quality. Thereafter, the Himanchal Pradesh unit
sells these processed products to wholesalers. There are no other factories in the neighboring area which are
engaged in the same business as that of Himanchal Pradesh unit. 1,000 units of the products of same kind and
quality are supplied to Himanchal Pradesh unit, at the time when goods are sent by Madhya Pradesh unit, by
another manufacturer located in Himanchal Pradesh. The ex-factory price of such goods is Rs. 19,00,000. The
Himanchal Pradesh unit of Rustagi & Co. is eligible for full ITC.
Determine the value of 1000 products supplied by Rustagi & Co. to its Himanchal Pradesh unit. (PAST EXAM
MAY 2018)
A. As per section 25(4), a person who has obtained or is required to obtain more than one registration, whether
in one State or Union territory or more than one State or Union territory shall, in respect of each such registration,
be treated as distinct persons for the purposes of this Act. Therefore, units of Rustagi & Co. in Madhya Pradesh
and Himanchal Pradesh are distinct persons under GST.

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As per rule 28, the value of the supply of goods between distinct persons, other than where the supply is made
through an agent, shall –
(a) be the open market value of such supply;
(b) if open market value is not available, be the value of supply of goods of like kind and quality;
(c) if value cannot be determined under the above methods, be cost of the supply plus 10% mark-up or be
determined by other reasonable means, in that sequence.
Rule 28 also provides that where the goods are intended for further supply as such by the recipient, the value
shall, at the option of the supplier, be an amount equivalent to 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. Further, rule 28 provides that
where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the
open market value of the goods or services.
In the given case, the option of valuing the goods @ 90% of the price charged by the recipient to his unrelated
customer is not available as the goods are not further supplied ‘as such’ but only after processing at Himachal
Pradesh unit. However, since the Himanchal Pradesh unit is eligible for full ITC, the value declared by the
Madhya Pradesh unit in the invoice for transfer of such products, i.e. Rs. 20,00,000 shall be deemed to be the
open market value of the products.
Thus, the value of 1000 products supplied by Rustagi & Co. to its Himanchal Pradesh unit in terms of rule 28 is
the open market value of such products which is Rs. 20,00,000.

Q30. Chirayu Life Insurance Company Limited (CLICL) has collected premium from policy subscribers. It does
not intimate the amount allocated for investment to subscribers of the policy at the time of collection of premium.
The company has provided the following details in relation to its receipts:
Premium for only risk cover Rs. 25,00,000
Premium from new policy subscribers Rs. 40,00,000
Renewal premium Rs. 80,00,000
Single premium on annuity policy Rs. 1,00,00,000
All amounts are exclusive of tax. You are required to compute the value of supply by CLICL in terms of rule
32(4). (PAST EXAM MAY 2019)
A. As per rule 32(4), the value of supply of services in relation to life insurance business, when the amount
allocated for investment/ savings on behalf of the policy holder is not intimated to the policy holder at the time
of supply of service, is-
(i) in case of single premium annuity policies,10% of single premium charged from the policy holder;
(ii) in all other cases, 25% of the premium charged from the policy holder in the first year and 12.5% of the
premium charged from the policy holder in subsequent years;
(iii) in case the entire premium paid by the policy holder is only towards the risk cover in life insurance, the
premium so paid.
Therefore, in the given case, the value of the services provided by CLICL will be computed as under:
Particulars Amount (Rs.)
Premium for only risk cover 25,00,000
Premium from new policy subscribers 25% of Rs. 40,00,000 10,00,000
Renewal premium 12.5% of Rs. 80,00,000 10,00,000
Single premium on annuity policy10% of Rs. 1,00,00,000 10,00,000
Total value of supply 55,00,000

Q31. Surya Agencies has agreed to supply goods to customer’s premises. Goods valued ₹ 80,000 are taxable
@ 5% IGST as it is an inter-State supply. It also pays freight and transit insurance of ₹ 12,000. GTA is a
registered entity and has charged GST (6% CGST and 6% SGST) under forward charge.

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(i) Compute the invoice value of supply including IGST.
(ii) What will be the invoice value of supply including IGST, if the supply was under ex -factory basis instead of
door-delivery basis? (PAST EXAM NOV 2019)
A. Computation of invoice value of supply
(i) When supplier agrees to supply the goods at customer’s premises, i.e. freight and transit insurance are paid
by the supplier, invoice value of supply will be computed as follows:
Particulars Amount (Rs.)
Value or goods supplied 80,000
Add:- Freight and transit Insurance (It is composite supply since supplier has 12,000
agreed to deliver the goods at the customer’s premises)
Total 92,000
Add:- IGST @ 5% 4,600
Tax Invoice Value 96,600
(ii) When supplier agrees to supply the goods on ex-factory basis, i.e. the buyer pays the freight and transit
insurance, invoice value of supply will be computed as follows:
Particulars Amount (Rs.)
Value or goods supplied 80,000
Total 80,000
Add:- IGST @ 5% 4,000
Tax Invoice Value 84,000
Note: The above answer is based on the view that part (ii) of the question is an independent case and thus, the
information provided in the first paragraph of the question regarding payment of freight and transit insurance by
Surya Agencies does not apply to it. Moreover, when the contract is ex-factory, it implies that the freight and
insurance will be the buyer’s responsibility and seller will have no role, whatsoever, in delivering the goods to
the customer’s premises.

Q32. M/s Global Travels is providing money changer and air travel agent services to various clients. From the
information provided below, you are required to calculate the value of taxable supply for the month of Mar’20:
(i) It had converted US $ 6,000 into Singapore dollar 9,000. RBI reference rate at that time was ₹ 72 per US $
and for Singapore dollar, it was ₹ 52.
(ii) It had booked domestic ticket value of ₹ 7,00,000 and international ticket value of ₹ 15,00,000.
The concern has not opted for rule 32(2)(b) of the CGST Rules, 2017. Basic air fare component under both
domestic and international ticket value is 70% and 60% respectively. (PAST EXAM NOV 2020)
A.
(i) Since in the given case, neither of the currencies exchanged is Indian Rupees, value of taxable supply, in
terms of rule 32(2)(a) of the CGST Rules, 2017, is 1% of lower of the following:
(A) US dollar converted into Indian rupees at RBI reference rate = US $ 6,000 x ₹ 72 = ₹ 4,32,000
(B) Singapore dollar converted into Indian rupees at RBI reference rate = Singapore dollar 9,000 x ₹ 52 = ₹
4,68,000
Value of taxable service for the month of March 2020 = 1% of ₹ 4,32,000 = ₹ 4,320
(ii) Computation of value of taxable supply
Particulars Amount (Rs.) Value of Supply
Amount (Rs.)
Basic fare in domestic bookings (Rs. 7,00,000*70%) 4,90,000
Value of Taxable Supply @ 5% [Rule 32(3)] 24,500
Basic fare in internation bookings (Rs. 15,00,000*60%) 9,00,000
Value of Taxable Supply @ 10% [Rule 32(3)] 90,000
Value of Supply Total 114,500

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 Section 16 Eligibility and conditions for taking input tax credit
Rule 36 Documentary requirements and conditions for claiming input tax credit
Rule 37 Reversal of input tax credit in the case of non-payment of consideration
Section 17 Apportionment of credit and blocked credits
Rule 38 Claim of credit by a banking company or a financial institution
Rule 42 Manner of determination of ITC in respect of inputs or input services
and reversal thereof
Rule 43 Manner of determination of ITC in respect of capital goods and reversal
thereof in certain cases
Rule 88A Order of utilization of ITC
Section 18 Availability of credit in special circumstances
Rule 40 Manner of claiming credit in special circumstances
Rule 41 Transfer of credit on sale, merger, amalgamated, lease or transfer of a
business
Rules 41A Transfer of credit on obtaining separate registration for multiple places
of business within a State or Union territory
Rule 44 Manner of reversal of credit under special circumstances
Section 19 Taking ITC in respect of inputs & capital goods sent for job work
Rule 45 Conditions and restrictions in respect of inputs and capital goods sent
to the job worker
Section 20 Manner of distribution of credit by input service distributor
Section 21 Manner of recovery of credit distributed in excess
Rule 39 Procedure for distribution of ITC by Input Service Distributor

Section 16 Eligibility and conditions for taking input tax credit

Section 16(1)

Eligible Person: Every registered person shall be entitled to take credit of ITC, subject to section 49 (Section
49 prescribes provisions relating to payment of tax, interest, penalty & other amounts), on any supply of goods
or services or both to him.

Conditions: Goods or Services are used or intended to be used in the course or furtherance of his business.

Credited to Electronic Ledger: The said amount shall be credited to the electronic credit ledger of such person.

Note: Electronic Credit Ledger shall be maintained for each registered person eligible for ITC under the Act on
the Common Portal and every claim of ITC under the Act shall be credited to the said Ledger.

Section 16(2)

Registered person shall be entitled to the ITC, in respect of any supply of goods or services or both to him
unless: -

(a) He is in possession of a tax invoice or debit note or such other tax paying documents as may be
prescribed;
(aa) the details of the invoice or debit note referred to in clause (a) has been furnished by the supplier in the

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 statement of outward supplies and such details have been communicated to the recipient of such invoice or
debit note in the manner specified under section 37;

Impact of Amendment:- ITC will be available only when Supplier has furnished the details in his GSTR -
1. It provides an additional condition to claim ITC based on GSTR-2A and newly introduced GSTR-2B,
i.e., ITC on invoice or debit note can be availed only when the details of such invoice or debit note have
been furnished by the supplier in the statement of outward supplies (FORM GSTR-1) as specified in
Section 37 of the CGST Act, 2017 and such details have been communicated to the recipient of such
invoice or debit note. Now, there is no relevance of restriction on availment of ITC under Rule 36(4).

(b) He has received the goods or services or both

(i) it shall be deemed that the registered person has received the goods where the goods are delivered by
the supplier to a recipient or any other person on the direction of such registered person, whether acting
as an agent or otherwise, before or during movement of goods, either by way of transfer of title to goods
or otherwise;
(ii) where the services are provided by the supplier to any person on the direction of and on account of
such registered person.
(c) subject to the provision of section 41, the tax charged in respect of such supply has been actually paid to
the Government, either in cash or through utilization of ITC admissible in respect of the said supply; and
(d) He has furnished the return under section 39:
Provided that:
• If goods against an invoice are received in lots or installments, the registered person shall be entitled
to take ITC upon receipt of the last lot of installment;
• If the recipient fails to make payment to the supplier against the invoice within a period of 180 days
from the date of issuance of invoice, then the recipient shall add back the amount of ITC claimed to
the output tax liability along with interest, in the manner as may be prescribed. This provision shall not
apply on tax paid on reverse charge basis {Section 9 (3) & 9 (4)}. If partial payment is made, the
reversal will be proportionate to the amount not paid to the supplier.
• If the recipient later makes payment to supplier, he can take ITC – third proviso to section 16 (2) of
CGST Act.

Section 16(3)

Where the registered person has claimed depreciation on the tax component of the cost of capital goods and
plant and machinery under the provisions of the Income-Tax Act, 1961, the ITC on the said tax component shall
not be allowed.

Example 1: ABC purchased a laptop for official working for Rs. 1,12,000 (GST element Rs. 12,000).
In such case, ABC is having 2 options for recording such purchase:
i. Book the fixed asset at Rs. 1,00,000 & claim ITC of Rs. 12,000. Depreciation in such case shall be
charged only on Rs. 1,00,000.
ii. Book the fixed asset at Rs. 1,12,000 & do not claim ITC. Depreciation in such case shall be charged on
Rs. 1,12,000.

Section 16(4)

A registered person shall not be entitled to take ITC in respect of any invoice or debit note for supply of goods
or services or both after the due date of furnishing of the return under section 39 for the month of September

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following the end of financial year to which such invoice or invoice relating to such debit note pertains or
furnishing of the relevant annual return, whichever is earlier.

Example 2: Suppose ITC related to purchase invoice for the month of December, 2018 has been omitted to be
taken in return. Annual return for the FY 18-19 has not been furnished yet. In this situation, ITC related to such
invoice can be availed earlier of
➢ Due date of September 2019 return i.e. 20th October 2019 (GSTR 3B)
➢ Date of annual of FY 2018-19 i.e. 31st December 2019
So, the maximum date by which the ITC can be claimed shall be 20th October 2019. If annual return is furnished
on 31st August 2019 then 31st August 2019 is last date to claim ITC in respect of such invoice.

CBIC had clarified via Circular No. 160/16/2021-GST (go through examples): -

Example 3: A debit note dated 07.07.2021 is issued in respect of the original invoice dated 16.03.2021. As the
invoice pertains to F.Y. 2020-21, the relevant financial year for availment of ITC in respect of the said invoice in
terms of section 16(4) of the CGST shall be 2020-21. However, as the debit note has been issued in FY 2021-
22, the relevant financial year for availment of ITC in respect of the said debit note shall be 2021-22 in terms of
amended provision of section 16(4) of the CGST Act.

Example 4: A debit note has been issued on 10.11.2020 in respect an invoice dated 15.07.2019. As per
amended provision of section 16(4), the relevant financial year for availment of input tax credit on the said debit
note, will be FY 2020-21 and accordingly, the registered person can avail ITC on the same till due date of
furnishing of FORM GSTR-3B for the month of September, 2021 or furnishing of the annual return for FY 2020-
21, whichever is earlier.

Rule 36 Documentary requirements and conditions for claiming ITC

Rule 36(1): ITC shall be availed by registered person including the Input service distributor on the basis of any
of the following documents, namely: -
• An invoice;
• An invoice for reverse charge, subject to payment of tax (reverse charge);
• A debit note;
• A bill of entry or any similar document prescribed under the Custom Act, 1962 or rules made thereunder
for the assessment of integrated tax on imports;
• An Input service distributor invoice or input service distributor credit note or any document issued by an
input service distributor in accordance with the provisions of sub-rule (1) of rule 54.

Rule 36(2): ITC shall be availed by a registered person only if all the applicable particulars as specified in the
provisions of Chapter VI are contained in the said document, and the relevant information, as contained in the
said document, is furnished in Form GSTR-2 by such person.

It is provided that if the said document doesn’t contain all the specified particulars but contains the details of the
amount of tax charged, description of goods or services, total value of supply of goods or services or both,
GSTN of the supplier and recipient and place of supply in case of inter-State supply, input tax credit may be
availed by such registered person.

As per CBIC tweet, ITC of RCM can be claimed in same month in which it is paid. Let say ITC of RCM of
July paid in August can be used for payment of liability of July

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Rule 36(3): No ITC shall be availed by a registered person in respect of any tax that has been paid in pursuance
of any order where any demand has been confirmed on account of any fraud, willful misstatement or
suppression of facts.

Rule 36(4): No input tax credit shall be availed by a registered person in respect of invoices or debit notes the
details of which are required to be furnished under sub-section (1) of section 37 unless,-
(a) the details of such invoices or debit notes have been furnished by the supplier in the statement of outward
supplies in FORM GSTR-1 or using the invoice furnishing facility; and
(b) the details of such invoices or debit notes have been communicated to the registered person in FORM
GSTR-2B under sub-rule (7) of rule 60.

CBIC has issued a circular 123/42/2019-GST dated 11th November 2019, with an intent to clarify therein,
various issues. Summary of Circular:-
• The restriction imposed under rule 36(4) of the CGST Rules, 2017, needs to be carried out by the
taxpayers on a self-assessment basis.
• Full ITC of eligible credits shall be available on following:
a. IGST paid on imports
b. Documents issued under reverse charge mechanism (RCM)
c. Credit received from input service distributor (ISD)
• The restriction is not to be computed supplier wise.
• For the purpose of calculating the restriction, ineligible credits such as those enumerated under
section 17(5) of the CGST Act, 2017, shall not be considered.
• For the purpose of determining the quantum of matched eligible credits, the GSTR-2B as available
on the due date of filing of form GSTR-1, should be considered.
Example 5:
Admissible ITC
Invoice uploaded by Supplier in his
Name of ITC Element on considering
GSTR-1 or IFF & Auto-populated to
Supplier Invoice restriction of Rule
GSTR-2B of Recipient
36(4)
Mr. A 2,00,000 2,00,000
Mr. B 3,00,000 1,00,000
No Invoice wise
10,00,000
Mr. C 10,00,000 ITC
{Blocked Credit 17(5)}
Total 15,00,000 13,00,000
Admissible ITC 5,00,000 3,00,000 (eligible ITC) 3,00,000

Example 6: Illustrations of the manner of calculating the eligible ITC that can be availed in GSTR-3B is as
under- (INR in lakhs)

Un-availed
Total eligible eligible credit by
Eligible credit Eligible credit
Eligible credit credit that can virtue of
Scenarios as per GSTR not reflected in
as per books be claimed in restriction
2B GSTR 2B
GSTR-3B imposed by rule
36(4)

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 1 10.00 6.00 4.00 6.00 4.00

2 10.00 7.00 3.00 7.00 3.00

3 10.00 9.60 0.40 9.60 0.40

Note: - Un-availed credit as illustrated in scenarios (1), (2) and (3) above, can be claimed in any of the
succeeding tax period(s), provided the details of requisite invoices are uploaded by the suppliers.

Rule 37 Reversal of ITC in the case of non-payment of consideration

Rule 37(1): After availing ITC, recipient fails to pay to the supplier the amount towards the value of supply along
with tax payable within 180 days from the date of issue of invoice. The amount of value not paid and the amount
of ITC availed or proportionate to such amount not paid to the supplier in Form GSTR-2 for the month
immediately following the period of 180 days from the date of the issue of the invoice.

Provided that the value of supplies made without consideration as specified in Schedule I of the said Act shall
be deemed to have been paid for the purpose of the second proviso to sub-section (2) of section 16.

Provided further that the value of supplies on account of any amount added in accordance with the provisions
of clause (b) of sub-section (2) of section 15 shall be deemed to have been paid for the purposes of the second
proviso to sub-section (2) of section 16.

Any amount that the supplier is liable to pay in relation to supply but which has been incurred by the recipient
of the supply and not included in price actually paid or payable for the goods or services or both.

In case the supplier has issued invoice after the due date on which invoice should have been issued in terms
of Section 31 of the CGST Act, calculation of 180 days will commence from the date of issue of invoice by the
supplier and not from the due date by which invoice should have been issued.

Rule 37(2): The amount of ITC referred in sub-section (1) will be added to output tax liability for the month in
which the details are furnished.

Rule 37(3): The registered person shall be liable to pay interest [Sec. 50 (1)] from the date of availment of credit
till the date when the amount is added to the output tax liability.

Rule 37(4): The time limit specified in Sec. 16 (4) shall not apply to a claim for re-availing of any credit, in
accordance with the provisions of the Act or the provisions of this chapter, that had been reversed earlier.

Example 7: A is a trader who places order on B and instruct to deliver goods at C and in turn he raised invoice
on C. Though the goods are not physically received at the premises of A, the condition of section 16 (2) (b) is
satisfied and A is entitled to take ITC.

Example 8: XYZ makes an advance payment along with GST in August. The supplier raises a bill in the month
of August but delivered goods in installment till November. XYZ can take ITC only in November.

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Example 9: Due to a quality dispute, ABC withheld payment on a machine supplied by a vendor till it could be
rectified. Over 180 days went by in this dispute. The credit taken by ABC and thus, it had to pay back the credit.
Only after the vendor rectified the machine and ABC released the payment, could ABC take the credit again.

Example 10: Hercules Machinery delivered a machine to XYZ in the month of January under Invoice no. 49
dated 28th January 2021 for Rs. 4,15,000 plus GST and undertook trial runs and calibration of the machine as
per the requirements of XYZ. The amount chargeable for the post-delivery activities was covered in a debit note
raised in the month of April 2021 for Rs. 50,000 plus GST. XYZ did not file its annual return till the month of
October. Due date for filing the return for the month of September is 20th October. The time-limit to avail ITC in
respect of tax paid on supply for Invoice No. 49 would be 20th October 2021.

Since the debit note is received in the next financial year, the time limit for taking ITC available on Rs. 50,000
is 20th October 2022 , [earlier of the date of filing the annual return for the preceding financial year or the return
for the month of September.]

Example 11: XYZ received goods from ABC Ltd. on 21.09.2018 worth Rs. 1 Lac for which invoice was issued
on 21.09.2018 along with GST of Rs. 18,000. XYZ claimed credit for the month of the same in form GSTR-3B
of September month, but, failed to pay the invoice amount to the supplier till April, 2019. In this case, 180 days
calculated from 21.09.2018, will expire on 20.03.2019. Thus, XYZ will reverse credit of Rs. 18,000 in its GSTR-
3B for the month of March 2019 and interest computation to start from date of availing of credit and not from the
date of invoice.

Section 17 Apportionment of credit & blocked credits

Section 17(1): If goods or services or both are used partly for the purpose of business & partly for other
purposes, the ITC shall be restricted for the purpose of business.

Section 17(2): If goods or services or both are used for taxable supplies, zero rated supply & exempt supply,
the ITC shall be restricted to taxable supplies & zero rated supply.

Section 17(3): Value of exempt supply {Definition u/s 2(27)} shall include supply as may be prescribed, and –

a. Supply where GST is payable on reverse charge basis

b. Transactions in securities
c. Sale of land
d. Sale of building (except construction of complex where supply is made before obtaining certificate).
This exception has been made as in fact, GST is payable and hence it is not ‘exempted supply’.

Explanation.—For the purposes of this sub-section, the expression ‘‘value of exempt supply’’ shall not include
the value of activities or transactions specified in Schedule III, except those specified in paragraph 5 of the said
Schedule {Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building}.

For determining the value of exempt supply as per section 17 (3) – (a) the value of land and building shall be
taken as same as adopted for the purpose of paying stamp duty, and (b) the value of security shall be taken as
one percent of the sale value of such security.

Section 17(4): A banking company or Financial Institution including NBFC;

a. as per provision of section 17 (2) i.e. proportionate credit; or

b. avail an amount equal to 50% of the eligible input tax credit on inputs, capital goods and input

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 services in that month and the balance 50% shall lapse.

Provided that option once exercise shall not be withdrawn during the remaining part of financial year.

Provided further that the restriction of fifty percent, shall not apply to the tax paid on supplied made by one
registered person to another registered person having the same PAN.

Rule 38 Claim of credit by Banking company or a financial institution (condition on choosing above option
(b):
(a) The said company or institution shall not avail the credit of –
(i) tax paid on Inputs & Input Services that are used for non-business purposes, and
(ii) the credit attributable (blocked credits) to supplies specified U/s 17 (5), in Form GSTR-2
(b) 50% of the input tax shall be the ITC admissible to the company or the institution and shall be
furnished in Form GSTR -2

Section 17(5): Notwithstanding anything contained in Sec. 16(1) and Sec. 18(1), ITC shall not be available: -

17(5)(a), (a) motor vehicles for transportation of persons having approved seating capacity of not more
(aa), (ab) than thirteen persons (including the driver), except when they are used for making the following
taxable supplies, namely:—
(A) further supply of such motor vehicles; or
(B) transportation of passengers; or
(C) imparting training on driving, such motor vehicles;
(aa) vessels and aircraft except when they are used––
(i) for making the following taxable supplies, namely:—
(A) further supply of such vessels or aircraft; or
(B) transportation of passengers; or
(C) imparting training on navigating such vessels; or
(D) imparting training on flying such aircraft;
(ii) for transportation of goods
(ab) services of general insurance, servicing, repair and maintenance in so far as they
relate to motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available—
(i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause
(aa) are used for the purposes specified therein;
(ii) where received by a taxable person engaged—
(I) in the manufacture of such motor vehicles, vessels or aircraft; or
(II) in the supply of general insurance services in respect of such motor
vehicles, vessels or aircraft insured by him;
As per section 2(28) of the Motor Vehicles Act, 1988, “motor vehicle” or “vehicle” means any
mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is
transmitted thereto from an external or internal source and includes a chassis to which a body
has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a
vehicle of a special type adapted for use only in a factory or in any other enclosed premises or
a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five
cubic centimetres.

Noticeable, for first three exceptions viz., further supply of such vehicles or conveyance,
transportation of passengers and imparting training on driving, flying, navigating such vehicles
or conveyance, the supply must be an outward taxable supply of the registered person. While,
in case of transportation of goods, there is no such requirement of making taxable supply.

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 Therefore, all types of vehicles (dumpers, work-trucks, fork-lift trucks, etc.) used for
transportation of goods are allowed to avail ITC without any restrictions under this sub-section.

Example 12: Dealer ‘A’ procures cars from Hyundai for further supply to various customers from
its showroom. ITC available for this.
Example 13: ABC Ltd., purchased cars for employees’ official use. ITC not available for this.
Example 14: A cab operator/transport agencies procures car for transportation of passengers.
ITC available for this.
Example 15: XYZ Ltd., purchased buses for daily commuting of employees. ITC available since
credit not restricted on motor vehicles for transportation of passengers with capacity > 13 person.
Example 16: ABC Ltd. bought truck for transportation of tiles manufactured by it. ITC available
for this.
Example 17: A driving school purchases car for imparting training to trainees. ITC available for
this.
Example 18: ABC Ltd. purchased a trailor which is used inside the factory for movement of semi-
finished goods to main plant. ITC available since it is not motor vehicle.
Example 19: ITC on aircraft purchased by a manufacturing company for official use of its CEO
is blocked.
Example 20: ITC on aircraft purchased by an Aviation School providing training on flying
aircrafts, is allowed.
Example 21: ITC on general insurance taken on a car used by employees of a manufacturing
company for official purposes, is blocked.
Example 22: ITC on maintenance & repair services availed by a company for a truck used for
transporting its finished goods, is allowed.
17(5)(b) The following supply of goods or services or both—
(i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and
plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred
to in clause (a) or clause (aa) except when used for the purposes specified therein, life
insurance and health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be
available where an inward supply of such goods or services or both is used by a
registered person for making an outward taxable supply of the same category of goods
or services or both or as an element of a taxable composite or mixed supply;
(ii) membership of a club, health and fitness centre; and
(iii) travel benefits extended to employees on vacation such as leave or home travel
concession:
Provided that the input tax credit in respect of such goods or services or both shall be available,
where it is obligatory for an employer to provide the same to its employees under any law for the
time being in force.
Example 23: ABC Ltd., organized a dealer meet in a hotel and was charged GST on food bills
of that hotel. ITC not available.
Example 24: ABC Ltd., pays GST on monthly purchase of mineral water bottles for its
employees. ITC not available.
Example 25: Director of ABC Ltd., has taken membership of club for which the fee is paid by the
company. ITC not available.
Example 26: ABC Ltd. pays monthly subscription fee for FICCI etc. for their employees to attend
their various programmes for knowledge enrichment. ITC available.
Example 27: ABC Ltd., pays GST on cab services availed for onsite visit of its employees. ITC
not available.
Example 28: A hotel pays GST on cab services availed for airport pick up and drop facilities for
its guests. In turn, the hotel recovers the same from its guests as part of composite supply of
hotel stay services and cab. ITC available.

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 Example 29: ABC caterers received a big contract for providing catering services to its client on
occasion of marriage. They availed services of another caterer to render quality services and
paid GST to the other caterer for his services. ITC available.
Example 30: ABC Ltd., avails services of a caterer for running canteen for its employees which
is mandatory as per Factories Act, 1948. ITC available.
Example 31: ITC on outdoor catering services availed by a company, for a team development
event organised for its employees, is blocked.
Example 32: ITC on outdoor catering service availed by a company to run a canteen in its factory.
The Factories Act, 1948 requires the company to set up a canteen in its factory. ITC on such
outdoor catering is allowed.
17(5)(c) Work contract services when supplied for construction of an immovable property (other than
plant and machinery) except where it is an input service for further supply of works contract
service;
Example 33: ABC Ltd., availed services of a builder for construction of its factory which will be
used for manufacturing taxable goods. The builder charged GST on invoice raised to ABC Ltd.
ITC not available to ABC Ltd.
Example 34: ABC Ltd., availed services of a building for renovating his office. If this is capitalized
then ITC not available. But let say it is minor expenses and expensed out in Profit & Loss account
then ITC available.
Example 35: ABC Ltd., availed works contract services for constructing foundation of pillars
supporting the machinery and paid GST charged thereupon. ITC available.
17(5)(d) goods or services or both received by a taxable person for construction of immovable property
(other than plant & machinery) on his own account including when such goods or services or
both are used in the course or furtherance of business .
17(5)(e) Goods or services or both on which tax has been paid under composition scheme.
17(5)(f) Goods or services or both received by a Non-resident taxable person except goods imported by
him.
17(5)(g) Goods or services or both used for personal consumption.
Example 36: ABC Ltd., is engaged in manufacturing tiles. 50 packs of tiles were taken by the
MD of the company for its newly constructed home. ITC not available.
Example 37: ABC & Co. is a CA Firm and provide advice on taxation matters. Two ACs were
purchased for installing in the office. ITC available.
17(5)(h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
17(5)(i) Any tax paid in accordance with the provisions of sections, 74, 129 and 130.

Subject to the provisions of section 17(5) of the CGST Act, if event management services, hotel, accommodation
services, consumables etc. are received by a SEZ developer or a SEZ unit for authorised operations, as
endorsed by the specified officer of the Zone, the benefit of zero rated supply shall be available in such cases
to the supplier. [Circular No. 48/22/2018 Dated 14.06.2018]

Section 17(6): The Government may prescribe the manner in which the credit referred to in Sec 17(1) & Sec.
17 (2) may be attributed.

Note: -
The expressions ”capital goods” shall include “plant and machinery” as defined in the Explanation to section
17.
Sec 17 (5) (c) & (d), expression “construction” includes re-construction, renovation, additions or alterations
or repairs, to the extent of capitalization, to the said immovable property.
“Plant & Machinery” means apparatus, equipment, and machinery fixed to earth by foundation or structural
support that are used for making outward supply of goods or services or both and includes such foundation
and structural supports but excludes: -

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 (i) land, building or any other civil structures;
(ii) telecommunication towers; and
(iii) pipelines laid outside the factory premises.

Rule 42 Manner of determination of ITC in respect of inputs or input

services and reversal thereof
The ITC in respect of Inputs or Input Services U/s 17 (1)/(2), being partly used for the purposes of business and
partly for other purposes, or partly used for effecting taxable supplies including zero rated supplies and partly
for effecting exempt supplies, shall be attributed to the purposes of business or for effecting taxable supplies in
the following manner, namely , -

Particulars
T Total Input tax involved on inputs and input services in a tax period
T1 Amount of Input Tax, out of ‘T’, attributable to Inputs and Input Services intended to be used
exclusively for purposes other than business
T2 Amount of Input Tax, out of ‘T’, attributable to Inputs and Input Services intended to be used
exclusively for effecting Exempt Supplies
T3 Amount of Input Tax, out of ‘T’, in respect of Input and Input Services on which credit is not
available u/s 17 (5)
C1 Amount of ITC credited to the Electronic credit ledger of Registered person
C1 = T – (T1+T2+T3)
T4 Amount of ITC attributable to Input & Input Services intended to be used exclusively for effecting
supplies other than exempted but including zero rated supplies
C2 Input Tax Credit left after attribution of ITC under T4 shall be called common credit, and calculated
as:
C2 = C1-T4
Note: ‘T1’, ‘T2’, ‘T3’ and ‘T4’ shall be determined and declared by the registered person at the
invoice level in Form GSTR-2 and at summary level in FORM GSTR-3B
D1 Amount of ITC attributable towards Exempt Supplies is calculated as follows –
D1 = (E/F) * C2
Where ‘E’ is the aggregate value of exempt supplies during the tax period, and
‘F’ is the total turnover in the State of the registered person during the tax period.
Note:
Where the registered person doesn’t have any turnover during the said tax period or the aforesaid
information is not available, the value of ‘E/F’ shall calculated by taking values of ‘E’ and ‘F’ of the
last tax period for which details of such turnover are available, previous to the month during which
the said value of ‘E/F’ is to calculated.
For the purposes of this clause, the aggregate value of exempt supplies and total turnover shall
exclude the amount of any duty or tax levied under entry 84 and entry 92A of List I of the Seventh
Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule [excluding Central &
State excise duty , CST & VAT on non-GST supplies, being petroleum products and alcoholic liquor]
D2 Amount of credit attributable to non-business purposes if common inputs and inputs services are
used partly for business and partly for non-business purposes and shall be equal to 5% of C2
C3 Remainder of the common credit shall be the eligible ITC attributed to the purposes of business and
for effecting supplies other than exempted supplies but including zero rated supplies –
C3 = C2 – (D1+D2)
Note:

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 • the amount ‘C3’,’D1‘ and ‘D2‘ shall be computed separately for input tax credit of central tax,
State tax, Union territory tax and integrated tax and declared in FORM GSTR-3B or through
FORM GST DRC-03
• The amount equal to aggregate of ‘D1’ & ‘D2’ shall be reversed by the registered person in
FORM GSTR-3B or through FORM GST DRC-03
• Where the amount of Input Tax relating to Inputs or Input Services used partly for purposes
other than business and partly for effecting exempt supplies has been identified and
segregated at invoice level by the registered person, the same shall be included in ‘T1’ and
‘T2’ respectively, and the remaining amount of credit on such inputs or input services shall
be included in ‘T4’

The ITC determined shall be calculated finally for the financial year before the due date for furnishing of the
return for the month of September following the end of the financial year to which such credit related.
Where the aggregate of the amounts calculated finally in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the
amounts determined in respect of ‘D1’ and ‘D2’, such excess shall be reversed by the registered person in
FORM GSTR-3B or through FORM GST DRC-03 in the month not later than the month of September following
the end of the financial year to which such credit related.

The said person shall be liable to pay interest on the said excess amount at the rate specified u/s 50 (1) for the
period starting from first day of April of the succeeding financial year till the date of payment.

Or

Where the aggregate of the amounts determined in respect of ‘D1’ and ‘D2’ exceeds the aggregate of the
amounts calculated finally in respect of ‘D1’ and ‘D2’, such excess amount shall be claimed as credit by the
registered person in his return for a month not later than the month of September following the end of the
financial year to which such credit relates.

Example 38: Out of 10 containers purchased by a registered person engaged in taxable supply of goods, 5
are used for storing non-taxable goods (exempt supply) such as petroleum. ITC on 5 containers used for non-
taxable goods cannot be availed.

Example 39: A registered person (partnership firm) purchases 5 laptops but one of the laptop is being used by
the son of one of the partners of the firm. ITC will not be available on such laptop as it is used for personal
purposes.

Example 40: ABC Ltd. provides taxable as well as exempted services. Turnover of ABC Ltd. during the month
of Nov’17 is as under:

Particulars Amount
Value of exempted supply of services 30,00,000
Value of taxable supply of services 64,00,000
Value of Zero rated taxable supply of services 16,00,000
Supply of services made for personal use 10,00,000
Total 1,20,00,000
Details of ITC for the month of Nov’17 are as under:

Particulars CGST SGST IGST

Total ITC available 1,08,000 1,08,000 54,000
The above ITC on input services includes the following:

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 (i) Credit on input services exclusively used for supplying exempted 18,000 18,000 7,200
services
(ii) Credit on input services exclusively used for supplying taxable 54,000 54,000 3,600
services (including zero rated supplies)
(iii) Credit availed on inputs which are not eligible u/s 17(5) 18,000 18,000 6,300
(iv) Credit on input services exclusively used for supplying services 10,800 10,800 5,400
for personal use
Please calculate entitlement of ITC for the month of Nov’17.

Particulars CGST SGST IGST

Total ITC available 1,08,000 1,08,000 54,000
Less:
(i) Credit on input services exclusively used for supplying services for 10,800 10,800 5,400
personal use [T1]
(ii) Credit on input services exclusively used for supplying exempted 18,000 18,000 7,200
services [T2]
(iii) Credit availed on inputs which are not eligible u/s 17(5) [T3] 18,000 18,000 6,300
Amount of ITC to the electronic credit ledger C1 = T – 61,200 61,200 35,100
[T1+T2+T3]
Less: Credit on input services exclusively used for supplying taxable 54,000 54,000 3,600
services including zero rated supplies [T4]
Common Credit of input & input services used for providing 7,200 7,200 31,500
supply of services [C2 = C1-T4]
Total inadmissible common ITC [D1+D2]** 2,160 2,160 9,450
Net eligible common credit [C3 = C2 – (D1+D2)] 5,040 5,040 22,050
Total credit eligible [T4+C3] 59,040 59,040 25,650
Amount to be reversed by registered person [D1+D2] 2,160 2,160 9,450
** Calculation of amount of ITC exempt supplies and supply made for non-business use :

Particulars CGST SGST IGST

Aggregate Value of Exempted supply of services [E] 30,00,000 30,00,000 30,00,000
Total turnover for Nov’17 [F] 1,20,00,000 1,20,00,000 1,20,00,000
Credit attributable towards exempt supplies [D1 = (E/F)*C2] 1,800 1,800 7,875
Credit attributable for supplies made for non-business purpose 360 360 1,575
[D2 = 5% *C2]
Total inadmissible common credit [D1+D2] 2,160 2,160 9,450

Rule 43 Manner of determination of ITC in respect of capital goods

and reversal thereof in certain cases
(1) Subject to the provisions of sub-section (3) of section 16, the ITC in respect of capital
goods, which attract the provisions of sub-sections (1) and (2) of section 17, being partly used for
the purposes of business and partly for other purposes, or partly used for effecting taxable supplies
including zero rated supplies and partly for effecting exempt supplies, shall be attributed to the
purposes of business or for effecting taxable supplies in the following manner, namely, -
(a) the amount of input tax in respect of capital goods used or intended to be used exclusively for
non-business purposes or used or intended to be used exclusively for effecting exempt supplies
shall be indicated in FORM GSTR-2 and FORM GSTR-3B and shall not be credited to his electronic credit
ledger;
(b) the amount of input tax in respect of capital goods used or intended to be used exclusively for

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 effecting supplies other than exempted supplies but including zero rated supplies shall be
indicated in FORM GSTR-2 and FORM GSTR-3B and shall be credited to the electronic credit ledger;
(c) the amount of input tax in respect of capital goods not covered under clauses (a) and (b),
denoted as ‘A’, shall be credited to the electronic credit ledger and the useful life of such goods
shall be taken as five years from the date of the invoice for such goods:
Provided that where any capital goods earlier covered under clause (a) is subsequently covered under
this clause, input tax in respect of such capital goods denoted as ‘A‘ shall be credited to the electronic
credit ledger subject to the condition that the ineligible credit attributable to the period during which such
capital goods were covered by clause (a), denoted as ‘Tie‘, shall be calculated at the rate of five
percentage points for every quarter or part thereof and added to the output tax liability of the tax period
in which such credit is claimed
Provided further that the amount ‘Tie‘ shall be computed separately for input tax credit of central tax,
State tax, Union territory tax and integrated tax and declared in FORM GSTR-3B.
Explanation. - An item of capital goods declared under clause (a) on its receipt shall not attract the
provisions of sub-section (4) of section 18, if it is subsequently covered under this clause.
Example 41 (ICAI Example): Azure Pvt. Ltd., a registered supplier, manufactures paints and other
chemicals. While paints are taxable, other chemicals are exempt from GST. It has purchased a machinery
on October 1, 20XX for making both paints and other chemicals. The invoice for the machinery shows
the value of the machinery to be Rs. 1 crore and GST payable thereon to be Rs. 12 lakh [12%]. Input tax
of Rs. 12 lakh will be denoted as ‘A’ and credited to electronic credit ledger. The useful life of the
machinery will end on 30.09.20XX+5.
Example 42 (ICAI Example): Continuing the facts of Example 41, from October 1, 20XX, Azure Pvt. Ltd.
started using one of its old machines, which was being used for the manufacture of other chemicals, for
manufacture of paints as well. The said machine was purchased on October 1, 20XX-2 for Rs. 60 lakh
(exclusive of GST @ 12%). Input tax of Rs. 7.2 lakh will be denoted as ‘A’ and credited in the electronic
credit ledger in the month of October 20XX. Out of Rs. 7.2 lakh, ITC of Rs. 2,88,000 will be the ineligible
credit, ‘Tie’ [Rs. 7.2 lakh x 5% x 8 quarters], and will be added to the output tax liability of Azure Pvt. Ltd.
for the month of October 20XX.
(d) the aggregate of the amounts of ‘A‘ credited to the electronic credit ledger under clause (c) in respect of
common capital goods whose useful life remains during the tax period, to be denoted as ‘Tc‘, shall be
the common credit in respect of such capital goods:
Provided that where any capital goods earlier covered under clause (b) are subsequently covered under
clause (c), the input tax credit claimed in respect of such capital good(s) shall be added to arrive at the
aggregate value ‘Tc‘;
Example 43 (ICAI Example): Continuing the facts of Examples 41 & 42, common credit ‘Tc’ will be Rs. 12
lakh [‘A’ for first machinery] plus Rs. 7.2 lakh [‘A’ for second machine], i.e. Rs. 19.2 lakh.
Example 44 (ICAI Example): Continuing the facts of Examples 39, 40 & 41, Azure Pvt. Ltd. started using
one of its old machines, which was being used for the manufacture of paints, for manufacture of other
chemicals as well. The said machine was purchased on October 1, 20XX-2 for Rs. 2 crore (exclusive of
GST @ 12%). Input tax of Rs. 24 lakh will be added to the common credit ‘T c’, i.e. to Rs. 19.2 lakh. Thus,
total common credit will be Rs. 43.2 lakh.
(e) the amount of input tax credit attributable to a tax period on common capital goods during their
useful life, be denoted as ‘Tm’ and calculated as
Tm= Tc÷60
Explanation.- For the removal of doubt, it is clarified that useful life of any capital goods shall be
considered as five years from the date of invoice and the said formula shall be applicable during the
useful life of the said capital goods.
Example 45 (ICAI Example): Continuing the facts of Examples 41, 42, 43 & 44, ‘Tm’ will be Rs. 43.2
lakh/60, i.e. Rs. 72,000.
(f) the amount of input tax credit, at the beginning of a tax period, on all common capital goods
whose useful life remains during the tax period, be denoted as ‘Tr’ and shall be the aggregate of
‘Tm’ for all such capital goods;
(g) the amount of common credit attributable towards exempted supplies, be denoted as ‘Te’, and

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 calculated as
Te= (E÷ F) x Tr

where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover in the State of the registered person during the tax period:

Provided that where the registered person does not have any turnover during the said tax period or the
aforesaid information is not available, the value of ‘E/F’ shall be calculated by taking values of ‘E’ and
‘F’ of the last tax period for which the details of such turnover are available, previous to the month during
which the said value of ‘E/F’ is to be calculated;
Explanation:- For the purposes of this clause, it is hereby clarified that the aggregate value
of exempt supplies and the total turnover shall exclude the amount of any duty or tax levied
under entry 84 and entry 92A of List I of the Seventh Schedule to the Constitution and entry 51 and 54
of List II of the said Schedule [excluding Central & State excise duty , CST & VAT on non-GST supplies,
being petroleum products and alcoholic liquor];
(h) the amount ‘Te’ along with the applicable interest shall, during every tax period of the useful Life of the
concerned capital goods, be added to the output tax liability of th e person making such claim of credit.
(i) The amount Te shall be computed separately for input tax credit of central tax, State tax, Union territory
tax and integrated tax and declared in FORM GSTR3B.

There is no provision to make final calculations at end of every financial year in Rule 43.

Example 46 (ICAI Example): With the help of information given below in respect of a manufacturer for the month
of September, compute the ITC credited to the Electronic Credit Ledger, for the month. Also, compute the
amount of ITC to be added to the output tax liability for the month of September. Ignore interest, if any.

Particulars Amount in INR

Outward supply of taxable goods (exclusive of 70,000
taxes)
Outward supply of exempt goods 40,000
Total turnover 1,10,000
Capital goods used exclusively for taxable outward 2,000
supply (GST Paid)
Capital goods used exclusively for exempt outward 1,800
supply (GST Paid)
Capital goods used for both taxable and exempt 4,200
outward supply (GST Paid)
Subject to the information given above, assume that all the other conditions necessary for availing ITC have
been fulfilled.
A.
Computation of ITC credited to Electronic Credit Ledger and amount of ITC to be added to the output tax
liability for the month of September: -
Particulars Amount in INR
Capital goods used exclusively for taxable supply 2,000
[Since used exclusively for taxable supply, full ITC is
available under rule 43(1)(b)]
Capital goods used exclusively for exempt supply Nil
[Since used exclusively for exempt supply, ITC is
not available under rule 43(1)(a)]
Capital goods used for both taxable and exempt 4,200
supply -Common credit (Tc) [Commonly used for
taxable and exempt supplies – Rule 43(1)(c)]

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 Total ITC credited to Electronic Credit Ledger for the 6,200
month of September
Common credit for the month of September (Tm) = 70
Tc ÷ 60 = 4,200 ÷ 60 [Rule 43(1)(e)]
Common credit attributable to exempt supplies in a 25.45
month (Te)
= (E ÷ F) x Tr* where,
‘E’ is the aggregate value of exempt supplies, made,
during the tax period, and
‘F’ is the total turnover in the State of the registered
person during the tax period [Rule 43(1)(g)]
= (40,000/1,10,000) × Rs. 70 (rounded off)
Amount to be added to the output tax liability for the 25.45
month of September [Rule 43(1)(h)]

Note: *Prior to the amendment vide Notification No. 16/2020 CT dated 23.03.2020 clause (f) of rule 43(1)
provided that the amount of ITC, at the beginning of a tax period, on all common capital goods whose useful life
remains during the tax period, be denoted as ‘Tr‘ and shall be the aggregate of ‘Tm‘ for all such capital goods.
However, clause (f) has been omitted vide the said notification. Consequently, the term “Tr” becomes redundant
in the formula provided in rule 43(1)(g). However, for the sake of computation of common credit attributable to
exempt supply, value of ‘Tm’ has been used here. It may be noted that as per the erstwhile clause (f) of rule
43(1) value of ‘Tr’ was the aggregate of ‘Tm.’

Notes for rule 42 & 43:

i. If the registered person does not have any turnover during the said tax period, or the above
information is not available, the values for the last tax period may be used.
ii. Here, exempt supplies include supplies charged to tax under reverse charge, transactions in
securities, sale of land and sale of building when entire consideration is received either after issuance
of completion certificate by the competent authority or its first occupation, whichever is earlier. Thus,
ITC attributable to such supplies will need to be reversed.
iii. Here, exempt supplies exclude-
a. supply of services by way of accepting deposits, extending loans or advances where the
consideration is either interest or discount. However, value of such services is included in the
exempt supply when the same are provided by a banking company or a financial institution
including a NBFC.
b. transportation of goods by a vessel from the customs station of clearance in India to a place
outside India.
Thus, ITC attributable to such supplies need not be reversed.
iv. Aggregate value of exempt supplies and total turnover excludes the central excise duty, State excise
duty, CST and VAT.
v. The value of exempt supply in respect of land and building is the value adopted for paying stamp
duty and for security is 1% of the sale value of such security.

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Rule 88A Order of utilization of ITC
Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and the
amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union territory
tax, as the case may be, in any order:
Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be utilised
towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be, only after
the input tax credit available on account of integrated tax has first been utilised fully.

1. Use ITC of IGST to pay IGST liability then exhaust ITC of IGST balance to pay CGST or SGST
liability in any order & proportion before using CGST/SGST ITC.
2. ITC of CGST shall be utilized for payment of CGST & IGST in that order. ITC of CGST cannot be
utilized for payment of SGST/UTGST.
3. ITC of SGST/UTGST shall be utilized for payment of SGST/UTGST & IGST in that order. ITC of
SGST/UTGST cannot be utilized for payment of CGST.

One State/UT input tax credit cannot be utilized against other State’s CGST & SGST/UTGST liability.

Output tax liability Output tax liability

Output tax liability
ITC on account of on account of on account of
on account of IGST
CGST SGST/UTGST
IGST (I) (II) – In any order and in any proportion
(III) ITC on account of IGST to be completely exhausted mandatorily
CGST (V) (IV) Not permitted
SGST/UTGST (VII) Not Permitted (VI)

In exam please use Rule 88A

Example 47:
Amount of Input tax Credit available and output liability under different tax heads
Head Output Liability Input tax Credit
Integrated Tax 1000 1300
Central Tax 300 200
State Tax/UTGST 300 200
Total 1600 1700

Option1:
Input tax Credit on Discharge of Discharge of Discharge of Balance of Input
account of output liability on output liability on output liability on Tax Credit
account of account of Central account of State
Integrated tax tax tax / Union
Territory tax
Integrated Tax 1000 200 100 0
Input tax Credit on account of Integrated tax has been completely exhausted

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 Central Tax 0 100 - 100
State Tax/Union 0 - 200 0
Territory Tax
Total 1000 300 300 100

Option 2:

Input tax Credit on Discharge of Discharge of Discharge of Balance of Input

account of output liability on output liability on output liability on Tax Credit
account of account of Central account of State
Integrated tax tax tax / Union
Territory tax
Integrated Tax 1000 100 200 0
Input tax Credit on account of Integrated tax has been completely exhausted
Central Tax 0 200 - 0
State Tax/Union 0 - 100 100
Territory Tax
Total 1000 300 300 100

Section 18 Credit in Special Circumstances

Section 18(1):

(a) Person who has applied for registration within 30 days from the date on which he becomes liable
for registration and has been granted registration, shall be entitled to take ITC in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the
day immediately preceding the date from which he becomes liable to pay tax.
(b) Person who takes registration under Sec. 25 (3) [voluntarily registration], shall be entitled to take
ITC in respect of inputs held in stock and inputs contained in semi-finished or finished goods
held in stock on the day immediately preceding the date of grant of registration.
(c) where any registered person ceases to pay tax under section 10 (composition dealer), shall be
entitled to take ITC in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock and on capital goods (credit on capital goods shall be reduced by
such percentage points as prescribed) on the day immediately preceding the date from which he
becomes liable to pay tax under Section 9.
(d) where an exempt supply of goods or services or both by a registered person becomes a taxable
supply, such person shall be entitled to take ITC in inputs held in stock and inputs contained in
semi-finished or finished goods held in stock and on capital goods exclusively used for such
exempt supply (credit on capital goods shall be reduced by such percentage points as
prescribed) on the day immediately preceding the date from which he becomes liable to pay tax
under Sec. 9.

Example 48: Mr. A whose liability arises, say, on 1st April, may have paid GST on his purchases, say from 1st
January, is required to take registration within 30 days form 1st April i.e. upto 30th April. Supposedly, the dealer
applies for registration for 29th April, ITC shall be allowed in respect of inputs held in stock, inputs contained in
semi-finished goods or finished goods held in stock as on 31st March.

Example 49: Suppose in the above example, if the supplier whose liability arises, say, on 1st April, applies for
registration on 6th May, when he was required to take registration within 30 days i.e. upto 30th April. Now,

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supposedly, registration is granted on 9th May. In such case, ITC would be allowed only from 9 th May. It would
lead to loss of ITC for the period prior to 9 th May.

Section 18(2): A registered person shall not be entitled to take ITC U/s 18 (1) in respect of any supply of goods
or services or both to him after 1 year from the date of issue of tax invoice relating to such supply.

Section 18(3): There is a change in the constitution of a registered person on account of sale, merger,
demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities,
the said registered person shall be allowed to transfer the ITC which remains unutilized in his electronic credit
ledger to such sold, merged, demerged, amalgamated, leased or transferred business.

Clarification in respect of transfer of ITC in case of death of sole proprietor

Issue: Whether section 18(3) of the CGST Act provides for transfer of ITC which remains unutilized to the
transferee in case of death of the sole proprietor?

Clarification: For the purpose of section 18(3) of the CGST Act and rule 41(1) of the CGST Rules, transfer or
change in the ownership of business will include transfer or change in the ownership of business due to death
of the sole proprietor. [Circular No. 96/15/2019 GST Dated 28.03.2019]

Section 18(4): Where any registered person who has availed of ITC opts to pay tax under section 10 or, where
the goods or services or both supplied by him become wholly exempt, he shall pay an amount by way of debit
in the electronic credit ledger or electronic cash ledger, equivalent to the credit of input tax in respect of inputs
held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods, reduced
by such percentage as may be prescribed, on the day immediately preceding the date of exercising of such
option or, as the case be, the date of such exemption.

Provided that after payment of such amount, the balance of input tax credit, if any, lying in his electronic credit
ledger shall lapse.

Section 18(5): The amount of credit under sub-section (1) & the amount payable under sub-section (4) shall be
calculated in such manner as may be prescribed.

Section 18(6): In case of supply of capital goods or plant and machinery, on which ITC has been taken, the
registered person shall pay an amount equal to the ITC taken on the said capital goods or plant and machinery
reduced by such percentage points as may be prescribed or the tax on the transactions value of such capital
goods or plant and machinery determined U/S 15, whichever is higher.
Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the taxable
person may pay tax on the transaction value of such goods determined U/s 15.

The amount of credit shall be calculated by reducing the ITC @ 5% for every quarter or part thereof, from the
date of issue of invoice for the capital goods – Rule 40 (2) of CGST & SGST Rules, 2017.

Rule 40 Manner of claiming ITC in special circumstances

(1) The input tax credit claimed in accordance with the provisions of sub-section (1) of section 18 on the inputs
held in stock or inputs contained in semi-finished or finished goods held in stock, or the credit claimed on capital

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goods in accordance with the provisions of clauses (c) and (d) of the said sub-section, shall be subject to the
following conditions, namely,-
(a) the input tax credit on capital goods, in terms of clauses (c) and (d) of sub-section (1) of section
18, shall be claimed after reducing the tax paid on such capital goods by five percentage points
per quarter of a year or part thereof from the date of the invoice or such other documents on which
the capital goods were received by the taxable person.
(b) the registered person shall within a period of thirty days from the date of becoming eligible to avail
the input tax credit under sub-section (1) of section 18, or within such further period as may be
extended by the Commissioner by a notification in this behalf, shall make a declaration,
electronically, on the common portal in FORM GST ITC-01 to the effect that he is eligible to avail
the input tax credit as aforesaid:
Provided that any extension of the time limit notified by the Commissioner of State tax or the
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
(c) the declaration under clause (b) shall clearly specify the details relating to the inputs held in stock
or inputs contained in semi-finished or finished goods held in stock, or as the case may be, capital
goods–
(i) on the day immediately preceding the date from which he becomes liable to pay tax under the
provisions of the Act, in the case of a claim under clause (a) of sub-section (1) of section 18;
(ii) on the day immediately preceding the date of the grant of registration, in the case of a claim
under clause (b) of sub-section (1) of section 18;
(iii) on the day immediately preceding the date from which he becomes liable to pay tax under
section 9, in the case of a claim under clause (c) of sub-section (1) of section 18;
(iv) on the day immediately preceding the date from which the supplies made by the registered
person becomes taxable, in the case of a claim under clause (d) of sub-section (1) of section
18;
(d) the details furnished in the declaration under clause (b) shall be duly certified by a practicing
chartered accountant or a cost accountant if the aggregate value of the claim on account of central
tax, State tax, Union territory tax and integrated tax exceeds two lakh rupees;
(e) the input tax credit claimed in accordance with the provisions of clauses (c) and (d) of sub-section
(1) of section 18 shall be verified with the corresponding details furnished by the corresponding
supplier in FORM GSTR-1 or as the case may be, in FORM GSTR- 4, on the common portal.

(2) The amount of credit in the case of supply of capital goods or plant and machinery, for the purposes
of sub-section (6) of section 18, shall be calculated by reducing the input tax on the said goods at
the rate of five percentage points for every quarter or part thereof from the date of the issue of the
invoice for such goods.

Rule 41 Transfer of credit on sale, merger, amalgamation, lease or

transfer of business
(1) A registered person shall, in the event of sale, merger, de-merger, amalgamation, lease or transfer
or change in the ownership of business for any reason, furnish the details of sale, merger, de-
merger, amalgamation, lease or transfer of business, in FORM GST ITC-02, electronically on the
common portal along with a request for transfer of unutilized input tax credit lying in his electronic
credit ledger to the transferee:
Provided that in the case of demerger, the input tax credit shall be apportioned in the ratio of the
value of assets of the new units as specified in the demerger scheme.
Explanation:- For the purpose of this sub-rule, it is hereby clarified that the “value of assets” means the
value of the entire assets of the business, whether or not input tax credit has been availed thereon.

(2) The transferor shall also submit a copy of a certificate issued by a practicing chartered accountant

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 or cost accountant certifying that the sale, merger, de-merger, amalgamation, lease or transfer of
business has been done with a specific provision for the transfer of liabilities.

(3) The transferee shall, on the common portal, accept the details so furnished by the transferor and,
upon such acceptance, the un-utilized credit specified in FORM GST ITC- 02 shall be credited to
his electronic credit ledger.

(4) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his
books of account.

Rule 41A Transfer of credit on obtaining separate registration for

multiple places of business within a State or Union territory
(1) A registered person who has obtained separate registration for multiple places of business in accordance
with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax
credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish
within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A
electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by
the Commissioner:
Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value
of assets held by them at the time of registration.
Explanation.- For the purposes of this sub-rule, it is hereby clarified that the value of assets‘ means the
value of the entire assets of the business whether or not input tax credit has been availed thereon.
(2) The newly registered person (transferee) shall, on the common portal, accept the details so furnished by
the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in
FORM GST ITC-02A shall be credited to his electronic credit ledger.

Circular No.133/03/2020-GST dated 23rd March 2020

Sr. Issue/Question Clarification

No.
A1 In case of demerger State level
of entity, whether the
value of assets of Illustration A company XYZ is registered in two States of M.P. and U.P. Its
the new units to be total value of assets is worth Rs. 100 crore, while its assets in State of M.P.
considered at State and U.P are Rs 60 crore and Rs 40 crore respectively. It demerges a part of
level or at all India its business to company ABC. As a part of such demerger, assets of XYZ
level for the purpose amounting to Rs 30 Crore are transferred to company ABC in State of M.P,
of transfer of ITC while assets amounting to Rs 10 crore only are transferred to ABC in State
of U.P. (Total assets amounting to Rs 40 crore at all-India level are
transferred from XYZ to ABC). The unutilized ITC of XYZ in State of M.P.
shall be transferred to ABC on the basis of ratio of value of assets in State
of M.P., i.e. 30/60 = 0.5 and not on the basis of all-India ratio of value of
assets, i.e. 40/100=0.4. Similarly, unutilized ITC of XYZ in State of U.P. will
be transferred to ABC in ratio of value of assets in State of U.P.,i.e. 10/40 =
0.25.
A2 Is the transferor Only in those states where both transferor and transferee are registered
required to file
FORM GST ITC –
02 in all the States
where it is registered

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B Whether the proviso Yes, it shall be applicable to all forms of business re-organization that
to rule 41(1) of the results in partial transfer of business assets along with liabilities
CGST Rules, 2017
would be applicable
to calculate the
amount of
transferable ITC in
case of business
reorganization other
than ‘demerger’?
C1 Manner of applying It has to be applied on total amount of unutilized ITC and not for each head
the ratio of value of separately.
assets, in respect of
each of the heads of Illustration : The ITC balances of transferor X in the State of Maharashtra
input tax credit viz. under CGST, SGST and IGST heads are 5 lakh, 5 lakh and 10 lakh
CGST/ SGST/ IGST/ respectively. Pursuant to a scheme of demerger, X transfers 60% of its
Cess assets to transferee B. Accordingly, the amount of ITC to be transferred
from A to B shall be 60% of 20 lakh (total sum of CGST, SGST and IGST
credit) i.e. 12 lakh.
C2 Manner of The amount to be transferred under each head shall be at the liberty of the
determination of ITC transferor subject to maximum ITC available for transfer.
that is to be
transferred to the ITC balance
Total
transferee under of Transferor
ITC balance amount of
each tax head i.e. (post
Asset of Transferor ITC
IGST/CGST/SGST. apportionme-
Ratio (pre transferred
nt) after filing
of Tax apportionmen- to the
State of FORM
Transfe Heads t) as on the Transferee
GST ITC–
ree date of filing under
02)
FORM GST FORM
[Col (4) – Col
ITC–02) GST
(5)]
ITC02

Delhi 70% CGST 10,00,000 10,00,000 0

SGST 10,00,000 10,00,000 0
IGST 30,00,000 15,00,000 15,00,000
Total 50,00,000 35,00,000 15,00,000
Haryana 40% CGST 25,00,000 3,00,000 22,00,000
SGST 25,00,000 5,00,000 20,00,000
IGST 20,00,000 20,00,000 0
Total 70,00,000 28,00,000 42,00,000
D1 Relevant date for The relevant date for this purpose is the date of filing FORM GST ITC – 02
calculating the by the transferor
amount of unutilized
ITC balance to be
transferred
D2 Relevant date to The relevant date would be “Appointed date of demerger” as defined in
calculate the ratio of Section 232(6) of the Companies Act 2013.
value of assets

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Rule 44 Manner of reversal of credit under Special Circumstances
(1) The amount of input tax credit relating to inputs held in stock, inputs contained in semi-finished
and finished goods held in stock, and capital goods held in stock shall, for the purposes of sub-
section (4) of section 18 or sub-section (5) of section 29, be determined in the following
manner, namely,-
(a) for inputs held in stock and inputs contained in semi-finished and finished goods held in stock,
the input tax credit shall be calculated proportionately on the basis of the corresponding
invoices on which credit had been availed by the registered taxable person on such inputs;
(b) for capital goods held in stock, the input tax credit involved in the remaining useful life in
months shall be computed on pro-rata basis, taking the useful life as five years.
(2) The amount, as specified in sub-rule (1) shall be determined separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax.

(3) Where the tax invoices related to the inputs held in stock are not available, the registered person
shall estimate the amount under sub-rule (1) based on the prevailing market price of the goods
on the effective date of the occurrence of any of the events specified in sub-section (4) of section
18 or, as the case may be, sub-section (5) of section 29.

(4) The amount determined under sub-rule (1) shall form part of the output tax liability of the registered
person and the details of the amount shall be furnished in FORM GST ITC-03, where such amount
relates to any event specified in sub-section (4) of section 18 and in FORM GSTR-10, where such
amount relates to the cancellation of registration.

(5) The details furnished in accordance with sub-rule (3) shall be duly certified by a practicing
chartered accountant or cost accountant.

(6) The amount of input tax credit for the purposes of sub-section (6) of section 18 relating to capital
goods shall be determined in the same manner as specified in clause (b) of sub rule (1) and the
amount shall be determined separately for input tax credit of central tax, State tax, Union territory
tax and integrated tax: {please refer to rule 40 (2). Look like that is more relevant for Section 18 (6)}
Provided that where the amount so determined is more than the tax determined on the transaction
value of the capital goods, the amount determined shall form part of the output tax liability and the
same shall be furnished in FORM GSTR-1.

Example 50: Mr. Z becomes liable to pay tax on 1st August and has obtained registration on 15th August. Mr. Z
is eligible for ITC on inputs held in stock and as part of semi-finished goods or finished goods held in stock as
on 31st July 2017. Mr. Z cannot take ITC on capital goods.

Example 51: Mr. A applies for voluntarily registration on 5th June and obtain registration on 22nd June. Mr. A is
eligible for ITC on inputs held in stock and as part of semi-finished goods or finished goods held in stock as on
21st June. Mr. A cannot take ITC on capital goods.

Example 52: Mr. B, a registered taxable person, was paying tax at composition rate upto 30th July. However,
w.e.f. 31st July, Mr. B becomes liable to pay tax under regular scheme. Mr. B will be eligible for ITC on inputs
held in stock and inputs contained in semi-finished or finished goods held in stock and on capital goods as on
30th July. ITC on capital goods will be reduced by 5% per quarter from the date of the invoice.

Example 53: Capital goods have been in use for 4 years, 6 month and 15 days.
The useful remaining life in months = 5 months ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C * 5/60

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Section 19 ITC in respect of inputs & capital goods sent to job
worker
Principal is entitled to take ITC of inputs sent for job worker. If it is directly sent to job worker from supplier
premises then principal can avail ITC when these inputs received by job worker. Same rule apply in case of
capital goods.

The most important condition is that ‘inputs’ must be received within 1 year (from the date of dispatch by principal
or if it is directly sent through supplier then from the date when job worker receive) or supplied from the place
of business of job worker & ‘capital goods’ must be received back in 3 years. No time period in case of moulds
& dies, jogs, fixtures or tools. This 1 year or 3 years can be further extended by the Commissioner for a further
period not exceeding 1 year or 2 years respectively.

In case inputs/capital goods are not received back within a period of 1/3 years, it shall be a deemed supply from
the principal to job worker on the date of inputs/capital goods sent for job work & interest need to be paid.

Rule 45 Conditions and restrictions in respect of inputs and capital

goods sent to the job worker
(1) The inputs, semi-finished goods or capital goods shall be sent to the job worker under the cover of a
challan issued by the principal, including where such goods are sent directly to a job-worker, and where
the goods are sent from one job worker to another job worker, the challan may be issued either by the
principal or the job worker sending the goods to another job worker:
Provided that the challan issued by the principal may be endorsed by the job worker, indicating therein
the quantity and description of goods where the goods are sent by one job worker to another or are
returned to the principal:
Provided further that the challan endorsed by the job worker may be further endorsed by another job
worker, indicating therein the quantity and description of goods where the goods are sent by one job
worker to another or are returned to the principal.

(2) The challan issued by the principal to the job worker shall contain the details specified in rule 55.

(3) The details of challans in respect of goods dispatched to a job worker or received from a job during a
quarter during a specified period shall be included in FORM GST ITC-04 furnished for that period on or
before the twenty-fifth day of the month succeeding the said quarter the said period or within such
further period as may be extended by the Commissioner by a notification in this behalf:
Provided that any extension of the time limit notified by the Commissioner of State tax or the
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
Explanation. - For the purposes of this sub-rule, the expression “specified period” shall mean.-
(a) the period of six consecutive months commencing on the 1st day of April and the 1st day of October
in respect of a principal whose aggregate turnover during the immediately preceding financial year
exceeds five crore rupees; and
(b) a financial year in any other case.

(4) Where the inputs or capital goods are not returned to the principal within the time stipulated in section
143, it shall be deemed that such inputs or capital goods had been supplied by the principal to the job
worker on the day when the said inputs or capital goods were sent out and the said supply shall be
declared in FORM GSTR-1 and the principal shall be liable to pay the tax along with applicable interest.

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Example 54: A supplier of notebooks for schools sends the paper of required dimensions and GSM to a job
worker for making the notebooks as per the design given by him.
However, the Government changes the specifications of notebooks for supply to its schools. The supplier sends
a fresh stock of paper with fresh instructions to the job worker and instructs him to hold the earlier consignment
in stock till a buyer is found. The new notebooks are easily sold, but the paper and semi-finished notebooks of
the old design lie in the godown of the job worker for over a year. Here, sending of paper by the notebook
supplier to the job worker in the first lot will be deemed as a supply and thus, tax would be payable on the same.

Section 20 Manner of distribution of credit by input service distributor

Section 20(1): The Input Service Distributor shall distribute the credit of central tax as central tax or integrated
tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of
input tax credit being distributed in such manner as may be prescribed.

Section 20(2): The Input Service Distributor may distribute the credit subject to the following conditions,
namely:–
(a) the credit can be distributed to the recipients of credit against a document containing such details
as may be prescribed;
(b) the amount of the credit distributed shall not exceed the amount of credit available for distribution;
(c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only
to that recipient;
(d) the credit of tax paid on input services attributable to more than one recipient of credit shall be
distributed amongst such recipients to whom the input service is attributable and such distribution
shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such
recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom
such input service is attributable and which are operational in the current year, during the said
relevant period;
(e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed
amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a
State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate
of the turnover of all recipients and which are operational in the current year, during the said
relevant period.
Explanation. – For the purposes of this section,–
(a) the “relevant period” shall be–
(i) if the recipients of credit have turnover in their States or Union territories in the financial year
preceding the year during which credit is to be distributed, the said financial year; or
(ii) if some or all recipients of the credit do not have any turnover in their States or Union
territories in the financial year preceding the year during which the credit is to be distributed,
the last quarter for which details of such turnover of all the recipients are available, previous
to the month during which credit is to be distributed;
(b) the expression “recipient of credit” means the supplier of goods or services or both having the
same Permanent Account Number as that of the Input Service Distributor;
(c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods
as well as goods not taxable under this Act, means the value of turnover, reduced by the amount
of any duty or tax levied under entry entries 84 and 92A of List I of the Seventh Schedule to the
Constitution and entries 51 and 54 of List II of the said Schedule.

Section 21 Manner of recovery of credit distributed in excess

Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section
20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed

213
shall be recovered from such recipients along with interest, and the provisions of section 73 or section 74, as
the case may be, shall, mutatis mutandis, apply for determination of amount to be recovered.

Rule 39 Procedure for distribution of ITC by Input Service Distributor

(1) An Input Service Distributor shall distribute input tax credit in the manner and subject to the
following conditions, namely,-
(a) the input tax credit available for distribution in a month shall be distributed in the same month
and the details thereof shall be furnished in FORM GSTR- 6 in accordance with the provisions
of Chapter VIII of these rules;
(b) the Input Service Distributor shall, in accordance with the provisions of clause (d), separately
distribute the amount of ineligible input tax credit (ineligible under the provisions of sub-section
(5) of section 17 or otherwise) and the amount of eligible input tax credit;
(c) the input tax credit on account of central tax, State tax, Union territory tax and integrated tax
shall be distributed separately in accordance with the provisions of clause (d);
(d) the input tax credit that is required to be distributed in accordance with the provisions of clause
(d) and (e) of sub-section (2) of section 20 to one of the recipients ‘R1’, whether registered or
not, from amongst the total of all the recipients to whom input tax credit is attributable, including
the recipient(s) who are engaged in making exempt supply, or are otherwise not registered
for any reason, shall be the amount, “C1”, to be calculated by applying the following formula –

C1 = (t1÷T) × C
where,
“C” is the amount of credit to be distributed,
“t1” is the turnover, as referred to in section 20, of person R1 during the relevant period, and
“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the
input service is attributable in accordance with the provisions of section 20;
(e) the input tax credit on account of integrated tax shall be distributed as input tax credit of
integrated tax to every recipient;
(f) the input tax credit on account of central tax and State tax or Union territory tax shall-
(i) in respect of a recipient located in the same State or Union territory in which the Input
Service Distributor is located, be distributed as input tax credit of central tax and State tax
or Union territory tax respectively;
(ii) in respect of a recipient located in a State or Union territory other than that of the Input
Service Distributor, be distributed as integrated tax and the amount to be so distributed
shall be equal to the aggregate of the amount of input tax credit of central tax and State tax
or Union territory tax that qualifies for distribution to such recipient in accordance with
clause (d);
(g) the Input Service Distributor shall issue an Input Service Distributor invoice, as prescribed in
sub-rule (1) of rule 54, clearly indicating in such invoice that it is issued only for distribution of
input tax credit;
(h) the Input Service Distributor shall issue an Input Service Distributor credit note, as prescribed
in sub-rule (1) of rule 54, for reduction of credit in case the input tax credit already distributed
gets reduced for any reason;
(i) any additional amount of input tax credit on account of issuance of a debit note to an Input
Service Distributor by the supplier shall be distributed in the manner and subject to the
conditions specified in clauses (a) to (f) and the amount attributable to any recipient shall be
calculated in the manner provided in clause (d) and such credit shall be distributed in the month
in which the debit note is included in the return in FORM GSTR-6;
(j) any input tax credit required to be reduced on account of issuance of a credit note to the Input
Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in
which the input tax credit contained in the original invoice was distributed in terms of clause (d),

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 and the amount so apportioned shall be-
(i) reduced from the amount to be distributed in the month in which the credit note is included
in the return in FORM GSTR-6; or
(ii) added to the output tax liability of the recipient where the amount so apportioned is in the
negative by virtue of the amount of credit under distribution being less than the amount to be
adjusted.
(2) If the amount of input tax credit distributed by an Input Service Distributor is reduced later on for
any other reason for any of the recipients, including that it was distributed to a wrong recipient by
the Input Service Distributor, the process specified in clause (j) of sub rule (1) shall apply, mutatis
mutandis, for reduction of credit.
(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the Input Service
Distributor credit note specified in clause (h) of sub-rule (1), issue an Input Service Distributor
invoice to the recipient entitled to such credit and include the Input Service Distributor credit note
and the Input Service Distributor invoice in the return in FORM GSTR-6 for the month in which
such credit note and invoice was issued.
Example 55: ABC Ltd. a confectionary manufacturer, has paid bills of an advertising company amounting to Rs.
24 Lacs for advertising campaigns for two varieties of cakes, which are manufactured at separate locations in
Pune and Bangalore. The company had a total turnover of Rs. 112 crores in the previous financial year. The
turnover of the Pune unit was Rs. 5 crores, and the turnover of the Bangalore unit was Rs. 10 crores. The
aggregate turnover here is taken as Rs. 15 crores, as advertising was for cakes, which are manufactured at
these two units only.
The ITC is to be distributed Pune and Bangalore units in the ratio 1:2. Therefore, Pune unit will be given ITC of
Rs. 8 Lacs, and the Bangalore unit will be given ITC of Rs. 16 Lacs for the advertising bills.

Example 56: XYZ Ltd., having its head office at Mumbai, is registered as ISD. It has three units in different cities
situated in different States namely Mumbai, Jabalpur and Delhi which are operational in the current year.
M/s XYZ Ltd. furnishes the following information for the month of July 20XX
(i) CGST paid on services used only for Mumbai Unit Rs. 3,00,000
(ii) IGST, CGST & SGST paid on services used for all units Rs. 12,00,000

Total Turnover of the units for the previous financial year are as follows –
Total Turnover Rs. 10,00,00,000
Turnover Mumbai Rs. 5,00,00,000
Turnover Jabalpur Rs. 3,00,00,000
Determine the credit to be distributed by XYZ Ltd. to each of its three units.

Particulars Total Mumbai Jabalpur Delhi

CGST paid on services used only for Mumbai 3,00,000 3,00,000
IGST, CGST & SGST paid on services used for all units 12,00,000 6,00,000 3,60,000 2,40,000
Distribution on pro rata basis to all the units which are
operational in the current year
15,00,000 9,00,000 3,60,000 2,40,000

Note 1:Credit distributed pro rata on the basis of the turnover of all the units is as under :-
1. Unit Mumbai (5,00,00,000/10,00,00,000) * 12,00,000 = Rs. 6,00,000
2. Unit Jabalpur (3,00,00,000/10,00,00,000) * 12,00,000 = Rs. 3,60,000
3. Unit Delhi (2,00,00,000/10,00,00,000) * 12,00,000 = Rs. 2,40,000

Example 57: ABC Ltd., a registered supplier of goods having Head Office at Delhi, also registered as ISD,
furnishes the following information for month of July 2018 and asks you to distribute the credit to various unites:
Input Particulars CGST SGST IGST Total
Service

215
 Alfa Used exclusively in Unit – III 27,000 27,000 54,000
Beta Used in Unit – I, II and III 36,000 36,000
Cancer Used in Unit – I, II, III and IV 12,600 12,600 25,200
Drama Used in Unit – I (Input service “D” is availed for 1,080 1,080 2,160
employee on vacation during the month to its Unit I)
Total 40,680 40,680 36,000

Total Turnover for the units for the year ending 31 st March, 2018 is Rs. 3,30,00,000 with details are as under :
Unit I Rs. 50,00,000
Unit II Rs. 30,00,000
Unit III (not registered as exclusively engaged in exempt goods) Rs. 1,50,00,000
Unit IV Rs. 1,00,00,000
All units are operational during the current year. Unit I is located in Delhi whereas Unit II is in Mumbai, Unit III
is in Rajasthan and Unit IV is in Gujarat. Compute credit attributable to each of the units.

Particulars Total Credit Available Unit I Unit II Unit III Unit IV

CGST SGST IGST Total CGST SGST IGST IGST IGST IGST
Alfa 27,000 27,000 54,000 54,000
Beta 36,000 36,000 7,826 4,696 23,478
Cancer 12,600 12,600 25,200 1,909 1,909 2,291 11,455 7,636
Drama 1,080 1,080 2,160 1,080 1,080
2,989 2,989 7,826 6,987 88,933 7,636
Working Notes: -
1. The credit of input tax attributable as input service to a particular unit shall be distributed only to that unit.
Since Unit III is exclusively engaged in supply of exempted goods, the total credit of Rs. 54,000 is
distributable to it. Further as per rule 39 (1)(d), no differentiation is to be made whether the unit is registered
or not, and therefore, credit attributable to Unit III is distributed to that unit although it is not registered, which
implies, it is a loss of credit.
2. As per section 20 (2)(b), the credit of tax attributable as input service to more than one unit but not at all the
units shall be distributed only amongst such units to which the input service is attributable and such
distribution shall be pro rata on the basis of the turnover of such units, to the total turnover of all such units
during the relevant period. Hence, the credit of input service “Beta” is distributed to Unit – I, II & III.
3. Given that the service availed for employee on vacation during the month would not be eligible input services
under section 17 (5), the taxes relating to Invoice “Drama” should be distributed as ineligible input tax (Rs.
1080 + Rs. 1080), and the distribution must be done separately for CGST and SGST. Since the service is
wholly attributable to Unit I, hence distributed to only to such unit.

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Excess ITC distributed by an input service distributor (ISD) would be recovered from the recipients along with
interest and penalty, if any. Further, the ISD would also be liable to a general penalty under section 122(1)(ix)
of CGST Act, 2017 .(Circular No. 71/45/2018-GST dated 26-10-2018)

ITC on moulds and dies provided by the original equipment manufacturer (OEM) to component
manufacturer on FOC basis
Moulds and dies owned by the original equipment manufacturer (OEM) which are provided to a component
manufacturer (the two not being related persons or distinct persons) on free on cost (FOC) basis does not
constitute a supply as there is no consideration involved. Further, since the moulds and dies are provided on
FOC basis by the OEM to the component manufacturer in the course or furtherance of his business, there is no
requirement for reversal of input tax credit availed on such moulds and dies by the OEM.
However, where the contract between OEM and component manufacturer is for supply of components made by
using the moulds/dies belonging to the component manufacturer, but the same have been supplied by the OEM
to the component manufacturer on FOC basis, the OEM will be required to reverse the credit availed on such
moulds/ dies, as the same will not be considered to be provided by OEM to the component manufacturer in the
course or furtherance of the former’s business [Circular No. 47/21/2018 GST dated 08.06.2018].

Return of time expired medicines/drugs

Where the time expired medicines/drugs (goods) returned by the retailer/wholesaler as a fresh supply, are
destroyed by the manufacturer, he/she is required to reverse the ITC availed on the return supply in terms of
section 17(5)(h) of the CGST Act. It is pertinent to mention here that the ITC which is required to be reversed
in such scenario is the ITC availed on the return supply and not the ITC that is attributable to the manufacture
of such time expired goods. Illustration: Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of
manufacture of medicines valued at Rs. 100/-. At the time of return of such medicine on the account of expiry,
the ITC available to the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when
the time expired goods are destroyed by the manufacturer, he would be required to reverse ITC of Rs. 15/- and
not of Rs. 10/.
The clarification may also be applicable to return of goods for reasons other than being time expired. [Circular
No. 72/46/2018 GST Dated 26.10.2018].

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 Question & Answer
Q1. ABC Co. Ltd. is engaged in the manufacture of heavy machinery. It procured the following items during
the month of July.
S. No. Items GST paid
(i) Electrical transformers to be used in the manufacturing process 5,20,000
(ii) Trucks used for the transport of raw material 1,00,000
(iii) Raw material 2,00,000
(iv) Confectionery items for consumption of employees working in the factory 25,000
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving necessary
explanations for treatment of various items.

Note: All the conditions necessary for availing the ITC have been fulfilled.
A. Computation of ITC available with ABC Co. Ltd. for the month of July:-
S. No. Items ITC
(i) Electrical transformers 5,20,000
[Being goods used in the course or furtherance of business, ITC thereon is available
in terms of section 16(1)]
(ii) Trucks used for the transport of raw material 1,00,000
[After amendment in Section 17(5)(a), the blockage is only for the motor vehicle for
transportation of passengers. Motor vehicles for transportation of goods are not in the
list of blockage. No condition is required to be fulfilled to avail the ITC for vehicles
meant for carriage of goods.]
(iii) Raw material 2,00,000
[Being goods used in the course or furtherance of business, ITC thereon is available
in terms of section 16(1)]
(iv) Confectionery items for consumption of employees working in the factory
[ITC on food or beverages is specifically disallowed unless the same is used for Nil
making outward taxable supply of the same category or as an element of the taxable
composite or mixed supply-Section 17(5)(b)(i)]
Total ITC 8,20,000

Q2. XYZ Ltd., is engaged in manufacture of taxable goods. Compute the ITC available with XYZ Ltd. for the
month of October, 2018 from the following particulars: -

S. Inward supplies GST Remarks

No.
(i) Inputs ‘A’ 1,00,000 One invoice on which GST payable was Rs. 10,000 is
missing
(ii) Inputs ‘B’ 50,000 Inputs are to be received in two installments. First
instalment has been received in October, 2018.
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalized the capital goods at full invoice
value inclusive of GST as it will avail depreciation on the
full invoice value.
(iv) Input services 2,25,000 One invoice Dated 20.01.2018 on which GST payable was
50,000 has been received in October, 2018.
Note:
All the conditions necessary for availing the ITC have been fulfilled.
ABC Co. Ltd. is not eligible for any threshold exemption.

The annual return for the financial year 2017-18 was filed on 15th September, 2018.

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A.
S. No. Inward supplies ITC
(i) Inputs ‘A’
[ITC cannot be taken on missing invoice. The registered person should have the invoice 90,000
in its possession to claim ITC-Section 16(2)(a)]
(ii) Inputs ‘B’
[When inputs are received in installments, ITC can be availed only on receipt of last Nil
installment-First proviso to section 16(2)]
(iii) Capital goods
[Input tax paid on capital goods cannot be availed as ITC, if depreciation has been Nil
claimed on such tax component – Section 16(3)]
(iv) Input services
[As per section 16(4), ITC on an invoice cannot be availed after the due date of 1,75,000
furnishing of the return for the month of September following the end of financial year
to which such invoice pertains or the date of filing annual return, whichever is earlier.
Since the annual return for the FY 2017-18 has been filed on 15th September, 2018
(prior to due date of filing the return for September, 2018 i.e., 20th October, 2018), ITC
on the invoice pertaining to FY 2017-18 cannot be availed after 15th September, 2018.
Total 2,65,000

Q3. ABC Ltd. supplied goods Rs. 11,500. ABC Ltd. received goods valued at Rs. 10,000. The supplier has
charged GST in his invoice. SGST and CGST rate of supply of goods is 9% each. Calculate the tax payable.
A.
Details SGST CGST
Tax payable on supply of goods by ABC Ltd. on Rs. 11,500 @ 9% 1,035 1,035
ITC of taxes paid by supplier available in Electronic credit ledger 900 900
Net Tax Payable 135 135

Q4. ABC Ltd. supplied goods Rs. 15,000. ABC Ltd. received goods valued at Rs. 20,000. The supplier has
charged GST in his invoice. They sold 60% of inputs procured and balance 40% were in stock. State Tax
(SGST) and Central Tax (CGST) rate on supply and purchase of goods is 9% each. Calculate the tax payable.
A.
Details SGST CGST
Tax payable on supply of goods by ABC Ltd. on Rs. 15,000 @ 9% 1,350 1,350
ITC of taxes paid by supplier available in Electronic credit ledger 1,800 1,800
Net Tax Payable NIL NIL
Credit carried forward in Electronic Credit Ledger 450 450

Q5. ABC Ltd. are manufacture of drugs. SGST and CGST rate on supply of goods is 2.5% each. They sold the
goods at Rs. 20,000. They purchased inputs at Rs. 13,000. The SGST and CGST on inputs is 6% each. All
these inputs were used in Manufacture of final products. There was no opening or closing stock of inputs or
final products. Calculate the tax payable.
A.
Details SGST CGST
Tax payable on supply of goods by ABC Ltd. on Rs. 20,000 @ 2.5% 500 500
ITC of taxes paid by supplier available in Electronic credit ledger 780 780
Net Tax Payable NIL NIL

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 Credit carried forward in Electronic Credit Ledger 280 280
This excess credit is due to inverted tax structure i.e. tax on inputs is more than tax payable on outputs. In that
case, Deepak Manufacturers can claim refund of this excess ITC.

Q6. ABC Ltd. procures input goods and services within State Rs. 1,000. SGST and CGST rate on receipt is 9%
each. He manufactured 2 products out of inputs. One product of value of Rs. 800 was subject to SGST and
CGST @ 9% each. Other product of value of Rs. 800 was exempt from CGST & SGST. Calculate the tax
payable.
A.
Details SGST CGST
Tax payable on supply of goods and services 72 72
ITC of taxes paid on input goods and services available 90 90
Reversal of 50% ITC is ineligible (to be reversed in Electronic Credit Ledger) 45 45
Eligible ITC 45 45
Net tax payable by cash through Electronic cash ledger 27 27

Q7. When the ISD is one State say at Delhi and the Recipients of credits (Suppliers or Locations) are in different
States say in Chennai, Tamil Nadu and Bangalore, Karnataka. Assume the turnovers for the relevant period
(previous financial year) of Chennai unit are Rs. 10 crores and that of Bangalore unit is at Rs. 30 crores.

Credit Available with ISD at Delhi SGST CGST IGST

Amount in Lacs
Credit directly attributable to
Chennai 5 5 10
Bangalore 3 2 5
Common Credits 5 7 8
Total 13 14 23
A.
Credit Available with ISD at Delhi Chennai Bangalore
Amount in Lacs
Directly Attributable
SGST as IGST 5 3
CGST as IGST 5 2
IGST as IGST 10 5
Total (a) 20 10
Common Credit
SGST as IGST 1.25 3.75
(5*10/40) or (5*30/40)
CGST as IGST 1,75 5.25
(7*10/40) or (7*30/40)
IGST as IGST 2 6
(8*10/40) or (8*30/40)
Total (b) 5 15
Total (a+b) 25 25

Q8. ABC Ltd. a registered person supplying taxable goods in Jaipur has opted to pay tax on composition scheme
u/s 10 with effect from 1st April 2018. It provides following information relating to balance of ITC lying as on 31st
March 2018:
1. Inputs lying in stock as valued at Rs. 3,36,000 (inclusive of CGST & SGST @12%)

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 2. Inputs contained in finished goods where tax invoice is not available relating to such inputs but it is
known that market price of such inputs (inclusive of CGST & SGST @ 12%) on 31st March 2018 is Rs.
1,79,200
3. ITC on capital goods purchased on 29th November 2017 is Rs. 1,44,000
4. Balance in Electronic credit ledger is Rs. 2,20,000.
Decide whether ABC Ltd. is eligible for ITC lying on 31st March 2018,
A. As per Section 18(4), where any registered taxable person who has availed of ITC opts to pay tax under
section 10 i.e. composition scheme, he shall pay an amount, by way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock and on capital goods, taking useful life of capital
goods 5 years, on the day immediately preceding the date of exercising such option. Therefore, in given case
ABC Ltd. is required to pay following amounts: -

Particulars Amount
Inputs lying in stock (Rs. 3,36,000*12/112) 36,000
Inputs contained in finished goods lying in stock (Rs. 1,79,200*12/112) 19,200
Input Tax on Capital goods used for 4 months and 2 days, taking residual life as 5 years 1,32,000
(1,44,000*55/60) (55 months being remaining residual life of capital goods)
Amount to be paid by ABC Ltd. (CGST+SGST) 1,87,200
Working Note: As per Rule 44(3) of CGST Rules, 2017, where the tax invoices related to the inputs lying in
stock are not available, the registered person shall estimate the amount under Rule 44(1) based on the
prevailing market price of goods on the date of opting for composition scheme.
The aforesaid amount can be paid by utilizing the balance in Electronic Credit Ledger. The balance credit in
Electronic Credit Ledger = Rs. 2,20,000 – Rs. 1,87,200 = Rs. 32,800 lapse.

Q9. ABC Ltd. a supplier of goods has purchased capital goods invoice Dated 1st October 2017 for Rs. 4,13,000
(inclusive of CGST and SGST @ 9%). After taking it for business use, the said capital goods were supplied for
Rs. 2,85,000 on 26th April 2018.
A.
Particulars Amount
Date of Invoice of purchase of capital goods 1st Oct’17
Date of supply of capital goods after taking into use 26th Apr’18
No. of Quarter for which it is used 3
CGST & SGST paid on purchase of capital goods [4,13,000 * (18/118)] 63,000
Reduced by Rs. 63,000*5%*3 9,450
Amount of CGST and SGST 53,550
Transaction value on supply of capital goods u/s 15 2,85,000
CGST & SGST payable on supply of Capital Goods @ 18% 51,300
Amount to be payable higher of 53,550

Q10. What would be your answer if capital goods being Refractory Bricks are removed as scrap at a transaction
value of Rs. 25000 on 29th March 2018?
A. As per section 18(6), where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, there
shall be no requirement for reversal of ITC, taxable person may pay tax on the transaction value i.e. if tax rate
is 9% each then CGST Rs. 2,250 & SGST Rs. 2,250.

Q11. ABC Ltd. a registered manufacturer demerged its entity into AB cement Ltd. and BC Steel Ltd. the total
value of assets of ABC Ltd. is Rs. 25,00,000 and unutilized credit on account of CGST, SGST and IGST

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amounted to Rs. 60,000, Rs. 45,000 and Rs. 84,600 respectively. The value of assets of AB cement Ltd. and
BC Steel Ltd. is Rs. 12,00,000 and Rs. 13,00,000 respectively obtained as per the scheme. Discuss the eligibility
of credit transferred to new units on account of Demerger?
A. As per Rule 41 of CGST Rules, 2017, in case of Demerger, input tax credit shall be apportioned in the ratio
of Value of assets of new unit as specified in Demerger scheme. In the given case, credit transferred to both
the new units would be –

Particulars ABC Ltd. AB Cement BC Steel Ltd.

Ltd.
Value of Assets 25,00,000 12,00,000 13,00,000
Unutilized credit relating to CGST (to be apportioned
in ratio of value of assets of AB Cement and BC
Steel Ltd.) 60,000 28,800 31,200
SGST 45,000 21,600 23,400
IGST 84,600 40,608 43,992
Total Apportioned Credit 1,89,600 91,008 98,592

Q12. What would be scenario of Input Tax Credit in respect of Immovable Property?
A. Law divides claim of Input Credit in respect of construction of Immovable Property in two parts:
(a) Works contract services when supplied for construction of immovable property (other than plant and
machinery) except where it is an input service for further supply of works contract service;
Example: Mr. A wants to start a Hotel. He engages Mr. B as contractor for construction of the hotel building and
allots him the contract with entire material and labour to be procured by C.
CGST Act, 2017 provides that any person who has paid taxes under a contract which has resulted in
construction of immovable property, he would not be able to claim Input Tax Credit of such taxes paid unless
such services are used as Input Services for further supply of Work contract service.
Thus, in the given scenario, Mr. A would not be eligible to claim input tax credit of taxes paid to Mr. B, as work
contract services of Mr. B have not been used by Mr. A for further supply of works contract service.
(b) Goods or services or both received by a taxable person for construction of an immovable property (other
than plant and machinery) on his own account including when such goods or services or both are used
in the course or furtherance of business
Example: Mr. A wants to start a Hotel land he engages Mr. B as contractor for construction of Hotel Building.
He allots him the contract with part of the material being provided by Mr. A and balance material and labour to
be procured by Mr. B.
In the above cases, Mr. A has provided part of the material to Mr. B, ownership of the material to the extent
provided by Mr. A remains with Mr. A and Mr. B uses the material for the construction of building for Mr. A only.
Mr. A would not be entitled to credit of any taxes paid on purchase of such material for construction of Immovable
property.

Impact of the two provisions: With the insertion of the two provisions, both the scenarios wherein:
(a) A person awards contract of construction of the immovable property to a contractor or
(b) Constructs the immovable property himself by purchasing material and hiring labour,
he would not be able to claim credit of the taxes paid for the construction of the immovable property.

Q13. Mr. Amit, a supplier of goods, pays GST under regular scheme. He is not eligible for any threshold
exemption. He has made the following outward taxable supplies in the month of August, 2019 – Intra-State
supplier of goods 6,00,000, Inter-State supplies of goods 2,00,000. He has also furnished following information
in respect of purchases made by him from registered dealers during August, 2019 – Intra-State purchase of
goods 4,00,000, Inter-State purchase of goods 50,000. Balance of ITC available at the beginning of the August

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2019 – CGST 15,000, SGST 35,000, IGST 20,000. Compute the net GST payable by Mr. Amit for the month of
August, 2019.
Note : (i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively, on both inward and outward
supplies (ii) Both inward and outward supplies given above are exclusive of taxes, wherever applicable (iii) All
the conditions necessary for availing the ITC has been fulfilled.
A. (A) Tax payable
Description CGST (Rs.) SGST (Rs.) IGST (Rs.)
Inter-State taxable supply of goods – Rs. 36,000
2,00,000 – IGST @ 18%
Intra-State taxable supply of goods – Rs. 54,000 54,000
6,00,000 – CGST @ 9% and SGST @ 9%
Total Tax Payable 54,000 54,000 36,000

(B) ITC Available

Description CGST (Rs.) SGST (Rs.) IGST (Rs.)
Opening Balance 15,000 35,000 20,000
Intra-State Purchases {Rs. 4,00,000 - CGST 36,000 36,000
9% & SGST @ 9%}
Inter-State Purchases {Rs. 50,000 – IGST @ 9,000
18%}
Total ITC available 51,000 71,000 29,000

(B) Net Tax Payable

Description CGST (Rs.) SGST (Rs.) IGST (Rs.)
Total Tax Payable 54,000 54,000 36,000
Less ITC available 51,000 71,000 29,000
Net Payable 3,000 NIL 7,000
Less Cross Utilization NIL NIL -7,000
Net Tax Payable 3,000 NIL NIL
Excess ITC carried forward NIL 10,000 NIL

Q14. M Ltd. Mumbai procured goods 10,000 Kgs @ Rs. 100 per Kg. from K Ltd. of Kolkata. These goods came
to M Ltd. of Mumbai in the following manner:
Date of Dispatch No. of Kgs dispatched Date of receipt Transit No. Kgs
Losses received
10th October 2017 3,000 15th November 2017 NIL 3,000
2nd November 2017 4,000 20th November 2017 NIL 4,000

3rd December 2017 3,000 1st January 2018 20 2,980

Invoice shows 10,000 Kgs and IGST @ 18%.

