OM SAI RAM

AN AXE TO CRACK

a SIMPLIFIED HANDBOOK
On
GOODS &Service Tax
For CA-Inter
As applicable for May’23 & November’23 exams

COMPILED
CA Vikas gOWDA
BY:
E-Mail: cavikasgowda.edu@gmail.com
 CA-Inter
group 1
• Paper 4: Taxation

Section A: Direct Tax- Income Tax (60Marks)

section B:
Indirect tax
(40 marks)

Goods & service tax

GST index
Chapter
Name of the Chapter Page No.
No.
1) GST in India- An Introduction 1 to 7
2) Supply under GST 8 to 23
3) Charge of GST 24 to 45
4) Exemptions from GST 46 to 68
5) Time and Value of Supply 69 to 82
6) Input Tax Credit 83 to 102
7) Registration 103 to 124
8) Tax Invoice: Credit and Debit Notes; E-Way Bill 125 to 139
9) Payment of Tax 140 to 147
10) Returns 148 to 168

Pattern: 28 marks descriptive type and balance 12 marks Multiple

Choice Questions.
 Question Paper Pattern

PAPER 4: TAXATION

Direct Tax (Income Tax) Indirect Tax (GST)

60 Marks 40 Marks

Multiple Choice Descriptive Multiple Choice Descriptive

Questions (MCQ) Questions Questions (MCQ) Questions

18 Marks 42 Marks 12 Marks 28 Marks

1) 14 Marks (Compulsory) 1) 8 Marks (Compulsory)

2) 14 Marks 2) 10 Marks
3) 14 Marks Any 2 3) 10 Marks Any 2
4) 14 Marks 4) 10 Marks

Never Give Up
 HAPPY
Learning
“Teachers Open the Door, but you
must enter by yourself”
 Goods & Service Tax
CHAPTER-1

CONCEPT OF INDIRECT TAXES & GST IN INDIA-

AN INTRODUCTION

TAX

DIRECT TAX INDIRECT TAX

➢ The person paying the tax to the
Government directly bears the incidence of
the tax.
➢ Progressive in nature
➢ Burden of tax borne by the person himself
➢ Government collects the same from the
ultimate consumer. Thus, incidence of
the tax is shifted to the other person.
➢ Regressive in nature
➢ Burden of tax shifted to another person

INDIRECT TAXES IN INDIA – AN OVERVIEW:

The previous indirect tax regime consisted of Central and State laws. For the Central Government,
Central Excise, Customs and Service tax were the three main components of indirect taxes. While for
State Government, Value Added Tax (VAT) and CST were the major taxes along with Octroi,
Entertainment Tax etc. Taxation of goods and services was governed under separate legislatures. In
respect of goods, the Centre had the powers to levy tax on the manufacture of goods (except alcoholic
liquor for human consumption, opium, narcotics etc.) while the states had the powers to levy tax on the
sale of goods. In the case of inter-state sales, the Centre had the power to levy a tax (the Central Sales
Tax) but, the tax was collected and retained entirely by the states. As far as services were concerned, it
was the Centre alone that was empowered to levy service tax governed by the Finance Act.

Further to this, many other taxes were levied by both the Central Government and the State Government
on production, manufacture and distributive trade, where no set-off was available in the form of input tax
credit. These taxes added to the cost of goods and services and led to tax on tax i.e., cascading of taxes
and the erstwhile indirect tax regime was ineffective to remove this cascading effect of taxes.

These taxes were being levied and collected exclusively under their respective entries in Union and State
lists as demarcated by Article 246 in schedule VII.

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 Goods & Service Tax
The following diagram summarizes the indirect taxation in India before introduction of GST:
Tax Tax Law Taxable Event Tax Collection Entry No. (as per
Authority Schedule VII)
Customs duty Customs Act, Import/ Export of Central 83
1962 Goods Government
Central Excise Central Excise Manufacture/ Central 84
Act, 1944 Production of Goods Government
Central Sales Central sales Interstate sale of State Government 92A
Tax tax Act, 1956 Goods
Service Tax Finance Act, Taxable service Central 97
1994 Government
VAT State VAT Act Sale of Goods within State Government 54 of state list
the State

Following are the major reasons for implementation of a new indirect tax regime:
a) Plethora of taxes: There were various indirect taxes in India in existence prior to introduction of
GST.
b) Plenty of Taxable Events: Taxes were levied at various stages on various taxable events by
different authorities on the same subject matter or transaction.
c) Double taxation: On a single transaction, multiple taxes were being imposed, often by different
authorities.
d) Multiplicity of compliances: Payment of tax to various authorities, different due dates,
assessment, and refund process at various levels made the taxation system more complex and led
to an increase in compliance cost.
e) Lack of Cross-utilization facility between goods and services: Taxes paid on procurement of
input purchases were not allowed to be set off against output tax payable on services and vice
versa.
f) Non-availability of set off arrangement against other State or Central Government levies:
CST paid in one state was not available as set off against sales tax payable in another state.
Similarly, central taxes were not available as credit to set off against the taxes payable at the state
level and vice versa

FRAMEWORK OF GST IN INDIA:

Need for GST in India-

Deficiencies in the A cure for ills of

existing value Has led to
GST existing indirect tax
added taxation regime

GST, a cure for ills of existing Indirect tax regime-

Cascading effects of taxes are removed and a continuous chain of set-off from the original producer’s
point/ service provider’s point upto the retailer’s level/ consumer’s level is established.

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 Goods & Service Tax
Goods and Services Tax (GST) was rolled out in India with effect from 1st July, 2017.

GST is a major milestone in indirect tax reforms in independent India. It is a destination based
consumption tax. It is applicable all over India including Jammu & Kashmir. It adorns dual taxation
model where Union and states levy and collect taxes simultaneously. It ensures seamless flow of input tax
credit to a large extent. It has been designed to be fully automated and online. A giant portal called GSTN
is being used to ensure working of the GST system which is the IT backbone of GST.

A high powered federal body called GST Council has been established under Article 279A of the
Constitution of India to decide policy matters, formulate principles for administration and implementation
of GST.

GST is one of the biggest taxation reforms of independent India with the objective of integrating State
economies. GST, the most historic indirect tax reform, is implemented with the aim of enhancing the
overall growth of the Nation along with supporting the Make in India initiative. It aims at creating a
single, unified Indian market throughout the Nation. It is a comprehensive destination based indirect tax
levy on goods as well as services at the national level. Its main objective is to consolidate multiple
indirect tax levies into a single tax thus subsuming an array of tax levies, overcoming the limitations of
previous indirect tax structure, and creating efficiencies in tax administration.

GST is a consumption based tax which is levied on the basis of “Destination principle.” The concept
relates to taxing the supply of goods or services at the point of consumption.

The essence of GST is in removing the cascading effects i.e., tax on tax of both Central and State taxes by
allowing setting-off of taxes throughout the value chain, right from the original producer and service
provider’s point up to the consumer level.

Goods & Services Tax regime of indirect taxes brought a single tax which was levied on supply of goods
or services or both with concurrent jurisdiction of Centre and states. This led to bringing about
amendments in the Constitution so that they may simultaneously levy and collect Goods & Services Tax.

The Constitution of India has been amended by the Constitution (101st) Amendment Act, 2016 for this
purpose.

CONSTITUTION AMENDMENT ACT, 2016:

India has a three-tier federal structure, comprising the Union Government, the State Governments and the
Local Government. The power to levy taxes and duties is distributed among the three tiers of
Governments, in accordance with the provisions of the Indian Constitution.
The Constitution of India is the supreme law of India. It consists of a Preamble, 25 parts containing 448
Articles and 12 Schedules.
Significant amendments made by Constitution (101st) Amendment Act are discussed below:
a) Article 246A: Power to make laws with respect to Goods and Services Tax:
➢ This article grants power to Centre and State Governments to make laws with respect to
GST imposed by Centre or such State.

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 Goods & Service Tax
➢ Centre has the exclusive power to make laws with respect to GST in case of inter-State
supply of goods and/or services.
➢ The provisions of Article 246A are notwithstanding anything contained in Articles 246 and
254.
b) Article 269A: Levy and collection of GST on inter-State supply
➢ Article 269A stipulates that GST on supplies in the course of inter-State trade or commerce
shall be levied and collected by the Government of India and such tax shall be apportioned
between the Union and the States in the manner as may be provided by Parliament by law
on the recommendations of the Goods and Services Tax Council.
➢ In addition to above, import of goods or services or both into India will also be deemed to
be supply of goods and/ or services in the course of Inter-State trade or Commerce.
➢ This will give power to Central Government to levy IGST on the import transactions which
were earlier subject to countervailing duty under the Customs Tariff Act, 1975.
➢ Where an amount collected as IGST has been used for payment of SGST or vice versa, such
amount shall not form part of the Consolidated Fund of India. This is to facilitate transfer of
funds between the Centre and the States.
c) Article 279A: GST Council
➢ Article 279A of the Constitution empowers the President to constitute a joint forum of the
Centre and States namely, Goods & Services Tax Council (GST Council).
➢ The provisions relating to GST Council came into force on 12th September, 2016. President
constituted the GST Council on 15th September, 2016.
➢ The Goods and Services Tax Council shall consist of the following members, namely :
i. the Union Finance Minister- Chairperson;
ii. the Union Minister of State in charge of Revenue or Finance- Member;
iii. the Minister in charge of Finance or Taxation or any other Minister nominated by
each State Government- Members.
The Members of the Goods and Services Tax Council referred above shall, as soon as
may be, choose one amongst themselves to be the Vice-Chairperson of the Council for
such period as they may decide.
➢ The function of the Council is to make recommendations to the Union and the States on
important issues like tax rates, exemptions, threshold limits, dispute resolution etc.
➢ It shall also recommend the date on which GST will be levied on petroleum crude, high
speed diesel, motor spirit, natural gas and aviation turbine fuel.
➢ One-half of the total number of Members of the Goods and Services Tax Council shall
constitute the quorum at its meetings.
➢ Every decision of the GST Council is taken by a majority of not less than three-fourths of
the weighted votes of the members present and voting. Vote of the Centre has a weightage
of one-third of total votes cast and votes of all the State Governments taken together has a
weightage of two-thirds of the total votes cast, in that meeting.
➢ No act or proceedings of the GST Council shall be invalid merely by reason of -
i. any vacancy in, or any defect in, the constitution of the Council; or
ii. any defect in the appointment of a person as a Member of the Council; or
iii. any procedural irregularity of the Council not affecting the merits of the case.

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 Goods & Service Tax
Important Note: Total 11 special category states are provided under sub-clause (g) of clause (4) of
Article 279A of the Constitution which are as follows:

Jammu and Kashmir, Uttarakhand, Himachal Pradesh, Arunachal Pradesh, Assam, Meghalaya, Manipur,
Mizoram, Nagaland, Sikkim and Tripura. [3 top most states + 8 North Eastern States]

Along with the amendment in the Constitution, to empower the Centre and the states to levy and collect
the GST, four legislations were given assent by the President on April 12,2017, which include:
➢ The Central GST Act, 2017
➢ The Integrated GST Act, 2017
➢ The GST (Compensation to States) Act, 2017 and
➢ The Union Territory GST Act, 2017

Compensation to states for deficit in tax collections:

The amendment provides that Parliament shall, by law, on the recommendations of the GST Council,
provide for compensation to the States for loss of revenue arising on account of implementation of the
goods and service tax for a period of 5 years.

Parliament has passed the law to compensate states for revenue deficit. The Act is ‘GST (Compensation
to States) Act, 2017. Under this Act some additional tax is collected as GST compensation cess on
specified goods and the amount is distributed among those states incurring revenue loss due to
introduction of GST.

The current status of GST Laws Passed in India is as under:

The law Purpose
The Central Goods and Services Tax Act, 2017 To levy, collect CGST on intra-state supplies and for other
(CGST Act) matters
The Integrated Goods and Services Tax Act, 2017 To levy, collect IGST on inter-state supplies and for other
(IGST Act) matters
The Union Territory Goods and Services Tax To levy, collect UTGST on intra-UT supplies and for other
Act, 2017 (UTGST Act) matters
GST (Compensation to States) Tax Act, 2017 To compensate states for the loss of revenue if any due to
introduction of GST
The States Goods and Services Tax Act, 2017 To levy, collect SGST on intra-state supplies and for other
(SGST Act) Matters

The following taxes have been subsumed under GST:

Central Taxes State Taxes
Central Excise Duty State VAT
Duties of Excise (Medicinal and Toilet Central Sales Tax
Preparations)
Additional Duties of Excise (Goods of Special Purchase Tax
Importance)

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 Goods & Service Tax
Additional Duties of Excise (Textiles and Luxury Tax
Textile Products)
Additional Duties of Customs (commonly Entry Tax (All forms)
known as CVD)
Special Additional Duty of Customs (SAD) Entertainment Tax (except those levied by the
local bodies)
Service Tax Taxes on advertisements
Central cesses and surcharges in so far as they Taxes on lotteries, betting and gambling
relate to supply of goods or services
State cesses and surcharges in so far as they
relate to supply of goods or services

GST MODEL:

India has adopted a dual GST model, i.e., where the tax is imposed concurrently by the Centre and the
States. For an intra-state supply, the GST is equally divided between the Centre and the State (CGST +
SGST), and for inter-state supply, the GST is collected by the Centre (IGST).

GST, therefore is a destination-based tax applicable on all transactions, involving supply of goods /
services for a consideration, and comprises of Central Goods & Services Tax (CGST), levied by the
Central Government, and State Goods and Services Tax (SGST), levied by the State Government OR
Union Territory Goods and Services Tax (UTGST) levied by Union Territories, on Intra-state supplies of
taxable goods & services. Inter-state supplies of taxable goods / services are subject to Integrated Goods
& Services Tax (IGST), which is levied by the Central Government and is equal to CGST + SGST.

The CGST is levied under the CGST Act, 2017. UTGST is levied under the UTGST Act, 2017 and this is
applicable to Union Territories, i.e., Andaman & Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli
and Daman & Diu (w.e.f. 26.01.2020), Chandigarh, Ladakh (w.e.f. 31.10.2019). SGST is levied under the
respective state legislations.

National Capital Territory of Delhi, Puducherry (earlier Pondicherry) and Jammu & Kashmir (w.e.f.
31.10.2019) SGST is levied under the respective state legislations.

The following subject matters kept outside the purview of GST. As such these are taxed
under the existing laws of centre and states as the case may be-
➢ Alcoholic Liquor for Human Consumption
➢ Entertainment Tax levied by Local bodies
➢ Motor Vehicles Tax
➢ Property tax such as Stamp Duty
➢ Petroleum crude, Diesel, Petrol, Aviation Turbine Fuel & Natural gas

Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to
levy Central Excise duty on these products.

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 Goods & Service Tax
Basic Summary of Goods & Services Tax:
➢ The first country to implement Goods & Services Tax was France in as early as 1954.
➢ India has the highest tax slab in the world i.e., 28%, next only to Argentina which is at 27%.
➢ Almost 160 countries around the world follow this scheme of indirect taxation.
➢ Indian GST has four rate structures, viz. 5%, 12%, 18% and 28% with cess on sin goods and
luxury items.
➢ There is a special rate of 3% on precious metals like gold.
➢ GST is covered under five legislations i.e., Central GST Act, State GST Act, Integrated GST Act,
Union Territory GST Act and GST (Compensation to States) Act.
➢ Integrated GST, Compensation cess and Central GST are levied by Central Government
➢ All taxation policies and their implementation under GST are based on the recommendations of
the GST Council
➢ The taxable event under GST is supply
➢ GST Bill was introduced under 122nd Constitutional Amendment Bill, but passed under 101st
Amendment Act,2016
➢ Assam was the first state to ratify GST Bill but Telangana was the first state to pass State GST
Bill.
➢ GST Council was constituted with its headquarters in Delhi. The Union Finance Minister is the
Chairperson & State Finance Ministers are members of GST Council
➢ 1st July 2017 will be observed as the GST day
➢ The threshold limit for registration under GST is Rs.20 Lakhs/40Lakhs, for some special category
states it is Rs.10 Lakhs and in some special case Rs.40 Lakhs.
➢ There is a special purpose vehicle called GSTN which caters the IT needs of GST. GSTN comes
under Companies Act, 2013 with combined stake of Central and State Governments is 49%. The
rest is contributed by LIC Finance with 11% and ICICI Bank, HDFC, HDFC Bank and NSE
Strategic Investment Corporation with 10% each.
➢ The GST Council recommended a uniform policy on e-way bill which is being implemented all
over the country. This totally eliminates the check post system breaking the entry barriers and
reducing bottlenecks in transportation.

