Direct Tax Vs Indirect Tax

Direct taxes are paid in entirety by a taxpayer directly to the government. It is

also defined as the tax where the liability as well as the burden to pay it
resides on the same individual. Direct taxes are collected by the central
government as well as state governments according to the type of tax levied.
Major types of direct tax include:
 Income Tax: Levied on and paid by the same person according to tax
brackets as defined by the income tax department.
 Corporate Tax: Paid by companies and corporations on their profits.
 Wealth Tax: Levied on the value of property that a person holds.
 Estate Duty: Paid by an individual in case of inheritance.
 Gift Tax: An individual receiving the taxable gift pays tax to the
government.
 Fringe Benefit Tax: Paid by an employer that provides fringe benefits
to employees, and is collected by the state government.
Indirect tax, as mentioned above, include those taxes where the liability to
pay the tax lies on a person who then shifts the tax burden to another
individual.
Some types of indirect taxes are:
 Excise Duty: Payable by the manufacturer who shifts the tax burden to
retailers and wholesalers.
 Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax
burden to customers by charging sales tax on goods and services.
 Custom Duty: Import duties levied on goods from outside the country,
ultimately paid for by consumers and retailers.
 Entertainment Tax: Liability is on the cinema owners, who transfer
the burden to cinemagoers.
 Service Tax: Charged on services rendered to consumers, such as food
bill in a restaurant.
Therefore, the prime difference between direct tax and indirect tax is the
ability of the taxpayer to shift the burden of tax to others. Direct taxes include
tax varieties such as income tax, corporate tax, wealth tax, gift tax,
expenditure tax etc. Some examples of indirect taxes are sales tax, excise
duty, VAT, service tax, entertainment tax, custom duty etc. However, this is
not an exhaustive list of taxes and more types of taxes are levied by the
government on specific cases.
Key differences between Direct and Indirect Tax are:
1. Direct tax is levied and paid for by individuals, Hindu undivided
Families (HUF), firms, companies etc. whereas indirect tax is ultimately
paid for by the end-consumer of goods and services.
2. The burden of tax cannot be shifted in case of direct taxes while burden
can be shifted for indirect taxes.
3. Lack of administration in collection of direct taxes can make tax
evasion possible, while indirect taxes cannot be evaded as the taxes are
charged on goods and services.
4. Direct tax can help in reducing inflation, whereas indirect tax may
enhance inflation.
5. Direct taxes have better allocative effects than indirect taxes as direct
taxes put lesser burden over the collection of amount than indirect taxes,
where collection is scattered across parties and consumers’ preferences of
goods is distorted from the price variations due to indirect taxes.
6. Direct taxes help in reducing inequalities and are considered to be
progressive while indirect taxes enhance inequalities and are considered to
be regressive.
7. Indirect taxes involve lesser administrative costs due to convenient and
stable collections, while direct taxes have many exemptions and involve
higher administrative costs.
8. Indirect taxes are oriented more towards growth as they discourage
consumption and help enhance savings. Direct taxes, on the other hand,
reduce savings and discourage investments.
9. Indirect taxes have a wider coverage as all members of the society are
taxed through the sale of goods and services, while direct taxes are
collected only from people in respective tax brackets.
10. Additional indirect taxes levied on harmful commodities such as
cigarettes, alcohol etc. dissuades over-consumption, thereby helping the
country in a social context.
Electronic liability ledger (also known as electronic tax
liability register): Accounts for a taxpayer’s gross tax liability — form GST
PMT-01 on the GST portal

1. Electronic credit ledger (also known as electronic input tax credit

ledger): Records the tax payments already made during the supply
chain e. every claim of ITC is recorded here — form GST PMT-02
2. Electronic cash ledger: All amounts paid by the taxpayer are reflected
here — form GST PMT-05

Let's analyze each one in more detail.

Electronic liability ledger

This ledger records all liabilities of a taxable person including:

 The tax, interest, late fees, or any other amount payable per the return
furnished by the taxpayer or per any proceedings
 The tax and interest payable arising out of any mismatch of ITC or
output tax liability
 Any interest that may accrue from time to time
 The reversal of ITC or interest

Taxpayers should settle their liabilities in the following order:

1. Self-assessed tax and other dues, such as interest, penalty, fees, or any
other amount relating to previous tax period returns
2. Self-assessed tax and other dues relating to the current tax period
return
3. Any other amount payable under the act/rules (liability arising out of
demand notice, proceedings, etc.)
Electronic credit ledger
Every claim of ITC self-assessed by the taxpayer shall be credited to this
ledger. The amount available in this ledger may be used for payment towards
output tax only. Under no circumstance can an entry be made directly in the
electronic credit ledger.

