For CS EXECUTIVE

VolUmE - 3
 Preface

It is with pride and pleasure that we place before the readers the second
edition of my book “TAX LAWS AND PRACTICE”.

The main features of this book are:

 It is user-friendly and provides information in a well structured manner.

 It is a comprehensive and critical study of the law relating to income tax.
 Even the last minute changes in the law have been incorporated in this
book and it is, therefore, the latest and most upto-date book. The
amendments made by the Finance Act, 2018 have been incorporated at
all relevant places in the book.
 It contains solutions to practical problems of Company Secretary exams,

We look forward to the comments, suggestions and criticism from the readers.

CS Hitesh Gera
Ph: 9999833474
hitesh.gera2012@gmail.com

GoD BlESS All

GooD lUCK For FUTUrE AND YoUr SUCCESS
 HITESH GERA

GOODS & SERVICE TAX (GST)

Introduction
International Scenario of GST
 GST is presently levied in more than 140 countries across the globe.
 GST was first levied in France in 1954 and Malaysia is the most recent country to join the
bandwagon of GST.
 Different countries across the globe follow different model of GST based upon their own
legislature and administrative structure and their requirements.
 Brazil, Canada and India also follow dual GST model.
 Some of the models followed by different countries are:
 In Australian Model, tax is collected by the Centre and distributed to the States
 Canadian Model wherein there are three variants of taxes
 India has chosen Canadian model of Dual GST

History & Background of GST in India

 Bagchi – Poddar Model

Envisages combination of Central Excise, Service Tax, VAT other laws to provide a common base
for levy of GST by both Centre and the States separately and jointly.
 The origin of GST could be traced backed to July 17, 2000, relating to setting up of Empowered
committee of State Finance Ministers framed by government of India with the following
objectives:
 to monitor the implementation of uniform floor rates of sales tax by States and Union
Territories;
 to monitor the phasing out of the sales-tax based incentive schemes; to decide milestones and
methods of States to switch over to VAT; and
 to monitor reforms in the Central Sales Tax system existing in the country
 On August 12, 2004, the Empowered committee was reconstituted by Government of India with
all the Hon’ble State Finance/Taxation Ministers as its member. And later on the said body was
registered as society under Societies Registration Act, 1860.
 During 2003, the Kelkar Task Force on Indirect Tax suggested a comprehensive GST based on VAT
principle.
 In February 2007, in Central Budget the Hon’ble Union Finance Minister made an announcement
to the effect that GST would be introduced with effect from April, 2010.
 In November, 2009, based on inputs from Government(s) of Centre and States, Empowered
Committee released its First Discussion Paper on GST.
 In March, 2011, the Constitution (One Hundred and Fifteenth Amendment) Bill, 2011 to give
concurrent taxing powers to the Union and States was introduced in Lok Sabha. The Bill
suggested the creation of Goods and Services Tax Council and a Goods and Services Tax Dispute
Settlement Authority. The Bill was lapsed in 2014 and was replaced with the Constitution (122nd
Amendment) Bill, 2014.
 In January 2013, The Empowered Committee deliberated on the proposed design including the
Constitution (115th) Amendment Bill and submitted the report. Based on this Report, the EC
recommended certain changes in the Constitution Amendment Bill and decided to constitute
three below mentioned Committees of Officers to discuss and Report on various aspects of GST:
 Committee on Place of Supply Rules and Revenue Neutral Rates;
 Committee on dual control, threshold and exemptions;
 Committee on IGST and GST on imports.
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 In March, 2013, a not for profit, non-Government, private limited company was incorporated in
the name of Goods and Services Tax Network (GSTN) as special purpose vehicle setup by the
Government primarily to provide IT infrastructure and services to the Central and State
Government(s), tax payers and other stakeholders for implementation of the Goods and Services
Tax (GST).
 In May, 2015, the Constitution Amendment (122nd) Bill was passed by Lok Sabha on May 06,
2015.
 In May, 2015, in Rajya Sabha, Bill was referred to a 21-member Select Committee of Rajya Sabha.
 On June 14, 2016, the Ministry of Finance released draft model law on GST in public domain for
views and suggestion.
 In September, 2016: Final assent of Hon’ble President of India was given on 8th September,2016
 In April, 2017: Parliament passed the following four bills:
 Central Goods and Services Tax (CGST)Bill
 Integrated Goods and Services Tax(IGST) Bill
 Union Territory Goods and Services Tax (UTGST)Bill
 Goods and Services Tax (Compensation to States) Bill
 April, 2017: President’s assent was given to four key legislations on Goods and Services tax.

The GST Council on 4th March, 2017 in its 11th meeting approved the “the Central GST” Bill which
makes provisions for levy and collection of tax on Intra-State supply of goods or services or both by
the Central Government.
The Union Government presented the Central Goods and Services Tax Bill, 2017 in Lok Sabha on 27th
March, 2017 in Lok Sabha on 29th March, 2017. The Rajya Sabha passed the Bill on 6th April, 2017 and
was assented by the President on 13th April, 2017.

Principles of GST levied in India

 GST is a broad-based tax.
 GST is a comprehensive destination based tax.
 GST is technically paid by suppliers but it is actually funded by consumers.
 GST is collected through a staged process i.e. a tax on the value added to goods
or services at every point in the supply chain.
 GST is a tax on the consumption of products from business sources, and not on
personal or hobby activities.
 Under GST, input tax credit is provided throughout the value chain for creditable
acquisition.
 The essence of GST is in removing the cascading effects of both Central and
State taxes by allowing setting-off of taxes throughout the value chain, right from
the original producer and service provider’s point up to the retailer’s level.
 Under GST, input tax credit is provided throughout the value chain for creditable
acquisition.

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Taxes which have been subsumed under GST

Central taxes State taxes
Central Excise Duty State VAT
Duties of Excise (Medicinal and Toilet Central Sales Tax
Preparations) Purchase Tax
Additional Duties of Excise (Goods of Special Luxury Tax
Importance) Entry Tax (All forms
Additional Duties of Excise (Textiles and Entertainment Tax (except those levied by the
Textile Products) local bodies)
Additional Duties of Customs (commonly Taxes on advertisements
known as CVD) Taxes on lotteries, betting and gambling
Special Additional Duty of Customs (SAD) State cesses and surcharges insofar as they
Service Tax relate to supply of goods or services
Cesses and surcharges insofar as they relate to
supply of goods or services

GST Council
GST Council is the main decision-making body that has been formed to finalize the design of GST.
This governing body of GST comprises of Union Finance, is the Chairman of the council, the Minister
of State (Revenue) and the State Finance/ Taxation Ministers. The duty of the Council is to make
recommendations to the Union and the States. It has been provided in the Constitution (one
hundred and first amendments) Act, 2016 that the GST Council, in its discharge of various functions,
shall be guided by the need for a harmonized structure of GST and for the development of a
harmonized national market for goods and services. In the GST Council, a decision will be taken by a
three-fourth majority with the Centre having a one-third vote and the states the remaining two-
third.
Functions of the GST Council seeked to include making recommendations on:
 taxes, cesses, and surcharges levied by the Centre, States and local bodies which may be
subsumed in the GST;
 goods and services which may be subjected to or exempted from GST;
 Model GST laws, principles of levy, apportionment of IGST and principles that govern the place
of supply;
 threshold limit of turnover below which goods and services may be exempted from GST;
 rates including floor rates with bands of GST;
 special rates to raise additional resources during any natural calamity;
 special provision with respect to Arunachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya,
Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand; and
 any other matters

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THE CENTRAL GOODS & SERVICE TAX ACT, 2017

Short Title, Extent and Commencement [Sec 1]
Title: The Central Goods and Service tax Act, 2017
The said extends to whole of India except the state of Jammu and Kashmir and came into force from
1st July 2017.
On 07.07.2017, the Jammu Kashmir State GST received the assent of the Governor and w.e.f
08.07.2017 (vide SRO 281 Notification, the 8th July) Jammu and Kashmir GST came into force

Definitions [Sec 2]

1) “Adjudicating authority” [Sec 2(4)]

means any authority, appointed or authorised to pass any order or decision under this Act,
but does not include
 the Central Board of Excise and Customs,
 the Revisional Authority,
 the Authority for Advance Ruling,
 the Appellate Authority for Advance Ruling,
 the Appellate Authority and
 the Appellate Tribunal
2) “Aggregate Turnover” [Sec 2(6)]
means the aggregate value of all taxable supplies (excluding the value of inward supplies on
which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or
services or both and Inter- State supplies of persons having 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.
3) “Agriculturist” [Sec 2(7)]
means an individual, HUF who undertakes cultivation of land-
a) by own labour, or
b) by the labour of family, or
c) by servants on wages payable in cash or kind or by hired labour under personal supervision
or the personal supervision of any member of the family.
4) “Appellate Authority” [Sec 2(8)]
means an authority appointed or authorized to hear appeals as referred to in section 107.
5) “Appellate Tribunal” [Sec 2(9)]
means the GST Appellate Tribunal constituted under section 109.
6) “Assessment” [Sec 2(11)]
means determination of tax liability under the CGST Act and includes self-assessment, re-
assessment, provisional assessment, summary assessment and best judgement.
7) “Associated Enterprises” [Sec 2(12)]
shall have the same meaning as assigned to it in Section 92A of the Income-tax Act, 1961.
8) “Business” [Sec 2(17)] includes––
a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar
activity, whether or not it is for a pecuniary benefit;
b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transaction;

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d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business;
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;
f) admission, for a consideration, of persons to any premises;
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;
h) services provided by a race club by way of totalisator or a licence to book maker in such club ;
and
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;
9) “Business vertical” [Sec 2(18)]
means a distinguishable component of an enterprise that is engaged in the supply of individual
goods or services or a group of related goods or services which is subject to risks and returns
that are different from those of the other business verticals.
Explanation.––For the purposes of this clause, factors that should be considered in determining
whether goods or services are related include––
a) the nature of the goods or services;
b) the nature of the production processes;
c) the type or class of customers for the goods or services;
d) the methods used to distribute the goods or supply of services; and
e) the nature of regulatory environment (wherever applicable), including banking, insurance,
or public utilities
10) “Capital goods” [Sec 2(19)]
means goods, the value of which is capitalised in the books of account of the person claiming
the input tax credit and which are used or intended to be used in the course or furtherance of
business.
11) “Casual Taxable Person” [Sec 2(20(]
means a person who occasionally undertakes transactions involving supply of goods or services
or both in the course or furtherance of business, whether as principal, agent or in any other
capacity, in a State or a Union territory where he has no fixed place of business.
12) “Composite supply” [Sec 2(30)]
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 consideration 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.
13) “Consideration” [Sec 2(31)]
in relation to the supply of goods or services or both includes
a) any payment made or to be made, whether in money or otherwise, in respect of, in
response to, or for the inducement of, the supply of goods or services or both, whether by
the recipient or by any other person but shall not include any subsidy given by the Central
Government or a State Government;
b) the monetary value of any act or forbearance, in respect of, in response to, or for the
inducement of, the supply of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the Central Government or a State
Government.
However, a deposit given in respect of the goods or services or both shall not be considered as
payment made for such supply unless the supplier applies such deposit as consideration for the
said supply.
14) “Continuous Supply of goods” [Sec 2(32)]

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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 wire, cable, pipeline or other
conduit, and for which the supplier invoices the recipient on e regular or periodic basis and
includes supply of such goods as the Government may, subject to such conditions, as it may, by
notifications.
15) “Continuous supply of services” [Sec 2(33)]
means a supply of services which is provided, or agreed to be provided, continuously or on
recurrent basis, under a contract, for a period exceeding three months with periodic payment
obligations and includes supply of such services as the Government may, subject to such
conditions, as it may, by notification, specify
16) “Exempt supply” [Sec 2(47)]
means supply of any goods or services or both which attracts nil rate of tax or which may be
wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and
Services Tax Act, and includes non-taxable supply
17) “Family” [Sec 2(49)]
means
 the spouse and children of the person, and
 the parents, grandparents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person.
18) “fixed establishment” [Sec 2(50)]
means a place (other than the registered place of business) which is characterised by a
sufficient degree of permanence and suitable structure in terms of human and technical
resources to supply services, or to receive and use services for its own needs
19) “Goods” [Sec 2(52)]
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) “Input” [Sec 2(59)]
means any goods other than capital goods used or intended to be used by a supplier in the
course or furtherance of business
21) “input service” [Sec (60)]
means any service used or intended to be used by a supplier in the course or furtherance of
business
22) “Input Service Distributor” [Sec 2(61)]
means an office of the supplier of goods or services or both which receives tax invoices issued
under section 31 towards the receipt of input services and issues a prescribed document for the
purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax
paid on the said services to a supplier of taxable goods or services or both having the same
Permanent Account Number as that of the said office
23) “Input tax” [Sec 2(62)] in relation to a registered person,
means the central tax, State tax, integrated tax or Union territory tax charged on any supply of
goods or services or both made to him and includes—
a) the integrated goods and services tax charged on import of goods;
b) the tax payable under the provisions of sub-sections (3) and (4) of section 9;
c) the tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated
Goods and Services Tax Act;
d) the tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective
State Goods and Services Tax Act; or
e) the tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union
Territory Goods and Services Tax Act,

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Does not include the tax paid under the composition levy (Section 2(62) of the CGST Act)
24) “Input tax credit” [Sec 2(63)]
means the credit of input tax
25) “Inward supply” [Sec 2(67)] 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
26) “Job work” [Sec 2(68)]
means undertaking any treatment or process by a person on goods belonging to another
registered person and the expression “job worker” shall be construed accordingly.
27) “Mixed supply” [Sec 2(74)]
means as 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.
Illustration.(As given in act) — 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
28) “Non-resident taxable person” [Sec 2(77)]
Means any person who occasionally undertakes transactions involving supply of goods or
services or both, whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India.
29) “Non taxable supply” [Sec 2(78)]
means a supply of goods or services or both which is not leviable to tax under the Act or under
the IGST Act.
30) “Non taxable territory” [Sec 2(79)]
means the territory which is outside the taxable territory.
31) “Outward supply” [Sec 2(82)] 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.
32) “Person” [Sec 2(84)]
includes
a) Individual
b) HUF
c) Company
d) Firm
e) LLP
f) AOP pr BOI, whether incorporated or not, in India or outside India
g) Corporation established by or under any Central, State or Provisional Act, or
h) Government Company
i) Any body corporate outside India
j) Co-operative Society
k) Local Authority
l) Central Government or a State Government
m) Society as defined under the Societies Registration Act, 1860
n) Trust and
o) Every artificial judicial person, not falling within any of the above.

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LEVY AND COLLECTION OF GST

LEVY & COLLECTION OF CGST
 GST is levied on supply of all goods or services or both except alcoholic liquor for human
consumption.
 Five petroleum like petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel have temporarily been kept out and GST Council shall decide the date from
which they shall be included in GST.
 Electricity has also been kept out of GST.
 GST is being levied on dual structure in India in this Centre and State both levy and collect tax on
common base.
GST Structure

GST

INTRA-STATE INTER-STATE

CGST SGST IGST

TAXABLE EVENT OF GST

Taxable event is SUPPLY of goods or services or both.

SCOPE OF SUPPLY [SEC 7(1)]

Supply includes-
a) Supply in the form of sale, transfer, barter, exchange, licence, rental, lease or disposal 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);
c) the activities specified in Schedule I, (made or agreed to be made without a consideration); and
d) the activities specified in Schedule II (to be treated as supply of goods or supply of services)

New section (1A) inserted to Section 7

Where certain activities or transactions constitute a supply in accordance with the provisions of sub-
section (1) shall be treated either as supply of goods or supply of services as referred to in Schedule
II.

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Power of Government to Specify Supply [Sec 7(3)]

The Government may, on the recommendations of the Council, specify, by notification, the
transactions that are to be treated as-
a) A supply of goods and not as a supply of services or
b) A supply of services and not as a supply of goods.

Schedule I
Activities that are to be treated as supply even if they are without a consideration.
1) Permanent transfer or disposal of business assets where input tax credit (ITC) has been availed
on such assets
2) Supply of goods or services between related parties and between distinct persons as specified
in section 25(4) or 25(5), when made in the course or furtherance of business.
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services or both.
Related persons (Explanation to Sec 15(5)]
a) persons shall be deemed to be “related persons” if–
i. such persons are officers or directors of one another’s businesses;
ii. such persons are legally recognised partners in business;
iii. such persons are employer and employee;
iv. any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the
outstanding voting stock or shares of both of them;
v. one of them directly or indirectly controls the other;
vi. both of them are directly or indirectly controlled by a third person;
vii. together they directly or indirectly control a third person; or
viii. they are members of the same family;
b) the term “person” also includes legal persons;
c) persons who are associated in the business of one another in that one is the sole agent or sole
distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be
related.
Distinct persons [Section 25(4) and 25(5)]
1) One person having more than one registration- treated as distinct person: A person who has
obtained or is required to obtain more than one registration, whether in one State or Union
territory or more than one State or Union territory shall, in respect of each such registration, be
treated as distinct persons for the purposes of this Act.
2) Where a person who has obtained or is required to obtain registration in a State or Union territory
in respect of an establishment, has an establishment in another State or Union territory, then
such establishments shall be treated as establishments of distinct persons for the purposes of
this Act.
3) Supply of goods-
a) by a principal to his agent where the agent undertakes to supply such goods on behalf of
the principal; or
b) by a agent to his principal where the agent undertakes to receive such goods on behalf of
the principal; or
4) Import of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

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Schedule II
Activities to be treated as supply of goods or supply of services
1) Transfer
a) Any transfer of title in goods is a supply of goods
b) Any transfer of right in goods or undivided share in goods without transfer of title is a
supply of service (like renting or operating leasing)
c) Transfer of title in goods under an agreement which stipulates that property in goods shall
pass at a future date upon payment of full consideration as agreed, is a supply of goods.
(like hires purchase or financial lease)
2) Land and Building
a) Any lease, tenancy, easement, licence to occupy land is a supply of service
b) Any lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly, is a supply of service (like giving
residential building for rent to telecom company for setting up of tower)
3) Treatment or process
Any treatment or process which is applied to another person's goods is a supply of service (like
job work, repair, testing etc)
4) Transfer of business assets
a) Where, goods forming part of the assets of a business are transferred or disposed of by or
under the direction of a person carrying on a business so as no longer to form part of those
assets, whether or not for a consideration, such transfer or disposal is a supply of goods by
the person. (Transfer of only those goods on ITC has been claimed. Thus transfer of entire
business as going concern would not be subjected to GST)
b) Where, by or under the direction of a person carrying on a business, goods held or used for
purpose of business are put to any private use or used, or made available to any person for
any use, for any purpose other than for the purpose of business, whether or not for a
consideration, the usage or making available of such goods is supply of services. (Like
providing motor vehicles of companies for use of partners/ directors/ employees)
c) Where any person ceases to be a taxable person, any goods forming a part of business
assets of any business carried on by him shall be deemed to be supplied by him in the course
or furtherance of business immediately before he ceases to be a taxable person- unless”
i. the business is transferred as a going concern to another person
ii. the business is carried on by a personal representative who is deemed to be a taxable
person
5) Supply of Services
The following shall be treated as supply of services:
a) Renting of immovable property
b) Construction of a complex, building, civil structure or a part thereof, including a complex or
building intended for sale to a buyer, wholly or partly, except where the entire consideration
has been received after issuance of completion certificate, where required, by the
competent authority or after its first occupation, whichever is earlier.
c) Temporary transfer or permitting the use or enjoyment of any intellectual property right
(like use of trademark, copyright, patent etc)
d) Development, design, programming, customisation, adaptation, up-gradation,
enhancement, implementation of information technology software
e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do
an act (like penalty for breach of contract etc)
f) Transfer of the right to use any goods for any purpose (whether or not for a specified period)
for cash, deferred payment or other valuable consideration
6) Composite Supply

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The following composite supplies shall be treated as a supply of services:

a) Works Contract as defined under Section 2 [Works contracts means a contract for building
construction, fabrication, completion, erection, installation, fitting out, improvement,
modification, repair, maintenance, renovation, alteration or commissioning of any
immovable property wherein transfer of property in goods(whether as goods or in some
other form) is involved in the execution of such contract.]
b) Supply of goods, as a part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (other than alcoholic
liquor for human consumption), where such supply or service is for cash, deferred payment
or other valuable consideration (like restaurant service or home delivery but not covers sale
of tinned food as it would be sale of goods)
7) Supply of Goods
Supply of goods by any unincorporated association or body of persons to a member thereof for
cash, deferred payment or other valuable consideration.

Activities which are neither supply of goods nor supply of services [Sec 7(2)]
Section 7(2) states that notwithstanding anything contained in sub-section 7(1) of the CGST Act
a) Activities or transactions specified in Schedule III, or
b) Such activities or transactions undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities, as may be notified by
the Government on the recommendations of the Council,
shall neither be treated as supply of goods nor as supply of services

Schedule III
Activities or transactions which shall be treated neither as a supply of goods nor a supply of
services
1) Services by employee to employer in the course of or in relation to employment
2) Services by any court or tribunal established under any law for the time being in force
3) The functions performed by the Members of Parliament, Members of State legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities
4) The duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity.
5) The duties performed by any person as a Chairperson or a Member or a Director in a bods
established by the Central Government or a State Government or local authority and who is not
deemed as an employee before the commencement of this clause
6) Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
7) Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
8) Actionable claims, other than lottery, betting and gambling

COMPOSITE & MIXED SUPPLY [SEC 8]

The tax liability on a composite or a mixed supply shall be determined in the following manner-
a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be
treated as a supply of such principal supply; and
Illustration— 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
b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular
supply which attracts the highest rate of tax.
Illustration— 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

11 9013878840, 8010796433
 HITESH GERA

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

Principal Supply [Sec 2(90)]

“principal supply” means the 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.

LEVY & COLLECTION [SEC 9]

Section 9 is charging section of CGST Act, 2017
1) Levy of GST not exceeding 20%: There shall be levied a tax called the central goods and services
tax on all Intra- 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 and at such rates,
not exceeding 20%, 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.
2) GST on petroleum products at later date: The central 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) Recipient of such goods or services liable to GST – reverse charge mechanism: 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) Reverse charge in case of receipt of supply from unregistered person: The central tax to
respect of the supply of taxable goods or services or both by a supplier, who is not registered, to
a registered person shall be paid by such person on reverse charge basis as the recipient and all
the provisions of the 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.
GST Amendment Act, 2018, substituted this sub-section with the new sub-section (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) iPayment of tax by electronic commerce operator: The Government may, on the
recommendations of the Council, by notification, specify categories of services the tax on Intra-
State supplies of which shall be paid by the electronic commerce operator if such services are
supplied through it, and all the provisions of the 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. However, 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.
Where an electronic commerce operator does not have a physical presence in the taxable
territory and also he does not have a representative in the said territory, such electronic

12 9013878840, 8010796433

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.
Central Government has notified the following services wherein the whole of the central tax shall
be paid by the recipient of supply of such services: [N/N 13/2017 CT(Rate)]
S. No Category of supply of SERVICE
(1) (2)
1 Supply of Services by a goods transport Goods Transport
agency (GTA) in respect of
transportation of goods by road to-
a. any factory registered under or
governed by the Factories Act,
1948(63 of 1948);or
b. any society registered under the
Societies Registration Act, 1860 (21
of 1860) or under any other law for
the time being in force in any part
of India; or
c. any co-operative society
established by or under any law; or
d. any person registered under the
Central Goods and Services Tax Act
or the Integrated Goods and
Services Tax Act or the State Goods
and Services Tax Act or the Union
Territory Goods and Services Tax
Act; or
e. any body corporate established, by
or under any law; or
f. any partnership firm whether
registered or not under any law
including association of persons; or
g. any casual taxable person.
Provided that nothing contained in this
entry shall apply to-
i) a Department or Establishment of
the CG or SG or UT or LA or
Governmental agencies, which has
taken registration only for the
purpose of deducting tax at source
and not for making a taxable
supply of goods or services; or
ii) a registered person paying tax
under section 10 of the said Act.
[Inserted by NN 29/2018 -CT®]
2 Services supplied by an individual
advocate including a senior advocate
by way of representational services
before any court, tribunal or authority,
13 9013878840, 8010796433
HITESH GERA
Supplier of Recipient
SERVICE
(3) (4)
a. Any factory registered under
Agency (GTA) or governed by the Factories
Act, 1948(63 of 1948); or
b. any society registered under
the Societies Registration
Act, 1860 (21 of 1860) or
under any other law for the
time being in force in any
part of India; or
c. any co-operative society
established by or under any
law; or
d. any person registered under
the Central Goods and
Services Tax Act or the
Integrated Goods and
Services Tax Act or the State
Goods and Services Tax Act
or the Union Territory Goods
and Services Tax Act; or
e. any body corporate
established, by or under any
law; or
f. any partnership firm
whether registered or not
under any law including
association of persons; or
g. any casual taxable person;
located in the taxable
territory.
An individual Any business entity located in
advocate including the taxable territory.
a senior advocate
 HITESH GERA

directly or indirectly, to any business or firm of

entity located in the taxable territory, advocates.
including where contract for provision
of such service has been entered
through another advocate or a firm of
advocates, or by a firm of advocates, by
way of legal services, to a business
entity.
3 Services supplied by an arbitral tribunal An arbitral tribunal. Any business entity located in
to a business entity. the taxable territory.
4 Services provided by way of Any person Anybody corporate or
sponsorship to anybody corporate or partnership firm located in the
partnership firm. taxable territory.
5 Services supplied by the Central Central Any business entity located in
Government, State Government, Union Government, State the taxable territory.
territory or local authority to a business Government,
entity excluding, - Union territory or
1) renting of immovable property, and local authority
2) services specified below-
i. services by the Department of
Posts by way of speed post,
express parcel post, life insurance,
and agency services provided to a
person other than Central
Government, State Government or
Union territory or local authority;
ii. services in relation to an aircraft or
a vessel, inside or outside the
precincts of a port or an airport;
iii. transport of goods or passengers.
5A Services supplied by the CG, SG, UT or CG, SG, UT or LA Any person registered under
LA by way of renting of immoveable the CGST Act, 2017
property to a person registered under
the CGST Act, 2017
[Inserted by N.N. 3/2018 CT(R)]
6 Services supplied by a director of a A director of a The company or a body
company or a body corporate to the company or a body corporate located in the taxable
said company or the body corporate. corporate territory.
7 Services supplied by an insurance agent An insurance agent Any person carrying on
to any person carrying on insurance insurance business, located in
business. the taxable territory.
8 Services supplied by a recovery agent A recovery agent A banking company or a
to a banking company or a financial financial institution or a non-
institution or a nonbanking financial banking financial company,
company. located in the taxable territory.
9 Supply of services by an author, music Author or music Publisher, music company,
composer, photographer, artist or the composer, producer or the like, located in
like by way of transfer or permitting photographer, the taxable territory.
the use or enjoyment of a copyright artist, or the like
covered under clause (a) of sub-section
14 9013878840, 8010796433
 HITESH GERA

(1) of section 13 of the Copyright Act,

1957 relating to original literary,
dramatic, musical or artistic works to a
publisher, music company, producer or
the like.
10 Supply of services by the member of Members of RBI
Overseeing Committee of RBI Overseeing
Committee
11 Services supplied by individual Direct Individual Direct to bank or non-banking financial
Selling Agents (DSAs) other than a body Selling Agents company located in the taxable
corporate, partnership firm to bank or (DSAs) other than a territory.
non-banking (NBFCs) body corporate,
partnership firm or
LLP
12 Services provided by Business Business facilitator A banking company, located in
facilitator (BF) to a banking company (BF) the taxable territory.
13 Service provided by an agent of An agent of A business correspondent
business correspondent to business business located in the taxable territory.
correspondent correspondent
14 Security services provided to a
registered person.
Provided that nothing contained in this
entry shall apply to-
i. a Department or Establishment of
the CG or SG or UT or LA or
Governmental agencies, which has
taken registration only for the
purpose of deducting tax at source
and not for making a taxable
supply of goods or services; or
ii. a registered person paying tax
under sec 10 of the said act.
Entry Supply of service from non-taxable The person located The person located in taxable
1 of territory to taxable territory in a non-taxable territory other than non-taxable
IGST territory online recipient
Entry Services supplied by the person located Person located in Importer, as defined in section
10 of in non-taxable by way of transportation non-taxable 2(26) of Customs Act, 1962.
IGST of goods by vessel from a place outside territory
India upto the customs station of
clearance in India

Central Government has notified the following goods wherein the whole of the central tax shall be
paid by the recipient of supply of such goods: [N/N 4/2017 CT(Rate)]
S. No Category of supply of Supplier of GOODS Recipient
GOODS
1 Cashew nuts, not shelled or Agriculturist Any registered person
peeled
2 Bidi wrapper leaves (tendu) Agriculturist Any registered person
3 Tobacco leaves Agriculturist Any registered person

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 HITESH GERA

4 Silk yarn Any person who Any registered person

5 Supply of lottery.
6 Primary Sector Lending
Certificate
manufactures silk yarn from
raw silk or silk worm
cocoons for supply of silk
yarn
State Government, Union
Territory or any local
authority
Any registered person
Lottery distributor or
selling agent.
Explanation.- For the
purposes of this entry,
lottery distributor or
selling agent has the same
meaning as assigned to it
in clause (c) of Rule 2 of
the Lotteries (Regulation)
Rules, 2010, made under
the provisions of sub
section 1 of section 11 of
the Lotteries (Regulations)
Act, 1998 (17 of 1998).
Any registered person

Central Government has notified the following services wherein the whole of the central tax shall
be paid by the ECO: [N/N 17/2017 CT(Rate) as amended by N/N 23/2017 CT(Rate)]
The Central Government, on the recommendations of the Council, hereby notifies that in case of the
following categories of services, the tax on intra-State supplies shall be paid by the electronic
commerce operator –
(i) services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and
motor cycle;
(ii) services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites
or other commercial places meant for residential or lodging purposes, except where the
person supplying such service through electronic commerce operator is liable for
registration under sub-section (1) of section 22 of the said Central Goods and Services Tax
Act.
(iii) services by way of house-keeping, such as plumbing, carpentering etc, except where the
person supplying such service through electronic commerce operator is liable for
registration under sub-section (1) of section 22 of the said Central Goods and Services Tax
Act.

COMPOSITION LEVY SCHEME [SEC 10]

COMPOSITION LEVY [SEC 10(1)]

Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-
sections (3) and (4) of section 9, a registered person, whose aggregate turnover in the preceding
financial year did not exceed following amount
i. Upto 12.10.2017: Rs 75 Lakh (Rs 50 lakh for 9 North Eastern States and special category states)
ii. Upto 31.03.2019: Rs 1 crore (Rs 75 lakh for 9 North Eastern States and special category states)
iii. W.e.f 31.03.2019: Rs 1.5 crore (Rs 75 lakh for 8 North Eastern States and special category states),

16 9013878840, 8010796433
 HITESH GERA

may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be
prescribed, but not exceeding,––
a) 1% of the turnover in State or turnover in Union territory in case of a manufacturer,
b) 2.5% of the turnover in State or turnover in Union territory in case of persons engaged in
making supplies referred to in clause (b) of paragraph 6 of Schedule II [supply of food for
human consumption], and
c) 0.5% of the turnover in State or turnover in Union territory in case of other suppliers,
subject to such conditions and restrictions as may be prescribed:
1st Provisio to Sec 10: Provided that the Government may, by notification, increase the said limit to
such higher amount, not exceeding Rs 1.5 crore, (Increased by GST Amendment Act 2018, from
01.02.2019 earlier it was Rs 1 crore) as may be recommended by the Council.
2nd Provisio to Sec 10: Provided further that a person who opts to pay tax under composition
scheme may supply services (other than restaurant services), of value not exceeding the higher of
the following:
 10% of turnover in a State or Union Territory in the preceding financial year or
 Rs 5,00,000

Notes
1) There will be equal SGST. Thus total shall be double the above mentioned limit.
2) Under composition scheme tax @ 0.5%/1%/2.5% are to be paid on exempted goods also. The
tax is payable on “aggregate turnover”

ELIGIBILITY AND CONDITIONS FOR OPTING FOR COMPOSITION LEVY [SE 10(2)]
The registered person shall be eligible to opt under sub-section (1), if––
he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph
6 of Schedule II;
a) he is not engaged in making any supply of goods which are not leviable to tax under this Act;
he is not engaged in making any inter-State outward supplies of goods;
b) he is not engaged in making any supply of goods through an electronic commerce operator who
is required to collect tax at source under section 52; and
c) he is not engaged in the supply of service except the supplies referred to in clause b of
paragraph 6 of Schedule II
d) he is not a manufacturer of such goods as may be notified by the Government on the
recommendations of the Council:
The Central Government has notified the following goods, the manufacturer cannot opt for
compositions scheme [N/N 8/2017]
i) Ice cream and other edible ice, whether or not containing cream
ii) Pan Masala
iii) All goods i.e. tobacco and manufactured tobacco substitutes
Provided that where more than one registered persons are having the same Permanent Account
Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt
for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that

17 9013878840, 8010796433
 HITESH GERA

sub-section. [i.e. All registered persons having same income tax PAN must opt for composition
scheme.]
North Eastern states and Special Category States
Upto 31.03.2019 W.e.f From 01.04.2019
1. Arunachal Pradesh 1. Arunachal Pradesh
2. Assam Assam
3. Manipur 2. Manipur
4. Meghalaya 3. Meghalaya
5. Mizoram 4. Mizoram
6. Nagaland 5. Nagaland
7. Sikkim 6. Sikkim
8. Tripura 7. Tripura
9. Himachal Pradesh Himachal Pradesh
8. Uttarakhand

WHEN COMPOSITION SCHEME LAPS [SEC 10(3)]

The option availed of by a registered person under sub-section (1) shall lapse with effect from the
day on which his aggregate turnover during a financial year exceeds the limit specified under sub-
section (1).

COLLECTION OF TAX [SEC 10(4)]

A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the
recipient on supplies made by him nor shall he be entitled to any credit of input tax.

LEVY OF PENALTY [SEC 10(5)]

If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1)
despite not being eligible, such person shall, in addition to any tax that may be payable by him under
any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74
shall, mutatis mutandis, apply for determination of tax and penalty.

COMPOSITION RULES [CGST RULES, 2017]

Rule 3: Intimation for Composition Levy

Any registered person who opts to pay tax under section 10 shall electronically file an intimation in
FORM GST CMP-02, duly signed or verified through electronic verification code, on the common
portal, either directly or through a Facilitation Centre notified by the Commissioner, prior to the
commencement of the financial year for which the option to pay tax under the aforesaid section is
exercised and shall furnish the statement in FORM GST ITC-03 in accordance with the provisions of
sub-rule (4) of rule 44 within a period of sixty days from the commencement of the relevant financial
year.

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 HITESH GERA

Rule 4: Effective date for Composition Levy

The option to pay tax under section 10 shall be effective from the beginning of the financial year,
where the intimation is filed under sub-rule 3.

Rule 5: Conditions for Composition Levy

1) The person exercising the option to pay tax under section 10 shall comply with the following
conditions, namely:-
a. he is neither a casual taxable person nor a non-resident taxable person;
b. the goods held in stock by him on the appointed day have not been purchased in the course
of inter-State trade or commerce or imported from a place outside India or received from
his branch situated outside the State or from his agent or principal outside the State, where
the option is exercised under subrule (1) of rule 3;
c. the goods held in stock by him have not been purchased from an unregistered supplier and
where purchased, he pays the tax under sub-section (4) of section 9;
d. he shall pay tax under sub-section (3) or sub-section (4) of section 9 on inward supply of
goods or services or both;
e. he was not engaged in the manufacture of goods as notified under clause (e) of sub-section
(2) of section 10, during the preceding financial year;
f. he shall men on the words ―composi on taxable person, not eligible to collect tax on
supplies‖ at the top of the bill of supply issued by him; and
g. he shall men on the words ―composi on taxable person‖ on every no ce or signboard
displayed at a prominent place at his principal place of business and at every additional
place or places of business.
2) The registered person paying tax under section 10 may not file a fresh intimation every year and
he may continue to pay tax under the said section subject to the provisions of the Act and these
rules.

Rule 6: Validity of Composition Levy

1) The option exercised by a registered person to pay tax under section 10 shall remain valid so
long as he satisfies all the conditions mentioned in the said section and under these rules.
2) The person referred to in sub-rule (1) shall be liable to pay tax under sub-section (1) of section 9
from the day he ceases to satisfy any of the conditions mentioned in section 10 or the provisions
of this Chapter and shall issue tax invoice for every taxable supply made thereafter and he shall
also file an intimation for withdrawal from the scheme in FORM GST CMP-04 within seven days
of the occurrence of such event.
3) The registered person who intends to withdraw from the composition scheme shall, before the
date of such withdrawal, file an application in FORM GST CMP04, duly signed or verified through
electronic verification code, electronically on the common portal.

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 HITESH GERA

4) Where the proper officer has reasons to believe that the registered person was not eligible to
pay tax under section 10 or has contravened the provisions of the Act or provisions of this
Chapter, he may issue a notice to such person in FORM GST CMP-05 to show cause within fifteen
days of the receipt of such notice as to why the option to pay tax under section 10 shall not be
denied.
5) Upon receipt of the reply to the show cause notice issued under sub-rule (4) from the registered
person in FORM GST CMP-06, the proper officer shall issue an order in FORM GST CMP-07within
a period of thirty days of the receipt of such reply, either accepting the reply, or denying the
option to pay tax under section 10 from the date of the option or from the date of the event
concerning such contravention, as the case may be.
6) Every person who has furnished an intimation under sub-rule (2) or filed an application for
withdrawal under sub-rule (3) or a person in respect of whom an order of withdrawal of option
has been passed in FORM GST CMP-07 under subrule (5), may electronically furnish at the
common portal, either directly or through a Facilitation Centre notified by the Commissioner, a
statement in FORM GST ITC01 containing details of the stock of inputs and inputs contained in
semi-finished or finished goods held in stock by him on the date on which the option is
withdrawn or denied, within a period of thirty days from the date from which the option is
withdrawn or from the date of the order passed in FORM GST CMP-07, as the case may be.
7) Any intimation or application for withdrawal under sub-rule (2) or (3) or denial of the option to
pay tax under section 10 in accordance with sub-rule (5) in respect of any place of business in
any State or Union territory, shall be deemed to be an intimation in respect of all other places of
business registered on the same Permanent Account Number.

POWER OF CENTRAL GOVERNMENT TO GRANT EXEMPTION [SEC 11]

1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on
the recommendations of the Council, by notification, exempt generally, either absolutely or
subject to such conditions as may be specified therein, goods or services or both of any specified
description from the whole or any part of the tax leviable thereon with effect from such date as
may be specified in such notification.
2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on
the recommendations of the Council, by special order in each case, under circumstances of an
exceptional nature to be stated in such order, exempt from payment of tax any goods or services
or both on which tax is leviable.
3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying
the scope or applicability of any notification issued under sub-section (1) or order issued under
sub-section (2), insert an explanation in such notification or order, as the case may be, by
notification at any time within one year of issue of the notification under sub-section (1) or order
under sub-section (2), and every such explanation shall have effect as if it had always been the
part of the first such notification or order, as the case may be.

20 9013878840, 8010796433
 HITESH GERA

Explanation.––For the purposes of this section, where an exemption in respect of any goods or
services or both from the whole or part of the tax leviable thereon has been granted absolutely, the
registered person supplying such goods or services or both shall not collect the tax, in excess of the
effective rate, on such supply of goods or services or both.

Exemption Notifications issued so far:

Nature Exemption Details
Mega Exemption In exercise of the powers conferred by section 11(1) above, the Central
– Goods Government, has issued this mega exemption notification consisting 153
goods which are fully exempt
N.N. 2/2017 CT(R) dt 28/06/2017
Mega Exemption In exercise of the powers conferred by section 11(1) above, the Central
– Services Government, has issued this mega exemption notification consisting 81
services which are fully exempt
N.N. 12/2017 CT(R) dt 28/06/2017
No RCM on In exercise of the powers conferred by section 11(1) above, the Central
supplies from Government, has exempted the Intra-state supplies of goods or services or
unregistered both received BY a registered person From an unregistered supplier, from
suppliers whole of the central tax leviable thereon under section 9(4) of CGST Act,
2017. Exemption applicable from 30.09.2017
N/N 8/2017 CT (R) and N/N 38/2017 CT (R) and N/N 10/2018 CT (R) and N/N
12/2018 CT (R) and N/N 22/2018 CT (R)
Special GST Rates In exercise of the powers conferred by section 9(1), 11(1), section 15(5) and
section 16(1) of the CGST Act. 2017, the Central Government has notified
certain services on which GST shall be levied at the rate as specified in the
said notification subject to the conditions as specified therein.
N/N 11/2017 CT (R) dt. 28/06/2017
Supply of heavy In exercise of the powers conferred by section 11(1) above, the Central
water and Government, exempts Intra-state supply-
nuclear fuels,  of heavy water and nuclear fuels falling in Chapter 28 of the First
exempt from GST Schedule of the CTA, 1975
 by the Department of Atomic Energy to the Nuclear Power Corporation
of India Ltd
 from the whole of the central tax leviable thereon u/s 9 of CGST Act,
2017.
N/N 26/2017 CT (R) dt. 21/09/2017
Licensing or In exercise of the powers conferred by section 11(1) above, the Central
leasing relating Government, exempts Intra-state supply of
to petroleum etc.