You are required to answer:
(a) M Ltd. can avail the proportionate credit on 15th Nov 2017 and 20th Nov 2017.
(b) When can M Ltd. is eligible for input tax credit?
(c) How much credit is allowed to M Ltd.
A. (a) M Ltd. cannot take proportionate credit on the quantity received on 15th November 2017 and 20th
November 2017.
(b) M Ltd. is eligible to avail the input tax credit on 1st January 2018.
(c) Input tax credit allowed = Rs. 1,79,640/- (10,000 Kgs x Rs. 100) x 18% x 9980 kgs/10,000 kgs.

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Note:
(i) Goods received in lots ITC available only on receipt of last lot/installment [1st proviso to Sec 16(2)]
(ii) ITC is admissible only upon receipt of goods. Thus, ITC not admissible in respect of goods not received.

Q15. M/s X Ltd. has establishment in Chennai, and establishment in Hyderabad. Supply of goods (open market
value of Rs. 5,00,000) made by M/s X Ltd. Chennai to M/s X Ltd. Hyderabad. M/s X Ltd. Chennai paid IGST of
Rs. 60,000. Accordingly M/s X Ltd. Hyderabad availed the input tax credit of Rs. 60,000. 2nd Proviso to Section
16(2) of CGST Act, 2017 is applicable in the given case (i.e. to reverse the credit where payment is not made
within 180 days from the date of invoice). Discuss.
A. As per proviso to rule 37(1) of the CGST Rules, 2017, the value of supplies made without consideration as
specified in Schedule I of the said Act shall be deemed to have been paid for the purposes of the second proviso
to sub- section (2) of section 16. In the given case M/s X Ltd. Hyderabad is not required to reverse the input tax
credit. Since, as per Section 25(4) of the CGST Act, 2017 two establishments are considered as establishment
of distinct person and accordingly, supply made by one establishment to another establishment will be covered
under Schedule I without consideration.

Q16. XYZ Ltd. is engaged in supply of passenger transportation services. In the month of September, 2017, it
has purchased two motor vehicles for Rs. 18,00,000 plus GST @28%. You are required to advice XYZ Ltd. if it
can avail Input tax credit of the GST paid by it on motor vehicles.
A. As per Section 17(5)(a), input tax credit shall not be available in respect of motor vehicles having approved
seating capacity of not more than thirteen person (including the driver). However, credit will be available when
they are used for making the supplies of transportation of passengers. In this case XYZ Ltd. is engaged in
transportation of passengers it will be entitled to take credit of GST amounting Rs. 5,04,000 i.e. [Rs. 18,00,000
× 28%].

Q17. ABC Bank has purchased a van for transportation of cash (money). Whether ITC of such motor van is
admissible?
A. The blockage is only for the motor vehicle for transportation of passengers. Under GST law, Cash/money is
neither goods nor services {Sec 2(52) and Sec 2(102) of CGST Act}. But since it is not specifically blocked in
CGST Act, ABC Bank is eligible for ITC of motor vans purchased by it for transportation of cash.

Q18. ABC Ltd. is engaged in supply of transport of passengers by air services. The company avails outdoor
catering services of XYZ Caterers in order to provide food and beverages to the passengers. XYZ Caterers
raises an invoice on ABC Ltd charging GST. ABC Ltd. wants to avail the ITC on outdoor catering services
supplied by XYZ Caterers. Advise.
A. ITC shall be available where an inward supply of goods or services or both of a particular category is used
by a registered person as an element of a taxable composite or mixed supply.
In the given case, ABC Ltd will be entitled to avail the ITC of the GST paid to XYZ Caterers since outdoor
catering services forms part of taxable composite supply of passengers by air services.

Q19. ABC Ltd is a BPO which works on night shift basis. As per the Government Guidelines for BPO Sector, it
has to provide rent a cab facilities to its employees who work on night shifts. Whether, ABC Ltd. is eligible to
avail ITC on rent a cab services.
A. No, ABC Ltd cannot claim ITC on the GST paid on such rent-a-cab services. The reason being that such
credit is not admissible unless it is obligatory for an employer to provide the same to its employees under any
law for time being in force.

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Q20. Mr. A of USA being technician came to India to assemble parts of machinery. He also imported goods
worth Rs. 10,00,000 and paid following customs duties:
(i) Basic customs duty is Rs. 1,00,000.
(ii) Integrated Goods and Services Tax (IGST) of Rs. 1,98,540.
In India Mr. A wants to register as non-resident taxable person and his estimated liability is Rs. 2,50,000. How
much Mr. A is liable to pay as advance tax?
A. Mr A is Non-resident taxable person. NRTP needs to pay tax in advance before he is granted registration
certificate. NRTP is entitled to book credit of goods imported by him. However, only IGST paid on imported
goods is eligible ‘input tax’. Thus, ITC admissible to him is Rs 1,98,540.
Considering the admissible amount of ITC, Mr. A of USA is liable to pay advance tax of Rs. 51,460. (i.e. Rs.
2,50,000 – 1,98,540)

Q21. ABC Bank, having a branch in Jaipur engaged in supply of services by way of accepting deposits and
extending loans opted for Section 17(4). Its head office is in Udaipur and branch in Jaipur. ITC (CGST & SGST)
available for the month August, 2017 is Rs 90,000. Determine the amount of admissible ITC for ABC Bank,
Jaipur Branch. Total ITC of 90,000 includes credit relating to :
Particulars Input Tax (CGST & SGST)
1. Services availed from from Udaipur Head Office (deemed distinct 18,000
person under GST law)
2. Outdoor catering services received for its employees 16,900
3. Auditing Services 22,500
4. Goods which are used for personal use of employees 6,500
A.
Statement showing ITC eligibility for ABC Bank (Jaipur Branch) which has opted for Section 17 (4)
Particulars Input Tax (CGST &
SGST)
Services availed from from Udaipur Head Office (deemed distinct person 18,000
under GST law) – Deemed supply between distinct person - Full ITC available
Outdoor catering services received for its employees {Blocked Credit U/s 17 (5)} Not Allowed
Auditing Services (Allowed @ 50%)
Goods which are used for personal use of employees {Blocked Credit U/s 17 (5)} Not Allowed

ITC available (90,000 – 16,900 – 6,500 – 18,000) = 48,600 @ 50% 24,300

Total Admissible ITC (available for utilization for August Month GST liability) 42,300

Q22. X is a chartered accountant by profession. He gives the following information pertaining to October 20XX
1. Consultancy given to different clients during October 20XX (but not including the transactions given
below) (invoice value : Rs. 35,70,000).
2. Consultancy given to A Ltd. (invoice value : Rs. 8,000, market value of supply : Rs. 50,000, X holds
40 percent shares in A Ltd.)
3. Consultancy given to B (invoice value : nil, market value of supply : Rs. 48,000, B is not a relative of
X).
4. Consultancy given to Mrs. X (invoice value : nil, market value of supply : Rs. 75,000, Mrs. X is not
dependent upon X).
5. Consultancy given to C, younger brother of X (invoice value : nil, market value of supply : Rs. 60,000,
C is not dependent upon X).
6. Consultancy given to D, elder brother of X (invoice value : nil, market value of supply : Rs. 70,000, D
is dependent upon X).

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 7. Consultancy given to E, an employee of X (invoice value : nil, market value of supply : Rs. 80,000).
Above figures are exclusive of GST. GST is 18%. Calculate the amount of GST payable by X for October
20XX. He want to avail input tax credit —
− Balance available in electronic credit ledger on October 1, 20XX : Rs. 22,000
− Fees paid to a chartered accountant pertaining to tax audit of X (taxable value : Rs. 20,000, GST : Rs.
3,600).
− GST paid on food and beverages for employees / clients (amount of GST being Rs. 8,000).
− Motor car purchased for official use of employees (amount of GST being Rs. 2,80,000).
− Motor car purchased for private use of X and his family (amount of GST being Rs. 7,00,000).
− Membership of a club taken by X for entertaining official guests (amount of GST being Rs. 18,000).
− Fees paid to a consultant pertaining to transfer pricing matter of a client (amount of GST being Rs. 20,000).
A.
Particulars Amount (Rs.)
Consultancy given to different clients 35,70,000
Consultancy given to A Ltd. (A Ltd. is related to X, price is not sole consideration, 50,000
market value to be considered)
Consultancy given to B (B is not a relative of X, price is sole consideration, transaction Nil
value to be considered)
Consultancy given to Mrs. X (Mrs. X is “related person”, open market value to be 75,000
considered)
Consultancy given to C, younger brother not dependent upon X (C does not come in Nil
the list of “related persons”, GST applicable on transaction value on the assumption
that price is sole consideration)
Consultancy given to D, elder brother dependent upon X (related person, GST on 70,000
open market value)
Consultancy given to E, an employee of X (employer and employee are related 80,000
persons, gift to employees which is not covered by employment agreement is
chargeable to GST on the basis of market value. Exemption of Rs. 50,000 is
available) invoice value : nil, market value of supply : Rs. 80,000).
Total Outward Supply 38,45,000
GST @ 18% 6,92,100
Less:- Input Tax Credit 45,600
Balance available in electronic credit ledger on October 1, 20XX 22,000
Fees paid to a chartered accountant pertaining to tax audit of X 3,600
GST paid on food and beverages for employees / clients (not eligible) Nil
Motor car purchased for official use of employees (not eligible) Nil
Motor car purchased for private use of X and his family (not eligible) Nil
Membership of a club taken by X for entertaining official guests (not eligible) Nil
Fees paid to a consultant 20,000
Balance to be paid through electronic cash ledger 6,46,500

Q23. X Ltd. provides services pertaining to retail packing of goods. This service is provided in Punjab to
manufacturing units and plantation units. It gives the following information pertaining to January 2018 —
1. Service by bay of waxing, retail packing, labelling of apples provided to A Plantation (P.) Ltd.,
Ludhiana(invoice value : Rs. 17,10,000).
2. Service by way of packing and labelling of chemical goods provided to B Ltd. (invoice value : Rs.
28,00,000).
3. Service by way of packing of leather goods provided to C Ltd. (invoice value : Rs. 3,00,000, market
value of similar service to unrelated persons : Rs. 6,50,000).

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 4. Service by way of waxing and packing of wooden toys provided to D Ltd. (invoice value : Rs.
5,00,000).
X owns 60 per cent shares in X Ltd. and Mrs. X owns 40 per cent shares in C Ltd.
Above figures are exclusive of GST. GST rate is 18 per cent. The above invoices are issued during January
2018. Payment is received from A Plantation (P.) Ltd. on January 27, 2018. Payment from B Ltd. and C Ltd. is
received on February 12, 2018. Nothing is received from D Ltd. so far. On January 31, 2018, X Ltd. gets an
advance payment of Rs. 50,000 from E Ltd. for packing of goods which will be manufactured during 2018-19
(GST rate is 18 per cent, Rs. 50,000 is for providing services in future, nothing is received on account of GST).
Calculate the amount of GST payable by X Ltd. for January 2018. X Ltd. wants to avail input tax credit —
− Balance available in electronic credit ledger on January 1, 2018 : Rs. 61,000.
− Fees paid to an interior decorator for canteen of X Ltd. (taxable value : Rs. 10,000, GST : Rs. 1,800).
− Membership of health club for employees (amount of GST being Rs. 17,000).
A.
Particulars Amount (Rs.)
Service by way of waxing, retail packing, labelling of apples provided to A Plantation Nil
(P.) Ltd. [it is exempt from GST vide Exemption Notification (Sr. No. 57)]
Service by way of packing and labelling of chemical goods provided to B Ltd. 28,00,000
Service by way of packing of leather goods provided to C Ltd. (X Ltd. and C Ltd. are 6,50,000
related, GST applicable on market value)
Service by way of waxing and packing of wooden toys provided to D Ltd. 5,00,000
Advance payment from E Ltd. (Rs. 50,000 × 100 ÷ 118) 42,373
Total Outward Supply 39,92,373
GST @ 18% 7,18,627
Less:- Input Tax Credit 62,800
Balance available in electronic credit ledger on January 1, 2018 61,000
Fees paid to an interior decorator for canteen 1,800
Membership of health club for employees (not eligible) NIL
Balance to be paid through electronic cash ledger 6,55,827

Q24. ABC Ltd. purchased goods valuing Rs. 10,00,000 (excluding CGST @ 2.5% & SGST @ 2.5%) under the
cover of invoice Dated 25th December 2017. The company made the payment to the supplier as per due date.
The company has not taken ITC at the time of receipt of input since there was a doubt regarding admissibility
of tax credit. It legal consultant has opined that it can very much avail ITC on such inputs. The opinion was
received on 5th May 2018. ABC Ltd. now would like to avail ITC. Can it do so? ABC Ltd. has filed its annual
return for the year 2017-18 on 12th August 2018.
A. As per Section 16 (4), a registered person shall not be entitled to take ITC in respect of any invoice or debit
note for supply of goods or services or both after
(a) The due date of furnishing of the return U/s 39 for the month of September following the end of financial
year to which such invoice pertains; or
(b) Furnishing of the relevant annual return,
Whichever is earlier.
In this case the inputs were purchased by invoice Dated 25th December 2017, hence ITC in respect of such
inputs can be taken on earlier of the following dates-
• 20th Oct’18 being due date of furnishing return of month of Sept’18;
• 12th Aug’18 being the date of furnishing of annual return.
ABC Ltd. can avail ITC till 12th Aug’18. Therefore, it can avail credit of CGST Rs. 25,000 & SGST Rs. 25,000.

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Q25. A registered supplier of taxable goods supplied goods valued Rs. 1,12,000 (inclusive of CGST Rs. 6,000
and SGST Rs. 6,000) to ABC Ltd. under the forward charge on 12-11-2017 for which tax invoice was also issued
on the same date. But ABC Ltd. did not make any payment towards such supply along with tax thereon to the
supplier and availed input tax credit of CGST and SGST of Rs. 12,000 on 15-12-2017. Is ABC Ltd. eligible to
avail input tax credit on such supply?
Discuss ITC implications if ABC Ltd. makes the payment of Rs. 1,12,000 to the supplier on 15-09-2018.
A. Yes, ABC Ltd. can avail input tax credit on receipt of taxable supply of goods. But it is required to pay the
consideration along with tax within 180 days from the date of issue of invoice.
I. If ABC Ltd. does not make payment within 180 days from the date of invoice: As per Rule 37 of CGST
Rules, 2017, a registered person, who has availed of input tax credit on any inward supply of goods or
services or both, but fails to make payment to the supplier within 180 days from the date of issue of
invoice shall furnish the details of such supply and the amount of input tax credit proportionate to such
unpaid amount, availed of, in FORM GSTR-2 in succeeding month after expiry of 180 days (will be
added to Output Tax Liability alongwith interest)
In this case since ABC Ltd. does not make any payment within 180 days from the date of invoice i.e.
upto 11th May 2018, therefore amount equal to input tax credit availed by ABC Ltd. shall be added
towards its output tax liability along with interest for the month of June, 2018 in which details of such
supplies are required to be furnished.
Interest shall be calculated @18% [as given u/s 50(1) for the period starting from date of availing credit
till the date when input tax credit added to the output tax liability is paid]
Particulars Amount (Rs.)
Amount of Input tax 12,000
Date of availing credit (Date of taking credit shall be construed as date of 15-12-2017
taking credit in electronic credit ledger)
Date of payment of ITC added to Output Tax Liability 15-06-2018
No. of Days for which interest needs to be paid 182
Interest @ 18% {12000*18%*182/365} 1,077
II. Re-credit of Input tax if payment made after 180 days: If ABC Ltd. makes payment on 15-09-2018 that
is after 180 days from date of issue of invoice, then, it shall be entitled to avail the credit of input tax.

Q26. Determine the amount of ITC admissible to ABC Ltd. in respect of following items procured by them in
the month of December 2017 (below amount is GST amount):-
1. Goods supplied for Captive consumption in a factory Rs. 10,000
2. Goods used in constructing an additional floor of office building Rs. 20,000
3. Packing material used in a factory Rs. 5,000
4. Goods destroyed due to natural calamities Rs. 20,000
5. Goods used for repairing the office building and cost of such repairs is debited to P & L Rs. 25,000
6. Paper for photocopying machine used in Administrative Office Rs. 1,000
7. Goods given as gifts Rs. 25,000
8. Inputs used for tests or quality control check Rs.15,000
9. Goods purchased for being used in repairing the factory shed and same has been
Capitalized in books Rs.18,000
10. Cement used for making foundation and structural support to Plant & Machinery Rs.14,000
11. Inputs used in trial runs Rs.15,000

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A. Statement showing ITC admissible to ABC Ltd. for the month of December 2017
Particulars Amount (Rs.)
Goods supplied for Captive consumption in a factory (since, used in course of 10,000
business, hence, ITC on same will be available)
Goods used in constructing an additional floor of office building {As per section 17 NIL
(5)(d), ITC shall not be available in respect of goods or services or both received by a
taxable person for construction of an immovable property (other than plant &
machinery) on his own account including when such goods or services or both are
used in the course or furtherance of business. Hence, ITC shall not be available}
Packing material used in a factory (since, used in course of business, hence, ITC on 5,000
same will be available)
Goods destroyed due to natural calamities {As per section 17(5)(h), ITC shall not be NIL
available in respect of goods lost, stolen, destroyed, written off or disposed of by way
of gift or free samples. Hence, no ITC shall be available in respect of goods destroyed
due to natural calamities}
Goods used for repairing the office building and cost of such repairs is debited to P & 25,000
L {As per explanation, the expression “construction” includes re-construction,
renovation, additions or alterations or repairs, to the extent of capitalization, to the
immovable property. Goods used for revenue repairs are considered as an eligible
input and credit shall be allowed on the same}
Paper for photocopying machine used in Administrative Office (since, used in course 1,000
of business, hence, ITC on same will be available)
Goods given as gifts {As per section 17(5)(h), ITC shall not be available in respect of NIL
goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples.
Hence, no ITC shall be available in respect of goods given as gift}
Inputs used for tests or quality control check (since, used in course of business, hence, 15,000
ITC on same will be available)
Goods purchased for being used in repairing the factory shed and same has been NIL
Capitalized in books {As per section 17(5)(d), ITC shall not be available in respect of
goods or services or both received by a taxable person for construction of an
immovable property (other than plant & machinery) on his own account including when
such goods or services or both are used in the course or furtherance of business.
Hence, ITC shall not be available}
Cement used for making foundation and structural support to Plant & Machinery {As 14,000
per explanation to Section 17, “plant and machinery” means apparatus, equipment,
and machinery fixed to earth by foundation or structural support that are used for
marking outward supply of goods or services or both and includes such foundation
and structural supports. ITC is admissible in respect of goods or services or both
received by a taxable person for construction of plant and machinery}
Inputs used in trial runs (since, used in course of business, hence, ITC on same will 15,000
be available)
Total Input Tax credit available 85,000

Q27. ABC Ltd. is engaged in supply of works contract services for construction of immovable property. It gives
a part of the construction work to a sub-contractor. The sub-contractor charges GST in his invoice to ABC Ltd.
Whether ABC Ltd. can avail ITC on this?
A. As per section 17 (5) (c), ITC shall not be available in respect of works contract services when supplied for
construction of an immovable property. However, credit is allowed where it is an input service for further supply
of works contract service. In given case, the services supplied by the sub-contractor have been used by the
ABC Ltd. for supply of works contract service. Hence, ABC Ltd. can avail the ITC of the GST charged on the
input service provided by the sub-contractor.

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Q28. ABC Ltd., a manufacturer, which is engaged in supply of taxable goods has purchased 10,000 kg of
Product ‘A’ for Rs.. 10,00,000 (exclusive of CGST @ 14% and SGST @ 14%) on which input tax credit has
been taken. Due to changes in fashion process, the said product became obsolete and their value has been
written off in the books of accounts. Explain Input tax credit treatment in above case.
A. As per Section 17(5)(h) of the CGST Act, 2017, if the value of any goods is written off in the books of account,
then no input tax credit shall be allowed in respect of the said input. Where input tax credit has been taken in
respect of the said goods, the same has to be paid by recipient. Since in the given case, ABC Ltd. has availed
input tax credit, thus it has to pay Rs. 1,40,000 (Rs. 10,00,000 @ 14%) towards CGST and Rs. 1,40,000 (Rs.
10,00,000 @ 14%) towards SGST liability.

Q29. ABC Ltd. paying tax under composition scheme becomes liable to pay tax under regular scheme from
01/04/2018. Can it avail Input tax credit and if so determine the amount of ITC available?
Break-up of credit available with ABC Ltd. as on 31/03/2018:
Particulars CGST SGST
Inputs lying in stock (Invoice Dated 11/03/2018) 4,500 4,500
Capital goods procured on 25/09/2017 Invoice Dated 6,000 6,000
27/09/2017
Inputs lying in semi-finished goods in stock (Invoice Dated 1,500 1,500
21/12/2017)
A. As per Section 18(1)(c), where any registered person ceases to pay tax under Section 10, he shall be entitled
to take credit of input tax in respect of inputs held in stock, inputs contained in semi-finished or finished goods
held in stock and on capital goods on the day immediately preceding the date from which he become liable to
pay tax under Section 9.
Therefore, in given case, ABC Ltd. shall be entitled from 01/04/2018 to avail credit available as on 31/03/2018.
The credit of capital goods is to be claimed after reducing the tax paid on such capital goods by 5% points per
quarter of a year or part thereof from the date of invoice or such other documents on which the capital goods
were received by the taxable person. (Rule 40 of CGST Rules)
Statement showing ITC available to ABC Ltd. in respect of inputs
Particulars ITC (CGST + Eligible
SGST) Credit

Inputs lying in stock (4500+4500) 9,000 9,000

Inputs lying in semi-finished goods in stock (Invoice Dated 21/12/2017) (1500+1500) 3,000 3,000

Total Input tax credit available 12,000 12,000

Statement showing ITC available to ABC Ltd. in respect of capital goods

Particulars Amount in Rs.

Date of invoice of capital goods 27/09/2017

Date from which ABC Ltd. are liable to pay tax under Section 9 01/04/2018
No. of quarters from date of invoice 3
12,000
CGST and SGST paid on capital goods procured on 27/09/2017
1,800
ITC to be reduced by Rs.. 12,000 x 5% × 3 quarters

Credit (CGST and SGST) available on capital goods 10,200

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Note: As per Section 2(92), “quarter” shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a calendar year.

Q30. ABC Ltd. a registered dealer engaged in supplying exempted goods to its customers. On 12/09/2018,
exemption notification was rescinded and goods were liable for tax. ABC Ltd. has to make e-payment of tax on
the due date i.e., on 20/10/2018. Determine the eligible credit for the month of September, 2018 if the following
information is provided:

Value
(exclusive of CGST SGST IGST
Particulars CGST/SGST @ 9% (Rs.)
/IGST) (Rs.) @ 9% (Rs.) @ 5% (Rs.)

Value of Inputs lying in stock as on 11/09/2018. 1,25,000 6,250

Value of inputs contained in semi-finished goods lying 87,000 7,830 7,830

in stock as on 11/09/2018 but only inputs worth 28,000
in semi-finished goods were procured after 11/09/2017

Inputs received on 30/04/2018 lying in finished goods 1,15,000 10,350 10,350

in stock on 11/09/2018

Capital goods procured in 10/10/2017 which is 6,55,000 32,750

exclusively used in supplying exempted goods
A. As per Section 18(1)(d), where an exempt supply of goods or services or both by a registered person become
a taxable supply, such person shall be entitled to take credit of input tax in respect of inputs held in stock and
inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital
goods exclusively used for such exempt supply on the day immediately preceding the date from which such
supply becomes taxable.
As per CGST Rules, 2017, the input tax credit on capital goods, shall be claimed after reducing the tax paid on
such capital goods by 5% points per quarter of a year or part thereof from the date of invoice or such other
documents on which the capital goods were received by the taxable person.
Computation of Input tax credit relating to CGST/SGST/IGST available to ABC Ltd. in respect of inputs
and capital goods will be as follows:

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.) Total

Eligible
Credit (Rs.)

ITC on the value of inputs lying in stock. (In absence of -- -- 6,250 6,250
any information, it is assumed that all stocks are
purchased within one year and hence are eligible)

Input tax credit on the value of inputs contained in 2,520 2,520 -- 5,040
semi-finished goods [Working Notes 1]

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Input tax credit on value of inputs lying in stock of 10,350 10,350 -- 20,700
finished goods stock [Inputs received on 30/04/2018
lying in finished goods in stock on 11/09/2018 as all
inputs were acquired within 1 year prior to the effective
date on which the goods become taxable, therefore,
entire ITC would be allowed]

Capital goods [Working Notes 2] -- -- 26,200 26,200

Total Input tax credit available 12,870 12,870 32,450 58,190

Working Notes:
1. ITC on the value of inputs contained in semi-finished goods – Out of the total stock of Rs. 87,000,
inputs totaling to Rs. 59,000 are ineligible as period of 1 year has elapsed form the effective date
of purchase. ITC on inputs contained in stock of Rs.28,000 would be eligible. [Eligible Credit = Rs.
7,830 x Rs. 28,000 ÷ Rs. 87,000 each in respect of CGST and SGST]

2. Credit available in respect of capital goods:

Particulars Rs.

Date of invoice 10/10/2017

Date from which the goods become taxable 17/09/2018
No. of quarters or part thereof from date of invoice 4
Percentage points to be reduced (5% per quarter) 20%
IGST paid on the capital goods used exclusively in relation to goods exempted upto 11/09/2018 32,750
ITC to be reduced by 20% 6,550

Amount of Input tax credit available in respect of capital goods 26,200

Q31. ABC Ltd. a supplier of goods has purchased capital goods on 01/04/2018 for Rs. 11,20,000 (inclusive of
CGST @ 6% and SGST @ 6%). After taking it for business use, the said capital goods were supplied for Rs.
9,50,000 on 01/12/2018. Explain Input tax credit treatment in this case.
A. As per Section 18(6) of the CGST Act read with Rule 40(2) of CGST Rule, 2017, in case of supply of
capital goods, on which input tax credit has been taken, the registered person shall pay an amount –
Equal to the input tax credit taken on the said capital goods reduced by an amount calculated @ 5% for
every quarter or part thereof from the date of issue of invoice for such goods; or
The tax on the transaction value of such capital goods or plant and machinery determined under Section
15, whichever is higher.

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 Computation of amount of tax payable by ABC Ltd.

Particulars Rs.

Date of Invoice of purchase of capital goods 01/04/2018

Date of Supply of capital goods after taking into use 01/12/2018
No. of Quarters from the date of issue of invoice for such goods 3
CGST and SGST paid on purchase of Capital Goods [Rs. 11,20,000 x 12 ÷ 112] 1,20,000
Reduced by Rs. 1,20,000 x 5% × 3 quarters (18,000)
Amount of CGST and SGST (A) 1,02,000

9,50,000
Transaction Value on supply of Capital Goods u/s 15
1,14,000
CGST and SGST payable on supply of Capital Goods @ 12% 1,14,000
(B)
Amount to be payable (higher of A or B)

Q32. What would be your answer if capital goods being Jig are removed as scrap at a transaction value of Rs..
1,25,000 on 01/12/2018?
A. As per proviso to Section 18(6), where refractory bricks, moulds and dies, jigs and fixtures are supplied as
scrap, there shall be no requirement for reversal of Input tax credit, taxable person may tax on the transaction
value determined under Section 15.
In the given case, since, jig are cleared as scrap, the manufacturer shall pay an amount equal to the tax leviable
on transaction value i.e. CGST Rs. 1,25,000 x 6% = Rs. 7,500 and SGST Rs. 1,25,000 x 6% = Rs. 7,500.

Q33. A garment factory received a government order for making uniforms for a defense personnel. This supply
is exempt from tax under a special notification. The fabrics is separately procured for the supply, but thread,
buttons and lining material for the collars are the once which are used for other taxable products of the factory.
The turnover of the other garments of the factory and exempted uniforms in July 2018 is Rs. 8 crore and Rs. 2
crore respectively, the ITC on thread, button and lining material procured in July 2018 is Rs. 5,000; Rs. 25,000
and Rs. 15,000 respectively. Calculate the eligible ITC on thread and lining material.
A. Thread, buttons and lining material are inputs which are used for making taxable as well as exempt supplies.
Therefore, credit on such items will be apportioned and credit attributable to exempt supplies will be added to
the output tax liability in items of rule 43 of the CGST rules, 2017.
Credit attributable to exempt supplies = Common credit x (Exempt turnover / Total turnover)
Common credit = Rs. 5,000 + Rs. 25,000 + Rs. 15,000 = Rs. 45,000
Exempt turnover = Rs. 2 Crore
Total turnover = Rs. 10 Crore [Rs. 2 Crore + Rs. 8 Crore]
Credit attributable to exempt supply = (Rs. 2 crore / 10 Crore) x Rs. 45,000 = Rs. 9,000
Ineligible credit of Rs. 9,000 will be added to the output tax liability for the month of July. Credit of Rs. 36,000
will be eligible credit for the month of July.

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Q34. Total Credit Available to ISD is Rs. 20,00,000/- & the credit distributed to all the units is Rs. 24,00,000/-
(i.e. Delhi Rs. 10,00,000, unit Jaipur Rs. 6,00,000 & unit Ahmedabad Rs. 8,00,000). What will be the
consequences?
A. The excess credit of Rs. 4,00,000 (Rs. 24,00,000- Rs. 20,00,000) distributed would be recovered from the
recipient along with interest and the provisions of section 73 or 74 shall apply mutatis mutandis for effecting
such recovery.

Q35. Total Credit Available to ISD is Rs. 15,00,000/- & the credit should have been distributed equal to all the
units as all units had equal turnover, however credit distributed in violation of Section 21, as under:
Delhi Rs. 7,00,000, Jaipur Rs. 6,00,000, Ahmedabad Rs. 2,00,000. What will be the consequences?
A. The excess credit of Rs. 2,00,000 (Rs. 7,00,000- Rs. 5,00,000) shall be recovered from Delhi and Rs.
1,00,000 (Rs. 600,000 – Rs. 5,00,000) shall be recovered from Jaipur along with interest and the provisions of
section 73 or 74 shall apply mutatis mutandis for effecting such recovery.

Q36. Whether benefit of input tax credit would be available if the company procures health insurance services
for benefit of its employees. Please assume that the procurement of such services is mandatory under Factories
Act?
A. Yes. Section 17(5)(b) of the CGST Act provides that tax paid w.r.t health insurance services will be eligible
as input tax credit where the Government notifies that such services are obligatory for an employer to provide
to its employees under any law for the time being in force. If not notifies by the Government then it is not
available.

Q37. Whether taxes paid on change of interiors of service apartment is eligible for input tax credit?
A. Input tax credit is not available on goods or services received by a taxable person for construction of an
immovable property on his own account other than plant and machinery even when used in course or
furtherance of business. The word “construction” includes reconstruction, renovation, additions or alterations
or repairs to the extent of capitalization to the said immovable property. If the cost of interiors is capitalized
towards the cost of immovable property, then it forms part of the cost of immovable property (Service apartment)
and accordingly taxes paid on change of interiors of service apartment will not be eligible as input tax credit.

Q38. In case the amount is paid partly to the supplier of service, whether full taxes can be adjusted first? If no,
then, whether it has to be calculated proportionately?
A. No, there is no provision under the GST law to allocate part payment of the invoice towards the taxes first
so that the input tax credit can be allowed. Second proviso to Section 16(2) of the CGST Act clearly provides
that the entire value of supply (with tax) is to be paid within 180 days from the date of issue of invoice. Therefore,
as long as the entire payment is made within 180 days, the recipient would be entitled to claim the credit in
full.
Assuming that only part payment is made within 180 days, availing of proportionate credit based on such part
payment is not provided for under the CGST Act. However, Rule 37(1) of the CGST Rules provides for
availability of the amount of input tax credit availed of proportionate to the amount paid to the supplier.

Q39. With reference to the provisions of section 17, examine the availability of ITC in the following independent
cases:
(i) MBF Ltd., an automobile company, has availed works contract service for construction of a foundation on
which a machinery (to be used in the production process) is to be mounted permanently.

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(ii) Shah & Constructions procured cement, paint, iron rods and services of architects and interior designers for
construction of a commercial complex for one of its clients.
(iii) ABC Ltd. availed maintenance & repair services from “Jaggi Motors” for a truck used for transporting its
finished goods. (ICAI SM) (RTP NOV 2019)
A.
(i) Section 17(5)(c) blocks input tax credit in respect of works contract services when supplied for construction
of an immovable property (other than plant and machinery) except where it is an input service for further supply
of works contract service.
Further, the term “plant and machinery” means apparatus, equipment and machinery fixed to earth by
foundation or structural support that are used for making outward supply of goods and/or services and includes
such foundation or structural support but excludes land, building or other civil structures, telecommunication
towers, and pipelines laid outside the factory premises. Thus, in view of the above-mentioned provisions, ITC
is available in respect of works contract service availed by MBF Ltd. as the same is used for construction of
plant and machinery which is not blocked under section 17(5)(c). It is assumed that the expenditure incurred
towards works contract service is capitalised in the books of MBF Ltd. and no depreciation has been claimed
on the tax component.
(ii) Section 17(5)(d) blocks ITC on goods and/or services received by a taxable person for construction of an
immovable property (other than plant and machinery) on his own account even though such goods and/or
services are used in the course or furtherance of business. Thus, ITC on goods and/or services used in the
construction of an immovable property is blocked only in those cases where the taxable person constructs the
immovable property for his own use even if the immovable property being constructed is used in the course or
furtherance of his business. In the given case, Shah & Constructions has used the goods and services for
construction of immovable property for some other person and not on its own account. Hence, ITC in this case
will be allowed.
(iii) On a conjoint reading of section 17(5)(a) and 17(5)(ab), it can be concluded that ITC is allowed on repair
and maintenance services relating to motor vehicles, which are eligible for input tax credit. Further, as per
section 17(5)(a) ITC is allowed on motor vehicles which are used for transportation of goods. Thus, ITC on
maintenance & repair services availed from “Jaggi Motors” for a truck used for transporting its finished goods is
allowed to ABC Ltd.

Q40. George Pvt. Ltd., a registered supplier of goods at Kerala who pays GST under regular scheme, has made
the following transactions (exclusive of tax) during a tax period:

Purchases (Rs.) Sales (Rs.) Tax Rate

5,00,000 [Purchases made from 10,00,000 [Sale made to IGST - 18% CGST – 9% SGST-
registered person in New Delhi] registered person in New Delhi] 9%
2,50,000 [Purchases made from 8,00,000 [Sales made to
registered person in Trivandrum, registered person in Trivandrum]
Kerala]

The company has complied with all the conditions for availing the ITC. The following further information
regarding various balances available with it on the first day of the tax period, is provided by the company:
Source Taxes (Rs.) Interest (Rs.) Penalty (Rs.)
CGST 50,000 1500 500
SGST 30,000 1500 500
IGST 1,00,000 2000 500

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Compute the minimum net CGST, SGST and IGST payable from the Electronic Cash Ledger by George Pvt.
Ltd. for the tax period as also ITC to be carried forward to next tax period, if any. (PAST EXAM MAY 2019)
A. Computation of minimum net CGST, SGST and IGST payable from the electronic cash ledger by George
Pvt. Ltd. for the tax period

Particulars Amount (Rs.) CGST @ 9% SGST @ 9% IGST @ 18%

(Rs.) (Rs.) (Rs.)
Sales made outside Kerala (New 10,00,000 1,80,000
Delhi) – [Being inter-State sale, the
same is liable to IGST]
Sales made in Trivandrum [Being 8,00,000 72,000 72,000
intraState sale, the same is liable to
CGST & SGST]
Less: ITC available during the tax (72,000) (10,000) (1,80,000)
period for set off [Refer Working CGST IGST
Note Below]
(52,500)
SGST
Net Tax Payable using Electronic Nil 9,500 Nil
cash ledger
ITC Carried forward to next tax 500 Nil Nil (1,90,000-
period (72,500- (52,500-52,500) 1,90,000)
72,000)

Working Note: -
Particulars Amount (Rs.) CGST @ 9% SGST @ 9% IGST @ 18%
(Rs.) (Rs.) (Rs.)
Opening balance of ITC 50,000 30,000 1,00,000
Purchases from New Delhi [Being 5,00,000 90,000
inter-State purchase, IGST would
have been paid on it.]
Purchases from Trivandrum 2,50,000 22,500 22,500
Total input tax credit 72,500 52,500 1,90,000
Note: Since sufficient balance of ITC of CGST is available for paying CGST liability and crossutilization of
ITC of CGST and SGST is not allowed, ITC of IGST has been used to pay SGST (after paying IGST liability)
to minimize cash outflow. Interest and penalty paid are not available as credit for payment of output tax liability
under GST. It can be used only against corresponding interest/penalty under the GST law.

Q41. Mr. Rajesh Surana has a proprietorship firm in the name of Surana & Sons in Jaipur. The firm, registered
under GST in the State of Rajasthan, manufactures three taxable products ‘M’, ‘N’ and ‘O’. Tax on ‘N’ is payable
under reverse charge. The firm also provides taxable consultancy services. The firm has provided the following
details for a tax period:
Particulars Amount (Rs.)
Turnover of ‘M’ (excluding export sales) 14,00,000
Turnover of ‘N’ 6,00,000
Turnover of ‘O’ (excluding export sales) 10,00,000
Export of ‘M’ with payment of IGST (not eligible to avail benefit of merchant exports 2,50,000
under Notification No. 41/2017)
Export of ‘O’ under letter of undertaking 10,00,000

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 Consultancy services provided to unrelated clients located in foreign countries. In 20,00,000
all cases, the consideration has been received in convertible foreign exchange
Sale of building (excluding stamp duty of Rs. 2.50 lakh, being 2% of value) [Entire 1,20,00,000
consideration is received post issuance of completion certificate; building was
occupied thereafter]
Interest received on investment in fixed deposits with a bank 4,00,000
Sale of shares (Purchase price Rs. 2,40,00,000/-) 2,50,00,000
Legal services received from an advocate in relation to product ‘M’ 3,50,000
Common inputs and input services used for supply of goods and services 50,00,000
mentioned above [Inputs - Rs. 35,00,000; Input services - Rs. 15,00,000]
With the help of the above-mentioned information, compute the net GST liability of Surana & Sons, payable
from Electronic Credit Ledger and/or Electronic Cash Ledger, as the case may be, for the tax period. Note:
Assume that rate of GST on goods and services are 12% and 18% respectively (Ignore CGST, SGST or IGST
for the sake of simplicity). Subject to the information given above, assume that all the other conditions necessary
for availing ITC have been fulfilled. Turnover of Surana & Sons was Rs. 85,00,000 in the previous financial year.
(MTP MAY 2019)
A.
Computation of net GST liability of Surana & Sons for the tax period
Particulars Amount (Rs.)
GST payable on outward supply [Refer Working Note 1] 3,18,000
Less: Input tax credit (ITC) [Refer Working Note 3] 2,78,180
GST payable from Electronic Cash Ledger [A] 39,820
Add: GST payable on legal services under reverse charge [Rs. 3,50,000 X 18%] 63,000
[B] [Tax on legal services provided by an advocate to a business entity, is
payable under reverse charge by the business entity in terms of Notification No.
13/2017 CT (R) dated 28.06.2017. Further, such services are not eligible for
exemption provided under Notification No. 12/2017 CT (R) dated 28.06.2017 as
the turnover of the business entity (Surana & Sons) in the preceding financial
year exceeds Rs. 20 lakh.]
Total GST paid from Electronic Cash Ledger [A] + [B] [As per section 49(4) 1,02,820
amount available in the electronic credit ledger may be used for making payment
towards output tax. However, tax payable under reverse charge is not an output
tax in terms of section 2(82). Therefore, input tax credit cannot be used to pay
tax payable under reverse charge and thus, tax payable under reverse charge
will have to be paid in cash.]

Working Note 1:-

Computation of GST payable on outward supply
Particulars Value (Rs.) GST (Rs.)
Turnover of ‘M’ [liable to GST @ 12%] 14,00,000 1,68,000
Turnover of ‘N’ [Tax on ‘N’ is payable under reverse charge by 6,00,000 Nil
the recipient of such goods]
Turnover of ‘O’ [liable to GST @ 12%] 10,00,000 1,20,000
Export of ‘M’ with payment of IGST @ 12% 2,50,000 30,000
Export of ‘O’ under letter of undertaking (LUT) [Export of goods 10,00,000 Nil
is a zero rated supply in terms of section 16(1)(a) of the IGST
Act, 2017. A zero rated supply can be supplied without

237
 payment of tax under a LUT in terms of section 16(3)(a) of that
Act.]
Consultancy services provided to independent clients located 20,00,000 Nil
in foreign countries
[The activity is an export of service in terms of section 2(6) of
the IGST Act, 2017 as- • the supplier of service is located in
India; • the recipient of service is located outside India; • place
of supply of service is outside India (in terms of section 13(2)
of the IGST Act, 2017); • payment for the service has been
received in convertible foreign exchange or in Indian rupees
wherever permitted by the Reserve Bank of India; and •
supplier of service and recipient of service are not merely
establishments of distinct person. [Export of services is a zero
rated supply in terms of section 16(1)(a) of the IGST Act, 2017.
A zero rated supply can be supplied without payment of tax
under a LUT in terms of section 16(3)(a) of that Act.] It is
assumed that export has been made under LUT
Sale of building 1,20,00,000 Nil
[Sale of building is neither a supply of goods nor a supply of
services in terms of para 5 of Schedule III to the CGST Act,
provided the entire consideration has been received after issue
of completion certificate by the competent authority or after its
occupation, whichever is earlier. Hence, the same is not liable
to GST]
Interest received on investment in fixed deposits with a bank 4,00,000 Nil
[Exempt vide Notification No. 12/2017 CT (R) dated
28.06.2017]
Sale of shares [Shares are neither goods nor services in terms 2,50,00,000 Nil
of section 2(52) and 2(102). Hence, sale of shares is neither a
supply of goods nor a supply of services and hence, is not
liable to any tax.]
Total GST payable on outward supply 3,18,000

Working Note 2
Computation of common credit attributable to exempt supplies during the tax period
Particulars Amount (Rs.)
Common credit on inputs and input services [Tax on inputs - Rs. 4,20,000 (Rs. 6,90,000
35,00,000 x 12%) + Tax on input services – Rs. 2,70,000 (Rs. 15,00,000 x 18%)]
Common credit attributable to exempt supplies (rounded off) = Common credit on 4,74,820
inputs and input services x (Exempt turnover during the period / Total turnover during
the period) = Rs. 6,90,000 x Rs. 1,33,50,000/ Rs. 1,94,00,000 Exempt turnover = Rs.
1,33,50,000 and total turnover = Rs.1,94,00,000 [Refer note below]

Note: As per section 17(3), value of exempt supply includes supplies on which the recipient is liable to pay tax
on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of
Schedule II, sale of building. As per explanation to Chapter V of the CGST Rules, the value of exempt supply
in respect of land and building is the value adopted for paying stamp duty and for security is 1% of the sale
value of such security. Further, as per explanation to rule 42, the aggregate value of exempt supplies inter alia
excludes the value of services by way of accepting deposits, extending loans or advances in so far as the
consideration is represented by way of interest or discount, except in case of a banking company or a financial
institution including a non-banking financial company, engaged in supplying services by way of accepting

238
deposits, extending loans or advances. Therefore, value of exempt supply in the given case will be the sum of
value of output supply on which tax is payable under reverse charge (Rs. 6,00,000), value of sale of building
(Rs. 2,50,000 / 2 x 100 = Rs. 1,25,00,000) and value of sale of shares (1% of Rs. 2,50,00,000 = Rs. 2,50,000),
which comes out to be Rs. 1,33,50,000.
Total turnover = Rs. 1,94,00,000 (Rs. 14,00,000 + Rs. 6,00,000 + Rs. 10,00,000 + Rs. 2,50,000 + Rs. 10,00,000
+ Rs. 20,00,000 + Rs. 1,25,00,000 + Rs. 4,00,000 + Rs. 2,50,000)

Working Note 3
Computation of ITC available in the Electronic Credit Ledger of the Surana & Sons for the tax period
Particulars Amount (Rs.)
Common credit on inputs and input services 6,90,000
Legal services used in the manufacture of taxable product ‘M’ 63,000
ITC available in the Electronic Credit Ledger 7,53,000
Less: Common credit attributable to exempt supplies during the tax period [Refer 4,74,820
Working Note 2]
Net ITC available 2,78,180

Q42. ABC Company Ltd. of Bengaluru is a manufacturer and registered supplier of machineries. It has provided
the following details for a tax period:
Inward supplies GST paid (Rs.)
Health insurance of factory employees as required by the Factories Act, 1948 20,000
Raw materials for which invoice has been received and GST has also been paid for 18,000
full amount but only 50% of material has been received, remaining 50% will be
received in next month
Work contractor’s service used for installation of plant and machinery 12,000
Purchase of manufacturing machine sent directly to job worker’s premises under 50,000
delivery challan
Purchase of car used by director exclusively for the purpose of business meetings 25,000
Outdoor catering service availed for business meetings 8,000

ABC Company Ltd. also provides service of hiring of machines along with manpower for operation. As per trade
practice, machines are always hired out along with operators and also operators are supplied only when
machines are hired out.
Outward supply (exclusive of GST) for the tax period are as follows:
Hiring receipts for machine Rs. 5,25,000
Service charges for supply of manpower operators Rs. 2,35,000
Assume the rates of GST to be as under:
(i) Service of hiring of machine 12%
(ii) Supply of manpower operator service 18%
(Ignore CGST, SGST or IGST for the sake of simplicity)
Compute the amount of ITC available as also the net GST payable from the Electronic Cash Ledger for the tax
period by giving necessary explanations for treatment of various items. Note: Opening balance of ITC is Nil.
(PAST EXAM MAY 2018) (MTP NOV 2020)
A.
Computation of net GST payable by ABC Company Ltd.

Particulars GST payable (Rs.)

Gross GST liability [Refer working note (2) below] 91,200

239
 Less: Input tax credit [Refer working note (1) below] 82,000
Net GST payable from Electronic Cash Ledger 9,200

Working Notes:

(1) Computation of ITC available with ABC Company Ltd.

Particulars GST payable (Rs.)

Health insurance of factory employees [Note – 1] 20,000
Raw material received in factory [Note – 2] Nil
Work’s contractor’s service used for installation of plant and machinery [Note -3] 12,000
Manufacturing machinery directly sent to job worker’s premises under challan 50,000
[Note -4]
Purchase of car used by director for business meetings only [Note -5] Nil
Outdoor catering service availed for business meetings [Note -6] Nil
Total ITC available 82,000

Notes:

1. ITC of health insurance is available in the given case in terms of proviso to section 17(5)(b) since it is
obligatory for employer to provide health insurance to its employees under the Factories Act, 1948.

2. Where the goods against an invoice are received in lots/ instalments, ITC is allowed upon receipt of the last
lot/ instalment vide first proviso to section 16(2). Therefore, ABC Company Ltd. will be entitled to ITC of raw
materials on receipt of second instalment in next month.

3. Section 17(5)(c) provides that ITC on works contract services is blocked when supplied for construction of
immovable property (other than plant and machinery) except when the same is used for further supply of
works contract service. Though in this case, the works contract service is not used for supply of works
contract service, ITC thereon will be allowed since such services are being used for installation of plant and
machinery.

4. ITC on capital goods directly sent to job worker’s premises under challan is allowed in terms of section
19(5) read with rule 45(1).

5. Section 17(5)(a) provides that motor vehicle for transportation of persons having approved seating capacity
of not more than 13 persons (including the driver), except when they are used for making taxable supply of- (i)
further supply of such vehicles, (ii) transportation of passengers, (iii) imparting training on driving, flying,
navigating such vehicles and Since ABC Company Ltd is a supplier of machine and it does not use the car for
transportation of passengers or any other use as specified, ITC thereon will not be available.

6. Section 17(5)(b)(i) provides that ITC on outdoor catering is blocked except where the same is used for
making further supply of outdoor catering or as an element of a taxable composite or mixed supply. Since
ABC Company Ltd is a supplier of machine, ITC thereon will not be available.

(2) Computation of gross GST liability

Value received Rate of GST GST payable

(Rs.) (Rs.)

240
 Hiring receipts for machine 5,25,000 12% 63,000
Service charges for supply of manpower 2,35,000 12% 28.200
operators
Gross GST liability 91,200
Note: Since machine is always hired out along with operators and operators are supplied only when the
machines are hired out, it is a case of composite supply, wherein the principal supply is the hiring out of
machines [Section 2(30) read with section 2(90)]. Therefore, service of supply of manpower operators will also
be taxed at the rate applicable for hiring out of machines (principal supply), which is 12%, in terms of section
8(a).

Q43. Pari Ltd. of Jodhpur (Rajasthan) is a registered manufacturer of cosmetic products. Pari Ltd. has furnished
following details for a tax period:
Particulars GST payable (Rs.)
Details of Outward supplies
Supplies in Rajasthan 8,75,000
Supplies in States other than Rajasthan 3,75,000
Export under LUT 6,25,000
Details of expenses
Raw materials purchased from registered suppliers located in Rajasthan 1,06,250
Raw materials purchased from unregistered suppliers located in Rajasthan 37,500
Raw materials purchased from Punjab from registered supplier 1,00,000
Integrated tax paid on raw materials imported from USA 22,732
Consumables purchased from registered suppliers located in Rajasthan including 1,56,250
high speed diesel (Excise and VAT paid) valuing Rs. 31,250 for running the
machinery in the factory
Monthly rent for the factory building to the owner in Rajasthan 1,00,000
Salary paid to employees on rolls 6,25,000
Premium paid on life insurance policies taken for specified employees. Life 2,00,000
insurance policies for specified employees have been taken by Pari Ltd. to fulfill a
statutory obligation in this regard. The life insurance service provider is registered
in Rajasthan.
All the above amounts are exclusive of all kinds of taxes, wherever applicable. However, the applicable taxes
have also been paid by Pari Ltd.
The opening balance of ITC with Pari Ltd. for the given tax period are:-
CGST Rs. 20,000
SGST Rs. 15,000
IGST Rs. 15,000
Assume CGST, SGST and lGST rates to be 9%, 9% and 18% respectively, wherever applicable. Assume that
all the other necessary conditions to avail the ITC have been complied with by Pari Ltd., wherever applicable.
Compute (i) ITC available with Pari Ltd. for the tax period; and (ii) Net GST payable [CGST, SGST or IGST, as
the case may be] from Electronic Cash Ledger by Pari Ltd. for the tax period. (PAST EXAM NOV 2018) (MTP-
NOV 2021)
A.
Computation of ITC available with Pari Ltd.
Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)
1. Raw Material
Purchased from local registered suppliers [Note 9,562.50 9,562.50
1(i)] (Rs. 1,06,250 x 9%)

241
 Purchased from local unregistered suppliers Nil Nil
[Note 1(ii)]
Purchased from Punjab from registered supplier 18,000
[Note 1(i)] (Rs. 1,00,000 x 18%)
Raw material imported from USA [Note 1(iii)] 22,732
2. Consumables [Note 2] (Rs. 1,56,250- Rs. 11,250 11,250
31,250) x 9%]
3. Monthly rent for the factory building to the 9,000 9,000
owner in Rajasthan [Note 3]
4.Salary paid to employees on rolls [Note 4] Nil Nil Nil
5. Premium paid on life insurance policies taken 18,000 18,000
for specified employees [Note 5] (Rs. 2,00,000 x
9%)
Total 47,812.50 47,812.50 40,732
Add: Opening balance of ITC 20,000 15,000 15,000
Total ITC [Note 7] 67,812.50 62,812.50 55,732

Computation of net GST payable

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)

Intra-State supply 78,750 78,750
Inter-State supply 67,500
Exports under LUT [Note 6] Nil Nil Nil
Total output tax liability 78,750 78,750 67,500
Less: ITC 67,812.50 62,812.50 55,732
Net GST payable 10,937.50 15,937.50 11,768

Notes: 1. (i) Credit of input tax (CGST & SGST/ IGST) paid on raw materials used in the course or furtherance
of business is available in terms of section 16. (ii) Tax on procurements made by a registered person from an
unregistered supplier is levied only in case of notified goods and services in terms of section 9(4). Therefore,
since no GST is paid on such raw material purchased, there does not arise any question of ITC on such raw
material. (iii) IGST paid on imported goods qualifies as input tax in terms of section 2(62). Therefore, credit of
IGST paid on imported raw materials used in the course or furtherance of business is available in terms of
section 16.

2. ITC on consumables, being inputs used in the course or furtherance of business, is available. However,
since levy of GST on high speed diesel has been deferred till a date to be notified by Government, there
cannot be any ITC of the same.

3. ITC on monthly rent is available as the said service is used in the course or furtherance of business.

4. Services by employees to employer in the course of or in relation to his employment is not a supply in terms
of section 7 read with Schedule III to the CGST Act. Therefore, since no GST is paid on such services, there
cannot be any ITC on such services.

5. ITC on life insurance service is available if the same is obligatory for an employer to provide to its
employees under any law for the time being in force as per proviso to section 17(5)(b).

6. Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act. A zero rated supply
under bond is made without payment of IGST in terms of section 16(3)(a).

242
7. Since export of goods is a zero rated supply, there will be no apportionment of ITC and full credit will be
available as per section 17(2).

Q44. Flowchem Palanpur (Gujarat) has entered into a contract with R Refinery, Abu Road (Rajasthan) on
1stJuly to supply 10 valves on FOR basis. The following information is provided in this regard:
(1) List price per valve isRs. 1,00,000, exclusive of taxes.
(2) One of the conditions of the contract is that Flowchem should ensure a two stage third party inspection for
the valves during the manufacturing process. Cost of inspection of Rs. 15,000 (for 10 valves) is directly paid by
R Refinery to testing agency.
(3) R Refinery requires a special packing for the valves. Cost of special packing is Rs. 10,000 (for 10 valves).
(4) Flowchem arranges for erection and testing of the valves supplied by it at R Refinery’s site. Cost of erection
etc. is Rs. 15,000 (for 10 valves).
(5) Goods are dispatched with tax invoice on 20thJuly and they reach the destination at Abu-Road on 21stJuly.
Lorry freight ofRs. 5,000 has been paid by R Refinery directly to the lorry driver.
Assume CGST and SGST rates to be 9% each and IGST rate to be 18%. Opening balance of ITC of IGST is
Nil, CGST is Rs. 20,000 and SGST is Rs. 20,000. All the given amounts are exclusive of GST, wherever
applicable. Flowchem has also undertaken following local transactions during the month of July on which it has
paid CGST and SGST as under:
Particulars CGST (Rs.) SGST (Rs.)
Availed services of works contractor to erect foundation for fixing 5,000 5,000
the machinery to earth, in the factory.
Laid pipelines (from the water source outside the factory) upto the 10,000 10,000
gate of the factory for the purpose of production facility.
For the purpose of smooth and convenient mobile communication 5,000 5,000
in its factory, it has installed telecommunication tower of a mobile
company (with due permission)
It has entered into an agreement with a travel company to provide 2,500 2,500
home travel facility to its employees when they are on leave.
It has entered into an agreement with a fitness center to provide 2,000 2,000
wellness services to its employees after office hours
Work out the net GST [CGST, SGST or IGST, as the case may be] payable from Electronic Cash Ledger of
Flowchem, Palanpur (Gujarat) for the month of July after making suitable assumptions, if any.
(PAST EXAM MAY 2019) (MTP- NOV 2021)
A.
Computation of net GST payable by Flowchem for the month of July
Particulars IGST (Rs.)
Output tax liability [Working Note 1] 1,88,100
Less: ITC of CGST [Working Note 2] (25,000)
Less: ITC of SGST has been utilized only after ITC of CGST has been utilized (25,000)
fully in terms of proviso to section 49(5)(c) [Working Note 2]
Net GST payable from Electronic Cash Ledger 1,38,100

Working Note 1

Computation of output tax liability of Flowchem for the month of July

Particulars Amount (Rs.)

List price of 10 valves (Rs. 1,00,000 x 10) 10,00,000
Add: Amount paid by R Refinery to testing agency [Note 1] 15,000

243
 Add: Special packing [Note 2] 10,000
Add: Erection and testing at site [Note 2] 15,000
Add: Freight [Note 3] 5,000
Value of taxable supply 10,45,000
IGST @ 18% [Note 4] 1,88,100

Notes: (1) As per section 15(2), any amount that the supplier is liable to pay in relation to a 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 shall be included in the value of supply. Since, in the given case, arranging inspection was the liability
of the supplier, the same should be included in the value of supply charges for the same, however, have been
paid directly to the third party service provider by the recipient. Therefore, the value shall be included in
taxable value.

(2) As per section 15(2), any amount charged for anything done by the supplier in respect of the supply of
goods at the time of, or before delivery of goods shall be included in the value of supply.

(3) As per section 15(2), any amount that the supplier is liable to pay in relation to a 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 shall be included in the value of supply. Since, in the given case, the supply contract is on FOR basis,
payment of freight is the liability of supplier but the same has been paid by the recipient and thus, should be
included in the value of supply.

(4) As per section 10(1) of the IGST Act, 2017, where the supply involves movement of goods, the place of
supply is the location of the goods at the time at which the movement of goods terminates for delivery to the
recipient, which in the given case is Abu Road (Rajasthan). Since the location of the supplier (Gujarat) and the
place of supply (Rajasthan) are in two different States, the supply is an inter-State supply liable to IGST.

Working Note 2

Computation of ITC available with Flowchem for the month of July

Particulars CGST SGST

(Rs.) (Rs.)
Opening ITC 20,000 20,000
Works contract services availed for erecting foundation for fixing the 5,000 5,000
machinery to the earth in the factory [Note 1]
Laying of pipeline up to the gate of factory from water source located Nil Nil
outside the factory [Note 2]
Installation of telecommunication towers [Note 2] Nil Nil
Services of travel company to provide home travel facility to Nil Nil
employees Note 3]
Services of fitness center to provide wellness services to employees Nil Nil
[Note 3]
Total ITC 25,000 25,000
Notes:

(1) As per section 17(5), ITC on works contract services when supplied for construction of an immovable
property (other than plant and machinery) except where it is an input service for further supply of works
contract service, is blocked. Further, plant and machinery includes foundation and structural supports used to
fix the machinery to earth.

244
(2) As per section 17(5), ITC on goods and/ or services received by a taxable person for construction of an
immovable property (other than plant or machinery) on his own account including when such and/ or services
are used in course/ furtherance of business, is blocked. However, plant and machinery excludes pipelines laid
outside the factory premises and telecommunication towers.

(3) As per section 17(5), ITC on travel benefits extended to employees on home travel concession and
membership of health and fitness center is blocked unless it is obligatory for an employer to provide the same
to its employees under any law for the time being in force.

Q45. Jumbo Sales Pvt. Ltd., a supplier of readymade garments, announced ‘Buy One get Two free’ offer on
Men’s T-Shirts on Diwali to boost its sales.
You are required to advise the company on the availability of ITC in respect of inward supplies used in relation
to such supply. (ICAI SM)
A. It may appear at first glance that in case of offers like “Buy One, Get One Free”, one item is being “supplied
free of cost” without any consideration.
As per clause (a) of section 7(1) read with clause (c) thereof, goods or services which are supplied free of cost
(without any consideration) shall not be treated as supply except in case of activities mentioned in Schedule I.
Circular No. 92/11/2019 GST dated 07.03.2019 has clarified the entitlement of ITC in the hands of supplier in
respect of sales promotional scheme like ‘buy one get one free’. Such promotional offers are not individual
supplies of free goods, but a case of two or more individual supplies where a single price is being charged for
the entire supply. It can at best be treated as supplying two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a mixed
supply and the rate of tax shall be determined as per the provisions of section 8.
ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to supply
of goods or services or both as part of such offers.
Therefore, the given case is not the case of individual supplies of free goods, but a case of three individual
supplies where a single price is being charged for the entire supply. Thus, Jumbo Sales Pvt. Ltd. will be entitled
to avail ITC on inputs, input services and capital goods used in relation to supply of TShirts as part of such offer.

Q46. Flamingo Ltd. is an airlines providing passenger transportation services by air. The company offers meals
of premium quality to passengers on board the aircraft. The value of such meals is compulsorily included in the
price of the air ticket. The company avails outdoor catering services of Dhaniaram Pvt. Ltd. for providing such
meals to its customers.
Examine whether Flamingo Ltd. can avail ITC on such outdoor catering service availed by it. (ICAI SM)
A. As per section 17(5)(i)(b), ITC on supply of inter alia food and beverages and outdoor catering is blocked.
However, ITC in respect of such goods or services or both shall be available where an inward supply of such
goods or services or both is used by a registered person for making an outward taxable supply of the same
category of goods or services or both or as an element of a taxable composite or mixed supply.
In the given case, Flamingo Ltd. is availing outdoor catering service to provide outdoor catering (meals) to the
passengers on board the aircraft. Since ITC in respect of outdoor catering is available if the same is used for
making an outward taxable supply as an element of a taxable composite or mixed supply, Flamingo Ltd. can
avail ITC on outdoor catering service procured by it as it will be considered as supply of an ancillary service to
the passenger transportation services supplied by it (principal supply).

245
Section 22 Persons liable for Registration
Section 24 Compulsory Registration in Certain Cases
Section 23 Persons not liable for Registration
Section 25 Procedure for Registration
Section 26 Deemed Registration
Section 27 Special provisions relating to CTP and non-resident taxable person
Section 28 Amendment of Registration
Section 29 Cancellation of Registration
Section 30 Revocation of cancellation of Registration

Section 22 Persons liable for registration

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than
special category States, from where he makes a taxable supply of goods or services or both, if his
aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the
special category States, he shall be liable to be registered if his aggregate turnover in a financial year
exceeds ten lakh rupees.
Provided further that the Government may, at the request of a special category State and on the
recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten
lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and
limitations, as may be so notified.
Provided also that the Government may, at the request of a State and on the recommendations of the
Council, enhance the aggregate turnover from twenty lakh rupees to such amount not exceeding forty
lakh rupees in case of supplier who is engaged exclusively in the supply of goods, subject to such
conditions and limitations, as may be notified.
Explanation.––For the purposes of this sub-section, a person shall be considered to be engaged
exclusively in the supply of goods even if he is engaged in exempt supply of services provided by way of
extending deposits, loans or advances in so far as the consideration is represented by way of interest or
discount.
(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a license
under an existing law, shall be liable to be registered under this Act with effect from the appointed day.
(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on
account of succession or otherwise, to another person as a going concern, the transferee or the
successor, as the case may be, shall be liable to be registered with effect from the date of such transfer
or succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to
sanction of a scheme or an arrangement for amalgamation or, as the case may be, de-merger of two or
more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be
liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate
of incorporation giving effect to such order of the High Court or Tribunal.

Except sub-section (1), other sub-sections

compulsory registration

246
Explanation:-
• Aggregate turnover includes own supplies or made on behalf of all principals.
• The supply of goods by job worker to principal after completion of job work, shall not be included in
the aggregate turnover of the registered job worker.
• Special category States (as specified in sub-clause (g) of clause (4) of Article 279A of the
Constitution) for GST are Jammu & Kashmir, Arunachal Pradesh, Assam, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himanchal Pradesh & Uttarakhand.
• If a person having place of business in different States across India and one branch is in Special
Category State then threshold limit for GST registration will be reduced to Rs. 10 Lakh.

Threshold Limit for Registration for Exclusive supplier of goods

Aggregate turnover Rs. 20 Lacs Rs. 40 Lacs

Rs. 10 lakhs
1. Manipur 1. Arunachal Pradesh All other states/union territories
2. Mizoram 2. Meghalaya (not applicable if compulsory
3. Nagaland 3. Puducherry registration U/s 24 & persons
4. Tripura 4. Sikkim exercising option under the
5. Telangana provisions of sub-section (3) of
6. Uttarakhand section 25, or such registered
persons who intend to continue
with their registration under the
said Act)

Threshold Limit for Registration for others including Suppliers of Ice cream and other edible
ice, whether or not containing cocoa, Pan masala, Tobacco, manufactured tobacco
substitutes, Fly ash bricks or fly ash aggregate with 90 per cent. or more fly ash content; Fly
ash blocks, Bricks of fossil meals or similar siliceous earths, Building bricks, Earthen or
roofing tiles
Rs. 10 Lacs Rs. 20 Lacs
1. Manipur All other states/union territories
2. Mizoram
3. Nagaland
4. Tripura

Threshold Limit for Registration under Composition

Rs. 75 Lacs Rs. 1.5 crore
1. Arunachal Pradesh All other states/union territories
2. Manipur
3. Meghalaya
4. Mizoram
5. Nagaland
6. Sikkim
7. Tripura
8. Uttarakhand

247
 Section 24 is not
subject to
Section 24 Compulsory Registration in Certain cases Section 23

Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall
be required to be registered under this Act, ––

Sec. 51: TDS in GST

(i) persons making any inter-State taxable supply;
(ii) casual taxable persons making taxable supply; Sec. 52: TCS by e-
(iii) persons who are required to pay tax under reverse charge; commerce operator
(iv) person who are required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately registered under
this Act;
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons
whether as an agent or otherwise {now it has been clarified that such registration is required only by C
& F agents who stock and sale goods on behalf of Principal and not by ordinarily commission agents
who do not deal in goods or services themselves -CBIC circular No. 57/31/2018-GST Dated 4-9-2018}
(viii) Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of
section 9, through such electronic commerce operator who is required to collect tax at source under
section 52;
(x) every electronic commerce operator who is required to collect tax at source U/s 52
(xi) every person supplying online information and data base access or retrieval services from a place
outside India to a person in India, other than a registered person; and
(xii) such other person or class of persons as may be notified by the Government on the recommendations
of the Council.

• In case a person already registered under GST is required to deduct tax under section 51, he
is required to take separate registration for the purpose of deducting tax under section 51.
• An ISD is required to obtain a separate registration even though it may be separately registered.

Section 23 Persons not liable for registration

Person engaged exclusively in supplying goods or services or both not liable to tax or
wholly exempt from tax

Agriculturist to the extent of supply of produce out of cultivation of land

Specified category of persons notified by the Government

248
Notification No. 10/2017-IT
Dated 13-10-2017 w.e.f. 13-
10-2017
Notification No. 05/2017-CT
Dated 19-06-2017 w.e.f. 22-
06-2017
Notification No. 7/2017-IT
Dated 14-09-2017
Notification No. 65/2017-CT
Dated 15-11-2017
Notification No. 56/2018 – CT
Dated 23.10.2018
Casual Taxable Persons
making inter-State taxable
supplies of notified goods up
to Rs. 20,00,000
Notification No. 03/2018 – IT
Dated 22.10.2018
Persons making inter-State
taxable supplies of notified
goods up to Rs. 20,00,000
Government has specified the person making inter-State supplies of
taxable services and having an aggregate turnover, to be computed on all
India basis, not exceeding Rs. 20 Lakh in a financial year, is exempt from
obtaining registration. If such person aggregate value of such supplies
includes Special Category State (according to Section 22 explanation)
where threshold is 10 Lacs, then should not exceed Rs. 10 Lakh.
Persons only engaged in making taxable supplies, total tax on which is
liable to be paid on reverse charge basis – Exempt from obtaining
registration. (u/s 9 (3).
Job worker engaged in making inter-state supply of services – exempt from
obtaining registration except engaged in jewelers business. The limit of 20
Lakhs/10 Lakhs will be applicable.
Persons making supplies of services, other than supplies specified U/s 9(5)
through an ECO who is required to collect TCS U/s 52, and having
aggregate turnover, not exceeding an amount of Rs. 20 Lakhs in a financial
year, as the category of persons exempted from obtaining registration
under the said Act. If such person aggregate value of such supplies
includes Special Category State (according to Section 22 explanation)
where threshold is 10 Lacs, then should not exceed Rs. 10 Lakh.
As we have seen earlier that as per section 24, a CTP is liable to be
registered compulsorily under GST irrespective of the threshold limit.
However, following categories of CTPs have been exempted from
obtaining registration:
a. CTPs making inter-State taxable supplies of handicraft goods notified
under Notification No. 21/2018 CT (R) Dated 26.07.2018.
b. CTPs making inter-State taxable supplies of notified products, when
made by the craftsmen predominantly by hand even though some
machinery may also be used in the process.
Conditions to be fulfilled:
1. CTPs are availing benefit of Notification No. 03/2018 IT Dated
22.10.2018
2. The aggregate value of such supplies, to be computed on all India basis,
does not exceed an amount of Rs. 20 lakh [Rs. 10 lakh in case of Special
Category States] in a FY.
3. Such persons have obtained a PAN and have generated an eway bill.
As we have seen earlier that as per section 24 read with Notification No.
10/2017 IT Dated 13.10.2017, a person making inter-State supplies of
taxable goods is liable to be registered compulsorily under GST
irrespective of the threshold limit.
However, following categories of persons have been exempted from
obtaining registration:
a. Persons making inter-State taxable supplies of handicraft goods
notified under Notification No. 21/2018 CT (R) Dated 26.07.2018.
b. Persons making inter-State taxable supplies of notified products, when
made by the craftsmen predominantly by hand even though some
machinery may also be used in the process.
Conditions to be fulfilled:
1. The aggregate value of such supplies, to be computed on all India
basis, does not exceed an amount of Rs. 20 lakh [Rs. 10 lakh in
case of Special Category States] in a FY.
249

Circular No. 71/45/2018 Dated
26th October 2018
PIB press release Dated 28-5-
2018
Circular No. 57/31/2018 GST
Dated 04.09.2018
Services provided by the
commission agent for sale/
purchase of agricultural
produce - Registration
requirements
2. Such persons have obtained a PAN and have generated an eway
bill
• Amount of advance tax which a casual taxable person (CTP) is
required to deposit while obtaining registration should be
calculated as the net tax liability after considering the estimated
input tax credit (ITC).
• In cases of long running exhibitions (for a period more than 180
days), the taxable person cannot be treated as a CTP and would
need to obtain registration as a normal taxable person. While
applying for normal registration, the said person should upload a
copy of the allotment letter granting him permission to use the
premises for the exhibition and the allotment letter/consent letter
shall be treated as the proper document as a proof for his place of
business.
Support services to agriculture, forestry, fishing or animal husbandry are
exempt from GST. Such exempted support services include renting or
leasing of vacant land with or without a structure incidental to its use.
Agriculturist are also exempt from taking GST registration.
Mr. A sells agricultural produce by utilizing the services of Mr. B who is a
commission agent as per the Agricultural Produce Marketing Committee
Act (APMC Act) of the State9. Mr. B identifies the buyers and sells the
agricultural produce on behalf of Mr. A for which he charges a commission
from Mr. A. In cases where the invoice is issued by Mr. B to the buyer, Mr.
B is an agent as covered under Para 3. of Schedule I. Hence, services
supplied by commission agent Mr. B on behalf of the principal without
consideration shall be deemed to be a supply – Concept of Deemed Supply
under Schedule-I has been discussed in detail in Chapter 2 – Supply under
GST.
The registration requirements of the commission agents in such cases
have been clarified as follows:
(i) Since the services provided by the commission agent for sale or
purchase of agricultural produce are exempt from GST vide
Notification No. 12/2017 CT (R) dated 28.06.2017 [Discussed in
Chapter 4 – Exemptions from GST], such commission agents
(even when they qualify as agent under Schedule I) are not liable
to be registered in accordance with provisions of section 23(1)(a).
(ii) As we have already seen, a person is liable for mandatory
registration if he makes taxable supply of goods or services or both
on behalf of other taxable persons.
Accordingly, a commission agent will be liable to get mandatorily
registered under this provision only when both the following
conditions are satisfied:
(a) the principal should be a taxable person; and
(b) the supplies made by the commission agent should be taxable.
However, generally, a commission agent under APMC Act makes
supplies on behalf of an agriculturist who is not a taxable person if
he supplies produce out of cultivation of land [as seen above].
Thus, a commission agent, who is making supplies on behalf of
non-taxable person [viz. agriculturist], is not liable for compulsory
registration under this provision.
(iii) However, where a commission agent is liable to pay tax under
reverse charge, such an agent will be required to get registered
compulsorily (We have already seen under previous heading that
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 persons liable to pay tax under reverse charge are required to
obtain registration mandatorily).
(Please refer examples in Chapter 2)

Example 1: A dealer ‘X’ has two offices – one in Delhi and another in Haryana. ‘X’ supply goods & services
both. In order to determine whether ‘X’ is liable to registration, turnover of both the offices would be taken into
account and only if the same exceeds Rs. 20 Lakh, X is liable for registration.

Example 2: XYZ Oils, Punjab, is engaged in supplying machine oil. In order to determine whether, XYZ Oils is
liable for registration, aggregate turnover shall be calculated and if the same exceeds Rs. 40 Lakh, XYZ Oils is
liable to registration.

Example 3: Mr. A gifts his business (registered in GST) to M/s XYZ partnership as a going concern. In such
case, since transferor was registered, then by the application of Section 22(3), M/s XYZ shall be liable to take
registration with effect from the date of such transfer or succession.

Example 4: ABC Pvt. Ltd. merged into XYZ Pvt. Ltd. and formed PQR Pvt. Ltd. the resultant company obtained
its certificate of incorporation on 30-06-2018 by the Registrar of Companies. According to Section 22(4), PQR
Pvt. Ltd. shall be liable to take registration w.e.f. 30 th June 2018.

Example 5: Mohini Enterprises has appointed ABC as its agent. All the supplies of goods made by ABC as
agent of Mohini Enterprises will also be included in the aggregate turnover of ABC (Recollect discussion of
Chapter 2).

Example 6: Mr. A Nasik, has Intra State supply of agricultural produce (own effort) Rs. 15 Lacs, Intra State
supply of exempt goods Rs. 10 Lacs & taxable supplies Rs. 25 Lacs. He is supposed to take registration since
his aggregate turnover is Rs. 15 Lacs + Rs. 10 Lacs + Rs. 25 Lacs = Rs. 50 Lacs.

Example 7: Mr. A Nasik, has Intra State supply of services chargeable at 0% Rs. 20 Lacs, Intra State supply of
exempt services Rs. 20 Lacs & taxable supplies Rs. 1 Lacs. He is supposed to take registration since his
aggregate turnover is Rs. 20 Lacs + Rs. 20 Lacs +Rs. 1 Lacs = Rs. 41 Lacs.

Example 8: ABC is running an electronics shop in Mumbai. His turnover in a financial year is Rs. 9 Lakhs which
includes an inter-State supply of some items to Ahmedabad worth Rs. 10,000. Even though aggregate turnover
of ABC is only Rs. 9 Lakhs, but compulsory registration shall be required for making taxable inter-State supply
of goods to Ahmedabad.

Example 9: ABC is running a toy shop in Delhi. His turnover in a financial year is Rs. 9 lakhs which includes a
consignment for supply of children’s picture & colouring books to Noida, UP worth Rs. 10,000. Here even though
inter-State supply is involved but the items involved are exempt from GST. Thus, provisions of compulsory
registration shall not apply and accordingly no registration shall be required as aggregate turnover of ABC is
only Rs. 9 lakhs.

Example 10: Mr. A is a professional in Gurgaon, Haryana giving consultancy services to various clients in
Gurgaon, Noida & Delhi. His turnover in a financial year is Rs. 19 lakhs. Even though inter-State supply is
involved but same is exempted vide notification no. 10/2017 – integrated tax Dated 13.10.2017 from application
of Section 24. Accordingly, no registration shall be required as aggregate turnover of Mr. A is only Rs. 19 lakhs.

251
Example 11: Mr. A has business in 3 States i.e. Maharashtra, Gujarat, MP. Total turnover of supplies of goods
in different state taken together is below threshold. But from Maharashtra, Mr. A has supplied goods to its units
in MP. In GST, different registrations of a person are considered as distinct persons and stock transfers are
taxable. Further, compulsory registration is required in case of inter-State taxable supply. Thus, benefit of
threshold limit shall not be available in this case. Further when liability to register has arisen in one State then
registration shall be required for all other place of businesses as well.

Example 12 (ICAI):
Aggregate Applicable threshold Whether liable to
Supplier Engaged
turnover limit for registration obtain registration?
exclusively in supply of shoes Rs. 22 lakh Rs. 40 lakh 
exclusively in supply of pan Rs. 22 lakh Rs. 20 lakh ✓
masala
Prithiviraj
exclusively in supply of Rs. 22 lakh Rs. 20 lakh ✓
of Assam
taxable services
in supply of both taxable Rs. 22 lakh Rs. 20 lakh ✓
goods and services
exclusively in supply of toys Rs. 22 lakh Rs. 20 lakh ✓
exclusively in supply of ice Rs. 22 lakh Rs. 20 lakh ✓
cream
Shivaji of
exclusively in supply of Rs. 22 lakh Rs. 20 lakh ✓
Telangana
taxable services
in supply of both taxable Rs. 22 lakh Rs. 20 lakh ✓
goods and services
exclusively in supply of paper Rs. 12 lakh Rs. 10 lakh ✓
exclusively in supply of Rs. 12 lakh Rs. 10 lakh ✓
tobacco
Ashoka of
exclusively in supply of Rs. 12 lakh Rs. 10 lakh ✓
Manipur
taxable services
in supply of both taxable Rs. 12 lakh Rs. 10 lakh ✓
goods and services

Example 13 (ICAI): Uday Enterprises is engaged in supply of taxable goods in Maharashtra. It also supplies
alcoholic liquor for human consumption from Nagaland. Its turnover in the current financial year is Rs. 34 lakh
in Maharashtra and Rs. 8 lakh in Nagaland.
Since Uday Enterprises is exclusively engaged in making taxable supplies of goods from Maharashtra, the
applicable threshold limit for obtaining registration is Rs. 40 lakh. However, the threshold limit will not be
reduced to Rs. 10 lakh in this case, as supply of alcoholic liquor for human consumption from Nagaland (one
of the Special Category States) are non-taxable supplies.
In the given case, since the aggregate turnover of Uday Enterprises exceeds the applicable threshold limit of
Rs. 40 lakh, it is liable to obtain registration. It will obtain registration in Maharashtra, but is not required to
obtain registration in Nagaland as he is not making any taxable supplies from said State.

Example 14 (ICAI): Ariza Pvt. Ltd., located in Madhya Pradesh, is a supplier of taxable and notified handicraft
goods. It supplies these goods in the neighbouring States of Uttar Pradesh and Orissa. Its aggregate
turnover in the month of April is Rs. 15 lakh. Although Ariza Pvt. Ltd. is engaged in making inter-State
supplies of taxable goods, it is not liable to obtain registration till its aggregate turnover does not exceed Rs.
20 lakh as it has availed the exemption from registration under Notification No. 03/2018-IT.

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Section 25 Procedure for Registrations

(1) Every person who is liable to be registered under section 22 or section 24 shall apply for registration in every
such State or Union territory in which he is so liable within thirty days from the date on which he becomes liable
to registration, in such manner and subject to such conditions as may be prescribed:
Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least five
days prior to the commencement of business.
Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a SEZ or
being a SEZ developer shall have to apply for a separate registration, as distinct from his place of business
located outside the Special Economic Zone in the same State or Union territory.
Explanation.—Every person who makes a supply from the territorial waters of India shall obtain registration in
the coastal State or Union territory where the nearest point of the appropriate baseline is located.

(2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:
Provided that a person having multiple places of business in a State or Union territory may be granted a
separate registration for each such place of business, subject to such conditions as may be prescribed.

(3) A person, though not liable to be registered under section 22 or section 24 may get himself registered
voluntarily, and all provisions of this Act, as are applicable to a registered person, shall apply to such person.

(4) A person who has obtained or is required to obtain more than one registration, whether in one State or Union
territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct
persons for the purposes of this Act.

Example 15: Mr. A, Delhi having PAN ABCDE1234F

Delhi North Delhi Delhi Central Delhi Delhi South Delhi
Shop 1 Shop 2 Shop 3
07ABCDE1234F1Z5 07ABCDE1234F1Z5 07ABCDE1234F1Z5
Same person same PAN treated as single person since in same State (* Business vertical definition deleted
w.e.f. 1.2.2019 NN 2/2019 CT dated 29.1.2019 therefore separate registration of same business can be taken
and if taken it shall be treated as distinct person)

Example 16: Mr. A, Maharashtra having PAN ABCDE1234F

Mumbai Pune Nagpur
Shop 1 Shop 2 Shop 3
27ABCDE1234F1ZR 27ABCDE1234F2ZR 27ABCDE1234F3ZR
Same person same PAN treated as distinct person since taken different registration

(5) Where a person who has obtained or is required to obtain registration in a State or Union territory in respect
of an establishment, has an establishment in another State or Union territory, then such establishments shall
be treated as establishments of distinct persons for the purposes of this Act.

Example 17:
Maharashtra Delhi Sikkim
Head Office Branch Office Branch Office
27ABCDE1234F1ZR 07ABCDE1234F1ZR 11ABCDE1234F1ZR
Same person same PAN still treated as distinct person

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(6) Every person shall have a Permanent Account Number issued under the Income- tax Act, 1961 in order to
be eligible for grant of registration:
Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent Account
Number, a Tax Deduction and Collection Account Number issued under the said Act in order to be eligible for
grant of registration.

(6A) Every registered person shall undergo authentication, or furnish proof of possession of Aadhaar number,
in such form and manner and within such time as may be prescribed:
Provided that if an Aadhaar number is not assigned to the registered person, such person shall be offered
alternate and viable means of identification in such manner as Government may, on the recommendations of
the Council, prescribe:
Provided further that in case of failure to undergo authentication or furnish proof of possession of Aadhaar
number or furnish alternate and viable means of identification, registration allotted to such person shall be
deemed to be invalid and the other provisions of this Act shall apply as if such person does not have a
registration.

(6B) On and from the date of notification, every individual shall, in order to be eligible for grant of registration,
undergo authentication, or furnish proof of possession of Aadhaar number, in such manner as the Government
may, on the recommendations of the Council, specify in the said notification:
Provided that if an Aadhaar number is not assigned to an individual, such individual shall be offered alternate
and viable means of identification in such manner as the Government may, on the recommendations of the
Council, specify in the said notification.

Effective Date 1st April 2020, notified by Notification No. 18/2020-CT dated 23rd March 2020. In this notification,
it is further provided that if Aadhaar number is not assigned to the said individual, he shall be offered alternate
and viable means of identification in the manner specified in rule 9 of the said rules.

(6C) On and from the date of notification, every person, other than an individual, shall, in order to be eligible for
grant of registration, undergo authentication, or furnish proof of possession of Aadhaar number of the Karta,
Managing Director, whole time Director, such number of partners, Members of Managing Committee of
Association, Board of Trustees, authorised representative, authorised signatory and such other class of
persons, in such manner, as the Government may, on the recommendations of the Council, specify in the said
notification:
Provided that where such person or class of persons have not been assigned the Aadhaar Number, such person
or class of persons shall be offered alternate and viable means of identification in such manner as the
Government may, on the recommendations of the Council, specify in the said notification.

As per Notification No. 19/2020-CT dated 23rd March 2020, the Central Government, on the recommendations
of the Council, hereby notifies the date 1st April 2020 as the date, from which the -
(a) authorised signatory of all types;
(b) Managing and Authorised partners of a partnership firm; and
(c) Karta of an Hindu undivided family,
shall undergo authentication of possession of Aadhaar number.
Provided that if Aadhaar number is not assigned to the said persons, they shall be offered alternate and viable
means of identification in the manner specified in rule 9 of the said rules.

254
(6D) The provisions of sub-section (6A) or sub-section (6B) or sub-section (6C) shall not apply to such person
or class of persons or any State or Union territory or part thereof, as the Government may, on the
recommendations of the Council, specify by notification.
Explanation. —For the purposes of this section, the expression “Aadhaar number” shall have the same meaning
as assigned to it in clause (a) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies,
Benefits and Services) Act, 2016.

As per Notification No. 03/2021 – CT dated 23rd February 2021, the Central Government, on the
recommendations of the Council, hereby notifies that the provisions of sub-section (6A) or sub-section (6B) or
subsection (6C), shall not apply to a person who is
(a) not a citizen of India
(b) a Department or establishment of the Central Government or State Government; or
(c) a local authority; or
(d) a statutory body; or
(e) a Public Sector Undertaking; or
(f) a person applying for registration under the provisions of sub-section (9) of section 25 of the said Act.

(7) Notwithstanding anything contained in sub-section (6), a non-resident taxable person may be granted
registration under sub-section (1) on the basis of such other documents as may be prescribed.

(8) Where a person who is liable to be registered under this Act fails to obtain registration, the proper officer
may, without prejudice to any action which may be taken under this Act or under any other law for the time being
in force, proceed to register such person in such manner as may be prescribed.

(9) Notwithstanding anything contained in sub-section (1),––

(a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and
Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or
Embassy of foreign countries; and
(b) any other person or class of persons, as may be notified by the Commissioner,
shall be granted a Unique Identity Number in such manner and for such purposes, including refund of taxes on
the notified supplies of goods or services or both received by them, as may be prescribed.

(10) The registration or the Unique Identity Number shall be granted or rejected after due verification in such
manner and within such period as may be prescribed.

(11) A certificate of registration shall be issued in such form and with effect from such date as may be prescribed.

(12) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry of the
period prescribed under sub-section (10), if no deficiency has been communicated to the applicant within that
period.

255
Section 26 Deemed Registration

As per Sec. 26 (1), the grant of registration
or the Unique Identity Number under
SGST/UTGST shall be deemed to be
granted under CGST Act if it is not
rejected as per Sec. 25 (10)
As per Sec. 26 (2), Any rejection of
application for registration or the Unique
Identity Number under the SGST/UTGST
shall be deemed to be a rejection of
application for registration under CGST.

Section 27 Special provisions relating to casual taxable person and

non-resident taxable person

As per Sec. 27 (1), Certificate of Registration issued to a casual taxable person or a non-
resident taxable person shall be valid for the period specified in application for
registration or 90 days from the effective date of registration, whichever is earlier.
Commissioner can further extend this period by maximum 90 days. Any supply can be
done only after the issuance of certificate of registration (Rule 15).

As per Sec. 27 (2), An advance deposit of tax in an amount

equivalent to the estimated tax liability of such person for the
period for which the registration is sought. In case of extension,
additional amount need to be deposited.

As per Sec. 27 (3), Amount deposited shall

be credited to electronic cash ledger of
such person.

Key Rules related to registration:

Around 30 forms/formats have been prescribed in the CGST Rules, 2017. For every process in the registration
chain such as application for registration, acknowledgement, query, rejection, registration certificate, show
cause notice for cancellation, reply, cancellation, amendment, field visit report etc., there are standard formats.
This makes the process uniform across country. The decision-making process will also be fast. Strict time lines
have been stipulated for completion of different stages of registration process.

Rule 8 Every person seeking registration shall, before applying for registration, declare his
(Application for PAN, mobile number, email address, State or UT in Part A of Form GST REG-01.
Registration except After proper validation reference number will be generated, the applicant shall use
TDS U/s 51 TCS U/s this reference number and file application of registration in Part B of Form GST
52, non-resident REG-01.
taxable person or ISD shall make a separate application for registration.
OIDAR) A casual taxable person shall be given a temporary reference number by the
common portal for making advance deposit of tax.
Where an applicant, other than a person notified under sub-section (6D) of section
25, opts for authentication of Aadhaar number, he shall, while submitting the

256
 application, with effect from 21st August, 2020, undergo authentication of Aadhaar
number and the date of submission of the application in such cases shall be the
date of authentication of the Aadhaar number, or fifteen days from the submission
of the application in Part B of FORM GST REG-01, whichever is earlier.
Rule 9 (1) The application shall be forwarded to the proper officer who shall examine the
Verification of the application and the accompanying documents and if the same are found to be
application and in order, approve the grant of registration to the applicant within a period of
approval three seven working days from the date of submission of the application.
Provided that where
(a) a person, other than a person notified under sub-section (6D) of section
25, fails to undergo authentication of Aadhaar number as specified in sub-
rule (4A) of rule 8 or does not opt for authentication of Aadhaar number;
or
(b) the proper officer, with the approval of an officer authorised by the
Commissioner not below the rank of Assistant Commissioner, deems it fit
to carry out physical verification of places of business,
the registration shall be granted within thirty days of submission of application,
after physical verification of the place of business in the presence of the said
person, in the manner provided under rule 25 and verification of such
documents as the proper officer may deem fit;
(2) Where the application submitted under rule 8 is found to be deficient, either in
terms of any information or any document required to be furnished under the
said rule, or where the proper officer requires any clarification with regard to
any information provided in the application or documents furnished therewith,
he may issue a notice to the applicant electronically in FORM GST REG-03
within a period of three seven working days from the date of submission of the
application and the applicant shall furnish such clarification, information or
documents electronically, in FORM GST REG-04, within a period of seven
working days from the date of the receipt of such notice.
Provided that where-
(a) a person, other than a person notified under sub-section (6D) of section
25, fails to undergo authentication of Aadhaar number as specified in sub-
rule (4A) of rule 8 or does not opt for authentication of Aadhaar number;
or
(b) the proper officer, with the approval of an officer authorised by the
Commissioner not below the rank of Assistant Commissioner, deems it fit
to carry out physical verification of places of business,
the notice in FORM GST REG-03 may be issued not later than thirty days from
the date of submission of the application.”;
Explanation.- For the purposes of this sub-rule, the expression ―clarification
includes modification or correction of particulars declared in the application for
registration, other than Permanent Account Number, State, mobile number and
e-mail address declared in Part A of FORM GST REG-01.
(3) Where the proper officer is satisfied with the clarification, information or
documents furnished by the applicant, he may approve the grant of registration
to the applicant within a period of seven working days from the date of the
receipt of such clarification or information or documents.
(4) Where no reply is furnished by the applicant in response to the notice issued
under sub-rule (2) or where the proper officer is not satisfied with the
clarification, information or documents furnished, he may, for reasons to be
recorded in writing, reject such application and inform the applicant
electronically in FORM GST REG 05.
(5) If the proper officer fails to take any action, -

257
 (a) within a period of seven working days from the date of submission of
the application in cases where the person is not covered under proviso
to sub-rule (1); or
(b) within a period of thirty days from the date of submission of the
application in cases where a person is covered under proviso to sub-
rule (1); or
(c) within a period of seven working days from the date of the receipt of
the clarification, information or documents furnished by the applicant
under sub-rule (2),
the application for grant of registration shall be deemed to have been approved.
Rule 10 Issue of A certificate of registration in Form GST REG-06 shall be issued. The registration
Registration Certificate shall be effective from the date on which the person becomes liable to registration
where the application for registration has been submitted within a period of 30 days
from such date. Otherwise, effective date of registration shall be the date of the
grant of registration. It will include principal place of business and additional place
of business.
Example 18: Sugam Services Ltd. is engaged in taxable supply of services in MP.
The turnover of Sugam Services Ltd. exceeded Rs. 20 Lakh on 1 st November. It is
liable to get registered by 1st December [30 days] in MP. It applies to registration
on 28th November and is granted registration certificate on 5th December. The
effective date of registration is 1st November. If it applies on 3rd December and
granted registration on 10th December then effective registration is 10th December.
Rule 10A Furnishing of After a certificate of registration in FORM GST REG-06 has been made available
Bank Account Details on the common portal and a Goods and Services Tax Identification Number has
been assigned, the registered person, except those who have been granted
registration under rule 12 or, as the case may be rule 16, shall as soon as may be,
but not later than forty five days from the date of grant of registration or the date on
which the return required under section 39 is due to be furnished, whichever is
earlier, furnish information with respect to details of bank account, or any other
information, as may be required on the common portal in order to comply with any
other provision.
Rule 10B Aadhaar The registered person, other than a person notified under sub-section (6D) of
authentication for section 25, who has been issued a certificate of registration under rule 10 shall,
registered person undergo authentication of the Aadhaar number of the proprietor, in the case of
proprietorship firm, or of any partner, in the case of a partnership firm, or of the
karta, in the case of a Hindu undivided family, or of the Managing Director or any
whole time Director, in the case of a company, or of any of the Members of the
Managing Committee of an Association of persons or body of individuals or a
Society, or of the Trustee in the Board of Trustees, in the case of a Trust and of the
authorized signatory, in order to be eligible for the purposes as specified in column
(2) of the Table below:
S. No. Purpose
(1) (2)
1. For filing of application for revocation of cancellation of registration in
FORM GST REG-21 under Rule 23
2. For filing of refund application in FORM RFD-01 under rule 89
3. For refund under rule 96 of the integrated tax paid on goods exported
out of India

Provided that if Aadhaar number has not been assigned to the person required to
undergo authentication of the Aadhaar number, such person shall furnish the
following identification documents, namely: -
(a) her/his Aadhaar Enrolment ID slip; and

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 (b) (i) Bank passbook with photograph; or
(ii) Voter identity card issued by the Election Commission of India; or
(iii) Passport; or
(iv) Driving license issued by the Licensing Authority under the Motor
Vehicles Act, 1988 (59 of 1988):
Provided further that such person shall undergo the authentication of Aadhaar
number within a period of thirty days of the allotment of the Aadhaar number.
Rule 11 Separate (1) Any person having multiple places of business within a State or a Union
registration for multiple territory, requiring a separate registration for any such place of business
places of business under sub-section (2) of section 25 shall be granted separate registration
within a State or a in respect of each such place of business subject to the following
Union territory conditions, namely:-
(a) such person has more than one place of business as defined in clause
(85) of section 2;
(b) such person shall not pay tax under section 10 for any of his places of
business if he is paying tax under section 9 for any other place of
business;
(c) all separately registered places of business of such person shall pay
tax under the Act on supply of goods or services or both made to
another registered place of business of such person and issue a tax
invoice or a bill of supply, as the case may be, for such supply.
Explanation. - For the purposes of clause (b), it is hereby clarified that
where any place of business of a registered person that has been granted
a separate registration becomes ineligible to pay tax under section 10, all
other registered places of business of the said person shall become
ineligible to pay tax under the said section.
(2) A registered person opting to obtain separate registration for a place of
business shall submit a separate application in FORM GST REG-01 in
respect of such place of business.
(3) The provisions of rule 9 and rule 10 relating to the verification and the
grant of registration shall, mutatis mutandis, apply to an application
submitted under this rule.
Rule 12 Grant of A person required to deduct tax as per Sec. 51 or required to collect tax as per Sec.
Registration to 52, shall apply in Form GST REG-07. Registration shall be granted in Form GST
persons required to REG-06.
deduct or collect tax at A person applying for registration to deduct or collect tax in accordance with the
source provisions of section 51, or, as the case may be, section 52, in a State or Union
territory where he does not have a physical presence, shall mention the name of
the State or Union territory in PART A of the application in FORM GST REG-07 and
mention the name of the State or Union territory in PART B thereof in which the
principal place of business is located which may be different from the State or Union
territory mentioned in PART A.
Rule 13 Grant of A non-resident taxable person shall file application in Form GST REG-09 along with
Registration to non- a self-attested copy of his valid passport, at least 5 days prior to commencement
resident taxable of business. If business entity incorporated or established outside India, the
person application or registration shall be submitted along with its tax identification number
or unique number on the basis of which the entity is identified by the Government
of that country or its PAN.
A non-resident taxable person shall be given a temporary reference number by the
common portal for making advance deposit of tax.
Rule 14 Registration OIDAR supplying services to non-taxable person, shall file application in Form GST
for a OIDAR REG-10 and registration shall be granted in GST REG-06.

