UNIT 2

Assessment under GST

To facilitate easy calculation and payment of taxes, GST has provisions for assessments such
as self-assessment.
Assessment means determination of tax liability under GST law.
Normally, persons having GST registration file GST returns and pay GST every month
based on self-assessment of GST liability. However, the Government at all times has the right
to re-assess or perform an assessment by itself and determine if there is a short payment of
GST.
Below are the various types of assessment under GST.
Types of Assessment under GST
The different types of assessment under GST are as under:

 Section 59 – Self-assessment of taxes payable

 Section 60 – Provisional assessment
 Section 61 – Scrutiny of tax returns filed by registered taxable persons
 Section 62 – Assessment of registered taxable person who has failed to file the tax
returns
 Section 63 – Assessment of unregistered persons
 Section 64 – Summary assessment in certain special cases

Section 59 – Self Assessment

In this regard, provisions of Section 59 of the GST Act is reproduced hereunder:
“Every registered person shall self-assess the taxes payable under this Act and furnish a
return for each tax period as specified under section 39.”

The taxable person is required to pay tax on the basis of self-assessment done by himself.
Hence, all GST return filings are based on self-assessment by the taxpayer. This means GST
continues to promote self-assessment just like the Excise, VAT and Service Tax under
current tax regime.
Section 60- Provisional Assessment
An assessee can request the officer for provisional assessment if he is unable to determine
value or rate.
 Unable to determine value due to difficulty in –
 Calculating the transaction value
 Understanding whether certain receipts should be included or not
 Unable to determine rate of tax due to difficulty in –
 Classifying the goods/services
 Identifying whether any notification is applicable or not
Provisions of Provisional Assessment
 Requests for provisional assessments will be given in writing
 The proper officer can allow paying tax on provisional basis at a rate or on a value
specified by him.
 Order will be passed within 90 days from date of request.
 The taxable person has to issue a bond with a security promising to pay the difference
between provisionally assessed tax and final assessed tax.
 Provisional assessments will be followed by final assessments. The proper officer
can ask for information before final assessment.
Time Limit for Final Assessments
The final assessment will be done within 6 months of the provisional assessment. This can
be extended for 6 months by the Joint/Additional Commissioner. However, the
Commissioner can extend it for further 4 years as he seems fit.
Interest Payable for Provisional Assessment (u/s 50)
In case, after the final assessment, if the taxable person liable to pay more tax than the tax
paid at the time of provisional assessment, then the taxable person should pay the interest on
such tax payment. ( 18% p.a)

Interest would be calculated from the actual due date of tax till the date of actual payment of
tax. The interest calculation position will remain the same, even if the payment of tax is made
before or after the final assessment.
Refund under Provisional Assessment
In case of refund, interest will be paid on such refund as provided under section 56.
(@6%p.a)

Section 61 – Scrutiny Assessment

GST Officers can scrutinize a GST return and related particulars furnished by the registered
person to verify the correctness of the return. This is called a scrutiny assessment. In case
of any discrepancies noticed by the officer, he/she would inform the same to the registered
person and seek his explanation on the same. On the basis of the explanation received from
the registered person, the officer can take the following action:

 When Explanation is Satisfactory- The officer will inform the taxpayer and no
further actions will be taken in this regard.
 When Explanation is not Satisfactory- The taxpayer has not given the explanation
within 30 days or has not rectified the discrepancies the officer may

 Conduct a tax audit under section 65.

 Inspect and search the places of the taxpayer’s business

 Start a special audit under section 66

 Initiate demand and recovery provisions

 Send notices for outstanding demand or shortfall of when there is no wilful

intention of doing fraud under section 73

 Send notices for outstanding demand or shortfall when there is wilful intention
of fraud under section 74.

No order can be passed under scrutiny assessment as it is not a legal or judicial proceeding
Section 62 – Failure to File GST Return – Best Judgement Assessment
When a registered person fails to furnish the required returns, even after service of notice
under Section 46, an assessment would be conducted by the GST Officer. In such cases, the
GST officer would proceed to assess the tax liability of the taxpayer to the best of his
judgment taking into account all the relevant material which is available or which he has
gathered and issue an assessment order within a period of five years from the date for
furnishing of the annual return for the financial year to which the tax not paid relates.

On receipt of the said assessment order, if the registered person furnishes a valid return
within a period of 30 days from the date of issuance of the assessment order, then in such
case, the assessment order would be deemed to have withdrawn. However, the registered
person will be liable to pay interest under Section 50 (1) and/or liable to pay a late fee under
Section 47.