This ledger may include the following:

 ITC on inward supplies from registered taxpayers

 ITC available based on distribution from input services distributor
(ISD)
 ITC on input of stock held/semi-finished goods or finished goods held
in stock on the

day immediately preceding the date on which the taxpayer became liable to
pay tax, provided he applies for registration within 30 days of becoming
liable

 Permissible ITC on inputs held in stock and inputs contained in semi-

finished or finished goods held in stock on the day of conversion from
composition scheme to regular tax scheme

 ITC eligible on a payment made on a reverse charge basis

Electronic cash ledger

Any amount paid by the taxpayer will be reflected in the electronic cash
ledger. The amount available in this ledger may be used for making any
payment towards tax, interest, penalty, fees, or any other amount due under
the act/rules in the time and manner prescribed. (It is reiterated that any credit
in the electronic credit ledger can be utilized only for payment of output tax.)
To initiate a payment, taxpayers generate a challan online using form GST
PMT-06, which will be valid for a period of 15 days. Payment can then be
remitted through any of the following modes:

 Internet banking (authorized banks only)

 Credit or debit card (authorized banks only)
 National Electronic Fund Transfer (NEFT) or real-time gross
settlement (RTGS) (any bank, authorized or unauthorized)
 Over-the-counter (OTC) payment (authorized banks only) for deposits
up to ten thousand rupees per challan and per tax period

Advantages of GST
1. GST eliminates the cascading effect of tax
GST is a comprehensive indirect tax that was designed to bring the indirect
taxation under one umbrella. More importantly, it is going to eliminate the
cascading effect of tax that was evident earlier.
Cascading tax effect can be best described as ‘Tax on Tax’. Let us take this
example to understand what is Tax on Tax:
Before GST regime:
A consultant offering services for say, Rs 50,000 and charged a service tax of
15% (Rs 50,000 * 15% = Rs 7,500).
Then say, he would buy office supplies for Rs. 20,000 paying 5% as VAT
(Rs 20,000 *5% = Rs 1,000).
He had to pay Rs 7,500 output service tax without getting any deduction of
Rs 1,000 VAT already paid on stationery.
His total outflow is Rs 8,500.
Under GST 
 GST on service of Rs 50,000 @18% 9,000

Less: GST on office supplies (Rs 20,000*5%) 1,000

Net GST to pay 8,000

2. Higher threshold for registration

Earlier, in the VAT structure, any business with a turnover of more than Rs 5
lakh (in most states) was liable to pay VAT. Please note that this limit
differed state-wise. Also, service tax was exempted for service providers with
a turnover of less than Rs 10 lakh.
Under GST regime, however, this threshold has been increased to Rs 20 lakh,
which exempts many small traders and service providers.
Let us look at this table below:

Tax Threshold Limits

Excise 1.5 crores

VAT 5 lakhs in most states

Service Tax 10 lakhs

GST 20 lakhs (10 lakhs for NE states)

3. Composition scheme for small businesses
Under GST, small businesses (with a turnover of Rs 20 to 75 lakh) can
benefit as it gives an option to lower taxes by utilizing the Composition
scheme. This move has brought down the tax and compliance burden on
many small businesses.

4. Simple and easy online procedure

The entire process of GST (from registration to filing returns) is made online,
and it is super simple. This has been beneficial for start-ups especially, as
they do not have to run from pillar to post to get different registrations such
as VAT, excise, and service tax.
Our ClearTax GST software is already on a roll filing GST returns

5. The number of compliances is lesser

Earlier, there was VAT and service tax, each of which had their own returns
and compliances. Below table shows the same:
Under GST, however, there is just one, unified return to be filed. Therefore,
the number of returns to be filed has come down. There are about
11 returns under GST, out of which 4 are basic returns which apply to all
taxable persons under GST. The main GSTR-1 is manually populated and
GSTR-2 and GSTR-3 will be auto-populated.

6. Defined treatment for E-commerce operators

Earlier to GST regime, supplying goods through e-commerce sector was not
defined. It had variable VAT laws. Let us look at this example:
Online websites (like Flipkart and Amazon) delivering to Uttar Pradesh had
to file a VAT declaration and mention the registration number of the delivery
truck. Tax authorities could sometimes seize goods if the documents were not
produced.
 Again, these e-commerce brands were treated as facilitators or mediators by
states like Kerala, Rajasthan, and West Bengal which did not require them to
register for VAT.
All these differential treatments and confusing compliances have been
removed under GST. For the first time, GST has clearly mapped out the
provisions applicable to the e-commerce sector and since these are applicable
all over India, there should be no complication regarding the inter-state
movement of goods anymore.
Read a more detailed analysis of the impact of GST on e-commerce.

7. Improved efficiency of logistics

Earlier, the logistics industry in India had to maintain multiple warehouses
across states to avoid the current CST and state entry taxes on inter-state
movement. These warehouses were forced to operate below their capacity,
giving room to increased operating costs.
Under GST, however, these restrictions on inter-state movement of goods
have been lessened.
As an outcome of GST, warehouse operators and e-commerce aggregators
players have shown interest in setting up their warehouses at strategic
locations such as Nagpur (which is the zero-mile city of India), instead of
every other city on their delivery route.
Reduction in unnecessary logistics costs is already increasing profits for
businesses involved in the supply of goods through transportation.
Visit here to read more about the impact of GST on logistics.

8. Unorganized sector is regulated under GST

In the pre-GST era, it was often seen that certain industries in India like
construction and textile were largely unregulated and unorganized.
Under GST, however, there are provisions for online compliances and
payments, and for availing of input credit only when the supplier has
accepted the amount. This has brought in accountability and regulation to
these industries.
Let us now look at disadvantages of GST. Please note that businesses need to
overcome these disadvantages to run the business smoothly.
Parameter VAT GST

Under the old

taxation
system, the
central taxes
applicable
were custom
Under GST, all
duty/central
the central
excise duty,
and state
central sales
taxes will be
tax on
subsumed and
commodities
a single tax
and services,
will be levied
surcharge and
on all
Structure cesses. The
commodities
state taxes
and services
included state
apart from
VAT, WCT,
motor spirit,
entertainment
petroleum,
tax, luxury tax,
natural gas
tax on
and high-
gambling,
speed diesel.
betting and
lottery, sales
tax deducted
at source, and
surcharge and
cesses.

