Unit 3 [5 Marks]: [with option]

Basic Concepts of indirect Tax and overview of

GST [5 Marks] [with option]
Concept of indirect Tax; Difference between direct tax and indirect tax; Concept, objectives, structure and types
of GST; Taxes subsumed into GST; Application of SGST, CGST, UTGST and IGST; Non-applicability of GST,
Rates of GST and Compensation Cess.
Definitions:
Aggregate turnover, Business, Capital goods, Casual taxable person, Goods, lnput, lnput tax, lnput tax credit,
Output tax, Person, Place of business, Registered Person, Services, Taxable person, Turnover in state and union
territory

1. GST: Short title, extent and commencement. [Not Important]

(a) This Act may be called the Central Goods and Services Tax Act, 2017.
(b) It extends to the whole of India

2. Concept of Indirect Taxes [Not Important]

Meaning
Indirect Tax is a tax of which incidence and impact fall on two different person.
• Incidence falls on the person who pays the tax to the Government and
• Impact falls on the person who finally bears the burden of tax.
Tax is paid by one person and borne by another. It is generally levied on goods, services, expenditure,
consumption, import, export, etc. Indirect tax is often also known as the consumption tax.
Example
GST: GST is paid by Suppliers (seller) but borne by recipient (buyer).
Custom duty: Custom duty is paid by importer but borne by ultimate buyer of goods.
Regressive in nature
These taxes are regressive in nature i.e. it imposes equal burden of tax on payer irrespective of his income. In
other words, it imposes same effect on richer and poor class.
Features of Indirect Taxes
1. Regressive in nature: IDT is regressive in nature. Both richer and poor need to pay tax of same
amount.
2. Tax on goods and services: IDT is generally levied on goods or services or both, e.g. GST, Custom
duty.
3. Shifting of burden: Tax burden I case IDT can be shifted. The person who pays tax can recover the
same from another person. And ultimately burden of GST falls on consumer.
4. Inflationary: IDT are inflationary in nature. It causes increases in price.
5. Wider tax base: IDT has wider tax base then Direct tax. Hence, it generates more revenue.
6. Major source of revenue: IDT is the major source of revenue.
 3. Difference between Direct Tax and Indirect Tax *****

S.N Particulars Direct Tax Indirect Tax

1 Meaning
2 Nature of tax
3 Imposition
4 Inflation
Direct Tax is a tax of which
incidence and impact fall on
same person.
Direct Tax is progressive in
nature.
It is generally imposed on
Income of the person.
It does not causes inflation
Indirect Tax is a tax of which
incidence and impact fall on two
different persons.
Indirect Tax is regressive in nature.
It is generally imposed on goods or
services.
It may cause increase in inflation

5 Tax evasion It leads to more tax evasion It comparatively has less chances of
because only one person is tax evasion because two persons are
involved. involved.

6 Administrative cost It causes high administrative It causes low administrative cost to

cost to Government. Governments.
7 Example Income tax, Corporate GST, Custom duty, Securities
dividend tax, Municipal tax, transaction tax etc.
etc.

4. What is Goods and Services Tax (GST)?

GST is a single uniform indirect tax which was introduced to replace Central and State indirect taxes such as
VAT, CST, and others. GST applies on all types of businesses, small or large. This makes it one of the greatest
tax reforms in the country. The entire nation will follow a unified tax structure. As the name suggests, GST will
be applicable on both goods and services and India will follow a dual system of GST to keep both the Centre
and State independent of each other. The GST council will be headed by the Union Finance Minister and it will
consist of various State Finance Ministers. GST will be devised as a four-tiered tax structure with tax slabs of
5%, 12%, 18%, and 28% for various different categories of products and services. 0% rate is kept for most
essential goods such as rice, wheat.

5. Concept of GST
(a) GST stands for “Goods and Service Tax”
(b) It is levied on supply of goods or service or both.
(c) It is an Indirect tax.
(d) It is applicable all over India.
(e) Its main objective is to consolidate all indirect taxes into a single tax.
(f) It is a type of value added tax.
(g) Input tax credit is the main feature of GST. Tax (GST) paid on input shall be adjusted with tax (GST)
payable on output.
 6. Salient features of GST in brief:*
The salient features of GST are as follows:
(a) GST is an indirect tax.
(b) No distinction is made between goods and services except in certain cases for certain purposes.
(c) For the words manufacture, sale, service, etc. the only ‘Supply’ is used. Supply covers all forms of
supplies like sale, barter, rental, lease, exchange or disposal.
(d) GST is levied on supply of goods or service or both.
(e) It is a consumption based tax. Tax is payable in the State where goods or services are finally consumed.
(f) GST is levied both by Central Government and State Government/Union territory on a common sale
(i.e. supply) according to the relevant provisions of the Act. Thus, GST introduced in India is dual GST.
(g) Tax paid on inward supplies is available as input tax credit against tax on outward supplies subject to
fulfillment of certain conditions.
(h) GST law is applicable all over India

7. Objectives of GST**
Objectives of GST are as under :
(a) To Develop national Market- One Nation, one Tax
(b) To Remove cascading effect of various indirect taxes.
(c) To reduce multiplicity of indirect taxes.
(d) To Eliminate classification dispute between goods & services.
(e) To avoid overlapping of State & Central Tax.
(f) To remove barriers in inter-State movement of goods
(g) To reduce wastage of truck time & wastage of man-hours at check posts.
(h) To ease the administrative control.
(i) To reduce the compliance cost.
(j) Uniformity of tax rates and automated compliances.
(k) Ensuring availability of input tax credit across the value chain
(l) Simplification of registration, filing of return, tax administration and compliance.
(m) Harmonization of tax base, laws, and administration procedures across the country.
(n) Minimizing tax rate slabs to avoid classification issues.
(o) Prevention of unhealthy competition among states.
(p) Increasing the tax base and raising compliance.
(q) Free movement of Goods across the country without any additional tax.
 8. Advantages of GST in brief: [Important]********
The chief advantages of GST are mentioned below:
(a) As almost all indirect taxes are subsumed in one tax i.e. GST, it would be easier to handle the single
legislation both by the taxpayer and tax administrators.
(b) It eliminates the cascading effect of several indirect taxes.
(c) It eliminates the unhealthy competition among the States.
(d) GST is levied on a common base i.e. ‘supply’ of goods and services. Thus, separate valuation rules are
not required to be followed for changing different indirect taxes.
(e) An input tax credit (ITC) is available under the GST Act subject to fulfillment of certain conditions,
payment of GST would not be considered as cost. As a result, cost of goods and services will be
reduced.
(f) Composition scheme is available to small taxpayers. In such a case, compliance procedure would be
comparatively less.

