Indirect Tax (GST)

UNIT - 1
Features of Tax
• A tax is a compulsory payment to be paid by the citizens who are liable to pay it. Hence, refusal to
pay a tax is a punishable offence.

• There is no direct quid-pro-quo between the tax payers and the public authority.

• A tax is levied to meet public expenditure incurred by the government in the general interest of
the nation.

• A tax is payable regularly and periodically as determined by the taxing authority.

• A tax is a legal correction.

Types of Tax
Direct Tax
Indirect Tax
• Direct Tax is tax that is paid by an individual or any other person on the
basis of his Income. It is a form of tax that is directly paid by the person to
the government, i.e., the liability to pay the tax and the burden of tax falls
on the same person.

• Indirect taxes are the types of taxes where the person depositing the tax
with government and the person actually having been burdened by the
tax are different. Generally these taxes are included in the prices of the
goods or services which are provided to the people and then such taxes
are deposited by the person collecting the same from their customers.
GST is one of the most popular type of indirect tax.
• Direct Tax
• Income Tax GOVT
PUBLIC
• Corporation Tax

• Indirect Tax
• GST
• Custom Duty
• Excise Duty
(Limited)
 DIRECT TAX INDIRECT TAX

Directly paid to the government Indirectly paid to the government

Tax burden can’t be shifted Tax burden is shifted from tax

payer to the other person

Creates civic consciousness Lack of awareness

Majorly applicable on Income Generally applicable on Expenses

Compulsory in nature By avoiding taxable expenditure,

indirect tax can be avoided
Background of GST
Prior to GST Major Indirect Taxes were Excise Duty, Service Tax, Value
Added Tax, Central Sales Tax

I. Major Defects in earlier Indirect Tax/ Need for Tax Reforms

i. Confusion between goods & services for example food, works contract etc.
ii. Different state VAT Laws & rules
iii. Cascading effect (like Excise +VAT, CST + Entry Tax)
iv. Central Sales Tax (CST) & Input Tax Credit (ITC) Problems
v. Invisible barriers of Tax & Visible barriers of check posts
vi. CG was majorly dependent upon Excise & Service Tax
vii. SG was majorly dependent upon VAT
viii. Many compliances
 Introduction of GST
1) First time idea of National GST was mooted by Kelkar Committee in 2004 by Dr. Vijay Kelkar

2) First announcement on 28.02.2006 by FM P. Chidambaram in Budget Speech and proposed to

be introduced on 01.04.2010

3) Empowered Committee of State Finance Ministers was assigned task

4) Empowered Committee released first discussion paper on 10 Nov, 2009

5) Constitution amendment (101st Amendment) Bill 2014 was passed and received assent of
President on 08.09.2016

6) GST Council was constituted on 15.09.2016 having representatives of State Governments. GST
Council is the Apex constitutional authority to decide GST policies. 1st Meeting held on 22nd-
23rd Sep 2016 & 47th Meeting to be held in May, 2022
Definition of GST
• Constitution (101st Amendment) Act, 2017

“Goods and services tax” means any tax on supply of goods, or services
or both except taxes on the supply of the alcoholic liquor for human
consumption”
 Concept of GST
CGST paid = Rs. 10
CGST @ 10%
• GST is based on concept of VAT. CGST paid = Rs. 10
CGST paid = Rs. 10
(Rs. 30 – 20 (Input Tax Credit)
(Rs. 20 – 10 (Input Tax Credit)

T1 T2 T3
A B C D

SGST paid = Rs. 10

(Rs. 20 – 10 (Input Tax Credit)
CGST paid = Rs. 10
(Rs. 30 – 20 (Input Tax Credit)

SGST @ 10%
SGST paid = Rs. 10
• The GST applies on the supply of goods or services as against the
earlier concept of tax on the manufacture and sale of goods or
services.

• It is a destination based consumption tax.