Section 63 – Assessment of Unregistered Person – Best Judgement

When a taxable person fails to obtain GST registration even though liable to do so or
whose registration has been cancelled under section 29 (2) but who was liable to pay tax, the
GST officer can proceed to assess the tax liability of such taxable person to the best of his
judgment for the relevant tax periods and issue an assessment order within a period of five
years from the date specified under section 44 for furnishing of the annual return for the
financial year to which the tax not paid relates.

Section 64 – Summary Assessment

A GST Officer can on any evidence showing a tax liability of a person coming to his notice,
proceed to assess the tax liability of such person to protect the interest of revenue and issue
an assessment order if he has sufficient grounds to believe that any delay in doing so may
adversely affect the interest of revenue. In order to undertake assessment under section 64,
the proper officer should obtain previous permission of additional commissioner or joint
commissioner. Such an assessment is called a summary assessment.

PLACE OF SUPPLY
Why are time, place and value of supply important?
 Time of supply means the point in time when goods/services are considered supplied’.
When the seller knows the ‘time’, it helps him identify due date for payment of taxes.
 Place of supply is required for determining the right tax to be charged on the invoice,
whether IGST or CGST/SGST will apply.
 Value of supply is important because GST is calculated on the value of the sale. If the
value is calculated incorrectly, then the amount of GST charged is also incorrect
Place of Supply
PLACE OF SUPPLY
Under the GST environment, Place of Supply (PoS) of Goods and Services is the most
important concept because the chargeability of GST is based on three pillars.
„ Taxable event i.e supply
 „ Time of supply of Goods / Services (point of taxation)
„ Place of Supply of Goods and Services.
Therefore, it can be said that Place of Supply is very significant for computation of tax under
GST regime. In case the Place of Supply is wrongly determined, it has vast implication under
provision of Section 77.
According to that section if a person wrongly collect and paid the CGST and SGST assuming
the transaction is a IntraState supply, while the actual transaction is a Inter-State supply, shall
refund the CGST/SGST and paid IGST along with interest and vice versa.
As per Section 7 of IGST Act, a transaction is said to be a Intra-State supply if the location of
supplier and the Place of Supply of goods and services are in same state or same Union
Territory.
As per Section 8 of IGST Act, a transaction is said to be a Inter-State supply if the location of
supplier and the Place of Supply of goods and services are two different States or two
different Union Territory or one in Union Territory and another is State Territory.
Inter- State supplies also includes the supply of goods or services imported into India, where
LoS (location of supplier) is outside India and PoS (Place of Supply) is in India, and supply
of goods and services exported from India, where LoS in India but PoS is outside India.
Apart from this, there are some specified transactions which actually looks like Intra- State
supplies but deemed to be a Inter- State supplies, for example supplies made to or by SEZ
units even within the State would be considered as Inter- State Supplies. All Intra-State
supplies are governed by Central GST Act and State/ Union Territory GST Act, 2017 and
applicable taxes are CGST plus SGST/UGST.
Thus the concept of Place of Supply is the utmost important from the point of Government to
determine which State or Union Territory will get the share of IGST and it is also important
for the business to identify which taxes to be imposed depending upon whether the
transaction is Inter Sate supply or Intra- State supply.
Scope of the Provisions
Sections 10 to 13 of the IGST Act, 2017 indicate the principles to determine the Place of
Supply.
1. Section 10 governs the Place of Supply of goods other than goods imported into and
exported from India.
2. Section 11 governs the Place of Supply of Goods imported into or exported from India.
3. Section 12 governs the Place of Supply of services, where location of supplier and location
of recipient is in India.
4. Section 13 governs the Place of Supply of services, where the location of supplier or
location of recipient is outside India.
It is important to state that where Sections 10 and 12 deal with domestic transaction but
Sections 11 and 13 deal with cross border transactions of goods and services.
Also, Sections 10 and 11 cover the Place of Supply of goods, but Sections 12 and 13 cover
the supply of services, both are independent provisions.
PLACE OF SUPPLY IN CASE OF GOODS

Place of Supply of goods other than export and import (Sec 10)

According to the related provisions, Rules governing the Place of Supply of Goods other than
Imports and export (for Domestic supply) are as under:
1) where the supply involves movement of goods:
The place of supplier or receiver is of no consequence to determine the Place of
Supply when it comes to those transactions which involve the movement of goods.
 The place where delivery terminates i.e. where the ownership is passed on shall be
critical to determine the Place of Supply.

Case study 1: A Ltd. of West Bengal sold 300 units of computer to Info Traders of
Bihar, to be delivered at his office at Jharkhand. Place of Supply of goods is
Jharkhand and IGST will be levied as it is a Inter- State supply.

2) where the goods are delivered on the direction of a third person:

When goods are delivered to a party on the direction of a third person the Place of
Supply will be the location of such third person and not where the delivery terminates.

