UNIT 1

Introduction:
GST is the biggest reform for indirect taxes in India in the post-independence period. It
simplified indirect taxation, reduced tax complexities, removed the cascading effect and led
to one nation and one tax regime in India. Experts believe that GST will have a huge positive
impact on business and change the way the economy functions.

Concept of Direct and Indirect Taxes:

Tax
A tax may be defined as a fee charged by a government on a product, income or an activity. It
is a pecuniary burden laid upon individuals or property owners to support the Government; a
payment exacted by legislative authority. A tax "is not a voluntary payment or donation, but
an enforced contribution, exacted pursuant to legislative authority".
Taxes are broadly classified into direct and indirect taxes.
Direct Taxes:
If a tax is levied directly on income or wealth of an individual or an organization it is called
direct tax. A direct tax is a kind of charge, which is imposed directly on the taxpayer and paid
directly to the Government by the persons (juristic or natural) on whom it is imposed. An
incidence of direct tax cannot be shifted by the taxpayer to someone else. The burden of such
tax is borne by the payer of tax himself. An important direct tax imposed in India is income
tax.
Indirect Taxes:
If tax is levied on the price of a good or service, then it is indirect tax. The person paying the
indirect tax passes on the incidence of tax to some other person. He collects the tax from his
customer on sale of goods and services and remits it to the government. The ultimate burden
of such tax falls on the final consumer of such goods and services. If the taxpayer (such as a
manufacturer or provider of service or seller of goods) is just a conduit and at every stage the
tax incidence is passed on till it finally reaches the consumer, who really bears the brunt of it,
such tax is indirect tax. An indirect tax is one that can be shifted by the taxpayer to someone
else.
Distinction between Direct and Indirect Taxes:

Features of Indirect-taxes:
 1. A major source of revenue: Indirect taxes are an important source of tax revenues
for Governments all over the world and continue to grow as more and more countries
are moving to consumption oriented tax regimes. In India, indirect taxes contribute
more than 50% of the total tax revenues of Central and State Governments.
2. Tax on commodities and services: It is levied on commodities at the time of
manufacture or purchase or sale or import/export thereof. Hence, it is also known as
commodity taxation. It is also levied on provision of services.
3. Shifting of burden: In the indirect taxes the tax burden is shifted by the tax payer to
his customer. The tax is collected through the selling price of goods and services and
remitted to the tax department of the government. Price of goods and services serves
as vehicle for indirect taxes. For example, GST paid by the supplier of the goods is
recovered from the buyer by including the tax in the cost of the commodity.
4. No direct pinch to tax payers: Since, value of indirect taxes is generally inbuilt in
the price of the commodity or service, most of the time the tax payer pays the tax
without actually knowing that he is paying tax to the Government. Thus, tax payer
does not perceive a direct pinch while paying indirect taxes. Through the purchase
and consumption of various goods and services in our day to day life we are regularly
paying several indirect taxes to the government treasury.
5. Inflationary: As indirect taxation directly affects the prices of commodities and
services a rise in indirect taxes leads to inflationary trend.
6. Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax base. Majority
of the products or services are subject to indirect taxes with low thresholds. Hence
every person in a nation is indirect tax-payee. Therefore, it is rightly said that there
are two things certain in human life namely, death and taxes.
7. Promotes social welfare: High taxes are imposed on the consumption of harmful
products (also known as ‘sin goods’) such as alcoholic products, tobacco products etc.
This not only curtails their consumption but also enables the State to collect
substantial revenue. Thus, indirect taxes indirectly promote social welfare.
8. Regressive in nature: Generally, the indirect taxes are regressive in nature. The rich
and the poor have to pay the same rate of indirect taxes on certain commodities of
mass consumption. This may lead to further increase the income disparities between
the rich and the poor.

GST in India:
The pre-GST indirect tax structure, which comprises of so many different taxes, can be
classified as: Central taxes: levied by the Central govt (includes Central Sales Tax, Excise
Duty etc.) State taxes: levied by the various state govts (VAT, Service Tax, Octroi)
The prevailing value added tax system had several deficiencies which were cured by the
GST. These deficiencies were as under:
1. Multi-tax Regime: In the earlier indirect tax regime, there were many indirect taxes
levied by both state and centre. States mainly collected taxes in the form of Value
Added Tax (VAT). Every state had a different set of rules and regulations. Interstate
sale of goods was taxed by the Centre. CST (Central State Tax) was applicable in case
of interstate sale of goods. Other than above there were many indirect taxes like
entertainment tax, octroi and local tax that was levied by state and centre. This led to a
lot of overlapping of taxes levied by both state and centre. For example, when goods
were manufactured and sold, excise duty was charged by the centre. Over and above
Excise Duty, VAT was also charged by the State. This led to a tax on tax also known
as the cascading effect of taxes.
In the earlier indirect tax regime, a manufacturer of excisable goods charged excise
duty and value added tax (VAT) on intra-State sale of goods. However, the VAT
dealer on his subsequent intra- State sale of goods charged VAT (as per prevalent
VAT rate as applicable in the respective State) on value comprising of (basic value +
excise duty charged by manufacturer + profit by dealer). Further, in respect of tax on
services, service tax was payable on all ‘services’ other than the Negative list of
services or otherwise exempted.
2. Deficiencies and Diversities in Indirect taxes: The earlier indirect tax framework in
India suffered from various shortcomings.
a) Indirect taxes not Mutually Exclusive: Under the earlier indirect tax
structure, the various indirect taxes being levied were not necessarily
mutually exclusive. To illustrate, when the goods were manufactured
and sold, both central excise duty (CENVAT) and State- Level VAT
were levied. Though CENVAT and State- Level VAT were essentially
value added taxes, set off of one against the credit of another was
not possible as CENVAT was a central levy and State-Level VAT was
a State levy.
b) Multi point System: Moreover, CENVAT was applicable only at
manufacturing level and not at distribution levels. The erstwhile sales
tax regime in India was a combination of origin based (Central
 Sales Tax) and destination based multipoint system of taxation
(State-Level VAT).
c) Service tax was also a value added tax and credit across the service tax
and the central excise duty was integrated at the central level. Despite
the introduction of the principle of taxation of value added in India - at
the Central level in the form of CENVAT and at the State level in the
form of State VAT - its application remained piecemeal and
fragmented on account of the several reasons.

Introduction of GST in India:

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and
Service Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect
on 1st July 2017; Goods & Services Tax Law in India is a comprehensive, multistage,
destination-based tax that is levied on every value addition.
In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of
goods and services. This law has replaced many indirect tax laws that previously existed in
India. GST is one indirect tax for the entire country.

Features of GST
1. Single and Comprehensive Tax- One nation One tax
Comprehensive: GST will subsume all of the current indirect taxes. Plus, by
bringing in a unified taxation system, across the country, it will ensure that there is
no more arbitrariness in tax rates.

2. Supply- Point of Taxation

3. Value Added Tax - on Manufacturing, Sale & Consumption.
Value-addition: This is the process of addition to the value of a product/ service
at each stage of its production, exclusive of initial costs. Under GST, the tax is
levied only on the value added.

For E.g. Let us consider the following case:

 Purchase of raw materials
 Production or manufacture
 Warehousing of finished goods
 Sale to wholesaler
 Sale of the product to the retailer
 Sale to the end consumer

Goods and Services Tax is levied on each of these stages which makes it a multi-stage
tax. The manufacturer who makes biscuits buys flour, sugar and other material. The
value of the inputs increases when the sugar and flour are mixed and baked into
biscuits. The manufacturer then sells the biscuits to the warehousing agent who packs
large quantities of biscuits and labels it. That is another addition of value after which
the warehouse sells it to the retailer. The retailer packages the biscuits in smaller
quantities and invests in the marketing of the biscuits thus increasing its value. GST is
levied on these value additions i.e. the monetary value added at each stage to achieve
the final sale to the end customer.
 4. Multi-stage: GST is levied each stage in the supply chain, where a transaction
takes place.
5. Destination-based consumption: Unlike the current indirect taxes, GST will be
collected at the point of consumption. The taxing authority with appropriate
jurisdiction in the place where the goods/ services are finally consumed will
collect the tax. For E.g. Consider goods manufactured in Maharashtra and are sold
to the final consumer in Karnataka. Since Goods & Service Tax is levied at the
point of consumption. So, the entire tax revenue will go to Karnataka and not
Maharashtra.

Cascading Effect:
The current indirect tax has one major problem - the cascading effect. When you buy
something, you pay a tax on tax itself. Let’s understand this with a hypothetical numerical
example –
1. PRE- GST
STAGE 1 Say a shirt manufacturer pays INR 90 to buy raw materials and adds value
of Rs 10. If the rate of taxes is set at 10%, and there is no profit or loss involved, then
he has to pay INR 10 as tax. So, the final cost of the shirt now becomes INR
(100+10=) 110.
STAGE 2 At the next stage, the wholesaler buys the shirt from the manufacturer at
INR 110, and adds labels to it. When he is adding labels, he is adding value.
Therefore his cost increases by say INR 40. On top of this, he has to pay a 10% tax,
and the final cost therefore becomes INR (110+40=) 150 + 10% tax = 165.
STAGE 3 Now, the retailer pays INR 165 to buy the shirt from the wholesaler
because the tax liability had passed on to him. He has to package the shirt, and when
he does that, he is adding value again. This time, let’s say his value add is INR 30.
Now when he sells the shirt, he adds this value plus the VAT he has to pay the
government to the final cost. So the cost of the shirt becomes INR 214.5 Let’s see a
breakup for this: Cost = INR 165 + Value add = INR 30 + 10% tax = INR 195 + INR
19.5 = INR 214.5
So, the customer pays INR 214.5 for a shirt the cost price of which was basically only
INR 170. Along the way the tax liability was passed on at every stage of transaction
and the final liability comes to rest with the customer. This is called the Cascading
Effect of Taxes where a tax is paid on tax and the value of the item keeps increasing
every time this happens.