Under
VAT, tax will
Under GST,
be levied at
tax will be
the place
levied at the
where goods
Basis of place of
are
Levy consumption,
manufactured
Time of supply in case of supply of vouchers
A voucher has been defined in the CGST Act as an instrument where there is an obligation to

accept it as consideration or part consideration for a supply of goods or services or both, and where

the goods or services or both to be supplied or the identities of their potential suppliers are either

indicated on the instrument itself or in related documentation, including the terms and conditions

of use of such instrument. Vouchers are commonly used for transaction in the Indian economy. A

shopkeeper may issue vouchers for a specific supply i.e. supply which is identifiable at the time of

issuance of voucher. In trade parlance, these are known as single purpose vouchers. For example,

vouchers for pressure cookers or television or for spa or haircut. Similarly a voucher can be a

general purpose voucher which can be used for multiple purposes. For example a Rs. 1000/-

voucher issued by Shoppers Stop store can be used for buying any product or service at any

Shoppers Stop store. The time of supply is different in case of single purpose voucher and in the

case of general purpose voucher. Time of supply in the case of single purpose voucher i.e. case

where supply is identifiable at the time of issuance of voucher is the date of issue of voucher.

However, in all other cases of supply of vouchers, the time of supply is the date of redemption of

voucher.
How can payment be done in gst
Payment can be done by the following methods:

 Through debit of Credit Ledger of the tax payer maintained on

the Common Portal – ONLY Tax can be paid. Interest, Penalty
and Fees cannot be paid by debit in the credit ledger. Tax payers
shall be allowed to take credit of taxes paid on inputs (input tax
credit) and utilize the same for payment of output tax. However,
no input tax credit on account of CGST shall be utilized towards
payment of SGST and vice versa. The credit of IGST would be
permitted to be utilized for payment of IGST, CGST and SGST in
that order.
 In cash by debit in the Cash Ledger of the tax payer maintained
on the Common Portal. Money can be deposited in the Cash
 Ledger by different modes, namely, E-Payment (Internet
Banking, Credit Card, Debit Card); Real Time Gross Settlement
(RTGS)/ National Electronic Fund Transfer (NEFT); Over the
Counter Payment in branches of Banks Authorized to accept
deposit of GST.

What is composite
supply?
A composite supply means a supply comprising two or
more taxable supplies of goods or services, or any
combination thereof, which are naturally bundled 
and supplied in conjunction with each other in the
ordinary course of business, one of which is a principal
supply.
For example, when a manufacturer has to supply goods
which need to be transported up to the place of
recipient, he will charge for value of goods, cost of
packing, cost of transportation and in transit insurance
up to the place of recipient. Here supply of goods is the
principal activity. Activities of packing and
transportation are necessary to complete the supply.
There is nothing unusual in this transaction and hence
these are naturally bundled in the ordinary course of
business. Though individually some of these activities
are supply of goods (value of goods and packing
material) and some of them are supply of services
(expense on putting the goods in packing material and
transporting), the GST law will treat all these activities
as a single activity, taking its character from main
activity, i.e. supply of principal goods and tax will be
charged accordingly.
For qualifying as composite supply, activities should be
naturally-bundled. While selling a car, it is natural for the
car dealer to supply standard
accessories such as extra set of tyres, tools necessary
to replace the tyres, first aid box etc. All these supplies
are naturally bundled. Car dealers generally do not
engage in imparting driving training. If a dealer agrees
to arrange training also and charges for it, the activity of
training will not fit into the concept of composite supply
as it is neither ‘naturally bundled’ nor ‘in the ordinary
course of business’.
For qualifying as composite supply, composition should
be in the ordinary course of business. A readymade
garment is put into transparent polyethylene bag and
that bag is put into a bright print card board box. This is
in ordinary course of business. A FMCG company
approaches the garments supplier for buying garments
to be packed in a set of five pieces in an attractive,
durable suit case for gifting to delegates in its upcoming
sales conference. Here supply of suitcase is not in the
ordinary course of business.

Mixed Supply Under GST

, a mixed supply means two or more individual supplies of goods or services, or

any combination thereof, made in conjunction with each other by a taxable
person for a single price where such supply does not constitute a composite
supply: 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 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. In order to identify if the particular supply is a mixed supply,
the first requisite is to rule out that the supply is a composite supply. A supply can
be a mixed supply only if it is not a composite supply. As a corollary it can be said
that if the transaction consists of supplies not naturally bundled in the ordinary
course of business then it would be a mixed supply. Once the amenability of the
transaction as a composite supply is ruledout, it would be a mixed supply,
classified in terms of supply of goods or services attracting highest rate of tax.

Activities Treated As Supply of Goods

Following are the activities that form “Supply of Goods”
under GST:

1. Any transfer of title in Goods

2. Transfer of title in goods under an agreement stipulating
that the property in goods shall pass at a future date upon
payment of full consideration as agreed.
3. Goods forming part of the assets of a business
transferred or disposed of by or under the direction of the
person carrying on the business. Provided such goods are
transferred so that they no longer form part of those assets.
Moreover, such a transfer takes place whether or not for a
consideration.
4. There are cases where a person ceases to be a taxable
person. In such a case, goods forming part of the assets of
any business carried on by the said person shall be deemed
to be supplied by him in the course or furtherance of his
business. Provided such goods are supplied immediately
before the person ceases to be a taxable person, unless:
1. The business is transferred as a going concern to
another person
2. Business is carried on by a personal representative
who is deemed to be taxable
5. Supply of goods by any unincorporated association to a
member for cash, deferred payment or other valuable
consideration.