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Rule 15 Extension in (1) Where a registered casual taxable person or a non-resident taxable person
period of operation by intends to extend the period of registration indicated in his application of
CTP/NRTP registration, an application in FORM GST REG-11 shall be submitted electronically
through the common portal, either directly or through a Facilitation Centre notified
by the Commissioner, by such person before the end of the validity of registration
granted to him.
(2) The application under sub-rule (1) shall be acknowledged only on payment of
the amount specified in sub-section (2) of section 27.
Rule 16 Suo motu The proper officer finds that a person liable to registration under the Act, has failed
Registration to apply for such registration, such officer may register the said person on
temporary basis and issue and order in Form GST REG-12. Such person, shall
apply for the registration within 90 days. He has right to appeal against such
temporary registration. Once appeal is finalized then he needs to submit the
application within 30 days.
Rule 17 Assignment of The proper officer may, upon submission of an application in Form GST REG-13,
Unique Identity assign a UIN to the eligible entities.
Number to certain The Unique Identity Number granted under sub-rule (1) to a person under clause
Special entities (a) of sub-section (9) of section 25 shall be applicable to the territory of India.
Rule 18 Display of Every registered person shall display his certificate of registration in a prominent
registration certificate location at his principal place of business and at every additional place of business.
and GST Identification He also needs to display his GSTIN on the name board exhibited at the entry of his
Number on the name principal place of business and at every additional place or places of business.
board
Rule 25 Physical Where the proper officer is satisfied that the physical verification of the place of
verification of business business of a person is required due to failure of Aadhaar authentication or due to
premises in certain not opting for Aadhaar authentication before the grant of registration, or due to any
cases other reason after the grant of registration, he may get such verification of the place
of business, in the presence of the said person, done and the verification report
along with the other documents, including photographs, shall be uploaded in FORM
GST REG 30 on the common portal within a period of fifteen working days following
the date of such verification.
Rules 26 Method of All applications, including reply, if any, to the notices, returns including the details
authentication of outward and inward supplies, appeals or any other document required to be
submitted under the provisions of these rules shall be so submitted electronically
with digital signature certificate or through e-signature as specified under the
provisions of the Information Technology Act, 2000 or verified by any other mode
of signature or verification as notified by the Board in this behalf:
Provided that a registered person registered under the provisions of the Companies
Act, 2013 shall furnish the documents or application verified through digital
signature certificate.
Each document including the return furnished online shall be signed or verified
through electronic verification code.

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 GST Registration
Flow Chart

Aadhar card not

authenticated or
proper officer
going for physical
verification 30 days

Section 28 Amendment of Registration (Read with Rule 19)

• Every registered person and a person to whom a UIN has been assigned shall inform the proper officer
of any changes in the information furnished at the time of registration or subsequent thereto. Such
person shall submit an application in prescribed manner, within 15 days of such change.
• In case of amendment of core fields of information (Rule 19)
(i) legal name of business,
(ii) address of the principal place of business or any additional place(s) of business,
(iii) addition, deletion or retirement of partners or directors, Karta, Managing Committee, Board of
Trustees, CEO or equivalent, responsible for the day to day affairs of the business,
The proper officer may, on the basis of information furnished or ascertained by him, approve or reject
amendments in the registration particulars in the prescribed manner.

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 • If it is non-core field of information registration certificate shall stand amended upon submission of the
application.
• If there is change in PAN of registered person, then said person shall apply for fresh registration.
• If proper officer fails to take any action, within a period of 15 working days from the date of submission
of application or within 7 working days from the date of the receipt of the reply to show cause notice,
the certificate of registration shall stand amended.
• Any particular of the application for registration shall not stand amended with effect from a date earlier
than date of submission of application for amendment on common portal except with order of
Commissioner for reasons to be recorded in writing and subject to conditions specified by
Commissioner in the said order.

Section 29 Cancellation or Suspension of Registration

Section 29(1)

The proper officer may, either on his own motion or on an application filed by the registered person or by his
legal heirs, in case of death such person, cancel the registration: -
(a) the business has been discontinued, transferred fully for any reason including death of the proprietor,
amalgamated with other entity, demerged or otherwise disposed of; or
(b) there is any change in the constitution of business; or
(c) the taxable person is no longer liable to be registered u/s 22 or 24 or intends to optout of the registration
voluntarily made under sub-section (3) of section 25;
Provided that during pendency of the proceedings relating to cancellation of registration filed by the registered
person, the registration may be suspended for such period and in such manner as may be prescribed.

Section 29(2)

The proper officer may cancel the registration of a person from such date, including any retrospective date, as
he may deem fit, where –
(a) A registered person contravened Act or rules;
(b) A person paying tax U/s 10 (composition dealer) not furnished returns for 3 consecutive tax periods;
(c) Any registered person other than composition dealer has not furnished return for a continuous 6 months;
Provided that where the person instead of replying to the notice served under sub rule (1) of Rule 22 for
contravention of the provisions contained in clause (b) or clause (c) of sub-section (2) of section 29, furnishes
all the pending returns and makes full payment of the tax dues along with applicable interest and late fee, the
proper officer shall drop the proceedings and pass an order in FORM GST-REG 20.
(d) Any person who has taken voluntarily registration but has not commenced business within 6 months from
the date of registration;
(e) registration has been obtained by means of fraud, willful misstatement or suppression of facts.
Provided that the Proper officer shall not cancel the registration without giving the person an opportunity being
heard.
Provided further that during pendency of the proceedings relating to cancellation of registration, the proper
officer may suspend the registration for such period and in such manner as may be prescribed.

Further in terms of rule 21 of CGST Rules, the registration granted to a person is liable to be cancelled, if the
said person,-
(a) does not conduct any business from the declared place of business; or

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(b) issues invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or
the rules made thereunder; or
(c) violates the provisions of section 171 of the Act or the rules made thereunder.
(d) violates the provision of rule 10A
(e) avails input tax credit in violation of the provisions of section 16 of the Act or the rules made thereunder; or
(f) furnishes the details of outward supplies in FORM GSTR-1 under section 37 for one or more tax periods
which is in excess of the outward supplies declared by him in his valid return under section 39 for the said tax
periods; or
(g) violates the provision of rule 86B.

Section 29(3): The cancellation of registration under this section shall not affect the liability of the person to pay
tax and other dues for any period prior to the date of cancellation.

Section 29(4): the cancellation of registration under the SGST or UTGST, shall be deemed to be a cancellation
of registration under this Act.

Section 29(5): Every registered person shall pay an amount by way of debit in the electronic credit ledger or
cash ledger, equivalent to the ITC in respects of inputs held in stock and inputs contained in semi-finished or
finished goods or capital goods or plant the machinery on the day immediately preceding the date of such
cancellation or the output tax payable on such goods, whichever is higher. In case of capital goods or plant and
machinery, the taxable person shall pay an amount equal to the ITC taken, which shall be reduced by such
percentage points as may be prescribed or the tax on the transaction value of such capital goods or plant and
machinery U/s 15, whichever is higher.

A registered person, other than tax deductor or tax collector to whom a registration has been granted or a
person to whom a UIN has been granted, seeking cancellation of registration, shall apply electronically in
prescribed form.

Rule 21A Suspension of registration

(1) Where a registered person has applied for cancellation of registration under rule 20, the registration shall be
deemed to be suspended from the date of submission of the application or the date from which the cancellation
is sought, whichever is later, pending the completion of proceedings for cancellation of registration under rule
22.
(2) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled
under section 29 or under rule 21, he may, after affording the said person a reasonable opportunity of being
heard, suspend the registration of such person with effect from a date to be determined by him, pending the
completion of the proceedings for cancellation of registration under rule 22.
(2A) Where, a comparison of the returns furnished by a registered person under section 39 with
(a) the details of outward supplies furnished in FORM GSTR-1; or
(b) the details of inward supplies derived based on the details of outward supplies furnished by his
suppliers in their FORM GSTR-1,
or such other analysis, as may be carried out on the recommendations of the Council, show that there are
significant differences or anomalies indicating contravention of the provisions of the Act or the rules made
thereunder, leading to cancellation of registration of the said person, his registration shall be suspended and
the said person shall be intimated in FORM GST REG-31, electronically, on the common portal, or by sending

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a communication to his e-mail address provided at the time of registration or as amended from time to time,
highlighting the said differences and anomalies and asking him to explain, within a period of thirty days, as to
why his registration shall not be cancelled.
(3) A registered person, whose registration has been suspended under sub-rule (1) or sub-rule (2) or sub-rule
(2A), shall not make any taxable supply during the period of suspension and shall not be required to furnish any
return under section 39.
Explanation: - For the purposes of this sub-rule, the expression “shall not make any taxable supply” shall mean
that the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by
him during the period of suspension.
(3A) A registered person, whose registration has been suspended under sub-rule (2) or sub-rule (2A), shall not
be granted any refund under section 54, during the period of suspension of his registration.
(4) The suspension of registration under sub-rule (1) or sub-rule (2) or sub-rule (2A) shall be deemed to be
revoked upon completion of the proceedings by the proper officer under rule 22 and such revocation shall be
effective from the date on which the suspension had come into effect.
Provided that the suspension of registration under this rule may be revoked by the proper officer, anytime during
the pendency of the proceedings for cancellation, if he deems fit.
(5) Where any order having the effect of revocation of suspension of registration has been passed, the
provisions of clause (a) of sub-section (3) of section 31 and section 40 in respect of the supplies made during
the period of suspension and the procedure specified therein shall apply.

Circular No: 145/01/2021-GST dated 11th February, 2021

The Jurisdiction officer can suspend a GST registration if he finds Significant Anomalies between the values of

• GSTR 3B Outward Supplies vs GSTR-1 Outward Supplies as declared by the registered person
• GSTR 3B Inward Supplies of the registered person vs GSTR-1 Outward Supplies by his suppliers

This suspension will be for 30 days and the Taxpayer can submit his reply with clarifications / justifications to
the Jurisdictional officer within 30 days from the date of notice.

In case the intimation for suspension and notice for cancellation of registration is issued on ground of non -filing
of returns, the said person may file all the due returns and submit the response. Similarly, in other scenarios as
specified under FORM GST REG-31, they may meet the requirements and submit the reply.

If the jurisdiction officer satisfied with the Taxpayer’s reply he can revoke suspension of GST registration.

If the Jurisdiction officer not satisfied with the Taxpayer’s reply, or the Taxpayer has not submitted his reply to
the Jurisdiction officer within the prescribed time limit, then the Jurisdiction officer can proceed for Cancellation
of the GST Registration.

The notice to the Taxpayer in FORM GST REGN – 31 will be generated through System and communicated to
the Taxpayer. However, till the time the facility of generating FORM GST REGN – 31 through Online is enabled,
as an alternative arrangement, the Jurisdiction officer can issue a Notice in FORM GST REG – 17 in the GST
portal. This notice can be seen from “View/Notice and Order” tab post login.

The reply against FORM GST REG – 17 notice can be filed by the taxpayer in online through FORM GST
REG – 18 in the same portal within the specified time limit of 30 days.

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Rule 22 Cancellation of registration

(1) Where the proper officer has reasons to believe that the registration of a person is liable to be cancelled
under section 29, he shall issue a notice to such person in FORM GST REG-17, requiring him to show cause,
within a period of seven working days from the date of the service of such notice, as to why his registration shall
not be cancelled.

(2) The reply to the show cause notice issued under sub-rule (1) shall be furnished in FORM REG–18 within
the period specified in the said sub-rule.

(3) Where a person who has submitted an application for cancellation of his registration is no longer liable to be
registered or his registration is liable to be cancelled, the proper officer shall issue an order in FORM GST REG-
19, within a period of thirty days from the date of application submitted under sub-rule (1) of rule 20 or, as the
case may be, the date of the reply to the show cause issued under sub-rule (1) or under sub-rule (2A) of rule
21A, cancel the registration, with effect from a date to be determined by him and notify the taxable person,
directing him to pay arrears of any tax, interest or penalty including the amount liable to be paid under sub-
section (5) of section 29.

(4) Where the reply furnished under sub-rule (2) or in response to the notice issued under sub-rule (2A) of rule
21A is found to be satisfactory, the proper officer shall drop the proceedings and pass an order in FORM GST
REG –20.

Provided that where the person instead of replying to the notice served under sub-rule (1) for contravention of
the provisions contained in clause (b) or clause (c) of sub-section (2) of section 29, furnishes all the pending
returns and makes full payment of the tax dues along with applicable interest and late fee, the proper officer
shall drop the proceedings and pass an order in FORM GST-REG 20.

(5) The provisions of sub-rule (3) shall, mutatis mutandis, apply to the legal heirs of a deceased proprietor, as
if the application had been submitted by the proprietor himself.
No revocation for UIN
holders, GST practitioner

Section 30 Revocation of cancellation of registration (Read with

Rule 23)
Any registered person, whose registration is cancelled by the proper officer on his own motion, may subject to
the provisions of rule 10B, apply to such officer for revocation of cancellation of the registration within 30 days
from the date of service of the cancellation order.
Provided that such period may, on sufficient cause being shown, and for reasons to be recorded in writing, be
extended,-
(a) by the Additional Commissioner or the Joint Commissioner, as the case may be, for a period not
exceeding thirty days;
(b) by the Commissioner, for a further period not exceeding thirty days, beyond the period specified in
clause (a).
However, in case registration was cancelled for failure of registered person to furnish returns, before applying
for revocation the person has to make good the defaults (by filing all pending returns, making payment of all
dues in terms of such returns along with interest, penalty, late fee, etc.) for which the registration was cancelled
by the officer.

The proper officer may either revoke cancellation of the registration or reject the application, after giving proper
opportunity of being heard. The revocation of cancellation of registration under SGST or UTGST, shall be
deemed to be a revocation of cancellation of registration under this Act.

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All returns due for the period from the date of the order of cancellation of registration till the date of the order of
revocation of cancellation of registration shall be furnished by the said person within a period of thirty days from
the date of order of revocation of cancellation of registration:

Where the registration has been cancelled with retrospective effect, the registered person shall furnish all
returns relating to period from the effective date of cancellation of registration till the date of order of revocation
of cancellation of registration within a period of thirty days from the date of order of revocation of cancellation of
registration

From the combined reading of aforesaid provisions, it can be inferred that where the registration has been
cancelled with effect from the date of order of cancellation of registration, (i) all returns due till the date of such
cancellation are required to be furnished before the application for revocation can be filed and (ii) all returns
required to be furnished in respect of the period from the date of order of cancellation till the date of order of
revocation of cancellation of registration have to be furnished within a period of 30 days from the date of the
order of revocation.

However, where the registration has been cancelled with retrospective effect, the application for revocation of
cancellation of registration can be filed, subject to the condition that all returns relating to the period from the
effective date of cancellation of registration till the date of order of revocation of cancellation of registration shall
be filed within a period of 30 days from the date of order of such revocation of cancellation of registration.

Circular No. 96/14/2019-Central Tax Dated 28th March 2019

Subject: Clarification in respect of transfer of input tax credit in case of death of sole proprietor – Reg
Clarification:
The credit transfer shall be eligible. The transferee / successor shall be liable to pay any tax, interest or any
penalty due from the transferor in cases of transfer of business due to death of sole proprietor.
Transfer/change in ownership referred in Sec 18(3), 22(3), 29(1)(a) and 85(1) of the CGST act, includes the
transfer or change in the ownership of business due to death of the sole proprietor.
Process:
• New registration – Transferee / successor should get registered w.e.f. date of transfer
• Cancellation of old registration – Legal heirs should apply for the cancellation in Form Reg-16
• In both the cases, mention the reason as “death of sole proprietor”.
• File ITC-02 in the registration required to be cancelled, before cancellation
• Accept the ITC-02 in the new GSTIN.

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 Question & Answer
Q1. There is an assessee located in New Delhi and registered under GST at Delhi. He wishes to participate in
a 15 days trade exhibition in the State of Tamil Nadu where he does not have a permanent place of business.
Would such assessee be liable for registration in the state of Tamil Nadu? In case yes, what would be the
procedure for his registration?
A. A person who occasionally undertakes business transactions in goods and/or services in the State where he
doesn’t have a fixed place of business is considered as a casual taxable person. In the given example, such
person would be considered as a casual taxable person for the State of Tamil Nadu.
The casual taxable person is required to make an application for registration in the state where he doesn’t have
a permanent place of business. Such person is required to deposit a sum called advance deposit which is equal
to the estimated liability of tax for the period he wishes to operate in the respective state. For making advance
deposit of money, such casual taxable person will be allotted a temporary identification number by GSTN.

Q2. In case a person liable for registration on 1st July makes an application for registration on 10th August, what
substantive benefits will not be available to the assessee for making late application of registration?
A. Since the application for registration is required to be made within 30 days period of being liable for it and
late applications of registration would result in registration to be effective from the date of grant of registration
i.e. 10th August in case of our example. For the period of non-registration, the assessee will not be able to claim
ITC. The customers of the supplier would not be able to claim ITC of material supplied to them during the period
of non-registration.

Q3. Whether the UN bodies, Consulate and Foreign embassies will be liable for registration under the GST
Law?
A. Under the GST Law, tax is required to be charged on taxable supplies made to UN bodies, Consulates or
foreign embassies, At the same time, these bodies have been made entitled to seek refund of any tax paid
under GST Law. To enable them to seek such refund, they are required to seek registration under the GST
Law.

Q4. Can there be multiple ISD of a single registered person?

A. Yes, a business entity can have multiple ISD in different States or even in one state. No such restriction has
been provided under the GST Act.

Q5. Gaurav is having a rental income from residential house given on rent of Rs.12 Lakhs and he is also having
a kirana shop which has a turnover of Rs. 10 Lakhs. Is he required to be registered under GST.
A. In the given case the aggregate turnover of Gaurav would consist of Rs. 12 Lakhs from exempt supply of
rent from residential property and Rs. 10 Lakh from taxable supply of Kirana Store. Therefore, Gaurav would
be liable to be registered in GST as his aggregate turnover is more than Rs. 20 Lakhs.

Q6. Kuldeep is a trader and he is trading 100% in alcohol for human consumption. His turnover from supply of
alcohol for human is Rs. 2 Crore. Whether he is liable to be registered under GST?
A. As per section 2(47) of the CGST Act, 2017, exempt supply includes non – taxable supply. Alcohol for human
consumption is a non – taxable supply as it is not leviable to tax under the law. Further, as per Section 23 of
the CGST Act, 2017, any person engaged exclusively in the business of supplying goods or services or both
that are not liable to tax or wholly exempt from tax under this Act would not be required to be registered.

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Therefore, as Kuldeep is exclusively supplying Alcohol for human consumption, which is not liable to tax, he
would not be liable to be registered under CGST Act, 2017.

Q7. In the above question, supposedly Kuldeep has also made supply of Soft Drinks of Rs. 10 Lakh. Whether
he would be liable to be registered under CGST Act, 2017?
A. If Kuldeep has also made supply of soft drinks of Rs. 10 Lakh along with turnover of Alcohol for human
consumption of Rs. 2 crores then in such case, exemption given from registration under section 23 of the CGST
Act, 2017 would not be applicable as he is not engaged exclusively in supplying goods not liable to tax
under the Law.
Threshold limit for registration would be counted by taking aggregate of both taxable and non – taxable and
non – taxable supply and as his aggregate turnover would be more than Rs. 40 Lakh (dealing exclusively in
goods), therefore he would be liable for registration under the law.

Q8. Mr. A is a salaried employee (salary income being Rs. 1 crore). Besides, he owns a residential property
which is let out for residential purposes for annual rent being Rs. 30 lakh.
A. In this case, aggregate turnover is Rs. 30 lakh, rent received from residential property renting. Since service
of renting of residential property for residential purpose is exempt supply, Mr. A shall be exempt from registration
requirement as Sec 23 of CGST Act provides for exemption from registration where a person is exclusively
engaged in making exempt supplies.
Since Mr. A is not making supply of any taxable services, he is not liable for registration.

Q9. Pure Oils, Delhi has started the supply of machine oils and high speed diesel in the month of April, 20XX.
The following details have been furnished by it for the said month: -
Particulars Amount*
Supply of machine oils in Delhi 2,00,000
Supply of high speed diesel in Delhi 4,00,000
Supply made through Fortis Lubricants - an agent of Pure Oils in Delhi 3,75,000
Supply made by Pure Oils from its branch located in Punjab 1,80,000
*excluding GST
Determine whether Pure Oils is liable for registration.
Will your answer change, if Pure Oils has a branch in Nagaland from where he supplies machine oils
amounting to Rs. 2,50,000?
A. Computation of Aggregate turnover
Particulars Amount
Supply of machine oils in Delhi {Supply of machine oil in Delhi is intra-state supply of 2,00,000
goods which is taxable under GST law. It shall be includible in ‘aggregate turnover’}
Supply of high speed diesel in Delhi {Supply of HSD in Delhi is intra-state supply of 4,00,000
goods which is non-taxable under GST law. Though non-taxable, it shall be includible
in ‘aggregate turnover’}
Supply made through Fortis Lubricants - an agent of Pure Oils in Delhi {Transfer of 3,75,000
goods to agent for further supply (sale) is also treated as ‘supply’ though such transfer
does not include any consideration. Sec 7(1)(c) read with Schedule I (Entry 3) covers
transfer of goods to agent. Further, since goods have been transferred to Agent in Delhi,
such transfer is an intra-state supply of goods which is taxable under GST. It shall be
includible in ‘aggregate turnover’}
Supply made by Pure Oils from its branch located in Punjab {Supply is made from 1,80,000
branch office in Punjab. Under GST law, such branch office is treated as establishment
of a different
person. Thus, Head Office (Delhi) and Branch Office (Punjab) are treated as ‘deemed
distinct persons (establishment of different persons)’ under GST law. In absence of
specific information, it is presumed that Punjab branch is also making ‘intra-state’

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 supply. Since ATO is computed on all India basis (establishments operating with same
PAN), it shall be includible in ‘aggregate turnover’}
Aggregate Turnover 11,55,000

Registration Requirement of Pure Oils, Delhi

All the supplies made by Pure Oils are intra-state supplies and thus, his liability for registration shall be governed
by Sec 22 of the CGST Act which provides that every supplier is liable to be registered in the State/UT from
where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year
exceeds Rs. 20 lakh (Rs. 40 Lacs for exclusive supplier of goods).
Since the aggregate turnover is not exceeding threshold limit, Pure Oils is not liable to be registered.
In case where Pure Oils has a branch in Nagaland from where he supplies machine oils amounting to
Rs. 2,50,000, then aggregate turnover in that case will be 14,05,000 (11,55,000 + 2,50,000). Further, in this
situation, the applicable threshold for registration will be Rs. 10 lakh as Nagaland is one of the specified Special
Category States. Thus, in such situation Pure Oils, Delhi shall be liable to be registered.

Q10. Mr. A, a dealer (situated in Mumbai) dealing with Intra State supply of goods and services has place of
business in India furnished the following information in the financial year 20XX-X1:
1. Sale of taxable goods by Head Office located in Chennai for Rs. 2,00,000
2. Supply of taxable services by Branch office at Delhi for Rs. 1,00,000
3. Supply of goods exempted from GST Rs. 10,000
4. Export of goods for Rs. 2,00,000

A. Computation of Aggregate turnover

Particulars Amount
Sale of taxable goods by Head Office located in Chennai 2,00,000
Supply of taxable services by Branch office at Delhi 1,00,000
Supply of goods exempted from GST 10,000
Export of goods and services 2,00,000
Aggregate Turnover 5,10,000

Though aggregate turnover is not exceeding Rs. 20 lakhs, but since he is engaged in exports which are inter-
state supplies, his registration falls under section 24 which provides for compulsory registration (i.e., no
threshold limit of 20 Lakhs).
Note: Export (inter-state supplies), Export supplies are zero-rated in terms of Sec 16 of IGST Act.
For availing benefit of zero-rating provided by Sec 16, registration is mandatory. [Sec 16(3) of IGST Act gives
benefit to ‘registered person’]

Q11. Mr. A has aggregate turnover of Rs 15 lakhs in a FY from the State of Maharashtra, through its sole
proprietorship firm. He has a property located in Chennai, which is currently in dispute and has engaged
lawyer for representing his case in dispute. Will Mr. A be required to register himself U/s 24 of the CGST Act,
considering persons required to pay under RCM?
A. Mr. A is a business entity making intra-state supplies in State of Maharashtra only. It is unregistered, as his
aggregate turnover is not exceeding Rs 20 lakhs in a FY. Now, it has received services legal services which
attracts reverse charge and thus, making recipient liable to pay GST. Presuming that legal services have been
sought in relation to business, such service is exempt from payment of GST as Mr. A is a business entity with
aggregate turnover not exceeding Rs 20 lakhs. Such service being exempt, the recipient, Mr. A, is actually not
required to pay GST. Thus, he is not required to take compulsory registration U/s 24 of CGST Act.

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Q12. Whether the Department through the proper officer, can suo-moto proceed with registration of a person
under the Act?
A. Yes. In terms of sub-section (8) of Section 25, where a person who is liable to be registered under the CGST
Act fails to obtain registration, the proper officer may, without prejudice to any action which may be taken
under the CGST Act, or under any other law for the time being in force, proceed to register such person in the
manner as may be prescribed.

Q13. Whether the proper Officer can reject an Application for Registration?
A. Yes. The Proper officer can reject the Application for registration in Form GST REG 05, if after filling the
Application of registration in Form GST REG 01 the proper officer issued notice in Form GST REG 03 for further
clarification and no response or no satisfactory response is given by the applicant.

Q14. What will be the effective date of registration?

A. Where the application for registration has been submitted within thirty days from the date on which the
person becomes liable to registration, the effective date of registration shall be date on which he become
liable for registration.
Where an application for registration has been submitted by the applicant after thirty days from the date of his
becoming liable to registration, the effective date of registration shall be the date of grant of registration.
In case of suo moto registration, i.e. registration pursuant to any survey, enquiry, inspection, search or any other
proceedings, the effective date of registration shall be the date of order of registration.

Q15. At the time of registration will the assessee have to declare all his places of business?
A. Yes. The principal place of business and place of business have been separately defined under section
2(85) & 2(89) of the CGST Act respectively. The taxpayer will have to declare the principal place of business
as well as the details of additional places of business in the registration form.

Q16. Should a casual taxable person or non-resident taxable person apply for registration in every State from
which that person is operating or is the registration common for all the States?
A. In terms of section 22(1) read with Section 25(1) such persons need to obtain a separate registration in
every such States.

Q17. From which State the taxable person should obtain registration?
A. As per Section 22(1) a taxable person should obtain registration in every State from where he makes
taxable supply of goods or services or both.

Q18. Whether licensed Tour Guides having registered office in one state but providing services Pan India will
have to register in each State?
A. If the presence of tour guide is in each State and he is supplying services from those States then registration
requirement in each State would be there.

Q19. When a person engaged in the provision of services having registration in the Maharashtra goes to Kolkata
to provide services to its client and stays therefore a period of 3 months and also take a residence in that State
is required to take separate registration in that State.
A. No, mere residence is not a business establishment, and therefore he need not take a registration in the
State of West Bengal.

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Q20. Mahadev Enterprises, a sole proprietorship firm, opened a shopping complex dealing in supply of ready-
made garments at multiple locations, i.e. in Himachal Pradesh, Uttarakhand and Tripura in the month of June.
It has furnished the following details relating to the supply (excluding taxes) made at such multiple locations for
the month of June:-
Particulars Himachal Uttarakhand Tripura
Pradesh (in Rs.) (in Rs.) (in Rs.)
Intra-State supply of taxable goods 22,50,000 7,00,000
Intra-State supply of exempted goods 6,00,000
Intra-State supply of nontaxable goods 21,00,000 40,000
With the help of the above mentioned information, answer the following questions giving reasons:-
(1) Determine whether Mahadev Enterprises is liable to be registered under GST law and what is the threshold
limit of taking registration in this case assuming that it is not required to pay any tax on inward supplies under
reverse charge.
(2) Explain with reasons whether your answer in (1) will change in the following independent cases:
(a) If Mahadev Enterprises is dealing exclusively in taxable supply of goods only from Himachal Pradesh;
(b) If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal Pradesh;
(c) If Mahadev Enterprises is dealing in taxable supply of goods only from Himachal Pradesh and has also
effected inter-State supplies of taxable goods (other than notified handicraft goods) amounting to Rs. 4,00,000.
(ICAI SM) (RTP NOV 2019)
A. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a supplier is liable to be registered
in the State/ Union territory from where he makes a taxable supply of goods and/or services, if his aggregate
turnover in a financial year exceeds the threshold limit. The threshold limit for a person making exclusive intra-
State taxable supplies of goods is as under:- (i) Rs. 10 lakh for the States of Mizoram, Tripura, Manipur and
Nagaland. (ii) Rs. 20 lakh for the States of States of Arunachal Pradesh, Meghalaya, Puducherry, Sikkim,
Telangana and Uttarakhand. (iii) Rs. 40 lakh for rest of India.
The threshold limit for a person making exclusive taxable supply of services or supply of both goods and services
is as under:-
(i) Rs. 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) Rs. 20 lakh for the rest of India.
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. In the light of the afore-mentioned provisions, the aggregate turnover
of Mahadev Enterprises is computed as under:

Computation of State-wise aggregate turnover of Mahadev Enterprises

Particulars Himachal Uttarakhand Tripura
Pradesh (in Rs.) (in Rs.) (in Rs.)
Intra-State supply of taxable goods 22,50,000 7,00,000
Intra-State supply of exempted goods 6,00,000
Intra-State supply of non-taxable goods [As per 21,00,000 40,000
section 2(47), exempt supply includes non-
taxable supply. Thus, intra-State supply of non-
taxable goods in Uttarakhand, being a non-
taxable supply, is an exempt supply and is,
therefore, included in the aggregate turnover]

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 Aggregate Turnover 22,50,000 21,00,000 13,40,000

In the given case, Mahadev Enterprises is engaged in exclusive intra-State supply of goods from Himachal
Pradesh, Tripura and Uttarakhand. However, since Mahadev Enterprises makes taxable supply of goods from
one of the specified Special Category States (i.e. Tripura), it will not be eligible for the higher threshold limit of
Rs. 40 lakh; instead, the threshold limit for registration will be reduced to Rs. 10 lakh.

(1) In view of the above-mentioned provisions, Mahadev Enterprises is liable to be registered under GST law
with the aggregate turnover amounting to Rs. 56,90,000 (computed on all India basis). The applicable
threshold limit of registration in this case is Rs. 10 lakh. Further, he is not liable to be registered in
Uttarakhand since he is not making any taxable supply from Uttarakhand.

(2) (a) If Mahadev Enterprises is dealing in supply of goods only from Himachal Pradesh, the applicable
threshold limit of registration would be Rs. 40 lakh. Thus, Mahadev Enterprises will not be liable for
registration as its aggregate turnover would be Rs. 22,50,000.

(b) If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal Pradesh
then higher threshold limit of Rs. 40 lakh will not be applicable as the same applies only in case of exclusive
supply of goods. Therefore, in this case, the applicable threshold limit will be Rs. 20 lakh and hence, Mahadev
Enterprises will be liable to registration.

(c) In case of inter-State supplies of taxable goods, section 24 requires compulsory registration irrespective of
the quantum of aggregate turnover. Thus, Mahadev Enterprises will be liable to registration.

Q21. LMN Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘X’ which is exempt from GST vide
notifications issued under relevant GST legislations. The company sells product ‘X’ only within Tamil Nadu and
is not registered under GST. Further, all the inward supply of the company are taxable under forward charge.
The turnover of the company in the previous year was Rs. 45 lakh. The company expects the sales to grow by
30% in the current year. The company purchased additional machinery for manufacturing ‘X’ on 1st July. The
purchase price of the capital goods was Rs. 30 lakh exclusive of GST @ 18%. However, effective from 1st
November, exemption available on ‘X’ was withdrawn by the Central Government and GST @ 12% was
imposed thereon. The turnover of the company for the half year ended on 30th September was Rs. 45 lakh.
(a) Examine the above scenario and advise LMN Pvt Ltd. whether it needs to get registered under GST.
(b) If the answer to the above question is in affirmative, advise LMN Pvt. Ltd. whether it can avail input tax credit
on the additional machinery purchased exclusively for manufacturing “X”?
(ICAI SM) (RTP NOV 2019) (MTP JULY 2021) (MTP- NOV 2021)
A.
(a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that every supplier
who is exclusively engaged in intra-State supply of goods is liable to be registered under GST in the State/
Union territory from where he makes the taxable supply of goods only when aggregate turnover in a financial
year exceeds Rs. 40,00,000.
However, the above provisions are not applicable to few specified States, i.e. States of Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand. Further, a
person exclusively engaged in the business of supplying goods and/or services that are not liable to tax or are
wholly exempt from tax is not liable to registration in terms of section 23(1)(a). In the given case, the turnover
of the company for the half year ended on 30th September is Rs. 45 lakh which is more than the applicable
threshold limit of Rs. 40 lakh. Therefore, as per above mentioned provisions, the company should be liable to

272
registration. However, since LMN Pvt. Ltd. supplied exempted goods till 31st October, it was not required to be
registered till that day; though voluntary registration was allowed under section 25(3).
However, the position will change from 1st November as the supply of goods become taxable from that day and
the turnover of company is above Rs. 40 lakh. It is important to note here that in terms of section 2(6), the
aggregate turnover limit of Rs. 40 lakh includes exempt turnover also. Therefore, turnover of ‘X’ prior to 1st
November will also be considered for determining the limit of Rs. 40 lakh even though the same was exempt
from GST. Therefore, the company needs to register within 30 days from 1st November (the date on which it
becomes liable to registration) in terms of section 25(1).
(b) Section 18(1)(a) provides that a person who has applied for registration within 30 days from the date on
which he becomes liable to registration and has been granted such registration shall be entitled to take credit
of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in
stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions
of this Act. Thus, LMN Pvt. Ltd. cannot avail credit for additional machinery purchased exclusively for
manufacturing X as input tax credit of only inputs is allowed when a person gets registered for the first time.

Q22. SNP Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘Z’ which is exempt from GST vide
notifications issued under relevant GST legislations. The company sells product ‘Z’ only within Tamil Nadu and
it not registered under GST. Further, all the inward supply of the company are taxable under forward charge.
The turnover of the company in the previous year was Rs. 55 lakh. The company expects the sales to grow by
20% in the current year. Owing to the growing demand for the product, the company decided to increase its
production capacity and purchased additional machinery for manufacturing ‘Z’ on 1st July. The purchase price
of the capital goods was Rs. 20 lakh exclusive of GST @ 18%.
However, effective from 1st November, exemption available on ‘Z’ was withdrawn by the Central Government
and GST @ 12% was imposed thereon. The turnover of the company for the half year ended on 30th September
was Rs. 50 lakh.
(a) The Board of Directors of SNP Pvt. Ltd. wants to know whether they have to register under GST?
(b) In case in the above question, SNP Pvt. Ltd. is already registered with respect to certain taxable supplies
being made by it along with manufacture of exempt product ‘Z’, other facts remaining the same, can it take input
tax credit on additional machinery purchased exclusively for manufacturing ‘Z’? If yes, then how much credit
can be availed?
Advice SNP Pvt. Ltd. on the above issues with reference to the provisions of GST law. (ICAI SM)
A.
(a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that every supplier
who is exclusively engaged in intra-State supply of goods is liable to be registered under GST in the State/
Union territory from where he makes the taxable supply of goods only when aggregate turnover in a financial
year exceeds Rs. 40,00,000.
However, the above provisions are not applicable to few specified States, i.e. States of Arunachal Pradesh,
Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand. However, a
person exclusively engaged in the business of supplying goods and/or services that are not liable to tax or are
wholly exempt from tax is not liable to registration in terms of section 23(1)(a). In the given case, the turnover
of the company for the half year ended on 30th September is Rs. 50 lakh which is more than the applicable
threshold limit of Rs. 40 lakh. Therefore, as per section 22, the company will be liable to registration. However,
since SNP Pvt. Ltd. supplied exempted goods till 31st October, it was not required to be registered till that day;
though voluntary registration was allowed under section 25(3).

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However, the position will change from 1st November as the supply of goods become taxable from that day and
the turnover of company is above Rs. 40 lakh. It is important to note here that in terms of section 2(6), the
aggregate turnover limit of Rs. 40 lakh includes exempt turnover also.
Therefore, turnover of ‘Z’ will be considered for determining the threshold limit even though the same was
exempt from GST. Therefore, the company needs to register within 30 days from 1st November (the date on
which it becomes liable to registration) in terms of section 25(1).
Further, the company cannot avail exemption of Rs. 40 lakh from 1st November as the GST law does not
provide any threshold exemption from payment of tax but threshold exemption from obtaining registration (which
in this case had been crossed).
(b) Rule 43(1)(a) of the CGST Rules, 2017 disallows input tax credit on capital goods used or intended to be
used exclusively for effecting exempt supplies.
However, as per section 18(1)(d), where an exempt supply of goods and/or services by a registered person
becomes a taxable supply, such person gets entitled to take credit of input tax in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on
capital goods exclusively used for such exempt supply on the day immediately preceding the date from which
such supply becomes taxable.
Rule 40(1)(a) of the CGST Rules, 2017 lays down that the credit on capital goods can be claimed after reducing
the tax paid on such capital goods by 5% per quarter of a year or part thereof from the date of the invoice.
Therefore, in the given case, SNP Pvt. Ltd. could not claim credit on machinery till the time the supply of product
‘Z’ for which said machinery was being used was exempt. However, it can claim credit from 31st October - the
day immediately preceding the date from which the supply of product ‘Z’ became taxable (1st November).
The credit will be available for the remaining useful life of the machinery and will be computed as follows:

Date of purchase of machinery 1st July

Date on which credit becomes eligible 31st October
Number of quarters for which credit is to be reduced 2 (including part of quarter)
GST paid on machinery [Rs. 20,00,000 x 18%] Rs. 3,60,000
Credit to be reduced [Rs. 3,60,000 x 5% x 2] Rs. 36,000
Amount of credit that can be taken [Rs. 3,60,000 – Rs. 36,000] Rs. 3,24,000

Q23. Rishabh Enterprises – a sole proprietorship firm – started an air-conditioned restaurant in Virar,
Maharashtra in the month of February wherein the customers are served cooked food as well as cold drinks/non-
alcoholic beverages. In March, the firm opened a liquor shop in Raipur, Uttarakhand for trading of alcoholic
liquor for human consumption. Determine whether Rishabh Enterprises is liable to be registered under GST law
with the help of the following information (excluding GST):
Particulars February (Rs.) March (Rs.)

Serving of cooked food and cold drinks/nonalcoholic beverages in 5,50,000 6,50,000

restaurant in Maharashtra
Sale of alcoholic liquor for human consumption in Uttarakhand 5,00,000
Supply of packed food items from restaurant in Maharashtra 1,50,000 2,00,000
You are required to provide reasons for treatment of various items given above. (ICAI SM)
A. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a supplier is liable to be registered
in the State/ Union territory from where he makes a taxable supply of goods and/or services, if his aggregate
turnover in a financial year exceeds the threshold limit. The threshold limit for a person making exclusive intra-
State taxable supplies of goods is as under:-
(i) Rs. 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.

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(ii) Rs. 20 lakh for the States of States of Arunachal Pradesh, Meghalaya, Puducherry, Sikkim, Telangana and
Uttarakhand.
(iii) Rs. 40 lakh for rest of India.
The threshold limit for a person making exclusive taxable supply of services or supply of both goods and services
is as under:-
(i) Rs. 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) Rs. 20 lakh for the rest of India.
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. Further, the aggregate turnover excludes central tax, State tax, Union
territory tax, integrated tax and cess. Moreover, the value of inward supplies on which tax is payable under
reverse charge is not taken into account for calculation of ‘aggregate turnover’. In the given question, since
Rishabh Enterprises is engaged in making taxable supplies of goods and services from Maharashtra and non-
taxable supplies from Uttarakhand, the threshold limit for obtaining registration is Rs. 20 lakh.
In the light of the afore-mentioned provisions, the aggregate turnover of Rishabh Enterprises is computed as
under:
Computation of aggregate turnover of Rishabh Enterprises
Particulars Turnover of Cumulative
February (Rs.) turnover of
February & March
(Rs.)
Serving of cooked food and cold drinks/non-alcoholic beverages in 5,50,000 12,00,000 [Rs.
restaurant in Maharashtra 5,50,000 + Rs.
6,50,000]
Add: Sale of alcoholic liquor for human consumption in Uttarakhand 5,00,000
[As per section 2(47), exempt supply includes non-taxable supply.
Thus, supply of alcoholic liquor for human consumption in
Uttarakhand, being a non-taxable supply, is an exempt supply and
is, therefore, includible while computing the aggregate turnover.]
Add: Supply of packed food items from restaurant in Maharashtra 1,50,000 3,50,000 [Rs.
1,50,000 + Rs.
2,00,000]
Aggregate Turnover 7,00,000 20,50,000
Rishabh Enterprises was not liable to be registered in the month of February since its aggregate turnover did
not exceed Rs. 20 lakh in that month. However, since its aggregate turnover exceeds Rs. 20 lakh in the month
of March, it should apply for registration within 30 days from the date on which it becomes liable to registration.
Further, he is not liable to be registered in Uttarakhand since he is not making any taxable supply from
Uttarakhand.

Q24. Rajesh Dynamics, having its head office in Chennai, Tamil Nadu carries on the following activities with
respective turnovers in a financial year:
Particulars Amount (Rs.)
Supply of petrol at Chennai, Tamil Nadu 18,00,000

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 Value of inward supplies on which tax is payable on reverse charge basis 9,00,000
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000
Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka 1,50,000
without payment of consideration
Value of taxable supplies at Manipur branch 11,50,000
It argues that it does not have taxable turnover crossing threshold limit of Rs.40,00,000 either at Chennai, Tamil
Nadu or Bengaluru, Karnataka and including turnover at Manipur branch. It believes that the determination of
aggregate turnover is not required for the purpose of obtaining registration, but is required for determining
composition levy.
Decide based on the above facts:
(i) The aggregate turnover of Rajesh Dynamics.
(ii) All conditions that fulfil the requirements for registration under CGST Act in the given circumstances.
(ICAI SM)
A. Computation of aggregate turnover of Rajesh Dynamics:
Particulars Amount (Rs.)
Supply of petrol at Chennai, Tamil Nadu [Being a non-taxable supply, it is an 18,00,000
exempt supply and thus, includible in aggregate turnover vide section 2(6)]
Value of inward supplies on which tax is payable on reverse charge basis Nil
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000
Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka 1,50,000
without payment of consideration [Being a taxable supply, it is includible in
aggregate turnover]
Value of taxable supplies at Manipur branch 11,50,000
Aggregate turnover 33,00,000

Rajesh Dynamics is not liable to be registered in Chennai, Tamil Nadu, if his aggregate turnover in a financial
year does not exceeds Rs. 40 lakh. However, since Rajesh Dynamics also makes taxable supplies from
Manipur, a specified Special Category State, the threshold exemption gets reduced to Rs. 10 lakh in terms of
section 22(1) [Notification No.10/2019-CT dated. 07.03.2019].
Rajesh Dynamics’ argument that it is not liable to registration since the threshold exemption of Rs. 40 lakh is
not being crossed either at Chennai, Tamil Nadu, Bengaluru, Karnataka or Manipur is not correct as firstly, the
aggregate turnover to be considered in its case is Rs. 10 lakh and not Rs. 40 lakh and secondly, the same is
computed on all India basis and not State-wise.
Further, Rajesh Dynamics is also wrong in believing that aggregate turnover is computed only for the purpose
of determining the eligibility limit for composition levy since the aggregate turnover is required for determining
the eligibility for both registration and composition levy.
Further, Rajesh Dynamics is compulsorily required to register under section 24 irrespective of the turnover limit
as it is liable to pay tax on inward supplies under reverse charge and it also makes inter-State taxable supply.

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Section 31 Tax Invoice
Section 31A Facility of digital payment to recipient
Section 34 Credit & Debit Note
Section 32 Prohibition of Unauthorized collection of tax
Section 33 Amount of tax to be indicated in tax invoice and other documents

Types of invoices/Other Documents: A snapshot

Document Type When to Issue
Tax invoice – for supply of taxable Section 31(1), (2), (4), (5), (6), and (7) read with rule 46 & rule 48
goods and services
Revised tax invoice – in case of grant Section 31(3)(a) read with rule 53
of registration w.e.f. a date earlier
than the date of issuance of
certificate of registration
Bill of Supply – for supply of Section 31(3)(c) read with rule 49
exempted goods or services or by
composition dealer
Invoice cum Bill of Supply – for Rule 46A
supplying taxable as well as
exempted goods or services
Delivery Challan – to be issued in Rule 55
cases other than supply
Receipt Voucher – for receipt of Section 31(3)(d) read with rule 50
advance money
Refund Voucher – for refund of Section 31(3)(e) read with rule 51
advance money
Self-invoice for reverse charge from Section 31(3)(f)
unregistered suppliers
Payment voucher – for payment of Section 31(3)(g) read with rule 52
supplies under reverse charge
Credit note – for reduction of taxable Section 34(1) & (2) read with rule 53
value and/or tax amount, sales return
etc.
Debit note- for increase in taxable Section 34(3) & (4) read with rule 53
value and/or tax amount
Consolidated tax invoice in specified Section 31(3)(b) read with rule 46
B2C supplies

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Section 31 Tax Invoice
Goods Services
Section 31(1) Section 31(2)
A registered taxable person shall issue a tax invoice A registered person supplying taxable services shall,
showing descriptions, quantity and value of goods, before or after the provision of service but within a
tax charged thereon and other prescribed prescribed period, issue a tax invoice, showing the
particulars, before or at the time of description, value, tax charged thereon and such
a. Removal of goods for supply to the recipient, other particulars as may be prescribed.
where supply involves movement of goods or Provided that the Government may, on the
b. Delivery of goods or making available thereof to recommendations of the Council, by notification,-
the recipient in other cases. (a) specify the categories of services or
supplies in respect of which a tax invoice
shall be issued, within such time and in
such manner as may be prescribed;
(b) subject to the condition mentioned therein,
specify the categories of services in
respect of which-
(iii) any other document issued in
relation to the supply shall be
deemed to be a tax invoice; or
(iv) tax invoice may not be issued.
Note: As per Rule 47 of CGST Rules, Invoice should
be issued within 30 days from the date of provision of
Services.
In case of Insurance, Banks or Financial Institution &
NBFC’s the above limit is extended to 45 days.
An insurer or a banking company or a financial
institution, including a NBFC, or a telecom operator,
making taxable supplies of services between distinct
persons as specified in section 25, may issue the
invoice before or at the time such supplier records the
same in his books of account or before the expiry of
the quarter during which the supply was made.
Section 31(3)
Notwithstanding anything contained in sub-sections (1) and (2)–
(a) a registered person may, within one month from the date of issuance of certificate of
registration and in such manner as may be prescribed, issue a revised invoice against
the invoice already issued during the period beginning with the effective date of
registration till the date of issuance of certificate of registration to him;
(b) a registered person may not issue a tax invoice if the value of the goods or services
or both supplied is less than two hundred rupees subject to such conditions and in
such manner as may be prescribed;
(c) a registered person supplying exempted goods or services or both or paying tax under
the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply
containing such particulars and, in such manner, as may be prescribed:
It is hereby clarified that provisions of clause (c) of subsection (3) of section 31 of the said Act
shall apply to a person paying tax under Notification No. 2/2019- Central Tax (Rate) Dated
07.03.2019 {Removal of Difficulty Order No. 3/2019-Central Tax Dated 8th March, 2019}
(d) a registered person shall, on receipt of advance payment with respect to any supply of
goods or services or both, issue a receipt voucher or any other document, containing
such particulars as may be prescribed, evidencing receipt of such payment;

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 (e) where, on receipt of advance payment with respect to any supply of goods or services
or both the registered person issues a receipt voucher, but subsequently no supply is
made and no tax invoice is issued in pursuance thereof, the said registered person
may issue to the person who had made the payment, a refund voucher against such
payment;
(f) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of
section 9 (reverse charge) shall issue an invoice in respect of goods or services or both received
by him from the supplier who is not registered on the date of receipt of goods or services or
both;
(g) a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of
section 9 shall issue a payment voucher at the time of making payment to the supplier.
Example 1: XYZ is running a consumer durables shop in Pune. He takes services of an advocate for Rs.
50,000 to litigate a department’s notice. Such advocate is not registered under GST. Here XYZ will issue a
self-invoice for advocate services and accordingly discharge GST liability under reverse charge and take ITC
of the same.
Section 31(4) Section 31(5)
In case of continuous supply of goods, where In case of continuous supply of services
successive statements of accounts or successive (a) if due date is ascertainable from the
payment are involved, the invoice shall be issued contract, invoice shall be issued on or
before or at the time each such statement is issued before such due date of payment;
or, as the case may be, each such payment is (b) where the due date is not ascertainable,
received. the invoice shall be issued before or at the
time of receiving payment
(c) where the payment is linked to the
completion of an event, the invoice shall be
issued on or before the date of completion
of that event.
Section 31(7) Section 31(6)
The goods being sent or taken on approval for sale In a case where the supply of services ceases under
or return are removed before the supply takes place, a contract before the completion of the supply, the
the invoice shall be issued before or at the time of invoice shall be issued at the time when the supply
supply or six months from the date of removal, ceases and such invoice shall be issued to the
whichever is earlier. extent of the supply made before such cessation.

Key Points for Tax Invoice U/s 31 & Rule 46

• There is no format prescribed for Tax Invoice. Invoices may be issued manually or electronically.
• The signature or digital signature of the supplier or his authorised representative shall not be required
in the case of issuance of an electronic invoice in accordance with the provisions of the Information
Technology Act, 2000.
This is also applicable to Bill of supply (Rule 49), consolidated tax invoice in case of Insurance/Banking
companies, financial institutions including NBFCs {Rule 54(2)}, ticket issued for passenger
transportation service {Rule 54(4)}.
• A Tax invoice shall be issued by:
➢ Supplying Taxable goods or services
➢ Receiving Taxable goods or services from unregistered supplier (RCM)
• Zero rated supply Invoice shall carry an endorsement “SUPPLY MEANT FOR EXPORT/SUPPLY TO
SEZ UNIT/SEZ DEVELOPER FOR AUTHORIZED OPERATIONS ON PAYMENT OF INTEGRATED
TAX” or “SUPPLY MEANT FOR EXPORT/SUPPLY TO SEZ UNIT/SEZ DEVELOPER FOR

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 AUTHORIZED OPEATIONS UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT
OF INTEGRATED TAX”.
• A registered person, other than the supplier engaged in making supply of services by way of
admission to exhibition of cinematograph films in multiplex screens, may not issue a tax invoice in
accordance with the provisions of clause (b) of sub-section (3) of section 31 subject to the following
conditions, namely,-
a. the recipient is not a registered person; and
b. the recipient does not require such invoice, and
shall issue a consolidated tax invoice for such supplies at the close of each day in respect of all such
supplies.
• A consecutive serial number not exceeding sixteen characters, in one or multiple series, containing
alphabets or numerals or special characters-hyphen or dash and slash symbolized as “-“ and “/”
respectively, and any combination thereof, unique for financial year;
{This is same in case of:- Bill of Supply, Receipt Voucher, Refund Voucher, Payment Voucher, Revised
tax invoice and credit and debit notes etc.}
• CBIC has issued Circular No. 90/09/2019-GST Dated 18th February, 2019, instructing that all registered
persons making supply of goods or services or both in the course of inter-State trade or commerce shall
specify the place of supply along with the name of the State in the tax invoice. The provisions of sections
10 and 12 of the Integrated Goods and Services Tax Act, 2017 may be referred to in order to determine
the place of supply in case of supply of goods and services respectively. Contravention of any of the
provisions of the Act or the rules made there under attracts penal action under the provisions of sections
122 or 125 of the CGST Act.
• As per Rule 46A, notwithstanding anything contained in rule 46 or rule 49 or rule 54, where a registered
person is supplying taxable as well as exempted goods or services or both to an unregistered person,
a single “invoice-cum-bill of supply” may be issued for all such supplies.
• Important content of Tax Invoice

If recipient is unregistered and value of supply is more than Rs. 50,000 then name and address of the
recipient and the address of delivery, along with the name of State & its code. Please recollect
discussion of POS.

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Board may, on the recommendations of the Council, by notification, specify-
(i) the number of digits of Harmonised System of Nomenclature code for goods or services that a class
of registered persons shall be required to mention; or
(ii) a class of supply of goods or services for which specified number of digits of Harmonised System of
Nomenclature code shall be required to be mentioned by all registered taxpayers; and
(iii) the class of registered persons that would not be required to mention the Harmonised System of
Nomenclature code for goods or services.

The requirement to furnishing HSN code in TAX INVOICE:-

Aggregate Turnover in the No. of Digits of HSN

preceding FY Code
In respect of supply to unregistered
Upto ₹ 5 crores 4 Digits person (B2C), mentioning of HSN code
is optional
More than ₹ 5 Crores 6 Digits

CBIC has notified in Notification No. 90/2020 – Centra Tax dated 1st December 2020, registered person
supplying i.e. Dimethyl propylphosphonate, Dimethyl methylphosphonate etc., shall mention eight number of
digits of HSN Codes in a tax invoice issued by him.

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Rule 48 Manner of Issuing Invoice

(1) The invoice shall be prepared in triplicate, in the case of supply of goods, in the following manner,
namely,-
(a) the original copy being marked as ORIGINAL FOR RECIPIENT;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR SUPPLIER.
(2) The invoice shall be prepared in duplicate, in the case of the supply of services, in the following
manner, namely,-
(a) the original copy being marked as ORIGINAL FOR RECIPIENT; and
(b) the duplicate copy being marked as DUPLICATE FOR SUPPLIER.
(3) The serial number of invoices issued during a tax period shall be furnished electronically through the
common portal in FORM GSTR-1.
(4) The invoice shall be prepared by such class of registered persons as may be notified by the
Government, on the recommendations of the Council, by including such particulars contained in
FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained
therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to
such conditions and restrictions as may be specified in the notification.
Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt
a person or a class of registered persons from issuance of invoice under this sub-rule for a specified
period, subject to such conditions and restrictions as may be specified in the said notification.
(5) Every invoice issued by a person to whom sub-rule (4) applies in any manner other than the manner
specified in the said sub-rule shall not be treated as an invoice.
(6) The provisions of sub-rules (1) and (2) shall not apply to an invoice prepared in the manner specified
in sub-rule (4).

As per Notification No. 13/2020-CT dated 21st March 2020, the Government, on the recommendations of the
Council, hereby notifies registered person, whose aggregate turnover in any preceding financial year from
2017-18 onwards exceeds fifty crore rupees 20 crores rupees, as a class of registered person who shall
prepare invoice in terms of sub-rule (4) of rule 48 of the said rules in respect of supply of goods or services or
both to a registered person or for exports.

Presently, such notified persons are not required to report B2C invoices. Further, e-invoicing is also not
applicable to invoices issued by Input Service Distributor (ISD).

E-invoicing is not generation of invoice by a Government portal. Taxpayers will continue to create their GST
invoices on their own Accounting/ERP Systems as per e-invoice schema. These invoices will then be reported
to ‘Invoice Registration Portal (IRP)’. On such reporting, IRP will generate a unique ‘Invoice Reference
Number (IRN)’, digitally sign it and return the e-invoice to the supplier. A GST e-invoice will be valid only with
a valid IRN.

CBIC has notified websites via Notification No. 69/2019-CT dated 13th December 2019 i.e.
www.einvoice1.gst.gov.in, www.einvoice2.gst.gov.in ..................................... www.einvoice10.gst.gov.in

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If the invoice issued by a notified person is in respect of supplies made by him tax on which is payable under
reverse charge under section 9(3), e-invoicing is applicable i.e. A firm of advocates, having aggregate
turnover in a FY Rs. 750 crore is supplying services to a company (who will be discharging tax liability as
recipient under RCM), such invoices have to be reported by said tax payer (since it is a notified person) to
Invoice Registration Portal (IRP).

On the other hand, where specified category of supplies are received by notified person from unregistered
persons [attracting RCM under section 9(4)] or through import of services, e-invoicing not applicable. E-
invoicing is also not applicable for import of goods (Bills of Entry).

This provision is not going to apply on a Special Economic zone unit (not SEZ developer), insurer, banking
company, financial institution, including a non-banking financial company, goods transport agency, passenger
transportation service, supplying services by way of admission to exhibition of cinematograph films in
multiplex screens, a government department, a local authority.

Example 2: ABC Limited has an SEZ unit and a regular DTA unit (both having same PAN). The aggregate
total turnover of ABC Limited is Rs. 750 crores (considering both the GSTINs under same PAN). However, the
turnover of DTA unit is below Rs. 20 crores for FY 2021-22. In this scenario, SEZ unit is exempt from e -
invoicing. However, e-invoicing will be applicable to DTA Unit because the aggregate turnover of the legal
entity in this case is > Rs. 20 crores. The eligibility is based on aggregate annual turnover on the common
PAN.

The e-invoicing system is also available for the E-Commerce Operators (ECO) to report the invoices to the
Invoice Registration portal, generated by them on behalf of the suppliers.

Upon successful registration of invoice on IRP, it will return a signed e-invoice to the supplier with IRN and QR
Code. IRN is embedded in the QR Code which shall be extracted and printed on the invoice. The QR code
enables quick view, validation and access of the invoices from the GST system from hand-held devices. The
digitally signed QR code will have a unique IRN which can be verified on the central portal as well as by an
offline app by the officer. This will be helpful for tax officers checking the invoice offline on the roadside where
internet may not be available all the time.

The QR code consists of the following e-invoice parameters:

• GSTIN of supplier
• GSTIN of recipient
• Invoice number as given by supplier
• Date of generation of invoice
• Invoice value (taxable value and gross tax)
• Number of line items
• HSN code of main item (the line item having highest taxable value)
• Unique Invoice Reference Number (hash)
• Date of generation of IRN

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Dynamic QR code

All B2C invoices issued by a registered person whose aggregate turnover in any preceding financial year from
2017-18 onwards exceeds Rs. 500 crores, to have a QR code.

A Dynamic Quick Response (QR) code made available to buyer by such registered person through digital
display (with payment cross-reference) shall be deemed to be having QR code. The purpose of this provision
is to enable and encourage digital payments where buyer can scan the dynamic QR code and make payment
from mobile wallet directly.

Many shops have static QR code at the payment counter which is scanned by the buyer, but the buyer has to
enter the amount to be paid to the shop in the mobile payment App. The dynamic QR code, on the other hand,
will have the payment details and thus ‘scan and pay’ in one go is possible.

This has no relevance or applicability to the e-invoicing in respect to B2B supplies by notified class of taxpayers.
Dynamic QR Code will be generated by the seller himself either on the Point of Sale (PoS) machine or the
invoice issued.

Dynamic QR code is not applicable to an invoice issued to an unregistered person by following suppliers:
• Insurer or banking company or financial institution including NBFC
• GTA supplying services in relation to transportation of goods by road in a goods carriage
• Supplier of passenger transportation service
• Person supplying services by way of admission to exhibition of cinematograph films in multiplex screens
• Supplier of online information and database access or retrieval (OIDAR) services.

No Dynamic QR code in case of exports: As regards the supplies made for exports, though such supplies are
made by a registered person to an unregistered person, however, since e-invoices are required to be issued in
respect of supplies for exports treating them as B2B supplies, Dynamic QR code requirement will not be
applicable to them.

Dynamic QR Code, shall contain the following information: -

• Supplier GSTIN number
• Supplier UPI ID
• Payee’s Bank A/c number and IFSC
• Invoice number & invoice date,
• Total invoice value and
• GST amount along with breakup i.e. CGST, SGST, IGST, Cess, etc.
Further, Dynamic QR Code should be such that it can be scanned to make a digital payment

Compliance with the Dynamic QR Code requirements in certain cases

If the supplier has issued invoice having Dynamic QR Code for payment, the said invoice shall be deemed
to have complied with Dynamic QR Code requirements. Compliance with the Dynamic QR Code
requirements has been examined in the following cases:

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Case-I: If a supplier provides/ displays Dynamic QR Code, but the customer opts to make payment without
using Dynamic QR Code and supplier provides the cross reference of such payment made without use of
Dynamic QR Code, on the invoice
In cases where the supplier, has digitally displayed the Dynamic QR Code and the customer pays for the
invoice: -
(i) using any mode like UPI, credit/ debit card or online banking or cash or combination of various
modes of payment, with or without using Dynamic QR Code, and the supplier provides a cross
reference of the payment (transaction id along with date, time and amount of payment, mode of
payment like UPI, Credit card, Debit card, online banking etc.) on the invoice; or
(ii) in cash, without using Dynamic QR Code and the supplier provides a cross reference of the
amount paid in cash, along with date of such payment on the invoice;
said invoice shall be deemed to have complied with the requirement of having Dynamic QR Code.

Case-II: If a supplier makes available to customers an electronic mode of payment like UPI Collect, UPI
Intent or similar other modes of payment, through mobile applications or computer-based applications,
where though Dynamic QR Code is not displayed, but the details of merchant as well as transaction are
displayed/ captured otherwise
In such cases, if the cross reference of the payment made using such electronic modes of payment is made
on the invoice, the invoice shall be deemed to comply with the requirement of Dynamic QR Code.
However, if payment is made after generation/ issuance of invoice, the supplier shall provide Dynamic QR
Code on the invoice.

Case-III: In case of pre-paid invoices i.e. where payment has been made before issuance of the invoice
If cross reference of the payment received either through electronic mode or through cash or combination
thereof is made on the invoice, then the invoice would be deemed to have complied with the requirement of
Dynamic QR Code.
In cases other than pre-paid supply i.e. where payment is made after generation / issuance of invoice, the
supplier shall provide Dynamic QR Code on the invoice.

Case-IV: In case where the e-commerce operator (ECO)/online application has complied with the Dynamic
QR Code requirements, whether the suppliers using such e-commerce portal or application will still be
required to comply with the requirement of Dynamic QR Code?
Dynamic QR code requirements apply to each supplier/registered person separately, if such person is liable
to issue invoices with Dynamic QR Code for B2C supplies.
In case, the supplier is making supply through the e- commerce portal or application, and the said supplier
gives cross references of the payment received in respect of the said supply on the invoice, then such
invoices would be deemed to have complied with the requirements of Dynamic QR Code. In cases other
than pre-paid supply i.e. where payment is made after generation / issuance of invoice, the supplier shall
provide Dynamic QR Code on the invoice.

Case-V: In cases, where receiver of services is located outside India, and payment is being received by the
supplier of services ,through RBI approved modes of payment, but as per provisions of the IGST Act 2017,
the place of supply of such services is in India, then such supply of services is not considered as export of
services as per the IGST Act 2017; whether in such cases, the Dynamic QR Code is required on the
invoice issued, for such supply of services, to such recipient located outside India?
No. Wherever an invoice is issued to a recipient located outside India, for supply of services, for which the
place of supply is in India, as per the provisions of IGST Act 2017, and the payment is received by the
supplier, in convertible foreign exchange or in Indian Rupees wherever permitted by the RBI, such invoice
may be issued without having a Dynamic QR Code, as such dynamic QR code cannot be used by the
recipient located outside India for making payment to the supplier.

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Revised Tax Invoice [Sec. 31(3)(a) read with rule 53]
Every registered person who has been granted registration with effect from a date earlier than the date of
issuance of certificate of registration to him, may issue Revised Tax Invoices. Such invoices shall be issued
against the invoices already issued during said period. Revised Tax Invoice shall be issued within 1 month from
the date of issuance of certificate of registration. For supplies made by such person during this intervening
period, the law enables the issuance of a revised invoice, so that ITC can be availed by the recipient on such
supplies.
A registered person may issue a consolidated Revised Tax Invoice in respect of all taxable supplies made to
an unregistered recipient (B2C) during such period. In the case of inter-State supplies, where the value of a
supply does not exceed two lakh and fifty thousand rupees, a consolidated revised invoice may be issued
separately in respect of all the recipients located in a State, who are not registered under the Act. Particulars of
Debit & Credit Notes are also same as revised tax invoices.

Consolidated Revised Tax Invoice – B2C supply (Intra-State) :- No limit prescribed

Consolidated Revised Tax Invoice – B2C supply (Inter-State) :- State wise consolidated revised tax invoice. In
case of inter-State supplies, where the value of a supply doesn’t exceed INR 2,50,000, a consolidated revised
invoice may be issued separately in respect of all the recipients located in a State, who are not registered under
GST.

Government amended Rule 53 to distinguish the mandatory requirements in the issue of Revised invoice and
in the issue of debit note or credit note.
Revised invoice can be issued in one month of registration for all supplies done from the date on which
registration was applied till the date registration was granted.
By separating the requirements for revised invoice and debit or credit note the requirement for nature of
document in case of Revised invoice remains of no use and hence deleted. Also, the requirement for stating
the taxable value, rate of tax, amount of tax credited or debited in case of Revised invoice remains of no use
and hence deleted in amendment. {Notification No. 03/2019-Central Tax Dated 29.01.2019}

Any invoice or debit note issued in pursuance of any tax payable in accordance with the provisions of Section
74 (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or
utilized by reason of fraud or any willful misstatement or suppressions of facts), Section 129 (Detention, seizure
and release of goods and conveyances in transit), Section 130 (Confiscation of goods or conveyances and levy
of penalty), shall prominently contain the words, ‘INPUT TAX CREDIT NOT ADMISSIBLE”.

Consolidated Tax Invoice [Section 31(3)(b) read with rule 46]

A registered person, other than the supplier engaged in making supply of services by way of admission to
exhibition of cinematograph films in multiplex screens, may not issue a tax invoice if the value of goods or
services or both supplied is less than INR 200 and in lieu thereof, shall issue a consolidated tax invoice for such
supplies at the close of each day in respect of all such supplies, but subject to the following conditions, namely,-
(a) the recipient is not a registered person; and
(b) the recipient does not require such invoice, and

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Bill Of Supply [Section 31(3)(c) read with rule 49]
A registered person supplying exempted goods or services or both or paying tax under composition levy shall
issue a bill of supply instead of a tax invoice.

As per second proviso to Rule 49 of the CGST Rules, any tax invoice or any other similar document issued
under any other Act for the time being in force in respect of any non-taxable supply shall be treated as a bill of
supply for the purposes of GST Act.

Receipt Voucher [Section 31(3)(d) read with rule 50]

A registered person shall, on receipt of advance payment with respect to any supply of goods or services or
both, issue a receipt voucher evidencing receipt of such payment.

If rate of tax is not determinable, tax shall be paid at the rate of 18%. If nature of supply is not determinable then
same shall be paid as inter-State supply.

Refund Voucher [Section 31(3)(e) read with rule 51]

Where, on receipt of advance payment with respect to any supply of goods or services or both the registered
person issues a Receipt Voucher, but subsequently no supply is made and no tax invoice is issued in pursuance
thereof, the said registered person may issue to the person who made the payment, a Refund Voucher against
such payment.

Supplier permitted to issue any document other than tax

invoices [Section 31(2) and proviso to section 31(1) read with
rules 54 and 55]
Supplier of taxable service Document in lieu of the tax invoice
Optional information Mandatory information
Insurer/Banking • Serial Number Other information as prescribed
company/Financial • Address of the recipient for a Tax invoice, under rule 46
institution/NBFC of taxable service Such document may be
issued/made available,
physically/electronically
Where the supplier of taxable service is an insurer or a banking company or a financial institution,
including a non-banking financial company, the said supplier may issue a consolidated tax invoice or any
other document in lieu thereof, by whatever name called for the supply of services made during a month
at the end of the month, whether issued or made available, physically or electronically whether or not
serially numbered, and whether or not containing the address of the recipient of taxable service but
containing other information as mentioned under rule 46.
Goods Transport Agency (GTA) • Gross weight of the
supplying services in relation to consignment
transportation of goods by road • Name of the consignor
in a goods carriage and the consignee
• Registration number of
goods carriage in which

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Supplier of passenger • Serial number
transportation service • Address of the recipient
of taxable service
the goods are
transported
• Details of goods
transported
• Details of place of origin
and destination
• GSTIN of the person
liable for paying tax
whether as consignor,
consignee or GTA
• Other information as
prescribed for a tax
invoice
Other information as prescribed
for a tax invoice, under rule 46
Tax invoice shall include ticket
in any form, by whatever name
called

Supplying services by way of Required to issue an electronic

admission to exhibition of ticket and the said electronic
cinematograph films in multiplex ticket shall be deemed to be a
screens tax invoice for all purposes of
(the supplier of such service in a the Act, even if such ticket does
screen other than multiplex not contain the details of the
screens may, at his option, recipient of service but contains
follow the same procedure) the other information as
[Rule 54(4A)] mentioned under rule 46.
It is important to note here that keeping in view the large number of transactions in banking, insurance
and passenger transportation sector, taxpayers need not mention the address of the customer and the
serial number in their invoices.

Delivery Challan (Rule 55)

(1) For the purposes of-
(a) supply of liquid gas where the quantity at the time of removal from the place of business of the
supplier is not known,
(b) transportation of goods for job work,
(c) transportation of goods for reasons other than by way of supply, or
(d) such other supplies as may be notified by the Board, the consignor may issue a delivery
challan, serially numbered not exceeding sixteen characters, in one or multiple series, in lieu of
invoice at the time of removal of goods for transportation, containing the following details,
namely: -
(i) date and number of the delivery challan;
(ii) name, address and Goods and Services Tax Identification Number of the consignor, if
registered;
(iii) name, address and Goods and Services Tax Identification Number or
Unique Identity number of the consignee, if registered;
(iv) Harmonized System of Nomenclature code and description of goods;
(v) quantity (provisional, where the exact quantity being supplied is not known);
(vi) taxable value;
(vii) tax rate and tax amount – central tax, State tax, integrated tax, Union territory tax or cess,

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 where the transportation is for supply to the consignee;
(viii) place of supply, in case of inter-State movement; and
(ix) signature.
(2) The delivery challan shall be prepared in triplicate, in case of supply of goods, in the following
manner, namely: –
(a) the original copy being marked as ORIGINAL FOR CONSIGNEE;
(b) the duplicate copy being marked as DUPLICATE FOR TRANSPORTER; and
(c) the triplicate copy being marked as TRIPLICATE FOR CONSIGNOR.
(3) Where goods are being transported on a delivery challan in lieu of invoice, the same shall be
declared as specified in rule 138 (E-way Bill).
(4) Where the goods being transported are for the purpose of supply to the recipient but the tax invoice
could not be issued at the time of removal of goods for the purpose of supply, the supplier shall
issue a tax invoice after delivery of goods.
(5) Where the goods are being transported in a semi knocked down or completely knocked down
condition or in batches or lots {Inserted vide Notification No. 39/2018-CT, Dated 04.09.2018} –
(a) the supplier shall issue the complete invoice before dispatch of the first consignment;
(b) the supplier shall issue a delivery challan for each of the subsequent consignments, giving
reference of the invoice;
(c) each consignment shall be accompanied by copies of the corresponding delivery challan along
with a duly certified copy of the invoice; and
(d) the original copy of the invoice shall be sent along with the last consignment.

This procedure is possible and practical when machinery is dispatched in span of few day. In case
of large machinery, if supply is likely to be spread over months or even years, separate invoice for each
consignment is the only practical solution.

Tax Invoice or Bill of Supply to accompany transport of goods

(Rule 55A)
The person-in-charge of the conveyance shall carry a copy of the tax invoice or the bill of supply issued in
accordance with the provisions of rule 46 (tax invoice), 46A (invoice cum Bill of supply) or 49 (Bill of supply) in
a case where such person is not required to carry an e-way bill under these rules.

Tax Invoice by ISD [Rule 54 (1) & 54 (1A)

This Rule 54 (1) is applicable when ISD has to distribute the ITC to the various units.
(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor credit note
issued by an Input Service Distributor shall contain the following details:-
(a) name, address and Goods and Services Tax Identification Number of the Input Service
Distributor;
(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolized
as- “-”, “/” respectively, and any combination thereof, unique for a financial year;
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number of the recipient to whom
the credit is distributed;
(e) amount of the credit distributed; and
(f) signature or digital signature of the Input Service Distributor or his authorized representative:
Provided that where the Input Service Distributor is an office of a banking company or a financial
institution, including a non-banking financial company, a tax invoice shall include any document in lieu
thereof, by whatever name called, whether or not serially numbered but containing the information as

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 mentioned above.

This Rule 54 (1A) is applicable when registered person in its own GSTIN gets the invoice from supplier (i.e.
If supplier doesn’t raise the invoice on GSTIN of ISD), then registered person may issue this document to
ISD so as to further allocate the ITC to the units.
(1A) (a) A registered person, having the same PAN and State code as an Input Service Distributor, may issue
an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the
Input Service Distributor, which shall contain the following details:-
i. name, address and Goods and Services Tax Identification Number of the registered person having the same
PAN and same State code as the Input Service Distributor;
ii. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets
or numerals or special characters -hyphen or dash and slash symbolised as ―-‖ and ―/‖ respectively, and any
combination thereof, unique for a financial year;
iii. date of its issue;
iv. Goods and Services Tax Identification Number of supplier of common service and original invoice number
whose credit is sought to be transferred to the Input Service Distributor;
v. name, address and Goods and Services Tax Identification Number of the Input Service Distributor;
vi. taxable value, rate and amount of the credit to be transferred; and
vii. signature or digital signature of the registered person or his authorised representative.
(b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common
services.

Section 31A Facility of digital payment to recipient

The Government may, on the recommendations of the Council, prescribe a class of registered persons who
shall provide prescribed modes of electronic payment to the recipient of supply of goods or services or both
made by him and give option to such recipient to make payment accordingly, in such manner and subject to
such conditions and restrictions, as may be prescribed.

Section 34 Credit & Debit Notes

(1) Where a tax invoice has one or more tax invoices have been issued for supply of any goods or services or
both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable
in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services
or both supplied are found to be deficient, the registered person, who has supplied such goods or services or
both, may issue to the recipient a credit note one or more credit notes for supplies made in a financial year
containing such particulars as may be prescribed.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall
declare the details of such credit note in the return for the month during which such credit note has been issued
but not later than September following the end of the financial year in which such supply was made, or the date
of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such
manner as may be prescribed:

Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and
interest on such supply has been passed on to any other person.

(3) Where a tax invoice has where one or more tax invoices have been issued for supply of any goods or
services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable
value or tax payable in respect of such supply, the registered person, who has supplied such goods or services

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or both, shall issue to the recipient a debit note one or more debit notes for supplies made in a financial year
containing such particulars as may be prescribed.

(4) Any registered person who issues a debit note in relation to a supply of goods or services or both shall
declare the details of such debit note in the return for the month during which such debit note has been issued
and the tax liability shall be adjusted in such manner as may be prescribed.

Explanation.––For the purposes of this Act, the expression “debit note” shall include a supplementary invoice.

It has to be strictly borne in mind that a credit or a debit note, for the purpose of the GST Law, can be issued by
the registered person who has issued a tax invoice, i.e. the supplier.

One need to bear in mind that mechanism of credit note must not be used to offset the liability of GST on account
of bad debts, which is not permissible under specified purposes of credit note U/s 34 (1).

In Section 34 amendment is made to enable the registered person to issue a single or multiple credit notes or
debit notes against multiple invoices.

Rule 53 sub-Rule (1A) is inserted to provide the mandatory requirements for the issue of credit note or debit
note. The content remain more or less same. In debit or credit note, “serial number(s) and date(s) of the
corresponding tax invoice(s) or, as the case may be, bill(s) of supply”, need to be mentioned.

Example 3: ABC supplied 10 televisions to XYZ for Rs. 6,00,000 on 25.02.2018. Accordingly, GST on the same
was discharged in the month of February, paid on 20.03.2018. Later it was realized that out of 10 sets of
television, one television was of lower grade model and hence Rs. 10,000 has been billed extra to XYZ. But
such credit note can be issued till 30.09.2018 so as to adjust the tax liability paid extra on Rs. 10,000. Based
on the credit note of ABC, XYZ will reduce the amount of ITC availed on Rs. 10,000.

Circular No. 72/46/2018 Dated 26th October 2018

The circular provides two options which can be followed for return of expired drugs or medicine:
The retailer or the wholesaler can issue tax invoice/bill of supply/commercial invoice, as the case may be,
by treating return of expired goods as fresh supply, or
The manufacturer/wholesaler can issue a credit note against the supply made earlier to the wholesaler/
retailer.

Return of time expired goods to be treated as fresh supply

If the wholesaler/retailer is a registered person, it can return the goods by treating it as a fresh supply and
thereby issuing an invoice for the same. The value of the said goods as shown in the invoice on the basis
of which the goods were supplied earlier may be taken as the value of such return supply. The recipient
i.e. the manufacturer or wholesaler as the case may be, will be eligible to take credit of tax paid.
Further, if the person returning the goods, is a composition taxpayer, then he may return goods by issuing
a bill of supply and pay applicable tax. In such case, credit will not be available to the person to whom
goods are returned.
If the expired goods are returned by an unregistered person, then he may return the goods under the
cover of any commercial document.

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 Where the returned expired goods are destroyed by the manufacturer, it is required to reverse the credit
availed in respect of such returned goods in view of provisions of section 17(5)(h) of the Central Goods
and Services Tax Act and not the credit attributable to the manufacture of such time expired goods.
Illustration: Supposedly, manufacturer has availed ITC of Rs. 10/- at the time of manufacture of medicines
valued at Rs. 100/-. At the time of return of such medicine on the account of expiry, the ITC available to
the manufacturer on the basis of fresh invoice issued by wholesaler is Rs. 15/-. So, when the time expired
goods are destroyed by the manufacturer he would be required to reverse ITC of Rs. 15/- & not of Rs.
10/-.

Return of time expired goods by issuing the credit note

As an alternative to the above procedure, the supplier can issue a credit note to the person returning the
goods. The person returning such expired medicines can return it by issuing a delivery challan.
If the credit note is issued within the time limit specified in section 34(2) of the CGST Act, the supplier can
adjust his tax liability, if the person returning the medicine has either not availed ITC or reversed the ITC,
if availed.
A credit note can still be issued if the time limit specified in section 34(2) of the CGST Act has lapsed.
However, the supplier cannot adjust the tax liability. It is also clarified that in such cases, there is no
requirement to declare such credit note on GSTN by the supplier.
The manufacturer will be required to reverse the ITC attributable to the manufacture of such goods at the
time of destruction of such time expired medicines

Further, this circular is applicable to such other scenarios where the goods are returned on account of other
reasons.

Section 32 Prohibition of Unauthorized collection of Tax

A person who is not a registered person shall not collect in respect of any supply of goods or services or both
any amount by way of tax under this Act.

No registered person shall collect tax except in accordance with the provisions of this Act or the rules made
thereunder.

Section 33 Amount of tax to be indicated in tax invoice and

other documents
Notwithstanding anything contained in this Act or any other law for the time being in force, where any supply is
made for a consideration, every person who is liable to pay tax for such supply shall prominently indicate in all
documents relating to assessment, tax invoice and other like documents, the amount of tax which shall form
part of the price at which such supply is made.

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Goods moved within the State or from the State of registration to
another State for supply on approval basis and art works sent by artists
to galleries for exhibition
Suppliers of jewellery etc. who are registered in one State may have to visit other States (other than their State
of registration) and need to carry the goods (such as jewellery) along for approval. In such cases if jewellery
etc. is approved by the buyer, then the supplier issues a tax invoice only at the time of supply. Since the
suppliers are not able to ascertain their actual supplies beforehand and while ascertainment of tax liability in
advance is a mandatory requirement for registration as a casual taxable person, the supplier is not able to
register as a casual taxable person. Such goods are also carried within the same State for the purposes of
supply.

In view of relevant provisions of rule 55, it is clarified that the goods which are taken for supply on approval
basis can be moved from the place of business of the registered supplier to another place within the same State
or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice
may be issued at the time of delivery of goods. For this purpose, the person carrying the goods for such supply
can carry the invoice book with him so that he can issue the invoice once the supply is fructified. [Circular No.
10/10/2017 GST Dated 18.10.2017].

Likewise, in case where artists supply art works in different States - other than the State in which they are
registered as a taxable person and if the art work is selected by the buyer, then the supplier issues a tax invoice
only at the time of supply, it is clarified that the art work for supply on approval basis can be moved from the
place of business of the registered person (artist) to another place within the same State or to a place outside
the State on a delivery challan along with the eway bill wherever applicable and the invoice may be issued at
the time of actual supply of art work.
[Circular No. 22/22/2017 GST Dated 21.12.2017].

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 Question & Answer
Q1. ABC Ltd. entered into a contract with XYZ Ltd., for supply of goods on 15th August 2017. The goods were
to be delivered on 30th August 2017. ABC Ltd. removed goods on 28th August 2017. When should ABC Ltd.
issue the tax invoice?
A. 28th August 2017 according to section 31.

Q2. The aggregate turnover of ABC Ltd. exceeded Rs. 20 Lacs on 15 th August 2017. It applied for registration
on 5th September 2017 and was granted registration on 7th September 2017. Please give your commentary for
this.
A. As per Section 25 of CGST Act, ABC Ltd. has applied within 30 days of becoming liable for registration. So,
effective date of registration is date on which it becomes liable to registration i.e. 15 th August 2017.
As per Section 31, ABC Ltd. has to issue the revised tax invoices in respect of taxable supplies effected
during the period starting from the effective date of registration i.e. 15 th August 2017, till date of issuance
certificate of registration i.e. 7th September 2017 within 1 month from the date of issuance of certificate of
registration i.e. on or before 7th October 2017.

Q3. ABC Ltd. is a trader dealing in provisions items. It is registered under GST and has undertaken following
sales during the day:
Sr. No. Recipient of Supply Amount
1 A – a registered retail dealer under composition levy 190
2 B – an unregistered dealer 500
3 C – an unregistered buyer 900
4 D Charitable Trust – an unregistered entity 175
5 E – a senior citizen – an unregistered 150
None of the recipients require a tax invoice.
A. In the given question, ABC Ltd. can issue a consolidated tax invoices to supplies made to D Charitable
trust & E as the value of goods supplied to these recipients is less than Rs. 200 (unregistered & don’t require
a tax invoice).
Although A sales is less than Rs. 200 but A is registered retail dealer. So consolidated invoice cannot be
issued. Other sales are anyway more than Rs. 200, so consolidated invoice cannot be issued.

Q4. When can a taxable person not issue credit note?

A. According to proviso to Sec 34(2) of the CGST Act, 2017, no credit note shall be issued by the taxable
person if the incidence of tax and interest on such supply has been passed by the supplier to the recipient. No
reduction in output tax liability of the supplier shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.

Q5. What is the time limit for issuance of credit note?

A. A supplier cannot issue a credit note pertaining to a supply of goods or services or both of a particular
financial year later than the
(i) Month of September following the end of the financial year in which such supply was made, or
(ii) Date of furnishing of the relevant annual return.
Whichever is earlier.
Example: Suppose, Mr. A has supplied goods to Mr. B in the month of Sept’17. Mr. B sends a complaint to Mr.
A about deficient quality of goods. Mr. A can issue a credit note to Mr. B in respect of such supply of goods
and declare details of such credit note in the return till the month of Sept’18 or till the date of furnishing of
annual return of 2017-18, whichever is earlier.

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Q6. When can a debit note be issued? Is there any time limit for issue of debit note?
A. Debit note can be issued by the supplier of the goods or services or both, to the recipient, when
subsequent to the issue of tax invoice he comes to know that taxable value or tax charged in that tax invoice
is less than the taxable value or tax payable with respect to such supply
Example: Mr. A has provided services of dry cleaning to Mr. B and charges Rs. 500 and tax at the rate of 12%
i.e. Rs. 60. Afterwards, Mr. A comes to know that he has undercharged Mr. B by Rs. 200. He communicates
to Mr. B that he has charged Mr. B less by Rs. 200 and issues debit note and charges additional tax of Rs. 24.
In such a case, tax liability of Mr. A would be on Rs. 700 only and he would have to pay tax of Rs. 84.
There is no time limit for issuance of debit note.

Q7. I am constructing a building for my client. The client is required to pay me on completion of plinth, 1st
floor and 2nd floor. When should the invoice be raised?
A. The above instance is a case of continuous supply of services. Here, since the payment is linked to
completion of an event (i.e., milestones set in the contract), an invoice should be raised on or before
the due date of completion of event as per section 31(5)(c) of the CGST Act, 2017. Therefore, an
invoice be raised on or before completion of the 1st floor and the second time on or before the completion
of 2nd floor.

Q8. I had a contract for supplying manpower for 28 days for Rs. 28,000/-. However, after 10 days, the service
has stopped. Should I raise an invoice?
A. Yes. Where a supply of service ceases before its completion, an invoice has to be issued at the time the
supply ceases, i.e., on the 10th day. The invoice shall be issued to the extent of the service provided before its
cessation. (Section 31(6) of the CGST Act,2017).

Q9. ABC Ltd., located in Pune (Maharashtra), received the advance to supply the training. As per the
agreement, the supplier may have to impart the training to Jaipur branch or Mumbai branch (both are
registered place of recipient) as per the need. What should be the treatment?
A. At the time of receiving the advance, supplier is known that where he has impart the training. Nevertheless,
he has to issue the receipt voucher at the time of receipt of advance. As far as, nature of supply is concerned,
he will have to treat it as inter-State supply and will have to pay IGST on it. If later on it is supplied that it was
imparted in Mumbai Branch (intra-State supply), then as per Section 19 of IGST Act, it says that person will
pay correct tax (here, it is CGST+SGST, being found as intra-State supply) without interest and claim the
refund of IGST paid.

Q10. How can I supply goods without movement?

A. In cases where the ownership, or the risks and rewards are transferred without requiring the movement of
goods, the goods would be treated as supplied although no movement is involved in effecting such supply.
E.g. when an Agent who is in possession of certain goods decides to buy the goods from the principal, or in
case where there is an on-site installation of machinery, or in case of sale and lease back transactions, etc.

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Section 35 Accounts & Records
Section 36 Period of retention of accounts
Section 68 Inspection of goods in movement
Rule 138 E-way Bill

Section 35 Accounts & Records & Section 36 Period of

retention of accounts

Applicability [Sec. 35(1)] Every Registered person

Location [Sec. 35(1)] At the principal place of business, as mentioned in the certificate of registration.
In case of more than one place of business, the accounts relating to each place
of business shall be kept at such places of business.
Records to be kept [Sec. Registered Person shall keep and maintain, a true and correct account of –
35(1)] a) Production or Manufacture of goods;
b) Inward & outward supply of goods or services or both;
c) Stock of goods;
d) Input Tax credit availed;
e) Output tax payable and paid; and
f) Such other prescribed particulars.
Electronic Form The registered person may keep and maintain such accounts and other
particulars in electronic form stored on any electronic device and record so
maintained shall be authenticated by means of a digital signature. Back up of
records shall be maintained. Whenever demanded, provide authenticated hard
copy or in any electronically readable format, relevant passwords, codes etc. No
entry to be erased/overwritten.
Persons covered for 1. Following persons shall mandatorily maintain records of the Consignor,
mandatory Maintenance Consignee and other prescribed details: -
of records [Sec. 35(2) a) Every owner or operator of warehouse or godown or any other place
read with rule 58] used for storage of goods and
b) Every transporter
2. If such persons are not already registered, they shall obtain a unique
enrollment number by applying electronically at the GST common portal.
3. Records to be maintained: -
a) Persons engaged in the business of Transporting Goods: Records
of goods transported, delivered and goods stored in transit by him along
with GSTIN of the registered consignor and consignee for each of his
branches.
b) Owner or Operator of warehouse or Godown: Books of Accounts,
with respect to the period for which particular goods remain in the
warehouse, including the particulars relating to dispatch, movement,
receipt, and disposal of such goods.
For the purposes of Chapter XVI of these rules, a transporter who is registered
in more than one State or Union Territory having the same Permanent Account
Number, he may apply for a unique common enrolment number by submitting
the details in FORM GST ENR-02 using any one of his Goods and Services Tax
Identification Numbers, and upon validation of the details furnished, a unique

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Power of Commissioner
[Sec. 35(3) & 35(4)]
Requirement for Audit
[Sec. 35(5)]
Failure to Account for
Goods or Services [Sec.
35(6)]
Records prescribes by
rules [Rule 56(1), (3), (5)
& (6)]
Records which are not to
be maintained by a
supplier opting for
composition levy [Rule
56(2) & (4)]
Records to be maintained
by Agent [Rule 56(11)]
common enrolment number shall be generated and communicated to the said
transporter:
Provided that where the said transporter has obtained a unique common
enrolment number, he shall not be eligible to use any of the Goods and Services
Tax Identification Numbers for the purposes of the said Chapter XVI.
Rule 58 (1A) - Inserted vide notification No. 28/2018-CT, Dated 19.06.2018
Chapter XVI is related to e-way rules. Transporter may apply for a unique
common enrollment number for all his registration under GST. After obtaining
unique common enrolment number, he shall not be eligible to use any of GSTIN
for the purpose of e-way rules.
a) May also notify a person to maintain additional accounts or documents
b) May permit to maintain in prescribed manner.
Every registered person whose turnover during a financial year exceeds the Rs.
2 crores, must get his accounts audited by a Chartered Accountant or Cost
Accountant. He shall submit a copy of the
• Audited Annual accounts, and
• A reconciliation statement u/s 44(2) [to reconcile the value of supplies
declared in the returns with the audited annual financial statements] &
• Such other documents as may be prescribed
Provided that nothing contained in this sub-section shall apply to any
department of the Central Government or a State Government or a local
authority, whose books of account are subject to audit by the Comptroller and
Auditor-General of India or an auditor appointed for auditing the accounts of
local authorities under any law for the time being in force.
Proper officer shall determine the of tax payable on the goods or services or
both that are not accounted for. Also, provisions regarding determination of tax
not paid or short paid due to Fraud or other reasons shall be equally apply for
determination of such tax.
Every registered person shall keep and maintain a True and Correct Account of
the following –
a) The goods/services imported/exported
b) Supplies attracting payment of tax on reverse charge along with
relevant documents, including invoices, bills of supply, delivery
challans, credit notes, debit notes, receipt vouchers, payment vouchers
and refund vouchers
c) Separate account of advances received, paid and adjustments made
thereto
Registered person also required to keep complete address of suppliers from he
has received goods or services, to whom he has supplies goods or services. He
is also required to keep the particulars of the complete address of premises
where goods are stored by him. If any taxable goods found to be stored at any
place other than those so declared without proper documents then proper officer
shall determine the amount of tax payable on such goods.
a) Stock of goods: No need to keep records of goods received, supplied,
opening balance, goods lost, stolen, destroyed, written off or disposed
of by way of gift or free sample and balance stock.
b) Details of Tax: Account, containing the details of tax payable (including
tax payable under reverse charge), tax collected and paid, input tax,
ITC claimed, together with a register of tax invoice, credit notes, debit
notes, delivery challan issued or received during any tax period.
a) Particulars of authorization received by him from each principal to
receive or supply goods or services on behalf of such principal
separately;
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 b) Particulars including description, value and quantity (wherever
applicable) of goods or services received on behalf of every principal;
c) Particulars including description, value and quantity (wherever
applicable) of goods or services supplied on behalf of every principal;
d) Details of accounts furnished to every principal; and
e) Tax paid on receipts or on supply of goods or services effected on
behalf of every principal;
Records to be maintained Monthly production accounts showing quantitative details of raw materials or
by manufacturer [Rule services used in the manufacture and quantitative details of the goods or
56(12)] manufactured including the waste and by products thereof.
Records to be maintained Account showing quantitative details of goods used in the provision of services,
by a supplier of services details of input services utilized and the services supplied.
[Rule 56(13)]
Separate Accounts to be a) The names and addresses of the person on whose behalf the works
maintained by a contract is executed
registered person b) Description, value and quantity of goods or services received for the
executing works contracts execution of works contract
[Rule 56(14)] c) Description, value and quantity of goods or services utilized in the
execution of works contracts
d) The details of payment received in respect of each works contract and
e) The names and addresses of suppliers from whom he received goods
or services
Records to be maintained Any person having custody over the goods in the capacity of a carrier or a
by a custodian/clearing clearing and forwarding agent for delivery or dispatch thereof to a recipient on
and forwarding agent behalf of any registered person shall maintain true and correct records in respect
[Rule 56(17)] of such goods handled by him on behalf of such registered person and shall
produce the details thereof as and when required by the proper officer
Period of Retention of Till expiry of 72 months from the due date of furnishing of annual return
Accounts [Section 36]
Extended time limit If a registered person, is a party to
a) An appeal or shall retain the
b) Revision or accounts & other
c) Any other proceedings before any records pertaining
Appellate Authority or Revisional to the subject
Authority or Appellate Tribunal or matter
Court, or - for a period of
d) Is under investigation for an offence 1 year after final
disposal of
such matter or
for 72 months
whichever is
later
Requirement of In case of auction of tea, coffee, rubber etc., the requirement of maintaining the
maintaining the books of books of accounts at the Principal Place of Business (PPoB) and Additional
accounts in case of Place(s) of Business (APoB) is as below:
auction of tea, coffee, a. For the purpose of auction of tea, coffee, rubber, etc, the principal and the
rubber etc. auctioneer may declare the warehouses, where such goods are stored, as
[Circular No. 47/21/2018 their APoB. The buyer is also required to disclose such warehouse as his
GST Dated 08.06.2018] APoB if he wants to store the goods purchased through auction in such
warehouses. For the purpose of supply of tea through a private treaty, the
principal and an auctioneer may also comply with the said provisions.
b. The principal and the auctioneer for the purpose of auction of tea, coffee,
rubber etc., or the principal and the auctioneer for the purpose of supply

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 of tea through a private treaty, are required to maintain the books of
accounts relating to each and every place of business in that place itself
in terms of the first proviso to section 35(1) of the CGST Act [discussed
earlier]. However, in case difficulties are faced in maintaining the books of
accounts, it is clarified that they may maintain the books of accounts
relating to the APoB at their PPoB instead of such additional place(s).
c. The principal and the auctioneer for the purpose of auction of tea, coffee,
rubber etc., or the principal and the auctioneer for the purpose of supply
of tea through a private treaty, shall intimate their jurisdictional officer in
writing about the maintenance of books of accounts relating to the APoB
at their PPoB.
ITC availment: It is further clarified that the principal and the auctioneer for the
purpose of auction of tea, coffee, rubber etc., or the principal and the auctioneer
for the purpose of supply of tea through a private treaty, shall be eligible to avail
ITC subject to the fulfilment of other provisions of the CGST Act read with the
rules made thereunder.