“Without your involvement you can’t succeed. With your

involvement you can’t fail”

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 Goods & Service Tax
CHAPTER-2

SUPPLY UNDER GST

RELEVANT DEFINITIONS:

Supplier: Supplier in relation to any goods or services or both, shall mean the person supplying the said
goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to
the goods or services or both supplied [Section 2(105) of CGST Act].

Recipient: Recipient of supply of goods and/or services means-

a) where a consideration is payable for the supply of goods or services or both, the person who is liable
to pay that consideration,
b) where no consideration is payable for the supply of goods, the person to whom the goods are
delivered or made available, or to whom possession or use of the goods is given or made available,
and
c) where no consideration is payable for the supply of a service, the person to whom the service is
rendered, and any reference to a person to whom a supply is made shall be construed as a reference
to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in
relation to the goods or services or both supplied. [Section 2(93) of CGST Act]

Goods: Goods means every kind of movable property other than money and securities but includes
actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed
to be severed before supply or under a contract of supply. [Section 2(52) of CGST Act]

Services: Service means anything other than goods, money and securities but includes activities relating
to the use of money or its conversion by cash or by any other mode, from one form, currency or
denomination, to another form, currency or denomination for which a separate consideration is charged.
[Section 2(102) of CGST Act].
Example: Services includes facilitating or arranging transactions in securities

Consideration: Consideration in relation to the supply of goods or services or both includes:

➢ any payment made or to be made, whether in money or otherwise, in respect of, in response to, or
for the inducement of, the supply of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the Central Government or a State
Government,
➢ the monetary value of any act or forbearance, in respect of, in response to, or for the inducement
of, the supply of goods or services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a State Government.

However, a deposit given in respect of the supply of goods or services or both shall not be considered
as payment made for such supply unless the supplier applies such deposit as consideration for the said
supply. [Section 2(31) of CGST Act].

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 Goods & Service Tax
Taxable supply: Taxable supply means a supply of goods or services or both which is leviable to tax
under this Act [Section 2(108) of CGST Act].

Taxable territory: Taxable territory means the territory to which the provisions of this Act apply
[Section 2(109) of CGST Act].

Agent: Agent means a person, including a factor, broker, commission agent, del credere agent, an
auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply
or receipt of goods or services or both on behalf of another [Section 2(5) of CGST Act].

Principal: Principal means a person on whose behalf an agent carries on the business of supply or
receipt of goods or services or both [Section 2(88) of CGST Act].

Business: Business includes –

a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar
activity, whether or not it is for a pecuniary benefit
b) any activity or transaction in connection with or incidental or ancillary to (a) above
c) any activity or transaction in the nature of (a) above, whether or not there is volume, frequency,
continuity or regularity of such transaction;
d) supply or acquisition of goods including capital assets and services in connection with
commencement or closure of business
e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members, as the case may be;
f) admission, for a consideration, of persons to any premises; and
g) services supplied by a person as the holder of an office which has been accepted by him in the
course or furtherance of his trade, profession or vocation;
h) activities of a race club including by way of totalisator or a licence to book maker or activities of a
licenses book maker in such club
i) any activity or transaction undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities
[Section 2(17) of CGST Act].

Union Territory: Union Territory means the territory of-

➢ Andaman & Nicobar Islands,
➢ Lakshadweep,
➢ Dadra & Nagar Haveli and Daman & Diu (w.e.f. 26.01.2020),
➢ Chandigarh,
➢ Ladakh (w.e.f. 31.10.2019)
Section 2(114) of CGST Act read with finance act 2020.

Family: Family means-

i. the spouse and children of the person, and
ii. the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person [Section 2(49)].

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 Goods & Service Tax
SUPPLY UNDER GST:

The GST law lays down one comprehensive taxable event i.e: “Supply” - Supply of goods or services or
both. GST Law, by levying tax on the ‘supply’ of goods and/or services, departs from the historically
understood concepts of ‘taxable event’ under the State VAT Laws, Excise Laws and Service Tax Laws
i.e. sale, manufacture and service respectively.

Supply is the point of taxation or the taxable event under Goods & Services Tax.
The term supply is characterized by the following necessary traits:
➢ Supply should be of goods or services
➢ Anything which is not goods / services (like money, securities etc.) is not supply
➢ It must be reiterated that only movable property is construed as goods
➢ Barters and exchanges would be leviable to GST
➢ Supply should be made for a consideration which could be in the form of money or otherwise
➢ Deposit is not consideration unless specifically applied to by the supplier
➢ Supply should be made in the course of or in the furtherance of business
➢ Supply should be made by a taxable person
➢ Supply between both non-taxable parties is not leviable to GST
➢ A taxable person is one who is registered or is liable to be registered under the Act

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 Goods & Service Tax
MEANING AND SCOPE OF SUPPLY – [Section 7 of CGST Act]:

(1) Supply includes –

a) Section 7(1)(a): all forms of supply of goods or services or both such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business.
b) Section 7(1)(aa): the activities or transactions, by a person, other than an individual, to its
members or constituents or vice-versa, for cash, deferred payment or other valuable
consideration.
Analysis: The aforesaid provision has been inserted through Finance Act, 2021 and has been
given retrospective effect from 1.7.2017. The purpose of such insertion is to constitute activities
or transactions between an association, club or similar entities and its members or constituents as
‘supply’. For the purpose of taxability, the members and the entity shall be deemed to be two
distinct persons.
c) Section 7(1)(b): Import of services for consideration whether or not in the course or furtherance
of business.
Example: Ramaiyaa, a proprietor, has received the architect services for his house from an
architect located in New York at an agreed consideration of $ 5,000.
The import of services by Ramaiyaa is supply under section 7(1)(b) though it is not in course or
furtherance of business.
d) Section 7(1)(c): The activities specified in Schedule I, made or agreed to be made without a
consideration.

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

(2) Notwithstanding anything contained in sub-section (1),

a) Activities or transactions specified in Schedule III or
b) such activities or transactions undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities, as may be notified by the
Government on the recommendations of the Council
shall be treated neither as supply of goods nor supply of services.

(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the
recommendations of the Council, specify, by notification, the transactions that are to be treated as—
a) a supply of goods and not as a supply of services; or
b) a supply of services and not as a supply of goods.

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 Goods & Service Tax
Modes of Supply (Forms of supply)- Section 7(1)(a):

➢ Supply includes all forms of supply of goods or services or both.

➢ Supply of anything other than goods or services does not attract GST.

Supply of

Other than
Goods Services goods or
Section[2(52)] Section[2(102)]
services

Means every kind of Anything other Does not

movable property than goods attract GST

Excludes Money and

Securities

Includes Includes

1) Actionable claim Activities relating to:

2) Growing crops, grass
and things attached
to/forming part of the
land which are agreed
to be severed before
supply or under a
contract of supply.
1) Use of money or
2) Conversion of money by
cash/by any other mode,
from one form/currency/
denomination, to another,
for which a separate
consideration is charged.

Supply of goods or services or both + for a consideration + in the course or furtherance of business.

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 Goods & Service Tax
SUPPLY WITHOUT CONSIDERATION- DEEMED SUPPLY
[Section 7(1)(c) read with Schedule I]:
As per Schedule I, in the following four cases, supplies made without consideration will be treated as
supply under section 7 of the CGST Act:
1. Permanent Transfer/Disposal of Business Assets where ITC has been availed on such assets:
Exp: A Furniture dealer permanently transfers furniture from his stock in trade, free of cost.
The transactions will constitute a supply as it is a permanent transfer/disposal of business assets.
If input tax credit is availed for such assets, then only such transfer amounts to supply.
Note: Transfer of entire business as going concern is not subject to GST.
2. Supply between related person or distinct persons as referred in section 25 when made in
the course or furtherance of business:
Gifts upto 50,000 by employer to employee in a financial year shall not be treated as supply of
goods or services or both.
Exp: A Ltd. transfers 100 ACs & 100 Televisions from his factory located at Maharashtra to his
retail showroom in Delhi so that the same can be sold there. The factory and retail showroom are
registered in the states where they are located. Although no consideration is charged, supply of
goods from factory at Maharashtra to retail showroom at Delhi constitutes supply.
a) Related persons:
As per Explanation to Section 15 of CGST Act, 2017, persons shall be deemed to be “related
persons” if-
➢ Such persons are officers/directors of one another’s business
➢ Such persons are legally recognised partners
➢ Such persons are employer & employee
➢ A third person controls/ own/ holds (directly/ indirectly) ≥ 25% voting stock/shares of
both of them
➢ One of them controls (directly/indirectly) the other
➢ Such persons together control (directly/indirectly) a third person
➢ Such persons are members of the same family
➢ One of them is the sole agent/sole distributor/sole concessionaire of the other

b) Distinct Persons specified under section 25:

A person who has obtained/is required to obtain more than one registration, whether in one
State/Union territory or more than one State/Union territory shall, in respect of each such
registration, be treated as distinct persons [Section 25(4)].
Example: Mohan, a Chartered Accountant, has a registered head office in Delhi.
He has also obtained registration in the State of West Bengal in respect of his newly opened
branch office. Mohan shall be treated as distinct persons in respect of registrations in West
Bengal and Delhi.

Further, where a person who has obtained or is required to obtain registration in a State or
Union territory in respect of an establishment, has an establishment in another State or Union
territory, then such establishments shall be treated as establishments of distinct persons
[Section 25(5)].
Example: Rishabh Enterprises, a registered supplier, owns an air- conditioned restaurant in
Virar, Maharashtra. It has opened a liquor shop in Raipur, Uttarakhand for trading of
alcoholic liquor for human consumption.
Since supply of alcoholic liquor for human consumption in Uttarakhand is a non-taxable

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 Goods & Service Tax
supply, Rishabh Enterprises is not required to obtain registration with respect to the same in
Uttarakhand. In this case, air-conditioned restaurant in Maharashtra and liquor shop [though
unregistered] in Uttarakhand shall be treated as establishments of distinct persons. Supply by
Maharashtra restaurant to Uttarakhand shop, in course or furtherance of business, even
without consideration will qualify as supply.

However, transfer between two units of a legal entity under single registration (apparently
within same State) will not be considered as supply.
Example: Raghubir Fabrics transfers 1000 shirts from his factory located in Lucknow to his
retail showroom in Kanpur so that the same can be sold from there. It has taken one
registration in the State of Uttar Pradesh declaring Lucknow factory as its principal place of
business and Kanpur showroom as its additional place of business.
Since no consideration is charged, supply of goods from factory to retail showroom in same
State under single registration does not constitute supply.
However, in the above example, if Raghubir Fabrics obtains separate registrations for
Lucknow factory and Kanpur showroom, stock transfer between the Lucknow factory and
Kanpur showroom will constitute supply.
Supply of goods or services or both + between related persons or distinct persons + in the
course or furtherance of business.

3. Supply of goods -
a) by a principal to his agent where the agent undertakes to supply such goods on behalf of
the principal; or
b) by an agent to his principal where the agent undertakes to receive such goods on behalf of
the principal.
And Invoice is issued in the name of agent.
Example: A C&F agent takes possession of the goods from the principal and issues the
invoice in his own name to the customer.
In such case, the C&F agent is an agent of the principal for the supply of goods in terms of
Para 3 of Schedule I.
The disclosure or non-disclosure of the name of the principal is immaterial in such situations.

Supply of goods by a principal to agent and vice-versa + Invoice is issued in the name of
Agent

4. Import of services without consideration by a person from a related person or from any of
his other establishments outside India, in the course or furtherance of business.
Example: Jhumroo Associates received legal consultancy services from its head office located in
Malaysia. The head office has rendered such services free of cost to its branch office.
Since Jhumroo Associates and the head office are related persons, services received by Jhumroo
Associates will qualify as supply even though the head office has not charged anything from it.

Import of services + without consideration + from a related party/establishment outside India

+ in course or furtherance of business

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 Goods & Service Tax
Illustration 1:
ABC Ltd. a manufacturing company scraps old plant and machinery due to renovation of manufacturing
facility. The company has taken input tax credit on plant and machinery so scrapped without
consideration. Does it qualify as a supply?
Solution:
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, Permanent transfer or disposal of
business assets where input tax credit has been availed shall be treated as supply even made without
consideration. Hence scrapping of old plant and machinery without consideration shall qualify as supply
since input tax credit has been availed by XYZ & Co.

Illustration 2:
Big Ltd. provides management technical services without consideration to Small Ltd. in which Big Ltd.
has controlling rights. These technical services have been provided for benefit of entire group. Does it
qualify as a supply?
Solution:
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, Supply of goods or services between
related persons is treated as supply even if it is without consideration.
As per Explanation to Section 15 of CGST Act, 2017, persons shall be deemed to be “Related persons” if
“one of them directly or indirectly controls the other”.
Since Big Ltd. has controlling rights of Small Ltd., they will be treated as related person and the said
transaction will qualify as supply even if it is without consideration.

Illustration 3:
American Express Pvt. Ltd. makes gifts to an employee worth Rs. 75,000 during the year. Do such gifts
qualify as a supply? Would your answer be different if gifts of Rs. 45,000 have been given to employee?
Solution:
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, supply of goods or services between
related persons is treated as supply even if it is without consideration.
As per Explanation to Section 15 of CGST Act, 2017, persons shall be deemed to be “Related persons” if
such persons are employer and employee.
Thus, gifts to employee worth Rs. 75,000 will qualify as supply and such supply would be leviable to
GST in full.
If gifts of Rs. 45,000 are given instead of Rs. 75,000, the same will not qualify as supply since it has been
specifically provided that gifts not exceeding Rs. 50,000 in value in a financial year by an employer to an
employee shall not be treated as supply of goods or services or both.
Illustration 4:
Honda Motors Ltd. engages DD Motors as an agent to sell motorcycle on its behalf. For the purpose,
Honda Motors Ltd. has supplied 500 cars to the showroom of DD Motors located in Punjab. Does it
qualify as supply?
Solution:
As per Section 7(1)(c) read with Schedule I of CGST Act, 2017, Supply of goods by a principal to his
agent where the agent undertakes to supply such goods on behalf of the principal shall be treated as
supply even if made without consideration only if the invoice is issued in the name of agent.
In the given case, Supply of motorcycles by Honda Motors Ltd. to DD Motors will qualify as supply as
per Section 7(1)(c) read with Schedule I only if the invoice is issued in the name of agent.