Stages Cost of inputs Value Added Tax (@10%) Total

Stage1: 90 10 10 110
Manufacturer
Stage2: 110 40 15 165
Wholesaler
Stage3: Retailer 165 30 19.5 214.50
170 44.5 214.50
 GST aims to solve this problem by introducing seamless Input Tax Credit (ITC).
Today, the tax that you pay on material purchases cannot be claimed from output tax.
This is set to change with ITC.
2. AFTER INTRODUCTION OF GST
In our example, when the wholesaler buys from the manufacturer, he pays a 10% tax
on his cost price because the liability has been passed on to him. Then he adds value
of INR 40 on his cost price of INR 100 and this brings up his cost to INR 140. Now
he has to pay 10% of this price to the government as tax. But he has already paid one
tax to the manufacturer. So this time what he does is, instead of paying INR (10% of
140=) 14 to the government as tax, he subtracts the amount he has paid already. So he
deducts the INR 10 he paid on his purchase from his new liability of INR 14, and pays
only INR 4 to the government. So the INR 10 becomes his input credit. When he pays
INR 4 to the government, he can pass on its liability to the retailer. So, the retailer
pays INR (140+14=) 154 to him to buy the shirt. At the next stage, the retailer adds
value of INR 30 to his cost price and has to pay a 10% tax on it to the government.
When he adds value, his price becomes INR 170. Now, if he had to pay 10% tax on it,
he would pass on the liability to the customer. But he already has input credit because
he has paid INR 14 to the wholesaler as the latter’s tax. So, now he reduces INR 14
from his tax liability of INR (10% of 170=) 17 and has to pay only INR 3 to the
government. And therefore, he can now sell the shirt for INR (140+30+17) 187 to the
customer.

Stages Value Cost after Tax Actual Total (2+3)

Added Value (@10%) Liability
Added
Stage1: 10 100 10 10 110
Manufacturer
has inputs @
90
Stage2: 40 140 14 4 154
Wholesaler
Stage3: 30 170 17 3 187
Retailer
170 187

In the end, every time an individual was able to claim input tax credit, the sale price
for him reduced and the cost price for the person buying his product reduced because
of a lower tax liability. The final value of the shirt also therefore reduced from INR
214.5 to INR 187, thus reducing the tax burden on the final customer.
So essentially, GST is going to have a two-pronged benefit:
One, it will reduce the cascading effect of taxes, and
second, by allowing input tax credit, it will reduce the burden of taxes and, hopefully,
prices.

Taxation Powers of union & State Government

In India, the constitution is Supreme and all laws and actions of the Government are sub-
ordinate to it. The constitution provides that no tax shall be levied or collected except by
authority of law. The Structure of Government in India is federal in nature.
As per article 1(1) of constitution, India shall be union of States. There is a bifurcation of
powers between union and states. Government of India (Central Government) has certain
powers in respect of whole country. Each state (and union territory) has certain powers in
respect of that particular state (Union territory).
Indian constitution India has a three-tier federal structure, comprising the following:-
(a) The Union Government
(b) The State Government
(c) The Local Government
The power to levy taxes and duties is distributed among the three tiers of Government, in
accordance with the provisions of Indian Constitution. The constitution consists of a
preamble, 25 parts containing 448 articles and 12 Schedules.

Provisions of constitution regarding taxation

The power to levy and collect taxes emerges from the constitution of India. The following are
the significant provisions of the constitution regarding taxation:
1. Article 265: It states that no tax shall be levied or collected except by authority of law. In
fact, it prohibits arbitrary collection of tax.
2. Article 246: The authority to enact law and levy taxes and duties is given by constitution
vide Article 246. The 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 the State.
3. Seventh Schedule (to Article 246): The Seventh Schedule contains three lists which
enumerate the matters under which the union and the State Governments have the authority to
make laws.
(a) List I (Union List): The Central Government has the exclusive right to make laws
in respect of any matter covered in this list. Parliament makes law in this regard.
Some of the items in List I are defence of India, naval, military and air forces, atomic
energy and mineral resources, central bureau of intelligence and investigation,
railways, highways, currency, RBI, post office saving bank, taxes on income other
than agricultural income, duties of customs, corporation tax, etc.
(b) List II (State List): It contains the matters in respect of which the State
Government has the exclusive right to make laws. These matters include public order,
police, local government, public health and sanitation, hospital, burials and burial
grounds, cremation ground, libraries, water, fisheries, betting and gambling, etc.
(c) List III (Concurrent List): It contains the matters in respect of which both
Central & State Governments have powers to make laws. This list includes criminal
laws, criminal procedure, marriage and divorce, contracts including partnership,
agency, bankruptcy and insolvency, trust and trustees, trade unions, industrial and
labour disputes, etc.

Power to Levy GST

The power to levy Goods and Services Tax (GST) has been conferred by Article 246A of the
constitution which was introduced by the constitution (101st Amendment) Act, 2016.

Framework of GST as introduced in India

Components of GST
There are 3 taxes applicable under this system: CGST, SGST & IGST.
 CGST: Collected by the Central Government on an intra-state sale (E.g.: transaction
happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (E.g.: transaction
happening within Maharashtra)
 IGST: Collected by the Central Government for inter-state sale (E.g.: Maharashtra to Tamil
Nadu)
 UTGST- and collected by the Union Territory on the intra-state supply of goods or services.
( E.g. transaction happening within Chandigarh)

Accordingly, a Dual GST Model was implemented that distributed powers to both Centre and
the States to levy the tax concurrently

What is Central Goods and Services Tax (CGST) ?

Central Goods and Services Tax (CGST) is an indirect tax levied and collected by the Central
Government on the intra-state supplies. Such supplies do not include alcoholic liquor for
human consumption. This tax levy is governed by the Central Goods and Services Act,
2017. And such a tax is levied on the transaction value of the goods or services supplied as
per section 15 of the CGST Act. The transaction value is the price actually paid or payable
for the said supply of goods or services.

What is State Goods and Services Tax (SGST)?

SGST is an indirect tax levied and collected by the State Government on the intra-state
supplies. Such supplies do not include alcoholic liquor for human consumption. This tax levy
is governed by the State Goods and Services Act (SGST), 2017. And such a tax is levied on
the transaction value of the goods or services supplied as per section 15 of the SGST Act.
The transaction value is the price actually paid or payable for the said supply of goods or
services.

What is Integrated Goods and Services Tax (IGST)?

IGST is approximately the sum total of CGST and SGST/UTGST and is levied by Centre on
all inter-State supplies of goods or services. Such supplies do not include alcoholic liquor
for human consumption. This tax levy is governed by the Integrated Goods and Services
Tax Act, 2017. And the same is apportioned between Centre and State governments.

What Is Union Territory Goods and Services Tax (UTGST)?

UTGST is an indirect tax levied and collected by the Union Territory on the intra-state supply
of goods or services. Such supplies do not include alcoholic liquor for human
consumption. This tax levy is governed by the Union Territory Goods and Services Act
(UTGST), 2017. And such a tax is levied on the transaction value of the goods or services
supplied as per section 15 of the CGST Act, 2017. The transaction value is the price actually
paid or payable for the said supply of goods or services.
Suppose goods worth INR 10,000 are sold by manufacturer A in Maharashtra to Dealer B in
Maharashtra. B resells them to trader C in Rajasthan for INR 17,500. Trader C finally sells to
End User D in Rajasthan for INR 30,000. Suppose CGST= 9%, SGST=9%. Then, IGST=
9+9=18%
Since A is selling this to B in Maharashtra itself, it is an intra-state sale and both CGST and
SGST will apply, at the rate of 9% each. (CGST+SGST)
B (Maharashtra) is selling to C (Rajasthan). Since it is an interstate sale, IGST at the rate of
18% will apply. (IGST)
C (Rajasthan) is selling to D also in Rajasthan. Once again it is an intra-state sale and both
CGST and SGST will apply, at the rate of 9% each. (CGST+SGST)

Advantages of GST
A. For business and industry
1. Easy compliance: A robust and comprehensive IT system would be the foundation of
the GST regime in India. Therefore, all tax payer services such as registrations,
 returns, payments, etc. would be available to the taxpayers online, which would make
compliance easy and transparent.
2. Uniformity of tax rates and structures: GST will ensure that indirect tax rates and
structures are common across the country, thereby increasing certainty and ease of
doing business. In other words, GST would make doing business in the country tax
neutral, irrespective of the choice of place of doing business.
3. Removal of cascading: A system of seamless tax-credits throughout the value-chain,
and across boundaries of States, would ensure that there is minimal cascading of
taxes. This would reduce hidden costs of doing business.
4. Improved competitiveness: Reduction in transaction costs of doing business would
eventually lead to an improved competitiveness for the trade and industry.
5. Gain to manufacturers and exporters: The subsuming of major Central and State taxes
in GST, complete and comprehensive set-off of input goods and services and phasing
out of Central Sales Tax (CST) would reduce the cost of locally manufactured goods
and services. This will increase the competitiveness of Indian goods and services in
the international market and give boost to Indian exports. The uniformity in tax rates
and procedures across the country will also go a long way in reducing the compliance
cost.

B. For Central and State Governments

1. Simple and easy to administer: Multiple indirect taxes at the Central and State
levels are being replaced by GST. Backed with a robust end-to-end IT system,
GST would be simpler and easier to administer than all other indirect taxes of the
Centre and State levied so far.
2. Better controls on leakage: GST will result in better tax compliance due to a
robust IT infrastructure. Due to the seamless transfer of input tax credit from one
stage to another in the chain of value addition, there is an inbuilt mechanism in the
design of GST that would incentivize tax compliance by traders.
3. Higher revenue efficiency: GST is expected to decrease the cost of collection of
tax revenues of the 3 Government, and will therefore, lead to higher revenue
efficiency.

