~ INDIRECT TAXES IN INDIA: PRE-GST ERA 1) 1.1 INTRODUCTION “Afterstudying this chapter, youshall India is a Socialist, democratic and republic country. The beable to understand the following: federal structure of India comprises central and state level = Types of taxes in India = Features of Indirect Taxes = Provisionsin Constitution regard- ing taxation = VAT; Concept and Features = Variants of VAT = Defects in structure of Indirect Taxes prior to GST Government. Both the Governments, share the prime respon- sibilities including meeting out the increasing development needs of the country. The primary source of revenue is the levy of taxes only. In fact, in order to stimulate economic growth and to fulfil socio-economic objectives, the tax is considered to be the most important source of revenue for the Government. ‘A tax is a compulsory contribution from a person to the expenses incurred by the state in common interest of all without reference to specific benefits conferred on any in- dividual. The tax cannot be regarded as voluntary payment or donation. Rather, it is enforced contribution which is ex- acted through legislative authority. The word tax has been derived from the Latin word “Taxo” which means touch sharply or charge. As per Wikipedia, “A tax is a mandatory financial charge or some other type of levy imposed upon a tax payer (an individ- ualor other legal entity) by the Government in order to fund various public expenditure”. It may be noted that the tax is a mandatory payment because a failure to pay or evasion of or resistance of taxation, is punishable by law. 1.2 TYPES OF TAXES The taxes are generally classified into direct tax and indirect tax. 1, Direct Tax: A direct tax is paid directly by an indivi- dual or organization to an imposing entity. The direct tax is a type of tax where the incidence and impact of taxation falls on the same entity. It means brunt ___— gNNVIWXV ——j para 1.4 INDIRECT TAXES IN INDIA: PRE-GST ERA 12 of direct tax cannot be shifted by the taxpayer to someone else Th ices. The immediate liability 4, | e significant direct ta | imposed in India is Income Tax. goods/servi 2, Indirect Tax : The indirect taxes are imposed on he pay indirect taxes lies on the manufacturer/service provider/seller, etc. but tt Ec burden ig ultimately transferred to the consumers. Since this tax is indirectly borne a © consumer, it is called as indirect tax. Hence, an indirect tax is collected by an See har fe the person who bears the ultimate economic burden of the tax. Itmay be noted that lhe burden Prindirect taxis transferred not in the form of taxes but asa part of the price Boods services. 4.3 FEATURES OF INDIRECT TAXES ‘The following are the basic features of indirect taxes: rchase/sale/manufacture of goods and 1, Taxable Event: The indirect taxes are levied on pul provision of services. 2. Incidence & Impact: persons. It means the tax but or services. and impact fall on two different irect taxes, the incidence t ree de sl the buyer or recipient of goods irden is shifted by the supplier to wn paying capacity as tax payable on norrich person. Therefore, indirect The indirect taxes do not depend 0! 's argument as higher taxes may be ether itis purchased by a poor mai 3, Regressive Taxation: tions to this commodity is same wh taxes are regressive in nature. There are except imposed on luxury goods. 4, Impact of Indirect Tax: The indirect tax on goods and services increases its price. This leads to inflationary trend. cts like alcohol, tobacco, etc. may be taxed at 5, Promotes Welfare: The harmful or sin produc : higher rate. This practice not only discourages consumption of such goods but also increases the revenue of the State. 6. Major Source of Revenue: In India, the contribution of indirect taxes to total tax revenue is more than 50%, Therefore, it is a major source of tax revenue for the Government. — TAXMANN® 1.4 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). 1.4.1 Indian Constitution | India has a three-tier federal structure, comprising the following: (a) The Union Government (6) The State Government () The Local Government | , tina | The power a oy toad and ais é distributed among the three tiers of Government, in acco" e Is of lian Constitutic il i f é a wi the roves of Lien Cnt ution. The Constitution consists of a preamble, 25 pa"'sie ‘CONCEPT OF VALUE ADDED TAX Paras | 1,42 Provisions of constitution regarding taxation | ‘The power to levy and collect taxes emerges from the Constitution of India. The following are the | sinificant 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 are defense 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 If (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, crema- tion ground, libraries, water, fisheries, betting and gambling, etc. (©) 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. | | was introduced by the Constitution (101 Amendment) Act, 2016. The significant provisions of Constitution | (101 Amendment) Act, 2016 have been discussed in detail in Chapter 2 “GST in India : An introduction: 1.5 CONCEPT OF VALUE ADDED TAX (VAT)' The value added tax (VAT) was introduced in India in 2005. It is a multi point system of taxation on sale of goods wherein a mechanism is provided to grant credit for tax paid on inputs. Under VAT, the tax is collected in Stages and transactions involving sale of goods. The input tax (ie. paid on purchases) is rebated against output tax (ie. tax payable on sales). Under the VAT system, the net tax payable is calculated in the following manner: VAT = Tax collected on sales - Tax paid on purchases 1.5.1 What is Cascading Effect The cascading effect implies charging tax on tax. In other words, at the time of levy of tax, the total value is considered which is inclusive of all taxes paid up to that point. In this manner, if the tax is always charged on the selling price of the product, the burden of tax keeps on increasing at each Point of sales. In this process, the effect of taxation magnifies as at each level tax is calculated on 1. The VAT was state level level tax, prevailing in Pre-GST era. At present, it has been in GST. Ithas been discussed ere, ‘as this topic forms part of B.Com. (Hons,) Syllabus. r see en Se 2 & = 5 z z e Power to Levy GST __ The power tolevy Goods and Services Tax (GST) has been conferred by Article 246A of the Constitution whichPara 1.6 INDIRECT TAXES IN INDIA: PRE-GST ERA 14 1 of tax on tax is called as C4, value, which includes taxes already levied and paid. The chargins cading Effect of tax’. 1.5.2 VAT has eliminated cascading effect VaTThas been developed to avoid cascading effect of taxes. This Ha tively charged only on value addition at each stage and Hot O° 7 tax credit system, called as Inp' effect has been prevented through s become possible as taxis effee, entire sale price. The cascading jt Tax Credit. 1.5.3 Input Tax Credit If any registered dealer is purchasing goods within @ particular state and has paid value added ay and subsequently the goods were sold in the same state, in that case such registered a shall be “allowed! to take credit for input tax, subject (0 certain conditions. In other word ee isim. posed at each stage on the entire Sales value and the a paid at the ae al meds se thas credit availability is called as “Input Tax Credit”, For exampie 0 s cecetod hs ae inputs “arth #5,00,000 (plus VAT @ 4%). The actual sales in the month were & 9,00,000 (plus VAT @ 10%). It means VAM paid on purchases =€ 20,000 [Calculated as € 5,00,000 » 465] = x 10%] Output VAT payable =¥90,000 [Calculated as & 9,00,000 1 X VAT payable; the net VAT payable Since, VAT paid on purchases can be adjusted against output VA‘ rayab race warn shall be € 90,000 minus € 20,000. It means after adjusting ITC. the net VAT liability is € 70,000. 1.5.4 Scope of input tax credit under VAT In Pre-GST era, the concept of ITC was prevailing in VAT, Excise and Service Tax. The following important points may be noted about the entitlement of ITC under VAT: (a) Itis allowed to a registered dealer. (b) Itis also allowed in respect at VAT paid on purchase of capital goods. | (c) The Central Sales Tax (CST) paid on purchases made from outside state is not all (@ Itis allowed only if the purchases are made from a registered dealer. | @ TherTCisnetavalabeinrespet of purchases from dealer who has opted for composition | | @ Itgoods have been used to manufacture the exempted goods, ITC is not available. | |R6VARIANTS OF VAT" | The various possibilities of . inewen credit for VAT paid on purchase is called as variants of VAT. The VAT | @ Gross Product Variant (8) Income Variant | (© Consumption Variant (a) Gross Product Variant: Under this variant, VAT ‘materials other than capital Goods. The merit of cascading effect due to allowance of VAT credit ‘TAXMANN® lowed as ITC. Gili is allowed only of VAT paid on raw oss Product variant is the prevention of on non-capital goods. |. VAT has been subsumed in GST. Th in GST. The variants of VAT have been disc used as it forms part of B.C Com. (Hons, Syllabus.ns VARIANTS OF VAT Paral.