9. Structure of GST ****

Structure of GST
India is a federal country, which means there’s division of power between the Central government and the State
governments. Because of India’s Federal structure, dual GST model had been adopted. This means GST is
administered by the Central Government and State Government.
What is Dual Model?
Dual model GST is applicable in India i.e. two varieties of GST will be charged on same bill i.e. CGST (Central
goods and service tax) and SGST (State goods and service tax). On an Intra State Supply, both CGST and SGST
shall be applicable. Amount of CGST is revenue of the Central Government and the amount of SGST is revenue
of State Government.
 10. Types of GST*****
There are four types of GST:
1. Central Goods and Services Tax (CGST)
2. State Goods and Services Tax (SGST)
3. Integrated Goods and Services Tax (IGST)
4. Union Territory Goods and Services Tax (UTGST)
1. What is CGST?
CGST refers to the Central GST tax that is levied by the Central Government of India on any transaction of
goods and services tax taking place within a state. It is one of the two taxes charged on every intra-state (within
one state) transaction, the other one being SGST (or UTGST for Union Territories).
2. What is SGST?
SGST (State GST) is one of the two taxes levied on every intrastate (within one state) transaction of goods and
services. The other one is CGST. SGST is levied by the state where the goods are being sold/purchased. The
State Government is the sole claimer of the revenue earned under SGST.
3. What is IGST?
Integrated GST (IGST) is applicable on inter-state (between two states) transactions of goods and services, as
well as on imports. This tax will be collected by the Central government and will further be distributed among
the respective states. IGST is charged when a product or service is moved from one state to another.
4. What is UTGST (or UGST)?
The Union Territory Goods and Services Tax, commonly referred to as UTGST, is the GST applicable on the
goods and services supply that takes place in any of the five Union Territories of India, including Andaman and
Nicobar Islands, Dadra and Nagar Haveli, Chandigarh, Lakshadweep and Daman and Diu. This UTGST will be
charged in addition to the Central GST (CGST) explained above.
Difference between Different Types of GST Taxes
Types of
CGST SGST IGST UGST/UTGST
Differences

Inter-state
Applicable
Intrastate Intrastate (between two Within one
transactions
(Within one (Within one states or one state Union Territory
(Goods &
state) state) and one UT) and (UT)
Services)
imports

Central
Collected by State Govt. Central Govt. UT Govt.
Govt.

Benefitting Central Central Govt. &

State Govt. UT Govt.
Authority Govt. State Govt.
 11. Taxes subsumed in GST [Important]********
OR
The GST replaces which indirect taxes?
GST subsumes following taxes:
Central Taxes Subsumed in GST
(a) Central Excise Tax
(b) Additional Excise Duties
(c) Service Tax
(d) Additional Custom duty, commonly known as Countervailing Tax (CVD)
(e) Special Additional Tax of Customs (SAD)
(f) Surcharges, and
(g) Cess as they relate to goods or services.
State Taxes Subsumed in GST
(a) VAT / Sales tax
(b) Entertainment tax (excluding Entertainment tax levied by the local bodies).
(c) Luxury tax
(d) Purchase tax
(e) Taxes on lottery, betting and gambling.
(f) State Cess and Surcharges in so far as they relate to supply of goods and services.
(g) Entry tax / Octroi
(h) Taxes on advertisement
(i) Central Sales Tax

12. Taxes not subsumed in GST**

Many of the indirect taxes are not subsumed in GST, few of these are illustrated here
(a) Custom duty
(b) Stamp duty
(c) Securities transaction Tax
(d) Electricity tax
(e) State Excise on Alcohol
(f) Entertainment Tax (Levied by Local Bodies)
(g) Central Excise on Petroleum products, Tobacco
(h) VAT on Petroleum Products and Alcohol
(i) Profession Tax
(j) Property Tax levied by Local Bodies
 13. Non-applicability of GST ****
There are certain activities which are items not covered under GST. They are beyond the scope of GST, i.e.,
GST will not apply on them. These are classified under Schedule III of the GST Act as “Neither goods nor
services”.
(a) Services by an employee to the employer in relation to his employment
(b) Courts will not charge GST to pass judgement.
(c) Duties performed by The Members of Parliament, State Legislature, Panchayats, Municipalities and
other local authorities etc are not chargeable to GST
(d) There are no taxes on funeral services for any religion.
(e) Actionable claims (other than lottery, betting and gambling): Actionable Claims’ means claims which
can be enforced only by a legal action or a suit, example a book debt, bill of exchange, promissory note.
(f) Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory
(g) Supply in Customs port before Home consumption.
Apart from Schedule III, GST is also not applicable on the following, i.e., they are beyond the scope of GST:
(a) Alcohol for human consumption
(b) Electricity [it shall be liable to electricity tax]
(c) 5 verities of Petroleum Products

14. Rate of GST***

Rate of GST varies from product to product. There are 4 popular rates of GST i.e.
(a) 5% (2.5% CGST + 2.5% SGST)
(b) 12% (6% CGST + 6 % SGST)
(c) 18% (9 % CGST + 9 % SGST) and
(d) 28% (14 % CGST+14 % SGST)
Note:
(a) Special Rate of GST on Jewellery: It is 3% in case of Gold, Silver, Platinum, jeweler and limitation
jeweler.
(b) In case of Rough diamond rate of GST is 0.25%

15. GST Compensation Cess*

Goods and Services Tax (Compensation to States) Act, 2017 was enacted to levy Compensation cess for
providing compensation to the States for the loss of revenue arising on account of implementation of the goods
and service tax.
(a) Compensation cess shall be levied on goods such as Pan Masala, Tobacco and manufactured tobacco
substitutes, coal, aerated water, Luxury car etc.
(b) It is levied to provide compensation to the States for loss of revenue arising on account of
implementation of the GST for a period of 5 years.
(c) General rate of compensation cess is 15 %.
(d) It is levied on assessable value (and not on the amount of tax).
 16. Definitions: Aggregate turnover [Section 2 (6)] **
As per Section 2(6) of the CGST Act, “Aggregate turnover” means the aggregate value of
(a) all taxable supplies
(b) exempt supplies
(c) export of goods or services or both
(d) includes inter-state supplies
Aggregate turnover of a person having the same Permanent Account Number (PAN) shall be computed on all
India basis. It includes stock transfer & Branch Transfer. However It does not include the followings:
(a) the value of inward supplies on which tax is payable by a person on reverse charge basis.
(b) excludes Central tax, State tax, Union tax, integrated tax and Cess.

17. Definitions: Capital goods [Section 2 (19] ****

As per Section 2(19) of the CGST Act, “capital goods” means goods,
(a) The value of which is capitalized in the books of account of the person claiming the input tax credit and
(b) Which are used or intended to be used in the course or furtherance of business;

18. Definitions: Casual taxable person [Section 2 (20]

As per Section 2(20) of the CGST Act, “casual taxable person” means
a person who occasionally undertakes transactions involving supply of goods or services or both in the course or
furtherance of business. Such supply may be made
— whether as principal, agent or in any other capacity,
— in a State or a Union territory
— where he has no fixed place of business.

19. Definitions: Goods [Section 2 (52)] [Important]********

As per Section 2(52) of the CGST Act, 2017, “goods” means
— every kind of movable property
— other than money and securities
— but includes
• actionable claim,
• growing crops,
• grass and things attached to or forming part of the land
— which are agreed to be severed before supply or under a contract of supply.

20. Definitions: lnput [Section 2 (59)]

As per Section 2(59) of the Central Goods and Services Tax (CGST) Act, 2017, “input” means any goods other
than capital goods used or intended to be used by a supplier in the course or furtherance of business.
 21. Definitions: lnput tax [Section 2 (62)] [Important]*********
As per Section 2(62) of the Central Goods and Services Tax (CGST) Act, 2017, input tax” in relation to a
registered person, means the CGST, SGST, IGST or UTGST charged on any supply of goods or services or both
made to him and includes-
(a) IGST charged on import of goods;
(b) The tax payable under Reserve charge mechanism for inward supplies.
However, input tax does not include the tax paid under the composition levy.

22. Definitions: lnput tax credit [Section 2 (63)] *****

As per Section 2(63) of the Central Goods and Services Tax (CGST) Act, 2017, “input tax credit” means
the credit of input tax;

23. Definitions: Output tax [Section 2 (82)] [Important]*******

As per Section 2(82) of the Central Goods and Services Tax (CGST) Act, 2017, “Output Tax “in relation to
a taxable person,
• Means the tax chargeable under this Act on taxable supply made by him or by his agent;
• But excludes tax payable by him on reverse charge basis.