C. For the consumer

1. Single and transparent tax proportionate to the value of goods and services: Due to
multiple indirect taxes being levied by the Centre and State, with incomplete or no
input tax credits available at progressive stages of value addition, the cost of most
goods and services in the country today are laden with many hidden taxes. Under
GST, there would be only one tax from the manufacturer to the consumer, leading
to transparency of taxes paid to the final consumer.
2. Relief in overall tax burden: Because of efficiency gains and prevention of
leakages, the overall tax burden on most commodities will come down, which will
benefit consumers.

Challenges in implementing GST:

1. Understanding between Centre and States: Unlike in many other countries where GST
is a centralized tax, in India it is to be executed by both central and state governments,
according to the proposals. This implies that both the structure and administration of
the levy had to emerge after detailed negotiations and bargaining between the centre,
29 states and the two Union Territories with legislatures. Given the sharp differences
 in the structure of the economy and sales tax revenue (as a ratio of gross state
domestic product, or GSDP) across states, the interests of the states did not always
coincide. Hence considerable effort was needed to persuade them to adopt a uniform
or even a broadly harmonized structure and administrative system for the tax.
2. Information Technology Platform: For ensuring seamless input tax credit, they had
agreed on a mechanism wherein the tax levied at the stage of interstate sale was to be
collected and pooled separately and transferred to the destination state through a
clearing house. They had also established the GST Network (GSTN), a special
purpose vehicle with equity contributions from the technology partner (NSDL), and
central and state governments to erect the information technology (IT) platform to
administer GST.
3. Issue of compensation for the loss of revenue: The 13th Finance Commission’s
recommendation that states should levy “flawless” GST to be eligible to receive
compensation for any loss of revenue put the entire negotiation process on the back
burner. The problem was compounded by the central government’s refusal to pay
compensation for the loss of revenue arising from the reduction in central sales tax
(CST). CST is the sales tax levied on inter-state transactions. The tax which was
levied at 4% by the exporting state was reduced to 2% in 2007 in preparation for the
introduction of GST. The central government had agreed to pay compensation for the
loss of revenue to the states until 2010, when the GST was to be implemented. When
the central government refused to compensate the states after 2010, a huge trust
deficit was created and the entire negotiation process virtually broke down. The new
finance minister has promised to clear the backlog of dues to the states and the states
have resumed the negotiation process. The finance minister has also announced that
the Constitution Amendment Bill will be placed in the winter session of Parliament.
These developments bode well.
4. Contentious issues and negotiation process: There are a number of issues on which
negotiations are necessary to reach a consensus between the centre and the states and
among the states themselves. The first issue relates to the inclusion of taxes within the
ambit of GST. The bone of contention relates to inclusion of purchase taxes on
foodgrain, taxes on motor spirit and high-speed diesel (GSD), and octroi or entry tax
in lieu thereof. The foodgrain surplus states have been levying the purchase tax, the
burden of which is exported to non-residents. The states were reluctant to bring motor
spirit and high speed diesel within the ambit as presently the tax is levied at a floor
rate of 20% and the states derive about 35% of their sales tax collections from these
petroleum products.
5. Determination of Revenue Neutral Rate: Another issue to be decided is the rates of
central and state GSTs to be levied. It was expected that the tax rates would be
revenue neutral. This implies that in the short term, there would not be any revenue
loss or gain, but over time the revenue productivity is expected to increase due to
better compliance of the tax and increased productivity of the economy. However,
estimation of revenue-neutral rate required consensus on the exemption list, number
of tax rates to be levied and the list of goods and services to be included in different
rate categories. Revenue-neutral rates had to be estimated for the centre and for each
of the states. Furthermore, when there was a preference for two rates— one for
essential goods and services consumed by common people and another general rate—
the estimation of revenue-neutral rates becomes further complicated.
6. Setting up of an administrative system: Another area where a lot of work is needed is
the setting up of an administrative system for GST and working out the transitional
arrangements. Ideally, from the viewpoint of reducing compliance cost, a unified
 administration would be desirable. However, that is not likely to happen as each state
would like to control the administration of its GST. In this situation, harmonization of
administrative processes with uniform systems, forms and procedures would be
necessary. This would also require additional training of tax collectors in the
administration and enforcement of the tax. Equally important is the dissemination of
information about the tax to taxpayers.

Legislative Framework:
There are total 35 GST Acts in India:
 1-The Central Goods and Service Tax Act, 2017 for imposing CGST on intraState
supply of goods and services.
 31- State Goods and Service Tax Act, 2017 for imposing SGST by respective state on
intra-State supply of goods and services.
 1 – The Union Territory Goods and Services Tax Act, 2017 for levying UTGST in 5
union Territories without State Legislatures on intra-Territory supply of goods and
services. (Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli,
Daman and Diu and Chandigarh)
 1 – The Integrated Goods and Service Tax Act, 2017 for levying IGST and
 1 – The Goods and services Tax (Compensation to states) Act, 2017 for levying GST
Compensation Cess.

There is single legislation – CGST Act, 2017 – for levying CGST. Similarly, Union
Territories without State legislatures [Andaman and Nicobar Islands, Lakshadweep, Dadra
and Nagar Haveli, Daman and Diu and Chandigarh] are governed by UTGST Act, 2017 for
levying UTGST. (India is a Union of States. The territory of India comprises of the territories
of the States and the Union Territories. Currently, there are 29 States and 7 Union Territories;
of which, two (Delhi and Pondicherry) are having Legislature).
States and Union territories with their own legislatures [Delhi and Puducherry] have their
own GST legislation for levying SGST. Though there are multiple SGST legislations, the
basic features of law, such as chargeability, definition of taxable event and taxable person,
classification and valuation of goods and services, procedure for collection and levy of tax
and the like are uniform in all the SGST legislations, as far as feasible. This is necessary to
preserve the essence of dual GST.

Classification of Goods and Services;- HSN (Harmonized System of Nomenclature) code is

used for classifying the goods under the GST. A new Scheme of Classification of Services
has been devised wherein the services of various descriptions have been classified under
various sections, headings and groups. Each group consists of various Service Codes (Tariff).
Chapters referred are the Chapters of the First Schedule to the Customs Tariff Act, 1975.
Manner of utilization of ITC:- Input Tax Credit (ITC) of CGST and SGST/UTGST is
available throughout the supply chain, but cross-utilization of credit of CGST and
SGST/UTGST is not possible, i.e. CGST credit cannot be utilized for payment of
SGST/UTGST and SGST/UTGST credit cannot be utilized for payment of CGST. However,
cross utilization is allowed between CGST/SGST/UTGST and IGST, i.e. credit of IGST can
be utilized for the payment of CGST/SGST/UTGST and vice versa
Registration Every supplier of goods and/ or services is required to obtain registration in the
State/UT from where he makes the taxable supply if his aggregate turnover exceeds ` 20 lakh
during a FY. However, the limit of ` 20 lakh will be reduced to ` 10 lakh if the person is
carrying out business in the Special Category States – [11 Special Category States are
specified in Article 279A(4)(g) of the Constitution] - States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal
Pradesh and Uttarakhand.
Composition Scheme In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State
supplies and IGST for inter-State supplies) is payable by every taxable person and in this
regard provisions have been prescribed in the law. However, for providing relief to small
businesses making intra-State supplies, a simpler method of paying taxes and accounting
thereof is also prescribed, known as Composition Levy.

Exemptions Apart from providing relief to small-scale business, the law also contains
provisions for granting exemption from payment of tax on essential goods and/or services.

SUPPLY
TAXABLE EVENT UNDER GST
Taxable event is very important matter in every tax law. Its determination is most crucial for
the proper implementation of any tax law. Taxable event is that on the happening of which
the charge is fixed. It is that event which on its occurrence creates or attracts the liability to
tax.
A taxable event in a law is the event, happening of which results in imposition of tax. ...
If a person earns any income, he is subject to income-tax and provisions of Income-tax Act
is applicable, unless such income is exempt from tax. Under excise duty, taxable event is
manufacturing of goods.
The taxable event under GST shall be the supply of goods or services or both made for
consideration in the course or furtherance of business. The taxable events under the
existing indirect tax laws such as manufacture, sale, or provision of services shall stand
subsumed in the taxable event known as ‘supply.’
RELEVANT DEFINITION
1. Meaning of goods [Sec. 2(52)]
As per section 2(52) “goods” means:
 every kind of movable property
 other than money and securities
 but includes
o actionable claim,
o growing crops,
o grass and
o things attached to or forming part of the land which are agreed to be
severed before supply or under a contract of supply.
2. Meaning of services [Sec. 2(102)]
As per section 2(102) “services” means
 anything
 other than goods, money and securities
 but includes activities relating to the
o use of money or its conversion
o by cash or by any other mode,
o from one form, currency or denomination, to another form, currency or
denomination
 for which a separate consideration is charged;
 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 currency). The related activity of providing the services for which a
commission is charged separately would be very much a ‘supply’.
3. Consideration [Sec. 2(31)]
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;
Note: 1. Consideration can be in monetary or non-monetary form or partly in
monetary form and partly in non-monetary form.
(a) Monetary consideration includes payment by cash, cheque or credit card,
bank transfer and deduction from bank account.
(b) Non-monetary consideration essentially means compensation in kind such
as the following:
 Barter, Part Exchange
 Doing or agreeing to do an act

 Consideration in GST is the basis for deciding upon the value of supply of goods or
supply of services.
 Consideration is must for 95% of supplies to be taxed, except for the specified
transactions as detailed under Schedule I to IV of Section 3 of the draft GST
Act,2016.
 Consideration is an obligation towards a supply. But, every payment cannot be
lamented as consideration towards the taxable supply.

4. Business [Sec. 2(17)]

It includes—
5. Job work [Sec. 2(68)]
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.