é | ie | ‘The VAT paid an purchase of capital goods (like plant and machinery) will not be eligible for \ seit and will therefore form part of cost of that capital goods. The depreci rt , : re i erStudes some portion of VAT and also part of cost of final product. ‘When taxis calculated an this Cost, cascading effect still prevails. (b) Income Variant: The VAT credit is allowed on all VAT paid on raw material and cor Incase of capital goods, VAT credit is allowed only to the extent of depreciation ee ‘means, VAT credit an capital goods is apportioned to various years in the ratio at depreciation Mowance on such capital assets in those years. \ (c) Consumption Variant: Under this variant, 100% VAT credit is allowed of VAT paid on all raw | materials and components as well as capital goods. | tustration 1: Consider the following information | Particulars ‘Amount@) | | Purchase of raw material and component (Exclusive of VAT @ 4%) l 3,00,000| | Purchase of machinery (Life 10 years) Exclusive of VAT @ 12.5% | 24,00,000| | Direct and indirect expenses | ,00,000 t Profit margin 20% on total cost | | VAT on sales 12.5% | \ | Compute seling price and VAT payable under the three variants of VAT. Solution: CALCULATION OF NET VAT PAYABLE Gross Product Income Consumption Raw Material 8,00,000 | 8,00,000 8,00,000 | Depreciation (WN-1) 2,70,000, 2,40,000, 2,40,000 Expenses 6,00,000 | 6,00,000 6,00,000 Total Exp. 16,70,000| 16,40,000] _16,40,000 Margin 3,34,000 3,28,000 3,28,000 | Selling Price 20,04,000 19,68,000 19,68,000 | Output VAT | 2,50,500 2,46,000 2,46,000 \orreqwn-2)___ | 32,000) (62,000) (332,000) Net VAT payable 2,18,500 1,84,000 (86,000) Working Note 1: Calculation of Depreciation Gross Product Variant = 24,00,000-+-3,00,000 =2,70,000 Income/Consumption Variant = 24,00,000 = 2,40,000 Working Note 2: Calculation of Input Tax Credit (ITC) under various Variants Gross Product | Income | Consumption Input Goods 32,000| 32,000 32,000 Capital Goods Nil] 30,000 3,00,000 | Total 32,000| 62,000] _3,32,000|Para 1.8 INDIRECT TAXES IN INDIA: PRE-GST ERA ly 1.7 METHODS FOR COMPUTATION OF VAT! There are three commonly used methods for computation of VAT. (a) Addition Method (8) Invoice Method (6) Subtraction Method ; (a) Addition Method: This method is based upon identification us a eee 28erea 4 factor payment and profit. The payments made to aoe ore called as factor Pent “ preciation, hire charges, interest on capital, wages, VAT Liability = Tax Rate X Value added x this method, the tax is levied on full sale pre, shases. Thus, effectively, the tax is levied only op (b) Invoice Method or Voucher Method: Under hod is the most common and popular meth; But, the credit is given for tax paid on purcl value added. It may be noted that Invoice Met] for computing the tax liability under VAT system. he difference between sale price LU is method, the tax is paid on t (€) Subtraction Method: Under ths metho, the tax PORT x has not been calculate cd value of purchases. There is no ques call ae otal value of goods sold The subtraction method could be further analysed into Direc Subtraction method and Indirect Subtraction method. Direct subtraction method Indirect subtraction method Value | Aggregate value of sales exclusive of tax / Cum Tax T Tax inclusive value of sales Added Minus | ao | Minus | | Agzregate Valueof purchasesexclusiveof tax | [Tax inclusive value of purchases 1.8 MAJOR DEFECTS IN THE STRUCTURE OF INDIRECT TAXES PRIOR TO GST The following were the major draw backs in the structure of indirect taxes prior to GST imple. — TAXMANN® mentation: 1. Multiplicity of Indirect Taxes: The Central Government was empowered to levy customs duty. On imports/Exports, excise duty on manufacture, service tax on provision of services, ‘etc. On the other side the State Government was empowered to levy VAT on sale of goods, luxury tax, entertainment tax, octroi, etc. This has led to a multiplicity of indirect taxes being levied by various authorities. That is considered to be the major defect in the structure of indirect taxes in pre-GST era. Non-Availability of cross utilization of taxes: The levies of Central Government against the State Government levies were not allowed. That led to cascading of taxes, For example. The dealer who has paid CST on inter-State purchases was not allowed to utilize such CST under ITC against VAT payable on sales. Obstructed movement of goods: Due to creation of tariff and non-tariff trade and tax barriers such as octroi, entry tax, check posts, etc. there was hindrance in free flow of trade. | Mallee ‘Repetitive Compliances: The vatiousindirect taxes like excise duty, VAT, service 2%, fe te) ed ir own, compliance procedures, which required multiple registrations, registration aa pie beac dates, etc. This led to expending time as well as money, which faite fon of ppc eget e of the major drawbacks was high compliance costs = "VAT has been subsumed in GST. The meth syllabus ds for computation of VAT have een discussed asi forms part of B.Com.)fr TEST YOUR KNOWLEDGE troduction of GST, at both Central and State levels, overcome the above pr re is not only the integration at Goods and services taxation Data ee also the state ‘The reason being, thei level tax TEST YOUR KNOWLEDGE ute tn what way, indivet taxes are different from direct taxes? 0.2, Explain the salient feature of indirect taxes. 0.3, Deserbe the provisions of "Constitution of India” regarding taxation fg. What are the various variants and methods of value added tax, which existed before the introduction 04 Most wee. Ist July 2017? ae Be (45. Explain the major drawbacks in Indirect Taxes System in Pre-GST Fra 046. Explain in brief about the constitutional framework of Indirect Taxes before GST [DU B.Com. (Prog.) Dec. 2018]GST IN IN Afterstudying this chapter, youshall beable o understand thefollowing: = Genesis of GST in India = Constitutional provisions on GST = Concept of GST = Taxes subsumed in GST = Structure of GST # GST Council = GST Network ® State Compensation Mechanism \ \ CHAPTER \ DIA: AN INTRODUCTION | 2.1 INTRODUCTION \ Any new law is introduced with the basic aim of providing remedy to deficiency in existing law and to rationalize the execution and procedural aspects. As regards Indirect Taxes in India, there existed dual levy by the Union and also by the State Government. There were multiple registrations and other compliances under various indirect tax laws. The GST has been introduced in order to overcome the defects of prevailing indirect tax laws. It is correct to treat it as an unprecedented step by the Government when India moved into GST on Ist July, 2017. The GST has impacted the ma- jority of the persons paying indirect taxes. There has been a paradigm shift in the structure and functioning of Indi- rect Taxes in India. The new system of GST has subsumed. most of the Central and State level indirect taxes. The given chapter describes the various elementary aspects of GST. The basic structure of GST has also been discussed along with its administrative functioning through GST Council and GST network. 2.2 GENESIS OF GST In Global perspective, France was the first Country toimple- ment GST in the year 1954. As the GST h: ¢ as the capacity to raise revenue in the most transparent and aise h neutral manner, within 62 years of its advent, more than 160 countries across the world have adopted and implemented GST, n ‘ow been more than a decade since the idea of GST was mooted in 2004 by Kelkar task force. The journey of GST in India from its origin in 2004 up to its enactment and implementation in 2017 has gone through many ups and downs, The political enmeshment In Indian perspective, it has ni NNVIWXVI o!GST IN INDIA: AN INTRODUCTION a 2 Para 2.2 has created hurdles in the path of GST implementation. These developments can be consolidateg in chronological order in the following manner. oe Kelkar Task Force (2004) a T level goods and services tax ang Tn 2004, the kelkar task force floated the idea of an integrated national strongly recommended the introduction of GST in India. Budget Speech (2007-2008) The then Union Finance Minister, Shri P. Chidambaram, while presenting announced the introduction of GST from April 1, 2010. Abeyance Period of GST ; ‘Many hurdles and problems burgeoned and GST could not be implemented. It kept missing several dead. lines but finally gained momentum once again in 2014 Constitution Amendment Bill - Revival of GST (2014) Bara ‘On 19th December, 2014, the NDA Government tabled in Lok Sabha the 122nd ‘Amendment Bill, 2014 on GST. Constitution Amendment Act Constitution (122*! Amendment) Bill 2014 Passed in Lok Sabha. the Central Budget 2007-2008 6th May 2014 3rd August, 2016 The Amendment bill was passed in Rajya Sabha. Sth September, 2016 : Subsequently ratified by many states one after the other. When ratified by more Sree sOi of the States, the Constitutional (122% Amendment) Bill, 2014 rect Constitutional (101% Amendment) Act, the assent of President of India. It became a 2016 which paved the way of GST in India. a Central GST Act | | 27th March, 2017 Four bills introduced in Lok Sabha. CGST Bill, 2017 @ IGST Bill, 2017 UTGST Bill, 2017 ‘ GST (Compensation to States) Bill, 2017. | | | | [2othMarch, 2017: The above four Central GST Legislations were passed in Lok Sabha. | [12th April, 2017 : The above four Central GST legislations received assent of President & Bills lH turned into following Acts. | © CGST Act, 2017 ¢ IGST Act, 2017 UTGST Act, 2017 GST (Compensation to States) Act, 2017. | [State GST Act | | - /"The enactment of the Central GST Acts was followed by the enactm i] ; th ral G yy the enactment of the State GST |. a [este and 2 Union teritres (Delhi Puducherry) having their own legislature The tlloviog table | shows the passing of respective SGST Act by the States (and 2 Union Territories) in chronological alan4, 23 GENESIS OF Gs [Table Showing Date of Enactment of State GSTUawsl 1, | Telangana [_2._| Bihar 3._| Rajasthan st 4._| Jharkhand 27th April, 2017 5. | Chhattisgarh 28th April, 2017 6._| Uttarakhand 2nd May, 2017 Himachal Pradesh 7._ [Madhya Pradesh 3rd May, 2017 | 23. | Del 3. | Haryana 4th May, 2017 | 24. | Manipur 9. | Gujarat 9th May, 2017 | 25. | Meghalaya 12th 10. | Goa 9th May, 2017 26. | Karnataka 16th June, 2017. “| \ 11. | Odisha Lith May, 2017 27. | Punjab 19th June, 2017 4) | 12. | Assam 11th May, 2017 __| 28. | Tamil Nadu 19th June, 2017 al] 13, | Arunachal Pradesh 12th May, 2017 | 29. | West Bengal 13th June, 2017 || | 14. | Uttar Pradesh ___l6th May, 2017 30. | Kerala 21st June, 2017 \\ 15, | Andhra Pradesh 16th May, 2017 | 31. | Jammu & Kashmir Sth July, 2017 + 16. | Puducherry (UT) 17th May, 2017 \ GST Roll out from 1st July, 2017 4 | GST has been implemented across India w.e. 1st July 2017. But the same came into force inJ& Kwel.