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 HITESH GERA

 services by way of grant of license or lease to explore or mine

petroleum crude or natural gas or both
 from so much of the central tax as is leviable on the consideration paid
to the Central Government in the form of Central Government’s share
of profit petroleum defined in the contract entered into by the Central
Government on this behalf.
N/N 5/2018 CT (R) dt. 25/01/2018

EXEMPTED SERVICES UNDER GST [N.N. 12/2017 CENTRAL TAX (RATE) dt. 28.06.2017]
S. No Description of Service
1 Services by an entity registered under section 12AA of the Income-tax Act, 1961 (43 of
1961) by way of charitable activities.
2 Services by way of transfer of a going concern, as a whole or an independent part thereof.
3 Pure services (excluding works contract service or other composite supplies involving
supply of any goods) provided to the Central Government, State Government or Union
territory or local authority or a Governmental authority by way of any activity in relation
to any function entrusted to a Panchayat under article 243G of the Constitution or in
relation to any function entrusted to a Municipality under article 243W of the
Constitution.
3A Composite supply of goods and services in which the value of supply of goods constitutes
not more than 25 per cent. of the value of the said composite supply provided to the
Central Government, State Government or Union territory or local authority or a
Governmental authority or a Government Entity by way of any activity in relation to any
function entrusted to a Panchayat under article 243G of the Constitution or in relation to
any function entrusted to a Municipality under article 243W of the Constitution.
N/N 2/2018 CT (R) dt. 25/01/2018
4 Services by Central Government, State Government, Union territory, local authority or
governmental authority by way of any activity in relation to any function entrusted to a
municipality under article 243 W of the Constitution.
5 Services by a governmental authority by way of any activity in relation to any function
entrusted to a Panchayat under article 243G of the Constitution
6 Services by the Central Government, State Government, Union territory or local authority
excluding the following services—
(a) services by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central Government,
State Government, Union territory;
(b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or
an airport;
(c) transport of goods or passengers; or

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 HITESH GERA

(d) any service, other than services covered under entries (a) to (c) above, provided to
business entities.
7 Services provided by the Central Government, State Government, Union territory or local
authority to a business entity with an aggregate turnover of up to twenty lakh rupees (ten
lakh rupees in case of a special category state) in the preceding financial year.
Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this
entry shall not be applicable to-
(a) services,- (i) by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central Government,
State Government, Union territory; (ii) in relation to an aircraft or a vessel, inside or
outside the precincts of a port or an airport; (iii) of transport of goods or passengers; and
(b) services by way of renting of immovable property.
8 Services provided by the Central Government, State Government, Union territory or local
authority to another Central Government, State Government, Union territory or local
authority:
Provided that nothing contained in this entry shall apply to services-
(i) by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central
Government, State Government, Union territory;
(ii) in relation to an aircraft or a vessel, inside or outside the precincts of a port or an
airport;
(iii) of transport of goods or passengers
9 Services provided by Central Government, State Government, Union territory or a local
authority where the consideration for such services does not exceed five thousand
rupees:
Provided that nothing contained in this entry shall apply to-
(i) services by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central
Government, State Government, Union territory;
(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a
port or an airport;
(iii) transport of goods or passengers:
Provided further that in case where continuous supply of service, as defined in sub-
section (33) of section 2 of the Central Goods and Services Tax Act, 2017, is provided by
the Central Government, State Government, Union territory or a local authority, the
exemption shall apply only where the consideration charged for such service does not
exceed five thousand rupees in a financial year.

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9A Services provided by and to Fédération Internationale de Football Association (FIFA) and

its subsidiaries directly or indirectly related to any of the events under FIFA U-17 World
Cup 2017 to be hosted in India.
Provided that Director (Sports), Ministry of Youth Affairs and Sports certifies that the
services are directly or indirectly related to any of the events under FIFA U17 World Cup
2017.
N/N 21/2017 CT (R) dt. 22/08/2017
9B Supply of services associated with transit cargo to Nepal and Bhutan (landlocked
countries).
N/N 30/2017 CT (R) dt. 29/09/2017
9C Supply of service by a Government Entity to CG, SG, UT, LA or any person specified by CG,
SG, UT or LA against consideration received from CG, SG, UT or LA, in the forms of grants.
N/N 31/2017 CT (R)
9D Services by an old age home run by Central Government, State Government or by an
entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) to its
residents (aged 60 years or more) against consideration upto twentyfive thousand rupees
per month per member, provided that the consideration charged is inclusive of charges
for boarding, lodging and maintenance.
N/N 14/2018 CT (R)
10 Services provided by way of pure labour contracts of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance, renovation, or
alteration of a civil structure or any other original works pertaining to the beneficiary-led
individual house construction or enhancement under the Housing for All (Urban) Mission
or Pradhan Mantri Awas Yojana.
10A Services supplied by electricity distribution utilities by way of construction, erection,
commissioning, or installation of infrastructure for extending electricity distribution
network upto the tube well of the farmer or agriculturalist for agricultural use.
N/N 14/2018 CT (R)
11 Services by way of pure labour contracts of construction, erection, commissioning, or
installation of original works pertaining to a single residential unit otherwise than as a part
of a residential complex
11A Service provided by Fair Price Shops to Central Government by way of sale of wheat, rice
and coarse grains under Public Distribution System(PDS) against consideration in the form
of commission or margin.
N/N 21/2017 CT (R) dt. 22/08/2017
11B Service provided by Fair Price Shops to State Governments or Union territories by way of
sale of kerosene, sugar, edible oil, etc. under Public Distribution System (PDS) against
consideration in the form of commission or margin.
N/N 21/2017 CT (R) dt. 22/08/2017

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12 Services by way of renting of residential dwelling for use as residence.

13 Services by a person by way of-
(a) conduct of any religious ceremony;
(b) renting of precincts of a religious place meant for general public, owned or managed
by an entity registered as a charitable or religious trust under section 12AA of the Income-
tax Act, 1961 (hereinafter referred to as the Income-tax Act) or a trust or an institution
registered under sub clause (v) of clause (23C) of section 10 of the Income-tax Act or a
body or an authority covered under clause (23BBA) of section 10 of the said Income-tax
Act:
Provided that nothing contained in entry (b) of this exemption shall apply to,-
(i) renting of rooms where charges are one thousand rupees or more per day;
(ii) renting of premises, community halls, kalyanmandapam or open area, and the like
where charges are ten thousand rupees or more per day;
(iii) renting of shops or other spaces for business or commerce where charges are ten
thousand rupees or more per month.
14 Services by a hotel, inn, guest house, club or campsite, by whatever name called, for
residential or lodging purposes, having declared tariff value of supply of a unit of
accommodation below one thousand rupees per day or equivalent
N/N 14/2018 CT (R)
15 Transport of passengers, with or without accompanied belongings, by –
(a) air, embarking from or terminating in an airport located in the state of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at
Bagdogra located in West Bengal;
(b) non-airconditioned contract carriage other than radio taxi, for transportation of
passengers, excluding tourism, conducted tour, charter or hire; or
(c) stage carriage other than airconditioned stage carriage.
16 Services provided to the Central Government, by way of transport of passengers with or
without accompanied belongings, by air, embarking from or terminating at a regional
connectivity scheme airport, against consideration in the form of viability gap funding:
Provided that nothing contained in this entry shall apply on or after the expiry of a period
of one year from the date of commencement of operations of the regional connectivity
scheme airport as notified by the Ministry of Civil Aviation
17 Service of transportation of passengers, with or without accompanied belongings, by—
(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;
(b) metro, monorail or tramway;
(c) inland waterways;

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(d) public transport, other than predominantly for tourism purpose, in a vessel between
places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws)
18 Services by way of transportation of goods-
(a) by road except the services of—
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.
19 Services by way of transportation of goods by an aircraft from a place outside India upto
the customs station of clearance in India
20 Services by way of transportation by rail or a vessel from one place in India to another of
the following goods –
(a) relief materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap;
(b) defence or military equipments;
(c) newspaper or magazines registered with the Registrar of Newspapers;
(d) railway equipments or materials;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.
21 Services provided by a goods transport agency, by way of transport in a goods carriage of
–
(a) agricultural produce;
(b) goods, where consideration charged for the transportation of goods on a consignment
transported in a single carriage does not exceed one thousand five hundred rupees;
(c) goods, where consideration charged for transportation of all such goods for a single
consignee does not exceed rupees seven hundred and fifty;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap; or
(h) defence or military equipments.
21A Services provided by a goods transport agency to an unregistered person, including an
unregistered casual taxable person, other than the following recipients, namely:
(a) any registered factory: or
(b) any registered society: or
(c) any co-operative society: or
(d) any person registered under GST Act: or

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(e) any body corporate: or

(f) any partnership firm including AOP: or
(g) any causal taxable person.
21B Services provided by a goods transport agency, by way of transport of goods in a goods
carriage, to, -
(a) a Department or Establishment of the Central Government or State Government or
Union territory; or (b) local authority; or (c) Governmental agencies, which has taken
registration under the Central Goods and Services Tax Act, 2017 (12 of 2017) only for
the purpose of deducting tax under Section 51 and not for making a taxable supply of
goods or services or
(b) a registered person paying tax under section 10 of the Act
N/N 28/2018 CT(R)
22 Services by way of giving on hire –
(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve
passengers; or
(b) to a goods transport agency, a means of transportation of goods.
23 Service by way of access to a road or a bridge on payment of toll charges.
23A Service by way of access to a road or a bridge on payment of annuity.
24 Services by way of loading, unloading, packing, storage or warehousing of rice.
24A Services by way of warehousing of minor forest produce.
N/N 21/2017 CT (R) dt. 22/08/2017
25 Transmission or distribution of electricity by an electricity transmission or distribution
utility.
26 Services by the Reserve Bank of India
27 Services by way of—
(a) extending deposits, loans or advances in so far as the consideration is represented by
way of interest or discount (other than interest involved in credit card services);
(b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of
foreign exchange or amongst banks and such dealers.
27A Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account
holders under Pradhan Mantri Jan Dhan Yojana (PMJDY).
28 Services of life insurance business provided by way of annuity under the National Pension
System regulated by the Pension Fund Regulatory and Development Authority of India
under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013).
29 Services of life insurance business provided or agreed to be provided by the Army, Naval
and Air Force Group Insurance Funds to members of the Army, Navy and Air Force,
respectively, under the Group Insurance Schemes of the Central Government.
29A

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30 Services by the Employees’ State Insurance Corporation to persons governed under the
Employees’ State Insurance Act, 1948 (34 of 1948)
31 Services provided by the Employees Provident Fund Organisation to the persons governed
under the Employees Provident Funds and the Miscellaneous Provisions Act, 1952 (19 of
1952).
31A Services by Coal Mines Provident Fund Organisation to persons governed by the Coal
Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948).
N.N 14/2018 CT(R)
31B Services by National Pension System (NPS) Trust to its members against consideration in
the form of administrative fee.
N.N 14/2018 CT(R)
32 Services provided by the Insurance Regulatory and Development Authority of India to
insurers under the Insurance Regulatory and Development Authority of India Act, 1999
(41 of 1999).
33 Services provided by the Securities and Exchange Board of India set up under the
Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the
interests of investors in securities and to promote the development of, and to regulate,
the securities market.
34 Services by an acquiring bank, to any person in relation to settlement of an amount upto
two thousand rupees in a single transaction transacted through credit card, debit card,
charge card or other payment card service. Explanation.— For the purposes of this entry,
“acquiring bank” means any banking company, financial institution including non-banking
financial company or any other person, who makes the payment to any person who
accepts such card
34A Services supplied by Central Government, State Government, Union territory to their
undertakings or Public Sector Undertakings(PSUs) by way of guaranteeing the loans taken
by such undertakings or PSUs from the financial institutions
N.N 14/2018 CT(R)
35 Services of general insurance business provided under following schemes –
(a) Hut Insurance Scheme;
(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as
Integrated Rural Development Programme);
(c) Scheme for Insurance of Tribals;
(d) Janata Personal Accident Policy and Gramin Accident Policy;
(e) Group Personal Accident Policy for Self-Employed Women;
(f) Agricultural Pumpset and Failed Well Insurance;
(g) premia collected on export credit insurance;

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(h) Weather Based Crop Insurance Scheme or the Modified National Agricultural
Insurance Scheme, approved by the Government of India and implemented by the
Ministry of Agriculture;
(i) Jan Arogya Bima Policy;
(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);
(k) Pilot Scheme on Seed Crop Insurance; (l) Central Sector Scheme on Cattle Insurance;
(m) Universal Health Insurance Scheme;
(n) Rashtriya Swasthya Bima Yojana;
(o) Coconut Palm Insurance Scheme;
(p) Pradhan Mantri Suraksha BimaYojna;
(q) Niramaya Health Insurance Scheme implemented by the Trust constituted under the
provisions of the National Trust for the Welfare of Persons with Autism, Cerebral Palsy,
Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999).
36 Services of life insurance business provided under following schemes-
(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product as approved by the Insurance Regulatory and
Development Authority, having maximum amount of cover of fifty thousand rupees two
lakh rupees;
(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan JyotiBimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.
36A Services by way of reinsurance of the insurance schemes specified in serial no 35 or 36 or
40.
N/N 2/2018 CT(R)
37 Services by way of collection of contribution under the Atal Pension Yojana.
38 Services by way of collection of contribution under any pension scheme of the State
Governments.
39 Services by the following persons in respective capacities – (a) business facilitator or a
business correspondent to a banking company with respect to accounts in its rural area
branch; (b) any person as an intermediary to a business facilitator or a business
correspondent with respect to services mentioned in entry (a); or (c) business facilitator
or a business correspondent to an insurance company in a rural area.
39A Services by an intermediary of financial services located in a multi services SEZ with
International Financial Services Centre (IFSC) status to a customer located outside India
for international financial services in currencies other than Indian rupees (INR).

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40 Services provided to the Central Government, State Government, Union territory under
any insurance scheme for which total premium is paid by the Central Government, State
Government, Union territory.
41 One time upfront amount (called as premium, salami, cost, price, development charges or
by any other name) leviable in respect of the service, by way of granting long term (thirty
years, or more) lease of industrial plots, provided by the State Government Industrial
Development Corporations or Undertakings to industrial units.
42 Services provided by the Central Government, State Government, Union territory or local
authority by way of allowing a business entity to operate as a telecom service provider or
use radio frequency spectrum during the period prior to the 1st April, 2016, on payment
of licence fee or spectrum user charges, as the case may be.
43 Services of leasing of assets (rolling stock assets including wagons, coaches, locos) by the
Indian Railways Finance Corporation to Indian Railways.
44 Services provided by an incubatee up to a total turnover of fifty lakh rupees in a financial
year subject to the following conditions, namely:- (a) the total turnover had not exceeded
fifty lakh rupees during the preceding financial year; and (b) a period of three years has
not elapsed from the date of entering into an agreement as an incubatee.
45 Services provided by-
(a) an arbitral tribunal to –
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh
rupees in the case of special category states) in the preceding financial year;
(iii) the CG, SG, UT, LA, GA, or GE
(b) a partnership firm of advocates or an individual as an advocate other than a senior
advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh
rupees in thecase of special category states) in the preceding financial year;
(iv) the CG, SG, UT, LA, GA, or GE
(c) a senior advocate by way of legal services to-
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to twenty lakh rupees (ten lakh
rupees in the case of special category states) in the preceding financial year
(iii) the CG, SG, UT, LA, GA, or GE
46 Services by a veterinary clinic in relation to health care of animals or birds.
47 Services provided by the Central Government, State Government, Union territory or local
authority by way of- (a) registration required under any law for the time being in force; (b)
testing, calibration, safety check or certification relating to protection or safety of

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workers, consumers or public at large, including fire license, required under any law for
the time being in force.
47A Services by way of licensing, registration and analysis or testing of food samples supplied
by the Food Safety and Standards Authority of India (FSSAI) to Food Business Operators.
N.N 14/2018 CT(R)
48 Taxable services, provided or to be provided, by a Technology Business Incubator or a
Science and Technology Entrepreneurship Park recognised by the National Science and
Technology Entrepreneurship Development Board of the Department of Science and
Technology, Government of India or bioincubators recognised by the Biotechnology
Industry Research Assistance Council, under the Department of Biotechnology,
Government of India.
49 Services by way of collecting or providing news by an independent journalist, Press Trust
of India or United News of India.
50 Services of public libraries by way of lending of books, publications or any other
knowledge-enhancing content or material.
51 Services provided by the Goods and Services Tax Network to the Central Government or
State Governments or Union territories for implementation of Goods and Services Tax
52 Services by an organiser to any person in respect of a business exhibition held outside
India.
53 Services by way of sponsorship of sporting events organised –
(a) by a national sports federation, or its affiliated federations, where the participating
teams or individuals represent any district, State, zone or Country;
(b) by Association of Indian Universities, Inter-University Sports Board, School Games
Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India
or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.
53A Services by way of fumigation of warehouse of agricultural produce.
N/N 2/2018 CT(R)
54 Services relating to cultivation of plants and rearing of all life forms of animals, except the
rearing of horses, for food, fibre, fuel, raw material or other similar products or
agricultural produce by way of—
(a) agricultural operations directly related to production of any agricultural produce
including cultivation, harvesting, threshing, plant protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending, pruning, cutting,
harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading,
cooling or bulk packaging and such like operations which do not alter the essential

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characteristics of agricultural produce but make it only marketable for the primary
market;
(d) renting or leasing of agro machinery or vacant land with or without a structure
incidental to its use;
(e) loading, unloading, packing, storage or warehousing of agricultural produce;
(f) agricultural extension services;
(g) services by any Agricultural Produce Marketing Committee or Board or services
provided by a commission agent for sale or purchase of agricultural produce.
(h) services by way of fumigation of warehouse of agricultural produce.
55 Carrying out an intermediate production process as job work in relation to cultivation of
plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre,
fuel, raw material or other similar products or agricultural produce.
55A Services by way of artificial insemination of lifestock other than horse.
N/N 14/2018 CT(R)
56 Services by way of slaughtering of animals.
57 Services by way of pre-conditioning, precooling, ripening, waxing, retail packing, labelling
of fruits and vegetables which do not change or alter the essential characteristics of the
said fruits or vegetables.
58 Services provided by the National Centre for Cold Chain Development under the Ministry
of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge
dissemination.
59 Services by a foreign diplomatic mission located in India
60 Services by a specified organisation in respect of a religious pilgrimage facilitated by the
Ministry of External Affairs, the Government of India, under bilateral arrangement
61 Services provided by the Central Government, State Government, Union territory or local
authority by way of issuance of passport, visa, driving licence, birth certificate or death
certificate.
62 Services provided by the Central Government, State Government, Union territory or local
authority by way of tolerating non-performance of a contract for which consideration in
the form of fines or liquidated damages is payable to the Central Government, State
Government, Union territory or local authority under such contract.
63 Services provided by the Central Government, State Government, Union territory or local
authority by way of assignment of right to use natural resources to an individual farmer
for cultivation of plants and rearing of all life forms of animals, except the rearing of
horses, for food, fibre, fuel, raw material or other similar products.
64 Services provided by the Central Government, State Government, Union territory or local
authority by way of assignment of right to use any natural resource where such right to
use was assigned by the Central Government, State Government, Union territory or local
authority before the 1st April, 2016: Provided that the exemption shall apply only to tax

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payable on one time charge payable, in full upfront or in installments, for assignment of
right to use such natural resource
65 Services provided by the Central Government, State Government, Union territory by way
of deputing officers after office hours or on holidays for inspection or container stuffing or
such other duties in relation to import export cargo on payment of Merchant Overtime
charges.
65A Services by way of providing information under the Right to information Act, 2005.
N/N 2/2018 CT(R)
65B Services supplied by a State Government to Excess Royalty Collection Contractor (ERCC)
by way of assigning the right to collect royalty on behalf of the State Government on the
mineral dispatched by the mining lease holders. Explanation.- “mining lease holder”
means a person who has been granted mining lease, quarry lease or license or other
mineral concession under the Mines and Minerals (Development and Regulation) Act,
1957 (67 of 1957), the rules made thereunder or the rules made by a State Government
under sub-section (1) of section 15 of the Mines and Minerals (Development and
Regulation) Act, 1957.
Provided that at the end of the contract period, ERCC shall submit an account to the State
Government and certify that the amount of goods and services tax deposited by mining
lease holders on royalty is more than the goods and services tax exempted on the service
provided by State Government to the ERCC of assignment of right to collect royalty and
where such amount of goods and services tax paid by mining lease holders is less than the
amount of goods and services tax exempted, the exemption shall be restricted to such
amount as is equal to the amount of goods and services tax paid by the mining lease
holders and the ERCC shall pay the difference between goods and services tax exempted
on the service provided by State Government to the ERCC of assignment of right to collect
royalty and goods and services tax paid by the mining lease holders on royalty.”;
66 Services provided –
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance examination against
consideration the form of entrance fee;
(b) to an educational institution, by way of,- (i) transportation of students, faculty and
staff; (ii) catering, including any mid-day meals scheme sponsored by the Central
Government, State Government or Union territory; (iii) security or cleaning or
housekeeping services performed in such educational institution; (iv) services relating to
admission to, or conduct of examination by, such institution; upto higher secondary:
Provided that nothing contained in entry (b) sub-items (i), (ii) and (iii) of item (b) shall
apply to an educational institution other than an institution providing services by way of
pre-school education and education up to higher secondary school or equivalent

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Provided further that nothing contained in sub-item (v) of item (b) shall apply to an
institution providing services by way of,- (i) pre-school education and education up to
higher secondary school or equivalent; or (ii) education as a part of an approved
vocational education course
67 Services provided by the Indian Institutes of Management, as per the guidelines of the
Central Government, to their students, by way of the following educational programmes,
except Executive Development Programme: - (a) two year full time Post Graduate
Programmes in Management for the Post Graduate Diploma in Management, to which
admissions are made on the basis of Common Admission Test (CAT) conducted by the
Indian Institute of Management; (b) fellow programme in Management; (c) five year
integrated programme in Management.
68 Services provided to a recognised sports body by- (a) an individual as a player, referee,
umpire, coach or team manager for participation in a sporting event organised by a
recognized sports body; (b) another recognised sports body
69 Any services provided by, _
(a) the National Skill Development Corporation set up by the Government of India;
(b) a Sector Skill Council approved by the National Skill Development Corporation;
(c) an assessment agency approved by the Sector Skill Council or the National Skill
Development Corporation;
(d) a training partner approved by the National Skill Development Corporation or the
Sector Skill Council, in relation to- (i) the National Skill Development Programme
implemented by the National Skill Development Corporation; or (ii) a vocational skill
development course under the National Skill Certification and Monetary Reward Scheme;
or (iii) any other Scheme implemented by the National Skill Development Corporation.
70 Services of assessing bodies empanelled centrally by the Directorate General of Training,
Ministry of Skill Development and Entrepreneurship by way of assessments under the Skill
Development Initiative Scheme.
71 Services provided by training providers (Project implementation agencies) under Deen
Dayal Upadhyaya Grameen Kaushalya Yojana implemented by the Ministry of Rural
Development, Government of India by way of offering skill or vocational training courses
certified by the National Council for Vocational Training.
72 Services provided to the Central Government, State Government, Union territory
administration under any training programme for which total expenditure is borne by the
Central Government, State Government, Union territory administration
73 Services provided by the cord blood banks by way of preservation of stem cells or any
other service in relation to such preservation.
74 Services by way of-
(a) health care services by a clinical establishment, an authorised medical practitioner or
para-medics;

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(b) services provided by way of transportation of a patient in an ambulance, other than

those specified in (a) above.
74A Services provided by rehabilitation professionals recognised under the Rehabilitation
Council of India Act, 1992 (34 of 1992) by way of rehabilitation, therapy or counselling and
such other activity as covered by the said Act at medical establishments, educational
institutions, rehabilitation centers established by Central Government, State Government
or Union territory or an entity registered under section 12AA of the Incometax Act, 1961
(43 of 1961).
75 Services provided by operators of the common bio-medical waste treatment facility to a
clinical establishment by way of treatment or disposal of bio-medical waste or the
processes incidental thereto.
76 Services by way of public conveniences such as provision of facilities of bathroom,
washrooms, lavatories, urinal or toilets.
77 Service by an unincorporated body or a non- profit entity registered under any law for the
time being in force, to its own members by way of reimbursement of charges or share of
contribution –
(a) as a trade union;
(b) for the provision of carrying out any activity which is exempt from the levy of Goods
and service Tax; or
(c) up to an amount of five thousand rupees per month per member for sourcing of goods
or services from a third person for the common use of its members in a housing society or
a residential complex.
77A Services provided by an unincorporated body or a non-profit entity registered under any
law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art, science, literature, culture,
sports, education, social welfare, charitable activities and protection of environment,
to its own members against consideration in the form of membership fee upto an amount
of one thousand rupees (Rs 1000/-) per member per year.
N/N 14/2018 CT(R)
78 Services by an artist by way of a performance in folk or classical art forms of-
(a) music, or
(b) dance, or
(c) theatre,
if the consideration charged for such performance is not more than one lakh and fifty
thousand rupees:
Provided that the exemption shall not apply to service provided by such artist as a brand
ambassador.

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79 Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve
or zoo.
80 Services by way of training or coaching in recreational activities relating to-
(a) arts or culture, or
(b) sports by charitable entities registered under section 12AA of the Income-tax Act
81 Services by way of right to admission to-
(a) circus, dance, or theatrical performance including drama or ballet;
(b) award function, concert, pageant, musical performance or any sporting event other
than a recognised sporting event;
(c) recognised sporting event,
(d) planetarium
where the consideration for admission is not more than Rs 250 500 per person as
referred to in (a), (b) and (c) above.
82 Services by way of right to admission to the events organised under FIFA U-17 World Cup
2017.
N/N 25/2017 CT(R).

TIME OF SUPPLY OF GOODS [SEC 12]

LIABILITY TO PAY TAX [SEC 12(1)]

The liability to pay tax on goods shall arise at the time of supply, as determined in accordance with
the provisions of this section.

TIME OF SUPPLY OF GOODS [SEC 12(2)] (General Provisions)

The time of supply of goods shall be the earlier of the following dates, namely:—
a) the date of issue of invoice by the supplier or the last date on which he is required, under sub
section (1) of section 31, to issue the invoice with respect to the supply; or
b) the date on which the supplier receives the payment with respect to the supply:
Provided that where the supplier of taxable goods receives an amount up to Rs 1,000 in excess of the
amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at
the option of the said supplier, be the date of issue of invoice in respect of such excess amount.

In other words
General provisions - Earliest of the Following:
 Date of issue of invoice
 Last date of issue of invoice u/s 31(1)
 Date of receipt of payment

Excess Amount: Upto to Rs 1,000 (At option of

supplier)
Date of issue of Invoice

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Explanation 1: For the purposes of clauses (a) and (b), “supply” shall be deemed to have been made
to the extent it is covered by the invoice or, as the case may be, the payment.
Explanation 2: For the purposes of clause (b), “the date on which the supplier receives the payment”
shall be the date on which the payment is entered in his books of account or the date on which the
payment is credited to his bank account, whichever is earlier.

TIME OF SUPPLY OF GOODS WHEN GST PAYABLE ON REVERSE CHARGE BASIS [SEC 12(3)]
In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, 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 the date on which the
payment is debited in his bank account, whichever is earlier; or
c) the date immediately following 30 days from the date of issue of invoice or any other document,
by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or
clause (c), the time of supply shall be the date of entry in the books of account of the recipient of
supply.

In other words
In case of Reverse Charge - Earliest of the Following:
 Date of receipt of goods
 Date of payment as entered in the books of account or payment is debited in his
bank account, whichever is earlier
 the date immediately following 30 days from the date of issue of invoice or any
other document

Where it is not possible to determine the time of supply, the date of entry in the books of
account of the recipient of supply

TIME OF SUPPLY: SUPPLY OF VOUCHERS FOR GOODS [SEC 12(4)]

In case of supply of vouchers by a supplier, the time of supply shall be—
a) the date of issue of voucher, if the supply is identifiable at that point; or
b) the date of redemption of voucher, in all other cases.

TIME OF SUPPLY IN OTHER SITUATIONS [SEC 12(5)]

Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-
section (3) or sub-section (4), the time of supply shall–
a) in a case where a periodical return has to be filed, be the date on which such return is to be filed;
or
b) in any other case, be the date on which the tax is paid.

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TIME OF SUPPLY WHEN INTEREST, LATE FEE ETC IS RECEIVED [SEC 12(6)]
The time of supply to the extent it relates to an addition in the value of supply by way of interest, late
fee or penalty for delayed payment of any consideration shall be the date on which the supplier
receives such addition in value.

TIME OF SUPPLY OF SERVICE [SEC 13]

LIABILITY TO PAY TAX [SEC 13(1)]

The liability to pay tax on services shall arise at the time of supply, as determined in accordance with
the provisions of this section.

TIME OF SUPPLY OF SERVICES [SEC 13(2)] (General Provisions)

The time of supply of services shall be the earliest of the following dates, namely:—
a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed
under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
b) the date of provision of service, if the invoice is not issued within the period prescribed under
sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or
c) the date on which the recipient shows the receipt of services in his books of account, in a case
where the provisions of clause (a) or clause (b) do not apply:
Provided that where the supplier of taxable service receives an amount up to Rs 1,000 in excess of the
amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at
the option of the said supplier, be the date of issue of invoice relating to such excess amount.
Explanation.––For the purposes of clauses (a) and (b)–
(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the
case may be, the payment;
(ii) “the date of receipt of payment” shall be the date on which the payment is entered in the books
of account of the supplier or the date on which the payment is credited to his bank account, whichever
is earlier.

In other words
General provisions - Earliest of the Following:
 Date of issue of invoice if issued if within time as per 31(2) (i.e 30 days) or date of
payment whichever is earlier
 Date of provision of service if invoice not issues within time as per 31(2) or date of
payment whichever is earlier
 Date of receipt as entered in books of account

Excess Amount: Upto to Rs 1,000 (At option of supplier)

Date of issue of Invoice

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TIME OF SUPPLY OF SERVICES WHEN GST PAYABLE ON REVERSE CHARGE BASIS [SEC 13(3)]
In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time
of supply shall be the earlier of the following dates, namely:–
a) the date of payment as entered in the books of account of the recipient or the date on which the
payment is debited in his bank account, whichever is earlier; or
b) the date immediately following 60 days from the date of issue of invoice or any other document,
by whatever name called, in lieu thereof by the supplier:
Provided that where it is not possible to determine the time of supply under clause (a) or clause (b),
the time of supply shall be the date of entry in the books of account of the recipient of supply:
Provided further that in case of supply by associated enterprises, where the supplier of service is
located outside India, the time of supply shall be the date of entry in the books of account of the
recipient of supply or the date of payment, whichever is earlier.

In other words
In case of Reverse Charge - Earliest of the Following:
 Date of payment as entered in the books of account or payment is debited in his
bank account, whichever is earlier
 the date immediately following 60 days from the date of issue of invoice or any
other document

Supply of services by associated enterprises

where the supplier of service is located outside India,(earlier of the two)
 the date of entry in the books of account of the recipient
 the date of payment

TIME OF SUPPLY: SUPPLY OF VOUCHERS FOR SERVICES [SEC 13(4)]

In case of supply of vouchers by a supplier, the time of supply shall be–
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.

TIME OF SUPPLY IN OTHER SITUATIONS [SEC 13(5)]

Where it is not possible to determine the time of supply under the provisions of sub-section (2) or sub-
section (3) or sub-section (4), the time of supply shall–
a) in a case where a periodical return has to be filed, be the date on which such return is to be filed;
or
b) in any other case, be the date on which the tax is paid.

TIME OF SUPPLY WHEN INTEREST, LATE FEE ETC IS RECEIVED [SEC 13(6)]
The time of supply to the extent it relates to an addition in the value of supply by way of interest, late
fee or penalty for delayed payment of any consideration shall be the date on which the supplier
receives such addition in value.

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CHANGE IN RATE OF TAX [SEC 14]

Notwithstanding anything contained in section 12 or section 13, the time of supply, where there is a
change in the rate of tax in respect of goods or services or both, shall be determined in the following
manner, namely:–
a) in case the goods or services or both have been supplied before the change in rate of tax,–
i. where the invoice for the same has been issued and the payment is also received after the
change in rate of tax, the time of supply shall be the date of receipt of payment or the date of
issue of invoice, whichever is earlier; or
ii. where the invoice has been issued prior to the change in rate of tax but payment is received
after the change in rate of tax, the time of supply shall be the date of issue of invoice; or
iii. where the payment has been received before the change in rate of tax, but the invoice for the
same is issued after the change in rate of tax, the time of supply shall be the date of receipt
of payment;
b) in case the goods or services or both have been supplied after the change in rate of tax,–
i. where the payment is received after the change in rate of tax but the invoice has been issued
prior to the change in rate of tax, the time of supply shall be the date of receipt of payment;
or
ii. where the invoice has been issued and payment is received before the change in rate of tax,
the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever
is earlier; or
iii. where the invoice has been issued after the change in rate of tax but the payment is received
before the change in rate of tax, the time of supply shall be the date of issue of invoice:
Provided that the date of receipt of payment shall be the date of credit in the bank account if such
credit in the bank account is after four working days from the date of change in the rate of tax.
Explanation: For the purposes of this section, “the date of receipt of payment” shall be the date on
which the payment is entered in the books of account of the supplier or the date on which the
payment is credited to his bank account, whichever is earlier.

Condition Time of Supply

TIME OF SUPPLY Tax Invoice issued and payment the date of receipt of payment or the
Where goods or received after the change date of issue of invoice, whichever is
services or both earlier;
have been Invoice issued BEFORE the change but Date of Issue of Invoice
supplied - payment received AFTER the change
BEFORE the Payment received before the change Date of receipt of payment
change in rate of but invoice issued after the change
Tax

Condition Time of Supply

TIME OF SUPPLY payment received after the change the date of receipt of payment
Where goods or but invoice issued before the change
services or both Invoice issued BEFORE the change but the date of receipt of payment or
have been supplied payment received AFTER the change the date of issue of invoice,
– AFTER the change whichever is earlier;
in rate of Tax Payment received before the change Date of receipt of invoice
but invoice issued after the change
Note: “the date of receipt of payment” shall be the date on which the payment is entered in the
books of account of the supplier or the date on which the payment is credited to his bank account,
whichever is earlier.

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VALUATION AND INPUT TAX CREDIT

VALUE OF SUPPLY [SEC 15]

TRANSACTION VALUE BASIS FOR VALUATION [SEC 15(1)]

The value of a supply of goods or services or both shall be the transaction value, which is the price
actually paid or payable for the said supply of goods or services or both where the supplier and the
recipient of the supply are not related and the price is the sole consideration for the supply.

VALUE OF SUPPLY [SEC 15(2)]

The value of supply shall include–
a) any taxes, duties, cesses, fees and charges levied under any law for the time being in force other
than this Act, the State Goods and Services Tax Act, the Union Territory Goods and Services Tax
Act and the Goods and Services Tax (Compensation to States) Act, if charged separately by the
supplier;
b) any amount that the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable for
the goods or services or both;
c) incidental expenses, including commission and packing, charged by the supplier to the recipient
of a supply and any amount charged for anything done by the supplier in respect of the supply of
goods or services or both at the time of, or before delivery of goods or supply of services;
d) interest or late fee or penalty for delayed payment of any consideration for any supply; and
e) subsidies directly linked to the price excluding subsidies provided by the Central Government and
State Governments.
Explanation: For the purposes of this sub-section, the amount of subsidy shall be included in the value
of supply of the supplier who receives the subsidy.

NON INCLUSION OF DISCOUNT [SEC 15(3)]

The value of the supply shall not include any discount which is given–
a) before or at the time of the supply if such discount has been duly recorded in the invoice issued
in respect of such supply; and
b) after the supply has been effected, if—
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 invoices; and
ii. input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.

REFERENCE TO RULES [SEC 15(3) & 15(4)]

[As per Sec 15(4)] Where the value of the supply of goods or services or both cannot be determined
under sub-section (1), the same shall be determined in such manner as may be prescribed.

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[As per Sec 15(5)] Notwithstanding anything contained in sub-section (1) or sub-section (4), the value
of such supplies as may be notified by the Government on the recommendations of the Council shall
be determined in such manner as may be prescribed.

Explanation: For the purposes of this Act,–

a) persons shall be deemed to be “related persons” if–
i. such persons are officers or directors of one another’s businesses;
ii. such persons are legally recognised partners in business;
iii. such persons are employer and employee;
iv. any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the
outstanding voting stock or shares of both of them;
v. one of them directly or indirectly controls the other;
vi. both of them are directly or indirectly controlled by a third person;
vii. together they directly or indirectly control a third person; or
viii. they are members of the same family;
b) the term “person” also includes legal persons;
c) persons who are associated in the business of one another in that one is the sole agent or sole
distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be
related.

VALUATION RULES [DETERMINATION OF SUPPLY, CHAP IV CGST RULES, 2017

Value of supply of goods or services where the consideration is not wholly in money.- [RULE 27]
Where the supply of goods or services is for a consideration not wholly in money, the value of the
supply shall,-
a) be the open market value of such supply;
b) if the open market value is not available under clause (a), be the sum total of consideration in
money and any such further amount in money as is equivalent to the consideration not in
money, if such amount is known at the time of supply;
c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of
goods or services or both of like kind and quality;
d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of
consideration in money and such further amount in money that is equivalent to consideration
not in money as determined by the application of rule 30 or rule 31 in that order.
Illustration:
1) Where a new phone is supplied for twenty thousand rupees along with the exchange of an old
phone and if the price of the new phone without exchange is twenty four thousand rupees, the
open market value of the new phone is twenty four thousand rupees.
2) Where a laptop is supplied for forty thousand rupees along with the barter of a printer that is
manufactured by the recipient and the value of the printer known at the time of supply is four
thousand rupees but the open market value of the laptop is not known, the value of the supply
of the laptop is forty four thousand rupees.

Notes:

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Meaning of Open Market Value: means the full value of money excluding GST, payable by the
recipient to obtain such supply at the time when supply being valued is made, provided such supply
is between unrelated persons and price is the sole consideration for such supply.

Value of supply of goods or services or both between distinct or related persons, other than
through an agent.- [RULE 28]
The value of the supply of goods or services or both between distinct persons as specified in sub-
section (4) and (5) of section 25 or where the supplier and recipient are related, other than where
the supply is made through an agent, shall-
a. be the open market value of such supply;
b. if the open market value is not available, be the value of supply of goods or services of like kind
and quality;
c. if the value is not determinable under clause (a) or (b), be the value as determined by the
application of rule 30 or rule 31, in that order:
Provided that where the goods are intended for further supply as such by the recipient, the value
shall, at the option of the supplier, be an amount equivalent to ninety percent of the price charged
for the supply of goods of like kind and quality by the recipient to his customer not being a related
person:
Provided further that where the recipient is eligible for full input tax credit, the value declared in the
invoice shall be deemed to be the open market value of the goods or services.

Value of supply of goods made or received through an agent.- [RULE 29]

The value of supply of goods between the principal and his agent shall-
a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety
percent. of the price charged for the supply of goods of like kind and quality by the recipient to
his customer not being a related person, where the goods are intended for further supply by the
said recipient.
Illustration: A principal supplies groundnut to his agent and the agent is supplying groundnuts of
like kind and quality in subsequent supplies at a price of five thousand rupees per quintal on the
day of the supply. Another independent supplier is supplying groundnuts of like kind and quality
to the said agent at the price of four thousand five hundred and fifty rupees per quintal. The
value of the supply made by the principal shall be four thousand five hundred and fifty rupees
per quintal or where he exercises the option, the value shall be 90 per cent. of five thousand
rupees i.e., four thousand five hundred rupees per quintal.
b) where the value of a supply is not determinable under clause (a), the same shall be determined
by the application of rule 30 or rule 31 in that order.

Value of supply of goods or services or both based on cost.- [RULE 30]

Where the value of a supply of goods or services or both is not determinable by any of the preceding
rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or
manufacture or the cost of acquisition of such goods or the cost of provision of such services.

Residual method for determination of value of supply of goods or services or both.- [RULE 31]
Where the value of supply of goods or services or both cannot be determined under rules 27 to 30,
the same shall be determined using reasonable means consistent with the principles and the general
provisions of section 15 and the provisions of this Chapter: Provided that in the case of supply of
services, the supplier may opt for this rule, ignoring rule 30.