Section 68 Inspection of goods in movement

Sec. 68(1) Carrying of documents
For the movement of goods, the person in charge of a conveyance may require to carry such documents as
may be specified by the government and such devices as may be prescribed. The documents may be required
to carry by the person in charge only in case if they are exceeding the value specified in this respect.
Sec. 68(2) Validation of documents
The details of documents required to be carried under sub-section (1) shall be validated in such manner as may
be prescribed.
Sec. 68(3) Inspection of documents
Proper officer may intercept any person in charge carrying goods in conveyance to produce such documents
and devices as prescribed in sub-section (1) to check the validity of the movement of goods, and such person
in charge of goods will be required to produce the same for verification.

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300
Rule 138 Information to be furnished prior to commencement of
movement of goods and generation of e-way bill

E-way bill is of three parts:

Part A is description of
goods, which is normally
expected to be filled by
consignor, but can be filled
by others also.

Part B is description of
mode of transport, which is
normally expected to be
filled in by transporter but in
many cases, by other also.

The third part is unique e-

way bill number and date,
which is generated on
common portal once both
parts get filled up.

(1) Every registered person who causes movement of goods of consignment value exceeding Rs. 50,000:
(i) In relation to a supply; or
(ii) For reasons other than supply; or
(iii) Due to inward supply from an unregistered person,
shall, before commencement of such movement, furnish information relating to the said goods as
specified in Part A of Form GST EWB-01, electronically, on the common portal and a unique number
will be generated on the said portal.

Transporter, may furnish such information on authorization from the registered person.

ECO or courier agency, may furnish such information on authorization from the consigner.

In case of job work, principal/job worker (if registered) can furnish information if it is inter-State,
irrespective of value of consignment.

In case of interstate supply of handicraft goods, even if person has been exempted from the requirement
of obtaining registration, e-way bill shall be generated irrespective of value of consignment.
Consignment value of goods would be value, determined in accordance with Section 15 and
would be declared in an invoice, bill of supply or a delivery challan and include central tax,
State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude
the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable
supply of goods.
(2) Where the goods are transported by registered person as a consignor or the recipient of supply as the
consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the said person
shall generate the e-way bill in Form GST EWB-01 on the common portal after furnishing information in
Part B of Form GST EWB-01.

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(2A)Where the goods are transported by railways or by air or vessel, the e-way bill shall be
generated by registered supplier or registered recipient. He shall generate before or after the
commencement of movement, the information in Part B of Form GST EWB-01. Where the goods are
transported by railways, the railways shall not deliver the goods unless the e-way bill is produced for
delivery.
(3) Where the e-way bill is not generated under sub-rule (2) and the goods are handed over to a transporter for
transportation by road, the registered person shall furnish the information relating to the transporter on the
common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of
the information furnished by the registered person in Part A of FORM GST EWB-01:
Provided that the registered person or, the transporter may, at his option, generate and carry the e-way bill
even if the value of the consignment is less than fifty thousand rupees:
Provided further that where the movement is caused by an unregistered person either in his own
conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the
e-way bill in FORM GST EWB-01 on the common portal in the manner specified in this rule:
Provided also that where the goods are transported for a distance of upto fifty kilometers within the State or
Union territory from the place of business of the consignor to the place of business of the transporter for
further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish
the details of conveyance in Part B of FORM GST EWB-01.
Explanation 1.– For the purposes of this sub-rule, where the goods are supplied by an unregistered supplier
to a recipient who is registered, the movement shall be said to be caused by such recipient if the recipient
is known at the time of commencement of the movement of goods.
Explanation 2.- The e-way bill shall not be valid for movement of goods by road unless the information in
Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the
third proviso to sub-rule (3) and the proviso to sub rule (5).
(4) Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN) shall be made
available to the supplier, the recipient and the transporter on the common portal.
(5) Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has
provided information in Part A of the FORM GST EWB-01, or the transporter shall, before such transfer and
further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part
B of FORM GST EWB-01:
Provided that where the goods are transported for a distance of upto fifty kilometers within the State or
Union territory from the place of business of the transporter finally to the place of business of the consignee,
the details of the conveyance may not be updated in the e-way bill.
(5A)The consignor or the recipient, who has furnished the information in Part A of FORM GST
EWB-01, or the transporter, may assign the e-way bill number to another registered or enrolled
transporter for updating the information in Part B of FORM GST EWB-01 for further movement of
the consignment:
Provided that after the details of the conveyance have been updated by the transporter in Part B of
FORM GST EWB-01, the consignor or recipient, as the case may be, who has furnished the information
in Part A of FORM GST EWB-01 shall not be allowed to assign the e-way bill number to another
transporter.
(6) After e-way bill has been generated in accordance with the provisions of sub-rule (1), where multiple
consignments are intended to be transported in one conveyance, the transporter may indicate the serial
number of e-way bills generated in respect of each such consignment electronically on the common portal
and a consolidated e-way bill in FORM GST EWB-02 maybe generated by him on the said common portal
prior to the movement of goods.

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 Example 1: ABC transport in Kashmir, has to transport 3 different type of goods to 3 different traders in New
Delhi. All 3 consignments are being transported against 3 different invoices issued by 3 different traders
but, will be transported in a single truck. ABC transport may generate a consolidated e-way bill.
(7) Where the consignor or the consignee has not generated the e-way bill in FORM GST EWB-01 and the
aggregate of the consignment value of goods carried in the conveyance is more than fifty thousand rupees,
the transporter, except in case of transportation of goods by railways, air and vessel, shall, in respect of
inter-State supply, generate the e-way bill in FORM GST EWB-01 on the basis of invoice or bill of supply or
delivery challan, as the case may be, and may also generate a consolidated e-way bill in FORM GST EWB-
02 on the common portal prior to the movement of goods:
Provided that where the goods to be transported are supplied through an e-commerce operator or a courier
agency, the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce operator
or courier agency. (Provisions of Rule 138 (7) not notified yet)
(8) The information furnished in Part A of FORM GST EWB-01 shall be made available to the registered
supplier on the common portal who may utilize the same for furnishing the details in FORM GSTR-1:
Provided that when the information has been furnished by an unregistered supplier or an unregistered
recipient in FORM GST EWB-01, he shall be informed electronically, if the mobile number or the e-mail is
available.
(9) Where an e-way bill has been generated under this rule, but goods are either not transported or are not
transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on
the common portal within twenty four hours of generation of the e-way bill:
Provided that an e-way bill cannot be cancelled if it has been verified in transit in accordance with the
provisions of rule 138B:
Provided further that the unique number generated under sub-rule (1) shall be valid for a period of fifteen
days for updation of Part B of FORM GST EWB-01.
(10)An e-way bill or a consolidated e-way bill generated under this rule shall be valid for the period as mentioned
in column (3) of the Table below from the relevant date, for the distance, within the country, the goods have
to be transported, as mentioned in column (2) of the said Table:-

Sr. No. Distance Validity Period

1. Upto 100 KM 200 One day in cases other than Over Dimensional Cargo or multimodal
KM shipment in which at least one leg involves transport by ship
2. For every 100 KM One additional day in cases other than Over Dimensional Cargo or
200 KM, or part multimodal shipment in which at least one leg involves transport by
thereof thereafter ship
3. Upto 20 KM One day in case of Over Dimensional Cargo or multimodal shipment
in which at least one leg involves transport by ship
4. For every 20 KM or One additional day in case of Over Dimensional Cargo or multimodal
part thereof shipment in which at least one leg involves transport by ship
thereafter

Example 2: Suppose eway bill generated on April 1, 2021 at 5 p.m. for transport of cargo which will cover
a distance of 110 kms. This eway bill will be valid for one day (till mid night of April 2, 2021);
Suppose eway bill generated on April 1, 2021 at 5 p.m. for transport of cargo which will cover a distance of
290 kms. This eway bill will be valid for two days (till mid night of April 3, 2021).

Provided that the Commissioner may, on the recommendations of the Council, by notification, extend the
validity period of an e-way bill for certain categories of goods as may be specified therein:

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 Provided further that where, under circumstances of an exceptional nature, including trans-shipment, the
goods cannot be transported within the validity period of the e-way bill, the transporter may extend the
validity period after updating the details in Part B of FORM GST EWB-01, if required.
Provided also that the validity of the e-way bill may be extended within eight hours from the time of its expiry.
Explanation 1.—For the purposes of this rule, the ―”relevant date” shall mean the date on which the e-way
bill has been generated and the period of validity shall be counted from the time at which the e-way bill has
been generated and each day shall be counted as the period expiring at midnight of the day immediately
following the date of generation of eway bill.
Explanation 2.— For the purposes of this rule, the expression ―”Over Dimensional Cargo” shall mean a
cargo carried as a single indivisible unit and which exceeds the dimensional limits prescribed in rule 93 of
the Central Motor Vehicle Rules, 1989, made under the Motor Vehicles Act, 1988.
(11)The details of the e-way bill generated under this rule shall be made available to the-
(a) supplier, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by
the recipient or the transporter; or
(b) recipient, if registered, where the information in Part A of FORM GST EWB-01 has been furnished by
the supplier or the transporter,
on the common portal, and the supplier or the recipient, as the case may be, shall communicate his
acceptance or rejection of the consignment covered by the e-way bill.
(12)Where the person to whom the information specified in sub-rule (11) has been made available does not
communicate his acceptance or rejection within seventy two hours of the details being made available to
him on the common portal, or the time of delivery of goods whichever is earlier, it shall be deemed that he
has accepted the said details.
(13)The e-way bill generated under this rule or under rule 138 of the Goods and Services Tax Rules of any
State or Union territory shall be valid in every State and Union territory.
(14) Specific goods that are exempt from eway bill rules are:
1. Transportation of those goods laid down in the annexure to rules as specified below:
1. Liquefied petroleum gas for supply to household and non-domestic exempted
category customers
2. Kerosene oil sold under PDS
3. Postal baggage transported by Department of Posts
4. Natural or cultured pearls and precious or semi-precious stones; precious metals and
metals clad with precious metal
5. Jewellery, goldsmiths’ and silversmiths’ wares and other articles
6. Currency
7. Used personal and household effects
8. Unworked and worked coral
2. Goods being transported are alcoholic liquor for human consumption, petroleum crude, high-speed
diesel, petrol, natural gas or aviation turbine fuel.
3. Goods being transported are not treated as supply under Schedule III of the Act (Schedule III consists
of activities that would neither be supply of goods nor service like service of an employee to an employer
in the course of his employment, functions performed by MP, MLA etc.)
4. Goods transported are empty cargo containers
5. Goods, other than de-oiled cake, being transported are specified in notification No. 2/2017– Central tax
(Rate) Dated the 28th June, 2017. Few of the goods that are included in the above notification are as
follows:
▪ Curd, lassi, buttermilk
▪ Fresh milk and pasteurized milk not containing added sugar or other sweetening matter
▪ Vegetables
▪ Fruits
▪ Unprocessed tea leaves and unroasted coffee beans

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 ▪ Live animals, plants and trees
▪ Meat
▪ Cereals
▪ Unbranded rice and wheat flour
▪ Salt
▪ Items of educational importance (books, maps, periodicals)
6. Goods exempted under notification No. 7/2017– Central Tax (Rate) Dated 28th June 2017 (supply by
CSD to unit run canteens and authorized customers) and notification No. 26/2017– Central Tax (Rate)
Dated 21st September 2017 (consists of heavy water and nuclear fuels)
7. Where empty cylinders for packing of liquefied petroleum gas are being moved for reasons other than
supply.

Other transactional cases where eway bill is not required are:

1. Eway bill is optional for Goods of value less than Rs. 50,000 (except in cases of mandatory Eway bill
provisions like the movement of Handicraft goods and movement of goods for Inter-state Job work )
2. If goods are being transported by a non- motorized conveyance (Ex. Horse carts or manual carts)
3. If goods are being transported:
1. From the port, airport, air cargo complex and land customs station to an inland
container depot (ICD) or a container freight station (CFS) for clearance by Customs
2. From ICD or CFS to a customs port, airport, air cargo etc. under customs bond
3. From one customs port/station to another one under customs bond
4. Goods transported under the customs supervision or customs seal
4. Goods transported within the notified area
5. Goods transported are transit from/to Nepal/ Bhutan
6. If goods are transported to a weighbridge within 20kms and back to the place of business by being
covered under a Delivery Challan
7. Where Government or local authorities transport goods by rail as a consignor
8. Goods transported are to/from the Ministry of Defense

Rule 138A Documents and devices to be carried by a person-in-

charge of a conveyance
Rule 138A(1)

The person-in-charge of conveyance shall carry-

(a) The invoice or bill of supply or delivery challan, and
(b) A copy of e-way bill in physical form or the e-way bill number in electronic form or mapped to a Radio
Frequency Identification Device embedded on to the conveyance in such manner as may be notified
by the Commissioner.

Rule 138A(2)

In case, e-invoice is issued {according to Rule 48(4)}, the Quick Response (QR) code having an embedded
Invoice Reference Number (IRN) in it, may be produced electronically, for verification by the proper officer in
lieu of the physical copy of such tax invoice.

As per Circular No. 160/16/2021-GST, it is clarified that there is no need to carry the physical copy of tax invoice
in cases where invoice has been generated by the supplier in the manner prescribed under rule 48(4) of the

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CGST Rules and production of the Quick Response (QR) code having an embedded Invoice Reference Number
(IRN) electronically, for verification by the proper officer, would suffice.

Rule 138A(3)

In such a case, the registered person will not have to upload the information in Part A of E-way bill for generation
of e-way bill and the same shall be auto-populated by the common portal on the basis of the information
furnished in the prescribed form.

Rule 138A(5)

Where circumstances so warrant, the Commissioner may, by notification, require the person-in-charge of the
conveyance to carry the following documents instead of the e-way bill:
(a) tax invoice or bill of supply, or bill of entry; or
(b) a delivery challan, where the goods are transported for reasons other than by way of supply

Rule 138B Verification of documents and conveyances

(1) The Commissioner or an officer empowered by him in this behalf may authorize the proper officer to
intercept any conveyance to verify the e-way bill in physical or electronic form for all inter-State and
intra-State movement of goods.
(2) The Commissioner shall get Radio Frequency Identification Device readers installed at places where
the verification of movement of goods is required to be carried out and verification of movement of
vehicles shall be done through such device readers where the e-way bill has been mapped with the
said device.
(3) The physical verification of conveyances shall be carried out by the proper officer as authorized by the
Commissioner or an officer empowered by him in this behalf.
Provided that on receipt of specified information on evasion of tax, physical verification of a specific
conveyance can also be carried out by any other officer after obtaining necessary approval of the
Commissioner or an officer authorized by him in this behalf.

Rule 138C Inspection and verification of goods

(1) A summary report of every inspection of goods in transit shall be recorded online by the proper officer
in Part A of Form GST EWB-03 within 24 hours of inspection and the final report in Part B of Form GST
EWB-03 shall be recorded within 3 days of such inspection.
Provided that where the circumstances so warrant, the Commissioner, or any other officer authorised
by him, may, on sufficient cause being shown, extend the time for recording of the final report in Part B
of FORM EWB-03, for a further period not exceeding three days.
Explanation.- The period of twenty four hours or, as the case may be, three days shall be counted from
the midnight of the date on which the vehicle was intercepted.
(2) Where the physical verification of goods being transported on any conveyance has been done during
transit at one place within the State or UT or in any other State or UT, no further physical verification of
the said conveyance shall be carried out again in the State or UT, unless a specific information relating
to evasion of tax is made available subsequently.

Example 3: Where a conveyance carrying 30 consignments is intercepted and the person-in-charge of such
conveyance produces valid e-way bills and other relevant documents in respect of 20 consignments, but is

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unable to produce the same with respect to the remaining 10 consignments, detention/ confiscation can be
made only with respect to the 10 consignments and the conveyance in respect of which the violation of the Act
or the rules made thereunder has been established by the proper officer.

Rule 138D Facility for uploading information regarding detention

of vehicle
Where a vehicle has been intercepted and detained for a period exceeding 30 minutes, the transporter may
upload the said information in Form GST EWB-04 on the common portal.

Explanation. - For the purposes of this Chapter (E-way Bill), the expressions ‘transported by railways‘,
‘transportation of goods by railways‘, ‘transport of goods by rail‘ and ‘movement of goods by rail‘ does not include
cases where leasing of parcel space by Railways takes place.

Rule 138E Restriction on furnishing of information in PART A of

FORM GST EWB-01
Notwithstanding anything contained in sub-rule (1) of rule 138, no person (including a consignor, consignee,
transporter, an e-commerce operator or a courier agency) shall be allowed to furnish the information in PART
A of FORM GST EWB-01 in respect of any outward movement of goods of a registered person, who, —
(a) being a person paying tax under section 10, has not furnished the statement in FORM GST CMP-08
for two consecutive quarters; or
(b) being a person other than a person specified in clause (a), has not furnished the returns for a
consecutive period of two tax periods:
(c) being a person other than a person specified in clause (a), has not furnished the statement of outward
supplies for any two months or quarters, as the case may be.
(d) being a person, whose registration has been suspended under the provisions of sub-rule (1) or sub-
rule (2) or sub-rule (2A) of rule 21A.

Provided that the Commissioner may, on receipt of an application from a registered person in FORM GST EWB-
05, on sufficient cause being shown and for reasons to be recorded in writing, by order, in FORM GST EWB-
06 allow furnishing of the said information in PART A of FORM GST EWB 01, subject to such conditions and
restrictions as may be specified by him:

Provided further that no order rejecting the request of such person to furnish the information in PART A of FORM
GST EWB 01 under the first proviso shall be passed without affording the said person a reasonable opportunity
of being heard:

Provided also that the permission granted or rejected by the Commissioner of State tax or Commissioner of
Union territory tax shall be deemed to be granted or, as the case may be, rejected by the Commissioner.

Explanation:– For the purposes of this rule, the expression ― ”Commissioner” shall mean the jurisdictional
Commissioner in respect of the persons specified in clauses (a) and (b).

Explanation. - For the purposes of this Chapter, the expressions ‘transported by railways‘, ‘transportation of
goods by railways‘, ‘transport of goods by rail‘ and ‘movement of goods by rail‘ does not include cases where
leasing of parcel space by Railways takes place.

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Earlier, a user was not able to generate e-way bill for a GSTIN if the said GSTIN was not eligible for e-way bill
generation in terms of rule 138E. It implies that the GSTINs of such blocked taxpayers could not be used to
generate the e-way bills neither as supplier (consignor) nor as recipient (consignee).

Rule 138E has been amended to relax such restriction. Blocking of GSTIN for e-way bill generation would only
be for the defaulting supplier GSTIN and not for the defaulting Recipient or Transporter GSTIN. Suspended
GSTIN cannot generate e-way bill as supplier. However, the suspended GSTIN can get the e-way bill generated
as recipient or as transporter.

In other words, e-way bill generation facility is blocked only in respect of any outward movement of goods of the
registered person who is not eligible for e-way bill generation as per rule 138E. E-way bills can be generated in
respect of inward supplies of said registered person.

Example 4: Mr. X, a registered person paying tax under regular scheme in Delhi, has not filed Form GSTR-1
for last 2 months. Mr. Y, Haryana, (a regular return filer) wants to generate an e-way bill for goods to be supplied
to Mr. X. As per earlier position of law, Mr. Y would not have been able to generate e-way bill with Mr. X’s
GSTIN. In terms of the amended position of law, there will be no more restriction in generating e-way Bill as Mr.
Y who is making outward movement of goods is a regular return filer. Mr. X wants to generate an e-way bill in
respect of an outward supply of goods to Mr. A. E-way bill generation is blocked in this case as it’s an outward
movement of goods of Mr. X who has not filed GSTR-1 for past 2 months.

Circular No. 64/38/2018-GST Dated 14.09.2018

It is clarified that in case a consignment of goods is accompanied by an invoice or any other specified document
and not an e-way bill, proceedings under section 129 of the CGST Act may be initiated.

Further, in case a consignment of goods is accompanied with an invoice or any other specified document and
also an e-way bill, proceedings under section 129 of the CGST Act may not be initiated, inter alia, in the following
situations:
a. Spelling mistakes in the name of the consignor or the consignee but the GSTIN, wherever applicable, is
correct;
b. Error in the pin-code but the address of the consignor and the consignee mentioned is correct, subject
to the condition that the error in the PIN code should not have the effect of increasing the validity period
of the e-way bill;
c. Error in the address of the consignee to the extent that the locality and other details of the consignee
are correct;
d. Error in one or two digits of the document number mentioned in the e-way bill;
e. Error in 4 or 6 digit level of HSN where the first 2 digits of HSN are correct and the rate of tax mentioned
is correct;
f. Error in one or two digits/characters of the vehicle number.
In case of the above situations, penalty to the tune of Rs. 500/- each under section 125 of the CGST Act and
the respective State GST Act should be imposed (Rs.1000/- under the IGST Act) in FORM GST DRC-07 for
every consignment. A record of all such consignments where proceedings under section 129 of the CGST Act
have not been invoked in view of the situations listed in paragraph 5 above shall be sent by the proper officer
to his controlling officer on a weekly basis.

Circular No. 61/35 /2018 GST Dated 04.09.2018 {Consignee/ recipient taxpayer storing goods in the
transporter’s godown}

Textile traders use transporters’ godown for storage of their goods due to their weak financial conditions. The
transporters providing such warehousing facility will have to get themselves registered under GST and maintain

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detailed records in cases where the transporter takes delivery of the goods and temporarily stores them in his
warehouse for further transportation of the goods till the consignee/recipient taxpayer’s premises.

In this regard, it is clarified that since e-way bill is a document which is required for the movement of goods from
the supplier’s place of business to the recipient taxpayer’s place of business, the goods in movement including
when they are stored in the transporter's godown (even if the godown is located in the recipient taxpayer’s
city/town) prior to delivery shall always be accompanied by a valid e-way bill.

Further, section 2(85) defines the “place of business” [see definitions] to include “a place from where the
business is ordinarily carried out, and includes a warehouse, a godown or any other place where a taxable
person stores his goods, supplies or receives goods or services or both”. An additional place of business (APoB)
is the place of business from where taxpayer carries out business related activities within the State, in addition
to the principal place of business.

Declaring the transporter’s godown as APoB

In case the consignee/ recipient taxpayer stores his goods in the godown of the transporter, the transporter’s
godown has to be declared as an APoB by the recipient taxpayer. Mere declaration by the recipient taxpayer to
this effect with the concurrence of the transporter in the said declaration will suffice.

In such cases, the transportation under the e-way bill shall be deemed to be concluded once the goods have
reached the transporter’s godown (recipient taxpayer’ APoB). Hence, e-way bill validity in such cases will not
be required to be extended. Whenever the goods move from the transporter’s godown (recipient taxpayer’s
APoB) to the recipient taxpayer’s any other place of business, relevant provisions of the e-way bill rules shall
apply. Consequently, a valid e-way bill shall be required, as per the extant State-specific e-way bill rules.

Requirement of maintaining accounts and records

1. Transporter, being a warehouse keeper, has to maintain accounts and records as specified in section 35 read
with rule 58 [discussed earlier in this chapter].
2. Recipient taxpayer shall also maintain accounts and records as required under rules 56 and 57 [discussed
earlier]. Furthermore, as per rule 56(7), books of accounts in relation to goods stored at the transporter’s
godown (i.e., the recipient taxpayer’s APoB) by the recipient taxpayer may be maintained by him at his
principal place of business

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 Question & Answer
Q1. Who all can generate E-way bill (EWB)?
A. Every registered person who causes movement of goods of consignment value exceeding Rs. 50,000 or
the threshold prescribed (in each State/Union Territory) in relation to supply; or reasons other than supply; or
inward supply from unregistered person shall generate EWB.
It means, the consignor or consignee, as a registered person or a transporter of the goods can generate the
EWB. The unregistered transporter can enroll on the common portal and generate the EWB for movement of
goods for his clients.

Q2. Whether EWB may be generated if the consignment value is less than Rs. 50,000?
A. Yes, the registered person or the transporter, as the case may be, may generate EWB voluntarily, even
if the value of consignment is less than Rs. 50,000.
However, Proviso 3 and 4 to Rule 138(1) of the CGST Rules 2017 mandatorily requires a registered person
to generate an EWB irrespective of the value of consignment where:
• the goods are to be sent by the principal located in one State or Union Territory to a job worker in
other State or Union Territory.
• handicraft goods are transported from one State or Union territory to another State or Union territory
by a person who has been exempted from the requirement of obtaining registration under clauses
(i) and (ii) of section 24 of the CGST Act.

Q3. Who has been casted with the ultimate responsibility of generating EWBs? Consignor, consignee or the
transporter?
A. The primary responsibility to generate EWB shall be of the registered person who causes the movement of
goods, i.e. the consignor or the consignee, as the case may be. However, if such consignor or consignee
doesn’t generate the EWB, it may be generated by transporter as well, if authorized by the registered person.
Also, in case of supply of goods by an unregistered person to registered person, the liability to generate EWB
is on the recipient.

Q4. Whether EWB would be required, if transportation is done in one's own vehicle or through a public transport?
A. Yes, as per Rule 138(2), it has been provided that EWB shall be required to be generated, in case the goods
are transported by consignor or consignee in his own vehicle or in a hired one or a public conveyance, by road.
In such case, the registered person causing the movement of goods may raise the EWB after furnishing the
vehicle no. in Part B of FORM GST EWB – 01 if the value of goods being transported is more than Rs. 50,000.

Q5. How shall one calculate the distance and validity of goods in case of supply through multi-modal transport?
A. The distance and the validity of EWB shall remain the same even if the goods are supplied through a multi-
modal transport. In order to calculate the validity of the EWB, the distance to be covered by all the modes
combined together must be taken into consideration. The validity provided in the CGST Rules is as under:

Sr. No. Distance Validity Period

1. Upto 200 KM One day in cases other than Over Dimensional Cargo or multimodal
shipment in which at least one leg involves transport by ship
2. For every 200 KM, or One additional day in cases other than Over Dimensional Cargo or
part thereof multimodal shipment in which at least one leg involves transport by
thereafter ship

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 3. Upto 20 KM One day in case of Over Dimensional Cargo or multimodal shipment
in which at least one leg involves transport by ship
4. For every 20 KM or One additional day in case of Over Dimensional Cargo or multimodal
part thereof shipment in which at least one leg involves transport by ship
thereafter

The “relevant date” shall mean the date on which the e-way bill has been generated and the period of validity
shall be counted from the time at which the e-way bill has been generated and each day shall be counted as
the period expiring at midnight of the day immediately following the date of generation of e-way bill. For
example:
• Suppose e-way bill generated on April 1, 2021 at 5 p.m. for transport of cargo which will cover a distance
of 190 kms. This e-way bill will be valid for one day (till mid night of April 2, 2021);
• Suppose e-way bill generated on April 1, 2021 at 5 p.m. for transport of cargo which will cover a distance
of 390 kms. This eway bill will be valid for two days (till mid night of April 3, 2021).
Note:- Supplier handed over the goods to the transporter on April 1, 2021. Part A of the eway bill was submitted
by the supplier on April 1, 2021 after updating the GSTIN of the transporter. Transporter loaded the goods on
the truck on April 3, 2021 and completed Part B of the eway bill by updating the vehicle number. In this case,
the validity of the eway bill commences from April 3, 2021.

Q6. What is the liability of generation of EWB in case of transportation of goods through e-commerce?
A. Generally, in case of an E-Commerce business model, the logistics is handled by an independent third party
logistic service provider. So, in such a case 4 parties are involved in the transaction (seller, buyer, logistic service
provider and E-Commerce operator). Therefore, in such cases where the goods are to be transported through
an e-commerce operator, on an authorization from consignor, Part A of the EWB may be furnished by the E-
Commerce operator and Part B of the EWB may be furnished either by the E-Commerce operator or by the
third party logistic service provider.

Q7. Whether any other document needs to be provided to the transporter in addition to EWB, for movement of
goods?
A. In accordance with Rule 55A read with Rule 138A of the CGST Rules, the person in-charge of conveyance
shall carry
➢ Tax Invoice or Delivery Challan or Bill of Supply, as the case may be; and
➢ a copy of the EWB in physical form or the EWB number in electronic form or mapped to a Radio
Frequency Identification Device embedded on to the conveyance in such manner as may be notified by
the Commissioner:
EWB is an additional document and not a substitute for Tax Invoice, delivery challan or any other prescribed
document for the said transaction.

Q8. Can the EWB be deleted?

A. The EWB once generated cannot be deleted. However, it can be cancelled by the generator within 24 hours
of its generation. If it has been verified by any proper officer within 24 hours, then it cannot be cancelled. Further,
EWB can be cancelled if, either goods are not transported or are not transported as per the details furnished in
the EWB. A recipient has right to cancel/ reject the EWB within 72 hours of its generation or actual receipt of
goods, whichever is earlier.

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Q9. In case of High Sea Sale Transactions – Whether EWB is required?
A. EWB is required for movement of goods within the country. In case of High Sea Sales as the supply is
affected before the goods cross the custom frontiers of India, EWB is not required to be generated. When the
ultimate buyer files bill of entry, he is required to generate EWB for movement of goods from port to his place
of business.

Q10. Whether EWB is required to be generated for the movement of goods between CFS /ICD to port in
the course of importation and exportation of goods?
A. Rule 138(14) of the CGST Rules 2018, provides that no EWB is required to be generated in respect of:
➢ Movement of goods from the port, airport, air cargo complex and land customs station to an ICD or a
CFS for clearance by Customs in the course of importation.
➢ where the goods are being transported—
1. under customs bond from an ICD or a CFS to a customs port, airport, air cargo complex and land
customs station, or from one customs station or customs port to another customs station or customs
port, or
2. under customs supervision or under customs seal
Therefore, EWB is not required for movement of goods between CFS/ICD to port or vice versa in the course of
importation and exportation of goods.

Q11. How to handle “Bill to” - “Ship to” invoice in e-way bill system?
A. Sometimes, the tax payer raises the bill to somebody and sends the consignment to somebody else as per
the business requirements. There is a provision in the e-way bill system to handle this situation, called as ‘Bill
to’ and ‘Ship to’.
In the e-way bill form, there are two portions under ‘TO’ section. In the left hand side - ‘Billing To’ GSTIN and
trade name is entered and in the right hand side - ‘Ship to’ address of the destination of the movement is entered.
The other details are entered as per the invoice.
In case ship to state is different from Bill to State, the tax components are entered as per the billing state party.
That is, if the Bill to location is inter-state for the supplier, IGST is entered and if the Bill to Party location is intra-
state for the supplier, the SGST and CGST are entered irrespective of movement of goods whether movement
happened within state or outside the state.

Q12. Whether multiple invoices can be clubbed in one E way bill? If yes, then to what extent?
A. The value of goods determined in the invoice shall be regarded as the value of consignment, on the basis
of which it is decided whether the consignor or consignee is required to generate EWB or not. Therefore, a
separate EWB is required to be generated for every individual invoice where value of corresponding
consignment exceeds Rs.50,000.

Q13. If the goods are taken from one State to another for the purpose of display in exhibition, whether EWB is
required to be generated?
A. EWB would be required to be generated, where the value of the consignment exceeds Rs. 50,000.

Q14. How to generate the EWB in case goods are to be moved to a weighbridge situated outside the factory
and invoice cannot be issued unless goods are weighed?
A. EWB is not required to be generated where the goods are to be transported up to a distance of 20 kms for
the purpose of weighment from the place of business of consignor to a weighbridge, or, from the weighbridge
back to place of consignor. However, such movement should be along with delivery challan to be covered under
relaxation of EWB generation.

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Q15. What if the vehicle is stuck at a particular point in the journey due to calamity or traffic jam?
A. The goods are required to be transported within the validity period of the EWB. However, it is provided
that under circumstances of exceptional nature, the transporter may generate another EWB after updating the
details in Part-B of FORM GST EWB-01. These circumstances could be said to be in the nature of exceptional
nature. However, in the absence of specific meaning of the term “exceptional nature”, further clarification is
required.

Q16. What if the same invoice contains both categories of goods i.e. ones exempted for the purpose of
EWBs and taxable, then whether EWB needs to be generated?
A. It is to be noted that the explanation to the Rule 138(1) provides that consignment value for the purpose
of EWB shall be the value, determined in accordance with the provisions of Section 15, declared in invoice or
delivery challan or bill of supply as the case may be. However, it shall exclude the value of exempt supply where
the invoice is issued in respect of both exempted and taxable supply of goods. Therefore, the value of taxable
goods only shall be considered for the purpose of consignment value.

Q17. A registered person has purchased a new mobile phone for Rs. 75,000 and carrying with him on
motorized vehicle. Whether EWB is required to be generated?
A. Yes. It appears that if the movement is caused by a registered person, EWB is required to be generated
for goods exceeding value of Rs. 50,000.
.
Q18. A person has been shifting his households from one State to another on account of job change. Whether
EWB is required to be generated?
A. Used personal and household effects have been covered in the Annexure to the Rule 138 in respect
of which EWB is not required to be generated. Hence, such person is not required to generate EWB in such
cases.

Q19. How to consider consignment value in case goods is being moved for renting purpose. Do we need to
take the value of goods or value of the rent charged on goods?
A. The consignment value is the value of goods to be determined under section 15 of the CGST Act including
applicable tax thereon. The rent charged represents the value of service portion whereas EWB is to be
generated for the value of goods for which movement is to be undertaken. Hence, in such cases, the value to
be considered should be of the goods not the rental charges charged by the supplier of services. The
movement could be based on delivery challan based on which EWB may be generated.

Q20. Supply of goods through pipeline, whether oil, petroleum, gases, water, electricity etc. whether EWB
is required to be generated?
A. EWB is required to be generated when movement of goods is through motorized conveyance. Further, the
EWB portal has 4 modes of transportation i.e. road, air, rail and ship. As the transportation of goods through
pipeline may not involve movement of goods through motorized vehicle, there may not be need to generate
EWB for such movement of goods.

Q21. An outdoor catering company is transporting utensils and other accessories for catering outside the
kitchen, interstate or intra state. Whether EWB is necessary? If yes what are the documents to be attached
with the EWB? If not under which document, it has to be dispatched?
A. The EWB is required for every movement of goods, even if it is for the purpose other than supply. When
the goods are transported by caterer for use by him in the course of making supply of catering services, it
could be said to be movement of goods by him for himself/ self-use. Though there is no supply of utensils and

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other materials to the customer, yet there is movement of goods and hence EWB is required to be generated.
Such EWB may be generated against delivery challan, by providing “Outward” movement and “For own use”
under the reason for transportation.

Q22. A farmer carries the goods from his farm to Mandi for the purpose of sale therein. Whether there is
requirement to generate EWB?
A. Many of the agricultural produces have been exempted from the levy of GST. Wherever items to be
transported is exempted from GST, there is no need to generate EWB. However, if the goods being
transported by farmer are in the nature of taxable goods, EWB has to be generated.

Q23. Where goods are supplied on “as is-where is” basis, whether EWB is required to be generated?
A. EWB is not required to be generated for supply of goods unless it involves movement of goods through
motorized conveyance. In case of sale of goods on “as is – where is” basis, there is no movement of goods.
Hence, there is no need to generate EWB in case of such instances.

Q24. In many cases where manufacturer or wholesaler is supplying to retailers, or where a consolidated
shipment is shipped out, and then distributed to multiple consignees, the recipient is unknown at the time the
goods are dispatched from shipper’s premises. A very common example is when FMCG companies send a
truck out to supply kirana stores in a particular area. What needs to be done in such cases?
A. In such cases, EWB shall be generated for outward movement of goods. No supply is being made, movement
is caused on behalf of self. In such cases, delivery challan may be used for generation of EWBs. All the
provisions for delivery challan need to be followed along with the rules for EWBs.

Q25. Where an invoice is in respect of both goods and services, whether the consignment value should be
based on the invoice value (inclusive of value of services) or only on the value of goods. Further, whether HSN
wise details of service is also required to be captured in Part A of the EWB in such case.
A. Consignment value and HSN needs to be determined for goods only not for services as only the goods are
in movement and EWB needs to be generated accordingly.

Q26. What shall be the consequence if any document, register, or books of accounts belonging to a registered
person are found at any premises other than those mentioned in the certificate of registration?
A. As per Rule 56(10) of the CGST Rules, 2017, unless it is proved otherwise, if any document, register, or
books of accounts belonging to a registered person are found at any premises other than those mentioned in
the certificate of registration, they shall be presumed to be maintained by the said registered person.

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 Section 49 Payment of tax, interest and other amounts
Rule 85 Electronic Liability Register
Rule 86 Electronic Credit Ledger
Rule 86A Conditions of use of amount available in electronic credit ledger
Rule 86B Restrictions on use of amount available in electronic credit ledger
Rule 87 Electronic Cash Ledger
Rule 88 Unique Identification number
Section 50 Interest on delayed payment of tax
Section 51 Tax deduction at Source
Section 52 Collection of Tax at Source
Section 53 Transfer of ITC
Section 53A Transfer of certain amounts

Section 49 Payment of tax, interest and other amounts

Payments
Payments Deposited in Utilized for
(a) Every deposit made Electronic Cash Payment towards tax, interest, penalty,
towards Tax, Interest, Ledger fees or any other amount payable under
Penalty, Fee or any other the provisions of this Act or the rules
amount by a Person [Sec. 49 (1)] [Sec. 49 (3)]
(b) ITC as self-assessed in the Electronic Credit Any payment towards output tax under
Return of a Registered Ledger this Act or under the IGST Act
Person [Sec. 49 (2)] [Sec. 49(4)]

When GST is payable under reverse charge, it should be paid by cash i.e. through Electronic Cash Ledger, the
GST under reverse charge cannot be paid by utilizing ITC – Section 49 (4) read with section 2 (82).

Date of Payment
Payment of taxes by the normal tax payer is to be done on monthly basis by the 20 th of the succeeding month.
Cash payment will be first deposited in the Cash Ledger and the tax payer shall debit the ledger while making
payment in the monthly returns and shall reflect the relevant debit entry number in his return. Payment can also
be debited from the Credit Ledger. Payment of taxes for the month of March shall be paid by the 20 th April.
Composition tax payers will need to pay tax on quarterly basis. [The Date of Credit to the account of the
Government in the authorized Bank shall be deemed to be the date of deposit in the Electronic Cash Register].

Mode of Payment
i. Internet Banking, or
ii. By using Credit or Debit cards, or
iii. NEFT/RTGS
iv. By such other mode prescribed by the Government

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Rounding off Tax [Sec. 170]
The amount of duty, interest, penalty, fine or any other sum payable, and the amount of refund or any other
sum due, under CGST shall be rounded off to the nearest rupee.

Utilization of Credit available in Electronic Credit Ledger [Sec. 49 (5)]

The amount of input tax credit available in the electronic credit ledger of the registered person on account of–

(a) integrated tax shall first be utilised towards payment of integrated tax and the amount remaining, if any,
may be utilised towards the payment of central tax and State tax, or as the case may be, Union territory
tax, in that order;
(b) the central tax shall first be utilised towards payment of central tax and the amount remaining, if any,
may be utilised towards the payment of integrated tax;
(c) the State tax shall first be utilised towards payment of State tax and the amount remaining, if any, may
be utilised towards payment of integrated tax;
Provided that the input tax credit on account of State tax shall be utilised towards payment of
integrated tax only where the balance of the input tax credit on account of central tax is not available
for payment of integrated tax.
(d) the Union territory tax shall first be utilised towards payment of Union territory tax and the amount
remaining, if any, may be utilised towards payment of integrated tax;
Provided that the input tax credit on account of Union territory tax shall be utilized towards payment
of integrated tax only where the balance of the input tax credit on account of central tax is not
available for payment of integrated tax.
Please refer
(e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and
Rule 88A in
(f) the State tax or Union territory tax shall not be utilised towards payment of central tax. Chapter 8
ITC
Discharge of Tax Liability [Sec. 49 (7), (8) & (9)]
1. All liabilities of a taxable person under this Act shall be recorded and maintained in an Electronic Liability
Register.
2. Every taxable person shall discharge his tax and other dues under this Act in the following order –
a. Self-assessed tax, and other dues related to Returns of Previous Tax Periods,
b. Self-assessed tax, and other dues related to the Return of the Current Tax Period,
c. Any other amount payable under this Act or the Rules made thereunder including the demand
for recovery of tax determined U/s 73 or U/s 74.
3. Every person who has paid the tax on goods or services or both under this Act shall, unless
the contrary is proved by him, be deemed to have passed on the full incidence of such tax to
the recipient of such goods or services or both.
Note
➢ Tax period means the period for which the tax return is required to be furnished.
➢ Tax dues means the tax payable under this Act and does not include interest, fee and
penalty, and
➢ Other dues mean interest, penalty, fee or any other amount payable under this Act or the
rules made thereunder.

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Transfer from one head to another head [Sec. 49 (10) & (11)]
As per Section 49 (10), a registered person may, on the common portal, transfer any amount of tax, interest,
penalty, fee or any other amount available in the electronic cash ledger under this Act, to the electronic cash
ledger for integrated tax, central tax, State tax, Union territory tax or cess, in such form and manner and
subject to such conditions and restrictions as may be prescribed and such transfer shall be deemed to be a
refund from the electronic cash ledger under this Act.

As per Section 49 (11), where any amount has been transferred to the electronic cash ledger under this Act,
the same shall be deemed to be deposited in the said ledger as provided in sub-section (1).

Section 49A Notwithstanding anything contained in section 49, the input tax credit on account of central tax,
State tax or Union territory tax shall be utilised towards payment of integrated tax, central tax, State tax or
Union territory tax, as the case may be, only after the input tax credit available on account of integrated tax has
first been utilised fully towards such payment.

Section 49B Notwithstanding anything contained in this Chapter and subject to the provisions of clause (e) and
clause (f) of sub-section (5) of section 49, the Government may, on the recommendations of the Council,
prescribe the order and manner of utilisation of the input tax credit on account of integrated tax, central tax,
State tax or Union territory tax, as the case may be, towards payment of any such tax .

Please see example in Chapter 8 :- Input tax credit to understand utilisation of ITC {Rule 88A}
Sec

Tax wrongfully collected and paid to Central Government or State

Government [Sec. 77]
➢ If a registered person has paid the Central tax and State tax/UT tax on a transaction considered by him
to be an intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded
the amount of taxes so paid.
➢ If a registered person who has paid Integrated tax on a transaction considered by him to be an inter-
State supply, but which is subsequently held to be an intra-State supply, shall not be required to pay
any interest on the amount of central tax and State tax/UT tax payable.

There is identical provision in Section 19 of IGST Act, 2017 for wrongly transactions considered as inter-State
instead of intra-State.

Rule 85 Electronic Liability Register

1. Form: The Electronic Liability Register Specified U/s 49 (7) shall be maintained in FORM GST PMT-01
for each person liable to pay tax, interest, penalty, late fee or any other amount on the Common Portal
and all amounts payable by him shall be debited to the said register.
2. Amounts debited: The electronic liability register of the person shall be debited by:
a. Amount payable towards Tax, Interest, Late fee or any other amount payable as per the return
furnished by the said person,
b. Amount of tax, interest, penalty or any other amount payable as determined by a Proper Officer
in pursuance of any proceedings under the Act or as ascertained by the said person;

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 c. Amount of tax and interest payable as a result of mismatch u/s 42 or u/s 43 or u/s 50, or
d. Amount of interest that may accrue from time to time.
3. Corresponding Debits in Electronic Credit/Cash Ledger: Payment of every liability by a Registered
Person as per his Return shall be made by debiting the Electronic Credit Ledger maintained or the
Electronic Cash Ledger maintained and the Electronic Liability Register shall be credited accordingly.
4. Credit Entries in the Electronic Liability Register: The following amounts shall be paid by debiting the
Electronic Cash Ledger and crediting the Electronic Liability Register –
a. Amount deducted u/s 51, or
b. Amount collected u/s 52, or
c. Amount payable or Reverse charge basis, or
d. Amount payable u/s 10,
e. Amount payable towards interest, penalty, fee or any other amount under this Act,
5. Electronic Tax Liability Register: The Electronic Liability Register shall be credited with –
a. Any amount of demand debited in the Electronic Liability Register which stands reduced to the
extent of relief given by the Appellate Authority or Appellate Tribunal or Court.
b. Amount of Penalty imposed or liable to be imposed which stands reduced partly or fully, as the
case may be, if the taxable person makes the payment of tax, interest and penalty specified in
the show cause notice or demand order.
6. Discrepancy: A Registered person shall, upon noticing any discrepancy in his Electronic Liability
Ledger, communicate the same to the officer exercising jurisdiction in the matter, through the Common
Portal in FORM GST PMT-04.

Debit Entries Credit Entries

Tax, interest and other liability based on self-
assessment return
Amount of tax, interest, penalty or any other amount
payable as determined by a proper officer
Amount of tax and interest payable as a result of
mismatch
Amount of interest that may accrue from time to time
Payment of all liability made by debiting the
electronic credit ledger and/or electronic cash ledger
Amount of TCS collected, tax payable, or any
amount payable towards interest, penalty, fee or any
other amount paid by debiting the electronic cash
ledger

Rule 86 Electronic Credit Ledger

➢ Form: The Electronic Credit Ledger shall be maintained in FORM GST PMT-02 for each registered
person eligible for ITC under the Act on the Common Portal and every claim of ITC under the Act shall
be credited to the said ledger.
➢ Discharge of liability: The Electronic Credit Ledger shall be debited to the extent of discharge of any
liability in accordance with the provisions of U/s 49 or U/s 49A or U/s 49B.
➢ Refund of Unutilized amount:
• Where a Registered Person has claimed refund of any unutilized amount from the Electronic
Credit Ledger u/s 54, the amount to the extent of the claim shall be debited in the said ledger.
• If the refund so filed is rejected, either fully or partly, the amount debited to the extent of
rejection, shall be re-credited to the Electronic Credit Ledger by the Proper Officer by an order
made in FORM GST PMT-03.

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 • Where a registered person has claimed refund of any amount paid as tax wrongly paid or paid
in excess for which debit has been made from the electronic credit ledger, the said amount, if
found admissible, shall be re-credited to the electronic credit ledger by the proper officer by an
order made in FORM GST PMT-03.
➢ Discrepancy: A registered person shall, upon noticing any discrepancy in his Electronic Credit Ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the common portal in
FORM GST PMT – 04.
Please note:
➢ No entry shall be made directly in the Electronic Credit Ledger under any circumstance.
➢ A refund shall be deemed to be rejected, if the appeal is finally rejected or if the claimant gives
an undertaking to the proper officer that he shall not file an appeal.

Debit Entries Credit Entries

Liability discharged through electronic credit ledger Self-assessed ITC
Claim of refund of unutilized ITC Rejected claim of refund of unutilized ITC

Rule 86A Conditions of use of amount available in electronic

credit ledger
(1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant
Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger
has been fraudulently availed or is ineligible in as much as-
a) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other
document prescribed under rule 36-
• issued by a registered person who has been found non-existent or not to be conducting any
business from any place for which registration has been obtained; or
• without receipt of goods or services or both; or
b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other
document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has
not been paid to the Government; or
c) the registered person availing the credit of input tax has been found non-existent or not to be
conducting any business from any place for which registration has been obtained; or
d) the registered person availing any credit of input tax is not in possession of a tax invoice or debit note
or any other document prescribed under rule 36,
may, for reasons to be recorded in writing, not allow debit of an amount equivalent to such credit in
electronic credit ledger for discharge of any liability under section 49 or for claim of any refund of any
unutilised amount.
(2) The Commissioner, or the officer authorised by him under sub-rule (1) may, upon being satisfied that
conditions for disallowing debit of electronic credit ledger as above, no longer exist, allow such debit.
(3) Such restriction shall cease to have effect after the expiry of a period of one year from the date of
imposing such restriction.

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CBIC has issued detailed guidelines for the officers to exercise the
powers of Rule 86A
Recently, there have been several instances of blocking of electronic credit ledger, in response to which Writ
were filed in several courts. The High Courts in some cases have emphasized the need for laying guidelines
for invoking rule 86A of the CGST Rules. In view of the same, CBIC has issued guidelines with respect to
powers under rule 86A of the CGST Rules. Summary of guidelines: -
• There must be ‘reasons to believe’ after proper application of mind that credit of input tax available in
the electronic credit ledger is either ineligible or has been fraudulently availed by the registered
person, before disallowing the debit of amount from electronic credit ledger of the said registered
person under rule 86A
• The amount disallowed for debit from electronic credit ledger should not be more than the amount of
input tax credit which is believed to have been fraudulently availed or is ineligible, as per the
conditions / grounds mentioned in sub-rule (1) of rule 86A;
• Upon expiry of one year from the date of restriction, the registered person would be able to debit input
tax credit so disallowed, subject to any other action that may be taken against the registered person.

Proper authority for the purpose of Rule 86A

Total amount of ineligible or fraudulently Officer to disallow debit of amount

availed input tax credit
Not exceeding Rupees 1 crore
Above Rupees 1 crore but not exceeding Rs. 5
crore
Above Rs. 5 crore
from electronic credit ledger under Rule 86A
Deputy Commissioner/Assistant Commissioner
Additional Commissioner/Joint Commissioner
Principal Commissioner/Commissioner

Rule 86B Restrictions on use of amount available in electronic

credit ledger
Notwithstanding anything contained in these rules, the registered person shall not use the amount available in
electronic credit ledger to discharge his liability towards output tax in excess of ninety-nine percent of such tax
liability, in cases where the value of taxable supply other than exempt supply and zero-rated supply, in a month
exceeds fifty lakh rupees:

Provided that the said restriction shall not apply where –

(a) the said person or the proprietor or karta or the managing director or any of its two partners, whole-time
Directors, Members of Managing Committee of Associations or Board of Trustees, as the case may be,
have paid more than one lakh rupees as income tax under the Income-tax Act, 1961(43 of 1961) in each
of the last two financial years for which the time limit to file return of income under subsection (1) of
section 139 of the said Act has expired; or
(b) the registered person has received a refund amount of more than one lakh rupees in the preceding
financial year on account of unutilised input tax credit under clause (i) of first proviso of sub-section (3)
of section 54; or

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 (c) the registered person has received a refund amount of more than one lakh rupees in the preceding
financial year on account of unutilised input tax credit under clause (ii) of first proviso of sub-section (3)
of section 54; or
(d) the registered person has discharged his liability towards output tax through the electronic cash ledger
for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said
month in the current financial year; or
(e) the registered person is – (i) Government Department; or (ii) a Public Sector Undertaking; or (iii) a local
authority; or (iv) a statutory body:

Provided further that the Commissioner or an officer authorised by him in this behalf may remove the said
restriction after such verifications and such safeguards as he may deem fit.

Example 1: Taxable turnover during April, 2021 = Rs. 1,00,00,000, Applicable tax rate = 18%

Thus amount of tax = Rs. 1,00,00,000 * 18% = Rs. 18,00,000

Input tax credit after considering rule 36(4) = Rs. 20,00,000

Pre-amendment: - Registered person was allowed to pay full liability of Rs. 18,00,000 by utilizing ITC i.e. from
electronic credit ledger because he has Rs. 20,00,000 in electronic credit ledger.

• The balance in electronic credit ledger after utilization would be Rs. 2,00,000 [20,00,000-18,00,000]
• No liability is to be discharged using electronic cash ledger

Post-amendment: - Utilization of electronic credit ledger is restricted to maximum of 99% of output tax liability

• Therefore, utilization from electronic credit ledger will be restricted to Rs. 17,82,000 [18,00,000 * 99%]
• The balance in electronic credit ledger after utilization would be Rs. 2,18,000 [20,00,000–17,82,000]
• The balance liability of Rs. 18,000 is to be discharged using electronic cash ledger.

Rule 87 Electronic Cash Ledger

1. Form: The Electronic cash ledger u/s 49 (1) shall be maintained in FORM GST PMT-05 for each person,
liable to pay tax, interest, penalty, late fee or any other amount, on the Common Portal for crediting the
amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any other
amount.
2. Major Heads & Minor Heads:
Major Head Minor Head for each Major Head
IGST Tax
CGST Interest
SGST/UTGST Penalty
Cess Fee
Others
3. A registered taxpayer can make cash deposits in the recognized Banks through the prescribed modes
to the Electronic Cash Ledger using any of the Online or Offline modes permitted by the GST Portal.
The Cash deposits can be used for making payments like tax liability, interest, penalties, fee and others.
4. Restriction in cross utilization of Major Heads: The amount available in Electronic Cash Ledger can be
utilized for payment of any liability for the respective major or minor heads. For example, liability for the
tax under SGST/UTGST can be settled only from the available amount of cash under SGST/UTGST
Major head.

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 Example 2: An amount of Rs. 1,000 available under minor head ‘tax’ of major head ‘SGST/UTGST’ and
the taxpayer has a liability of Rs. 200 for minor head ‘interest’ under the same major head
‘SGST/UTGST’. Since, there is no amount available under minor head ‘interest’ under major head
‘SGST/UTGST’, therefore, interest payment cannot be made from the amount available under ‘tax’ of
the same major head.
Amount available under one Major head cannot be utilized for discharging the liability under any other
major head. For example, amount available in SGST/UTGST cannot be utilized for discharging liabilities
under CGST, IGST or Cess and vice versa.
Example 3: A taxpayer made a cash deposit of Rs. 1,000 to IGST – Tax, through net banking. The tax
payer can utilize this cash deposit of Rs. 1,000 in the cash ledger to make payment only of the IGST –
tax liability by debiting the cash ledger.
➢ Challan:
a. Any person, or a person on his behalf, shall generate a challan in FORM GST PMT – 06 on the
common portal and enter the details of the amount to be deposited by him towards tax, interest,
penalty fees or any other amount.
b. It shall be valid for a period of 15 days.
c.
For making payment of any amount indicated in the challan, the commission, if any, payable in
respect of such payment shall be borne by the person making such payment.
➢ Mode of Deposit:
a. Internet Banking through authorized banks,
b. Credit Card or Debit Card through the authorized bank,
c. NEFT/RTGS
d. Over the counter (OTC) payment through authorized banks for deposits up to Rs. 10,000 per
challan per tax period, by cash, cheque or demand draft.
➢ OTC limit not applicable:
a. Government Departments or any other deposit to be made by notified persons,
b. Proper Officer or any other officer authorized to recover outstanding dues from any person,
including recovery made through attachment or sale of movable or immovable properties,
c. Proper Officer or any other officer authorized for the amounts collected by way of cash, cheque or
demand draft during any investigation or enforcement activity or any ad hoc deposit.
➢ Temporary Identification Number: Any payment required to be made by a person who is not registered
under the Act, shall be made on the basis of a Temporary Identification Number generated through the
Common Portal.
➢ Payment through NEFT/RTGS:
a. Where the payment is made by way of NEFT/RTGS mode from any bank, the mandate form shall
be generated along with the challan on the Common Portal and the same shall be submitted to the
bank from where the payment is to be made.
b. The mandate form shall be valid for a period of 15 days from the date of generation of Challan.
➢ Generation of Challan Identification Number (CIN):
a. On successful credit of the amount to the concerned government account maintained in the
authorized bank, a CIN will be generated by the collecting Bank and the same shall be indicated in
the challan.
b. On receipt of CIN from the Collecting Bank, the said amount shall be credited to the Electronic Cash
Ledger of the person on whose behalf the deposit has been made and the Common Portal shall
make available a receipt of this effect.

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 c. Where the bank account of the person concerned, or the person making the deposit on his behalf,
is debited but no CIN is generated or generated but not communicated to the Common Portal, the
said person may represent electronically in FORM GST PMT-07 through the Common Portal to the
Bank or electronic gateway through which the deposit was initiated.
➢ Tax deduction/collection: Any amount deducted u/s 51 or collected u/s 52 and claimed in FORM GSTR-
02 by the Registered Taxable Person from whom the said amount was deducted or, as the case may
be, collected shall be credited to his Electronic Cash Ledger in accordance with the provisions of Rule
87.
➢ Refund from Electronic Cash Ledger:
a. Where a person has claimed refund of any amount from Electronic Cash ledger, the amount shall
be debited to the Electronic Cash Ledger.
b. If the refund so claimed is rejected, either fully or partly, the amount debited to the extent of rejection,
shall be credited back to Electronic cash ledger by an order made in FORM GST PMT-03.
➢ Discrepancy: A registered person shall, upon noticing any discrepancy in his electronic cash ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the common portal in
FORM GST PMT-04.
➢ Transfer: A registered person may, on the common portal, transfer any amount of tax, interest, penalty,
fee or any other amount available in the electronic cash ledger under the Act to the electronic cash
ledger for integrated tax, central tax, State tax or Union territory tax or cess in FORM GST PMT-09.
Note: A refund shall be deemed to be rejected, if the appeal is finally rejected or it the claimant gives an
undertaking to the proper officer that he shall not file an appeal.
Debit Entries Credit Entries
Any payment of tax, interest, penalty, fee etc. made Amount deposited through Challan
through electronic cash ledger
Amount of refund claimed from electronic cash Amount of TDS and TCS deducted/collected under
ledger Section 51 and Section 52
Refund from cash ledger rejected by order in Form
GST PMT-3

Refer Question 7 to
understand CIN & CPIN

Example 4: ABC has deposited the following amounts in its Electronic Cash Ledger under its major heads.
The position of Electronic Cash Ledger for the month of May 2019 is as follows: -

IGST CGST Cess SGST

Balance 9.000 10,000 - 12,000

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For the month of May 2019 Tax Liability:-
Net Tax Liability IGST CGST Cess SGST
Tax 8,000 12,000 - 12,000
It is to be determined as to how ABC can utilize the balance in Electronic Cash Ledger for payment of net tax
liability?
Description Total Tax Taxes paid through Electronic Cash Ledger
Payable IGST CGST SGST Cess
IGST 8,000 8,000
CGST 12,000 10,000
SGST 12,000 12,000
Cess
In this case, ABC need to deposit INR 2,000 more for payment of CGST.

Now, w.e.f. 21st April 2020, registered person has facility to transfer inter-head amount available in electronic
cash ledger so no need to deposit INR 2,000 from his bank account
{Section 49(10) & (11) read with Rule 87(13)

Rule 88 Unique Identification Number

1. A unique identification number shall be generated at the common portal for each debit or credit to the
electronic cash or credit ledger, as the case may be.
2. The unique identification number relating to discharge of any liability shall be indicated in the
corresponding entry in the electronic liability register.
3. A unique identification number shall be generated at the common portal for each credit in the electronic
liability register for reasons other than those covered under sub-rule (2).

Section 50 Interest on delayed payment of tax

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made
thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed,
shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at
such rate, not exceeding eighteen percent, as may be notified by the Government on the
recommendations of the Council. {Notified rate is 18% as per NN 13/2017-CT dated 28-6-2017}

Provided that the interest on tax payable in respect of supplies made during a tax period and declared
in the return for the said period furnished after the due date in accordance with the provisions of
section 39, except where such return is furnished after commencement of any proceedings under
section 73 or section 74 in respect of the said period, shall be payable on that portion of the tax which
is paid by debiting the electronic cash ledger.

(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the
day succeeding the day on which such tax was due to be paid.

(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of
section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall
pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be,
at such rate not exceeding twenty-four percent, as may be notified by the Government on the
recommendations of the Council. {Notified rate is 24% as per NN 13/2017-CT dated 28-6-2017}

Example 5: Mr. A has provided following information with respect to filing of return for the period of June 2018:-
Particulars Amount (INR)

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 Amount of IGST to be deposited 2,00,000
Due Date of filing GSTR 3B for the month of June 2018 is 20.07.2018
Actual Deposit is made on 30.07.2018
In this case, interest to be deposited is Rs. 986 {Rs. 2,00,000 * 18%* 10 days/365 days}

Section 51 Tax deduction at source

(1) Notwithstanding anything to the contrary contained in this Act, the Government may mandate,–
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) such persons or category of persons as may be notified by the Government on the
recommendations of the Council

Notified under notification No. 50/2018 – CT Dated 13.09.2018 & 57/2018 – CT Dated 23.10.2018}
The following persons have been notified under clause (d) of sub-section (1) of section 51 of the CGST Act
by the Central Government:
(a) an authority or a board or any other body, -
i. set up by an Act of Parliament or a State Legislature; or
ii. established by any Government,
with 51% or more participation by way of equity or control, to carry out any function;
(b) society established by the Central Government or the State Government or a Local Authority under the
Societies Registration Act, 1860;
(c) public sector undertakings
With respect to deductor under section 51(1)(a), provisions of TDS are applicable only on the certain
prescribed authorities of Ministry of Defence, remaining authorities under the Ministry of Defence are exempt.
✓ No TDS in case of supply of goods or services or both from a public sector undertaking to another
public sector undertaking, whether or not a distinct person, with effect from the 1st day of October,
2018.
{Notification No. 61/2018 – Central Tax Dated 5th November, 2018}.
✓ Nothing in this notification shall apply to the supply of goods or services or both which takes place
between one person to another person specified under clauses (a), (b), (c) and (d) or sub-section (1)
of Section 51 of said Act.
Notification No.73/2018 – Central Tax Dated 31st December, 2018}
✓ The CBIC vide circular no. 76/50/2018 – GST Dated 31.12.2018 has clarified that the provisions of
TDS are applicable only to such authority or a board or any other body, set up by an Act of Parliament
or a State Legislature or established by any government in which fifty one percent or more
participation by way of equity or control is with the Government.

(hereafter in this section referred to as “the deductor”), to deduct tax at the rate of one percent under CGST Act,
2017, (also need to consider deduction under SGST Act, 2017 i.e. 1% CGST & 1% SGST = Total 2%) from the
payment made or credited to the supplier (hereafter in this section referred to as “the deductee”) of taxable
goods or services or both, where the total value of such supply, under a contract, exceeds two lakh and fifty
thousand rupees:
Provided that no deduction shall be made if the location of the supplier and the place of supply is in a State or
Union territory which is different from the State or as the case may be, Union territory of registration of the
recipient.
Example 6: Registered dealer of Bhubaneswar has placed supply order to a registered dealer of Bihar for
delivery of material to a party in Patna. The supply would be intra-State supply and Central tax and State tax
would be levied. In such case, transfer of TDS (Central tax + State tax of Orissa) to the cash ledger of the
supplier (Central tax + State tax of Bihar) would be difficult. So in such cases, TDS would not be deducted.

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• Value of supply shall exclude GST taxes & Cess.
• The amount of tax deducted at source should be deposited to the Government account by deductor by 10th
of the succeeding month.
• A certificate of tax deduction at source shall be issued in such form and in such manner as may be
prescribed.
• If the deductor does not furnish the certificate of deduction-cum- remittance within 5 days of the remittance,
the deductor has to pay a late fee of Rs. 100 per day from the expiry of the 5th day until the day he furnishes
the certificate. This late fee would not be more than Rs. 5000/-.
• If the deductor has not remitted the amount deducted as TDS to the Government within the prescribed time
limit, he is liable to pay penal interest under Section 50 in addition to the amount of tax deducted.
• The amount of tax deducted is reflected in
➢ Electronic Cash Ledger of deductee.
➢ Return filed by deductor under section 39(3).
The deductee can claim credit of the tax deducted, in his electronic cash ledger. This provision enables
the Government to cross check whether the amount deducted by the deductor is correct and that there
is no mis-match between the amount reflected in the electronic cash ledger and the amount shown in
the return filed by deductor.
• The deductor or the deductee can claim refund of excess deduction or erroneous deduction. The provisions
of section 54 relating to refunds would apply in such cases. However, if the deducted amount is already
credited to the electronic cash ledger of the supplier, the same shall not be refunded.

FAQ released by CBIC

Situations / Contracts Deduction required Remarks

Finance Department is making a
payment of Rs.3 Lakh to a
supplier of ‘printing & stationery’.
Education Department is making
payment of Rs.5 Lakh to a
supplier of ‘printed books and
printed or illustrated post cards’
where payment for books is Rs.2
Lakh and Rs.3 Lakh is for other
printed or illustrated post cards.
Finance Department, is making
payment of Rs.1.5 Lakh to a
supplier of ‘car rental service’.
YES / NO
Yes Where the total contract value of
taxable supply is more than
Rs.2.5 Lakh deduction is
mandatory.
Yes, deduction is required in Books are exempted goods; no
respect of payment of Rs. 3 Lakh deduction is required in respect of
only i.e. for payment in respect of supply of books.
taxable supply. However, payment involving
‘printed or illustrated post cards’
is for supply of taxable goods and
value of such supply is > Rs.2.5
Lakh; so deduction is required.
See Remarks Deduction is mandatory in case
the total value of taxable supply
under the contract > Rs.2.5 Lakh
irrespective of the amount paid.
However, if the total value of
supply under a contract is <
Rs.2.5 Lakh, deduction is not
required.

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 Health Department executed a
contract with a local supplier to
supply “medical grade oxygen” of
Rs.2.6 Lakh (including GST) and
is making full payment.
Municipal Corporation of Kolkata
purchases a heavy generator
from a supplier in Delhi. Now, it is
making payment of Rs.5 Lakh
and IGST @18% on Rs.5 Lakh
for such purchase.
Fisheries Department is making a
payment of Rs.10 Lakh to a
contractor for supplying labour for
digging a pond for the purpose of
Fisheries.
Municipality is making payment of
Rs.5 Lakh to a supplier in respect
of cleaning of drains where the
value of supply of goods is not
more than 25% of the value of
composite supply
Government school is making a
payment of Rs.3 Lakh to a
supplier for supply of cooked food
as mid-day meal under a scheme
sponsored by Central/State
Government.
Health Department is making
payment of Rs.10 Lakh to a
supplier for supply of Hearing
Aids.
No Total value of supply as per the
contract is Rs.2.6 Lakh (including
GST). Tax rate is 12%. So,
taxable value of supply (excluding
GST) stands at Rs.2.6L x
100/112 = Rs.2.32 L < Rs.2.5
Lakh Hence, deduction is not
required.
Yes, deduction is required @ 2% Deduction is required in case of
inter-State supply and if the value
of taxable supply under a contract
exceeds Rs.2.5 Lakh.
No This supply of service is exempt
in terms of Sl. No. 3 of notification
No.12/2017 – Central Tax (Rate)
Dated 28.06.2017 and hence
deduction is not required.
No This supply of service is exempt
in terms of Sl. No. 3A of
notification No.12/2017 – Central
Tax (Rate) Dated 28.06.2017 as
amended by notification no.
2/2018- Central Tax (Rate) Dated
25.01.2018 and hence deduction
is not required.
No This supply of service is exempt
in terms of Sl. No. 66 of
notification No. 12/2017 – Central
Tax (Rate) Dated 28.06.2017 as
amended and hence deduction is
not required.
No This supply of goods is exempt in
terms of Sl. No.142 of notification
No. 2/2017 – Central Tax (Rate)
Dated 28.06.2017 as amended
and hence deduction is not
required.

Example 7 (ICAI): Suppose a supplier makes a supply worth Rs. 1000/- to a recipient and the GST at the rate
of 18% is required to be paid. The recipient, while making the payment of Rs. 1000/- to the supplier, shall deduct
1% viz Rs. 10/- as TDS.
The value for TDS purpose shall not include 18% GST. The TDS, so deducted, shall be deposited in the account
of Government by 10th of the succeeding month.
The TDS so deposited in the Government account shall be reflected in the electronic cash ledger of the supplier
(i.e. deductee) who would be able to use the same for payment of tax or any other amount. The purpose of TDS
is just to enable the Government to have a trail of transactions and to monitor and verify the compliances.

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Example 8:
Particulars (in all cases Location of Place of State of Type of Tax TDS
taxable contract value is Supplier Supply Registration of Supply deductio
over Rs.2.5 Lakh) recipient n

State Government of Jaipur Jaipur Rajasthan Intra- CGST & Yes

Rajasthan purchases State SGST
taxable goods from a
local supplier
State Government of Mumbai Punjab Punjab Inter- IGST Yes
Punjab purchases State
taxable goods from a
supplier in Mumbai
State Government of Delhi Delhi Haryana Intra - CGST & No
Haryana engages a State SGST
contractor of Delhi for
repairing of Haryana
Bhawan in Delhi

Section 52 Collection of Tax at Source

(1) Notwithstanding anything to the contrary contained in this Act, every electronic commerce operator
(hereafter in this section referred to as the “operator”), not being an agent, shall collect an amount calculated
at such rate not exceeding one per cent., as may be notified by the Government on the recommendations
of the Council, of the net value of taxable supplies made through it by other suppliers where the
consideration with respect to such supplies is to be collected by the operator.
Explanation.––For the purposes of this sub-section, the expression “net value of taxable supplies” shall
mean the aggregate value of taxable supplies of goods or services or both, other than services notified
under sub-section (5) of section 9, made during any month by all registered persons through the operator
reduced by the aggregate value of taxable supplies returned to the suppliers during the said month.
(2) The power to collect the amount specified in sub-section (1) shall be without prejudice to any other mode
of recovery from the operator.
(3) The amount collected under sub-section (1) shall be paid to the Government by the operator within ten days
after the end of the month in which such collection is made, in such manner as may be prescribed.
(4) Every operator who collects the amount specified in sub-section (1) shall furnish a statement, electronically,
containing the details of outward supplies of goods or services or both effected through it, including the
supplies of goods or services or both returned through it, and the amount collected under sub-section (1)
during a month, in such form and manner as may be prescribed, within ten days after the end of such month.
Provided that the Commissioner may, for reasons to be recorded in writing, by notification, extend the time
limit for furnishing the statement for such class of registered persons as may be specified therein:
Provided further that any extension of time limit notified by the Commissioner of State tax or the
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
(5) Every operator who collects the amount specified in sub-section (1) shall furnish an annual statement,
electronically, containing the details of outward supplies of goods or services or both effected through it,
including the supplies of goods or services or both returned through it, and the amount collected under the
said sub-section during the financial year, in such form and manner as may be prescribed, before the thirty
first day of December following the end of such financial year.

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 Provided that the Commissioner may, on the recommendations of the Council and for reasons to be
recorded in writing, by notification, extend the time limit for furnishing the annual statement for such class
of registered persons as may be specified therein:
Provided further that any extension of time limit notified by the Commissioner of State tax or the
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
(6) If any operator after furnishing a statement under sub-section (4) discovers any omission or incorrect
particulars therein, other than as a result of scrutiny, audit, inspection or enforcement activity by the tax
authorities, he shall rectify such omission or incorrect particulars in the statement to be furnished for the
month during which such omission or incorrect particulars are noticed, subject to payment of interest, as
specified in sub-section (1) of section 50:
Provided that no such rectification of any omission or incorrect particulars shall be allowed after the due
date for furnishing of statement for the month of September following the end of the financial year or the
actual date of furnishing of the relevant annual statement, whichever is earlier.
(7) The supplier who has supplied the goods or services or both through the operator shall claim credit, in his
electronic cash ledger, of the amount collected and reflected in the statement of the operator furnished
under sub-section (4), in such manner as may be prescribed.
(8) The details of supplies furnished by every operator under sub-section (4) shall be matched with the
corresponding details of outward supplies furnished by the concerned supplier registered under this Act in
such manner and within such time as may be prescribed.
(9) Where the details of outward supplies furnished by the operator under sub-section (4) do not match with
the corresponding details furnished by the supplier under section 37 or Section 39, the discrepancy shall
be communicated to both persons in such manner and within such time as may be prescribed.
(10)The amount in respect of which any discrepancy is communicated under sub-section (9) and which is not
rectified by the supplier in his valid return or the operator in his statement for the month in which discrepancy
is communicated, shall be added to the output tax liability of the said supplier, where the value of outward
supplies furnished by the operator is more than the value of outward supplies furnished by the supplier, in
his return for the month succeeding the month in which the discrepancy is communicated in such manner
as may be prescribed.
(11)The concerned supplier, in whose output tax liability any amount has been added under sub-section (10),
shall pay the tax payable in respect of such supply along with interest, at the rate specified under sub-
section (1) of section 50 on the amount so added from the date such tax was due till the date of its payment.
(12)Any authority not below the rank of Deputy Commissioner may serve a notice, either before or during the
course of any proceedings under this Act, requiring the operator to furnish such details relating to—
(a) supplies of goods or services or both effected through such operator during any period; or
(b) stock of goods held by the suppliers making supplies through such operator in the godown or
warehouses, by whatever name called, managed by such operator and declared as additional places
of business by such suppliers,
as may be specified in the notice.
(13)Every operator on whom a notice has been served under sub-section (12) shall furnish the required
information within fifteen working days of the date of service of such notice.
(14)Any person who fails to furnish the information required by the notice served under sub-section (12) shall,
without prejudice to any action that may be taken under section 122, be liable to a penalty which may extend
to twenty-five thousand rupees.

Explanation.—For the purposes of this section, the expression “concerned supplier” shall mean the supplier of
goods or services or both making supplies through the operator.

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• In cases where someone is selling their own products through a website, there is no requirement to
collect tax at source as per the provisions of this Section. These transactions will be liable to GST at
the prevailing rates.
• If we purchase goods from different vendors and are selling them on our website under our own
billing. In this case, there are two transactions - where we purchase the goods from the vendors,
and where we sell it through our website. For the first transaction, GST is leviable, and will need to
be paid to our vendor, on which ITC is available to us. The second transaction is a supply on our own
account, and not by other suppliers and there is no requirement to collect tax at source. The
transaction will attract GST at the prevailing rates.
• If electronic commerce operator has suppliers in different States, he is required to obtain GST
registration in each State. However, he can indicate his head office as place of business, if he doesn’t
have place of business in that State. Thus, all returns can be filed through HO.
{Sr. Nos. 5 to 7 of FAQ released by Law Committee of GST Council on 28-9-2018}
• The supplier cannot supply under composition scheme. He must supply goods or services through
normal scheme only.
{Sr. Nos. 6 & 16 of FAQ released by Law Committee of GST Council on 28-9-2018}
• The net value of taxable supplies will be calculated at GSTIN level and not at gross level. In other
words, net suppliers are to be calculated for each supplier separately.
{Sr. Nos. 10 & 11 of FAQ released by Law Committee of GST Council on 28-9-2018}
• If in a particular month, the sale returns are more than supplies made, there will be no TCS for that
month. However, such negative figure will not be carried forward. Hence, such shortage cannot be
adjusted in next month.
{Sr. Nos. 20 of FAQ released by Law Committee of GST Council on 28-9-2018}
• The TCS by electronic commerce operator shall be on billing basis and not on collection basis
{Sr. Nos. 11 of FAQ released by Law Committee of GST Council on 28-9-2018}
TCS provision is not applicable when GST is payable on reverse charge. TCS provisions also do
not apply in case of exempt supply.
{Sr. Nos. 14 & 15 of FAQ released by Law Committee of GST Council on 28-9-2018}
• TCS provision don’t apply on import of goods or services.
{Sr. Nos. 17 of FAQ released by Law Committee of GST Council on 28-9-2018}
• The rate of TCS are as follows-
(a) For supplies within the State – 0.5% CGST plus 0.5% SGST/UTGST
(b) For inter-State supplies – 1% IGST
of the net value of supplies made through it by other suppliers where consideration with respect to
such supplies is to be collected by the said operator.
{Sr. Nos. 4 of FAQ released by Law Committee of GST Council on 28-9-2018}
{Notification Nos. 52/2018-CT and 02/2018-IT both Dated 20-9-2018}
• The payment of TCS is to be made through electronic cash ledger only within 10 days from close of
month. Payment of TCS amount cannot be made through electronic credit ledger.
{Sr. Nos. 19 of FAQ released by Law Committee of GST Council on 28-9-2018}
• As per Section 24 (ix) every person supplying goods or services through an e-commerce operator
who is required to collect TCS under Section 52, is required to be mandatorily register in GST
irrespective of the value of supply made by him. However, vide notification No. 65/2017-central tax
Dated 15.11.2017, such supplier is going to get threshold limit. It means e-commerce operator is not
liable to collect TCS on supply of services being by such supplier through their portal.
• The Government vide circular no. 74/48/2018 – GST Dated 05.11.2018 has clarified on applicability
of TCS provisions on operator of electronic auction system for trading tea, in view of the
representation received from the Tea Board of India.
The CBIC vide above circular has clarified that the Tea Board admittedly falls under the category of
e-commerce operator liable to collect TCS at notified rate in accordance with the provisions of Section
52 of the CGST Act, respectively from the:
✓ Sellers (i.e. tea producers) on the net value of supply of goods i.e. tea; and

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 ✓ Auctioneers on the net value of supply of services (i.e. brokerage)
• The CBIC vide circular no. 76/50/2018 – GST Dated 31.12.2018 has clarified that for the purpose of
determination of value of supply under GST, Tax collected at source (TCS) under the provisions of
the Income Tax Act, 1961 would not be includible as it is an interim levy not having the character of
tax.

E-commerce Operator liable to E-commerce Operator not E-commerce Operator not

collect TCS
Amazon is liable to collect TCS,
because they are facilitating
actual supply of goods through
their platform (popularly called
market place model)
liable to collect TCS
Amazon will not be treated as e-
commerce operators liable to
collect TCS, in relation to those
supplies which they make on their
own account (popularly called
inventory model)
liable to collect TCS
Titan supplying watches and
jewels through its own website
would not be considered as an e-
commerce operator for the
purpose of Section 52. Thus, TCS
provisions are not applicable.

Example 9: ABC Ltd. is an e-commerce operator. For the month of May 2019, following information was
provided by ABC Ltd.
Particulars Amount in INR
Aggregate Value of all taxable supplies made through ABC Ltd. by all taxable persons 50,00,000
Supplies returned out of above taxable supplies 10,00,000
Value of supply of notified services made by unregistered suppliers through ABC Ltd., 15,00,000
falling under Section 9 (5) of the CGST Act

In this case net value of taxable supplies for the purpose of collecting TCS @ 1% shall be Rs. 40,00,000 (Rs.
50,00,000-Rs. 10,00,000). Accordingly TCS amount is Rs. 40,000. ABC Ltd. would be considered deemed
supplier of service in terms of Section 9 (5) of the CGST Act for Rs. 15,00,000 and TCS won’t be applicable on
this. If suppose suppliers are registered & responsible for GST payment then TCS will be also applicable on Rs.
15,00,000. So total TCS amount will become Rs. 55,000.

Section 53 Transfer of ITC

On utilization of input tax credit availed under this Act for payment of tax dues under the Integrated Goods and
Services Tax Act in accordance with the provisions of sub-section (5) of section 49, as reflected in the valid
return furnished under sub-section (1) of section 39, the amount collected as central tax shall stand reduced by
an amount equal to such credit so utilized and the Central Government shall transfer an amount equal to
the amount so reduced from the central tax account to the integrated tax account in such manner and within
such time as may be prescribed.

Section 53A Transfer of certain amounts

Where any amount has been transferred from the electronic cash ledger under this Act to the electronic cash
ledger under the State Goods and Services Tax Act or the Union territory Goods and Services Tax Act, the
Government shall, transfer to the State tax account or the Union territory tax account, an amount equal to the
amount transferred from the electronic cash ledger, in such manner and within such time as may be
prescribed.

Please refer Question 7 to understand CPIN, CIN, BRN & E-FPB

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 Question & Answer
Q1. How to determine the value limit of Rs. 2,50,000 to decide on the applicability of TDS?
A. As per Section 51, tax to be deducted "where the total value of such supply, under a contract, exceeds Rs
2,50,000”. If there is a Purchase order for supply of goods or services or both, for a value exceeding Rs.
2,50,000 then TDS provisions would be attracted. Against the Purchase Order, if several supplies are made
under several invoices, even if the value of any particular invoice is less than Rs. 2,50,000 TDS would apply i.e.
Public Sector Unit issues ‘Purchase order’ for a total value of Rs. 10,00,000 on 01.10.2018. Supplier is
supplying goods through various invoices & one invoice value is Rs. 50,000. Even then TDS is applicable for
this invoice, as the contract value is more than Rs. 2,50,000.
Further, while determining the value, the CGST, SGST, UTGST and IGST shall not be included. For example,
if the value of the goods or services being supplied is Rs. 2,40,000/- plus 5% GST, total invoice value Rs.
2,52,000, TDS provisions will not apply, as the value, excluding GST is less than Rs.2,50,000/-.

Q2. State TDS applicability in following cases:

(a) Supply under RCM
(b) Supply by unregistered supplier
(c) Supply by composition Supplier
A.
(a) No TDS, where the tax is to be paid on reverse charge by the recipient i.e. the deductee;
(b) No TDS, where the payment is made to an unregistered supplier;
(c) TDS is required in case of supply received from Composition Supplier i.e. Supplier ZA is a person
registered under the composition scheme in Jharkhand who makes taxable supply worth Rs. 10,000 to
a Local Authority of Jharkhand where value of taxable supply under the contract is for Rs. 2,55,000
which is more than Rs. 2.5 Lakh and hence deduction of tax is required.

Q3. Mr. X has deducted Rs 1 lakh of TDS in Nov’18. He deposits Rs 70,000 on 10.12.2018 & the rest of Rs
30,000 on 30.01.2019. He submits the return in FORM GSTR 7 on 28.02.2019. Has he incurred any liability to
pay late fee or interest? Is he liable to pay any penalty? {FAQ released by CBIC}
A. Electronic Cash Ledger of the DDO is credited on 10.12.2018 and 30.01.2019 with Rs. 70,000 and Rs. 30,
000 respectively on account of deposit of TDS of Rs 70,000/- on 10.12.2018 & Rs 30,000 on 30.01.2019. Since
return in FORM GSTR 7 for the month of November, 2018 is filed on 28.02.2019 and he discharges his payment
liability of tax so deducted by debiting his electronic cash ledger as well on this date only, therefore, late fee of
80 days (11.12.2018 to 28.02.2019) have to be paid under CGST and SGST. The amount of late fee will be
restricted to Rs. 5000 (upper limit provided in the Act). Interest has also to be paid for the delay. Penalty is also
payable by a DDO if he fails to deduct the tax in accordance with the provisions of sub-section (1) of section 51,
or deducts an amount which is less than the amount required to be deducted under the said sub-section, or
where he fails to pay to the Government under sub-section (2) of section 51 [section 122 (v) refers]. He is liable
to penalty of Rs.1,00,000/-.

Q4. Whether a supplier of goods or services supplying through ecommerce operator would be entitled to
threshold exemption? {FAQ released by CBIC}
A. As per Section 24 (ix) of the CGST Act, 2017, every person supplying goods through an ecommerce operator
shall be mandatorily required to register irrespective of the value of supply made by him. However, a person
supplying services, other than supplier of services under section 9 (5) of the CGST Act, 2017, through an e-
commerce platform are exempted from obtaining compulsory registration provided their aggregate turnover

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does not exceed INR 20 lakhs (or INR 10 lakhs in case of specified special category States) in a financial year.
Government has issued the notification No. 65/2017 – Central Tax Dated 15th November, 2017 in this regard.

Q5. Whether e-Commerce operator is required to obtain registration in every State/UT in which suppliers listed
on their e-commerce platform are located to undertake the necessary compliance as mandated under the law?
{FAQ released by CBIC}
A. As per the CGST law, registration for TCS would be required in each State / UT as the obligation for collecting
TCS would be there for every intra-State or inter-State supply. In order to facilitate the obtaining of registration
in each State / UT, the e-commerce operator may declare the Head Office as its place of business for obtaining
registration in that State / UT where it does not have physical presence. It may be noted that each State/UT has
indicated one administrative jurisdiction where all e-commerce operators having business (but not having
physical presence) in that State/UT shall register. The proper officer for the purpose of registration of ECOs has
also been notified by each State/UT.

Q6. Foreign e-commerce operator do not have place of business in India since they operate from outside. But
their supplier and customers are located in India. So, in this scenario will the TCS provision be applicable to
such ecommerce operator and if yes, how will foreign e-commerce operator obtain registration?
{FAQ released by CBIC}
A. Where registered supplier is supplying goods or services through a foreign e-commerce operator to a
customer in India, such foreign ecommerce operator would be liable to collect TCS on such supply and would
be required to obtain registration in each State / UT. It may be noted that each State/UT has indicated one
administrative jurisdiction where all ecommerce operators having business (but not having physical presence)
in that State/UT shall register. The proper officer for the purpose of registration of ECOs has also been notified
by each State/UT. If the foreign e-commerce operator does not have physical presence in a particular State /
UT, he may appoint an agent on his behalf.

Q7. What do you mean by:-

• CPIN
• CIN
• BRN
• E-FPB
A.
CPIN stands for Common Portal Identification Number given at the time of generation of challan. It is a 14
digit unique number to identify the challan. The CPIN remains valid for a period of 15 days.
CIN or Challan Identification number is generated by banks, once payment in lieu of a generated challan is
successful. It is a 17-digit number that is 14-digit CPN plus 3-digit bank code. CIN is generated by the
authorized banks/Reserve Bank of India (RBI) when payment is actually received by such authorized banks or
RBI and credited in the relevant government account held with them. It is an indication that the payment has
been realized and credited to the appropriate government account. CIN is communicated by the authorized
bank to taxpayer as well as to GSTN.
BRN or Bank reference number is the transaction number given by the bank for a payment against a challan.
E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are
authorized to collect payment of GST. Each authorized bank will nominate only one branch as its E-FPB for
pan India Transactions. The E-FPB will have to open accounts under each major head for all governments.
Total 38 accounts (one each for CGST, IGST and one each for SGST for each State/UT Government) will
have to be opened. Any amount received by such E-FPB towards GST will be credited to the appropriate
account held by such E-FPB. For NEFT/RTGS transactions, RBI will act as E-FPB.

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Section 37 Furnishing details of outward supplies
Section 39 Furnishing Returns Please download
Section 40 First Return offline utility to
Section 44 Annual Return understand
Returns, to make it
Section 45 Final Return
simple &
Section 46 Notice to Return defaulters
interesting. Please
Section 47 Levy of Late Fee
memorize below
Section 48 Goods & Service Tax Practitioners
chart (important
Section 150 Information Return
for MCQ)
Section 123 Penalty for failure to furnish Information Return

Category of Regular returns Consolidated Final return

Persons Annual return upon
cancellation of
registration
Form applicable Due date
Taxpayers whose GSTR-1 GSTR-1 (13th of GSTR-9 & GSTR-10 To be
aggregate (Outward Supply) the month GSTR-9C (31st filed within the
turnover does not succeeding the December of the due date, which
exceed Rs 5 quarter) following is later of: (i) 3
Crores and have Financial year) months of the
opted for GSTR-3B GSTR-3B (22nd date of cancellati
quarterly return & 24th Depends on or (ii) 3
filing on States/UT) months of the
date of order of
cancellation
Taxpayers whose GSTR-1 GSTR-1 (11th of GSTR-9 & GSTR-10 To be
aggregate (Outward Supply) the following GSTR-9C (31st filed within the
turnover does not month) December of the due date, which
exceed Rs 5 following is later of: (i) 3
Crores and have Financial year) months of the
not opted for GSTR-3B GSTR-3B (20th date of cancellati
quarterly return of the following on or (ii) 3
filing / month) months of the
Taxpayers whose date of order of
aggregate cancellation
turnover exceeds
Rs 5 Crores
Casual Taxable GSTR-1 GSTR-1 (11th of N.A.
Person (Outward Supply) the following
month)

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 GSTR-3B (20th
GSTR-3B of the following
month)
Composition GSTR-4 GSTR-4 (30th GSTR-9A (31st N.A.
Taxpayer April following the December of the
end of the following
Financial year Financial year)

GST CMP-08 GST CMP-08

(18th of the
month
succeeding the
quarter)
Non resident GSTR-5 Earlier of : N.A. N.A.
taxable person 1. 20th of the
following month
or
2. within 7 days
after expiry of
registration
Non-resident GSTR-5A 20th of the N.A. N.A.
OIDAR service following month
provider
Input Service GSTR-6 13th of the N.A. N.A.
Distributor (ISD) following month
Persons liable to GSTR-7 10th of the N.A. N.A.
deduct tax under following month
Section 51 of the
Act
Persons liable to GSTR-8 10th of the N.A. N.A.
collect Tax at following month
source (TCS)
under Section 52
of the Act
Persons who GSTR-11 No due date. UIN N.A. N.A.
have been issued holder can file
UIN and those the form any time
who claim refund after the end of
of taxes paid on the relevant
inward supplies quarter

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Section 37 Furnishing Details of Outward Supplies
Details of outward supplies [Section 37 (1] read with rule 59]

Every registered person including casual registered person excluding:

• Input Service Distributor
• Non-resident taxable person
• Person paying tax under composition scheme
• Person deducting TDS
• Person collecting tax at source i.e. ECO, not being an agent
• OIDAR

The due date of filing GSTR-1 may be extended by the Commissioner/Commissioner of State
GST/Commissioner of UTGST for a class of taxable persons by way of notification.
A taxpayer cannot file GSTR-1 before the end of current tax month period except
• Casual taxpayers, after the closure of their business
• Cancellation of GSTIN of a normal taxpayer

Rule 59 Form and manner of furnishing details of outward supplies

(1) Every registered person, other than a person referred to in section 14 of the Integrated Goods and
Services Tax Act, 2017, required to furnish the details of outward supplies of goods or services or
both under section 37, shall furnish such details in FORM GSTR-1 for the month or the quarter, as the
case may be, electronically through the common portal, either directly or through a Facilitation Centre
as may be notified by the Commissioner.
(2) The registered persons required to furnish return for every quarter under proviso to sub-section (1) of
section 39 may furnish the details of such outward supplies of goods or services or both to a
registered person, as he may consider necessary, for the first and second months of a quarter, up to
a cumulative value of fifty lakh rupees in each of the months,- using invoice furnishing facility
(hereafter in this notification referred to as the “IFF”) electronically on the common portal, duly
authenticated in the manner prescribed under rule 26, from the 1st day of the month succeeding such
month till the 13th day of the said month.
Provided that a registered person may furnish such details, for the month of April, 2021, using IFF
from the 1st day of May, 2021 till the 28th day of May, 2021.
Provided further that a registered person may furnish such details, for the month of May, 2021, using
IFF from the 1st day of June, 2021 till the 28th day of June, 2021.
(3) The details of outward supplies furnished using the IFF, for the first and second months of a quarter,
shall not be furnished in FORM GSTR-1 for the said quarter.
(4) The details of outward supplies of goods or services or both furnished in FORM GSTR-1 shall include
the–
(a) invoice wise details of all –
(i) inter-State and intra-State supplies made to the registered persons; and
(ii) inter-State supplies with invoice value more than two and a half lakh rupees made to
the unregistered persons;
(b) consolidated details of all –
(i) intra-State supplies made to unregistered persons for each rate of tax; and
(ii) State wise inter-State supplies with invoice value upto two and a half lakh rupees
made to unregistered persons for each rate of tax;
(c) debit and credit notes, if any, issued during the month for invoices issued previously.
(5) The details of outward supplies of goods or services or both furnished using the IFF shall include the
–

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 (a) invoice wise details of inter-State and intra-State supplies made to the registered persons;
(b) debit and credit notes, if any, issued during the month for such invoices issued previously.
(6) Notwithstanding anything contained in this rule, –
(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or
services or both under section 37 in FORM GSTR-1, if he has not furnished the return in
FORM GSTR-3B for preceding two months for the preceding month;
(b) a registered person, required to furnish return for every quarter under the proviso to sub-
section (1) of section 39, shall not be allowed to furnish the details of outward supplies of
goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing
facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period;
(c) a registered person, who is restricted from using the amount available in electronic credit
ledger to discharge his liability towards tax in excess of ninety-nine per cent. of such tax
liability under rule 86B, shall not be allowed to furnish the details of outward supplies of goods
or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility,
if he has not furnished the return in FORM GSTR-3B for preceding tax period.