| 8th July, 2017, CGST (Extension to J & K) Ordinance, 2017 and IGST (Extension to J & K) Ordinance, 2017 | = were promulgated making necessary change in CGST Act and IGST Act and declaring that the said Acts | = shall be applicable to the State of J & K also. 2 A Special Mid-night Session For the implementation of GST in India, a special function was organized on mid-night, between 30th June-Ist July 2017, at the Central Hall of parliament of India. The revolutionary step was inaugurated by Shri Narendra Modi, the Hon’ble Prime Minister of India in the presence of Shri Pranav Mukherjee, the then President of India. Jammu and Kashmir Reorganisation Act, 2019 The Jammu and Kashmir Reorganisation Act, 2019 contains the provisions to reconstitute the Indian-administered State of Jammu and Kashmir into the following two Indian-administered Union Territories: (a) The Union Territory of Jammu and Kashmir and (b) The Union Territory of Ladakh As per the above Act, the UT of Jammu and Kashmir will have a legislative assembly whereas the UT of Ladakh will be administered by a Lieutenant Governor alone. Did You Know about Jammu and Kashmir Reorganisation Act, 2019 (1) The introduction of the J & K Reorganisation Bill was preceded by a Presidential order under Article 370 of the Indian Constitution that revoked J & K’s special status. (2) The following are the landmark dates in this regard:: % g g z Para 2.3 GST IN INDIA: AN INTRODUCTION Sth August, 2019: The bill for the above Act was introduced by the Minister of Home Affairy, yj, Shah in the Rajya Sabha, S =~ 5th August, 2019 + The said Bill was passed in Rajya Sabha. 6th August, 2019: The Bill was passed in Lok Sabha and becomes Act. 9th August, 2019: The Act received the President's assent. 31st October, 2019 : Effective date of applicability of the Act, The power to levy Goods and Services Tax has been conferred by Article 246A of the Cor which was introduced by the Constitution (101st Amendment) Act, 2016. The following are significant provisions introduced in Constitution in relation to GST: (a) Article 246A This Article grants power to Centre and State Governments to make laws inte Fespect to GST imposed by centre or such state. The centre has the exclusive power to make laws with | respect to GST in case of inter-State supply of goods and/or services. (b) Article 269A It is related with the levy and collection of GST on inter-State supply. Article 269A stipulates the following: (1) GST on supplies in the course of inter-State trade or commerce shall be levied and | collected by the Govt. of India. (2) Such tax shall be apportioned be tween the Union and the States in manner as may be provided by Parliament by law as the recommendation of GST Council. (3) Import of goods or services will commerce. be deemed as in the course of Inter-State trade or (4) The Central Government is empowered to levy IGST on import transactions (which were earlier subject to CVD under Customs Tariff Act, 1975) (8) Where an amount collected as IGST has been used for payment of SGST or vice versa, such amount shall not form part of the consolidated fund of India. This is to facilitate the transfer of funds between the (c) Article 366 Centre and the States. except taxes on the supply of the alcoholic liquor for human consumption. | Article 366(12A) : Goods and Services Tax means any tax on supply of goods or services or both | Article 366(26A)_: Services mean anythi eae 366(26B) : State includesa Union ing other than goods, | territory with legislative (with reference to articles 246A 268, 269, 269A & 279A) [Article 366(12) Goods include all mat (d) Article 279A This Article of the Constitution empowel tre and states namely, Goods and Service: in detail in Para 2.8, erials, commodities and articles. the President to constitute a joint forum of the ce 's Tax Council (GST Council). It has been discussedConcer oF ost a Para2.4 | '2)4 CONCEPT OF GST tne Goods and Services Tax (GST) means a tax on supply of goods or services or both except ta Te ot) of alcoholic liquor for human consumption. It is a comprehensive a ee och the indirect tax is levied not only on supply of goods but also on supply of services. The is the integration of taxes on goods and taxes on services as well. The GST nla sumed many indirect taxes that existed in PRE-GST era. Some of the taxes were levied b fas sural Government (Like Excise Duty, Service Tax, etc.) whereas many others were levied by ine cate Governments. The GST has been introduced simultaneously at both the Central and the State level. ‘The following are the salient features of GST: \ (1) Applicability: GST extends to whole of India. (2) Dual GST: The GST in India has been imposed concurrently by the Centre and States. (3) Destination based tax: The GST is a destination based tax applicable on all transactions in- volving supply of goods and services. The tax is payable in the state where goods or services are finally consumed. (4) IGST on Inter-State supplies: The inter-State supplies of taxable goods and/or services are subject to Integrated Goods and Services Tax (IGST) called as Integrated Tax. Itis levied by the Centre on all inter-State supplies. The rate of IGST is approximately the sum total of CGST and SGST/UTGST. ST and SGST/UTGST on Intra-State supplies: In case of Inter-State supply of goods and/ unique feature of GST () CG or services both CGST as well as SGST are levied. In case of Union territories, which do not have their own legislature, UTGST is levied in place of SGST. (6) Legislations governing GST: ’ & For Levy of CGST ‘There is single legislation CGST Act, 2017 _| (a) | For Levy of UTGST in those Union Territories | Governed by UTGST Act, 2017 which do not have their state legislatives These Union Territories are : Note: Theerstwhile UTS namely Dadra & Nagar | (4) And; .d Ni Ish Havl sil Donnan é Dis have boon merged | 12. Andaman and Niobe: telands now they have become single UT. (2) Lakshadweep (3) Dadra & Nagar Haveli and Daman & Diu (4) Chandigarh | (3) Ladakh. \ Their own GST Act (SGST) These Union Territories are : | (1) Delhi (2) Puducherry (3) Jammu & Kashmir Their own GST legislations The names of states are given in 2.2, except Jammu & Kashmir which has been reorganised into 2 UTs wef. 31.10.2019 (6) | For UT having own legislative (c) | SGST in 28 States| Para 24 GST IN INDIA: AN INTRODUCTION | 7 . Important to Note for Union territories which do not have legislature ‘Or has been passed : i Feared ox Get cach Union Territory shall be considered as a separate Union tens! re Purpose the goods have been supplied by a trader from Chandigath to Lakshagyo™ Nov alnough both the UT's are governed by the same UTGST Act butt wil be rag | Inter-State Supply & is subject to IGST. : sur -Postach Territories, the three Union territories “Delhi’, Puducherry” and Jam, Fear” heir own levislature and they have passed their own SGST Acts. Thais vie Delhi, Puducherry and J&K are not covered by the list of UT for this purpose. f is i i SGST on sy 8 states have passed their own State GST Act in order to impose ply of y be noted that all provisions of State GST Acts ‘are (3) All the 2 Goods & Services within the State. It maj | | identical with CGST Act. IMlustration 2.1 Inrespect of the followingindependent cases, determine the type of GST leviable on supply of ‘goods or service, (1) Mr: Shiv of Delhi supplied goods to Mr. Vinod of Delhi. (2) Raman of Kashmir provided services to Shyam of Pune. (3) Janaki of Goa supplied goods to Mr. Cruz of Goa. (4) Pankaj supplied goods from his place of business in Chandigarh to Surender of Dehradun (UP) (8) Ms. Kajol sold goods to Rani. They both live in the State of Rajasthan. Solution The type of GST to be levied depends upon the nature of supply. In case of intra-State supplies, CGST and 8 E SGST are levied whereas in case of inter-state supplies IGST is applicable. 2 \ [Case ‘Type of Supply te ‘Type of GST to be levied ] | oh feo 1GsT cost SGST urest 1 | Intra-State v v ] Waal INTER-STATE v = | 1) Intra-State Y v i \ [4 INTER-STATE v | + ts Intra-State v v | | Mlustration 2.2 7 Consider the following details in respect i ; — ‘espect independent cases of taxable supplies by a registered person: Save; Particulars I | LE | Local Intra-State Supply in Delhi t Value ot Supply (@) | | [ 2. Local intra-State supply in Punjab — 40,000 | | [3 [Supply from Assam to Punjab 60,000 4. | Supply from Delhi Goa —____ 25,000 1 5._| Supply from Delhi to Puducherry 30,000 | 6 [Local Supply in Chandigarh 50,000 _| 20,000 | The rates of GST to be followed are CGST @ 9%; SGST/UTG! respective GST in respect of thewicerhen erese above independent cases of tay —L sie 9% & IGST @18%, Fi Xi ‘able supplies at normal rates, The values givenRATIONALE FOR GST 27 solution Calculation | CGST 40,000 @ 9% | 3,600 40,000 @ 9% 60,000 @ 9% 60,000 @ 9% | 25,000 @ 18% 30,000 @ 18% 50,000 @ 18% 7 20,000 @ 9% - | (Union territory without state legislation) 20,000 @9% | 1,800 | - - | - J 2.5 TAXES SUBSUMED IN GST (GOODS AND SERVICES TAX) As already discussed, India moved into GST wee, Ist July, 2017. There has been a paradigm shift a ae atructure and functioning of Indirect Taxes in India. The new systern of GST has subsumed in thy of the Central and State level indirect taxes. Although, there are few levies like Customs Duar Excise Duty on Alcoholic liquor for human consumption, te which are still in force even eter introduction of GST. The following table shows the list of various Central and State taxes subsumed in GST. Central levies Subsumed State Levies Subsumed 1 | Central Excise Duty 1_| Statesurchargesand cessesinsofaras they relate to supply of goods & services 2 | Additional Excise Duties 2 | Entertainment Tax (except