Activities Treated As Supply of Services

Following are the activities that form “Supply of Services”
under GST:

1. Transfer of right in goods or of undivided share in goods

without the transfer of title
2. Any lease, tenancy, easement, licence to occupy land
3. Lease or letting out of the building including a
commercial, industrial or residential complex for business or
commerce, either wholly or partly
4. Any treatment or process which is applied to another
person’s goods
5. Transfer of business assets:
1. By or under the direction of a person carrying on a
business
2. Goods held assets or used for the purposes of the
business are put to any private use or
3. Are used, or made available to any person for use,
for any purpose other than the purpose of the business,
whether or not for a consideration
6. Renting of immovable property
7. 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. This is except the cases where:
1. the entire consideration has been received after
issuance of completion certificate, where required by the
competent authority or
2. after its first occupation, whichever is earlier.
8. Temporary transfer or permitting the use of any
intellectual property right
9. Development, design, programming, customization,
adaptation, up-gradation, enhancement, implementation of
information technology software
10. Agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act.
11. 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.
12. Composite supply of works contract as defined in
clause (119) of section 2.
13. Composite supply:
1. by way of or as part of any service or
2. 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).
Provided such supply or service is for cash, deferred payment
or other valuable consideration.
Schedule III
There are certain activities that are not to be treated as
Supply under GST. Hence, following activities are neither
treated as supply of goods not supply of services:

 Services given by an employee to the employer

 Any person performing duties as a Chairperson or a
Member or a Director of a government body. Provided the
 person is not regarded as an employee before the
commencement of this clause.
 Functions performed by members of:
o Parliament
o State Legislature
o Panchayats
o Municipalities
o Other Local Authorities
 Duties performed by a person holding any
designation in order to pursue constitutional provisions.
 Funeral, burial, crematorium or mortuary including
transporting the deceased.
 Sale of land
 Actionable claims besides lottery, gambling and
betting
 Sale of building subject to clause (b) of paragraph 5
of Schedule II

Inter state and intra state supply levy

While levying tax on various supplies of goods or services, it
becomes pertinent to decide whether supplies shall be treated as
intra-State supplies or inter-State supplies. Also, this is necessary
to determine because it will be a decisive factor for charging
correct taxes, i.e. CGST and SGST/UTGST or IGST.

The relevant provisions for determining inter-State and intra-State

supplies are governed by Section 7 and Section 8 of IGST Act.
Section 8 of IGST Act pertains to intra-State supplies. Sub-section
(1) of Section 8 of IGST Act deals with intra-State supply of
goods. The said section provides that “subject to provisions of
section 10, supply of goods where the location of the supplier and
place of supply of goods are in the same State or same Union
territory shall be treated as intra-State supply”, the proviso to
above section excludes three supplies from being treated as intra-
State supply even if the location of supplier and place of supply
are in same State or Union territory, these are:

(i)           supply to or by an SEZ developer or unit;

(ii)        goods imported into India and;
(iii)      supplies made to tourist referred in Section 15

Sub-section (2) to Section 8 deals with intra-State supply of

services and it provides that “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”. The proviso to
Section 8(2) provides that the intra-State supply of services shall
not include supply of services to or by a Special Economic Zone
developer or Special Economic Zone Unit.

A plain reading of the above provisions makes it clear that

whereas Section 8(1) is subject to provisions of Section 10,
Section 8(2) is subject to provisions of Section 12. In other words,
these provisions shall not be applicable in case of export/import of
goods which are covered by the provisions of Section 11 of IGST
Act, as well as cases where the place of supply of services is
determined as per the provisions of Section 13, i.e., in case where
either the supplier or the recipient of services is located outside
India.

As per Section 13(8) of IGST Act where either the location of

supplier and or the location of recipient is outside India, in case of
services mentioned below the place of supply of services shall be
the location of supplier:

(a)   Services supplied by the 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.
In all the above-mentioned supplies, in a case where the location
of recipient is outside India and the supplier of services is in India,
the location of supplier and place of supply will fall within same
State by the reason of location of supplier being the place of
supply.

Since the location of supplier and place of supply are in the same
State, the same should be treated as intra-State supply of
services. But, the provisions of Section 8(2) dealing with definition
of intra-State supplies begins with “Subject to provisions of
Section 12” i.e. the provisions of Section 8(2) shall be governed
by or will be applicable only where the place of supply is
determined as per provisions of Section 12 of IGST Act. As per
the wordings of Section 8 of IGST Act, it can be considered that
where the place of supply of services is determined as per
provisions of Section 13, Section 8(2) should not be applied.
To determine the appropriate tax leviable on the supplies
mentioned above, let us analyse the provisions of Section 7 of
IGST Act which deals with Inter-State supplies. The said section
does not specifically provide the kind of supplies satisfying the
conditions as mentioned above shall be treated as inter-State
supplies. However, Section 7(5)(c) provides that “Supply of goods
or services or both in the taxable territory, not being an intra-state
supply and not covered elsewhere in this section, shall be treated
to be supply of goods or services or both in the course of inter-
state trade or commerce”. Through these provisions one may
conclude that the supplies of above nature made to a person
outside India shall be treated as inter-State supplies. But, the
same appears to be conflicting, for the reason that supplies are
made to a recipient outside India and not in a taxable territory and
therefore different views may be possible giving rise to litigation in
the near future. Use of the words ‘Supply….in the taxable territory’
seems to point to major elements of supply being present in the
taxable territory and when the location of recipient is not in India,
it is possible to argue that sub-section (5) of Section 7 will not
come into play at all.