Case study 2: Samanta Traders, a dealer in Furniture, located in west Bengal place an
order to Rahim traders located at Assam, for 100 units of Chairs, with the direction
that to deliver the Chairs to City College of Kolkata, West Bengal, who is the
customer of Samanta Traders.
There are two legs of the Transaction
Leg 1: Samanta Traders and Rahim Traders, Place of Supply is West Bengal and
IGST will be levied as Inter- State sale.
Leg 2: Samanta Traders and City College (having registered under GST), PoS of
goods is West Bengal and Intra- State supply, CGST plus SGST will be charged.

3) Where supply involves no movement of goods

When goods are of such nature which does not require any movement, Place of
Supply shall be the location of such goods.
Case study 3: Silk Traders of Gujarat Sold 20 pieces of silk salwar to Amit traders of
west Bengal at Gujarat show room. Here the transaction is Intra -Sate Supply of
goods, as Place of Supply is Gujarat.
4) When Goods are Installed:
Where the goods are assembled or installed at site, the Place of Supply shall be the
place of such installation or assembly.
Case study 4: Ramco Limited registered in Bihar opens a new office in Delhi. It
purchases 10 ACs to be installed at its Delhi office from Patil electronics in Bihar. In
this case, the location of the supplier is Bihar, but a Place of Supply of goods will be
Delhi. Hence, IGST will be levied.
5) Goods on Board a conveyance: In case the goods are supplied on board a
conveyance, including a vessel, an aircraft, a train or a motor vehicle, the Place of
Supply shall be the location at which such goods are taken on board. This provision
includes those purchases which are done while travelling on a conveyance.
Case Study 5: Mr. Mehta is travelling on a cruise liner from Mumbai to Goa. He
purchases a book from the in-house store in the cruise liner. These books were on-
boarded from Mumbai. Registered place of business of the book shop is in Mumbai.
Place of location of supplier is Maharashtra and Place of Supply of goods, in this
case, will be Maharashtra. This is an Intra-State supply, and CGST and SGST will be
charged.
Place of Supply of goods imported into or exported from India(Sec 11)

PLACE OF SUPPLY IN CASE OF SERVICES

Place of Supply of services where location of supplier & recipients is in India

Section (12)

Broad principles governing the Place of Supply of services where the location of
service supplier (provider) and recipient (Receiver) is in India, are 13 in numbers, out
of which 1 is general principle and 12 are specific situation based principles.
General Principle: The place of supply of services, except the services specified in
sub-section (3) to (14) is as follows (i.e. General provision)

1) General Rules:
Where both supplier and recipient are located in India, the Place of Supply of
service would be:
a) When the service supplied or provided to persons registered under the GST the
Place of Supply of service is the location of registered person.
Case Study 7: Mr. Rahaman is the chartered accountant of West Bengal,
provided professional services to ABC Ltd, of Assam. The PoS of the Service
is the location of Registered person. Here it is Assam. So Mr. Rahaman will
charge IGST for his service as Inter- State Supply.
b) When the services are provided to an un-registered person but the address
exists on records of the supplier of service, the Place of Supply of service is
the location of service recipient of to un-registered persons.
Case study 8: Samanta Furniture of Kolkata is providing services of renting of
furniture to Amit of Midnapur. Then the location of supply of services is at
West Bengal, hence Intra- States supply. So both CGST and SGST will be
levied.
c) When the services are provided to an un-registered person but the address
doesn’t exists on records of the supplier of service, the Place of Supply of
service is the location of service supplier or provider.
Case study 9: Infotech Kolkata is providing computer repair services to Rahul
of Jharkhand, unregistered person and address is not available in its records. In
this situation Place of Supply is location of service provider i.e West Bengal
 (Intra- State supply) The general rule has been framed keeping in the view the
difference between B to B and B to C supplies. The rule is very well aligned
with the overall philosophy of GST Act which is destination based
consumption tax.

2) Specific Rules:
After discussing the principles governing PoS for the entire domestic supplies of
services, it may be seen that overall objective of the principle is to capture the
location of consumption of services and to ascertain the PoS accordingly.

Illustrations
 TIME OF SUPPLY/ POINT OF TAXATION

In order to calculate and discharge tax liability it is important to know the date
when the tax liability arises i.e. the date on which the charging event has occurred.
In GST law, it is known as Time of Supply. GST law has provided separate
provisions to determine the time of supply of goods and time of supply of
services. Sections 12, 13 & 14 of the CGST Act, 2017, deals with the provisions
related to time of supply.
Section 12 –Time of Supply of Goods
Section 13 –Time of Supply of Services
Section 14 – Change in rate of Tax

CGST/SGST or IGST must be paid at the time of supply. Goods and services have
a separate basis to identify their time of supply.