24. Definitions: Person [Section 2 (84)]

As per Section 2(84) of the Central Goods and Services Tax (CGST) Act, 2017 “Person” includes –
(a) An Individual;
(b) A Hindu Undivided Family;
(c) A Company;
(d) A Firm;
(e) A Limited Liability Partnership
(f) An AOP (association of persons) or a BOI (body of individuals), (whether incorporated or
not) in India or outside India
(g) Any Corporation established by or under any Central Act, State Act or Provincial Act or a
Government company;
(h) Any Body corporate incorporated by or under the laws of a country outside India;
(i) A co-operative society registered under any law relating to co-operative societies;
(j) A local authority
(k) Central Government or a State Government;
(l) Society as defined under the Societies Registration Act, 1860;
(m) Trust; and
(n) Every Artificial juridical person, not falling within any of the above.
 25. Definitions: Place of business [Section 2 (85)]
As per Section 2(85) of the Central Goods and Services Tax (CGST) Act, “Place of Business” includes
–
(a) A place from where the business is ordinarily carried on, and includes a warehouse, a godown o any
other place where a taxable person stores his goods, supplies or receives goods or services or both; or
(b) A place where a taxable person maintains his books of account; or
(c) A place where a taxable person is engaged in business through an agent, by whatever name called.
[POB = Ordinary place of business + Warehouse + Place where Accounts kept + Agent’s place]

26. Definitions: Registered Person [Section 2 (94)]

As per Section 2(94) of the Central Goods and Services Tax (CGST) Act “Registered person” –
(a) Means a person who is registered u/s 25 of the CGST Act,
(b) But does not include a person having a Unique Identity Number.

27. Definitions: Services [Section 2 (102)]

As per Section 2(102) of the Central Goods and Services Tax (CGST) Act “Services” means –
(a) anything other than
• goods
• money and
• securities
(b) However it includes activities relating to the use of money or its conversion by cash or by any other
mode, from one form, currency or denomination, to another form, currency or denomination for which a
separate consideration is charged.

28. Definitions: Taxable person [Section 2 (107)]

As per Section 2(107) of the Central Goods and Services Tax (CGST) Act “Taxable Person” means
(a) a person who is registered or
(b) liable to be registered u/s 22 or 24.

29. Definitions: Turnover in state and union territory [2 (112]

As per Section 2(107) of the Central Goods and Services Tax (CGST) Act “Turnover in State” or
“Turnover in Union Territory” means the aggregate value of:
(a) All taxable supplies (excluding the value of inward supplies on which tax is payable by a person on
reverse charge basis) and
(b) Exempt supplies made within a State or Union territory by a taxable person and
(c) Export of goods or services or both and
(d) inter-State supplies of goods or services or both made from the State or Union territory by the said
taxable person
(e) But excludes CGST, SGST, IGST, UTGST and Cess.
 30. Meaning of Business under GST explained with illustrations
[For knowledge purpose only]
As per Sec 2(17) of CGST Act, 2017 “Business” includes :
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity,
whether or not it is for a pecuniary benefit;
▪ Banks providing financial services to its customers.
▪ Company manufacturing turbines for export and local sale.
▪ Provision of CA services to client such as audit and consultancy.
▪ An artist earning income for dance performances.
▪ Gambling in a Derby.
▪ Charitable hospital providing free medicines to farmers.
Note: Pecuniary benefit means monetary benefits. It’s a benefit or compensation that is quantifiable in monetary
terms. The primary significance of this term is economic gain by the entity.
(b) any activity or transaction in connection with or incidental or ancillary to (a) above;
▪ Provisions of lockers for rent to customers in the Bank premises as Banks have high security.
Turbine Manufacturing company letting out R&D facilities to research units towards improvement of product
and expansion.
(c) any activity or transaction in the nature of(a) above, whether or not there is volume, frequency, continuity or
regularity of such transaction;
▪ Mr. X gambles for the first time in Derby and wins.
▪ Sale of mangoes by a farmer during summer in flea market.
▪ Sale of old newspapers by a CA firm.
(d) supply or acquisition of goods including capital assets and services in connection with commencement or
closure of business;
▪ Services rendered by a Company Secretary to incorporate a Company.
▪ Real estate agent helping Company to acquire factory godown for a commission.
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of
the facilities or benefits to its members, as the case may be;
▪ Cooperative society formed for lending loans to farmers.
▪ Recreation club formed by apartment owners.
(f) admission, for a consideration, of persons to any premises; and
▪ PVR selling movie tickets.
▪ Museums run by Governments for an entry fee to public to display objects of historical
significance.
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or
furtherance of his trade, profession or vocation;
▪ Consultancy service provided by a Company CFO regarding Mergers to another company.
(h) services provided by a race club by way of totalisator or a licence to bookmaker in such club;
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities;
▪ Acquisition of land for Metro construction by the State Government from the landowners for some
compensation.
▪ Government running BBMP service for the welfare of citizens.
 Unit 4 [15 Marks]
(A) Taxable events & Concept of Supply: [5 Marks]
Meaning of taxable event, Supply as per CGST Act (excluding detailed discussion on Sch l, Sch-ll and lll), inward supply,
outward supply, Non-taxable supply, Taxable supply, Exempt supply, Continuous supply of goods, composite supply, mixed
supply, intrastate and interstate supply of goods, zero rated supply (basic concepts only)

1. Meaning of taxable event*

Taxable event means as event which causes accrual of tax liability. A taxable event refers to any event or transaction
those results in a tax consequence for the party who executes the transaction. Every law has its own taxable event.
The taxable event in GST is supply of goods or services or both. The liability to pay tax arises at the ‘time of supply of
goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to
decide GST’s applicability.

2. Supply as per CGST Act [Section 7 (1)]*************

The scope of term supply is given under Section 7(1) of CGST Act which provides the inclusive definition of term
supply. As per the provision of supply, supply includes:
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business and;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration and;
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
 3. Meaning of Furtherance of Business Under GST
The term “business” has been defined but the phrase “in the course or furtherance of” has not been dealt with in any
manner under the GST law.
The literal meaning of the said phrase ‘in the course of or furtherance of ‘ is ‘during the act of or in continuation of
carrying out such act in future’
Thus, in course or furtherance of Business means either of following :
(a) Anything done in relation to business, while carrying out business or simply a revenue-generating ordinary
activity of that organisation/concern. For example: Selling scrap generated in process of manufacturing turbines.
Purchases & Sales of spare parts by an automobile vendor.
(b) Anything done to achieve the objectives of continuing to conduct the same business in future. Example:
Consultancy service provided by a Company CFO regarding Mergers to another company.

4. Please give example of ‘in course of business’ and ‘in

furtherance of business’.
(a) ABC Ltd. Is engaged in the business of transmission of power across the Maharashtra. Transmission of power is
carried out through the networks of transmission lines and sub-stations constructed by ABC Ltd. It has a market
share of 50% transmission network in India. This is example of ‘in course of business’.
(b) ABC Ltd. appointed consultants to increase market share from 50 % to 60 %. This is example of ‘in furtherance of
business’

5. What are the necessary elements that constitute supply under

CGST/SGST Act?**
In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-
(a) The activity involves supply of goods or services or both;
(b) The supply is for a consideration unless otherwise specifically provided for;
(c) The supply is made in the course or furtherance of business;
(d) The supply is a taxable supply; and
(e) The supply is made by a taxable person.
Examples:
(a) Mr. A buys a table for ₹ 10,000 for his personal use and sells it off after 10 months of use to a dealer. This is not
considered as supply under CGST as this is not done by Mr. A for the furtherance of business.
(b) Mrs. B provides free coaching to neighbouring students as a hobby. This is not considered as supply as this act is
not performed for a consideration. However, as specified in Schedule I of GST Act, certain activities are
considered as supply even if it is made without consideration.
(c) Supply of goods to an orphanage by any manufacturing company for free distribution will not get covered as a
taxable supply as it is without consideration.
(d) A non resident person Mr. X visits India as a tourist and sells his camera for ₹10000. This doesn’t amount to
supply as it is not in the course and furtherance of business.
(e) A practicing CA who is registered under GST sells his personal Rado watch. It doesn’t amount to supply as it is
not in the course and furtherance of business.
6. Schedule I: Transactions Treated as Supply under GST Even If
Made Without Consideration****
Transactions Treated as Supply under GST Even If Made Without Consideration
a) Supply of goods or services between related persons. Whereas, the supply made between related
persons for inadequate or no Consideration is covered under Schedule I of the GST Act. Such
transactions shall be treated as ‘Supply’ only if it happens in course or furtherance of business.
b) Supply of goods by principal to his agent or by an agent to his principal
c) Import of services by taxable person from a related person or from any of his other establishment
outside India, in the course or furtherance of business
d) Permanent transfer of business asset where ITC has been availed.