• It is a dual GST with the Centre and States simultaneously levying it
on a common tax base. The GST to be levied by the Centre on intra-
State supply of goods and / or services would be called the Central
GST (CGST) and that to be levied by the States would be called the
State GST (SGST). For Inter-state transactions IGST is applicable.

• The GST applies to all goods other than alcoholic liquor for human
consumption and five petroleum products, viz. petroleum crude,
motor spirit (petrol), high speed diesel, natural gas and aviation
turbine fuel. It applies to all services barring a few.
• HSN (Harmonized System of Nomenclature-12 digits) code is used for
classifying the goods under the GST regime.

• Exports shall be treated as zero-rated supply. No tax is payable on

export of goods or services but credit of the input tax related to the
supply shall be admissible to exporters and the same can be claimed
as refund by them.

• Import of goods and services would be treated as inter-State supplies

and subject to IGST in addition to the applicable customs duties. The
IGST paid shall be available as ITC for payment of taxes on further
supplies.
Taxes Subsumed under GST
 The GST replaced the following taxes earlier levied and collected by the Centre:
a. Central Excise duty
b. Duties of Excise (Medicinal and Toilet Preparations)
c. Additional Duties of Excise (Goods of Special Importance)
d. Additional Duties of Excise (Textiles and Textile Products)
e. Additional Duties of Customs (commonly known as CVD)
f. Special Additional Duty of Customs (SAD)
g. Service Tax
h. Central Surcharges and Cesses so far as they relate to supply of goods and services
 State taxes that subsumed under the GST are:
a. State VAT
b. Central Sales Tax
c. Luxury Tax
d. Entry Tax (all forms)
e. Entertainment and Amusement Tax (except when levied by the local bodies)
f. Taxes on advertisements
g. Purchase Tax
h. Taxes on lotteries, betting and gambling
i. State Surcharges and Cesses so far as they relate to supply of goods and services
Significance of GST/ Advantages of GST

• GST eliminates the cascading effect of tax

• Export of globally competitive products
• Wider tax base
• Uniform tax rate in entire India
• Harmonization of laws & procedures
• The cost and number of compliances is lesser
• Reduced need of maintaining documents for various taxes
• Composition scheme for small businesses
• Simple and easy online procedure through common portal
• Speedy transactions
• Improved efficiency of logistics
Limitations/ Disadvantages of GST
• Increased costs due to software purchase
• Not being GST-compliant can attract penalties
• GST will mean an increase in operational costs
• Adapting to a complete online taxation system
• SMEs may have a higher tax burden
 GST Types & Rates

• If the Receiver is Located within the State, CGST & SGST both shall be made applicable.

• If the Receiver is Located within the Union Territory, CGST & UTGST shall be made applicable.

• If the Receiver is Located in other State, IGST shall be made applicable.

0 % Nil Rate Items

Tax Structure:
• CGST 5% Essential Items
• SGST
12 % Standard Rate
• IGST
• UGST 18 % Standard Rate
Luxury Items
28 % Addon Tax on Ultra
Add. Levy % Luxury, Sin & Demerit
Items
Present GST Rates
 Global GST Rates

• USA- 0%
• Germany- 19%
• Russia- 20%
• France- 20%
• China- 10%
• Australia- 10%
• Malaysia- 6%
• Pakistan- 17%
• Japan- 10%
• Brazil- 17%
 GST Registration
GST registration is mandatory for all businesses in India in case they fulfill any of these
conditions :
• Annual turnover greater than Rs 40 Lakh (Rs 20 lakhs in special category states*)
• For Services- Exempt upto turnover Rs 20 Lacs (Rs 10 Lacs in special category states)
• Making sales of goods outside own state
• Casual taxable person
• NRI
• Input Service Distributor
• Persons who are selling through E-Commerce operator
• Persons liable to pay tax under Reverse Charge Mechanism (RCM)
• GST TDS Deductors
• Online Information & Data Retrieval Services

* Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand;
& Rs 10 lakhs for Manipur, Mizoram, Nagaland and Tripura
Documents Required For Registration As Individuals / Proprietor
• Legal Name (same as PAN )
• PAN
• Mobile No.
• E-Mail ID
• Trade Name
• Photo of Proprietor (size upto 100 kb)
• Adhaar (proprietor adhaar)
• Proof of place of business
• Electricity Bill
• Rent Agreement in case of rented place of business
• HSN code
• Reason to obtain Registration
• Date of Liability
• Tax paid receipt if any
For Firm/Company/ Trust / Society etc.