Details of outward supplies are required to be furnished in GSTR-1 [Explanation to section 37 read
with rule 59(2) of CGST Rules]

• Invoices can be modified/deleted any number of times till the final submission.
• If there is no consideration as per Schedule I, the taxable value needs to be worked out.
• Scanned copies of invoices are not required to be uploaded. Only certain prescribed fields of
information from invoices need to be uploaded e.g., invoice no., date, value, taxable value, rate
of tax, amount of tax etc.

Contents of GSTR 1 (for details download GSTR 1 offline utility from common portal):-

Basic & miscellaneous details Details of Outward Supplies

➢ GSTIN ➢ B2B supplies
➢ Legal name & Trade name, if any ➢ Supplies to UIN holders
➢ Aggregate turnover in previous year

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 ➢ Year and Month
➢ HSN-wise summary of outward supplies
➢ Details of documents issued
➢ B2C inter-State supplies where invoice
value > Rs. 2.5 lakh
➢ Consolidated details of other B2C supplies
➢ Zero rated and Deemed exports
➢ Debit/ Credit notes issued
➢ Nil rated/ Exempted/ Non-GST
➢ Amendments for prior period
➢ Advances received/advances adjusted

A Nil GSTR-1 can be filed through an SMS using the registered mobile number of the taxpayer. GSTR-1
submitted through SMS is verified by registered mobile number-based OTP facility.

Prior periods amended [Section 37 (3)]

A. Scope of amendment/correction entries

The supplier can make amendments in the particulars furnished in GSTR-1 filed by him for the prior
periods if he agrees to the mismatch report communicated to him by the system every month, after
the processing of the return.
The details of original debit notes/credit notes/refund vouchers issued by the tax-payer in the
current tax period as also the revision in the debit notes/credit notes/refund vouchers issued in the
earlier tax periods are required to be shown in Table 9 of GSTR-1.
Ordinarily in Amendment Table the supplier is required to give details of original invoice (No. and
Date), the particulars of which have been wrongly entered in GSTR-1 of the earlier months and are
now sought to be amended. However, it may happen that, a supplier altogether forgets to include
the entire original invoice while furnishing the GSTR-1 for a particulars month. In such cases also,
he would be required to show the details of the said missing invoice which was issued in earlier
month in the Amendment Table only, as such type of errors would also be regarded as data entry
error.
B. Time limit for rectification
Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 then
he can make correction in the subsequent periods but maximum time limit permissible:
• Date of filing of monthly return u/s 39 for the month of September following the end of
financial year to which such details pertain or
• Date of filing of the relevant annual return.

Key Points to remember:

• GSTR 1 needs to be filed even if there is no business activity in the tax period.
• All values like invoice value, taxable value and tax amounts in GSTR 1 are to be declared up to 2 decimal
digits. The rounding off of the self-declared tax liability to the nearest rupee will be done in GSTR 3B.
• Taxpayer opting for voluntary cancellation of GSTIN will have to file GSTR 1 for active period.
• In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer, GSTR 1 will
be available for filing only for the period during which the taxpayer was registered as normal taxpayer. The
GSTR 1 for the said period, even if filed with delay would accept invoices for the period prior to conversion.

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Section 39 Furnishing of Returns
GSTR-3B [Rule 61(5) of the CGST Rules]

Section 39(1) prescribes, every registered person, other than an Input Service Distributor or a non-resident
taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for
every calendar month or part thereof, furnish, a return, electronically, of inward and outward supplies of goods
or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and
manner, and within such time, as may be prescribed:

Provided that the Government may, on the recommendations of the Council, notify certain class of registered
persons who shall furnish a return for every quarter or part thereof, subject to such conditions and restrictions
as may be specified therein. {Refer Section 39(7)}

Currently, return in Form GSTR-3B is being notified as the monthly return to be filed by the registered persons
who are required to file GSTR-3.

GSTR-3B can be submitted electronically through the common portal, either directly or through a notified
Facilitation Centre.

GSTR-3B is a simple return containing summary of outward supplies, inward supplies liable to reverse charge,
eligible ITC, payment of tax etc. Thus, GSTR-3B does not require invoice-wise data of outward supplies.

A Nil GSTR-3B can be filed through an SMS using the registered mobile number of the taxpayer.
GSTR-3B submitted through SMS is verified by registered mobile number-based OTP facility.

Contents of GSTR 3B (for details download GSTR 3B offline utility from common portal):-

Basic & miscellaneous details Details of Outward Supplies

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

GSTR 3B filed without payment of self-assessed tax disclosed therein, is not be regarded as a valid return in
terms of section 2(117).
The return in Form GSTR-3B is the return under section 39(1) and where a return in GSTR-3B is furnished by a
person then such person shall not be required to furnish the return in Form GSTR-3.

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CBIC has issued Notification 82/2020 – Central Tax dated 10th November 2020, 84/2020 – Central Tax
dated 10th November 2020 & 85/2020 – Central Tax dated 10th November 2020 & Circular No.
143/13/2020- GST dated 10th November 2020. Summary of these notification & circular is as below:-

Due Date for filing Form GSTR-1

From 1 January 2021, the time limit for furnishing details of outward supply in GSTR-1 has been extended
till 11th day of the succeeding month. For past period, the same was extended from time to time.

For quarterly return filers, the same has been extended till 13th day of the month succeeding the quarter.

Due Date for filing Form GSTR-3B

Sub-rule (6) has been inserted in rule 61 to provide that a registered person shall furnish GSTR-3B for a tax
period on or before 20th day of the succeeding month.

For taxpayers having aggregate turnover up to INR 5 crores in the previous FY, the due date for filing
GSTR-3B for the months October 2020 to March 2021 shall be 22nd/ 24th day of the succeeding month
(basis on the state of registration).

Details of inward supplies w.e.f. 1 January 2021

Details of outward supplies furnished by supplier shall be made available to the recipient in GSTR-2A, 4A
and 6A, as the case may be.

Details of invoices furnished by a non-resident taxable person, input service distributor (ISD), person liable
to deduct/ collect tax at source and details of integrated tax paid on a bill of entry shall also be made
available in respective parts of GSTR-2A.

Further, an auto-drafted statement containing details of ITC shall be made available to recipient every
month in GSTR-2B.

QRMP Scheme Eligibility

A registered person who is required to furnish GSTR-3B and has an aggregate turnover up to INR 5 crore
in the preceding FY is eligible for the QRMP Scheme.

This scheme will be effective from 1 January 2021.

Further, in case the aggregate turnover exceeds INR 5 crore during any quarter in the FY, the registered
person shall not be eligible for the scheme from the next quarter.

QRMP Scheme Exercising the option

Facility to avail the scheme on the common portal would be available throughout the year.

A registered person can opt the scheme for any quarter from first day of second month of the preceding
quarter to the last day of the first month of the quarter.

In order to opt for the scheme, the registered person must have furnished the last return, as due on the
date of exercising such option.

For the quarter January to March 2021, all registered persons, whose aggregate turnover for FY 2019-20
was up to INR 5 crores and who have furnished GSTR-3B for the month of October 2020 by 30 November
2020, shall be migrated on the common portal as below:

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 Class of registered person Default option
Person having aggregate turnover up to INR 1.5 Quarterly return
crores and have furnished GSTR-1 on quarterly
basis in the current FY
Person having aggregate turnover up to INR 1.5 Monthly return
crores and have furnished GSTR-1 on monthly
basis in the current FY
Person having aggregate turnover more than Quarterly return
INR 1.5 crores and up to INR 5 crores

However, registered person is free to change the option between 5 th December 2020 and 31st January
2021.

Similarly, the facility for opting out of the scheme is also available

In case the aggregate turnover exceeds INR 5 crores during any quarter in the FY, the registered person
shall not be eligible for the scheme from the next quarter.

The option to avail the Scheme is GSTIN wise and therefore, some GSTINs can opt for the scheme and
remaining GSTINs may not opt for the scheme.

Furnishing details of outward supplies

For each of the first and second months of a quarter, the registered person will have the invoice furnishing
facility (IFF) to furnish the details of outward supplies between 1st day and 13th day of the succeeding
month.

However, the said details shall not exceed the value of INR 50 lakh in each month.

The facility of IFF has been provided so that the same can be reflected in GSTR-2A and GSTR2B of the
recipient

IFF is not mandatory but only an option provided to the registered person.

The details of invoices furnished using IFF in the first two months are not required to be furnished again in
GSTR-1.

Monthly payment of tax

The registered person would be required to pay the tax due in each of the first two months of the quarter by
depositing the amount in GST PMT-06 by 25th of the succeeding month.

The person can opt for any of the following two options:
• Fixed sum method - 35% of the tax paid (in cash) in the preceding quarter where the return is
furnished quarterly; or tax paid (in cash) in the last month of the immediately preceding quarter
where the return was furnished monthly.
Illustration:- In case the last return filed was on quarterly basis for Quarter Ending March, 2021:
Tax paid in Cash in Quarter (January - March, Tax required to be paid in each of the months
2021) – April and May, 2021
CGST 100 CGST 35
SGST 100 SGST 35
IGST 500 IGST 175
Cess 50 Cess 17.5

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 Illustration:- In case the last return filed was monthly for tax period March, 2021:

Tax paid in Cash in March, 2021 Tax required to be paid in each of the months
– April and May, 2021
CGST 50 CGST 50
SGST 50 SGST 50
IGST 80 IGST 80
Cess - Cess -

• Self-assessment method - The person can pay the tax due by considering the tax liability and input
tax credit available.

No amount is required to be deposited where the balance in the cash or credit ledger is adequate for
discharging tax liability or where the tax liability is Nil.

Quarterly filing of GSTR-3B

Such registered person would be required to file GSTR-3B, for each quarter, on or before 22nd/ 24th day of
the month succeeding such quarter (basis the state of registration).

The amount deposited in the first two months shall be debited solely for the purpose of offsetting the liability
in that quarter’s GSTR-3B.

However, any amount left after filing GSTR-3B may either be claimed as refund or may be used for any
other purpose in subsequent quarters.

Applicability of interest

Under Fixed Sum Method:

• No interest would be payable in case the tax due is paid in the first two months of the quarter by
way of depositing auto calculated fixed sum amount by the due date.
• In case such deposit is not made by due date, interest would be payable from the due date of
furnishing GST PMT-06 till the date of making such payment.
• Further, in case GSTR-3B for the quarter is furnished beyond the due date, interest would be
payable as per the provisions of section 50 of the CGST Act.
Self-assessment Method:
• Interest amount would be payable as per the provision of section 50 for tax or any part thereof (net
of ITC) which remains unpaid/ paid beyond the due date for the first two months of the quarter.

Illustration – A registered person, who has opted for the Scheme, had paid a total amount of Rs. 100/- in
cash as tax liability in the previous quarter of October to December. He opts to pay tax under fixed sum
method. He therefore pays Rs. 35/- each on 25th February and 25th March for discharging tax liability for the
first two months of quarter viz. January and February. In his return for the quarter, it is found that liability,
based on the outward and inward supplies, for January was Rs. 40/- and for February it was Rs. 42/-. No
interest would be payable for the lesser amount of tax (i.e. Rs. 5 and Rs. 7 respectively) discharged in
these two months provided that he discharges his entire liability for the quarter in the FORM GSTR-3B of
the quarter by the due date.

Illustration – A registered person, who has opted for the Scheme, had paid a total amount of Rs. 100/- in
cash as tax liability in the previous quarter of October to December. He opts to pay tax under fixed sum
method. He therefore pays Rs. 35/- each on 25th February and 25th March for discharging tax liability for the
first two months of quarter viz. January and February. In his return for the quarter, it is found that total
liability for the quarter net of available credit was Rs. 125 but he files the return on 30th April. Interest would

342
 be payable at applicable rate on Rs. 55 [Rs. 125 – Rs. 70 (deposit made in cash ledger in M1 and M2)] for
the period between due date of quarterly GSTR 3B and 30th April.

Applicability of late fee

Late fee would be the applicable for delay in filing quarterly GSTR-1 or GSTR-3B.
However, no late fee is applicable for delay in payment of tax in first two months of the quarter.

GSTR-4 – Return for composition supplier u/s 10 [Section 39(2) read with rule 62 of the CGST Rules]

A registered person paying tax under the provisions of section 10, shall, for each financial year or part thereof,
furnish a return, electronically, of turnover in the State or Union territory, inward supplies of goods or services
or both, tax payable, tax paid and such other particulars in such form and manner, and within such time, as may
be prescribed.

GSTR-4 for a financial year or part of a financial year should be filed electronically through the common portal
either directly or through a notified Facilitation Centre.

Quarterly statement for payment of self-assessed tax: The persons required to file GSTR-4 are also required
to furnish a statement in the FORM GST CMP-08 containing details of payment of self-assessed tax, for every
quarter (or part of the quarter), by 18th day of the month succeeding such quarter.

Due Date: GSTR-4 for a financial year should be furnished by 30th April of the succeeding financial year.

The inward supplies of a composition supplier received from registered persons filing GSTR-1 will be auto
populated in FORM GSTR-4A for viewing.

Contents of GSTR 4:-

Basic & miscellaneous details Details of Outward Supplies

➢ GSTIN
➢ Legal name and Trade name, if any
➢ TDS/TCS credit received
➢ Tax, interest, late fee payable and paid
➢ Refund claimed from Electronic cash ledger
➢ Invoice-wise details of all inward supplies
(i.e., intra and inter-State supplies and from
registered and unregistered persons)
including RCM supplies and import of
services
➢ Summary of self-assessed liability as per
GST CMP-08 (Net of advances credit &
debit notes and any other adjustments due
to amendment tables etc.)
➢ Tax rate wise details of outward
supplies/inward supplies attracting reverse
charge (Net of advances, credit & debit
notes and any other adjustments due to
amendments etc.) - Consolidated details of
outward supplies

A Nil GST CMP-08 can be filed through an SMS using the registered mobile number of the taxpayer. A
Nil GST CMP-08 submitted through SMS is verified by registered mobile number-based OTP facility.

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GSTR 5 (NRTP) [Section 39 (5) read with rule 63]

A registered NRTP is not required to file separately the Statement of Outward, Inward supplies. A simplified
monthly tax return has been prescribed in Form GSTR 5 which they need to file 20 days after the end of the
calendar month or within 7 days after the last day of validity period of the registration, whichever is earlier.

A NRTP is not required to file an annual return.

NRTPs or casual taxable persons are required to make advance deposit of an amount equivalent to their
estimated tax liability for the period for which registration is sought or extension of registration is sought in terms
of section 27(2).

GSTR 6 Return for ISD [Section 39 (4) read with rule 60 (5) & rule 65]

An ISD is required to distribute both eligible as well as ineligible credit as per rule 39.

ISD is not required to file separate statements of outward and inward supplies with its return.

Form GSTR 6 contains the details of input tax credit received for distribution, total ITC/eligible/ineligible ITC to
be distributed for the tax period, distribution of ITC, details of debit/credit notes etc. Return needs to be filed
13th of the month succeeding the tax period.

The details of ITC received for distribution by an ISD will be auto populated in Form GSTR-6A. Such details are
auto-populated in Form GSTR-6A when the registered suppliers file their GSTR-1.

ISD can view the auto-populated details of ITC received for distribution in GSTR-6A and, where required, after
adding, correcting or deleting the details, furnish GSTR-6.

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ISD will not have reverse charge supplies. If ISD wants to take reverse charge supplies, in that case it has to
separately register as a Normal taxpayer.

GSTR 7 Return for TDS [Section 39 (3) read with rule 60 (6) & rule 66]

Deductor shall furnish a monthly return in Form GSTR-7 electronically through the common portal.

The details in GSTR-7 should be furnished on/before 10th of the month succeeding the calendar month in which
tax has been deducted at source.

The details of TDS furnished by the deductor in GSTR-7 shall be made available electronically to each of the
deductees on the common portal after filing of Form GSTR-7 for claiming the amount of tax deducted in his
electronic cash ledger after validation. (Similar provision is also there for GSTR-8 TCS)

A TDS certificate is required to be issued by deductor (the person who is deducting tax) in Form GSTR-7A to
the deductee (the supplier from whose payment, TDS is deducted), within 5 days of crediting the amount to
the Government. It contains the details pertaining to value on which tax has been deducted, rate of
deduction, amount of tax deducted at source and amount paid to the Government.
This is not
return u/s 39
GSTR-8 Statement for TCS [Section 52 (4) read with rule 60 (4) & rule 67]

An ECO liable to collect tax at source shall furnish a monthly return in Form GSTR-8 electronically through the
common portal.

The details in GSTR-8 should be furnished on/before 10th of the month succeeding the calendar month in which
tax has been collected at source. Further, the amount of tax collected by ECO (TCS amount) is required to be
deposited by the 10th of the month succeeding the calendar month in which tax has been collected at source.

The details of TCS furnished by the ECO in GSTR-8 is made available electronically to each of the supplier on
the common portal after filing of Form GSTR-8 for claiming the amount of tax collected in his electronic cash
ledger after validation.

If after submission of GSTR-8, the ECO discovers any discrepancy therein on his own - not being the result of
any scrutiny, audit, inspection or enforcement proceedings - he should rectify such discrepancy in GSTR-8 to
be filed for the month during which such discrepancy is noticed, subject to payment of interest under section
50. The rectification is not allowed after the due date of filing of GSTR-8 for the month of September following
the end of the financial year [i.e. 10th October of next financial year] or the actual date of filing of the relevant
annual statement [GSTR-9B], whichever is earlier.

The supplier who has supplied the goods and/or services through the ECO claims credit, in his electronic cash
ledger of the TCS reported by the ECO in the GSTR-8 filed by it.

Tax Payment Section 39(7)

Every registered person who is required to furnish a return under sub-section (1), other than the person referred
to in the proviso thereto, or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per
such return not later than the last date on which he is required to furnish such return:

Provided that every registered person furnishing return under the proviso to subsection (1) shall pay to the
Government, the tax due taking into account inward and outward supplies of goods or services or both, input

345
tax credit availed, tax payable and such other particulars during a month, in such form and manner, and within
such time, as may be prescribed:

Provided further that every registered person furnishing return under sub-section (2) shall pay to the
Government, the tax due taking into account turnover in the State or Union territory, inward supplies of goods
or services or both, tax payable, and such other particulars during a quarter, in such form and manner, and
within such time, as may be prescribed.

GSTR 11 (UIN) [Rule 82]

Such person shall furnish the details of those inward supplies of taxable goods and/or services on which refund
of taxes has been claimed in Form GSTR-11, along with application for such refund claim.

Rectification of errors/omissions [Section 39(9)]

Section 40 First Return

Every registered person who has made outward supplies in the period between the date on which he became
liable to registration till the date on which registration has been granted shall declare the same in the first return
furnished by him after grant of registration.

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Section 44 Annual Return (Read with Rule 80)
Every registered person, other than an
• Input Service Distributor,
• a person paying tax under section 51 or section 52,
• a casual taxable person, and
• a non-resident taxable person,

shall furnish an annual return which may include a self-certified reconciliation statement, reconciling the value
of supplies declared in the return furnished for the financial year, with the audited annual financial statement
for every financial year electronically, within such time and in such form and in such manner as may be
prescribed:

Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt any
class of registered persons from filing annual return under this section:

Provided further that nothing contained in this section shall apply to any department of the Central
Government or a State Government or a local authority, whose books of account are subject to audit by the
Comptroller and Auditor-General of India or an auditor appointed for auditing the accounts of local authorities
under any law for the time being in force.

Due date for filing:- 31st day of December following the end of such financial year through the common portal
either directly or through a Facilitation Centre notified by the Commissioner:

The annual return is to be filed electronically in Form GSTR-9 through the common portal.
Person registered under composition levy: A person paying tax under composition scheme is required to
file the annual return in Form GSTR-9A.
ECO required to collect tax at source: An ECO required to collect tax at source is required to file an annual
statement referred to in section 52(5) in Form GST-9B.

Every registered person, other than those referred to in the second proviso to section 44, an Input Service
Distributor, a person paying tax under section 51 or section 52, a casual taxable person and a non-resident
taxable person, whose aggregate turnover during a financial year exceeds five crore rupees, shall also furnish
a self-certified reconciliation statement as specified under section 44 in FORM GSTR-9C along with the
annual return referred to in sub-rule (1), on or before the thirty-first day of December following the end of such
financial year, electronically through the common portal either directly or through a Facilitation Centre notified
by the Commissioner.

Section 45 Final Return

Every registered person who is required to furnish a return U/s 39 (1) and whose registration has been cancelled
shall furnish a final return within three months of the date of cancellation or date of order of cancellation,
whichever is later, in such form and manner as may be prescribed. (Form GSTR 10)

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Section 46 Notice to Return Defaulters
Where a registered person fails to furnish a return under section 39 (Normal Return) or section 44 (Annual
Return) or section 45 (Final Return), a notice shall be issued requiring him to furnish such return within fifteen
days in such form and manner as may be prescribed.

Section 47 Levy of late fee

(1) Any registered person who fails to furnish the details of outward or inward supplies required under
section 37 (Statement of Outward Supplies) or section 38 (Statement of Inward Supplies) or
returns required under section 39 (Returns) or section 45 (Final Return) by the due date shall
pay a late fee of one hundred rupees for every day during which such failure continues subject to
a maximum amount of five thousand rupees.
(2) Any registered person who fails to furnish the return required under section 44 by the due date
shall be liable to pay a late fee of one hundred rupees for every day during which such failure
continues subject to a maximum of an amount calculated at a quarter per cent (0.25%) of his turnover in
the State or Union territory.

An equal amount of late fee is payable by such person under the respective SGST/UTGST Act as well. Penalty
leviable under IGST Act shall be the sum total of the penalties leviable under the CGST Act and the
SGST/UTGST Act.

• The total amount of late fee payable under section 47 of the said Act for the tax period June, 2021
onwards or quarter ending June, 2021 onwards, as the case may be, shall stand waived which is in
excess of an amount as specified in column (3) of the Table given below, for the class of registered
persons mentioned in the corresponding entry in column (2) of the said Table, who fail to furnish the
returns in FORM GSTR-3B by the due date, namely: —

Sr. Class of registered persons Amount (CGST)

No. (2) (3)
(1)
1 Registered persons whose total amount of central tax payable in Two hundred and fifty
the said return is nil rupees
2 Registered persons having an aggregate turnover of up to One thousand rupees
rupees 1.5 crores in the preceding financial year, other than
those covered under S. No. 1
3 Taxpayers having an aggregate turnover of more than rupees Two thousand and five
1.5 crores and up to rupees 5 crores in the preceding financial hundred rupees
year, other than those covered under S. No. 1

• The total amount of late fee payable under section 47 of the said Act for the tax period June, 2021
onwards or quarter ending June, 2021 onward, as the case may be, shall stand waived which is in
excess of an amount as specified in column (3) of the Table given below, for the class of registered
persons mentioned in the corresponding entry in column (2) of the said Table, who fail to furnish the
details of outward supplies in FORM GSTR-1 by the due date, namely: —

Sr. Class of registered persons Amount (CGST)

No. (2) (3)
(1)
1 Registered persons who have nil outward supplies in the tax period Two hundred and
fifty rupees

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 2 Registered persons having an aggregate turnover of up to rupees 1.5 One thousand
crores in the preceding financial year, other than those covered under rupees
S. No. 1
3 Registered persons having an aggregate turnover of more than Two thousand and
rupees 1.5 crores and up to rupees 5 crores in the preceding financial five hundred
year, other than those covered under S. No. 1 rupees

• For delayed filing of GSTR-4:- Total amount of late fee payable under section 47 of the CGST Act
from F.Y. 2021-22 onwards, by the registered person (composition taxpayer) who fail to furnish Form
GSTR-4 by the due date, shall be as follows:
➢ Total tax payable in GSTR-4 is Nil :- Rs. 250 under CGST Act
➢ Registered persons other than those covered above :- Rs. 1000 under CGST Act

• For delayed filing of GSTR-7:- Total amount of late fee payable under section 47 of the CGST Act by
any registered person, required to deduct tax at source under the provisions of section 51 of the
CGST Act for delayed filing of GSTR-7, from the month of June 2021 onwards, shall be as follows:

Section 48 Goods & Services Tax Practitioners (Read with Rule 83)
(1) The manner of approval of goods and services tax practitioners, their eligibility conditions, duties
and obligations, manner of removal and other conditions relevant for their functioning shall be
such as may be prescribed.
(2) A registered person may authorize an approved goods and services tax practitioner to furnish the
details of outward supplies under section 37, the details of inward supplies under section 38 and
the return under section 39 or section 44 or section 45, and to perform such other functions
in such manner as may be prescribed.
(3) Notwithstanding anything contained in sub-section (2), the responsibility for correctness of any
particulars furnished in the return or other details filed by the goods and services tax practitioners
shall continue to rest with the registered person on whose behalf such return and details are
furnished.
GST Practitioner – Eligibility Criteria
Any person who is a citizen of India having necessary qualification, of sound mind and not convicted or
adjudicated as insolvent can become a GST Practitioner. To be qualified as a GST Practitioner, the person
must be:

• A retired officer of the Commercial Tax Department of any State Government or of the Central Board
of Excise and Customs, Department of Revenue, Government of India, who, during his service under
the Government, had worked in a post not lower in rank than that of a Group-B gazetted officer for a
period of not less than two years; or
• Has been enrolled as a sales tax practitioner or tax return preparer under the existing law for a period
of not less than five years;
• Has the following degree or qualification:

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 o A graduate or postgraduate degree or its equivalent examination having a degree in
Commerce, Law, Banking including Higher Auditing, or Business Administration or Business
Management from any Indian University established by any law for the time being in force; or
o A degree examination of any Foreign University recognized by any Indian University as
equivalent to the degree examination having a degree in Commerce, Law, Banking including
Higher Auditing, or Business Administration or Business Management; or
o Any other examination notified by the Government, on the recommendation of the Council, for
this purpose; or
o Has passed any of the following examinations, namely:
▪ Final examination of the Institute of Chartered Accountants of India;
▪ Final examination of the Institute of Cost Accountants of India;
▪ Final examination of the Institute of Company Secretaries of India.

Duties of a GST Practitioner {Rule 83 (8)}

A goods and services tax practitioner can undertake any or all of the following activities on behalf of a registered
person, if so authorised by him to-
(a) furnish the details of outward and inward supplies;
(b) furnish monthly, quarterly, annual or final return;
(c) make deposit for credit into the electronic cash ledger;
(d) file a claim for refund;
(e) file an application for amendment or cancellation of registration;
(f) furnish information for generation of e-way bill;
(g) furnish details of challan in FORM GST ITC-04;
(h) file an application for amendment or cancellation of enrolment under rule 58; and
(i) file an intimation to pay tax under the composition scheme or withdraw from the said scheme:
Provided that where any application relating to a claim for refund or an application for amendment or cancellation
of registration or where an intimation to pay tax under composition scheme or to withdraw from such scheme
has been submitted by the goods and services tax practitioner authorised by the registered person, a
confirmation shall be sought from the registered person and the application submitted by the said practitioner
shall be made available to the registered person on the common portal and such application shall not be further
proceeded with until the registered person gives his consent to the same.

GST Practitioner – Application Procedure

Any person who is eligible to become a GST Practitioner as per the criteria above can apply using FORM
GST PCT-01 through the GST Common Portal or through a GST Facilitation Centre notified by the
Commissioner for GST Practitioner enrolment. On receiving the application, the GST officer would process
the application and make enquires as considered necessary for enrolment. If the Officer is satisfied, a GST
Practitioner certificate would be issued in GST PCT 02.

Rule 83A inserted vide notification No. 60/2018 – CT Dated 30.10.2018, which is related to Examination of
Goods and Services Tax Practitioners. The National Academy of Customs, Indirect Taxes and Narcotics
(hereinafter referred to as “NACIN”) shall conduct the examination. The rules contains syllabus, frequency of
examination, examination centers, period for passing the examination and number of attempts allowed, nature
of examination, qualifying marks, guidelines for the candidates etc.
Validity of License

GST Practitioner license would valid until its cancelled by the relevant authority. However, any person holding
a GST Practitioner license would be required to pass examinations held by the GST Authority and notified by
the Commissioner from time to time. Further, all persons applying to become a GST Practitioner through the

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sales tax practitioner or tax return preparer route are required to pass an exam conducted by the GST Authority
within thirty months from the implementation of GST.

Further, a goods and services tax practitioner enrolled in any State or Union Territory shall be treated as enrolled
in the State/Union territory for the purposes.

Filing GST Returns as GST Practitioner

Once a person is enrolled as a GST Practitioner, his/her client can authorise the Practitioner to file GST returns
on the taxpayers behalf by filing Form GST PCT-05 on the GST Common Portal. The GST Practitioner can then
prepare GST return on behalf of taxpayer with diligence and affix his/her digital signature on the GST
return prepared by him/her or electronically verify the credentials.
When a GST return is prepared by a GST Practitioner, the GST return will be held for filing and the filing must
be approved by the registered person. Confirmation for filing the return prepared by the GST Practitioner will be
requested from the registered person through email and SMS. If the registered person fails to respond to the
request for confirmation till the last date of furnishing of such statement, then the return prepared by the GST
practitioner will be automatically filed.
In case a GST taxpayer is not satisfied with the services of a GST Practitioner, the taxpayer can withdraw a
Practitioner’s authorisation at any time through the GST Common Portal. If any GST Practitioner is found guilty
of misconduct, then a GST Officer can provide a reasonable opportunity for being heard and then if required,
disqualify him/her from practising as a GST Practitioner.

Section 150 Information Return

(1) Any person, being—

(a) a taxable person; or
(b) a local authority or other public body or association; or
(c) any authority of the State Government responsible for the collection of value added tax or sales
tax or State excise duty or an authority of the Central Government responsible for the collection of
excise duty or customs duty; or
(d) an income tax authority; or
(e) a banking company; or
(f) a State Electricity Board or an electricity distribution or transmission licensee under the Electricity
Act, 2003, or any other entity entrusted with such functions by the Central Government or the State
Government; or
(g) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or
(h) a Registrar within the meaning of the Companies Act, 2013; or
(i) the registering authority empowered to register motor vehicles; or
(j) the Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and
Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or
(k) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts
(Regulation) Act, 1956; or
(l) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996;
or
(m) an officer of the Reserve Bank of India as constituted under section 3 of the Reserve Bank of
India Act, 1934; or
(n) the Goods and Services Tax Network, a company registered under the Companies Act, 2013; or
(o) a person to whom a Unique Identity Number has been granted under sub-section (9) of section
25; or
(p) any other person as may be specified, on the recommendations of the Council, by the
Government,

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who is responsible for maintaining record of registration or statement of accounts or any periodic return or
document containing details of payment of tax and other details of transaction of goods or services or both or
transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange
of goods or property or right or interest in a property under any law for the time being in force, shall furnish an
information return of the same in respect of such periods, within such time, in such form and manner and to
such authority or agency as may be prescribed.

(2) Where the Commissioner, or an officer authorised by him in this behalf, considers that the
information furnished in the information return is defective, he may intimate the defect to the
person who has furnished such information return and give him an opportunity of rectifying the
defect within a period of thirty days from the date of such intimation or within such further period
which, on an application made in this behalf, the said authority may allow and if the defect is not
rectified within the said period of thirty days or, the further period so allowed, then, notwithstanding
anything contained in any other provisions of this Act, such information return shall be treated as
not furnished and the provisions of this Act shall apply.

(3) Where a person who is required to furnish information return has not furnished the same within
the time specified in sub-section (1) or sub-section (2), the said authority may serve upon him a
notice requiring furnishing of such information return within a period not exceeding ninety days
from the date of service of the notice and such person shall furnish the information return.

Section 123 Penalty for failure to furnish Information Return

If a person who is required to furnish an information return under section 150 fails to do so within the period
specified in the notice issued under sub-section (3) thereof, the proper officer may direct that such person shall
be liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish
such return continues:
Provided that the penalty imposed under this section shall not exceed five thousand rupees.

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 Question & Answer
Q1. ABC Ltd. furnished annual returns for the year 2017-18 on September 15, 2018. An error is discovered in
respect of a transaction pertaining to outward supplies of January 2018. Determine the time limit to rectify the
mistake in case return of Sept’18 furnished on October 15 ,2018.
A. Annual return has been furnished by September 15, 2018 and return for the month of Sept’18 filed on October
15, 2018. The rectification of error pertaining to January 2018 cannot be done beyond September 15, 2018.

Q2. In some period of the year, there may not be any business activity like in case of seasonal business.
Whether a taxable person will be required to file return in such case also?
A. Every registered taxable person is required to file returns. Without filing the return of the period, next return
cannot be filed. Therefore, even if there is no taxable supplies made or received during any period, such person
is required to file a NIL return but not filing the return is not an option in GST.

Q3. What are the different means available to taxpayer for filing the returns?
A. The taxpayer can file the return on GSTN by using one of the followings: -
1) By taxpayer himself by using the user id and password issued to such taxpayer
2) By the authorized representative using the login and password issued to such authorized
representative. Such authorized representative should have been selected by the taxpayer before such
filing and such authorized representative should be linked to such taxpayer account.
3) Through the Facilitation Centre (FC) by using the login and password of such FC. Post filing by FC,
system generates a message for taxpayer by mail and SMS.
Facilitation Centre is a facility for digitization and uploading of returns on the GSTN data base. This
facility is created with the approval of Central Board of Indirect Taxes or by respective State
Governments. Small taxpayers who don’t have facility for digitization of their data and/or uploading their
returns can use this facility of facilitation centers for doing this function.

Q4. How would a supplier who has taken a new registration, file his first return under GST?
A. There might be cases wherein a person is liable to be registered under the law from a particular date and
there is time gap between the date from when he was liable to be registered under the law and the date on
which registration is granted to such person. He would have made outward supplies in this period between the
date when he was liable to be registered under the law and the date from which is granted registration.
In such case the registered person who has made outward supplies in the period between the dates on which
he became liable to registration till the date on which registration has been granted shall declare the details of
such outward supplies in the first return filed by him after the date of grant of registration.

Q5. Whether credit of Input Tax can be used for making payment of Interest, Fees, Penalty and any other
Amount?
A. No, Input Tax Credit can only be utilized for making payment towards output tax liability. It can’t be used for
making payment towards Interest, Fees, Penalty or any other amount payable under this Act.

Q6. Whether GSTR 3B can be revised after filing? Whether there is any column in GSTR 3B for reporting any
discrepancies which have taken place while filing returns for previous months?
A. No, GSTR 3B filed, can’t be revised. Form GSTR 3B doesn’t contain any column for reporting of differential
figures for past month(s).

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Q7. If a return has been filed, how can it be revised if some changes are required to be made?
A. In GST since the returns are built from details of individual transactions, there is no requirement for having a
revised return. Any need to revise a return may arise due to the need to change a set of invoices or debit/ credit
notes. Instead of revising the return already submitted, the system will allow changing the details of those
transactions (invoices or debit/credit notes) that are required to be amended. They can be amended in any of
the future GSTR- 1 in the tables specifically provided for the purposes of amending previously declared details.

Q8. What will be the legal position in regard to the reversed input tax credit if the supplier later realizes the
mistake and feeds the information?
A. At any stage, but before September of the next financial year, supplier can upload the invoice and pay duty
and interest on such missing invoices in his GSTR-3B of the month in which he had earlier failed to upload the
invoice. The recipient shall be eligible to reduce his output tax liability to the extent of the amount in respect of
which the supplier has rectified the mis-match. The interest paid by the recipient at the time of reversal will also
be refunded to the recipient by crediting the amount in corresponding head of his electronic cash ledger.

Q9. During the course of inspection/audit/scrutiny/enforcement activity, the department has pointed out certain
omissions or incorrect particulars in the returns. Whether the assessee can rectify the returns to correct the
omissions or incorrect particulars in its returns?
A. As per Section 39(9), provides for correction in the returns on account of Omission of wrong particulars filed
other than as a result of audit/inspection/scrutiny/enforcement, the assessee can rectify such
omissions/incorrect particulars in the returns. In the month/quarter in which such omission/ incorrect particulars
are noticed, the due tax and interest shall be payable thereon.

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 Section 14 (IGST) OIDAR
Section 2 (10) & 2 Import of Goods/Services
(11) (IGST)
Section 2 (5) & 2 (6) Export of Goods/Services
(IGST)
Section 16 (IGST) Zero Rated Supply
Section 15 (IGST) Refund of Integrated Tax Paid on Supply of Goods to Tourist Leaving
India

Section 14 OIDAR (IGST Act)

Both the following conditions must be satisfied to be a OIDAR service. If one is not satisfied, the service is not
OIDAR {Section 2(17) of IGST}.

• Delivery is mediated through internet.

• The supply is essentially automated involving minimal human intervention and impossible without
information technology.

Examples of OIDAR services:

• Advertising on internet
• Providing cloud services (Google Drive)
• Provision of e-books, movie, music, software and other intangibles via internet (Hotstar, Amazon
Prime Video)
• Providing data or information, retrievable or otherwise, to any person, in electronic form through a
computer network;
• Online gaming

Non-OIDAR services
• Supplies of goods, where the order and processing is done electronically
• Supplies of physical books, newsletters, newspapers or journals
• Services of lawyers and financial consultants who advise clients through email
• Booking services or tickets to entertainment events, hotel accommodation or car hire
• Educational or professional courses, where the content is delivered by a teacher over the internet
• Offline physical repair services of computer equipment
• Advertising services in newspapers, on posters and on television

Applicability of GST for OIDAR Services

Location of Location of Taxabil Forward Charge/ Reverse Examples

Supplier of recipient of ity Charge
service service

India India Yes Forward Charge Hotstar (registered in India)

(GST payable by the service allows Indian users to register
provider) and watch movies.

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 Outside India Yes Reverse Charge An Indian Co.(registered) asks
India Blue Host (US) for web hosting
Recipient: (GST payable by the services. GST is payable by
Registered recipient)
the Indian Co. under RCM.

Recipient: Yes Forward Charge A student in India registers in

Non-Taxable Netflix (US) for watching
(GST payable by the service
Person movies. Netflix has to pay
provider)
IGST.

India Outside India No NA Hotstar allows foreigners to

register and watch movies.
(Export GST is not applicable as it is an
of
export of service.
service)

Outside Outside India No NA Netflix (US) provides online

India movie streaming services to
(Not people in US.
covered
under This is not covered in Indian
GST) GST.

Who will register and pay GST for OIDAR services when the service provider is located outside India?

In respect of import of online information and database access or retrieval services (OIDAR) by unregistered,
non-taxable recipients, the supplier located outside India will be responsible for payment of taxes.

The service provider (or intermediary as the case may be) will be required to take a single registration for paying
IGST under the Simplified Registration Scheme to be notified by the Government.

Either he will have to take registration or he will have to appoint a person in India to pay GST.

The person receiving any such services i.e. OIDAR should pay the IGST to the government only if he is
registered under GST as a taxable person.

The peculiarity of OIDAR service is that it can be provided online from a remote location outside India.
• If a similar service is provided by an Indian Service Provider, from India to recipients in India then such
service would be taxable.
• If such services are received by a registered entity in India then GST will be payable under reverse
charge.

This gives the overseas suppliers of such services an unfair tax advantage if their services are left out of the
tax net.

Again, as the service provider is located overseas and might not have a presence in India, the compliance
becomes difficult. So, the government has a simplified scheme of registration for such service providers located
outside India.

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Other important points: -

• Where the supplier of OIDAR service is located outside India and the recipient is located in India, the
place of supply would be the location of the recipient of service,
• Intermediary located outside India arranges or facilitates supply of such service to a non-taxable
online recipient in India, the intermediary would be deemed to be the supplier of the said service,
except when the intermediary satisfies the following conditions: -
❖ The invoice or customer’s bill or receipt issued by such intermediary taking part in the supply
clearly identifies the service in question and its supplier in non-taxable territory
❖ If intermediary neither collects or processes payment in any manner nor is responsible for the
payment between the non-taxable online recipient and the supplier of such services
❖ The intermediary involved in the supply doesn’t authorize delivery
❖ The general terms & conditions of the supply are not set by the intermediary involved in the
supply but by the supplier of services.

Section 2(10) & 2(11) Import of Goods/Services (IGST Act)

Import of Goods
Import of Goods {Section 2(10) of IGST Act}

‘‘Import of goods”, means bringing goods into India from a place outside India;

➢ Supply of goods into India till they cross the customs frontiers of India is deemed to be an inter-State
supply and thus, attracts levy of IGST. IGST on goods imported into India is levied and collected in
accordance with the provisions of section 3 of the Customs Tariff Act, 1975. Thus, though goods
imported into India are leviable to IGST under IGST Act, the machinery of customs law is used to collect
IGST.
The place of supply of goods, imported into India is the location of the importer [Section 11]. Thus, if
an importer say is located in Karnataka, the state tax component of the IGST accrues to the State of
Karnataka.
➢ IGST on goods imported into India is levied and collected at the point when duties of customs are levied
on the said goods under the Customs Act, 1962. Customs duty is leviable when importation of goods
gets complete, i.e. when the goods become part of the mass of goods within the country; the taxable
event being reached at the time when the goods reach the customs barriers and bill of entry for home
consumption is filed. Thus, the point of levy and collection of IGST will also be the point when the bill
of entry for home consumption is filed.
➢ In addition, GST Compensation Cess, may also be leviable on certain luxury and de-merit goods under
the Goods and Services Tax (Compensation to States) Cess Act, 2017.
➢ Value of the goods for the purpose of levying IGST shall be, assessable value plus basic custom duty
& any other duty chargeable on the said goods under any law for the time being in force as an addition
to, and in same manner as, a duty of customs.
➢ Value of the goods for the purpose of levying Cess shall be, assessable value plus basic custom duty
& any other duty chargeable on the said goods under any law for the time being in force as an addition
to, and in same manner as, a duty of customs.

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 ➢ In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation
of IGST as well as GST Compensation Cess also includes Anti-Dumping Duty and Safeguard duty.
➢ There is no GST liability on high sea sales. GST is payable only when goods are cleared from customs.
Circular No. 33/2017 Cus Dated 01.08.2017 has also clarified that IGST on high sea sale(s) transactions
of imported goods, whether one or multiple, shall be levied and collected only at the time of importation,
i.e. when the import declarations are filed before the Customs authorities for the customs clearance
purposes for the first time. Further, value addition accruing in each such high sea sale shall form part
of the value on which IGST is collected at the time of clearance. The importer (last buyer in the chain)
would be required to furnish the entire chain of documents, such as original invoice, high seas sales
contract, details of service charges/commission paid etc. to establish a link between the first contracted
price of the goods and the last transaction.
➢ Goods imported by a unit or a developer in the Special Economic Zone (SEZ) for authorised operations
are exempted from the whole of IGST leviable under section 3(7) of the Customs Tariff Act, 1975 vide
Notification No. 64/2017 Customs Dated 05-07-2017.
➢ Goods imported by 100% EOU’s are governed by Notification No. 52/2003 Cus as amended by
Notification No. 65/2018 Cus Dated 24.09.2018. EOUs are allowed duty free import of goods (exempt
from Customs duties, IGST & GST Compensation Cess) under the said notifications. However,
exemption from IGST & GST Compensation Cess are available only till 31.03.2022.

Import of Services

Import of Services {Section 2(11) of IGST Act}

‘‘Import of services” means the supply of any service, where––

(i) the supplier of service is located outside India;
(ii) the recipient of service is located in India; and
(iii) the place of supply of service is in India;

➢ Services imported by a unit or a developer in the SEZ for authorized operations, are exempt from the
whole of the IGST {Notification No. 18/2017-IT (R) Dated 05-07-2017}
➢ Import of service (please recollect Schedule I): -
Nature of Service Consideration Business Test
Import of services Necessarily Required Not Required
Import of services by a person Not required Necessarily Required
from a related person or from a
distinct person

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Section 2(5) & 2(6) Export of Goods/Services (IGST Act)
Export of goods and services are important for any nation. Goods and services are to be exported, taxes are
not to be exported. Supplies to SEZ Unit & SEZ Developer are treated at par with physical exports.

Export of Goods {Section 2(5) of IGST Act}

“Export of goods” , means taking goods out of India to a place outside India.

Example 1: ABC Ltd. having place of business in Delhi receives an order for supply of goods worth Rs. 1,00,000
from XYZ Ltd., Sri Lanka. ABC Ltd. supplied goods to XYZ Ltd., Sri Lanka. This is export of goods by ABC Ltd.
to XYZ Ltd.

If suppose ABC Ltd. received order for supply of goods worth Rs. 1,00,000 from XYZ Ltd., Sri Lanka, but it is
mentioned that goods may directly be supplied to the XYZ Ltd.’s client site in Hyderabad. In this case, such
supply of goods will not qualify as export of goods since, goods are not taken out of India.

Export of Services {Section 2(6) of IGST Act}

“Export of services” means the supply of any service when, -

(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible
foreign exchange or in Indian Rupees wherever permitted by the Reserve Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct
Person in accordance with Explanation 1 in section 8;

Example 2: Indian branch office of ABC Ltd., supplies consultancy services to Head Office of UK. Supply of
services in this case will not be treated as export of services since Head Office & Branch Office are treated as
establishment of distinct persons.

Example 3: ABC Ltd. is wholly owned subsidiary of XYZ Ltd. (a UK based company). ABC Ltd. supplies
consultancy services to its parent company in UK. Supply of services in this case will be treated as export of
services since holding and subsidiary company under different PAN cannot be treated as establishment of
distinct persons. Thus, benefit of export of services will be available.

CBIC had clarified via Circular No. 161/17/2021-GST, a company incorporated in India and a body corporate
incorporated by or under the laws of a country outside India, which is also referred to as foreign company
under Companies Act, are separate persons under CGST Act, and thus are separate legal entities.
Accordingly, these two separate persons would not be considered as “merely establishments of a distinct
person in accordance with Explanation 1 in section 8.
Therefore, supply of services by a subsidiary/ sister concern/ group concern, etc. of a foreign company, which
is incorporated in India under the Companies Act, 2013 (and thus qualifies as a ‘company’ in India as per
Companies Act), to the establishments of the said foreign company located outside India (incorporated
outside India), would not be barred by the condition (v) of the sub-section (6) of the section 2 of the IGST Act
2017 for being considered as export of services, as it would not be treated as supply between merely
establishments of distinct persons under Explanation 1 of section 8 of IGST Act 2017 . Similarly, the supply
from a company incorporated in India to its related establishments outside India, which are incorporated under
the laws outside India, would not be treated as supply to merely establishments of distinct person under
Explanation 1 of section 8 of IGST Act 2017. Such supplies, therefore, would qualify as ‘export of services’,
subject to fulfilment of other conditions as provided under sub-section (6) of section 2 of IGST Act.

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Section 16 Zero Rated Supply (IGST Act)
“Zero-rated supply” means a supply of any goods or services or both in terms of section 16 of IGST Act – Section
2(23) of IGST Act.
Section 16 (1) of IGST Act: Export of goods or services or both and supplies of goods or services or both to
SEZ unit or SEZ developer will be zero rated supply.

Section 16 (2) of IGST Act: ITC may be availed for making zero-rated supplies, even if such supply is exempted
supply.
Section 16 (3) of IGST Act: The registered person making zero rated supply can claim refund under either of
two options –
a. supply of goods or services or both under bond or LUT without payment of IGST and claim refund of
unutilized ITC.
The facility of export under LUT has been now extended to all registered persons who intend to supply
goods or services for export without payment of IGST except those who have been prosecuted for any
offence under the CGST Act or the IGST Act or any of the existing laws and the amount of tax evaded in
such cases exceeds Rs. 2,50,00,000. A bond in all cases, shall be accompanied by a bank guarantee of
15% of the bond amount.
b. supply goods or services or both on payment of IGST and claim refund of IGST paid on goods or services
or both.
The refund will be in accordance with section 54 of CGST Act.

“Manufacturer exporter” means a person who exports goods manufactured by him or intends to export such
goods – para 9.32 of FTP 2015-2020

“Merchant exporter” means a person engaged in trading activity and exporting or intending to export goods –
para 9.33 of FTP 2015-2020

Special Provisions for Export

It may be noted that Export may be seen for any of the two aspects:-
1. First way (Refund): Export without paying IGST, so need of LUT arises and assessee may get refund
of ITC. Generally LUT is furnished before export but by way of Circular No. 37/11/2018-GST issues on
15th March 2018, it is clarified that the delay in furnishing of LUT in such cases may be condoned and
the facility for export under LUT may be allowed on for previous cases also taking into account the facts
and circumstances of each case.
It need to be borne in mind that in terms of Rule 89 (4) of the CGST Rules, which prescribes the formula
for computing eligible amount of refund of untilized ITC in the case of zero-rated supply of goods or
services or both made without payment of tax under bond/LUT, meaning of “Net ITC” is defined as ITC
availed on inputs and input services during the relevant period. Thus under this , there will be no refund
of credit paid on capital goods.
2. Second way (Rebate): Export by paying IGST, so no need of LUT arises and refund of IGST can be
availed.
It is worthwhile here to note that rebate model of zero-rated supply is beneficial for faster processing of
refund and under this option, there will not be any bar on refund of credit of capital goods, as the same
can be utilized along with credit of inputs and input services for discharging IGST liability on outward
supply and then claiming full refund of IGST so paid.

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If one is not paying the tax (i.e. IGST being inter-State supply) on exports then he will have to file LUT and he
may get refund of ITC and if one exports by way of paying IGST then no need of LUT arises and so, the need
of refund arises in second case.
Submission of LUT to be made in form GST RFD-11 online and no physical documentation is to be submitted
to department as specified by Circular No. 40/14/2018-GST issued on 6-4-2018.

Though the theme behind GST was to keep refund based on online working but due to non-availability of online
module, circular was issued stating that refund process will be handled manually which will go on till online
module is operationalised. (Circular No. 17/17/2017 Dated 15-11-2017 and Circular No. 24/24/2017-GST Dated
21-12-2017). This is the reason, new rule 97A inserted w.e.f. 15th November 2017 allowing manual filing &
processing, in respect of refund process.

But now refund process is online according to Circular No. 125/44/2019-GST dated 18 November 2019 (Details
of this circular discussed in Chapter 15).

Other Points: -
➢ Exporter will be eligible for refund of Compensation Cess paid on goods exported by him {on similar
lines as refund of IGST}. No compensation Cess if export is under bond or LUT and he can claim refund
of accumulated ITC on Compensation Cess like IGST.
➢ Exporter need to only file shipping bill with the customs. The shipping bill filed with the custom is treated
as an application for refund of IGST (if he opt for “rebate” explained above).
➢ Export will be under self-sealing & self-certification.
➢ It has been clarified vide CBIC circular no. 37/11/2018-GST Dated 15-3-2018 that BRC (Bank
Remittance Certificate) or FIRC (Foreign Inward Remittance Certificate) is required only in case of
export of services and not in case of export of goods.
➢ Services supplied by establishment of person in India to own establishment out of India is exempt, if
place of supply is out of India (it is not zero-rated).
➢ All exporters registered under GST can export goods or services without payment of IGST, on execution
of LUT, except those who have been prosecuted for offence under any law where tax evade exceeds
Rs. 250 Lakhs. The LUT is valid for whole financial year. However, if payment is not received within
prescribed period, facility of LUT is deemed to have been withdrawn. If payment is received later, the
facility to export under LUT is restored. Export can be done under bond while LUT is not allowed.
➢ Where date of filing GSTR-1 has been extended by Commissioner, the supplier shall furnish information
relating to export invoices in Table 6A of form GSTR-1 after return in form GSTR-3B has been furnished.
➢ LUT not required in case of export of exempted or non GST goods. The exporter may follow procedure
under Central Excise or State Vat Laws or Customs Act – CBIC circular No. 45/19/2018-GST Dated
30-5-2018.

Circular no. 78/52/2018-GST Dated 31 December 2018

The circular clarifies the GST implications where the Indian exporter of services outsources part of the activities
to a person outside India and the consideration relating to such outsourced services is not received by the
exporter in India. In such case, the Indian exporter would be liable to pay IGST on reverse charge basis on
import of services on such portion which has been provided by the supplier located outside India to the recipient
of services located outside India. Furthermore, the Indian exporter would be eligible for taking input tax credit
(ITC) of the integrated tax so paid.

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Even if the full consideration for the services exported is not received in convertible foreign exchange in India
due to the fact that the recipient of services located outside India has directly paid to the supplier of services
located outside India, such portion of the consideration shall also be treated as consideration received for export
in terms of section 2(6)(iv) of the IGST Act. This is subject to the conditions that:
✓ IGST has been paid by the Indian exporter for import of services; and
✓ RBI, by general instruction or by specific approval, has allowed part of the consideration for such exports
to be retained outside India.

Example 4: ABC Ltd. India has received an order for supply of services amounting to $ 5,00,000/- to a US based
client. ABC Ltd. India is unable to supply the entire services from India and asks XYZ Ltd. Mexico (who is not
merely an establishment of a distinct person viz. ABC Ltd. India, in accordance with the Explanation 1 in Section
8 of the IGST Act) to supply a part of the services (say 40% of the total contract value).
✓ ABC Ltd. India shall be the exporter of services for the entire value if the invoice for the entire amount
is raised by ABC Ltd. India. The services provided by XYZ Ltd. Mexico to the US based client shall be
import of services by ABC Ltd. India and it would be liable to pay integrated tax on the same under
reverse charge and also be eligible to take input tax credit of the integrated tax so paid.
✓ Further, if the provisions contained in section 2(6) of the IGST Act are not fulfilled with respect to the
realization of convertible foreign exchange, say only 60% of the consideration is received in India and
the remaining amount is directly paid by the US based client to XYZ Ltd. Mexico, even in such a
scenario, 100% of the total contract value shall be taken as consideration for the export of services by
ABC Ltd. India provided integrated tax on import of services has been paid on the part of the services
provided by XYZ Ltd Mexico directly to the US based client and RBI (by general instruction or by specific
approval) has allowed that a part of the consideration for such exports can be retained outside India. In
other words, in such cases, the export benefit will be available for the total realization of
convertible foreign exchange by ABC Ltd. India and XYZ Ltd. Mexico.

Circular No. 108/27/2019-GST dated 18th July 2019

Goods taken out of India for exhibition or on consignment basis for export promotion:

As per section 7 of CGST Act, for any activity or transaction to be treated as supply, it should be in course or
furtherance of business and for a consideration. Some of the exception are carved out in Schedule I to CGST
Act, wherein certain activities are treated as supply even if made without consideration. As per section 16 of
IGST Act, supplies which are either ‘exports’ or ‘made to SEZ unit/developer’ would qualify as zero-rated supply.

Accordingly, the circular clarifies that activity of sending/taking goods out of India for exhibition or on
consignment basis for export promotion would not be considered as supply since there is no consideration at
that point of time (unless the same is covered under schedule I of CGST Act). Such activity which is not a supply
could not be regarded as ‘zero-rated supply’.

As per section 31(7) of CGST Act, where the goods are sent on approval for sale or return, tax invoice is
required to be issued before or at the time of supply or six months from the date of removal, whichever is
earlier.

The circular also clarifies on the following issues: -

• Records to be maintained: The registered person shall maintain record of such goods in the format
prescribed.

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 • Documentation: As the activity is in the nature of ‘sale on approval basis’, the goods shall be
accompanied with a delivery challan. Since it is not a zero-rated supply, execution of bond or LUT is
not required.
• Supply of goods: If the goods are sold partially or fully, then the supply is made, in respect of quantity
so sold, on the date of such sale. However, if the goods are neither sold nor brought back within six
months, then supply would be deemed to have taken place on the expiry of six months.
• Invoice: If the goods are sold within six months, then the supplier needs to raise a tax invoice. Further,
if the goods are neither sold nor brought back within six months, then the invoice is required to be raised
on the date of expiry of six months.
• Refund: Even in absence of execution of bond or LUT, refund of input tax credit can be preferred
provided the supplier is otherwise eligible for refund under GST law.

Further, refund claim cannot be preferred under Rule 96 of CGST Rules, 2017 i.e. refund for export with payment
of tax, as supply is taking place at a time after goods have already been sent/ taken out of India.

The illustration provides that in case where out of 100 units sent outside India, 60 units were sold and 40 units
were not brought back, the refund of accumulated ITC can be claimed in respect of zero-rated supply of 60
units.

Refund claim in case of Deemed Export

Supplies to EOU units, supplies against annual advance authorization etc. are deemed export. These don’t
leave the country at the time of supply and payment is in Indian rupees. EOU units have to procure goods on
payment of GST as applicable. Supplies to EOU are like any other supplies. Zero rating is applicable to EOU
only in case of goods or services exported by them. EOU units clearing goods in Domestic Tariff Area or to
other EOU unit will be required to pay IGST/CGST/SGST/UTGST as applicable.

In respect of supplies regarded as deemed exports, the application may be filed by

a. The recipient of deemed export supplies; or
b. The supplier of deemed export supplies in cases where the recipient doesn’t avail of ITC on such
supplies and furnishes an undertaking to the effect that the supplier may claim the refund – third proviso
to Rule 89 (1) of CGST & SGST Rules 2017 as amended w.e.f. 18-10-2017.
If supplier has claimed benefit of deemed export under Notification No. 48/2017-CT Dated 18-10-2017, refund
of ITC, availed in respect of other inputs or input services is available if the recipient makes a zero rated supply
– 89 (4A) of CGST Rules.

If the supplier is claiming deemed export benefits, export by recipient of goods on payment of IGST not
permissible. If still IGST is paid on export of goods or services, its ITC is not available – Rule 96 (10) of CGST
Rules.

Merchant Export
Merchant exporter means a person engaged in trading activities and exporting or intending to export such
goods. Notification No. 41/2017 – IT (R) Dated 23rd Oct’17, states that inter-State supply made to Merchant
exporters will be charged at rate of 0.1% {0.05% CGST(equivalent SGST) in case of intra-State as per
Notification No. 40/2017 – CT (R) Dated 23rd Oct’17}. If regular rate of goods is 12% then a registered supplier
supplying to merchant exporter (registered recipient) will charge GST only 0.1% which means tax 11.9% will be

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exempted in such a case, if conditions prescribed in Notification No. 41-2017-IT (R) are satisfied (within 90 days
needs to export from the date of tax invoice by the supplier, registered with an Export Promotion Council, move
the said goods directly to the port, ICD or registered warehouse etc.).
If goods were procured on payment of 0.1% GST, the merchant exporter can export the goods only under
LUT/Bond and cannot export on payment of IGST – Rule 96 (10).

Section 15 Refund of Integrated Tax Paid on Supply of Goods to

Tourist Leaving India
The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded
in such manner and subject to such conditions and safeguards as may be prescribed.
Explanation: For the purposes of this section, the term “tourist” means a person not normally resident in India,
who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

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 Question & Answer
Q1. Who shall be liable to collect and discharge the Integrated tax liability in cases of provision of cross
border B2C OIDAR services?
A. Service providers providing OIDAR services to a non-taxable online recipient in taxable territory would be
responsible for collection and discharge of integrated tax.

Q2. Under what circumstances an intermediary, who arranges or facilitates the supply of OIDAR services
would not be liable to collect tax from non-taxable online recipient?
A. If the intermediary satisfies the following conditions, he shall not be liable to collect tax from non-taxable
online recipient;
(a) the invoice or customer’s bill or receipt issued or made available by such intermediary taking part in
the supply clearly identifies the service in question and its supplier in non-taxable territory;
(b) the intermediary involved in the supply does not authorise the charge to the customer or take part in its
charge which is that the intermediary neither collects or processes payment in any manner nor is
responsible for the payment between the non-taxable online recipient and the supplier of such services;
(c) the intermediary involved in the supply does not authorise delivery; and
(d) the general terms and conditions of the supply are not set by the intermediary involved in the supply
but by the supplier of services.

Q3. Who is non-taxable online recipient?

A. “Non-taxable online recipient” means any Government, local authority, governmental authority, an individual
or any other person not registered and receiving online information and database access or retrieval services
in relation to any purpose other than commerce, industry or any other business or profession, located in taxable
territory.

Q4. Would a supplier of OIDAR required to take registration in all states in India in GST Act?
A. No. The CBIC has notified the Principal Commissioner of Central Tax, Bengaluru West and all the officers
subordinate to him as the officers empowered to grant registration in case of online information and database
access or retrieval services provided or agreed to be provided by a person located in non-taxable territory
and received by a non-taxable online recipient.

Q5. Mr. A is supplying goods to SEZ Unit. Whether he has to charge IGST on supply of goods.
A. As per the provision of section 16 of IGST Act, 2017, Supply to SEZ Unit are Zero Rated Supplies. Therefore,
in such case Mr. A can either supply goods against payment of IGST (which can be claimed as refund) or he
can supply goods without payment of IGST (against LUT /Bond).

Q6. A person had submitted Bank Guarantee for Issue of Bond for export of goods without payment of tax. He
was granted Bond with a validity period upto 31st March 2018. However, in view of Notification No. 37/2017 –
Central Tax Dated 4th October 2017, he wants to submit Letter of Undertaking and get the bond released which
was submitted earlier. Can he do so.
A. Yes, he can submit a Letter of Undertaking as per the guidelines issued vide Notification No. 37/2017 –
Central Tax Dated 4th October 2017 and get the bond submitted earlier released.

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Q7. What is the meaning of the term “Zero Rated Supply”?
A. “Zero Rated Supply” refers to supplies made to SEZ units / developers or exports of goods or services or
both. Zero rated supply doesn't necessarily mean that the above supplies are not leviable to IGST or will taxed
at "0" (Zero) Rate or will be exempt from IGST unconditionally.

Q8. Are exports and supplies to SEZ units/Developers out of the ambit of GST?
A. No. They are treated as IGST supplies under the IGST Act, 2017. However, the tax burden on the same
will be neutralized by granting refunds to persons making such supplies.

Q9. Can SEZ unit / Developers claim refund of IGST charged by his supplier?
A. No. The IGST Act, 2017 allows the supplier of SEZ unit / developer to claim refund of IGST paid by him on
supplies to SEZ unit / Developers.

Q10. Are supplies made by SEZ units/Developer are Zero rated supplies?
A. No. only the supplies made to SEZ units/Developer are zero rates supplies. However, exports made by SEZ
units/Developer will be zero rated supplies.

Q11. Can the NRI's claim refund of tax paid under Section 15 of IGST Act, 2017?
A. Yes, since the NRI's are not normally resident in India they will be treated as tourist if the stay in India is for
legitimate non-immigrant purpose for a period of less than 6 months.

Q12. Whether services of short-term accommodation, conferencing, banqueting etc. provided to a SEZ
unit/Developer by a supplier located in the same State as that of the SEZ unit/Developer should be treated as
an inter-State supply under section 7(5)(b) or an intra-State supply in terms of section 8(2) read with section
12(3)(c)? Explain. (ICAI Study Material)
A. Circular No. 48/22/2018 GST has clarified on this issue as under: As per section 7(5)(b), the supply of goods
and/or services to a SEZ unit/Developer shall be treated to be a supply of goods and/or services in the course
of inter-State trade or commerce. Whereas, as per section 12(3)(c), the place of supply of services by way of
accommodation in any immovable property for organising any functions shall be the location at which the
immovable property is located. Thus, in such cases, if the location of the supplier and the place of supply is in
the same State/ Union territory, it would be treated as an intra-State supply. It is an established principle of
interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall
prevail over the general provision. In the instant case, section 7(5)(b) is a specific provision relating to supplies
of goods and/or services made to a SEZ unit/Developer, which states that such supplies shall be treated as
inter-State supplies. Further, proviso to section 8(2) also lays down that intra-State supply of services do not
include supply of services to a SEZ unit/Developer. It is, therefore, clarified that services of short term
accommodation, conferencing, banqueting etc., provided to a SEZ unit/Developer shall be treated as an inter
State supply.

Q13. GER Ltd. of Germany supplies luxurious car worth ₹ 1 crore to IND Ltd. of India. Before the car reached
Indian port but after crossing of the territorial waters of India, IND Ltd. sells it to T1 Ltd. by way of transfer of
documents of title. T1 Ltd. clears the said car for warehousing and stores said goods in customs bonded
warehouse. T1 Ltd. sells the said car from warehouse to T2 Ltd., and T2 Ltd. clears the said car from the
customs bonded warehouse. Answer the following with brief reasons:
(i) Is GST leviable on import of goods from GER Ltd. by IND Ltd.?
(ii) Is GST leviable on supply of goods by IND Ltd. to T1 Ltd.?
(iii) Is GST leviable on supply of goods by T1 Ltd. to T2 Ltd.?

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(iv) Is GST leviable on clearance of goods by T2 Ltd. from the customs bonded warehouse?
(PAST EXAM JAN 2021)
A.
(i) GST on import of goods is levied at the time when customs duty is levied on the said goods under the
Customs Act, 1962, i.e., on importation. Importation gets completed when the goods become part of the mass
of goods within the country. Thus, GST is not leviable on import of goods from GER Ltd. by IND Ltd. since the
import of goods is not complete.
(ii) GST is not leviable on supply of goods by IND Ltd. to T1 Ltd. as supply of goods by the consignee to any
other person, by endorsement of documents of title to the goods, after the goods have been dispatched from
the port of origin located outside India but before clearance for home consumption is treated neither as a supply
of goods nor a supply of services.
(iii) GST is not leviable on supply of goods by T1 Ltd. to T2 Ltd. since supply of warehoused goods to any person
before clearance for home consumption is treated neither as a supply of goods n or a supply of services.
(iv) Yes, GST is leviable on clearance of goods by T2 Ltd. from the customs bonded warehouse as customs
duty is levied on warehoused goods at the time of clearance thereof from the warehouse and as mentioned in
point (i), GST on import of goods is levied at the time when customs duty is levied thereon.

Q14. DF Ltd. exported goods valued ₹ 50 lakh and received refund of integrated tax paid amounting to ₹ 9 lakh
on 16th August, 2020. He could realise export proceeds to the extent of ₹ 25 lakh, but did not realise the balance
export proceeds within the prescribed time limit of 9 months and has applied for extension of time to RBI. There
is no dispute about the supply of the goods as regards quality, time of supply and fulfilment of terms and
conditions of sale. He wants you to inform him of the consequences under GST law in case RBI does not give
him the extension?
A. Where any applicant has received the refund of integrated tax paid on export of goods but could not realise
the sale proceeds of such exported goods within the prescribed time limit (or extended time period), he shall
deposit the amount so refunded along with interest of 18% within 30 days of the expiry of the said period (or
extended time period), to the extent of non-realisation of sale proceeds. However, if the RBI writes off the
requirement of such realization on merits, recovery shall not be made. In view of the aforesaid provisions, DF
Ltd. has to deposit the refund of integrated tax of ₹ 4.5 lakh (to the extent of non-realisation of export proceeds
of ₹ 25 lakh) along with interest @ 18% within 30 days of the expiry of the prescribed time-limit. In case of failure
to do so, the amount will be recovered in accordance with the provisions relating to recovery of erroneous refund
and also penalty can be imposed.

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 Section 54 Refund of Tax
Section 55 Refund to UN Bodies, Embassies, etc.
Section 56 Interest on Delayed Refunds
Section 57 Consumer Welfare Fund
Section 58 Utilization of Fund
Section 15 Refund of Integrated tax paid on supply of goods to Tourist leaving
[IGST] India

Section 54 Refund of Tax

A. Situation leading to refund claims

Refund may be due to situations discussed U/s 54 or U/s 77 of CGST Act and the requirement of submission
of prescribed relevant documents as is an indicator of the various situations that may necessitate a refund
claim. A claim for refund may arise on account of any one of the following:
1. Export of goods or services (Unjust enrichment – No)
2. Supplies to SEZs units and developers (Unjust enrichment – Yes)
3. Deemed exports (Unjust enrichment – Yes)
4. Casual Taxable Person (CTP)/Resident Taxable Person (NRTP) (Unjust enrichment – Yes)
5. Refund of taxes on purchase made by UN or Embassies etc. (Unjust enrichment – No)
6. Refund arising on account of judgement, decree, order or direction of the Appellate Authority,
Appellate Tribunal or any court (Unjust enrichment – Yes)
7. Refund of accumulated ITC on account of inverted duty structure (Unjust enrichment – No)
8. Finalisation of provisional assessment (Unjust enrichment – No)
9. Refund of pre-deposit (Unjust enrichment – No)
10. Excess payment due to mistake (Unjust enrichment – Yes)
11. Refunds to International Tourists of GST paid on goods in India and carried abroad at the time of their
departure from India (Unjust enrichment – No)
12. Refund on account of issuance of refund vouchers for taxes paid on advances against which, goods
or services have not been supplied (Unjust enrichment – No)
13. Refund of CGST and SGST paid by treating the supply as intra-State supply which is subsequently
held as inter-State supply and vice-versa (Unjust enrichment – No)
However, refund of unutilized ITC shall not be allowed if
• The goods exported out of India are subjected to export duty.
As per Circular No. 160/16/2021-GST, ‘only those goods which are actually subjected to export duty
i.e., on which some export duty has to be paid at the time of export, will be covered under the restriction
imposed under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject
to any export duty and in respect of which either NIL rate is specified in Second Schedule to the
Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of any
customs notification or which are not covered under Second Schedule to the Customs Tariff Act, 1975,
would not be covered by the restriction imposed under the second proviso to section 54(3) of the CGST
Act for the purpose of availment of refund of accumulated ITC’.
• The supplier of goods or services or both avails of drawback in respect of CGST or claims refund of the
IGST paid on such supplies. While claiming refund of accumulated ITC in case of zero rated supplies
without payment of tax, a supplier can avail drawback of only basic customs duty and cannot claim
drawback of any of the taxes under GST (Central Tax, Integrated Tax, State/Union Territory Tax). In
other words, a supplier availing drawback of only basic customs duty shall be eligible for refund of

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 unutilized ITC of central tax/ State tax/ Union territory tax/ integrated tax/ compensation cess under the
said provision. It is further clarified that refund of eligible credit on account of State tax shall be available
even if the supplier has availed of drawback in respect of central tax [Circular No.24/24/2017 GST Dated
21.12.2017 and Circular No. 37/11/2018 GST Dated 15.03.2018].

B. Time limit within which refund claim can be filed

❖ Any person claiming refund of any tax, interest, if any paid on such tax or any other amount paid by
him, may make an application before the expiry of 2 years from the ‘Relevant Date’ in such form and
manner as may be prescribed [Section 54(1)]
❖ A registered person may claim refund of any unutilized ITC in case of zero rated supplies {clause (i) U/s
54 (3)} or accumulated ITC on account of inverted duty structure {clause (ii) U/s 54 (3)} at the end of
any tax period. Government may, on the recommendations of the Council, notify supplies of certain
goods or services or both where no refund of unutilized ITC on account of inverted duty structure is
allowed. [Section 54(3)]

C. Meaning of ‘Relevant Date’ [Explanation 2 to section 54]

Case
1. Taxable goods are exported by Sea or Air
2. Taxable goods are exported by Land
3. Taxable goods are exported by Post
4. Supply of goods regarded as Deemed
Export
5. Export of Services out of India [where the
supply of services had been completed prior exchange or in Indian rupees wherever permitted by
to the receipt of such payment]
6. Export of Services out of India [where
payment for the services had been received
in advance prior to the date of issue of the
invoice]
7. Refund of tax as a consequence of
judgement, decree, order or direction of
Appellate Authority, Tribunal or Court
8. In the case of refund of unutilised input tax
credit under clause (ii) of the first proviso to 39 for the period in which such claim for refund
sub-section (3) – Inverted duty structure
9. Tax paid on Provisional Assessment
10. Refund to a person, other than the supplier
11. Any other case
Relevant Date
Date on which the Ship or Aircraft in which such
goods are loaded, leaves India
Date on which such goods pass the Frontier
Date of Despatch of goods by the Post Office, to a
place outside India
Date on which return relating to such deemed
exports is furnished
Date of receipt of payment in convertible foreign
the Reserve Bank of India
Date of issue of invoice
Date of communication of judgement, decree, order
or direction
The due date for furnishing of return under section
arises
Date of adjustment of tax after final assessment
Date of receipt of goods or services by such person
Date of payment of tax

D. Application for refund of tax, interest, penalty, fees or any other amount [Rule 89]
❖ Any person, except the persons covered by notification issued under section 55, claiming refund of any
tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on
goods exported out of India, may file subject to the provisions of rule 10B, an application in Form GST
RFD-01 electronically through GST common portal. [Rule 89(1)]
❖ Any claim for refund relating to balance in the Electronic Cash Ledger in as per Section 49 (6) may also
be made through the return furnished for the relevant tax period in Form GSTR 3/4/7.
❖ Casual Taxable person/NRTP, shall get the refund only when they furnished all the returns related to
period specify in the certificate of registration. [Section 54(13)]
Refund amount, shall be claimed in the last return required to be furnished by him.

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 ❖ In respect of supplies regarded as deemed export, the application shall be filed by the recipient of
deemed export supplies. The supplier of deemed export can also file the application if recipient give
undertaking that he has not availed ITC and supplier can claim refund. [Third proviso to rule 89 (1)]
❖ In respect of supplies to a SEZ unit/developer, the application shall be filed by the-
a) Supplier of goods after such goods have been admitted in full in the SEZ for authorized
operations, as endorsed by the specified officer of the Zone.
b) Supplier of services along with such evidence regarding receipt of services for authorized
operations as endorsed by the specified officer of SEZ. [Second proviso to rule 89(1)]
❖ W.e.f. 24th September 2021, any person, claiming refund under section 77 of the Act of any tax paid by
him, in respect of a transaction considered by him to be an intra-State supply, which is subsequently
held to be an inter-State supply, may, before the expiry of a period of two years from the date of payment
of the tax on the inter-State supply, file an application electronically in FORM GST RFD-01 through the
common portal, either directly or through a Facilitation Centre notified by the Commissioner.
Provided that the said application may, as regard to any payment of tax on inter-State supply before
coming into force of this sub-rule, be filed before the expiry of a period of two years from the date on
which this sub-rule comes into force.

Circular No. 162/18/2021-GST

Doubts have been raised regarding the interpretation of the term “subsequently held” in the
aforementioned sections, and whether refund claim under the said sections is available only if supply
made by a taxpayer as inter-State or intra-State, is subsequently held by tax officers as intra-State and
inter-State respectively, either on scrutiny/ assessment/ audit/ investigation, or as a result of any
adjudication, appellate or any other proceeding or whether the refund under the said sections is also
available when the inter-State or intra-State supply made by a taxpayer, is subsequently found by
taxpayer himself as intra-State and inter-State respectively.

In this regard, it is clarified that the term “subsequently held” in section 77 of CGST Act, 2017 or under
section 19 of IGST Act, 2017 covers both the cases where the inter-State or intra-State supply made
by a taxpayer, is either subsequently found by taxpayer himself as intra-State or inter-State respectively
or where the inter-State or intra-State supply made by a taxpayer is subsequently found/ held as intra-
State or inter-State respectively by the tax officer in any proceeding. Accordingly, refund claim under
the said sections can be claimed by the taxpayer in both the above mentioned situations, provided the
taxpayer pays the required amount of tax in the correct head.

Example 1:- Proper officer or adjudication authority or appellate authority of “A” has held the transaction
as an inter-State supply and accordingly, “A” has paid the IGST in respect of the said transaction on
10.11.2022. Since “A” has paid the correct tax on 10.11.2022, in terms of rule 89(1A) of the CGST
Rules, the last date for filing refund application in FORM GST RFD-01 would be 09.11.2024 (two years
from the date of payment of tax under the correct head, i.e. integrated tax)

E. Documents for filing refund claim [Sec. 54(4)]

1. The application for refund shall be accompanied by –
a) Such documentary evidence as may be prescribed to establish that a refund is due to the applicant,
and
b) Such documentary or other evidence (including the documents referred u/s 33) as the applicant may
furnish to establish that the amount of tax and interest or any other amount paid in relation to which
refund is claimed was collected from, or paid by, him and the incidence of such tax and interest had not
been passed on to any other person.

2. Self-Declaration: If the claimed refund amount doesn’t exceed Rs. 2,00,000, it is not necessary for
the applicant to furnish any documentary and other evidences. Instead, he may file a self-
declaration, based on the documentary or other evidences available with him, certifying that the

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 incidence of such tax and interest had not been passed on to any other person.
The application shall be accompanied by any of the following documentary evidences, in Annexure I in Form
GST RFD-01 as applicable, to establish that a refund is due to the applicant namely:
Situation
Pre-Deposit of Tax U/s 107(6) or 112(8)
Refund on account of Exports of Goods
Refund on account of Export of Services
Refund on account of supply of goods to SEZ unit or
SEZ developer
Refund on account of supply of services to SEZ unit
or SEZ developer
Refund on account of supply of goods or services or
both to SEZ unit or SEZ developer
Refund is on account of deemed exports
Refund on account of unutilised ITC due to Inverted
Duty Structure (other than nil rated or fully exempt
supplies)
Refund on account of finalization of Provisional
assessment
Refund u/s 77 for wrong collection and payment of
tax to Central and State Government
Refund on account of excess payment of tax
In case where the amount of refund
i) doesn’t exceed Rs. 2 Lacs/or
ii) exceeds Rs. 2 Lacs
(tax paid but incidence has not been passed to the
other person)
Note: If the amount of tax has been recovered from the recipient, it shall be deemed that the
incidence of tax has been passed on to the ultimate consumer.
Documents treated as Evidence
Reference number of the order and a copy of the
order passed by the proper officer/appellate
authority/appellate tribunal/court resulting in refund
or reference number of the payment of the pre-
deposit of tax
A statement containing the number and date of
shipping bills or bills of export and the number and
date of relevant export invoices
Statement containing the number and date of
invoices and the relevant Bank Realization
Certificates or Foreign Inward Remittance
Certificates
Statement containing the number and date of
invoices as provided in Rule 46 along with the
evidence regarding goods admitted in full for
authorized operations as endorsed by the specified
officer of SEZ
Statement containing the number and date of
invoices, along with the evidence regarding receipt of
services for authorized operations as endorsed by
the specified officer of SEZ., and the details of
payment
A declaration to the effect that tax has not been
collected from the Special Economic Zone unit or the
Special Economic Zone developer
Statement containing the number and date of
invoices along with such other evidence as may be
notified
A statement containing the number and the date of
the invoices received and issued during a tax period
Reference number of the final assessment order and
a copy of the said order
A statement showing the details of transactions
considered as intra-State supply but which is
subsequently held to be inter-State supply
Statement showing the details of the amount of claim
i) Declaration for the claim.
ii)) If it exceeds Rs. 2 Lacs then Certificate in Annex
2 of FORM GST RFD-01 issued by a Chartered
Accountant or a Cost Accountant to the effect of
claim.
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Further, neither a declaration by the applicant nor a certificate by a Chartered Accountant/Cost Accountant
is required to be furnished in the following cases:-
(a) Refund of tax paid on zero-rated supply export of goods or services or both or on inputs or input services
used in making such zero-rated supply exports;
(b) Refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty
structure;
(c) Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice
has not been issued or where a refund voucher has been issued;
(d) Refund of tax in pursuance of section 77 which means a registered person who has paid
CGST/SGST/UTGST on a transaction considered by him as intra-state supply but held as
inter-State supply;
(e) The tax or interest borne by notified class of applicant.

F. Amount to be claimed as refund in case of zero rated supply of goods or services and on
account of inverted duty structure (Rule 89)

As per Rule 89(4), in the case of zero-rated supply of goods or services or both without payment of
tax under bond or letter of undertaking in accordance with the provisions of sub-section (3) of section 16 of
the Integrated Goods and Services Tax Act, 2017, refund of input tax credit shall be
granted as per the following formula –

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of

services) x Net ITC ÷Adjusted Total Turnover
Where,-
(A) “Refund amount” means the maximum refund that is admissible;
(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant
period other than the ITC availed for which refund is claimed under Deemed export {Rule 89(4A)} or
Merchant export {Rule 89(4B)} or both.
(C) “Turnover of zero-rated supply of goods” means the value of zero-rated supply of goods made during the
relevant period without payment of tax under bond or letter of undertaking or the value which is 1.5 times
the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared by
the supplier, whichever is less, other than the turnover of supplies in respect of which refund is claimed
under Deemed export {Rule 89(4A)} or Merchant export {Rule 89(4B)} or both.
The value of zero-rated supplies is restricted to 1.5 times of the domestically supplied goods either by the
exporter themselves or by other similarly placed supplier. The value adopted by the “similarly placed
supplier” prima facie seems to be provided only when the exporter is not having any domestic supply of
goods, the requirement is prone to litigation on two counts, i.e. when the value of the similarly placed
supplier would be required to be provided and manner of identifying ‘similarly placed supplier’.

(D) “Turnover of zero-rated supply of services” means the value of zero-rated supply of services
made without payment of tax under bond or letter of undertaking, calculated in the following
manner, namely:-
Zero-rated supply of services is the aggregate of the payments received during the relevant
period for zero-rated supply of services and zero-rated supply of services where supply has
been completed for which payment had been received in advance in any period prior to the
relevant period reduced by advances received for zero-rated supply of services for which the
supply of services has not been completed during the relevant period;
(E) “Adjusted Total Turnover” means the sum total of the value of-

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 (a) the turnover in a State or a Union territory, as defined under clause (112) of section 2, excluding the
turnover of services; and
(b) the turnover of zero-rated supply of services determined in terms of clause (D) above and non-zero-
rated supply of services,
excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-rule (4B)
or both, if any,
during the relevant period. Confused! Don’t worry,
see below table
(F) “Relevant period” means the period for which the claim has been filed.

(A) Refund Amount It means the maximum refund that is admissible

(B) Net ITC ITC availed on input & input services during relevant …………….
period
Less: ITC availed for which refund is claimed under 89 …………….
(4A) Deemed export
Less: ITC availed for which refund is claimed under 89 …………….
(4B) Merchant Exporter
ITC availed for relevant period …………….
(C) Turnover of zero- Turnover Zero-rated Supply of goods under bond/LUT …………….
rated supply of Less: Turnover on which refund is claimed under 89 (4A) …………….
goods Deemed export
Less: Turnover on which refund is claimed under 89 (4B) …………….
Merchant Exporter
Turnover Zero-rated Supply of goods (remember …………….
restriction to 1.5 times of the domestically supplied goods)
(D) Turnover of zero- Aggregate of payment received during the relevant period …………….
rated supply of for zero rated supply of services
services Add: Advances received in any period prior to relevant …………….
period but supply completed in this relevant period
Less: Advances received in this relevant period but supply …………….
not completed
Turnover Zero-rated Supply of Services …………….
(E) Adjusted Total Turnover of goods in a State / UT (excluding the turnover …………….
Turnover of services)
Add: Zero rated supply of services as computed in (D) …………….
Add: Non-Zero rated supply of services …………….
Less: Value of exempt supply (Non-zero rated) …………….
Less: Turnover on which refund is claimed under 89 (4A) …………….
Deemed export
Less: Turnover on which refund is claimed under 89 (4B) …………….
Merchant Exporter
Adjusted Total Turnover …………….
(F) Relevant Period It means the period for which the claim has been filed.

As per Rule 89(5), In the case of refund on account of inverted duty structure, refund of input tax
credit shall be granted as per the following formula –
Maximum Refund Amount = {(Turnover of inverted rated supply of goods & Services) x Net
ITC ÷ Adjusted Total Turnover} – tax payable on such inverted rated supply of goods &
Services

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 No refund
on input
services &
capital
goods
Explanation:- For the purposes of this sub-rule, the expressions –
(a) Net ITC shall mean input tax credit availed on inputs during the relevant period other than the
input tax credit availed for which refund is claimed under sub-rules (4A) or (4B) or both; and
(b) “Adjusted Total turnover” and “relevant period” shall have the same meaning as assigned to them in
sub-rule (4).

Circular No. 147/03//2021-GST dated 12th March 2021

Definition of “Turnover of zero-rated supply of goods” under rule 89(4) was amended to restrict it to 1.5 times
the value of like goods domestically supplied by the same or similarly placed supplier, as declared by the
supplier.
Doubts had been raised whether the same would also apply for computation of “Adjusted Total Turnover” for
the purpose of calculating refund. The above expression has been defined to include the value of turnover in
a State or a Union territory, as defined under clause (112) of section 2, excluding the turnover of services.
As per section 2(112) of the Central Goods and Services Tax Act, 2017 (CGST Act), “Turnover in a State or
Union Territory” includes zero-rated supplies of goods.
In view of the above, the value, calculated as per amended definition of “Turnover of zero rated supply of
goods”, need to be taken into consideration while calculating “turnover in a state or a union territory” and
accordingly, the “adjusted total turnover” for the purpose of rule 89(4).
Thus, the restriction of 1.5 times the value of like goods domestically supplied, as applied in “Turnover of
zero-rated supply of goods”, would also apply to the value of “Adjusted Total Turnover”.
Illustration: Suppose a supplier is manufacturing only one type of goods and is supplying the same goods in
both domestic market and overseas. During the relevant period of refund, it has net admissible ITC of INR
270. The details of outward supply are shown in the table below:

Outward Supply Turnover Turnover as per amended

definition
Local 1000 1000
Export 1750 1500 (1.5*1000)
Total 2750 2500
The formula for calculation of refund as per rule 89(4) is:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net
ITC ÷Adjusted Total Turnover
Turnover of zero-rated supply of goods (as per amended definition) = INR 1500
Adjusted Total Turnover = INR 1000 + INR 1500 = INR 2500 [and not INR 1000 + INR 1750]
Net ITC = INR 270
Refund Amount = INR (1500*270)/2500 = INR 162

Circular 79/53/2018-GST:-
Refund of Accumulated ITC on A/c of Inverted Duty Structure-

Input A – GST @ 5%
Input B – GST @ 12% Output Product @ 12%
Input C – GST @ 18%

The above-mentioned case belongs to the Inverted Duty Structure. Department officers were denying the
refund of Accumulated ITC of Input A & B, since GST rate of Tax for these inputs is less than or equal to the
GST rate of output supply.

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 Clarification: – The accumulated ITC on Input A & B will also be included for the calculation of maximum
refund amount. Since, the definition of “Net ITC” includes the same as per rule 89(5) of the CGST Rules.

Refund of ITC of GST paid on invoices of earlier tax period but availed in the subsequent tax period-

Goods purchased against a Tax invoice which is issued in Aug 2017. But ITC on that invoice was availed in
the GST return of Sept 2017, that ITC cannot be excluded from the calculation of the refund amount for the
month of Sept 2017.
Net ITC means input availed during the relevant period but only till the due date of GST return of Sept month
of the next FY.
Relevant period means the period for which the refund claim has been filed.

In the above case, the relevant period would be Sept 2017. Input will be deemed to have been availed when
it is shown in GSTR-3B, and was reflected in the Electronic Credit Ledger. Hence, that ITC would be included
in the refund calculation for the month of Sept 2017.

Duration for the GST Refund by department-

If Deficiency Memo is issued, 60 days will be counted from the date of submission of fresh refund application.
If GST refund is not credited to the bank A/c of the taxpayer within 60 days as mentioned above, interest @
6% p.a. on the refund amount will be paid.

Interpretation of the term “Inputs”-

On certain occasions, departmental officers do not consider ITC on stores and spares, packing
materials, materials purchased for machinery repairs, printing and stationery items, as part of Net ITC
on the grounds that these are not directly consumed in the manufacturing process and therefore, do
not qualify as input.
The circular clarifies that ITC of the GST paid on inputs shall be available to a registered person as long
as he uses or intends to use such inputs for the purposes of his business and there is no specific
restriction on the availment of such ITC anywhere else in the GST Act.
Thus, the GST paid on inward supplies of stores and spares, packing materials etc. shall be available
as ITC as long as these inputs are used for the purpose of business and/or for effecting taxable supplies,
including zero rated supplies, and the ITC for such inputs is not restricted under section 17(5) of the
CGST Act.
Further, capital goods have been clearly defined in section 2(19) of the CGST Act as goods whose
value has been capitalized in the books of account and which are used or intended to be used in the
course or furtherance of business. Stores and spares, which has been charged as a revenue expense
in the books of account, cannot be held to be capital goods.

Example 2: ABC Ltd. is a registered taxable company having registered office at Hyderabad, engaged in
providing consultancy service to its client in India and outside India. It is exporting services without payment of
IGST under LUT. The company after adjusting all the taxable liability for the period September 2017 to March

375
2018, claim excess ITC as refund from the department. The following are the information provided by the
company, for calculating amount of ITC eligible for refund (all amount in INR)

Taxable @ 18% Tax @ 18%

Sr.
Particular Turnover on outward Inward Supply on inward
No.
supply supply
1. Domestic Outward Supply 1000 180 1250 225
2. Export (Zero rated supply) 500
3. Exempt Supply 250 - -
Total 1750 180 1250 225
Additional information:-
Sr. Tax @ 18% on inward
Other Inward Supplies Value
No. supply
1. Consultancy Services 100 18
2. Rent 250 45
3. Food Items (assume 18%) 200 36
4. Cleaning Services 50 9
Total 600 108
Note: Impact of Rules 42 & 43 is ignored for simplicity. Assume that the value of zero-rated supplies is
restricted to 1.5 times of the domestically supplied goods.
A.
Particular Amount Total
Turnover for zero rated supply 500 500
Adjusted total turnover
Total Turnover 1750
Less: Exempt Supply 250 1500
Input Tax Credit
Inward input tax credit 225
Add: Total common input tax credit 108
Less: Blocked credit [U/s 17 (5)] 36
Less: Outward Tax 180 117

Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net
ITC ÷Adjusted Total Turnover

Refund Amount = 500/1500*117 = 39 i.e. Rs. 39

Example 3: XYZ Ltd. is a registered manufacturing company at Kochi, indulged in the business of processing
of woven fabrics which is taxable @ 5%. The inputs used for making such product are taxable @ 12%. The
company wants to determine the ITC eligible for refund.
Following are the information provided by the company during the period January to March 2019:
Sr. No. Particular Amount Tax Amount
1. Raw materials used (inward supply) @ 12% 100 12
2. Woven fabrics (outward supply) @ 5% 150 7.5
3. Consultancy service @ 18% (other inward supply) 10 1.8
A.
Maximum Refund Amount = {(Turnover of inverted rated supply of goods & Services) x Net ITC ÷ Adjusted
Total Turnover} – tax payable on such inverted rated supply of goods & services

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Maximum Refund Amount= {150*12/150)/150}-7.5 = Rs. 4.5
Note:- No refund permissible for accumulated credit on input services i.e. Rs. 10

Example 4: My smart Ltd. furnishes following information. Please compute maximum refund eligible on
account of inverted duty structure:
ITC availed on inputs 3,60,000
ITC availed on inputs services 36,000
ITC availed on capital goods 2,00,000
Turnover of inverted rated supply of goods (taxable @ 5%) 30,00,000
Turnover of inverted rated supply of services (taxable @ 5%) 3,00,000
Note:- included in turnover of other supplies of goods & services i.e. Rs. 15,00,000
Turnover of other supplies of goods and services (including exempt supplies Rs. 15,00,000
5,00,000)
A.
Net ITC i.e. ITC availed on Inputs 3,60,000
Turnover of inverted rated supply of goods & services (30,00,000+3,00,000) 33,00,000
Total Adjusted Turnover {30,00,000+15,00,000-5,00,000} 40,00,000
Tax paid on inverted rated supply of goods & services (33,00,000*5%) 1,65,000
Maximum Refund {33,00,000 x 3,60,000÷ 40,00,000} – 1,65,000 1,32,000

G. Acknowledgement of refund claim [Rule 90]

❖ The application relates to a claim for refund from the electronic cash ledger, shall get acknowledgement
(specifying date of filing) through the Common Portal electronically.
❖ The application relates to a claim other than claim for refund from the electronic cash ledger, shall be
forwarded to proper officer, who will within a period of 15 days, shall issue acknowledgement through
the Common Portal electronically (specifying date of filing) if the application is found to be complete in
terms of rule 89.
❖ If any deficiencies are noticed, the proper officer shall communicate the deficiencies through the
common portal, requiring him to file a fresh refund application.
The time period, from the date of filing of the refund claim in prescribed form till the date of
communication of the deficiencies in prescribed form by the proper officer, shall be excluded from the
period of two years as specified under sub-section (1) of Section 54, in respect of any such fresh refund
claim filed by the applicant after rectification of the deficiencies.
❖ The applicant may, at any time before issuance of provisional refund sanction order in prescribed form
or final refund sanction order in prescribed form or payment order in prescribed form or refund withhold
order in prescribed form or notice in prescribed form, in respect of any refund application filed in
prescribed form, withdraw the said application for refund by filing an application in prescribed form.
❖ On submission of application for withdrawal of refund in prescribed form, any amount debited by the
applicant from electronic credit ledger or electronic cash ledger, as the case may be, while filing
application for refund in prescribed form, shall be credited back to the ledger from which such debit was
made.