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Value of supply in case of lottery, betting, gambling and horse racing. – [RULE 31A]
(1) Notwithstanding anything contained in the provisions of this Chapter, the value in respect of
supplies specified below shall be determined in the manner provided hereinafter.
(2) (a) The value of supply of lottery run by State Governments shall be deemed to be 100/112 of the
face value of ticket or of the price as notified in the Official Gazette by the organising State,
whichever is higher
(b) The value of supply of lottery authorised by State Governments shall be deemed to be 100/128
of the face value of ticket or of the price as notified in the Official Gazette by the organising State,
whichever is higher.
Explanation:– For the purposes of this sub-rule, the expressions-
(a) ―lottery run by State Governments means a lottery not allowed to be sold in any State other
than the organizing State;
(b) ―lo ery authorised by State Governments means a lo ery which is authorised to be sold in
State(s) other than the organising State also; and
(c) ―Organising State‖ has the same meaning as assigned to it in clause (f) of sub-rule (1) of rule 2 of
the Lotteries (Regulation) Rules, 2010.
(3) The value of supply of actionable claim in the form of chance to win in betting, gambling or horse
racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator

Determination of value in respect of certain supplies [RULE 32]

SUPPLY OF SERVICES INVOLVING SALE/PURCHASE OF FOREIGN CURRENCY [RULE 32(2)]
Valuation will be ass under:
Option A  If RBI reference rate is available: Value = Difference between buying-selling
rate of RBI reference rate
 If RBI reference rate is not available but one currency is INR: Value= 1% of the
INR involved
 If RBI reference rate is not available and no currency is INR: Value= 1% of the
lesser of the Indian Rupee equivalent of each currency exchanged
Option B  Exchange amount upto : 1% thereof (min Rs 250)
Rs 1,00,000
 Exchange amount exceeding : 1,000 + 0.5% of (exchange
Rs 1,00,000 but upto amount – Rs 1,00,000)
Rs 10,00,000
 Exchange amount exceeding : Rs 5,500 + 0.1% of (exchange
amount – Rs 10,00,000)
(Max Rs 60,000)

SUPPLY OF SERVICES BY AIR TRAVEL AGENT [RULE 32(3)]

Valuation will be ass under:
a) Domestic bookings: Value = 5% of the basic fare
b) International bookings: Value = 10 % of the basic fare
Basic fare means, that part of air fare on which airlines pays commission to its agent

SUPPLY OF SERVICES BY INSURANCE AGENT ]RULE 32(4)]

Valuation will be ass under:
a) Only risk covering policies: Value = 100% of the premium
b) Composite policies- If amount allocated for investment/ saving is separately given at the time of
providing service: Value = Gross premium charged from policy holder minus amount allocated
for amount allocated for investment/ saving on behalf of policy holder

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c) Composite policies – Single premium policy: Value = 10% of the premium amount
d) Composite policies – Other policies: Value =
First Premium: 5% of the premium amount
Subsequent year’s Premium: 12.5% of the premium amount

DEALER DEALING IN SECOND HAND GOODS [RULE 32(5)]

Where a taxable supply is provided by a person dealing in buying and selling of second hand goods
i.e., used goods as such or after such minor processing which does not change the nature of the
goods and where no input tax credit has been availed on the purchase of such goods, the value of
supply shall be the difference between the selling price and the purchase price and where the value
of such supply is negative, it shall be ignored:
Provided that the purchase value of goods repossessed from a defaulting borrower, who is not
registered, for the purpose of recovery of a loan or debt shall be deemed to be the purchase price of
such goods by the defaulting borrower reduced by five percentage points for every quarter or part
thereof, between the date of purchase and the date of disposal by the person making such
repossession.

VALUE OF TOKEN OR VOUCHER [RULE 32(6)]

The value of a token, or a voucher, or a coupon, or a stamp (other than postage stamp) which is
redeemable against a supply of goods or services or both shall be equal to the money value of the
goods or services or both redeemable against such token, voucher, coupon, or stamp.

Value of supply of services in case of pure agent.- [RULE 33]

Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs
incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of
supply, if all the following conditions are satisfied, namely,-
i) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment
to the third party on authorisation by such recipient;
ii) the payment made by the pure agent on behalf of the recipient of supply has been
separately indicated in the invoice issued by the pure agent to the recipient of service; and
iii) the supplies procured by the pure agent from the third party as a pure agent of the recipient
of supply are in addition to the services he supplies on his own account.
Explanation.- For the purposes of this rule, the expression ―pure agent‖ means a person who- (a)
enters into a contractual agreement with the recipient of supply to act as his pure agent to incur
expenditure or costs in the course of supply of goods or services or both; (b) neither intends to hold
nor holds any title to the goods or services or both so procured or supplied as pure agent of the
recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d)
receives only the actual amount incurred to procure such goods or services in addition to the
amount received for supply he provides on his own account.
Illustration.- Corporate services firm A is engaged to handle the legal work pertaining to the
incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and
approval fee for the name of the company paid to the Registrar of Companies. The fees charged by
the Registrar of Companies for the registration and approval of the name are compulsorily levied on
B. A is merely acting as a pure agent in the payment of those fees. Therefore, A‘s recovery of such
expenses is a disbursement and not part of the value of supply made by A to B.

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INPUT TAX CREDIT

REGISTERED PERSON TO TAKE CREDIT [SEC 16(1)]
Every registered person shall, subject to such conditions and restrictions as may be prescribed and in
the manner specified in section 49, be entitled to take credit of input tax charged on any supply of
goods or services or both to him which are used or intended to be used in the course or furtherance
of his business and the said amount shall be credited to the electronic credit ledger of such person.

CONDITIONS FOR AVAILMENT OF CREDIT BY REGISTERED PERSON [SECTION 16(2)]

Notwithstanding anything contained in this section, no registered person shall be entitled to the
credit of any input tax in respect of any supply of goods or services or both to him unless,––
(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or
such other tax paying documents as may be prescribed;
(b) he has received the goods or services or both. Explanation.—For the purposes of this clause, it
shall be deemed that the registered person has received the goods where the goods are delivered by
the supplier to a recipient or any other person on the direction of such registered person, whether
acting as an agent or otherwise, before or during movement of goods, either by way of transfer of
documents of title to goods or otherwise;
(c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually
paid to the Government, either in cash or through utilisation of input tax credit admissible in respect
of the said supply; and
(d) he has furnished the return under section 39:
Provided that where the goods against an invoice are received in lots or instalments, the registered
person shall be entitled to take credit upon receipt of the last lot or instalment:
Provided further that where a recipient fails to pay to the supplier of goods or services or both, other
than the supplies on which tax is payable on reverse charge basis, the amount towards the value of
supply along with tax payable thereon within a period of one hundred and eighty days from the date
of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient
shall be added to his output tax liability, along with interest thereon, in such manner as may be
prescribed:
Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made
by him of the amount towards the value of supply of goods or services or both along with tax
payable thereon.

CAPITAL GOODS ON WHICH DEPRECIATION IS CLAIMED [SECTION 16(3)]

Where the registered person has claimed depreciation on the tax component of the cost of capital
goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.

TIME LIMIT TO AVAIL THE INPUT TAX CREDIT [SECTION 16(4)]

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit
note for supply of goods or services or both after the due date of furnishing of the return under
section 39 for the month of September following the end of financial year to which such invoice or
invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is
earlier.

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APPORTIONMENT OF INPUT TAX CREDIT [SEC 17]

PROPORTIONATE ITC WHEN GOODS OR SERVICE OR BOTH USED FOR BUSINESS AS WEEL AS OTHER
PURPOSES [SEC 17(1)]
Where the goods or services or both are used by the registered person partly for the purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of the input
tax as is attributable to the purposes of his business.

PROPORTIONATE ITC WHEN GOODS OR SERVICE OR BOTH USED FOR TAXABLE AS WEEL AS EXEMPT
SUPPLIES [SEC 17(2)]
Where the goods or services or both are used by the registered person partly for effecting taxable
supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax
Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be
restricted to so much of the input tax as is attributable to the said taxable supplies including zero-
rated supplies.

INCLUSION UNDER EXEMPT SUPPLIES [ SEC 17(3)]

The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall include
supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities,
sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

SPECIAL PROVISIONS IN RESPECT OF BANKS, FI & NBFC [SEC 17(4)]

A banking company or a financial institution including a non-banking financial company, engaged in
supplying services by way of accepting deposits, extending loans or advances shall have the option to
either comply with the provisions of sub-section (2), or avail of, every month, an amount equal to fifty
per cent. of the eligible input tax credit on inputs, capital goods and input services in that month and
the rest shall lapse.
Provided that the option once exercised shall not be withdrawn during the remaining part of the
financial year:
Provided further that the restriction of 50% shall not apply to the tax paid on supplies made by one
registered person to another registered person having the same Permanent Account Number.

SUPPLY OF GOODS AND SERVICES INELIGIBLE FOR ITC [SEC 17(5)]

Notwithstanding anything contained in sub-section (1) of section 16 and subsection (1) of section 18,
input tax credit shall not be available in respect of the following, namely:—
a) motor vehicles and other conveyances except when they are used–
i. for making the following taxable supplies, namely:—
A. further supply of such vehicles or conveyances ; or
B. transportation of passengers; or
C. imparting training on driving, flying, navigating such vehicles or conveyances;
ii. for transportation of goods;

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b) the following supply of goods or services or both—

i. food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic
surgery except where an inward supply of goods or services or both of a particular category is
used by a registered person for making an outward taxable supply of the same category of goods
or services or both or as an element of a taxable composite or mixed supply;
ii. membership of a club, health and fitness centre;
iii. rent-a-cab, life insurance and health insurance except where–
A. the Government notifies the services which are obligatory for an employer to provide to its
employees under any law for the time being in force; or
B. such inward supply of goods or services or both of a particular category is used by a registered
person for making an outward taxable supply of the same category of goods or services or
both or as part of a taxable composite or mixed supply; and
iv. travel benefits extended to employees on vacation such as leave or home travel concession;
c) works contract services when supplied for construction of an immovable property (other than
plant and machinery) except where it is an input service for further supply of works contract
service;
d) goods or services or both received by a taxable person for construction of an immovable property
(other than plant or machinery) on his own account including when such goods or services or
both are used in the course or furtherance of business.
Explanation: For the purposes of clauses (c) and (d), the expression “construction” includes re-
construction, renovation, additions or alterations or repairs, to the extent of capitalisation, to the
said immovable property;
e) goods or services or both on which tax has been paid under section 10;
f) goods or services or both received by a non-resident taxable person except on goods imported
by him;
g) goods or services or both used for personal consumption;
h) goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples; and
i) any tax paid in accordance with the provisions of sections 74, 129 and 130.

OTHER PROVISION [SEC 17(6)]

The Government may prescribe the manner in which the credit referred to in sub-sections (1) and (2)
may be attributed.

Explanation: For the purposes of this Chapter and Chapter VI, the expression “plant and machinery”
means apparatus, equipment, and machinery fixed to earth by foundation or structural support that
are used for making outward supply of goods or services or both and includes such foundation and
structural supports but excludes-
i. land, building or any other civil structures;
ii. telecommunication towers; and
iii. pipelines laid outside the factory premises.

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TAKING INPUT CREDIT IN RESPECT OF INPUTS & CAPITAL GOODS SENT FOR JOB WORK [SEC 19]
1) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed
input tax credit on inputs sent to a job worker for job work.
2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal
shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job
worker for job work without being first brought to his place of business.
3) Where the inputs sent for job work are not received back by the principal after completion of job
work or otherwise or are not supplied from the place of business of the job worker in accordance
with clause (a) or clause (b) of sub-section (1) of section 143 within one year of being sent out, it
shall be deemed that such inputs had been supplied by the principal to the job worker on the day
when the said inputs were sent out:
Provided that where the inputs are sent directly to a job worker, the period of one year shall be
counted from the date of receipt of inputs by the job worker.
4) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed
input tax credit on capital goods sent to a job worker for job work.
5) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16, the principal
shall be entitled to take credit of input tax on capital goods even if the capital goods are directly
sent to a job worker for job work without being first brought to his place of business.
6) Where the capital goods sent for job work are not received back by the principal within a period
of three years of being sent out, it shall be deemed that such capital goods had been supplied by
the principal to the job worker on the day when the said capital goods were sent out:
Provided that where the capital goods are sent directly to a job worker, the period of three years
shall be counted from the date of receipt of capital goods by the job worker.
7) Nothing contained in sub-section (3) or sub-section (6) shall apply to moulds and dies, jigs and
fixtures, or tools sent out to a job worker for job work.

Explanation: For the purpose of this section, “principal” means the person referred to in section 143.

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ACCOUNTS AND RECORDS, TAX INVOICE, DEBIT NOT

& CREDIT NOTE
ACCOUNTS & OTHER RECORDS [SEC 35]
1) Every registered person shall keep and maintain, at his principal place of business, as mentioned
in the certificate of registration, a true and correct account of—
a. production or manufacture of goods;
b. inward and outward supply of goods or services or both;
c. stock of goods;
d. input tax credit availed;
e. output tax payable and paid; and
f. such other particulars as may be prescribed:
Provided that where more than one place of business is specified in the certificate of registration,
the accounts relating to each place of business shall be kept at such places of business:
Provided further that the registered person may keep and maintain such accounts and other
particulars in electronic form in such manner as may be prescribed.
2) Every owner or operator of warehouse or godown or any other place used for storage of goods
and every transporter, irrespective of whether he is a registered person or not, shall maintain
records of the consigner, consignee and other relevant details of the goods in such manner as
may be prescribed.
3) The Commissioner may notify a class of taxable persons to maintain additional accounts or
documents for such purpose as may be specified therein.
4) Where the Commissioner considers that any class of taxable person is not in a position to keep
and maintain accounts in accordance with the provisions of this section, he may, for reasons to
be recorded in writing, permit such class of taxable persons to maintain accounts in such manner
as may be prescribed.
5) Every registered person whose turnover during a financial year exceeds the prescribed limit shall
get his accounts audited by a chartered accountant or a cost accountant and shall submit a copy
of the audited annual accounts, the reconciliation statement under sub-section (2) of section
44 and such other documents in such form and manner as may be prescribed.
6) Subject to the provisions of clause (h) of sub-section (5) of section 17, where the registered
person fails to account for the goods or services or both in accordance with the provisions of sub-
section (1), the proper officer shall determine the amount of tax payable on the goods or services
or both that are not accounted for, as if such goods or services or both had been supplied by such
person and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis,
apply for determination of such tax

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PERIOD OF RETENTION OF ACCOUNTS [SEC 36]

Every registered person required to keep and maintain books of account or other records in
accordance with the provisions of sub-section (1) of section 35 shall retain them until the expiry of
seventy-two months from the due date of furnishing of annual return for the year pertaining to such
accounts and records:
Provided that a registered person, who is a party to an appeal or revision or any other proceedings
before any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed
by him or by the Commissioner, or is under investigation for an offence under Chapter XIX, shall
retain the books of account and other records pertaining to the subject matter of such appeal or
revision or proceedings or investigation for a period of one year after final disposal of such appeal or
revision or proceedings or investigation, or for the period specified above, whichever is later.

TAX INVOICE, CREDIT & DEBIT NOTES

TAX INVOICE [SECTION 31]

Tax invoice in respect of goods [Sec 31(1)]: A registered person supplying taxable goods shall, before
or at the time of,—
a. Removal of goods for supply to the recipient, where the supply involves movement of goods; or
b. Delivery of goods or making available thereof to the recipient, in any other case,
issue a tax invoice showing the description, quantity and value of goods, the tax charged thereon and
such other particulars as prescribed in Revised Invoice Rules, 2017.
Relaxation for issue of tax invoice of goods in some cases: The Government on the
recommendations of the Council specify the categories of goods or supplies in respect of which a tax
invoice shall be issued within such time and in such manner as may be prescribed.
Tax invoice in respect of services [Sec 31(2)]: A registered person supplying taxable services shall,
before or after the provision of service but within a prescribed period, issue a tax invoice, showing
the description, value, tax charged thereon and such other particulars as prescribed.
Time limit for issuing tax invoice for services [Rule 47 of the CGST Rules, 2017]: A tax invoice shall
be issued within 30 days from the date of supply of services or within 45 days in case supplier of
service is an Insurer or a Banking company or a Financial Institution including a NBFC.
Relaxation for issue of tax invoice of services in some cases: The Government may specify the
categories of services in respect of which-
a) Any other document issued in relation to the supply shall be deemed to be a tax invoice; or
b) Tax invoice may not be issued
Issue of revised invoices for goods sold during the period prior to registration [Sec 31(3)(a)]: A
registered person may issue a revised invoice against the invoice issued during the period beginning
with the effective date of registration till the date of issuance of certificate of registration but within
one month from the date of issuance of certificate of registration.
Tax may not be issued if value is less that Rs 200 [Sec 31(3)(b)]: If the value of supply is less than
Rs.200 , a registered person may not issue a tax invoice.
Bill of Supply [Sec 31(3)(c)]: if a registered person supplying exempted goods or services or paying
tax under composition invoice, a Bill of Supply shall be issued instead of Tax Invoice.
There is no requirement of Bill of Supply if value of goods or services is less than Rs. 200.
In case of receipt of advance voucher has to be issued: [Sec 31(3)(d)]: a registered person shall, on
receipt of advance payment with respect to any supply of goods or services or both, issue a receipt
voucher or any other document, containing such particulars as may be prescribed, evidencing receipt
of such payment;
[Sec 31(3)(e)] Where, on receipt of advance payment with respect to any supply of goods or services
or both the registered person issues a receipt voucher, but subsequently no supply is made and no tax

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invoice is issued in pursuance thereof, the said registered person may issue to the person who had
made the payment, a refund voucher against such payment;
Invoice and payment voucher under reverse charge, if supplier is not registered [Sec 31(3)(f) & (g)]:
A registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall
issue an invoice in respect of goods or services or both received by him from the supplier who is not
registered on the date of receipt of goods or services or both;
A registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall
issue a payment voucher at the time of making payment to the supplier.
Issue of invoice in case of continuous supply [Sec 31(4) & (5)]:
In case of continuous supply of goods, where successive statements of accounts or successive
payments are involved, the invoice shall be issued before or at the time each such statement is issued
or, as the case may be, each such payment is received.

Subject to the provisions of clause (d) of sub-section (3), in case of continuous supply of services,––
a) where the due date of payment is ascertainable from the contract, the invoice shall be issued on
or before the due date of payment;
b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued
before or at the time when the supplier of service receives the payment;
c) where the payment is linked to the completion of an event, the invoice shall be issued on or
before the date of completion of that event.
Issue of Invoice when supply of services ceases before the completion of the supply [Section 31(6)]:
In a case where the supply of services ceases under a contract before the completion of the supply,
the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the
extent of the supply made before such cessation.
Issue of invoice in case of sale on return basis [Sec 31(7)]: Notwithstanding anything contained in
sub-section (1), where the goods being sent or taken on approval for sale or return are removed before
the supply takes place, the invoice shall be issued before or at the time of supply or six months from
the date of removal, whichever is earlier.
Explanation.––For the purposes of this section, the expression “tax invoice” shall include any revised
invoice issued by the supplier in respect of a supply made earlier.

PROHIBITION OF UNAUTHORIZED COLLECTION OF TAX [SEC 32]

1) A person who is not a registered person shall not collect in respect of any supply of goods or
services or both any amount by way of tax under this Act.
2) No registered person shall collect tax except in accordance with the provisions of this Act or the
rules made thereunder.

AMOUNT OF TAX TO BE INDICATED IN TAX INVOICE [SECTION 33]

Notwithstanding anything contained in this Act or any other law for the time being in force, where any
supply is made for a consideration, every person who is liable to pay tax for such supply shall
prominently indicate in all documents relating to assessment, tax invoice and other like documents,
the amount of tax which shall form part of the price at which such supply is made.

CREDIT NOTES & DEBIT NOTES [SEC 34]

CREDIT NOTES [SEC 34(1) & (2)]
When credit note can be issued [Sec 34(1)]: Where a tax invoice has been issued for supply of any
goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed
the taxable value or tax payable in respect of such supply, or where the goods supplied are returned
by the recipient, or where goods or services or both supplied are found to be deficient, the registered

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person, who has supplied such goods or services or both, may issue to the recipient a credit note
containing such particulars as may be prescribed.
Declaration in return of details of credit note issued [Sec 34(2)]: Any registered person who issues a
credit note in relation to a supply of goods or services or both shall declare the details of such credit
note in the return for the month during which such credit note has been issued but not later than
September following the end of the financial year in which such supply was made, or the date of
furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in
such manner as may be prescribed:
Provided that no reduction in output tax liability of the supplier shall be permitted, if the incidence of
tax and interest on such supply has been passed on to any other person.

DEBIT NOTE [SEC 34(3) & (4)]

When debit note can be issued [Sec 34(3)]: Where a tax invoice has been issued for supply of any
goods or services or both and the taxable value or tax charged in that tax invoice is found to be less
than the taxable value or tax payable in respect of such supply, the registered person, who has
supplied such goods or services or both, shall issue to the recipient a debit note containing such
particulars as may be prescribed.
Declaration in return of details of debit note issued [Sec 34(4)]: Any registered person who issues a
debit note in relation to a supply of goods or services or both shall declare the details of such debit
note in the return for the month during which such debit note has been issued and the tax liability
shall be adjusted in such manner as may be prescribed.
Explanation: For the purposes of this Act, the expression “debit note” shall include a supplementary
invoice.

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REGISTRATION AND FILING OF RETURNS

AND PAYMENT OF TAX

REGISTRATION

PERSON LIABLE FOR REGISTRATION [SEC 22 & 24]

Section 22 of the CGST Act, 2017 specifies the list of persons liable for registration and section 24 of
the CGST Act, 2017 lists categories of persons who are required specifically to take registration even
if they are not covered under section 22 of the Act. Following is a summarised list:
1) Supplier: Supplier of taxable goods or services or both exceeding the specified threshold limit of
Rs. 10 lakhs (for special category States) and Rs. 20 lakhs for other states and Union territories
Provided further that the Government may, at the request of a special category State and on
the recommendations of the Council, enhance the aggregate turnover referred to in the first
provisio from Rs 10 lakh to such amount, not exceeding Rs 20 lakh and subject to such
conditions and limitations, as may be so notified.
2) Licensee: Every person who is a registered licensee or holds a license under an existing law, on
the day immediately preceding the appointed day i.e 1st July
3) Transferee: Where a business, which is carried by a taxable person is transferred as a going
concern shall be liable to be registered with effect from the date of such transfer or succession
4) Transferee under a scheme: Transfer pursuant to sanction of a scheme or an arrangement for
amalgamation or, as the case may be, demerger of two or more companies pursuant to an
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
5) Interstate supplier: An interstate supplier is compulsorily required to get registered under GST
6) Casual Taxable person: A person who occasionally undertakes transactions involving supply of
goods or services or both in the course or furtherance of business, whether as principal, agent
or in any other capacity, in a State or a Union territory where he has no fixed place of business
is termed as a casual taxable person. Such persons if making taxable supply of goods or services
or both comes under the ambit of taxable persons
7) Payer of Reverse charge: Persons who are required to pay tax under reverse charge shall get
registered under GST
8) Person under Section 9(5) of CGST Act, 2017: As stated in section 9(5) of CGST Act,2017, the
Government may, on the recommendations of the Council, by notification, specify categories of
services, the tax on intra-State supplies of which shall be paid by the electronic commerce
operator 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
9) Non-resident: A non-resident taxable person making taxable supply
10) Deductor of tax at source: Persons who are required to deduct tax under section 51, whether
or not separately registered under this Act
11) Supplier on behalf of another person: Persons who make taxable supply of goods or services or
both on behalf of other taxable persons whether as an agent or otherwise
12) Input Service Distributor: Whether or not separately registered under this Act
13) Supplier through Electronic Commerce Operator: Persons who supply goods or services or both
(other than supplies specified under sub-section (5) of section 9), through such electronic
commerce operator who is required to collect tax at source under section 52
14) Electronic Commerce Operator: Every Electronic Commerce Operator
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15) Supplier of online information: Every person supplying online information and database access
or retrieval services from a place outside India to a person in India, other than a registered
person
16) Any other person: Any other person or class of persons as notified by the Government on
recommendations of the Council

PERSON NOT LIABLE FOR REGISTRATION [SEC 23]

1) The following persons shall not be liable to registration, namely:–
a) any person engaged exclusively in the business of supplying goods or services or both that are
not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and
Services Tax Act;
b) an agriculturist, to the extent of supply of produce out of cultivation of land.
2) The Government may, on the recommendations of the Council, by notification, specify the
category of persons who may be exempted from obtaining registration under this Act.

 Person making supplies on which reverse change applies, exempt from obtaining registration :
Vide Notification No. 5/2017 – CT (dated 19.06.2017), the Central Government, on the
recommendations of the Council, specifies the persons who are only engaged in making supplies
of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge
basis by the recipient
 Persons making TCS, exempt from obtaining registration: Vide Notification No. 65/2017-CT (dt
15.11.2017), the Central Government, on the recommendations of the Council, specifies the
persons making supplies of services (other than supplies specified u/s 9(5) of CGST Act made
through an ECO) who is required to collect tax at source u/s 52 of the said Act, and having an
aggregate turnover, to be computed on all India basis, not exceeding Rs 20 lakh ( Rs 10 lakh in case
of special category States other than J & K) in a financial year, as the category of persons exempted
from obtaining registration under the said Act.
 Persons supplying handicraft goods, exempt from obtaining registration: Vide Notification No.
32/2017-CT (dated 15.09.2017), the Central Government, on the recommendations of the
Council, specifies the persons supplying handicraft goods having an aggregate turnover, to be
computed on all India basis, not exceeding Rs 20 lakh ( Rs 10 lakh in case of special category States
other than J & K) in a financial year, as the category of persons exempted from obtaining
registration under the said Act.

Conditions: Exemption from registration to such ‘casual taxable’ will be available if he satisfies the
following conditions:
a) He shall obtain a PAN and generate an e-way bill in accordance with the provisions of rule 138 of
the CGST Rules, 2017
b) He makes inter-state taxable supplies of handicraft goods and avails the benefit of Notification
No. 8/2017 Integrated Tax (i.e. Exemption of GST in the case applies of handicraft goods)

PROCEDURE FOR REGISTRATION [SEC 25]

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1) When to Register: Every person who is liable to be registered under section 22 or section 24 shall
apply for registration in every such State or Union territory in which he is so liable within 30 days
from the date on which he becomes liable to registration, in such manner and subject to such
conditions as may be prescribed:
Provided that a casual taxable person or a non-resident taxable person shall apply for registration
at least five days prior to the commencement of business.
Provided further that a person having a unit, as defined in the Special Economic Zones Act,
2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to
apply for a separate registration, as distinct from his place of business located outside the
Special Economic Zone in the same State or Union territory. [Inserted by GST Amendment Act,
2018)
Explanation: Every person who makes a supply from the territorial waters of India shall obtain
registration in the coastal State or Union territory where the nearest point of the appropriate
baseline is located.
As per Rule 8 of CGST Rules, 2017
 Every such person, shall, before applying for registration, declare his Permanent Account
Number, mobile number, e-mail address, State or Union territory in Part A of FORM GST REG-
01 on the common portal,
 On successful verification of the Permanent Account Number, mobile number and e-mail
address, a temporary reference number shall be generated and communicated to the
applicant on the said mobile number and e-mail address.
 Using the reference number generated under sub-rule (3), the applicant shall electronically
submit an application in Part B of FORM GST REG-01, duly signed or verified through electronic
verification code, along with the documents specified in the said Form at the common portal,
2) Single or Multiple registration: A person seeking registration under this Act shall be granted a
single registration in a State or Union territory:
Provided that a person having multiple business verticals in a State or Union territory may be
granted a separate registration for each business vertical, subject to such conditions as may be
prescribed.
As per Rule 11 of CGST Rules, 2017
Separate registration in respect of each of business verticals may be granted subject to the
following conditions, namely:-
a. such person has more than one place of business;
b. such person shall not pay tax under section 10 for any of his places of business if he is paying tax
under section 9 for any other place of business;
c. all separately registered places of business of such person shall pay tax under the Act on supply
of goods or services or both made to another registered place of business of such person and
issue a tax invoice or a bill of supply, as the case may be, for such supply.
Explanation. - For the purposes of clause (b), it is hereby clarified that where any place of business
of a registered person that has been granted a separate registration becomes ineligible to pay tax

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under section 10, all other registered places of business of the said person shall become ineligible
to pay tax under the said section.
3) Voluntary Registration: A person, though not liable to be registered under section 22 or section
24 may get himself registered voluntarily, and all provisions of this Act, as are applicable to a
registered person, shall apply to such person.
4) One person having more than one registration- treated as distinct person: A person who has
obtained or is required to obtain more than one registration, whether in one State or Union
territory or more than one State or Union territory shall, in respect of each such registration, be
treated as distinct persons for the purposes of this Act.
5) Where a person who has obtained or is required to obtain registration in a State or Union territory
in respect of an establishment, has an establishment in another State or Union territory, then
such establishments shall be treated as establishments of distinct persons for the purposes of
this Act.
6) PAN Mandatory for registration: Every person shall have a Permanent Account Number issued
under the Income-tax Act, 1961 in order to be eligible for grant of registration:
Provided that a person required to deduct tax under section 51 may have, in lieu of a Permanent
Account Number, a Tax Deduction and Collection Account Number issued under the said Act in
order to be eligible for grant of registration.
7) Registration of non-resident taxable person: Notwithstanding anything contained in sub-section
(6), a non-resident taxable person may be granted registration under sub-section (1) on the basis
of such other documents as may be prescribed.
As per Rule 13 of CGST Rules, 2017
 A non-resident taxable person shall electronically submit an application, along with a self-attested
copy of his valid passport, for registration, duly signed or verified through electronic verification
code, in FORM GST REG-09, at least five days prior to the commencement of business at the
common portal either directly or through a Facilitation Centre notified by the Commissioner:
Provided that in the case of a business entity incorporated or established outside India, the
application for registration shall be submitted along with its tax identification number or unique
number on the basis of which the entity is identified by the Government of that country or its
Permanent Account Number, if available.
 The application for registration made by a non-resident taxable person shall be duly signed by his
authorised signatory who shall be a person resident in India having a valid Permanent Account
Number
8) Registration by proper officer if person fails to get registered: Where a person who is liable to
be registered under this Act fails to obtain registration, the proper officer may, without prejudice
to any action which may be taken under this Act or under any other law for the time being in
force, proceed to register such person in such manner as may be prescribed.
As per Rule 16 of CGST Rules, 2017
 Where, pursuant to any survey, enquiry, inspection, search or any other proceedings under the
Act, the proper officer finds that a person liable to registration under the Act has failed to apply

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for such registration, such officer may register the said person on a temporary basis and issue an
order in FORM GST REG- 12.
 The registration granted under sub-rule (1) shall be effective from the date of such order granting
registration.
 Every person to whom a temporary registration has been granted under sub-rule (1) shall, within
a period of ninety days from the date of the grant of such registration, submit an application for
registration in the form and manner provided in rule 8 or rule 12:
9) Unique Identity Number: Notwithstanding anything contained in sub-section (1),–
a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution
and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries; and
b) any other person or class of persons, as may be notified by the Commissioner shall be granted a
Unique Identity Number in such manner and for such purposes, including refund of taxes on the
notified supplies of goods or services or both received by them, as may be prescribed.
As per Rule 9 and 10 of CGST Rules, 2017
Rule 9: Verification of the application and approval
 1) The application shall be forwarded to the proper officer who shall examine the application and
the accompanying documents and if the same are found to be in order, approve the grant of
registration to the applicant within a period of three working days from the date of submission of
the application.
 2) Where the application submitted under rule 8 is found to be deficient, either in terms of any
information or any document required to be furnished under the said rule, or where the proper
officer requires any clarification with regard to any information provided in the application or
documents furnished therewith, he may issue a notice to the applicant electronically in FORM GST
REG-03 within a period of three working days from the date of submission of the application and
the applicant shall furnish such clarification, information or documents electronically, in FORM
GST REG-04, within a period of seven working days from the date of the receipt of such notice.
 3) Where the proper officer is satisfied with the clarification, information or documents furnished
by the applicant, he may approve the grant of registration to the applicant within a period of seven
working days from the date of the receipt of such clarification or information or documents.
 4) Where no reply is furnished by the applicant in response to the notice issued under sub-rule (2)
or where the proper officer is not satisfied with the clarification, information or documents
furnished, he shall, for reasons to be recorded in writing, reject such application and inform the
applicant electronically in FORM GST REG05.
 5) If the proper officer fails to take any action, -
(a) within a period of three working days from the date of submission of the application; or
(b) within a period of seven working days from the date of the receipt of the clarification,
information or documents furnished by the applicant under sub-rule (2),
the application for grant of registration shall be deemed to have been approved.
Rule 10 Issue of Registration Certificate

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Where the application for grant of registration has been approved under rule 9, a certificate of
registration in FORM GST REG-06 showing the principal place of business and additional place or
places of business shall be made available to the applicant on the common portal and a Goods
and Services Tax Identification Number shall be assigned subject to the following characters,
namely:-
(a) two characters for the State code;
(b) ten characters for the Permanent Account Number or the Tax Deduction and Collection
Account Number;
(c) two characters for the entity code; and
(d) one checksum character.
10) The registration or the Unique Identity Number shall be granted or rejected after due verification
in such manner and within such period as may be prescribed.
11) A certificate of registration shall be issued in such form and with effect from such date as may be
prescribed.
12) A registration or a Unique Identity Number shall be deemed to have been granted after the expiry
of the period prescribed under sub-section (10), if no deficiency has been communicated to the
applicant within that period.

Note: Effective date of GST Registration: Where the application for registration has been submitted
within 30 days from the date on which the person becomes liable to registration, the effective date of
registration shall be the date on which he became liable for registration.
Where an application for registration has been submitted by the applicant after 30 days from the date
on which the person becomes liable to registration, the effective date of registration shall be the date
of grant of registration.
In case of a person taking registration voluntarily while being within the threshold exemption limit for
paying tax, the effective date of registration shall be the date of order of registration.

Rule 18 of CGST Rules, 2017: Display of Registration Certificate and GSTIN on name board:
1) Every registered person shall display his certificate of registration in a prominent location at his
principal place of business and at every additional place or places of business.
2) Every registered person shall display his Goods and Services Tax Identification Number on the
name board exhibited at the entry of his principal place of business and at every additional place
or places of business.

DEEMED REGISTRATION [Sec 26]

1) The grant of registration or the Unique Identity Number under the State Goods and Services Tax
Act or the Union Territory Goods and Services Tax Act shall be deemed to be a grant of
registration or the Unique Identity Number under this Act subject to the condition that the
application for registration or the Unique Identity Number has not been rejected under this Act
within the time specified in sub-section (10) of section 25.
2) Notwithstanding anything contained in sub-section (10) of section 25, any rejection of application
for registration or the Unique Identity Number under the State Goods and Services Tax Act or the

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Union Territory Goods and Services Tax Act shall be deemed to be a rejection of application for
registration under this Act.

SPECIAL PROVISIONS RELATING TO REGISTRATION OF CASUAL TAXABLE PERSON AND NON-

RESIDENT TAXABLE PERSON [SECTION 27]
1) The certificate of registration issued to a casual taxable person or a non-resident taxable person
shall be valid for the period specified in the application for registration or ninety days from the
effective date of registration, whichever is earlier and such person shall make taxable supplies
only after the issuance of the certificate of registration:
Provided that the proper officer may, on sufficient cause being shown by the said taxable person,
extend the said period of ninety days by a further period not exceeding ninety days.
2) A casual taxable person or a non-resident taxable person shall, at the time of submission of
application for registration under sub-section (1) of section 25, make an advance deposit of tax
in an amount equivalent to the estimated tax liability of such person for the period for which the
registration is sought:
Provided that where any extension of time is sought under sub-section (1), such taxable person
shall deposit an additional amount of tax equivalent to the estimated tax liability of such person
for the period for which the extension is sought.
3) The amount deposited under sub-section (2) shall be credited to the electronic cash ledger of
such person and shall be utilised in the manner provided under section 49.

AMENDMENT OF REGISTRATION [SEC 28]

1) Every registered person and a person to whom a Unique Identity Number has been assigned shall
inform the proper officer of any changes in the information furnished at the time of registration
or subsequent thereto, in such form (i.e. Form GST Reg – 14) and manner and within such period
(i.e. within 15 days from the date of such change) as may be prescribed.
2) The proper officer may, on the basis of information furnished under sub-section (1) or as
ascertained by him, approve or reject amendments in the registration particulars in such manner
(see Rule 19) and within such period (i.e. within 15 days from the date of receipt of application
for amendment) as may be prescribed:
Provided that approval of the proper officer shall not be required in respect of amendment of
such particulars as may be prescribed:
Provided further that the proper officer shall not reject the application for amendment in the
registration particulars without giving the person an opportunity of being heard.
3) Any rejection or approval of amendments under the State Goods and Services Tax Act or the
Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a rejection
or approval under this Act.

CANCELLATION OF REGISTRATION [SEC 29]

The proper officer may, either on his own motion or on an application filed by the registered person
or by his legal heirs, in case of death of such person, cancel the registration, in such manner and
within such period as may be prescribed.
Application for cancellation of registration shall be filled electronically in Form GST REG-16.

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Voluntary registration cannot be cancelled within 1 year [Rule 20 of CGST Rules, 2017]: Application
for cancellation of voluntary registration shall not be considered before the expiry of 1 year from the
effective date of registration.
Cases in which registration can be cancelled: The proper officer may cancel the registration in
following cases-
a. the business has been discontinued, transferred fully for any reason including death of the
proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or
b. there is any change in the constitution of the business; or
c. the taxable person, other than the person registered under sub-section (3) of section 25, is no
longer liable to be registered under section 22 or section 24.
Suo motu cancellation of registration by Proper Officer: The proper officer may cancel the
registration of a person from such date, including any retrospective date, as he may deem fit, where,–
a. a registered person has contravened such provisions of the Act or the rules made thereunder as
may be prescribed; or
b. a person paying tax under section 10 has not furnished returns for three consecutive tax periods;
or
c. any registered person, other than a person specified in clause (b), has not furnished returns for a
continuous period of six months; or
d. any person who has taken voluntary registration under sub-section (3) of section 25 has not
commenced business within six months from the date of registration; or
e. registration has been obtained by means of fraud, wilful misstatement or suppression of facts:
Provided that the proper officer shall not cancel the registration without giving the person an
opportunity of being heard.
Liability continues despite after cancellation of registration: The cancellation of registration under
this section shall not affect the liability of the person to pay tax and other dues under this Act or to
discharge any obligation under this Act or the rules made thereunder for any period prior to the date
of cancellation whether or not such tax and other dues are determined before or after the date of
cancellation.
Deemed Cancellation: The cancellation of registration under the State Goods and Services Tax Act or
the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a
cancellation of registration under this Act.
Payment of GST on stock and capital goods at the time of cancellation: Every registered person
whose registration is cancelled shall pay an amount, by way of debit in the electronic credit ledger or
electronic cash ledger, equivalent to the credit of input tax in respect of inputs held in stock and inputs
contained in semi-finished or finished goods held in stock or capital goods or plant and machinery on
the day immediately preceding the date of such cancellation or the output tax payable on such goods,
whichever is higher, calculated in such manner as may be prescribed:
Provided that in case of capital goods or plant and machinery, the taxable person shall pay an amount
equal to the input tax credit taken on the said capital goods or plant and machinery, reduced by such
percentage points as may be prescribed or the tax on the transaction value of such capital goods or
plant and machinery under section 15, whichever is higher.

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Reference to Rules: The amount payable under sub-section (5) shall be calculated in such manner as
may be prescribed.

REVOCATION OF CANCELLATION OF REGISTRATION [SEC 30]

1) Subject to such conditions as may be prescribed, any registered person, whose registration is
cancelled by the proper officer on his own motion, may apply to such officer for revocation of
cancellation of the registration in the prescribed manner within thirty days from the date of
service of the cancellation order.
2) The proper officer may, in such manner and within such period as may be prescribed, by order,
either revoke cancellation of the registration or reject the application:
Provided that the application for revocation of cancellation of registration shall not be rejected
unless the applicant has been given an opportunity of being heard.
3) The revocation of cancellation of registration under the State Goods and Services Tax Act or the
Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a
revocation of cancellation of registration under this Act.

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RETURNS

FURNISHING OF OUTWARD SUPPLIES RETURN [SECTION 37]

Who is required to furnish details of outward supply [Sec 37(1)]: Every registered person, other than
an Input Service Distributor, a non-resident taxable person and a person paying tax under the
provisions of section 10 or section 51 or section 52, shall furnish, electronically, in such form and
manner as may be prescribed, the details of outward supplies of goods or services or both effected
during a tax period on or before the tenth day of the month succeeding the said tax period and such
details shall be communicated to the recipient of the said supplies within such time and in such
manner as may be prescribed:
Who is not required furnish details of outward supply: The above provisions is not applicable to
following (i.e they are not required to furnish details of outward supply)-
 Input service Distributor
 A non-resident taxable person
 A person paying tax under the provisions of section 10 (composition scheme)
 A person paying tax under the provisions of section 51 (person paying TDS)
 A person paying tax under the provisions of section 52 (e-commerce operator paying TDS)
Provided that the registered person shall not be allowed to furnish the details of outward supplies
during the period from the eleventh day to the fifteenth day of the month succeeding the tax period:
Provided further that the Commissioner may, for reasons to be recorded in writing, by notification,
extend the time limit for furnishing such details for such class of taxable persons as may be specified
therein:
Provided also that any extension of time limit notified by the Commissioner of State tax or
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
[Sec 37(2)] Every registered person who has been communicated the details under sub-section (3)
of section 38 or the details pertaining to inward supplies of Input Service Distributor under sub-section
(4) of section 38, shall either accept or reject the details so communicated, on or before the
seventeenth day, but not before the fifteenth day, of the month succeeding the tax period and the
details furnished by him under sub-section (1) shall stand amended accordingly.
[Sec 37(3)] Any registered person, who has furnished the details under sub-section (1) for any tax
period and which have remained unmatched under section 42 or section 43, shall, upon discovery of
any error or omission therein, rectify such error or omission in such manner as may be prescribed, and
shall pay the tax and interest, if any, in case there is a short payment of tax on account of such error
or omission, in the return to be furnished for such tax period:
Provided that no rectification of error or omission in respect of the details furnished under sub-section
(1) shall be allowed after furnishing of the return under section 39 for the month of September
following the end of the financial year to which such details pertain, or furnishing of the relevant
annual return, whichever is earlier.
Explanation: For the purposes of this Chapter, the expression “details of outward supplies” shall
include details of invoices, debit notes, credit notes and revised invoices issued in relation to outward
supplies made during any tax period.