those levied by local bodies) 3 | Service Tax 3._| Tax on lottery, betting and gambling | Excise Duty under Medicinal & Toilet Prepa-| 4 | Entry Tax (all forms) & Purchase Tax | ration Act 5 | CVD & Special CVD 5_| VAT/Sales tax 6 | Central Sales Tax 6 | Luxury Tax | 7 | Central Surcharges and Cesses insofar as they | 7 | Taxes on advertisements relate to supply of goods & services Taxes not subsumed in GST: Although the GST has subsumed many taxes as stated above, yet there are few similar indirect taxes which have not been subsumed under GST. These are as follows: Central Taxes: Basic Customs Duty, Research and Development Cess, Export Duty, Anti-Dumping duty, safeguard duty, etc. State Taxes: State Excise duty, Stamp Duty, Profe: ional Tax, Motor Vehicle tax, etc. 2.6 RATIONALE FOR GST The deficiencies in earlier tax laws have already been discussed in Chapter 1. The rationale for intro- ducing GST was to overcome these issues. But, the ultimate positive effects of GST were manifold. All the stakeholders are being benefited including industry, Government and even the consumer. The following are the major benefits which justify the rationale for introducing GST. _— gNNVWXVE| Para2.7 GST IN INDIA: AN INTRODUCTION 24 (1) Benefits to the Government: |e st ins a cana Me (&) The states will be benefited due to improvement in investment cult in the county (c) The uniform SGST and IGST rates actually reduce the incentive for tax evasion, (@) It will bring buoyancy to the Government revenue by widening the tax base a, | improving the tax payer compliance. " (2) Benefits to Trade and Industry: (a) The multiplicity of indirect taxes has been reduced (b) By allowing a set-off of prior-stage taxes for the transactions across the entire vai, chain, GST leads to mitigation of ill effects of cascading. y in tax rates, the common national market has been developed, It will boost the exports. (0) Due to uniformity (d) The export has been classified as zero rated supply. (3) Benefits to customer : (a) Itis relatively simple tax system. (b) On account of mitigation of cascading effect, and services. there is a reduction in prices of goods (c) The pricing structure is uniform through the country. (d) The taxation system is more transparent. 2.7 STRUCTURE OF GST The architecture of GST may be discussed in following points: 1. The GST is on supply of goods and/or services — TAXMANN® ————_____ 2, There are four types of taxes in GST: (a) Central Tax (ie. CGST) levied under CGST Act, 2017 | (b) Integrated Tax (ie. IGST) levied under IGST Act, 2017 | (0) State Tax (ie. SGST) levied under SGST Act, 2017 (@) Union Territory Tax (ie. UTGST) levied under UTGST Act, 2017 3. In addition, there is a provit levy of GST com 1 mrovision for the levy of i ir fe poproia in ‘ST compensation cess on sin and luxury 4. There are four Acts relating to GST la ws namely CGS Act. (These have already been discussed in Pars 24) Act SGST Act, UTGST Act and IGSTGST COUNCIL, ‘the Goods and Services Tax Counell (GST Council isa joint forum of the Centre and States to make jecommendations to Union and States relating to GST. GST council is the apex constitutional body (authority) to decide policies ‘of GST. The following are the important points as regards GST Council. "a (a) The Article 2798 in Constitution of India makes provision for Constitution of GST Council. ‘This Article empowers the President for the same. (b) TheprovisionsrelatingtoGSTCouncileameinto force on 12th September, 2016. The President constituted the GST council on 15th September, 2016. (0) The function of the council is to make recommendations to the union and the states on important issues like tax rates, exemptions, threshold limits, dispute resolution, ete, 2.8.1 Members in GST Council ‘The following are the members of GST Council. (a) The Union Finance Minister (Chairperson) (b) The Union Minister of State in Charge of Revenue or Finance (Member) (c) The Minister in charge of Finance or taxation or any other Minister nominated by each State Government (Member) ‘The vice-chairperson of GST Council is elected by GST Council from amongst its members. | ([Present status of number of members in GST Council “After reorganisation of erstwhile State of Jammu & Kashmir into two UTs, wef. 31st October 2019, India jshaving 28 States, 3 Union Territories with legislature and 6 Union Territories without separate legislature. ‘Accordingly, the GST Council has 33 members in total, in the following manner. Representation of No. of Members Central Government 2 \ 28 States 28 3 UTs with legislature 3 6 UTs without separate legislature Nil | Total members 33 | | 2.8.2 Recommendations of GST Council il, shall make recommendations to the Union | The Goods and Services Tax Council, ie, GST Counc and the States on the following matters: | (a) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which | may be subsumed in the goods and services tax; (b) the goods and services that may be subjected to, or exempted from the goods and services tax; (0) model Goods and Services Tax Laws, principles of levy, apportionment of Goods and Services Tax levied on supplies in the course of Inter-State trade or commerce under article 269A and the principles that govern the place of supply; (d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax; (e) the rates including floor rates with bands of goods and services tax;| GST ININDIA: AN INTRODUCTION . My Para 2.8 ied period, toraise additional resources during any nay, ‘Ur () any special rate or rates fora specifi calamity or disaster; seca ts i jsion with respect tothe States of Arunachal Pradesh, Assam, wand Kash, [oe speci pr aay, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and khand; ; ; (f) any other matter relating to the goods and services tax, as the Council may decide. Date of Levy on Petroleum Products : ‘The GST Council shall also recommended the date on which GST High speed diesel motor spirit, natural gas and aviation turbine fuel. be levied on petroleum cryg, 2.8.3 Decision-making Process at GST Council {As a part of decision making process, the member's views are taken on a giv after deliberations & discussionsin thecouncil.In order to takea decision, twoparameters (@) Valid Meeting (b) Valid Decision cen subject matter OF Tesolutc, arerequired name), 2.8.4 Valid Meeting (Quorum of meeting) In order to take a valid decision, there should be participation of substantial members in the meeting. The minimum number of members to be present in order to take official and legal action is called as quorum. The Article 279A provides that one-half of the total number of members of the GST council shall constitute a quorum for the meeting. Total number of members in GST Council (including chairperson)= 33 ~ Quorum = 50% of 33 = 17 Members. Thus, the presence of 17 members constitutes a valid meeting of the council. 2.8.5 Valid Decision (Required majority) As per Article 279A(9), every decision of the GST council shall be taken at a meeting, by a majority of not less than three - fourths of the weighted votes of the members present and voting, in accordance with the following principles. The vote of th i is (@ z he a te of the Central Government shall have a weightage of one third of the total votes (b) The votes of all the State Governments taken togeth e i of the total votes cast, in that meeting, ether shal have a weightage of two - thirds | Government _ | Weightage of Votes Cast Central 1/3 fie, 33.33%] Minit imum 75% Vot¢ i he Be | otes should be in favour to pass Resolution Illustration = There are 2 members GST council. All the m from Central Government (CG) & i 31 embers have attended the meeting, members from State Governments (SG) in the Consider the following detail:GST COUNCIL, 241 [ease No. | Members who cast vote Votes Against in favour po - cG SG 1 2 31 0 aes == 2 2 19 5 pf 2f 2 | 2 15 5 ree 3 2 14 1s. Deiermine the weighted votes in favour of resolution in e ch of the above indepe peiher the resolution can be said to have been pased? the aboveindependent case also comment | Answer: ‘Table showing the weightage of votes cose c ‘No. of Votes cast Weights of Votes cast Remarks about Resolu- \ - | Govt. Favour | Against Favour Against cs Central 2 0 33.33% 0 Passed Unanimously 1 [State 31 0 66.67% 0 iy oral | 33 0 100% 100% Central | 2 0 33.33% 0 Passed by Majority State 19 5 5 (86.11%) 2 66.67 X = = 13.89% m TOTAL | 21 5 13.89% 100% Central | 2 0 0 Passed by Majority State 15 5 3 (8333%) 3 66.67 X 2 = 16.67% \ 20 Toray | 17 5 16.67% 100% | | Central | 2 0 0 Not Passed as majority | | itia wos of the states are not in 4 6667 15 =3448%| Favour of Resolution toraL | 16 15 65.52% 34.48% 100% Tutorial Note: (1) The weights: of votes in favour (State Government) have been determined using the following formula: ave Votes in Favour (State Govt.) =Total Weight (ie. 66.67%) X~ Votes Cast (State Govt) Where, Votes Cast = Votes in favour + Votes in against. (2) Article 279A provides to determine weightage on the basis of total votes c members who remained abstained will not be considered in such calculation ‘ase. It means the Status of Voting at GST Council in Actual Practice ‘The 38th meeting of GST council was held on 18th December, 2019. Up to first 37 meetings, all decision at the GST Council were taken through consensus. ‘The former Finance Minister Late Shri Ne ey had earlier said that, “The GST Council was an excellent federal institution in ‘which thousands ol issues were decided through consensus.”| Para 2.9 GSTIN INDIA: ern ang In 38th meeting, when the issue of imposition nt B of . overs was placed fr discussion and decision, the tradition of taking deisga Ma, ‘nance Minis . The Union Finance ."