Incorrect determination of nature of supply as inter-State or intra-

State will lead to payment of incorrect type of tax as well i.e.
instead of CGST and SGST, the tax payer may pay IGST and
vice versa. Section 77(2) of CGST Act, provides that “A
registered person who has paid integrated tax on a transaction
considered by him to be an inter-state supply, but which is
subsequently held to be an intra-state supply, shall not be
required to pay any interest on the amount of central tax and
state tax, or as the case may be, the central tax and the union
territory tax payable.”  As per this provision, if the type of tax is
wrong, an assessee shall be liable to make the payment of
appropriate tax but interest shall not be payable on the same.
Section 55 contains provisions for refunding the tax paid wrongly,
but the same will lead to blockage of working capital from the time
of payment of tax till the time refund is processed by the
department.

Debit note
Meaning When 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 the prescribed particulars.

Format

There is no prescribed format but debit note issued by a supplier must contain
the following particulars, namely:

(a) name, address and Goods and Services Tax Identification Number of the
supplier;

(b) nature of the document;

(c) a consecutive serial number not exceeding sixteen characters, in one or

multiple series, containing alphabets or numerals or special characters hyphen or
dash and slash symbolised as “-” and “/” respectively, and any combination
thereof, unique for a financial year;

(d) date of issue;

 (e) name, address and Goods and Services Tax Identification Number or Unique
Identity Number, if registered, of the recipient;

(f) name and address of the recipient and the address of delivery, along with the
name of State and its code, if such recipient is un-registered;

(g) serial number and date of the corresponding tax invoice or, as the case may
be, bill of supply;

(h) value of taxable supply of goods or services, rate of tax and the amount of the
tax debited to the recipient; and

(i) signature or digital signature of the supplier or his authorized representative.

Credit note

Meaning 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 person, who has supplied such
goods or services

Bill of Supply?
Bill of Supply is a document to be issued by a registered person
supplying exempted goods or services or both or paying tax under the
provisions of section 10 instead of a tax invoice.

What are the Contents of Bill of Supply?

The contents of a Bill of supply are as follows: 

(a) name, address and Goods and Services Tax Identification
Number of the supplier; 
(b) a consecutive serial number not exceeding sixteen characters, in
one or multiple series, containing alphabets or numerals or special
characters - hyphen or dash and slash symbolised as “-” and “/”
respectively, and any combination thereof, unique for a financial year; 
(c) date of its issue;
(d) name, address and Goods and Services Tax Identification Number
or Unique Identity Number, if registered, of the recipient; 
(e) Harmonised System of Nomenclature Code for goods or services; 
(f) description of goods or services or both; 
(g) value of supply of goods or services or both taking into account
discount or abatement, if any; and 
(h) signature or digital signature of the supplier or his authorised
representative.

When is a Bill of Supply has to be Issued?

a) A Bill of Supply is issued in case where a registered person is a

supplier of exempted goods; or
b) If a registered person opts for composition scheme
In these cases, as the registered person cannot issue tax invoice, so he
has to issue a Bill of Supply.

Tax Invoice under GST

Under the GST regime, an “invoice” or “tax invoice” means the tax invoice
referred to in section 31 of the CGST Act, 2017. This section mandates the
issuance of an invoice or a bill of supply for every supply of goods or services. It is
not necessary that only a person supplying goods or services needs to issue an
invoice. The GST law mandates that any registered person buying goods or
services from an unregistered person needs to issue a payment voucher as well as
a tax invoice. The type of invoice to be issued depends upon the category of
 registered person making the supply. For example, if a registered person is
making or receiving supplies (from unregistered persons), then a tax invoice
needs to be issued by such registered person. However, if a registered person is
dealing only in exempted supplies or is availing the composition scheme
(composition dealer), then such a registered person needs to issue a bill of supply
in lieu of invoice. The invoice should contain description, quantity and value &
such other prescribed particulars (in case of supply of goods), and the description
and value & such other prescribed particulars (in case of supply of services). An
invoice or a bill of supply need not be issued if the value of the supply is less than
Rs. 200/-, subject to specified conditions.

