CA SURAJ SATIJA Ssguru CHARGE OF GST

CHAPTER 2 CHARGE OF GST

> Power to levy any tax is drawn from the Constitution of India.
Introduction of GST necessitated the amendment of Constitution of India to enable
integration of central excise duty including additional duties of customs, State VAT and
certain state specific taxes and service tax levied by the Central Government into a
comprehensive Goods Services Tax.

> The very basis for the charge of tax in any taxing statute is the taxable event, ie the point
of time at which the levy of tax gets attracted. Under the erstwhile indirect taxes regime,
each indirect tax levy had a separate taxable event (such as manufacture in case of excise,
provision of services in case of service tax, sale of goods in case of VAT/CST, etc). Under
the GST regime, the taxable event is supply of goods and/or services. The scope of the
word 'supply' has been discussed in detail in the next chapter.

EXTENT OF CGST ACT / SGST ACT / UTG5T ACT / IGST ACT

> Central Goods and Services Tax Act, 2017 extends to the whole of India including the
State of J&K.
> Integrated Goods and Services Tax Act, 2017 extends to the whole of India including the
State of J&K.
> State GST law of the respective State/Union Territory with State Legislature (ie Delhi
and Puducherry) extends to the whole of that State/Union Territory.
> Union Territory Goods and Services Tax Act, 2017 extends to the following Union
Territories of India where there is no State Legislature:
 the Andaman and Nicobar Islands;
 the Lakshadweep Islands;
 Dadra and Nagar Haveli;
 Daman and Diu; and
 Chandigarh.

INTRODUCTION

In order to understand the scope of any taxation law, the first and the foremost step is a
careful analysis of the charging section. Section 9 of CGST Act prescribes the charge of CGST
on all intra-state supplies of taxable goods and/or services whereas Section 5 of IGST Act
prescribes the charge of IGST on all interstate supplies of taxable goods and/or services.

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Along with CGST, SG5T/UTGST is also chargeable on all intra-state supplies of taxable goods
and/or services. However, analysis of any state specific law never forms a part of any
academic curriculum.
The basis for classifying any supply as intra-state supply or inter-state supply is articulated
u/s 7 & 8 of IGST Act, which have been discussed adequately in this chapter.

Section 9(1): Subject to the provision of sub-section (2), there shall be levied a tax 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 twenty per cent, as may be notified by the
Government on the recommendations of the Council and collected in such manner as may
be prescribed and shall be paid by the taxable person.

Section 9(2): 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.

Section 9(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 recipients of such goods or services or both and all the
provisions of this Act shall apply to such recipients as if he is the person liable for the
paying the tax in relation to supply of such goods or services or both.

Section 9(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.

Section 9(5): 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.

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 as 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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LEVY & COLLECTION OF CGST/ IGST (Sections 9(1) & 9(2) of CGST Act (+)
SECTIONS(1) & 5(2) OF IGST ACT)

LEVY OF CGST / SGST UTGST

/IGST:
> Central Goods and Services Tax
(CGST) shall be levied on all intra-
state supplies of goods or services
or both.
> State Goods and Services Tax
(SGST) is levied on those intra-
state supplies of goods or services
or both where the transaction
takes place within a State/Union
Territory with State Legislature.
Union Territory Goods and Services
Tax (UTGST) is levied on those intra-
state supplies of goods or services
where the transaction takes place within a Union Territory without State Legislature

> Integrated Goods and Services Tax (IGST) shall be levied on all inter-state supplies of
goods or services or both

MEANING OF INTRA-STATE SUPPLY (Section 8 of IGST Act}

Where the location of the supplier and the place of supply of goods or services are in the
same State/Union Territory, the supply is treated as intra-state supply of goods or services.

MEANING OF INTER-STATE SUPPLY

(Section 7 of IGST Act)
 Where the location of the supplier and the place of supply of goods or services are
in:
 two different States; or
 two different Union Territories; or
 a State and a Union Territory,
the supply is treated as inter-state supply of goods or services.

 Section 7 of IGST provides that the following supplies shall be deemed as inter-state
supplies:
 Supply of goods or services imported into the territory of India;

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Supply of goods or services when the supplier is located in India and the place of
supply is outside India; and Supply of goods or services to or by a SEZ
Developer/ SEZ Unit.