Time of Supply of Goods

 Time of supply of goods is earliest of:
1. Date of issue of invoice
2. Last date on which invoice should have been issued
3. Date of receipt of advance/ payment*.
For example:
Mr. X sold goods to Mr. Y worth Rs 1,00,000. The invoice was issued on 15th
January. The payment was received on 31st January. The goods were supplied on
20th January.
Solution:
Time of supply is earliest of –
1. Date of issue of invoice – 15th January
2. Last date on which invoice should have been issued – 20th January.
Thus the time of supply is 15th January.
What will happen if, in the same example an advance of Rs 50,000 is received by
Mr. X on 1st January?
The time of supply for the advance of Rs 50,000 will be 1st January(since the date
of receipt of advance is before the invoice is issued). For the balance Rs 50,000,
the time of supply will be 15th January.

Time of Supply for Services

Time of supply of services is earliest of:
1. Date of issue of invoice
2. Date of receipt of advance/ payment.
3. Date of provision of services (if invoice is not issued within prescribed period)
Let us understand this using an example:
Mr. A provides services worth Rs 20000 to Mr. B on 1st January. The invoice was issued on
20th January and the payment for the same was received on 1st February.
In the present case, we need to 1st check if the invoice was issued within the prescribed time.
The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was
issued on 20th January. This means that the invoice was issued within a prescribed time limit.
The time of supply will be earliest of –
1. Date of issue of invoice – 20th January
2. Date of payment = 1st February
This means that the time of supply of services will be 20th January.
Time of Supply under Reverse Charge
In case of reverse charge the time of supply for service receiver is earliest of:
 1. Date of payment*
2. 60 days from date of issue of invoice for services.

For example:

M/s ABC Pvt. Ltd undertook service of a director Mr. X worth Rs. 50,000 on 15th January.
The invoice was raised on 1st February. M/s ABC Pvt Ltd made the payment on 1st May.
The time of supply, in this case, will be earliest of –
Date of payment = 1st May
60 days from date of date of invoice – 2nd April
Thus, the time of supply of services is 2nd April.

VALUE OF SUPPLY IN GST

Introduction

In case of GST, tax is payable on ad-valorem basis i.e., percentage of value of the supply of
goods or services. Thus, it becomes important to know how to arrive at the value on which
tax is to be paid. Section 15 of the CGST Act prescribes the provisions for determining the
value of supply of goods and services made in different circumstances and to different
persons.

Why is value of supply important?

The GST to be applied on a transaction will depend on the value of these goods and services
sold or transferred. Buyers can pay for transactions with a monetary consideration by giving
the seller cash or electronically transferring money. They can also pay for transactions
with non-monetary considerations by giving the seller other goods or services in exchange.

Finally, there are cases where they can pay for transactions partly in cash and partly in
kind (by bartering goods or services). Hence it is really important to accurately calculate the
value of supply.
The value of a supply of goods or services or both shall be the transaction value, that
is the price actually paid or payable for the said supply of goods or services or both
where the supplier and the recipient of the supply are not related and the price is the
sole consideration for the supply – section 15(1) of CGST and SGST Act.
So, we can say that if the supplier and recipient are not related and the price is the sole
consideration then the value of taxable supply is the Transaction Value.

Inclusions in the Value of supply sec 15(2)

Transaction Value INCLUDES:
1. Any taxes, duties, cess, fees, and charges levied under any act, except GST. GST
Compensation Cess will be excluded if charged separately by the supplier.
2. Any amount that the supplier is liable to pay which has been incurred by the recipient
and is not included in the price.
3. The value will include all incidental expenses in relation to sale such as packing,
commission Freight etc.

 Commission:- Any commission paid to an agent by the supplier and

recovered from the recipient for supply of goods or services or both will be the
part of the value of taxable supply
 Inspection or certificate charges:- This is another element that may be added
to the value , if billed to the recipient of supply
 Packing :- If the packing charges are charged by the supplier to the recipient
then it is to be included in the value of supply
 Freight and other charges:- Where the supplier agrees to deliver the goods to
the recipient and facilitate the transportation then the charges of freight will be
the part of value of supply.

4. Subsidies linked to supply, except Government subsidies, will be included.

5. Interest/late fee/penalty for delayed payment of any consideration for supply of goods
or services will be included value of supply.

Exclusions in the Value of supply

Transaction Value EXCLUDES discount(sec 15(3)):
Discounts will be treated differently under GST. Discounts given before or at the time
of supply will be allowed as a deduction from transaction value. Discounts given after
supply will be allowed only if certain conditions are satisfied.
Discounts details are given as under:-

 Discount given on or before supply :- Any discount which is duly recorded

in the invoice and given before the time of supply is required to be excluded
from the value of taxable supply.
 Discount given after the supply (Post supply discount):-Any discount
which is given after the supply however such discount is already decided as
per the agreement between supplier and the recipient before the time of supply
and recipient has reversed the input tax credit on the value of discount then
such discount value is required to be excluded from the value of taxable
supply.