• PAN (Firm / Company / Trust / Society)

• Legal Name ( same as PAN )
• Mobile No ( of Authorised Signatory)
• E-Mail ID ( of Authorised Signatory)
• Trade Name (Firm / Company / Trust / Society)
• Photo of Partner / director / trustee (size upto 100 kb)
• Address proof of Partners/ director/ trustee
• Proof of constitution of business
• Proof of appointment of authorised signatory (Firm / Company / Trust / Society).
GST REGISTRATION PRCEDURE
Step 1: Go to the GST Portal
Step 2: Generate a TRN (Temporary Reference Number) by Completing OTP Validation
Step 3: OTP Verification & TRN Generation
Step 4: TRN Generated
Step 5: Log in with TRN
Step 6: Submit Business Information
Step 7: Submit Promoter Information
Step 8: Submit Authorized Signatory Information
Step 9: Principal Place of Business
Step 10: Additional Place of Business
Step 11: Details of Goods and Services
Step 12: Details of Bank Account
Step 13: Verification of Application
Step 14: ARN (Application Reference Number) Generated
 Amendment of Registration under GST
• Every registered taxable person shall inform the proper officer of any changes done within
15 days of such change.

• Changes has to be done online through an application in Form GST REG- 14 along with
documents related to change.

• The proper officer may, approve or reject amendments in the registration particulars.

• The proper officer shall give proper notice and opportunity of being heard before rejection
amendment.

• Any rejection or approval of amendments shall be deemed to be a rejection or approval of

amendments under the CGST Act/ SGST Act.
Cancellation of GST Registration
• The proper officer may cancel the registration on the death of the registered taxable
person by himself or on the basis of application made by the legal heir
• Suo-motu cancellation of registration under GST
• If tax return has not been furnished for three consecutive tax periods opting composition
scheme.
• Taxable person, other than a person opted for composition scheme, failed to furnish
return for a continuous period of six months.
• Who has taken voluntary registration and not done business in six months from date of
registration
• Registration obtained by fraud
• Proper notice and hearing to be provided before cancellation of registration
• Liability continues despite cancellation of registration
• Cancellation under SGST means cancellation under CGST & vice-versa
Impact of GST on E-Commerce Operator/ TCS
• E-Commerce Operators (ECOs) should collect TCS on taxable supply.

• TCS refers to tax which is collected by the electronic commerce operator

when a supplier supplies some goods or services through its portal and the
payment for that supply is collected by the electronic commerce operator.

• There are many e-Commerce operators like Amazon, Flipkart, Jabong, etc.
operating in India. These operators displays / lists on their portal products
as well as services which are actually supplied by some other person to the
consumer.
• The goods or services belonging to other suppliers are displayed on
the portals of the operators and consumers buy such goods/services
through these portals.

• On placing the order for a particular product/ services the actual

supplier supplies the selected product/services to the consumer.

• The price/consideration for the product/services is collected by the

Operator from the consumer and passed on to the actual supplier
after deducting his commission by the Operator.

• The Government has placed the responsibility on the Operator to

collect the ‘tax’ at a rate of 1% from the supplier.
For example:

Sale price of goods for goods sold through an e- Rs. 10000

commerce operator (say Sarees), the taxable value of
which is (50 No’s X 200 per saree)

Taxable value of services (Commission) charged by Rs. 200

the e-commerce operator

Returned goods value by e-commerce operator (10 Rs. 2000

Nos X 200 per saree)

In the given example TCS to be collected by the e-commerce operator would work
out as:
• Rs. 8,200 x 0.5% (CGST) = Rs. 41 (CGST)
• Rs. 8,200 x 0.5%. (SGST) = Rs. 41 (SGST)
• The ecommerce operator as well as the supplier supplying goods or
services through an operator need to compulsorily register under GST.