LEVY & COLLECTION OF IGST {SECTION 5 OF IGST ACT}

 Section 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 of goods or services or
both; except on the supply of alcoholic liquor for human consumption, on the value
determined under section 15 of central Goods and Services Tax Act and at such rates,
not exceeding forty per cent, as may be notified by the Government on the
recommendations of the Council and collected in such manner as may be prescribed and
shall be paid by the taxable person.

Provided that the integrated tax on goods imported into India shall be levied and
collected 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 1962.

 Section 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.
 Section 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.

 Section 5(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.

 Section 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.

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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.

GOODS PERMANENTLY EXCLUDED FROM THE PURVIEW OF GST LAW:

Supply of alcoholic liquor for human consumption is outside the purview of CGST as well as
IGST law.

GOODS TEMPORARILY EXCLUDED FROM THE PURVIEW OF GST LAW

(To Be Taxed Under GST At A Later Point of Time):

 Presently, CG5T/SGST/UTG5T/IG5T is not applicable on the supply of the following

items:
U Petroleum crude;
U High speed diesel;
U Motor spirit (commonly known as petrol);
U Natural gas; and
U Aviation turbine fuel.
 The above-mentioned products shall be brought under the ambit of GST law
with effect from such date as may be notified by the Government on the
recommendations of the GST Council.

VALUE FOR LEVY OF CGST/IGST: Transaction Value u/s 15 of CGST Act

RATES OF CGST/IGST:

 IGST is approximately the sum total of CGST and SGST/UTGST. Maximum rate of
CGST is 20%
whereas maximum rate of IGST is 40%.
 Multi-tier rate structure has been introduced under GST. The following are the
different types of
GST rates which are applicable presently {These rates are the sum total of CGST (+)
SGST/UTGST in case of intro-state supplies}:
U 0% (Exempted Supplies)
U 5%
U 12%
U 18%
U 28%

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Note: GST rate of 0.25% has been prescribed for supply of raw/unprocessed
precious stones. GST rate of 3% has been prescribed for supply of gold, gold
jewellery, precious metals, etc.

REVERSE CHARGE ON NOTIFIED GOODS/SERVICES

{Section 9(3) of CGST Act (+) Section 5(3) of IGST Act)

 Generally, the supplier of goods or services is liable to pay GST. However, in

specified cases like imports and other notified supplies, the liability may be cast on the
recipient under the reverse charge mechanism. Reverse charge means the liability to pay
tax is on the recipient of supply of goods or services instead of the supplier of such goods or
services in respect of notified categories of supply. There are two type of reverse charge
scenarios provided in GST law:
„ First is dependent on the nature of supply and/or nature of supplier. This scenario is
covered by Section 9(3) of CGST Act and Section 5(3) of IGST Act.
„ The second scenario is covered by Section 9(4) of CGST Act and Section 5(4) of IGST Act
where specified supplies by any unregistered person to a registered person are covered.

Section 9(3) of CGST Act and Section 5(3) of IGST Act empowers the Government to notify,
on the recommendations of the G5T Council, specific 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 supply and all the provisions of GST law shall apply to such recipient as if he is the
person liable for paying tax in relation to the supply of such goods or services or both.

SUPPLIES OF SERVICES UNDER REVERSE CHARGE MECHANISM (AS NOTIFIED):

In exercise of the powers conferred u/s 9(3) of CGST Act and 5(3) of IGST Act, the following
transactions have been notified from time to time where GST will be payable by the
recipient of services under reverse charge:

S.NO. Description Of Supply Of Services Supplier Of Services Recipient Of Services

1 Sponsorship services Any person Any body-corporate
or partnership firm
located in the taxable
territory
2 Services supplied by a director of a A director of a A company or a body-
company or a body-corporate to the company or a body- corporate located in
said company or the body-corporate corporate the taxable territory

3 Services supplied by an insurance agent An insurance agent Any person carrying

to any person carrying on insurance on insurance
business business located in
the taxable territory