Value cannot be determined as per the provisions

When it is not possible to calculate value of supply as per section 15 due to related
party transaction or price not being the only or the sole consideration. The value of
taxable supply is to be calculated as per the chapter IV of CGST Rules, 2017.

Value of taxable supply where the consideration is not wholly in money (Rule 27)
Where the consideration is not wholly in money then the value of supply is

 Open market value

 If the open market value is not available then the sum total of consideration in money
and any further amount in money as is equivalent to the consideration not in money.
 If the value of supply is not determinable as per above points then the value of supply
of goods or services of like kind and quality
  If the value of supply is not determinable as per above points then the value of supply
of goods or services will be calculated as per rules 30 that means the consideration
in money plus money equivalent of the non money consideration plus 10% mark
up or
 As per rule 31 other reasonable methods.

Value of taxable supply where supply between distinct or related persons other than
agent (Rule 28)
The value of taxable supply between distinct persons or where the recipient and supplier are
related other than in case of supply being made through agent then value is

 Open market value

 If the open market value is not available then the value of supply of goods or
services of like kind and quality
 If the value of supply is not determinable as per above points then the value of supply
of goods or services will be calculated as per rules 30 or 31

However, if the goods are intended for further supply as such by the recipient then the
supplier has an option to take 90% of the price charged by the recipient from his unrelated
customers as value of goods.

Value of taxable supply where supply made through an agent (Rule 29)
Where supply is made through an agent then value of supply is

 Open market value of goods

 Or supplier has an option to take 90% of the price charged for the supply of goods of
like kind and quality by the recipient from his unrelated customers as value of goods.
 If the value of supply is not determinable as per above points then the value of supply
of goods or services will be calculated as per rules 30 or 31

Value of supply as per rule 30

Where value of taxable supply is not determinable as per rules 27,28,29 than it will be
calculated as per Rule 30. As per this rule the value shall be 110% of the

 Cost of production
 Cost of acquisition
 Cost of provision of such service

However service provider has an option to take rule 31, by-passing rule 30.
Value of supply as per rule 31
Where the value of supply of goods or services or both cannot be determinable as per Rule 27
to 30 then the same shall be determined as per reasonable means consistent with the
principles and general provisions of the section 15 and the provisions of the chapters.
TAX INVOICE
Different kinds of documents are issued under various circumstances whenever a transaction
involves supply of goods or services. Such documents include tax invoice, debit note, credit
note and bill of supply
Invoice under GST- Under the GST regime, an “invoice” or “tax invoice” means the tax
invoice referred to in section 31 of the CGST Act, 2017. This section mandates the issuance
of an invoice or a bill of supply for every supply of goods or services. An invoice or a bill of
supply need not be issued if the value of the supply is less than Rs. 200/-, subject to specified
conditions.

How many copies of tax invoice will be required for supply of goods?
As per CGST rules, tax invoice is required to prepared in TRIPLICATE for Goods
I. The original copy being marked as ORIGINAL FOR RECIPIENT
II. The duplicate copy being marked as DUPLICATE FOR
TRANSPORTER
III. The triplicate copy being marked as TRIPLICATE FOR
SUPPLIER Duplicate for transporter copy will not be required in
case supplier obtains an invoice reference number.
How many copies of tax invoice will be required for supply of services?
As per CGST rules, tax invoice is required to be prepared in DUPLICATE for Services
I. The original copy being marked as ORIGINAL FOR RECEIPIENT
II. The duplicate copy being marked as DUPLICATE FOR SUPPLIER
CONTENTS OF TAX INVOICE
Contents of tax invoice which needs to be mentioned on supply of Goods & services covered
under GST are as follows
I. Name, address and GSTIN of the supplier
II. A consecutive serial number in one or multiple series, containing alphabets or
numerals or special characters hyphen or dash and slash symbolised as “-” and “/”
respectively and any combination thereof, , unique for a financial year
III. Date of its issue
IV. Name, address and GSTIN/ Unique ID Number, if registered, of the recipient
V. Name and address of the recipient and the address of delivery, along with the
name of State and its code, if such recipient is unregistered and where the taxable
value of supply is fifty thousand rupees or more
VI. HSN code of goods or Accounting Code of services
VII. Description of goods or services
VIII. Quantity in case of goods and unit or Unique Quantity Code thereof
IX. Total value of goods or services
X. Taxable value of goods or services taking into account discount or abatement, if
any
XI. Rate of tax (CGST, SGST or IGST)
XII. Amount of tax charged in respect of taxable goods or services (CGST, SGST or
IGST)
XIII. Place of supply along with the name of State, in case of a supply in the course of
inter-State trade or commerce
XIV. Place of delivery where the same is different from the place of supply
XV. Whether the tax is payable on reverse charge
XVI. The word “Revised Invoice” or “Supplementary Invoice”, as the case may be,
indicated prominently, where applicable along with the date and invoice number
of the original invoice
XVII. Signature or digital signature of the supplier or his authorized representative.