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 Goods & Service Tax
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
[Section 7(1A) read with Schedule II]:

Section 7(1A) of the CGST Act classifies certain activities/ transactions constituting supply, either as
supply of goods or supply of services.
Schedule II to the CGST Act contains the list of activities or transactions which have been classified
either as supply of goods or supply of service which are as follows-
Form of Supply Description Supply of
Transfer of title in goods. Goods
Example: Shivaji sells ready-made garments to its customers.
Any transfer of right in goods/ undivided share in goods without Services
transfer of title in goods.
Example: Genius Equipments Ltd. gives a machinery on rent to
Suhaasi Manufacturers.
Transfer Any transfer of title in goods under an agreement which stipulates Goods
that property shall pass at a future date upon payment of full
consideration as agreed.
Example: Dhruva Capitals supplied goods on hire purchase basis to
customers.
Optima Manufacturers supplies toys to retailers on ‘sale or return
basis’.
Any lease, tenancy, easement, licence to occupy land. Services
Land & Building Any lease or letting out of building including a commercial, Services
industrial or residential complex for business or commerce, wholly or
partly.
Any treatment or process which is applied to another person’s goods. Services
Treatment or Process Example: Damani Dying House dyes the clothes given by Shubham
Textiles Ltd. on job work basis.
Goods forming part of business assets are transferred or disposed off Goods
by/under directions of person carrying on the business so as no longer
to form part of those assets.
Goods held/used for business are put to private use or are made Services
available to any person for use for any purpose other than business,
by/ under directions of person carrying on the business.
Example: Arunodhya, a sole proprietor, owns a laptop used for
making office presentations. He transfers said laptop to his son for
making school projects.
Goods forming part of assets of any business carried on by a person
who ceases to be a taxable person, shall be deemed to be supplied by
Tranfer of business
him, in the course or furtherance of his business, immediately before Goods
assets he ceases to be a taxable person.
Example: Arun, a trader, is winding up his business. Any goods left
in stock shall be deemed to be supplied by him.
Exceptions:
➢ Business is transferred as a going concern to another person.
➢ Business is carried on by a personal representative who is
deemed to be a taxable person.

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 Goods & Service Tax
Immovable Property Renting of immovable property Services
Construction of a complex, building, civil structure or a part thereof,
Contruction or sale including a complex or building intended for sale to a buyer, wholly
or partly, except where the entire consideration has been received Services
after issuance of completion certificate, where required, by the
competent authority or after its first occupation, whichever is earlier.
Example: Rathi Builders has constructed individual residential units
for agreed consideration of Rs.1.2 crore per unit. Rs.90 lakh per unit
were received before issuance of completion certificate by the
competent authority and balance after completion.
The term construction includes additions, alterations, replacements,
or remodeling of any existing civil structure.
The expression competent authority means the Government or any
authority authorised to issue completion certificate under any law for
the time being in force.
Intellectual Property Temporary transfer or permitting use or enjoyment of any intellectual Services
Right property right.
Example: Temporary transfer of patent.
Information Development, design, programming, customisation, adaptation, Services
Techonology upgradation, enhancement, implementation of IT software.
software Example: Suvidha Solutions develops an accounting software for a
business.
Action Agreeing to obligation to refrain from an act, or to tolerate an act or Services
situation, or to do an act.
Examples:
(i) Cable operator - Sakharam has entered into an agreement with
Cable operator - Aatmaram that Sakharam will not provide cable
connections in the specified areas where Aatmaram is providing the
connections. Non-compete agreements constitute supply of service.
(ii) Late delivery charges recovered from supplier for non-fulfilment
of contract within stipulated time.
(iii) Notice pay recovered from employee for leaving the job before
agreed period of notice for leaving a job.
Right to use goods Transfer of right to use any goods for any purpose. Services
Example: Machinery given on hire.
Composite Supplies Works contract services. Services
Supply by way of or as part of any service or in any other manner Services
whatsoever, of goods, being food or any other article for human
consumption or any drink.

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 Goods & Service Tax
NEGATIVE LIST UNDER GST [Section 7(2) read with Schedule III of CGST Act, 2017]:

I. Activities/transactions specified under Schedule III in the CGST Act:

Activities specified under Schedule III can be termed “Negative list” under the GST regime.
Sl.No. Activities or Transactions which shall be treated neither as a supply of goods
nor a supply of services
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any Court or Tribunal established under any law for the time being in
force.
"Court" includes District Court, High Court and Supreme Court.
3. a) Functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and Members
of other local authorities;
b) Duties performed by any person who holds any post in pursuance of the
provisions of the Constitution in that capacity; or
Examples: Duties performed by President of India, Vice President of India,
Prime Minister of India, Chief Justice of India, Speaker of the Lok Sabha,
Chief Election Commissioner, Comptroller and Auditor General of India, , in
that capacity
c) Duties performed by any person as a Chairperson or a Member or a Director in
a body established by the Central Government or a State Government or local
authority and who is not deemed as an employee before the commencement
of this clause.
4. Services of funeral, burial, crematorium or mortuary including transportation of the
deceased.
5. Sale of land and, subject to paragraph 5(b) of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.
For example: As per Schedule III, the services by an employee to an employer are not
chargeable to GST, and the gifts made by employer to any employee up to INR 50,000 in any
Financial Year shall not be treated as supply, however if more than INR 50,000 it shall be
subject to GST.

II. Activities/transactions notified by the Government:

Such activities or transactions undertaken by the Central Government, a State Government or
any local authority in which they are engaged as public authorities, as may be notified by the
Government shall be treated neither as a supply of goods nor a supply of services.
Till now, following activities/transactions have been notified under saidclause:
1. Services by way of any activity in relation to a function entrusted to a Panchayat under
article 243G of the Constitution or to a Municipality under article 243W of the
Constitution are treated neither as a supply of goods nor as a supply of service.
2. Services by way of grant of alcoholic liquor licence by the State Governments are treated
neither as a supply of goods nor as a supply of service.
This special dispensation is applicable only to supply of service by way of grant of liquor
licenses by the State Governments as an agreement between the Centre and States.
Hence, this is not applicable in relation to grant of other licenses and privileges for a fee
in other situations, where GST is payable.

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Levy of GST on the service of display of name or placing of name plates of the donor in the
premises of charitable organisations receiving donation or gifts from individual donors:
[Circular No. 116/35/2019 GST dated 11.10.2019]

Individual donors provide financial help or any other support in the form of donation or gift to institutions
such as religious institutions, charitable organisations, schools, hospitals, orphanages, old age homes etc.
The recipient institutions place a name plate or similar such acknowledgement in their premises to
express the gratitude. When the name of the donor is displayed in recipient institution premises, in such a
manner, which can be said to be an expression of gratitude and public recognition of donor’s act of
philanthropy and is not aimed at giving publicity to the donor in such manner that it would be an
advertising or promotion of his business, then it can be said that there is no supply of service for a
consideration (in the form of donation). There is no obligation (quid pro quo) on part of recipient of the
donation or gift to do anything (supply a service). Therefore, there is no GST liability on such
consideration.

Some examples of cases where there would be no taxable supply are as follows: -
a) “Good wishes from Mr. Rajesh” printed underneath a digital blackboard donated by Mr. Rajesh to
a charitable Yoga institution.
b) “Donated by Smt. Malati Devi in the memory of her father” written on the door or floor of a room
or any part of a temple complex which was constructed from such donation.

In each of these examples, it may be noticed that there is no reference or mention of any business activity
of the donor which otherwise would have got advertised. Thus, where all the three conditions are satisfied
namely the gift or donation is made to a charitable organization, the payment has the character of gift or
donation and the purpose is philanthropic (i.e., it leads to no commercial gain) and not advertisement,
GST is not leviable.

Art works sent by artists to galleries for exhibition is not a supply as no consideration flows
from the gallery to the artists: [Circular No. 22/22/2017 GST dated 21.12.2017]

Artists give their work of art to galleries where it is exhibited for supply. However, no consideration
flows from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore,
the same is not a supply.

It is only when a buyer selects a particular art work displayed at the gallery, that the actual supply takes
place and applicable GST would be payable at the time of such supply

Note: Any transaction involving supply of goods and/or services without consideration is not a supply
unless it is deemed to be a supply under Schedule I

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 Goods & Service Tax
TAXABILITY OF COMPOSITE AND MIXED SUPPLIES [Section 8]:

Often goods or services or both together are supplied in combination for a single price and that’s when it
may not be simple enough to distinguish supplies and identify them separately, as each of them may
attract a different rate of tax but is sold as one package for a single price.

COMPOSITE SUPPLY:

Section 2(30) of CGST Act, 2017 defines “Composite supply” as a supply made by a taxable person to a
recipient consisting of two or more taxable supplies of goods or services or both, or any 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.
Principal supply means the supply of goods or services which constitutes the predominant element of a
composite supply and to which any other supply forming part of that composite supply is ancillary
[Section 2(90)].
Example: Charger supplied along with mobile phones.

The features of a Composite supply are:

➢ Consist of two or more supplies
➢ Naturally bundled
➢ In conjunction with each other
➢ One of which is principal supply
➢ A single price is charged for the supply
➢ Tax liability shall be rate of principal supply

Examples:
1) When a consumer buys a television set and he also gets mandatory warranty and a maintenance
contract with the TV, this supply is acomposite supply.
In this case, supply of TV is the principal supply,warranty and maintenance services are ancillary.
2) Mahesh Manufacturers entered into a contract with Cheeku Ltd. for supply of readymade shirts
packed in designer boxes at Cheeku Ltd.’s outlet. Further, Mahesh Manufacturers would also get
them insured during transit.
In this case, supply of goods, packing materials, transport & insurance is a composite supply
wherein supply of goods is principal supply.
3) A travel ticket from Mumbai to Delhi may include service of food being served on board, free
insurance, and the use of airport lounge.
In this case, the transportation of passenger, constitutes the pre-dominant element of the composite
supply, and is treated as the principal supply and all other supplies are ancillary.

Taxability: The entire value of composite supply will be charged at the rate which is applicable to the
principal supply. [Section 8]

Illustration: Rati Computers supplies laptop (worth Rs.52,000) alongwith laptop bag (worth Rs.3,000) to
a customer for Rs.55,000. Being naturally bundled, supply of laptop bag along with the laptop is

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 Goods & Service Tax
composite supply which is treated as the supply of the principal supply [viz. laptop]. Assuming that the
rate of tax applicable on laptop is 18% and on laptop bag is 28%, in the given case, rate of principal
supply, i.e. laptop @ 18% will be charged on the entire value of Rs.55,000.

Works contract and restaurant services are classic examples of composite supplies. However, the GST
law identifies both as supply of services and such services are chargeable to specific rate of tax mentioned
against such services (works contract and restaurants).

MIXED SUPPLY:

Under Section 2(74) of CGST Act, 2017, “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.
Example: A gift pack comprising of chocolates and sweets.

The features of a mixed supply are:

➢ Consist of two or more supply
➢ Not naturally bundled
➢ A single price is charged for the supply
➢ None of the supplies within the package is identifiable as a principal supply
➢ Tax liability shall be the rate applicable to the supply that attracts highest rate of tax

Examples:
1) One buys a consolidated package of beauty products (that is shampoo, comb, conditioner, nail
polish, lipstick and tooth powder).
2) A shopkeeper selling storage water bottles along with refrigerator. Bottles and the refrigerator can
easily be priced and sold independently and are not naturally bundled. So, such supplies are mixed
supplies.
3) A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated
drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be
supplied separately.
It is evident here that the products can all be independently supplied and any one of them cannot be
singled out as a principal supply and these are deliberately bundled and sold together.

Taxability: The entire value of mixed supply will be charged at the rate applicable to the supply that
attracts the highest rate of tax from within the consolidated package. [Section 8]

Illustration: Srinath Enterprises supplies 10,000 kits (at Rs.50 each) amounting to Rs.5,00,000 to Raghav
General Store. Each kit consists of 1 shampoo, 1 face wash and 1 kajal pencil. It is a mixed supply and is
treated as supply of that particular supply which attracts highest tax rate. Assuming that the rate of tax
applicable on shampoo is 18%, on face wash is 28% and on kajal pencil is 12%, in the given case, highest
tax rate [viz. face wash] @ 28% will be charged on the entire value of Rs.5,00,000.

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 Goods & Service Tax
Summary:
Section 7 Meaning and Scope of supply
Schedule I Activities to be treated as supply even if made without consideration
Schedule II Activities or transactions to be treated as supply of goods or as supply of
services
Schedule III Activities or transactions which shall be treated neither as supply of goods
nor as supply of services.
Section 8 Taxability of Composite and Mixed supplies

PROBLEMS:

1) From the following activities or transactions identify whether it is supply under GST, if yes
specify the section under which it is regarded as transfer:
Activities or Transactions Supply Section
A shopkeeper sells a pen for Rs.100 to the buyer.
Nikhil sells his pen to Mohan for Rs.50
When a new car worth Rs.5,00,000 is sold in exchange of an old car
alongwith the monetary consideration of Rs.4,00,000 paid for the
said purchase.
A doctor got his hair cut from a barber and provides him medical
consultancy in return.
Rishabh buys a car for his personal use and after a year sells it to a
car dealer for Rs.4,00,000.
Tata Motors sold Tata Punch car to Pratheek for Rs,7,50,000
Manasa sold her old gold bangles and earrings to ‘Bhushan
Jewellers’ for Rs.2,00,000.
KLM Jewellers sold gold to Bhargavi for Rs.1,00,000
Samples which are supplied free of cost, to customers (ITC availed)
Vinod gives old laptops being used in his business to his customer
free of cost. Input tax credit has been availed by Vinod on such
laptops.
A dealer of air-conditioners permanently transfers the motor vehicle
free of cost. ITC on said motor vehicle is blocked.
A company transfers goods from its factory to the depot within the
same state for sale purposes. (Not separately registered)
Raghubir Fabrics transfers 1000 shirts from his factory located in
Lucknow to his retail showroom in Delhi so that the same can be
sold from there. (Separately registered in the respective state)
Chirag, a proprietor registered in Delhi, has sought architect
services from his son located in US, with respect to his newly
constructed house in Delhi without consideration.
In the above case if the consideration for service is Rs.10,00,000
Vijay has received legal services from his friend from USA for his
personal purpose for $10,000 as consideration
Vijay has received legal services from his friend from USA for his
personal purpose without any consideration

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 Goods & Service Tax
Vijay has received legal services from his Son from USA for his
business purpose for $10,000 as consideration
Vijay has received legal services from his Son from USA for his
business purpose without any consideration
Vijay has received legal services from his Son from USA for his
personal purpose without any consideration

2) Examine whether the following activities would amount to supply under section 7 read with
Schedule I of the CGST Act:
a) Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai. Both these
establishments are registered in respective States. Finished goods are sent from factory in
Delhi to the Mumbai depot without consideration so that the same can be sold.
b) Raman is an architect in Chennai. His brother who is settled in London is a well-known
lawyer. Raman has taken legal advice from him free of cost with regard to his family
dispute.
c) Would your answer be different if in the above case, Raman has taken advice in respect of
his business unit in Chennai?

3) State whether the following supplies would be treated as supply of goods or supply of services as
per Schedule II of the CGST Act:
a) Renting of immovable property
b) Goods forming part of business assets are transferred or disposed of by/under directions of
person carrying on the business, whether or not for consideration.
c) Transfer of right in goods without transfer of title in goods.
d) Transfer of title in goods under an agreement which stipulates that property shall pass at a
future date.

4) Supply of all goods and/or services is taxable under GST. Discuss the validity of the statement.

5) Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of
services? Give reason.

6) Determine whether the following supplies amount to composite supplies:

a) A hotel provides 4 days-3 night’s package wherein the facility of breakfast and dinner is
provided along with the room accommodation.
b) A toothpaste company has offered the scheme of free soap along with the toothpaste.

“There is no Elevator to success. You have to take the stairs”

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 Goods & Service Tax
CHAPTER-3

CHARGE OF GST(LEVY)
GST is a consumption based tax levied on the basis of the “Destination principle.” It is an inclusive tax
regime covering both goods and services, to be collected on value-added at each stage of the supply
chain.

GST also does away with the cascading effects of taxation, by providing a comprehensive and continuous
chain of tax credits, end to end and taxing only the value-added at every stage. The final tax is borne by
the end consumer, as all the parties in the interim can claim credit of the tax already paid by them (Input
Tax Credit).

GST MODEL:

India has adopted a dual GST model, i.e., where the tax is imposed concurrently by the Centre and the
States. For an intra-state sale, the GST is equally divided between the Centre and the State (CGST +
SGST), and for inter-state sales, the GST is collected by the Centre (IGST).