7. Who is a related person under GST?

Persons shall be deemed to be related if they fall under any of the categories below:
(a) Officer/ director of one business is the officer/ director of another business
(b) Businesses are legally recognised as partners
(c) An employer and an employee
(d) Any person holds at least 25% of shares in another company either directly or indirectly
(e) One of them controls the other directly or indirectly
(f) They are under common control or management
(g) The entities together control another entity
(h) They are members of the same family

8. Schedule II: Activities or transactions to be treated as supply

of goods or supply of services**
[Permanent transfer – Goods]
[Temporary given to use –Service]
Deemed as supply of services
• Renting of immovable property
• Work contract
• Developing, designing, programming, customizing of IT software
• Construction of a building, complex or civil structure
• Transfer of right to use any goods
• Job work
• Temporary transfer or use of intellectual property rights
Deemed as supply of goods
• Transfer of title in goods
• Transfer of title in goods at a future date i.e. hire purchase
• Transfer or disposal of business assets
 9. Schedule III: Activities or transactions treated neither as the
sale of goods nor sale of services*****
Activities which are neither supply of goods or services
(a) Services provided by an employee to the employer.
(b) Gifts up to ₹50,000/- in value in a Financial Year, by an employer to an employee
(c) Services of the funeral, burial, crematorium or mortuary including transportation of the deceased
(d) Services by any court or Tribunal.
(e) Duties performed by the MP/MLA/MLC/ Members of Local Bodies.
(f) Duties performed by any person as a Chairperson or a Member or a Director in a body established by
the Central Government or a State Government or local authority.
(g) Duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity.
(h) Sale of Land
(i) Sale of Building (However, If construction of a complex /building intended for sale to a buyer and
part of the consideration is received before completion, then it will be treated as Supply of Services)
(j) Actionable claims, other than lottery, betting and gambling.

10. Types of Supply*

Based on Recipient
(a) Inward Supply
(b) Outward Supply

Based on Tax treatment

(a) Exempt Supply
(b) Zero-Rated Supply
(c) Non-Taxable Supply
(d) Taxable Supply

Based on combination
(a) Composite Supply
(b) Mixed Supply
(c) Continuous Supply

Based on location
(a) Intra-State supply
(b) Territorial waters
(c) Inter-State supply
 11. Inward supply [Section 2 (67)]**
Inward supply literally means receiving goods or services or both.
As per Section 2(67) of the Central Goods and Services Tax (CGST) Act, 2017, “inward supply” in
relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any
other means with or without consideration.

12. Outward supply [Section 2 (83)]**

As per Section 2(83) of the CGST Act, 2017, the term “outward supply” has been defined, as under:
“outward supply” in relation to a taxable person, means supply of goods or services or both, whether by sale,
transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by
such person in the course or furtherance of business.

13. Non-taxable supply [Section 2 (78)]****

As per Section 2(78) of the Central Goods and Services Tax (CGST) Act, 2017 “Non-taxable supply”
means a supply of goods or services or both which is not leviable to tax under CGST Act or under the IGST
Act.
Note:
(a) A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable supply
under the GST.
(b) Only those supplies that are excluded from the scope of taxation under GST are covered by this
definition – i.e.,
• alcoholic liquor for human consumption,
• articles listed in section 9(2) or
• articles listed in schedule III

14. Taxable Supply [Section 2 (108)]**

As per Section 2(108) of the Central Goods and Services Tax (CGST) Act, 2017,
“taxable supply” means a supply of goods or services or both which is leviable to tax under this Act.

15. Exempt supply [Section 2 (47)]****

As per Section 2(47) of the CGST Act, 2017, “exempt supply” means
(a) supply of any goods or services or both which attracts nil rate of tax
(b) Supplies that are wholly or partially exempted from CGST or IGST,
(c) Non-taxable supply as defined under Section 2(78)
Tax need not be paid on these supplies.

16. Zero-Rated Supply [Section 16 (1)]****

Section 16 (1) of the IGST Act, 2017, which states that “zero rated supply” means any of the following
supplies of goods or services or both, namely: ––
a) export of goods or services or both; or
b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone
unit.
 17. Difference between Exempt Supply & Zero-Rated Supply**
Exempt Supply
As per section 2(47) of the CGST Act, 2017, a supply is said to be exempt, when it attracts nil rate of duty or
is specifically exempted by a notification or kept out of the purview of tax (i.e. a non-GST supply).
But if a good or service is exempted from payment of tax, it cannot be said that it is zero rated. The inputs
and input services which go into the making of the good or provision of service has already suffered tax and
only the final product is exempted. Moreover, when the output is exempted, tax laws do not allow
availment/utilisation of credit on the inputs and input services used for supply of the exempted output.
Thus, in a true sense the entire supply is not zero rated. Though the output suffers no tax, the inputs and input
services have suffered tax and since availment of tax credit on input side is not permitted, it becomes a cost
for the supplier. The concept of zero rating of supplies aims to correct this anomaly.
Zero-Rated Supply
By zero rating it is meant that the entire value chain of the supply is exempt from tax.
This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on
taking/availing credit of taxes paid on the input side for making/providing the output supply. Such an
approach would in true sense make the goods or services zero rated. As per the GST Law exports are meant
to be zero rated the zero rating principle is applied in letter and spirit for exports and supplies to SEZ.

18. Difference between Nil Rated, Exempt, Zero Rated and Non-
GST supplies****

Supply Name Description

Zero Rated Exports
Supplies made to SEZ or SEZ Developers.

Nil Rated Supplies that have a declared rate of 0 % GST.

Example: Salt, grains, Jaggery etc.

Exempt Supplies are taxable but do not attract GST and for which ITC cannot be
claimed.
Example: Fresh milk, Fresh fruits, Curd, Bread etc.

Non-GST These supplies do not come under the purview of GST law.
Example: Alcohol for human consumption, Petrol etc.

19. Continuous supply of goods [Section 2 (32)]

As per Section 2(32) of the Central Goods and Services Tax (CGST) Act, 2017 “continuous supply of
goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent
basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the
supplier invoices the recipient on a regular or periodic basis and includes supply of such goods as the
Government may, subject to such conditions, as it may, by notification, specify.
 20. Composite supply [Section 2 (30)] [Important]*********
As per Section 2(30) of the Central Goods and Services Tax (CGST) Act, 2017,
“composite supply” means a supply made by a taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.
Principal supply has been defined in Section 2(90) of the CGST Act as supply of goods or services which
constitutes the predominant element of a composite supply and to which any other supply forming part of
that composite supply is ancillary.

Example:
(a) Buying a Dry Fruit Gift Box for Diwali. It includes dry fruits, a box and a wrapper. Box and wrapper
cannot be sold individually without the main content which is dry fruit. This is composite supply.

(b) Where goods are packed and transported with insurance, the supply of goods, packing materials,
transport and insurance is a composite supply and supply of goods is a principal supply.

(c) Booking of Air Tickets which involves cost of the meal to be provided during travel will be Composite
supply and tax will be calculated on the principle supply which in this case is transportation of
passengers through flight.