Time limit for issuing tax invoice

A. For goods
 Where supply involves the movement of goods: On or before the removal of goods
for supply to the buyer from the location of supplier. For eg. Dealer A in Delhi is
dealing in TV sets. He has to make delivery of 5 TVs to Dealer B in Mumbai. Here
supply involves movement of goods. In such case the invoice will be issued on or
before the date of dispatch of consignment.
 Where supply does not involve movement of goods: On or before date of delivery
of goods to the recipient For eg. ABC Ltd purchases an escalator, for its office
 building. The supplier agrees to assemble and install it at office premises. Here, since
the supply does not require movement of the generator set, the invoice must be issued
at the time when the escalator is made available to ABC Ltd.
 Continuous supply: In case of continuous supply of goods, where successive
statements of accounts or successive payments are involved, the invoice shall be
issued before or at the time each such statement is issued or, as the case may be, each
such payment is received.
 Sale on approval basis: Where the goods being sent or taken on approval for sale or
return are removed before the supply takes place, the invoice shall be issued before or
at the time of supply or six months from the date of removal, whichever is earlier

B. For services
I. Supply of Taxable Service
 General case: The issue of invoice under GST must be done within 30 days of
rendering such services.
 Financial services: For services provided by banks, NBFCs, and other financial
institutions, the last date of issue of invoice under GST is the 45th day from the date
of service supply.
II. Invoice in case of continuous supply of services

In case of continuous supply of services, where,

(a) the due date of payment is ascertainable from the contract; the invoice shall be issued
on or before the due date of payment;
(b) the due date of payment is not ascertainable from the contract; the invoice shall be
issued before or at the time when the supplier of service receives the payment;
(c) the payment is linked to the completion of an event; the invoice shall be issued on or
before the date of completion of that event.
III. Issue of invoice in case, where supply of service ceases under a contract before
completion of supply- In a case where the supply of services ceases under a contract before
the completion of the supply, the invoice shall be issued at the time when the supply ceases
and such invoice shall be issued to the extent of the supply made before such cessation.

Debit Note and Credit Note

Debit Note
Introduction
A supplier of goods or services or both is mandatorily required to issue a tax invoice.
However, during the course of trade or commerce, after the invoice has been issued there
could be situations like:
• The supplier has erroneously declared a value which is less than the actual value of the
goods or services or both provided.
• The supplier has erroneously declared a lower tax rate than what is applicable for the kind
of the goods or services or both supplied.
• The quantity received by the recipient is more than what has been declared in the tax
invoice.
• Any other similar reasons.
In order to regularize these kinds of situations the supplier is allowed to issue what is called
as debit note to the recipient.
Definition:
A debit note is a document a seller uses to remind the purchaser of current debt obligations,
or a document produced by a purchaser when returning goods purchased on loan. The debit
note may include information about an immediate payment or may serve as a reminder of
current funds due.
A debit note, widely used in business-to-business transactions, is also known as a debit
memo.
Debit note is a document issued by a supplier under Section 34(3)of CGST Act, 2017,
when there is a need of increase in taxable value or increase in GST charged in invoice.
The tax liability of the supplier will increase, as and when the Debit Note is issued by the
supplier.
It is to be noted that a debit note can be issued by a recipient also when the goods are returned
or damaged in transit. But under GST, only supplier can issue the debit note.
For example: A trader “ABC” purchases goods from “XYZ”. After receiving the material,
ABC founds that the goods contain some defective goods of value of Rs. 10,000. Now ABC
has to reduce the liability standing in his books as payment due to creditor XYZ. Therefore,
ABC sends a debit note amounting to Rs. 10,000 to XYZ stating that he has debited his
account in his books.

Format
There is no prescribed format but debit note issued by a supplier must contain the following
particulars, namely:
(a) name, address and Goods and Services Tax Identification Number of the supplier; (b)
nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolised
as “-” and “/” respectively, and any combination thereof, unique for a financial year;
(d) date of issue;
(e) name, address and Goods and Services Tax Identification Number or Unique Identity
Number, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered;
(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of
supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the tax debited
to the recipient; and
(i) signature or digital signature of the supplier or his authorized representative.

