1 Goods and Service Tax (GST) is an upgraded version of Value Added Tax (VAT).

GST is a consumption
based tax and a comprehensive indirect tax which shall levy on the supply of goods and services.

Presently, Indian indirect tax structure is very vast and complex. Under indirect tax ambit, we have
Central Excise, Service Tax, Central Sales Tax, 31 VAT laws, Luxury tax, entry tax, etc. As we can see,
there is a whole complex web of laws.

GST is set to subsume all these taxes and will prevail as a single indirect tax levy in the whole country.
This will facilitate wider tax base, more compliant business, less litigation and tax collection cost will also
decrease.

 The tax which was previously levied on manufacture or sale of goods and provision of services
would now be levied on ‘supply’ of goods and services

 As against the present principle of origin based taxation, GST would function on the principle of
taxation on destination based consumption

 The exemption limit is applicable on both SGST and CGST and holds good for taxpayers having
an annual turnover of Rs. 20 lakh. However, for some hilly and North Eastern states specified
under article 279A of the constitution, this annual turnover limit is Rs. 10 lakh

 Small taxpayers, including select categories of service providers and manufacturers having
annual turnover of up to Rs. 50 lakh have the option to pay tax at a flat rate without credits, also
known as compounding option. This compounding scheme and threshold exemption is optional

 The number of exempted services and goods will be kept to a minimum

 All exports will be zero rated

Apart from this, taxpayers should also note that credits for a certain category of GST may only be used
for paying GST of that particular category. This means that credits of CGST may not be used for paying
SGST/ UTGST and similarly credits of SGST/UTGST may not be used for paying CGST. The two types of ITS
(input tax credit) may not be cross utilized, however there is exception to this rule for specific
circumstances for payment of IGST of inter-state supplies. The ITC is permitted to be utilized in the
following manner.

2 Reverse charge means the liability to pay GST is on the recipient instead of the supplier of goods and
services. This is unlike the usual regulation under GST where the supplier of goods and services is
obligated to pay GST for the supplies made.

Further, this means all the provisions of the Act would be applicable to such a recipient as if he is the
person responsible for paying the tax with regards to supply of goods or services. In other words, in case
the recipient is unable to pay the tax under reverse charge mechanism, the supplier holds no liability to
pay such a tax.

Section 16 of the CGST Act lays down the conditions to be fulfilled by GST registered buyers to claim ITC.
The conditions are summarised as follows-
 1. Such input tax credit is eligible for claims if the goods or services purchased are further used for
business purposes and not personal use.

2. Buyer must hold such tax invoice or debit note or document evidencing payment towards the
purchase

3. Such tax invoice or debit note is filed by the supplier in Form GSTR-1 and it appears in the
buyer’s Form GSTR-2B.

4. From 1st January 2022, the benefit of provisional ITC claims is no longer available as per Section
16(2)(aa). It means the amount of ITC reported in GSTR-3B will be a total of actual ITC in GSTR-
2B. The provisional ITC of 5% of actual ITC in GSTR-2B will no longer be allowed. Hence, a regular
matching of the purchase register or expense ledger with GSTR-2B is crucial. Until 31st
December 2021, a regular taxpayer could have claimed provisional ITC in GSTR-3B to the extent
of 5% of the ITC available in GSTR-2B, in addition to ITC in GSTR-2B.

5. The buyer has received the goods and/or services. The goods are said to be received if it is
delivered by the supplier to the buyer or his representative or agent or another person as
directed, against a document of transfer of title of goods. On the other hand, the services are
said to be received if it is rendered by the supplier to the buyer or another person as directed.

6. The buyer must furnish the GST returns in Form GSTR-3B.

7. Where the goods are received in lots or instalments, ITC will be allowed to be availed when the
last lot or instalment is received.

8. The buyer must pay towards the supply of goods and/or services within 180 days from the
invoice date. If they fail to, then the ITC already claimed will be added back to output tax liability
and interest must be paid on such tax. ITC claim will be reinstated once the payment is made to
the supplier.

9. No ITC will be allowed if depreciation has been claimed on the tax component of a capital good
purchased.

10. ITC on a tax invoice or debit note belonging to a financial year must be claimed within the time
limit given by the GST provisions, explained in the next section.

11. Common credit of ITC must be identified and split as it is used together for selling both exempt
and taxable supplies, and/or business and non-business activity.

12. There are certain items listed down that are not eligible for ITC claims under Section 17(5) of the
CGST Act, known as blocked credits under Section 17(5) of the CGST Act.

3 Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid
of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any
taxpayer whose turnover is less than Rs. 1.0 crore*.

Provisions of composition scheme (section 10)

As per the section 10(1) a registered person, whose aggregate turnover in the preceding financial year
does not exceeds Rs 1.5 crore, will be eligible to opt for payment of tax under composition scheme.

The turnover limit for determining the eligibility for composition scheme in case of special category
states and other states:

1. The eligibility turnover limit for composition

 For 8 special category states – Arunachal Pradesh, Uttarakhand, Manipur, Meghalaya, Mizoram,
Nagaland, Sikkim and Tripura is 75 lakh

 For other states have 1.5 crore turnover limit.

2. Composition scheme taxpayers permitted to render services other than restaurant services up
to a specified limit:

 Under the erstwhile provisions, only a supplier of restaurant service was eligible for composition
scheme. A person engaged in the supply of any other service other than restaurant service was
not eligible for composition scheme.

 However, there are certain cases where a manufacturer/ trader is engaged in the supply of
services other than restaurant service though the percentage of such supply of services is very
small as compared to the supplies of goods.

 The percentage of such supply of services should not exceed:

o 10% of the turnover in a State or Union territory in the preceding financial year

Or

o 5 lakh,
Whichever is higher

4 Levy and Collection Section 5 of IGST (1) Subject to the provisions of sub-section (2), there shall be
levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services
or both; except on the supply of alcoholic liquor for human consumption, on the value determined
under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per
cent., as may be notified by the Government on the recommendations of the Council and collected in
such manner as may be prescribed and shall be paid by the taxable person: Provided that the integrated
tax on goods imported into India shall be levied and collected in accordance with the provisions of
section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point
when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962. (2) The
integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be
notified by the Government on the recommendations of the Council. (3) The Government may, on the
recommendations of the Council, by notification, specify categories of supply of goods or services or
both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or
both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both. (4) The Government may, on the
recommendations of the Council, by notification, specify a class of registered persons who shall, in
respect of supply of specified categories of goods or services or both received from an unregistered
supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both,
and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the
tax in relation to such supply of goods or services or both. (5) The Government may, on the
recommendations of the Council, by notification, specify categories of services, the tax on inter-State
supplies of which shall be paid by the electronic commerce operator if such services are supplied
through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is
the supplier liable for paying the tax in relation to the supply of such services: Provided that where an
electronic commerce operator does not have a physical presence in the taxable territory, any person
representing such electronic commerce operator for any purpose in the taxable territory shall be liable
to pay tax: Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also does not have a representative in the said territory, such
electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying
tax and such person shall be liable to pay tax