(d) M/s P Ltd. entered into a contract with M/s Z Ltd. for supply of goods. Where goods are packed and
transported with insurance. The supply of goods, packing materials, transport and insurance is a
composite supply and supply of goods is a principal supply.

(e) Five-star hotel provides four days and three-night package, with breakfast. This is a composite supply as
the package of accommodation facilities and breakfast is a natural combination in the ordinary course of
business for a hotel. In this case, the hotel accommodation is the principal supply, and breakfast is
ancillary to the hotel accommodation.

(f) If the laptop bag is supplied along with the laptop in the ordinary course of business, the principal
supply is that of the laptop and the bag is an ancillary. Therefore, it is a composite supply and the rate of
tax would that as applicable to the laptop

21. Mixed supply [Section 2 (74)] [Important]**********

As per Section 2(74) of the Central Goods and Services Tax (CGST) Act, 2017, “mixed supply” means two
or more individual supplies of goods or services, or any combination thereof, made in conjunction with each
other by a taxable person for a single price where such supply does not constitute a composite supply.
Example:
(a) A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks
and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied
separately.
 (b) M/s X Ltd. a dealer offer combo packs of shirt, watch, wallet, book and they are bundled as a kit and
this kit is supplied for a single price and the supply of one item does not naturally necessitate the supply
of other elements. Hence the supply is a mixed supply. Tax rate for a shirt, watch, wallet and book are
12%, 18%, 5% and Nil respectively. In this case, watch attracts the highest rate of tax in the mixed
supply i.e., 18%. Hence, the mixed supply will be taxed at 18%.

22. Intra-state supply of goods [Section 2 (64) & section 8]*****

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

23. Inter-state supply of goods************

It is a supply of goods or services, where the location of the supplier and place of supply are in-
(a) Two different States;
(b) Two different Union territories; or
(c) A State and a Union territory
It also includes import of goods or services into the territory of India.
Further, the following shall be treated as an inter-state supply of goods or services:
(a) When the supplier is located in India and the place of supply is outside India;
(b) To or by a Special Economic Zone (SEZ) developer or a SEZ unit; or
(c) In the taxable territory, not being an intra-state supply and not covered elsewhere

24. Difference between “supply of Goods” and Supply of

Service”
Difference between “supply of Goods” and Supply of Service”

Rates Rates of GST may vary for supply of goods and for supply of services.
Composite scheme Composite scheme is applicable only on goods and not on service (except
restaurant & catering service)
Time of supply Time of supply of goods is governed by sec. 12 of CGST Act whereas time of
supply of service is governed by sec. 13 and both are substantially different.
Invoice Time limit for issue of invoice in case of supply of goods (generally
immediately) and supply of service (generally within 30 days) also varies
significantly.
Place of supply Principle governing determination of place of supply of goods varies from place
of supply of service.
Import Import of goods is governed by Custom law and import of service is governed by
GST law.
 25. Mixed Supply & Composite supply: Practicals
In the following cases based on information given and the query, give your comments on the taxability under
GST and the rate of GST applicable, if any:
(a) Space Bazar offers a free bucket with detergent purchased. It is composite supply or mixed supply?
Assume rate of GST for detergent @ 28% and bucket @ 18%.

(b) Mr. A booked a Rajdhani train ticket, which includes meal. It is composite supply or mixed supply?

(c) Mr. Ravi being a dealer in laptops, sold a laptop bag along with the laptop to a customer, for Rs.
55,000. CGST and SGST for laptop @ 18% and for laptop bag @ 28%. What would be the rate of
tax leviable? Also find the GST liability.

Solution:
(a) This is a mixed supply. These items can be sold separately. Product which has the higher rate, will
apply on the whole mixed bundle. i.e., 28%.

(b) It is a bundle of supplies. It is composite supply where the products cannot be sold separately. The
transportation of passenger is, therefore, the principal supply. Rate of tax applicable to the principal
supply will be charged to the whole composite bundle. Therefore, rate of GST applicable to
transportation of passengers by rail will be charged by IRCTC on the booking of Rajdhani ticket.

(c) If the laptop bag is supplied along with the laptop in the ordinary course of business, the principal
supply is that of the laptop and the bag is an ancillary. Therefore, it is a composite supply and the
rate of tax would be that at applicable to the laptop. Hence, applicable rate of GST 18% on Rs.
55,000.CGST is Rs. 4,950 and SGST is Rs. 4,950.

26. Mixed Supply & Composite supply: Practicals

From the following information determine the nature of supply and tax liability. XYZ Ltd. a manufacturer of
cosmetic products supplied a package consisting of hair oil (GST Rate - 18%), sun screen cream (GST Rate -
28%), shampoo (GST Rate - 28%) and hair comb (GST Rate -12%). The price per package is ₹ 500
(exclusive of taxes). 10,000 packages were supplied by the company to its dealers. Determine the nature of
supply and its tax liability.
Solution:
This supply would be regarded as mixed supply, since in this case each of the goods in the package have
individual identity and can be supplied separately, but are deliberately supplied conjointly for a single
consolidated price. The tax rates applicable in case of mixed supply would be the rate of tax attributable to
that one supply (goods, or services) which suffers the highest rate of tax from amongst the supplies forming
part of the mixed supply. Therefore, the package will be chargeable to 28% GST.
The tax liability will be arrived as under :
Value of taxable supply per package ₹ 500
No. of packages 10,000
Total Taxable Value of supply ₹ 50,00,000
Applicable GST Rate 28%
Total Tax liability ₹ 14,00,000
 27. Mixed Supply & Composite supply: Practicals
State with reason GST payable in the following cases:-
(a) X Ltd. supplied 10 Laptops to B Ltd. under an inter-state supply. Each laptop is supplied with Windows
10 & MS Office installed in the Laptop. Laptop is given with laptop bag. Each laptop is supplied for a
consolidated price of ₹ 70,000. Applicable rate of IGST on:- Laptop-18%, Windows 10 -12% , MS
Office-12% , Laptop bag- 5%.
(b) A supplied 20 packets each consisting of canned foods, sweets, chocolates, cakes, dry fruits and fruit
juices to B for a single price of ₹ 850 and out of different items in the package, the applicable CGST rate
on: canned foods- 18% , sweets-5 %, chocolates-12%, cakes-12 %, dry fruits- 5% and fruit juices -12%.
Solution:
(a) If the laptop bag, Windows, MS office are supplied along with the laptop in the ordinary course of
business, the principal supply is that of the laptop and the others are ancillary. Therefore, it is a
composite supply and the rate of tax would be that at applicable to the laptop. Hence, applicable rate of
IGST will be 18% on Rs. 70,000 i.e. ₹ 12,600 (IGST as the supply is inter-state supply)

(b) Gift hamper which consist of different Items like sweets, chocolates, cakes, dry fruits packed in one pack
is Mixed supply as these items can be sold separately and it shall be treated as a supply of that particular
item which attracts the highest rate of tax. Hence
The tax liability will be arrived as under :
Value of taxable supply per package ₹ 850
No. of packages 20
Total Taxable Value of supply ₹ 17,000
Applicable GST Rate 18%
Total Tax liability ₹ 3,060