The different types of assessment under GST are

as under:
 Section 59 – Self assessment of taxes payable
 Section 60 – Provisional assessment
 Section 61 – Scrutiny of tax returns filed by registered taxable
persons
 Section 62 – Assessment of registered taxable person who have
failed to file the tax returns
 Section 63 – Assessment of unregistered persons
 Section 64 – Summary assessment in certain special cases
Section 59 – Self Assessment
The taxable person is required to pay tax on the basis of self-
assessment done by him. Hence, all GST return filings are based on
self-assessment by the taxpayer .In other words; Every registered
taxable person shall himself assess the taxes payable and furnish a
return for each tax period. This means GST continues to promote self-
assessment just like the Excise, VAT and Service Tax under current
tax regime.
Section 60 – Provisional Assessment
Provisional assessment can be conducted for a taxable person when
the taxpayer is unable to determine the value of goods or service or
both or determine the rate of tax applicable thereto.
 Situations demanding Provisional Assessment
Provisional assessment provides a method for determining the
tax liability in case the correct tax liability cannot be determined
at the time of supply. The major determinants of the tax liability are
generally the applicable tax rate and the value. There might be
situations when these determinants might not be readily ascertainable
and may be subject to the outcome of a process that requires
deliberation and time.
Where the taxable person is unable to determine ─
1. value of goods or services or both to be supplied by him; or
2. the rate of tax applicable to the goods or services to be supplied by
him,
he may furnish an application in prescribed form stating therein
reasons for payment of tax on a provisional basis along with the
documents in support of his request, electronically through the
common portal, either directly or through a Facilitation Centre notified
by the Commissioner.
Section 61 – Scrutiny Assessment
GST Officers can scrutinize a GST return and related particulars
furnished by the registered person to verify the correctness of the
return. This is called a scrutiny assessment. In case there is any
discrepancies noticed by the officer, he/she would inform the same to
the registered person and seek his explanation on the same. On the
basis of the explanation received from the registered person, the
officer can take following action:
 If the explanation provided is satisfactory, the officer will inform
about the same to the registered person and no further action will be
taken in this regard.
 If the explanation provided is not satisfactory or the registered
person has failed to take corrective measures after accepting the
discrepancies, the proper officer will initiate appropriate action like
conducting audit of registered person, conducting special audit,
inspect and search the place of business of registered person, or
initiate demand and recovery provisions.
The proper officer may scrutinize the same along with related
particulars furnished by registered person, to verify the correctness of
return. In case of any discrepancy is noticed, he shall issue a notice in
b informing him of discrepancy and seeking explanation thereto
within 30 days of service of notice. Wherever possible proper officer
will quantify the amount of tax, interest and other dues in relation to
discrepancy.
If proper officer agrees with explanation furnished by registered
person in form ASMT-11, no further action will be taken. If registered
person agrees with discrepancy, he will deposit the amount specified
in notice and take the corrective action as specified in notice. And if
registered person does not furnish explanation or satisfactory
explanation is not furnished or does not take corrective measures in
return for the month in which discrepancy is communicated, the proper
officer may take appropriate action in accordance with section-65, 66
and 67
Section 62 – Failure to File GST Return – Best Judgement
Assessment
When a registered person fails to furnish the required returns, even
after service of notice under Section 46 an assessment would be
conducted by the GST Officer. In such cases, the GST officer would
proceed to assess the tax liability of the taxpayer to the best of
his 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 five years from the date for furnishing of the
annual return for the financial year to which the tax not paid relates.
On receipt of the said assessment order, if the registered person
furnishes a valid return within a period of 30 days from the date of
issuance of assessment order, then in such case, the assessment
order would deemed to have withdrawn. However, the registered
person will be liable to pay interest under Section 50 (1) and/or liable
to pay late fee under Section 47. The proper officer may proceed to
determine the tax liability of such person to the best of his judgment
considering all the relevant material he has gathered and pass the
assessment order in form ASMT-13 within 5 years from the due date
of furnishing annual return for the financial year for which tax not paid
relates.
If registered person furnish the valid return within 30 days of service
of assessment order, then the said assessment order deemed to be
withdrawn (But liability to pay interest and late fees still be applicable).
Section 63 – Assessment of Unregistered Person – Best
Judgement
 When a taxable person fails to obtain GST registration even though
liable to do so or whose registration has been cancelled under
section 29 (2) but who was liable to pay tax, the GST officer can
proceed to assess the tax liability of such taxable person to the best of
his judgment for the relevant tax periods and issue an assessment
order within a period of five years from the date specified under
section 44 for furnishing of the annual return for the financial year to
which the tax not paid relates. The proper officer may proceed to
assess the tax liability of such person to the best of his judgment
considering all the relevant material he has gathered within a period
of 5 years from the due date of furnishing annual return for the
financial year for which tax not paid relates.
For passing the assessment order under this section, the proper
officer will issue a notice in form ASMT-14, containing the grounds on
which assessment is proposed to be made and after considering the
reply proper officer will issue order in form ASMT-15.
Section 64 – Summary Assessment
A GST Officer can on any evidence showing a tax liability of a person
coming to his notice, proceed to assess the tax liability of such person
to protect the interest of revenue and issue an assessment order, if he
has sufficient grounds to believe that any delay in doing so may
adversely affect the interest of revenue. In order to undertake
assessment under section 64, the proper officer is required to obtain
previous permission of additional commissioner or joint commissioner.
Such an assessment is called summary assessment. The summary
assessment order shall be issued in form GST ASMT-16.The taxable
person may file an application in form ASMT-17, within 30 days from
receipt of order or commissioner may on his motion withdraw such
order if he considers that such order is erroneous and follow the
procedure laid down in section 73 to 74.