6. Works contract [Sec. 2(119)]

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 transfer of property
in goods (whether as goods or in some other form) is involved in the execution of
such contract.
7. Meaning of ‘Money’ {Section 2(75) of CGST Act}:
Money means Indian legal tender or any foreign currency, cheque, promissory note,
bill of exchange, letter of credit, draft, pay order, traveller cheque, money order,
postal or electronic remittance or any other instrument recognised by the Reserve
Bank of India when used as a consideration to settle an obligation or exchange with
Indian legal tender of another denomination. However, money shall not include any
currency that is held for its numismatic value.
8. Meaning of ‘Person’ {Section 2(84) of CGST Act):
  Person includes:
 an individual (i.e. a natural human being);
 a Hindu Undivided Family (‘HUF’) (The meaning of HUF has not been given
under the tax laws. As per the Hindu law, it means a family which consists of
all persons lineally descended from a common ancestor including their wives
and daughters. Married daughters are no longer treated as a member of HUF
after they get married in other families):
 a firm;
 a limited liability partnership firm;
 a company;
 a trust;
 a body -corporate incorporated by or under the laws of a country outside India;
 an association of persons (AOP), whether incorporated or not (an AOP refers
to a situation where two or more persons join hands to carry on any business);
 a body of individuals (BOI), whether incorporated or not (a BOI is similar to
AOP; however, all the participants of BOI are only individuals whereas in
case of AOP, one or more participant is a non-individual);
 government (Central Government as well as State Government);
 a local authority (ie, panchayat, municipality, cantonment board, etc); and
 a co-operative society registered under any law relating to cooperative
societies;
 a society as defined under the Societies Registration Act, 1860;
 a corporation established by/under any Central, State or Provincial Act or
Government company as defined u/s 2(45) of Companies Act, 2013;
 every artificial juridical person not covered above (artificial juridical persons
are entities which are not natural persons but are separate entities in the eyes
of law. Though they may not be sued directly in a court of law, but they can be
sued through persons managing them. Examples are universities, ICAI, ICSI,
etc);
Meaning of ‘Related Persons’ {Explanation to Section 15 of CGST Act}
 Persons shall be deemed to be ‘related persons’ if:
 such persons are officers or directors of one another’s businesses;
 such persons are legally recognised partners in business;
 such persons are employer & employee;
 a third person directly or indirectly owns, controls or holds 25% or more of
the outstanding voting stock or shares of both of them;
 one of them directly or indirectly controls the other;
 both of them are directly or indirectly controlled by a third person;
 together they directly or indirectly control a third person;
 they are members of the same person; or
 one of them is the sole agent, sole distributor or sole concessionaire of the
other.

9. Taxable Person under GST

A taxable person under GST is anyone who is registered under GST or required to be
registered under GST. Various criteria’s like turnover, business activity or transaction have
been specified in the GST Act, which details persons liable to be registered under GST.
Further, any person having registration under Service Tax, VAT or Central Excise on the date
of GST coming into force will automatically be considered a taxable person under GST.

MEANING AND SCOPE OF SUPPLY [SEC. 7]

 Activities to be treated as Supply even if made without consideration under
Schedule 1
Sections 7(1)( c) of the CGST Act : Activities to be treated as supply even without a
consideration

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

Here the following parameters are required to be satisfied to be attract under para-1

(a) There should be permanent transfer or disposal of business assets

(b) Transfer in kind of permanent in nature

(c) ITC has been availed on such business assets

2) Supply of goods or services or both between related persons or between distinct persons as
specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services or both.

3) Supply of goods—

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of
the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of
the principal.

4) Import of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

For example

1) ABC Ltd. is manufacturing uniform. Purchased raw material from market and has
stitched (convert) uniform, later donating uniform to the school. even ITC taken at
time of purchase on such raw material does it qualify as a supply ?

Ans : yes this transaction will be qualify as a supply because ABC Ltd donating
uniform to the school not a raw material , this clause cover only such assets no further
any minor processing hence gst is applicable ITC was taken at time of purchase
therefore as a ABC Ltd. Need to be reversal of ITC for the reasons donating uniform (
foc) no ITC will be available under section 17(5)(h)

2) Mr. X purchased one motor car for the purpose of his business on which no ITC
was allowed u/s 17(5) and subsequently it was gifted by him to one of his friends does
it qualify as a supply ?

Ans: in this case it will not be considerations as a supply because no ITC was taken at
time of purchase of such business assets hence gst is not applicable on this
transactions

3) Mr. X is a dealer engaged exclusively in supply of AC his taken ITC at time of

purchase & later donating an air conditioner to a school does it qualify as a
supply? Even though AC from his stock in trade

Ans; this transaction will be constitute as a supply because it is permanent transfer

/disposal of business of assets & ITC should have been availed on such assets hence
gst is applicable

4) A Chartered Accountant has rendered services to one of its client without

consideration does it qualify as supply?

Ans: this transactions will not be constitute as a supply because services have not
been covered under this clause para- 1 of schedule -1
 5) A Chartered Accountant has purchased one laptop for use in his office and tax
credit of `60000 was taken but after 2 years it was given by him to one of his
friend without consideration does it qualify as supply ?

Ans: yes in this case it will be considered to be supply because a chartered

accountant has taken ITC at the time of purchase of such laptop hence gst is
applicable

6) An individual buys a car for personal purpose & sells it to a car dealer. Does it
qualify as a supply?

Ans; this transaction will not be supply because an individual is not engaged any
exclusively business (non-business) further no ITC was admissible on such car at time
of acquisition hence, in the above case gst is not applicable

7) XYZ Ltd. Has 2 branches A and B in different states. A in Bangalore has supply of
old capital goods to B branch in tamil nadu for uses purpose but A branch not taken
ITC at the time of purchase does it qualify as a supply ?

Ans: this transaction will not be cover under this clause because A branch no ITC was
taken at the time of acquisition even though as A branch supply of business assets gst
is not applicable

8) A proprietor gives mobile (phone) from his business stock to his friend, as a gift on
his birth day. He claimed ITC such mobile at the time of purchases does it qualify as a
supply?

Ans: this transaction will be qualify as a supply in term of section 7(1)( c ) of cgst act
because proprietor permanent transfer or disposal of business assets where ITC has
been availed on such assets hence gst is applicable

WHAT ARE ACTIVITIES OR TRANSACTIONS WHICH ARE TREATED AS

SUPPLY UNDER SCHEDULE II
1. TRANSFER OF TITLE IN GOODS:
X sells fertilizers to Y. The Title in goods is transferred by X to Y. It is a
transaction of supply of goods.
2. Transfer of rights in goods:
Any transfer of right in goods or of undivided share in goods without the transfer of
title thereof, is a supply of services.
X Ltd. owns a computer. It is given on rent to Y. Ownership is not transferred.
X Ltd. Has transferred only right to use computer to Y. It is a transaction of supply of
services.
3. TRANSFER OF TITLE IN GOODS UNDER A FORWARD CONTRACT:
 Any 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, is a
supply of goods.
X enters into an agreement with Y on July 20, 2022. Under this agreement, X will sell
5,000 bags of white cement to Y on December1,2022 at Rs.810 per bag. Title in
goods will be transferred to Y at the time of payment of full consideration on
December1,2022. This is supply of goods.
4. LEASE/ TENANCY OF LAND AND BUILDING:
Any lease, tenancy, easement, licence to occupy land is a supply of services.
X owns agricultural land. It is given on lease for non- agricultural purposes to
Y on yearly rent of Rs. 24 lac. This lease is for 3 years. This transaction is treated as
supply of services.
5. Letting out of Land and Building:
Any lease or letting out of the building including a commercial, industrial or
residential complex for business or commerce, either wholly or partly, is a supply of
services.
X owns a industrial complex. It is given on lease to Y (monthly lease rent
being Rs. 8.5 lac). It is treated as supply of services.
6. TREATMENT OR PROCESS/JOB WORK SERVICES:
Any treatment or process which is applied to another person’s goods is a supply of
services.
7. Transfer of business assets:
Where goods forming part of the assets of a business are transferred or disposed of by
or under the directions of the person carrying on the business so as no longer to form
part of those assets, whether or not for a consideration, such transfer or disposal is a
supply of goods by the person.
8. USE OF BUSINESS GOODS FOR NON-BUSINESS USE:
Where, by or under the direction of a person carrying on a business, goods held or
used for the purposes of the business are put to any private use or are used, or made
available to any person for use, for any purpose other than a purpose of the business,
whether or not for a consideration, the usage or making available of such goods is a
supply of services.
9. Treatment of goods after the person (owing the business) ceases to be a taxable
person:
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.

10. RENTING OF IMMOVABLE PROPERTY:

11. Construction of a complex, building, civil structure:
Construction of a 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 first occupation, whichever is earlier.

12. Composite supply:

The following composite supplies shall be treated as a supply of services, namely: —
(a) works contract as defined in clause (119) of section 2;
X Ltd. owns a commercial flat at Nariman Point, Mumbai. Renovation work
of this flat is given to Y for a consideration of Rs.5 Lakh . Renovation work
will be done by Y according to design /plan given by X Ltd. Labour and
material for the renovation work will be supplied by Y. This is a works
contract. By virtue of Schedule II, it is treated as composite supply and
chargeable to GST.
(b) supply, by way of or as part of any service or in any other manner whatsoever, of
goods, being food 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.

13. Supply of Goods:

The following shall be treated as supply of goods, namely : Supply of goods by any
unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.

WHAT ARE ACTIVITIES OR TRANSACTIONS WHICH ARE TREATED AS

SUPPLY UNDER SCHEDULE I EVEN IF THE CONSIDERATION IS
ABSENT

1. PERMANENT TRANSFER OR DISPOSAL OF BUSINESS ASSETS:

It is applicable if the following points are satisfied :
 Supply is made by a taxable person to a taxable /nontaxable person.
 Supply is permanent transfer of business assets or permanent disposal of
business assets.
 In respect of the aforesaid supply, the supplier has availed input tax credit.

X is a retail dealer in garments. Out of his business stock, 5 shirts are given free of
cost to a friend. Input credit was availed when these shirts were purchased. There
is no consideration. However, the supply satisfies the above 3 points. GST is
applicable.
2. SUPPLY BETWEEN RELATED PERSONS OR DISTINCT PERSONS:
Supply of goods or services or both between related persons or between distinct
persons as specified in section 25, when made in the course or furtherance of
business.
Provided that gifts not exceeding fifty thousand rupees in value in a financial year
by an employer to an employee shall not be treated as supply of goods or services
or both.
3. SUPPLY OF GOODS BETWEEN PRINCIPAL AND AGENTS:
It covers the following:
(a)by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods
on behalf of the principal.