28. Illustrations: Discuss whether GST is applicable in the

following transaction? ***
Question:
(a) M transfers 1,000 debentures of A Ltd. to N for a consideration of ₹ 4,50,000.
(b) T transfers a plot of land situated in Madurai to B for a consideration of ₹ 40 lakh.
(c) Whether actionable claim liable to GST
Solution:
(a) Sale of debentures – GST is applicable on supply of goods and / or services. Debentures are securities.
Under GST law, securities are neither ‘goods’ (as defined u/Sec 2(52)) nor ‘services’ (as defined u/Sec
2(102)). Thus, transfer of debentures (securities) is not subject to GST.
(b) Sale of plot of land – Plot of land, being immovable property, is not ‘goods’ as defined u/Sec 2(52) of
CGST Act. However, it is covered by definition of ‘service’ as given u/s 2(102) of CGST Act. However,
transaction of sale of land are out of scope of supply under GST law (Sec 7(2) of CGST Act read with
Schedule III of CGST Act). Thus, sale consideration is not subject to GST.
(c) Actionable claim: Only lottery, betting and gambling shall be treated as supplies under the GST
regime. All the other actionable claims shall be out of scope of supply and thus, will not attract GST
liability
 29. Examine whether the following activities would amount to
supply under section 7 of the CGST Act: ****
Question:
(a) ABC Ltd. is trader of detergent. It intends to explore market of southern India. It distributes samples of
detergent in that area.
(b) An individual buys a car for personal use and after a year sells it to a car dealer
(c) Sale of gold/silver Jewellary by a household entity to jeweller
Solution:
(a) Free Sample: Supply by way of free sampling is supply in furtherance of business.
(b) Personal goods: The transaction be not be a supply because the sale of old and used car by an
individual is not in the course or furtherance of business and hence does not constitute supply.
(c) Personal goods: The transaction be not be a supply Sale of gold/silver Jewellary by a household
entity to jeweller is not in the course or furtherance of business and hence does not constitute supply.

30. Examine whether the following activities are supply ****

Question:
(a) A cloth retailer gives clothes from his business stock to his friend free of cost.
(b) A dealer of air-conditioners permanently transfers an air conditioner from his stock in trade, for
personal use at his residence.
(c) ABC Academy purchases some laptops for business purpose. ITC on these laptops have been
availed. After 3 years it have been donated to the trust.
(d) Damodar Charitable Trust, a trust who gets the eye treatment of needy people done free of cost,
donates clothes and toys to children living in slum area.
Solution:
(a) Give Business stock to his friend free of cost: In this case, cloth retailer (trader) has gifted cloth to
his friend (unrelated person). Since the goods supplied (cloth) is his trading stock/business asset, he
must have availed ITC thereon. In terms of Sec 7 (1) (c) of CGST Act read with Entry No. 1 of
Schedule I of CGST Act such transfer of business stock would amount to ‘supply’.
(b) Transfer of Business Assets to his residence: Assets In this case, dealer of air-conditioners (sole
proprietor) has transfer one unit of his trading stock to himself for his personal use at his residence.
Since the goods transferred (AC) is his business asset, he must have availed ITC thereon. In terms of
Sec 7 (1) (c) of CGST Act read with Entry No. 1 of Schedule I of CGST Act, such transfer of
business asset would amount to ‘supply’.
(c) Donation of Business Assets to trust: In this case, ABC Academy has transferred/donated his ITC
availed laptop (business asset) to a trust. Since the goods transferred (laptop) is his business asset, he
must have availed ITC thereon. In terms of Sec 7 (1) (c) of CGST Act read with Entry No. 1 of
Schedule I of CGST Act, such transfer of business asset would amount to ‘supply’.
(d) Donation without consideration: Damodar Charitable Trust is providing eye treatment services free
of cost to the needy people (unrelated persons). Its activity does not fall within the scope of supply
(as supply made for without consideration and not getting covered by Sec 7 (1) (c) read with
Schedule I of CGST Act).
 31. Mixed Supply & Composite supply: [2020 Honours]
A dealer sold detergent along with bucket. The taxable value of the supply is 1,20,000. The rate of CGST and
SGST on detergent is 9% in each case and that on the bucket is 14% in each case. Compute CGST and SGST
payable.
Solution:
This is a mixed supply. These items can be sold separately. Product which has the higher rate, will apply on
the whole mixed bundle. i.e., 14 % CGST & 14 % SGST
The tax liability will be arrived as under :
Total Taxable Value of supply ₹ 1,20,000
Applicable GST Rate 14 % CGST & 14 % SGST
CGST payable ₹ 16,800
SGST payable ₹ 16,800

32. Mixed Supply & Composite supply: [2020 Honours]

(a) Determine whether the following supplies amount to composite supplies–
(i) A hotel provides 3 nights - 4 days package wherein the facility of breakfast and dinner is provided
alongwith the room accommodation.
(ii) A toothpaste company has offered the scheme of free toothbrush of ₹ 15 alongwith the toothpaste
tube of ₹ 100.

Solution:
(i) A hotel provides four days and three-night package, with breakfast. This is a composite supply as the
package of accommodation facilities and breakfast is a natural combination in the ordinary course of
business for a hotel. In this case, the hotel accommodation is the principal supply, and breakfast is
ancillary to the hotel accommodation. If the hotel accommodation attracts 18% tax and the restaurant
service attracts 28% tax. As per the example, hotel accommodation is the principal supply, and the
entire supply will be taxed at 18%.

(iii) A toothpaste company has offered the scheme of free toothbrush of ₹ 15 alongwith the toothpaste
tube of ₹ 100. Here the toothpaste supplied free of cost are not naturally bundled, they can be
supplied separately. Hence the supply is not a composite supply. This is a mixed supply. These items
can be sold separately.
 Unit 4 (B) [5 Marks]
Time of Supply:
Need for determination, provisions in relation to forward and reverse charge only.

1. Time, Place and Value of Supply

Under GST, 3 types of taxes can be charged in the invoice. SGST and CGST in case of an intra-state
transaction and IGST in case of an interstate transaction. But deciding whether a particular transaction is
inter or intrastate is not an easy task.
Think about an online training where customers are sitting in different parts of the world.
Say in case, hotel services, where the receiver may have an office in another state and may be visiting the
hotel only temporarily, or where goods are sold on a train journey passing through different states.
To help address some of these situations, the IGST act lays down certain rules which define whether a
transaction is inter or intrastate. These rules are called the place of supply rules.
Time of supply
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
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
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

2. Time of Supply of Goods (Forward charge)********

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. CGST/SGST or IGST must be paid at
the time of supply.
Time of Supply of Goods
Time of supply of goods is earliest of:
1. Date of issue of invoice by the supplier
2. The last date on which he is required, under section 31, to issue the invoice with respect to the supply;
(i.e. removal of goods for supply to the recipient, where the supply involves movement of goods)
(delivery of goods or making available thereof to the recipient, in any other case)
(Practically, in case of goods, the date of receipt of payment by the supplier is no longer a criterion for
determination of time of supply for payment of tax)
 3. Time of supply of services (Forward charge)****
Time of Supply of Services if invoiced is issued within 30 Days from Supply of Services:
Time of supply of services is earliest of:
(a) Date of issue of invoice by the supplier
(b) Date on which the supplier receive the payment.

Time of Supply of Services if invoiced is not issued within 30 Days from Supply of Services:
Time of supply of services is earliest of:
(a) The date of provision of service, (i.e. Date of completion of services)f
(b) Date on which the supplier receive the payment.