H. Order of Refund [Section 54(5), (7) read with rule 92]

❖ If, on receipt of any such application, the proper officer is satisfied that the whole or part of the amount
claimed as refund is refundable, he may make an order in FORM GST RFD – 06 and the amount so
determined shall be credited to the Fund referred to in section 57. [Sec. 54(5)]
❖ The proper officer shall issue the order under sub-section (5) within sixty days from the date of receipt
of application complete in all respects. [Sec. 54(7)]

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 Extract of CGST Rule 92
➢ The proper officer shall issue the order of sanctioning the amount in Form GST RFD-06 stating:
• The amount of refund due to the applicant,
• The amount provisionally refunded to the applicant (if any),
• The amount adjusted against any outstanding demand,
• The balance amount refundable to the applicant.
In case the whole amount of refund is adjusted against any outstanding demand under this Act or
under any of the existing law an order mentioning the details of such adjustment shall be issued in
Part A of Form GST RFD-07 {Rule 92(1)}
Proviso to rule 92(2) has been inserted to provide that where the proper officer or the Commissioner
is satisfied that the refund is no longer liable to be withheld, he may pass an order for release of
withheld refund in prescribed form.
➢ Where, upon examination of the application of refund of any amount paid as tax other than the refund
of tax paid on zero-rated supplies or deemed export, the proper officer is satisfied that a refund under
sub-section (5) of section 54 of the Act is due and payable to the applicant, he shall make an order
in FORM RFD-06 sanctioning the amount of refund to be paid, in cash, proportionate to the amount
debited in cash against the total amount paid for discharging tax liability for the relevant period,
mentioning therein the amount adjusted against any outstanding demand under the Act or under any
existing law and the balance amount refundable and for the remaining amount which has been
debited from the electronic credit ledger for making payment of such tax, the proper officer shall issue
FORM GST PMT-03 re-crediting the said amount as Input Tax Credit in electronic credit ledger.
{Rule 92(1A)}
➢ Where the proper officer is satisfied that the amount refundable under sub-rule (1) or sub-rule (1A)
or sub-rule (2) or is payable to the applicant under sub-section (8) of section 54, he shall make an
order in FORM GST RFD-06 and issue a payment order in FORM GST RFD-05 for the amount of
refund and the same shall be electronically credited to any of the bank accounts of the applicant
mentioned in his registration particulars and as specified in the application for refund on the basis of
a consolidated payment advice:
Provided that the order issued in FORM GST RFD-06 shall not be required to be revalidated by the
proper officer:
Provided further that the payment order in FORM GST RFD-05 shall be required to be revalidated
where the refund has not been disbursed within the same financial year in which the said payment
order was issued {Rule 92(4)}
➢ The Central Government shall disburse the refund based on the consolidated payment advice issued
under sub-rule (4). {Rule 92(4A)}

I. Grant of Provisional refund [Section 54(6) read with rule 91]

Irrespective of Sec. 54(5), 90% of refund may be sanctioned on provisional basis in such manner and subject
to such conditions, limitations and safeguard as may be prescribed (paid to the claimant) without verification of
documents if following conditions are satisfied:
➢ Claim for refund on account of zero-rated supply
➢ Made by registered persons
➢ Other than such category of registered person as may be notified by the government
Remaining 10% may be refunded after due verification of documents furnished by the applicant.

Extract of CGST Rule 91

(1) The provisional refund of 90% shall be granted to the applicant if the person claiming the refund has
not been prosecuted for any offence under the act or under an existing law where the amount of tax
evaded exceeds two hundred and fifty lakh rupees during any period of five years immediately
preceding the tax period to which the claim for refund relates.

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 (2) The proper officer, after scrutiny of the claim and the evidence submitted in support thereof and on
being prima facie satisfied that the amount claimed as refund under sub-rule (1) is due to the
applicant in accordance with the provisions of sub-section (6) of section 54, shall make an order in
FORM GST RFD-04, sanctioning the amount of refund due to the said applicant on a provisional
basis within a period not exceeding seven days from the date of the acknowledgement under sub-
rule (1) or sub-rule (2) of rule 90:
Provided that the order issued in FORM GST RFD-04 shall not be required to be revalidated by the
proper officer.
(3) The proper officer shall issue a payment order in FORM GST RFD-05 for the amount sanctioned
under sub-rule (2) and the same shall be electronically credited to any of the bank accounts of the
applicant mentioned in his registration particulars and as specified in the application for refund on
the basis of a consolidated payment advice:
Provided that the payment order in FORM GST RFD-05 shall be required to be revalidated where
the refund has not been disbursed within the same financial year in which the said payment order
was issued.
(4) The Central Government shall disburse the refund based on the consolidated payment advice issued
under sub-rule (3).
With combined reading of Rule 91 & 92, it can be concluded that Government inserted the proviso to
Rule 91(2) and Rule 91(3) to provide that in the case where refund is not disbursed, the order issued by
officer in GST RFD-04 form for grant of provisional refund shall not be revalidated and only payment
advice issued in FORM GST RFD 05 shall be revalidated if refund is not disbursed within same financial
year in which said payment advice was issued.

J. Principal of Unjust Enrichment [Section 54(8) & (9)]

The person who has not passed the incidence of tax will be eligible to claim the refund. Under unjust enrichment,
a presumption is always drawn that the businessman will shift the incidence of tax to the final consumer. This
is because GST is an indirect tax whose incidence is to be borne by the consumer. It is for this reason that
every refund claim if sanctioned is first transferred to the “consumer welfare fund”.
The GST Law makes this test inapplicable in case of refund of accumulated ITC, refund on account of exports,
refund of payment of wrong tax (IGST instead of CGST + SGST & vice versa), refund of tax paid on a supply,
which is not provided or when refund voucher is issued or if the applicant shows that he has not passed on the
incidence of tax to any other person.
If refund claim doesn’t exceed Rs. 2 Lacs, then a self-declaration of the applicant and in case of more than Rs.
2 Lacs, a certificate from Chartered Accountant/Cost Accountant will have to be given.

Cases where refundable amount shall be paid to the applicant [Sec. 54(8):

The refund shall be sanctioned directly to the claimant, in the following cases –
(f) Refund of tax paid on zero-rated supply export of goods or services or both or on inputs or input services
used in making such zero-rated supply exports;
(g) Refund of unutilized ITC in case of zero rated supplies or accumulated ITC on account of inverted duty
structure;
(h) Refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice
has not been issued or where a refund voucher has been issued;
(i) Refund of tax in pursuance of section 77 which means a registered person who has paid
CGST/SGST/UTGST on a transaction considered by him as intra-state supply but held as
inter-State supply;
(j) The tax/interest/other amounts paid by the applicant, where the incidence had not passed on to any
other person; or
(k) The tax or interest borne by notified class of applicant.

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In all cases other than the one listed above, where the application is found to be in order, the refund amount,
shall be credited to consumer welfare fund within 60 days of receipt of the application.

Disbursement [Sec. 54(8A)]:

The Government may disburse the refund of the State tax in such manner as may be prescribed.

K. Issue of SCN and rejection of refund claim [Rule 92(3)]

➢ The Proper Officer is satisfied that the whole or any part of the refund amount claimed, is not admissible,
he shall issue “Show Cause Notice”.
➢ Applicant will be required to furnish a reply within 15 days of the receipt of notice.
➢ The proper officer shall, after considering reply and giving him an opportunity of being heard, make an
order in Form GST RFD-06, sanctioning the amount of refund in whole or part, or rejecting the said
refund claim.

L. Withholding of refund claim & other provisions [Sec. 54(10) to Sec. 54(15)]

Sec. 54(10)
Proper officer may withhold the refund due in case on non-filing of return or non-payment of tax, interest and
penalty which is not stayed by any court, tribunal or appellate authority by specified date (in case no appeal has
been filed – the last date for filing an appeal under this act) until he files return or pay the amount due. Proper
officer may also adjust the amount payable from refund amount.
Sec. 54(11)
The commissioner/board may, after giving the tax payer an opportunity of being heard, withhold the refund till
such time as he may determine in case where he is of the opinion that such refund is –
➢ Likely to have an adverse effect on the revenue and
➢ An order giving rise to a refund is the subject matter of an appeal or further proceeding or where any
other proceeding under this act is pending on account of malfeasance or fraud committed. (order need
to be passed in prescribed form)
Sec. 54(12)
If refund has been withheld by commissioner/board U/s 54(11) above and later he becomes entitled to the
refund, he shall be entitled to interest @ 6%, irrespective of Section 56.
Sec. 54(13)
The amount of advance tax deposited by a casual taxable person or a non-resident taxable person at the time
of taking registration would be refunded only after completion of entire period for which the certificate of
registration granted and all the returns required to be furnished U/s 39 are furnished.
Sec. 54(14)
No refund shall be granted or paid to an applicant, if the amount is less than Rs. 1000. The limit of Rs. 1,000
shall apply for each tax head separately and not cumulatively. Further, the limit would not apply in cases of
refund of excess balance in the electronic cash ledger. {Circular No. 59/ 33/ 2018 GST Dated 04.09.2018}

M. Any refund claim rejected shall be re-credited to the Electronic Credit Ledger [Rule 93]

N. Refund of taxes to the retail outlets established in departure area of

an international Airport beyond immigration counters making tax free
supply to an outgoing international tourist
[Rule 95A & Circular No. 106/25/2019-GST dated 29-6-2019]

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Section 15 of IGST Act, provides that the IGST paid by tourist leaving India, on any supply of goods taken
out of India by him, shall be refunded in such manner and subject to such conditions and safeguards as
may be prescribed. As per the proviso to section 8(1) read with section 7(5) of IGST Act, supply made to
tourist referred in section 15 shall be treated as inter-state supply.

The term “tourist” has been defined to mean a person not normally resident in India, who enters India for a
stay of not more than six months for legitimate non-immigrant purposes.

There are two kinds of retail outlets at international airports: -

✓ Duty Free Shops (DFS) which supplies goods procured from customs warehouse as well as tax
paid indigenous goods.
✓ Duty Paid Shops (DPS) which supplies only tax paid indigenous goods.

The procedure and applicable rules as specified under the Customs Act are required to be followed for
procurement and supply of imported/ warehoused goods.

Under GST regime there is no special procedure for procurement of indigenous goods for sale by DFS or
DPS. Therefore, all indigenous goods would have to be procured by DFS or DPS on payment of applicable
tax when procured from the domestic market.

CBIC has issued certain notifications and a circular in this regard. The notifications are effective from 1 July
2019.

According to Notification No. 11/2019 - IT(Rate), dated 29 June 2019 issued in exercise of powers
conferred under section 6(1) of the IGST Act and 11(1) of GST (Compensation to States) Act, 2017,
“Supply of goods by retail outlets established in the departure area of an international airport beyond the
immigration counters (retail outlets) supplying goods to outgoing international tourist (tourist) has been
exempted from integrated tax and GST Compensation Cess (Cess), if applicable.”
Refund of tax paid on inward supply

Rule 95A has been inserted in Central Goods and Services Tax (CGST) Rules, 2017. As per the said rule,
the retail outlets supplying indigenous goods to tourist shall be entitled to claim refund of integrated tax or
central tax and state tax, as the case may be, and Cess (if applicable) paid on the inward supply of such
indigenous goods, subject to the following conditions:
• inward supplies are received by retail outlets from a registered person against the tax invoice; No refund
• goods are supplied to tourist against foreign exchange without charging any tax; on input
services
• goods and services tax identification number of the retail outlets is mentioned on the tax invoice for
the inward supply;
• such other restrictions or conditions, as may be specified.
• The provisions of rule 92 shall, mutatis mutandis, apply for the sanction and payment of refund
under
this rule.

Since the outward supplies by retail outlets is exempt, they will not be eligible to claim input tax credit.
Thus, it is clarified that the refund to be granted to retail outlets is not on account of the accumulated input
tax credit but based on the invoices of the inward supplies of indigenous goods received by them.

For making supplies without payment of tax, the following documents and declaration are required:
• Details of passport (via Passport Reading Machine);
• Details of boarding pass (via a barcode scanning reading device);
• A passenger declaration in the prescribed format;
• Copy of invoice evidencing that no tax was charged from the eligible passenger by the retail outlet.

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Manner of filing refund application

The retail outlets shall claim refund in Form GST RFD10B on a monthly or quarterly basis (manually to the
jurisdictional proper officer until online application available), as the case may be.

The refund application should be accompanied with following documents:

• Self-certified compiled information of invoices issued for the supply made during the month or
quarter;
• Undertaking by retail outlets that the indigenous goods on which refund is being claimed have
been received by them and such goods have been sold to tourist;
• Copies of Form GSTR-3B and GSTR-2A for period covered in refund claim;
• Attested hard copies of inward invoices on which refund is claimed but which are not reflected in
Form GSTR-2A.

Other Points

• The records with respect to duty paid indigenous goods being brought to the retail outlets and their
supplies to tourist shall be maintained in the prescribed manner.
• The retail outlets are required to prominently display a notice that tourist is eligible for purchase of
goods without payment of domestic taxes.

Processing and sanction of the refund claim

✓ Upon receipt of the complete application in GST RFD-10B, an acknowledgement shall be issued
manually by the proper officer within 15 days of the receipt of application in GST RFD-02. In case
of any deficiencies or any additional information is required, the same shall be communicated to the
retail outlets by issuing a deficiency memo manually in GST RFD-03 by the proper officer within 15
days of the receipt of the refund application. Only one deficiency memo should be issued against
one refund application which is complete in all respects.
✓ The proper officer shall validate the GSTIN details on the common portal to ascertain whether the
return in GSTR- 3B has been filed by the retail outlets. The proper officer may scrutinize the details
contained in RFD-10B, GSTR-3B and GSTR-2A. The proper officer may rely upon GSTR-2A as an
evidence of the accountal of the supply received by them in relation to which the refund has been
claimed by the retail outlets. Normally, officers are advised not to call for hard copies of invoices or
details contained in Annexure A. It is reiterated that the retail outlets would be required to submit
hard copies of only those invoices of inward supplies that have not been reflected in GSTR-2A.
✓ The proper officer shall issue the refund order manually in GST RFD-06 along with the manual
payment advice in GST RFD-05 for each head i.e., Central tax/State tax/Union territory
tax/Integrated tax/Compensation Cess. The amount of sanctioned refund along with the bank
account details of the retail outlets shall be manually submitted in the PFMS system by the
jurisdictional Division’s DDO and a signed copy of the sanction order shall be sent to the PAO for
disbursal of the said amount.
✓ Where any refund has been made in respect of an invoice without the tax having been paid to the
Government or where the supply of such goods was not made to an eligible passenger, such
amount refunded shall be recovered along with interest as per the provisions contained in the
Section 73 or Section 74 of the CGST Act.
✓ It is clarified that the retail outlets will apply for refund with the jurisdictional Central tax/State tax
authority only, however, the payment of the sanctioned refund amount in relation to CGST/ IGST/
Compensation Cess shall be made by the Central tax authority while payment of the sanctioned
refund amount in relation to State Tax / Union Territory Tax shall be made by the State tax/Union
Territory tax authority. It therefore becomes necessary that the refund order issued by the proper
officer of Central Tax is duly communicated to the concerned counter-part tax authority within 7

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 days for the purpose of disbursal of the remaining sanctioned refund amount. The procedure
outlined in para 6.0 of Circular No.24/24/2017GST dated 21-12-2017 should be followed in this
regard.
The scheme shall be effective from 01.07.2019 and would be applicable in respect of all supplies made to
eligible passengers after the said date. In other words, retail outlets would be eligible to claim refund of
taxes paid on inward supplies of indigenous goods received by them even prior to 01.07.2019 as long as all
the conditions laid down in Rule 95A of the CGST Rules and this circular are fulfilled.

O. Refund of Integrated tax paid on goods or services exported out of India [Rule 96]

A taxable person has option to pay IGST on goods exported out of India and claim refund. Shipping bill filed by
exporter of goods shall be deemed to application for refund of IGST. A Departure Manifest or Export Manifest
or Export report covering the number and date of shipping bill should have been filed. The applicant has
furnished a valid return in Form GSTR 3 or GSTR 3B. The applicant has undergone Aadhaar authentication in
the manner provided in rule 10B.
Details of export invoices in respect of export of goods contained in Form GSTR 1, shall be transmitted to
system in respect of designated by customs. The system shall confirm that the goods have been exporters out
of India.
Where date of filing of GSTR 1 has been extended by Commissioner the supplier shall furnish information
relating to export invoices in table 6A of form GSTR 1 after return in form GSTR 3B has been furnished.
The system designated by the Customs or the proper officer of Customs, as the case may be, shall process the
claim of refund in respect of export of goods and an amount equal to the integrated tax paid in respect of each
shipping bill or bill of export shall be electronically credited to the bank account of the applicant mentioned in
his registration particulars and as intimated to the Customs authorities.

Refund of IGST paid on services exported shall be filed in form GST RFD – 01 and shall be dealt with in
accordance with provisions of rule 89 of CGST Rules – Rule 96 (9) of CGST Rules, 2017.
The Central Government may pay refund of the IGST to the Government of Bhutan on the exports to Bhutan
for such class as may be notified in this behalf and where such refund is paid to the Government of Bhutan, the
exporter shall not be paid any refund of the integrated tax.
The claim for Refund shall be withheld where-
a. A request has been received from jurisdictional Commissioner of Central tax, State tax & Union Territory
Tax;
b. The proper officer of customs determined that the goods were exported in violation of the provisions of
the Customs Act, 1962.

Sub-rule (7) of this rule provides that in case where the claim for refund was withheld for specified reasons and
subsequently, the applicant becomes entitled to refund of the amount withheld, the concerned jurisdictional
officer shall proceed to refund the amount after passing refund sanction order.

The said sub-rule has been amended. Now, the concerned jurisdictional officer is required to first pass an order
for release of withheld refund and then he will pass refund sanction order in case of the applicant who becomes
entitled to refund withheld.

Person claiming refund of IGST paid on export of goods/ services should not have:
i. received supplies on which the benefit of deemed exports, except so far it relates to receipt of capital
goods by such person against Export Promotion Capital Goods (EPCG) Scheme, has been availed or
benefit of supply of goods to merchant exporters at the concessional rate of 0.1% has been availed, or

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 ii. availed the benefit of exemption from IGST and Compensation Cess, in respect of goods imported by
EOU or for goods imported under Advance Authorisation (AA).
For the purpose of this sub-rule, the benefit of the notifications mentioned above shall not be considered to have
been availed only where the registered person has paid IGST and Compensation Cess on inputs and has
availed exemption of only Basic Customs Duty (BCD) under the said notifications.

P. Export of goods or service under bond or LUT [Rule 96A] Or such further period as
may be allowed by the
Commissioner

Filing of invoices is
similar to Rule 96

Pay within 15 days after expiry of 1 year from Date of

Invoice if not received payment in convertible foreign
exchange or
in Indian rupees, wherever permitted by the RBI

If fails to pay the amount mentioned in specified time, the export as

allowed under bond/LUT shall be withdrawn. It shall be restored
immediately when the registered person pays the amount due.

Q. Recovery of refund of unutilised input tax credit or integrated tax paid on export of goods where
export proceeds not realised [Rule 96B]

(1) Where any refund of unutilised input tax credit on account of export of goods or of integrated tax paid
on export of goods has been paid to an applicant but the sale proceeds in respect of such export
goods have not been realised, in full or in part, in India within the period allowed under the Foreign
Exchange Management Act, 1999, including any extension of such period, the person to whom the
refund has been made shall deposit the amount so refunded, to the extent of non-realisation of sale
proceeds, along with applicable interest within thirty days of the expiry of the said period or, as the
case may be, the extended period, failing which the amount refunded shall be recovered in
accordance with the provisions of section 73 or 74 of the Act, as the case may be, as is applicable for
recovery of erroneous refund, along with interest under section 50:
Provided that where sale proceeds, or any part thereof, in respect of such export goods are not
realised by the applicant within the period allowed under the Foreign Exchange Management Act,
1999 (42 of 1999), but the Reserve Bank of India writes off the requirement of realisation of sale
proceeds on merits, the refund paid to the applicant shall not be recovered.
(2) Where the sale proceeds are realised by the applicant, in full or part, after the amount of refund has
been recovered from him under sub-rule (1) and the applicant produces evidence about such

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 realisation within a period of three months from the date of realisation of sale proceeds, the amount
so recovered shall be refunded by the proper officer, to the applicant to the extent of realisation of
sale proceeds, provided the sale proceeds have been realised within such extended period as
permitted by the Reserve Bank of India.

Circular No. 125/44/2019-GST dated 18th November 2019

Determination of refundable amount in case of refund of unutilised ITC on account of (i) exports without
payment of tax, (ii) supplies made to SEZ Unit/SEZ Developer without payment of tax or (iii) accumulation due
to inverted tax structure, clarified.

In case of refund of unutilized input tax credit (ITC) on account of (i) exports without payment of tax, (ii)
supplies made to SEZ Unit/SEZ Developer without payment of tax or (iii) accumulation due to inverted tax
structure, the common portal calculates the refundable amount as the least of the following amounts:

a) The maximum refund amount as per the formula in rule 89(4) {this sub-rule lays down the formula for
determination of amount of refund of ITC on account of, exports without payment of tax or supplies
made to SEZ Unit/SEZ Developer without payment of tax} or rule 89(5) {this sub-rule lays down the
formula for determination of amount of refund of ITC on account of inverted duty structure} of the
CGST Rules, 2017 [formula is applied on the consolidated amount of ITC, i.e. Central tax + State
tax/Union Territory tax +Integrated tax];
b) The balance in the electronic credit ledger of the applicant at the end of the tax period for which the
refund claim is being filed after the return in Form GSTR-3B for the said period has been filed; and
c) The balance in the electronic credit ledger of the applicant at the time of filing the refund application.

After calculating the least of the above 3 amounts, as detailed above, the equivalent amount is to be debited
from the electronic credit ledger of the applicant in the following order :

a) Integrated tax, to the extent of balance available;

b) Central tax and State tax/Union Territory tax, equally to the extent of balance available and in the
event of a shortfall in the balance available in a particular electronic credit ledger (say, Central tax),
the differential amount is to be debited from the other electronic credit ledger (i.e., State tax/Union
Territory tax, in this case).

Circular No. 135/05/2020-GST dated 31st March 2020

Bunching of refund claims across financial years
• Earlier, CBIC had clarified (Circular No. 125/44/2019-GST dated 18 November 2019) that exporters
cannot club tax periods across different financial years while filing refund claim.
• Delhi High Court, in the case of Pitambra Books Pvt. Ltd., had stayed para 8 of the Circular No.
125/44/2019-GST dated 18 November 2019 and observed that:
➢ Circulars can supplant but not supplement the law
➢ Circulars might mitigate rigors of law by granting administrative relief beyond relevant
provisions of the statute, however, Central Government is not empowered to withdraw
benefits or impose stricter conditions than postulated by the law.
• Further, on perusal of section 16(3) of the Integrated Goods and Services Tax Act, 2017 and section
54(3) of the Central Goods and Services Tax Act, 2017, there appears to be no bar in claiming refund
by clubbing tax periods across successive financial years.

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Thus, the restriction on bunching of refund claims across financial years shall not apply.

Refund of accumulated input tax credit (ITC) due to rate reduction

• Section 54(3)(ii) of the CGST Act provides for refund of accumulated ITC on account of rate of tax on
inputs being higher than the rate of tax on output supplies.
• It is clarified that the above provision is not applicable in cases where the inversion is due to change
in the GST rate on the same goods (i.e. where input and output supplies are same). This is because
section 54(3)(ii) does not cover cases where the ITC accumulation is on account of different tax rates
applicable at different point in time on the same goods.

Illustration: A trader purchased goods “X” attracting GST at 18%. Subsequently, the GST rate on goods “X” is
reduced to 12%. In this case, even though there is credit accumulation due to subsequent rate reduction, the
refund of accumulated ITC cannot be claimed.

Refund of accumulated ITC in respect of invoices reflecting in Form GSTR-2A

• Circular No. 125/44/2019-GST dated 18 November 2019, permitted refund of accumulated ITC even
in respect of invoices not reflected in Form GSTR-2A. This was subject to uploading copy of such
invoices by the applicant along with the refund application.
• In view of above, it is clarified that refund of accumulated ITC shall be restricted only to those invoices
which are uploaded by the supplier in Form GSTR–1 and are reflected in Form GSTR-2A of the
applicant.
• CBIC has clarified through Circular no. 139/09/2020-GST dated 10th June 2020 that restriction shall
not apply for ITC refunds claim pertaining to: -
a. Invoice/documents relating to Imports,
b. ISD invoices,
c. Inward supplies liable to Reverse charge (RCM supplies)

Circular No. 137/07/2020-GST dated 13th April 2020

Sr. Issue
No.
1. An advance is received by a
supplier for a Service contract
which subsequently got
cancelled. The supplier has
issued the invoice before supply
of service and paid the GST
thereon. Whether he can claim
refund of tax paid or is he
required to adjust his tax liability
in his returns?
2. An advance is received by a
supplier for a Service contract
which got cancelled
subsequently. The supplier has
issued receipt voucher and paid
Clarification
In case GST is paid by the supplier on advances received for a
future event which got cancelled subsequently and for which
invoice is issued before supply of service, the supplier is required
to issue a “credit note” in terms of section 34 of the CGST Act. He
shall declare the details of such credit notes in the return for the
month during which such credit note has been issued. The tax
liability shall be adjusted in the return subject to conditions of
section 34 of the CGST Act. There is no need to file a separate
refund claim.
However, in cases where there is no output liability against which
a credit note can be adjusted, registered persons may proceed to
file a claim under “Excess payment of tax, if any” through FORM
GST RFD-01.
In case GST is paid by the supplier on advances received for an
event which got cancelled subsequently and for which no invoice
has been issued in terms of section 31 (2) of the CGST Act, he is
required to issue a “refund voucher” in terms of section 31 (3) (e)
of the CGST Act read with rule 51 of the CGST Rules.

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 the GST on such advance
received. Whether he can claim
refund of tax paid on advance or
he is required to adjust his tax
liability in his returns?
3. Goods supplied by a supplier
under cover of a tax invoice are
returned by the recipient.
Whether he can claim refund of
tax paid or is he required to
adjust his tax liability in his
returns?
The taxpayer can apply for refund of GST paid on such advances
by filing FORM GST RFD-01 under the category “Refund of
excess payment of tax”.
In such a case where the goods supplied by a supplier are
returned by the recipient and where tax invoice had been issued,
the supplier is required to issue a “credit note” in terms of section
34 of the CGST Act. He shall declare the details of such credit
notes in the return for the month during which such credit note
has been issued. The tax liability shall be adjusted in the return
subject to conditions of section 34 of the CGST Act. There is no
need to file a separate refund claim in such a case.

However, in cases where there is no output liability against which

a credit note can be adjusted, registered persons may proceed to
file a claim under “Excess payment of tax, if any” through FORM
GST RFD-01.

Circular No. 147/03//2021-GST dated 12th March 2021

Refund claim by recipient of deemed export supply

For obtaining refund of tax paid by the recipient of deemed export supplies, para 41 of Circular No.
125/44/2019 has placed a condition that such person should submit an undertaking that it has not availed
input tax credit (ITC) on invoices in respect of which refund is claimed.
However, when the said person proceeds to file refund application on the portal, system requires debit of the
amount so claimed from the electronic credit ledger.
Third proviso to Rule 89(1) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) does not
impose any such restriction on recipient of deemed export supplies while claiming refund of tax.
In order to ensure that there is no dual benefit to the claimant, the portal requires recipient to debit equivalent
amount from electronic credit ledger.
Accordingly, para 41 of Circular No. 125/44/2019 is modified to remove the restriction of non availment of ITC
by the recipient of deemed export supplies on the invoices for which refund has been claimed.

Circular No. 166/22//2021-GST dated 17th November 2021

Following clarifications have been issued in regard to refund:

• The time period within which an application for refund can be made shall not be applicable in cases of
refund of excess balance in electronic cash ledger.
• Furnishing of certification/declaration for not passing the incidence of tax to any other person is not
required in cases of refund of excess balance in electronic cash ledger as unjust enrichment clause is
not applicable in such case.
• The amount deducted/collected as TDS u/s 51 /TCS u/s 52, as the case may be, and credited to
electronic cash ledger of the registered person, is equivalent to cash deposited in electronic cash
ledger. It is not mandatory for the registered person to utilize such TDS/TCS amount only for the
purpose of discharging tax liability. The registered person is at full liberty to discharge his tax liability

387
 in respect of the supplies made by him during a tax period, either through debit in electronic credit
ledger or through debit in electronic cash ledger, as per his choice and availability of balance in the
said ledgers. Any amount, which remains unutilized in electronic cash ledger, after discharge of tax
dues and other dues payable under CGST Act, 2017 and rules made thereunder, can be refunded to
the registered person as excess balance in electronic cash ledger in accordance with the proviso to
sub-section (1) of section 54, read with sub-section (6) of section 49 of CGST Act, 2017.
• Clause (b) of Explanation (2) under section 54 of the CGST Act, 2017 is applicable for determining
relevant date in respect of refund of amount of tax paid on the supply of goods regarded as deemed
exports irrespective of the fact whether the refund claim is filed by the supplier or by the recipient.
Further, as the tax on the supply of goods, regarded as deemed export, would be paid by the supplier
in his return, therefore, the relevant date for purpose of filing of refund claim for refund of tax paid on
such supplies would be the date of filing of return, related to such supplies, by the supplier.

Section 55 Refund of UN Bodies, Embassies etc. [Sec. 55 read

with Rule 95(2)]

1. Applicability:
➢ Specialised Agency of the United Nations Organization or
➢ Consulate or Embassy of foreign countries
➢ Any Multilateral Financial Institution and Organization notified under the United Nations
(Privileges and Immunities) Act, 1947
➢ Any other notified person
2. Application for refund shall be made in Form GST RFD-10 once in every quarter. Also, to file a statement
of inward supplies of goods or services or both in Form GSTR 11. (Entities covered U/s 55, shall make
an application for refund of tax paid by it on inward supplies, to the jurisdictional tax authority, in such
form and manner as specified, before the expiry of 18 months from the last date of the quarter in which
such supply was received)
3. Acknowledgement for Application of refund shall be given in Form GST RFD-02.
4. Condition for Refund:
a. The inward supplies of goods or services or both were received from a registered person
against a tax invoice.
b. Name and GSTIN or UIN of the applicant is mentioned on the tax invoice and
c. such other restrictions or conditions as may be specified in the notification are satisfied.
Provided that where Unique Identity Number of the applicant is not mentioned in a tax invoice, the
refund of tax paid by the applicant on such invoice shall be available only if the copy of the invoice, duly
attested by the authorised representative of the applicant, is submitted along with the refund application
in FORM GST RFD-10.
5. In case of inconsistent provisions, International Treaty will prevail over rules.

In exercise of above power, following persons have been notified, subject to fulfilment of specified conditions:
i. United Nations or a specified international organization**; and
ii. Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular
officers posted therein.

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 **Specified international organisation means an international organisation declared by the Central
Government in pursuance of section 3 of the United Nations (Privileges and Immunities Act) 1947, to which
the provisions of the Schedule to the said Act apply.
Further, in exercise of said power, Canteen Stores Department (CSD), under the Ministry of Defence, has
been notified as a person who shall be entitled to claim a refund of 50% of the applicable CGST/IGST paid
by it on all inward supplies of goods received by it for the purposes of subsequent supply of such goods to
the Unit Run Canteens of the CSD or to the authorized customers of the CSD.
Specialized agencies notified under section 55 of CGST Act entitled to refund of IGST paid on import of
goods.

Specialized agencies notified under section 55 of CGST Act entitled to refund

of IGST paid on import of goods [Circular No. 23/2019 Cus. dated 01.08.2019]

Section 55 of the CGST Act provides refund of taxes paid on the notified supplies of goods and/or services by
notified specialized agencies like United Nations or a specified international organisation. Section 3(7) of
Customs Tariff Act, 1975 provides for a parity between the integrated tax rate attracted on imported goods
and the integrated tax applicable on the domestic supplies of goods. Therefore, on this principle of parity,
specialised agencies ought to get the refund of the IGST paid on imported goods.

Section 56 Interest on Delayed Refunds

In case of refund arising from an order passed by
the adjudicating authority, appellate authority or
appellate tribunal
Other Cases
Government shall pay an interest of 9% from the
date immediately after the expiry of 60 days from
the date of receipt of application of refund.
The Government shall pay an interest of 6% from
the date immediately after the expiry of 60 days
from the date of receipt of application of refund.

Section 57 Consumer Welfare Fund

The Government shall constitute a Fund, to be called the Consumer Welfare Fund and there shall be credited
to the Fund,—
(a) the amount referred to in sub-section (5) of section 54;
(b) any income from investment of the amount credited to the Fund; and
(c) such other monies received by it,
in such manner as may be prescribed.

Amounts to be credited to/paid from Consumer Welfare Fund [Rule 97 of the CGST Rules, 2017]

✓ All amounts of duty CGST/ SGST/ IGST/ UTGST/ cess and income from investment along with other
monies specified in section 12C(2) of the erstwhile Central Excise Act, 1944, section 57 of the CGST
Act, 2017 read with section 20 of the IGST Act, 2017, section 21 of the UTGST Act, 2017 and section
12 of the GST (Compensation to States) Act, 2017 shall be credited to the Fund [discussed earlier in
this chapter] [Rule 97(1)].
✓ An amount equivalent to 50% of the amount of IGST determined under section 54(5) of the CGST Act,
read with section 20 of the IGST Act, shall be deposited in the Fund [Proviso to rule 97(1)].
✓ An amount equivalent to 50% of the amount of compensation cess determined under section 54(5) of
the CGST Act, read with section 11 of the GST (Compensation to States) Act, shall be deposited in the
Fund. [Second Proviso to rule 97(1)]]

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 ✓ Any amount, having been credited to the Consumer Welfare Fund, ordered or directed as payable to
any claimant by orders of the proper officer, Appellate Authority or Appellate Tribunal or Court, shall be
paid from the Fund [Rule 97(2)].
✓ Accounts of the Fund maintained by the Central Government shall be subject to audit by the Comptroller
and Auditor General of India [Rule 97(3)].

Section 58 Utilization of Fund

(1) All sums credited to the Fund shall be utilised by the Government for the welfare of the consumers in
such manner as may be prescribed.
(2) The Government or the authority specified by it shall maintain proper and separate account and other
relevant records in relation to the Fund and prepare an annual statement of accounts in such form as
may be prescribed in consultation with the Comptroller and Auditor-General of India.

Section 15 (IGST) Refund of Integrated Tax paid on supply of

goods to tourist leaving India
The integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded
in such manner and subject to such conditions and safeguards as may be prescribed.
Explanation: For the purposes of this section, the term “tourist” means a person not normally resident in India,
who enters India for a stay of not more than six months for legitimate non-immigrant purposes.

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 Question & Answer
Q1. What are the cases under which refund of unutilized input tax credit shall not be allowed?
A. As per first proviso to Sec. 54(3), no refund of unutilized ITC shall be allowed except in following cases:
(i) Zero rated supplies made without payment of tax, or
(ii) Credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output
supplies (other than Nil rated or exempt supplies). However, such refund should not relate to supply of
goods or services or both as may be notified by the government on recommendation of GST council.
Thus, except the above two exceptions, refund of unutilized credit will not be allowed.

Q2. Whether refund of unutilized ITC can be allowed in case where export of goods is subject to export duty?
A. As per second proviso to Sec. 54(3), no such refund will be allowed in case goods exported out of India are
subject to levy of export duty.

Q3. Whether refund of unutilized ITC can be allowed in case where exporter of goods or services claims
drawback or refund of taxes paid on such supplies?
A. The export of goods has to be free from the effect of any taxes. It is important to note that refund of unutilized
credit is only one of the methods to free export transactions from the burden of taxes. The other 2 methods are
drawback of taxes or refund of taxes paid on such supplies. As per second proviso to sec. 54(3), refund of input
taxes shall not have allowed in case supplier of goods or services avail drawback of central taxes or claims
refund of IGST paid on such supplies.

Q4. Whether the principle of unjust enrichment be applicable to export?

A. The principle of unjust enrichment will not be applicable in case of export of goods and services.

Q5. ABC Ltd., filed an application for refund of tax amounting Rs. 9,00,000 on 1 st Nov’’17. The refund was
granted on 25th Jan’18. Compute the interest payable?
A. Interest is payable after 60 days which is completing on 31st Dec’17 (60 days from 1st Nov’17). So, interest
is payable for 25 days @ 6% i.e. Rs. 9,00,000 * 6% * 25/365 = Rs. 3,698

Q6. Mr. A has opted for Export against LUT / Bond without payment of taxes. LUT/ Bond issued by the
Jurisdictional Officer is valid till 31st March 2018. He has exported goods against such LUT / Bond till December
2017. Can he start to export goods against payment of IGST from January 2018?
A. Yes, even though validity of LUT / Bonds is till 31st March 2018, Mr. A can start exporting goods against
payment of IGST from January, 2018.

Q7. Mr. A is supplying goods to SEZ Unit. Whether he has to charge IGST on supply of goods?
A. As per the provision of section 16 of IGST Act, 2017, Supply to SEZ Unit are Zero Rated Supplies. Therefore,
in such case Mr. A can either supply goods against payment of IGST (which can be claimed as refund) or he
can supply goods without payment of IGST (against LUT /Bond).

Q8. Can goods be sold to EOU without payment of GST as was being done prior to implementation of GST?
A. No, goods cannot be supplied to EOU without payment of taxes, however, as per Notification No. 48/2017 –
Central Tax Dated 18th October 2017, domestic supplies to holder of Advance Authorization / EPCG and EOUs
would be treated as deemed exports under section 147 of CGST / SGST Act and refund of tax paid on such
supplies can be claimed by the supplier.

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Following supplies have been treated as deemed exports under section 147 of the CGST Act:

Sr. No. Description of supply

i. Supply of goods by a registered person against Advance Authorisation
Provided that goods so supplied, when exports have already been made after availing input tax
credit on inputs used in manufacture of such exports, shall be used in manufacture and supply of
taxable goods (other than nil rated or fully exempted goods) and a certificate to this effect from a
chartered accountant is submitted to the jurisdictional commissioner of GST or any other officer
authorised by him within 6 months of such supply,;
Provided further that no such certificate shall be required if input tax credit has not been availed
on inputs used in manufacture of export goods.
ii. Supply of capital goods by a registered person against Export Promotion Capital Goods
Authorization.
iii. Supply of goods by a registered person to Export Oriented Unit
iv. Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017 –
Customs, Dated the 30th June, 2017, (as amended) against Advance Authorization.

Explanation – For the purposes of this notification, -

“Advance Authorization” means an authorization issued by the Director General of Foreign Trade under Chapter
4 of the Foreign Trade Policy 2015 – 20 for import or domestic procurement of inputs on pre – import basis for
physical exports.
Export Promotion Capital Goods Authorization means an authorization issued by the Director General of Foreign
Trade under Chapter 5 of the Foreign Trade Policy 2015 – 20 for import of capital goods for physical exports.
“Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software
Technology Par Unit or Bio – Technology Par Unit approved in accordance with the provisions of Chapter 6 of
the Foreign Trade Policy 2015 – 20.

Q9. Will unutilized ITC at the end of the financial year (after introduction of GST) be refunded?
A. There is no such provision to allow refund of such unutilized ITC at the end of the financial year in the GST
Law. It shall be carried forward to the next financial year.

Q10. Are SEZ Units liable to pay taxes on their inward supplies? Who will be eligible for refund of taxes paid
on supplies to SEZ?
A. No. SEZ units shall not be charged with taxes for supplies made to them.
In respect of supplies to a SEZ unit or a SEZ developer, the application for refund shall be filed by the –
(a) supplier of goods after such goods have been admitted in full in the SEZ for authorised operations,
(b) supplier of services along with such evidence regarding receipt of services for authorised operations;
as endorsed by the specified officer of the Zone.

Q11. Can the refund of balance in cash ledger be claimed?

A. Yes, as per provisions of Section 49(6), the balance of cash ledger after payment of tax, interest, penalty,
fee or any other amount payment refund can be claimed as per provisions of Section 54. Once the refund is
claimed, the amount of credit of CGST/SGST/ IGST (as the case may be) would be reduced to that extent.

Q12. Whether separate applications need to be filed for refund in case of export of goods and export of services?
A. Yes, there shall be separate application and different procedure for refund of export of goods and export of
services.

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Q13. Who can file an application for refund in case of deemed export?
A. In terms of third proviso to Rule 89 inserted vide Notification No. 47/2017 – Central Tax Dated 10.10.2017,
application for refund in case of deemed export can be filed by:
• the recipient of deemed export supplies; or
• the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit
on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund

Q14. Discuss the provisions relating to refund of the amount of advance tax deposited by a casual taxable
person under section 27(2) of the CGST Act, 2017.
A. The amount of advance tax deposited by a casual taxable under section 27(2), shall be refunded only when
such person has, in respect of the entire period for which the certificate of registration granted to him had
remained in force, furnished all the returns required under section 39 [Section 54(13)]. Further, refund of any
amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him under section
27 at the time of registration, shall be claimed in the last return required to be furnished by him [Fourth proviso
to rule 89(1)].

Q15. M/s Housefull Convention Hall is in the business of letting out its halls for functions. It provides you with
the following information for determining the amount of refund out of advance received based on time of supply
for one of its clients.
Particulars Date Amount in Rs.
Advance paid at the time of booking the hall for a function from 16.07.2019 1,00,000
1st to 3rd Nov 2019
Additional deposit paid 18.08.2019 2,00,000
Function is held as scheduled 1st Nov to 3rd Nov
2019
Invoice issued 25.11.2019 2,50,000
Consider that there is a change in the rate of tax on 15th October 2019 from CGST & SGST 2.5% to CGST
& SGST 9%
What would be the amount of refund payable to the client? (PAST EXAM NOV 2020)
A. The time of supply of services is the date of issue of invoice if the same is issued within 30 days from the
date of supply of service or the date of receipt of payment, whichever is earlier. In the given case, invoice is
issued within 30 days of the supply of service and advances have also been received.
Therefore, tax becomes payable at the time of receipt of advances on 16.07.2019 and 18.08.2019 as it is not
clear at the time of receipt of such advances as to what would be the total value of the supply. However, when
invoice is issued for a lesser value on 25.11.2019, refund would become payable to the client. In case of change
in rate of tax, where the service is supplied and invoice is issued after the change in rate of tax and payment is
received before change in rate of tax, time of supply shall be date of issue of invoice, i.e., 25.11.2019.
Hence, applicable rate of tax is new rate even though tax has been paid at old rate on advances received.
Therefore, refund payable to client will be computed as under:
Total advance received including GST* = ₹ 3,00,000
Less: Actual liability [₹ 2,50,000 + ₹ 2,50,000 x 18% (new rate of tax)] = ₹ 2,95,000
Amount of refund = ₹ 5,000
*It has been assumed that the advances received are inclusive of tax.

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 Section 2 (68) Job Work definition
Section 19 ITC in respect of goods & capital goods sent to job worker
Section 143 Job Work Procedures

Section 2 (68) Job Work Definition

It means any treatment or process undertaken by a person by goods belonging to another registered person
and the expression “job worker” shall be construed accordingly.

The characteristics of job work, 1. Process or treatment carried out by “Job worker: as per instructions of
“Principal” 2. Ownership remain with “Principal”. 3. “Principal” shall be registered.

Section 19 ITC in respect of inputs & capital goods sent to job worker
Principal is entitled to take ITC of inputs sent for job worker. If it is directly sent to job worker from supplier
premises then principal can avail ITC when these inputs received by job worker. Same rule applies in case of
capital goods.
The most important condition is that ‘inputs’ must be received within 1 year (from the date of dispatch by principal
or if it is directly sent through supplier then from the date when job worker receive) or supplied from the place
of business of job worker & ‘capital goods’ must be received back in 3 years. No time period in case of moulds
& dies, jogs, fixtures or tools.
This 1 year or 3 years can be further extended by the Commissioner for a further period not exceeding 1 year
or 2 years respectively.
If the inputs or capital goods are not returned within time limit specified, the principal is liable to pay tax
along with interest @18% from the day goods sent out by deeming the activity as an outward supply. In
case principal, directly deliver to job worker from supplier then date of receipt at Job worker’s premises.

Section 143 Job Work Procedures

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Job worker can clear waste/scrap on payment of GST. If unregistered then, principal has to discharge GST
Liability as per section 143 (5).

Section 143 (1) is amended to give power to commissioner: The period of one year and three years may, on
sufficient cause being shown, be extended by the Commissioner for a further period not exceeding one year
and two years respectively.

Other key points: -

• Supply under job work will be considered as principal’s turnover.
• Job worker can use his own goods for providing the services of job work (Circular 38/12/2018 Dated
26th March 2018).
• As per valuation Rule 27, “Value of supply of goods or services where the consideration is not wholly
in money”. So, what will be treatment of wastage/scrap generated during the process (CCE, Jaipur V/s
General Engineering Works, SC, 2007)? It may be an issue of litigation if job worker is retaining the
scrap and selling it to scrap dealer without adding that amount in assessable value charge to principal.
• The principal shall prepare in triplicate, the challan, for sending goods to job worker. Two copies of
challan may be sent to the job worker along with goods. The job worker should send one copy of the
said challan along with goods, while returning them to the principal.
• Where goods are sent from one job worker to another job worker, the goods may move under the cover
of a challan issued either by the principal or the job worker. Alternatively, the challan issued by the
principal may be endorsed by the job worker sending the goods to another job worker, indicating therein
the quantity and description of goods being sent. The same process may be repeated for subsequent
movement of the goods to other job workers, indicating therein the quantity and description of goods.
• Where the goods are sent directly by the supplier to the job worker, the goods may move from the place
of business of the supplier to the place of business/premises of the job worker with a copy of the invoice
issued by the supplier in the name of the buyer (i.e., the principal) wherein the job worker’s name and
address should also be mentioned as the consignee in such invoice. Further, the buyer (i.e., the
principal) shall issue the challan [required to be issued under rule 45] and send the same to the job
worker directly.
In case of import of goods by the principal which are then supplied directly from the customs station of
import, the goods may move from the customs station of import to the place of business/premises of
the job worker with a copy of the Bill of Entry and the principal shall issue the challan under rule 45 and
send the same to the job worker directly.
• In case the goods after carrying out the job work, are sent in piecemeal quantities by a job worker to
another job worker or to the principal, the challan issued originally by the principal cannot be endorsed
and a fresh challan is required to be issued by the job worker.
• W.e.f. 01.10.2021, rule 45(3) has been amended. Now, Form GST ITC-04 is required to be furnished
by the principal on annual/half yearly basis, depending upon the quantum of his aggregate turnover
during immediately preceding financial year.
Aggregate turnover of principal Form GST ITC-04 to be filed Due date(s) for filing Form
during preceding F.Y. on GST ITC-04
upto Rs. 5 crore annual basis 25th April
greater than Rs. 5 crore half yearly basis 25th October & 25th April

• This period can be extended by the Commissioner/Commissioner of State GST/Commissioner of UTGST.

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 Question & Answer
Q1. Are transactions of repair included in job work?
A. The activity of carrying out repairs on goods will get covered on job work and thus would be covered by
provisions of section 143.

Q2. Whether job worker has to be a different person or can some other unit of principal can also become job
worker?
A. Job worker has been defined to mean undertaking of treatment or process by a person on the goods
belonging to another registered taxable person. In view of the fact that another unit of the same person has
been categorized as a distinct person. As a distinct person, it has got all the obligations as are applicable to
separately registered person, it can be concluded that even if the job worker happens to be another unit of the
same person, it would be covered by provisions of sec 143 of the GST Act.

Q3. What would happen in case job worked goods are not received back by the principal within a period of one
year?
A. In case job worked goods are not received back by the principal within one year of their being sent for job
work, it shall be deemed that such goods were supplied by the principal on the day when these goods were
sent out and the principal is required to pay GST on the goods so sent for job work along with interest at the
appropriate rate.

Q4. Can goods be sent by the principal for further job work from one job to another job worker?
A. Yes, inputs/capital goods can be sent for further job work from one job worker to another job worker. However,
time limit of one year/three year to bring back inputs/capital goods after completion of job work, would be
counted from the date when they were first sent for job work.

Q5. If job worker purchased additional material and incorporate the same in the goods received from the
principal amount to supply?
A. Yes, it amounts to supply in the hands of the job worker as composite supply or otherwise.

Q6. Can a job worker take input credit on the inputs used in the process of job work?
A. Yes, the job worker is eligible to claim input tax credit since the processing charges received in respect of
labour charges and the supply of additional goods added is taxable in the hands of the job worker.

Q7. If the job-worker subsequently registers, should the principal amend his registration by cancelling the job-
workers premises as his additional place of business?
A. Yes.

Q8. Whether intermediate goods can also be sent for job work?
A. Yes. The term inputs, for the purpose of job work, includes intermediate goods arising from any treatment or
process carried out on the inputs by the principal or job worker.

Q9. Whether the goods of principal directly supplied from the job worker’s premises will be included in the
aggregate turnover of the job worker?
A. No, it will be included in the aggregate turnover of principal. However, the value of goods or services used
by the job worker for carrying out the job work will be included in the value of services supplied by the job worker.

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Q10. ABC Ltd. sends the goods to XYZ & Co. for making finished goods on 30-08-2017. What are the tax
implications, in the following cases if GST @ 18% is levied:
i. XYZ & Co. sends the goods back to ABC Ltd. within one year of being sent.
ii. XYZ & Co. sells the goods directly to the customer on behalf of ABC Ltd.
A. As per Section 143 of CGST Act 2017, supply of goods to a job worker without payment of tax is permissible
upon an intimation. In the given example, the implications are as follows:
➢ On supply of goods to XYZ & Co., as per the section 143 of CGST Act 2017, no tax shall be payable
on supply of goods to XYZ & Co., However, the tax will be payable if finished goods is not returned
before one year from 30-08-2017.
➢ XYZ & Co. sends the finished goods back to ABC Ltd.: As per the act, there is no tax liability on returning
of goods back to the principal i.e. ABC Ltd. within a period of one year. Hence, post completion of Job
work, no tax is leviable on finished goods returned to ABC Ltd.
➢ XYZ & Co. sells the finished goods on behalf of ABC Ltd.: Section 143 also allows the job worker to
directly sell the goods on behalf of principal, wherein the liability to pay tax is of the principal and not
the job worker. ABC Ltd. is liable to pay GST on sale of finished goods to customer by XYZ & Co.
However, ABC Ltd. must declare the premises of XYZ & Co., as ‘additional place of business’ and the
sale of finished goods will form part of aggregate turnover of ABC Ltd.
Such a declaration is not required in case where:
i. Job worker is registered under section 25; or
ii. Principal is engaged in supply of notified goods.

Q11. ABC Ltd. sends the goods (inputs) to XYZ & Co. for further processing on 30-08-2017. The value of goods
sent for Job work is Rs. 2,00,000. What are the tax implications, in following cases, if GST @ 18% is levied:
(i) XYZ & Co. sends the processed goods back to ABC Ltd on 30-11-2017
(ii) XYZ & Co. sends the processed goods back to ABC Ltd on 30-10-2018.
A. XYZ & Co. sends the processed goods back to ABC Ltd. on 30-11-2017: As per Section 143 of the Act,
Principal can remove the goods without payment of tax and take input tax credit provided inputs sent for job
work are returned back within one year of removal. Otherwise, it shall be treated as supply from principal to Job
worker as on 30-08-2017 and subject to tax along with interest.
(i) In the present case, as the inputs are received back on 30-11-2017 i.e. before completion of one year,
and hence no tax is payable.
(ii) XYZ & Co. sends the processed goods back to ABC Ltd. on 30-10-2018: In the present case, the goods
are received after the period of one year and hence, ABC Ltd. needs to pay the tax along with the
interest on the supply made by him to XYZ & Co. Hence, ABC Ltd. need to pay Rs. 18,000 (CGST) and
Rs. 18,000 (SGST) along with specified interest.

Q12. Under what circumstances can the principal directly supply goods from the premises of job worker without
declaring the premises of job worker as his additional place of business?
A. The goods can be supplied directly from the place of business of job worker without declaring it as additional
place of business in two circumstances namely where the job worker is a registered taxable person or where
the principal is engaged in supply of such goods as may be notified by the Commissioner.

Q13. Who is responsible for the maintenance of proper accounts related to job work?
A. It is completely the responsibility of the principal to maintain proper accounts of job work related inputs and
capital goods.

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 Section 59 Self-Assessment
Section 60 Provisional Assessment
Section 61 Scrutiny of Returns
Section 62 Assessment of Non-Filers of Returns
Section 63 Assessment of Unregistered Persons
Section 64 Summary Assessment in Certain Cases
Section 65 Audit by Tax Authorities
Section 66 Special Audit

Assessment means determination of tax liability under GST law and also the tax payable thereon, which is
paid/payable by the taxable person, ‘audit’ refers to a systematic & independent examination of books, accounts,
statutory records, etc., of an organization to ascertain how far the financial statements as well as non-financial
statements discloses a true and fair view of the concern. Below are the various types of assessment under
GST. Types of Assessment under GST:
• Self-assessment
• Provisional assessment
• Scrutiny assessment
• Assessment of non-filers of returns
• Assessment of unregistered persons
• Summary assessment
Only self-assessment is done by the taxpayer himself. All the other assessments are by tax authorities.

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Section 59 Self-Assessment
Every registered person shall self-assess the taxes payable under this Act and furnish a return for each tax
period as specified under section 39.
Self-Assessment is the first stage for all the assessments now. The registered person is required to compute
his output, take the available input credit and pay the balance amount and file the returns in the prescribed
forms. Prima- Facie the department shall accept such self-assessed returns and declarations, subject to
scrutiny and other modes of assessment in the selected cases and in the prescribed manner.

Section 60 Provisional Assessment

(1) The taxable person is
• unable to determine the value of goods or services or both or
• unable to determine the rate of tax
he may request the proper officer in writing giving reasons for payment of tax on a provisional basis.
The proper officer may request additional information by issuing notice and request person to
appear in person. The proper officer shall pass an order, within a period not later than ninety days
from the date of receipt of such request, allowing payment of tax on provisional basis at such rate
or on such value as may be specified by him.
Normally, provisional assessment is done in the case of imports and in a case of foreign ships doing
business through Indian ports. Provisional assessment also opts in certain cases of manufacturing and
processing which may attract litigation as to taxability and valuation.
(2) The payment of tax on provisional basis may be allowed, if the taxable person executes a bond in such
form as may be prescribed, and with such surety or security as the proper officer may deem fit, binding
the taxable person for payment of the difference between the amount of tax as may be finally assessed
and the amount of tax provisionally assessed. Rule 98 (3) in this regard provides that proper officer will
decide the amount of security to be furnished, the amount of which will not exceed 25% of the amount
covered under bond. Rule 98 (4) provides that the security will be in the form of bank guarantee of the
amount as determined in rule 98 (3). For the purposes of this rule, the expression “amount” shall include
the amount of integrated tax, central tax, State tax or Union territory tax and cess payable in respect of
the transaction.
These kind of surety clauses exist along with the provisional assessment clauses, so as to ensure that
the revenue is not at loss post such provisional assessment, which is normally done in haste.
(3) The proper officer shall, within a period not exceeding six months from the date of the communication
of the order issued under sub-section (1), pass the final assessment order after taking into account
such information as may be required for finalising the assessment:
Provided that the period specified in this subsection may, on sufficient cause being shown and for
reasons to be recorded in writing, be extended by the
• Joint Commissioner or Additional Commissioner for a further period not exceeding six months
and
• Commissioner for such further period not exceeding four years.
(4) The registered person shall be liable to pay interest on any tax payable on the supply of goods or
services or both under provisional assessment. In simple words, in case any tax amount becomes
payable subsequent to finalization of the provisional assessment, then interest at the specified rate will
also be payable by the supplier from the first day after the due date of payment of the tax till the date of
actual payment, whether such amount is paid before or after the issuance of order for final assessment.
(5) Where the registered person is entitled to a refund consequent to the order of final assessment under
sub-section (3), subject to the provisions of sub-section (8) of section 54, interest shall be paid on such
refund as provided in section 56. In simple words, in case any tax amount becomes refundable

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 subsequent to finalization of the provisional assessment, then interest (subject to the eligibility of refund
and absence of unjust enrichment) at the specified rate will be payable to supplier.

The applicant may file an application for release of security furnished after issue of final assessment order. The
proper officer shall release the security furnished after ensuring that the applicant has paid the amount, within
a period of seven working days from the date of the receipt of the application.

Example 1: ABC Ltd. is in business of manufacturing various components and caters to various industries. In
the course of its business, ABC Ltd. receives order for manufacturing some specialized components for which
the required moulds are provided free of cost (FOC) by recipient. ABC Ltd. was unsure as to whether amortized
cost of tools was to be added to arrive at the value of the components supplied for the purpose of GST.
Accordingly, ABC Ltd. made an application to proper officer, for assessment on provisional basis on 01.10.2018.
Time period for passing provisional order, 90 days to be calculated from 01.10.2018 i.e. 30.12.2018.
Suppose, in this case the provisional assessment order was passed and communicated to ABC Ltd. on
30.11.2018. Now, the final order shall be passed by the proper officer within 6 months from 30.11.2018 i.e. by
29.05.2019. For sufficient reasons, the time limit of 6 months can be extended upto:-
• By Joint/Additional Commissioner – 28.11.2019 (i.e. 6 months from 29.05.2019)
• Order by Commissioner – 28.05.2023 (4 years from 29.05.2019)

Section 61 Scrutiny of Returns

(1) The proper officer may scrutinise the return and related particulars furnished by the registered person
to verify the correctness of the return and inform him of the discrepancies noticed, if any, in such manner
as may be prescribed and seek his explanation thereto.
As per Rule 99, proper officer shall issue a notice to the said person, informing him of such discrepancy
and seeking his explanation thereto within such time, not exceeding thirty days from the date of service
of the notice or such further period as may be permitted by him and also, where possible, quantifying
the amount of tax, interest and any other amount payable in relation to such discrepancy.
(2) In case the explanation is found acceptable, the registered person shall be informed accordingly and
no further action shall be taken in this regard.
(3) In case no satisfactory explanation is furnished within a period of thirty days of being informed by the
proper officer or such further period as may be permitted by him or where the registered person, after
accepting the discrepancies, fails to take the corrective measure in his return for the month in which the
discrepancy is accepted, the proper officer may initiate appropriate action including those under section
65 (audit by tax authorities) or section 66 (special audit) or section 67 (inspection, search & seizure) ,
or proceed to determine the tax and other dues under section 73 or section 74.

Section 61, deals with discretionary power to a proper officer to scrutinize returns filed by registered
persons to verify the correctness of the return. It is a pre-adjudication process. The process of
adjudication is provided in Section 73 to Section 75. The return’s scrutiny process is entirely automated
in GST regime as compared to earlier regime.

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 Section 62(1) & Section 63
will have an overriding
Section 62 Assessment of Non-Filers of Returns effect over the provisions
of Section 73 & 74

(1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a registered
person fails to furnish the return under section 39 or section 45, even after the service of a notice under
section 46, the proper officer may proceed to assess the tax liability of the said person to the best of his
judgment taking into account all the relevant material which is available or which he has gathered and
issue an assessment order within a period of five years from the date specified under section 44 for
furnishing of the annual return for the financial year to which the tax not paid relates.
(2) Where the registered person furnishes a valid return within thirty days of the service of the assessment
order under sub-section (1), the said assessment order shall be deemed to have been withdrawn but
the liability for payment of interest under subsection (1) of section 50 or for payment of late fee under
section 47 shall continue.

This is a provision similar to “Best Judgement Assessment (BJA)” under the Income Tax Act, 1961. Noticeably,
issuing notice U/s 46 to return defaulter appears to be a pre-condition for initiating proceedings of best
judgement assessment U/s 62. Therefore, it can be seen that non-compliance with the notice U/s 46, paves the
way for initiating the proceedings under this section. If the assessee fails to furnish the return within 15 days of
issue of notice U/s 46, then the proper officer may assess the tax liability based on his judgement. It may be
noted that consequences of late fee U/s 47 and interest U/s 50 of the CGST Act will both be applicable in case
of best judgement assessment made under this section.

Example 2: if a person defaults in filing of return for any tax period falling in FY 2017-18, period of 5 years shall
be reckoned from the due date of filing of Annual Return for FY 2017-18 i.e. 31st December 2018. Accordingly,
the best judgement assessment can be made by Proper Officer on or before 31st December 2023.

Circular No. 129/48/2019-GST dated 24th December 2019

Standard Operating Procedure to be followed in case of non-filers of returns – reg

(i) Preferably, a system generated message would be sent to all the registered persons 3 days before the
due date to nudge them about filing of the return for the tax period by the due date.
(ii) Once the due date for furnishing the return under section 39 is over, a system generated mail / message
would be sent to all the defaulters immediately after the due date to the effect that the said registered
person has not furnished his return for the said tax period; the said mail/message is to be sent to the
authorized signatory as well as the proprietor/partner/director/karta, etc.
(iii) Five days after the due date of furnishing the return, a notice in FORM GSTR-3A (under section 46 of the
CGST Act read with rule 68 of the CGST Rules) shall be issued electronically to such registered person
who fails to furnish return under section 39, requiring him to furnish such return within fifteen days;
(iv) In case the said return is still not filed by the defaulter within 15 days of the said notice, the proper officer
may proceed to assess the tax liability of the said person under section 62 of the CGST Act, to the best
of his judgement taking into account all the relevant material which is available or which he has gathered
and would issue order under rule 100 of the CGST Rules in FORM GST ASMT-13. The proper officer
would then be required to upload the summary thereof in FORM GST DRC07;

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 (v) For the purpose of assessment of tax liability under section 62 of the CGST Act, the proper officer may
take into account the details of outward supplies available in the statement furnished under section 37
(FORM GSTR-1), details of supplies auto populated in FORM GSTR-2A, information available from e-way
bills, or any other information available from any other source, including from inspection under section 71;
(vi) In case the defaulter furnishes a valid return within thirty days of the service of assessment order in FORM
GST ASMT-13, the said assessment order shall be deemed to have been withdrawn in terms of provision
of sub-section (2) of section 62 of the CGST Act. However, if the said return remains unfurnished within
the statutory period of 30 days from issuance of order in FORM ASMT-13, then proper officer may initiate
proceedings under section 78 and recovery under section 79 of the CGST Act;

Above general guidelines may be followed by the proper officer in case of non-furnishing of return. In deserving
cases, based on the facts of the case, the Commissioner may resort to provisional attachment to protect revenue
under section 83 of the CGST Act before issuance of FORM GST ASMT-13.
Further, the proper officer would initiate action u/s 29 (2) of the CGST Act for cancellation of registration in cases
where the return has not been furnished for the period specified in section 29.

Section 63 Assessment of Unregistered Persons

Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable person fails to
obtain registration even though liable to do so or whose registration has been cancelled under sub-section (2)
of section 29 but who was liable to pay tax, the proper officer may proceed to assess the tax liability of such
taxable person to the best of his judgment for the relevant tax periods and issue an assessment order within a
period of five years from the date specified under section 44 for furnishing of the annual return for the financial
year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of being
heard.
As per Rule 100 (2), the proper officer shall issue a notice to a taxable person containing the grounds on which
the assessment is proposed to be made on best judgment basis and shall also serve a summary thereof
electronically in FORM GST DRC-01, and after allowing a time of fifteen days to such person to furnish his
reply, if any, pass an order in FORM GST ASMT-15 and summary thereof shall be uploaded electronically in
FORM GST DRC07.

Section 64 Summary Assessment in Certain Special Cases

(1) The proper officer may, on any evidence showing a tax liability of a person coming to his notice, with
the previous permission of Additional Commissioner or Joint Commissioner, proceed to assess the tax
liability of such person to protect the interest of revenue and issue an assessment order, if he has
sufficient grounds to believe that any delay in doing so may adversely affect the interest of revenue:
Provided that where the taxable person to whom the liability pertains is not ascertainable and such
liability pertains to supply of goods, the person in charge of such goods shall be deemed to be the
taxable person liable to be assessed and liable to pay tax and any other amount due under this section.

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 (2) On an application made by the taxable person within thirty days from the date of receipt of order passed
under sub-section (1) or on his own motion, if the Additional Commissioner or Joint Commissioner
considers that such order is erroneous, he may withdraw such order and follow the procedure laid down
in section 73 or section 74.
This provision gives a right to the proper officer to carry out assessment and pass orders in case of special
cases, where the department has ‘sufficient grounds’ to believe adverse effect to the revenue. In this case,
the liability can be raised either by the taxable person or if the taxable person is not known (E.g. – In the case
of confiscation of goods), the person-in-charge of the goods can be deemed as ‘taxable person’ and liability
can be raised on him accordingly.
Within 30 days of such an order, either on application and representation made by a taxable person or on its
own motion, an order under this section can be withdrawn if found to be erroneous.
Though section does not specifically say so, principles of natural justice like issue of SCN, opportunity of
hearing, order with reasons etc. have to be followed.

Summary of various assessment orders to be uploaded on portal

The summary of assessment orders under section 62, 63 and 64 of the CGST Act is
required to be uploaded electronically in the prescribed forms.

[Notification No. 16/2019 CT Dated 29.03.2019]

Section 65 Audit by Tax authorities & Section 66 Special Audit

Sec. 65 Audit by Tax authorities Sec. 66 Special Audit

• The Commissioner or a person authorised by him •
may undertake an audit of a registered person for
the period, frequency and manner prescribed
• As per Rule 101 (1), the period of audit to be
conducted, shall be a financial year or part
thereof or multiples thereof.
• Audit can be carried out either in the premises of
the registered person or may also be done at the
office of the proper officer, by calling for
information and documents
• 15 days clear notice shall be provided to the
person before initiation of such an audit
• The audit proceedings have to be closed within 3
months from the date of initiation of audit (where
the date of commencement of audit shall be the
date on which all the documents and information •
called for are provided or audit actually initiated
at the business premises, whichever is later)
During any stage of any investigation, scrutiny,
assessment or any other proceedings under this
act, if the proper officer, not below the rank of
Assistant Commissioner, with the prior approval
of Commissioner, may get the books of accounts
audited by a CA or Cost Accountant nominated
by the Commissioner, if so required in interest of
revenue keeping in view of the complexity of
transactions or business or claim of input credit
• Such CA or Cost Accountant is required to submit
duly signed and certified report within 90 days to
such Assistant Commissioner, extendable to
further period of 90 days in case of an application
in writing by such CA or Cost Accountant or for a
sufficient reason
Such audit report is subject to principle of natural
justice, wherein, an opportunity to be heard shall
also be provided to the registered person

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 • Also, if the Commissioner is satisfied that the • Remuneration or fee of such nominated person
audit cannot be completed in 3 months, he can shall be decided by the commissioner and his
record the reasons in writing extend the time for decision shall be final
a further period of maximum 6 more months • All other provisions of tax, interest, penalty and
• The registered person is obliged to provide all collection shall apply to audit under this section
necessary details, documents and information too (Sec. 73 & Sec. 74)
required for completion of an audit
• On conclusion of an audit, the proper officer shall,
within thirty days, inform the registered person,
about the findings, his rights & obligations and the
reasons for such findings
• Once the above are done, the proper officer may
determine tax payable and interest and penalty
(Sec. 73 & Sec. 74), if any, thereon, and also
initiation collection proceedings

Under GST, power has been given specifically to the department to conduct audit of any registered person. This
matter was highly debated under pre GST service tax era.
However, still in the GST Law, there is no provision which prescribes that if any tax authority has conducted
audit of an assessee for a particular period, then another tax authority would not conduct audit for the same
period, otherwise it would create undue-hardship to the assessee.

Question & Answer

Q1. Can a person who has furnished a return on self-assessment basis make a request for provisional
assessment?
A. For provisional assessment a request needs to be made to proper officer for filing return on provisional
basis. In case the taxable person furnishes the return on self-assessment basis, he foregoes the right to make
an application for permission to furnish return and pay tax on provisional basis.

Q2. Please provide brief summary on various assessments.

Section Type of Assessment Assessment by Conditions precedent to assessment
59 Self-assessment Taxable Person Where registered taxable person
assesses his tax liability himself.
60 Provisional assessment Proper Officer Where registered taxable person is
unable to determine following:
• Value of supply, and/or
• Rate of applicable tax on supply
61 Scrutiny assessment Proper Officer Verifying the correctness of the return
by scrutinizing the return and particulars
furnished by taxable person.
62 Assessment of non-fliers Proper Officer Where the registered taxable person
of return (Best Judgement fails to furnish return U/s 39 or Sec. 45
Assessment) even after service of notice U/s 46.

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 63 Assessment of
unregistered person (Best
judgment assessment)
64 Summary Assessment
Proper Officer Where a taxable person fails to obtain
registration, even though liable to do so.
Proper Officer To protect the interest of revenue with
previous permission of Additional/Joint
Commissioner.

Q3. Audit has to be completed within a stipulated period of three months (subject to extension) from the date
of commencement. What is implied by date of commencement of audit?
A. ‘Commencement of audit’ shall imply that date on which the records and other documents, called for by the
tax authorities, are made available by the taxable person or date of actual institution of audit at the place of
business, whichever is later. The period of three months can be extended by six months for reasons to be
recorded in writing.
Example:
Date of which documents requested 1 st April 2017
Date of which documents/recorded made available 20 th April 2017
Date of actual institution of audit at auditee’s placed 5 th May 2017
The date of commencement of audit will be taken as 5 th May 2017
Date by which audit should be completed in normal course 4th Aug 2017
Last date by which audit should be completed (including extended period) 4 th Feb 2018

Q4. What is the difference between the two audit Sec. 65 and Sec. 66?
Issue Audit U/s 65 Audit U/s 66
Trigger Point General audit; audit of business Nature & complexity of case, interest of
transaction, no specific reason to be cited revenue, incorrect value of supply or
abnormal availment of credit
Nature of Audit Departmental Audit Special Audit
Conducted by Officers of department authorized by Chartered Accountant/Cost Accountant
commissioner appointed by Commissioner
Frequency Discretionary Discretionary
Prior notice to Yes, 15 days’ notice is required No such notice/intimation envisaged
auditee
Time for conclusion 3 months, further extension of 6 months 90 days, further extension of 90 days
of audit allowed allowed
Audit findings report To be intimated soon on completion of Report to Deputy/Assistant Commissioner
audit
Audit expenses Borne by department Borne by department
Opportunity of No specific provision Yes, where material gathered during audit
being heard is to be used in any proceedings against
the auditee
Action based on If results in demand of tax, shall be If results in demand of tax, shall be
report recovered U/s 73 or 74 recovered U/s 73 or 74

Q5. What would be the process of Scrutiny of Returns?

A. The proper officer would inform registered person of the discrepancies noticed during the course of scrutiny
of returns. The proceedings would be dropped if the explanation submitted by the registered person is found

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acceptable. However, if no explanation is furnished within the stipulated period by the registered person or no
corrective action is taken by the registered person after accepting discrepancy, proper officer may initiate
appropriate action against the registered person.

Q6. What are the consequences on conclusion of provisional assessment by way of passing final assessment
order in so far as short/excess remittance of tax is concerned?
A. The consequences on concluding the provisional assessment by way of passing final assessment order
would be as follows:
• Additional tax liability: In case of short remittance of taxes in terms of final assessment order, the
additional tax liability, if any should be remitted along with interest at the rate prescribed U/s 50 (1) for
delay in remittance of taxes viz., from the 1st day after the due date of remittance of taxes as prescribed
U/s 39 (7) till the date of actual payment.
• Excess remittance of tax on provisional basis: In case of excess remittance of taxes in terms of final
assessment order, the registered person is entitled to refund of such excess remittance in the manner
as provided in Section 54 (8) along with interest as provided under Section 56.

Q7. Whether any time limit has been specified to issue notice for scrutiny?
A. No, the provisions relating to scrutiny assessments do not specify time limit for issuing notice for scrutiny of
assessments.

Q8. Whether any reason to believe or evidence is required for initiate audit U/s 65?
A. No, Section 65 doesn’t specify any such requirements. Commissioner can initiate audit on any taxable person
for such period, at such frequency and in such manner as may be prescribed.

Q9. Is there any additional opportunity provided for taxable person to submit a return even after passing an
assessment order under Section 62 (1)?
A. Yes, if the registered person furnishes a valid return within 30 days from the date of service of best judgement
assessment order u/s 62 (1), the said assessment order shall be deemed to have been withdrawn.

Q10. Whether Self-Assessment and provisional assessment are mutually exclusive?

A. Yes, if the taxable person opts for self-assessment, he cannot opt for provisional assessment for the same
period for same supply. However, he can opt for provisional assessment if he is unable to determine taxable
value / tax liability/ (rate of tax) for any subsequent periods.

Q11. Whether audit by officer can be done for a person other than registered person U/s 65?
A. Audit by officer cannot be ordered for a person who is not registered even if he is required to be registered
as per the provisions of the law. [S. 65(1)]

Q12. What process of audit is required to be followed by the officer in case audit is conducted U/s 65?
A. Following process is to be followed for conduct of audit by officer:
1. Proper Officer shall verify the documents, correctness of turnover, exemptions and deductions
claimed, the rate of tax applied, input tax credit availed and utilized and refund claimed. [R.101(3)]
2. Proper Officer shall record the observations in audit notes. [R. 101(3)]
3. Proper Officer may inform discrepancies noticed during audit to registered person [R.101(4)]
4. Registered Person shall reply to discrepancies [R. 101(4)]
5. Proper officer shall finalize findings of audit only after due consideration of reply [R. 101(4)]
6. On the conclusion of audit, Proper Officer shall inform the Registered Person whose records are

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 audited about the:
- findings
- reasons for findings,
- assessee’s rights and obligations. [S. 65(6)]
7. Information of findings, reasons, right and obligations shall be made within 30 days (in FORM
GST ADT-02) [S. 65(6)]

Q13. What action will be initiated when the audit conducted u/s 65(1) results in a demand?
A. Where the audit u/s 65(1) results in detection of tax not paid or short paid or erroneously refunded, or input
tax credit wrongly availed or utilized, the proper officer may initiate action under Section 73 or Section 74.

Q14. At what stage the directions of special audit can be given?

A. At any stage of scrutiny, inquiry, investigation or any other proceedings, having regard to the nature and
complexity of the case and interest of revenue, a direction to Registered Person to get its accounts examined
and audited can be given [S.66(1)]

Q15. Whether already audited accounts are also covered by special audit?
A. Special Audit may be directed even if accounts of the registered person have been audited under any other
provisions of this Act or any other law for the time being in force.[S.66(3)]

Q16. How to deal with detection of short paid taxes as a result of special audit?
A. Where audit results in detection of tax not paid/short paid /erroneous paid or ITC wrongly availed or utilized,
Proper Officer may initiate action u/s 73 or 74 [S.66(6)]

Q17. Whether the phrase “nature and complexity of the case” is defined in the Act?
A. No, Section 66 does not define the phrase “nature and complexity of the case’. However, there is enough
jurisprudence under the Income Tax Laws to determine what will constitute complexity of the case.

Q18. Who can conduct audit of taxpayers?

A. There are two types of audit prescribed in the GST Act(s) as explained below:
(a) Audit by Department: The Commissioner or any officer of CGST or SGST or UTGST authorized by
him by a general or specific order, may conduct audit of any registered person. The frequency and
manner of audit will be prescribed in due course. (Section 65 of the CGST Act)
(b) Special Audit: If at any stage of scrutiny, inquiry, investigations or any other proceedings, if
department is of the opinion that the value has not been correctly declared or credit availed is not with
in the normal limits, department may order special audit by chartered accountant or cost accountant,
nominated by department. (Section 66 of the CGST Act)

Q19. Divy Trader obtained permission for provisional assessment and supplied three consignments of furniture
on 28th April, 20XX. The tax payment on provisional basis was made in respect of all the three
consignments on 20th May, 20XX. Consequent to the final assessment order passed by the Assistant
Commissioner on 21stJune, 20XX, a tax of ₹ 1,20,000 and ₹ 1,50,000 became refundable on 1st and 3rd
consignments, whereas a tax of ₹ 1,20,000 became due on 2nd consignment. Divy Trader applies for the
refund of the tax on 1stand 3rd consignments on 12thJuly, 20XX and pays the tax due on 2nd consignment
on the same day. Tax was actually refunded to it of 1st consignment on 8thSeptember, 20XX, whereas of
3rd consignment on 18th September, 20XX. Customers of Divy Trader who purchased the consignments
have not taken Input Tax Credit (ITC). Determine the interest payable and receivable, if any, under CGST

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Act, 2017 by Divy Trader. (PAST EXAM NOV 2018)
A. Where tax becomes due consequent to order of final assessment, interest is payable @ 18% p.a., from the
first day after the due date of payment of tax in respect of the goods supplied under provisional assessment till
the date of actual payment, whether such amount is paid before/after the issuance of order for final assessment.
In the given case, due date for payment of tax on goods cleared on 28.04.20XX under provisional assessment
is 20.05.20XX. Thus, interest payable in respect of 2nd consignment
= ₹ 1,20,000 × 18% × 53 [21.05.20XX – 12.07.20XX]/365
= ₹ 3,136 (rounded off)

Further, section 56 of CGST Act, 2017 provides that where tax becomes refundable consequent to the order of
final assessment, interest is receivable @ 6% p.a. from the date immediately after the expiry of 60 days from
the date of receipt of refund application till the date of refund of such tax.
In the given case, since refund of tax of 1st consignment has been paid on 08.09.20XX which is within 60 days
from the date of receipt of application of refund (12.07.20XX), interest is not receivable on tax refunded in
respect of 1st consignment. However, interest receivable in respect of 3rd consignment is as follows:
60 days from the date of receiving the refund application expire on 10.09.20XX.
= ₹ 1,50,000 × 6% × 8 [11.09.20XX - 18.09.20XX]/365
= ₹ 197 (rounded off)

Q20. Prithviraj Ltd., registered under GST in Uttar Pradesh, is served a notice for audit by the tax authority
under GST law on 10th July. The records and other documents as sought by the tax authority have been made
available by Prithviraj Ltd. on 25th July. The tax authority visits the office of Prithviraj Ltd. located in Noida, Uttar
Pradesh on 8th August for conducting audit. Determine the time-limit within which the audit under section 65 of
the CGST Act, 2017 is required to be completed assuming that no extension is permitted in the given case.
(RTP NOV 2021)
A. As per section 65(4) of the CGST Act, 2017, audit shall be completed within a period of 3 months from the
date of commencement of the audit. Further, commencement of audit means the later of the following:
(a) the date on which the records and other documents, called for by the tax authorities, are made available by
the registered person, or
(b) the actual institution of audit at the place of business of the taxpayer.
Accordingly, in the given case, date of commencement of audit is later of:
(a) the date on which the records and other documents, are made available by Prithviraj Ltd., i.e. 25th July, or
(b) the actual institution of audit at the place of business of Prithviraj Ltd., i.e. 8th August.
Thus, date of commencement of audit is 8th August.
Hence, audit shall be completed within 3 months from the date of commencement of the audit (8th August).

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 Section 67 Power of Inspection, search & seizure
Section 68 Inspection of goods in movement
Section 69 Power to arrest
Section 70 Power to summon persons to give evidence and produce documents
Section 71 Access to Business premises
Section 72 Officers to assist proper officers

Section 67 Power of Inspection, Search & Seizure

Sec. 67(1) Power of Inspection
In case a proper officer holding the rank of joint commissioner or a higher rank has reason to believe that –
a) Any transaction relating to supply of goods or services or both has been suppressed by the taxable person
or any person has claimed any amount of tax as ITC in excess of credit available to him under the act or
any person has contravened any provisions of the Act or rules made thereunder to evade tax; or
b) Any goods which have escaped from the payment of tax or are kept in a manner to cause evasion of tax
and are in the custody of any transporter of the goods or owner or operator of a warehouse or godown or
any other place,
Only upon a written authorization (Rule 139 Form GST INS-01) given by an officer of the rank of joint
commissioner or above, the officer can conduct the inspection of the place of business of the taxable person or
the place of transporter of goods or owner or operator of warehouse or godown or any other place.

Sec. 67(2) Power to search and seize

In case a proper officer holding the rank of joint commissioner or a higher rank has reason to believe, whether
on the basis of inspection carried out or otherwise, that any goods are liable to confiscation U/s 130 or any
document or books or things which shall be useful for or relevant to any of the proceedings, he may search and
seize such goods, documents, books or things by himself or he may authorize any other officer to search and
make order of seizure in Form GST INS-02.
As per sub-rule (5) of Rule 139 of CGST Rules, the proper officer or the officer authorized by him shall make
the inventory of the goods or documents or things to seized containing description, quantity, make and model
and shall get it signed by the custodian of the goods or documents.
In case where seizure of the goods is not possible, the proper officer or the officer authorized by him, may serve
the notice in Form GST INS-03 to prohibit the owner or custodian of the goods to remove, part with, or otherwise
deal with the goods without taking prior permission of the officer.
The officer may retain the documents or books or things so seized for a period as may be necessary for the
examination of the facts of the proceeding under the Act.
Example1: Jurisdiction officer of ABC Ltd. has reasons to believe that certain activities are being carried out by
them in order to evade taxes. Accordingly, business premises of ABC Ltd. were visited by Revenue Authorities
as directed under rule 139 (1) under form GST INS-01, for carrying out search proceedings, and production of
books & accounts was demanded, on observing certain irregularities with the books and stock. As ABC Ltd.
was not in possession of documents, it sought 24 hours for production of books and accounts. In such situation,
even though ABC Ltd., sought time for production of books and accounts, the goods are liable to be seized,
provided seizure order is passed in Form GST INS-02.
Let say, during the search in ABC Ltd.’s manufacturing unit, it comes to notice of the proper officer that the ABC
Ltd. has installed new machinery, which nowhere has been accounted for in the books of accounts, thus, the
machinery is liable to be seized, unless the ABC Ltd. proves that it has been accounted for into the books of

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accounts. The proper officer may seize such machinery by way of making the ABC Ltd. as the custodian of the
machinery and serve an order of prohibition in Form GST INS -03.

Sec. 67(3) Releasing of non-related document

Where the accounts or documents so seized or produced by the taxable person are not relevant for further
proceeding or are not serving the solution of the purpose for which the notice was issued then such documents
shall be returned to the person within a period of 30 days from the date of issue of notice.

Sec. 67(4) Power to access premises

In case where any person refuses to allow an officer to provide access of premises, almirah, locker, box,
electronic device or safe or godown then the officer is authorized in sub-section (2) to seal or break down the
door or premises or can break the almirah, electronic safe, box etc. in which any goods or relevant documents
are suspected to be kept.

Sec. 67(5) Grant to take extracts

The custodian of the documents or books, which are seized in sub-section (2), shall be allowed to take the
copies of the documents so seized in the presence of the officer at such place and time as provided by such
officer. However, the officer may refuse the custodian to take copies of such documents in case he is of the
opinion that taking such copies may adversely impact the investigation.

Sec. 67(6) Execution of bond

The goods so seize under sub-section (2) shall be released by the officer provisionally on receipt of bond (as
per Rule 140, Form GST INS-04) equivalent to the amount of goods along with security in form of bank
guarantee equivalent to the amount of applicable tax, interest and penalty payable.
The “applicable tax” shall include central tax and State tax or central tax & the Union territory tax, as the case
may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act.
In case the custodian fails to produce such provisionally released goods, the proper officer may encash the
bank guarantee & shall adjust the same against tax, interest and penalty or fine payable in respect of such
goods.

Sec. 67(7) Releasing of goods

The goods so seized shall be returned to the custodian from whose custody the goods were seized where notice
in respect thereof is not given within a period of six months or such period extended by the officer from the date
of seizure.
The period of six months in sub-section (7) may be extended by proper officer, on sufficient cause, by a further
period not exceeding six months.

Sec. 67(8) Disposal of specified seized goods

In case goods seized in sub-section (2) are perishable or hazardous in nature or goods are depreciated with
the passage of time or in case of any issues in storage of such goods or any other issued arises, in that case
the government may, by notification, allow proper officer to dispose such goods or class of goods.
The goods specified in sub-section (8) shall be release by the proper officer if the taxable persons pays an
amount equivalent to the lower of :
• Market price of the goods, or
• The amount of tax, interest or penalty in respect to such goods is payable.
Proper officer, on the proof of payment, shall pass the order in Form GST INS-05 and shall release the goods.
The list of such goods has been given in Notification no. 27/2018 CT Dated 13-6-2018. The list covers salt, raw
hides, newspapers, cell, batteries, fireworks, red sander, sandalwood, food articles, unclaimed goods which are
depreciable on account of change in technology, change in model etc.

Sec. 67(9) Inventory of specified seized goods

The proper officer or the officer authorized by him, in prescribed manner, shall prepare the inventory of all the
goods so seized as specified in sub-section (8).

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Sec. 67(10) Procedure of search and seizure
The procedure of search and seizure will be the same as of the provisions of search and seizure prescribed in
code of criminal procedure, 1973. However, documents or records so seized shall be given to the
“Commissioner” instead of magistrate and the commissioner, on application of the custodian, shall provide the
copies of the seized documents.

Sec. 67(11) Retention of accounts, register or document

The proper officer, for the reasons recorded, may seize the books of accounts, documents or registers produced
before him by the registered person and shall retain it for so long as required for any proceeding under the act
for prosecution. The proper officer shall retain such accounts or documents on in case he has reason to believe
that the person has evaded or attempting to evade any payment of tax provide the receipt of the books or
documents so seized.

Sec. 67(12) Surprise check of invoicing

The Commissioner or an officer authorized by him, to check whether a registered person is issuing proper
invoice or not, may purchase any goods or services or both by themselves or by authorizing any person on their
behalf. The taxable person or any other person authorized by him shall, on return of such goods by such officer
shall refund the amount so paid at time of purchase and shall cancel such invoice or bill of supply issued earlier.
[look like service is not included for refund]

Section 68 Inspection of goods in movement

Sec. 68(1) Carrying of documents
For the movement of goods, the person in charge of a conveyance may require to carry such documents as
may be specified by the government and such devices as may be prescribed. The documents may be required
to carry by the person in charge only in case if they are exceeding the value specified in this respect.

Sec. 68(2) Validation of documents

The details of documents required to be carried under sub-section (1) shall be validated in such manner as may
be prescribed.

Sec. 68(3) Inspection of documents

Proper officer may intercept any person in charge carrying goods in conveyance to produce such documents
and devices as prescribed in sub-section (1) to check the validity of the movement of goods, and such person
in charge of goods will be required to produce the same for verification.

Section 69 Power to arrest

Sec. 69(1) Order to Arrest
In case where a commissioner has reason to believe that a person has committed any offence under clause (a)
or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable as imprisonment
in clause (i) or (ii) of sub-section (1), or sub-section (2) of section 132, in that case the proper officer may
authorize any officer to arrest such person.
Relevant extract of Section 132(1):
In case a person has committed the below mentioned offences, namely :
(a) Supply of goods without issue of any invoices to evade tax,
(b) Issues any invoices in violation of the act to avail any wrongful input tax credit or refund of tax,
(c) Availed input tax credit on false invoices,
(d) Collects the tax from customer but not paid the same to the Government within 3 months from the
due date,
As per Section 132(1)(i), where such amount so evaded or wrongly claimed or refund taken exceeds five
hundred lakh rupees will be punishable as imprisonment up to five years with fine.

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 As per Section 132(1)(ii), where such amount so evaded or wrongly claimed or refund taken exceeds two
hundred lakh rupees but not exceeding five hundred lakh rupees will be punishable as imprisonment up to
three years with fine.
As per Section 132(2), where a person commits offence prescribed in section 132 for the second or
subsequent time shall be punishable as imprisonment up to five years with fine.

Sec. 69(2) Appearance before magistrate for non-bailable offences

In case a person has committed an offence under sub-section (5) of section 132 i.e. the offences which are
cognizable and non-bailable, the officer who has arrested the person shall inform that person the grounds for
which he is arresting him and shall take him before the magistrate within twenty four hours from the arrest.

Sec. 69(3) Arrest in case of bailable offences

Subject to the provisions of the Code of Criminal Procedure, 1973, -
a) Where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of
section 132 i.e. bailable offences shall be released on bail or in default of bail shall be forwarded to the
custody of the magistrate.
b) The deputy commissioner or the assistant commissioner shall, for the purpose of releasing an arrested
person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-
in-charge of a police station.

Section 70 Power to Summon Persons to give Evidence and

Produce Documents
(1) In case the proper officer requires the presence of any person in any inquiry to provide any document or
thing which he seems is required in any proceeding then he may summon that person for his presence
and the officer shall have the same powers as prescribed under the provisions of Code of Civil procedure,
1908 in this regard.
(2) The proceeding before the officer who has issued the summon shall deemed to be the “Judicial
proceeding” within the meaning of section 193 and section 228 of the Indian Penal Code.

Section 71 Access to Business Premises

Sec. 71(1) Access to place of business
The officer authorized by the proper officer shall have the access to any place of business of the registered
person and he may inspect any books of account, documents, computers, computer programs, computer
software and other things, available at such place, which seems to be required by him for carrying out any audit,
scrutiny, verification and checks to safeguard the interest of the revenue.

Sec. 71(2) Responsibility of person in charge

The officer so authorized in sub-section (1) or the audit party deputed by the officer or a cost accountant or a
chartered accountant nominated by the department to conduct special audit U/s 66 may demand any of the
below mentioned documents to conduct any audit or scrutiny and it will be the responsibility of the person in
charge of that place of business to provide the same to the concerned person within fifteen days from their
demand or such further period allowed to him.
Documents that can be demanded by the officer or audit party or a cost accountant or a chartered accountant
nominated U/s 66 –
• Records that are prepared or maintained by the registered person and declared to the proper officer in
such manner as may be prescribed,
• Trial Balance,
• Statements of annual financial accounts, duly audited, wherever required,
• Report of cost audit, if applicable, prescribed in Section 148 of the Companies Act, 2013,

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 • Tax audit report where the person is required to get his books of accounts audited U/s 44 AB of the
Income-Tax Act, 1961, and
• Any other document or record as may be required by him.

Section 72 Officers to Assist Proper Officer

To safeguard the interest of revenue all the officers of police, railways, customs and those officers engaged in
the collection of land revenue, including village officers, officers of state tax and officers of union territory tax
shall assist the proper officers in the implementation of this Act.
Further the Government may empower and require any class of officers other than specified above to assist the
proper officers in the implementation of the act.

Question & Answer

Q1. What is the distinction in law between ‘Seizure’ and ‘Detention’?
A. Denial of access to the owner of the property or the person who possesses the property at a particular point
of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by
the department. Detention order is issued when it is suspected that the goods are liable to confiscation. Seizure
can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable
to confiscation.

Q2. What is meant by the expression ‘reason to believe’?

A. The expression, ‘reason to believe’ is not defined anywhere but needs to be understood through judicial
interpretation, some of which are as follows:
In ITO v Lakhmani Mewal Das (1976) 103 ITR 437 (SC), it was held that the expression ‘reason to believe’
doesn’t mean a purely subjective satisfaction on the part of the income-tax officer. The reason must be held in
good faith. It cannot be merely a pretence. In CIT v Kelvinator India Ltd. (2010) 320 ITR 562 (SC), it was held
that there must be tangible material for the formation of the belief in the context of search.
As per Sec. 26 of IPC, a person is said to have reason to believe a thing, if he has sufficient cause to believe
that thing, but not otherwise.

Q3. Will access to place of business premises U/s 71 also include unregistered premises?
A. Perhaps, yes. This provision facilitates access to a business premise which is not registered by a taxable
person as a principal or additional place of business but has books of accounts, documents, computers etc.
which are required for audit or verification of accounts of a taxable person.

Q4. Whether the list of documents/information is exhaustive and no other document can be inspected?
A. No, the list of documents is considered illustrative. Certain documents are specifically listed in this provision
but if any other relevant records are maintained at the said premises, they may also be required to be produced.

Q5. Is it mandatory that such ‘reasons to believe’ has to be recorded in writing by the proper officer, before
issuing authorization for Inspection or Search and Seizure?
A. Although the officer is not required to state the reasons for such belief before issuing an authorization for
search, but he should disclose the material on which his belief was formed. ‘Reason to believe’ need not be
recorded invariably in each case.

Q6. Can the proper officer access business premises of a registered taxable person?

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A. Yes. An audit party of CGST, deputed by proper officer or a cost accountant or chartered accountant
nominated under section 66 have access to any business premises without issuance of a search warrant for
the purposes of revenue carrying out any audit, scrutiny, verification and checks as may be necessary to
safeguard the interest of. Further, in terms of Section 71(1), an officer authorised by a proper officer not below
the rank of Joint Commissioner can also have access business premises of a registered person.

Q7. What is the meaning of ‘Inspection’, ‘Search’ & ‘Seizure’?