4. IMPORT OF SERVICES:
Import of services by a taxable person from a related person or from any of his
other establishments outside India, in the course or furtherance of business.
 Case: X is a businessman. Y, his younger brother, is an interior designer.
Presently, he is employed by a multi-national company and posted in Hong Kong
(Y is not in practice). X wants to construct a residential house in Pune. Interior
designing service is provided by Y from Hong Kong. X does not pay any
consideration to Y. GST is not applicable, as import of service by X is not in the
course of or furtherance of business (i.e., business of supplier Y).
Illustrations:
Problem 1: R is a supplier of goods located in Mumbai. In October, 2017 he has
imported Consultancy Services for Development of IT Software from U.S.A. for a
stipulated consideration of $ 80,000. Will the import of consultancy services be
treated as supply? Solution : The importation of service in the above case shall fall
within the ambit of term “supply” as it is for a consideration and in the course or
furtherance of business and shall be liable to IGST.

Problem 2: R is a supplier of goods located in Chandigarh. In November, 2017,

he has imported ‘ ‘Architecture Services’ from a relative consultant located in
Germany, without any consideration (monetary or non-monetary) for construction
of his personal house. (a) Will the import of architecture services for personal use
be treated as supply and liable to IGST? (b) What will be your answer if the above
services have been imported by R in the course or furtherance of business?
Solution : (a) Since, there is no consideration and it is for personal use,
importation of service in the given case shall not fall within the ambit of term
‘supply’ and not liable to IGST. However, in the above example if the import of
Architecture Service is for a consideration, it shall fall within the scope of term
‘supply’, although services have been imported for personal purposes.
(b) Since the services have been imported from a related person and these are in
the course or furtherance of business, it will be treated as supply even if it is
without consideration.

Problem 3: A dealer of washing machines, who has availed input tax credit on
washing machines, permanently transfers a washing machine from his stock-in-
trade, for personal use at his residence. Will this transfer for personal use be
treated as supply and liable for GST?
Solution: Such transaction though without, a consideration shall constitute supply
and be liable to GST, as it is a permanent transfer of washing machine for his
personal use

Problem 5: R is engaged in supply of certain goods in Delhi and Haryana. He

wishes to transfer goods worth Rs. 1,40,000 from Delhi to its branch in Haryana.
Will such transfer be treated as supply and liable for GST?
Solution: R shall be treated as distinct persons. Thus any supply of goods or
services or both between Delhi to branch at Haryana shall be subject to integrated
tax in terms of IGST Act, even though such transaction may not involve any
payment of consideration.

Problem 6: Employees of a R Ltd., which is a subsidiary of G Limited, have been

sent on deputation basis to its Holding Company namely G Limited. Will such
transfer on deputation be treated as supply and liable to GST?
Solution: Such transfer of employee shall fall within the ambit of the term
‘supply’ even in the absence of any consideration. As both the companies fall
under the definition of related person.

Problem 7: R, the Principal located in Nagpur (Maharashtra) supplies certain

goods to his agent G, located in Delhi. G undertakes to supply the said goods in
Delhi on behalf of R. Will the above activity be treated as supply and liable for
GST?
Solution : As per Schedule I of CGST Act, supply of goods by a principal to his
agent where the agent undertakes to supply such goods on behalf of the principal
is treated as supply even if such supply is without any consideration.
Thus, such supply of goods by R to G shall fall within the ambit of the term
‘supply’ even if made without consideration and shall be liable for integrated tax
under IGST Act.

Problem 8: R works as an agent and is located in Mumbai. G is a manufacturer

located in Delhi. R agrees to purchase certain goods from Mumbai on behalf of G
every month and supply the same to G. Will the above activity be treated as
supply and liable for GST? Solution: As per Schedule I of CGST Act, supply of
goods by an agent to his principal where the agent undertakes to receive such
goods on behalf of the principal shall be treated as supply even if it is without
consideration. Thus such supply of goods by R to G shall fall within the term of
supply, even if made without consideration. This supply of goods from R to G
shall be subject to integrated tax under IGST Act.
Problem 9: R lives in Germany. His brother G is carrying on business in India. G
imports technical services from R without any consideration in November, 2017
in the course or furtherance of business. Will this be treated as supply or services
although G did not pay any consideration to R?
Solution : As per Schedule I of the CGST Act. import of services by a taxable
person from a related person or from any of his other establishments outside India,
in the course or furtherance of business shall by treated as supply even if it is
without any consideration. The said importation of service shall fall within the
ambit of term “supply” and G shall be liable to pay integrated tax under IGST Act,
2017 even if R has provided consultancy services without any consideration.
However, if such services are for personal use then it will not be treated as supply
unless there is a consideration.

Problem 10: Under a scheme of finance, Maruti Ltd. gives the possession of car
to the buyer in November, 2017. It agrees to transfer the ownership of the car to
the buyer in January, 2019 upon payment of full consideration of Rs. 9,60,000, in
installments as agreed. What will be the nature of this transaction?
Solution : As per Schedule II of the CGST Act, 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 shall be treated as supply of goods. Thus,
the aforesaid transaction shall be treated as supply of goods on hire purchase and
liable to GST.

Problem 11: R, the owner of a specific piece of land in Delhi, leases the same to
G for one year for an agreed, Consideration in November, 2017. What will be the
nature of this transaction?
 Solution: As per Schedule II of the CGST Act, any lease, tenancy, easement,
license to occupy land shall be treated as supply of services. Thus, the aforesaid
lease of land shall be treated as a supply of services and liable to GST.

Problem 12: R is a manufacturer of goods. He sends his goods for the purpose of
special packaging to G on job work. The packaging material has also been
provided by R. What is the nature of this activity?
Solution: As per Schedule II of the CGST Act, treatment or process applied to
another person’s goods (job work) shall be treated as supply of services. Further,
it shall be immaterial, whether the job-work is to be carried out by a job-worker
with or without any material. In the given case, the activity of special packing by
G shall be treated as supply of services. Further, it shall be immaterial whether G
uses his own packing material or the same is provided by R.

ACTIVITIES OR TRANSACTIONS TREATED NEITHER AS THE SALE OF

GOODS NOR SALE OF SERVICES
(A) ACTIVITIES OR TRANSACTIONS SPECIFIED IN SCHEDULE III
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any court or Tribunal established under any law for the time being in force.
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;
(b) the duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity; 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.
6. Actionable claims, other than lottery, betting and gambling.
7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of 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.

(B) SUCH ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY THE

CENTRAL GOVERNMENT, A STATE GOVERNMENT OR ANY LOCAL
AUTHORITY IN WHICH THEY ARE ENGAGED AS PUBLIC
AUTHORITIES, AS MAY BE NOTIFIED BY THE GOVERNMENT ON THE
RECOMMENDATIONS OF THE COUNCIL, SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES.

DIFFERENT TYPES OF SUPPLY UNDER GST

A. Based on Location
 Intra-State supply
Intra-State is a type of supply of goods or services where the location of the supplier
and the place of supply of goods are in the same State or same Union Territory.
Exceptions – Supply of goods to or by a Special Economic Zone developer or a SEZ
unit; or Goods imported into the territory of India; or made to a tourist (section 15).

Territorial waters
Where the location of the supplier is in the territorial waters; or Where the place of
supply is in the territorial waters; The place of supply will be in the nearest Coastal
State or Union Territory.

Inter-State supply
It is a supply of goods or services, where the location of the supplier and place of
supply are in-
 Two different States;
 Two different Union territories; or
 A State and a Union territory It also includes import of goods or services into
the territory of India.

Further, the following shall be treated as an inter-state supply of goods or services:

 When the supplier is located in India and the place of supply is outside India;
 To or by a Special Economic Zone (SEZ) developer or a SEZ unit; or
 In the taxable territory, not being an intra-state supply and not covered
elsewhere.

B. Based on Combination
Composite Supply and Mixed Supply
GST is payable on supply of goods/ services at a rate notified by the government. In case of
supply of single goods/ services poses no problem for determination of applicable GST rate,
if they are clearly identifiable. However, some of the supplies are a combination of
goods/combination of services/ combination of services and goods wherein each individual
component of such supply attracts a different rate of tax. In such cases, determination of
applicable rate of tax to be levied on such supplies may be a challenge. To address this issue,
the GST law categorises such supplies into composite supplies and mixed supplies.