• Section 52 of the CGST Act, 2017 provides for Tax Collection at source,
by e-Commerce operator in respect of the taxable supplies made
through it by other suppliers, where the consideration in respect of
such supplies is collected by him.
• The amount of tax so collected by the TCS Mechanism under GST operator
is required to be deposited by the 10th of the following month, during
which such collection is made.

• The operator is also required to furnish a monthly statement in Form GSTR-

8 by the 10th of the following month.

• The Operator is also required to file an Annual statement in prescribed

form by the 31st of December following the end of every financial year. The
Operator can rectify errors in statements filed, if any.

• The tax collected by the operator shall be credited to the cash ledger of the
supplier who has supplied the goods/services through the Operator.
• The details of the supplies, including the value of supplies, submitted
by every operator in the statements will be matched with the details
of supplies submitted by all such suppliers in their returns.

• If there is any discrepancy in the value of supplies, the same would be

communicated to both of them. If such discrepancy in value is not
rectified within the given time, then such amount would be added to
the output tax liability of such suppler.
Impact of GST on Job Work
What is Job work?

• Section 2(68) of the CGST Act, 2017 defines job work as ‘any treatment or process
undertaken by a person on goods belonging to another registered person’. The
one who does the said job would be termed as ‘job worker’.

• The ownership of the goods does not transfer to the job-worker but it rests with
the principal. The job-worker is required to carry out the process specified by the
principal, on the goods.

• Job Work includes outsourced activities that may or may not culminate into
manufacture.
• The term Job-work itself explains the meaning. It is processing of goods supplied
by the principal.

• In the concept of Job work a principal manufacturer can send inputs or semi-
finished goods to a job worker for further processing.

• The whole idea is to make principal responsible for meeting compliances on

behalf of the job-worker on the goods processed by him (job-worker),
considering the fact that typically the job-workers are small persons who are
unable to comply with the discrete provisions of the law.

• The GST Act makes special provisions with regard to removal of goods for job-
work and receiving back the goods after processing from the job-worker without
payment of GST.
Job work Procedural aspects:
• Certain facilities with certain conditions are offered in relation to job work, some
of which are as under:

a) A registered person (Principal) can send inputs/capital goods under intimation

and subject to certain conditions without payment of tax to a job worker and from
there to another job worker and after completion of job work bring back such
goods without payment of tax. The principal is not required to reverse the ITC
availed on inputs or capital goods dispatched to job-worker.
b) Principal can send inputs or capital goods directly to the job worker
without bringing them to his premises, still the principal can avail the
credit of tax paid on such inputs or capital goods.

c) However, inputs and/or capital goods sent to a job worker are

required to be returned to the principal within 1 year and 3 years,
respectively, from the date of sending such goods to the job worker.
d) After processing of goods, the job-worker may clear the goods to-
(i) Another job-worker for further processing;
(ii) Dispatch the goods to any of the place of business of the
principal without payment of tax;
(iii) Remove the goods on payment of tax within India or without
payment of tax for export outside India on fulfilment of
conditions.
• The facility of supply of goods by principal to the third party directly
from the premises of the job-worker on payment of tax in India
likewise with or without payment of tax for export may be availed by
the principal on declaring premise of the job-worker as his additional
place of business in registration.

• In case the job-worker is a registered person under GST, even

declaring the premises of the job worker as additional place of
business is not required.
• Before supply of goods to job-worker, principal would be required to
intimate the Jurisdictional Officer containing the details of description
of inputs intended to be sent by the principal and the nature of
processing to be carried out by the job-worker.

• The said intimation shall also contain the details of another job-
worker, if any.