Cases when ITC is not available

under GST
1. Motor vehicles & conveyances
ITC is not available for Motor vehicles used to transport persons,
having a seating capacity of less than or equal to 13 persons
(including the driver).
Further, ITC is not available on vessels and aircraft.
For example, XYZ & Co. buys a car for their business. They cannot
claim ITC on the same.
Exceptions to ITC on motor vehicles/vessels/aircrafts
ITC will be available when the vehicle is used for making taxable
supplies by the following.
a) Supply of other vehicles or conveyances, vessels or aircrafts.
If you are in the business of supplying cars then ITC will be available.
For example, a car dealer purchases a car for Rs.50 lakh plus 14 lakh
GST (ignoring cess calculations). The same car was later sold for 70
lakhs along with Rs.19.60 lakh GST. Since he is a dealer, he can
claim ITC of 14 lakhs and pay only Rs.5.60 lakh (19.60 – 14).
b) Transportation of passengers
If you are providing transportation of passengers then ITC will be
allowed on the vehicle purchased.
For example, Happy Tours purchased a bus for inter-city transport of
passengers. ITC is available.
c) Imparting training on driving, flying, navigating such vehicle or
conveyances or vessels or aircrafts, respectively.
A driving school purchases a car to give training to students. The
school can claim ITC on the GST paid on the car.
d) Transportation of goods
ITC will be allowed on motor vehicles (and other conveyances) used
to transport goods from one place to another. However, this is
concerning other transporters and not goods transport agencies
(GTA).

2. Food, beverages, club memberships and

others
ITC is not for the supply of following goods or services or both:

 Food and beverages

 Outdoor catering
 Beauty treatment
 Health services
 Cosmetic and plastic surgery

However, ITC will be available if the category of inward and

outward supply is same or the component belongs to a mixed or
composite supply under GST.
Examples-
Ajay Enterprises arranges for an office party for its employees. Ajay
Enterprises will not be able to claim ITC on the food & beverages
served.
3. Services of general insurance, servicing,
repair and maintenance
No ITC is allowed on services of general insurance, servicing, repair
and maintenance in so far as they relate to motor vehicles, vessels or
aircraft referred to in (1).
Exceptions to ITC on insurance, repair or maintenance
 Same as expections mentioned for motor
vehicles/vessels/aircrafts
 where received by a taxable person engaged—
(I) In the manufacture of such motor vehicles, vessels or aircraft;
or
(II) In the supply of general insurance services in respect of such
motor vehicles, vessels or aircraft insured by him

4. Sale of membership in a club, health,

fitness centre
No ITC will be allowed on any membership fees for gyms, clubs etc.
Example-
X, a Managing Director has taken membership of a club and the
company pays the membership fees.  ITC will not be available to the
company or Mr. X.

5. Rent-a-cab, life insurance, health

insurance
ITC is not available for rent-a-cab, health insurance and life
insurance.
However, the following are exceptions, i.e., ITC is available for-
a. Any services which are made obligatory for an employer to provide
its employee by the Indian Government under any current law in force
For example, assuming the government passes a rule for all
employers to provide mandatory cab services to female staff in night
shifts. ABC Ltd. hires a rent-a-cab to provide to transportation to its
female staff on night shifts. Then ITC will be available to ABC Ltd. on
the GST paid to the rent-a-cab service.
b. If the category is same for the inward supply and outward supply or
it is a part of the mixed or composite supply
For example, ABC Travels lends out a car to XYZ Travels. Then XYZ
Travels can claim ITC on the same.
c. leasing, renting or hiring of motor vehicles, vessels or aircraft with
exceptions same as those mentioned for (1).
Read our article on GST impact on cab services.

6. Travel
ITC is not available in the case of travel, benefits extended to
employees on vacation such as leave or home travel concession.
For example,
ABC Ltd. offers a travel package to its employees for personal
holidays. ITC on GST paid by ABC Ltd. for the holiday package will
not be allowed.
ITC will be allowed for travel for business purposes. Please read our
article to know more about the impact of GST on air fare and rail
fare.  

7. Works contract
ITC shall not be available for any work contract services. ITC for the
construction of an immovable property cannot be availed, except
where the input service is used for further work contract services.
For example, XYZ Contractors are constructing an immovable
property. They cannot claim any ITC on the works contract. However,
XYZ hires ABC Contractors for a portion of the works contract. XYZ
can claim ITC on the GST charged by ABC Contractors.
Please read our article on GST impact on works contract.

8. Constructing an immovable property on

own account
No ITC is available for goods/services for construction of an
immovable property on his own account. Even if such goods/services
are used in the course or furtherance of business, ITC will not be
available.
But this rule does not apply to plant or machinery. ITC is available on
inputs used to manufacture plant and machinery for own use.
Example-

 Ajay Steel Industries constructs an office building for its

headquarters. ITC will not be available.
 Ajay Steel Industries also constructs a blast furnace to
manufacture steel. ITC is available since it is a plant.

9. Composition Scheme
No ITC would be available to the person who has made the payment
of tax under composition scheme in GST law.
Please read our extensive guides on composition scheme under
GST and whether you are eligible for it.
10. No ITC for Non-residents
ITC cannot be availed on goods/services received by a non-resident
taxable person. ITC is only available on any goods imported by him.
Please read our articles on GST on non-residents and the registration
process for non-residents.

11. No ITC for personal use

No ITC will be available for the goods/ services used for personal
purposed and not for business purposes.
Find out more on how to calculate the amount of common credit
applicable for business if you use the same input for both business
and personal uses.

12. Free samples and destroyed goods

No ITC is available for goods lost, stolen, destroyed, written off or
given off as gift or free samples.