Composite Supply
U/s 2(30) of CGST Act, 2017 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 ordinary course of business,
 and out of all supplies, one of which is principal supply. (Principal supply means
predominant element of composite supply for which other supplies forming part of
composite supply play an ancillary role)
Condition for Composite Supply
Any supply of goods or services will be treated as composite supply if it satisfies the
following conditions simultaneously:
i) supply of two or more taxable supply
ii) it is naturally bundled i.e., goods or services are usually provided together in
normal course of business. They cannot be separated.
iii) One of the supplies must be principal supply.
Tax liability for Composite Supply
As per Sec. 8 of CGST Act, 2017 a Composite Supply, comprising two or more supplies, one
of which is a principal supply, shall be treated as a supply of such principal supply.
Accordingly, the tax rate applicable for the goods or services which is treated as principal
supply is the rate of tax for Composite Supply.
Mixed Supply
It means two or more individual supplies of goods or services, made in conjunction with each
other by a taxable person for a single price where such supply does not constitute a composite
supply.
Guiding principles for determining a supply as Composite Supply or Mixed Supply
Following guiding principles could be adopted to determine whether it would be a Composite
Supply or Mixed Supply:

Illustrations
Problem 1:
R is selling hampers consisting of canned foods, sweets, chocolates, cakes and dry fruits on
diwali and other festivals. What is the kind of supply and at which rate will GST be payable
by R?
Solution: The supply of hamper consisting of canned foods, sweets, chocolates, cakes and dry
fruits if sold for a single price shall be a mixed supply and the GST rate shall be rate of any of
these items which attracts the highest rate of tax. However, if each of the items is supplied
separately and is not dependant on any other item, it shall not be mixed supply and GST rate
applicable shall be the rate applicable for each supply.
Problem 2: R dispatched chocolates to G from Delhi to Punjab after getting it packed and
paying insurance charges of such goods. What is the kind of such supply of chocolates and
what rate will GST be applicable?
Solution: 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 the
principal supply. GST rate applicable in this case shall be the GST rate of chocolates.
Problem3: R purchases air travel ticket of Air India from Delhi to Bangalore for Rs. 9,000
which includes free food on board and free insurance. What is the kind of such supply and
what rate will GST be applicable? Solution: Air travel ticket from Delhi to Bangalore costing
Rs. 9,000 includes free food on board and free insurance. Therefore, it is a case of composite
supply. In this case, the transport of passenger, institutes the pre-dominant element of the
composite supply, and is treated as the principal supply and all other supplies are ancillary.
Hence, GST rate applicable in this case shall be the GST rate of transportation of passenger
by air.
Problem 4: Mr. Ram being a dealer in laptops, sold laptop to a customer in Laptop Bag, for
Rs. 55,000. CGST and SGST for laptop @ 18% and for laptop bag @ 28%. What would be
the rate of tax leviable? Also find the GST liability.
Solution: If the laptop bag is supplied along with the laptop in the ordinary course of
business, the principal supply is that of the laptop and the bag is an ancillary. Therefore, it is
a composite supply and the rate of tax would that as applicable to the laptop. Hence,
applicable rate of GST 18% on Rs.55,000. CGST is Rs.4,950 and SGST is Rs. 4,950
Problem 5: Mr. A booked a Rajdhani train ticket, which includes meal. Is it composite supply
or mixed supply?
Solution : It is a bundle of supplies. It is a composite supply where the products cannot be
sold separately. The transportation of passenger is, therefore, the principal supply. Rate of tax
applicable to the principal supply will be charged to the whole composite bundle. Therefore,
rate of GST applicable to transportation of passengers by rail will be charged by IRCTC on
the booking of Rajdhani ticket.
Problem 6 :
Big Bazar offers a free bucket with detergent purchased. Is it composite supply or mixed
supply? Assume rate of GST for detergent @ 28% and bucket @ 18%.
Solution : This is a mixed supply. These items can be sold separately. Product which has the
higher rate will apply on the whole mixed bundle.
Problem 7: XYZ Ltd. is a manufacturer of cosmetic products, supplied a package consisting
of hair oil (GST Rate -18%), Sun screen cream (GST Rate - 28%), Shampoo (GST rate -
28%) and hair comb (GST Rate -12%). The Price per package is Rs. 500 (exclusive of taxes).
10,000 packages were supplied by the company to its dealers. Determine the nature of supply
and its tax liability.
Solution: This supply would be regarded as mixed supply, since in this case each of the goods
in the package have individual identity and can be supplied separately, but are deliberately
supplied conjointly for a single consolidated price. The tax rates applicable in case of mixed
supply would be the rate of tax attributable to that one supply (goods, or services) which
suffers the highest rate of tax from amongst the supplies forming part of the mixed supply.
Therefore, the package will be chargeable to 28% GST.

Problem 8 : A Ltd. a manufacturing concern in Rajasthan has opted for composition scheme
furnishes you with the following information for Financial Year 2018-19. It requires you to
determine its composition tax liability and total tax liability. In Financial Year 2017-18 total
value of supplies including inward supplies taxed under reverse charge basis are Rs.
68,00,000. The break up of supplies are as follows –
Continuous Supply
Continuous supply is of two types viz.,
 continuous supply of goods and
 continuous supply of services.
 C. Based on Treatment

Exempt Supply
Exempt Supply of any goods or services is one which attracts nil rate of tax or which may be
wholly exempt from tax. It includes non-taxable supply. In the case of exempt supply in
respect of any goods and/or services, the taxable person shall not be required to pay tax.
Zero-Rated Supply
It means export or supply of goods or services to a Special Economic Zone developer or a
Special Economic Zone unit.
Non-Taxable Supply
Non-taxable supply is the sale of any good or service which attracts nil rate of tax and is
similar to exempt supply.
Taxable Supply
Supply on which tax shall be paid under GST.

Levy and Collection of GST under CGST Act, IGST Act and UTGST Act

Se
ction 9 of CGST Act/SGST Act and Section 5 of IGST Act are the Charging Sections for
the purposes of levy of GST.
CGST and SGST shall be levied on all intra-state supplies of goods and/or services and IGST
shall be levied on all inter-state supplies of goods and/or services respectively.
A. Levy and Collection of GST Under CGST Act. (Section 9)
1. Levy of central goods and service tax [Section 9(1)]:
U/s 9(1) of CGST Act, 2017 there shall be levied a tax –
 Called the Central Goods and Services Tax (CGST);
 On all the intra-state supplies of goods or services or both, except on supply of
alcoholic liquor for human consumption;
 On the value determined u/s 15; and
 At such a rate (maximum 20%,) as notified by the Central Government on
recommendation of GST Council; and
 Collected in such a manner as may be prescribed; and
 Shall be paid by the taxable person.
2. Central tax on petroleum products to be levied from the date to be notified [Section
9(2)]:
U/s 9(2) of CGST Act 2017, the CGST of following supply shall be levied with the effect
from such date as notified by the Central Government on recommendation of GST Council
 Petroleum crude
 High speed diesel
 Motor spirit (commonly known as petrol)
 Natural gas
 Aviation turbine fuel

3. Tax payable on reverse charge basis [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.
Further, all the provisions of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services or both.
4. Tax payable on reverse charge if the supplies are made to a registered person by
unregistered person [Section 9(4)]:
The central tax in respect of the supply of taxable goods or services or both by a supplier,
who is not registered, to a registered person shall be paid by such person on reverse charge
basis as the recipient and all the provisions of this Act shall apply to such recipient as if he
is the person liable for paying the tax in relation to the supply of such goods or services or
both. [Section 9(4) has been deferred till 30.6.2018]
5. Tax payable on intra-State supplies by the electronic commerce operator on notified
services [Section 9(5)]
As per section 2(45) of the CGST Act, 2017, “electronic commerce operator” means any
person who owns, operates or manages digital or electronic facility or platform for electronic
commerce.
Further, “electronic commerce” means the supply of goods or services or both, including
digital products over digital or electronic network.
Thus, Electronic Commerce Operators (ECO), like flipkart, uber, makemy-trip, display
products as well as services which are actually supplied by some other person to the
consumer, on their electronic portal. The consumers buy such goods/services through these
portals. On placing the order for a particular product/service, the actual supplier supplies the
selected product/service to the consumer. The price/consideration for the product/service is
collected by the ECO from the consumer and passed on to the actual supplier after the
deduction of commission by the ECO.
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 (ECO), if such services are supplied through it.
Further, all the provisions of this Act shall apply to such electronic commerce operator
(ECO) as if he is the supplier liable for paying the tax in relation to the supply of such
services.
However, where an electronic commerce operator (ECO) does not have a physical presence
in the taxable territory, any person representing such electronic commerce operator (ECO) for
any purpose in the taxable territory shall be liable to pay tax.
Where an electronic commerce operator (ECO) does not have a physical presence in the
taxable territory and also, he does not have a representative in the said territory, such
electronic commerce operator shall appoint a person in the taxable territory for the purpose of
paying tax and such person shall be liable to pay tax.
The Government vide Notification No. 17/2017 CT (R) dated 28.06.2017 has notified the
following categories of services supplied through ECO for this purpose—
1. services by way of transportation of passengers by a radio-taxi, motorcab, maxicab
and motor cycle;
2. 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 the CGST Act.
B. Levy and Collection of GST Under IGST Act. (Section 5)
The provisions under section 5 of the IGST Act are similar to section 9 of CGST Act except
—
1. the word CGST has been substituted by IGST under IGST Act
2. under IGST Act, tax called integrated tax is to be levied on all inter-State supplies and
on goods imported into India.
3. maximum rate under section 5(1) of the IGST Act is 40% (i.e. 20% CGST +
20% UTGST).
U/s 5(2) of IGST Act 2017, the CGST of following supply shall be levied with the effect
from such date as notified by the Central Government on recommendation of GST Council
 Petroleum crude
 High speed diesel
 Motor spirit (commonly known as petrol)
 Natural gas
 Aviation turbine fuel
C. Levy and Collection of GST Under UTGST Act. (Section 7)
The provisions under section 7 of the UTGST Act are similar to section 9 of CGST Act
except—
1. the word CGST has been substituted by the word UTGST under the UTGST Act.
2. under UTGST Act, tax called UT tax is be levied on all intra-State supplies,
3. maximum rate 7(1) of UTGST Act is 20%.

Registration under GST

Introduction
In any tax system, registration is the most fundamental requirement for identification of tax
payers to ensure tax compliance in the economy. Registration of any business entity under the
GST Law implies obtaining a unique alphanumeric code from the concerned tax authorities
for the purpose of collecting taxes on behalf of the Government and to avail input tax credit
of the taxes paid on its inward supplies. Without registration, a person can neither collect tax
from his customers nor claim any input tax credit of tax paid by him.
What is a GST Registration?
GST Registration of a business with the tax authorities implies obtaining a unique, 15-digit
Goods and Service Tax Identification Number (GSTIN) from the GST authorities so that all
the operations of and the data relating to the business can be collected and correlated. In any
tax system this is the most fundamental requirement for identification of the business for tax
purposes or for having any compliance verification program.
What is advantage of taking registration in GST?
Registration under Goods and Service Tax (GST) regime will confer following advantages to
the business:
• Legally recognized as supplier of goods or services.
• Proper accounting of taxes paid on the input goods or services which can be utilized for
payment of GST due on supply of goods or services or both by the business.
• Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid
on the goods or services supplied to purchasers or recipients.
• Getting eligible to avail various other benefits and privileges rendered under the GST laws.