FURNISHING DETAILS OF INWARD SUPPLIES [SEC 38]

1) Every registered person, other than an Input Service Distributor or a non-resident taxable
person or a person paying tax under the provisions of section 10, section 51 or section 52, shall
verify, validate, modify or delete, if required, the details relating to outward supplies and credit
or debit notes communicated under sub-section (1) of section 37 to prepare the details of his
inward supplies and credit or debit notes and may include therein, the details of inward
supplies and credit or debit notes received by him in respect of such supplies that have not
been declared by the supplier under sub-section (1) of section 37.

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The above provisions is not applicable to following (i.e they are not required to furnish details of
inward supply)-
 Input service Distributor
 A non-resident taxable person
 A person paying tax under the provisions of section 10 (composition scheme)
 A person paying tax under the provisions of section 51 (person paying TDS)
 A person paying tax under the provisions of section 52 (e-commerce operator paying TDS)
2) Every registered person, other than an Input Service Distributor or a non-resident taxable
person or a person paying tax under the provisions of section 10 or section 51 or section 52,
shall furnish, electronically, the details of inward supplies of taxable goods or services or both,
including inward supplies of goods or services or both on which the tax is payable on reverse
charge basis under this Act and inward supplies of goods or services or both taxable under the
Integrated Goods and Services Tax Act or on which integrated goods and services tax is payable
under section 3 of the Customs Tariff Act, 1975, and credit or debit notes received in respect of
such supplies during a tax period after the tenth day but on or before the fifteenth day of the
month succeeding the tax period in such form and manner as may be prescribed:
Provided that the Commissioner may, for reasons to be recorded in writing, by notification,
extend the time limit for furnishing such details for such class of taxable persons as may be
specified therein:
Provided further that any extension of time limit notified by the Commissioner of State tax or
Commissioner of Union territory tax shall be deemed to be notified by the Commissioner.
3) The details of supplies modified, deleted or included by the recipient and furnished under sub-
section (2) shall be communicated to the supplier concerned in such manner and within such
time as may be prescribed.

FURNISHING OF RETURNS [SEC 39]

(1) Monthly return by registered dealer: Every registered person, other than an Input Service
Distributor or a non-resident taxable person or a person paying tax under the provisions
of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish,
in such form and manner as may be prescribed, a return, electronically, of inward and outward
supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other
particulars as may be prescribed, on or before the 20TH day of the month succeeding such
calendar month or part thereof. (In Form GSTR-3)
(2) Quarterly return by dealer opted for composition scheme: A registered person paying tax under
the provisions of section 10 shall, for each quarter or part thereof, furnish, in such form and
manner as may be prescribed, a return, electronically, of turnover in the State or Union territory,
inward supplies of goods or services or both, tax payable and tax paid within 18 days after the
end of such quarter. (In Form GSTR-4)
(3) Monthly return for person paying TDS: Every registered person required to deduct tax at source
under the provisions of section 51 (person paying TDS) shall furnish, in such form and manner as
may be prescribed, a return, electronically, for the month in which such deductions have been
made within 10 days after the end of such month. (In Form GSTR-7)
(4) Monthly return for Input Service Distributor: Every taxable person registered as an Input Service
Distributor shall, for every calendar month or part thereof, furnish, in such form and manner as
may be prescribed, a return, electronically, within 13 days after the end of such month. (In Form
GSTR-6).
(5) Monthly return for non-resident taxable person: Every registered non-resident taxable person
shall, for every calendar month or part thereof, furnish, in such form and manner as may be
prescribed, a return, electronically, within 20 days after the end of a calendar month or within 7

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days after the last day of the period of registration specified under sub-section (1) of section 27,
whichever is earlier. (In Form GSTR-5)
(6) Extension of time for filling return: The Commissioner may, for reasons to be recorded in writing,
by notification, extend the time limit for furnishing the returns under this section for such class
of registered persons as may be specified therein:
Provided that any extension of time limit notified by the Commissioner of State tax or Union
territory tax shall be deemed to be notified by the Commissioner.
(7) Payment of tax not paid earlier has to be paid along with return: Every registered person, who
is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-
section (5), shall pay to the Government the tax due as per such return not later than the last
date on which he is required to furnish such return.
(8) Return has to be filed even if there is no supply: Every registered person who is required to
furnish a return under sub-section (1) or sub-section (2) shall furnish a return for every tax period
whether or not any supplies of goods or services or both have been made during such tax period.
(9) Rectification of return: Subject to the provisions of sections 37 and 38, if any registered person
after furnishing a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section
(4) or sub-section (5) discovers any omission or incorrect particulars therein, other than as a result
of scrutiny, audit, inspection or enforcement activity by the tax authorities, he shall rectify such
omission or incorrect particulars in the return to be furnished for the month or quarter during
which such omission or incorrect particulars are noticed, subject to payment of interest under
this Act:
Provided that no such rectification of any omission or incorrect particulars shall be allowed after
the due date for furnishing of return for the month of September or second quarter following the
end of the financial year, or the actual date of furnishing of relevant annual return, whichever is
earlier.
(10) A registered person shall not be allowed to furnish a return for a tax period if the return for any
of the previous tax periods has not been furnished by him.

FIRST RETURN [SEC 40]

Every registered person who has made outward supplies in the period between the date on which
he became liable to registration till the date on which registration has been granted shall declare the
same in the first return furnished by him after grant of registration.

CLAIM OF INPUT TAX CREDIT AND PROVISIONAL ACCEPTANCE [SEC 41]

1) Every registered person shall, subject to such conditions and restrictions as may be prescribed,
be entitled to take the credit of eligible input tax, as self-assessed, in his return and such
amount shall be credited on a provisional basis to his electronic credit ledger.
2) The credit referred to in sub-section (1) shall be utilised only for payment of self assessed
output tax as per the return referred to in the said sub-section.

MATCHING, REVERSAL AND RECLAIM OF INPUT TAX CREDIT [ SECTION 42]

1) The details of every inward supply furnished by a registered person (hereafter in this section
referred to as the “recipient”) for a tax period shall, in such manner and within such time as
may be prescribed, be matched––
a) with the corresponding details of outward supply furnished by the corresponding registered
person (hereafter in this section referred to as the “supplier”) in his valid return for the same
tax period or any preceding tax period;
b) with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975
in respect of goods imported by him; and
c) for duplication of claims of input tax credit.

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2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply that
match with the details of corresponding outward supply or with the integrated goods and
services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported
by him shall be finally accepted and such acceptance shall be communicated, in such manner as
may be prescribed, to the recipient.
3) Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of
the tax declared by the supplier for the same supply or the outward supply is not declared by
the supplier in his valid returns, the discrepancy shall be communicated to both such persons in
such manner as may be prescribed.
4) The duplication of claims of input tax credit shall be communicated to the recipient in such
manner as may be prescribed.
5) The amount in respect of which any discrepancy is communicated under sub-section (3) and
which is not rectified by the supplier in his valid return for the month in which discrepancy is
communicated shall be added to the output tax liability of the recipient, in such manner as may
be prescribed, in his return for the month succeeding the month in which the discrepancy is
communicated.
6) The amount claimed as input tax credit that is found to be in excess on account of duplication of
claims shall be added to the output tax liability of the recipient in his return for the month in
which the duplication is communicated.
7) The recipient shall be eligible to reduce, from his output tax liability, the amount added under
sub-section (5), if the supplier declares the details of the invoice or debit note in his valid return
within the time specified in sub-section (9) of section 39.
8) A recipient in whose output tax liability any amount has been added under sub-section (5) or
sub-section (6), shall be liable to pay interest at the rate specified under sub-section (1) of
section 50 on the amount so added from the date of availing of credit till the corresponding
additions are made under the said sub-sections.
9) Where any reduction in output tax liability is accepted under sub-section (7), the interest paid
under sub-section (8) shall be refunded to the recipient by crediting the amount in the
corresponding head of his electronic cash ledger in such manner as may be prescribed:
Provided that the amount of interest to be credited in any case shall not exceed the amount of
interest paid by the supplier.
10) The amount reduced from the output tax liability in contravention of the provisions of sub-
section (7) shall be added to the output tax liability of the recipient in his return for the month
in which such contravention takes place and such recipient shall be liable to pay interest on the
amount so added at the rate specified in sub-section (3) of section 50.

MATCHING, REVERSAL AND RECLAIM OF REDUCTION IN OUTPUT TAX LIABILITY [SEC 43]
1) The details of every credit note relating to outward supply furnished by a registered person
(hereafter in this section referred to as the “supplier”) for a tax period shall, in such manner and
within such time as may be prescribed, be matched––
a) with the corresponding reduction in the claim for input tax credit by the corresponding
registered person (hereafter in this section referred to as the “recipient”) in his valid return for
the same tax period or any subsequent tax period; and
b) for duplication of claims for reduction in output tax liability.
2) The claim for reduction in output tax liability by the supplier that matches with the
corresponding reduction in the claim for input tax credit by the recipient shall be finally
accepted and communicated, in such manner as may be prescribed, to the supplier.
3) Where the reduction of output tax liability in respect of outward supplies exceeds the
corresponding reduction in the claim for input tax credit or the corresponding credit note is not

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declared by the recipient in his valid returns, the discrepancy shall be communicated to both
such persons in such manner as may be prescribed.
4) The duplication of claims for reduction in output tax liability shall be communicated to the
supplier in such manner as may be prescribed.
5) The amount in respect of which any discrepancy is communicated under sub-section (3) and
which is not rectified by the recipient in his valid return for the month in which discrepancy is
communicated shall be added to the output tax liability of the supplier, in such manner as may
be prescribed, in his return for the month succeeding the month in which the discrepancy is
communicated.
6) The amount in respect of any reduction in output tax liability that is found to be on account of
duplication of claims shall be added to the output tax liability of the supplier in his return for
the month in which such duplication is communicated.
7) The supplier shall be eligible to reduce, from his output tax liability, the amount added under
sub-section (5) if the recipient declares the details of the credit note in his valid return within
the time specified in sub-section (9) of section 39.
8) A supplier in whose output tax liability any amount has been added under sub-section (5) or
sub-section (6), shall be liable to pay interest at the rate specified under sub-section (1) of
section 50 in respect of the amount so added from the date of such claim for reduction in the
output tax liability till the corresponding additions are made under the said sub-sections.
9) Where any reduction in output tax liability is accepted under sub-section (7), the interest paid
under sub-section (8) shall be refunded to the supplier by crediting the amount in the
corresponding head of his electronic cash ledger in such manner as may be prescribed:
Provided that the amount of interest to be credited in any case shall not exceed the amount of
interest paid by the recipient.
10) The amount reduced from output tax liability in contravention of the provisions of sub-section
(7) shall be added to the output tax liability of the supplier in his return for the month in which
such contravention takes place and such supplier shall be liable to pay interest on the amount
so added at the rate specified in sub-section (3) of section 50.

ANNUAL RETURN [SEC 44]

1) Every registered person, other than an Input Service Distributor, a person paying tax under
section 51 or section 52, a casual taxable person and a non-resident taxable person, shall
furnish an annual return for every financial year electronically in such form and manner as may
be prescribed on or before the 31 day of December following the end of such financial year.
2) Every registered person who is required to get his accounts audited in accordance with the
provisions of sub-section (5) of section 35 shall furnish, electronically, the annual return under
sub-section (1) along with a copy of the audited annual accounts and a reconciliation statement,
reconciling the value of supplies declared in the return furnished for the financial year with the
audited annual financial statement, and such other particulars as may be prescribed.

FINAL RETURN [SEC 45]

Every registered person who is required to furnish a return under sub-section (1) of section 39 and
whose registration has been cancelled shall furnish a final return within 3 months of the date of
cancellation or date of order of cancellation, whichever is later, in such form and manner as may be
prescribed.

NOTICE TO RETURN DEFAULTERS [SEC 46]

Where a registered person fails to furnish a return under section 39 or section 44 or section 45, a
notice shall be issued requiring him to furnish such return within 15 days in such form and manner
as may be prescribed.

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LEVY OF LATE FEE [SEC 47]

1) Any registered person who fails to furnish the details of outward or inward supplies required
under section 37 or section 38 or returns required under section 39 or section 45 by the due
date shall pay a late fee of Rs 100 for every day during which such failure continues subject to a
maximum amount of Rs 5,000.
2) Any registered person who fails to furnish the return required under section 44 by the due date
shall be liable to pay a late fee of Rs 100 for every day during which such failure continues
subject to a maximum of an amount calculated at a quarter per cent (0.25%) of his turnover in
the State or Union territory.

GOODS & SERVICE TAX PRACTITIONERS [ SEC 48]

1) The manner of approval of goods and services tax practitioners, their eligibility conditions,
duties and obligations, manner of removal and other conditions relevant for their functioning
shall be such as may be prescribed.
2) A registered person may authorise an approved goods and services tax practitioner to furnish
the details of outward supplies under section 37, the details of inward supplies under section 38
and the return under section 39 or section 44 or section 45 in such manner as may be
prescribed.
3) Notwithstanding anything contained in sub-section (2), the responsibility for correctness of any
particulars furnished in the return or other details filed by the goods and services tax
practitioners shall continue to rest with the registered person on whose behalf such return and
details are furnished.

An application in FORM GST PCT-1 may be made electronically through the common portal either
directly or through a Facilitation centre notified by the Commissioner for enrolment as goods and
service tax practitioner by any person-
i. who is a citizen of India
ii. who is a person of sound mind
iii. who is not adjudicated as insolvent
iv. who has not been convicted by a competent Court

Conditions to act as GST Practitioner: Following person can act as GST Practitioner-
a) Retired officer of the Commercial Tax Department of any State Government or of the CBEC,
Department of Revenue, Government of India, who, during his service under the Government,
had worked in a post not lower than the rank of a Group-B gazetted officer for a period of not
less than 2 years.
b) Person enrolled as a Sales Tax Practitioner or Tax Return Preparer under the existing law for a
period of not less than 5 years.
c) Person who has passed –
i. A graduate or postgraduate degree or its equivalent examination having a degree in
commerce, law, banking including higher auditing, or business administration or business
management from any Indian university established by any law for the time being in force.
ii. A degree examination of any foreign university recognized by any Indian university as
equivalent to the degree examination
iii. Any other examination notified by the Government, on the recommendation of the
Council.
iv. Any of the following examinations:
 Final examination of the ICAI or
 Final examination of the Institute of Cost Accountants of India or
 Final examination of the ICSI

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On receipt of the application, the authorized officer shall, after making such enquiry as he considers
necessary, either enrol the applicant as GST practitioner and issue a certificate to that effect in
FORM GST PCT – 2 or reject his application where it is found that the applicant is not qualified to be
enrolled as a goods and service tax practitioner.

Submission of Matching of Final Rectification of

return ITC acceptance of discrepancies in
ITC ITC

Matching of claim in
reduction in output
tax liability

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PAYMENTS

PAYMENT OF TAX, INTEREST, PENALTY AND OTHER AMOUNTS [SEC 49]

1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by
internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real
Time Gross Settlement or by such other mode and subject to such conditions and restrictions as
may be prescribed, shall be credited to the electronic cash ledger of such person to be
maintained in such manner as may be prescribed.
2) The input tax credit as self-assessed in the return of a registered person shall be credited to his
electronic credit ledger, in accordance with section 41, to be maintained in such manner as may
be prescribed.
3) The amount available in the electronic cash ledger may be used for making any payment
towards tax, interest, penalty, fees or any other amount payable under the provisions of this
Act or the rules made thereunder in such manner and subject to such conditions and within
such time as may be prescribed.
4) The amount available in the electronic credit ledger may be used for making any payment
towards output tax under this Act or under the Integrated Goods and Services Tax Act in such
manner and subject to such conditions and within such time as may be prescribed.
5) The amount of input tax credit available in the electronic credit ledger of the registered person
on account of––
a) integrated tax shall first be utilised towards payment of integrated tax and the amount
remaining, if any, may be utilised towards the payment of central tax and State tax, or as the
case may be, Union territory tax, in that order;
b) the central tax shall first be utilised towards payment of central tax and the amount
remaining, if any, may be utilised towards the payment of integrated tax;
c) the State tax shall first be utilised towards payment of State tax and the amount remaining,
if any, may be utilised towards payment of integrated tax;
d) the Union territory tax shall first be utilised towards payment of Union territory tax and the
amount remaining, if any, may be utilised towards payment of integrated tax;
e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and
f) the State tax or Union territory tax shall not be utilised towards payment of central tax.
6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax,
interest, penalty, fee or any other amount payable under this Act or the rules made thereunder
may be refunded in accordance with the provisions of section 54.
7) All liabilities of a taxable person under this Act shall be recorded and maintained in an
electronic liability register in such manner as may be prescribed.
8) Every taxable person shall discharge his tax and other dues under this Act or the rules made
thereunder in the following order, namely:––
a) self-assessed tax, and other dues related to returns of previous tax periods;
b) self-assessed tax, and other dues related to the return of the current tax period;
c) any other amount payable under this Act or the rules made thereunder including the
demand determined under section 73 or section 74.
9) Every person who has paid the tax on goods or services or both under this Act shall, unless the
contrary is proved by him, be deemed to have passed on the full incidence of such tax to the
recipient of such goods or services or both.
Explanation.––For the purposes of this section,—
a) the date of credit to the account of the Government in the authorised bank shall be deemed to
be the date of deposit in the electronic cash ledger;
b) the expression,—

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i. “tax dues” means the tax payable under this Act and does not include interest, fee and penalty;
and
ii. “other dues” means interest, penalty, fee or any other amount payable under this Act or the
rules made thereunder.

INTEREST ON DELAYED PAYMENT OF TAX [SEC 50]

1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules
made thereunder, but fails to pay the tax or any part thereof to the Government within the
period prescribed, shall for the period for which the tax or any part thereof remains unpaid,
pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by
the Government on the recommendations of the Council.
2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed,
from the day succeeding the day on which such tax was due to be paid.
3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10)
of section 42 or undue or excess reduction in output tax liability under sub-section (10) of
section 43, shall pay interest on such undue or excess claim or on such undue or excess
reduction, as the case may be, at such rate not exceeding twenty-four per cent., as may be
notified by the Government on the recommendations of the Council.

ADJUSTMENT OF CREDIT BETWEEN STATE AND CENTRAL GOVERNMENT [SEC 53]

On utilization of input tax credit for payment of IGST, the amount collected as CGST shall stand
reduced by an amount equal to such credit so utilized and the Central Government shall transfer and
amount equal to the amount so reduced from CGST to the IGST account.

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REFUNDS, ASSESSMENT,
AUDIT & ARREST

REFUNDS

DOCTRINE OF UNJUST ENRICHMENT

 Unjust enrichment means getting benefit at the expenses of another.
 Refund will be normally paid by crediting tax to Consumer Welfare fund and not to taxable
person.
 If the supplier of goods or services has recovered GST from recipient, it is clear that he has
passed on burden to the recipient. In such case if GST is refunded to taxable person he will get
double benefit – one from GST recovered from recipient and second refund of GST from
Government. Thus, it is not equitable to refund GST to taxable person.
 With this view, concept of unjust enrichment was introduced in Central Excise Act and Custom
Act. These provisions are being continued in GST also.

REFUND OF GST [SEC 54]

1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount
paid by him, may make an application before the expiry of two years from the relevant date in
such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any balance in the electronic cash ledger
in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the
return furnished under section 39 in such manner as may be prescribed.
2) A specialised agency of the United Nations Organisation or any Multilateral Financial Institution
and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947,
Consulate or Embassy of foreign countries or any other person or class of persons, as notified
under section 55, entitled to a refund of tax paid by it on inward supplies of goods or services or
both, may make an application for such refund, in such form and manner as may be prescribed,
before the expiry of six months from the last day of the quarter in which such supply was
received.
3) Subject to the provisions of sub-section (10), a registered person may claim refund of any
unutilised input tax credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall be allowed in cases other than––
i. zero rated supplies made without payment of tax;
ii. where the credit has accumulated on account of rate of tax on inputs being higher than the
rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies
of goods or services or both as may be notified by the Government on the recommendations
of the Council:
Provided further that no refund of unutilised input tax credit shall be allowed in cases where
the goods exported out of India are subjected to export duty:
Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or
services or both avails of drawback in respect of central tax or claims refund of the integrated
tax paid on such supplies.
4) The application shall be accompanied by—
a) such documentary evidence as may be prescribed to establish that a refund is due to the
applicant; and

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b) such documentary or other evidence (including the documents referred to in section 33) as the
applicant may furnish to establish that the amount of tax and interest, if any, paid on such tax
or any other amount paid in relation to which such refund is claimed was collected from, or
paid by, him and the incidence of such tax and interest had not been passed on to any other
person:
Provided that where the amount claimed as refund is less than two lakh rupees, it shall not be
necessary for the applicant to furnish any documentary and other evidences but he may file a
declaration, based on the documentary or other evidences available with him, certifying that
the incidence of such tax and interest had not been passed on to any other person.
5) If, on receipt of any such application, the proper officer is satisfied that the whole or part of the
amount claimed as refund is refundable, he may make an order accordingly and the amount so
determined shall be credited to the Fund referred to in section 57.
6) Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of
any claim for refund on account of zero-rated supply of goods or services or both made by
registered persons, other than such category of registered persons as may be notified by the
Government on the recommendations of the Council, refund on a provisional basis, ninety per
cent. of the total amount so claimed, excluding the amount of input tax credit provisionally
accepted, in such manner and subject to such conditions, limitations and safeguards as may be
prescribed and thereafter make an order under sub-section (5) for final settlement of the
refund claim after due verification of documents furnished by the applicant.
7) The proper officer shall issue the order under sub-section (5) within sixty days from the date of
receipt of application complete in all respects.
8) Notwithstanding anything contained in sub-section (5), the refundable amount shall, instead of
being credited to the Fund, be paid to the applicant, if such amount is relatable to—
a) refund of tax paid on zero-rated supplies of goods or services or both or on inputs or input
services used in making such zero-rated supplies;
b) refund of unutilised input tax credit under sub-section (3);
c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which
invoice has not been issued, or where a refund voucher has been issued;
d) refund of tax in pursuance of section 77;
e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on
the incidence of such tax and interest to any other person; or
f) the tax or interest borne by such other class of applicants as the Government may, on the
recommendations of the Council, by notification, specify.
9) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction
of the Appellate Tribunal or any court or in any other provisions of this Act or the rules made
thereunder or in any other law for the time being in force, no refund shall be made except in
accordance with the provisions of sub-section (8).
10) Where any refund is due under sub-section (3) to a registered person who has defaulted in
furnishing any return or who is required to pay any tax, interest or penalty, which has not been
stayed by any court, Tribunal or Appellate Authority by the specified date, the proper officer
may—
a) withhold payment of refund due until the said person has furnished the return or paid the tax,
interest or penalty, as the case may be;
b) deduct from the refund due, any tax, interest, penalty, fee or any other amount which the
taxable person is liable to pay but which remains unpaid under this Act or under the existing
law.
Explanation.––For the purposes of this sub-section, the expression “specified date” shall mean
the last date for filing an appeal under this Act.

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11) Where an order giving rise to a refund is the subject matter of an appeal or further proceedings
or where any other proceedings under this Act is pending and the Commissioner is of the
opinion that grant of such refund is likely to adversely affect the revenue in the said appeal or
other proceedings on account of malfeasance or fraud committed, he may, after giving the
taxable person an opportunity of being heard, withhold the refund till such time as he may
determine.
12) Where a refund is withheld under sub-section (11), the taxable person shall, notwithstanding
anything contained in section 56, be entitled to interest at such rate not exceeding six per cent.
as may be notified on the recommendations of the Council, if as a result of the appeal or further
proceedings he becomes entitled to refund.
13) Notwithstanding anything to the contrary contained in this section, the amount of advance tax
deposited by a casual taxable person or a non-resident taxable person under sub-section (2) of
section 27, shall not be refunded unless such person has, in respect of the entire period for
which the certificate of registration granted to him had remained in force, furnished all the
returns required under section 39.
14) Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-
section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.

Explanation.—For the purposes of this section,––

1) “refund” includes refund of tax paid on zero-rated supplies of goods or services or both or on
inputs or input services used in making such zero-rated supplies, or refund of tax on the supply
of goods regarded as deemed exports, or refund of unutilised input tax credit as provided under
sub-section (3).
2) “relevant date” means—
a) in the case of goods exported out of India where a refund of tax paid is available in respect of
goods themselves or, as the case may be, the inputs or input services used in such goods,––
i. if the goods are exported by sea or air, the date on which the ship or the aircraft in which
such goods are loaded, leaves India; or
ii. if the goods are exported by land, the date on which such goods pass the frontier; or
iii. if the goods are exported by post, the date of despatch of goods by the Post Office
concerned to a place outside India;
b) in the case of supply of goods regarded as deemed exports where a refund of tax paid is
available in respect of the goods, the date on which the return relating to such deemed exports
is furnished;
c) in the case of services exported out of India where a refund of tax paid is available in respect of
services themselves or, as the case may be, the inputs or input services used in such services,
the date of––
i. receipt of payment in convertible foreign exchange, where the supply of services had been
completed prior to the receipt of such payment; or
ii. issue of invoice, where payment for the services had been received in advance prior to the
date of issue of the invoice;
d) in case where the tax becomes refundable as a consequence of judgment, decree, order or
direction of the Appellate Authority, Appellate Tribunal or any court, the date of
communication of such judgment, decree, order or direction;
e) in the case of refund of unutilised input tax credit under sub-section (3), the end of the financial
year in which such claim for refund arises;
f) in the case where tax is paid provisionally under this Act or the rules made thereunder, the date
of adjustment of tax after the final assessment thereof;
g) in the case of a person, other than the supplier, the date of receipt of goods or services or both
by such person; and

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h) in any other case, the date of payment of tax.

REFUND IN CERTAIN CASES [SEC 55]

The Government may, on the recommendations of the Council, by notification, specify any
specialised agency of the United Nations Organisation or any Multilateral Financial Institution and
Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or
Embassy of foreign countries and any other person or class of persons as may be specified in this
behalf, who shall, subject to such conditions and restrictions as may be prescribed, be entitled to
claim a refund of taxes paid on the notified supplies of goods or services or both received by them.

INTEREST ON DELAYED REFUNDS [SEC 56]

If any tax ordered to be refunded under sub-section (5) of section 54 to any applicant is not
refunded within sixty days from the date of receipt of application under subsection (1) of that
section, interest at such rate not exceeding six per cent. as may be specified in the notification
issued by the Government on the recommendations of the Council shall be payable in respect of
such refund from the date immediately after the expiry of sixty days from the date of receipt of
application under the said sub-section till the date of refund of such tax:
Provided that where any claim of refund arises from an order passed by an adjudicating authority or
Appellate Authority or Appellate Tribunal or court which has attained finality and the same is not
refunded within sixty days from the date of receipt of application filed consequent to such order,
interest at such rate not exceeding nine per cent. as may be notified by the Government on the
recommendations of the Council shall be payable in respect of such refund from the date
immediately after the expiry of sixty days from the date of receipt of application till the date of
refund.
Explanation.––For the purposes of this section, where any order of refund is made by an Appellate
Authority, Appellate Tribunal or any court against an order of the proper officer under sub-section
(5) of section 54, the order passed by the Appellate Authority, Appellate Tribunal or by the court
shall be deemed to be an order passed under the said sub-section (5).

CONSUMER WELFARE FUND [SEC 57]

The Government shall constitute a Fund, to be called the Consumer Welfare Fund and there shall be
credited to the Fund,—
a) the amount referred to in sub-section (5) of section 54;
b) any income from investment of the amount credited to the Fund; and
c) such other monies received by it, in such manner as may be prescribed.

UTILIZATION OF FUND [SEC 58]

1) All sums credited to the Fund shall be utilised by the Government for the welfare of the
consumers in such manner as may be prescribed.
2) The Government or the authority specified by it shall maintain proper and separate account and
other relevant records in relation to the Fund and prepare an annual statement of accounts in
such form as may be prescribed in consultation with the Comptroller and Auditor-General of
India.

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ASSESSMENT
Assessment means determination of tax liability.

SELF ASSESSMENT [SEC 59]

Every registered person shall self-assess the taxes payable under this Act and furnish a return for
each tax period as specified under section 39.

PROVISIONAL ASSESSMENT [SEC 60]

Cases in which taxable person can apply for provisional assessment & Application and passing
order by proper officer for payment of tax on provisional basis [Sec 60(1)]
Subject to the provisions of sub-section (2), where the taxable person is unable to
 determine the value of goods or services or both or
 determine the rate of tax applicable thereto,
he may request the proper officer in writing giving reasons for payment of tax on a provisional basis
and the proper officer shall pass an order, within a period not later than ninety days from the date of
receipt of such request, allowing payment of tax on provisional basis at such rate or on such value as
may be specified by him.
Execution of Bond: [Sec 60(2)]: The payment of tax on provisional basis may be allowed, if the
taxable person executes a bond in such form as may be prescribed, and with such surety or security
as the proper officer may deem fit, binding the taxable person for payment of the difference
between the amount of tax as may be finally assessed and the amount of tax provisionally assessed.
Period of passing final order and extension thereof [Sec 60(3)]: The proper officer shall, within a
period not exceeding 6 months from the date of the communication of the order issued under sub-
section (1), pass the final assessment order after taking into account such information as may be
required for finalizing the assessment:
Provided that the period specified in this sub-section may, on sufficient cause being shown and for
reasons to be recorded in writing, be extended by the Joint Commissioner or Additional
Commissioner for a further period not exceeding 6 months and by the Commissioner for such
further period not exceeding 4 years.
Payment of interest [Sec 60(4)]: The registered person shall be liable to pay interest on any tax
payable on the supply of goods or services or both under provisional assessment but not paid on the
due date specified under sub-section (7) of section 39 or the rules made thereunder, at the rate
specified under sub-section (1) of section 50, from the first day after the due date of payment of tax
in respect of the said supply of goods or services or both till the date of actual payment, whether
such amount is paid before or after the issuance of order for final assessment.
Interest on Refund [Sec 60(4)]: Where the registered person is entitled to a refund consequent to
the order of final assessment under sub-section (3), subject to the provisions of sub-section (8) of
section 54, interest shall be paid on such refund as provided in section 56.

SCRUTINY OF RETURNS [SECTION 61]

1) The proper officer may scrutinize the return and related particulars furnished by the registered
person to verify the correctness of the return and inform him of the discrepancies noticed, if
any, in such manner as may be prescribed and seek his explanation thereto.
2) In case the explanation is found acceptable, the registered person shall be informed accordingly
and no further action shall be taken in this regard.
3) In case no satisfactory explanation is furnished within a period of 30 days of being informed by
the proper officer or such further period as may be permitted by him or where the registered
person, after accepting the discrepancies, fails to take the corrective measure in his return for
the month in which the discrepancy is accepted, the proper officer may initiate appropriate

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action including those under section 65 or section 66 or section 67, or proceed to determine the
tax and other dues under section 73 or section 74.

BEST JUDGEMENT ASSESSMENT OF NON-FILERS OF RETURN [SEC 62]

1) Notwithstanding anything to the contrary contained in section 73 or section 74, where a
registered person fails to furnish the return under section 39 or section 45, even after the
service of a notice under section 46, the proper officer may proceed to assess the tax liability of
the said person to the best of his judgement taking into account all the relevant material which
is available or which he has gathered and issue an assessment order within a period of 5 years
from the date specified under section 44 for furnishing of the annual return for the financial
year to which the tax not paid relates.
2) Where the registered person furnishes a valid return within thirty days of the service of the
assessment order under sub-section (1), the said assessment order shall be deemed to have
been withdrawn but the liability for payment of interest under sub-section (1) of section 50 or
for payment of late fee under section 47 shall continue.

BEST JUDGEMENT ASSESSMENT OF UNREGISTERED PERSON [SEC 63]

Notwithstanding anything to the contrary contained in section 73 or section 74, where a taxable
person fails to obtain registration even though liable to do so or whose registration has been
cancelled under sub-section (2) of section 29 but who was liable to pay tax, the proper officer may
proceed to assess the tax liability of such taxable person to the best of his judgment for the relevant
tax periods and issue an assessment order within a period of 5 years from the date specified under
section 44 for furnishing of the annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the person an opportunity of
being heard.

SUMMARY ASSESSMENT IN CARTAIN SPECIAL CASES [SEC 64]

1) The proper officer may, on any evidence showing a tax liability of a person coming to his notice,
with the previous permission of Additional Commissioner or Joint Commissioner, proceed to
assess the tax liability of such person to protect the interest of revenue and issue an assessment
order, if he has sufficient grounds to believe that any delay in doing so may adversely affect the
interest of revenue:
Provided that where the taxable person to whom the liability pertains is not ascertainable and
such liability pertains to supply of goods, the person in charge of such goods shall be deemed to
be the taxable person liable to be assessed and liable to pay tax and any other amount due
under this section.
2) On an application made by the taxable person within thirty days from the date of receipt of
order passed under sub-section (1) or on his own motion, if the Additional Commissioner or
Joint Commissioner considers that such order is erroneous, he may withdraw such order and
follow the procedure laid down in section 73 or section 74.

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AUDIT

AUDIT BY AN TAX AUTHORITY [SEC 65]

1) The Commissioner or any officer authorised by him, by way of a general or a specific order, may
undertake audit of any registered person for such period, at such frequency and in such manner
as may be prescribed.
2) The officers referred to in sub-section (1) may conduct audit at the place of business of the
registered person or in their office.
3) The registered person shall be informed by way of a notice not less than fifteen working days
prior to the conduct of audit in such manner as may be prescribed.
4) The audit under sub-section (1) shall be completed within a period of three months from the
date of commencement of the audit:
Provided that where the Commissioner is satisfied that audit in respect of such registered
person cannot be completed within three months, he may, for the reasons to be recorded in
writing, extend the period by a further period not exceeding six months.
Explanation.––For the purposes of this sub-section, the expression “commencement of audit”
shall mean the date on which the records and other documents, called for by the tax
authorities, are made available by the registered person or the actual institution of audit at the
place of business, whichever is later.
5) During the course of audit, the authorised officer may require the registered person,—
i. to afford him the necessary facility to verify the books of account or other documents as he
may require;
ii. to furnish such information as he may require and render assistance for timely completion
of the audit.
6) On conclusion of audit, the proper officer shall, within thirty days, inform the registered person,
whose records are audited, about the findings, his rights and obligations and the reasons for
such findings.
7) Where the audit conducted under sub-section (1) results in detection of tax not paid or short
paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper officer
may initiate action under section 73 or section 74.

SPECIAL AUDIT [SEC 66]

1) If at any stage of scrutiny, inquiry, investigation or any other proceedings before him, any
officer not below the rank of Assistant Commissioner, having regard to the nature and
complexity of the case and the interest of revenue, is of the opinion that the value has not been
correctly declared or the credit availed is not within the normal limits, he may, with the prior
approval of the Commissioner, direct such registered person by a communication in writing to
get his records including books of account examined and audited by a chartered accountant or a
cost accountant as may be nominated by the Commissioner.
2) The chartered accountant or cost accountant so nominated shall, within the period of ninety
days, submit a report of such audit duly signed and certified by him to the said Assistant
Commissioner mentioning therein such other particulars as may be specified:
Provided that the Assistant Commissioner may, on an application made to him in this behalf by
the registered person or the chartered accountant or cost accountant or for any material and
sufficient reason, extend the said period by a further period of ninety days.
3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of the
registered person have been audited under any other provisions of this Act or any other law for
the time being in force.

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4) The registered person shall be given an opportunity of being heard in respect of any material
gathered on the basis of special audit under sub-section (1) which is proposed to be used in any
proceedings against him under this Act or the rules made thereunder.
5) The expenses of the examination and audit of records under sub-section (1), including the
remuneration of such chartered accountant or cost accountant, shall be determined and paid
by the Commissioner and such determination shall be final.
6) Where the special audit conducted under sub-section (1) results in detection of tax not paid or
short paid or erroneously refunded, or input tax credit wrongly availed or utilised, the proper
officer may initiate action under section 73 or section 74.

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INSPECTION, SEARCH, SEIZURE & ARREST

POWER OF INSPECTION, SEARCH & SEIZURE [SECTION 67]

1) Inspection: Where the proper officer, not below the rank of Joint Commissioner, has reasons to
believe that––
a) a taxable person has suppressed any transaction relating to supply of goods or services or both
or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under
this Act or has indulged in contravention of any of the provisions of this Act or the rules made
thereunder to evade tax under this Act; or
b) any person engaged in the business of transporting goods or an owner or operator of a
warehouse or a godown or any other place is keeping goods which have escaped payment of
tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax
payable under this Act,
he may authorise in writing any other officer of central tax to inspect any places of business of
the taxable person or the persons engaged in the business of transporting goods or the owner
or the operator of warehouse or godown or any other place.
2) Search & Seizure: Where the proper officer, not below the rank of Joint Commissioner, either
pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe
that any goods liable to confiscation or any documents or books or things, which in his opinion
shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he
may authorise in writing any other officer of central tax to search and seize or may himself
search and seize such goods, documents or books or things:
Provided that where it is not practicable to seize any such goods, the proper officer, or any
officer authorised by him, may serve on the owner or the custodian of the goods an order that
he shall not remove, part with, or otherwise deal with the goods except with the previous
permission of such officer:
Provided further that the documents or books or things so seized shall be retained by such
officer only for so long as may be necessary for their examination and for any inquiry or
proceedings under this Act.
3) The documents, books or things referred to in sub-section (2) or any other documents, books or
things produced by a taxable person or any other person, which have not been relied upon for
the issue of notice under this Act or the rules made thereunder, shall be returned to such
person within a period not exceeding thirty days of the issue of the said notice.
4) The officer authorised under sub-section (2) shall have the power to seal or break open the
door of any premises or to break open any almirah, electronic devices, box, receptacle in which
any goods, accounts, registers or documents of the person are suspected to be concealed,
where access to such premises, almirah, electronic devices, box or receptacle is denied.
5) The person from whose custody any documents are seized under sub-section (2) shall be
entitled to make copies thereof or take extracts therefrom in the presence of an authorised
officer at such place and time as such officer may indicate in this behalf except where making
such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect
the investigation.
6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon
execution of a bond and furnishing of a security, in such manner and of such quantum,
respectively, as may be prescribed or on payment of applicable tax, interest and penalty
payable, as the case may be.
7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given
within six months of the seizure of the goods, the goods shall be returned to the person from
whose possession they were seized:

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Provided that the period of six months may, on sufficient cause being shown, be extended by
the proper officer for a further period not exceeding six months.
8) The Government may, having regard to the perishable or hazardous nature of any goods,
depreciation in the value of the goods with the passage of time, constraints of storage space for
the goods or any other relevant considerations, by notification, specify the goods or class of
goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by
the proper officer in such manner as may be prescribed.
9) Where any goods, being goods specified under sub-section (8), have been seized by a proper
officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of
such goods in such manner as may be prescribed.
10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so
far as may be, apply to search and seizure under this section subject to the modification that
sub-section (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”,
wherever it occurs, the word “Commissioner” were substituted.
11) Where the proper officer has reasons to believe that any person has evaded or is attempting to
evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts,
registers or documents of such person produced before him and shall grant a receipt for the
same, and shall retain the same for so long as may be necessary in connection with any
proceedings under this Act or the rules made thereunder for prosecution.
12) The Commissioner or an officer authorised by him may cause purchase of any goods or services
or both by any person authorised by him from the business premises of any taxable person, to
check the issue of tax invoices or bills of supply by such taxable person, and on return of goods
so purchased by such officer, such taxable person or any person in charge of the business
premises shall refund the amount so paid towards the goods after cancelling any tax invoice or
bill of supply issued earlier.

INSPECTION OF GOODS IN MOVEMENT [SEC 68]

1) The Government may require the person in charge of a conveyance carrying any consignment
of goods of value exceeding such amount as may be specified to carry with him such documents
and such devices as may be prescribed.
2) The details of documents required to be carried under sub-section (1) shall be validated in such
manner as may be prescribed.
3) Where any conveyance referred to in sub-section (1) is intercepted by the proper officer at any
place, he may require the person in charge of the said conveyance to produce the documents
prescribed under the said sub-section and devices for verification, and the said person shall be
liable to produce the documents and devices and also allow the inspection of goods.

POWER TO ARREST [SEC 69]

1) Where the Commissioner has reasons to believe that a person has committed any offence
specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132
which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said
section, he may, by order, authorise any officer of central tax to arrest such person.
2) Where a person is arrested under sub-section (1) for an offence specified under subsection (5)
of section 132, the officer authorised to arrest the person shall inform such person of the
grounds of arrest and produce him before a Magistrate within twenty-four hours.
3) Subject to the provisions of the Code of Criminal Procedure, 1973,––
a) where a person is arrested under sub-section (1) for any offence specified under sub-section (4)
of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the
Magistrate;

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b) in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant
Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have
the same powers and be subject to the same provisions as an officer-in-charge of a police
station.

CIVIL & CRIMINAL PUNISHMENT

The GST Law envisages 2 types of punishment. These can be simultaneous and concurrent.
Civil Punishment: This involves penalty for violation of statutory provisions involving a penalty of
money and confiscation of goods.
Criminal Punishment: Criminal penalty is of imprisonment and fine.