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4 Services supplied by a recovery agent A recovery agent A banking company or

to a banking company or a financial a financial institution
institution or a NBFC or a NBFC located in
the taxable territory
5 Supply of services by an author, music Author or music Publisher, music
composer, photographer, artist or the composer, company, producer or
like by way of transfer or permitting photographer, the like located in the
the use or enjoyment of a copyright artist, or the like taxable territory
relating to original literary, dramatic,
musical or artistic works to a
publisher, music company, producer or
the like
6 Supply of services by the members of Members of Overseeing Reserve Bank of India
Overseeing Committee to Reserve Committee
Bank of India constituted by the
Reserve Bank of
INDIA

S.NO. Description Of Supply Of Services Supplier Of Services Recipient Of Services

7 GTA Services Goods Transport Any of the following
Agency which has not persons located in
paid CGST @ 6% taxable territory: >
Factory
> Co-operative society
> Person registered
under GST law >
Body-corporate >
Partnership firm
> Casual taxable
person

8 Legal services An individual Any business entity

advocate, including located in the taxable
a senior advocate or territory
a firm of advocates

9 Services supplied by an arbitral tribunal Arbitral tribunal Any business entity

to a business entity located in the taxable
territory

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10 Central Government, Any business entity

Any service supplied by CG/SG/ Union State Government, located in the taxable
Territory/Local Authority to a business Union Territory or territory
entity excluding: Local Authority
> renting of immovable property;
> 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 CG/SG/Union Territory or
Local Authority;
> Services in relation to an aircraft or
a
vessel, inside or outside the
precincts of a port or an airport;
and > Transport of goods or
11 passengers.
Services supplied by CG/SG/ Union Central Government, Any person registered
Territory/Local Authority by way of State Government, under GST law
renting of immovable property to any Union Territory or
person registered under GST law Local Authority

12 Any service supplied by any person who Any person located in Any located in taxable
is located in a non-taxable territory to non-taxable territory territory
any person located in taxable territory

13 Services supplied by a person located in A person located in a Importer located in the

non-taxable territory by way of non-taxable territory taxable territory
14 transportation
Services of goods
supplied by a vesselDirect
by Individual from Individual Direct (Meaning
A bankingof importer
company or
Selling Agents (DSAs) Selling Agents (DSAs) a NBFC located in the
15 Services provided by a business other
A than afacilitator
business body taxable
A bankingterritory
company
facilitator to a banking company located in the taxable
16 Services provided by an agent of A agent of business territory
A business
business correspondent to business correspondent correspondent located
correspondent in the taxable territory

State the person liable to pay GST in the following independent cases provided the
recipient is located in the taxable territory:

a) Services provided by an arbitral tribunal to any business entity.

b) Sponsorship services provided by a company to an individual.

c) Services by way of renting of immovable property provided by CG to a business

entity registered under GST law.

Answer

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a) GST on services provided or agreed to be provided by an arbitral tribunal to any

business entity located in the taxable territory is payable under reverse charge.
Therefore, in the given case, GST is payable by the recipient, i.e. the business entity.

b) GST on sponsorship services provided by any person to any body-corporate or

partnership firm located in the taxable territory is payable under reverse charge. Since
services have been provided to on individuals, reverse charge provisions will not
apply. Thus, G5T is payable under forward charge by the supplier (i.e. the company).

c) GST on services by way of renting of immovable property provided by Central

Government, State Government, Union Territory, or local authority to any person
registered under GST law is payable under reverse charge. Thus, reverse charge
provisions will get attracted and the recipient would be liable to pay GST.

SUPPLIES OF GOODS UNDER REVERSE CHARGE MECHANISM (AS NOTIFIED):

In exercise of the powers conferred u/s 9(3) of CGST Act and 5(3) of IGST Act, the following
transactions have been notified from time to time where GST will be payable by the recipient
of goods under reverse charge. However, ICAI has excluded this topic for examination
purposes and the same has been incorporated in the book just for the sake of knowledge of
the students.