GST, therefore is a destination-based tax applicable on all transactions, involving supply of goods /
services for a consideration, and comprises of Central Goods & Services Tax (CGST), levied by the
Central Government, and State Goods and Services Tax (SGST), levied by the State Government OR
Union Territory Goods and Services Tax (UTGST) levied by Union Territories, on Intra-state supplies of
taxable goods & services. Inter-state supplies of taxable goods / services are subject to Integrated Goods
& Services Tax (IGST), which is levied by the Central Government and is equal to CGST + SGST.

The CGST is levied under the CGST Act, 2017. UTGST is levied under the UTGST Act, 2017 and this is
applicable to Union Territories, i.e., Andaman & Nicobar Islands, Lakshadweep, Dadra & Nagar Haveli,
Daman & Diu, Chandigarh and other territory. SGST is levied under the respective state legislations.

Supply

Intra-State Inter-State
Supply Supply

Location of the supplier Location of the supplier and the place

and the place of supply of
goods or services are in the
same State/Union territory
of supply of goods or services are in
(i) two different States or
(ii) two different Union Territories or
(iii) a State and a Union territory

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 Goods & Service Tax
RELEVANT DEFINITIONS:

1) E-Commerce operator: E-Commerce operator means any person who owns, operates or
manages digital or electronic facility or platform for electronic commerce. [Section 2(45) of
CGST Act]

2) Exempt supply: Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of
the Integrated Goods and Services Tax Act, and includes non-taxable supply [Section 2(47) of
CGST Act].

3) Aggregate turnover: Aggregate turnover means the aggregate value of all taxable supplies
(excluding the value of inward supplies on which tax is payable by a person on reverse charge
basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons
having the same Permanent Account be computed on all India basis but excludes central tax,
State tax, Union territory tax, Integrated tax and cess [Section 2(6) of CGST Act].

4) Reverse charge: Reverse charge means the liability to pay tax by the recipient of supply of
goods or services or both instead of the supplier of such goods or services or both under section
9(3)/9(4), or under section 5(3)/5(4) of the IGST Act [Section 2(98) of CGST Act].

5) Taxable supply: Taxable supply means a supply of goods and/or services which is chargeable
to tax under CGST Act. [Section 2(108) of CGST Act]

6) Non-taxable supply: Non-taxable supply means a supply of goods or services or both which is
not leviable to tax under CGST Act or under IGST Act. [Section 2(78) of CGST Act]

7) Taxable person: Taxable person means a person who is registered or liable to be registered
under section 22 or section 24. [Section 2(107) of CGST Act]
It is important to note that even an unregistered person who is liable to be registered is a taxable
person. Similarly, a person not liable to be registered, but has taken voluntary registration and got
himself registered is also a taxable person.

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 Goods & Service Tax
EXTENT & COMMENCEMENT OF CGST ACT/ SGST ACT/ UTGST ACT:

I. Central Goods and Services Tax Act, 2017

➢ Applicable to the whole of India [Section 1 of the CGST Act]
➢ India: “India” means-
a) territory of India as referred to in article 1 of the Constitution
b) Its territorial waters, seabed and sub-soil underlying such waters, continental shelf,
exclusive economic zone or any other maritime zone as referred to in the Territorial
Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones
Act, 1976
c) the air space above its territory and territorial waters
[Section 2(56) of CGST Act]

Territorial Exclusive Economic Zone

Waters (TWI) (upto 200 NM from High Sea
(upto 12 NM baseline)
from
baseline) Contigu
ous
Baselin Zone
e

Continental Shelf
(upto 200 NM from
TWI)
II. State GST law
Applicable to the respective State/Union Territory with State Legislature [Delhi, Puducherry
and Jammu & Kashmir (w.e.f. 31.10.2019)]

III. Union Territory Goods and Services Tax Act, 2017

Extends to the Union territories of the Andaman and Nicobar Islands, Lakshadweep, Dadra &
Nagar Haveli and Daman and Diu, Chandigarh, Ladakh (w.e.f. 31.10.2019) and other
territory, i.e. the Union Territories without State Legislature [Section 1 of the UTGST Act].

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 Goods & Service Tax
Levy & Collection of CGST [Section 9 of the CGST Act]:

Section Particulars
9
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central
goods and services tax on all intra-State supplies of goods or services or both, except on the
supply of alcoholic liquor for human consumption, on the value determined u/s 15 and at
such rates, not exceeding 20%, as may be notified by the Government on the
recommendations of the Council and collected in such manner as may be prescribed and
shall be paid by the taxable person.
(2) The CGST on the supply of petroleum crude, high speed diesel, motor spirit (commonly
known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such
date as may be notified by the Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council, by notification, specify
categories of supply of goods or services or both, the tax on which shall be paid on
reverse charge basis by the recipient of such goods or services or both and all the provisions
of this Act shall apply to such recipient as if he is the person liable for paying the tax in
relation to the supply of such goods or services or both.
(4) The Government may, on the recommendations of the Council, by notification, specify a
class of registered persons who shall, in respect of supply of specified categories of goods
or services or both received from an unregistered supplier, pay the tax on reverse charge
basis as the recipient of such supply of goods or services or both, and all the provisions of
this Act shall apply to such recipient as if he is the person liable for paying the tax in
relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council, by notification, specify
categories of services the tax on intra-state supplies of which shall be paid by the Electronic
Commerce Operator if such services are supplied through it, and all the provisions of this
Act shall apply to such electronic commerce operator as if he is the supplier liable for
paying the tax in relation to the supply of such services.
Provided that where an electronic commerce operator does not have a physical presence in
the taxable territory, any person representing such electronic commerce operator for any
purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical
presence in the taxable territory and also he does not have a representative in the said
territory, such electronic commerce operator shall appoint a person in the taxable territory
for the purpose of paying tax and such person shall be liable to pay tax.
Note: The provisions contained in Section 9 of CGST Act shall mutatis mutandis apply to IGST act u/s 5.

Outside the scope of GST:

Alcoholic Liquor for human consumption is kept outside the ambit of GST [Section 9(1)].

However, CGST on supply of the following items has not been levied immediately. It shall be levied
with effect from such date as may be notified by the Government on the recommendations of the Council
[Section 9(2)]:
➢ Petroleum crude
➢ High speed Diesel
➢ Motor spirit (commonly known as petrol)

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 Goods & Service Tax
➢ Aviation Turbine Fuel &
➢ Natural gas

Therefore, Central Excise Duty continues to be levied on manufacture of Tobacco, Petroleum Crude,
High Speed Diesel, Petrol, Natural Gas and Aviation Turbine Fuel.
State Excise Duty continues to be levied on manufacture of alcohol. Tobacco attracts both Excise and
GST.

LEVY & COLLECTION OF TAX:

GST is levied at the point of supply, that is at the time and place of supply and that’s when the liability to
charge GST arises.

As explained under Section 15 to Central Goods & Services tax Act, 2017, such GST would be levied on
the transaction value.
GST Liability = Value of Supply (transaction value) x GST Rate

Rates (Goods):

Rates are broadly 0.25%, 3%, 5%, 12%, 18% and 28% and that is split into CGST and SGST equally for
Intra- state sales and fully leviable as IGST for Inter-state sale.

Rates (Services):

Rates are broadly 1.5%, 5%, 12%, 18% and 28% and that is split into CGST and SGST equally for Intra-
state supply of service and fully leviable as IGST for Inter-state supply of service.

Maximum rate of CGST or SGST or UTGST will be 20%. Whereas maximum rate of IGST shall
be 40%.

REVERSE CHARGE MECHANISM:

The liability to pay GST would depend on the mechanism the transaction aligns to, as under:
a) Forward Charge Mechanism:
Here the supplier is registered with GST, he issues a tax invoice, collects the GST and pays it to
the Government.
b) Reverse Charge Mechanism:
➢ Reverse charge means Tax payable by recipient of supply of goods or services or both.
➢ CGST shall be paid by the recipient of goods or services or both, on reverse charge basis, in
the following cases:
a) Supply of goods or services or both, notified by the Government on the
recommendations of the GST Council- Covered by Section 9(3).
b) Supply of taxable goods or services or both by an unregistered supplier to a registered
person - covered u/s 9(4)

All the provisions of the CGST Act shall apply to the recipient in the aforesaid cases as if he is the person
liable for paying the tax in relation to the supply of such goods or services or both.

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 Goods & Service Tax
It must be noted although, that Input Tax Credit can be availed in both the above scenarios, subject to the
fulfillment of conditions for availing Input Tax Credit.

Goods and services notified under Reverse charge mechanism are as follows:
i. Supplies of goods taxable under reverse charge [Section 9(3)]:
Goods like cashewnuts [not shelled/peeled], bidi wrapper leaves, tobacco leaves, supply of
lottery, silk yarn, used vehicles, seized and confiscated goods, old and used goods, waste and
scrap, raw cotton etc. are taxable under reverse charge.

ii. List of services taxable under reverse charge, i.e. the services where tax is payable by the
recipient [Section 9(3)]:
Notification No. 13/2017 CT (R) dated 28.06.2017 has notified the following categories of supply
of services wherein whole of the CGST shall be paid on reverse charge basis by the recipient of
services:
SL Category of supply of service Supplier of Recipient of Service
No. service
1 Supply of services by a Goods Transport Goods Transport a) Any factory registered
Agency (GTA) in respect of- Agency (GTA) under or governed by the
Transportation of goods by road to- who has not paid Factories Act, 1948; or
a) Any factory registered under or CGST @ 6% (GST b) Any society registered
governed by the Factories Act, @ 12%) under the Societies
1948; or Registration Act, 1860 or
b) Any society registered under the under any other law for the
Societies Registration Act, 1860 or time being in force in any
under any other law for the time part of India; or
being in force in any part of India; c) Any co-operative society
or established by or under any
c) Any co-operative society law; or
established by or under any law; or d) Any person registered
d) Any person registered under the under the CGST Act or the
CGST Act or the IGST Act or the IGST Act or the SGST Act
SGST Act or the UTGST Act; or or the UTGST Act; or
e) Any Body corporate established, by e) Any Body corporate
or under any law; or established, by or under any
f) Any partnership firm whether law; or
registered or not under any law f) Any partnership firm
including association of persons; or whether registered or not
g) Any casual taxable person. under any law including
association of persons;
g) Any casual taxable person;
Located in the taxable territory.
[referred as Specified
recipients]
However, reverse charge mechanism (RCM) shall not apply to services provided by a GTA, by
way of transport of goods in a goods carriage by road to-
a) a Department/establishment of the Central Government/ State Government/ Union
territory; or
b) Local authority; or

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 Goods & Service Tax
c) Governmental agencies,
which has taken registration under the CGST Act only for the purpose of deducting tax under
section 51 and not for making a taxable supply of goods or services.
2 Services supplied by an individual An individual Any business entity located in
advocate including a senior advocate or advocate including the taxable territory.
firm of advocates by way of legal a senior advocate
services directly or indirectly. or firm of
advocates
Note: Legal services means any service
provided in relation to advice,
consultancy or assistance in any branch
of law, and also includes representational
services before any court, tribunal or
authority.
3 Services supplied by an arbitral tribunal An arbitral Any Business entity located in
to a business entity. tribunal. the taxable territory.
4 Services provided by way of sponsorship Any person Any Body corporate or
to any Body corporate or partnership partnership firm located in the
firm. taxable territory.
5 Services supplied by the Central Central Any Business entity located in
Government, State Government, Union Government, State the taxable territory.
territory or local authority to a business Government,
entity excluding, - Union territory or
a) Renting of immovable property, and local authority
b) Services specified below-
➢ Services by the Department of
Posts by way of speed post,
express parcel post, life
insurance, and agency services
provided to a person other than
Central Government, State
Government or Union territory
or local authority;
➢ Services in relation to an
aircraft or a vessel, inside or
outside the precincts of a port
or an airport;
➢ Transport of goods or
passengers

5A. Services supplied by the Central Central Any person registered under the
Government, State Government, Union Government, State CGST Act, 2017
territory or local authority by way of Government,
renting of immovable property to a Union territory or
person registered under CGST Act, 2017 local authority
5B. Services supplied by any person by way Any person Promoter
of transfer of development rights or Floor
Space Index (FSI) (including additional
FSI) for construction of a project by a
promoter

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 Goods & Service Tax
5C. Long term lease of land (30 years or Any person Promoter
more) by any person against
consideration in the form of upfront
amount (called as premium, salami, cost,
price, development charges or by any
other name) and/or periodic rent for
construction of a project by a promoter.
6 Services supplied by a director of a A director of a The Company or a Body
company/Body corporate to the said company or a corporate located in the taxable
company/body corporate. Body corporate territory
7 Services supplied by an insurance agent An insurance agent Any person carrying on
to any person carrying on insurance insurance business, located in
business. the taxable territory.
8 Services supplied by a recovery agent to a A recovery agent A Banking company or a
banking company or a financial Financial institution or a Non-
institution or a non- banking financial banking financial company,
company. located in the taxable territory.
9 Supply of services by an music composer, Music composer, Music company, Producer or
photographer, artist or the like by way of photographer, the like, located in the taxable
transfer or permitting the use or artist, or the like territory.
enjoyment of a copyright covered under
section 13(1)(a) of the Copyright Act,
1957 relating to original literary,
dramatic, musical or artistic works to a
publisher, music company, producer or
the like.
9A Supply of services by an author by way Author Publisher located in the taxable
of transfer or permitting the use or territory.
enjoyment of a copyright covered under
section 13(1)(a) of the Copyright Act,
1957 relating to original literary works to
a publisher.
However, an author can choose to pay tax under forward charge if-
a) he has taken registration under the CGST Act and filed a declaration, in the prescribed
form, that he exercises the option to pay CGST on the said service under forward charge in
accordance with section 9(1) of the CGST Act and to comply with all the provisions as
they apply to a person liable for paying the tax in relation to the supply of any goods and/or
services and that he shall not withdraw the said option within a period of 1 year from the
date of exercising such option;
b) he makes a declaration on the invoice issued by him in prescribed form to the publisher.
10 Supply of Services by the members of Members of RBI
overseeing committee to RBI Overseeing
Committee
11 Supply of services by Individual Direct Individual Direct Bank or NBFC, located in the
Selling Agent (DSAs) other than a body Selling Agent taxable territory.
corporate, partnership or LLP to bank or (DSAs) other than
NBFC a body corporate,
partnership or LLP
firm

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 Goods & Service Tax
12 Services provided by Business facilitator Business facilitator A banking company, located in
to a banking company the taxable territory
13 Services provided by an agent of business An agent of A business correspondent,
correspondent to business correspondent. business located in the taxable territory.
correspondent
14 Security services (services provided by Any person other A registered person, located in
way of supply of security personnel) than a body the taxable territory.
provided to a registered person. corporate

However, nothing contained in this entry shall apply to:

A)
i. A Department or Establishment of the Central Government or State Government or
Union territory; or
ii. Local authority; or
iii. Governmental agencies;
which has taken registration under the CGST Act, 2017 only for the purpose of deducting tax
u/s 51 of the said Act and not for making a taxable supply of goods or services; or
B) a registered person paying tax under composition scheme.
15 Services provided by way of renting of a Any person other Any body corporate located in
motor vehicle provided to a body than a body the taxable territory
corporate corporate, who is
paying CGST @
2.5% on renting of
motor vehicles
with input tax
credit only of input
service in the same
line of business
16 Services of lending of securities under Lender i.e., a Borrower i.e., a person who
Securities Lending Scheme, 1997 person who borrows the securities under the
(“Scheme”) of Securities and Exchange deposits the Scheme through an approved
Board of India, as amended securities intermediary of SEBI
registered in his
name or in the
name of any other
person duly
authorised on his
behalf with an
approved
intermediary for
the purpose of
lending under the
Scheme of SEBI
All the above services have also been notified for reverse charge under IGST Act. In addition to them,
two additional services are also notified for reverse charge under IGST law. These services will be
discussed at the Final level.

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 Goods & Service Tax
Body Corporate: Body Corporate has the same meaning as assigned to it in the Companies Act, 2013.