°u consensus was challenged by Kerala's Finance Minister ‘Thomas Isaac’ n Finance 2g Ni ‘aati Wwho heads the council, made every attempt to keep the set tradition of un, Mis te decision alive, but when the council was reminded that the rules allow and that tradition was yg of the Rule book’, the voting was held at 5:31 PM (18-12-2019) on the request of one member, |" Pin The following was the result of voting: Votesin Favour | Abstained Central Govt. _| 2 mi o |_| state Gov a | 7 | 3 J _ 23 7 | 3 Calculation of weighted majority | oe No. of Votes cast Weights of Votes cast Favour | Against Favour Against Central 2 0 33.33% 0 State 21 7 a 7 x 21 259, x © = 16.67% 66.67 » 55 = 5000% | 6667 * 55 TOTAL 2B 7 83.33% 16.67% Thus, 83.33% of members voted in favour of a uniform rate of lottery effective from March 1, 2020 ang resolution was passed. It was a partial defeat for Kerala Finance Minister Thomas Isaac’s proposal on whose insistence voting was conducted. 2.9 GOODS AND SERVICES TAX NETWORK (GSTN) The Goods and Services Tax Network (or GSTN) is a section 25 company, [Section 8 under Com- Panies Act, 2013] ie, a non-government, non-profit organization. It has been formed with the sole purpose of providing the IT backbone to Government, pertaining to Goods and Services Tax Law. It manages the entire IT system of the GST portal, which is the mother database for everything GST, This portal will be used by the government to track every financial transaction, and will provide taxpayers with all services - from registration to filing taxes and maintaining all tax details. GSTN helps India fulfil its dream of paperless transactions where the compliances related to GST can be performed digitally with maximum provision of automation. It will establish a uniform interface fer the taxpayer and also create acommon and shared IT infrastructure between the Centre and States. 2.9.1 Salient Features of the GSTN The following are the main features of GSTN: 1. Ownership: t (49%) and partly by include Banks and Financial Institutions Partly by Private players (51%) which Central and State Governments, THe 49% holding is divided equally ee 2. Grant: The GSTN has also bee2.13 GOODS & SERVICES TAX NETWORK Para 2.9 4, Management: The team at GSTN is led by Mr CEO. Mr, Navin Kumar, an Indi many senior positions with the Govt. of Bihar 5, Technology Partner: The contract for developing this vast technological backend was awarded to Infosys in September 2015. Infosys, as technology s updated and robust. as its Chairman and Mr. Prakash Kumar as its ive Service servant (1975 batch), has served in nd the Central Govt vice provider, has continuously strives to keep it 6. Trusted National Information Utility: ‘The GSTN is a trusted National Information Utility (NIU) providing reliable, efficient and ro- bust IT backbone for the smooth functioning of GST in India. It is capable of handle a large number of confidential data on behalf of the Indian taxpayers. So the information is kept confidential and secure. 7. Government Control: The government has complete control over GSTN including, on the composition of the Board, mechanisms of Special Resolution and Shareholders Agreement, and agreements between the GSTN and other State Governments. Since the Central Government holding is much larger than any individual private holding, it ensures a complete control by the Government over the governing body of the institution, 8. Handles Complex Transactions: The proper functioning of GSTN requires a strong IT infrastructure which can capture, pro- cess and exchange the information. Considering the volume of transactions all over India, the adjustment of IGST (for inter-State trade) at the government level (Centre & various States) is extremely complex. The GSTN has made possible a rapid settlement mechanism amongst the States and the Centre. 9, Sharing of Expenses: ‘The user charges will be paid entirely by the Central Government and the State Governments in equal proportion (ic. 50:50) on behalf of all users. The state share will be then apportioned to individual states, in proportion to the number of taxpayers in the state. 2.9.2 Functions of GSTN Portal ‘The GSTN portal acts as a window for interaction between the GST taxpayers of the country and the Department. This portal facilitates end-to-end compliances regarding GST Tax including reg- istration, receiving Invoice details and Returns, facilitation of payment of taxes by the taxpayers, refunds, etc. It has to support about 3 billion invoices per month and the subsequent return filing for 65 to 70 lakh taxpayers. The functions of the GSTN are as follows: (a) To facilitate the registration of the persons. (b) To forward the returns to Central and State authorities. (c) To compute and settle the IGST among union and states. (d@) To facilitate the matching of tax payment details with banking network. (e) To provide various MIS reports to the Central and the State Governments based on the taxpayer return information. () Providing analysis of taxpayers’ profile; and running the matching engine for matching, reversal and reclaim of input tax credit. — gNNVIVXVL ——GST IN INDIA AN INTRODUCTION ay an | Para 2.10 | 2.9.3 GsT Suvidha Providers (GSP) ; | elected certain IT, ITeS and financial technology companies to be called a, oe oe rprauiders(GSPS) ‘The function of GSPs is to develop applications to be used by taxpat for interacting with the GSTN. They facilitate the tax payers in uploading invoices as well ag file? | rr eturns and act as a single stop shop for GST related services. They customize product, it | dress the needs of different segment of users. GSPs may’ take the help of Application Sey; | Providers (ASPs) who act as a link between taxpayers and GSPs. © | 2.9.4 Goods and Services Tax Identification Number (GSTIN) | ‘ i | The Goods and Services Tax Identification Number (GSTIN) is the unique number each taxpayy, | will receive once they have registered on the common portal. It compris’ of its PAN number a codes denoting the State it is registered in entity num! ber in that particular state, alphabet 7" ang | setheek code of a single number. It has been discussed in Chapter 3 of the book. | | 2,10 STATE COMPENSATION MECHANISM re were so many indirect taxes with varying features. Some of | | Before the introduction of GST, ther ures | them were collected by Central Government and others by State Governments. These indirect taxes | were the major source of revenue earned directly by these State Governments. These taxes were bacically production based taxes. For example, the Central Sales Tax (CST) was collected by the State from where the goods were supplied. It means the States which were the main producers had ST era, there is a paradigm shift from production based tax ‘o understand the impact of change huge collection of these taxes. But in Gi to destination/Consumption based tax. Let us take an example t f goods from State ‘A’ to State ‘B’. In in system on revenue of the State. Suppose there is a supply of pre GST era, the State ‘A’ was entitled to CST whereas now, under GST, State ‘B’ will be getting the indirect tax. It clearly reveals that there is a loss of revenue to the producer State. Though it might get compensated to some extent by the revenue earned on supplies received from other producing States. Now, in this regard the following were the major issues: @ How to compute the net loss of revenue to a particular State? | @ Who will compensate for this loss and how the funds would be arranged? | Therefore, specific provisions were required to settle these issues. Accordingly section 18 of The Constitution Amendment Act provides that the parliament shall, on the recommendation of GST coun provide for compensation to States for loss of revenue arising on account of implementa- fae er ae Period 7 compensation is restricted up to 5 years. Consequently, the parliament ‘ enact a) ls and Services Tax (Compensation to States) Act, 2017”. s per Section 7 of the Goods and Services Tax (Compensation to St: Jnic territories with legislatures have to be compensated for revenue ‘one eee as and vaion tion of GST during the five-year transition period begi out of implementa- period beginning from the date on which the SGST Act rAXMANN® — é of the concerned State has come into force. 2.10.1 Salient Features of State Compensation Mechanism | The following are the salient featur es of State compensati is Gianna § 1p ‘ion mechanism provided under GST era: | a ‘oods and Services Tax (Compensation to States) Act, 2017, has been | = , 2017, egis- ted. (2) The objective i of the Act is to provi. arising on acc provide for compensati “ount of implementation of the goods and: ae States for the loss of revenue ices tax,a STATE COMPENSATION MECHANISM 10 (3) This Act extends to the whole of India, (A) The term “Cess” means the Goods and Services Tax compensation cess levie | 8 of GST (Compensation to States) Act, 2017. Compensation cess levied under section : — | (6) Theterm ‘Compensation’ means an amount, in the form of GST compensation as dete under section 7 of GST (Compensation to States) Act, 2017. nn mvasdetertmined (6) The provisions relating to levy and collection of cess a (7) The period of levy is 5 years. en in section 8, (8) The base year for calculation of compensation is Financial Year 2015-2016, (9) The proeted nominal growth rate of revenue during translation period has been taken at (10) The compensation shall be for the loss of revenue to States for the taxes like State VAT, Central sales tax, entry tax, Octroi, local body tax, taxes on luxuries, taxes on advertisements. How- ever, any revenue among these taxes related to supply of alcohol for human consumption, entertainment tax levied by the States but collected by local bodies and petroleum products | not part of GST will be excluded from the base year revenue. 2.10.2 Manner of calculation and release of compensation The following are the various terms and manner of calculation and release of compensation: 1, Projected growth rate [Section 3]: The projected nominal growth rate of revenue subsumed for a State during the transition period shall be 14% per annum. 