A.
Inspection Search Seizure
It is a softer provision than The term ‘search’, in simple language, In Law Lexicon Dictionary, ‘seizure’,
search to enable officers to denotes an action of a government is defined as the act of taking
access any place of machinery to go, look through or possession of property by an officer
business of a taxable examine carefully a place, area, under legal process. It generally
person and also any place person, object etc. in order to find implies taking possession forcibly
of business of a person something concealed or for the purpose contrary to the wishes of the owner
engaged in transporting of discovering evidence of a crime. The of the property or who has the
goods or who is an owner or search of a person or vehicle or possession and who was unwilling
an operator of a warehouse premises etc. can only be done under to part with the possession.
or godown. proper and valid authority of law.

Q8. What is meant by term ‘Arrest’ and ‘Cognizable & Non Cognizable Offence’?
A.
Arrest
The term ‘arrest’ has not been defined
in the CGST/SGST Act. However, as
per judicial pronouncements, it
denotes ‘the taking into custody of a
person under some lawful command
or authority’. In other words, a person
is said to be arrested when he is taken
and restrained of his liberty by power
or colour of lawful warrant.
Cognizable Offence
Generally, cognizable offence
means serious category of
offences in respect of which a
police officer has the authority to
make an arrest without a warrant
and to start an investigation with
or without the permission of a
Court.
Non Cognizable Offence
Non-cognizable offence means
an offence in respect of which a
police officer does not have the
authority to make an arrest
without a warrant and an
investigation cannot be initiated
without the permission of a
Court.

Q9. What are the safeguards provided for a person who is placed under arrest?
A. The following are the safeguards provided for a person who is placed under arrest:
a) If a person is arrested for a cognizable offence, he must be informed in writing of the grounds of arrest
and he must be produced before a Magistrate within 24 hours of his arrest;
b) If a person is arrested for a non-cognizable and bailable offence, the Deputy/ Assistant Commissioner
shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and
be subject to the same provisions as an officer-in-charge of a police station.
All arrest must be in accordance with the provisions of the Code of Criminal Procedure, 1973 relating
to arrest.

Q10. Which are the places of business / premises which can be inspected by the CGST officer?
A. CGST officer authorized by the proper officer not below the rank of Joint Commissioner shall have the
powers to carry out inspection of any of the following places / premises:
a) any place of business of a taxable person;
b) any place of business of a person engaged in the business of transporting goods;
c) any place of business of an owner or an operator of a warehouse or godown or any other place;

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Section 73 Determination of tax not paid or short paid or erroneously refunded
Section 74 Determination of tax not paid or short paid or erroneously refunded by
reason of fraud or wilful misstatement or suppressions of facts
Section 75 General provisions relating to determination of tax
Section 76 Tax collected and not deposited with the Central Government or a State
Governments
Section 77 Tax wrongfully collected and deposited with the Central Government or
a State Government
Section 78 Initiation of Recovery Proceedings
Section 79 Recovery of tax
Section 80 Payment of tax and other amount in installments
Section 81 Transfer of property to be void in certain cases
Section 82 Tax to be first charge on property
Section 83 Provisional attachment to protect revenue in certain cases
Section 84 Continuation and validation of certain recovery proceedings

Section 73 Determination of tax not paid or short paid or

erroneously refunded & Section 74 Determination of tax not
paid or short paid or erroneously refunded by reason of fraud
or wilful misstatement or suppression of facts

Sub Section Defaults made U/s 73 (for reason Defaults made U/s 74 (For reasons of
other than fraud etc.) fraud, or any wilful-misstatement or
suppressions of facts etc.)
(1) Issuance • Tax not paid, or • Tax not paid, or
of Show • Short paid, or • Short paid, or
Cause • Erroneously refunded, or • Erroneously refunded, or
Notice • ITC has been wrongly • ITC has been wrongly
(SCN) availed/utilized availed/utilized
Proper Officer will issue SCN why Proper Officer will issue SCN why
taxable person should not pay the taxable person should not pay the
amount specified in notice along with amount specified in notice along with
interest U/s 50 & applicable penalty as interest U/s 50 & penalty equivalent to
per Act & Rules. the tax specified in the notice.
(2) Time limit At least three months prior to time limit At least Six months prior to time limit
for SCN specified for issuance of order [Refer to specified for issuance of order [Refer to
sub-section (10)] sub-section (10)]
(3) Deemed Proper officer may serve a statement Proper officer may serve a statement for
Notice for such periods other than those such periods other than those covered
covered in above sub-section (1), on in above sub-section (1), on the person
the person chargeable to tax chargeable to tax
(4) Status of The above statement shall be deemed The above statement shall be deemed
statement to be service of notice, if ground to be service of notice, u/s 73(1), subject
issued on to the condition that the grounds relied

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 recurring remain same as per above sub-section upon in the same statement, except the
SCN (1) ground of fraud, or any wilful-
misstatement or suppression of facts to
evade tax, for periods other than those
covered under sub-section (1) are the
same as are mentioned in the earlier
notice.
(5) Intimation The person chargeable with tax may, The person chargeable with tax may,
by before service of notice under sub- before service of notice under sub-
taxable section (1) or (3), pay the amount section (1), pay the amount along with
person of along with interest U/s 50 on his own interest U/s 50 & penalty equivalent to
deposit ascertainment or as ascertained by the 15% of such tax, on his own
prior to proper officer and inform proper officer ascertainment or as ascertained by the
issue of in writing of such payment. proper officer and inform proper officer
notice in writing of such payment.
As per Rule 142(1A), the proper officer may, before service of notice to the person chargeable with tax,
interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may
be, communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of
FORM GST DRC-01A.
As per Rule 142(2), where, before the service of notice or statement, the person chargeable with tax makes
payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the
case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or
where any person makes payment of tax, interest, penalty or any other amount due in accordance with the
provisions of the Act whether on his own ascertainment or, as communicated by the proper officer under
sub-rule (1A), he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper
officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST
DRC–04.
As per Rule 142(2A), where the person referred to in Rule 142(1A) has made partial payment of the
amount communicated to him or desires to file any submissions against the proposed liability, he may make
such submission in Part B of FORM GST DRC-01A.
(6) Proper Proper Officer, on receipt of deposit Proper officer, on receipt of deposit
Officer not information, shall not service any information, shall not serve any notice
to issue notice Under sub section (1) or (3), in under sub-section (1), in respect of the
SCN on respect of tax so paid or any penalty tax so paid or any penalty payable
receipt of payable under the provisions of this act under the provisions of this Act or the
information or rules. rules made thereunder.
of deposit
(7) Short Issue SCN for the sum short paid Issue SCN for the sum short paid under
receipt of under sub section (1). sub section (1).
tax under
sub-
section (5)
as per
opinion of
proper
officer
(8) Conclusion On deposit of sum of tax along with On deposit of tax along with interest and
of interest as per SCN within 30 days of a penalty equivalent to 25% of such tax
proceedings SCN, no penalty shall be payable and within 30 days of issue of the notice, all
within 30 all proceedings in respect of SCN, shall proceeding in respect of SCN, shall be
days of issue be deemed to be concluded. deemed to be concluded.
of SCN

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 (9) Considering Order for payment of Order for payment of
representation tax+interest+penalty not more than tax+interest+penalty.
and issue of 10% of tax or Rs. 10,000 whichever is
order of SCN higher.
(10)Limitation Within 3 years from due date of annual Within 5 years from due date of annual
period for return or 3 years from the date of return or 5 years from the date of
issuance of erroneous refund. erroneous refund.
an order
(11)Miscellaneous Notwithstanding anything contained in On deposit of tax along with interest and
sub-section (6) or (8), penalty under a penalty equivalent to 50% of such tax
sub-section (9) shall be payable where within 30 days of issue of the order, all
any amount of self-assessed tax or any proceeding in respect of notice, shall be
amount collected as tax has not been deemed to be concluded.
paid within a period of 30 days from the
due date of payment of such tax.
For the purpose of section 73 & 74 –
i. The expression “all proceeding in respect of the said notice” shall not include proceedings
under section 132 (prosecution/punishment for certain offences);
ii. Where the notice under the same proceedings is issued to the main person liable to pay
tax and some other persons, and such proceedings against the main person have been
concluded under section 73 or section 74, the proceedings against all the person liable to
pay penalty under sections 122, and 125, 129 and 130 are deemed to be concluded.
“Suppression” shall mean non-declaration of facts or information which a taxable person is required to
declare in the return, statement, report or any other document furnished under this Act or the rules made
thereunder, or failure to furnish any information on being asked for, in writing by the proper officer.

Impact of Amendment:- To make seizure and confiscation of goods and conveyances in transit, a separate
proceeding from the recovery of tax and the same to be adjudicated independently as per respective Section
129 and 130 of CGST Act.

Penalty provisions (over and above interest amount U/s 73 & 74 at a glance:

Situation Penalty U/s 73 Penalty U/s 74

Before issuance of SCN
Within 30 days after the issuance
of SCN
Within 30 days of issuance of
order
After 30 days of issuance of order
No Penalty 15% of the tax amount
No Penalty 25% of the tax amount
10% of the tax or INR 10,000 50% of the tax amount
whichever is higher (INR 20000 –
total of CGST & SGST or IGST)
10% of the tax or INR 10,000 100% of the tax amount
whichever is higher (INR 20000 –
total of CGST & SGST or IGST)

Circular No. 76/50/2018-GST Dated 31st December 2018

The circular clarifies that delayed filing of Form GSTR-3B will not attract penalty leviable u/s 73(11) of
Central Goods and Services Tax (CGST) Act as the tax along with applicable interest has already been
paid.
Further, as tax has been paid after the due date in contravention of the provisions of CGST Act, a general
penalty under section 125 of the CGST Act may be imposed.

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Table below, the functions as the proper officers in relation to issue of show cause notices and orders -
Circular No. 31/05/2018 – GST Dated 9th Feb’18

Designation of Monetary limit of the Monetary limit of the Monetary limit of the
Officer amount of CGST amount of IGST (including amount of CGST and
(including cess) for cess) for issuance of IGST (including cess)
issuance of show show cause notices & for issuance of show
cause notices & orders u/s 73 and 74 of cause notices & orders
orders u/s 73 & 74 of CGST Act made applicable u/s 73 and 74 of CGST
CGST to IGST Act made applicable to
IGST
Superintendent Up to Rs. 10 lakhs Up to Rs. 20 lakhs Up to Rs. 20 lakhs
Deputy or Above Rs. 10 lakhs up to Above Rs. 20 lakhs up to Above Rs. 20 lakhs up to
Assistant Rs. 1 crore Rs. 2 crore Rs. 2 crore
Commissioner
Additional or Joint Above Rs. 1 Crore Above Rs. 2 Crore Above Rs. 2 Crore
Commissioner

Example 1: ABC Ltd. sold 100 boxes of chocolates for Rs. 1,00,000 on which tax was payable @ 18%. However,
ABC Ltd. did not show the transaction in it books and raised bogus invoices of supply. If ABC Ltd. decides to
pay tax before issuance of SCN, then it is liable to pay penalty U/s 74 i.e. 1,00,000*18% = Rs. 18,000*15%=
Rs. 2,700 penalty. If it pay within 30 days of issuance of SCN then penalty is Rs. 18,000*25%= Rs. 4.500
penalty. Apart from penalty, tax & interest thereon also need to be paid by ABC Ltd.

Section 75 General provisions relating to determination of tax

Sec. 75(1) Exclusion of stay period from time limit for demand order
Where a court or Appellate Tribunal issues the order of stay in respect of serving of notice or issue of order of
demand then such period of stay shall not be included while computing the time period specified the issue of
notice and demand order.
Example 2: Let say if court has issued the stay order for 6 months then if annual return date is 31st December
2018 then order of demand within 5 years (in case of fraud) is 31st December 2023 and since order is stayed
for 6 months then order can be issued by 30th June 2024.

Sec. 75(2) Change in opinion

Where any person has been served with a notice to show cause with charges of fraud or wilful misstatement or
suppression of facts to evade tax and later any Appellate authority or appellate tribunal or Court opines that the
charges of fraud has not been established then the proper officer shall proceed to determine the tax liability as
if the tax has not paid or erroneously refund is for the reason other than fraud, deeming the notice has been
served under sub-section (1) of section 73.
This provision is detrimental to the interests of the assessee because the SCN which have been issued after 3
years but before 5 years shall also deemed to be validly issued and proper officer can accordingly create
demand on the assessee.

Sec. 75(3) Order in case of direction of court

In case the Appellate Authority or Appellate Tribunal or a court has directed the issue of any order then such
order shall be issued within a period of two years from the date of issue of such direction by the Appellate
Authority or Appellate Tribunal or a court.

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Sec. 75(4) Opportunity of being heard
An opportunity of hearing shall be given to the aggrieved party if he makes the representation in writing or where
any adverse decision has been contemplated against him.

Sec. 75(5) Adjournment of hearing

The proper officer on sufficient cause shown by the person chargeable to tax and for reasons recorded in writing
shall grant the time to such person and shall adjourn the hearing. However such adjournment shall be allowed
to the maximum of three times to a person.

Sec. 75(6) Disclosure of facts in order

The proper officer, in his order, shall set out the relevant facts and the basis of his decision.

Sec. 75(7) Basis of order

The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified
in the notice including deemed notice and no demand shall be confirmed on the grounds other than grounds
specified in the notice.
A welcome change has been introduced under the GST Law by incorporating the provision which prescribes
that the order cannot travel beyond the allegations or grounds raised in the SCN. In the pre-GST indirect tax
regime, this principle has been established only through legal Jurisprudence.

Sec. 75(8) Consequences of modification of order

In case where the Appellate Authority or Appellate Tribunal or court has modified the amount of tax in any order
then the amount of interest and penalty shall also stand modified proportionately computed on the basis of the
amount of tax so modified.
Example 3: In case any order of demand has been served: Tax Rs. 1,00,000, Interest Rs. 36,000 (2 years
@18%), Penalty Rs. 1,00,000 (100% of tax).
Appellate Authority/Tribunal or Court has modified tax amount to Rs. 50,000: Tax Rs. 50,000, Interest Rs.
18,000 (2 years @18%), Penalty Rs. 50,000 (100% of tax).

Sec. 75(9) to Sec. 75(13) Miscellaneous provisions

Interest on tax short paid or not paid shall be payable at applicable rates whether or not specified in the order
of demand.
In case any proper officer fails to issue the demand order within the time prescribed under sub-section (10) of
section 73 or sub-section (10) of section 74 then such proceedings shall deemed to be concluded.
Where in some other proceeding on which the Appellate Authority or the Appellate Tribunal or the High Court
has given its decision which is prejudicial to the interest of revenue and an appeal has been filed which is
pending for decision in Appellate Tribunal or the High Court or the Supreme Court then for computing the time
period for issue of order under sub-section (10) of section 73 or under sub-section (10) of section 74 shall not
include the period spent between:

Decision of Appellate Authority Appellate Tribunal High Court Supreme Court

Therefore, an issue on which an Appellate Authority or Tribunal or High Court has given its decision against the
revenue, against which an appeal to the Appellate Tribunal or High Court or Supreme Court is pending, then,
the period spent between the two dates of decision shall be excluded in computing the period of 3 years (non-
fraud cases) or 5 years (fraud cases) respectively, for issue of order.

According to Section 75(12), where a person has self-assessed the tax in accordance with a return furnished
U/s 39 and fails to pay such tax, either wholly or partly, or any amount of interest payable on such tax remains
unpaid, the same shall be recovered under the provisions of Section 79. Finance Act, 2021 has inserted
explanation to Section 75(12), For the purposes of this sub-section, the expression "self-assessed tax" shall
include the tax payable in respect of details of outward supplies furnished under section 37, but not included in
the return furnished under section 39.

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Impact of Amendment:- Self-assessed tax shall include the tax payable in respect of details of outward supplies
furnished in Form GSTR-1 but not included and paid in Form GSTR-3B. Consequently, such self-assessed tax
shall be recovered directly under Section 79 which deals with recovery of tax. Therefore, in such a situation, a
proper officer shall not be required to issue a show cause notice as well as adjudication order in terms of Section
73 or 74 of CGST Act.

Where any penalty is imposed U/s 73 or 74 then no penalty shall impose under any other provisions of this act
for the same omission or same act.

CBIC issued guidelines (Instruction No. 01/2022-GST dated 7 January 2022) to address the doubts raised by
trade and field formations regarding the modalities of initiation of recovery proceedings in such cases.

The Instruction acknowledges that there can be genuine reasons for difference between the details furnished
in GSTR-1 and GSTR-3B, such as typographical error, wrong reporting, tax paid on outward supply in GSTR-
3B of earlier period but declared in GSTR-1 of current period etc. Therefore, opportunity should be provided to
the taxpayers to explain such differences before any recovery action is taken.

In this regard, the proper officer may send communication to the taxpayer to pay the amount short paid or not
paid, or to explain the reasons for such difference within a reasonable time, as prescribed in the communication.

If the taxpayer justifies the difference or explain the reason for short-payment or non-payment to the satisfaction
of proper officer, then there may not be any requirement to initiate recovery proceedings. However, where the
registered person fails to justify the difference or fails to reply or make payment within the prescribed period,
then recovery proceedings may be initiated.

Section 76 Tax Collected but not paid to Government

Sec. 76(1) Amount collected as tax
Where a person has collected any amount from any person as a tax under GST, whether the supply was taxable
or not, shall pay the amount of tax to the Government irrespective of anything contrary contained in any order
or the Appellate Authority or Appellate Tribunal or Court or in any other provisions of this Act or the rules made
thereunder or any other law for the time being in force.
Example 4: In case A has sold goods chargeable @ 18% to B by charging 28% tax on such goods. A shall pay
the whole of tax collected from B.

Sec. 76(2) SCN for tax collected but not paid to Government
Where a person has collected tax under GST but fails to pay the same to the Government then the proper officer
may issue SCN as to why the amount so collected by him as tax along with penalty equivalent to the tax should
be paid by him to the Government.

Sec. 76(3) to 76(6) Determination of tax liability

The proper officer shall determine the tax liability of the person, to whom notice has been served, under sub-
section (2) considering the representations made by him and such person shall pay the amount so determined
along with the interest U/s 50 from the date of collection of such amount to the date of payment.
The proper officer shall issue the order of demand within a period of one year from the date of notice under sub-
section (2) and the opportunity of hearing shall be granted where the person to whom the notice was served
has requested in writing.

Sec. 76(7) Exclusion of stay period from time limit for demand order
Where a court or Appellate Tribunal issues the order of stay in respect of serving order of demand then such
period of stay shall not be included while computing the time period of one year for the issue of demand order.

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Sec. 76(8) Disclosure of facts in demand order
The proper officer shall disclose the facts on the basis of which he has made the decision of the proceedings in
the order.

Sec. 76(9) to 76(11) Adjustment of tax paid

The amount paid to the Government which was collected in excess of tax or under the notice of payment of
such excess deduction shall be adjusted against the tax payable and where the surplus is left after adjustment
of tax it shall credited to the fund or shall be refunded to the person who borne the incidence of tax.
The person who borne the incidence of tax may apply for refund of the tax in accordance with the provisions of
Section 54 in Form GST RFD-01, along with documentary evidence. [Rule 89 (2)]

Section 77 Adjustment of Tax paid

In case where Central tax and State tax/Union Territory tax, as the case may be, has been paid on any supply
considering it to be an intra-state supply and later it came to notice that it is to be an interstate supply and
Integrated tax should have been paid then amount so paid earlier at the time of supply shall be refunded as per
the provisions of section 54.
However, where Integrated tax has been paid on any supply considering it to be an interstate supply and later
it came to notice that it is to be an intrastate supply and Central tax and State tax/Union territory tax, as the case
may, then he shall not be required to pay any interest on the amount Central tax and State tax/Union territory
tax, as the case may be payable.
[the person may apply for refund according to Sec. 54 in Form GST RFD-01 along with documentary evidence
(Rule 89 (2)]

Section 78 Initiation of Recovery Proceedings

If tax demand is not paid within 3 months from the date of service of order, recovery proceedings shall be
initiated. The proper officer may require payment of amount prior to expiry of 3 months to protect interest of
revenue.

Section 79 Recovery of tax

i. Modes of recovery: The proper officer shall proceed to recover the amount by one or more of the
following modes, namely –
a) Recovery of deduction from any money owed to such person.
b) Detention and sale of goods belonging to such person which are under the control of the
department.
Rule 144: -
• The proper officer shall make the inventory of the goods so detained with estimated
market value and shall proceed to sale only so much of goods which are required
for recovering the amount due from him and administrative cost of detaining and
selling such goods. The goods shall be sold through auction.
• The last date of submission of bid for an auction shall not be earlier then fifteen days
from the date of issue of notice of auction. However, the proper officer may sell such
goods immediately which are perishable or hazardous in nature or where the cost of
keeping the goods are likely to exceed the value of goods.
Rule 144A: -
A new rule 144A (Recovery of penalty by sale of goods or conveyance detained or seized in
transit) has been inserted. The new rule lays down that that where the person transporting
any goods or the owner of such goods fails to pay the amount of penalty section 129(1) within

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 fifteen days from the date of receipt of the copy of the order passed under section 129(3),
the proper officer shall proceed for sale or disposal of the goods or conveyance so detained
or seized by preparing an inventory and estimating the market value of such goods or
conveyance. If the detained or seized goods are perishable or hazardous in nature or are
likely to depreciate in value with passage of time, the said period of fifteen days may be
reduced by the proper officer. The said goods or conveyance shall be sold through a process
of auction, including e-auction.
Provided that where the person transporting said goods or the owner of such goods pays the
amount of penalty under sub-section (1) of section 129, including any expenses incurred in
safe custody and handling of such goods or conveyance, after the time period mentioned in
sub-rule (1) but before the issuance of notice under this sub-rule, the proper officer shall
cancel the process of auction and release such goods or conveyance.

c) Garnishee proceedings i.e. Recovery from debtors of the assessee:

• Debtor bound to comply with the notice. Recovery can be made from post office,
banking company or an insurer and it shall not be necessary to produce any pass book,
deposit receipt, policy or any other document for the purpose of any entry, endorsement
or the like being made before payment is made.
• In case of non-compliance of notice, the debtor shall be deemed to be defaulter and if
he discharges the liability, he shall be personally liable. The officer issuing a notice
may, at any time, amend or revoke such notice of extend the time for making any
payment in pursuance of the notice.
• Debtor shall be discharged from assessee’s liability to extent of such payment made to
the Government.
• However, such person is not personally liable as above, if he proves to the officer
issuing the notice that the money demanded or any part thereof was not due to the
person in default or at the time of service of the notice he did not hold any money for
or on account of the person in default, the money was not demanded from him; or any
part of the money demanded is not likely to become due to such other person or any
part of the money will not likely be held for or on account of such person.

Rule 147:-
• The proper officer shall make the inventory of the movable or immovable property so
detained with estimated market value.
• The order of attachment of such property and notice of sale shall be issued in Form
GST DRC-16 to prohibit any transaction with respect to such movable or immovable
property.
• Where any immovable property has been attached then the notice of attachment
shall be pasted on such immovable property and shall remain affixed till the
confirmation of sale of such property.
• Where any movable property has been attached then such movable property shall
be seized by the proper officer.
• The property so attached shall be sold by an auction, the notice of which shall be
issued in Form GST DRC-17.
• The last date of submission of bid for an auction shall not be earlier fifteen days from
the date of issue of notice by auction. However, the proper officer may sell such
goods immediately which are perishable or hazardous in nature or where the cost of
keeping the goods are likely to exceed the value of goods.

d) Collection by detention and sale of any movable or immovable property

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 [As per Rule 154:- First , be apportioned against the administrative cost of the recovery process.
Second, against the amount to be recovered. Next, be apportioned against any other amount
due under the Act. Balance amount shall be rendered to the defaulter]
e) Through the collector of the district in which such person owns any property or resides or carries
on his business, as if it was an arrear of land revenue.
f) The proper officer may file an application to the magistrate to recover the amount specified in
the application and the magistrate shall recover such amount as it is a fine imposed on such
person.
ii. Recovery of amount specified in bond can be made as per the above provisions.
iii. SGST/UTGST Officer may also recover CGST dues from defaulter and credit the same to Central
Government
iv. Apportionment of amount collected to State/Central Government in proportion to the amount due to
each such Government.
For the purposes of this section, the word person shall include “distinct persons” as referred to in sub-
section (4) or, as the case may be, sub-section (5) of section 25.

Rule 142 Notice and order for demand of amounts payable under the Act

(1) The proper officer shall serve, along with the

(a) notice issued under section 52 or section 73 or section 74 or section 76 or section
122 or section 123 or section 124 or section 125 or section 127 or section 129 or
section 130, a summary thereof electronically in FORM GST DRC-01,
(b) statement under sub-section (3) of section 73 or sub-section (3) of section 74, a
summary thereof electronically in FORM GST DRC-02,
specifying therein the details of the amount payable.
(1A) The proper officer may, before service of notice to the person chargeable with tax,
interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74,
as the case may be, communicate the details of any tax, interest and penalty as
ascertained by the said officer, in Part A of FORM GST DRC-01A.
(2) Where, before the service of notice or statement, the person chargeable with tax makes
payment of the tax and interest in accordance with the provisions of sub-section (5) of
section 73 or, as the case may be, tax, interest and penalty in accordance with the
provisions of sub-section (5) of section 74, or where any person makes payment of tax,
interest, penalty or any other amount due in accordance with the provisions of the Act
whether on his own ascertainment or, as communicated by the proper officer under
subrule (1A), he shall inform the proper officer of such payment in FORM GST DRC-03
and the proper officer shall issue an acknowledgement, accepting the payment made by
the said person in FORM GST DRC–04.
(2A) Where the person referred to in sub-rule (1A) has made partial payment of the amount
communicated to him or desires to file any submissions against the proposed liability, he
may make such submission in Part B of FORM GST DRC-01A.
(3) Where the person chargeable with tax makes payment of tax and interest under sub-
section (8) of section 73 or, as the case may be, tax, interest and penalty under sub-section
(8) of section 74 within thirty days of the service of a notice under sub-rule (1), or where
the person concerned makes payment of the amount referred to in sub-section (1) of
section 129 within fourteen days of detention or seizure of the goods and conveyance,
seven days of the notice issued under sub-section (3) of Section 129 but before the
issuance of order under the said sub-section (3), he shall intimate the proper officer of

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 such payment in FORM GST DRC03 and the proper officer shall issue an order in FORM
GST DRC-05 concluding the proceedings in respect of the said notice.
(4) The representation referred to in sub-section (9) of section 73 or sub-section (9) of section
74 or sub-section (3) of section 76 or the reply to any notice issued under any section
whose summary has been uploaded electronically in FORM GST DRC-01 under sub-rule
(1) shall be furnished in FORM GST DRC-06.
(5) A summary of the order issued under section 52 or section 62 or section 63 or section 64
or section 73 or section 74 or section 75 or section 76 or section 122 or section 123 or
section 124 or section 125 or section 127 or section 129 or section 130 shall be uploaded
electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and
penalty payable by the person chargeable with tax tax, interest and penalty, as the case
may be, payable by the person concerned.
(6) The order referred to in sub-rule (5) shall be treated as the notice for recovery.
(7) Where a rectification of the order has been passed in accordance with the provisions of
section 161 or where an order uploaded on the system has been withdrawn, a summary
of the rectification order or of the withdrawal order shall be uploaded electronically by the
proper officer in FORM GST DRC-08.

Rule 154 Disposal of proceeds of sale of goods or conveyance and movable or immovable
property

(1) The amounts so realised from the sale of goods or conveyance, movable or immovable property,
for the recovery of dues from a defaulter or for recovery of penalty payable under sub-section (3)
of section 129 shall,-
(a) first, be appropriated against the administrative cost of the recovery process;
(b) next, be appropriated against the amount to be recovered or to the payment of the penalty
payable under sub-section (3) of section 129, as the case may be;
(c) next, be appropriated against any other amount due from the defaulter under the Act or the
Integrated Goods and Services Tax Act, 2017 or the Union Territory Goods and Services
Tax Act, 2017 or any of the State Goods and Services Tax Act, 2017 and the rules made
thereunder; and
(d) the balance, if any, shall be credited to the electronic cash ledger of the owner of the goods
or conveyance as the case may be, in case the person is registered under the Act, and
where the said person is not required to be registered under the Act, the said amount shall
be credited to the bank account of the person concerned;
(2) where it is not possible to pay the balance of sale proceeds, as per clause (d) of sub-rule (1), to the
person concerned within a period of six months from the date of sale of such goods or conveyance
or such further period as the proper officer may allow, such balance of sale proceeds shall be
deposited with the Fund;

Section 80 Payment of tax and other amount in installments

▪ On Application of the concerned person, the Commissioner may extend the time or allow making of
payment in monthly installments not exceeding 24, subject to payment of interest U/s 50 and subject to
such conditions and limitations as may be prescribed.
However, the extension and installments shall not be allowed for the amount due as per the liability self-
assessed in any return.
▪ In case of default in payment of installment, all outstanding installments shall become due and payable
on date of such default and shall, without any further notice being served on the person, be liable for
recovery.

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 ▪ The facility for deferred payment/payment in installments shall not be allowed where –
✓ The taxable person has already defaulted on the payment of any amount under CGST Act,
2017 or the IGST Act, 2017 or the UTGST Act, 2017 or any of the SGST Act, 2017 for which
the recovery process is on;
✓ The taxable person has not been allowed to make payment in installments in the preceding
financial year under the CGST Act, 2017 or the IGST Act, 2017 or any of the SGST Tax Act,
2017;
✓ The amount for which installment facility is sought is less than Rs. 25,000.

Section 81 Transfer of property to be void in certain cases

Where a person after any amount has become due from him, creates a charge on or parts with the property
belonging to him or in his possession by way of sale, mortgage, exchange, or any other mode of transfer
whatsoever of any of his properties in favour of any other person with the intention of defrauding the Government
revenue, such charge or transfer shall be void as against any claim in respect of any tax or any other sum
payable by the said person.
Such charge or transfer shall not be void if it is made for adequate consideration, in good faith and without
notice of the pendency of such proceedings under this Act or without notice of such tax or other sum payable
by the said person, or with the previous permission of the proper officer.
Example 5: Mr. A was served with a notice of demand of Rs. 25 Lakhs on 05.05.2018. He filed a reply for the
said notice on 15.05.2018, stating that he was unable to deposit tax dues as he was financially stressed. On
10.05.2018, Mr. A transferred all the property Rs. 40 Lakhs under his name to the name of his wife for
consideration of Rs. 1,00,000. As per Section 81, this transfer would be void and the property worth Rs. 40
Lakhs would be considered still to be in hands of Mr. A.
Example 6: On Mr. B, notice was issued on 05.05.2018. However, the same was received by Mr. B on
15.05.2018. Meanwhile the property of Mr. B was sold to Mr. X for INR 1 crore. The sale is valid since the date
of sale there was no pending proceeding on Mr. B.

Section 82 Tax to be first charge on property

Notwithstanding anything to the contrary contained in any law for the time being in force, save as otherwise
provided in the Insolvency and Bankruptcy Code, 2016, any amount payable by a taxable person or any other
person on account of tax, interest or penalty which he is liable to pay to the Government shall be a first charge
on the property of such taxable person or such person .

Notification No. 11/2020 – Central Tax dated 21st March 2020

As per Insolvency Bankruptcy Code (IBC), 2016, once an entity defaults certain threshold amount, Corporate
Insolvency Resolution Process (CIRP) gets triggered and the management of such entity (Corporate Debtor)
and its assets vest with an interim resolution professional (IRP) or resolution professional (RP). The IRP/RP
continues to run the business and operations of the said entity as a going concern and is responsible for
compliance with all the laws till the insolvency proceeding is over and an order is passed by the National
Company Law Tribunal (NCLT).
The Government has prescribed special procedure under section 148 of the CGST Act for the corporate
debtors who are undergoing CIRP under the provisions of IBC and the management of whose affairs are
being undertaken by IRP/RP.
Circular No. 138/08/2020 GST provides as under:

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The corporate debtor who is undergoing CIRP is to be treated as a distinct person of the corporate debtor and
shall be liable to take a new registration in each State or Union territory where the corporate debtor was
registered earlier, within thirty days of the appointment of the IRP/RP. However, corporate debtors who have
not defaulted in furnishing statements (GSTR-1) and returns under GST would not be required to obtain a
separate registration with effect from the date of appointment of IRP/RP.
The new registration by IRP/RP shall be required only once, and in case of any change in IRP/RP after initial
appointment under IBC, it would be deemed to be change of authorized signatory and it would not be
considered as a distinct person on every such change after initial appointment.
The IRP/RP will be liable to furnish returns, make payment of tax and comply with all the provisions of the
GST law during CIRP period.

Section 83 Provisional attachment to protect revenue in certain

cases
Where during the pendency of any proceedings under section 62 or section 63 or section 64 or section 67 or
section 73 or section 74, the Commissioner is of the opinion that for the purpose of protecting the interest of the
Government revenue, it is necessary so to do, he may, by order in writing attach provisionally any property,
including bank account, belonging to the taxable person in such manner as may be prescribed.
Where, after the initiation of any proceeding under Chapter XII (Assessment), Chapter XIV (Inspection, Search,
Seizure & Arrest) or Chapter XV (Demand and Recovery), the Commissioner is of the opinion that for the
purpose of protecting the interest of the Government revenue it is necessary so to do, he may, by order in
writing, attach provisionally, any property, including bank account, belonging to the taxable person or any person
specified in sub-section (1A) of section 122, in such manner as may be prescribed.

Impact of Amendment:- The scope of Section 83 has been extended to above mentioned chapters i.e.
assessment, inspection, search, seizure & arrest, and demand & recovery. In addition to this, substituted
provision has extended department’s power to provisionally attach properties and bank account of such
other person as mentioned in Section 122(1A) – at whose instance the transaction is conducted and who retains
the benefit of any of following types of transactions: -
a) Supply of Goods/Services without Invoice or issue of incorrect/false invoice for supply
b) Issuance of Invoice without supply of Goods/Services
c) ITC wrongly availed or utilized without actual receipt of Goods/Services
d) ITC on the basis of ISD (Input Service Distributor) wrongly distributed.

Every such provisional attachment shall cease to have effect after the expiry of a period of one year from the
date when provisional attachment order is made under this section.
Where the property attached is of perishable or hazardous nature, and if the taxable person and if the person,
whose property has been attached, pays an amount equivalent to the market price of such property or the
amount that is or may become payable by the taxable person by such person, whichever is lower, then such
property shall be released forthwith.

Section 84 Continuation and validation of certain recovery

proceedings
Issuance of fresh notice is required when government dues are enhanced in appeal, revision or other
proceedings and recovery proceedings of earlier demand will be continued as per earlier notice.
Issuance of fresh notice is not necessary when government dues are reduced in appeal, revision or other
proceedings and any recovery proceedings initiated on the basis of the demand served upon him prior to the
disposal of such appeal, revision or other proceedings may be continued in relation to the amount so reduced
from the stage at which such proceedings stood immediately before such disposal.

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 Question & Answer

Q1. Will Omission on the part of the taxable person to provide correct information constitute ‘suppression of
facts’ for the purpose of Section 74 of the CGST Act, 2017? Write a brief note with reasons.
A. Yes. As per explanation to Section 74 of CGST Act, 2017, the expression “suppression” shall mean non-
declaration of facts or information which a taxable person is required to declare in the return, statement, report
or any other document furnished under this Act or the rules made thereunder, or failure to furnish any information
on being asked for, in writing, by the proper officer. Thus, omission on the part of the taxable person to provide
correct information constitute “suppression of facts”.

Q2. A ltd. is entitled for exemption from tax under GST Act. It collected tax from its buyers in Nov’17. It has not
deposited the said amount collected as GST with the Government. What are the consequences of not depositing
the same with Government as provided U/s 76?
A. It is mandatory to pay amount, collected from other person representing tax under GST Act, to the
Government [Sec. 76]. Every person who has collected from any other person any amount as representing the
tax under GST Act, and has not the said amount to the Government, shall forthwith pay the said amount to the
Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or
not. Proper officer may issue SCN for recovery of such amount and penalty equivalent to amount specified in
notice.
The proper officer shall, after considering the representation, if any, made by the person on whom SCN is
served, determine the amount due from such person and thereupon such person shall pay the amount so
determined along with interest at the rate specified under section 50 from the date such amount was collected
by him to the date such amount is paid by him to the Government.

Q3. Can the person chargeable with the tax seek adjournment of hearings?
A. Yes, the person chargeable with tax can seek adjournment of hearing and he can be granted time in case
sufficient cause is shown by person chargeable with tax. The hearing will be adjourned for reasons to be
recorded in writing. As provided in Sec. 75 (5) of the GST Act, no such adjournments shall be provided for more
than 3 times.

Q4. Would taxable person would be liable for payment of interest besides paying the tax U/s 77?
A. No, Sec. 77 (2) provides that such taxable person would not be liable for payment of interest on the amount
of central tax or state tax as the case may be.

Q5. Can the refund claim on account of Sec. 77 be subjected to provision of undue enrichment?
A. No, the claim of refund due to Sec. 77 will not be subjected to provision of undue enrichment. This has also
been clarified by the Government in flier of refunds issued by CBIC.

Q6. Can GST be collected, during a search operation, without an assessment order being passed by the
concerned authority?
A. No. In case law Chitra Builder Pvt. Ltd. V Addl. Commi. Of CCex & ST [2013] [Mad], it was held that it is a
well settled position in law that no tax can be collected from the assessee, without an appropriate assessment
order being passed by the authority concerned and without following the procedures established by law.

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Q7. When can extended period of limitation can be invoked?
A. U/s 74, extended period of limitation can be invoked if the GST has not been paid or has been short-paid or
erroneously refunded by reason of fraud or wilful mis-statement or suppression of facts or contravention of any
of the provision of CGST Act or of rules made thereunder with an intent to evade the payment of GST.

Q8. M/s ABC Ltd., were granted a refund by the Appellate Authority under CGST Act, 2017. The jurisdictional
Assistant Commissioner has issued a notice U/s 73 demanding the amount of refund on the ground that such
a refund is erroneous. Briefly discuss whether the action taken by Assistance Commissioner of Central Excise
is valid in law.
A. It is well settled law that if an order passed by statutory authority is not challenged by way of appeal/revision
or otherwise and the same becomes final, the said order holds the field and the same has to be given full effect
to. Nothing can be done and/or adjudicated, which is in contravention of what has been held in that order. In
overseas Engineers V/s CCEx [2007] [Tri], it was held that where orders sanctioning refund were not appealed
against or reviewed by Department, then, recovery from the appellant of refund paid to him, by issuance of
show cause notice U/s 73 is not tenable/sustainable.

Q9. How to compute period of limitation referred to in Section 73 (10) or Section 74 (10) where an issue on
which the Appellate Authority or the Appellate Tribunal or the High Court has given its decision which is
prejudicial to the interest of the revenue in some other proceedings and an appeal in the Appellate Tribunal or
the High Court or the Supreme Court against such decision is pending?
A. While computing the period of limitation referred to in Section 73 (10) or Section 74 (10), the period spent
between the date of the decision of the Appellate Authority/Appellate Tribunal/High Court and the date of the
decision of the Appellate Tribunal/High Court/Supreme Court as the case may be, shall be excluded.

Q10. What will be the recourse available to the proper officer in case of default in payment of any installment
on its due date by the taxable person?
A. Where there is default in payment of any one installment on its due date by the taxable person, the whole
outstanding balance payable on such date shall become due and payable forthwith, without any further notice.
The proper officer can initiate recovery of dues.

Q11. In case the person does not deposit tax collected in contravention of Section 76, what is the course of
action available to the proper officer?
A. The proper officer shall issue notice requiring him to show cause as to
• Why the amount so collected as tax should not be paid by him to the Government;
• Why a penalty equivalent to the amount specified in the notice should not be imposed on him under the
provisions of the Act; and
• The proper officer shall adjudicate the matter and issue order within 1 year from the date of issue of the
show cause notice.

Q12. Whether the amount of tax, interest and penalty demanded in the order can exceed the amount specified
in the notice?
A. No. The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount
specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in
the notice.

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Q13. Please explain time limit for issue of notice U/s 73 & U/s 74 by giving example.
A. Under Section 73: Let say, in case Mr. A has not paid the tax on a transaction considering it to be exempt for
the tax period of August 2017. The due date of filing annual return for which will be 31st December 2018. The
proper officer may serve the notice at least three months prior to the last date of order of demand.
The order of demand shall be served within 3 years from 31st December 2018 i.e. 31st December 2021.
Therefore, show cause notice shall be required to be served by 30th September, 2021.
Under Section 74: Let say, in case Mr. A has not paid the tax on a transaction for the tax period of August 2017.
The due date of filing annual return for which will be 31st December 2018. The proper officer may serve the
notice at least six months prior to the last date of order of demand
The order of demand shall be served within 5 years from 31st December 2018 i.e. 31st December 2023.
Therefore, show cause notice shall be required to be served by 30th June, 2023.

Q14. Whether proper officer can issue similar show cause notice for any periods other than those covered under
section 73(1)?
A. Yes, it can be issued for subsequent periods on same grounds raised in the show cause notice. The proper
officer may serve a statement under section 73(3) along with a summary electronically in Form GST DRC-02
containing details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or
utilized where the grounds relied upon by the proper officer for such periods are the same as are mentioned in
the earlier notice issued under section 73(1). The service of such statement shall be deemed to be service of
show cause notice on the person chargeable with tax.

Q15. Whether notice for a period of 5 years is valid even if charge of suppression, fraud and misstatement are
not sustained?
A. No, when the allegations of fraud, suppression or misstatement are not established, the notice issued under
section 74 would get covered under section 73 and 3 years’ time would be applicable for date of issue of order.

Q16. What happens when the Notice issued under Section 74(1) is held not sustainable by any Appellate
Authority or Tribunal or Court for the reason that the charges of fraud or any willful misstatement or suppression
of facts to evade tax has not been established?
A. The proper officer shall determine the tax payable by such person deeming as if the Notice were issued
under section 73(1).

Q17. What is the time limit for issue of order in pursuance of the direction of the Appellate Authority or Appellate
Tribunal or a Court?
A. The order shall be issued within 2 years from the date of communication of the said direction.

Q18. What happens in cases where Notice is issued but order has not been passed within 3 years (Section 73)
or 5 years (Section 74)?
A. The adjudication proceedings shall be deemed to be concluded if the order is not issued within the limitation
period of 3 years under section 73(10) or 5 years under section 74(10), as the case may be.

Q19. Is interest applicable in all cases, even if not specifically mentioned?

A. Yes, interest is applicable whenever the tax is payable whether or not it is specifically mentioned.

Q20. In case the person does not deposit tax collected in contravention of Section 76, is the same recoverable
with interest?

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A. Yes. In addition to the amount payable by him, the person is required to pay interest under Section 50 on the
same from the date of collection of the amount till the date such amount is paid to the Government.

Q21. Is there any time limit for issue of notice under section 76 in cases where tax collected but not paid to
Government?
A. No. Notice can be issued on detection of such cases without any time limit. Once show cause notice is issued,
the proper officer shall pass the order within 1 year from the date of issue of such notice.

Q22. How is the amount of surplus left after adjustment with tax payable dealt with?
A. Where any surplus is left after the adjustment against the tax payable, the amount of such surplus shall either
be credited to the Consumer Welfare Fund or, as the case may be, refunded to the person who has borne the
incidence of such amount.
Q23. What happens if the tax demand is not paid within the time limit prescribed under section 78?
A. The proper officer shall initiate recovery proceedings if the tax demand is not paid within 3 months from the
date of service of the order.

Q24. Whether the proper officer can require a taxable person to make payment of tax demand within shorter
period lesser than 3 months?
A. Yes. If it is expedient in the interest of the revenue, the proper officer, after recording reasons in writing, may
require taxable person to make such payment within shorter period as may be prescribed by him.

Q25. What are the methods of recovery as prescribed in Section 79?

A.
— Deduction out of any money owing to defaulter.
— By detaining and selling the goods belonging to defaulter.
— Recovery from any other person who owes money to defaulter.
— Collection by detention of any movable or immovable property.
— Recovery through District Collector.
— Recovery through Magistrate.

Q26. Whether proper officer can allow payment of self-assessed tax in installments U/s 80?
A. No. The proper officer shall have the power to allow payment of any amount due under this Act in installments
on tax other than the self-assessed tax.

Q27. Under which proceedings the property of a taxable person can be provisional attached?
A. Provisional attachment shall be applicable for the following pending proceedings of a taxable person:
(a) Assessment of non-filers of returns. (Section 62)
(b) Assessment of unregistered persons. (Section 63)
(c) Summary assessment in certain special cases. (Section 64)
(d) Inspection, search and seizure. (Section 67)
(e) Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed
or utilized for any reason other than fraud or any wilful misstatement or suppression of facts. (Section
73)
(f) Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed
or utilized by reason of fraud or any wilful-misstatement or suppression of facts. (Section 74)

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During the pendency of any proceedings under section 62, 63, 64, 67, 73 or 74, the Commissioner may pass
an order in Form GST DRC-22 to attach any property including bank account belonging to a taxable person
provisionally for the purpose of protecting the interest of the Government revenue.

Q28. Whether any amount payable by the taxable person under this Act is a first charge on his property?
A. Yes. As per section 82 of CGST Act 2017, notwithstanding anything to the contrary contained in any law for
the time being force, save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, first charge
shall be on –
a) the property of taxable person in respect of any amount payable by such taxable person, or
b) the property of any other person on account of tax, interest or penalty which he is liable to pay to the
Government.

Q29. In case of recovery of SGST/UTGST by CGST officer in the course of recovery of CGST, where the total
amount recovered is Rs. 5 Crore whereas the amounts due were Rs. 5 Crores of CGST and Rs. 10 Crore of
SGST/UTGST, to which account, the amount recovered would be allocated?
A. Rs. 5 Crores recovered will be allocated between Centre and State/Union Territory in the proportion of 1:2.

Q30. ‘A’ requested the Commissioner to provide the benefit to pay Rs. 5,00,000/- under installments.
Commissioner directs ‘A’ to make the payment in five monthly installments. How to pay the interest?
A. It is assumed that the actual date on which the tax was required to be paid as 06.06.2015. Benefit of
installment was granted by Commissioner on 25.05.2016 to be paid w.e.f. 02.06.2016 onwards over 5
installments.
Payment date Interest to be paid – No. of days Amount on which
interest to be paid
1st Installment – 02.06.2016 06.06.2015 to 01.06.2016 = 361 days Rs. 100,000
2nd Installment – 02.07.2016 06.06.2015 to 01.07.2016 = 391 days Rs. 100,000
3rd Installment – 02.08.2016 06.06.2015 to 01.08.2016 = 422 days Rs. 100,000
4th Installment - 02.09.2016 06.06.2015 to 01.09.2016 = 453 days Rs. 100,000
5th Installment – 02.10.2016 06.06.2015 to 01.10.2016 = 483 days Rs. 100,000

Q31. Please provide comment for below with respect to provision U/s 81.
• Mr. Defrauder was served with a notice of demand for Rs. 20 Lakhs on 10th June 2018. He filed a reply
for the said notice on 20th June 2018, stating that he was unable to deposit tax dues as he was
financially stressed. On 15th June 2018, Mr. Defrauder transferred all the property worth Rs. 35 Lakhs
under his name to the name of his wife for a consideration of Rs. 10,000/-. Is this act of Mr. Defrauder
valid?
• In the above illustration, if transfer of property was for a consideration of Rs. 42 Lakhs to Mr. X who is
unaware of the pending proceedings of Mr. Defrauder. The transfer took place on 15th June 2018. Is
the act of Mr. Defrauder valid?
• On Mr. Perfect, notice was issued on 10th June 2018. However, the same was received by Mr. Perfect
on 20th June, 2018. Meanwhile the property of Mr. Perfect was sold to Mr. Perfectionist for Rs. 35 lakhs.
Is the sale void or valid?
A.
• As per section 81, the said transfer would be void and the property worth Rs. 35 Lakhs would be
considered still to be in the hands of Mr. Defrauder.

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 • In this case the transaction would be a valid act, since the transfer was made for adequate consideration
and also without notice of the pendency of proceeding.
• The sale is valid since on the date of sale there was no pending proceeding on Mr. Perfect.

Q32. How should the recovery proceedings of enhanced demand under an appeal, revision of application or
other proceedings to be continued U/s 84?
A. In case of enhanced demand consequent to appeal, revision of application or other proceedings, then
• the Commissioner is required to issue fresh notice of demand only for enhance demand.
• If already recovery proceedings of Govt. dues is served on taxable person before disposal of appeal,
revision of application or other proceedings, then the enhanced demand would be merged with the first
recovery proceedings.

Q33. Checkernot has self-assessed tax liability under IGST Act, 2017, as Rs. 80,000. He fails to pay the tax
within 30 days from the due date of payment of such tax.
Determine the interest and penalty payable by him explaining the provisions of law, with the following particulars
available from his records:
Date of collection of tax 18th December, 2017
Date of payment of tax 26th February, 2018
No Show Cause Notice (SCN) has been issued to him so far, while he intends to discharge his liability, even
before it is issued to him, on the assumption that no penalty is leviable on him as payment is made before issue
of SCN. (CA Final May 2018 Old)
A. Due date for payment of tax collected on 18.12.2017 is 20.01.2018. However, since tax is actually paid on
26.02.2018, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days] in terms
of section 50 of CGST Act, 2017 read with Notification No. 13/2017 CT Dated 28.06.2017.
Amount of interest is: = Rs. 80,000 × 18% × 37/365 = Rs. 1,460 (rounded off)
As per section 73(11) of CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid
within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of SCN
to avoid penalty, is not available.
Consequently, penalty equivalent to
(i) 10% of tax, viz., Rs. 8,000 or
(ii) Rs. 10,000,
whichever is higher,
is payable in terms of section 73(9) of CGST Act, 2017. Therefore, penalty of Rs. 10,000 will have to be paid
by Checkernot.
However, CBIC vide Circular No. 76/50/2018-GST dated 31-12-2018 has clarified that penalty U/s 73 (11) can
be levied only when show cause notice is issued as per the provisions of Section 73 of the Act. No penalty in
accordance with Section 73 (11) of the CGST Act should be levied in cases where the return in Form GSTR –
3B has been filed after the due date of filing such return. However, general penalty U/s 125 can be imposed in
such cases.

Q34. Mr. X, registered under GST Act, had made short payment of GST for the month of July 2017. He does
not want a show cause notice to be served on him by proper officer. Advice Mr. X, if :
(i) Short payment of tax is on account of reasons other than fraud
(ii) Short payment of tax is on account of fraud.
(CA Final Nov 2018 Old)
A.

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 (i) Short payment of tax is on account of reasons other than fraud As per section 73 of the CGST Act,
2017, the show cause notice will not be issued by the proper officer, if Mr. X pays the amount of tax
short paid along with interest payable thereon on the basis of his own ascertainment of such tax or
the tax as ascertained by the proper officer, before the service of notice and inform the proper officer
in writing of such payment.
(ii) Short payment of tax is on account of fraud As per section 74 of the CGST Act, 2017, the show cause
notice will not be issued by the proper officer, if Mr. X pays the amount of tax short paid along with
interest payable thereon and a penalty equal to 15% of such tax on the basis of his own ascertainment
of such tax or the tax as ascertained by the proper officer, before the service of notice and inform the
proper officer in writing of such payment.

Q35. Inoba Bhave is engaged in supply of taxable services. He supplies some services in the month of April
and collects IGST of ₹ 15,50,000 on said supply on 18th April. However, he fails to pay the tax so collected
within 30 days from the due date of payment of such tax. No Show Cause Notice (SCN) has been issued to him
so far. Inoba Bhave decides to discharge his tax liability, before the SCN is issued to him. He is of the view that
no penalty is leviable if the payment of tax is made before issue of SCN. Therefore, he self-assesses his tax
liability at ₹ 15,50,000 and pays the same on 26th June. Determine the interest and penalty, if any, payable by
Inoba Bhave. (RTP MAY 2020)
A. Due date for payment of tax collected on 18th April is 20th May. However, since tax is actually paid on 26th
June, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days] in terms of section
50 of CGST Act, 2017 read with Notification No. 13/2017 CT dated 28.06.2017. Amount of interest is: = ₹
15,50,000 × 18% × 37/365 = ₹ 28,282 (rounded off)
As per section 73(11) of the CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid
within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of SCN
to avoid penalty, is not available.
Consequently, penalty equivalent to
(i) 10% of tax, viz., ₹ 1,55,500 or
(ii) ₹ 10,000, whichever is higher, is payable in terms of section 73(9) of the CGST Act, 2017.
Therefore, penalty of ₹ 1,55,500 will have to be paid by Inoba Bhave.

Q36. Everest Technologies Private Limited has been issued a show cause notice (SCN) on 31.01.2022 under
section 73(1) on account of short payment of tax during the period between 01.07.2018 and 31.12.2018. Everest
Technologies Private Limited contends that the show cause notice issued to it is time-barred in law. You are
required to examine the technical veracity of the contention of Everest Technologies Private Limited.
(MTP MAY 2018) (MTP- NOV 2021)
A. The contention of Everest Technologies Private Limited is not valid in law. The SCN under section 73(1) can
be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10) [Section
73(2)]. The adjudication order under section 73(10) has to be issued within 3 years from the due date for
furnishing of annual return for the financial year to which the short-paid/not paid tax relates to. The due date for
furnishing annual return for a financial year is 31st day of December following the end of such financial year
[Section 44]. Thus, SCN under section 73(1) can be issued within 2 years and 9 months from the due date for
furnishing of annual return for the financial year to which the short-paid/not paid tax relates to. The SCN has
been issued for the period between 01.07.2018 to 31.12.2018 which falls in the financial year (FY) 2018-19.
Due date for furnishing annual return for the FY 2018-19 is 31.12.2019 and 3 years’ period from due date of
filing annual return lapses on 31.12.2022. Thus, SCN under section 73(1) ought to have been issued latest by
30.09.2022. Since in the given case, the notice has been issued on 31.01.2022, notice is not time-barred

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 Section 85 Liability to pay in case of transfer of business
Section 86 Liability of agent and principal
Section 87 Liability to pay in case of an amalgamation/merger
Section 88 Liability in case of company in liquidation
Section 89 Liability of directors of private company
Section 90 Liability of partners of firm to pay tax
Section 91 Liability of guardians, trustees etc.
Section 92 Liability of Court of Wards etc.
Section 93 Special provisions regarding liability to pay tax, interest or penalty in
certain cases
Section 94 Liability in other cases

Section 85 Liability to pay in case of transfer of business

Prior to transfer of business Post transfer of business

In respect of liability of tax, interest or penalty arising
prior to transfer of business, the transferor and
transferee shall be jointly and severally liable.
In respect of liability arising post transfer, the
transferee liable for tax dues. Further, if he is a
registered person under this Act, apply within the
prescribed time for amendment of his certificate of
registration.

Interestingly, even penal liability, which is quasi-criminal in nature, is sought to be fastened on transferee,
although he would not have been responsible for the non-payment of tax, interest or penalty liability by the
transferor prior to transfer of such business. Thus, a person to whom the business is transferred needs to be
very cautious at the time of transfer.

Section 86 Liability of agent & principal

Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal
shall, jointly and severally, be liable to pay the tax payable on such goods under this Act.

Section 87 Liability in case of amalgamation or merger of

companies
If merger is effective from retrospective date, then, transactions between amalgamating/merging companies
and amalgamated/merged company during the period from ‘effective date of merger’ to ‘date of order upholding
merger’ shall be taxable and for this, companies are deemed to be separate.

Example 1: if merger order is passed on 1-9-2017 and merger takes effect from 1-5-2017, then, transactions
during May 2017 to August 2017 between the said companies would be taxable.

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Section 88 Liability in case of company in liquidation
The liquidator of company is required to give intimation of his appointment to Commissioner within 30 days after
his appointment. The Commissioner shall notify the liquidator within 3 months from the date on which he
receives intimation the amount which in the opinion of the Commissioner would be sufficient to provide for any
tax, interest or penalty which is then, or it likely thereafter to become, payable by the company.

When any private company is wound up and any tax, interest or penalty determined under this Act on the
company for any period, whether before or in the course of or after its liquidation, cannot be recovered, then
every person who was a director of such company at any time during the period for which the tax was due shall,
jointly and severally, be liable for the payment of such tax, interest or penalty.

The director of a private company shall not be held liable if he proves to the satisfaction of the Commissioner
that such non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in
relation to the affairs of the company.

Section 89 Liability of directors of private company

Directors shall be jointly and severally liable in case tax dues cannot be recovered from company unless the
director proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty
on his part in relation to the affairs of the company. In case of conversion of private company into public
company, then, this section will not apply for dues arising prior to such conversion. However, any personal
penalty imposed on such director will not be affected and can continue.

Section 90 Liability of partners of firm to pay tax

Where any firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of
the firm shall, jointly and severally, be liable for such payment. Where any partner retires from the firm, he or
the firm, has to intimate the date of retirement of partner to the Commissioner and such partner shall be liable
to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on that date.

If no such intimation is given within one month from the date of retirement, the liability of such partner under the
first proviso shall continue until the date on which such intimation is received by Commissioner.

Section 91 Liability of guardians, trustees, etc.

If business is carried on for the benefit of a minor or incapacitated person, Guardian/Trustee/Agent will be liable
to pay tax. Guardian, trustee or agent liable in like manner as minor or other incapacitated person is liable. The
dues are recoverable from the guardian, trustee or agent in respect of business of the minor or other
incapacitated person by treating them as major or capacitated person, who is conducting the business for
himself.

Section 92 Liability of Court of wards, etc.

Where the estate or any portion of the estate of a taxable person owning a business in respect of which any
tax, interest or penalty is payable under this Act is under the control of the Court of Wards, the Administrator
General, the Official Trustee or any receiver or manager (including any person, whatever be his designation,

435
who in fact manages the business) appointed by or under any order of a court, the tax, interest or penalty shall
be levied upon and be recoverable from such Court of Wards, Administrator General, Official Trustee, receiver
or manager in like manner and to the same extent as it would be determined and be recoverable from the
taxable person as if her were conducting the business himself, and all the provisions of this Act or the rules
made thereunder shall apply accordingly.

Example 2: Mr. A is appointed as manager of Mr. X, to manage the estate of Mr. X, who owns an automotive
business. Mr. X is liable to pay Rs. 10,00,000 of CGST & Rs. 5,00,000 of SGST along with interest and penalty
to the Government. The department can recover such dues from Mr. A who is managing the estates of Mr. X,
by invoking this provision.

Section 93 Special provisions regarding liability to pay tax,

interest or penalty in certain cases
(1) Liability in case of death of individual: Save as otherwise provided in the Insolvency and Bankruptcy
Code, 2016, where a person, liable to pay tax, interest or penalty under this Act, dies, then –
a. In case of continuation of business: person who continues the business shall be liable to pay
tax, interest or penalty due from such person under this Act; and
b. In case of discontinuation of business before or after his death: Legal representative is liable to
pay tax, interest or penalty and the liability shall be limited to the extent of estate of deceased.
(2) In case of partition of HUF or AOP: Members or group of members shall be jointly or severally liable to
pay the tax, interest or penalty due from the taxable person.
(3) In case of dissolution of firm: Partners of the firm at the time of dissolution shall be jointly and severally
liable to pay the tax, interest or penalty due from the firm.
(4) In case of termination of Guardianship or Trusteeship: The ward or the beneficiary shall be liable to
pay the tax, interest or penalty due from the taxable person upto the time of the termination of the
guardianship or trust, whether such tax, interest or penalty has been determined before the termination
of guardianship or trust but has remained unpaid or is determined thereafter.

Section 94 Liability in other cases

a. Where business is discontinued the tax, interest or penalty payable under this Act by firm, association
or family up to the date of such discontinuance may be determined as if no such discontinuance had
taken place; and every person who, at the time of such discontinuance, was a partner of such firm, or
a member of such association or family, shall, notwithstanding such discontinuance, jointly and
severally, be liable for the payment of tax and interest determined and penalty imposed and payable by
such firm, association or family, whether such tax and interest has been determined or penalty imposed
prior to or after such discontinuance and subject as aforesaid, the provisions of this Act shall, so far as
may be, apply as if every such person or partner or member were himself a taxable person. [In short,
erstwhile members/partners are liable to pay dues upto date of discontinuance/dissolution]

b. There will be Joint & several liability of partners of firm or member of AOP in case of change in
constitution of firm/AOP.
Explanation: For the purpose of this chapter:

I. Wherever the word “Firm” is used in this chapter, it shall include the LLP registered under Limited
Liability Partnership Act, 2008.
II. “court” means the district court, high court or supreme court.

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 Question & Answer
Q1. A person, liable to pay GST, interest and penalty under GST Act, dies. Who will be liable to pay his dues
after his death if business carried on by such person legal representative or business carried on by such person
who has dies, is discontinued after his death?
A. As per Section 93, if a business carried on by the person is continued after his death by his legal
representative or any other person, such legal representative or other person, shall be liable to pay tax, interest
or penalty due from such person under this Act, whether such tax, interest or penalty has been determined
before his death but has remained unpaid or is determined after his death.

If a business carried on by the person is discontinued, whether before or after his death, his legal representative
shall be liable to pay, out of the estate of the deceased, to the extent to which the estate is capable of meeting
the charge, the tax, interest or penalty due from such person under this Act, whether such tax, interest or penalty
has been determined before his death but has remained unpaid or is determined after his death.

Q2. ABC Ltd. engages XYZ Ltd. as an agent to sell goods on its behalf. XYZ Ltd. sells goods to DEF Ltd. on
behalf of ABC Ltd. Who will be liable U/s 86?
A. Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his principal
shall, jointly and severally, be liable to pay the tax payable on such goods under this Act. Thus, in the given
case, ABC Ltd. and XYZ Ltd. shall, jointly and severally, be liable to pay GST payable on such goods.

Q3. Whether the minor for whom the business is carried out by Guardian can escape liability on the ground of
minority of the beneficiary?
A. The minor is deemed to be a major for the purposes of collection of any tax/interest/penalties arising out of
the business carried out for him. Hence the general principle of law has no application and the Guardian, Trustee
or Agent cannot escape such liability.

Q4. Who is liable to pay tax dues if the estate of a taxable person is controlled by Court of Wards?
A. The dues are recoverable from the Court of Wards as if he is conducting the business for himself. Mr. Amit
Roy is appointed as manager of Mr. Sumit, to manage the estate of Mr. Sumit, who owns the business of
glasses. Mr. Sumit is liable to pay Rs. 10 Lakhs of GST, interest & penalty to the Government. The department
can recover such dues from Mr. Amit Roy who is managing the estates of Mr. Sumit by invoking Section 92.

Q5. Whether the director of a Private Limited Company is liable for the payment of tax in respect of the supply
made by or to such Private Company?
A. Yes. Every director of the private company during the period for which. tax, interest or penalty due in respect
of any supply of goods or services or both, is not recovered shall jointly and severally be liable for the payment
of such tax, interest or penalty, unless he proves that the non-recovery cannot be attributed to any gross neglect,
misfeasance or breach of duty on his part in relation to the affairs of the Company.

Q6. Whether the liability of the director still exists if such Private Limited Company is converted into Public
Limited Company?
A. No. If a Private Limited Company is converted into a Public Limited Company, then the provisions of this
section do not apply. However, any other personal penalty could be imposed on the Director.

Q7. Whether the retiring partner is liable in respect of the transactions taken place after his retirement?
A. No. The Retiring partner is not liable for the transactions taken place after his retirement provided he or the
firm intimates to the Commissioner by a notice in writing of his retirement within one month from the date of
retirement.

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Section 122 Penalty for certain offences
Section 123 Penalty for failure to furnish information return
Section 124 Fine for failure to furnish information return
Section 125 General penalty
Section 126 General disciplines related to penalty
Section 127 Power to impose penalty in certain cases
Section 128 Power to waive penalty or fee or both
Section 129 Detention, seizure and release of goods and conveyances in transit
Section 130 Confiscation of goods or conveyances and levy of penalty
Section 131 Confiscation or penalty not to interfere with other punishments
Section 132 Punishments for certain offences
Section 133 Liability of officers and certain other person
Section 134 Cognizance of offences
Section 135 Presumption of culpable mental state
Section 136 Relevancy of statements under certain circumstances
Section 137 Offences by companies
Section 138 Compounding of offences

Section 122 Penalty for certain offences

Sec. 122 (1) he shall be liable to pay a penalty
Where a taxable person who- of
(i) supplies any goods or services or both without issue of any • Rs. 10,000 (Rs. 20,000
invoice or issues an incorrect or false invoice with regard to CGST+SGST/IGST) or
any such supply; • Any of the following: -
(ii) issues any invoice or bill without supply of goods or services or a. Tax evaded
both in violation of the provisions of this Act or the rules made b. ITC availed or
thereunder; passed on or
(iii) collects any amount as tax but fails to pay the same to the distributed
Government beyond a period of three months from the date irregularly
on which such payment becomes due; c. TDS not
(iv) collects any tax in contravention of the provisions of this Act deducted/short
but fails to pay the same to the Government beyond a period deducted/not
of three months from the date on which such payment deposited to
becomes due; Government
(v) fails to deduct the tax in accordance with the provisions of sub- d. TCS not
section (1) of section 51, or deducts an amount which is less collected/short
than the amount required to be deducted under the said sub- collected/not
section, or where he fails to pay to the Government under deposited to
subsection (2) thereof, the amount deducted as tax; Government
(vi) fails to collect tax in accordance with the provisions of sub- e. refund claimed
section (1) of section 52, or collects an amount which is less fraudulently
than the amount required to be collected under the said sub- whichever is higher
section or where he fails to pay to the Government the amount
collected as tax under sub-section (3) of section 52;

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 (vii) takes or utilises input tax credit without actual receipt of goods
or services or both either fully or partially, in contravention of
the provisions of this Act or the rules made thereunder;
(viii) fraudulently obtains refund of tax under this Act;
(ix) takes or distributes input tax credit in contravention of section
20, or the rules made thereunder;
(x) falsifies or substitutes financial records or produces fake
accounts or documents or furnishes any false information or
return with an intention to evade payment of tax due under this
Act;
(xi) is liable to be registered under this Act but fails to obtain
registration;
(xii) furnishes any false information with regard to registration
particulars, either at the time of applying for registration, or
subsequently;
(xiii) obstructs or prevents any officer in discharge of his duties
under this Act;
(xiv) transports any taxable goods without the cover of documents
as may be specified in this behalf;
(xv) suppresses his turnover leading to evasion of tax under this
Act;
(xvi) fails to keep, maintain or retain books of account and other
documents in accordance with the provisions of this Act or the
rules made thereunder;
(xvii) fails to furnish information or documents called for by an
officer in accordance with the provisions of this Act or the rules
made thereunder or furnishes false information or documents
during any proceedings under this Act;
(xviii) supplies, transports or stores any goods which he has
reasons to believe are liable to confiscation under this Act;
(xix) issues any invoice or document by using the registration
number of another registered person;
(xx) tampers with, or destroys any material evidence or document;
(xxi) disposes off or tampers with any goods that have been
detained, seized, or attached under this Act,
Example:
1. ABC issues an invoice of 100 kg of chocolates for a consignment of 250 kg of chocolates. If such
consignment is caught by the tax authorities and misdeclaration is verified, then ABC, shall be liable
to pay penalty.
2. Mr. A supplied goods on 05.08.2018 and issued a tax invoice accordingly, for which payment was
also received in the same month. In this case, the due date for payment of tax on such supply of
goods will be 20.09.2018 (i.e. the due date for filing return for the month of August 2018). Mr. A is
obligated to make the payment of tax by 20.12.2018 for refraining from payment of penalty. However,
he shall continue to be liable to pay interest @ 18% p.a. for delayed payment of tax starting from the
date following the due date of payment, till the date of payment.
3. Mr. B is engaged in trading of goods, collects tax at the rate of 28% from the buyer, whereas the
actual tax rate is 18%. He deposited tax at 18% to the exchequer. Here, the differential tax of 10%
collected by Mr. B, but not deposited to government, cannot be retained by it. Penalty U/s 122 (1)
can be levied in such case. Further, interest @ 18% p.a. for delayed payment of tax starting from the
date following the due date of payment, till the date of payment, shall also be leviable.
4. Mr. A engaged in inter-State supply of various taxable goods. In terms of Section 24 (i), Mr. A is
mandatorily required to take registration in GST but fails to take registration under GST even after
30 days of conducting business. In such case, he shall be liable to penalty U/s 122 (1).

439
 5. XYZ Ltd. has various warehouses through which they supply goods to their customers, but such
warehouses have not been declared as additional place of business in their registration. XYZ Ltd.
shall be liable to penalty under this clause.
Sec. 122 (1A)
Any person who retains the benefit of a transaction covered under A penalty of an amount equivalent
clauses (i), (ii), (vii) or clause (ix) of sub-section (1) of Section 122 to the tax evaded or input tax
and at whose instance such transaction is conducted, credit availed of or passed on

Sec. 122 (2) • Penalty Rs. 10,000 or 10%

Any registered person who supplies any goods or services or both on of tax involved, whichever
which tax has not been paid or short-paid or erroneously refunded, or is higher
where the ITC has been wrongly availed or utilized • In case of fraud/wilful
misstatement/suppressions
of facts to evade tax
Penalty Rs. 10,000 or
100% of the tax amount,
whichever is higher
Sec. 122 (3)
Any person who-
a) Aids or abets offences specified U/s 122 (1) Amount which may extent
b) Acquires possession of, or in any way concerns himself in to Rs. 25,000
transporting, removing, depositing, keeping, concealing,
supplying, or purchasing or in any other manner deals with any
goods which he knows or has reasons to believe are liable to
confiscation under this Act or the rules made thereunder;
c) Receives or is in any way concerned with the supply of, or in
any other manner deals with any supply of services which he
knows or has reasons to believe are in contravention of any
provisions of this Act or the rules made thereunder;
d) Fails to appear before the officer of central tax, when issued
with a summon for appearance to give evidence or produce a
document in an inquiry;
e) Fails to issue invoice in accordance with the provisions of this
Act or the rules made thereunder or fails to account for an
invoice in his books of account,

Section 123 Penalty for failure to furnish information return

Section 124 Fine for failure to furnish information return
Section 125 General Penalty

Sec. 123
Failure to furnish information return with the period Rs. 100 for each day of the period during which the
as specified in notice failure to furnish information return continues subject
to maximum of Rs. 5,000
Sec. 124
Fails to furnish statistics without reasonable • Rs. 10,000
cause/wilfully furnishes or causes to furnish false • In continuing offence Rs. 100 per day
information subject to maximum of Rs. 25,000
Sec. 125
Amount which may extent to Rs. 25,000

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 Contravention for which no penalty is provided
separately

Section 126 General disciplines related to penalty

I. Penalty shall not to be imposed for minor breaches or omission or mistake in documentation made
without fraudulent intent or gross negligence. A breach shall be considered a ‘minor breach’ if the
amount of tax involved is less than Rs. 5,000. An omission or mistake in documentation shall be
considered to be easily rectifiable if the same is an error apparent on the face of record.
II. Penalty imposed shall depend on the facts and circumstances of each case and shall be commensurate
with the degree and severity of the breach. No penalty shall be imposed on any person without giving
him an opportunity of being heard. Penalty order must clearly specify the nature of breach.
Voluntary disclosure to be a mitigating factor when quantifying a penalty. The provision of this section
shall not apply in such cases where the penalty specified under this Act is either a fixed sum or
expressed as a fixed percentage.

Section 127 Power to impose penalty in certain cases

Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under
any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or
section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to
such person.

Section 128 Power to waive penalty or fee or both

The Government may, by notification, waive in part or full, any penalty referred to in section 122 or section 123
or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such mitigating
circumstances as may be specified therein on the recommendations of the Council.

Section 129 Detention, seizure and release of goods and

conveyances in transit

(1) Notwithstanding anything contained in this Act, where any person transports any goods or stores any
goods while they are in transit in contravention of the provisions of this Act or the rules made
thereunder, all such goods and conveyance used as a means of transport for carrying the said goods
and documents relating to such goods and conveyance shall be liable to detention or seizure and
after detention or seizure, shall be released,-

(a) Where the owner of the goods comes forward for payment of such penalty: -
• On payment of penalty equal to 200% of the tax payable on such goods, and
• in case of exempted goods, on payment of an amount equal to 2% of the value of
goods or Rs. 25,000/-, whichever is less.
(b) Where owner of the goods does not come forward for payment of such penalty: -
• On payment of penalty equal to 50% of the value of goods or 200% of the tax payable
on such goods, whichever is higher, and
• In case of exempted goods, on payment of an amount equal to 5% of the value of
goods or Rs. 25,000/-, whichever is less

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 (c) Upon furnishing a security equivalent to the amount payable under above clause (a) or (b) in
such form and manner as may be prescribed.

Provided that no such goods or conveyance shall be detained or seized without

serving an order of detention or seizure on the person transporting the goods.

(2) The provisions of sub-section (6) of section 67 shall, mutatis mutandis, apply for detention and seizure
of goods and conveyances.

(3) The proper officer detaining or seizing goods or conveyance shall issue a notice within seven days of
such detention or seizure, specifying the penalty payable, and thereafter, pass an order within a period
of seven days from the date of service of such notice, for payment of penalty under clause (a) or clause
(b) of sub-section (1).

(4) No penalty shall be determined under sub-section (3) without giving the person concerned an
opportunity of being heard.

(5) On payment of amount referred in sub-section (1), all proceedings in respect of the notice specified in
sub-section (3) shall be deemed to be concluded.

(6) Where the person transporting any goods or the owner of such goods fails to pay the amount of penalty
under sub-section (1) within fifteen days from the date of receipt of the copy of the order passed under
sub-section (3), the goods or conveyance so detained or seized shall be liable to be sold or disposed
of otherwise, in such manner and within such time as may be prescribed, to recover the penalty payable
under sub-section (3):
Provided that the conveyance shall be released on payment by the transporter of penalty under sub-
section (3) or one lakh rupees, whichever is less:
Provided further that where the detained or seized goods are perishable or hazardous in nature or are
likely to depreciate in value with passage of time, the said period of fifteen days may be reduced by the
proper officer.

Circular No. 76/50/2018 – Central Tax Dated 31.12.2018 clarifies that if the invoice or any other specified
document is accompanying the consignment of goods, then either the consignor or the consignee should be
deemed to be the owner. But if the invoice or any other specified document is not accompanying the
consignment of goods, then in such cases, the proper officer should determine who should be declared as the
owner of the goods.

Example 6: Mr. A (owner), a registered taxable person is getting its goods (taxable @ 18%) amounting to Rs.
10,00,000 (exclusive of GST) transported, without cover of an invoice and an e-way bill.
In this case, the said goods and the vehicle carrying such goods shall be liable to detention or seizure. If detained
or seized, the goods of Mr. A would be released on payment of the following amounts: -

(a) Where Mr. A, comes forward for the payment of tax and penalty:
Applicable tax (Rs. 10,00,000 * 18%) Rs. 1,80,000
Penalty equal to 200% of the tax payable on the subjected goods Rs. 3,60,000

(b) Where Mr. A, doesn’t come forward for the payment of tax and penalty:
Applicable tax (Rs. 10,00,000 * 18%) Rs. 1,80,000
Penalty equal to 50% of the value of the subjected goods Rs. 5,00,000
Penalty equal to 200% of the tax payable on such goods Rs. 3,60,000
Penalty payable, higher of above Rs. 5,00,000

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Section 130 Confiscation of goods or conveyances and levy of
penalty
This section provides for specific causes leading to confiscation of goods/conveyances. The nature of
authorization to confiscate and opportunity to release goods/conveyances liable for such confiscation are
detailed in this section.

There are five precise causes for confiscation of goods and/or conveyances specified in this section and they
are:

Action Consequence
Supply or receive goods in contravention of the Act or rules made Resulting in actual evasion of tax
thereunder
Not accounting for goods Carrying a liability to payment of tax
Supply of goods liable to tax Without applying registration
Contravention of the provisions of Act or rules made thereunder With intent to evade payment of tax
Use of conveyance as a means of transport/for carriage of taxable In contravention of the Act or rules made
goods thereunder

In all the above cases, goods or conveyance shall be liable for confiscation. However, the conveyance shall not
be confiscated where the owner of the conveyance proves that it is without the connivance of owner himself,
his agent or person in charge of the conveyance. Further, the person shall be liable to pay penalty under section
122 of the Act.

If the goods or conveyance are liable to be confiscated under the provisions of this Act, the proper officer shall
give the owner of the goods an option to pay fine in lieu of confiscation.

The amount of fine shall not exceed the market value of goods as reduced by the amount of tax payable thereon.
However, at the same time aggregate of fine and penalty leviable shall not be less than the amount of penalty
as leviable under section 129(1) penalty equal to 100% of the tax payable on such goods.

While section 129 is applicable on transporters, section 130 primarily covers the owner.

Where the conveyance is used for transportation of goods or passenger on hire, the owner of the conveyance
shall be given an option to pay in lieu of confiscation of the conveyance a fine equal to amount of tax payable
on the goods transported on his conveyance. It is worthwhile to note that the amount of fine payable is in addition
to any tax, penalty and other charges payable on confiscated goods or conveyance.

The order for confiscation cannot be issued without giving the person an opportunity of being heard.

The title of the confiscated goods or conveyance shall be vested upon the Government.

The proper officer adjudging confiscation shall take and hold possession of the things confiscated on behalf of
the Government and every officer of police shall assist in taking such hold and possession.
If the proper officer is satisfied that the confiscated goods/conveyance are not required for any proceedings
under the Act, then he shall after giving reasonable time not exceeding 3 months to pay fine in lieu of
confiscation, dispose the goods and deposit the sale proceeds with the Government.

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Section 131 Confiscation or penalty not to interfere with other
punishments
Without prejudice to the provisions contained in the Code of Criminal Procedure, 1973, no confiscation made
or penalty imposed under the provisions of this Act or the rules made thereunder shall prevent the infliction of
any other punishment to which the person affected thereby is liable under the provisions of this Act or under
any other law for the time being in force.
Such other proceedings can be that of prosecution (commencement of criminal proceeding), arrest, cancellation
of registration etc., as applicable and provided for the relevant non-compliances. Thus, confiscation made, or
penalty imposed cannot relieve the person from other punishments, as may be applicable.

Section 132 Punishment for certain offences

(1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences,
namely:
(a) Supply of goods or services or both without the cover of invoice with an intent to evade tax;
(b) If any person issues any invoice or bill without actual supply of goods or services or both leading to
wrongful input tax credit or refund of tax;
(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax
credit without any invoice or bill;
(d) Collection of taxes without payment to the government for a period beyond 3 months of due date;
(e) Evades tax fraudulently avails input tax credit or fraudulently obtains refund and where such offence is
not covered under clauses (a) to (d);
(f) Falsifying financial records or production of false records/ accounts/ documents/ information with an
intent to evade tax;
(g) Obstructs or prevents any officer from doing his duties under the act;
(h) Acquires or transports or in any manner or deals with any goods which he knows or has reasons to
believe are liable for confiscation under this Act or rules made thereunder;
(i) Receives or in any way, deals with any supply of services which he knows or has reason to believe
are in contravention of any provisions of this law;
(j) Tampers with or destroys any material evidence or documents;
(k) Fails to supply any information which he is required to supply under this law or supply false information;
(l) Attempts or abets the commission of any of the offences mention above {clauses (a) to (k) of this
section.
This section enables institution of prosecution proceedings against the offenders and the period of imprisonment
and quantum of fine varies depending on the amount of tax evaded or seriousness of the offence listed below.

Amount of Tax evaded/ erroneous refund/ wrong ITC availed or utilized Fine Imprisonment

(i) Exceeding 5 Crores Yes Upto 5 years

(ii) Exceeding 2 Crores to 5 Crores Yes Upto 3 years

(iii) Exceeding 1 Crores to 2 Crores Yes Upto 1 year

If any person commits any offence specified in clause (f), (g) or (j) above, he shall be punishable with
imprisonment for a term which may extend to six months or with fine or with both.

In case of repetitive offences without any specific/special reason which is recorded in the judgment of the Court
will entail an imprisonment term of not less than 6 months and which could extend to 5 years plus with a fine.

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The Imprisonment referred to in clauses (i), (ii) & (iii) and repetitive offences, in the absence of special and
adequate reasons to the contrary to be recorded in the judgment of Court, be for a term not less than six months.

All offences mentioned in this section are non-cognizable and bailable except the following cases:
• Where the amount exceeds 5 Crores and
• Instances covered by (a) to (d) in sub section (1) above.
Every prosecution proceeding initiated requires prior sanction of the Commissioner.

Section 133 Liability of officers and certain other persons

Where –
• any person engaged in collection of statistics or compilation or computerisation thereof
• if officer having access to Annual Information Return, or
• if any person engaged in provision of service on common portal or agent of common portal,
wilfully disclosed any information or the contents of any return furnished under this Act or rules made there
under (otherwise than in execution of his duties or for prosecution for an offence), he shall be punishable with
imprisonment for a term which may extend to 6 months or with fine which may extend to Rs. 25,000, or with
both.

Section 134 Cognizance of offences

No court shall take cognizance of any offence punishable under this Act or the rules made thereunder except
with the previous sanction of the Commissioner, and no court inferior to that of a Magistrate of the First Class,
shall try any such offence.

Section 135 Presumption of culpable mental state

In any prosecution for an offence under this Act which requires a culpable mental state on the part of the
accused, the court shall presume the existence of such mental state but it shall be a defence for the accused
to prove the fact that he had no such mental state with respect to the act charged as an offence in that
prosecution.
Explanation.—For the purposes of this section,–
(i) the expression “culpable mental state” includes intention, motive, knowledge of a fact, and belief in, or reason
to believe, a fact;
(ii) a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely
when its existence is established by a preponderance of probability.
Now, once the law has stated that in case of any prosecution which requires the existence of a culpable mental
state, the Court would presume the existence of it.
Under the old revenue laws, the burden to prove was on the one who alleges it. The Hon’ble Supreme Court in
the case of Uniworth Textiles Limited vs. Commissioner of Central Excise, Raipur [(2013) 31 taxmann.com 67
(SC)] stated that “Burden to prove invocation of extended period on Department. The assessee cannot be asked
to bring evidence to prove his bona fide. Similarly it is a cardinal postulate of law that the burden of proving any
form of mala fide lies on the shoulders of the one alleging it.”
The accused can prove that he had no such mental state in respect of a particular act for which he is charged.
The expression “Culpable Mental State” is defined inclusively to cover “intent, motive, knowledge of fact, belief
in or reason to believe”. It also covers facts which exist beyond a reasonable doubt and not based on
probabilities.
Hence, a very landmark judgement of the Hon’ble Supreme Court would lose its relevance in the cases covered
by this section.

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Section 136 Relevancy of statements under certain circumstances
Statement made and signed by a person on appearance in response to any summons issued U/s 70 shall be
valid in prosecution proceedings when the person who made the statement is dead or cannot be found, or is
incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be
obtained without an amount of delay or expense which, under the circumstances of the case, the court considers
unreasonable; or when the person who made the statement is examined as a witness in the case before the
court and the court is of the opinion that, having regard to the circumstances of the case, the statement should
be admitted in evidence in the interest of justice.

Section 137 Offences by companies

Where an offence committed by a company, every person who, at the time the offence was committed was in
charge of, and was responsible to, the company for the conduct of business of the company, as well as the
company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished
accordingly.
Where it is proved that the offence has been committed with the consent or connivance of, or it attributable to
any negligence on the part of, any director, manager, secretary, or other officer of the company, they shall also
be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Offences by LLP/Firm/HUF/Trust: Partner or Karta or managing trustee shall be liable to be proceeded against
and punished accordingly.

Section 138 Compounding of offences

(1) Compounding of offences by the Commissioner [Sec. 138(1)]: Any offence under this Act may, either
before or after the institution of prosecution, be compounded by the Commissioner on payment by the
person accused of the offence, to the Central Government or the State Government, as the case be, of
such compounding amount in such manner as may be prescribed.
Cases, where compounding is not possible: Nothing contained in this section shall apply to
a. a person who has been allowed to compound once in respect of any of the offences specified
in Sec. 132(1)(a) to (f) and the offences specified in clause (I) which are relatable to offences
specified in clauses (a) to (f) of the said sub-section;
b. a person who has been allowed to compound once in respect of any offence, other than those
in clause (a), under this Act or under the provisions of any SGST Act of the UTGST Act of the
IGST Act in respect of supplies of value exceeding Rs. 1 crores;
c. a person who has been accused of committing an offence under this Act which is also an
offence under any other law for the time being in force;
d. a person who has been convicted for an offence under this Act by a court;
e. a person who has been accused of committing an offence specified in Section 132(1)(g)/(j)/(k);
and
f. any other class of persons or offences as may be prescribed.
Compounding not to affect proceedings instituted under other law: Any compounding allowed under the
provisioning of this section shall not affect the proceedings, if any, instituted under any other law.
Tax/Interest/Penalty to be paid before compounding: Compounding shall be allowed only after making
payment of tax, interest and penalty involved in such offences.
(2) Compounding amount [Section 138(2)]: The amount for compounding of offences under this section
shall be such as may be prescribed, subject to –
a. The minimum limit for compounding amount is to be the higher of the following amounts:
• 50% of tax involved, or
• Rs. 10,000 (Rs. 20,000 CGST+SGST/IGST).
b. The upper limit for compounding amount is to be higher of the following amount:

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 • 150% of tax involved, or
• Rs. 30,000 (Rs. 60,000 CGST+SGST/IGST).
(3) Abatement of proceedings and non-initiation of criminal proceedings [Section 138(3)]: On payment of
such compounding amount as may be determined by the Commissioner, no further proceedings shall
be initiated under this Act against the accused person in respect of the same offence and any criminal
proceedings, if already initiated in respect of the said offence, shall stand abated.

Example 7: Suppose, the amount of tax involved is Rs. 90,000. In this case, the minimum and maximum
amount to be paid for compounding for offence will be calculated as under:-
• Minimum amount: Higher of Rs. 20,000 or Rs. 45,000 (50% of Rs. 90,000)
• Maximum amount: Higher of Rs. 60,000 or Rs. 1,35,000 (150% of Rs. 90,000)

Please remember penalty specified in CGST Act, is only for CGST Act. So, SGST/UTGST
will be equivalent to CGST & IGST will be double.

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 Question & Answer
Q1. Mr. A, an unregistered person under GST purchases the goods supplied by Mr. B who is a registered person
without receiving a tax invoice from Mr. B and thus helps in tax evasion by Mr. B. What action may be taken by
tax authorities to curb such type of cases and on whom?
A. Both Mr. A & Mr. B will be liable to penalty as:
Mr. A, penalty U/s 122 (3) which may extend to Rs. 25,000 (under CGST Act);
Mr. B, penalty U/s 122 (1), which will be higher of Rs. 10,000 (under CGST Act) or 100% of tax evaded.

Q2. What is the difference between the penalty under sub-section (1) and (3) of sec. 122?
A. Apart from the amount of penalty & nature of offences, U/s 122 (1) penalty is imposed on a taxable person
whereas in U/s 122 (3), penalty is imposed on any person who may or may not be a taxable person.

Q3. What is the general penalty which can be levied for any violation for which no specific penalty has been
prescribed?
A. Section 125 of the GST Act prescribes penalty of rupees twenty-five thousand for all those violations of
provisions of the Act or any rules for which no penalty is separately provided for under the Act.

Q4. When breach of law will be considered as a minor breach and easily rectifiable mistakes?
A. As per explanation to sub-section (1) of section 126 of the GST Act, provides that a ‘minor breach’ shall be
considered as minor breach if the amount of tax involved is less than Rs. 5,000. An omission or mistake in
documentation will be considered to be ‘easily rectifiable’ if the same is an error apparent on record.

Q5. I am collecting tax on supply of goods & services and did not remit the same within 3 months to the
Government. Does the same attract penalty? If yes, what is the amount of penalty?
A. Collection of tax and non-remittance of the same within 3 months to the Government from the due date for
remittance is considered to be an offence under Section 122 (1) (iii) of the CGST Act, 2017 attracting penalty
of (a) an amount equal to the tax so collected or (b) an Rs. 10,000 (whichever is higher).

Q6. Whether prosecution or other punishments could also be initiated along with confiscation or penalty?
A. In terms of section 131 confiscation made or penalty imposed under the provisions of this Act or the rules
made thereunder shall not prevent the infliction of any other punishment to which the person affected thereby
is liable under the provisions of this Act or under any other law.

Q7. Mr. A has collected tax on supply of exempted goods and did not remit the tax so collected to the
Government account. Would Mr. A, be liable to penal and other consequences?
A. Yes, in terms of Section 122(1) (iv) of the CGST Act, 2017, collection of tax in contravention to the provisions
of the CGST Act, 2017 and subsequent failure to remit the same to the credit of the Government beyond a
period of 3 months from the date on which such payment becomes due is an offence attracting penalty of Rs.
10,000/- or amount equal to the amount of tax so collected, whichever is higher.
Further, in terms of Section 132(1) (d) read with Section 132(1) (I) of the CGST Act, 2017, the said offence
attracts imprisonment which may extend from 1 year to 5 years based on the quantum of tax evasion.

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Q8. What is the penalty prescribed for a person who opts for composition scheme despite being ineligible for
the said scheme?
A. Section 10(5) of the CGST Act provides that if a person who has paid under composition levy is found
as not being eligible for compounding then such person shall be liable to penalty to an amount equivalent to
the tax payable by him under the provisions of the Act i.e. as a normal taxable person and that this penalty shall
be in addition to the tax payable by him.

Q9. Mangeshwar, registered under the CGST Act, 2017 has made a breach in payment of tax amounting to Rs.
6,100. Assessing Authority has imposed a penalty as per law applicable to the breach. Invoking the provisions
of section 126, Mangeshwar argues that it is a minor breach and therefore, no penalty is imposable.
In another instance, Mangeshwar has omitted certain details in documentation that is not easily rectifiable. This
has occurred due to the gross negligence of his accountant and he makes a plea that he was unaware of it and
therefore no penalty should be levied.
Mangeshwar voluntarily writes accepting a major procedural lapse from his side and requests the officer to
condone the lapse as the loss caused to the revenue was not significant.
Also a lapse on the part of Mangeshwar has no specific penalty provision under the CGST Act, 2017. He is very
confident that no penalty should be levied without a specific provision under the Act.
Discuss, what action may be taken by the Assessing Authority under law for each of the above breaches.
(CA Final Nov 2018 Old)
A. As per section 126(1) of the CGST Act, 2017, no penalty shall be leviable under the Act for minor breaches
of tax regulations. In terms of Explanation (a) to section 126(1), a breach shall be considered as “minor
breach”, if tax involved is less than Rs. 5,000. Breach made by Mangeshwar is not a ‘minor breach’ since the
amount involved is not less than Rs. 5,000. So, penalty is imposable. Any omission or mistake in
documentation which is easily rectifiable and made without fraudulent intent/gross negligence is not liable for
penalty in terms of section 126(1) of the CGST Act, 2017. Thus, penalty is imposable in the present case,
since the omission in the documentation is not easily rectifiable and has occurred due to gross negligence.
As per section 126(5) of the CGST Act, 2017, where there is a voluntary disclosure of breach, prior to its
discovery by the officer, the proper officer may consider this fact as a mitigating factor when quantifying the
penalty. Since Mangeshwar has voluntarily disclosed the breach of procedural requirement to the officer, the
proper officer may consider this fact as a mitigating factor when quantifying the penalty. Therefore, the
quantum of penalty will depend on the facts and circumstances of the case.
As per section 125 of the CGST Act, 2017, when no specific penalty has been specified for contravention of
any of the provisions of the Act or any rules made there under, it shall be liable to a penalty which may extend
to Rs. 25,000. Therefore, general penalty upto Rs. 25,000 may be imposed on Mangeshwar as when no
specific penalty is provided for any contravention, a general penalty may be imposed.

Q10. Examine the implications as regards the bailability and quantum of punishment on prosecution, in
respect of the following cases pertaining to the period December, 2017 under CGST Act, 2017:
i. 'X' collects Rs. 245 lakh as tax from its clients and deposits Rs. 241 lakh with the Central
Government. It is found that he has falsified financial records and has not maintained proper
records.
ii. 'Y' collects Rs. 550 lakh as tax from its clients but deposits only Rs. 30 lakh with the Central
Government.
What will be the implications with regard to punishment on prosecution of 'X' and 'Y' for the offences?
What would be the position, if 'X' and 'Y' repeat the offences?
It may be assumed that offences are proved in the court. (CA Final May 2018 New)

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A.
i. As per section 132(1)(d)(iii) of the CGST Act, 2017, failure to pay any amount collected as tax beyond
3 months from due date of payment is punishable with specified imprisonment and fine provided the
amount of tax evaded exceeds at least Rs. 100 lakh. Therefore, failure to deposit Rs. 4 lakh collected
as tax by ‘X’ will not be punishable with imprisonment. Further, falsification of financial records by ‘X’
is punishable with imprisonment up to 6 months or with fine or both vide section 132(1)(f)(iv) of the
CGST Act, 2017 and the said offence is bailable in terms of section 132(4) of the CGST Act, 2017
assuming that falsification of records is with an intention to evade payment of tax due under the
CGST Act, 2017.
ii. Failure to pay any amount collected as tax beyond 3 months from due date is punishable with
imprisonment upto 5 years and with fine, if the amount of tax evaded exceeds Rs. 500 lakh in terms of
section 132(1)(d)(i) of the CGST Act, 2017. Since the amount of tax evaded by ‘Y’ exceeds Rs. 500
lakh (Rs. 550 lakh – Rs. 30 lakh), ‘Y’ is liable to imprisonment upto 5 years and with fine. It has been
assumed that amount of Rs. 520 lakh collected as tax is not paid to the Government beyond 3 months
from the due date of payment of tax. Further, the imprisonment shall be minimum 6 months in the
absence of special and adequate reasons to the contrary to be recorded in the judgment vide section
132(3) of the CGST Act, 2017. Such offence is nonbailable in terms of section 132(5) of the CGST
Act, 2017.
If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for every subsequent offence with
imprisonment upto 5 years and with fine in terms of section 132(2) of the CGST Act, 2017. Such
imprisonment shall also be minimum 6 months in the absence of special and adequate reasons to the
contrary to be recorded in the judgment.