PENALTY FOR CERTAIN OFFENCES [SEC 132]

1) Whoever commits any of the following offences, namely:—
a) supplies any goods or services or both without issue of any invoice, in violation of the provisions
of this Act or the rules made thereunder, with the intention to evade tax;
b) issues any invoice or bill without supply of goods or services or both in violation of the
provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation
of input tax credit or refund of tax;
c) avails input tax credit using such invoice or bill referred to in clause (b);
d) collects any amount as tax but fails to pay the same to the Government beyond a period of
three months from the date on which such payment becomes due;
e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such
offence is not covered under clauses (a) to (d);
f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes
any false information with an intention to evade payment of tax due under this Act;
g) obstructs or prevents any officer in the discharge of his duties under this Act;
h) acquires possession of, or in any way concerns himself in transporting, removing, depositing,
keeping, concealing, supplying, or purchasing or in any other manner deals with, any goods
which he knows or has reasons to believe are liable to confiscation under this Act or the rules
made thereunder;
i) receives or is in any way concerned with the supply of, or in any other manner deals with any
supply of services which he knows or has reasons to believe are in contravention of any
provisions of this Act or the rules made thereunder;
j) tampers with or destroys any material evidence or documents;
k) fails to supply any information which he is required to supply under this Act or the rules made
thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him,
that the information supplied by him is true) supplies false information; or
l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to
(k) of this section,
shall be punishable––
i. in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or
utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with
imprisonment for a term which may extend to five years and with fine;
ii. in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or
utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not
exceed five hundred lakh rupees, with imprisonment for a term which may extend to three
years and with fine;
iii. in the case of any other offence where the amount of tax evaded or the amount of input tax
credit wrongly availed or utilised or the amount of refund wrongly taken exceeds one hundred

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lakh rupees but does not exceed two hundred lakh rupees, with imprisonment for a term which
may extend to one year and with fine;
iv. in cases where he commits or abets the commission of an offence specified in clause (f) or
clause (g) or clause (j), he shall be punishable with imprisonment for a term which may extend
to six months or with fine or with both.
2) Punishment for the second offence: Where any person convicted of an offence under this
section is again convicted of an offence under this section, then, he shall be punishable for the
second and for every subsequent offence with imprisonment for a term which may extend to
five years and with fine.
3) Minimum Punishment: The imprisonment referred to in clauses (i), (ii) and (iii) of sub-section
(1) and sub-section (2) shall, in the absence of special and adequate reasons to the contrary to
be recorded in the judgment of the Court, be for a term not less than six months.
4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences under
this Act, except the offences referred to in sub-section (5) shall be noncognizable and bailable.
5) Nature of Offence: The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of
sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-
bailable.
6) A person shall not be prosecuted for any offence under this section except with the previous
sanction of the Commissioner.

Explanation.— For the purposes of this section, the term “tax” shall include the amount of tax
evaded or the amount of input tax credit wrongly availed or utilised or refund wrongly taken under
the provisions of this Act, the State Goods and Services Tax Act, the Integrated Goods and Services
Tax Act or the Union Territory Goods and Services Tax Act and cess levied under the Goods and
Services Tax (Compensation to States) Act.

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INTEGRATED GOODS & SERVICE TAX ACT, 2017

INTRODUCTION
The GST Council in its 11th meeting held on 4rth March, 2017 approved the “draft Integrated GST”
bill to make a provision for levy and collection of tax on inter-state supply of goods or services or
both by the Central Government and for matters connected therewith or incidental thereto.
The Union Government presented the Integrated Goods and Services Tax bill, 2017 in Lok Sabha on
27th March, 2017 and the same was passed by Lok Sabha on 29 th March, 2017. The Rajya Sabha
passed the bill on 6th April, 2017 and was assented by the President on 13th April, 2017.
Under Article 269A of the Constitution, the GST on supplies in the course of Inter-State trade or
commerce shall be levied and collected by the Government of India and such tax shall be
apportioned between the Union and the States in the manner as may be provided by Parliament by
law on the recommendations of the GST Council.

SHORT TITLE, EXTENT AND COMMENCEMENT [Sec 1]

Title: Integrated Goods and Service tax Act, 2017
The said extends to whole of India except the state of Jammu and Kashmir and came into force from
1st July 2017.

DEFINITIONS [Sec 2]
1) Continuous Journey [Sec 2(3)]
means a journey for which a single or more than one ticket or invoice is issued at the same
time, either by a single supplier of service or through an agent acting on behalf of more than
one supplier of service, and which involves no stopover between any of the legs of the journey
for which one or more separate tickets or invoices are issued.
Explanation: The term “stopover” means a place where a passenger can disembark either to
transfer to another conveyance or break his journey for a certain period in order to resume it at
a later point of time.
2) Exports of Goods [Sec 2(5)]
with its grammatical variations and cognate expressions, means taking goods out of India to a
place outside India.
3) Exports of Services [Sec 2(6)]
means the supply of any service when,—
i. the supplier of service is located in India;
ii. the recipient of service is located outside India;
iii. the place of supply of service is outside India;
iv. the payment for such service has been received by the supplier of service in convertible foreign
exchange; and
v. the supplier of service and the recipient of service are not merely establishments of a distinct
person in accordance with Explanation 1 in section 8.
Establishments of Distinct persons [Explanation 1 to Section 8]
For the purposes of this Act, where a person has,––
i. an establishment in India and any other establishment outside India;
ii. an establishment in a State or Union territory and any other establishment outside that State or
Union territory; or
iii. an establishment in a State or Union territory and any other establishment being a business
vertical registered within that State or Union territory,
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then such establishments shall be treated as establishments of distinct persons.

4) Import of Goods [Sec 2(10)]
with its grammatical variations and cognate expressions, means bringing goods into India from
a place outside India;
5) Import of Services [Sec 2(11)]
means the supply of any service, where––
i. the supplier of service is located outside India;
ii. the recipient of service is located in India; and
iii. the place of supply of service is in India;
6) Location of the Recipient of Services [Sec 2(14)]
means,––
a. where a supply is received at a place of business for which the registration has been obtained,
the location of such place of business;
b. where a supply is received at a place other than the place of business for which registration has
been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
c. where a supply is received at more than one establishment, whether the place of business or
fixed establishment, the location of the establishment most directly concerned with the receipt
of the supply; and
d. in absence of such places, the location of the usual place of residence of the recipient;
7) Location of the Supplier of Services [Sec 2(15)]
means,––
a. where a supply is made from a place of business for which the registration has been obtained,
the location of such place of business;
b. where a supply is made from a place other than the place of business for which registration has
been obtained (a fixed establishment elsewhere), the location of such fixed establishment;
c. where a supply is made from more than one establishment, whether the place of business or
fixed establishment, the location of the establishment most directly concerned with the
provision of the supply; and
d. in absence of such places, the location of the usual place of residence of the supplier;
8) Non Taxable online Recipient [Sec 2(16)]
means any Government, local authority, governmental authority, an individual or any other
person not registered and receiving online information and database access or retrieval services
in relation to any purpose other than commerce, industry or any other business or profession,
located in taxable territory.
Explanation.––For the purposes of this clause, the expression “governmental authority” means
an authority or a board or any other body,––
i. set up by an Act of Parliament or a State Legislature; or
ii. established by any Government, with 90% or more participation by way of equity or control, to
carry out any function entrusted to a municipality under article 243W of the Constitution;
9) Online Information and Database Access or Retrieval Services [Sec 2(17)]
Means services whose delivery is mediated by information technology over the internet or an
electronic network and the nature of which renders their supply essentially automated and
involving minimal human intervention and impossible to ensure in the absence of information
technology and includes electronic services such as,––
i. advertising on the internet;
ii. providing cloud services;
iii. provision of e-books, movie, music, software and other intangibles through telecommunication
networks or internet;
iv. providing data or information, retrievable or otherwise, to any person in electronic form
through a computer network;

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v. online supplies of digital content (movies, television shows, music and the like);
vi. digital data storage; and
vii. online gaming;

LEVY AND COLLECTION OF IGST

Levy & Collection of IGST for Inter-State Sale Except on Alcoholic Liquor [Sec 5(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 40%, 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.
IGST on Petrol etc from Later Date [Sec 5(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.
On Notified Goods IGST to be paid on Reverse Charge Basis [Sec 5(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.
Registered Person Liable if Purchased Goods from Unregistered Person [Sec 5(4)]
The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is
not registered, to a registered person shall be paid by such person on reverse charge basis as the
recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for
paying the tax in relation to the supply of such goods or services or both.
IGST on Electronic Commerce Operator [Sec 5(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.

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DETERMINATION OF NATURE OF SUPPLY

Supply of Goods in the Course of Inter- State Trade or Commerce [Sec 7(1) and (2)]
Subject to the provisions of section 10, supply of goods, where the location of the supplier and the
place of supply are in––
a. two different States;
b. two different Union territories; or
c. a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State trade or commerce.
Supply of goods imported into the territory of India, till they cross the customs frontiers of India,
shall be treated to be a supply of goods in the course of inter-State trade or commerce.

Supply of Services in the Course of Inter- State Trade or Commerce [Sec 7(3) and (4)]
Subject to the provisions of section 12, supply of services, where the location of the supplier and the
place of supply are in––
a. two different States;
b. two different Union territories; or
c. a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade or commerce.
Supply of services imported into the territory of India shall be treated to be a supply of services in
the course of inter-State trade or commerce.

Supply of Goods or Services or Both in the Course of Inter- State Trade or Commerce [Sec 7(5)]
Supply of goods or services or both,––
a. when the supplier is located in India and the place of supply is outside India;
b. to or by a Special Economic Zone developer or a Special Economic Zone unit; or
c. in the taxable territory, not being an intra-State supply and not covered elsewhere in this
section,
shall be treated to be a supply of goods or services or both in the course of inter-State trade or
commerce.

Intra-State Supply of Goods [Sec 8(1)]

Subject to the provisions of section 10, supply of goods where the location of the supplier and the
place of supply of goods are in the same State or same Union territory shall be treated as intra-State
supply:
Provided that the following supply of goods shall not be treated as intra-State supply, namely:––
i. supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;
ii. goods imported into the territory of India till they cross the customs frontiers of India; or
iii. supplies made to a tourist referred to in section 15.

Intra-State Supply of Supply [Sec 8(2)]

Subject to the provisions of section 12, supply of services where the location of the supplier and the
place of supply of services are in the same State or same Union territory shall be treated as intra-
State supply:
Provided that the intra-State supply of services shall not include supply of services to or by a Special
Economic Zone developer or a Special Economic Zone unit.
Explanation 1.––For the purposes of this Act, where a person has,––
i. an establishment in India and any other establishment outside India;
ii. an establishment in a State or Union territory and any other establishment outside that State or
Union territory; or

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iii. an establishment in a State or Union territory and any other establishment being a business
vertical registered within that State or Union territory, then such establishments shall be
treated as establishments of distinct persons.
Explanation 2.––A person carrying on a business through a branch or an agency or a
representational office in any territory shall be treated as having an establishment in that territory.

Supplies in Territorial Waters [Sec 9]

Notwithstanding anything contained in this Act,––
a. where the location of the supplier is in the territorial waters, the location of such supplier; or
b. where the place of supply is in the territorial waters, the place of supply, shall, for the purposes
of this Act, be deemed to be in the coastal State or Union territory where the nearest point of
the appropriate baseline is located.

Place of Supply of Goods [Sec 10]

Sec 10(1): The place of supply of goods, other than supply of goods imported into, or exported from
India, shall be as under,––
a. where the supply involves movement of goods, whether by the supplier or the recipient or by
any other person, the place of supply of such goods shall be the location of the goods at the
time at which the movement of goods terminates for delivery to the recipient;
b. where the goods are delivered by the supplier to a recipient or any other person on the
direction of a third person, whether acting as an agent or otherwise, before or during
movement of goods, either by way of transfer of documents of title to the goods or otherwise,
it shall be deemed that the said third person has received the goods and the place of supply of
such goods shall be the principal place of business of such person;
c. where the supply does not involve movement of goods, whether by the supplier or the
recipient, the place of supply shall be the location of such goods at the time of the delivery to
the recipient;
d. where the goods are assembled or installed at site, the place of supply shall be the place of
such installation or assembly;
e. where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or
a motor vehicle, the place of supply shall be the location at which such goods are taken on
board.
Sec 10(2) Where the place of supply of goods cannot be determined, the place of supply shall be
determined in such manner as may be prescribed.

Place of Supply of Goods Imported into or Exported from India

The place of supply of goods,––
a) imported into India shall be the location of the importer;
b) exported from India shall be the location outside India.

Places of Supply of Services [Sec 12]

Sec 12(1) The provisions of this section shall apply to determine the place of supply of services
where the location of supplier of services and the location of the recipient of services is in India.
Sec 12(2) The place of supply of services, except the services specified in sub-sections (3) to (14),––
a) made to a registered person shall be the location of such person;
b) made to any person other than a registered person shall be,––
i. the location of the recipient where the address on record exists; and
ii. the location of the supplier of services in other cases.
Sec 12(3) The place of supply of services,––

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a) directly in relation to an immovable property, including services provided by architects, interior

decorators, surveyors, engineers and other related experts or estate agents, any service
provided by way of grant of rights to use immovable property or for carrying out or co-
ordination of construction work; or
b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by
whatever name called, and including a house boat or any other vessel; or
c) by way of accommodation in any immovable property for organising any marriage or reception
or matters related thereto, official, social, cultural, religious or business function including
services provided in relation to such function at such property; or
d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location
at which the immovable property or boat or vessel, as the case may be, is located or intended
to be located:
Provided that if the location of the immovable property or boat or vessel is located or intended to
be located outside India, the place of supply shall be the location of the recipient.
Explanation.––Where the immovable property or boat or vessel is located in more than one State or
Union territory, the supply of services shall be treated as made in each of the respective States or
Union territories, in proportion to the value for services separately collected or determined in terms
of the contract or agreement entered into in this regard or, in the absence of such contract or
agreement, on such other basis as may be prescribed.
Sec 12(4) The place of supply of restaurant and catering services, personal grooming, fitness,
beauty treatment, health service including cosmetic and plastic surgery shall be the location
where the services are actually performed.
Sec 12(5) The place of supply of services in relation to training and performance appraisal to,––
a) a registered person, shall be the location of such person;
b) a person other than a registered person, shall be the location where the services are actually
performed.
Sec 12(6) The place of supply of services provided by way of admission to a cultural, artistic,
sporting, scientific, educational, entertainment event or amusement park or any other place and
services ancillary thereto, shall be the place where the event is actually held or where the park or
such other place is located.
Sec 12(7) The place of supply of services provided by way of,—
a) organisation of a cultural, artistic, sporting, scientific, educational or entertainment event
including supply of services in relation to a conference, fair, exhibition, celebration or similar
events; or
b) services ancillary to organisation of any of the events or services referred to in clause (a), or
assigning of sponsorship to such events,––
i. to a registered person, shall be the location of such person;
ii. to a person other than a registered person, shall be the place where the event is actually held
and if the event is held outside India, the place of supply shall be the location of the recipient.
Explanation.––Where the event is held in more than one State or Union territory and a consolidated
amount is charged for supply of services relating to such event, the place of supply of such services
shall be taken as being in each of the respective States or Union territories in proportion to the value
for services separately collected or determined in terms of the contract or agreement entered into in
this regard or, in the absence of such contract or agreement, on such other basis as may be
prescribed.
Sec 12(8) The place of supply of services by way of transportation of goods, including by mail or
courier to,––
a) a registered person, shall be the location of such person;
b) a person other than a registered person, shall be the location at which such goods are handed
over for their transportation.

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Sec 12(9) The place of supply of passenger transportation service to,—

a) a registered person, shall be the location of such person;
b) a person other than a registered person, shall be the place where the passenger embarks on
the conveyance for a continuous journey:
Provided that where the right to passage is given for future use and the point of embarkation is not
known at the time of issue of right to passage, the place of supply of such service shall be
determined in accordance with the provisions of sub-section (2).
Explanation.––For the purposes of this sub-section, the return journey shall be treated as a separate
journey, even if the right to passage for onward and return journey is issued at the same time.
Sec 12(10) The place of supply of services on board a conveyance, including a vessel, an aircraft, a
train or a motor vehicle, shall be the location of the first scheduled point of departure of that
conveyance for the journey.
Sec 12(11) The place of supply of telecommunication services including data transfer, broadcasting,
cable and direct to home television services to any person shall,—
a) in case of services by way of fixed telecommunication line, leased circuits, internet leased
circuit, cable or dish antenna, be the location where the telecommunication line, leased circuit
or cable connection or dish antenna is installed for receipt of services;
b) in case of mobile connection for telecommunication and internet services provided on post-
paid basis, be the location of billing address of the recipient of services on the record of the
supplier of services;
c) in cases where mobile connection for telecommunication, internet service and direct to home
television services are provided on pre-payment basis through a voucher or any other means,––
i. through a selling agent or a re-seller or a distributor of subscriber identity module card or re-
charge voucher, be the address of the selling agent or re-seller or distributor as per the record
of the supplier at the time of supply; or
ii. by any person to the final subscriber, be the location where such prepayment is received or
such vouchers are sold;
d) in other cases, be the address of the recipient as per the records of the supplier of services and
where such address is not available, the place of supply shall be location of the supplier of
services:
Provided that where the address of the recipient as per the records of the supplier of services is not
available, the place of supply shall be location of the supplier of services:
Provided further that if such pre-paid service is availed or the recharge is made through internet
banking or other electronic mode of payment, the location of the recipient of services on the record
of the supplier of services shall be the place of supply of such services.
Explanation.––Where the leased circuit is installed in more than one State or Union territory and a
consolidated amount is charged for supply of services relating to such circuit, the place of supply of
such services shall be taken as being in each of the respective States or Union territories in
proportion to the value for services separately collected or determined in terms of the contract or
agreement entered into in this regard or, in the absence of such contract or agreement, on such
other basis as may be prescribed.
Sec 12(12) The place of supply of banking and other financial services, including stock broking
services to any person shall be the location of the recipient of services on the records of the supplier
of services:
Provided that if the location of recipient of services is not on the records of the supplier, the place of
supply shall be the location of the supplier of services.
Sec 12(13) The place of supply of insurance services shall,––
a) to a registered person, be the location of such person;
b) to a person other than a registered person, be the location of the recipient of services on the
records of the supplier of services.

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Sec 12(14) The place of supply of advertisement services to the Central Government, a State
Government, a statutory body or a local authority meant for the States or Union territories identified
in the contract or agreement shall be taken as being in each of such States or Union territories and
the value of such supplies specific to each State or Union territory shall be in proportion to the
amount attributable to services provided by way of dissemination in the respective States or Union
territories as may be determined in terms of the contract or agreement entered into in this regard
or, in the absence of such contract or agreement, on such other basis as may be prescribed.

Place of Supply of Services where Location of Supplier or Location of Recipient is outside India [Sec
13]
Sec 13(1) The provisions of this section shall apply to determine the place of supply of services
where the location of the supplier of services or the location of the recipient of services is outside
India.
Sec 13(2) The place of supply of services except the services specified in sub-sections (3) to (13) shall
be the location of the recipient of services: Provided that where the location of the recipient of
services is not available in the ordinary course of business, the place of supply shall be the location
of the supplier of services.
Sec 13(3) The place of supply of the following services shall be the location where the services are
actually performed, namely:—
(a) services supplied in respect of goods which are required to be made physically available by the
recipient of services to the supplier of services, or to a person acting on behalf of the supplier of
services in order to provide the services: Provided that when such services are provided from a
remote location by way of electronic means, the place of supply shall be the location where goods
are situated at the time of supply of services: Provided further that nothing contained in this clause
shall apply in the case of services supplied in respect of goods which are temporarily imported into
India for repairs and are exported after repairs without being put to any other use in India, than that
which is required for such repairs;
(b) services supplied to an individual, represented either as the recipient of services or a person
acting on behalf of the recipient, which require the physical presence of the recipient or the person
acting on his behalf, with the supplier for the supply of services.
Sec 13(4) The place of supply of services supplied directly in relation to an immovable property,
including services supplied in this regard by experts and estate agents, supply of accommodation by
a hotel, inn, guest house, club or campsite, by whatever name called, grant of rights to use
immovable property, services for carrying out or co-ordination of construction work, including that
of architects or interior decorators, shall be the place where the immovable property is located or
intended to be located.
Sec 13(5) The place of supply of services supplied by way of admission to, or organisation of a
cultural, artistic, sporting, scientific, educational or entertainment event, or a celebration,
conference, fair, exhibition or similar events, and of services ancillary to such admission or
organisation, shall be the place where the event is actually held.
Sec 13(6) Where any services referred to in sub-section (3) or sub-section (4) or sub-section (5) is
supplied at more than one location, including a location in the taxable territory, its place of supply
shall be the location in the taxable territory.
Sec 13(7) Where the services referred to in sub-section (3) or sub-section (4) or sub-section (5) are
supplied in more than one State or Union territory, the place of supply of such services shall be
taken as being in each of the respective States or Union territories and the value of such supplies
specific to each State or Union territory shall be in proportion to the value for services separately
collected or determined in terms of the contract or agreement entered into in this regard or, in the
absence of such contract or agreement, on such other basis as may be prescribed.

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Sec 13(8) The place of supply of the following services shall be the location of the supplier of
services, namely:––
(a) services supplied by a banking company, or a financial institution, or a non-banking financial
company, to account holders;
(b) intermediary services;
(c) services consisting of hiring of means of transport, including yachts but excluding aircrafts and
vessels, up to a period of one month.
Explanation.––For the purposes of this sub-section, the expression,––
(a) “account” means an account bearing interest to the depositor, and includes a non-resident
external account and a non-resident ordinary account;
(b) “banking company” shall have the same meaning as assigned to it under clause (a) of section 45A
of the Reserve Bank of India Act, 1934;
(c) ‘‘financial institution” shall have the same meaning as assigned to it in clause (c) of section 45-I of
the Reserve Bank of India Act, 1934;
(d) “non-banking financial company” means,–– (i) a financial institution which is a company; (ii) a
non-banking institution which is a company and which has as its principal business the receiving of
deposits, under any scheme or arrangement or in any other manner, or lending in any manner; or
(iii) such other non-banking institution or class of such institutions, as the Reserve Bank of India may,
with the previous approval of the Central Government and by notification in the Official Gazette,
specify.
Sec 13(9) The place of supply of services of transportation of goods, other than by way of mail or
courier, shall be the place of destination of such goods.
Sec 13(10) The place of supply in respect of passenger transportation services shall be the place
where the passenger embarks on the conveyance for a continuous journey.
Sec 13(11) The place of supply of services provided on board a conveyance during the course of a
passenger transport operation, including services intended to be wholly or substantially consumed
while on board, shall be the first scheduled point of departure of that conveyance for the journey.
Sec 13(12) The place of supply of online information and database access or retrieval services shall
be the location of the recipient of services.
Explanation.––For the purposes of this sub-section, person receiving such services shall be deemed
to be located in the taxable territory, if any two of the following non contradictory conditions are
satisfied, namely:––
(a) the location of address presented by the recipient of services through internet is in the taxable
territory;
(b) the credit card or debit card or store value card or charge card or smart card or any other card by
which the recipient of services settles payment has been issued in the taxable territory;
(c) the billing address of the recipient of services is in the taxable territory;
(d) the internet protocol address of the device used by the recipient of services is in the taxable
territory;
(e) the bank of the recipient of services in which the account used for payment is maintained is in
the taxable territory;
(f) the country code of the subscriber identity module card used by the recipient of services is of
taxable territory;
(g) the location of the fixed land line through which the service is received by the recipient is in the
taxable territory.
Sec 13(13) In order to prevent double taxation or non-taxation of the supply of a service, or for the
uniform application of rules, the Government shall have the power to notify any description of
services or circumstances in which the place of supply shall be the place of effective use and
enjoyment of a service.

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ZERO RATED SUPPLY [SEC 16]

Sec 16(1) “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.
Sec 16(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services
Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such
supply may be an exempt supply.
Sec 16(3) A registered person making zero rated supply shall be eligible to claim refund under either
of the following options, namely:––
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such
conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and
claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as
may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or
services or both supplied, in accordance with the provisions of section 54 of the Central Goods and
Services Tax Act or the rules made thereunder

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UNION TERRITORY GOODS & SERVICE TAX ACT, 2017

INTRODUCTION
The CGST Act, 2017 will be applicable on all the intra-state transactions of supply of goods or
services and both and is the revenue of Central Government. As CGST would be levied on all the
transactions of taxable goods and services, and therefore is applicable in all the State and Union
Territories of India. The IGST Act, 2017 will be applicable on all the inter-state transactions of goods
and services. It is regulated by the Central Government and therefore will be applicable on all the
transactions of goods and services applicable in India or import/export transactions. However, for
the purpose of levy and collection of SGST levied on each intra-state transactions of goods and
services, all the State/Union Territory legislation. This Act to make a provision for levy and collection
of tax on Intra-State supply of goods or services or both by the Union Territories and for matters
connected therewith or incidental thereto.

SHORT TITLE, EXTENT AND COMMENCEMENT [Sec 1]

Title: Union Territory Goods and Service tax Act, 2017
The said extends to the Union territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra
and Nagar Haveli, Daman and Diu, Chandigarh and other territory.
It came into force from 1st July 2017.

DEFINITIONS [Sec 2]
Exempt Supply [Sec 2(4)]
means supply of any goods or services or both which attracts nil rate of tax or which may be exempt
from tax under section 8, or under section 6 of the Integrated Goods and Services Tax Act, and
includes non-taxable supply;
Output tax [Sec 2(7)]
in relation to a taxable person, means the Union territory tax chargeable under this Act on taxable
supply of goods or services or both made by him or by his agent but excludes tax payable by him on
reverse charge basis;

LEVY AND COLLECTION [SEC 7]

Levy and Collection of UTGST for Inter-State Sale Except on Alcoholic Liquor [Sec 7(1)]
Subject to the provisions of sub-section (2), there shall be levied a tax called the Union territory tax
on all intra-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 twenty per cent., as may be notified by the Central
Government on the recommendations of the Council and collected in such manner as may be
prescribed and shall be paid by the taxable person.
UTGST on Petrol etc. From Later Date [Sec 7(2)]
The Union territory 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 Central Government on the recommendations of the Council.
On Notified Goods or Services UTGST to be paid on Reverse Charge Basis [Sec 7(3)]
The Central 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

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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.
Registered Person Liable to pay UTGST if Purchased Goods from Unregistered Dealer [Sec 7(4)]
The Union territory tax in respect of the supply of taxable goods or services or both by a supplier,
who is not registered, to a registered person shall be paid by such person on reverse charge basis as
the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable
for paying the tax in relation to the supply of such goods or services or both.
UTGST on Electronic Commerce Operator [Sec 7(5)]
The Central Government may, on the recommendations of the Council, by notification, specify
categories of services the tax on intra-State supplies of which shall be paid by the electronic
commerce operator 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 he does not have a representative in the said territory, such electronic
commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and
such person shall be liable to pay tax.

PAYMENT OF TAX

Payment of Tax [Sec 9]

The amount of input tax credit available in the electronic credit ledger of the registered person on
account of,—
a) integrated tax shall first be utilised towards payment of integrated tax and the amount
remaining, if any, may be utilised towards the payment of central tax and State tax, or as the
case may be, Union territory tax, in that order;
b) the Union territory tax shall first be utilised towards payment of Union territory tax and the
amount remaining, if any, may be utilised towards payment of integrated tax;
c) the Union territory tax shall not be utilised towards payment of central tax.

Transitional Provisions for Input Tax Credit [Sec 18]

Sec 18(1) A registered person, other than a person opting to pay tax under section 10 of the Central
Goods and Services Tax Act, shall be entitled to take, in his electronic credit ledger, credit of the
amount of Value Added Tax and Entry Tax, if any, carried forward in the return relating to the period
ending with the day immediately preceding the appointed day, furnished by him under the existing
law, not later than ninety days after the said day, in such manner as may be prescribed: Provided
that the registered person shall not be allowed to take credit in the following circumstances,
namely:—
(i) where the said amount of credit is not admissible as input tax credit under this Act; or
(ii) where he has not furnished all the returns required under the existing law for the period
of six months immediately preceding the appointed day; or
(iii) where the said amount of credit relates to goods sold under such exemption
notifications as are notified by the Government:
Provided further that so much of the said credit as is attributable to any claim related to section 3,
sub-section (3) of section 5, section 6 or section 6A or sub-section (8) of section 8 of the Central
Sales Tax Act, 1956 that is not substantiated in the manner, and within the period, prescribed in rule

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12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 shall not be eligible to be
credited to the electronic credit ledger: Provided also that an amount equivalent to the credit
specified in the second proviso shall be refunded under the existing law when the said claims are
substantiated in the manner prescribed in rule 12 of the Central Sales Tax (Registration and
Turnover) Rules, 1957.
Sec 18(2) A registered person, other than a person opting to pay tax under section 10 of the Central
Goods and Services Tax Act, shall be entitled to take, in his electronic credit ledger, credit of the
unavailed input tax credit in respect of capital goods, not carried forward in a return, furnished
under the existing law by him, for the period ending with the day immediately preceding the
appointed day in such manner as may be prescribed:
Provided that the registered person shall not be allowed to take credit unless the said credit was
admissible as input tax credit under the existing law and is also admissible as input tax credit under
this Act.
Explanation.—For the purposes of this section, the expression ‘‘unavailed input tax credit’’ means
the amount that remains after subtracting the amount of input tax credit already availed in respect
of capital goods by the taxable person under the existing law from the aggregate amount of input
tax credit to which the said person was entitled in respect of the said capital goods under the
existing law.
Sec 18(3) A registered person, who was not liable to be registered under the existing law or who was
engaged in the sale of exempted goods or tax free goods or goods which have suffered tax at first
point of their sale in the Union territory and the subsequent sales of which are not subject to tax in
the Union territory under the existing law but which are liable to tax under this Act or where the
person was entitled to the credit of input tax at the time of sale of goods, shall be entitled to take, in
his electronic credit ledger, credit of the value added tax and entry tax, if any, in respect of inputs
held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed
day subject to the following conditions, namely:—
(i) such inputs or goods are used or intended to be used for making taxable supplies under
this Act;
(ii) the said registered person is eligible for input tax credit on such inputs under this Act;
(iii) the said registered person is in possession of invoice or other prescribed documents
evidencing payment of tax under the existing law in respect of such inputs; and
(iv) such invoices or other prescribed documents were issued not earlier than twelve
months immediately preceding the appointed day:
Provided that where a registered person, other than a manufacturer or a supplier of services, is not
in possession of an invoice or any other documents evidencing payment of tax in respect of inputs,
then, such registered person shall, subject to such conditions, limitations and safeguards as may be
prescribed, including that the said taxable person shall pass on the benefit of such credit by way of
reduced prices to the recipient, be allowed to take credit at such rate and in such manner as may be
prescribed.
Sec 18(4) A registered person, who was engaged in the sale of taxable goods as well as exempted
goods or tax free goods under the existing law but which are liable to tax under this Act, shall be
entitled to take, in his electronic credit ledger,— (a) the amount of credit of the value added tax and
entry tax, if any, carried forward in a return furnished under the existing law by him in accordance
with the provisions of sub-section (1); and (b) the amount of credit of the value added tax and entry
tax, if any, in respect of inputs held in stock and inputs contained in semi-finished or finished goods
held in stock on the appointed day, relating to such exempted goods or tax free goods in accordance
with the provisions of sub-section (3).
Sec 18(5) A registered person shall be entitled to take, in his electronic credit ledger, credit of value
added tax and entry tax, if any, in respect of inputs received on or after the appointed day but the
tax in respect of which has been paid by the supplier under the existing law, subject to the condition

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that the invoice or any other tax paying document of the same was recorded in the books of account
of such person within a period of thirty days from the appointed day: Provided that the period of
thirty days may, on sufficient cause being shown, be extended by the Commissioner for a further
period not exceeding thirty days: Provided further that the said registered person shall furnish a
statement, in such manner as may be prescribed, in respect of credit that has been taken under this
sub-section.
Sec 18(6) A registered person, who was either paying tax at a fixed rate or paying a fixed amount in
lieu of the tax payable under the existing law shall be entitled to take, in his electronic credit ledger,
credit of value added tax in respect of inputs held in stock and inputs contained in semi-finished or
finished goods held in stock on the appointed day subject to the following conditions, namely:—
(i) such inputs or goods are used or intended to be used for making taxable supplies under
this Act;
(ii) the said registered person is not paying tax under section 10 of the Central Goods and
Services Tax Act;
(iii) the said registered person is eligible for input tax credit on such inputs under this Act;
(iv) the said registered person is in possession of invoice or other prescribed documents
evidencing payment of tax under the existing law in respect of inputs; and (v) such
invoices or other prescribed documents were issued not earlier than twelve months
immediately preceding the appointed day.
Sec 18(7) The amount of credit under sub-sections (3), (4) and (6) shall be calculated in such manner
as may be prescribed.

Transitional Provisions Relating to Job Work [Sec 19]

Sec 19(1) Where any inputs received at a place of business had been disptached as such or
disptached after being partially processed to a job worker for further processing, testing, repair,
reconditioning or any other purpose in accordance with the provisions of existing law prior to the
appointed day and such inputs are returned to the said place on or after the appointed day, no tax
shall be payable if such inputs, after completion of the job work or otherwise, are returned to the
said place within six months from the appointed day:
Provided that the period of six months may, on sufficient cause being shown, be extended by the
Commissioner for a further period not exceeding two months: Provided further that if such inputs
are not returned within a period of six months or the extended period from the appointed day, the
input tax credit shall be liable to be recovered in accordance with the provisions of clause (a) of sub-
section (8) of section 142 of the Central Goods and Services Tax Act.
Sec 19(2) Where any semi-finished goods had been despatched from any place of business to any
other premises for carrying out certain manufacturing processes in accordance with the provisions
of existing law prior to the appointed day and such goods (hereinafter in this section referred to as
‘‘the said goods’’) are returned to the said place on or after the appointed day, no tax shall be
payable if the said goods, after undergoing manufacturing processes or otherwise, are returned to
the said place within six months from the appointed day:
Provided that the period of six months may, on sufficient cause being shown, be extended by the
Commissioner for a further period not exceeding two months:
Provided further that if the said goods are not returned within a period specified in this sub-section,
the input tax credit shall be liable to be recovered in accordance with the provisions of clause (a) of
sub-section (8) of section 142 of the Central Goods and Services Tax Act: Provided also that the
person despatching the goods may, in accordance with the provisions of the existing law, transfer
the said goods to the premises of any registered person for the purpose of supplying therefrom on
payment of tax in India or without payment of tax for exports within six months or the extended
period, as the case may be, from the appointed day.

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Sec 19(3) Where any goods had been despatched from the place of business without payment of tax
for carrying out tests or any other process to any other premises, whether registered or not, in
accordance with the provisions of existing law prior to the appointed day and such goods are
returned to the said place of business on or after the appointed day, no tax shall be payable if the
said goods, after undergoing tests or any other process, are returned to such place within six months
from the appointed day: Provided that the period of six months may, on sufficient cause being
shown, be extended by the Commissioner for a further period not exceeding two months: Provided
further that if the said goods are not returned within the period specified in this sub-section, the
input tax credit shall be liable to be recovered in accordance with the provisions of clause (a) of sub-
section (8) of section 142 of the Central Goods and Services Tax Act: Provided also that the person
despatching the goods may, in accordance with the provisions of the existing law, transfer the said
goods from the said other premises on payment of tax in India or without payment of tax for exports
within six months or the extended period, as the case may be, from the appointed day.
Sec 19(4) The tax under sub-sections (1), (2) and (3) shall not be payable only if the person
despatching the goods and the job worker declare the details of the inputs or goods held in stock by
the job worker on behalf of the said person on the appointed day in such form and manner and
within such time as may be prescribed.

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THE GOODS & SERVICE TAX (COMPENSATION TO

STATES) ACT, 2017
INTRODUCTION
GST Compensation Law provides for compensating states that incur losses because of
implementation of the Goods and Service Tax (GST) in first 5 years.

SHORT TITLE, EXTENT AND COMMENCEMENT [Sec 1]

Title: The Goods and Service Tax (Compensation to States) Act, 2017
It extends to whole of India.

DEFINITIONS [Sec 2]
1) Transition Date [Sec 2(q)]
shall mean, in respect of any State, the date on which the State Goods and Services Tax Act of
the concerned State comes into force;
2) Transition Period [Sec 2(r)]
means a period of five years from the transition date

PROJECTED GROWTH RATE [Sec 3]

The projected nominal growth rate of revenue subsumed for a State during the transition period
shall be 14% per annum.

BASE YEAR [SEC 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.

OBJECTIVES OF THE ACT

The Act provides for the following:
1) It provides for the compensation of loss to the states arising out of introduction of Goods and
Service Tax in India.
2) The financial year 2015-16 shall be taken as base year for the purpose of calculating
compensation amount payable to the States.
3) The revenue to be compensated consists of revenues from all the taxes that are levied by the
States which are now to subsumed under goods and services tax, as audited by the comptroller
and auditor general of India.
4) The projected growth rate of revenue during transition period shall be 14%.
5) The compensation shall be released bi-monthly on provisional basis and final adjustment shall
be made after getting audited accounts of the year from the comptroller and auditor general of
India.
6) In case of eleven special category states referred to in article 279A of the Constitution the
revenue forgone on account of exemption of taxes granted by states shall be counted towards
the definition of Revenue for the base year 2015-16 for calculating compensation.
7) The revenue of the states that were not credited to the consolidated funds of states
government but were directly collected by “mandi” municipality” would also be included in the
definition of revenue if there were subsumed in the goods and service tax.

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8) To generate revenue to compensate states for 5 years for loss suffered by the states on account
of implementation of goods and service tax, by levy a cess on such goods as recommended by
the GST Council over and above the GST rate on that item.
9) The proceeds of the cess shall be credited to the fund called Goods and Service tax
compensation fund all the compensation payable to the states as GST compensation shall be
paid from the above mentioned fund. The balance if any left out in the GST compensation fund
after 5 years shall be equally shared between the Centre and the States.

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PRACTICAL QUESTIONS
1) Mr X purchases a product for Rs 3,40,000 plus SGST & CGST @ 10% each from Mr Y. He adds Rs
26,000 as his profit and sells the customer by levying SGST & CGST. Compute cost to consumer?
Also calculate the net GST payable by Mr Y.
Ans: Rs 4,39,200 and net GST: SGST= Rs 2,600; CGST = Rs 2,600
2) Mr Y purchases a product for Rs 1,700 plus SGST & CGST @ 10% each from Mr Z. He adds Rs 130
as his profit and sells the customer by levying SGST & CGST @ 20%. Compute cost to consumer?
Also calculate the net GST payable by Mr Y.
Ans: Rs 2,562 and GST: SGST= Rs 196; CGST = Rs 196
3) Mr X of Maharashtra, purchased Raw material A from Maharashtra for Rs 18,000 (inclusive
SGST & CGST @ 10%) and Raw material B for Rs 3,10,000 plus SGST & CGST @ 10%. His
expenses are Rs 6,75,000. Margin is 20% on cost. SGST & CGST rate is 10% each on supply. How
much net GST is payable by the trader?
Ans: Net GST: SGST= Rs 87,500; CGST = Rs 87,500
4) T ltd supplies the following information to you:
Value of receipt of goods and services: Rs 10,00,000
Value of supply of goods and services: Rs 12,00,000
SGST & CGST rate is 10% on input as well as output.
How much net GST is payable by T ltd.
Ans: Net GST: SGST= Rs 20,000; CGST = Rs 20,000
5) Z ltd supplies the following information to you:
Value of receipt of goods and services: Rs 10,00,000
Value of supply of goods and services: Rs 12,00,000
SGST & CGST rate is 10% on input
SGST & CGST rate is 6% on output.
How much net GST is payable by Z ltd.
Ans: Net GST: SGST= Rs 28,000; CGST = Rs 28,000 (Excess)
6) Y ltd supplies the following information to you:
Value of receipt of goods and services: Rs 10,00,000
Value of supply of goods and services: Rs 6,00,000
Y ltd had supplied only 50% of goods and services out of goods and services received by it.
SGST & CGST rate is 10% on input
SGST & CGST rate is 10% on output.
How much net GST is payable by Y ltd.
Ans: Net GST: SGST= Rs 40,000; CGST = Rs 40,000 (Excess)
7) Invoice price of goods received by N ltd is Rs 2,40,000 (inclusive SGST & CGST each @ 10%.
Details of supply of goods are as follows:
Value of goods sold within State: Rs 1,60,000
Value of goods exported: Rs 80,000
SGST & CGST rate is 10% on output.
How much net GST is payable by Y ltd.
Ans: Net GST: SGST= Rs 4,000; CGST = Rs 4,000 (Excess)

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8) A manufacturer use input and input services and makes two products namely Product X and
product Y. Product X is liable to GST while Product Y is exempt. Other details are as follows:
Value of goods and services received: Rs 5,00,000 (SGST & CGST 10%)
Value of Product X sold: Rs 40,000 (SGST & CGST 10%)
Value of Product Y sold: Rs 40,000 (exempt from SGST & CGST)
50% of input and input services has been used for Product X.
How much net GST is payable by Y ltd.
Ans: Net GST: SGST= Rs 25,000; CGST = Rs 25,000 (Excess)
9) XYZ ltd is engaged in sale of Product X. All the sales are made outside the State for the month
Value of goods and services received: Rs 14,00,000 (SGST & CGST @10%)
Value of product X sold: Rs 16,80,000 (IGST 20@)
How much net GST is payable by Y ltd.
Ans: Net GST: Rs 56,000
10) Value of receipt of goods and services within state: Rs 7,00,000
Value of supply of goods and services within state: Rs 4,20,000
Value of supply of goods and services in Inter-state sale: Rs 4,20,000
IGST rate for supply of goods and services is 20%.
SGST and CGST rate on receipt and supply of goods and services is 10% each.
Ans: Net GST: Rs 28,000
11) Value of receipt of goods and services Inter-state: Rs 10,00,000
Value of supply of goods and services within state: Rs 12,00,000
IGST rate on receipt is 20%.
SGST and CGST is 10% each.
Ans: Net GST: Rs 40,000
12) A registered dealer of Maharashtra purchased goods from another registered dealer located at
Delhi at Rs 10,00,000 plus IGST @ 20%.
Out of the inter-state purchase he supplied/sold some goods in Maharashtra at Rs 6,00,000 plus
SGST & CGST @ 10% and remaining goods to dealer located in Karnataka at Rs 6,00,000 plus
IGST @ 20%.
Ans: Net GST: Rs 40,000
13) From the following details find out the Total GST collection by the State Government and
Central Government?
Seller Purchaser Amount (Rs)
Dinesh Mohan 1,80,000
Mohan Trilok 2,50,000
Trilok Consumer 3,00,000
The SGST & CGST rate on purchase and sales is 12% each. Price above are exclusive of GST.
Ans: Net GST: SGST & CGST =Rs 36,000

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CUSTOM LAWS – BASIC CONCEPTS

CONSTITUION OF INDIA
Union List; Entry No. 83 – Duties of Customs including Export Duties.