As per section 2(11) of the Companies Act, 2013, body corporate or corporation includes a company
incorporated outside India.

Person liable to pay GST on GTA Services:

GTA services are taxable at the following two rates:

➢ @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided GTA has not taken the Input Tax
Credit (ITC) on goods and services used in supplying GTA service or
➢ @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where GTA opts to pay GST at said rate on
all the services of GTA supplied by it. In this case, there is no restriction on availing ITC on goods
and services used in supplying GTA service by GTA.
Person liable to pay tax under GTA
service

Where GST is payable @ 5% Where GST is payable @ 12%

Recipient is one of the Specified Recipient is other Recipient is one of the Specified
Recipients than the Specified Recipients
Recipients

Reverse charge Forward charge

Exempt from GST

Person liable to pay GST is Person liable to pay GST is

such recipient GTA

Recipient of GTA service is the person who pays/is liable to pay freight for transportation of goods by
road in goods carriage, located in the taxable territory.

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 Goods & Service Tax
Clarification regarding Reverse Charge Mechanism (RCM) on renting of motor vehicles
service:
Service by way of renting of any motor vehicle designed to carry passengers where the cost of fuel is
included in the consideration charged from the service recipient are taxable at the following two rates:
a) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier of services has taken
only the limited ITC (of input services in the same line of business) or
b) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of services opts to pay GST
at said rate. In this case, there is no restriction on availing ITC.
In case of each of the above two rates, the person liable to pay tax will be as follows:

Supply of taxable goods or services or both by an unregistered supplier to a registered

person - covered u/s 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.

If value of inputs and input services purchased from registered supplier is less than 80%, promoter has to
pay GST on reverse charge basis, under section 9(4) of the CGST Act, at the rate of 18% on all such
inward supplies (to the extent short of 80% of the inward supplies from registered supplier).

Further, where cement is received from an unregistered person, the promoter shall pay tax on supply of
such cement on reverse charge basis, under section 9(4) of the CGST Act.

Moreover, GST on capital goods shall be paid by the promoter on reverse charge basis, under section 9(4)
of the CGST Act at the applicable rates.

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 Goods & Service Tax
Taxability of Electronic Commerce Operator [ECO] on notified services [Section 9(5)]:

ECO displays products/services consumers buy The actual supplier

actually supplied by other person such goods/
services through
to the consumer on their electronic these portals by
portal
placing the orders
supplies the selected
product/ service to
the consumer.

Deducts the The price/

commission from the consideration for the
amount collected and product/ service is
passes on the remaining collected by the ECO
to the actual supplier from the consumer

➢ The Government may notify specific categories of services the tax on intra-State supplies of which
shall be paid by the electronic commerce operator (ECO) if such services are supplied through it.
Such services shall be notified on the recommendations of the GST Council.
➢ Notification No. 17/2017 CT (R) dated 28.06.2017 has notified the following categories of services
supplied through ECO for this purpose –
a) Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and
motor cycle; Example: OLA, Uber.
b) Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites
or other commercial places meant for residential or lodging purposes, except where the
person supplying such service through electronic commerce operator is liable for registration
under section 22(1) of the CGST Act. Example: Oyo, Make my trip.
c) Services by way of house-keeping such as plumbing, carpentering etc., except where the
person supplying such service through electronic commerce operator is liable for registration
under section 22(1) of the CGST Act. Example: Urbanclap.
➢ All the provisions of the CGST Act shall apply to such ECO as if he is the supplier liable for paying
the tax in relation to the supply of above services.

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 Goods & Service Tax
COMPOSITION SCHEME [Section 10]:

Section 10 of the CGST Act, 2017 contains the provisions regarding composition levy. The objective of
the scheme is to bring about simplicity and to reduce compliance cost for the small suppliers. Small
suppliers, who have an aggregate turnover of upto Rs.1.5 crore in the preceding Financial Year are
eligible to opt for Composition scheme. It is a voluntary and optional scheme.

For the states namely (i) Arunachal Pradesh (ii) Manipur, (iii) Meghalaya, (iv) Mizoram, (v) Nagaland,
(vi) Sikkim, (vii) Tripura, (viii) Uttarakhand aggregate turnover limit shall be Rs.75 lakh.

i. Arunachal Pradesh
ii. Uttarakhand
iii. Manipur Assam
iv. Meghalaya Rs.75 lakhs Himachal Pradesh Rs.1.5 Crore
v. Mizoram Jammu and Kashmir
vi. Nagaland All other States
vii. Sikkim
viii. Tripura

Aggregate turnover [Section 2(6) of CGST Act]:

Aggregate turnover means the aggregate value of all-
➢ Taxable supplies (excluding the value of inward supplies on which tax is payable by a person on
reverse charge basis),
➢ Exempt supplies,
➢ Exports of goods or services or both (Zero-rated supplies) and
➢ Inter-State supplies of persons having the same Permanent Account, to be computed on all India
basis
but excludes Central tax, State tax, Union territory tax, Integrated tax and Cess.

Aggregate turnover = Taxable outward supplies + Exempt supplies + Exports + Inter-State supplies
of persons having same PAN, computed on all India basis excluding GST and Cess.

Composition Rates [Section 10(1)]:

The tax rate for different categories of registered persons under the composition scheme is as follows:
Sl. REGISTERED PERSON CGST SGST TOTAL TAX RATE
NO. RATE RATE
1. Manufacturers (other than manufacturers of goods as 0.5% 0.5% 1% of the turnover in the
may be notified by the Government i.e. ice cream, pan State/Union territory
masala, aerated water, tabacco etc)
2. Restaurant Services i.e., suppliers of food/ drink for 2.5% 2.5% 5% of the turnover in the
human consumption (other than alcoholic liquour for State/Union territory
human consumption)
3. Traders or any other supplier eligible for composition 0.5% 0.5% 1% of the turnover of
levy taxable supplies of goods
and services in the State
or Union territory

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 Goods & Service Tax
Turnover in case of traders has been defined as ‘Turnover of taxable supplies of goods’. Thus, for traders,
exempted supplies would not be added in the turnover for the purpose of levy of 1% Composition levy.

Notes:
1) Students may note that while ‘aggregate turnover’ of preceding FY is relevant for the purpose of
determining eligibility to avail composition scheme, the tax has to be paid at applicable rates on
the ‘turnover’ (or ‘turnover of taxable supplies’, as the case may be) in a current tax period.
2) Tax is payable even on exempted supply except trader in goods.
3) There are cases where a manufacturer/trader is also engaged in supply of services other than
restaurant service though the percentage of such supply of services is very small as compared to
the supplies of goods. There may also be cases where a restaurant service provider is also engaged
in supplying a small percentage of others services.
In order to enable such tax payers avail the benefit of composition scheme, the following proviso
has been inserted:
The proviso permits a registered person opting for composition scheme to supply services of a
specified value not exceeding:
a) 10% of the turnover in a State/Union territory in the preceding financial year
or
b) Rs.5 Lakh,
Whichever is higher

Example: Rama is engaged in manufacture of goods. His aggregate turnover in preceding FY is Rs.60
lakh. Since his aggregate turnover in the preceding FY does not exceed Rs.1.5 crore, he is eligible for
composition scheme in current FY. Further, in current FY, he can supply services [other than restaurant
services] upto a value of not exceeding:
a) 10% of Rs.60 lakh, i.e. Rs.6 lakh or
b) Rs.5 lakh,
whichever is higher.
Thus, he can supply services upto a value of Rs.6 lakh in current FY. If the value of services supplied
exceeds Rs.6 lakh, he becomes ineligible for the composition scheme u/s 10(1) and has to opt out of the
composition scheme.

The following persons cannot opt for the composition scheme u/s 10(1): [Section 10(2)]
a) A person engaged in the supply of services other than the supply of restaurant service; [Exception
if it is a marginal service]
b) A person engaged in supply of goods or services which are not leviable to tax under this act;
c) A person engaged in making Inter-state outward supplies of goods or services;
d) A person engaged in making supply of goods or services through electronic commerce operator
who is required to collect tax source.
e) A person who is engaged in the manufacture of ice-cream, pan masala, tobacco products and
aerated water, Fly ash bricks or fly ash aggregate with 90% or more fly ash content; Fly ash
blocks, Bricks of fossil meals or similar siliceous earths, Building bricks, and Earthen or roofing
tiles.
f) Casual taxable person and a Non-resident taxable person

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 Goods & Service Tax
Illustration:
Mr. A, a retailer, presents the following information for the year -
Purchases of goods: Rs. 30,00,000, out of which goods worth Rs. 2,00,000 purchased from unregistered
dealer. Sale of Goods: Rs. 49,00,000. He has opted the composition scheme. Show the treatment in GST,
assuming that rate under GST are 0.5% CGST and 0.5% (composition scheme) and 9% CGST and 9%
SGST (Regular scheme).

Solution:
Tax payable under Composition Scheme:

CGST payable = 49, 00,000 x 0.5% = 24,500

SGST payable = 49, 00,000 x 0.5% = 24,500

Tax payable under reverse charge:

No tax is payable under revere charge as Mr. A is not a notified person under section 9(4) CGST Act,
2017.

New scheme of composition for Service suppliers or Mixed Suppliers (New Composition
Scheme) [Section 10(2A)]:

As we have already seen that primarily, the composition scheme is available in respect of goods and only
one service namely, restaurant service. However, a person engaged exclusively in supply of services other
than restaurant service is not eligible for the composition scheme.
In order to provide benefit to such suppliers, a scheme to pay tax at the concessional rate has been
formulated primarily for small service providers like salon stylist, tailors etc. who are not otherwise
eligible for composition scheme.

This section provides an option to a registered person whose aggregate turnover in the preceding financial
year is upto Rs.50 Lakhs and who is not eligible to pay tax under composition scheme u/s 10(1) and
10(2), may opt to pay tax @ 6%[CGST 3%+ SGST 3%] on the supplies of goods or services or both upto
an aggregate turnover of Rs.50 Lakhs made during the current financial year subject to specified
conditions which are primarily same as the conditions for availing the composition scheme u/s 10(1) and
10(2).

Who are the persons not eligible for composition scheme u/s 10(1) and 10(2), but eligible for New
composition scheme u/s 10(2A)?
➢ who is exclusively engaged in supplying services other than restaurant services, or
➢ who is engaged in supply of services [other than restaurant services] alongwith supply of goods
and/ or restaurant services of value exceeding Rs.5 lakh in current FY.

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 Goods & Service Tax
New composition scheme u/s 10(2A) is available for the suppliers who is [Section 10(2A)]:
➢ not engaged in making any supply of goods or services which is not leviable to tax under the said
Act.
➢ not engaged in making any Inter-State outward supply of goods or services.
➢ not engaged in making any supply of goods or services through an electronic commerce operator
who is required to collect tax at source under section 52.
➢ not engaged in the manufacture of notified goods, namely, ice cream and other edible ice, whether
or not containing cocoa, Pan masala, tobacco products, aerated waters, Fly ash bricks or fly ash
aggregate with 90% or more fly ash content; Fly ash blocks, Bricks of fossil meals or similar
siliceous earths, Building bricks, and Earthen or roofing tiles.
➢ neither a casual taxable person nor a non-resident taxable person.

Conditions and Restrictions:

Person opting for composition levy(both) has to comply with the following conditions:
1) The option to pay tax under composition scheme lapses from the day on which his aggregate
turnover during the FY exceeds the specified limit (Rs.75 lakh /Rs.1.5 Crore/50lakh).
[Section 10(3)]
2) The registered person shall not collect any tax from the recipient on supplies made by him nor
shall he be entitled to any credit of input tax paid on inward supply. [Section 10(4)]
3) The recipient of such supplies can't claim any Input Tax Credit (ITC) on supplies from such
suppliers who have opted for Composition Levy.
4) The supplier who opts for Composition Levy cannot issue tax invoice. Therefore, they need not
collect any tax on supply. He can issue Bill of supply for the recipient.
5) For the inward supply of goods or services if RCM is applicable, he shall pay the tax under reverse
charge as per normal rate.
6) He was not engaged in the manufacture of Ice cream and other edible ice, whether or not
containing cocoa, Pan masala, Aerated water and Tobacco and manufactured tobacco substitutes.
7) He shall mention the words “Composition taxable person, not eligible to collect tax on supplies” at
the top of the bill of supply issued by him; and
8) He shall mention the words “composition taxable person” on every notice or signboard displayed
at a prominent place at his principal place of business and at every additional place or places of
business.

Notes:
a) Registration under GST law is compulsory for opting for the composition scheme.
b) The composition scheme if opted is applicable under one PAN, and then it is applicable for all
businesses under that PAN, or none. This implies, that it is not allowed for some businesses under
normal levy and some under composition levy. If one such registered person opts for normal
scheme, others become ineligible for composition scheme.

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 Goods & Service Tax
As per explanation 1 to section 10, while computing aggregate turnover in order to determine eligibility
of a registered person to pay tax under any of the composition schemes the value of supply of exempt
services by way of extending deposits, loans or advances in so far as the consideration is represented by
way of interest or discount, shall not be taken into account.

While computing the threshold limit of 1.5 crore/ 75 lakh / 50 lakh, inclusions and exclusions from
‘aggregate turnover’ are as follows:
Includes Excludes
Value of all outward supplies- ➢ CGST/ SGST/ UTGST/ IGST/ Cess
➢ Taxable supplies ➢ Value of inward supplies on which tax is payable
➢ Exempt supplies under reverse charge.
➢ Exports ➢ Value of exempt supply of services provided by
➢ Inter-State supplies way of extending deposits, loans or advances in
of persons having the same PAN be computed on so far as the consideration is represented by way
all India basis. of interest or discount

Further, explanation 2 to section 10 clarifies that for the purposes of determining the tax payable by a
person under this section, the expression turnover in State or turnover in Union territory shall not include
the value of following supplies, namely:
a) Supplies from the first day of April of a FY up to the date when such person becomes liable for
registration under this Act; and
b) Exempt supply of services provided by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount.

While determining the tax payable by a composition person under section 10 for current financial
year, inclusions and exclusions from ‘turnover’ are as follows:
Includes Excludes
Value of all outward supplies- ➢ CGST/ SGST/ UTGST/ IGST/ Cess
➢ Taxable supplies ➢ Value of inward supplies on which tax is payable
➢ Exempt supplies under reverse charge.
➢ Exports ➢ Value of exempt supply of services provided by
➢ Inter-State supplies way of extending deposits, loans or advances in
of persons having the same PAN be computed on so far as the consideration is represented by way
all India basis. of interest or discount and
➢ Supplies from the first day of April of a FY up to
the date when such person becomes liable for
registration under this Act;

Note: The value of exports and inter-State supplies are relevant only while determining the aggregate
turnover of the preceding FY. These values are not relevant for determining the aggregate turnover of the
current FY in which the composition supplier has opted for composition levy as he is not permitted to
make inter-State supplies and exports in the said FY.

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 Goods & Service Tax
Advantages and Disadvantages of Composition Scheme:

• No classification of goods or services are required

• Single GST rate is applicable on all supplies made
• No requirement to raise Tax invoice
Advantages • Payment of tax has to be done quarterly and file payment
statement in GST CMP-08
• Return has to filed annually in GSTR-4 and GSTR-9A

• Composition dealer cannot avail the benefit of ITC paid

on inward supply
Disadvantages • He cannot charge tax to the recipient
• A limited territory of business. The dealer is barred from
carrying out inter-State outward supplies.

Procedure for opting for Composition Levy

➢ Any person who is not registered and applies for registration may give an option to pay tax under
composition levy in Part B of the registration form, viz., FORM GST REG-01. Such intimation
shall be considered only after the grant of registration to the applicant and his option to pay tax
under composition levy shall be effective from the date from which registration is effective as per
Rule 10.
➢ A registered person under normal scheme who want to opt to pay tax under composition levy
scheme shall electronically file an intimation in FORM GST CMP-02 on the Common Portal
[www.gst.gov.in], prior to the commencement of the FY for which said option is exercised. The
option to pay tax under section 10 shall be effective from the beginning of the financial year.
➢ The registered person paying tax under section 10 may not file a fresh intimation every year and
he may continue to pay tax under the said section subject to the provisions of the act and rules.