Q11. From the details given below determine the maximum amount of fine in lieu of confiscation leviable
under section 130 of CGST, Act, 2017 on:
i. The goods liable for confiscation.
ii. On the conveyance used for carriage of such goods.
Details are as follows:
Cost of the goods for owner before GST Rs. 15,00,000
Market Value of Goods Rs. 20,00,000
GST on such Goods Rs. 3,60,000
You are also required to explain relevant legal provisions in brief. (CA Final May 2018 New)
A.
i. As per section 130(2) of the CGST Act, 2017, in case of goods liable for confiscation, the maximum
amount of fine leviable in lieu of confiscation is the market value of the goods confiscated, less the tax
chargeable thereon.
Therefore, the fine leviable = Rs. 20,00,000- Rs. 3,60,000 = Rs. 16,40,000. The aggregate of fine
and penalty shall not be less than the amount of penalty leviable under section 129(1).
ii. In case of conveyance used for carriage of such goods and liable for confiscation, the maximum
amount of fine leviable in lieu of confiscation is equal to tax payable on the goods being transported
thereon [Third proviso to section 130(2) of the CGST Act, 2017].
Therefore, the fine leviable = Rs. 3,60,000.

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Q12. Where an offence under the GST law is committed by a taxable person being a trust, who are deemed
to be guilty of the offence and under what circumstances? When do the relevant provisions become
inapplicable in respect of individuals concerned with the trust? (CA Final Nov 2018 Old)
A. Section 137 of the CGST Act, 2017 stipulates that where an offence under the GST law is committed by a
taxable person being a trust, the managing trustee shall be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly. Further, where it is proved that the offence
committed by the trust has been committed –
• with the consent or connivance of, or
• is attributable to any negligence on the part of any other individual concerned with the trust,
he shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished
accordingly.
The relevant provisions will become inapplicable in respect of individuals concerned with the trust, if they
prove that the offence was committed without their knowledge or that they had exercised all due diligence to
prevent the commission of such offence.

Q13. Department initiated prosecution proceedings against a taxable person who had evaded GST of Rs. 4.2
crores. He has approached the Commissioner with a request for compounding the offence. After considering
the request, the Commissioner has directed him to pay an amount of Rs. 2.5 crores as compounding amount.
Indicate the minimum and maximum limits for compounding amount. Is the amount fixed by the Commissioner
in this case within the limits prescribed under the law? What is the consequence of the decision of the
commissioner allowing the request for compounding the offence?
(CA Final Nov 2018 Old)
A. As per section 138 of the CGST Act, 2017,
the minimum limit for compounding amount is higher of the following amounts: -
i. 50% of tax involved, or
ii. Rs. 10,000, and
the upper limit for compounding amount is higher of the following amounts: -
i. 150% of tax involved or
ii. Rs. 30,000
In the present case, the minimum limit for compounding is Rs. 2.10 crores. [Rs. 2.10 crores (50% x Rs. 4.2
crores) or Rs. 10,000, whichever is higher].
The maximum limit for compounding in this case is Rs. 6.3 crores [Rs. 6.3 crore (150% x Rs. 4.2 crores) or
Rs. 30,000, whichever is higher].
Thus, the amount fixed by the Commissioner at Rs. 2.5 crores is within the limits prescribed under the law.
If the taxable person pays the compounding amount decided by the Commissioner, no further proceedings
shall be initiated under GST law against the accused person in respect of the same offence and any criminal
proceedings, if already initiated in respect of the said offence, shall stand abated.

Q14. Mr. X, an unregistered person under GST purchases the goods supplied by Mr. Y who is a registered
person without receiving a tax invoice from Mr. Y and thus helps in tax evasion by Mr. Y. What disciplinary
action may be taken by tax authorities to curb such type of cases and on whom? (PAST EXAM NOV 2019)
A. Both Mr. X and Mr. Y will be offender and will be liable to penalty as under:
Mr. X – Penalty under section 122(3) which may extend to Rs. 25,000/-;
Mr. Y – Penalty under section 122(1), which will be higher of following, namely (i) Rs. 10,000/- or (ii) 100% of
tax evaded.

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Section 107 Appeals to Appellate Authority
Section 108 Powers of Revisional Authority
Section 109 Constitution of Appellate Tribunal and Benches thereof
Section 111 Procedure before Appellate Tribunal
Section 112 Appeals to Appellate Tribunal
Section 113 Orders of Appellate Tribunal
Section 115 Interest on refund of amount paid for admission of appeal
Section 116 Appearance by authorized representative
Section 117 Appeal to the High Court
Section 118 Appeal to the Supreme Court
Section 119 Sums due to be paid notwithstanding appeal etc.
Section 120 Appeal not to be filed in certain case
Section 121 Non-appealable decisions and orders

Brief chart showing Appellate Mechanism under indirect taxes

Description Appellate Revisional Appellate High Court Supreme Court

Authority Authority Tribunal
Section 107 108 112 117 118
Appeal can be Order of Suo Motu Against order of Order of Order of
filed against Adjudicating Revision (a) Appellate State/Area National/Region
Authority Authority or bench of al bench of
(b) Revisional Tribunal (If Tribunal and
Authority case involves against orders
substantial of HC if HC
question of certifies fit case
law) for appeal to
SC
Departmental Department can NA Department can Order of Order of
Appeal file appeal after file appeal on state/Area National/Region
review by review of bench of al bench of
Commissioner Commissioner Tribunal (If Tribunal and
case involves against orders
substantial of HC if HC
question of certifies fit case
law) for appeal to
SC
Place of Appealable Revision National/Regional No Yes
supply matters power bench of Tribunal
extends can hear
Other Matters Appealable Revision State/Area Bench Yes Yes
power of Tribunal can
extends hear
Appeal Fee Nil NA Rs. 1,000 per - -
lakh of tax or ITC
subject to

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 Description Appellate Revisional Appellate High Court Supreme Court
Authority Authority Tribunal
Section 107 108 112 117 118
maximum of Rs.
25,000
Time limit to 3 months + 1 Power 3 months + 3 Within 180 As per Code of
appeal month extension exercisable months extension days + Civil Procedure,
only after 6 condonation 1908
months but of delay
within 3 without time
years from limit
date of order
{if no appeal
filed}
Pre-deposit 100% of admitted NA 100% of admitted All tax dues All tax dues are
{mandatory} due (with due (with are required required to be
interest/penalty)+ interest/penalty) to be deposited
10% of disputed + Additional 20% deposited
tax (before of disputed tax
interest/penalty) (before
subject to a interest/penalty)
maximum of 25 subject to a
crore rupees maximum of 50
crore rupees
If assessee Deposit refunded NA Pre-deposit Sums to be Sums to be
wins with interest refunded with refunded refunded
interest

Section 107 Appeals to Appellate Authority

This section pertains to appeals to appellate authority by any person who is aggrieved against decision or order
passed by adjudicating authority. This section also provides for appeal by revenue against decision or order
passed by adjudicating authority.

i. The appeal is to be filed by the assessee within a period of 3 months from the date of communication
of decision or order in Form GST APL-01, along with relevant documents either electronically or
otherwise as notified by the Commissioner against a provisional acknowledgement. The grounds of
appeal and form of verification must be duly signed and a certified copy of the decision or order is to
be filed before the Appellate Authority within 7 days of filing the appeal electronically. Thereafter, a
final acknowledgement indicating the appeal number shall be issued in Form GST APL-02 by the said
authority. In such a situation the appeal shall be deemed to be filed on the date on which the
provisional acknowledgement stands issued.
In case the said certified copy is submitted after a period of 7 days, the date of filing of appeal shall be
the date of submission of such copy.
The appeal shall be treated to be filed only when the final acknowledgement, indicating the appeal
number is issued.
ii. The Commissioner of Central / State or any Union territory with a view to satisfying himself about the
legality or propriety of any order or decision direct a subordinate officer to file an application before the
Appellate Authority within six months from the date of communication of decision or order in Form GST
APL-03, along with relevant documents either electronically or otherwise as notified against issue of an
acknowledgement. A certified copy of the decision or order of the appeal is to be filed before the

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 Appellate Authority within 7 days of filing the application electronically and an appeal number shall be
generated accordingly.
iii. The appellate authority in either of the above cases is empowered to condone the delay up to a period
of 1 month.
iv. Appeal to be filed in prescribed form duly verified in prescribed manner along with
— Amount of tax, interest, fine, fee & penalty, as is admitted, in full; and
— pre-deposit of sum equal to 10% of remaining amount of tax in dispute subject to a maximum of 25
crore rupees (50 crores CGST+SGST/IGST).
Provided that no appeal shall be filed against an order under sub-section (3) of section 129, unless a
sum equal to 25% of the penalty has been paid by the appellant.
Impact of Amendment:- It is to be noted that there is a requirement to deposit 10% of the disputed
tax liability as pre-deposit in case of first appeal, which is proposed to be increased to 25% of the
penalty amount in case of detention and seizure of conveyance and goods during transit.

v. On payment of above amount, the recovery proceedings for balance amount are deemed to be stayed.
vi. Maximum 3 adjournments shall be granted to a party on showing reasonable cause that is to be
recorded in writing.
vii. Appellate authority may allow any additional grounds not specified in the grounds of appeal on being
satisfied that the omission was not wilful or unreasonable.
viii. Appellate authority to pass the order confirming, modifying or annulling the decision or order appealed
against but shall not remand the case back to the adjudicating authority.
ix. Opportunity of being heard to be granted in case of order for enhancing fees or penalty or fine in lieu of
confiscation of goods or reducing amount of refund/input tax credit after issuing show cause notice.
x. The appellate authority has power to issue show cause notice in case it is of the opinion that any tax
has not been paid or short paid or erroneously refunded or input tax credit is wrongly availed or utilised.
The appellant is given notice to show cause against the proposed order and the order is passed within
the time limit specified under section 73 or 74.
xi. Appellate authority need to hear and decide the appeal, wherever possible, within a period of 1 year
from the date of filing.
xii. Where the issuance of order is stayed by an order of a court or Tribunal, the period of such stay shall
be excluded in computing the period of one year.
xiii. Appellate authority to communicate the copy of order to the appellant, the respondent, the adjudicating
authority, jurisdictional Commissioner of CGST, SGST and UTGST.
xiv. The Appellate Authority shall, along with its order under sub-section (11) of section 107 of the Act, issue
a summary of the order in FORM GST APL-04 clearly indicating the final amount of demand confirmed.

As per Rule 109 A, if order is passed by the Additional/Joint Commissioner then appeal will be filed with
Commissioner (Appeals). If order is passed by the Deputy Commissioner/Assistant Commissioner
/Superintendent then appeals will be filed with any officer not below the rank of Joint Commissioner (Appeals).

Example 1:
Date of filing of appeal in Form Submission of certified
Date of filing of appeal
Case GST APL-01 and issuance of copy of decision or order
shall be
provisional acknowledgement appealed against
Case I 24.07.2018 28.07.2018 24.07.2018
Case II 24.07.2018 03.08.2018 03.08.2018

Example 2: Mr. A, wants to file an appeal to appellate authority against the order passed by the adjudicating
authority, which was received on 10.01.2018. In this case, the company can appeal against such order by
09.04.2018 in Form GST APL-01 i.e., within 3 months from the date of communication of adjudicating
authority.

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Now, suppose due to some unforeseen circumstances, the company could not file the appeal within given
time period. The appellate authority, may, after being satisfied as to existence of sufficient cause, condone the
delay upto 09.05.2018 (i.e. 1 month from expiry of 3 months), within which time aggrieved person must file the
appeal.
Example 3: Mr. X has been served with an order wherein demand of Rs. 5,00,000 has been alleged by the
adjudicating authority. Mr. X, admits liability of Rs. 1,00,000 but decides to litigate the demand of balance
amount, and hence file an appeal to the appellate authority. In this case, the amount of pre-deposit will be
calculated as follows:
(a) Demand admitted = Rs. 1,00,000
(b) Remaining Demand/Amount disputed = Rs. 4,00,000
10% of amount disputed i.e. (Rs. 4,00,000*10/100) = Rs. 40,000
Hence, the amounts of pre-deposit to be paid by Mr. X will be total of Rs. 1,40,000.
On amount of above amount of pre-deposit, the recovery proceedings for balance amount shall be deemed to
be stayed.

Section 108 Power of Revisional Authority

i. Revisional authority on his own motion or upon information received by him or on request from the
commissioner of State tax/UT, after examining the record of any proceeding, the Revisional Authority
may stay the operation of any decision or order if he considers that such decision or order passed by
any officer subordinate to him is erroneous in so far as it is prejudicial to the interest of the revenue.

ii. After giving the concerned person an opportunity of being heard and after making further necessary
inquiry, the Revisional Authority may pass such order within 3 years of passing of the said order sought
to be revised including enhancing or modifying or annulling the said decision or order.

iii. The Revisional Authority shall not exercise such revisionary powers if
(a) appeal is filed against the order to –
a. Appellate Authority U/s.107
b. Appellate Tribunal U/s.112
c. High Court U/s.117
d. Supreme Court U/s.118
(b) period of 6 months as specified in section 107 (2) has not expired or more than 3 years have
expired after passing the decision or order
(c) the order has already been taken for revision at any earlier stage
(d) revisionary order has already been passed once.

iv. However, the Revisional Authority may pass an order on any point which has not been raised & decided
in an appeal, referred to hereinabove, within 1 year from the date of order passed in such appeal or
within 3 years from the date of such order sought to be revised, whichever is later.

v. It may be noted that the said power of the revisional authority is subject to Section 121 of the CGST Act
(i.e. non appealable decisions and orders). Thus, the revisional authority cannot revise the decision or
order passed under the CGST Act/SGST Act/UTGST Act, by any officer subordinate to him, in the
matters as prescribed in Section 121 of the CGST Act, which are non-appealable in GST.

vi. Notification No. 74/2018 – Central tax Dated 31.12.2018 has inserted, new Rule 109B of the CGST
Rules, which provides that where the Revisional Authority decides to pass an order in revision U/s 108,
which is likely to affect the person adversely, the revisional authority shall serve on him a notice in Form
GST RVN-01 and shall give him a reasonable opportunity of being heard. In addition, as per sub-rule

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 (2) of rule 109B, a summary order is to be issued in Form GST Apl-04 clearly indicating the final amount
of demand confirmed.

vii. Every revision order shall be, subject to further appeal to the Tribunal, High Court or Supreme Court,
be final and binding on the parties.

viii. If the said decision or order involves an issue which is appealed in higher forum, the period spent
between the date of the decision of the lower authority and the date of the decision of the higher
authority shall be excluded in computing the period of limitation.

ix. Where the issuance of an order is stayed by the order of a court or Appellate Tribunal, the period of
such stay shall be excluded in computing the period of limitation referred to in Section 108 (2) (b) i.e. 3
years.

As per Notification No. 05/2020 – CT dated 13th January, 2020, CBIC authorises -
(a) the Principal Commissioner or Commissioner of Central Tax for decisions or orders passed by the
Additional or Joint Commissioner of Central Tax; and
(b) the Additional or Joint Commissioner of Central Tax for decisions or orders passed by the Deputy
Commissioner or Assistant Commissioner or Superintendent of Central Tax,
as the Revisional Authority under section 108.

Example 4: Mr. Amit is supplying two categories of goods viz clay lamps and stationery. Mr. Amit was availing
benefit of an exemption notification in respect of clay lamps and no tax was paid by him on the supply.
Proceedings were initiated against him.
The adjudicating authority took a view that exemption in respect of clay lamps was rightly available to Mr. Amit
and the same was mentioned in the order as well. Accordingly, adjudication order was issued on 30.10.2019,
confirming demanding of tax amounting to INR 40 Lakhs in respect of wrong classification of second category
of goods – stationery, thereby resulting in short payment of tax. Mr. Amit challenged the order of adjudicating
authority to the extent of demand confirmed in respect of stationery, in an appeal before the appellate
authority.
Date of filing Appeal – 30.11.2019
Date of order by appellate authority – 30.04.2020
Meanwhile, the revisional authority on 01.01.2020 called for and started examining the record of proceedings
in respect of clay lamps (goods which were not subject matter of appeal).
The revisional authority can pass the revised order in respect of clay lamps supplied by Mr. Amit by the
following time period, whichever is later –
(i) before the expiry of 1 year from the date of order passed by the appellate authority i.e. before
30.04.2021.
(ii) before the expiry of 3 years from the date of adjudication order i.e. 30.10.2022.
Hence, the revisional authority can pass the revised order, latest by 30.10.2022.

Example 5: Let us assume that in Example 4, the matter which is subject to revision by the revisional authority
i.e. whether exemption is available in respect of clay lamps is pending in case of another person also i.e. Mr.
Narayan, before the Supreme Court against a decision in his case by the High Court on 29.01.2022. The
Supreme Court decides the matter in Revenue’s favour on 29.12.2022. Now, the time period beginning from
29.01.2022 and ending on 29.12.2022 i.e. 11 months, shall be excluded while computing the time limit of 3
years.
Accordingly, in Example 4, revisional authority can pass the revised order, by 30.09.2023 (i.e. 30.10.2022
extended by 11 months).
Further, as per Section 108 of the CGST Act, where the issuance of an order is stayed by the order of a court
or appellate tribunal, the period of such stay shall also be excluded in computing the period of 3 years.

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 Section 109 Constitution of Appellate Tribunal and Benches
thereof
A. Constitution and structure of Appellate Tribunal

i. The law envisages constitution of a two tier Tribunal i.e. National Bench/Regional Benches and the
State Bench/ Area Benches. Jurisdiction of the two constituents of the GST Tribunal is also defined.
ii. If place of supply is one of the issues in dispute, then the National Bench/ Regional benches of the
Tribunal will have jurisdiction to hear the appeal.
If the dispute relates to issues other than the place of supply, then the State/Area Benches
will have the jurisdiction to hear the appeal.

iii. An appeal from the decision of the National Bench will lie directly to the Supreme Court and an appeal
from the decision of the State Bench will lie to the jurisdictional High Court on substantial questions
of law.

iv. A diagrammatic representation of the structure of the Appellate Tribunal is shown below:

President Appellate Tribunal -State

State Bench Area Bench

Technical Technical Technical Technical

Judicial Judicial
Member Member Member Member
Member Member
( Centre ) ( State ) ( Centre ) ( State )

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 The appointments to the Tribunal and functioning shall be in the manner prescribed under sections
110 and 111 of the CGST Act. On ceasing to hold office, the appointees to the Appellate Tribunal
shall not be entitled to appear, act or plead before the Appellate Tribunal.
v. In the absence of a Member in any Bench due to vacancy or otherwise, any appeal may, with the
approval of the President or, as the case may be, the State President, be heard by a Bench of two
Members.
However, any appeal where the tax or ITC involved or the difference in tax or ITC involved or the
amount of fine, fee or penalty determined in any order appealed against, does not exceed Rs.
5,00,000 and which does not involve any question of law may, with the approval of the President, be
heard by a bench consisting of a single member.

Section 111 Procedure before Appellate Tribunal

(1) The Appellate Tribunal shall not be bound by the procedure laid down in the Code of Civil Procedure,
1908. However, it shall be guided by the principles of natural justice and shall have power to regulate
its own procedure.

(2) The Appellate Tribunal shall have the same powers as are vested in a civil court under the Code of
Civil Procedure, 1908 while trying a suit in respect of the following matters, namely:

(a) summoning and enforcing the attendance of any person and examining him on oath;

(b) requiring the discovery and production of documents;

(c) receiving evidence on affidavits;

(d) subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872,
requisitioning any public record or document or a copy of such record or document from any
office;
(e) issuing commissions for the examination of witnesses or documents;
(f) dismissing a representation for default or deciding it ex-parte;
(g) setting aside any order of dismissal of any representation for default or any order passed by it
ex-parte; and
(h) any other matter which may be prescribed.
(3) Order of the Appellate Tribunal may be enforced in the same manner as if it were a decree made by
a court in a suit pending therein. The Appellate Tribunal can send for execution of its orders to the
court within the local limits of whose jurisdiction, —
(a) in the case of an order against a company, the registered office of the company is situated; or
(b) in the case of an order against any other person, the person concerned voluntarily resides or
carries on business or personally works for gain.

(4) All proceedings before the Appellate Tribunal shall be deemed to be judicial proceedings within the
meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code. The
Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI
of the Code of Criminal Procedure, 1973.

Section 112 Appeals to Appellate Tribunal

a. Appeal by the Assessee:

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 i. Any person aggrieved by an order of Appellate Authority or Revisional Authority may appeal to the
Appellate Tribunal against such order within 3 months from the date on which the order sought to
be appealed against is communicated to the person preferring the appeal. The tribunal can condone
the delay of up to 3 months beyond the specified time period of 3 months, if it is satisfied that there
was sufficient cause for the delay.
ii. Fees of filing and restoration of appeal: The fees for filing of appeal or its restoration shall be Rs.
1,000 for every Rs. 1 Lac of tax or ITC involved or the difference in tax or ITC involved or the amount
of fine, fee or penalty determined in the order appealed against, subject to maximum of Rs. 25,000.
iii. Discretionary Power: The Appellate Tribunal may, in its discretion, refuse to admit any such appeal
where the tax or ITC involved, or the difference in tax or ITC involved, or the amount of fine, fee or
penalty determined by such order, does not exceed Rs. 50,000.
iv. Conditions for Pre-deposit - 20% of the disputed tax: No appeal shall be filed unless the appellant
has paid –
• In full, such part of the amount of tax, interest, fine, fee and penalty arising from the
impugned order, as is admitted by him, and
• A sum equal to 20% of the remaining amount of tax in dispute, in addition to the amount
paid U/s 107 (6), arising from the said order subject to a maximum of fifty crore rupees (100
crores CGST+SGST/IGST), in relation to which the appeal has been filed.
On pre-deposit of tax, the recovery proceedings shall be stayed till the disposal of the appeal.
b. Departmental appeal:
i. Orders appealable to Appellate Tribunal [Section 112 (3)] : The commissioner may, on his own
motion, or upon request from the State/UT Commissioner call for and examine the record of
any order passed by Appellate Authority or Revisional Authority for the purpose of satisfying
himself as to the legality or propriety of the said order and may, by order, direct any officer
subordinate to him to apply to the Appellate Tribunal within 6 months from the date on which
the said order has been passed for determination of such points arising out of the said order as
may be specified by him.
ii. The Application so filed shall be dealt by the Appellate Tribunal as it were an appeal made
against the order of Appellate Authority or Revisional Authority and all the provisions of the Act
shall apply accordingly.
iii. There is no requirement of making a pre-deposit in case of departmental appeal.
c. Other aspects:
Memorandum of cross objection to be filed within 45 days [Section 112 (5)]: On receipt of notice that
an appeal has been preferred, the other party may, within 45 days of the receipt of notice from tribunal,
file a memorandum of cross-objections against any part of the order appealed against and such
memorandum shall be disposed or by the Appellate Tribunal, as if it were an appeal presented within
the specified time limit.

Production of additional evidence before the Appellate Authority or the Appellate Tribunal
[Rule 112]:
i. General bar on production of additional evidences [Rule 112 (1)]: The appellant shall
not be allowed to produce before the Appellate Authority or the Appellate Tribunal any
evidences, whether oral or documentary, other than the evidence produced by him during
the course of the proceedings before the adjudicating authority or, as the case may be, the
Appellate Authority except in the following circumstances namely: -
• where the adjudicating authority or, as the case may be, the Appellate Authority has
refused to admit evidence which ought to have been admitted, or
• where the appellant was prevented by sufficient cause from producing the evidence
which he was called upon to produce by the adjudicating authority or, as the case
may be, the Appellate Authority, or

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 • where the appellant was prevented by sufficient cause from producing before the
adjudicating authority or, as the case may be, the Appellate Authority any evidence
which is relevant to any ground of appeal, or
• where the adjudicating authority or, as the case may be, the Appellate authority has
made the order appealed against without giving sufficient opportunity to the
appellant to produce evidence relevant to any ground of appeal.
ii. No evidence shall be admitted unless the Appellate Authority or the Appellate Tribunal
records in writing the reasons for its admission.
iii. The Appellate Authority or the Appellate Tribunal shall not make any evidence produced
unless the adjudicating authority or an officer authorised in this behalf by the said authority
has been allowed a reasonable opportunity –
• to examine the evidence or document or to cross-examine any witness produced by
the appellant; or
• to produce any evidence or any witness in rebuttal of the evidence produced by the
appellant.

The Appellate Tribunal and its Benches are yet to be constituted in many States and Union territories under
section 109 of the said Act as a result whereof, the said appeal or application could not be filed within the time
limit and because of that, certain difficulties have arisen in giving effect to the provisions of the said section.

This Order may be called the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019

For the removal of difficulties, it is hereby clarified that for the purpose of calculating,-

(a) the “three months from the date on which the order sought to be appealed against is communicated to the
person preferring the appeal” in sub-section (1) of section 112, the start of the three months period shall be
considered to be the later of the following dates:-
(i) date of communication of order; or
(ii) the date on which the President or the State President, as the case may be, of the Appellate Tribunal
after its constitution under section 109, enters office;

(b) the “six months from the date on which the said order has been passed” in sub-section (3) of section 112,
the start of the six months period shall be considered to be the later of the following dates:-
(i) date of communication of order; or
(ii) the date on which the President or the State President, as the case may be, of the Appellate Tribunal
after its constitution under section 109, enters office.
According to Circular No. 132/2/2020 – GST dated 18th March 2020, hence, as of now, the prescribed time
limit to make application to appellate tribunal will be counted from the date on which President or the State
President enters office. The appellate authority while passing order may mention in the preamble that appeal
may be made to the appellate tribunal whenever it is constituted within three months from the President or the
State President enters office. Accordingly, it is advised that the appellate authorities may dispose all pending
appeals expeditiously without waiting for the constitution of the appellate tribunal.

Section 113 Orders of Appellate Tribunal

i. Appellate Tribunal to pass the order confirming, modifying or annulling the decision or order appealed
against.
ii. The Appellate Tribunal also has power to remand the case back to the appellate authority or the
Revisional authority or the original adjudicating authority.

460
 iii. Maximum 3 adjournments shall be granted to a party on showing reasonable cause to be recorded in
writing.
iv. The Appellate Tribunal is empowered to amend its order to rectify any mistake apparent from record,
However, tribunal may rectify its order if the mistake is brought to its notice by Commissioner or other
party to appeal within period of 3 months of date of such order. Opportunity of being heard to be granted
in case such rectification results into enhancing an assessment or reducing a refund or input tax credit
or otherwise increasing the liability.
v. The Appellate Tribunal to hear and decide the appeal, as far as possible, within a period of 1 year from
the date of filing.
vi. The Appellate Tribunal to communicate the copy of order to appellate authority / Revisional authority /
original adjudicating authority, the appellant, the jurisdictional Commissioner, Commissioner of State
Tax or Union Territory Tax.
vii. The jurisdictional officer shall issue a statement in FORM GST APL-04 clearly indicating the final
amount of demand confirmed by the Appellate Tribunal.

Section 115 Interest on refund of amount paid for admission of

appeal
Where an amount paid by the appellant under sub-section (6) of section 107 or sub-section (8) of section 112
is required to be refunded consequent to any order of the Appellate Authority or of the Appellate Tribunal,
interest at the rate specified under section 56 shall be payable in respect of such refund from the date of payment
of the amount till the date of refund of such amount.

Section 116 Appearance by authorised representative

This section provides for appearance by authorised representative in proceedings or appeals except in
circumstances where personal appearance is required for examination on oath or affirmation.

i. “Authorised representative” means –

— relative or regular employee
— Practising Advocate
— Practising CA, CWA or CS
— A retired government officer who had worked for not less than 2 years in a post not lower in rank
than Group-B gazetted officer
— Goods and Services Tax Practitioner
ii. Any person, who has retired or resigned after serving more than 2 years in the indirect tax
departments of Government of India or any State Government as a gazetted officer, shall not be
entitled to appear as authorised representative for a period of 1 year from the date of retirement or
resignation.
iii. Any person,
— who has been dismissed or removed from government service; or
— who is convicted of an offence under CGST Act, SGST Act, IGST Act, UTGST Act or under
erstwhile laws; or
— who is found guilty of misconduct by the prescribed authority;
shall not be qualified as authorised representative

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 iv. Any person, who has become insolvent, shall not be qualified as authorised representative during the
period of insolvency.
v. Any disqualification under SGST Act or UTGST Act shall be construed as disqualification under
CGST Act.

Section 117 Appeal to High Court

i. High Court may admit an appeal if it is satisfied that the case involves a substantial question of law.
ii. No appeal shall lie to High Court if such order is passed by National Bench or Regional Benches.
iii. Appeal to be filed in the form GST APL 08, precisely stating the substantial question of law involved,
within 180 days from the date of receipt of order appealed against accompanied by prescribed fee.
iv. High Court is empowered to condone the delay in filing appeal.
v. On being satisfied, High Court shall formulate a substantial question of law.
vi. Appeal to be heard only on the question so formulated and the respondent shall be allowed to argue
that the case does not involve such question.
vii. The High Court may hear the appeal on any other substantial question of law not formulated by it after
satisfying, for reasons to be recorded, of involvement of such question in the case.
viii. The High Court may determine any issue which has not been determined or has been wrongly
determined by the State Bench or Area Benches.
ix. Appeal to be heard by a Bench of not less than 2 Judges of High Court and shall be decided in
accordance with the majority of opinion of such Judges.
x. Difference of opinion on any point shall be referred to one or more of the other Judges of High Court
and such point shall be decided according to the opinion of majority of Judges who have heard the case
including those who first heard it.
xi. The effect of judgment of High Court shall be given on the basis of a certified copy of the judgment.
xii. The provisions of Code of Civil Procedure relating to appeals to High Court shall apply to appeals under
this section.
xiii. Pre-deposit of all the tax dues is required to be made, otherwise the inherent power of the High Court
have to be invoked for obtaining a stay pending disposal of the appeal.

Section 118 Appeal to Supreme Court

(1) An appeal shall lie to the Supreme Court—
(a) from any order passed by the National Bench or Regional Benches of the Appellate Tribunal; or
(b) from any judgment or order passed by the High Court in an appeal made under section 117 in any
case which, on its own motion or on an application made by or on behalf of the party aggrieved,
immediately after passing of the judgment or order, the High Court certifies to be a fit one for appeal
to the Supreme Court.
(2) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the Supreme Court shall, so
far as may be, apply in the case of appeals under this section as they apply in the case of appeals from
decrees of a High Court.
(3) Where the judgment of the High Court is varied or reversed in the appeal, effect shall be given to the
order of the Supreme Court in the manner provided in section 117 in the case of a judgment of the High
Court.

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Section 119 Sums due to be paid notwithstanding appeal, etc.
The sums due to the Government as a result of an order passed by the Appellate Tribunal or High Court shall
be paid notwithstanding that an appeal has been preferred to High Court or Supreme Court, as the case may
be.

Section 120 Appeal not to be filed in certain cases

The board may fix monetary limits for regulating the filing of appeal etc. The Central tax officer may file appeal
etc. in any other case involving the same or similar issues or questions of law if monetary amount is more. No
person, being a party in appeal or application shall content that the officer of the central tax has acquiesced in
the decision on the disputed issue by not filing an appeal or application. The Appellate Tribunal or court hearing
such appeal or application shall have regard to the circumstances under which appeal or application was not
filed by the departmental officer.

Section 121 Non-appealable decisions & orders

No appeal shall lie against any decision taken or order passed by an officer of central tax if such decision taken
or order passed relates to any one or more of the following matters, namely:-
a. An order of the Commissioner or other authority empowered to direct transfer of proceedings from one
officer to another officer; or
b. An order pertaining to the seizure or retention of books of account, register and other documents; or
c. An order sanctioning prosecution under this act; or
d. An order passed U/s 80 (Payment of tax & other amount in installment).

Question & Answer

Q1. What is the time limit for filing appeal to the Appellate authority by a person aggrieved by any decision or
order passed by an adjudicating authority? Whether this time limit can be extended?
A. A person aggrieved by any decision or order passed by an adjudicating authority may file an appeal to the
Appellate Authority within 3 months from the date of communication of decision/order of adjudicating authority.
The Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that there was
sufficient cause for such delay.

Q2. Section 113(3) of the CGST Act, 2017 provides that the Appellate Tribunal, may at any time within 3 months
of the date of order, with a view to rectifying any mistake apparent from the record, amend any order passed by
it. What would constitute “mistake apparent from record” for the purpose of this provision?
A. Failure to make into consideration the material evidence, which is present on record, would amount to a
“mistake apparent on the face of the record”. [CCEx V. Bharat Bijlee Ltd. 2006 (SC)]
When a decision rendered by the Apex Court is not considered, non-consideration of such binding precedent
constitutes an error apparent on the face of the record. The binding decision of the Apex Court would cover
even the period prior to the inception of such law during which the orders contrary to such ratio of the subsequent
decision were passed [HLL V. CCEx, 2006 (Tri. LB)]

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Other mistakes apparent on the face of the record, which can be rectified by the Tribunal in terms of section
113(3), can be typographical error, calculation mistakes, point raised in appeal but not considered, retrospective
amendments in the statute, etc.

Q3. An assessee moved an application on 15th December 2018 under section 113(3) for rectification of mistake
in order passed on 30th September 2018. The Tribunal took up the application on 15 th May 2019 and dismissed
the same on the ground that the Tribunal cannot entertain an application for rectification beyond a period of 3
months. Is this correct?
A. Section 113(3) states that the Appellate Tribunal may at any time within 3 months from the date of the order,
with a view to rectifying any mistake apparent from the record, amend any order passed by it. Since, in the
present case, the application has been made within 3 months from the date of the order, it is not relevant for
the purpose of limitation as to when the Tribunal takes up the same for hearing and disposal. Therefore, in this
case, the Tribunal cannot reject the application for rectification of mistake on the ground of limitation if
application is made with in time limit.

Q4. Discuss with the help of decided case, whether the re-appreciation of evidence on a debatable point by the
GST Appellate Tribunal can be considered as rectification of mistake apparent on record u/s 113(3)?
A. No, re-appreciation of evidence by GST Appellate Tribunal on a debatable point cannot be considered to be
rectification of mistake apparent on record u/s 113(3) of the CGST Act, 2017.
Supreme Court, in case of CCE V RDE Concrete India Pvt. Ltd. [2011] observed that a mistake apparent on
record must be an obvious and patent mistake. It need not be established by a long-drawn process of reasoning.
Arguments not accepted earlier during disposal of appeal cannot be accepted while hearing rectification of
mistake application.
The Supreme Court held that CESTAT had reconsidered its legal view as it concluded differently by accepting
the arguments which it had rejected earlier. Hence, the court opined that in pursuance of a rectification
application, CESTAT cannot reappreciate the evidence and reconsider its legal view taken earlier.

Q5. Can department file appeal in respect of same assessee, if in respect of some years, no appeal was filed
involving identical dispute?
A. It was held in C.K. Gangadharan V. CIT [2008] (SC) that if the revenue has not filed an appeal against any
order/judgement in one case, it would not be allowed to file an appeal in another case when the same issue is
involved due to the reasons that it cannot pick and choose and certainty in law should be ensured.
However, the revenue can file an appeal in another case involving same/similar issue –
• Where there is just cause in doing so i.e. where appeal was not preferred earlier in view of small amount
involved; or
• Where it is in public interest to do so; or
• For a pronouncement by higher court when divergent views are expressed by Tribunals/High Courts.
Section 120 provides that the Board may issue orders or instructions or directions fixing monetary limits for the
purposes of regulating the filing of appeal, etc. by the Department. If Department has not filed an appeal, etc.
as per circular fixing monetary limits, the Department may file any appeal, application or revision in any other
case involving the same or similar issues or questions of law and the assessee cannot contend that the
Department has accepted the decision on the disputed issue by not filing the appeal.

Q6. Where Commissioner of CGST feels that the order passed is not legal or proper, whether he can revise the
order on his own?

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A. The Commissioner cannot revise the order U/s 107. For CGST, as per Sec. 107(2), if the commissioner finds
an order or decision (passed by an adjudication authority) to be not legal or proper, he can pass an order setting
out the points for determination where he is of the view that the order is not legal and proper and directing a
GST officer sub-ordinate to him to file an application to appellate authority. Such application is then treated by
the appellate authority as if it were an appeal.

Q7. Does the AA have the power to remand the case back to the adjudicating authority for whatever reasons?
A. No. Section 107(11) specifically states that the AA shall, after making such inquiry as may be necessary,
pass such order, as he thinks just and proper, confirming, modifying or annulling the decision or order appealed
against, but shall not refer the case back to the authority that passed the decision or order.

Q8. When the Tribunal is having powers to refuse to admit the appeal?
A. In cases where the appeal involves –
• tax amount or input tax credit or
• the difference in tax or the difference in input tax credit involved or
• amount of fine, fees or amount of penalty determined by such order,
does not exceed Rs 50,000/-, the Tribunal has discretion to refuse to admit such appeal. (Section 112(2))

Q9. Whether interest becomes payable on refund of pre-deposit amount?

A. Yes. As per Section 115 of the Act, where an amount deposited by the appellant under sub-section (6) of
section 107 or under sub-section (8) of section 112 is required to be refunded consequent to any order of the
Appellate Authority or of the Appellate Tribunal, as the case may be, interest at the rate specified under section
56 not exceeding 9% shall be payable in respect of such refund from the date of payment of the amount till the
date of refund of such amount.

Q10. Compute the quantum of pre-deposit required to be made on U/s 107 of the CGST Act 2017 in each of
the following independent case:
(a) In an order Dated 18-10-2018 issued to ABC Ltd., the Joint Commissioner of central tax has confirmed
a tax demand of Rs. 50,00,000. ABC Ltd. has admitted Rs. 5,00,000 as tax liability and intends to file
an appeal with the Commissioner (Appeals) against tax demand of Rs. 45,00,000.
(b) In an order Dated 18-10-2018 issued to XYZ Ltd., the Joint Commissioner of central tax has confirmed
a tax demand of Rs. 50,00,000 and imposed a penalty of Rs. 5,00,000. XYZ Ltd. intends to file an
appeal with the Commissioner (Appeals) against the said order.
A.
(a) Section 107(6) of the CGST Act 2017, require an appellant before Appellate Authority to pre-deposit
full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order
and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order.
Thus, ABC Ltd. has to pre-deposit Rs. 5,00,000 (admitted tax) and 10% of Rs. 45,00,000 (tax in dispute)
= Rs. 9,50,000.
(b) Section 107(6) of the CGST Act 2017, require an appellant before Appellate Authority to pre-deposit
full amount of tax, interest, fine, fee and penalty, as is admitted by him, arising from the impugned order
and a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order. In
this case since entire amount of tax demanded is in dispute, hence XYZ Ltd. has to pre-deposit 10% of
Rs. 50,00,000 = Rs. 5,00,000.

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Q11. Whether other party could file cross objections against the appeal preferred by the assessee or by the
department?
A. On receipt of notice that an appeal has been preferred under section 112, other party against whom an
appeal is preferred, could file a cross objection to the appeal even though he has not preferred an appeal. A
Memorandum of Cross-Objections have to be filed within 45 days from the date of receipt of the notice of appeal
in FORM GST APL-06. The Tribunal shall dispose of the cross objections as if it is an appeal.

Q12. Whether appeal / application / cross objections filed beyond the time limit would be entertained?
A. Tribunal has been conferred with powers to condone the delay upto 3 months, beyond the period of 3 months
or 6 months in case of filing of appeals, where sufficient cause for the delay is shown. Similarly, delay upto 45
days could be condoned by the Tribunal in filing the memorandum of cross objections where sufficient cause
for the delay is shown.

Q13. Whether interest becomes payable on refund of pre-deposit amount?

A. Yes. As per sec 115 of the Act, where an amount deposited by the appellant under section 107(6) or under
section 112(8) is required to be refunded consequent to any order of the Appellate Authority or of the Appellate
Tribunal, as the case may be. Interest at the rate specified under section 56 shall be payable in respect of such
refund from the date of payment of the amount till the date of refund of such amount.

Q14. Whether the Tribunal has power to rectify / amend the orders passed by it?
A. Yes, the Tribunal may amend any order passed by it under in terms of Section 113(1) so as to rectify any
mistake apparent from the record. The Hon’ble Tribunal could undertake rectification on its own or on application
by either of the parties to the appeal (by the Commissioner or the Commissioner of State tax or the
Commissioner of the Union territory tax or the other party to the appeal). The application for rectification shall
be made within a period of three months from the date of the Order sought to be rectified.
However, no amendment which has the effect of enhancing an assessment or reducing a refund or input tax
credit or otherwise increasing the liability of the other party, shall be made under section 113(3), unless the
Tribunal has given notice to him of its intention to do so and has allowed him a reasonable opportunity of being
heard.

Q15. What are the orders against which appeal could be preferred before the Supreme Court?
A. Following orders could be challenged before the Supreme Court:
a) Order passed by the National Bench or Regional Benches of the Appellate Tribunal; or (no appeal in
High Court)
b) Judgment or order passed by the High Court in an appeal made under section 117 in any case which,
on its own motion or on an application made by or on behalf of the party aggrieved, immediately after
passing of the judgment or order, the High Court certifies to be a fit one for appeal to the Supreme
Court.

Q16. Who is an Appellate Authority?

A. “Appellate Authority” means an authority appointed or authorised to hear appeals as referred to in section
107. Section 107 provides that appeal shall be preferred before such Appellate Authority as may be prescribed.
Rule 109A provides that for the purpose of appeal, an Appellate Authority shall be:
(a) the Commissioner (Appeals) where such decision or order is passed by the Additional or Joint
Commissioner;

466
 (b) Any officer not the below the rank of Joint Commissioner (Appeals) where such decision or order is
passed by the Deputy or Assistant Commissioner or Superintendent.

Q17. Under what circumstances Commissioner could direct the Officer to prefer an appeal against the order of
the adjudicating authority?
A. The Commissioner may, on his own motion, or upon request from the Commissioner of State tax
Commissioner of Union Territory tax, call for and examine the records of any proceeding in which an
adjudicating authority has passed any decision or order under the CGST Act or the SGST Act or the UTGST
Act, for the purpose of satisfying himself as to the legality or propriety of the said decision or order. The
Commissioner may by an order, direct any Officer subordinate to him to apply to the Appellate Authority within
six months from the date of communication of the said decision or order for the determination of such points
arising out of the said decision or order as may be specified by the Commissioner in his order.

Q18. What type of order could the Appellate Authority pass? Whether Appellate Authority could refer the case
back to Adjudicating Authority?
A. The Appellate Authority may pass such order, as he thinks just and proper, confirming, modifying or annulling
the decision or order appealed against. The order shall be in writing giving details as to determination. The
Appellate Authority shall, along with its order under section 107(11), issue a statement in FORM GST APL-04
clearly indicating the final amount of demand confirmed. However, the Appellate Authority does not have power
to refer the case back to the Adjudicating Authority that passed the said decision or order.

Q19. Whether Order of the Appellate Authority could also be stayed by Revisional Authority?
A. The Order which has been subject to an appeal before the Appellate Authority (section 107) as well as orders
of the Appellate Authority which are appealed before the Tribunal cannot be stayed by the Revisional Authority.
However, the Revisional Authority could pass an order under revisionary power on any point which has not
been raised and decided in an appeal before Appellate Authority. Such, revision order could be passed within
1 year from the date of the order of the Appellate Authority or 3 years from the date of the original order,
whichever is later.

Q20. When a Revisional Authority cannot exercise its powers?

A. Revisional authority shall not exercise its powers, in case of following:
(a) When the order has been subject to an appeal before the adjudicating authority (under section 107) or
the Tribunal (under section 112) or the High Court (under section 117) or the Supreme Court (under
section 118); or
(b) If the period of 6 months as specified under 107(2) for preferring an appeal by department before
Appellate Authority has not yet expired or where more than three years have expired after the passing
of the decision or order sought to be revised; or
(c) where the order has already been taken for revision under section 108 at any earlier stage; or
(d) revisionary order passed under section 108(1).

Q21. What is the Constitution of National Appellate Tribunal and how the same is constituted? Where the
National Bench and Regional Bench shall be located?
A. The Central Government shall on the recommendation of the GST Council by Notification constitute Goods
and Services Tax Appellate Tribunal (hereinafter referred to as the Appellate Tribunal) for hearing appeals
against the orders passed by the Appellate Authority or the Revisional Authority.

467
National bench shall be located at New Delhi. The Central Government on the recommendations of the Council,
by notification, constitute such number of Regional Benches as may be required.

Q22. What is the composition of National Bench and Regional Benches?

A. National Bench shall be headed by the National president along with one Technical member (Centre) and
one Technical Member (State). Regional Benches shall consist of a Judicial Member, one Technical Member
(Centre) and one Technical Member (State).

Q23. What is jurisdiction of National or Regional Benches of the Appellate Tribunal?

A. National or Regional Benches of the Appellate Tribunal shall have jurisdiction to hear appeals against the
orders passed by the Appellate Authority or the Revisional Authority in the cases where one of the issues
involved relates to the place of supply.

Q24. What is State Bench or Area Bench?

A. The Government, by notification, specify for each State or Union territory, a Bench of the Appellate Tribunal,
for exercising the powers of the Appellate Tribunal within the concerned State or Union territory. Government
shall, on receipt of a request from any State Government, constitute such number of Area Benches in that State,
as may be recommended by the Council.

Q25. What is jurisdiction of State Bench or Area Bench?

A. State Bench or Area Benches shall have jurisdiction to hear appeals against the orders passed by the
Appellate Authority or the Revisional Authority in all cases other than those involving matters where one of the
issues involved relates to the place of supply.

Q26. What is the composition of State Bench and Area Benches?

A. Each State Bench and Area Benches shall consist of a Judicial Member, one Technical Member (Centre)
and one Technical Member (State) and the State Government may designate the senior most Judicial Member
in a State as the State President.

Q27. Whether any matter could be heard by bench consisting of members less than 3 as set out above?
A. Yes, in the absence of a Member in any Bench due to vacancy or otherwise, any appeal may, with the
approval of the President or, as the case may be, the State President, be heard by a Bench of two Members.
Further, where the tax or input tax credit involved or the difference in tax or input tax credit involved or the
amount of fine, fee or penalty determined in any order appealed against, does not exceed Rs. 5 Lakhs and
which does not involve any question of law may, with the approval of the President and subject to such
conditions as may be prescribed on the recommendations of the Council, be heard by a bench consisting of a
single member.

Q28. What would be consequence where there is a difference of opinion on any issue among the members of
the bench?
A. If the Members of the Bench (National/Regional/State/Area) differ in opinion on any point or points, it shall
be decided according to the opinion of the majority, if there is a majority, but if the Members are equally divided,
they shall state the point or points on which they differ, and the case shall be referred by the President or as the
case may be, State President for hearing on such point or points to one or more of the other Members of the
National Bench, Regional Benches, State Bench or Area Benches and such point or points shall be decided
according to the opinion of the majority of Members who have heard the case, including those who first heard
it.

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Q29. Can the Tribunal reject to entertain an appeal based on the monetary limits?
A. Yes. The Tribunal has been conferred with discretion to refuse to admit an appeal where:
• the tax or input tax credit involved or
• the difference in tax or input tax credit involved or
• the amount of fine, fee or penalty determined by such order,
does not exceed Rs. 50,000/-

Q30. Which are the matters on which the appeal against order of the Tribunal could be preferred before the
High Court?
A. Appeal shall lie to the High Court against an Order passed by the State Bench or Area Benches of the
Tribunal.

Q31. Whether all decisions and orders can be appealed?

A. No. in terms of Section 121, orders listed below cannot be appeal against:
(a) An order of the Commissioner or other competent authority for transfer of proceeding from one officer
to another officer; or
(b) An order pertaining to the seizure or retention of books of account, register and other documents; or
(c) An order sanctioning prosecution under this Act; or
(d) An order passed under section 80 relating to payment of tax, interest and other dues in installments.

Q32. XY Company received an adjudication order passed by the Assistant Commissioner of Central Tax on 01-
11-2017 under section 73 of the CGST Act, 2017 wherein it was decided as follows:
Particulars
CGST and SGST due (Total) Rs. 6,00,000
Interest @ 18% p.a. for number of delayed days
Penalty Rs. 60,000
The assessee filed an appeal before the Appellate Authority on 26-11- 2017.
Case I How much the company has to pay as pre-deposit of duty under section 107(6) of the CGST Act, 2017?
Case II Whether your answer would be different if the assessee appeals only against part of the demanded
amount say Rs. 4,00,000 and admits the balance liability of tax amounting to Rs. 2,00,000 arising from the said
order. (CA Final May 2018 New)
A. Section 107(6) of the CGST Act, 2017 provides that no appeal shall be filed before Appellate Authority, unless
the appellant pays:-
(a) in full, tax, interest, fine, fee and penalty arising from impugned order, as is admitted by him; and
(b) 10% of remaining tax in dispute arising from the impugned order.
Thus, in Case-I, XY Company has to make a pre-deposit of 10% of Rs. 6,00,000, which is Rs. 60,000 assuming
that XY Company disagrees with the entire tax demanded.
However, in Case-II, since XY Company admits the tax liability of Rs. 2,00,000 and disputes the tax demanded
of only Rs. 4,00,000, it has to make a pre-deposit of:
(i) Rs. 2,00,000 + Rs. 20,000 [proportionate penalty on tax admitted] + interest @ 18% p.a. payable on
the tax admitted for the period of delay, and
(ii) 10% of Rs. 4,00,000 which is Rs. 40,000.

Q33. In an order dated 20th August issued to GH (P) Ltd., the Joint Commissioner of CGST has confirmed
IGST demand of Rs. 280 crore. The company is disputing the entire demand of IGST and wants to know the
amount of pre-deposit it has to make under the IGST Act for filing an appeal before the Appellate Authority

469
against the order of the Joint Commissioner. Assuming that the Appellate Authority also confirms the order of
the Joint Commissioner and the company wants to file an appeal before the Appellate Tribunal against the order
of the Appellate Authority, determine the amount of pre-deposit to be made by the company for filing the said
appeal. (RTP NOV 2019) (MTP NOV 2021)
A. Section 107(6) read with section 20 of the IGST Act provides that no appeal shall be filed with the Appellate
Authority unless the applicant has paid in full, such part of the amount of tax, interest, fine, fee and penalty
arising from the impugned order, as is admitted by him and a sum equal to 10% of the remaining amount of tax
in dispute arising from the said order subject to a maximum of Rs. 50 crore. Thus, the amount of predeposit for
filing an appeal with Appellate Authority cannot exceed Rs. 50 crore (for tax in dispute) where IGST demand is
involved In the given case, the amount of pre-deposit for filing an appeal with the Appellate Authority against
the order of Joint Commissioner, where entire amount of tax is in dispute, is:
(i) Rs. 28 crore [10% of the amount of tax in dispute, viz. Rs. 280 crore]
or
(ii) Rs. 50 crore,
whichever is less
= Rs. 28 crore.
Further, section 112(8) provides that no appeal shall be filed with the Appellate Tribunal unless the applicant
has paid in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order,
as is admitted by him and a sum equal to 20% of the remaining amount of tax in dispute, in addition to the
amount paid as pre-deposit while filing appeal to the Appellate Authority, arising from the said order subject to
a maximum of Rs. 100 crores.
Thus, in the given case, the amount of pre-deposit for filing an appeal with the Appellate Tribunal against the
order of the Appellate Authority, where entire amount of tax is in dispute, is:
(i) Rs. 56 crores [20% of the amount of tax in dispute, viz. 280 crores]
or
(ii) Rs. 100 crores,
whichever is less
= Rs. 56 crores.

Q34. XY Company received an adjudication order passed by the Assistant Commissioner of Central Tax on 1st
November under section 73 wherein it was decided as follows:
CGST+SGST due Rs. 6,00,000
Interest @ 18% p.a. for number of delayed days
Penalty Rs. 60,000
The taxpayer filed an appeal before the Appellate Authority on 26th November. Determine the amount of pre-
deposit to be made by the company for filing the appeal. Whether your answer would be different if the taxpayer
appeals only against part of the demanded amount say Rs. 4,00,000 and admits the balance liability of tax
amounting to Rs. 2,00,000 and proportionate penalty arising from the said order?
(PAST EXAM MAY 2018) (MTP- NOV 2021)
A. Section 107(6) provides that no appeal shall be filed before Appellate Authority, unless the appellant pays*:-
(a) in full, tax, interest, fine, fee and penalty arising from impugned order, as is admitted by him; and
(b) 10% of remaining tax in dispute arising from the impugned order subject to a maximum of Rs. 25 crore, in
relation to which the appeal has been filed.
*Equivalent amount is required to be deposited with respect to SGST liability.
Thus, in Case-I, XY Company has to make a pre-deposit of 10% of Rs. 6,00,000, which is Rs. 60,000 (i.e. CGST
Rs. 30,000 and SGST Rs. 30,000) assuming that XY Company disagrees with the entire tax demanded.

470
However, when XY Company admits the liability of only Rs. 2,00,000 (CGST + SGST) and disputes the balance
tax demanded of Rs. 4,00,000, it has to make a pre-deposit of:
(i) Rs. 2,00,000 + Rs. 20,000 [proportionate penalty on tax admitted] + interest @ 18% p.a. payable on the tax
admitted for the period of delay, and
(ii) 10% of Rs. 4,00,000 which is Rs. 40,000.

471
 Section 97 Questions for which advance ruling can be sought
Section 96 & 99 Authority for Advance Ruling (AAR) and Appellate Authority for
Advance Ruling (AAAR)
Section 98 Procedure for obtaining advance ruling
Section 100 & 101 Appeals against order of AAR to the Appellate Authority
Section 102 Rectification of Mistakes
Section 103 Applicability of Advance Ruling
Section 104 Advance Ruling to be void in certain circumstances
Section 105 & 106 Powers and Procedure of AAR and AAAR

Section 97 Questions for which advance ruling can be sought

a. Classification of any goods or services or both;

b. Applicability of a notification issued under the provisions of this Act;
c. Determination of time and value of supply of goods or services or both;
d. Admissibility of input tax credit of tax paid or deemed to have been paid;
e. Determination of the liability to pay tax on any goods or services or both;
f. Whether applicant is required to be registered;
g. Whether any particular thing done by the applicant with respect to any goods or services or both
amounts to or results in a supply of goods or services or both, within the meaning of that term.

Section 96 Authority for Advance Ruling (AAR)

The Authority for advance ruling constituted under the provisions of a State Goods and Services Tax Act or
Union Territory Goods and Services Tax Act shall be deemed to be the Authority for advance ruling in respect
of that State or Union territory.
The Government shall appoint an officer not below the rank of Joint Commissioner as member of the Authority
for Advance Ruling. The authority shall consist of 1) one member from amongst the officers of CGST; and
2) one member from amongst the officers of SGST/UTGST.

Section 99 Appellate Authority for Advance Ruling (AAAR)

The Appellate Authority for Advance Ruling constituted under the provisions of a State Goods and Services Tax
Act or a Union Territory Goods and Services Tax Act shall be deemed to be the Appellate Authority in respect
of that State or Union territory.
The Appellate Authority shall consist of 1) Chief Commissioner of CGST as designated by the Board; and
2) the Commissioner of SGST/UTGST having jurisdiction over the applicant.

This would mean that the ruling given by the AAR & AAAR will be applicable only within the jurisdiction of the
concerned state or union territory. It is also for this reason that questions on determination of place of supply
cannot be raised with the AAR or AAAR.

472
Section 98 Procedure for obtaining advance ruling

i. The applicant desirous of obtaining advance ruling should make application to AAR in a prescribed form
and manner.
ii. Upon receipt of an application, the Authority shall send a copy of application to the concerned officer in
whose jurisdiction the applicant falls and call for relevant records.
iii. The Authority may, after examining the application and the records called for and after hearing the
applicant or his authorized representative and the concerned officer or his authorized representative,
by order, either admit or reject the application.
iv. Application for advance ruling will not be admitted in cases where the question raised in the application
is already pending or decided in any proceedings in the case of an application under any of the
provisions of this Act.
v. If the application is rejected, it should be by way of speaking order giving the reasons for rejection.
vi. If the application is admitted, the AAR shall pronounce its ruling within 90 days of receipt of application.
Before giving its ruling, it shall examine the application and any further material furnished by the
applicant or by the concerned department officer.
vii. Before giving the ruling, AAR must hear the applicant or his authorized representative as well as the
jurisdictional officers of CGST /SGST.
viii. If there is a difference of opinion between the two members of AAR, they shall refer the point or points
on which they differ to the AAAR for hearing the issue. If the members of AAAR are also unable to come
to a common conclusion in regard to the point(s) referred to them by AAR, then it shall be deemed that
no advance ruling can be given in respect of the question on which difference persists at the level of
AAAR.
ix. A copy of the advance ruling pronounced by the Authority duly signed by the members and certified in
such manner as may be prescribed shall be sent to the applicant, the concerned officer and the
jurisdictional officer.

Section 100 & 101 Appeals against order of AAR to the

Appellate Authority
i. If the applicant is aggrieved with the ruling of the AAR, he can file an appeal with AAAR. Similarly, if the
jurisdictional officer of CGST / SGST does not agree with the finding of AAR, he can also file an appeal
with AAAR.
ii. Any appeal must be filed within 30 days from the receipt of the advance ruling. AAAR has the power to
condone the delay of 30 days on being shown the sufficient cause for the delay.
iii. The Appellate Authority must pass an order after hearing the parties to the appeal within a period of 90
days of the filing of an appeal.
iv. If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling
is issued in respect of the question under appeal.
v. A copy of the advance ruling pronounced by the Appellate Authority duly signed by the members and
certified in such manner as may be prescribed shall be sent to the applicant, the concerned officer, the
jurisdictional officer & to the Authority.

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Section 102 Rectification of mistakes
The law gives power to AAR and AAAR to amend their order to amend any order passed by them under section
98 or section 101 of the CGST / SGST Act,2017, so as to rectify any error apparent on the face of the record, if
such error is noticed by the Authority or the Appellate Authority on its own accord or is brought to its notice by
the concerned officer, the jurisdictional officer, the applicant or the appellant within a period of six months from
the date of the order. If a rectification has the effect of enhancing the tax liability or reducing the quantum of
input tax credit, the applicant must be heard before the order is passed.

Section 103 Applicability of Advance Ruling

An advance ruling pronounced by AAR or AAAR shall be binding only on the applicant and on the concerned
officer or the jurisdictional officer in respect of the applicant. This clearly means that an advance ruling is not
applicable to similarly placed other taxable persons in that State. It is only limited to the person who has applied
for an advance ruling. There is no specific fixed time period for advance ruling validity; it has been provided that
advance ruling shall be binding till the period when the law, facts or circumstances supporting the original
advance ruling have not changed.

Section 104 Advance Ruling to be void in certain circumstances

However, an advance ruling shall be held to be ab initio void if the AAR or AAAR finds that the advance ruling
was obtained by the applicant by fraud or suppression of material facts or misrepresentation of facts. An order
declaring advance ruling to be void can be passed only after hearing the applicant.

Example 1: ABC Ltd. sought an advance ruling regarding the taxability of “Kumkum” manufactured by them &
used for pooja & other religious purposes as claimed by them. The authority ruled in favour of ABC Ltd. and
exempted their product “Kumkum” from the levy of GST as a pooja material. Later, it brought into the notice of
the Authority that the said product is actually used as a colorant in the cloth industry as a dying agent. After
giving opportunity, the authority can now pass an order u/s 104, declaring the advance ruling as void ab initio.

Section 105 & 106 Powers & Procedure of AAR and AAAR
i. Both the Authority and the Appellate Authority are vested with the powers of a civil court under the Code
of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and
examining him on oath, and compelling production of books of account and other records.
ii. Both the Authority and the Appellate Authority shall be deemed to be a civil court for the purposes of
section 195 of the Code of Criminal Procedure, 1973.
iii. Any proceeding before the Authority or the Appellate Authority shall be deemed to be a judicial
proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian
Penal Code. 1860. The both authorities have the power to regulate their own procedure.

A new rule 107A has been inserted vide N/N 55/2017-CT, Dated 15.11.2017, which states that in respect of
any process or procedure prescribed in Chapter XII, any reference to electronic filing of an application,
intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common
portal shall, in respect of that process or procedure, include the manual filing of the said application,
intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as
appended to the CGST Rules.

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 Question & Answer
Q1. What is the objective of having a mechanism of Advance Ruling?
A. The broad objective for setting up such an authority is to:
• provide certainty in tax liability in advance in relation to an activity proposed to be undertaken by the
applicant;
• attract Foreign Direct Investment (FDI);
• reduce litigation;
• pronounce ruling expeditiously in transparent and inexpensive manner.

Q2. Whether Appeal can be filed before High Court or Supreme Court against the ruling of Appellate Authority
for Advance Rulings?
A. The CGST /SGST Act do not provide for any appeal against the ruling of Appellate Authority for Advance
Rulings. Thus, no further appeals lie and the ruling shall be binding on the applicant as well as the jurisdictional
officer in respect of applicant. However, writ petition may lie before Hon’ble High Court or the Supreme Court.

Q3. Can advance ruling be applied for after supply of goods and/or services?
A. Yes, as per section 95 (a) of the Act, application can be made for advance ruling in relation to the supply of
goods and/or services, being undertaken by applicant.

Q4. When AAR shall not admit the application for advance ruling?
A. AAR shall not admit the application where the issue raised is already pending or decided in any proceedings
in the case of an applicant under any of the provisions of this Act.

Q5. Are the tax authorities bound by the advance ruling?

A. Only the jurisdictional officer/concerned officer, in respect of applicant who has sought advance ruling is
bound by such rulings pronounced.

Q6. What are the powers vested with the authority and the appellate authority?
A. The authority or the appellate authority shall have all the powers of a civil court to exercise the following
powers:
(i) discovery and inspection;
(ii) enforcing attendance of any person and examining him on oath;
(iii) issuing commissions and compelling production of books of account and other records.

Q7. Can the Ruling issued by the AAR or order passed by the AAAR be rectified?
A. In case there is any error apparent on the face of the records, the AAR or AAAR as the case may be, can
amend the original order passed by it, if such error is noticed by the AAAR or AAAR on its own record or is
brought to its notice by the concerned officer, the jurisdictional officer, the applicant or the appellant, within a
period of 6 months from the date of said order. However, no rectification which has the effect of enhancing the
tax liability or reducing the amount of admissible input tax credit shall be made unless the applicant or the
appellant has been given an opportunity of being heard.
Example: In case AAR or AAAR has decided the advance ruling and issued the order on 31st July 2018 and
later on 28th September 2018, it has been noticed by the authority itself (or any concerned officer or any
jurisdictional officer or applicant) that there is some mistake apparent on record then the authority may rectify
such order. The tax rate decided in earlier order was taken as 18% instead of 28%, then before rectifying such
order the Authority shall provide the opportunity of hearing to the applicant.

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Section 144 Where any document–
Presumption as i. is produced by any person under this Act or any other law for the time being
to documents in in force; or
certain cases ii. has been seized from the custody or control of any person under this Act or any
other law for the time being in force; or
iii. has been received from any place outside India in the course of any proceedings
under this Act or any other law for the time being in force,
and such document is tendered by the prosecution in evidence against him or any other
person who is tried jointly with him, the court shall—
(a) unless the contrary is proved by such person, presume—
i. the truth of the contents of such document;
ii. that the signature and every other part of such document which
purports to be in the handwriting of any particular person or which the
court may reasonably assume to have been signed by, or to be in the
handwriting of, any particular person, is in that person’s handwriting,
and in the case of a document executed or attested, that it was
executed or attested by the person by whom it purports to have been
so executed or attested;
(b) admit the document in evidence notwithstanding that it is not duly stamped,
if such document is otherwise admissible in evidence.
Section 145 The Micro films, facsimile copies and computer printouts shall be deemed to be document
Admissibility of and is admissible as evidence.
Micro Films, In any proceedings, where it is desired to give a statement in evidence, a certificate
Facsimile copies identifying the document containing the statement and describing the manner in which it
of Documents was produced and giving such particulars of any device involved in the production of that
and Computer document as may be appropriate for the purpose of showing that the document was
Printouts as produced by a computer, shall be evidence of any matter stated in the certificate and for
documents and the purposes of this sub-section it shall be sufficient for a matter to be stated to the best
as evidence of the knowledge and belief of the person stating it.
Section 146 The common portal (www.gst.gov.in) would facilitate registration, tax payment, filing of
Common Portal returns, computation and settlement of integrated tax and other prescribed purposes.
www.ewaybillgst.gov.in would facilitate furnishing electronic way bill (e-way bill).
Section 147 The Government may, on the recommendations of the Council, notify certain supplies of
Deemed exports goods as deemed exports, where goods supplied do not leave India, and payment for
such supplies is received either in Indian rupees or in convertible foreign exchange if such
goods are manufactured in India. The Central Government vide Notification No. 48/2017
Dated 18th Oct’17 has notified the following supplies as deemed exports: -
1. Supply of goods by a registered person against Advance Authorisation
Provided that goods so supplied, when exports have already been made after
availing input tax credit on inputs used in manufacture of such exports, shall be
used in manufacture and supply of taxable goods (other than nil rated or fully
exempted goods) and a certificate to this effect from a chartered accountant is
submitted to the jurisdictional commissioner of GST or any other officer
authorised by him within 6 months of such supply,;
Provided further that no such certificate shall be required if input tax credit has
not been availed on inputs used in manufacture of export goods.

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2. Supply of capital goods by a registered person against Export Promotion Capital
Goods Authorisation.
3. Supply of goods by a registered person to EOU.
4. Supply of gold by a bank or PSU specified in the Notification No. 50/2017-
Customs, Dated the 30th June 2017 (as amended) against Advance
Authorisation.
Section 148 The Government may, on the recommendations of the Council, and subject to such
Special conditions and safeguards as may be prescribed, notify certain classes of registered
procedure for persons, and the special procedures to be followed by such persons including those with
certain regard to registration, furnishing of return, payment of tax and administration of such
processes persons.
Section 149 (1) Every registered person may be assigned a goods and services tax compliance
Goods & rating score by the Government based on his record of compliance with the
Service Tax provisions of this Act.
Compliance (2) The goods and services tax compliance rating score may be determined on the
Rating basis of such parameters as may be prescribed.
(3) The goods and services tax compliance rating score may be updated at periodic
intervals and intimated to the registered person and also placed in the public
domain in such manner as may be prescribed.
Section 150 Covered in Chapter 13 Returns
Information
Return
Section 151 The Commissioner may, by way of a notification, direct collection of statistics for the
Power to collect purpose of better administration of the Act. After issuance of such notification, the
statistics call for Commissioner or any person authorized by Commissioner in this regard may call all
information concerned persons to furnish such information or return relating to any matter in respect
of which statistics is being collected.
The Commissioner or an officer authorised by him may, by an order, direct any person to
furnish information relating to any matter dealt with in connection with this Act, within such
time, in such form, and in such manner, as may be specified therein.
Section 152 Bar No information of any individual return or part thereof with respect to any matter given for
on disclosure of the purposes of section 150 or section 151 shall, without the previous consent in writing
information of the concerned person or his authorised representative, be published in such manner
so as to enable such particulars to be identified as referring to a particular person and no
such information shall be used for the purpose of any proceedings under this Act without
giving an opportunity of being heard to the person concerned.
Except for the purposes of prosecution under this Act or any other Act for the time being
in force, no person who is not engaged in the collection of statistics under this Act or
compilation or computerisation thereof for the purposes of this Act, shall be permitted to
see or have access to any information or any individual return referred to in section 151
However, this bar is not applicable to the publication of any information relating to a class
of taxable persons or class of transactions, if in the opinion of the Commissioner, it is
desirable in the public interest to publish such information.
Section 153 Any officer not below the rank of Assistant Commissioner may, having regard to the nature
Taking and complexity of the case and the interest of revenue, take assistance of any expert at
assistance from any stage of scrutiny, inquiry, investigation or any other proceedings before him.
an expert
Section 154 The Commissioner or an officer authorized by him may take samples of goods form the
Power to take possession of any taxable person, where he considers it necessary, and provide a receipt
samples for any samples so taken.

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Section 155 Where any person claims that he is eligible for input tax credit under this Act, the burden
Burden of proof of proving such claim shall lie on such person.
Section 156 All persons discharging functions under this Act shall be deemed to be public servants
Persons within the meaning of section 21 of the Indian Penal Code.
deemed to be
public servants
Section 157 Immunity from any legal or departmental proceedings is provided to the GST officers and
Protection of officers of the Tribunal for the acts done in good faith under the provisions of this Act.
action taken Actions taken in exercise of official functions cannot result in liability devolving on the
under this Act officers. It is this protection that officers enjoy while exercising authority vested in the law
without fear or favour.
Section 158 (1) All particulars contained in any statement made, return furnished or accounts or
Disclosure of documents produced in accordance with this Act, or in any record of evidence
information by a given in the course of any proceedings under this Act (other than proceedings
public servant before a criminal court) or in any record of any proceedings under this Act, save
as provided in Section 158 (3), shall not be disclosed.
(2) No court shall require any officer appointed or authorized under this Act to
produce before it or to give evidence before it is respect of particulars referred to
in Section 158 (1).
(3) Nothing contained in this section shall apply to the disclosure of information –
a. For prosecution.
b. For carrying out the objects of the Act.
c. For service of notice or recovery of demand.
d. For furnishing to Court in a proceeding where Government is a party.
e. For audit of tax receipts or refunds.
f. For inquiry into the conduct of GST officer.
g. For enabling levy/realization of any tax or duty.
h. By lawful exercise of powers.
i. For inquiry into a charge of misconduct by any professional.
j. For data entry on automated system.
k. For any other law.
l. In public interest.
Section 159 If the commissioner or any authorized officer, is of the opinion that it is necessary or
Publication of expedient in the public interest to publish the name of any person and any other particulars
information in relating to any proceedings or prosecution under this Act in respect of such person, it may
respect of cause to be published such name and particulars in such manner as it think fit.
persons in No publication shall be made in respect of penalty till disposal of appeal if the same has
certain cases been filed or time limit for filing appeal has not expired. In this case of firm, company or
other association of persons, the names of the partners of the firm, directors, managing
agents, secretaries and treasurers or managers of the company, or the members of the
association, as the case may be, may also be published if, in the opinion of the
Commissioner, or any other officer authorized by him in this behalf, circumstances of the
case justify it.
Section 160 Assessment, re-assessment, etc. shall not to be invalid merely on grounds of procedural
Assessment infractions. The service of any notice, order or communication shall not be called in
proceedings, question, if the notice, order or communication, as the case may be, has already been
etc., not to be acted upon by the person to whom it is issued or where such service has not been called
invalid on in question at or in the earlier proceedings commenced, continued or finalized pursuant
certain grounds to such notice, order or communication.

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Section 161 Without prejudice to the provisions of section 160, and notwithstanding anything
Rectification of contained in any other provisions of this Act, any authority, who has passed or issued
errors apparent any decision or order or notice or certificate or any other document, may rectify any
on the face of error which is apparent on the face of record in such decision or order or notice or
record certificate or any other document, either on its own motion or where such error is
brought to its notice by any officer appointed under this Act or an officer appointed under
the State Goods and Services Tax Act or an officer appointed under the Union Territory
Goods and Services Tax Act or by the affected person within a period of three months
from the date of issue of such decision or order or notice or certificate or any other
document, as the case may be:
Provided that no such rectification shall be done after a period of six months from the
date of issue of such decision or order or notice or certificate or any other document:
Provided further that the said period of six months shall not apply in such cases where
the rectification is purely in the nature of correction of a clerical or arithmetical error,
arising from any accidental slip or omission:
Provided also that where such rectification adversely affects any person, the principles
of natural justice shall be followed by the authority carrying out such rectification.
Section 162 Bar Save as provided in sections 117 and 118, no civil court shall have jurisdiction to deal with
on jurisdiction of or decide any question arising from or relating to anything done or purported to be done
civil courts under this Act.
Section 163 Wherever a copy of any order or document is to be provided to any person on
Levy of fee an application made by him for that purpose, there shall be paid such fee as may be
prescribed.
Section 164 (1) The Government may, on the recommendations of the Council, by notification,
Power of make rules for carrying out the provisions of this Act.
Government to (2) Without prejudice to the generality of the provisions of sub-section (1), the
make rules Government may make rules for all or any of the matters which by this Act are
required to be, or may be, prescribed or in respect of which provisions are to be or
may be made by rules.
(3) The power to make rules conferred by this section shall include the power to give
retrospective effect to the rules or any of them from a date not earlier than the date
on which the provisions of this Act come into force.
(4) Any rules made under sub-section (1) or sub-section (2) may provide that a
contravention thereof shall be liable to a penalty not exceeding ten thousand
rupees.
Section 165 The Board may, by notification, make regulations consistent with this Act and the rules
Power to make made thereunder to carry out the provisions of this Act.
regulations
Section 166 a. The Act permits making of rules by Government, issuance of regulation by Board
Laying of rules, and issuance of notification by the Government.
regulations & b. Such rule, regulation and notification, which is a part of delegated legislation is
notifications placed before the Parliament.
c. It is laid before the Parliament, as soon as may be after it is made or issued, when
the Parliament is in session, for a total period of thirty days which may be
comprised in one session or in two or more successive sessions.
d. Before the expiry of the session or successive sessions both Houses may make
suitable modifications and would have effect in such modified form.
e. However, any such modification or annulment shall be without prejudice to the
validity of anything previously done under that rule or regulation or notification, as
the case may be.

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Section 167 The Commissioner may, by notification, direct that subject to such conditions, if any, as
Delegation of may be specified in the notification, any power exercisable by any authority or officer
powers under this Act may be exercisable also by another authority or officer as may be specified
in such notification.
Section 168 (1) The Board may, if it considers it necessary or expedient so to do for the purpose
Power to issue of uniformity in the implementation of this Act, issue such orders, instructions or
instructions or directions to the central tax officers as it may deem fit, and thereupon all such
directions officers and all other persons employed in the implementation of this Act shall
observe and follow such orders, instructions or directions.
(2) The Commissioner specified in clause (91) of section 2, sub-section (3) of section
5, clause (b) of sub-section (9) of section 25, sub-sections (3) and (4) of section
35, sub-section (1) of section 37, sub-section (2) of section 38, sub-section (6) of
section 39, sub-section (1) of section 44, sub-sections (4) and (5) of section 52,
sub-section (1) of section 143, except the second proviso thereof, sub-section (1)
of section 151, clause (l) of sub-section (3) of section 158 and section 167 shall
mean a Commissioner or Joint Secretary posted in the Board and such
Commissioner or Joint Secretary shall exercise the powers specified in the said
sections with the approval of the Board.
Section 168A The Government is empowered to extend the time limits provided under the CGST Act in
Power of respect of actions which cannot be completed or complied with due to force majeure.
Government to Here, force majeure means war, epidemic, flood, drought, fire, cyclone, earthquake or any
extend time limit other calamity caused by nature affecting the implementations of provisions of the CGST
in special Act. This power can also be exercised retrospectively.
circumstances
Section 169 (1) Manner of Service: Any decision, order, summons, notice or other communication
Service of notice under this Act or the rules made thereunder shall be served by any of the following
in certain methods, namely:-
circumstances (a) by giving or tendering it directly or by a messenger including a courier to the
addressee or the taxable person or to his manager or authorised
representative or an advocate or a tax practitioner holding authority to
appear in the proceedings on behalf of the taxable person or to a person
regularly employed by him in connection with the business, or to any adult
member of family residing with the taxable person; or
(b) by registered post or speed post or courier with acknowledgement due, to
the person for whom it is intended or his authorised representative, if any,
at his last known place of business or residence; or
(c) by sending a communication to his e-mail address provided at the time of
registration or as amended from time to time; or
(d) by making it available on the common portal; or
(e) by publication in a newspaper circulating in the locality in which the taxable
person or the person to whom it is issued is last known to have resided,
carried on business or personally worked for gain; or
(f) if none of the modes aforesaid is practicable, by affixing it in some
conspicuous place at his last known place of business or residence and if
such mode is not practicable for any reason, then by affixing a copy thereof
on the notice board of the office of the concerned officer or authority who or
which passed such decision or order or issued such summons or notice.
(2) Deemed Service: Every decision, order, summons, notice or any communication
shall be deemed to have been served on the date on which it is tendered or
published or a copy thereof is affixed in the manner provide in section 169 (1).

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(3) Deemed service in case of registered post or speed post: When such decision,
order summons, notice or any communication is sent by registered post or speed
post, it shall be deemed to have been received by the addressee at the expiry of
the period normally taken by such post in transit unless the contrary is proved.
Section 170 The amount of tax, interest, penalty, fine or any other sum payable, and the amount of
Rounding off of refund or any other sum due, under the provisions of this Act shall be rounded off to the
tax, etc. nearest rupee and, for this purpose, where such amount contains a part of a rupee
consisting of paise, then, if such part is 50 paise or more, it shall be increased to Rs. 1
and if such part is less than 50 paise it shall be ignored.
Section 171 It mandatory that any reduction in rate of tax on any supply of goods or services or the
Anti-profiteering benefit of input tax credit shall be passed to the recipient by way of commensurate
measure reduction in prices.

National Anti-Profiteering Authority is therefore being constituted by the Central

Government to examine whether input tax credits availed by any registered person or the
reduction in the tax rate have actually resulted in a commensurate reduction in the price
of the goods and/or services supplied by him.

Where the Authority referred above, after holding examination as required, comes to the
conclusion that any registered person has profiteered, such person shall be liable to pay
penalty equivalent to ten percent of the amount so profiteered:

Provided that no penalty shall be leviable if the profiteered amount is deposited within
thirty days of the date of passing of the order by the Authority.

Explanation.—For the purposes of this section, the expression “profiteered” shall mean
the amount determined on account of not passing the benefit of reduction in rate of tax
on supply of goods or services or both or the benefit of input tax credit to the recipient by
way of commensurate reduction in the price of the goods or services or both.

The National Anti-Profiteering Authority shall be a five member committee consisting of a

Chairman who holds or has held a post equivalent in rank to a Secretary to the
Government of India; and four Technical Members who are or have been Commissioners
of State tax or central tax for at least one year or have held an equivalent post under
earlier laws.
The Authority shall cease to exist after the expiry of four five years from the date on which
the Chairman enters upon his office unless the GST Council recommends otherwise.
Duties of Authority:

It shall be the duty of the authority-

I. to determine whether the reduction in tax rate or the benefit of input tax credit has
been passed on by the seller to the buyer (hereinafter collectively referred to as
‘benefit’) by reducing the prices
II. to identify the taxpayer who has not passed on the benefit

III. to order
a. reduction in prices
b. return to the recipient, an amount equivalent to the amount not passed
on by way of commensurate reduction in prices along with interest at the
rate of 18% from the date of collection of the higher amount till the date
of the return of such amount or recovery of the amount not returned, as

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the case may be. If the eligible person does not claim return of the
amount or is not identifiable, the amount must be deposited in the
Consumer Welfare Fund;
c. imposition of penalty
d. cancellation of registration

IV. to furnish a performance report to the GST Council by the 10th of the month
succeeding each quarter
Process followed by the Authority
Application to the Authority: All applications from interested parties on issues of local
nature shall first be examined by the State Level Screening Committee. On being
satisfied that the supplier has not passed on the benefit, the Screening Committee will
forward the application with its recommendations to the Standing Committee on Anti-
profiteering.
If the Standing Committee is satisfied that there is a prima facie evidence to show that
the supplier has not passed on the benefit, it shall refer the matter to the Director General
of Anti-profiteering for a detailed investigation.

Investigation: Directorate General of Anti-profiteering shall conduct investigation and

collect evidence necessary to determine undue profiteering and before initiation of the
investigation, issue a notice to the interested parties (and to such other persons as
deemed fit for a fair enquiry into the matter).
The evidence or information presented to Directorate General of Anti-
profiteering by one interested party can be made available to the other interested parties,
participating in the proceedings. The evidence provided will be kept confidential and the
provisions of section 11 of the Right to Information Act, 2005, shall apply mutatis mutandis
to the disclosure of any information which is provided on a confidential basis.
Directorate General of Anti-profiteering can seek opinion of any other agency or statutory
authorities in the discharge of his duties. The Director General of Anti-profiteering, or an
officer authorized by him will have the power to summon any person either to give
evidence or to produce a document or any other thing. He will also have same powers
as that of a civil court and every such inquiry will be deemed to be a judicial proceeding.
Directorate General of Anti-profiteering will complete the investigation within a period of
6 months or within such extended period not exceeding a further period of 3 months for
reasons to be recorded in writing as allowed by the Standing Committee. Upon
completion of the investigation, Directorate General of Anti-profiteering will furnish to the
Authority, a report of its findings along with the relevant records.

Order of the Authority

Where the Authority determines that a registered person has not passed on the benefit of
the reduction in the rate of tax on the supply of goods or services or the benefit of input
tax credit to the recipient by way of commensurate reduction in prices, the Authority may
order-
(a) reduction in prices;
(b) return to the recipient, an amount equivalent to the amount not passed on by way
of commensurate reduction in prices along with interest at the rate of eighteen per
cent, from the date of collection of the higher amount till the date of the return of

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such amount or recovery of the amount including interest not returned, as the case
may be;
(c) the deposit of an amount equivalent to fifty percent of the amount determined under
the above clause along with interest at the rate of eighteen per cent. from the date
of collection of the higher amount till the date of deposit of such amount in the Fund
constituted under section 57 and the remaining fifty percent of the amount in the
Fund constituted under section 57 of the Goods and Services Tax Act, 2017 of the
concerned State, where the eligible person does not claim return of the amount or
is not identifiable;
(d) imposition of penalty as specified under the Act; and
(e) cancellation of registration under the Act.
Explanation: For the purpose of this sub-rule, the expression, “concerned State” means
the State or Union Territory in respect of which the Authority passes an order.
{Rule 133 (3)- Substituted vide Notification No. 26/2018-CT Dated 13.06.2018}

The following are noteworthy in this regard:

• Any order passed by the Authority shall be immediately complied with by

the registered person failing which action shall be initiated to recover the
amount.
• The Authority will pass order within 6 months from the date of the receipt of
the report from the Directorate General of Anti-profiteering.
• The Authority may seek the clarification, if any, from the Director General of
Anti Profiteering on the report submitted under sub-rule (6) of rule 129
during the process of determination under sub-rule (1) of rule 133.
• Notwithstanding anything contained in sub-rule (4) of rule 133, where upon
receipt of the report of the Director General of Anti-profiteering referred to
in sub-rule (6) of rule 129, the Authority has reasons to believe that there
has been contravention of the provisions of section 171 in respect of goods
or services or both other than those covered in the said report, it may, for
reasons to be recorded in writing, within the time limit specified in sub rule
(1) of rule 133, direct the Director General of Anti-profiteering to cause
investigation or inquiry with regard to such other goods or services or both,
in accordance with the provisions of the Act and these rules. The

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investigation or enquiry shall be deemed to be a new investigation or
enquiry and all the provisions of rule 129 shall mutatis mutandis apply to
such investigation or enquiry.
• A minimum of three members of the Authority shall constitute quorum at its
meeting. If opinion differ then decision will be taken by majority. If equal
votes, the Chairman shall have the second or casting vote.
• An opportunity of being heard will be given, if the interested parties request
for it in writing.
• Period of interest will be calculated from the date of collection of higher
amount till the date of return of such amount.
• If the eligible person (i.e., the buyer) does not claim the return or the person
is unidentifiable then the amount must be deposited to the Consumer
Welfare Fund along with applicable interest.

Section 172 (1) If any difficulty arises in giving effect to any provisions of this Act, the Government
Removal of may, on the recommendations of the Council, by a general or a special order
difficulties published in the Official Gazette, make such provisions not inconsistent with the
provisions of this Act or the rules or regulations made thereunder, as may be
necessary or expedient for the purpose of removing the said difficulty:
Provided that no such order shall be made after the expiry of a period of three
five years from the date of commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be, after it is
made, before each House of Parliament.
Section 173 Save as otherwise provided in this Act, Chapter V of the Finance Act, 1994 shall be
Amendment of omitted.
Act 32 of 1994
Section 174 (1) Save as otherwise provided in this Act, on and from the date of commencement of
Repeal & this Act, the Central Excise Act, 1944 (except as respects goods included in entry
Saving 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal
and Toilet Preparations (Excise Duties) Act, 1955, the Additional Duties of Excise
(Goods of Special Importance) Act, 1957, the Additional Duties of Excise (Textiles
and Textile Articles) Act, 1978, and the Central Excise Tariff Act, 1985 (hereafter
referred to as the repealed Acts) are hereby repealed.
(2) The repeal of the said Acts and the amendment of the Finance Act, 1994
(hereafter referred to as “such amendment” or “amended Act”, as the case may
be) to the extent mentioned in the sub-section (1) or section 173 shall not—
a. revive anything not in force or existing at the time of such amendment
or repeal; or
b. affect the previous operation of the amended Act or repealed Acts and
orders or anything duly done or suffered thereunder; or
c. affect any right, privilege, obligation, or liability acquired, accrued or
incurred under the amended Act or repealed Acts or orders under such
repealed or amended Acts:
Provided that any tax exemption granted as an incentive against
investment through a notification shall not continue as privilege if the said
notification is rescinded on or after the appointed day; or
d. affect any duty, tax, surcharge, fine, penalty, interest as are due or
may become due or any forfeiture or punishment incurred or inflicted in
respect of any offence or violation committed against the provisions of
the amended Act or repealed Acts; or

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e. affect any investigation, inquiry, verification (including scrutiny and
audit), assessment proceedings, adjudication and any other legal
proceedings or recovery of arrears or remedy in respect of any such duty,
tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability,
forfeiture or punishment, as aforesaid, and any such investigation,
inquiry, verification (including scrutiny and audit),
assessment proceedings, adjudication and other legal proceedings or
recovery of arrears or remedy may be instituted, continued or enforced,
and any such tax, surcharge, penalty, fine, interest, forfeiture or
punishment may be levied or imposed as if these Acts had not
been so amended or repealed;
f. affect any proceedings including that relating to an appeal, review or
reference, instituted before on, or after the appointed day under the said
amended Act or repealed Acts and such proceedings shall be continued
under the said amended Act or repealed Acts as if this Act had not come
into force and the said Acts had not been amended or repealed.
(3) The mention of the particular matters referred to in sub-sections (1) and (2)
shall not be held to prejudice or affect the general application of section 6 of the
General Clauses Act, 1897 with regard to the effect of repeal.

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Section 20 Subject to the provisions of this Act and the rules made thereunder, the provisions of
Application of Central Goods and Services Tax Act relating to,—
provisions of (i) scope of supply;
CGST Act (ii) composite supply and mixed supply;
(iii) time and value of supply;
(iv) input tax credit;
(v) registration;
(vi) tax invoice, credit and debit notes;
(vii) accounts and records;
(viii) returns, other than late fee;
(ix) payment of tax;
(x) tax deduction at source;
(xi) collection of tax at source;
(xii) assessment;
(xiii) refunds;
(xiv) audit;
(xv) inspection, search, seizure and arrest;
(xvi) demands and recovery;
(xvii) liability to pay in certain cases;
(xviii) advance ruling;
(xix) appeals and revision;
(xx) presumption as to documents;
(xxi) offences and penalties;
(xxii) job work;
(xxiii) electronic commerce;
(xxiv) transitional provisions; and
(xxv) miscellaneous provisions including the provisions relating to the imposition of
interest and penalty,
shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they
apply in relation to central tax as if they are enacted under this Act:

Provided that in the case of tax deducted at source, the deductor shall deduct tax at the
rate of two per cent from the payment made or credited to the supplier:

Provided further that in the case of tax collected at source, the operator shall collect tax
at such rate not exceeding two per cent, as may be notified on the recommendations of
the Council, of the net value of taxable supplies:

Provided also that for the purposes of this Act, the value of a supply shall include any
taxes, duties, cesses, fees and charges levied under any law for the time being in force
other than this Act, and the Goods and Services Tax (Compensation to States) Act, if
charged separately by the supplier:

Provided also that in cases where the penalty is leviable under the Central Goods and
Services Tax Act and the State Goods and Services Tax Act or the Union Territory
Goods and Services Tax Act, the penalty leviable under this Act shall be the sum total of
the said penalties.
Provided also that where the appeal is to be filed before the Appellate Authority or the
Appellate Tribunal, the maximum amount payable shall be fifty crore rupees and one
hundred crore rupees respectively.

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Section 17 Supplies in respect of which the IGST shall be apportioned
Apportionment
Sub-section (1) of section 17 lays down that in respect of the IGST paid on the following
of tax and
supplies of goods and/or services, the IGST shall be apportioned:
settlement of
funds a) inter-State supply to an unregistered person or to a registered person paying tax
under composition scheme;
b) inter-State supply where the registered person is not eligible for input tax credit;
c) inter-State supply made in a financial year to a registered person, where he does
not avail of the input tax credit within the specified period and thus the tax remains
in the integrated tax account after expiry of the due date for furnishing of annual
return for such year in which the supply was made;
d) import by an unregistered person or by a registered person paying tax under
composition scheme;
e) import where the registered person is not eligible for input tax credit;
f) import made in a financial year by a registered person, where he does not avail
of the said credit within the specified period and thus the tax remains in the
integrated tax account after expiry of the due date for furnishing of annual return
for such year in which the supply was received.

Thus, fundamentally IGST shall be apportioned only in respect of those supplies

where the input tax credit cannot be availed and thus, the tax revenue finally
accrues to the exchequer.
Methodology of apportionment

The IGST paid on the supplies mentioned above shall be apportioned as under:

I. The amount of tax calculated at the rate equivalent to the CGST on similar intra-
State supply shall be apportioned to the Central Government.
II. The balance amount of IGST remaining in the integrated tax account shall be
apportioned to the State where such supply takes place and to the Central
Government if such supply takes place in a Union territory.
If the place of such supply made by any taxable person cannot be determined
separately, the balance amount shall be apportioned to each of the
States/Central Government (in relation to Union territories) in proportion to the
total supplies made by such taxable person to each of such States/Union
territories in a financial year.
If the taxable person making such supplies is not identifiable, the said balance
amount shall be apportioned to all States and the Central Government in
proportion to the amount collected as SGST/UTGST by the respective State/ the
Central Government during the immediately preceding financial year.
The amount not apportioned under sub-section (1) and sub-section (2) may, for the
time being, on the recommendations of the Council, be apportioned at the rate of fifty
per cent. to the Central Government and fifty per cent. to the State Governments or
the Union territories, as the case may be, on ad hoc basis and shall be adjusted
against the amount apportioned under the said sub-sections.
Thus, essentially, the new sub-section (2A) provides for apportionment of IGST in
respect of B2B supplies wherein input tax credit has been taken by the recipients.
The interest, penalty and compounding amount realized in connection with the IGST shall
also be apportioned in the similar manner.

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The Central Government shall transfer the amount apportioned to it to the CGST
account or UTGST account, as the case may be and the amount apportioned to the
State Government(s) to the SGST account of the respective States.
Section 17A Where any amount has been transferred from the electronic cash ledger under this Act
Transfer of to the electronic cash ledger under the State Goods and Services Tax Act or the Union
certain amounts Territory Goods and Services Tax Act, the Government shall transfer to the State tax
account or the Union territory tax account, an amount equal to the amount transferred
from the electronic cash ledger, in such manner and within such time, as may be
prescribed.

Section 18 • When IGST credit is utilized for payment of CGST, the amount collected as
Transfer of ITC IGST shall stand reduced by the amount equal to such credit. The Central
Government shall transfer an amount equal to the amount so reduced from
the IGST account to the CGST account.
• When IGST credit is utilized for payment of UTGST, the amount collected as
IGST shall stand reduced by the amount equal to such credit. The Central
Government shall transfer an amount equal to the amount so reduced from
the IGST account to the UTGST account.
• When IGST credit is utilized for payment of SGST, the amount collected as
IGST shall stand reduced by the amount equal to such credit and shall be
apportioned to the appropriate State Government. The Central Government
shall transfer the amount so apportioned to the account of the appropriate
State Government.
• Appropriate State means the State or Union territory where a taxable person
is registered or is liable to be registered under CGST Act.

Question & Answer

Q1. Is there any condition that consideration must be received in foreign currency for deemed export goods?
A. There is no condition that consideration for goods notified as deemed exports must be received in convertible
foreign exchange. The consideration may be received in Indian Rupees also.

Q2. Whether imported goods, supplied ‘as such’ qualify for deemed exports?
A. Only goods manufactured in India, which are notified by Central Government qualify to be treated as deemed
exports. Thus, goods notified u/s 147, if imported do not qualify as deemed exports, if they are supplied ‘as
such’.

Q3. Whether goods notified u/s 147, if manufactured in India from imported goods qualify for the benefit of
deemed exports?
A. Provisions of Section 147 apply to ‘goods manufactured in India’. There is no restriction that raw materials
required for manufacture of notified goods must also be manufactured in India. Hence notified goods, if
manufactured from imported goods would qualify as deemed exports.

Q4. Who can rectify a mistake apparent on record u/s 161?

A. Any authority, who has passed or issued any decision or order or notice or certificate or any other document,
may rectify any error which is apparent on the face of record in such decision or order or notice or certificate or
any other document.

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