CUSTOMS LAW BODY

The body of the Customs Law comprises of:
The Customs Act, 1962 It provides for levy of import and export duties of customs on goods
imported into or exported from India through Sea, Air or Land. It
contains provisions of levy and collection of customs duty, baggage
charges, warehouse charges etc.
The Customs Tariff Act, 1975 The Customs Tariff Act, 1975 has been enacted for classification of
goods. The various types of custom duties to be levied on the
importation and exportation of the articles are provided under this
Act. It contains two Schedules:
a) The First Schedule is known as, “Import Tariff” and it refers
to goods liable to import duties of customs.
b) The Second Schedule is known as, “Export Tariff” and it
refers to goods liable to export duties of customs.
Rules Section 156 of the Customs Act, 1962 empowers the Central
Government to make rules. Such rules may provide for matters
relating to the manner of determining the value of imported goods/
export goods, duty drawback, baggage etc. The Rules so framed are
consistent with the provisions of the Customs Act, 1962.
Regulation The Central Board of Excise and Customs is empowered under
Section 157 of the Customs Act, 1962 to make regulations to carry
out the purposes of the Act. The Regulations so framed are
consistent with the provisions of the Act as well as the rules framed
by Central Government.
Notifications The Central Government has been empowered to issue
notifications under various sections of the Customs Act,7962 for
effective implementation of the provisions of the Customs Act,
1962.

ASSESSMENT:
 Means, a process of determining the tax liability with the provisions of the Act.
 It includes: provisional assessment, self assessment, re-assessment and any order of assessment
in which the duty assessed is nil.

SHORT TITLE, EXTENT AND COMMENCEMENT [SEC 1]

1) This Act may be called the Customs Act, 1962
2) It extends to the whole of India
3) It has been further extend to designated areas in the continental shelf and the exclusive
economic zone of India.

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4) It shall come into force on such date as the Central Government may, by notification in the
Official Gazette, appoint.

DEFINATIONS [SEC 2]

INDIA [SEC2 (27)]

India includes the TERRITORIAL WATERS OF INDIA.

TERRITORIAL WATERS OF INDIA:

Territorial Water extends to 12 nautical miles from the baseline. It also includes any bay, gulf,
harbour, creek, or tidal river. The outer boundary of territorial waters is international boundary of
India beyond which the high sea lies.

INDIAN CUSTOMS WATERS: [SEC 2(28)]

Indian customs water means the waters extending into the sea up to the limit of contiguous zone of
India under section 5 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976, includes any bay, gulf, harbour, creek or tidal river.

IMPORT [SEC 2(23)]

Import means bringing into India from a place outside India.
TAXABLE EVENT: The taxable event occurs when the imported goods crosses the customs
barrier/frontiers and the Bill of Entry for Home Consumption is filled u/s 46 or 68.
GARDEN SILK MILLS LTD-2002 SC,, KIRAN SPINNING MILLS-1999 SC.

STORES
Stores means; goods for use in a vessel or aircraft, and includes fuel and spare parts and other
articles or equipment, whether or not for immediate fitting.

GOODS [SEC 2(22)]

Goods includes:
a) Vessels, aircrafts and vehicles;
b) Stores;
c) Baggage;
d) Currency and negotiable instruments; and
e) Any other kind of moveable property.
Even though the vessel is covered under the definition of goods but, if the vessel enters the
territorial waters merely as conveyance. Then it cannot be suggested that the vessel was imported
and accordingly no question of import duty arises. JALYAN UDYOG – BOM HC

IMPORTED GOODS: [SEC 2(25)]

Imported Goods means any goods brought into India from a place outside India but does not include
goods which have been cleared for home consumption.

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COASTAL GOODS [SEC 2(7)]

Coastal Goods means:
 goods, other than imported goods,
 transported in a vessel,
 from one port in India to another port in India.
DUTIABLE GOODS [SEC 2(14)]
Dutiable Goods Means:
 any goods which are chargeable to duty and
 on which duty has not been paid.
Therefore, the goods on which no custom duty is payable either due to exemption notification or no
duty is specified in tariff, will not be regarded as dutiable goods.

PROHIBITED GOODS [SEC 2(33)]

Prohibited Goods Means:
 any goods the import or export of which is subject to any prohibition under this Act or any
other law for the time being in force
 but does not include any such goods in respect of which the conditions subject to which the
goods are permitted to be imported or exported have been complied with.

IMPORTER [SEC 2(26)]

Importer, in relation to any goods,
 At any time between their importation and the time when they are cleared for home
consumption,
 Includes,
 Any owner or
 Any person holding himself out to be an importer.

EXPORT [SEC 2 (18)]

Export means taking out of India to a PLACE OUTSIDE INDIA.

EXPORT GOODS [SEC 2(19)]

Export Goods means any goods which are to be taken out of India to a place outside India.

EXPORTER [SEC 2(20)]

Exporter, in relation to any goods,
 At any time between their entry for export and the time when they are exported,
 Includes,
 Any owner or
 Any person holding himself out to be an exporter.

CONVEYANCE [SEC 2(9)]

Conveyance includes a Vessel, an Aircraft and a Vehicle

VEHICLE [SEC 2(42)]

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Vehicle means conveyance of any kind used on land and includes a railway vehicle.

PERSON IN CHARGE [SEC 2(31)]

Person in Charge means
 in relation to a vessel, the master of the vessel;
 in relation to an aircraft, the commander or pilot‐in‐charge of the aircraft;
 in relation to a railway train, the conductor, guard or other person having the chief direction of
the train;
 in relation to any other conveyance, the driver or other person-in-charge of the conveyance.

FOREIGN GOING VESSEL/AIRCRAFT [SEC 2(21)]

Foreign going Vessel/ Aircraft means:
 any vessel or aircraft for the time being engaged in the carriage of goods or passengers,
 between any port or airport in India and any port or airport outside India,
 whether touching any immediate port or airport in India or not,
And Includes
 any naval vessel of a foreign Government, taking part in any naval exercises;
 any vessel engaged in Fishing or any other operations Outside the TWI;
 any vessel or aircraft, proceeding to a place outside India for any purpose.

SMUGGLING [SEC 2(39)]

Smuggling in relation to any goods, means any act or omission which will render such goods liable to
confiscation under section 111 or section 113.

CUSTOMS AREA [SEC 2(11)]

Customs area means the area of a Custom Station; and includes any area in which imported goods
or export goods are ordinarily kept before clearance by Custom Authorities.

CUSTOMS STATION [SEC 2(13)]

Custom station means Customs Port, Customs Airport or Land Customs Station.

CUSTOMS PORT [SEC 2(12)]

Customs port means Any Port appointed u/s 7 (by CBEC) to be a Customs port and
includes A Place appointed u/s 7 (by CBEC) to be a Inland Container Depot (ICD).

CUSTOMS AIRPORT [SEC 2(10)]

Customs Airport means Any Airport appointed u/s 7 (by CBEC) to be a Customs airport.

LAND CUSTOMS STATION [SEC 2(29)]

Land Customs station means Any Place appointed u/s 7 (by CBEC) to be a Land Customs station.

WAREHOUSE [SEC 2(43)]

Warehouse, means
 a Public Warehouse appointed u/s 57 or
 A Private Warehouse licensed u/s 58.

WAREHOUSED GOODS [SEC 2(44)]

Warehoused goods means the goods deposited in a warehouse.

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WAREHOUSING STATION [SEC 2(45)]

Warehousing station means a place declared as warehousing station u/s 9 (by CBEC).

TARIFF VALUE
Tariff value in relation to any goods, means the tariff value fixed in respect thereof u/s 14(2).

ENTRY
This is a term used in relation to goods. The following constitute entry:-
Imported goods : Filling Bill of Entry u/s 46.
Export goods : Filling Shipping Bill u/s 50. (In case of vessel and aircraft)
: Filling Bill of Export u/s 50. (In case of vehicle)
Postal Parcel : Label affixed to or declaration accompanying the parcel u/s 82.
Baggage : Baggage Declaration u/s 77.

CHARGING SECTION [SEC 12]

 The duty of customs shall be levied
 at such rates as may be specified under the Customs Tariff Act, 1975,
 on goods IMPORTED into, or EXPORTED FROM, India.
 The provisions of sub‐section (1) shall apply in respect of all goods belonging to Government
as they apply in respect of goods not belonging to Government.

Basic Provisions:
 Essential ingredients for Charge of custom duty : The charging section provides the following-
a) The levy of duty is on goods.
b) The goods must be imported into or exported from India.
c) The rate at which duty of customs is to be levied is specified in the Customs Tariff Act, 1975
or any other law for the time being in force.
d) Government goods shall be treated at par with the non-government goods for the Purpose
of levy of customs duty. Such levy of duty is subject to the exceptions as provided in this Act
or any other law for the time being in force.
Therefore, the importation of goods into India or exportation of goods from India is taxable
event in customs.

Major Principles in respect of Taxable events as follows:

 TAXABLE EVENT IN CASE OF IMPORTS
 In case of goods cleared for home consumption: The Supreme Court has held in Kiran
spinning Mills . Collector that taxable event occurs when the customs barrier is crossed
and not on the date when goods had landed in India or had entered the territorial waters
of India.
Taxable event is reached when the goods reach the customs barrier and the bill of entry for
home consumption is filed.
 In case of goods cleared for warehousing: In case of warehoused goods, the goods
continue to be in customs bond. Import takes place when goods cleared for home
consumption from warehouse.
 TAXABLE EVENT IN CASE OF EXPORTS

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Export of goods is complete when the goods cross the territorial waters of India. If ship sinks
within the territorial waters, export is not complete. [RAJINDRA DYEING AND PRINTING MILLS
(SC)]
SUN EXPORTS (SC): It was held that export is complete once the goods leave exclusive
economic zone.

RATES OF DUTY:
 Preferential rate of Duty: If goods are imported from the preferential area (as notified by the
Central Government), then a lower preferential rate of duty will be applicable on such goods
subject to the fulfilment of specified conditions.
 Standard rate of Duty: In any entry, if no preferential rate of duty has been notified, the
standard rate of duty shall be applicable.

EXCEPTIONAL CASES WHERE CUSTOMS DUTY NOT LEVIABLE:

SECTION COVERAGE EFFECT
13 Pilfered Goods No duty
(Importer not Liable for payment of Duty)
22 Damaged or Deteriorated Goods Reduced/Abated Duty
Duty will be reduced proportionate to
reduction in value of goods due to damage.
[Value of D/D Goods: At the option of
importer:
 Can leave determination of value with
Authority
 Can get the goods sold and then gross
sale proceeds shall be taken as value of
goods
23(1) Goods Lost/ Destroyed Remission of Duty
Remission application to Authority and
remission order would be passed
[Refund would be granted if importer had
already paid the duty]
23(2) Title of Goods surrendered No Duty
24 Goods Denatured/Mutilated Duty on goods in Denatured/Mutilated Form
 Denaturing: changing nature of
goods making them unfit for one or
more purposes
 Mutilation: destroying goods in
goods condition when imported as
waste/scrap

PILFERED GOODS [SEC 13]

MEANING OF PILFER
The term Pilfer is defined to mean, loss of goods in small quantities by reasons of theft etc.
Therefore, the term does not include loss of total package. In order to claim pilferage the following
circumstances should exist:

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a) there should be evidence of tampering with the packages;

b) there should be blank space for the missing articles in the package; and
c) the missing articles should be unit articles and not part articles.
NO DUTY ON PILFERED GOODS [SEC 13] If:
 any imported goods are pilfered;
 after the unloading thereof;
 and before the proper officer has made an order for clearance for home consumption or
deposit in a warehouse;
 the importer shall not be liable to pay the duty leviable on such goods;
 except where such goods are restored to the importer after pilferage.
SPECIFIED POINTS TO BE CONSIDERED:
 Sec 13 doesn’t apply in the case goods are pilfered after the order of clearance but before
actual clearance and importer liable to pay duty.
 Sec 13 doesn’t deals with loss or destruction of goods.
 Provisions of sec 13 would not apply if it is shown that pilferage took place prior to unloading of
goods.
 In case of pilferage only sec 13 applies and remission of duty u/s 23(1) is not permissible.

GOODS LOST/ DESTROYED [SEC 23(1)]

In case where it is shown to the satisfaction of AC/DC of Customs -
 that any imported goods have been lost (otherwise than as a result of pilferage) or destroyed,
 at any time before clearance for home consumption, the AC/DC shall remit the duty on such
goods.

Note: In case of pilferage goods duty has to be paid in case of warehoused goods because sec 23 not
applicable on pilferage and sec 13 not applicable on warehouse.

GOODS TITLE OF WHICH IS SURRENDERED [SEC 23(2)]

The owner of the imported goods may at any time before making of,-
 an order for clearance of goods for home consumption u/s 47 or
 an order for permitting the deposit of goods in a warehouse under section 60 has been made
i.e. WAREHOUSING ORDER u/s 60,
 relinquish his title to the goods and
 thereupon he shall not be liable to pay the duty thereon.
However, the owner of any such imported goods shall not be allowed to relinquish his title to such
goods regarding which an offence appears to have been committed under this Act or any other for
the time being in force.
Difference between Sec 13 & Sec 23
SECTION 13 SECTION 23(1)
Section 13 deals with pilferage. Section 23(1) deals with loss or destruction of
goods, except pilferage.
No duty is payable at all u/s 13, but liability Duty is payable u/s 23(1), but it is remitted by
revives of duty if goods are restored. AC/DC of customs. Thus, unless remitted, duty
has to be paid u/s 23(1).
Importer does not have to prove pilferage. Burden of proof is on importer to prove loss or
destruction.
Pilferage should be before order for clearance Loss or destruction can be any time before

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is made.
Loss must be only due to pilferage.
U/s 13, normally duty is not paid. However, if
duty is paid before examination of goods,
refund can be claimed if goods are found to be
pilfered during examination but before order
for clearance are made.
Section 13 is not applicable for warehoused
goods.
Sec 13 is the Inherent right of assessee.
clearance.
Loss or destruction may be due to fire, accident
etc, but not pilferage e.g. loss by leakage is
covered u/s 23.
U/s 23(1), if duty is paid, then refund can be
obtained only if remission is granted by Customs
Authorities. Thus, remission u/s 23(1) is at the
discretion of Custom Authorities.
Section 23(1) is applicable for warehoused goods
also.
Sec 23(1) is the Mercy of AC/DC

Ques 2009: Arpit Alloys Ltd imported a consignment of metal bars during July, 2012 by sea, weighing
5,300 tons from UK. A bill of entry for home consumption was filed and an order for clearance was
passed by the AC. The company paid the applicable duty. Thereafter, delivery was taken and on
examination by the company’s representatives; it was found that only 5,000 tons of metal bars were
available at the dock though was paid for the entire lot of 5,300 tons. Since there was no short
landing of the cargo, the short delivery of 300 tons was also supported by the weightment certificate
issued to the company by the port authorities. The company made a representation to the customs
department for appropriate relief u/s 23 under the Customs Act, 1962. Examine. (5 marks)
Ans Sec 23 states that where the goods imported have been lost without pilferage or destroyed at
any time before home consumption, duty on such on such goods shall be remitted. Here, loss is
forever without any hope of recovering the same. In the instant case, 300 tons of metal bars have
been lost in the custody of port trust authorities also substantiate the same. The company is
therefore entitled to remission of the duty on the lost goods i.e., 300 tons u/s 23 of the Customs Act.

DAMAGED OR DETERIORATED GOODS [SEC 22]

 Situations for reduction or abatement of duty: Where it is shown to the satisfaction of the
AC/DC of Customs that ,-
 any imported goods - had been damaged or had deteriorated - at any time before or during
the unloading of the goods in India; or
 any imported goods, other than warehoused goods, - had been damaged or deteriorated - at
any time after the unloading thereof in India but before their examination under section 17,
on account of any accident not due to any willful act, negligence or default of the importer, his
employee or agent or
 any warehoused goods ‐ had been damaged or deteriorated - at any time before clearance for
home consumption on account of any accident not due to any willful act, negligence or default
of the owner, his employee or agent.
 Duty liability in case of abatement: The goods shall be chargeable to duty determined in the
following manner:
Duty leviable on such Customs Duty (Goods Value (of Damaged/ Deteriorated
damage or deteriorated Before Damage/ x goods)
goods Deterioration) Value ( Goods before Damage/
Deterioration)
Abatement of Duty Duty leviable on the goods - Duty leviable on Goods After
Before Damage Damage
 Valuation of damaged/deteriorated goods : The value of damaged or deteriorated goods may
be ascertained by either of the following methods at the option of the owner,-
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 The value of such goods may be ascertained by the proper officer; or

 Such goods may be sold by proper officer by public auction or by tender or with consent of
owner in any other manner and the gross sale proceeds, shall be deemed to be the value of
such goods.

GOODS DENATURE/MUTILATED [SEC 24]

Section 24 of Customs Act, 1962, provides that an importer can request Central Government to
denature or mutilate the imported goods, which are ordinarily used for more than one purpose/ so
as to render them unfit for one or more of such purpose. If the goods are denatured or mutilated,
they are assessed as if the goods were imported in denatured or mutilated form.

Relevant Date for Imported Goods [Sec 15]

Situations
B/E for Home Consumption u/s 46
B/E for Home Consumption u/s 68
Other Cases
Provisions of this Section shall not apply to
 Baggage
 Goods imported by Post.
Relevant Date
Date of filling of Such B/E
Note: (Filling of Advance B/E u/s 46(3))
Where Advance B/E is Filled in case of
Vessel: Relevant date: Date of Grant of entry inward to
such vessel
Aircraft: Relevant Date: Date of such arrival
Vehicle: Relevant Date: Date of presentation of B/E
Date of filling of B/E for Home Consumption u/s 69
Date of payment of Duty

Exchange Rate Notified by CBEC

 The date on which a bill of entry in respect of such goods is presented u/s 46 (Bill of entry filled
u/s 46).
 The date on which a bill of entry in respect of such goods is presented u/s 46 (Bill of entry filled
u/s 68.
Qusetion X Ltd import certain article worth $ 1,00,000 from USA details of which shown below:
Particular Date Rate of Duty Exchange rate By Exchange rate By
RBI CBEC
Date of arrival of 23/06/2016 10% $1=60 $1=61
vessel
Date of filing of 29/06/2016 12% $1=62 $1=63
bill of entry
Date of entry 01/07/2016 15% $1=64 $1=65
inward
Ans Determination rate of duty and exchange rate
Rate of duty: 15%
Exchange rate $1= 63

Relevant Date for Exported Goods [Sec 16]

Situations Relevant Date
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Goods entered for export Date on which proper officer makes an order permitting
clearance and loading of goods for exportation.
Other Cases (e.g. smuggled goods) Date of payment of Duty
Exchange Rate Notified by CBEC
Of the date on which shipping bill or bill of export is presented u/s 50.

Assessment Of Duty [Sec 17]

 SELF ASSESSMENT by importer or exporter: An -
 importer entering any imported goods under section 46 (i.e. Bill of entry is presented by him
for clearance of goods), or
 exporter entering any export goods under section 50 (i.e. Shipping bill or Bill of export is
presented for clearance of export goods), shall self-assess the duty, if any, leviable on such
goods. However, stores can be warehoused without assessment as provided in Section 85.
 The proper officer may verify the self-assessment of such goods and for this purpose, examine
or test any imported goods or export goods or such part thereof as may be necessary.
 For verification of self-assessment the proper officer, may require the importer, exporter or any
other person to produce any contract, broker's note, insurance policy, catalogue or other
document, whereby the duty leviable on the imported goods or export goods, as the case may
be, can be ascertained, and to furnish any information required for such ascertainment which is
in his power to produce or furnish and thereupon, the importer, exporter or such other person
shall produce such document or furnish such information.
 RE‐ASSESSMENT of duty in case of incorrect self assessment: Where it is found on verification,
examination or testing of the goods or otherwise that the self-assessment is not done correctly,
the proper officer may, re-assess the duty leviable on such goods. However, such re-assessment
shall be without prejudice to any other action which may be taken under this Act.
 Reassessment contrary to self‐assessment - Where any re-assessment done is contrary to the
self assessment done by the importer or exporter regarding valuation of goods, classification,
exemption or concessions of duty availed consequent to any notification issued under this Act
and in cases other than those where the importer or exporter, as the case may be confirms his
acceptance of the said re-assessment in writing, the proper officer shall pass a speaking order
on the re-assessment. Such speaking order is passed within 15 days from the date of
re-assessment of the bill of entry or the shipping bill as the case may be.
 Audit by proper officer at his office or premises of importer or exporter.
For carrying out such audit, On-site Post Clearance Audit at the Premises of Imports and
Exporters Regulations, 2011 have been framed. According to the said regulations, the proper
officer is required to give not less than 15 days advance notice to the importer or exporter to
conduct audit.

Imp Notes
 Audit of transaction after goods have been cleared from custom is known as post clearance
audit.
 Manner of conducting audit
 PO shall give 15 days advance notice for audit
 Before preparing draft audit report, given importer and exporter an opportunity of neing
heard
 Importer of Exporter who contravene the provision of these regulation shall be liable to
penalty upto Rs 50,000.

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DETERMINATION OF DUTY WHERE GOODS CONSIST OF ARTICLES LIABLE TO DIFFERENT RATES OF

DUTY [SEC 19]
Except as otherwise provided in any law for the time being in force, where goods consist of a set of
articles, duty shall be calculated as follows,-
a) articles liable to duty with reference to quantity shall be chargeable to that duty;
b) articles liable to duty with reference to value shall be chargeable to duty as under,-
 if such articles are with the same rate of duty then duty shall be levied at that rate.
 If the articles in the set are liable to duty at different rates then duty shall be calculated at
the highest of those rates.
c) articles not liable to duty, then they shall also be chargeable to duty at the highest of the rates
specified in (b) above.

Rate of Duty applicable to ACCESSORIES, ETC. SUPPLIED WITH IMPORTED ARTICLE , then such
accessories/spare parts and maintenance implements shall be chargeable at the same rate of duty
as that article, if the proper officer is satisfied that in the ordinary course of trade,-
 such accessories, parts and implements are compulsorily supplied with that article; and
 no separate charge is made for such supply, their price being included in the price of that
article.

Explain briefly the expression ‘Person‐in‐charge’.

Ans. “Person-in-charge” have been defined u/s 2(31) of the customs Act, 1962 to mean-
(a) In relation to a vessel the master of vessel
(b) In relation to an aircraft the commander or pilot in charge
(c) In relation to railway train the conductor, guard or person having
chief direction of the train.
(d) In relation to any other conveyance the driver or other person-in-charge of
conveyance.

Exemption from customs duty

Central Government’s power to grant exemption: Article 265 of the Constitution provides that ―No
tax shall be levied or collected except by authority of law‖. The power of the Central Government to
alter the duty rate structure is known as delegated legislation and this power is always subject to
superintendence and check by the Parliament [Section 25].
a) General exemption: If the Central Government is satisfied that it is necessary in the public
interest so to do, it may, by notification in the Official Gazette, exempt generally either
absolutely or subject to such conditions (to be fulfilled before or after clearance) as may be
specified in the notification, goods of any specified description from the whole or any part of
duty of customs leviable thereon.
b) Special exemption: If the Central Government is satisfied that it is necessary in the public
interest so to do, it may, by special order in each case, exempt from payment of duty, any goods
on which duty is leviable only under circumstances of an exceptional nature to be stated in such
order.
Both the above mentioned exemptions may be granted by providing for the levy of duty on such
goods at a rate expressed in a form or method different from the form or method in which the
statutory duty is leviable. Further, the duty leviable under such altered form or method shall in no
case exceed the statutory duty leviable under the normal form or method.

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The Central Government is vested with similar powers of granting exemption under central excise
laws also. Thus, excise duty can also be exempted by Central Government by way of general and
special exemptions.
Rationale for grant of customs duty exemption: The power for grant of exemption vests with the
Central Government subject to the overall control of the Parliament. The Government on a rational
basis may use this power and the exemptions may be based on any of the following factors:
a) Moral grounds, where the duty should not be levied at all. Some of the instances, which may be
given, are;
i. Where the goods do not reach the Indian soil at all.
ii. Where the goods have reached the Indian soil, but are not available for consumption.
iii. Where the goods get damaged or deteriorated in transit.
b) Discretionary provision, where the exemption is used for controlling the economy and industrial
growth of the country.
It may be noted that no customs duty shall be collected if the amount of duty leviable is
equal to, or less than, Rs 100.

Classification of imported/export goods

What is classification?: Classification of goods under customs consists of determining the headings
or sub-headings of the Customs Tariff Act, 1975 (CTA) under which the imported/export goods
would be covered.
Why is classification necessary?: Classification of imported goods determines (a) rate of applicable
duty, (b) applicability of import controls or restrictions, (c) applicability of anti-dumping duty,
safeguard duty etc., and (d) benefits of duty exemption notifications.
Unlike in imports, in exports there are no implications of classification on rates of duty except for the
very few items on which export duty and cess are payable. However, the correct classification would
have implications for grant of export benefits like Drawback.
What is the scheme of classification?: The scheme of classification under customs is similar to the
one in central excise. The said scheme has been discussed in detail under Unit 2: Central Excise Duty.
Just like Central Excise Tariff Act, CTA is also based on the Harmonised System of Nomenclature
(popularly known as HSN).
Customs Tariff Act has two schedules:-
a) First Schedule: enlists the goods liable to import duty
b) Second Schedule: enlists the goods liable to export duty

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TYPES OF CUSTOMS DUTIES

Types of Duties
 BASIC CUSTOMS DUTY:
Duty levied u/s 12, charging section of Customs Act, 1962 on imported or exported goods on
rates as specified in the First and Second Schedules of the Customs tariff Act, 1975 on the
transaction value determined u/s 14(1)/ tariff value determined u/s 14(2) of the Customs Act,
1962.
 ADDITIONAL CUSTOMS DUTY [SEC 3(1)] [CVD- COUNTERVAILING DUTY] [IMP]
Levied on Any imported article.
Purpose Counter-balance the excise duty leviable on the like article
produced/manufactured in India.
Rate Rate:
Other Goods Alcoholic Liquor for
Human Consumption

Excise Duty (ED) leviable on like article Rate as specified

If produced/manufactured in India By Central Government

Where like article is not produced/

manufactured in India
 Ed as leviable on related Class/
Description of Articles

and where such duty is leviable at different

rates, the highest of such rates of duty.
Assessable AV for levy of ED on Domestic AV for Levy of CVD on the Imported
Value Article Article
 Where ED is paid by Domestic Such tariff value
industry on Tariff Value u/s
3(2) of Central Excise Act,
1944
 Where ED is paid by Domestic MRP of the Imported Article
industry on MRP under
section 4A
(as reduced by notified % of
abatement)
 In any other case Sec 14(1)/(2) Value + BCD
Notes
 Education Cess and SHEC are also payable on Basic duty of customs and CVD
 Baggage is exempt from CVD
 With the introduction of GST, imported goods are subject to IGST. However, even after
introduction of GST, CVD is still leviable on those goods which are outside the purview of
GST.
 CVD [SEC 3(3)]
Levied on Notified Imported Articles
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Purpose Counter-balance the excise duty leviable on Raw Material used in the
production or manufactured of like article in India.
Rate As notified by CG
Assessable AV will be same as in case of imposition of CVD u/s 3(1).
Value
 SPECIAL CVD [SEC 3(5)] [IMP]
Levied on Notified Imported Article
At present, leviable on ALL IMPORTED GOODS
E/N 102/2007: Any goods imported into India for subsequent sale, shall be
exempt from Special CVD.
Purpose Counter-Balance the Sales tax/VAT for the time being leviable on a like
article on its sale, purchase or transportation in India.
Rate As notified by CG. [CG can notify 4% as maximum rate]
At present, the notified rate is 4% (the maximum rate) in relation notified
goods.
Assessable Value u/s 14(1)/(2) XXX
Value + BCD (Sec 12 of CA) XXX
+ CVD u/s 3(1) XXX
+ CVD u/s 3(3) XXX
+ EDU. Cess XXX
+ SHE cess XXX
AV XXX
Special Pt ADD [ST/Local Charges – VAT)] can be levied irrespective of whether CVD
(ED) and or CVD (ED) is not leviable or not.

Question: Computation of additional duty u/s 3(1)- Assessable value of certain good imported from
USA is Rs.10,00,000. The packet contains 10,000 pieces with maximum retail price Rs. 200 each. The
goods are assessable u/s 4A of the CEA, 1944, after allowing an abatement of 40%.The excise duty
rate 8% ad valorem. Calculate the amount of additional duty of customs u/s 3(1) of the Custom Tariff
Act, 1975; assuming basic custom duty @ 10% ad valorem.
Ans. Since goods are assessable under section 4A of the Central Excise Act, 1944, hence,-
 As per section 3 of the Customs Tariff Act,1975, value for the purpose of levy of additional duty
of customs u/s 3(1) = RSP – permissible abatement =10,000*(200 – 40%)=RS.12 lakh;
 Additional duty of customs = 8% of Rs. 12 lakh = Rs. 96,000.(EC & SHEC are exempt).
 INTEGRATED TAX – SECTION 3(7) OF CTA
 Levy - Any article which is imported into India shall, in addition, be liable to integrated tax at
such rate, not exceeding forty per cent. as is leviable under section 5 of the Integrated
Goods and Services Tax Act, 2017 on a like article on its supply in India, on the value of the
imported article as determined under sub-section (8).
 Valuation - For the purposes of calculating the integrated tax under sub-section (7) on any
imported article where such tax is leviable at any percentage of its value, the value of the
imported article shall, notwithstanding anything contained in section 14 of the Customs Act,
1962, be the aggregate of— (a) the value of the imported article determined under sub-
section (1) of section 14 of the Customs Act, 1962 or the tariff value of such article fixed
under sub-section (2) of that section, as the case may be; and (b) any duty of customs
chargeable on that article under section 12 of the Customs Act, 1962, and any sum
chargeable on that article under any law for the time being in force as an addition to, and in
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the same manner as, a duty of customs, but does not include the tax referred to in sub-
section (7) or the cess referred to in sub-section.
 GST COMPENSATION CESS – SECTION 3(9) OF CTA
 Levy - Any article which is imported into India shall, in addition, be liable to the goods and
services tax compensation cess at such rate, as is leviable under section 8 of the Goods and
Services Tax (Compensation to States) Cess Act, 2017 on a like article on its supply in India,
on the value of the imported article as determined under sub-section (10).
 Valuation - For the purposes of calculating the goods and services tax compensation cess
under sub-section (9) on any imported article where such cess is leviable at any percentage
of its value, the value of the imported article shall, notwithstanding anything contained in
section 14 of the Customs Act, 1962, be the aggregate of— (a) the value of the imported
article determined under sub-section (1) of section 14 of the Customs Act, 1962 or the tariff
value of such article fixed under sub-section (2) of that section, as the case may be; and (b)
any duty of customs chargeable on that article under section 12 of the Customs Act, 1962,
and any sum chargeable on that article under any law for the time being in force as an
addition to, and in the same manner as, a duty of customs, but does not include the tax
referred to in sub-section (7) or the cess referred to in sub-section (9).
 PROTECTIVE DUTY [SEC 6]
Purpose  Where the CG, upon a recommendation made to in this behalf by the
Tariff Commission, is satisfied
 that circumstances exist which render it necessary to take immediate
action
 to provide for the protection of the interests of any industry
established in India.
Amount of  The CG may, by notification in the Official Gazette impose on any
Duty goods imported into India in respect of which the said
recommendation is made,
 a duty of customs of such amount,
 not exceeding the amount proposed in the said recommendation, as
it thinks fit.
Nature of Duty  Every duty imposed on any goods under sub-section (1) shall for the
purposes of this be deemed to have specified in the first schedule as
the duty leviable in respect of such goods.
Period of Duty  CG may specify the period upto which protective duty shall in force,
reduce or extend such period, reduce or increase the effective rate.
(SEC 7)

 SAFEGAURD DUTY [SEC 8B]

Purpose If the CG, after conducting such enquiry as it deems fit, is satisfied that any
article is imported into India, in such Increased quantities and under such
conditions so as to cause or threatening to cause serious injuries to
domestic industry, then the CG may, by notification in the Official Gazette,
impose safeguard duty on that article.
Provisional  Pending final determination of injury, Safeguard Duty may be imposed
Duty provisionally for a maximum period of 200 days, after 200 days it shall
be refunded (if not finalized within 200 days).
 The provisional duty collected shall be refunded IF it is finally
determined that such import shall not cause injury to domestic
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industry.
Period of  Duty can be imposed for a maximum period of 4 years.
Imposition Period of provisional imposition also included.
 Such period of imposition of 4 years could be increased but subject to
condition that total period doesn’t exceeds 10 years.
Exceptions to  Import
Imposition  From one developing country: if share of import from said
domestic company doesn’t exceeds 3% of total imports of
that article into India.
 From more than one developing Country: if import from all
such notified companies (each with less then 3% import share)
taken together does not exceeds 9% of the total imports of
that article into India.
 CG may by notification exempt import of notified quantity of any article
from this duty.
 Safeguard duty shall not be leviable to articles imported by a 100% EOU
undertaking or a unit in A FTZ or in a SEZ unless specifically made
applicable.
 SAFEGUARD DUTY ON ARTICLES IMPORTED FROM CHINA [SEC 8C] Omitted By FA 2016
Purpose Notwithstanding anything contained in Sec 8B
If the CG, after conducting such enquiry as it deems fit, is satisfied that
any article is imported into India from China, in such Increased
quantities and under such conditions so as to cause or threatening to
cause MARKET DISRUPTION to domestic industry, then the CG may, by
notification in the Official Gazette, impose safeguard duty on that
article.
Exceptions to Provided that the Central Government may by notification, exempt such
Imposition quantity of any article from payment of whole or part of the safeguard
duty leviable.
Other Points similar as given in relation to Safeguard duty imposable u/s 8B.
Market Disruption shall be caused whenever imports of articles increase rapidly so as to be
a significant cause of injury, to the domestic industry.
 COUNTERVAILING DUTY ON SUBSIDIZED ARTICLES [SEC 9]
Purpose The countervailing duty on subsidized articles is imposed if:
 Any country or territory, directly or indirectly, pays or bestows
any subsidy upon the manufacture or production or exportation
any article. Such subsidy includes subsidy on transportation of
such articles.
 Such articles imported into India
 Importation may or may not directly be from the country of
manufacture or production
 Article may be in the same condition as when exported from the
country of manufacture/production or may be in changed
condition by manufacture, production or otherwise.
 The countervailing duty shall not exceed the amount of subsidy
paid or bestowed as aforesaid.
Period of  Duty can be imposed for a maximum period of 5 years.
Imposition Period of provisional imposition also included.
 Such period of imposition of 5 years could be increased but subject
to condition that total period doesn’t exceeds 10 years.

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Provisional Duty
 Pending final determination of injury, Safeguard Duty may be
imposed provisionally for a maximum period of 4 months. Even
retrospective imposition on provisional basis is possible for a
maximum of 90 days
 The provisional duty collected shall be refunded IF it is finally
determined that provisional duty imposed was in excess of such
subsidy.
Inapplicability Safeguard duty shall not be leviable to articles imported by a 100% EOU
undertaking or a unit in A FTZ or in a SEZ unless specifically made
applicable.
 ANTI-DUMPING DUTY ON DUMPED ARTICLES [SEC 9A] [IMP]
Purpose Where any article is exported by an exporter to India at less than its
nominal value, then upon importation of such article into India, the CG
may impose an anti-dumping duty not exceeding the margin of dumping
in relation to such article.
Margin Of Normal Value – Export Price
Dumping
Normal Value In relation to the article/ means,-
 Comparable domestic price of the like article, in the ordinary course
of trade when destined for consumption in exporting country.
 In circumstances where there are no sales of the like article in the
domestic market of exporting country or the sales are under
circumstances which do not permit a proper comparison, the normal
value shall be either :
 comparable representative price when exported from the
exporting country to an appropriate third country ;
or
 cost of production of the said article alongwith reasonable
addition for administrative, selling and general costs, and for
profits.
Export Price Export price of the article is the price of the article exported from the
exporting country. In case where there is no export price or export price
is unreliable, then the export price is determined as follows:
 The price at which the imported article is first sold to an
independent buyer; and
 In case there is no independent buyer or such articles are not
resold in the condition in which it was imported, then, the price
is determined in accordance with the rules made in this behalf.
Period of  Duty can be imposed for a maximum period of 5 years.
Imposition Period of provisional imposition also included.
 Such period of imposition of 5 years could be increased but subject to
condition that total period doesn’t exceeds 10 years.
Provisional Duty  Pending final determination of injury, Safeguard Duty may be imposed
provisionally for a maximum period of 6 months. Even retrospective
imposition on provisional basis is possible for a maximum of 90 days
 The provisional duty collected shall be refunded IF it is finally
determined that provisional duty imposed was in excess of such
subsidy.
Inapplicability Safeguard duty shall not be leviable to articles imported by a 100% EOU
undertaking or a unit in A FTZ or in a SEZ unless specifically made

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applicable.
 REFUND OF ANTI DUMPING DUTY IN CERTAIN CASES SEC-9AA
Where an importer proves to the satisfaction of the Central Government that he has paid any
anti dumping duty imposed under sub-section (1) of sec-9A on any article, in excess of the
actual margin dumping in relation to such article, he shall be entitled to refund of such excess
duty.
For this purpose, the Central Government may make rules to-
 provide for the manner in which and the time within which the importer may make the
application;
 Authorise the officer of the central government to dispose off such application and the
manner of determination of the excess duty by such officer; and
 Provide for the manner in which the excess duty shall be refunded by the Deputy or
Assistant commissioner of customs after such determination.
 EDUCATION CESS (EC) [SEC 94 OF FINANCE ACT 2004]
Levied on Imported goods
Rate of cess 2% on aggregate of custom duties leviable on such goods
Duties to be Following duties to be excluded
excluded  Special CVD u/s 3(5) [BY E/N 20/2005]
 Safegaurd duty u/s 8B and 8C [BY Sec 94 of FA 2004]
 CVD u/s 9 [BY Sec 94 of FA 2004]
 Anti-Dumping Duty u/s 9A [BY Sec 94 of FA 2004]
 EC and SHEC itself [BY Sec 94 of FA 2004]
Assessable Value BCD + CVD [Sec 3(1)/(3) – ED]
 SECONDARY AND HIGHER EDUCATION CESS (EC) [SEC 94 OF FINANCE ACT 2004]
Levied on Imported goods
Rate of cess 1% on aggregate of custom duties leviable on such goods
Duties to be Following duties to be excluded [BY Sec 94 of FA 2004]
excluded  Special CVD u/s 3(5)
 Safegaurd duty u/s 8B and 8C
 CVD u/s 9
 Anti-Dumping Duty u/s 9A
 EC and SHEC itself
Assessable Value BCD + CVD [Sec 3(1)/(3) – ED]

 SOCIAL WELFARE SURCHARGE (SWS) – SEC 110 OF FA 2018

 There shall be levied and collected, in accordance with the provisions of this Chapter, for the
purposes of the Union, a duty of Customs, to be called a Social Welfare Surcharge, on the goods
specified in the First Schedule to the Customs Tariff Act, 1975 (hereinafter referred to as the
Customs Tariff Act), being the goods imported into India, to fulfil the commitment of the
Government to provide and finance education, health and social security.
 The Central Government may, after due appropriation made by Parliament by law in this behalf,
utilise such sums of money of the Social Welfare Surcharge levied under this Chapter for the
purposes specified in sub-section (1), as it may consider necessary.
 The Social Welfare Surcharge levied under sub-section (1), shall be calculated at the rate of ten
per cent. on the aggregate of duties, taxes and cesses which are levied and collected by the
Central Government in the Ministry of Finance (Department of Revenue) under section 12 of the

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Customs Act, 1962 and any sum chargeable on the goods specified in sub-section (1) under any
other law for the time being in force, as an addition to, and in the same manner as, a duty of
customs, but not including— (a) the safeguard duty referred to in sections 8B and 8C of the
Customs Tariff Act; (b) the countervailing duty referred to in section 9 of the Customs Tariff Act;
(c) the anti-dumping duty referred to in section 9A of the Customs Tariff Act; (d) the Social
Welfare Surcharge on imported goods levied under sub-section (1). (4) The Social Welfare
Surcharge on imported goods shall be in addition to any other duties of customs or tax or cess
chargeable on such goods, under the Customs Act, 1962 or any other law for the time being in
force.
ROAD & INFRASTRUCTURE CESS [SEC 111 OF FA 2018]
1. There shall be levied and collected, in accordance with the provisions of this Chapter, for the
purposes of the Union, an additional duty of customs, to be called the Road and Infrastructure
Cess, on the goods specified in the Sixth Schedule (hereinafter referred to as scheduled goods),
being the goods imported into India at the rates specified in the said Schedule for the purpose
of financing infrastructure projects.
2. The additional duty of the customs referred to in sub-section (1) shall be in addition to any
other duties of customs chargeable on scheduled goods under the Customs Act, 1962 or any
other law for the time being in force.
3. The provisions of the Customs Act, 1962 and the rules and regulations made thereunder,
including those relating to assessment, non-levy, short-levy, refunds, exemptions, interest,
appeals, offences and penalties shall, as far as may be, apply in relation to the levy and
collection of the additional duty of customs leviable under this section in respect of scheduled
goods as they apply in relation to the levy and collection of the duties of customs on scheduled
goods under the said Act or the rules and regulations, as the case may be.
STATEMENT SHOWING COMPUTATION OF CUSTOMS DUTIES
S.NO Particulars Amount
1 Assessable Value for Customs duty [Transaction value u/s 14(1)/
Tariff Value u/s 14(2)]
2 Add: Basic Customs Duty [(1) * Rate of BCD]
3 Total value for computing additional customs duty u/s 3(1)
[(1) + (2)]
4 Additional Customs Duty u/s 3(1) [(3) * Rate of CVD]
5 Total duty amount for education cess of customs [(2) + (4)]
6 Education Cess @ 2% of (5)
7 Secondary & Higher Education Cess @ 1% of (5)
8 Total duty payable before additional customs duty u/s 3(5)
[(5) + (6) + (7)]
9 Total value for computing additional customs duty u/s 3(5)
[(1) + (8)]
10 Additional Customs Duty u/s 3(5) [(9) * Rate of special CVD]
11 Total Duty Payable [(8) + (10)]

Practice Questions
Q1. In case of import of an article, additional duty of customs is not levied if no like article is not
levied if no like article is produced or manufactured in India.