Validity of Composition levy

➢ The option exercised by a registered person to pay tax under composition levy shall remain valid so
long as he satisfies all the conditions mentioned in the said section and rules.
➢ The option to pay tax under composition scheme lapses from the day on which his aggregate
turnover during the FY exceeds the specified limit (Rs.75 lakh /Rs.1.5 Crore/50lakh).
Example: A person availing composition scheme during a financial year crosses the turnover of
Rs.1.5 crore on 9th of December. The option availed shall lapse from the day on which his
aggregate turnover during the financial year exceeds Rs.1.5 crore, i.e. on 9th December, in this case.
➢ Such person is required to pay normal tax under section 9(1) from the day he ceases to satisfy any of
the conditions prescribed for composition levy. He shall issue tax invoice for every taxable supply

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 Goods & Service Tax
made thereafter and he shall also file an intimation for withdrawal from the scheme in FORM GST
CMP-04 within 7 days of the occurrence of such event.
➢ The registered person who intends to withdraw from the composition scheme shall, before the date
of such withdrawal, file an application in FORM GST CMP-04.
➢ However, such person shall be allowed to avail the input tax credit in respect of the stock of inputs
and inputs contained in semi-finished or finished goods held in stock by him and on capital goods
held by him on the date of withdrawal and furnish a statement in FORM GST ITC- 01, within 30
days of withdrawal of the option or from the date of the order passed in FORM GST CMP-07, as
the case may be, containing the details of such stock held.
➢ Where the proper officer has reasons to believe that the registered person was not eligible to pay tax
under section 10 or has contravened the provisions of the act or provision of this chapter, he may
issue a notice to such person in FORM GST CMP- 05 to show cause within 15 days of the receipt of
such notice as to why option to pay tax under section 10 shall not be denied.
➢ Upon receipt of the reply to the show-cause notice issued from the registered person in FORM GST
CMP-06, the proper officer shall issue an order in FORM GST CMP-07 within a period of 30 days
of the receipt of such reply, either accepting the reply, or denying the option to pay tax under
section 10.

Chapter II of Central Goods & Services Tax Rules, 2017 specify Composition Rules which lay down the
forms to be submitted by a person opting to be a Composition Dealer under Section 10 of the Act.

The following is the list of forms specified in relation to a Composition Dealer-

S. No. Form No. Description Time Limit
1. GST CMP-01 Intimation to pay tax under section 10 Prior to appointed date or within 30
(Only for persons registered under the days of the appointed date or such
existing law migrating to GST on the further period as may be extended
appointed day) by the Commissioner in this behalf.
2. GST CMP-02 Intimation to pay tax under section 10 Prior to commencement of financial
(For persons already registered under the year for which the scheme is opted
GST) for
3. GST CMP-03 Intimation of details of stock and inward Within 90 days of exercise of option
supplies from unregistered person
4. GST CMP-04 Intimation/Application for withdrawal Within 7 days of occurrence of event
from composition scheme
5. GST CMP-05 Show cause notice on contravention of On contravention
rules or act issued by proper officer
6. GST CMP-06 Reply to the notice by the Composition Within 15 days from service of such
dealer to show cause Notice
7. GST CMP-07 Order for acceptance / rejection of reply Within 30 days of receiving reply
to show cause notice

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IGST Act:
Integrated Goods and Services Tax (IGST) is charged during the Inter-State supply of goods or services
or both. IGST Act extends to the whole of India, including Jammu and Kashmir.

Levy and Collection of IGST – Section 5(1) & 5(2) of the IGST Act:

1) IGST shall be levied on Inter-State supplies of goods or services or both on the value as
determined u/s 15 of CGST Act and shall be paid by the taxable person.
2) Integrated tax on goods imported into India shall be levied and collected in accordance with the
provisions of Section 3 of Customs Tariff Act, 1975 on the value as determined u/s 15 at the point
when duties of customs are levied on the said goods u/s 12 of the Customs Act,1962
3) Rates of IGST as notified by the Government are 0%, 0.25%, 3%, 5%, 12%, 18%, 28% subject to
maximum of 40%.

Reverse Charge – Section 5(3) & 5(4) of the IGST Act:

Generally, the supplier of goods or services or both is liable to pay GST to the Government (i.e. forward
charge). However, in certain instances GST shall be paid to the Government by the recipient of goods or
services or both (i.e. reverse charge mechanism).

The supplies covered under Reverse Charge are:

a) Supply of goods or services or both as notified by the Government – Section 5(3): and
b) Supply of taxable goods or services or both by an unregistered person to a registered person –
Section 5(4).

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PROBLEMS:

1) State the person liable to pay GST in the following independent cases provided 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) Renting of immovable property service provided by the Central Government to a registered
business entity.
d) Services supplied by an insurance agent to an Insurance Company.
e) Services supplied by a recovery agent to a car dealer.
f) Security services (services provided by way of supply of security personnel) provided to a
registered person.

2) Vivek Goyal, director of A2Z Pvt. Ltd., has received sitting fee amounting to Rs.1 lakh from A2Z
Pvt. Ltd for attending the Board meetings. Who is the person liable to pay tax in this case?

3) Raghu Associates provided sponsorship services to WE-WIN Cricket Academy, an LLP.

Determine the person liable to pay tax in this case.

4) 'Safe Trans', a Goods Transport Agency, transported goods of Kapil & Co., a partnership firm,
which is not registered under GST. Determine the person liable to pay tax in this case.

5) Legal Fees is received by Sushrut, an advocate, from M/s. Tatva Trading Company having
turnover of Rs.50 lakh in preceding F. Y. Who is the person liable to pay tax in this case?

6) State whether the person is eligible for Composition Scheme:

a) Sanjana, a casual taxable person engaged in the business of trading Toys.
b) Karan Ltd is running its business in 2 branches. Coimbatore branch will supply goods to
southern States and Varanasi branch will supply goods to Northern states of India.
c) DN manufacturers, is engaged in the manufacture of Chocolates and Ice-cream in Karnataka

7) Determine whether the supplier in the following cases are eligible for composition levy provided
their turnover in preceding year does not exceed Rs.1.5 crore:
➢ Mohan Enterprises is engaged in trading of pan masala in Rajasthan and is registered in
the same state
➢ Sugam Manufacturers has registered offices in Punjab and Haryana and supplies goods in
neighboring States.

8) Taxpayer ‘Tolaram’ is a manufacturer having one unit – A1 in UP and another unit – A2 in MP.
Total turnover of two units in last FY was Rs.115 lakh (Rs.85 lakh + Rs.30 lakh). Turnover of
Unit A1 and A2 in the first quarter of this financial year was Rs.5 lakh and Rs.10 lakh
respectively.
Compute the amount payable under composition levy by Taxpayer ‘Tolaram’.

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9) Taxpayer ‘Bholaram’ is a trader (who has opted for composition levy for goods) of both taxable
and exempted goods (goods exempted by way of a notification).
It has one retail showroom – A1 in Punjab and another retail showroom – A2 in Rajasthan, both
selling taxable as well as exempted goods. Total turnover (including taxable and exempted goods)
of the two showrooms in last FY was Rs.115 lakh (Rs.85 lakh + Rs.30 lakh).
Turnover of showrooms A1 and A2 in the first quarter of current financial year is Rs.35 lakh [A1
- Rs.15 lakh (Rs.5 lakh from sale of taxable goods and Rs.10 lakh from sale of exempted goods)
and A2 - Rs.20 lakh (Rs.10 lakh from sale of taxable goods and Rs.10 lakh from sale of exempted
goods)].
Compute the amount payable under composition levy under section 10(1) & 10(2) of the CGST
Act, 2017 by ‘Bholaram’.

10) Taxpayer ‘Padmavati’ is a salon stylist, who has opted for composition levy for services, having
one branch – B1 in Vasant Kunj, Delhi and another branch – B2 in Gurgaon, Haryana. Total
turnover of two branches in last FY was Rs.45 lakh (Rs.25 lakh + Rs.20 lakh). Turnover of
branches B1 and B2 in the first quarter of current financial year is Rs.5 lakh and Rs.10 lakh
respectively.
Compute the amount payable under composition levy under section 10(2A) of the CGST Act,
2017 by ‘Padmavati’.

11) A person availing composition scheme in Haryana during a financial year crosses the turnover of
Rs.1.5 crore during the course of the year i.e. he crosses the turnover of Rs.1.5 crore in
December? Will he be allowed to pay tax under composition scheme for the remainder of the
year, i.e. till 31st March?

12) Subramanian Enterprises has two registered places of business in Delhi. Its aggregate turnover for
the preceding year for both the places of business was Rs.120 lakh. It wishes to pay tax under
composition levy for one of the place of business in the current year while under normal levy for
other.
You are required to advice Subramanian Enterprises whether he can do so?

13) A photographer ‘Champak’ has commenced providing photography services in Delhi from April
this year. His turnover for various quarters till December is as follows:
April-June Rs.20 lakh
July-Sept Rs.30 lakh
Oct-Dec Rs.20 lakh
Check whether the ‘Champak’ is eligible for composition levy and determine tax payable by
‘Champak’.

“It always seems impossible until it’s done”

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CHAPTER-4

EXEMPTIONS UNDER GOODS & SERVICES TAX

[Section 11 of CGST Act, 2017]
Governments offer exemptions which are based on goods and services consumed by low income people,
people living in disadvantaged regions and so on. Central Government has the power to grant exemption
on goods and / or services in the public interest on the recommendations of the Council, generally or by
special order.

General exemption is granted by notification and is available to all persons. It may be absolute or
conditional. Such exemption may be total or partial.
Specific, also known as ad hoc exemption is granted to persons under circumstances of an exceptional
nature by a special order communicated to the party seeking exemption. Exp: charitable, educational,
scientific, research, defence purpose etc.
Central Government also has the power to interpret by an explanation the provisions of the notification or
special order at a later date but within 1 year which has retrospective effect.

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

Distinctions between General Exemption and Specific (Special Order) Exemption:

General Exemption Section 11(1) Exemption By Special Order Section 11(2)

This is granted by a notification
This is goods/ services specific. Any supplier
supplying these notified goods or services can enjoy
the exemption
It may be absolute or conditional. If absolute, the
supplier has to avail it and he can collect tax only at
effective rates.
It may be partial or total
This is granted by a special order
This is person specific and purpose specific. The
goods are generally chargeable but exempted in
special circumstances and hence not available to all
persons generally
No such distinction
It is always total

Both the exemptions are granted in the public interest and both can be explained within 1 year of issue by
the government. All the exemptions are based on the recommendations of the GST Council.
Section 6 of the IGST Act, 2017 also contains similar provisions and exemption of IGST which is granted
on Interstate Supply.

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EXEMPTIONS UNDER GST:

Exempt supply has been defined as supply of any goods / services / both, which attract a NIL rate of tax,
or which may be wholly exempt from tax, and therefore includes non-taxable supplies. [Section 2(47)]

GOODS EXEMPT FROM TAX:

A list of items has been notified under section 11(1) of the CGST Act, 2017/ section 6(1) of the IGST
Act, 2017. These items have been exempted from whole of the tax.

Under GST, everyday items used by the common man have been included in the list of exempted items.
Items such as unbranded atta/ maida/ besan, unpacked food grains, milk, eggs, curd, lassi and fresh
vegetables are among the items exempted from GST.

LIST OF SERVICES EXEMPT FROM TAX:

Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 (hereafter referred to as “the Notification”)
unless otherwise specified, has exempted the various services wholly from CGST.

Exemption from IGST has been granted to various services vide Notification No. 9/2017 Integrated Tax
(Rate) dated 28.06.2017. All the services exempted from CGST have also been exempted from IGST.
Apart from these, there are few additional services which have been exempted only under IGST law. Such
services will be discussed at the Final Level.

Each of the entries of the exemption notification has been discussed below:

Services related to Charitable and Religious activities:

Entry Description of services
No.
1 Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way
of charitable activities. (Note-1, 2, & 3)
13 Services by a person by way of-
a) conduct of any religious ceremony;
b) renting of precincts of a religious place meant for general public, owned or
managed by an entity registered as a charitable or religious trust u/s 12AA or a
trust or an institution registered u/s 10(23C)(v) or a body or an authority covered
u/s 10(23BBA) of the Income-tax Act,1961. (Note-2, 3 & 4)
However, nothing contained in entry (b) of this exemption shall apply to-
➢ Renting of rooms where charges are Rs.1,000 or more per day;
➢ Renting of premises, community halls, kalyanmandapam or open area, and the like
where charges are Rs.10,000 or more per day;
➢ Renting of shops or other spaces for business or commerce where charges are
Rs.10,000 or more per month. (Note- 4)
60 Services by a specified organisation in respect of a religious pilgrimage facilitated by the
Government of India, under bilateral arrangement. (Note-5)
80 Services by way of training or coaching in recreational activities relating to-
a) arts or culture, or
b) Sports
by charitable entities registered under section 12AA of the Income-tax Act. (Note-6)

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Notes:
1. Services provided by entity registered under section 12AA of the Income-tax Act, 1961 by way of
advancement of religion, spirituality or yoga are exempt as such activities are covered in definition
of charitable activities.
2. Activities of schools, colleges or any other educational institutions run by charitable trusts by way
of education or skill development of abandoned, orphans, homeless children, physically or
mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural
area, will be considered as charitable activities and income from such supplies will be wholly
exempt from GST.
3. Hostel accommodation services provided by trusts to students do not fall within the ambit of
charitable activities as defined above.
However, accommodation service in hostels including such services provided by trusts having
below Rs.1,000 per day is exempt under Entry 14 of the Notification
4. It can be inferred that the amount charged, by whatever name called, for the conduct of any
religious ceremony is exempt from GST. Religious ceremonies are life-cycle rituals including
special religious poojas conducted in terms of religious texts by a person so authorized by such
religious texts.
5. Religious Yatras/pilgrimage organised by any charitable or religious trust are not exempt. Further,
services of transportation of passengers for a pilgrimage by the charitable trust are not exempt
from GST.
However as per Entry 60, the services provided by the Haj Committee and KMVN(Kumaon
Mandal Vikas Nigam) in relation to a religious pilgrimage facilitated by GOI are not liable to
GST.
6. Besides charitable activities, services provided by way of training or coaching in recreational
activities relating to arts or culture or sports, by a charitable entity registered under section 12AA
of Income-tax Act are also exempt.
7. Services provided to charitable or religious trusts are not exempt from GST. Unless specifically
exempted, all goods and services supplied to charitable or religious trusts are leviable to GST.

Examples:
1. Bhavyajyoti Foundation, a charitable trust registered under section 12AA of the Income-tax Act,
1961, has organized a ‘Meditation Camp’ for the old age people.
GST would be exempt on the same as services provided by entity registered under section 12AA
of the Income-tax Act, 1961 by way of advancement of religion, spirituality or yoga are exempt.
2. Raamanand Joshi, a priest, charges Rs.12,000 for conducting a religious ceremony on the birthday
of Mr. Ghanshyam’s son. The amount charged for the conduct of any religious ceremony is
exempt from GST.
3. Durgadevi Trust, a religious trust registered under section 12AA of the Income-tax Act, owns and
manages a temple in their locality. It rents the commercial shops located in the precincts of the
temple for a rent of Rs.10,000 per month per shop.
The consideration so received is liable to GST as the consideration is not less than Rs.10,000.
4. Sarvshiksha Foundation, an educational institution registered under section 10(23C)(v) of the
Income-tax Act, owns and manages a gurudwara. It rents the community hall located in the
precincts of the gurudwara for a rent of Rs.9,000 per day for a marriage function.

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The consideration so received is exempt from GST as the consideration is less than Rs.10,000.