2, Base Year [Section 4]: For the purpose of calculating the compensation amount payable in any financial year during the transition period, the financial year ending 31st March, 2016, shall be taken as the base year ie. 2015-2016. 3, Base Year revenue [Section 5]: The base year revenue for a State shall be the sum of the revenue collected by the State and the local bodies during the base year, net of refunds, with respect to the following taxes : (@) The value added tax, sales tax, purchase tax, tax collected on works contractor any other similar tax. (B) The central sales tax. ______—. ,Navwwxv. (o) The entry tax, octroi, local body tax or any other similar tax. (a) The taxes on luxuries, including taxes on entertainments, amusements, betting and gambling, etc. (e) The taxes on advertisement or any other similar tax. (f) The duties of excise on medicinal and toilet preparations levied by the Union but col- lected and retained by the concerned State Government. (g) Any cess or surcharge or fee leviable under various entries of List-Il of the Seventh Schedule to the Constitution. Taxes not to be included in calculation of Base Year Revenues The base year revenue shall not include the following: 1. In respect of the sale or purchase of petroleum crude, high speed diesel, motor spirit (com- monly known as petrol), natural gas, aviation turbine fuel and alcoholic liquor for human consumption, the following taxes shall not be included: | (@ Under entry 54 of List I. \Para 2.10 GST IN INDIA: AN INTRODUCTION PF (0) The tax levied under the Central Sales Tax Act, 1956 (6) any cess imposed by the State Government 2. The entertainment tax levied by the State but collected by local bodies. Important to Note about inclusion in Base Revenue ao | ea (@) In respect of the State of Jammu and Kashmir, the base year revenue shall ing). the amount of tax collected on sale of services by the said State Government tng | | the base year. | (b) Inrespect of the North East States, the amount of revenue foregone on accouny , exemptions or remission given by the said State Governments to promote industri, investment in the State, shall be included in the total base year revenue of the State subject to such conditions as may be prescribed. (¢) The base year revenue shall be calculated on the basis of the figures of reveny, collected and net of refunds given in that year, as audited by the Comptroller ang |____ Auditor-General of India, : | 3. Projected Revenue for any Year [Section 6]: The projected revenue for any year in a Stay. shall be calculated by applying the projected growth rate over the base year revenue of that | | State, Illustration. —If the base year revenue for 2015-16 for a concerned State (calculated as per section 5) is ¥ 250 crores, then the projected revenues will be as follows: [Financial Year | Calculation | Projected Revenue (@ in crores) ] [2015-16 | Itis the base year [Actual Revenue is % 250 Crores [2016-17 | 250[ 1+]! 285.0000 2017-18 250[1+P 324.9000 2018-19 250[1+} [ ____ 370.3860 2019-20 250[1+}" | 422.2400 202021 | 250[1+]} [ 481.3536 7 2021-22 250[1 +} [ 548.7432 | The compensation period is for 5 years from the transit ‘ / State GST Act of the concemed State comes into force A’ H the date on which the 4. Calculation and Release of Compensation [Section 7): (4) The compensation payable to a Stati isi theend of every two months rosea? shall be provisionally calculated and released at247 (@) The total compensation payable in any fin; the projected revenue for any financial yea Total Compensation = Projected Revenue - Actual Revenue TEST YOUR KNOWLEDGE 'ancial year shalll be t he difference betwe and theactualrev Temween ‘enue collected by a State. 2.10.3 Levy and collection of Cess [Section 8(1)} The following are the relevant provisions regarding GST Compensation cess; 1. Levy of Cess: It will be levied on Intra-State and Inter both. Pen }. Period of Levy: It will be levied for a period on the recommendation of the council. 2.10.4 Rate of GST Compensation Cess [Section 8(2)] The cess will be levied on such supplies of goods and services as specified in the schedule on the . Not on Composition Levy: The cess will not be levi who has opted for composition scheme under secti -State supplies of goods or services or | Collection: It will be collected in such manner as may be prescribed, Council's Recommendation; It will be levied on the recommendation of the council. of 5 years or for such period as may be prescribed ied on supplies made by taxable person ion 10 of the CGST Act, 2017. basis of value, quantity or such basis at such rate not exceeding the rate set forth in the schedule given below. S.No. | Description of supply ‘The maximum rate of compensation cess 1, __| Pan Masala ] | 135% ad valorem 2. | Tobacco and manufactured tobacco | substitutes, including tobacco products % 4,170 per thousand sticks or two hundred and ninety per cent ad valorem or 290% ad valorem or a combination thereof, but not exceeding %4,170per thousand sticks plus290%ad valorem. | Coal, briquettes, ovoids and similar solid fuels manufactured from coal, lignite, whether or not agglomerated, excluding jet, peat (including peat [litter), whether or not agglomerated. % 4,000 per tonne | Aerated waters 15% ad valorem Motor cars and other motor vehicles | principally designed for the transport of persons (other than motor vehicles for the transport of ten or more persons, including the driver), including station wagons and racing cars. 15% ad valorem oT ennvvxven 6.__| Any other supplies 15% ad valorem eG eels Q.1. Trace the genesis of GST in India. Q.2. Discuss the constitutional provisions in relation to GST.o od | GST IN INDIA: AN INTRODUCTION zy | 0.3. What are the taxes that have been subsumed in GST? x 0.4. What are the benefits of GST for Government, customers, trade and industry? to levy and Collection of GST Compensation cess. Q.5. Explain the provisions relating 06. What is the rationale of GST? What are the major defects in the structure of indirect taxes? Expy [DU B.Com. (Prog.) Dee. 2g Q.7. Write briefly about GST Network and functions of GSTN Portal. [DU B.Com. (Hons.) May 29, iy sn Mechanism provided under GST laws to compensate the State [DU B.Com. (Hons.) May 2019) Q.8. Write a note on State Compensatior | loss of revenue. | @.9. Analyse the following independent cases and determine the type of GST that will be levied on the trang | action. | (a) Mr. Sonu of Rajasthan, Udaipur supplied goods to Mr. Kanishk of Jaipur (Rajasthan) | (®) Mr. Swaminathan of Chennai provided Services to Mr. Kelkar of Pune. (©) Mrs. Jhanvi of Puducherry supplied goods to Mrs. Elizabeth of Puducherry. (@) Ms. Soumya of Goa sent goods to Ms. Mona of Goa. (e) Chinmay of Delhi sent goods to Nisha of Tamil Nadu. [Ans (a) CGST and SGST; (b) IGST; (c) CGST and SGST; (d) CGST and SGST; (e) IGst Q.10. Write short note on: (a) GST Council (b) GST Network (c) State Compensation Mechanism. | | ————— TAXMANN® —REGISTRATION ee ae 3.1 INTRODUCTION Inorder to identify the tax payers and to ensure tax compli- ose the economy, the concerned tax authorities need to : seslomerate the data relating to operations of the businesses a Legal provisions relating (0 and also to correlate ‘them. Therefore, the registration is the Registration trost fundamental requirement under any taxation system. Types of Registration ‘This chapter covers the legal provisions relating to the per, ans able for registration, compulsory registration, deemed registration, procedure and cancellation of registration, etc. ‘Afterstudyingthischapter youshall aeable to understand the following: a Time Limit for Registration » Procedure for Registration a Effective date of Registration 3.2 MEANING OF REGISTR ATION Concept of CTP & NTP ‘The registration of supplierimplies obtaining a Unique Iden lihcation Code from the GST authorities. It is a unique 15 digit Goods and Services Tax Identification Number(GSTIN). This registration is the basic requirement for twin purposes = of identification of tax payers and also to check compliance é. Ss mechanism. The registration legally recognises a person as ae ¥ supplier of goods and services. It also authorizes him to col- ip Ss na lect taxes from his customers and pass on the credit of such gS =o taxes paid to the purchasers of goods or recipient of services. ‘The registered person can claim the input tax credit of taxes x, paid by him and also utilize the same for payment of taxes bs) due. In fact, under indirect taxregime, without registration, a person can neither collect tax from his customers nor claim any credit of tax paid by him. 3.3 ADVANTAGES OF REGISTRATION The registration under GST laws confers the following advantages: 1. Legal Recognition: The supplier gets nation-wise legal recognition as a supplier of goods and/or services in India. 