3. Time of Supply of Goods (Reverse charge)

The time of supply shall be the earliest of the following dates, namely:—
(a) the date of the receipt of goods; or
(b) the date of payment as entered in the books of account of the recipient or
(c) the date on which the payment is debited in his bank account, whichever is earlier; or
(d) the date immediately following thirty days from the date of issue of invoice

4. Time of Supply of Services (Reverse charge)

The time of supply shall be the earliest of the following dates, namely:—
(e) the date of the supply of services; or
(f) the date of payment as entered in the books of account of the recipient or
(g) the date on which the payment is debited in his bank account, whichever is earlier; or
(h) the date immediately following sixty days from the date of issue of invoice

4. Determine time of supply of Goods: [Forward Charge]*******

Question:
Mr. Ram sold goods to Mr. Ravi worth ₹ 5,00,000. The invoice was issued on 15th November. The payment
was received on 31st October. The goods were supplied on 20th November. Find the time of supply of
goods. Prevous year turnover of Mr. Ram was ₹ 72 lakhs.
Solution:
Time of supply is earliest of –
1. Date of issue of invoice = 15th November
2. Date of removal of Goods = 20th November
Thus the time of supply is 15th November
[Note: No GST is payable on advance/Payment received against supply of Goods]

5. Determine time of supply of Goods: [Forward Charge]***

Mr. X sold goods to Mr. Y worth ₹ 1,00,000. The invoice was issued on 15th January. The payment was
received on 31st January. The goods were supplied on 20th January. Determine the time of supply.
[Answer: 15th January]
6. Determine time of supply of Goods: [Forward Charge]***
A machine has to be supplied at site. It is done by sourcing various components from vendors and
assembling the machine at site. The details of the various events are:
17th September Purchase order with advance of ₹ 50,000 is received for machine worth
₹ 12 lakh and entry duly made in the seller’s books of account

20th October The machine is assembled, tested at site, and accepted by buyer

23rd October Invoice raised

4th November Balance payment of ₹ 11,50,000 received
Determine the time of supply(ies) in the above scenario for the purpose of payment of tax.
Solution:
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person (excluding composition supplier)
has to pay GST on the outward supply of goods at the time of supply as specified in section 12(2)(a) i.e., date
of issue of invoice or the last date on which invoice ought to have been issued in terms of section 31.
Therefore, the time of supply for the purpose of payment of tax for the entire amount of ₹ 12,00,000 is 20th
October which is the date on which the goods were made available to the recipient as per section 31(1)(b),
and the invoice should have been issued on this date [Section 12(2)(a)].

7. Determine time of supply of services: [Forward Charge]***

Determine the time of supply from the following paerticulars
6th May Booking of convention hall, sum agreed ₹ 15000, advance of
₹ 3000 received
15th September Function held in convention hall

27th October Invoiceissued for ₹15000,indicating balance of ₹ 12000 payable

3rd November Balance payment of ₹ 12000 received

Solution:
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of
supply of service. In the given case, the invoice is not issued within the prescribed time limit. As per section
13(2)(b), in a case where the invoice is not issued within the prescribed time, the time of supply of service is
the date of provision of service or receipt of payment, whichever is earlier.
Therefore, the time of supply of service to the extent of ` 3,000 is 6th May as the date of payment of ` 3000 is
earlier than the date of provision of service. The time of supply of service to the extent of the balance `
12,000 is 15th September which is the date of provision of service.
 8. Determine time of supply of services [Forward Charge]****
Question:
Mr. A provides services worth Rs 20,000 to Mr. B on 1st January. The invoice was issued on 20th January
and the payment for the same was received on 1st February. (prescribed time for issue of invoice = 30 days)
Solution:
In the present case, we need to 1st check if the invoice was issued within 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.

9. Determine time of supply of Goods: [2019 GENERAL]

From the following information determine the time of supply of goods .
Date of removal of goods. 23..03 2021
Date of issue of invoice: 20.03.2021
Date of payment entered in the books or accounts: 28.03.2021
Date of credit in bank Accounts: 31.03.2021
Solution:
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person (excluding composition supplier)
has to pay GST on the outward supply of goods at the time of supply as specified in section 12(2)(a) i.e., date
of issue of invoice or the last date on which invoice ought to have been issued in terms of section 31.
Therefore, the time of supply for the purpose of payment of tax for the entire amount of ₹ 12,00,000 is 20th
October which is the date on which the goods were made available to the recipient as per section 31(1)(b),
and the invoice should have been issued on this date [Section 12(2)(a)].

10. Determine time of supply of Goods: [2019 Honours]

State the provisions relating to ‘Time of supply’ of goods in case of forward charge and calculate time of
supply from the information given below: Barun, a registered person, supplied certain goods to Tarun.
Following are the details available for a transaction:
Date of removal of goods 15-03-2021
Date of issue of invoice 18-03-2021
Date of payment entered in the books of accounts 25-03-2021
Date of credit in bank account 28-03-2021

11. Determine time of supply of Goods: [2020 Honours]

Ascertain Point of taxation in the following cases –
Nature of supply Goods delivered Date of Invoice Date of Payment
Goods 10.02.2021 08.02.2021 15.03.2021
Goods 10.04.2021 10.04.2021 02.02.2021
Goods 10.04.2021 12.04.2021 05.05.2021
 Unit 4 (C)
Place of Supply:
Need for ascertainment only.

1. Place & Location of supply

While determining the levy of taxes based on Place of Supply, two things are considered namely:
1. Location of Supplier: It is the registered place of business of the supplier.
2. Place of Supply: It is the registered place of business of the recipient
Place of supply of goods under GST defines whether the transaction will be counted as intra-state or inter-
state, and accordingly levy of SGST, CGST & IGST will be determined.

2. Place of Supply of Goods***

Place of Supply When There is Movement of Goods

No Movement of Goods

Imports & Exports

 3. Examples of Place of Supply of Goods (Movement)********
Question:
(a) Mr. Raj of Mumbai, Maharashtra sells 10 TV sets to Mr. Vijay of Nagpur, Maharashtra.
(b) Mr. Raj of Mumbai, Maharashtra sells 30 TV sets to Mr. Vinod of Bangalore, Karnataka
(c) Anand in Lucknow buys goods from Mr. Raj in Mumbai (Maharashtra). The buyer requests the
seller to send the goods to Nagpur (Maharashtra)
Solution:
(a) The place of supply is Nagpur in Maharashtra. Since it is the same state CGST & SGST will be
charge
(b) The place of supply is Bangalore in Karnataka. Since it is a different state IGST will be charged.
(c) In this case, it will be assumed that the buyer in Lucknow has received the goods & IGST will be
charged. Place of supply will be Lucknow (UP).

4. Examples of Place of Supply of Goods (Imports/Exports)****

Question:
(a) Ms. Malini imports school bags from China for her shop (registered in Mumbai)
(b) Ms. Anita (Kolkata) exports Indian perfumes to UK
Solution:
(a) Place of supply: Mumbai
GST: IGST
(b) Place of supply: UK
GST: Exempted

5. General Rules for Place of Supply of Services (except those

covered separately)
 6. Examples of Place of Supply of General services
Question:
(a) Mr. Ajay (Karnataka) provides consultancy services to M/s Sumati Technologies Ltd. (registered in
Maharashtra).
(b) Mr. Ajay (Karnataka) provides consultancy services to Mr. Vijay (unregistered but address on record
shows Tamil Nadu).
(c) Mr. Ajay (Karnataka) provides consultancy services to Mr. Anand (unregistered and address is not
available).
Solution:
(a) Place of supply: Maharashtra (location of registered person)
(b) Place of supply: Tamil Nadu (address of unregistered person is available)
(c) Place of supply: Karnataka (services to unregistered person and address is not available).

7. Place of Supply for Specific Services

8. Place of Supply for immovable Property*****

9. Determine the Place of Supply

Determine the place of supply of goods/services in the following cases as per the provisions of the Integrated
Goods and Services Tax (IGST) Act, 2017 :
(a) Mr. Raj of Kolkata Maharashtra sells 10 TV sets to Mr. Vijay of kolkata
(b) Mr. Raj of Kolkata, sells 30 TV sets to Mr. Vinod of Mumbai.
(c) Anand in Lucknow buys goods from Mr. Raj in Kolkata, The buyer requests the seller to send the
goods to Nagpur (Maharashtra)
(d) X Ltd., of Mumbai assembles its machinery for Z of Chennai at Bengaluru.
(e) JJ Paints Ltd., exported paints to London from Ahmadabad.
 Unit 4 (D) [5 Marks]
Value of Supply:
inclusion and exclusion of items for computation of value of supply under transaction value, value inclusive of tax.