Tax liability
The issuance of a debit note or a supplementary invoice creates additional tax liability. The
treatment of a debit note or a supplementary invoice would be identical to the treatment of a
tax invoice as far as returns and payment are concerned.
Records Retention:
The records of the debit note or a supplementary invoice have to be retained until the expiry
of seventy-two months from the due date of furnishing of annual return for the year
pertaining to such accounts and records.
Where such accounts and documents are maintained manually, it should be kept at every
related place of business mentioned in the certificate of registration and shall be accessible at
every related place of business where such accounts and documents are maintained digitally.
Credit Note:
Meaning
Section 34(1) of the CGST Act says that when a tax invoice is issued, and the same is
required to be amended to reduce the tax liability mentioned in it, the supplier can issue
a credit note.
The credit note is therefore a convenient and legal method by which the value of the goods or
services in the original tax invoice can be amended or revised. The issuance of the credit note
will easily allow the supplier to decrease his tax liability in his returns without requiring him
to undertake any tedious process of refunds.
Some of the common reasons for which the seller issues a credit note are:
 On account of sales returned by the buyer due to quality issues, service rejection, or
damaged goods receipt.
 Supplier has erroneously collected higher charges from the buyer or buyer paid
amount is more than invoiced value.
 Give a post-sale discount to the buyer.
 The quantity received by the customer is less than the one which is mentioned in the
tax invoice.
 Cancelling any pending payments against invoices.
 Any other similar reason.

Format:
There is no prescribed format but credit note issued by a supplier must contain the following
particulars, namely:
(a) name, address and Goods and Services Tax Identification Number of the supplier; (b)
nature of the document;
(c) a consecutive serial number not exceeding sixteen characters, in one or multiple series,
containing alphabets or numerals or special characters hyphen or dash and slash symbolised
as “-” and “/” respectively, and any combination thereof, unique for a financial year; (d) date
of issue; (e) name, address and Goods and Services Tax Identification Number or Unique
Identity Number, if registered, of the recipient;
(f) name and address of the recipient and the address of delivery, along with the name of
State and its code, if such recipient is un-registered;
(g) serial number and date of the corresponding tax invoice or, as the case may be, bill of
supply;
(h) value of taxable supply of goods or services, rate of tax and the amount of the tax credited
to the recipient; and
(i) signature or digital signature of the supplier or his authorised representative
Records
The records of the credit have to be retained until the expiry of seventy-two months from the
due date of furnishing of annual return for the year pertaining to such accounts and records.
Where such accounts and documents are maintained manually, it should be kept at every
related place of business mentioned in the certificate of registration and shall be accessible at
every related place of business where such accounts and documents are maintained digitally.
Time to issue Debit Note and Credit Note
Debit Note or Credit Note can be issued anytime that is there is no prescribed time limit for
issuing them. Both the Debit Notes and Credit Notes that are issued should be declared in the
returns of GST filed.
Credit Note and debit note is to be furnished in return for the month for which such note has
been issued before :

 September following the end of the financial year in which such supply was made or
 the date of furnishing of Annual return

Whichever is earlier, and the liability of the tax should be adjusted in the manner prescribed.
It may be noted that annual return is required to be filed under section 30(2) on or before
31st December of the financial year following the relevant financial year. In cases where such
annual return is filed after 30th November, the time limit for issuing credit/debit note will be
30th November only.

Amendments made in CGST act 2018

The major impacts of amendments are as follows:

 Credit notes and debit notes cannot be issued by recipients with GST. It is a
unidirectional flow from supplier.
 Multiple credit or debit notes for one tax invoice is permissible.
 One credit note or debit note for multiple tax invoices are also allowed.
 The credit note or debit note should be financial year wise that is it cannot be used for
multiple financial years.
 MAINTENANCE OF ACCOUNTS AND RECORDS UNDER GST REGIME
Every registered person under GST must maintain all records at his principal place of
business as prescribed under Section 35 of the Central Goods and Service Tax Act, 2017 read
with Rule 56 of the Central Goods and Service Tax Rule, 2017. Further, the accounts shall
also include records relating to additional place of business, if required.
Who must maintain accounts and records under GST?
It is the responsibility of the following persons to maintain specified records-

 The owner i.e. Manufactures, Service Supplier and Trader.

 Operator of Warehouse or Godown or any other place used for storage of goods.

 Every Transporter

Every registered person whose turnover during a financial year exceeds the prescribed limit
i.e. Rs. 2 Crore will get his accounts audited by a Cost Accountant or a Chartered
Accountant.
Necessary Records
According to Section 35 of the GST Act, all taxable persons under GST shall maintain the
following records at their principal place of business:

 Production or manufacture of goods;

 Inward and outward supply of goods or services or both;
 The stock of goods;
 Input tax credit availed;
 Output tax payable and paid; and
 Other particulars as prescribed.