Agriculture related Services:

Entry Description of services
No.
24 Services by way of loading, unloading, packing, storage or warehousing of rice.
24A Services by way of warehousing of minor forest produce.
24B Services by way of storage/ warehousing of cereals, pulses, fruits, nuts and vegetables,
spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc.,
indigo, unmanufactured tobacco, betel leaves, tendu leaves, coffee and tea.
53A Services by way of fumigation in a warehouse of agricultural produce.
54 Services relating to cultivation of plants and rearing of all life forms of animals, except
the rearing of horses, for food, fibre, fuel, raw material or other similar products or
agricultural produce by way of—
a) agricultural operations directly related to production of any agricultural produce
including cultivation, harvesting, threshing, plant protection or testing;
b) supply of farm labour;
c) processes carried out at an agricultural farm including tending, pruning, cutting,
harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting,
grading, cooling or bulk packaging and such like operations which do not alter the
essential characteristics of agricultural produce but make it only marketable for the
primary market;
d) renting or leasing of agro machinery or vacant land with or without a structure
incidental to its use;
e) loading, unloading, packing, storage or warehousing of agricultural produce;
f) agricultural extension services;
g) services by any Agricultural Produce Marketing Committee or Board or services
provided by a commission agent for sale or purchase of agricultural produce.
h) services by way of fumigation in a warehouse of agricultural produce.
55 Carrying out an intermediate production process as job work in relation to cultivation of
plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre,
fuel, raw material or other similar products or agricultural produce.
55A Services by way of artificial insemination of livestock (other than horses).

Examples:
1. Moolchand has leased out to a farmer – Tulsidas - a vacant land for agriculture. The land has a
green house and a storage shed which are incidental to its use for agriculture.
Leasing of vacant land with a green house or a storage shed which is incidental to its use for
agriculture is exempt from GST.
2. It is inferred that processed products such as tea (i.e. black tea, white tea etc.), processed coffee
beans or powder, pulses (dehusked or split), jaggery, processed spices, processed dry fruits,
processed cashew nuts etc. fall outside the definition of agricultural produce and therefore the
exemption from GST is not available to their loading, packing, warehousing etc. Similarly,
processing of sugarcane into jaggery changes its essential characteristics. Thus, jaggery is also not
an agricultural produce.

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Education Services:
Entry Description of services
No.
66 Services provided -
(a) by an educational institution to its students, faculty and staff; (Output Services)
(aa) by an educational institution by way of conduct of entrance examination against
consideration in the form of entrance fee; (Output Services)
(b) to an educational institution, by way of, (Input Services)-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central
Government, State Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such educational
institution;
(iv) services relating to admission to, or conduct of examination by, such institution;
(v) supply of online educational journals or periodicals.
However, nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an
educational institution other than an institution providing services by way of pre-school
education and education up to higher secondary school or equivalent.
Further, nothing contained in sub-item (v) of item (b) shall apply to an institution
providing services by way of,-
➢ Pre-school education and education up to higher secondary school or equivalent;
or
➢ Education as a part of an approved vocational education course.

Notes:
1. Educational institution means an institution providing services by way of,-
➢ Pre-school education and education up to higher secondary school or equivalent;
➢ Education as a part of a curriculum for obtaining a qualification recognised by any law for the
time being in force;
➢ Education as a part of an approved vocational education course.

Examples:
a) 'Littleways Public School' is a school loacted in Tamil Nadu. The school has two branches - one is a
pre-school and another is a higher secondary school affiliated to CBSE. A pre-school and a higher
secondary school are educational institutions. Thus, Littleways Public School qualifies as an
educational institution.
b) ‘Dharam Institute of Technology’ (DIT), a private engineering college in M.P., offers post graduate
engineering programmes. All the engineering courses including the distance learning post graduate
engineering programme offered by DIT are recognised by the law [The All India Council for
Technical Education (AICTE)]. Since DIT imparts education as a part of a curriculum for obtaining
a qualification recognised by the Indian law, the same is an educational institution.

2. Educational institutions generally have mess facility for providing food to their students and staff.
Such facility is either run by the institution/ students themselves or (ii) is outsourced to a third
person.
➢ If the catering services is one of the services provided by an educational institution to its
students, faculty and staff and the said educational institution is covered by the definition of

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 Goods & Service Tax
'educational institution' as given above, then the same is exempt. [covered under item (a) of
entry 66 of the Notification].
➢ If the catering services, i.e., supply of food or drink in a mess or canteen, is provided by
anyone other than the educational institution, i.e. the institution outsources the catering
activity to an outside contractor, then it is a supply of service to the concerned educational
institution by such outside caterer and attracts GST (Note).
It may be noted that said services when provided to an educational institution providing pre-
school education or education up to higher secondary school or equivalent are exempt from
tax.
3. Educational institutes such as IITs, IIMs charge a fee from prospective employers like corporate
houses/MNCs, who come to the institutes for recruiting candidates through campus interviews in
relation to campus recruitments. Such services shall also be liable to tax.
4. Private coaching centres or other unrecognized institutions, though self- styled as educational
institutions, would not be treated as educational institutions under GST and thus cannot avail
exemptions available to an educational institution.
5. Regarding input services, it may be noted that where output services are exempted, the educational
institutions may not be able to avail credit of tax paid on the input services.

The exemptions available in respect of input and output services of an educational institution have been
tabulated as follows:
Type of educational institution
Educational Institution Educational Institution Educational Institution
providing pre-school providing education as a Providing education as a
education and education up part of a curriculum for part of approved
to higher secondary school obtaining a recognised vocational education
or equivalent qualification course.
Exempt (i) transportation of students, (i) services relating to Services relating to
input faculty and staff; admission to, or conduct of admission to, or conduct
Services (ii) catering, including any mid- examination by, such of examination by, such
day meals scheme sponsored by institution institution.
the Central Government, State (ii) supply of online
Government or Union territory; educational journals or
(iii) security or cleaning or house- periodical
keeping services performed in
such educational institution;
(iv) services relating to admission
to, or conduct of examination by,
such institution
Exempt Services provided by an educational institution -
output (a) to its students, faculty and staff;
Services (aa) by way of conduct of entrance examination against consideration in the form of entrance
fee.

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Health Care Services:
Entry Description of services
No.
46 Services by a veterinary clinic in relation to health care of animals or birds.
74 Services by way of-
(a) health care services by a clinical establishment, an authorised medical practitioner or
para-medics;
(b) services provided by way of transportation of a patient in an ambulance, other than
those specified in (a) above.
73 Services provided by the cord blood banks by way of preservation of stem cells or any
other service in relation to such preservation.

Notes:
1. Health care services-
➢ means any service by way of diagnosis or treatment or care for illness, injury, deformity,
abnormality or pregnancy in any recognised system of medicines in India and
➢ includes services by way of transportation of the patient to and from a clinical establishment,
but
➢ does not include hair transplant or cosmetic or plastic surgery, except when undertaken to
restore or to reconstruct anatomy or functions of body affected due to congenital defects,
developmental abnormalities, injury or trauma.
As it is apparent from the definition of health care services, only services in recognized systems
of medicines in India are exempt under this entry. Following systems of medicines are the
recognized systems of medicines in India:- Allopathy, Yoga, Naturopathy, Ayurveda,
Homeopathy, Siddha, Unani, Any other system of medicine that may be recognized by Central
Government.
2. Rent of rooms provided to in-patients in hospitals is exempt
3. Health care services provided by the clinical establishments will include food supplied to the
patients; but such food may be prepared by the canteens run by the hospitals or may be outsourced
by the hospitals from outdoor caterers.
Food supplied to the in-patients as advised by the doctor/nutritionists is a part of composite supply
of healthcare and not separately taxable.
Other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are
taxable
4. Supply of services other than healthcare services such as renting of shops, auditoriums in the
premises of the clinical establishment, display of advertisements etc. will be subject to GST.

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Services provided by Government:
Entry Description of services
No.
4 Services by governmental authority by way of any activity in relation to any function
entrusted to a municipality under article 243 W of the Constitution are exempt.
5 Services by a governmental authority by way of any activity in relation to any function
entrusted to a Panchayat under article 243G of the Constitution.
6 Services by the Central Government, State Government, Union territory or local authority
excluding the following services—
(a) Services by the Department of Posts by way of speed post, express parcel post, life
insurance, and agency services provided to a person other than the Central Government,
State Government, Union territory;
(b) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or
an airport;
(c) Transport of goods or passengers; or
(d) Any service, other than services covered under entries (a) to (c) above, provided to
business entities. (Refer Entry No. 7)

7 Services provided by the CG, SG, UT or LA to a business entity with an aggregate

turnover of up to such amount in the preceding FY as makes it eligible for exemption
from registration under the CGST Act, 2017.
Explanation - For the purposes of this entry, it is hereby clarified that the provisions of
this entry shall not be applicable to following services:-
(i) Item (a), (b) and (c) of Entry 6 above.
(ii) Services by way of renting of immovable property.
Note: If the aggregate turnover of the business entity in the preceding FY is more than
Rs.20 lakh/10 lakh/40 lakh, then such business entity will pay tax under RCM.
8 Services provided by the CG, SG, UT or LA to another CG, SG, UT or LA.
However, nothing contained in this entry shall apply to services referred in item (a), (b)
and (c) of Entry 6 above.
9 Services provided by CG, SG, UT or LA where the consideration for such services does
not exceed Rs.5,000.
However, nothing contained in this entry shall apply to services referred in item (a), (b)
and (c) of Entry 6 above
Further, in case where continuous supply of service is provided by the CG, SG, UT or LA,
the exemption shall apply only where the consideration charged for such service does not
exceed Rs.5,000 in a FY.
9C Supply of service by a Government Entity to CG, SG, UT or LA or any person specified
by CG, SG, UT or LA against consideration received from CG, SG, UT or LA, in the
form of grants.
9D Services by an old age home run by:
➢ Central Government, State Government or
➢ an entity registered under section 12AA of the Income-tax Act, 1961
to its residents (aged 60 years or more) against consideration upto Rs.25,000 per month
per member, provided that the consideration charged is inclusive of charges for boarding,
lodging and maintenance.
34A Services supplied by CG, SG, UT to their undertakings or Public Sector
Undertakings(PSUs) by way of guaranteeing the loans taken by such undertakings or
PSUs from the banking companies and financial institutions.

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47 Services provided by the CG, SG, UT or LA by way of-
(a) registration required under any law for the time being in force;
(b) testing, calibration, safety check or certification relating to protection or safety of
workers, consumers or public at large, including fire license, required under any law for
the time being in force.
61 Services provided by the CG, SG, UT or LA by way of issuance of passport, visa, driving
license, birth certificate or death certificate.
61A Services by way of granting National permit to a goods carriage to operate through-out
India/ Contiguous states.
62 Services provided by the CG, SG, UT or LA by way of tolerating non- performance of a
contract for which consideration in the form of fines or liquidated damages is payable to
the CG, SG, UT or LA under such contract.
63 Services provided by CG, SG, UT or LA by way of assignment of right to use natural
resources to an individual farmer for cultivation of plants and rearing of all life forms of
animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar
products.
65 Services provided by the CG, SG, UT by way of deputing officers after office hours or on
holidays for inspection or container stuffing or such other duties in relation to import
export cargo on payment of Merchant Overtime charges.
74A Services provided by rehabilitation professionals recognised under the Rehabilitation
Council of India Act, 1992 by way of rehabilitation, therapy or counseling and such other
activity as covered by the said Act at medical establishments, educational institutions,
rehabilitation centers established by CG, SG, UT or an entity registered under section
12AA of the Income- tax Act, 1961.

Relevant definitions are as under:

➢ Business entity: means any person carrying out business.
➢ Governmental authority: means an authority or a board or any other body,
i. set up by an Act of Parliament or a State Legislature; or
ii. established by any Government,
with 90%, or more participation by way of equity or control, to carry out any function entrusted
to a Municipality under article 243W of the Constitution or to a Panchayat under article 243G of
the Constitution.
➢ Government Entity: means an authority or a board or any other body including a society, trust,
corporation,
i. set up by an Act of Parliament or State Legislature; or
ii. established by any Government,
with 90%, or more participation by way of equity or control, to carry out a function entrusted
by the Central Government, State Government, Union Territory or a local authority.
Examples:
1. A small business entity is carrying on a business relating to consulting engineer services in Delhi.
The aggregate turnover of the entity in the preceding financial year does not exceed the limit of
Rs.20 lakh in a F.Y. Thus, no tax is payable on the services received by it from Government or a
local authority.
2. The Karnataka Cricket Association, Bangalore requests the Commissioner of Police, Bangalore to
provide security in and around the Cricket Stadium for the purpose of conducting the cricket

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match. The Commissioner of Police arranges the required security for an agreed consideration. In
this case, services of providing security by the police personnel are not exempt. As the services are
provided by Government, Karnataka Cricket Association is liable to pay the tax on the
consideration paid, under reverse charge mechanism.

Services provided by CG, SG, UT, LA -

a, b, c RIP Other Services to-

Always Taxable Registered: Unregistered: Business Entity Others (including

under FCM Taxable under RCM Taxable under CG,SG,UT,LA,GA,GE):
FCM Exempt

Registered: Unregistered:
Taxable under RCM Exempt

Only if Consideration > Rs.5,000

Construction Services:
Entry Description of services
No.
10 Services provided by way of pure labour contracts of construction, erection,
commissioning, installation, completion, fitting out, repair, maintenance, renovation, or
alteration of a civil structure or any other original works pertaining to the beneficiary-led
individual house construction or enhancement under the Housing for All (Urban) Mission
or Pradhan Mantri Awas Yojana.
10A Services supplied by Electricity Distribution Utilities by way of construction, erection,
commissioning, or installation of infrastructure for extending electricity distribution
network upto the tube well of the farmer or agriculturalist for agricultural use.
11 Services by way of pure labour contracts of construction, erection, commissioning, or
installation of original works pertaining to a single residential unit otherwise than as a part
of a residential complex.
41A Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer are
and exempted subject to the condition that the constructed flats are sold before issuance of
41B completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be withdrawn in case of flats
sold after issue of completion certificate, but such withdrawal shall be limited to 1% of
value in case of affordable houses and 5% of value in case of other than affordable
houses.

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Passenger Transportation Services:
Entry Description of services
No.
15 Transport of passengers, with or without accompanied belongings, by –
(a) Air, embarking from or terminating in an airport located in the State of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at
Bagdogra located in West Bengal;
(b) Non-air conditioned contract carriage other than radio taxi, for transportation of
passengers, excluding tourism, conducted tour, charter or hire; or
(c) Stage carriage other than air- conditioned stage carriage.

However, nothing contained in items (b) and (c) above shall apply to services supplied
through an electronic commerce operator (ECO), and notified under section 9(5) of the
CGST, 2017.
In other words, in case where services of transport of passengers, by non-air conditioned
contract carriage other than radio taxi excluding tourism, conducted tour, charter or hire or
by non-air conditioned stage carriage, are supplied through ECO, such services are not
exempt from GST.
Further, tax on such services shall be paid by ECO.
16 Services provided to the Central Government, by way of transport of passengers with or
without accompanied belongings, by air, embarking from or terminating at a RCS
(Regional Connectivity Scheme) airport, against consideration in the form of viability gap
funding.
However, nothing contained in this entry shall apply on or after the expiry of a period of 3
years from the date of commencement of operations of the RCS airport as notified by the
Ministry of Civil Aviation.

17 Service of transportation of passengers, with or without accompanied belongings, by—

(a) railways in a class other than—
(i) first class; or
(ii) an air-conditioned coach;
(b) metro, monorail or tramway;
(c) inland waterways;
(d) public transport, other than predominantly for tourism purpose, in a vessel between
places located in India; and
(e) metered cabs or auto rickshaws (including e-rickshaws).