S NO. Description Of Supply Of Goods Supplier Of Goods Recipient Of Goods

1 > Unshelled/Unpeeled Cashew Nuts Agriculturist Any Registered
> Bidi Wrapper Leaves (Tendu) Person
> Tobacco Leaves
> Raw Cotton

2 Supply Of Lottery State Government, Lottery

Union Territory Or Distributor Or
Any Local Authority Selling Agent
3 Silk Yarn Any person Who Any Registered
Manufactures Silk Yarn Person
Form Raw Silk Or Silk
Worn Cocoons For
Supply Of Silk Yarn
4 Used Vehicles; Old & Used Goods; Seized Central Government, Any Registered
& Confiscated Goods; Waste & Scrap State Government, person
Union Territory Or
Any Local Authority

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REVERSE CHARGE ON SUPPLIES BY UNREGISTERED PERSONS

{Section 9(4) of CGST Act (+) Section 5(4) of IGST Act}

> The initial version of Section 9(4) of CGST Act and Section 5(4) of IGST Act which was
drafted at the time of introduction of GST law provided that where a supply of taxable
goods or services or both is made by an unregistered person to a registered person, tax on
such transaction shall be paid by the registered recipient on reverse charge basis and all
the provisions of GST law shall apply to such recipient as if he is the person liable for
paying tax in relation to the supply of such goods or services or both. Accordingly, as per
the initially introduced law, whenever a registered person procures supplies from an
unregistered supplier, he needs to pay GST on reverse charge basis.

> However, to minimize inconvenience in case of low value transactions, supply of taxable
goods or services or both by an unregistered supplier to a registered person were
exempted from GST provided the aggregate value of such supplies of goods and/or services
received by a registered person from any or all the unregistered suppliers does not exceed
Rs 5,000 in a day. This benefit was available since the introduction of GST on intra-state
supplies as well as inter-state supplies. For giving effect to this benefit, separate
notifications were issued under CGST Act as well as IGST Act.

> With the introduction of GST, it became very apparent that the above-mentioned
provisions casted a lot of burden on registered persons because a lot of their suppliers had
not got themselves registered under GST law. After considering numerous representations
filed by the industry and trade, the GST Council, in its 22nd meeting held on 6th October
2017, decided to suspend the reverse charge mechanism u/s 9(4) of CGST Act and 5(4) of
IGST Act.

> However, in order to reduce the scope of this provision and finally make it effective, an
amendment has been carried out recently. The objective behind this is to empower the
Central Government to notify classes of registered persons to pay the tax on reverse charge
basis in respect of receipt of supplies of certain specified categories of goods or services or
both from unregistered suppliers.

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TAXATION OF ELECTRONIC COMMERCE OPERATORS

{Section 9(5) of CGST Act (+) Section 5(5) of IGST Act)

INTRODUCTION:

> Electronic Commerce Operators ('ECO') display products as well as services on their
electronic
portal which are actually supplied by some other person to the consumer. The
consumers buy such goods/services through these portals.

> On placing the order for a particular product/service, the actual supplier supplies the
selected product/service to the consumer. The price/consideration for the
product/service is collected by the ECO from the consumer and passed on to the actual
supplier after the deduction of commission by the ECO.

LIABILITY OF ECO TO PAY GST:

> The Government may notify specific categories of services, on the recommendations of
the GST Council, the tax on which shall be paid by the ECO if such services are supplied
through it .
> The following services have been notified by the Government in this regard and thus in
case of
the following notified services, the provisions of GST law shall apply to such ECO as if he is
the supplier liable for paying tax in relation to the supply of such services:

> Services by way of transportation of passengers by a radio -taxi, motorcab, maxicab and
motor cycle; and

> 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 u/s 22(1) of CGST Act.

> 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 u/s 22(1) of CGST Act.

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PERSON LIABLE TO PAY GST FOR ABOVE SPECIFIED SERVICES WHEN SUPPLIED
THROUGH ECO:

> If the Electronic Commerce Operator is located in India, tax is to be paid by the Electronic
Commerce Operator.
> If the Electronic Commerce Operator does not have any physical presence in the taxable
territory, tax is to be paid by the Electronic Commerce Operator's representative located in
the taxable territory.
> If the Electronic Commerce Operator neither has physical presence nor any representative
in the taxable territory, the Electronic Commerce Operator would be required to appoint a
person in India who would discharge tax liability on its behalf.

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