Can a person without GST registration claim ITC and collect tax?
No, a person without GST registration can neither collect GST from his customers nor can
claim any input tax credit of GST paid by him.
What will be the effective date of registration?
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 the
date on which he became 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 a person taking registration voluntarily while being within the threshold exemption limit
for paying tax, the effective date of registration shall be the date of order of registration.
Who needs GST Registration?
The criteria for persons who should be registered under GST is provided under Chapter 6 of
the GST Act. As per the GST Act, the following persons should mandatorily obtain GST
registration:
GST Registration is mandatory for-

 Any business involved in the supply of goods whose turnover in a financial

year exceeds Rs.40 lakhs for Normal Category states (Rs.20 lakhs for Special
Category states)*
 Any business involved in the supply of services whose turnover in a financial
year exceeds Rs.20 lakhs for Normal Category states (Rs.10 lakhs for Special
Category states)
 Every person who is registered under an earlier law (i.e., Excise, VAT, Service
Tax etc.) needs to register under GST, too.
 When a business which is registered has been transferred to
someone/demerged, the transferee shall take registration with effect from the
date of transfer.
 A person making inter-state supplies
 Casual taxable person (see below)
 Non-Resident taxable person (see below)
  Agents of a supplier
 Those paying tax under the reverse charge mechanism
 Input service distributor (see below)
 e-Commerce operator or aggregator*
 Person who supplies via e-commerce aggregator
 Person supplying online information and database access or retrieval (OIDAR)
services from a place outside India to a person in India, other than a registered
taxable person

Note: If your turnover is supply of only exempted goods/services which are exempt under
GST, this clause does not apply.

*Some Normal Category states have chosen to continue with the existing limit of Rs.20 lakh,
and some Special Category states have opted for an increased limit of Rs.40 lakh.

**e-commerce sellers/aggregators need not register if total sales is less than Rs. 20
lakh. Notification No. 65/2017 – Central Tax dated 15th November 2017

Who is a Casual Taxable Person?

(Section 2 (20) of the CGST)
Casual Taxable Person under GST is a person who does not have a fixed place of business
but occasionally undertakes transactions involving supply of goods and/or services to the
state where GST is applicable.
Example: A person who has a place of business in Bangalore supplies taxable consulting
services in Pune where he has no place of business would be treated as a casual taxable
person in Pune.

Who is Non Resident Taxable person?( Section 2(77) of the CGST)

NRTP is a non-resident person who supplies to the States of India where GST is applicable
but does not have a fixed place of business in India. It is similar to above except the non-
resident has no place of business in India. Further Resident Taxable Person which is RTP full
form in GST.
Who is Input Service Distributor (ISD)?( Section 2(61) of the CGST)
Input Service Distributor (ISD) is a business or person who receives tax invoices for services
that were rendered by its branches. ISD than distributes the input tax credit on proportionate
to its branches by issuing an ISD invoice. It shall be noted that the GST Identification number
of the branches can be different but they shall be enrolled under the same PAN. Moreover,
ISD can only distribute credit on services but credits on goods or capital goods cannot be
distributed.
Who is Electronic Commerce Operator?
Electronic commerce refers to the supply of goods or service, including digital products over
a digital or electronic network. An electronic commerce operator refers to any person who
owns, operates or manages digital or electronic facility or platform for electronic commerce.
All electronic commerce operators should mandatorily obtain GST registration, irrespective
of turnover.
GST Registration based on the types of taxpayers in GST
(i) Every normal person who is required to obtain GST registration needs to
apply for it within 30 days from the date on which he was liable to obtain
it.
(ii) Casual Taxable Person or Non-Resident Taxable Person needs to apply for
the GST registration 5 days before their commencement of business.
(iii) CTP or NRTP or RTP in GST can obtain GST registration for 90 days that
can be extended to another 90 days. However, it shall be noted that these
taxpayers needs to pay estimated GST in advance and any excess amount
paid by them will be refunded back.
 Registration number in GST will be PAN based and hence, having PAN would be a
prerequisite for obtaining registration.
 The assessee must obtain separate registration for each State, as registration under
GST will be State-wise,
 The assessee has an option to obtain a separate registration for each of the ‘business
verticals’ in the same State.
If a person is operating in different states, with the same PAN number, whether he can
operate with a single Registration?
Ans. No. Every person who is liable to take a Registration will have to get registered
separately for each of the States where he has a business operation and is liable to pay GST in
terms of Section 22(1) of the CGST/TSGST Act.
What are the prerequisites for registration on the GST Portal?
To apply for a new registration, you must have
- PAN card/details of your business
- Valid and accessible e-mail ID and Mobile Number
- Documentary proof of constitution of your business
- Documentary proof of promoters/partners
- Documentary proof of principal place of business
- Details of additional places of business, if applicable
- Details of Authorised Signatories including photographs and proof of appointment
- Details of Primary Authorised Signatory
- Business bank account details along with bank statement or first page of bank passbook
- Valid Class II or Class III DSC of authorised signatory in case of companies and LLPs;
valid Class II or Class III DSC or Aadhaar (for E-Sign option) in case of other entities. Note:
Your mobile number should be updated with the Aadhaar authorities otherwise you cannot
use E-Sign option because OTP will be sent to the number in the Aadhaar database.

Procedure
Step 1: Go to the GST Portal
Access the GST Portal ->https://www.gst.gov.in/ > Services -> Registration > New
Registration option.
Step 2: Generate a TRN by Completing OTP Validation
The new GST registration page is displayed. Select the New Registration option. If the GST
registration application remains uncompleted, the applicant shall continue filling the
application using TRN number.

 Select the Taxpayer type from the options provided.

 Choose the state as per the requirement.
 Enter the legal name of the business/entity, as mentioned in the PAN database. As the
portal verifies the PAN automatically, the applicant should provide details as
mentioned in the card.
 In the Permanent Account Number (PAN) field, enter PAN of the business or PAN of
the Proprietor. GST registration is linked to PAN. Hence, in the case of a company or
LLP, enter the PAN of the company or LLP.
 Provide the email address of the Primary Authorized Signatory. (Will be verified in
next step)
 Click the PROCEED button.
Step 3: OTP Verification & TRN Generation
On submission of the above information, the OTP Verification page is displayed. OTP will be
valid only for 10 minutes. Hence, enter the two separate OTP sent to validate the email and
mobile number.

 In the Mobile OTP field, enter the OTP.

 In the Email OTP field, enter the OTP.
Step 4: TRN Generated
On successfully completing OTP verification, a TRN will be generated. TRN will now be
used to complete and submit the GST registration application.
Step 5: Log in with TRN
Upon receiving TRN, the applicant shall begin the GST registration procedure. In the
Temporary Reference Number (TRN) field on the GST Portal, enter the TRN generated and
enter the captcha text as shown on the screen. Complete the OTP verification on mobile and
email.
Step 6: Submit Business Information
Various information must be submitted for obtaining GST registration. In the first tab,
business details must be submitted.

 In the Trade Name field, enter the trade name of the business.
 Input the Constitution of the Business from the drop-down list.
 Enter the District and Sector/ Circle / Ward / Charge/ Unit from the drop-down list.
 In the Commissionerate Code, Division Code and Range Code drop-down list, select
the appropriate choice.
 Opt for the Composition Scheme, if necessary
 Input the date of commencement of business.
 Select the Date on which liability to register arises. This is the day the business
crossed the aggregate turnover threshold for GST registration. Taxpayers are required
to file the application for new GST registration within 30 days from the date on which
the liability to register arises.
Step 7: Submit Promoter Information
In the next tab, provide promoters and directors information. In case of proprietorship, the
proprietors’ information must be submitted. Details of up to 10 Promoters or Partners can be
submitted in a GST registration application.
The following details must be submitted for the promoters:

 Personal details of the stakeholder like name, date of birth, address, mobile number,
email address and gender.
 Designation of the promoter.
 DIN of the Promoter, only for the following types of applicants:
o Private Limited Company
o Public Limited Company
o Public Sector Undertaking
o Unlimited Company
o Foreign Company registered in India
 Details of citizenship
 PAN & Aadhaar
 Residential address
In case the applicant provides Aadhaar, the applicant can use Aadhaar e-sign for filing GST
returns instead of a digital signature.
Step 8: Submit Authorised Signatory Information
An authorised signatory is a person nominated by the promoters of the company. The
nominated person shall hold responsibility for filing GST returns of the company. Further,
the person shall also maintain the necessary compliance of the company. The authorised
signatory will have full access to the GST Portal. The person shall undertake a wide range of
transactions on behalf of the promoters.
Step 9: Principal Place of Business
In this section, the applicant shall provide the details of the principal place of business. The
Principal Place of Business acts as the primary location within the State where the taxpayer
operates the business. It generally addresses the books of accounts and records. Hence, in the
case of a company or LLP, the principal place of business shall be the registered office.
For the principal place of business enter the following:

 Address of the principal place of business.