3.1 __—— ,NNVNXVL ————y le, sd REGISTRATION ised to oh focan also pace pp of Tax: The registered su or from his cust credit of taxes paid (0 ¢ Inputs ‘@ Inputs services and Capital Goods “The above canbe utilised for payment of taxes duc on supplier of by him. 4. Seals Flow of Funds Thee | i goods oF ETVICES Pig, 1d states from whi Jess How of funds from GST credit and then to the cons tax paid to ercss utilization of services. Accounting for Taxes: There are running electron a igapaver by OSTN. These would be updated in real hove ledgers by the taxpayer. These ledgers are le Ledger (ITC) and El taxes paid on thei joods and/or services. — Tine Reghstraton for GST Att —_—— Under OST rege there a snge registratio the taxes Le COST SGST/UTGST, 16ST. ler that registration unde G speci, |cess 3,4 LEGAL PROVISIONS RELATING TO REGISTRATION SST LAWS, which are applicable in respect of registration of supplier 122 0 30 of Chapter VI of Central Goods and Services Tax A | Spe tthe provisions rating to repstration | 2. CGSTRules, 2017: The provisions of COST Act are fo be read with the rules prescribed un eee it Goods and Services Tax Rules, 2017. [Rules 8 to 26 given in Chapter Lf | 3, State GST Laws: The state GST laws also preseribe id | ration. The section 20 of the IGST Act, 2017 and section 2 {or the applicability of provisions contained in CGST Act \ | the following are the Gs | 4, esr act, 2017: The sectio | to registration provi | ___BSTYPES OF REGISTRATION UNDER CGST ACT, 2017, | ds OST A 1, Persons liable for Registration (Section 22] 2, Compulsory registration in certain cases [Section 24] 5. Voluntary Regisration [Section 25(3)] 4, Deemed Registration [Section 26] 5. Suo motu Res tion a ap or Tempra Registration [Section 25() . visions for Casual Taxable Taxable Person and Non-Resident taxable person [Section 21]os PERSONS LIABLE FOR REGISTRATION 3.6 PERSONS LIABLE FOR REGISTRATION Para 3.6 The section 22 of CGST Act, 2017 ereates liability for registration on the following basis 1. Based on Threshold Limit [Section 22(1)}: Every supplier shall be i under this Actin the State or Union territory, other than special accent ores ihe makes a taxable supply of goods or services or both, if his aggregate turnover in a financed] year exceeds twenty lakh rupees. As per proviso to section 21), where the perseu ange ‘taxable supplies of goods or services or both from any of the Special Category States, he dull be liable 10 be registered if his turnover in a financial year exceeds 810 Lakhs. Special Category States: As per Explanation (iii) to section 22, “For the purposes of this sec- | tion, the expression Special Category States shall mean the states as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution except the states of Jammu and Kashmir and states of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand. It may be noted that w.e-. 31st October, 2019, “Jammu and Kashmir” no longer exists as a special category state. Infact vide “The Jammu and Kashmir Reorganisation Act, 2019”, it has been divided into two separate Union Territories. (Refer Para 2.2 for detail). Explanatory Note on Threshold Limit of Turnover for Special Category States 1 | The following is the status of special category states: As per Article 279A(4)(g) of the Constitution For the purpose of Section 22 of CGST Act [After the CGST (Amendment) Act, 2018] (1) Arunachal Pradesh (8) Sikkim (1) Manipur (2) Assam (9) Jammuand Kashmir | (2) Mizoram (3) Manipur (10) Himachal Pradesh | (3) Nagaland (4) Meghalaya (11) Uttarakhand (4) Tripura (5) Mizoram (6) Nagaland | (1) Tripura | | Itis clear that as a result of the CGST (Amendment) Act, 2018, dated 30-8-2018, wef. 1-2- 2019 vide Notification No. 02/2019-Central Tax, dated 29-1-2019, now, only Mizoram, | | Tripura, Manipur and Nagaland are the special category states for the purpose of | | section 22 | 2 | Threshold limit for Jammu and Kashmir is 7 20 Lakhs: | (a) Prior to 31-10-2019: | ‘An Act has been passed specially to provide for the extension of the Central Goods and Services Tax Act, 2017 (Principal Act) to the State of Jammu and Kashmir. This Act is “THE CENTRAL GOODS AND SERVICES TAX (EXTENSION TO JAMMU AND KASHMIR) ACT, 2017” and it came into force on the 8th day of July, 2017. This act provides that all rules, notifications and orders made by the Central Government under the principal Act (ie. The Central Goods and Services Tax Act, 2017) shall be extended to and will be in force in the State of Jammu and Kashmir. The section 2(2)(b) of this special act has virtually amended the Explanation (iii) to section 22 of the CGST Act by inserting the words ‘except the State of Jammu and Kashmir” after the word constitution. Therefore, for the purposes of GST, now J & K ceases to be a special category State. Hence, the threshold limit under section | 22(1), shall be % twenty lakhs for the State of Jammu and Kashmir. }Para 3.6 o REGISTRATION Kashmir Reorganisation Act, 2019, the present ., ‘n, (® Wel. 31 7 fence, ¢ 20 Lakh threshold imi ‘After the enactment of Jammu and ganized Jammu and Kashmir is a Union Territory only. He applicable, _—_—_—_—____ Threshold limit for Arunachal Pradesh, Assam, Himachal Pradesh, Meghala Sikkim and Uttarakhand is % 20 Lakhs: The Central GST ( COST fe 2014 has made several amendments. As per the amendment to Sec. fees Act, 2017 the threshold turnover for registration under GST Act in Be oS 7 ue tates af! ‘Ananachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim farakhang has been increased from ten lakh rupees to twenty lakh rupees._________| ” ja sidering the * irmil i states is = 10 Lakhs: resol nl for remaining pee ee a the FDIS | category states: (a) Manipur (b) Mizoram (©) Nagaland d limit is & ten lakl ow (d) Tripura ‘As per second proviso to section 22(1), as inserted by Central GST (Amendment) Aci, 2018, the Government may, at the request of a special category state and on the rec.| ommendations of the Council, enhance the aggregate turnover from € ten lakh to such | amount, not exceeding twenty lakh and subject to such conditions and limitations, as may be So notified. However, this power has not yet been exercised. 6 Threshold Limit for Union Territories: For all the Union Territories (including the two UT's added | | wef. 31-10-2019 namely J & K and Ladakh), the threshold limit is €20 Lakhs. Threshold Limit of Turnover is ¥ 40 Lakhs in some cases With effect from April 1, 2019, registration is not required in the case of person who is engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ® 40 Lakhs. Its subject to four exceptions. [Please refer Para 3.7 for detail, (a) Where to take registration: The registration is required in the State or Union territory (b) Threshold Limits: Under this section the registration is re from where the taxable supply of goods or services or both are made. Example 3.1: POR Enterprises supplies goods from Delhi within Delhi i P as well as in Noida and Punj aggregate turnover is 25 lakhs. As per law, registration is required in State oan makes a taxable supply of goods/servi i eee re a Since the supplies are affected only from Delhi, exceeds & 20 lakhs in a financial year. This limit is reduceltnt cutee s if the person is carrying out business in th; i paragraph). © special category states (Names are mentioned in above in al3.5 (a) Taxable Suppl not taxable under GST. Example 3.4: 5‘ 5 | The POR Limited is having a bu: plying goods which ar lakhs during the financi Example 3.5: The ABC Limited (Based in NOIDA) deals in both exempted as well as taxable goods. Durin: the year, it has made local supplies of ® 12 lakhs and ® 9 lakhs towards taxable and exempte goods respecti ee e -one in Delhiand another in Uttar Pradesh : ar Pradesh, Inorderto threshold lim i ie ‘Adealer Ravi’ has two offic +r Raviis liable for re of the two of ‘determine of € 20 lakhs is applicable stat ana and Tripura. Since one branch (Tripura) is in special category state, the thre. Sia limit for GST registration will be & 10 Lakhs, ms legory state, the thresh- Unique Enterprises is engaged in supply of taxable goods with place of business in = The above limit is for taxable supply. It means a person is required to obtain registration with respect to his each place of business in India from where a taxable supply has taken place. However, a supplier is not liable to obtain registration if his aggregate turnover consists exclusively of goods or services or both which are wholly ess in Delhi. The entity is exclusively in the business of sup- empt from GST. The entity has made a local supply of 25 year. The entity is not required to obtain registration. “| ly. In this case, the supplier is required to obtain registration as the value of | Aggregate Turnover Exceeds the threshold limit of & 20 lakhs. 2. Persons registered under earlier Indirect Tax laws to migrate [Section 22(2)]: Every person who, on the: an existing dayi.e. ‘day immediately preceding the appointed day, is registered or holds a licence under Taw, shall be liable to be registered under this Act with effect from the appointed It means if a person is registered under the earlier laws (Excise/Service Tax/ VAT, etc.) as on the appointet have to enroll for primary migration. .d date, then the GST law mandates such persons to enroll under GST. He would The procedure has been explained under the topic “procedure for registration” in the given chapter. 3. On transfer of Business registered under this Act is transferred, whether on account of su another person as a going concern, the transferee or the successor, [Section 22(3)]: Where a business carried on by a taxable person cession or otherwise, to as the case may be, shall be liable to be registered with effect from the date of such transfer or succession. Therefore, in case of transfer of business, the transferee is liable to obtain registration. Note: Vide Circular No. 96/15/2019 GST dated 28-3-2019, it has been clarified by the Govern- ment that for the purposes of section 22(3), the transfer or change in the ownership of business will include transfer or change in the ownership of business due to death of the sole proprietor. 