13. No ITC in fraud cases

 ITC will not be available for any tax paid due to fraud cases which has
resulted into –

1. Non or short tax payment or

2. Excessive refund or
3. ITC utilised or

Fraud cases include fraud or willful misstatements or suppression of

facts or confiscation and seizure of goods.
14. No ITC on restaurants
As per Notification No. 46/2017-Central Tax (Rate), dated 14th
November 2017, standalone restaurants will charge only 5% GST but
cannot enjoy any ITC on the inputs.
However, restaurants as part of hotels with room tariffs exceeding Rs.
7,500 still continue pay 18% GST and enjoy ITC.
McDonald’s charges 5% GST and cannot claim any ITC.
Taj’s Grill by the Pool restaurant in Kolkata is a part of the Taj Bengal
hotel and so it will charge 18% GST while enjoying ITC.  

Section 13 of CGST Act, 2017 explains Time of supply of services

as below: (The amendments if any will also be updated here
soon).

The extract of Section 13 of CGST Act,2017 quoted below:

 
Time of supply of services.

 
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.

(2) 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 upto one

thousand rupees 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.

(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 sixty 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.

 
(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.
(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.
(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.

 
Step-by-step procedure to complete GST
Registration
The step-by-step procedure that individuals must follow
to complete GST Registration is mentioned below:
 Visit the GST portal (https://www.gst.gov.in/).
 Click on the ‘Register Now’ link which can be found
under the ‘Taxpayers’ tab
 Select ‘New Registration’.
 Fill the below-mentioned details:
 Under the ‘I am a’ drop-down menu, select
‘Taxpayer’.
 Select the respective state and district.
 Enter the name of the business.
 Enter the PAN of the business.
 Enter the email ID and mobile number in the
respective boxes. The entered email ID and mobile
number must be active as OTPs will be sent to them.
 Enter the image that is shown on the screen
and click on ‘Proceed’.
 On the next page, enter the OTP that was sent to
the email ID and mobile number in the respective
boxes.
 Once the details have been entered, click on
‘Proceed’.
 You will be shown the Temporary Reference
Number (TRN) on the screen. Make a note of the TRN.
 Visit the GST portal again and click on ‘Register’
under the ‘Taxpayers’ menu.
 Select ‘Temporary Reference Number (TRN)’.
 Enter the TRN and the captcha details.
 Click on ‘Proceed’.
 You will receive an OTP on your email ID and
registered mobile number. Enter the OTP on the next
page and click on ‘Proceed’.
 The status of your application will be available on
the next page. On the right side, there will be an Edit
icon, click on it.
 There will be 10 sections on the next page. All the
relevant details must be filled, and the necessary
documents must be submitted. The list of documents
that must be uploaded are mentioned below:
 Photographs
 Business address proof
 Bank details such as account number, bank
name, bank branch, and IFSC code.
 Authorisation form
 The constitution of the taxpayer.
 Visit the ‘Verification’ page and check the
declaration, Then submit the application by using one
of the below mentioned methods:
 By Electronic Verification Code (EVC). The code
will be sent to the registered mobile number.
 By e-Sign method. An OTP will be sent to the
mobile number linked to the Aadhaar card.
 In case companies are registering, the
application must be submitted by using the Digital
Signature Certificate (DSC).
 Once completed, a success message will be shown
on the screen. The Application Reference Number
(ARN) will be sent to the registered mobile number and
email ID.
 You can check the status of the ARN on the GST
portal.

Section 143 of CGST Act, 2017 Job

work procedure
 

The below post explains about Job work procedure under section
143 of CGST Act,2017.

Section 143 of CGST Act, 2017 explains Job work procedure as

below: (The amendments if any will also be updated here soon).

The extract of Section 143 of CGST Act,2017 quoted below 

143 Job work procedure

143. (1) A registered person (hereafter in this section referred to
as the “principal”)
may under intimation and subject to such conditions as may be
prescribed, send any inputs

or capital goods, without payment of tax, to a job worker for job-

work and from there

subsequently send to another job worker and likewise, and shall,

––

(a) bring back inputs, after completion of job work or otherwise,

or capital goods,
other than moulds and dies, jigs and fixtures, or tools, within one
year and three years,
respectively, of their being sent out, to any of his place of
business, without payment

of tax;

(b) supply such inputs, after completion of job work or otherwise,

or capital
goods, other than moulds and dies, jigs and fixtures, or tools,
within one year and three

years, respectively, of their being sent out from the place of

business of a job worker

on payment of tax within India, or with or without payment of tax

for export, as the case

may be:

Provided that the principal shall not supply the goods from the
place of business

of a job worker in accordance with the provisions of this clause

unless the said principal

declares the place of business of the job-worker as his additional

place of business

except in a case—

(i) where the job worker is registered under section 25; or

(ii) where the principal is engaged in the supply of such goods as
may be
notified by the Commissioner.

(2) The responsibility for keeping proper accounts for the inputs
or capital goods shall
lie with the principal.

(3) Where the inputs sent for job work are not received back by
the principal after
completion of job works or otherwise in accordance with the
provisions of clause (a) of subsection
(1) or are not supplied from the place of business of the job
worker in accordance
with the provisions of clause ( b) of sub-section (1) within a period
of one year of their 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.

(4) Where the capital goods, other than moulds and dies, jigs and
fixtures, or tools,
sent for job work are not received back by the principal in
accordance with the provisions

of clause (a) of sub-section (1) or are not supplied from the place
of business of the job
worker in accordance with the provisions of clause ( b) of sub-
section (1) within a period of
three years of their 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.

(5) Notwithstanding anything contained in sub-sections ( 1) and

(2), any waste and
scrap generated during the job work may be supplied by the job
worker directly from his

place of business on payment of tax, if such job worker is

registered, or by the principal, if the

job worker is not registered.