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Ans. Incorrect. As per sec- 3 of the Customs Tariff Act, if a like article is not produced or
manufactured in India, additional customs duty equal to the duty leviable on the class of article to
which imported goods belongs, is leviable.
Q2. Preferential rates of customs duty and lower customs duty under trade agreements under the
Customs Tariff Act, 1975.
Ans. Preferential Rates of Custom Duty
 There are few countries which have been declared as preferential areas like Mauritius, Tonga
etc.
 Goods produced in these countries are eligible for preferential rates u/s 4 of the Customs Tariff
Act.
 The Tariff provides two columns : i) standard rate, ii) preferential rates.
Lower Customs Duty under Trade agreement
 Section 5 (1) of Customs Tariff Act authorizes Central Government to issue notification charging
lower rate of duty, if it has entered into trade agreement with a foreign country.
 The owner must claim for lower duty and must produce necessary evidence.
 The central government is empowered to make rules on this behalf.
Q3. From the following information, compute the amount of basic customs duty and additional
duty of customs payable u/s 3 (1) of the Customs Tariff Act, 1975 in respect of import of
readymade garments:
i) Assessable value under customs : Rs. 1,50,000
ii) Tariff value notified under central excise for levy of excise duty : 45% of the RSP;
iii) RSP : Rs. 4,00,000 (readymade garments are not notified u/s 4A of the CEA,1944);
iv) Basic customs duty : 10%;
v) Central excise duty : 10%;
vi) Education cess: as applicable.
Ans.
Computation of Customs Duty Payable
Particulars Amount Amount
A. Assessable value (given) 1,50,000
B. Basic Customs Duty u/s 12 @10 % 15,000
C. Value for levy of additional
customs duty 1,80,000
D. Additional duty of customs u/s 3 18,000
(1) for central excise @10%
33,000

E. Education cess @ 2% on (B+D) 660

F. SHEC @1% (B+D) 330
G. Customs duty payable 33,990

Q4. Honest importers imported a machine with accessories from USA. Compute the assessable
value and customs duty payable thereon from the following data:
CIF value of machine (inclusive of accessories) US $ 1,50,000
CIF value of accessories compulsorily supplied
Along with the machine (not shown separately) US $ 30,000
Rate of basic customs duty on machine 10%
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Rate of basic customs duty on accessories 20%

Edu. Cess & SHEC 2% + 1%
Exchange rate 1US $ = Rs. 50
Effective rate of excise duty on similar goods in India 12%

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IMPORT & EXPORT PROCEDURES:

IMPORT PROCEDURE
Procedure for importation of goods by air, sea or by land:
 Arrival of vessels and aircraft in India:
In case goods being imported through air/sea, the goods are loaded in the vessel/aircraft in the
exporting country and sent to India and in case of import through land goods shall be sent
through vehicle.
Calling or landing at customs port/airport only: [Sec 29]
The person-in-charge of vessel/aircraft entering into India shall allow calling/landing of the said
vessel/aircraft at customs port or customs airport only unless otherwise permitted by CBEC.
Provided that in relation to any aircraft or vessel which is compelled by accident, stress of
weather or unavoidable cause could be allowed to call or land at any place other than customs
port or airport.
But the person-in-charge of any such vessel or aircraft-
(a) Shall immediately report the arrival of the vessel or the landing of the aircraft to the
nearest custom officer/officer-in-charge of a police station.
(b) Shall not without the consent of any such officer permit –
 Any goods carried in the vessel/ aircraft to be unloaded from the vessel/ aircraft, or
 Any of the crew or passengers to depart from the vicinity of the vessel/aircraft
However, if the departure or removal is necessary for reason of health, safety or
preservation of life or property, then it shall be allowed.
NOTE : Sec- 29 doesn’t have any provision for goods imported in vehicle. But still PIC
of vehicle. But still PIC of vehicle shall ensure that while carrying the goods
in vehicle he comes to the land custom station only otherwise goods liable
to confiscation u/s 111.
 Delivery of Import manifest/report: [Sec 30]
The person-in-charge shall deliver the import manifest (IGM) electronically to the PO as follows:
In case of Vessel/Aircraft -- Before the arrival of vessel/aircraft
In case of vehicle -- Within 12 hours after its arrival in customs
stations.
Provided that the principal cc or cc may in cases where it is not feasible to deliver the IGM by
presenting electronically, allow the same to be delivered in any other manner. (i.e., manually)
If IGM/ IR is not delivered to PO within the specified time, it can be filed belatedly if is satisfied
that there was a sufficient reason for such delay.
If PO is not satisfied as to sufficient reason for such delay, then IGM/ IR shall be acceptable
subject to a penalty not exceeding RS. 50,000.
 Imported Goods to Not to be Unloaded from Vessel until Entry Inwards Granted [Sec 31]
 The master of vessel shall not permit the unloading of any imported goods until an order has
been given by PO granting Entry Inwards to such vessel.
 Entry inward shall be granted only when IGM has been delivered by PIC of vessel.
In case where IGM has not been delivered but PO is satisfied that there was
Sufficient cause for not delivering it, then on exceptional basis he can still grants entry inward.
 Entry inward shall not be required for unloading of :-
 Mail bags
 Baggage
 Animals
 Perishable goods
 Hazardous goods

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 Unloading of Goods:
 Only the imported good mentioned in the IGM/R shall be unloaded. [Sec 32]
 Unloading of goods at approved places only. [Sec 33]
 Goods to be unloaded under supervision of customs officer. [Sec 34]
 No imported goods shall be water-borne for being unloaded from any vessel unless the
goods are being accompanied by the boat note. [Sec 35]
(Note Charges charged by port- Barging Charges shall form part of A.V as additional cost of
transportation)
 Imported goods to be unloaded from any conveyance on any Sunday or on any holiday
observed by the Customs department or on any other day after the working hours.
Except on payment of prescribed fees. [Sec 36]
 Restriction on custody and removal of Imported goods In Custody of Custodian: [Sec 45]
 Duty of Custodian
All imported goods unloaded in custom area shall go to the custody of such person as may
be approved by Principal CC or CC .
Goods will remain under the custody of the Custodian until they Cleared for Home
Consumption or Warehoused or Transhipped.
 Responsibility of Custodian
The person having custody of any imported goods in a custom area:-
 shall keep proper records of the goods and send a copy thereof to the PO.
 Shall not permit such goods to be removed from custom area or otherwise dealt with
except under in accordance with the permission in writing of PO.
 Liability of Custodian
Notwithstanding anything contained in any law
If In case of goods being pilfered after unloading in custom area while in the custody of
custodian,
The custodian shall be liable for the payment of duty on such goods.
 Filling of entry for import i.e. Bill of Entry: [Sec 46]
 Importer shall file an entry for import i.e Bill of Entry [B/E for Home Consumption or B/E
for Warehousing (Into-Bond B/E)] electronically except in the case of Transhipment.
 In exceptional cases Commissioner of Customs may allow to file B/E in any manner other
than electronically.
 In case of goods being cleared for home consumption from warehouse an Ex-Bound B/E is
filled.
Timing for filling of B/E
 B/E to be filled after delivery of IGM/IR
 In case of vessel/aircraft/vehicle may be filled before filling of IGM if it is expected to arrive
within 30 days from date of such presentation.
 B/E on approval from Commissioner be filled before filling of IGM/R.
 If PO is satisfied that the interest of revenue are not prejudicially affected and there was no
fraudulent intension, he may permit substitution of a bill of entry for H/C for B/E for
warehousing or vice-versa.
 If importer wishes to clear goods for H/C but he is not having full information which he is
required to file B/E for H/C , he can request to PO to transfer goods to warehouse till the
time he gathers full information and file B/E. The goods transferred to warehouse is
warehousing without warehousing.
 Clearance of goods for Home Consumption: [Sec 47]
 Where PO is satisfied that
 Any goods entered for H/C are not prohibited goods, and
 Importer has paid the import duty , if any, assessed thereon, and any charges payable
under this Act

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The PO may make a clearance order of the goods for H/C.

 Where importer fails to pay the import duty within 2 working days from the date on which
B/E is returned to him for payment of duty, he shall pay interest @ 15 % p.a on such duty
till the date of payment of duty.
Provided that CG may by notification in O.G, specify the class or classes of importer who
shall pay such duty electronically.
CG got power to allow deferred payment of duty to any class of importers. (FA 2016)
 E-payment mandatory for following importers :-
 Importer registered as Accredited client Programme.
 Other importer when import duty in transaction of Rs. 1,00,000 or more per bill of
entry.
 Failure to clear goods from custodian within 30 days: [Sec 48]
 If any goods unloaded at custom station are not cleared for H/C or warehoused or
transhipped within 30 days from the date of unloading (or within such further time as PO
may allow)
OR
 If title to any imported goods is relinquished
such goods may be sold by the Custodian.
 Subject to following condition :-
(i) Before sale, Notice to that effect shall be given to importer, and
(ii) Before sale, permission for sale shall be obtained from the PO.
Provided that:-
(a) Animals, perishable and hazardous goods may with permission of PO may be sold at
any time.
(b) Arms, Ammunition may be sold at such time and place and in such manner as CG may
direct.
 Storage of imported goods in warehouse pending clearance [Sec- 49]
Where in case of any imported goods entered for H/C the AC/DC is satisfied-
 On application of importer
 that the goods cannot be cleared within reasonable period.
The goods may, pending clearance, be permitted to be stored for a period not exceeding
30 days in public/ private warehouse.
But such goods shall not be deemed to be warehoused goods and
According provisions of warehousing chapter shall not apply to such goods.
Provided that the principal cc or cc may extend the period of storage for further period not
exceeding 30 days at a time.

EXPORT PROCEDURE:
Procedure for exportation of goods by air, sea or land as follows:
 Entry of Goods for Exportation: [Sec 50]
 The exporter is required to present a shipping bill (in case of export by a vessel or by air)
and a bill of export electronically (in case of export by vehicle) to a proper officer of
customs.
 In exceptional cases Commissioner of Customs may allow to file B/E in any manner other
than electronically.
 Order permitting clearance and loading of goods for exportation: [Sec 51]
The proper office after examination of goods and on being satisfied that:
 goods entered for export are not prohibited goods and
 exporter has paid duty, if applicable on them
passes an order permitting clearance and loading of goods for exportation called Let ship or Let
Export order.

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 Entry Outward: [Sec 39]

 A master of vessel would permit loading of goods on vessel otherwise being baggage and
mail luggage after receiving order for Entry Outwars by proper officer.
 The restriction is for vessels only not for aircraft or vehicles
 Loading of Goods: [Sec 40]
The export goods shall be loaded on conveyance for export otherwise in case of baggage and
mail luggage after the person-in-charge has been handed over the shipping bill or bill of export
or bill of transhipment as case may be by the exporter (And person-in-charge grants
permission).
 Export General Manifest: [Sec 41]
 The person-in-charge of conveyance carrying export goods shall, before the departure of
the conveyance from a custom station,
 deliver to proper officer in case of a vessel or aircraft, an export manifest, electronically
and in case of a vehicle, an export report.
 No conveyance to Leave without written order: [Sec 42]
Person-in-Charge can leave Customs Station --- only after taking Departure Permission (written
order from Proper officer).

SECTION WISE STUDY (ONLY FOR READING)

PROVISIONS RELATING TO CONVEYANCE CARRYING IMPORTED OR EXPORT GOODS SEC 29:
ARRIVAL OF VESSEL AND AIRCRAFT IN INDIA.
29 (1) (a): A vessel or aircraft, entering into India from a place outside India, shall first call at customs
port or customs airport.
29 (1) (b): Subsequent calls will also at customs orts and customs airports only if there are overseas
passengers / cargo on board.
The vessel/aircraft should enter India through the gateway ports notified u/s 7 only. They should not
enter India through any other point. Why? Customs officers are available only in the gateway ports.
29 (2): Landing at other places is permissible under unavoidable circumstances like accident, stress
of weather, navigational problem, etc., subject to the following conditions: -
a) Landing should be reported to the nearest customs officer or police officer; also, log book
should be produced on demand.
b) Without the permission of Customs neither the cargo should be unloaded nor the passengers or
crew depart from the vicinity of vessel/aircraft.
c) The persons in charge of the conveyance shall comply with the proper officer's instructions in
regard to such goods.
d) No passenger or crew shall leave the immediate vicinity of vessel or aircraft without the consent
of the proper officer.
29 (2): Proviso The passengers, crew and goods can however keep away from the conveyance for
reasons of health, safety or preservation of life or property.
Sec 30: DELIVERY OF IMPORT MANIFEST OR IMPORT REPORT:
30 (1): The person-in-charge of the conveyance shall deliver import manifest/report to the proper
officer:
NATURE OF CONVEYANCE NAME OF DOCUMENT TIME LIMIT
Vessel (Seaport) Import Manifest (IGM) Before arrival electronically
Aircraft (Airport) Import Manifest (IGM) Before arrival electronically
Vehicle (Land custom station) Import Report (IR) Within 12 hours after arrival

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Penalty for non-submission within the prescribed time-limit without sufficient cause for such delay =
Not more than Rs. 50,000/-
30(2): The person-in-charge of the Conveyance shall affix “Contents true” certificate at the foot of
import manifest/report.
30 (3): Amendments and supplements are permissible in the absence of fraudulent intentions:

SEC 31: MPORTED GOODS NOT TO BE UNLOADED FROM VESSEL UNTIL ENTRY INWARDS
GRANTED:
31 (1): Goods shall not be unloaded from a vessel until "Entry inwards". is granted by the proper
officer. What is entry inwards. It is the permission granted by Customs for unloading Cargo from
vessel. Popular name is "breaking bulk". Without getting "entry inwards the master of the vessel
cannot unload the cargo. ‘Entry inwards’ ---is specified for vessel only and not for aircraft or
vehicle.
31 (2): 'Entry inwards’ can be secured from Customs after submitting import manifest. For valid
reasons, the proper officer may grant ‘entry inwards’ before delivery of import manifest. Permission
to unload cargo is granted by the Commissioner after posting 'Boarding Officer’ to be on board the
vessel day and night.
Prerequisites for getting "Entry Inwards"
1. Calling at S. 7 port (S. 29)
2. Filing of IGM (S. 30).
3. Answering all questions (S. 3.8).
4. Departure permission from previous port of call.
5. Proof of payment of Light House Charges.
6. Production 'of 'log book’ of the vessel.

SEC 32: IMPORTED GOODS NOT TO BE UNLOADED MENTIONED IN THE IMPORT MANIFEST OR
IMPORT REPORT
The goods unloaded in a customs station should find place in the import manifest/report. This is
meant to ensure accountability on the part of the person in-charge for the goods brought in his
conveyance. Non-manifested goods should not be unloaded.

Sec. 33: UNLOADING AND LOADING OF GOODS AT APPROVED PLACES ONLY:

Customs area has been notified by the Commissioner of Customs u/s8 (a). Unloading / loading of
goods is permitted in this area only. This is meant to ensure proper customs surveillance over the
imported / export goods.

Sec 34: GOODS NOT TO BE UNLOADED OR LOADED EXCEPT UNDER SUPERVISION OF CUSTOMS:
This is also meant for customs surveillance. There are however exceptions notified by Board (e.g.)
Stone Ballast. [Stones for railway lines)

Sec 35: RESTRICTIONS ON GOODS BEING WATER BORNE

This is an extra measure popularly called "Boat Note Procedure" in regard to surveillance regulated
by Boat Notes Regulations, 1976. This is applicable to seaports When the vessel is berthed on the
quay the goods could be directly unloaded on the wharf. If the vessel is in moorings; pew anchored
away from the quay, say 2 or 3 nautical miles away from the wharf, direct transfer of goods between

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the vessel and wharf is not possible. Boats have necessarily to be used to transmit the goods
between the vessel and the wharf. A closer surveillance is called for in such a Situation The reasons
are quite obvious. (The boats may drift away from the customs stations).
Boat Notes have therefore been prescribed in Boat Notes Regulation No.4 - Form I (Export cargo),
Form II (Import cargo). From III (Transhipment cargo, reshipment cargo, same bottom cargo)
imported goods should be accompanied by the boat notes given by the Proper officer to the master
of the vessel. This ensures that all the goods loaded on a boat from the vessel have reached the
shore and have been handed over to the Custodian (Port Trust).
Export goods are to be accompanied by Shipping bins (S- 50) duly passed by customs for export and
loading (S, 51). The master of the vessel cannot take the export goods on board without the shipping
bills carrying customs clearance. Here in addition the Shipping bill there should be boat notes also
The Commissioner of Customs may authorise the exporter or his authorised agent to issue Boat Note
[Regulation No 3 (2) (a)]
Boat Notes are maintained in duplicate and they are machine numbered. Import = Boat Note only
Export = Shipping Bill + Boat Note
35: Proviso: Boat Note procedure may be dispensed with by the Board by means of special
permission. The exception may be general or particular or for any goods. (e.g.] N0 need for Boat
Note in-
(1) Chennai Port - for Export and’ Import. (2) Kolkata Port - For Export only.

Sec 36. RESTRICTIONS ON UNLOADING AND LOADING OF GOODS ON HOLIDAYS

Imported goods should not be unloaded from and export goods should not be loaded on a
conveyance on Sundays, on holidays observed by the Customs Department and on another days’,
after working hours. This is yet another measure of surveillance.
Exception: - Loading/unloading can be done during these times after giving notice and on payment
of prescribed fees. (Popularly known as merchant overtime fee)
36: Proviso: The department does not levy fees for the loading or unloading of accompanied
baggage of passengers or crew and mail bags during these times.

Sec 37. POWER TO BOARD CONVEYANCES

This proper officer may board any conveyance carrying imported/export goods and stay on board as
on as considered necessary. This is also a measure of surveillance. (The master / pilot cannot refuse
to accommodate the "preventive officer" in his vessel/aircraft)

Sec 38: POWER TO REQUIRE PRODUCTION OF DOCUMENTS AND ASK QUESTIONS

The person in-charge of the conveyance carrying imported goods or export goods should answer all
questions put by and also produce all document called for by the proper officer. (Note the Words
"All Questions”. The master has no Option as you have in the examination)

Sec 39: EXPORT GOODS NOT T0 BE LOADED ON VESSEL UNTIL ENTRY OUTWARDS GRANTED:
Vessel needs entry inwards to do unloading of imported (S. 31). Similarly, vessel needs entry
outwards to do loading of export goods. However, loading of baggage and mail bags does not
required entry outward. The prescription is for vessels only and not or aircraft and vehicles.
Attention. Entry outward u/s 39 is a general Permission to the master of the vessel to keep his hatch
Open to receive export goods. He can, however take in goods only if accompanied by Shipping bill

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with customs clearance endorsement. If the vessel is anchored away from the wharf, the goods sail
in a boat to the vessel. Therefore, they should be accompanied by a boat note also.
To sum up for loading export cargo on a vessel anchored in moorings, the requirements are-
(1) Entry Outwards u/s 39.
(2) Shipping Bill u/s 50
(3) “Let Export" order u/s 51 on the Shipping Bill (S. 40) and
(4) Boat note u/s 35.

Sec 40: EXPORT GOODS NOT TO BE LOADED UNLESS DULY PASSED BY PROPER OFFICER
This section applies to all types of conveyances. The person-in charge of the conveyance can take
export goods on board, only if they are cleared by Customs in the following manner.
Export Goods other than baggage and mail bags: Accompanied by Shipping Bill (Sea/ airports), by Bill
of Export (Land Customs Station) and by Bill of Transhipment (Transhipment Goods) duly passed by
the proper officer.
Baggage and Mail Bags: Permitted by Customs for export.

Sec 41: DELIVERY OF EXPORT MANIFEST / REPORT:

41 (1): Person-in-charge of a conveyance carrying export goods shall, before the departure of the
conveyance from the customs station, deliver to the proper officer export manifest/export report.’
41 (2): The Person-in-charge shall affix "contents true" certificate at the bottom of export manifest
/report.
41 (3): Amendments and supplements are permissible in the absence of fraudulent intentions.

Sec 42: NO CONVEYANCE TO LEAVE WITHOUT WRITTEN ORDER:

42 (1): Conveyance that brought imported goods or conveyance loaded with export goods can
depart from a customs station after getting customs permission in writing. This is called Departure
Permission". Unless this document is produced in the next customs station - in India or out of India -
entry inwards cannot be secured to unload the cargo on board.
Imp. note: Entry outwards is different from departure permission. The former is permission to load
export goods (S. 39); but the latter is permission to leave the customs station (S 42).
42 (2): Conditions for the grant of departure permission:
a) Answering all the questions u/s 38 by the person in-charge of the conveyance.
b) Compliance with Sec 41, i.e., submission of export manifest/ report.
c) Returning of Shipping Bills/Bills of Export/Bills of Transhipment/ Declaration of Transhipment to
the proper Officer.
d) Payment of-
 Duty for stores consumed (No duty for normal consumption-S 87. But duty is payable for
abnormal consumptions) and
 all charges and penalties in respect of the conveyance. if not guarantee/deposit for securing
the payments mentioned above shall be obtained.
e) No penalty is due u/s 116. This penalty is for discrepancy between the quantity of goods
imported as per import manifest and the quantity of goods cleared as per Bills of Entry.
Obtaining guarantee / deposit for securing the said penalty, if leviable.

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f) Unloading of export goods loaded without payment of export duty or in contravention of

Customs Act or other Acts. Getting an undertaking secured by deposit/guarantee, to bring back
the goods to India, in case of difficulty in unloading.
This section provides the last trump card to the department for ensuring that the provisions of
Customs law, have been fully complied with by the person-in-charge of the conveyance.

Sec 43: EXEMPTION or CERTAIN CLASSES or CONVEYANCES FROM CERTAIN PROVISTION OF THIS
CHAPTER:
43 (1): Vehicles carrying only baggage of occupants need not file import Report u/s 30, need not file
Export Report u/s 41, and need not seek departure permission u/s 42.
[Note.-. (1) Not applicable to vessels or aircraft. (2) Not applicable if the vehicle carries cargo:]
43 (2): Exemptions from all or any of the provisions of this chapter may be granted by central
Government through Gazette notification, in favour oi the following classes of conveyances: - (a)
Conveyances belonging to Indian or foreign Government. (b) Vessels/ aircraft entering India
temporarily in an emergency. [Note (1) S. 43 [1] applies to vehicle. (2) S. 43 (2) (a) applies to vehicle,
vessels and aircraft. (3) S. 43 (2) (b) applies to vessels and aircraft.]

CLEARANCE OF IMPORTED GOODS AND EXPOR GOODS

ln the previous chapter namely Chapter VI (S. 29 to 43) we saw how the movement of conveyances
is monitored by the department. This chapter (Chapter VII- Sec 44 to 51] covers monitoring of
imported goods and export goods. The system evolved is meant to ensure that there is no leakage of
duty sought to be collected in Chapter V (Sec 12 to 288). Hence chapter VII is complementary to
Chapter V.

Sec 44: CHAPTER NOT TO APPLY T0 BAGGAGEG AND POSTAL ARTICLES:

This chapter does not apply to baggage and goods imported or to be exported by post. There are
special provisions for baggage (S. 77 to 81] and postal goods (S. 82 to 84).

Sec 45: RESTRICTION ON CUSTODY AND REMOVAL OF IMPORTED GOODS:

45 (1): Goods handed over to custodian: The master hands over the cargo to the Custodian
approved by the Commissioner of Customs.
In case Postal parcels: They are handed over to the "Foreign Post Master" (Indian Post Master
handling foreign mail).
To Sum up: All imported goods except postal parcels are handed over to Custodian. They remain
with the Custodian till they are cleared for any purpose.
45 (2): Accountably by Custodian: The Custodian shall keep proper accounts of the imported goods
in his custody. He shall send extracts of accounts to the proper officer He shall not allow anybody to
remove or handle in any manner the goods in his custody unless specifically Permitted in writing by
the proper officer.
45 (3): Pilfered Goods: According to Sec 13 no duty is leviable if the imported goods are pilfered
after unloading and before customs clearance order. Government loses revenue. Who is responsible
for the pilferage? The goods landed in the customs area are in the custody of the Custodian. As a
bailee he should have taken steps to protect them. His failure has adversely affected revenue. S. 45
(3) provides for compensation in this regard by the Custodian. Accordingly in respect of pilfered
goods covered by S. 13. the Custodian shall pay duty.

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To get refund u/s 13, the importer need not wait till the department secures compensation
u/s 45 (3) from the Custodian.
Refund is Payable by the department. whether compensation from Custodian is secured or not.

SEC 46: ENTRY FOR GOODS ON IMPORTATION:

46 (1): Filing of B/E: The importer files B/E for all imported goods. N0 B/E for Transit Goods and
Transhipment Good. (for the clearing the Transhipment goods the master of vessel files Bill of
Transhipment u/s 54). B/E maybe for home consumption, i.e., for clearance to the town direct from
the wharf or from warehouse. B/E may also be for warehousing, i.e., for depositing them
temporarily in a warehouse and for clearing them later for home consumption from the warehouse.
Following are the Forms of B/E as prescribed by Regulation 3 of Bill of Entry (Forms) Regulations,
1976.
FORM I For home consumption (white).
FORM II For warehousing (Into bond-yellow).
FORM III For ex-bond clearance for home consumption (ex-bond - Green).
B/E Can be filed electronically too, in the Custom Houses providing such a facility. [Bill of Entry
(Electronic Declaration) Regulations, 1995.]
46(1): Proviso: Warehousing Without warehousing: The importer does not possess full information
of the goods. How can he file a B/E? If he confesses his predicament to the department, he may be
permitted to examine the goods in the presence of the proper officer and also, deposit the goods in
a public warehouse appointed u/s 57, without warehousing the same.
What is warehousing without warehousing? Normally for warehousing the importer files a B/E for
warehousing in Form II and gives a double duty bond u/s 59. Here warehousing is permitted without
a bond. No need to file any B/E. The help is meant for enabling the importer to file B/E.
This is the first instance of warehousing without warehousing provided for in Customs law.
The other two instances are provided for in S.49 and S. 85. Thus, warehousing without warehousing
is covered by three sections, namely S. 46 (1), 49 and 85.
45 (2): Bill of landing (B/L): The importer possesses the Bill of Lading [B/L] given by the carrier. This is
his document of title to goods. The B/L covers all the goods imported with full description The B/E
filed by the importer should include all the goods covered by the B/L.
46 (3): Time-limit for presentation of bill of Entry: A bill of entry may be presented at anytime after
the delivery of import manifest / report. However, a bill of entry may be presented even before the
delivery of such manifest or report if the vessel or the aircraft or the vehicle by which the goods have
been 5hipp€d for importation into India is expected to arrive within 30 days from the date of such
presentation (Amended by Finance Act, 2014)
46 (4): ‘Contents True’ Certificate: The importer shall endorse "Contents True" Certificate at The
bottom of B/E. in support thereof he shall produce the invoice relating to the imported goods.
46 (5): Conversion from home consumption to warehousing and vice-versa: The substitution of a
B/E for home consumption by a B/E for warehousing and vice versa can be permitted by the Proper
officer, if he is satisfied that the interest of revenue is NOT prejudicially affected and there was no
fraudulent intention. Please note conversion needs Customs consent.

Sec 47: CLEARANCE OF GOODS FOR HOME CONSUMPTION

After 3 B/E is filed u/s 46, examination and assessment is done u/s 17 (Final) or u/s 18 [Provisional].
Thereafter the B/E is returned to the importer to pay the duty and do the clearance as per S.47.

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47 (1): Customs Clearance Order for Home consumption: lf the proper Officer is satisfied that the
goods entered for home consumption, i.e., goods covered by the B/E are NOT prohibited goods and
the importer has paid the duty assessed as well as all other charges under Customs Act, (e.g.,
interest for belated payment of duty), then he shall pass clearance order for home consumption.
47(2): Interest: Interest is payable at a rate fixed by Central Government between 10% and 36%
(Present Rate is 15%) if the duty assessed is not paid within TWO working days after the return of
the assessed B/E to the importer.

Sec 48: PROCEDURE IN CASE OF GOODS NOT CLEARED WAREHOUSED OR TRANSHIPPED WITHIN 30
DAYS AFTER UNLOADING
If the goods unloaded are allowed to stay on the wharf indefinitely, then it will constrain the dock
space utilization and hinder material handling. Vessels cannot unload the cargo freely. Further
overstay of cargo on the wharf is likely to cause damage, deterioration, pilferage and destruction. All
these have impact on Revenue. This section finds solution for the problem.
Sec 48: Clearance within 30 days: The Custodian can sell the imported goods with customs
permission and after notice to the importer. (i) If they are NOT cleared for home consumption or
NOT warehoused or NOT transshipped within 30 days of their unloading or (ii) If the title to them is
relinquished by the importer (i.e., if the goods are abandoned by the importer).
48: Proviso: Special goods: Such a long wait of 30 days is not available to animals, perishable goods
and hazardous goods. They can be sold any time. Arms and ammunition fall under Arms Act, 1959.
They have to be sold at the time / place / manner prescribed, by Central Government.

Sec 49: STORAGE OF IMPORTED GOODS IN A WAREHOUSE PENDING CLEARANCE

The imported goods have to be cleared within 30 days of landing (S. 48). For some reason or other,
the importer is not in a position to produce the documents called for by the proper officer. It is
difficult to get customs clearance for overstay on the wharf. Further the goods are exposed t o
danger on the wharf. The solution lies in S.49.
Warehousing without warehousing: if the imported goods cannot be cleared for home consumption
within a reasonable time, then the goods can be deposited in a warehouse without double duty
bond. The goods may be dutiable or not. (Warehouses are meant for dutiable imported goods only-
S. 57 arid 58). The warehouse may be public or private (S. 46, the previous provision for warehousing
without warehousing, contemplates depositing in a public warehouse only). Such a warehousing
shall not be deemed to be warehousing under chapter IX of customs Act. The next and the last
provision for warehousing without warehousing is in Sec. 85.

SEC 50: ENTRY OF GOODS FOR EXPORTATION

50 (1)1 Filing of Shipping Bill (S/B): The exporter files in the prescribed form S/B for goods to be
exported by vessel or aircraft and bill of export for export by vehicle. The forms are prescribed in S/B
and Bill of Export (Form) Regulations, 1991; This is called entry of goods for exportation.
TYPES OF SIHPPENG BILLS
1. Dutiable goods Yellow
2. Duty-free goods White
3. With drawback claim Green
4. Duty - free ex-bond Pink.

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5. Export under DE PB Scheme Blue

50 (2): ‘Contents True Certificate: The exporter shall endorse "Contents True" certificate at the
bottom of S/B / Bill of Export.

Sec 51: CLEARANCE or GOODS FOR EXPORTATION

Customs Order for "Clearance and loading of goods for export" (popularly called "Let Export" Order)
is passed on the S/B / bill of export by the proper officer, if he is satisfied that: the export goods are
prohibited goods, export duty assessed has been paid and charges payable have been paid.

TRANSIT & TRANSHIPMENT OF GOODS

 Transit of Transhipment:
 Transit: [Sec 53 & 55]
 Goods are transited in the same conveyance which brings the goods into India.
 No need for filling any fresh documentation for carrying goods from first port to
destination port.
 Transhipment: [Sec 54 & 55]
 Goods are transhipped in a conveyance other than the conveyance which brings the
goods into India.
 Fresh documentation is required for carrying goods from first port to destination port.
Note : Provisions of Transit or Transhipment not applicable in respect of :
 Baggage
 Post
 Stores

Goods in Transit:
--Mention in IGM/R that goods
are intended to transited further
No separate documentation is required
England Port----------------------------Gujarat Port-----------------------------Kerala Port
(Goods not unloaded) (Goods unloaded for clearance)
No Import duty payable Goods shall be entered at this
(Sec 53) port as if they are directly
Imported at this port for
first and duty shall be
payable (Sec 55)

-- Mention in IGM/R that goods

are intended to transited further
No separate documentation is required
England Port---------------------Gujarat Port-----------------------------------Sri Lanka Port
(Goods not unloaded) (Goods unloaded for clearance)
No Import duty payable No import duty at all (as goods
(Sec 53) not for import in India)
(Sec 55)

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Goods in Transhipment:
-- Mention in IGM/R that goods
are intended to transited further
England Port---------------------Gujarat Port---------------------------------------Kerala Port
(Goods not unloaded) (Goods unloaded for clearance)

No Import duty payable Goods shall be entered at this

(Sec 54) port as if they are directly
Imported at this port for first
and duty shall be payable
(Sec 55)
-- Mention in IGM/R that goods
are intended to transited further
-- Bill of Transhipment or Declaration
Of Transhipment shall be filled With P.O.
England Port-----------------------Gujarat Port-----------------------------------Sri Lanka Port
(Goods not unloaded) (Goods unloaded for clearance)
No Import duty payable No import duty at all (as goods
(Sec 54) not for import in India)
(Sec 55)

Practice Question
Q1. State the difference between transit and transhipment of goods under the provisions of
customs Act.
Transit of goods Transhipment of goods
Transit of goods is governed by sec 53 Transhipment of goods is governed by Sec 54
read with sec 55 of the Customs Act, 1962 read with sec 55 of the Customs Act, 1962.
Goods are transited in the same Goods are transhipped in a conveyance other
conveyance which brings the goods into than conveyance which brings the goods into
India. India.
The goods are not unloaded from the The goods are unloaded from the conveyance
conveyance which brought them into which brought them into India and then,
India. reloaded onto another conveyance.
No need of filing any fresh documentation Fresh documentation is required for carrying
for carrying goods from first customs goods from first customs station to another
station to another custom station. custom station.
The document which needs to be filed is
called “Bill of transhipment”. However, where
the goods are transhipped under an
international treaty or bilateral agreement
between the government of India and the
Government of a foreign country. A
“Declaration for Transhipment” is sufficient.

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VALUATION OF IMPORTED & EXPORTED GOODS

The rates of Customs duties leviable on imported goods and export goods are either specific or on ad
valorem basis2 or at times on specific cum ad valorem basis.
Section 14 of the Customs Act lays down the basis for valuation of imported and export goods where
the customs duties are leviable on ad valorem basis. The value of imported goods and export goods
may be determined in any of the following manner: -
1) VALUATION ON THE BASIS OF TRANSACTION VALUE [Section 14(1)]
a) Valuation of imported goods: The value of the imported goods shall be the transaction value
of such goods*.
In case of imported goods, the transaction value shall be
 the price actually paid or payable for the goods
 when sold for export to India
 for delivery at the time and place of importation
 where the buyer and seller of the goods are not related and
 price is the sole consideration for the sale
subject to such other conditions as may be specified in the rules made in this behalf i.e. the
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
*The transaction value, in addition to the price as aforesaid, shall include any amount paid or
payable for costs and services, including:-
 commissions and brokerage
 engineering
 design work
 royalties and licence fees
 costs of transportation to the place of importation
 insurance
 loading, unloading and handling charges
to the extent and in the manner specified in the Valuation Rules referred above.
b) Valuation of export goods: As per section 14(1) of the Customs Act, 1962, the value of the
export goods shall be the transaction value of such goods. In case of export goods, the
transaction value shall be
 the price actually paid or payable for the goods
 when sold for export from India
 for delivery at the time and place of exportation
 where the buyer and seller of the goods are not related and
 price is the sole consideration for the sale
subject to such other conditions as may be specified in the rules made in this behalf i.e. the
Customs Valuation (Determination of Value of Export Goods) Rules 2007.
2) VALUATION ON THE BASIS OF TARIFF VALUE [Section 14(2)]: CBEC may fix tariff values for any
class of imported goods or export goods, having regard to the trend of value of such or like
goods by notification in the Official Gazette if it is satisfied that it is necessary to do so. Where
any such tariff values are fixed, the duty shall be chargeable with reference to such tariff value.
Sub-section (2) overrides the provisions of sub-section (1). Tariff values have presently been
fixed in respect of import of crude palm oil, crude petroleum, crude soyabean oil, brass scrap,
poppy seeds etc.

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VALUATION OF GOODS:
Customs Valuation (Determination of VALUE of Imported Goods) Rules, 2007

Rule 1: Short Title, Commencement and Application

Rule 2 : Definitions:

Identical Goods: [Rule 2(1)(d)]

means IMPORTED GOODS
 which are same in all respects, including physical characteristics, quality and reputation as the
goods being valued except for minor differences in appearance that do not affect the value of
the goods;
 produced in the same country in which the goods being valued were produced and
 produced by the same person who produced the goods being valued, or where no such goods
are available, goods produced by a different person,
but shall not imported goods where engineering, development work, art work, design work,
include plan or sketch undertaken in India
 were completed by the buyer on these imported goods
 and supplied free of charge or at a reduced cost
 for use in connection with the production & sale for export of these goods.

Similar Goods: [Rule 2(1)(e)]

means IMPORTED GOODS
 which although not alike in all respects, but have like characteristics and like component
materials which enable them
I. to perform the same functions and
II. to be commercially interchangeable with the goods being valued having regard to – the
quality, reputation and the existence of trade mark,
 produced in the same country in which the goods being valued were produced; and
 produced by the same person who produced the goods being valued, or where no such goods
are available, goods produced by a different person.
but shall not imported goods where engineering, development work, art work, design work,
include plan or sketch undertaken in India
 were completed by the buyer on these imported goods
 and supplied free of charge or at a reduced cost
 for use in connection with the production & sale for export of these goods.

Related persons: [Rule 2(2)]

Persons shall deemed to be related only if –
They are Officers or directors of one another’s businesses; or
Legally recognized partners in business; or
members of same family; or
Both of them Are controlled by third person (directly/indirectly); or
Control a third person (directly/indirectly);

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One of them Controls the other (directly/indirectly); or

Any person Owns, controls or holds (directly/indirectly) 5% or more of shares of both of
them.
Explanation: Person includes legal person i.e company, partnership firms etc
Explanation : Person, who are associated in the business of one another in such a way that
one is the sole agent or sole distributor of the other, shall be deemed to the
related party for the purposes of these rules, if they fall within the criteria of
this sub-rule.