As per Proviso to Sec. 35 (1) of the CGST Act, “The registered person may keep and
maintain such accounts and other particulars in electronic form in such manner as may be
prescribed”.
Records related to Tax paid/payable:
a. Record for Tax payable or paid
Every registered person shall keep and maintain an account, containing the details of
tax payable including tax payable under reverse charge, tax collected and paid, input
tax, input tax credit claimed, together with a register of Tax Invoice, Credit Notes,
Debit Notes, Delivery Challan issued or received during any tax period.
b. Electronic Cash and Credit Ledger
Every registered person will have 3 ledgers under GST which will be generated automatically
at the time of registration and will be maintained electronically.
o Electronic Cash Ledger- This ledger will serve as an electronic wallet. The taxpayer
will have to deposit money into his cash ledger (add money to the wallet). The money
will be utilized to make the payment.
o Electronic Credit Ledger- The input tax credit on purchases will be reflected here
under three categories i.e. IGST, CGST & SGST. The taxpayer will be able to utilize
the balance shown in this account only for payment of tax (not for interest, penalty
etc.)
o Electronic Liability Ledger: This ledger will show the total tax liability of a
taxpayer after netting off for the particular month. This ledger will be auto-populated.

Time and Place of retention of Accounts under GST

Accounts maintained by a taxable person under GST along with all invoices, bills of supply,
credit and debit notes, and delivery challans relating to stocks, deliveries, inward supply and
outward supply should be maintained for a period of 6 years from the date of furnishing GST
annual return. Further, the entity should keep all the related GST accounts and records at the
place of business mentioned in the certificate of registration.
Necessary GST Accounts to Maintain
According to the GST Accounts and Records Maintenance Rules, all taxable persons
registered under GST should mandatorily maintain the following accounts in addition to the
records mentioned above.

 A true and correct account of the goods or services imported, exported or supplies
attracting payment of tax on reverse charge along with relevant documents, including
invoices, bills of supply, delivery challans, credit notes, debit notes, receipt vouchers,
payment vouchers, refund vouchers and e-way bills.
 Accounts of stock in respect of goods received and supplied by the taxpayer, and
such account shall contain particulars of opening balance, receipt, supply, goods lost,
stolen, destroyed, written off or disposed of by way of gift or free sample and balance
of stock including raw material, finished goods, scrap and wastage thereof.
 Maintain an account, containing the details of tax payable (including tax payable, tax
collected and paid, input tax, input tax credit claimed, together with a register of tax
invoice, credit note, debit notes, delivery challan issued or received during any tax
period.
 Maintaining details of Suppliers with information including names and complete
addresses of suppliers from whom he has received the goods or services chargeable to
tax under GST;
 Maintain details of Customers with information including names and complete
addresses of the persons to whom he has supplied goods or services, where required
under GST;
 Complete address of the premises where the taxpayer stores the goods, including
goods stored during transit along with the particulars of the stock stored therein.

Necessary GST Accounts required to maintain by Agents, Brokers, Real Estate Brokers
and Stock Brokers
Under GST, the word Agent means a person, including a factor, broker, commission agent,
arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name
called, who carries on the business of supply or receipt of goods or services or both on behalf
of another. All agents or brokers, including real estate agents and brokers, should mandatorily
maintain the following additional records:

 Particulars of authorization received by him from each principal to receive or

supply goods or services on behalf of such principal separately;
 Details including description, value and quantity (wherever applicable) of goods or
services received on behalf of every principal;
 Particulars including description, value and quantity (wherever applicable) of goods
or services supplied on behalf of every principal;
 Details of accounts furnished to every principal; and
  Tax paid on receipts or on the supply of goods or services effected on behalf of
every principal.

Necessary GST Accounts required to maintain by Manufacturers

All persons involved in the manufacturing of Goods under GST should mandatorily maintain
monthly production accounts, showing quantitative details of raw materials or services used
in the manufacture and quantitative details of the goods so manufactured including the waste
and by-products.

Necessary GST Accounts required to maintain by Service Providers

All taxable persons providing services taxable under GST should maintain accounts showing
quantitative details of goods used in the provision of services, details of input services
utilized and the services supplied.

Necessary GST Accounts required to maintain for Works Contract

Person registration with GST and involved in executing works contract should keep a
separate account for works contract with details including:

 The names and addresses of the persons on whose behalf the works contract is
executed;
 Description, value and quantity (wherever applicable) of goods or services received
for the execution of works contract;
 Description, value and quantity (wherever applicable) of goods or services utilized in
the execution of works contract;
 Details of payment received in respect of each work contract; and
 The names and addresses of suppliers from whom he received goods or services.