• The responsibility for keeping proper accounts for the inputs or

capital goods sent to job worker, shall lie with the principal.
• Section 19 of the CGST Act, 2017 provides that the principal shall be
entitled to take the credit of input tax paid on inputs sent to the job-
worker for the job work.

• Further, the provison also provides that the principal can take the
credit even when the goods have been directly supplied to the job-
worker without bringing into the premise of the principal.
• Time Limit: As per section 19 of the CGST Act, 2017, inputs and
capital goods after processing shall be returned back to principal
within one year or three years respectively of their being sent out.
Further, the provision of return of goods is not applicable in case of
moulds and dies, jigs and fixtures or tools supplied by the principal to
job-worker.

• Both input and intermediate product can be cleared without payment

of duty to job-worker
• When there is inter-State supply of goods or services, the registration
under GST is mandatory. However, the government has provided
exemption from registration for job workers making inter-state supply
of services unless they are covered under the following:
• Job worker is registered as limit of 20 lakh is crossed, or;
• Job worker provides services in relation to goods such as-
Jewellery, goldsmiths and silversmiths etc
GST Rate charged by Job-Worker

• Notification 20/2019 – Central Tax(rate) from 1st October 2019,

The GST is reduced to 12% from 18% for job work other than those
specifically covered above

• Where the principal supplier is registered under GST – registered job

worker would require to charge 12%

• Where the principal supplier is unregistered under GST – registered

job worker would require to charge 18%
 GSTIN
• The registration in GST is PAN based and State specific.

• Supplier has to register in each of such State or Union territory from

where he effects supply.

• In GST registration, the supplier is allotted a 15-digit GST identification

number called “GSTIN” and a certificate of registration incorporating
therein this GSTIN is made available to the applicant on the GSTN
common portal.
 •

• The first 2 digits of the GSTIN is the State code, next 10 digits are the PAN
of the legal entity, the next two digits are for entity code, and the last digit
is check sum number.

• Registration under GST is not tax specific which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses.

• A given PAN based legal entity would have one GSTIN per State, that means
a business entity having its branches in multiple States will have to take
separate State wise registration for the branches in different States.
 Migration of Persons to GST

• Migrated taxpayers being every person who were registered under the old tax
regime like VAT, Service tax with a valid PAN number had to obtain GST
registration.

• The earlier time limit for switching was 31st December 2017. This provision is
now relaxed only for some taxpayers who could not complete the registration
process Under GST, If the aggregate turnover by making taxable supplies in a
financial year exceeds the specified limit.
Migration to GST - Process
• On enrollment, the taxpayer will get a provisional certificate of
registration in FORM GST REG-25, which will have the GSTIN

• If the taxpayer has had multiple registrations under the previous law
on the basis of a single PAN, he will now be granted only one
provisional registration under GST

• A person with centralized registration under service tax will be

granted only one GST provisional registration in the State which he is
registered under the service tax
• If the person is liable to register under GST (or wishes to voluntarily register
under GST), then he will submit an application electronically in FORM GST
REG–26. Any information must be furnished within a period of three
months

• If the information is correct and complete, the final GST registration will be
given in FORM GST REG-06

• If the information is not correct, then the officer will issue a show cause
notice in FORM GST REG-27. A reasonable opportunity of being heard will
be given, after which the provisional registration will be cancelled in FORM
GST REG-28

• If the applicant’s reply is satisfactory, the show cause notice issued can be
nullified by issuing an order in FORM GST REG- 20
 Special Persons under GST

• Casual taxable person

• NRI
• Input Service Distributor
• Making sales of goods outside own state
• Persons who are selling through E-Commerce operator
• Persons liable to pay tax under Reverse Charge Mechanism (RCM)
• GST TDS Deductors
• Online Information & Data Retrieval Services
GST Enactments
• Integrated Good And Services Tax Act 2017
• Central Goods And Services Tax Act 2017
• State Goods And Services Tax Ac 2017
• Union Territory Goods And services Tax Act 2017
• The Goods And Services Tax (Compensation To States) Act 2017