Rule 3: Determination of the method of valuation

Rule 3(1) Subject to Rule 12, the value of imported goods shall be Transaction value (TV) and
adjusted in accordance with provisions of Rule 10.
Rule 3(2) The TV of imported goods under 3(1) shall be accepted if ALL of the following conditions
are satisfied:
 Condition 1: No restriction on buyer for disposal of goods
No Restriction on buyer on disposition or use of goods except the following:
 Restrictions prescribed by public authorities in India
 Restriction on geographical area within which goods may be resold or
 Restriction that does not materially affect value of goods
 Condition 2: Sale – not subject to conditions of which value cannot be determined
The sale is not subject some condition or consideration for which a value cannot be determined
 Condition 3: No further consideration to seller of which adjustment cannot be made
 Seller shall not be entitled to further consideration like part of subsequent resale, disposal
or use of goods by the buyer will accrue directly or indirectly to seller
 Unless proper adjustments in value terms can be made as per Rule 10(1)(d)
 Condition 4: Buyer and seller are not related
Rule 3(3) In a sale between related person, the TV shall be accepted provided that:
 The examination of the circumstances of the sale of the imported goods indicates that the
relationship did not influence the price
 Otherwise if the importer demonstrates that
The Declared value of the goods being valued, closely approximates to one of the following
values
 TV of Identical/Similar Goods, in sales unrelated buyeRs in India;
 Deductive Value (as per Rule 7)
 Computed Value (as per Rule 8)
Provided that in applying the values used for comparison, adjustments shall be made for:
 Commercial levels,
 Quantity levels,
 Adjustments as per Rule 10 of these rules.
Rule 3(4) If the value cannot be determined under the provisions of sub-rule (1), the value shall be
determined by proceeding sequentially through Rules 4 to 9

Rule 4: TV of Identical goods

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 Subject to Rule 3, the value of imported goods shall be TV of Identical Goods imported at or
about the same time, as the goods being valued were imported
 The TV of identical goods at the same commercial level and in substantially the same quantity
as the goods being valued shall be used to determine the value of imported goods
 If TV at different commercial level or in different quantities or both is available, suitable
adjustments can be made to take into account the difference
 If price of goods manufactured by same manufacturer not available then price of goods by
another manufacturer in the same country shall be taken
 Where more than one TV of Identical Goods is found; the lowest of such value shall be used to
determine the value of imported goods.
 Adjustments as per Rule has to be made.

GIRA ENTERPRISES V. CC 2014 (SC)

If valuation of goods is made on the basis of identical goods, the same must be evidenced by
department that such import are comparable imports and the assessee must be given reasonable
opportunity to put his claim.

Rule 5: TV of Similar Goods

 Subject to Rule 3,
 The value of imported goods shall be the TV of similar goods imported at or about same
time,
 as the goods being valued were imported.
 The remaining provision of Rule 4 shall apply Mutatis Mutandis.

Rule 6: Application of Rule 8 before Rule 7, at request

In case value cannot be determined by Rule 3, 4 & 5 then value shall be determined under provisions
of Rule 7 or 8 sequentially, however at request of importer with approval of PO order of 7 and 8 shall
be reversed.

Rule 7: Deductive Value

 Deductive value method is applied in situation if transaction value of imported goods or
identical goods or similar goods is not available, but these goods are sold in India in similar
condition as imported at or about the time at which declaration for determination of value is
presented and sale price is available.
 Value shall be determined by reducing post-importation costs and expenses from the selling
this selling prices.
Following deductions like; Sales commission , selling profits; transport, insurance and related
costs incurred within India & customs duties and other taxes payable in India.
 Value of imported goods shall be based on the unit prices at which they are sold in India, at the
earliest date after importation but before the 90 days after such importation after adjustment
of sub-rule (1)

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Rule 8: Computed Value

Under this method, Value is the sum of
 Cost of value of materials and fabrication or other processing employed in producing the
imported goods
 An amount for profit and general expenses equal to that usually reflected in sale of goods of
same class or kind, which are made in the country of exportation for export to India
 All other expenses under Rule 10(2)

Rule 9: Residual Method

Subject to Rule 3, in case the value could not be determined by any of preceding rules value shall be
determined by reasonable means subject to principles and general provisions of these rules and Sec
14(1) of Customs Act, 1962.
Provided that value determined shall not exceed normal price i.e price at which such or like goods
are ordinarily sold or offered for sale for delivery at the same time and place of importation in couRse
of International Trade, when seller and buyer have no interest in the business of each other or one
of them has no interest in the other and price should be sole consideration for sale or offer for sale.
Provided that value shall not be determined on following basis
 Arbitrary or fictitious values
 Selling price in India of goods produced in India;
 Price of goods on the domestic market of the country of exportation;
 Price of goods for the export to a country other than India;
 Cost of production Except as per Rule 8;
 System which provides for acceptance for customs purposes of the highest of the two
alternative values;
 Minimum Custom Values

Rule 10: Costs & Services

Rule 10(1)(a) Cost of services to be included:
 Commission & Brokerage (except Buying Commission)
 Cost of containers (but E/N 104/94 excludes cost of containers on execution of bonds- cost of
containers not to be added if importer executes a bond to re-export the container within 6
months)
 Cost of Packing
Provided
 These are incurred by the buyer of the goods
 These are not already included in the price actually paid or payable
Rule 10(1)(b) Apportioned value of following goods & services
 Materials, components, parts and similar items incorporated in the imported goods;
 Materials consumed in the productions of the imported goods;
 Tools, dies, moulds and similar items used in the productions of the imported goods;
 Engineering, development, art work, design work and plans and sketches undertaken
elsewhere than in India and necessary for the production of the imported goods.
Provided
 These are supplied directly or indirectly, by the buyer, whether free of cost or at reduced price;

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 The supply is for use in connection with production and sale for export of imported goods; and
 The value has not already been included in the price actually paid/payable.
Rule 10(1)(c): Royalties & License Fees
Royalties and license fees refer to payment in respect of Patents, Trademarks and Copyrights,
however charges for right of reproduction in the country of importation shall not be includible.
Provided
 These shall be related to imported goods.
 These shall be payable by the buyer as a condition for sale of goods being valued.
 The value has not already been included in the price actually paid/payable.
Rule 10(1)(d): Any part of sale proceeds of any subsequent resale/disposal/use of Imported goods.
Provided: The resale price shall accrue to the seller directly or indirectly.
Rule 10(1)(e): All other payments
Provided
 Payment to be made as a condition for sale of imported goods.
 Payment shall be made either by buyer to the seller, or by a buyer to a third person to satisfy
obligation of the seller.

Rule 10(2): Value of Imported goods to Include following:

S. No Particular Actual Cost/ Charges Actual Cost/ Charges
Ascertainable Not Ascertainable
(a) Cost of Transport of the imported Actual Charges 20% of FOB
goods to the place of importation In case of import by air
addition shall be
restricted to 20% of
FOB
(b) Cost of Insurance Actual Charges 1.125% of FOB
(c). Landing Charges (Loading, unloading 1% of CIF 1% of CIF
and Handling Charges associated with
the delivery of the imported goods at
the place of importation)

COROMANDAL FERTILIZERS LTD. (SC) 1 % Cover thereby all aspects of landing charges and it is
not open to custom authorities to seek to add any amount thereto on the basis that this or that or
the other was not covered thereby.

Statement Showing Computation of Transaction Value u/s 14(1) and Rule 10(1),(2)
FOB Price (As per Sec 14(1) xxx(F.C)
Add: (i) Freight (As per Rule 10(2)) xxx (F.C)
(ii) Insurance (As per Rule 10(2)) xxx (F.C)
(iii) Adjustments(As per Rule 10(1)) xxx (F.C)
CIF Value xxx (F.C.)
CIF (INR) [CIF (F.C) *Exchange Rate] xxx (INR)
Add: Landing Charges @ 1% of CIF (Rule 10(2)) xxx (INR)
Transaction Value xxx (INR)

Relevant Date for Imported Goods [Sec 15]

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Situations
B/E for Home Consumption u/s 46
B/E for Home Consumption u/s 68
Other Cases
Provisions of this Section shall not apply to
 Baggage
 Goods imported by Post.
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HITESH GERA
Relevant Date
Date of filling of Such B/E
Note: (Filling of Advance B/E u/s 46(3))
Where Advance B/E is Filled in case of
Vessel: Relevant date: Date of Grant of entry inward to
such vessel
Aircraft: Relevant Date: Date of such arrival
Vehicle: Relevant Date: Date of presentation of B/E
Date of filling of B/E for Home Consumption u/s 69
Date of payment of Duty
 HITESH GERA

WAREHOUSING
SECTION 9: Warehousing Station
The Board may by notification in the official gazette palaces to be warehousing stations at
which alone public or private warehouses may be appointed. (Omitted from 2016)

APPOINTMENT OF PUBLIC WAREHOUSES

 Section 57 of the Customs Act, 1962
 empowers the AC/DC of Customs
 to appoint public warehouse at places notified under the Customs Act, 1962.
LICENSING OF PRIVATE WAREHOUSES [Section 58]
Licensing of Private Warehouses [Sec 58]
 At any warehousing station the AC/DC of Customs may licence private warehouses
wherein ‐
 dutiable goods imported by or on behalf of the licencee, or
 any other imported goods in respect of which facilities for deposit in a public
warehouse are not available,
may be deposited.
 Cancellation of license : The AC/DC of Customs is competent to cancel the licence in any
the following case,‐
 by serving one month’s notice, in writing, to the licensee; or
 if the licensee has contravened any of the provisions of the Customs Act, 1962 or the
Rules and Regulations made thereunder or committed breach of any of the
conditions of the licence.
 Licensee to be given opportunity of being heard.
 Suspension of license : Further, pending an enquiry whether any licence should be
cancelled under (b) above or not, the AC/DC of Customs may suspend the licence.
WAREHOUSING BOND [Section 59]
Warehousing Bond [Sec 59]
 The importer of any goods who wants to deposit the goods in a warehouse (i.e. who has
presented bill of entry for warehousing) has to execute a bond binding himself in a sum
equal to twice the amount of the duty assessed (under section 17 to 18), on such goods
 to observe all the provisions of this Act and the rules and regulations in respect of
such goods;
 to pay on or before a date specified in a notice of demand‐
 all duties, and interest, if any, payable under sub‐section (2) of section 61;
 rent and charges claimable on account of such goods under this Act, together with
interest on the same from the date so specified
 to discharge all penalties incurred for violation of the provisions of this Act and
the rules and regulations in respect of such goods.
 AC/DC of Customs may permit an importer to enter into a general bond in such amount
as may be approved by them in respect of the warehousing of goods to be imported by
him within a specified period.
 A bond executed by a transferor shall remain in force even if the goods have been
transferred to another warehouse or title of the goods has been transferred to another
person.

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 [Section 60] After execution of such warehousing bond, the proper officer may make an
order permitting deposit of such goods in warehouse.
PERIOD FOR WHICH GOODS MAY REMAIN WAREHOUSED [Section 61(1)]
Period for Which Goods May Remain Warehoused [Sec 61(1)]
Any warehoused goods may be left in the warehouse in which they are deposited or in any
warehouse to which they may be removed, till the expiry of the following periods after the
date on which the proper officer has made an order under section 60 permitting the deposit
of the goods in a warehouse:
 in the case of CAPITAL GOODS intended for use in any 100% export oriented
undertaking, till the expiry of 5 years;
 in the case of goods OTHER THAN CAPITAL GOODS intended for use in 100% export
oriented undertaking till the expiry of 3 years; and
 in the case of any OTHER GOODS, till the expiry of 1 year.
EXTENSION OF WAREHOUSI
Extension Of Warehousing Period
In the case of any goods not likely to deteriorate, the period specified above may be
extended on sufficient cause being shown ‐
 Goods meant for 100% EOU: Extension by the Commissioner of Customs, for such period
as he may deem fit and
 In any other case: Extension by the Commissioner of Customs, for a period not
exceeding 6 months and by the Chief Commissioner of Customs for such further period
as he may deem fit. REDUCTION of warehousing period

Reduction of Warehousing Period

In case of goods (i.e. goods other than those meant for 100% EOU) likely to Deteriorate, the
aforesaid period of one year may be reduced by the Commissioner of Customs to such
shorter period as he may deem fit.
Removal of goods from warehouse on cancellation of licence: in case when the licence for
any private warehouse is cancelled, the owner of any goods warehoused therein, shall,
within 7 days from the date on which notice of such cancellation is given, or within such
extended period as the proper officer may allow, remove the goods from such warehouse to
another warehouse or clear them for home consumption or exportation.
Interest in respect of ware rest in respect of warehoused goods [Section 61(2)]
Interest in respect of Warehoused Goods [Sec 61(2)]
 In case of goods meant for 100% EOU: @ 15% p.a. on the amount of duty payable at the
time of clearance of the goods for the period from the expiry of the said warehousing
period till the date of payment of duty on the warehoused goods.
 In case of other goods: @ 15% p.a. on the amount of duty payable at the time of
clearance of the goods, for the period after the expiry of 90 days till the date of
payment of duty on the warehoused goods.
 No interest leviable in case of NIL duty.

[The CBEC vide Circular No. 39/2013 Cus., dated 1‐10‐2013 has clarified that when the goods
deposited in a warehouse remain warehoused beyond a period of 90 days, then the interest
starts accruing. In other words, the relevant date when the period of 90 days would
commence would be the date of depositing the goods in the warehouse.]
Control over warehoused goods [section 62]
PRATIBHA PROCESSORS (SC)
It was held that if no duty is payable at the time of clearance of goods from warehouse, no
interest is payable.

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Control Over Warehoused Goods [Sec 62] [Omitted from 2016]

 All warehoused goods shall be subject to the control of the proper officer.
 No person shall enter a warehouse or remove any goods therefrom without permission
of the proper officer.
 The proper officer may cause any warehouse to be locked with the lock of the Customs
Department and no person shall remove or break such lock.
 The proper officer shall have access to every part of a warehouse and power to examine
the goods therein.
Section 63
Payment of Rent & warehouse charges [Sec 63] [Omitted from 2016]
The owner of the goods is liable
 to pay to the warehouse keeper, RENT AND WAREHOUSE CHARGES
 at the rate as fixed under any law for the time being in force or
 where no rates are so fixed, at such rates as may be fixed by the Commissioner of
Customs.
 If the rent or warehouse charges are not paid within ten days from the date when they
became due,
 the warehouse‐keeper may, after notice to the owner of the warehoused goods
 and with the permission of the proper officer,
 cause to be sold such sufficient portion of the goods
 as the warehouse‐keeper may select.
RIGHTS OF THE OWNER OF WAREHOUSED GOODS [Section 64]
Rights of the Owner Of Warehoused Goods [Sec 64] [Owners control]
The owner of any goods may, either before or after warehousing the same,
 Inspect the goods.
 Show the goods for sale.
 Separate damaged or deteriorated goods from the rest.
 Deal with the goods and their containers in such manner as may be necessary to prevent
loss or deterioration or damage to the goods.
 Sort the goods or change their containers for the purpose of preservation, sale or export
or disposal of the goods.
 Take samples of goods without entry for home consumption and if the proper officer so
permits without payment of duty on such samples.
MANUFACTURING OPERATIONS WAREHOUSED GOODS [Section 65,66]
Manufacturing Operations Warehoused Goods [Sec 65,66]
 Manufacture and other operations in relation to goods in a warehouse [Section 65(1)]
With the sanction of the AC/DC (omitted from 2016) principal commissioner and
commissioner of Customs and subject to such conditions and on payment of such fees as
may be prescribed the owner of any warehoused goods may carry on any
manufacturing process or other operations in the warehouse in relation to such goods.
 Duty liability on waste or refuse arising out of manufacturing or other operations
[Section 65(2)]ousted goods [Section 61(2)]
 IN CASE FINISHED GOODS ARE WHOLLY OR PARTLY EXPORTED: If the whole or any
part of the goods resulting from such operations are exported, import duty shall be
remitted on the quantity of the warehoused goods contained in so much of the
waste or refuse as has arisen from the operations carried on in relation to the goods
exported. However, this remission shall be allowed only if ‐
 Such waste or refuse is destroyed; or

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 HITESH GERA
 Duty is paid on such waste or refuse, as if it had been imported into India in that
form.
 IN CASE FINISHED PRODUCTS ARE WHOLLY OR PARTLY CLEARED FOR HOME
CONSUMPTION: If the whole or any part of the goods resulting from such
operations are cleared from the warehouse for home consumption, import duty
shall be charged on the quantity of the warehoused goods contained in so much of
the waste or refuse as has arisen from the operations carried on in relation to the
goods cleared for home consumption.
 Date for determination of rate of duty and tariff valuation of import material
contained in the waste, will be the date of actual payment of duty, since the said
goods category are covered by Section 15(1)(c).
 Power to exempt imported material used in the manufacture of goods in
warehouse [Section 66]: Central Government, may, by notification in the Official
Gazette, exempt the imported materials from the whole or part of the excess rate of
duty.

Permissible removals from Warehouse [Sec 71]

No warehoused goods shall be taken out of a warehouse except on clearance for home
consumption or export from inserted from 2016 or, for removal to another warehouse
or, as otherwise provided by this Act.
VAL OF GOODS FROM WAREHOUSE [Section 67]
Removal of Goods From Warehouse [Sec 67]
 Removal of goods from one warehouse to another [Section 67]:
The owner of any warehoused goods may remove them from one warehouse to another,
with the permission of the proper officer and subject to such conditions as may be
prescribed for the due arrival of the warehoused goods at the warehouse to which
removal is permitted.
 Warehoused Goods (Removal) Regulations, 1963
 TRANSFER OF WAREHOUSED GOODS IN THE SAME TOWN: Where the goods are to
be removed from one warehouse to another in the same town, the proper officer
may require that the transfer of the goods between the two warehouses be under
the supervision of an officer of Customs, the owner meeting the cost of such
supervision.
 TRANSFER OF WAREHOUSED GOODS TO ANOTHER TOWN: Where the goods are to
be removed from one warehouse to another in a different town, the proper officer
may require the person requesting removal to execute a bond in a sum equal to the
amount of import duty leviable on such goods.
 If the goods are warehoused at the destination within a period of 3 months from
their removal or such extended time as allowed by the proper officer, and certificate
issued in that respect the bond shall stand discharged, otherwise the bond amount
shall stand forfeited.
CLEARANCE OF WAREHOUSED GOODS FOR HOME CONSUMPTION [Section 68]
Clearance of Warehoused Goods for Home Consumption [Sec 68]
 Importer of any warehoused goods may clear such goods for home consumption if
following conditions are fulfilled,‐
 a Bill of Entry (ex‐bond bill of entry) for home consumption has been presented in
prescribed form;
 the import duty leviable on such goods and all penalties, rent, interest and other
charges payable in respect of such goods have been paid; and

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 an order for clearance of such goods for home consumption has been made by
the proper officer.
 The owner of any warehoused goods may relinquish his title to such warehoused
Goods and on such relinquishment; he shall not be liable to pay duty thereon.
 No relinquishment, if offence committed
CLEARANCE OF WAREHOUSED GOODS FOR EXPORTATION [Section 69]
New provision
Any warehoused goods may be cleared from the warehouse for home consumption. if‐
a) a bill of entry for home consumption in respect of such goods has been presented in the
prescribed form;
b) the import duty, interest, fine and penalties payable in respect of such goods have
been paid; and;
c) an order for clearance of such goods for home consumption has been made by the
proper officer.
Provided that the owner of any warehoused goods may, at any time before an order for
clearance of goods for home consumption has been made in respect of such goods, relinquish
his title to the goods upon payment of penalties that mat be payable in respect of the goods
and upon such relinquishment, he shall not be liable to pay duty thereon.
Provided further that the owner of any such warehoused goods shall not be allowed to
relinquish his title to such goods regarding which an offence appears to have been committed
under this Act or any other law for the time being in force.

Clearance of Warehoused Goods for Exportation [Sec 69]

Any warehoused goods may be exported to a place outside India without payment of import
duty, if following conditions are fulfilled‐
 a shipping bill or a bill of export in the prescribed form or a label or declaration
accompanying the goods as referred to in section 82 has been presented in respect of
such goods; (amendment 2013)
 the export duty, penalties, rent, interest and other charges payable in respect of such
goods have been paid; and
 an order for clearance of such goods for exportation has been made by the Proper
officer.
Central Govt. may direct for demand for payment of duty or conditions on export goods
likely to be smuggled back.
REMISSION OF DUTY IN CASE OF VOLATILE GOODS [Section 70]
Remission Of Duty in case of Volatile Goods [Sec 70]
The AC/DC of Customs is empowered to remit the import duty leviable on such shortage or
deficiency of the warehoused goods if following conditions are satisfied‐
 The goods are found deficient in quantity at the time of delivery from the warehouse.
 This shortage is on account of natural loss i.e. evaporation etc.
 The goods are specified by the Central Government, having regard to the volatility of
the goods and the manner of their storage. (For eg. aviation fuel, motor spirit, mineral,
turpentine, acetone, menthol, kerosene, high speed diesel oil, wine, spirit and beer kept
in casks have been notified by the Central Government).
GOO72]
Goods Improperly Removed From Warehouse [Sec 72]
 The goods shall be treated as improperly removed from the warehouse in following
cases‐

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 HITESH GERA
 where any warehoused goods are removed from a warehouse in contravention of
Section 71;
 where any warehoused goods have not been removed from a warehouse at the
expiration of the period during which such good: are permitted under section 61 to
remain in a warehouse;
 where any warehoused goods have been taken under section 64 as samples without
payment of duty;
 where any goods in respect of which a bond has been executed under section 59
and which have not been cleared for home consumption or exportation and are not
duly accounted for to the satisfaction of the proper officer.
 In case of improper removal of warehoused goods, the proper officer may demand the
full amount of import duty chargeable on such goods along with ill penalties, rent,
interest and other charges payable in respect of such goods.
 If any owner fails to pay any amount demanded, then the proper officer is authorised to
detain and sell such portion of the goods as he may select, after giving notice to the
owner.

Raj Exports v. Central Warehousing Corp. [2013]: After expiry of warehousing period, the
liability to pay customs duty crystalises ‐ Remission of duty cannot be granted.

U.K. PAINT INDUSTRIES V.CC 2014(DEL)

Production of advance license subsequent to import of goods can be utilized for payment of
duty in respect of goods which have not been cleared from custom
If an assessee is exempt from payment of duty on the goods kept in warehouse, then no
interest will be payable in respect of these exempted goods (Also refer Pratibha Processor)
CANCELLATION AND RETURN OF WAREHOUSING BOND [Section 73]
Cancellation and Return of Warehousing Bond [Sec 73]
When the whole of the goods covered by any bond executed under section 59 have been
cleared for home consumption or exported or are otherwise duly accounted for, and when all
amounts due on account of such goods have been paid, the Proper officer shall cancel the
bond as discharged in full, and shall on demand deliver it, so cancelled, to the person who has
executed or is entitled to receive it.

Custody over warehouse goods/liability of custodian/licensee [Sec 73A]

1) All warehoused goods shall remain in the custody of the person who has been granted a
license under section 57 or section 58 or section 58A until they are cleared for home
consumption or are transferred to another warehouse or are exported or removed as
otherwise provided under this Act.
2) The responsibilities of the person referred to in sub‐section (1) who has custody of the
warehoused goods shall be such as may be prescribed.
3) Where any warehoused goods are removed in contravention of section 71, the licensee
shall be liable to pay duty, interest, fine and penalties without prejudice to any other
action that may be taken against him under this Act or any other law for the time being
in force.

WAREHOUSING WITHOUT WAREHOUSING

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Warehousing without warehousing refers to a situation where goods are allowed to be stored
into the Customs warehouse without insistence upon compliance of all or any of the
conditions relating to the normal warehousing provisions contained in Se 57 to 73 of the
Customs Act. 1962.
Under Customs Laws, warehousing without warehousing is permissible under the following
three situations:
1) If the importer makes and subscribes to" a declaration before the PO, to the effect that
he is unable for want of full information to file bill of entry in relation to the goods, the
PO may, permit him, without filing of any bill of entry at all, to deposit the goods in a
public warehouse without warehousing the same. Proviso to sec 46
2) Where in the case of any imported goods, in which bill of entry for home consumption
has been filed by the importer, the AC/DC is satisfied on the application of the importer
that the goods cannot be cleared within a reasonable time, such goods may, pending
clearance, be permitted to be stored in public or private warehouse. Sec 49
3) Where bill of entry for warehousing is filed for any imported goods AND the importer
makes and subscribes to a declaration that the goods are to be supplied as stores to
vessels or aircraft without payment of import duty under provisions of Customs Act, then
the PO may permit the goods to be warehoused without the goods being assessed to
duty, i.e., without execution of any warehousing bond. Sec 85

PRACTICE QUESTIONS
Ques 1
Warehousing facility is not availed of for the following reasons-
(a) The importer may not required the goods immediately
(b) The importer wants to avoid heavy demurrage charges imposed by the port.
(c) The importer may not have enough funds to make payment of duty immediately.
(d) None of the above
Ans. D

Ques 2 with the sanction of the proper officer and on the payment of prescribed fees,the
owner of any goods after warehousing-
(a) Cannot inspect the goods
(b) Can show the goods for sale
(c) Cannot sale, export or dispose off the goods
(d) Cannot separate damage or deteriorated goods from the rest
Ans. B

Ques 3 section 61 of the Custom Act, 1962 provides for warehousing in case of capital goods
intended for use in any 100% EOU till the expiry of-
(a) 1 year
(b) 3 year
(c) 5 year
(d) None of the above

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Ans. C

Ques 4
I. who is authorised to appoint public warehouse under the custom act,1962?
II. What are the places were such warehouses can be appointed?
III. What is the purpose for which such warehouses are appointed?
Ans.
I. Section 57 empowers the AC/DC of customs to appoint public warehouse.
II. Public warehouses can be appointed at any warehousing station.
III. Public warehouses are appointed for depositing goods mean for reexport, without
payment of duty.

Ques 5 Explain the validity pf the following statement-

a) Ower of any warehoused goods cannot carry on any manufacturing process or other
opeartions in relation to warehoused goods.
b) Warehoused gppds may be transferred from one warehouse to another.
c) The importer must executive a bond equal to the amount of duty assessed with
necessary surety or security.
Ans.
a) Invalid. As per section 65,the owner of any warehoused goods,with the sanction of
AC/DC of customs subject to such conditions and on payment of such fees as may be
prescribed, may carry on any manufacturing process or other operations in the
warehouse in relation to warehoused goods.
b) Valid. As per section 67,the owner of any warehoused goods may,with the permission
of P.O,remove them from one warehouse to another,subject to such conditions as may
be prescribed.
c) Invalid. As per section 59, the importer of any goods,which have been entered for
warehousing and assessed to duty u/s 17 or 18 shall execute a bond binding himself in
sum equal to twice amount of duty assessed on such goods.

Ques.6 Prena imported certain goods in march 2012.An’ into bond’ bill of entry was
presented on 14 march 2012 and goods were cleared from the port for warehousing. The
order permitting the deposit of goods in warehouse for 6 months was issued on 21 st march
2012. Prena clear the imported goods even the after the warehousing period got over on
20th september ,2012. She didn’t obtain any extension of time as well. A notice was issued
u/s 72 of the custom act,1962 demanding duty and other charges. Prena, cleared the goods
on 10th december,2012.
Advise her about the applicability of rate of exchange and rate of duty and other charges
payable with the help of decided case law.
Ans. The apex court in Kesoram Rayon-vs-CC(1996) has held that goods, not removed from
the warehouse within the permissible period, is considered as deemed to be removed
Improperly on the due date, even though the goods actually removed at a later date. The
rate of duty prevailing on the date on which the goods should have be removed is to be
considered i.e, the rate of duty on 20-09-2012 shall be considered.

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However in case of into-bond bill of entry, exchange rate of the day, on which such bill of
entry is presented, shall be considered i.e, exchange rate on 14-03-2012 shall be
considered. Further, prena is also liable for interest along with rent, warehouse charges,
etc.

Ques.7 A company imported certain goods and warehoused them initially for a period of
one year. The company surrendered the goods and the auction of the goods was duly
advertised. However, subsequently the company made a request for permission to re-
export the goods u/s 69(1) of the Customs Act,1962 and for cancellations of the auction
sale. The request was not granted and the good were auctioned.
The company contends that it is entitled to withdraw the offer of surrender subsequently
and hence, the auction was not valid. Examine.
Ans. As per section 68, the owner of the warehoused goods can surrender or relinquish his
rights before an order for clearance of goods for home consumption had been made in
respect of such goods. However, the said provision doesn’t provide any right to the owner
was subsequent withdrawal of such surrender or relinquishment.
Thus, the contention of the company is not valid.(SHAKTI LPG LTD.)

Ques.8 Goods were imported in Feb,2006 and were cleared from mumbai port for
warehousing on 14th feb,2006 after assessment. Assessable value was Rs.10,000 calculated
on the basis of rate of exchange of Rs.45.54 = US $. The rate of duty on that date was 25%.
The goods were warehoused at Nasik and were cleared from Nasik warehouse on 3 rd
March, 2006, when rate of duty was 15% and exchange rate was Rs. 45.65 = 1 US $. What is
the duty payable while removing the goods from Nasik on 3rd March, 2006?
Ans. Assessment of duty requires determination of 3 things, namely, applicable rate of
exchange, assessable value based upon that rate of exchange and the applicable rate of
duty. Now, so far as the determination of applicable rate of exchange is concerned that
shall be determined in terms of proviso to Sec 14(1) of the Customs Act, 1962. Proviso to
Sec 14 provides that applicable rate of exchange for imported goods would be the date of
presentation of bill of entry (whether for clearance for home consumption from port or for
clearance deposit in warehouse) under section 46 of the Customs Act. Thus, the applicable
rate of exchange in the given situation shall be Rs. 45.54 = 1 US $. Thus, assessable value
based upon that rate of exchange shall be applicable AV. Hence, assessable value shall be
taken to be RS. 10,000.
Regarding applicable rate of duty, sec 15(1)(b) is applicable: As per Sec 15(1)(b) , in case of
clearance of goods from warehouse the applicable rate of duty would be as prevailing on
the date of presentation of bill of entry for home consumption under section 68 of Customs
Act. Thus, the applicable rate of duty in the given situation shall be 15%.
Accordingly, the duty payable by the importer shall be Rs. 1,500.

Ques 9. An importer imported some goods in Feb 2013 and the goods were cleared from
Mumbai port for warehousing on 8 th Feb 2013 after assessment. Assessable value was Rs.
4,86,000 (US $ 10,000 at the rate of exchange Rs. 48.60 per US $). The rate of duty on that
date was 15%. The goods were warehoused at pune and were cleared from pune

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warehouse on 4th March 2013, when rate of duty was 10% and exchange rate was Rs. 48.75
= 1US $. What is the duty payable while removing the goods from pune on 4th March 2013?
(Additional duty of customs (CVD and special CVD)=NIL)
Ans. As per Section 14 read with Section 15 of the Customs Act,1962-
Value of imported goods = value for delivery at time and place of importation = $ 10,000;
Rate of exchange for imported goods = Rate in force on date of presentation of bill of entry
on 8-2-2013 = Rs.48.60 per US $;
Therefore, value of imported goods in Rs. == US $10,000 * Rs. 48.60 =Rs. 4,86,000;
Rate of duty applicable = Rate in force on that date of clearance of warehoused goods for
home consumption = rate in force
On 4-3-2013 = 10%; and
Duty payable = 10.3% of Rs. 4,86,000 = Rs. 50,058.

Ques 10. What will be the impact on the customs duty if the goods are?
(i) Damaged inside the warehouse before clearance for home consumption.
(ii) Destroyed in the warehouse before clearance for home consumption.
(iii) Destroyed on the wharf, before clearance for home consumption
(iv) Destroyed after clearance from warehouse.
Ans.
(i) when the goods are damaged inside the warehouse abatement in customs duty, on
resultant loss in value, has been provided through section 22. Section 22 contemplates that
for claiming abatement of duty, the damage (not deterioration) should occur at any time
before clearance of the imported goods for home consumption from the warehouse.
However, the damage should not be attributable to the importer. It should be proved to the
satisfaction of AC/DC of customs that the imported goods have actually suffered damages.
The claim for abatement is not tenable unless the importer factually proves the damage.
The following equation provides the way to calculate the abatement of duty.
Duty after damage = Value after damage Duty before damage
Value before damage
ii) when the goods are destroyed in the warehouse before clearance for home
consumption, custom duty will be remitted as per the provisions of section 23(1)applies
when the goods have been lost (otherwise than as a result of pilferage) or destroyed in
entirely i.e. whole or part of goods is lost once for all. The goods cease to exist and cannot
be retrieved. The loss is generally on account of natural causes such as fire, flood etc., and
no human element is present as in section 13..The loss or destruction may occur at any time
before clearance for home consumption. The loss/destruction has to be proved to the
satisfaction of Assistant Commissioner of Deputy Commissioner.
iii) As all the conditions of section 23 are fulfilled, duty will be remitted in this case also.
iv) As per the discussion made in (iii) above it is clear that remission of duty is possible only
when destruction occurs before clearance for home consumption. In case of destruction
after clearance from a warehouse, no remission of duty is possible.

Ques 11
Clearly mention the relevant date in the following case of goods warehoused under bond:

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(i) Rate of exchange, when goods are removed for home consumption.
(ii) Rate of duty, when goods are removed for home consumption.
(iii) Rate of duty, if the goods are not removed from warehouse within the permissible
period.
Ans. Relevant date in the following cases of goods warehoused under bond-
(i) The relevant date for rate of exchange is the date on which the bill of entry is
presented for warehousing under section 46 of the Custom Act,1962 and not when
bill of entry is presented under section 68 for clearance from warehouse.
(ii) As per section 15(1)(b) of the Custom Act,1962 rate of duty as prevalent on date of
presentation of bill of entry for home consumption for clearance from warehouse is
applicable and not the rate prevalent when goods were removed from customs
port.
(iii) Goods which are not removed within the permissible period are deemed to be
improperly removed on the day it should have been removed. Thus, duty applicable
on such date i.e. last date on which the goods should have been removed is
relevant and not the date on which the goods were actually removed.

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TRANSIT & TRANSHIPMENT OF GOODS

 Transit of Transhipment:
 Transit: [Sec 53 & 55]
 Goods are transited in the same conveyance which brings the goods into
India.
 No need for filling any fresh documentation for carrying goods from first
port to destination port.
 Transhipment: [Sec 54 & 55]
 Goods are transhipped in a conveyance other than the conveyance which
brings the goods into India.
 Fresh documentation is required for carrying goods from first port to
destination port.

Note : Provisions of Transit or Transhipment not applicable in respect of :

 Baggage
 Post
 Stores

Goods in Transit:
--Mention in IGM/R that goods
are intended to transited further
No separate documentation is required
England Port----------------------------Gujarat Port-----------------------------Kerala Port
(Goods not unloaded) (Goods unloaded for
clearance)
No Import duty payable Goods shall be entered at this
(Sec 53) port as if they are directly
Imported at this port for
first and duty shall be
payable (Sec 55)

-- Mention in IGM/R that goods

are intended to transited further
No separate documentation is required
England Port---------------------Gujarat Port-----------------------------------Sri Lanka Port
(Goods not unloaded) (Goods unloaded for clearance)
No Import duty payable No import duty at all (as goods
(Sec 53) not for import in India)
(Sec 55)

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Goods in Transhipment:
-- Mention in IGM/R that goods
are intended to transited further
England Port---------------------Gujarat Port---------------------------------------Kerala Port
(Goods not unloaded) (Goods unloaded for clearance)

No Import duty payable Goods shall be entered at this

(Sec 54) port as if they are directly
Imported at this port for first
and duty shall be payable
(Sec 55)

-- Mention in IGM/R that goods

are intended to transited further
-- Bill of Transhipment or Declaration
Of Transhipment shall be filled With P.O.
England Port-----------------------Gujarat Port-----------------------------------Sri Lanka Port
(Goods not unloaded) (Goods unloaded for clearance)
No Import duty payable No import duty at all (as goods
(Sec 54) not for import in India)
(Sec 55)

Practice Question

Q1. State the difference between transit and transhipment of goods under the provisions of
customs Act.
Transit of goods Transhipment of goods
Transit of goods is governed by sec 53 Transhipment of goods is governed by Sec 54
read with sec 55 of the Customs Act, 1962 read with sec 55 of the Customs Act, 1962.
Goods are transited in the same Goods are transhipped in a conveyance other
conveyance which brings the goods into than conveyance which brings the goods into
India. India.
The goods are not unloaded from the The goods are unloaded from the conveyance
conveyance which brought them into which brought them into India and then,
India. reloaded onto another conveyance.
No need of filing any fresh documentation Fresh documentation is required for carrying
for carrying goods from first customs goods from first customs station to another
station to another custom station. custom station.
The document which needs to be filed is
called “Bill of transhipment”. However, where
the goods are transhipped under an
international treaty or bilateral agreement
between the government of India and the
Government of a foreign country. A
“Declaration for Transhipment” is sufficient.
`

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DUTY DRAWBACK
DUTY DRAWBACK
 is an export incentive scheme where
 the duties/taxes paid on
 any imported materials or
 excisable materials or
 input services which are
 used in the manufacture/processing/carrying out
 any operations on the goods
 that are exported outside India
 is allowed as refund to the exporter.

Drawback Allowance on Re-Export of Duty Paid Goods [Sec 74]

Duty drawback is allowed of custom duty paid on goods imported into India and which are
subsequently re-exported. The provisions of Section 74 are as follows:
 Drawback only on duty paid imported goods.
 Order for exportation: The goods so imported must have been entered for exportation either -
 under section 51; or
 under section 77 as baggage; or
 under section 82 by post,
and the proper officer must have made an order for permitting clearance of goods for
exportation. The goods shall be deemed to have been entered for export on the date with
reference to which the rate of duty is calculated under section 16.
Such goods are identified to the satisfaction of the AC/DC as the goods which were imported.
 98% of the import duty paid is allowed as drawback in case the GOODS ARE EXPORTED OUT
OF INDIA WITHOUT BEING PUT TO USE. In case the goods are taken into use and then
exported, duty drawback shall be allowed at notified rates under section 74(2) having regard to
the duration of use, the depreciation in value and other relevant circumstances.
 Re-export within 2 Years: The goods must be entered for export within 2 years from the date of
payment of duty on the importation thereof. However, extension can be granted by the Board
on sufficient cause been shown In the case of goods assessed to duty provisionally under
section 18, the date of payment of the provisional duty shall be deemed to be the date of
payment of duty.

For the purpose of this section Re‐export of Imported Goods (Drawback of Customs Duties) Rules,
1995 has been framed by the Central Government

GOODS ARE USED AFTER IMPORTATION [Sec 74(2)]

Central Government is empowered to fix the rate of drawback in case of those goods, which are
exported after having been put to use subsequent to their importation, having regard to the
duration of use, the depreciation in value and other relevant circumstances,
 Rates of Drawback notified by the Central Government: The Central Government has notified
the drawback rates in respect of goods taken into use after importation:
Length of period between the date of clearance for home % of import duty to be
consumption and the date when goods are placed under customs paid as Drawback
control for export.
<= 6 months 85%

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> 6 months but <= 12 months 70%

> 12 months but <= 18 months 60%
> 18 months but <= 24 months 50%
> 24 months but <= 30 months 40%
> 30 months but <= 36 months 30%
> 36 months NIL
 Goods in respect of which no duty drawback is allowed: The goods in respect of which no
drawback of import duty shall be allowed on export, if they have been used in India after
importation, are as follows,-
 Wearing apparel.
 Tea chests.
 Exposed cinematograph film passed by the Board of Film Censors in India.
 Unexposed photographic films, paper and plates and X-Ray films.

Goods Imported For Personal Use and Subsequently Re-Exported

 In respect of a motor car or goods imported by a person
 for his personal and private use,
 drawback of duty shall be
 equal to the import duty paid in respect of such motor car or goods
 as reduced by 4%, 3%, 2.5% and 2%
 for use for each quarter or part thereof
 during the period of first year, second year, third year, and fourth year respectively.
 Permission by CBEC in case re-export period is more than 2 years
 motor car or goods have been used for more than 4 years, then no drawback be allowed.

Prohibitions on Draw-Back [Sec 76]

Notwithstanding anything contained hereinbefore, mo drawback shall be allowed:
1) in respect of any goods, the market price of which is less than the amount of draw-back duty
thereon; or
2) where the draw-back due in respect of any goods is less than Rs 50
Market price of the goods prevailing in the country (India) is the relevant consideration for the
purpose of getting drawback and not the price of the goods which the exporter expects to receive
from the overseas purchaser – Section 76 of the Customs Act, 1962 [OM PRAKASH BHATIA (SC]

CUSTOMS, CENTRAL EXCISE DUTIES AND SERVICE TAX DRAWBACK RULES, 1995

Rule 5: The manner and time of claiming drawback in case o goods exported
Rule 5 provided that a claim for drawback, in case of goods exported other that by pos, shall be field
in the specified form within 3 months from the date of let export order u/s 51.

Extension of aforesaid period of 3 months

Authority Period of extension, which can Fee payable along with the
be allowed by authority application
AC/DC 3 months from original period Lower of :-
of 3 months (a) 1% of FOB value of
exports
(b) 1,000

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Commissioner 6 months from expiry of period Lower of :-

extended by AC/DC (a) 2% of FOB value of
exports
(b) 2,000

Grant, or refusal, of extension: The Assistant/Deputy Commissioner or the Commissioner may on

application and after making such enquiry as he thinks it, grant extension or refuse to grant
extension after recording in writing the reasons for such refusal.

Documents to be filed along with claim: The claim shall be filed along with the following documents
a) Triplicate copy of the Shipping Bill bearing examination report recorded by the proper officer of
the customs at the time of export;
b) Copy of Bill of Entry or any other prescribed document against which goods were cleared on
importation;
c) Import invoice;
d) Evidence of payment of duty paid at the time of importation of the goods;
e) Permission from RBI for re-export of goods, wherever necessary;
f) Export invoice and packing list;
g) Copy of Bill of lading or Airway bill;
h) Any other documents as may be specified in the deficiency memo.

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