 Official contact such as Email address, telephone number (with STD Code), mobile
number field and fax number (with STD Code).
 Nature of possession of the premises.
If the principal place of business located in SEZ or the applicant acts as SEZ developer,
necessary documents/certificates issued by Government of India are required to be uploaded
by choosing ‘Others’ value in Nature of possession of premises drop-down and upload the
document.
In this section, upload documents to provide proof of ownership or occupancy of the property
as follows:

 Own premises – Any document in support of the ownership of the premises like
Latest Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill.
 Rented or Leased premises – A copy of the valid Rent / Lease Agreement with any
document in support of the ownership of the premises of the Lessor like Latest
Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill.
 Premises not covered above – A copy of the Consent Letter with any document in
support of the ownership of the premises of the Consenter like Municipal Khata copy
or Electricity Bill copy. For shared properties also, the same documents may be
uploaded.
Step 10: Additional Place of Business
Upon having an additional place of business, enter details of the property in this tab. For
instance, if the applicant is a seller on Flipkart or other e-commerce portal and uses the
seller’s warehouse, that location can be added as an additional place of business.
Step 11: Details of Goods and Services
In this section, the taxpayer must provide details of the top 5 goods and services supplied by
the applicant. For goods supplied, provide the HSN code and for services, provide SAC code.
Step 12: Details of Bank Account
In this section, enter the number of bank accounts held by the applicant. If there are 5
accounts, enter 5. Then provide details of the bank account like account number, IFSC code
and type of account. Finally, upload a copy of the bank statement or passbook in the place
provided.
Step 13: Verification of Application
In this step, verify the details submitted in the application before submission. Once
verification is complete, select the verification checkbox. In the Name of Authorized
Signatory drop-down list, select the name of the authorised signatory. Enter the place where
the form is filled. Finally, digitally sign the application using Digital Signature Certificate
(DSC)/ E-Signature or EVC. Digitally signing using DSC is mandatory in case of LLP and
Companies.
Step 14: ARN Generated
On signing the application, the success message is displayed. The acknowledgement shall be
received in the registered e-mail address and mobile phone number. Application Reference
Number (ARN) receipt is sent to the e-mail address and mobile phone number. Using the
GST ARN Number, the status of the application can be tracked

Payments under GST

Introduction
Section 49 deals with payment provisions under GST.
A quick glance at the provisions related to payment read with the Payment of Tax Rules
clearly depicts the Government’s intent to focus primarily on e-payments for the liabilities
arising under GST rather than over the counter payments.
Simultaneously, for the small assessee, over the counter payment by cash/cheque/DD is
permissible up to the limit of Rs. 10,000 per challan per tax period.

Payments under GST can be made either through electronic cash ledger or through electronic
credit ledger as per the provisions of Section 49 of CGST Act, 2017 and Rules framed there
under.
Significant notable points are: -
1. Payment sources: Payment can be made through following two modes: -
i. Online banking;
ii. Over the counter (OTC)
 Online banking: - Payment of GST by taxpayer can be made through
four online modes: -  Internet banking  Debit card/Credit card 
NEFT  RTGS (No limit)
 Over The Counter (OTC): - OTC up to Rs. 10,000/- is permitted per
challan (online challan only generated at GST portal) per tax period by

Challan in Form GST PMT-06 generated at GST portal shall be valid

for a period of 15 days.
When Tax liability is more than 10000 it is mandatory to pay online.

Exceptions for offline Payment:

 Deposit made by PO
 To recover Outstanding proceedings/ sale of Movable/Immovable Property.
 During any investigation etc.
 Government Dept
 Persons notified by Commisioner.

What are E-Ledgers?

The GSTN maintains three different types of ledgers for tracking the payments, credits
and liabilities of a person registered under GST.
Electronic Ledgers or E-Ledgers are statements of cash and input tax credit in respect of
each registered taxpayer. In addition, each taxpayer shall also have an electronic tax liability
register. Once a taxpayer is registered on Common Portal (GSTN), two e-ledgers (Cash
&Input Tax Credit ledger) and an electronic tax liability register will be automatically opened
and displayed on his dash board at all times.
A. Electronic Liability Register:
In terms of provisions of Section 49(7) of the CGST Act, 2017 read with Rule 1 of Payment
of Tax Rules, all liabilities of a taxable person under this Act shall be recorded and
maintained in an electronic liability register to be maintained in Form GST PMT-01.
Significant notable points are: -
1. All amounts payable shall be debited to this register.
2. Debit to this register will be done for: -
i. Tax and other dues as per return;
ii. Tax and other dues determined by proper officer;
iii. Tax & interest due to mismatch;
iv. Any interest.
3. Credit to this register will be done by debiting electronic cash or credit ledger.
4. Sequence of discharging tax and other dues:
i. Previous tax period
ii. Current tax period
iii. Any other amount payable under this Act (Sec73 and 74).

B. Electronic Credit Ledger: -

In terms of provisions of Section 49(2) of the CGST Act, 2017 read with Rule 2 of Payment
of Tax Rules, the Input Tax Credit (ITC) as self-assessed in the return of a registered
person shall be credited to his electronic credit ledger to be maintained in Form GST PMT-
02.
Significant notable points are: -
1. Debit/credit entries: Entries in Electronic credit ledger shall be as under:
i. Self-assessed ITC in the return as per Section 41 read with Section 49(2) shall be
credited to the ledger.
ii. Utilization towards output tax shall be debited to the ledger.
iii. Unutilized amount in the Electronic Credit Ledger after payment of tax and other
dues can be claimed as refund subject to the provisions of Section 54 of CGST Act,
2017 read with Refund Rules. Ledger shall be debited accordingly. If refund is
 rejected, then ledger shall be re-credited by proper officer by order in Form GST
PMT-03.

2. Sequence and restriction for the utilization of Input Tax Credit

C. Electronic Cash Ledger: -

In terms of provisions of Section 49(1) of the CGST Act, 2017 read with Rule 3 of
Payment of Tax Rules, every deposit made towards tax, interest, penalty, fee or any
other amount by a person shall be credited to the electronic cash ledger to be
maintained in Form GST PMT-05.

Debit/credit entries in Electronic cash ledger in Form GST PMT-05

Following transactions shall have an effect on the electronic cash ledger and shall be
debited/ credited accordingly: -
i. Self-payment shall be credited to the ledger;
ii. TDS or TCS to be credited to electronic cash ledger of the person from whom the
amount was deducted or collected;
iii. Payment towards tax, interest, penalty, fee or any other amount shall be debited
to the ledger.
iv. Balance in Electronic cash ledger after payment of tax and other dues can be
claimed as refund. Amount claimed as refund to be debited to the ledger. If refund
is rejected, ledger to be re-credited by proper officer by order in Form GST PMT-
03;

What are the main features of GST payment process?

The payment processes under GST Act(s) have the following features:
• Electronically generated challan from GSTN Common Portal in all modes of payment and
no use of manually prepared challan;
• Facilitation for the tax payer by providing hassle free, anytime, anywhere mode of payment
of tax;
• Convenience of making payment online;
• Logical tax collection data in electronic format;
• Faster remittance of tax revenue to the Government Account;
• Paperless transactions;
• Speedy Accounting and reporting;
• Electronic reconciliation of all receipts;
• Simplified procedure for banks
• Warehousing of Digital Challan.

Payment procedure:
i. Challan to be generated in FORM GST PMT – 06 for the tax, interest, etc. to be
deposited (Valid for 15 days).
ii. Payment by non-registered person shall be made on the basis of temporary
identification no.
iii. Mandate form (Applicable in case of NEFT and RTGS): Where the payment is
made by way of NEFT or RTGS mode, 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 (The said mandate form will be valid
for 15 days from the date of generation of challan).
iv. On successful payment, a Challan Identification Number (CIN) will be generated
and the same shall be indicated in the challan. On receipt of CIN from the
authorized Bank, the said amount shall be credited to the electronic cash ledger.
But if CIN is not generated or not communicated, person may represent in FORM
GST PMT – 07 to bank/electronic gateway.

Services under GST

Section 2(102) of the Central Goods & Service Tax Act, 2017 (‘CGST Act’)
defines “services” means anything other than goods, money and 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 denomination, to another form, currency
or denomination for which a separate consideration is charged.

For the sake of better understanding, the above definition is vivisected as under;
services means ‘anything’ other than
– goods,
– money and
– 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 denomination, to another form,
currency or denomination for which a separate consideration is charged.

When it is said ‘anything’ other than goods is service, it is important to know what
is the meaning of ‘anything’? Whether anything means everything? If so
everything other than goods is service and accordingly liable for GST unless it is
exempted

If it so, can we say, the followings are service? a. X robs Mr. Y. Whether Mr. Y
received the service of Mr. X? b. Wife beats her husband. Can we say husband
received service from his wife? c. A encroaches the vacant plot of Mr. B. Is Mr. A
providing service to B? d. P bangs his car to Mr. Q and pays him compensation. Is
Mr Q is providing service to Mr. P?

Conclusion: Any transaction/activity to consider as service, it is important to

understand from the recipient point of view. If the recipient intends to receive the
same, then only it could be a service. If something is thrown upon him or forced
upon him against his wish or without choice for him, the same may not amount to
service received by him.

Exemptions of Services under GST

Understanding the taxability also involves knowing whether item is exempt or not
under GST. Due to the scope of taxable supplies being widened under GST, GST
Exemptions have clearly been defined. Not just knowing the Exemption list, but
also understanding the implication of item being exempt is important as certain
conditions are attached to it like reversing the ITC. Also, what can be Nil rated
today may become charged to a higher tax rate in the future.

Hence, clearly demarking the various terms such as Nil Rated, Exempt, Zero-rated
and Non-GST supplies under GST is important.

What is Exempt Supply

The following are some of the definitions of Exempt Goods in the context of the
GST regime:
Supplies which are taxable at a NIL rate (NIL means 0% tax is applicable, No ITC
available)
Supplies which are fully or partially as per the amendments made to the Section
11 of CGST Act and the Section 6 of the IGST Act
Supplies which are non-taxable from boot such as “Alcoholic liquor for the
purpose of human consumption”

Note: One cannot utilise the input tax credit applicable to these supplies.
file:///E:/MAIMS/Sem%205/GST_Exemption_List_of_Items_and_Services.pdf

Types of exemption in GST

Given below are the three types of exemptions in GST:
Absolute: Exemptions without any conditions are an absolute exemption. For
example, services by the RBI.
Conditional: Certain conditions are applicable to some exemptions. Services by
hotels, clubs, etc., with a statement of accommodation unit less than Rs.1000 per
day, fall under a conditional exemption.
Partial: Unregistered persons supplying goods within states (intrastate) to a
registered individual can enjoy tax exemption under reverse charge only if the
aggregate value of a supply does not exceed Rs.5000 per day.