4. In case of Amalgamation or Demerger [Section 22(4)}: In a case of transfer pursuant to Sane tion of a scheme or an arrangement for amalgamation or demerger of two or more companies pursuant toan order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal. It means, in case of amalgamation or demerger by order of court, the transferee is be registered. liable to — gNNVWX¥L —— | | |Para 3.7 REGISTRATION ay 3.7 THRESHOLD LIMIT OF TURNOVER IS 7 40 LAKHS IN SOME CASES 3 effect from April 1, 2019, regi, usive supply of goods and wh,” Exceptions to this exempig By virtue of Notification No. 10/2019 CT, dated 07.03.2019, with tion is not required in the case of person who is engaged in excl aggregate turnover in the financial year does not exceed & 40 Lakhs. are as follows: (a) Persons required to take compulsory registration under section 24 of the CGST Act. [SeePar, 3.9 for section 24] (0) Persons engaged in making supplies of ice cream and other edibleice, whether oF not contin, ing cocoa, Pan Masala and all goods of Chapter 24, ie. Tobacco and manufactured tobaccy substitutes. a (©) Persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manj. pur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand, Inter-State supplies of goods are nevertheless liable to compulsory registration and are thus covered in exception (a) above. | (@) Person who has opted for voluntary registration or such registered persons who intend to | continue with their registration under the CGST Act. | Note: As regards Notification No. 10/2019, the Finance (No. 2) Act, 2019 has inserted the following in CGST Act, 2017: (1) Third Proviso to section 22(1): “The Government may, at the request of a state and on the | recommendations of the Council, enhance the aggregate turnover from ® 20 Lakh to such | amount not exceeding 40 Lakh in case of a supplier who is engaged exclusively in the supply of goods, subject to such conditions and limitations, as may be notified.” (2) Explanation to section 22(1): ‘For the purposes of section 22(1), a person shall be considered 10 be engaged exclusively in the supply of goods even if he is engaged in exempt supply of ser- vices provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.” It may be noted that Vide Notification No. 01/2020-Central Tax, dated Ist January, 2020 the | Central Government has appointed 1-1-2020 as the date from which the above amendments shall | come into force. | —— TAxmann® The provisions relating to threshold limit for registration (as per section 22 and Notification No. 10/2019-CT) can be summarized in the following table: | | c Threshold limit for persons engaged | 5 Exclusive é Stats and UP covered news eae [gece | | § Goods services | both goods & i services ir | Special Category States |__| Manipur, Mizoram, Nagaland and Tripura F1OLakhs | 10Lakhs | 10 Lakhs | [IL | Special Category States | | Arunachal Pradesh, Meghalaya, Sikkim and Uttarakhand } |_| States |¥ 20 Lakh | |gelangana is |€20Lakhs | 20 Lakhs | Union Territory Hitascheny~~ AGGREGATE TURNOVER 37 aan ant | Specie gory States | = ‘Assam and Himachal Pradesh | States srhar, Rajasthan, Jharkhand Chhattisgarh, Madhya Bi sh Flaryana, Gujarat, Goa, Odisha, Uttar Pradesh, Nadu, West Bengal and Kerala, Union Territory | | andaman and Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli, Daman & Diu, Chandigarh, Delhi, Ladakh & Jammu and Kashmir. —— | jndhra Pradesh, Maharashtra, Karnataka, Punjab, Tamil | © 40 Lakhs | %20Lakhs | 20 Lakhs | Para 3.8 [Example 3.6: sual 7-3-2019 read with the relevant provisions of CGST Act. “onsider the following independent cases giving particulars about the type of supply, Ge ageregate turnover. Let us analyse the impact of exemption granted vide Notification No. 10/2019 CT place of supplier and __— gNNVIVXVL [/ Seppier Engaged ‘Aggregate | Applicable | Whether lia- ‘Turnover (%) | Threshold | ble to obtain g Limit for | registration registration 1 | Exclusively in supply of Toys 25 Lakh. 40 Lakh No | MnAof [2 | Exclusively in supply of Pan Masala 21 Lakh 20 Lakh Yes | Assam 3 | Exclusively in supply of taxable services 23 Lakh 20 Lakh ‘Yes 4 | Insupply of both taxable goods& services |__22 Lakh 20 Lakh Yes 5 | Exclusively in supply of Shoes 25 Lakh 40 Lakh No Mr.Bof | 6 | Exclusively in supply of Ice Cream 7 Lakh 20 Lakh No | Delhi | 7 | Exclusively in supply of taxable services | __19 Lakh 20Lakh | No \ | 8 | Insupply of both taxable goodsé& services | __21 Lakh 20Lakh | Yes | Mr.Cof | 9 | Exclusively in supply of Electrical Ap-| 15 Lakh 10 Lakh Yes | Tripura pliances | 10 | Exclusively in supply of Pan Masala 5 Lakh 10 Lakh No | 11 | Exclusively in supply of taxable services | __9 Lakh 10 Lakh No i 12 | Insupply of both taxable goods & services | __12 Lakh 10 Lakh Yes 3.8 AGGREGATE TURNOVER eee 2(6) of the CGST Act, “Aggregate Turnover means the aggregate value of all taxable Sfamles excluding the value of inward supplies on which tax is payable by a person on reverse sons Kar i exempt supplies, exports of goods or services or both and inter-State supplies of per- ing the same Permanent Account Number, to be computed on all India basis but excludes Central tax, State tax, Union territory tax, integrated tax and cess.”REGISTRATION | Para3.s a levant points in this regard: sion “aggregate turnover" gp, on his own account or made *t a slies on behalf of principal to be included: The expr (1) Suppr® | supplies made by the taxable person, whethi | behalf of alll his principals. [Explanation (i) to [Example 3.7: Shika Enterprises made supp! will also be included in aggregate turnover o! [its principal (2) Not included in turnover of Job worker: ‘he supply of goods, after completion of Job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker. [Example 3.8: ‘Mr. Vishal is a registered job-worker. Maharaja Garments sent super class fabrics to Mr. Vishal for | | ‘ompletion of job-work, the goods were sold directly from the value of such goods shall be included in the aggregate ‘er of Vishal (registered job-worker). The following are the rel | lies of goods as agent of M/s Prabhu and Associates. This turnoye, f shikha Enterprises, as it has been made on behalf gf 7 getting further work done on it. After c¢ the place of job worker (ic. Mr. Vishal). Th turnover of Maharaja Garments (Principal) and not in turnov« (3) Turnover of all branches with same PAN: The aggregate turnover is to be computed on all India basis for persons having the same Permanent Account Number. It means aggregate turnover shall include total turnover of all branches with same PAN. ‘Shyam Industries has two business places-one in ‘Delhi’ and another in ‘NOIDA. In order to determine whether the entity is liable for registration, turnover of both the business places would be taken into account. (4) Exempted Supplies to be included: The value of exempted goods/services will be included in aggregate turnover. [Example 3.10: Pratap has offices at two place value of taxable supply and exempted supply are 6 Lakhs and @ 5 Lakhs respectively. The aggregate turnover in this case would be @ 11 Lakhs. _ j (8) Exported Goods/Services also included: The value of exported goods/services shall also be | taken into account in determination of aggregate turnover. (6) Inward Supplies under Reverse Charge: The aggregate turnover excludes the value of inward supplies on reverse charge basis. (7) GST excluded in computation: The aggregate turnover excludes CGST, SGST, UTGST, IGST and Cess. ‘ The aggregate turnover can be calculated in the following manner: COMPUTATION OF AGGREGATE TURNOVER | | — TAXMANN' Delhi. He deals in both exempted and non-exempted supplies. The Particulars Amo alue of all Taxable Supplies = Exempted Supplies RX a tof Goods/ Service ma nter State Supplies XXX Supp of gout bs a = ——— one | (Agnes reiterel ub worker afte completion of Job [_xxx_| | i XXX J meAGGREGATE TURNOVER 39 es , ee computation, the following are not included: | Inat @ CGST @ SGST | @ UTGST | GST ‘@ Compensation cess Tutorial Note: Outward Supplies taxable under reverse charge would continue to be part of the| | aggregate turnover of the supplier of such supplies. \ Example 3.11: Shiv Enterprises, operating in one state only, made the following supplies: (a) Outward supply of Taxable Goods: ¥ 17,00,000 (Under forward charge) (b) Outward supply of Taxable Goods:® 2,50,000 (Under reverse charge) | | (c) Inward supply of Taxable Goods: & 3,00,000 (Under reverse charge) As per definition of aggregate turnover given in section 2(6), the value of inward supplies on which tax is payable on reverse charge basis is not included in aggregate turnover. But, the outward supplies under | | reverse charge are included. Therefore, the aggregate tumover inthis case is 19,50,000, Since the aggregate turnover does not exceed | | £20 Lakhs, the company is NOT LIABLE for registration under section 22(1) of CGST Act, 2017. But, itis | 3 important to note that the persons who are required to pay under reverse charge are compulsorily required 4 to obtain registration under section 24. Therefore, the Shiv Enterprises is still liable for registration. | 5 Z Example 3,12: 3 ee , Nishi Limited made the outward supplies of many types of goods. It includes supply of taxable goods |_| £500,000) Exempted goods 800,000) and non-axable gods ike Alcoholic Liquor & 1,50,000), The supply | | also includes supply of goods of & 3,00,000 from registered job worker premises. In addition, 8 2,00,000is the | | outward supply of goods at which GST had to be paid by the recipient ie. GST was payable on reverse charge | | basis. Whereas, the company has paid tax under reverse charge in respect of inward supply of goods for & 1,50,000.Now, theageregate turnover, asper section 2(6)of CGST Act, willbe calculatedin the following manner: | COMPUTATION OF AGGREGATE TURNOVER Particulars Amount \ || Outward Supply of taxable goods 5,00,000 | Outward Supply of exempted goods 7 8,00,000 Outward Supply of non-taxable goods 1,50,000 | Outward Supply of goods from registered job worker premises 3,00,000 Outward Supply of goods under reverse charge | 2,00,000 Inward Supply of goods under reverse charge | Not include | | Aggregate Turnover as per section 2(6) of CGST Act| 19,50,000 || | Since the aggregate turnover of Nishi Ltd. does not exceed 20 Lakhs, the company is not liable for registra- | is T, on the basis of threshold limit. But recipient und because of inward supplies on which the taxis paid by ler reverse charge, Nishi Limited is liable for registration under section 24, |