1. Valuation of supply under GST

Valuation of supply under GST
Currently, GST will be charged on the ‘transaction value’. Transaction value is the price actually paid (or
payable) for the supply of goods/services between un-related parties (i.e., price is the sole consideration)
The value of supply under GST shall include:
(a) Any taxes, duties, cess, fees, and charges levied under any act, except GST.
(b) Any amount that the supplier is liable to pay which has been incurred by the recipient and is not
included in the price.
(c) The value will include all incidental expenses in relation to sale such as packing, commission etc.
(d) Subsidies linked to supply, except Government subsidies will be included.
(e) Interest/late fee/penalty for delayed payment of consideration will be included.

2. Inclusions in the Transaction Value [Section 15(2)]

The transaction value shall include the following:
(a) Taxes under other statute Any taxes, duties, cesses, fees and charges levied under any statute other
than GST Act/IGST Act, if charged separately by the supplier to the
recipient.
(b) Any amount for which Any amount that the supplier is liable to pay in relation to such supply
supplier is liable to pay but which has been incurred by the recipient of the supply and not
included in the price actually paid or payable for the goods and/or
services.
(c) Incidental expenses Incidental expenses, such as commission and packing, charged by the
supplier to the recipient of a supply
(d) Interest or late fees Interest/late fee/penalty for delay in payment of consideration for supply
will form part of value.

3. Exclusions from Transaction Value [Section 15(3)]

The value of the supply shall not include any discount that is given:
(a) Discount given before or at the time of the supply provided such discount has been duly recorded in
the invoice issued in respect of such supply; and
(b) Discount given after the supply has been effected but:
i. such discount is established in terms of an agreement entered into at or before the time of such
supply and specifically linked to relevant invoice; and
ii. Input tax credit has been reversed by the recipient of the supply as is attributable to the discount
issued by the supplies.
 4. Transaction with the related person
If transaction is with the related person then the supplier has to substantiate that the value of supply is not
influenced because of relationship.

5. Compute GST & Total amount Payable***********

Question:
M/S Carwala Ltd. sells a car worth Rs 4,00,000 to “B Automobiles”.
(a) They incur packing charges of Rs 5,000 on the car
(b) They provide a discount of 1% on the price, as part of Diwali scheme
Compute GST & Total amount payable (assuming GST of 18 % on car).
Solution:
The invoice issued to “B Automobiles”, under GST, will look like this:
Description of Goods Amount
(₹)
CAR 4,00,000
Add: Packing Charges 5,000
Less: Discount @ 1 % on 4,00,000 4,000
Transaction Value: 4,01,000
Add: CGST @ 9 % 36,090
Add: SGST @ 9 % 36,090
Total 4,73,180
Notes:
(a) Packing charge of Rs 5,000 is included in the transaction value. Packing charges or any incidental
expenses charged before or at the time of supply of goods or services must be included in the
transaction value.
(b) Discount of 1 % is deducted from the transaction value. Discount given before or at the time of
supply, and which is recorded in the invoice, can be deducted from the transaction value.

6. Computation of Taxable value of supply***********

RG Pvt. Ltd. provides the following particulars relating to goods sold by it to GK Pvi Ltd.:
Particulars Amount in (₹)
List price of the goods (exclusive of taxes and discounts) 10,00,000
Tax levied by Municipal Authority in the sale of such goods 1,00,000
CGST and SGST chargeable on the goods 2,00,880
Packing charges (not included in price above) 20,000
Cash Discount @ 2 % on the list Price
RG Pvt. Ltd. received ₹ 40,000 as a subsidy from a NGO. The price of ₹
10,00,000 of the goods is after considering such subsidy.
Determine the value of the taxable supply made by RG Pvt. Ltd.
 7. Computation of Taxable value of supply***********
UPS Ltd. of Hyderabad supplied a power generator to TK Tyres Ltd., of Tamil Nadu and charged the
following amounts to the supply :
₹
Price of generator before taxes and cash discount 9,00,000
Other charges not included in the above price :
Packing & Designing charges 33,000
Freight & Transit & Transit insurance 24,000
Cash discount 3% on price
Rate of GST 18 %
Calculate the value of supply and the GST payable.

8. Computation of Taxable value of supply [CU B.com 2019]

From the following information compute the value of taxable supply:
₹
List price of Goods 1,00,000
Cost of Primary Packing (included in selling price) 1,000
Cost of packing at buyers request (not included in selling price) 500
Subsidy received from Government of West Bengal 2,000
Trade discount actually allowed shown separately in invoice 100
Sale price excludes CGST @ 2.5 % and SGST @ 2.5 %

9. Computation of Taxable value of supply

Mr. M of Maharashtra supplied goods/services for ₹ 35,000 (excluding GST) to Mr. P of Pune. Mr. M
purchased goods/ services for ₹ 23,600 (inclusive of IGST 18%) from Mr. C of Tamil Nadu. SGST and
CGST rate on supply of goods and services is 9 % each.
Find the following:
(i) Total price charged by Mr. M for supply of goods/services and
(iii) Net liability of GST payable by Mr. M

10. Computation of Taxable value of supply [2019 General]

In Decemberr 2021 X of Kolkata soId goods worth ₹ 1,00,000 (excludmg GST) to Y of Durgaapur. X
purchased the goods for ₹ 82,600 (inclluding GST) from Z of KoIkata. In case of both Purchases and Sales
CGST is 9 % and SGST i s. 9 %. You arn rnqurirnd to compurte : (i) Ourtpunt tax (ii) Input tax (iii) Net GST
payable.

11. Computation of Taxable value of supply [2020 General]

X, a registered dealer in Mumbai, purchases goods from certain dealers in Mumbai for an amount of ₹
2,50,000 (exclusive of GST) and sells goods within Mumbai for ₹ 4,42,500 (inclusive of GST) in June 2021.
Calculate the GST payable by X for the month of June 2021. Assume GST rate is 18 %.
 Unit 4 (E) [5 Marks]
Charge of GST:
Basis of charge, Forward and reverse charge (basic concepts only).

1. What is Reverse Charge?***

What is Reverse Charge?
Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the
receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.
Why Reverse Charge Mechanism under GST?
Motive of Reverse Charge Mechanism is mainly more tax compliance and increased tax revenues.
Government was unable to collect service tax from various unorganised sectors but through Reverse charge
mechanism compliance has gone up thus on certain services because of this reason RCM has been brought
under GST regime as well.
 2. Conditions/ Requirements under the Reverse Charge
Mechanism*
Conditions/ Requirements under the Reverse Charge Mechanism
(a) There should be a supply of goods or services
(b) The supply should be in respect of taxable goods/ services
(c) Supply must be by an unregistered person
(d) Supply must be to a registered person
(e) Supply must be an intra-state supply as compulsory registration is required for inter-state sales

3. Forward charge*
(a) Forward charge or direct charge is the mechanism where the supplier of goods/services is liable to pay
tax.
(b) Under the current tax system, most transactions are covered under the forward charge mechanism.

4. Difference between Forward Charge and Reverse Charge

[Important] ******
Difference between Forward Charge and Reverse Charge

S. No. Particulars Forward Charge Reverse Charge

1. Meaning Forward charge is a mechanism where Reverse charge is a mode of collecting

the supplier of goods/ services is liable GST on supplies of goods and services
to pay tax. where the receiver of the goods/ service
will be liable to pay GST to the
government.

2. Tax Liability The tax liability is on the supplier of The tax liability is on the receiver of the
the goods or services or both. goods or services or both.

3. Registration Registration is required once a supplier All the people required to pay tax under
meets the threshold limit. reverse charge have to register
themselves for GST irrespective of
threshold.

4. Supplier A supplier can only be a registered A supplier can also be a registered

supplier. An unregistered supplier supplier in case of supply of notified
cannot collect tax. goods or services.

5. Recipient A recipient can be a registered or an A recipient should be registered in RCM

unregistered person. in case of section 9(3) of CGST Act and
section 5(3) of IGST Act.