However, nothing contained in item (e) above shall apply to services supplied through an
electronic commerce operator (ECO), and notified under section 9(5) of the CGST, 2017.
In other words, in case where service of transport of Passengers by metered cabs or auto
rickshaws (including e-rickshaws) are supplied through ECO, such services are not
exempt from GST. Further, tax on such services shall be paid by ECO.

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Goods Transportation Services:
Entry Description of services
No.
18 Services by way of transportation of goods-
(a) by road except the services of—
(i) a goods transportation agency;
(ii) a courier agency;
(b) by inland waterways.
20 Services by way of transportation by rail or a vessel from one place in India to another of
the following goods –
(a) relief materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap;
(b) defence or military equipments;
(c) newspaper or magazines registered with the Registrar of Newspapers;
(d) railway equipments or materials;
(e) agricultural produce;
(f) milk, salt and food grain including flours, pulses and rice; and
(g) organic manure.

Goods Transport Agency (GTA) Service

21 Services provided by a goods transport agency, by way of transport in a goods carriage of
–
(a) agricultural produce;
(b) goods, where consideration charged for the transportation of goods on a consignment
transported in a single carriage does not exceed Rs.1,500;
(c) goods, where consideration charged for transportation of all such goods for a single
consignee does not exceed Rs.750;
(d) milk, salt and food grain including flour, pulses and rice;
(e) organic manure;
(f) newspaper or magazines registered with the Registrar of Newspapers;
(g) relief materials meant for victims of natural or man-made disasters, calamities,
accidents or mishap; or
(h) defence or military equipments.
21A Services provided by a GTA to an unregistered person, including an unregistered casual
taxable person, other than the recipients who are covered under RCM.
21B Services provided by a GTA, by way of transport of goods in a goods carriage, to, -
(a) a Department or Establishment of the Central Government or State Government or
Union territory; or
(b) local authority; or
(c) Governmental agencies, which has taken registration under the Central Goods and
Services Tax Act, 2017 only for the purpose of deducting tax under section 51 and not for
making a taxable supply of goods or services.

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Banking and Financial Services
Entry Description of services
No.
26 Any Services by the Reserve Bank of India. (Note-1)
27 Services by way of—
(a) Extending deposits, loans or advances in so far as the consideration is represented by
way of interest or discount (other than interest involved in credit card services);
(b) Inter se sale or purchase of foreign currency amongst banks or authorised dealers of
foreign exchange or amongst banks and such dealers.
27A Services provided by a banking company to Basic Saving Bank Deposit (BSBD) account
holders under Pradhan Mantri Jan Dhan Yojana (PMJDY).
34 Services by an acquiring bank, to any person in relation to settlement of an amount upto
Rs.2,000 in a single transaction transacted through credit card, debit card, charge card or
other payment card service.
39A Services by an intermediary of financial services located in a multi services SEZ with
International Financial Services Centre (IFSC) status to a customer located outside India
for international financial services in currencies other than Indian rupees (INR).
Notes:
1. All services provided by the Reserve Bank of India are covered under Entry 26 and are thus,
exempt from GST. However, services provided to the Reserve Bank of India are not covered
under said entry and would be taxable unless otherwise covered in any other entry.
2. Service charges/ fees, documentation fees, broking charges, administrative charges, entry
charges or such like fees or charges collected over and above interest on loan, advance or a deposit
are not exempt and thus, represent taxable consideration.
3. Interest charged on outstanding credit card balances has been specifically excluded from Entry 27.
Hence, the same is liable to GST.

Life Insurance Business Services:

Entry Description of services
No.
28 Services of life insurance business provided by way of annuity under the National Pension
System regulated by the Pension Fund Regulatory and Development Authority of India
under the Pension Fund Regulatory and Development Authority Act, 2013.
29 Services of life insurance business provided or agreed to be provided by the Army, Naval
and Air Force Group Insurance Funds to members of the Army, Navy and Air Force,
respectively, under the Group Insurance Schemes of the Central Government.
29A Services of life insurance provided or agreed to be provided by the Naval Group
Insurance Fund to the personnel of Coast Guard under the Group Insurance Schemes of
the Central Government.
29B Services of life insurance provided/agreed to be provided by the Central Armed Police
Forces (under Ministry of Home Affairs) Group Insurance Funds to their members under
the Group Insurance Schemes of the concerned Central Armed Police Force.
36 Services of life insurance business provided under following schemes-
(a) Janashree Bima Yojana;
(b) Aam Aadmi Bima Yojana;
(c) Life micro-insurance product as approved by the Insurance Regulatory and
Development Authority, having maximum amount of cover of Rs.2,00,000;

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(d) Varishtha Pension BimaYojana;
(e) Pradhan Mantri Jeevan Jyoti BimaYojana;
(f) Pradhan Mantri Jan DhanYogana;
(g) Pradhan Mantri Vaya Vandan Yojana.

Services provided by Specified Bodies:

Entry Description of services
No.
30 Services by the Employees’ State Insurance Corporation to persons governed under the
Employees’ State Insurance Act, 1948.
31 Services provided by the Employees Provident Fund Organisation to the persons governed
under the Employees Provident Funds and the Miscellaneous Provisions Act, 1952.
31A Services by Coal Mines Provident Fund Organisation to persons governed by the Coal
Mines Provident Fund and Miscellaneous Provisions Act, 1948.
31B Services by National Pension System (NPS) Trust to its members against consideration in
the form of administrative fee.
32 Services provided by the IRDAI (Insurance Regulatory and Development Authority of
India) to insurers under IRDAI Act, 1999.
33 Services provided by the SEBI (Securities and Exchange Board of India) set up under the
SEBI Act, 1992 by way of protecting the interests of investors in securities and to
promote the development of, and to regulate, the securities market.

General Insurance Business Services:

Entry Description of services
No.
35 Services of general insurance business provided under the schemes notified by the
government
36A Services by way of reinsurance of the insurance schemes specified in serial number 35.

Pension Schemes:
Entry Description of services
No.
37 Services by way of collection of contribution under the Atal Pension Yojana.
38 Services by way of collection of contribution under any pension scheme of the State
Governments.

Business Facilitator/Correspondent:
Entry Description of services
No.
39 Services by the following persons in respective capacities –
(a) business facilitator or a business correspondent to a banking company with respect to
accounts in its rural area branch;
(b) any person as an intermediary to a business facilitator or a business correspondent
with respect to services mentioned in entry (a); or
(c) business facilitator or a business correspondent to an insurance company in a rural
area.

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Services provided to Government:
Entry Description of services
No.
3 Pure services provided TO Government:
Pure services (excluding works contract service or other composite supplies involving
supply of any goods) provided to the Central Government, State Government or Union
territory or local authority by way of any activity:
➢ in relation to any function entrusted to a Panchayat under article 243G of the
Constitution or
➢ in relation to any function entrusted to a Municipality under article 243W of the
Constitution.
3A Composite supply of goods and services TO Government:
Composite supply of goods and services in which the value of supply of goods constitutes
not more than 25% of the value of the said composite supply provided to the CG, SG or
UT or LA by way of any activity:
➢ in relation to any function entrusted to a Panchayat under article 243G of the
Constitution or
➢ in relation to any function entrusted to a Municipality under article 243W of the
Constitution.
11A Service provided by Fair Price Shops to CG, SG or UT by way of sale of food grains,
kerosene, sugar, edible oil, etc. under Public Distribution System against consideration in
the form of commission or margin.
40 Services provided to the CG, SG or UT under any insurance scheme for which total
premium is paid by the CG, SG or UT.
72 Services provided to the CG, SG or UT administration under any training programme for
which 75% or more of the total expenditure is borne by the CG, SG or UT administration.
51 Services provided by the GSTN (Goods and Services Tax Network) to the CG, SG or UT
for implementation of Goods and Services Tax.

Legal Services:
Entry Description of services
No.
45 Services provided by-
An arbitral tribunal or a partnership firm of advocates or an individual as an advocate
including senior advocate, by way of legal services to
(i) any person other than a business entity; or
(ii) a business entity with an aggregate turnover up to such amount in the
preceding FY as makes it eligible for exemption from registration under the
CGST Act, 2017;
(iii) the Central Government, State Government, Union territory, local authority,
Governmental Authority or Government Entity.
Note: In addition to above, legal services provided by a partnership firm of advocates or
an individual as an advocate other than a senior advocate, to an advocate or partnership
firm of advocates providing legal services is also exempt.

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Legal Services provided by arbitral tribunal or an Individual/Law firm to-

Business Entity Others (including

CG,SG,UT,LA,GA,GE):
Exempt
Registered: Unregistered:
Taxable under RCM Exempt

Sponsorship of Sports Events:

Entry Description of services
No.
53 Services by way of sponsorship of sporting events organised -
(a) by a national sports federation, or its affiliated federations, where the participating
teams or individuals represent any district, State, zone or Country;
(b) by Association of Indian Universities, Inter-University Sports Board, School Games
Federation of India, All India Sports Council for the Deaf, Paralympic Committee of India
or Special Olympics Bharat;
(c) by the Central Civil Services Cultural and Sports Board;
(d) as part of national games, by the Indian Olympic Association; or
(e) under the Panchayat Yuva Kreeda Aur Khel Abhiyaan Scheme.

Performance by an artist:
Entry Description of services
No.
78 Services by an artist by way of a performance in folk or classical art forms of music, or
dance, or theatre, if the consideration charged for such performance is not more than
Rs.1,50,000 are exempt from GST.

Notes:
1. The activities by a performing artist in folk or classical art forms of music, dance, or theatre are
exempt if consideration does not exceed Rs.1,50,000. However, if consideration from such
activities exceeds Rs.1,50,000, entire consideration is subject to GST.
2. However, the exemption shall not apply to service provided by such artist as a brand ambassador.
‘Brand ambassador’ means a person engaged for promotion or marketing of a brand of goods,
service, property or actionable claim, event or endorsement of name, including a trade name, logo
or house mark of any person.
3. Further, all other activities by an artist in other art forms e.g. western music or dance, modern
theatres, performance of actors in films or television serials would be taxable. Similarly activities
of artists in still art forms e.g. painting, sculpture making etc. are taxable.

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Right to Admission to various Events:
Entry Description of services
No.
79 Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve
or zoo.
79A Services by way of admission to a protected monument so declared under the Ancient
Monuments and Archaeological Sites & Remains Act 1958 or any of the State Acts, for
the time being in force.
81 Services by way of right to admission to-
(a) circus, dance, or theatrical performance including drama or ballet;
(b) award function, concert, pageant, musical performance or any sporting event other
than a recognised sporting event;
(c) recognised sporting event;
(d) planetarium,
where the consideration for right to admission to the events or places as referred to in
items (a), (b), (c) or (d) above is not more than Rs.500 per person.

Services by an Unincorporated body or a Non- Profit Entity:

Entry Description of services
No.
77 Service by an unincorporated body or a non- profit entity registered under any law for
the time being in force, to its own members by way of reimbursement of charges or
share of contribution –
(a) as a trade union
(b) for the provision of carrying out any activity which is exempt from the levy of Goods
and Services Tax; or
(c) up to an amount of Rs.7,500 per month per member for sourcing of goods or
services from a third person for the common use of its members in a housing society or a
residential complex.
77A Services provided by an unincorporated body or a non-profit entity registered under any
law for the time being in force, engaged in,-
(i) activities relating to the welfare of industrial or agricultural labour or farmers; or
(ii) promotion of trade, commerce, industry, agriculture, art, science, literature, culture,
sports, education, social welfare, charitable activities and protection of environment, to
its own members against consideration in the form of membership fee upto an amount of
Rs.1000/- per member per year.

Other Exempt Services

Entry Description of services
No.
2 Services by way of transfer of a going concern, as a whole or an independent part thereof.
Example: Royal Hotel Group is in the business of running a chain of restaurants. It
intends to sell its business as a going concern. It would not be required to pay GST on
such sale of its business.
9B Supply of services associated with transit cargo to Nepal and Bhutan (landlocked
countries).

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12 Services by way of renting of residential dwelling for use as residence.
14 Services by a hotel, inn, guest house, club or campsite, by whatever name called, for
residential or lodging purposes, having Value of Supply of a unit of accommodation upto
Rs.1,000 per day or equivalent. (less than or equal to Rs.1,000 is exempt)
22 Services by way of giving on hire –
(a) to a state transport undertaking (STU), a motor vehicle meant to carry more than 12
passengers; or
(aa) to a local authority, an Electrically operated vehicle (EOV) meant to carry more than
12 passengers;
(b) to a goods transport agency, a means of transportation of goods.
(c) motor vehicle for transport of students, faculty and staff, to a person providing services
of transportation of students, faculty and staff to an educational institution providing
services by way of pre-school education and education upto higher secondary school or
equivalent.
23 Service by way of access to a road or a bridge on payment of toll charges.
23A Service by way of access to a road or a bridge on payment of annuity.
25 Transmission/distribution of electricity by an electricity transmission/ distribution utility.
However, in this regard CBIC has clarified that the other services provided by DISCOMS
(distribution companies) to consumer against charges are liable to GST such as,-
i. Application fee for releasing connection of electricity;
ii. Rental Charges against metering equipment;
iii. Testing fee for meters/transformers, capacitors etc.;
iv. Labour charges from customers for shifting of meters or shifting of service lines;
v. Charges for duplicate bill
49 Services by way of collecting or providing news by an independent journalist, Press Trust
of India or United News of India.
50 Services of public libraries by way of lending of books, publications or any other
knowledge-enhancing content or material.
52 Services by an organiser to any person in respect of a business exhibition held outside
India.
56 Services by way of slaughtering of animals.
57 Services by way of pre-conditioning, pre- cooling, ripening, waxing, retail packing,
labelling of fruits and vegetables which do not change or alter the essential characteristics
of the said fruits or vegetables.
58 Services provided by the National Centre for Cold Chain Development under the Ministry
of Agriculture, Cooperation and Farmer’s Welfare by way of cold chain knowledge
dissemination.
59 Services by a foreign diplomatic mission located in India.
65A Services by way of providing information under the RTI Act (Right to Information Act,
2005).
68 Services provided to a recognised sports body by-
(a) an individual as a player, referee, umpire, coach or team manager for participation in a
sporting event organised by a recognized sports body;
(b) another recognised sports body.
However, services by individuals such as selectors, commentators, curators, technical
experts are taxable. The service of a player to a franchisee which is not a recognized
sports body is also taxable.
76 Services by way of public conveniences such as provision of facilities of bathroom,
washrooms, lavatories, urinal or toilets.

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CLARIFICATIONS:

1) Clarification on the effective date of insertion of explanation in notification

Section 11(3) of CGST Act provides that the Government may insert an explanation in any
notification issued under section 11, for the purpose of clarifying its scope or applicability, at any
time within 1 year of issue of the notification and every such explanation shall have effect as if it
had always been the part of the first such notification.
It is hereby clarified that the explanation having been inserted under section 11(3) of the CGST
Act, is effective from the inception of the entry in notification and not from the date from which
the notification (that inserted said explanation) becomes effective.
For example, the principal Notification No. 11/2017 CT (R) dated 28.06.2017 came into force
with effect from 1.07.2017. Thereafter, a new entry - Entry no. 3(vi) is inserted w.e.f. 21.09.2017.
Subsequently, an explanation is also inserted with respect to entry no. 3(vi) on 27.07.2018.
Although the effective date mentioned in the notification which inserted said explanation is
27.07.2018, said explanation will be effective from the inception of entry in notification i.e.
21.09.2017 and not 27.07.2018.

2) Clarification regarding applicability of GST on delayed payment charges in case

of late payment of Equated Monthly Installments (EMI):
Issue: Whether GST is applicable on additional / penal interest on the overdue loan? Whether
such penal interest would be exempt under Entry 27 of exemption notification or it would be
taxable treating it as consideration for liquidated damages2?
Clarification: As per the provisions of section 15(2)(d) of the CGST Act, the value of supply
shall include interest or late fee or penalty for delayed payment of any consideration for any
supply. Entry 27 of exemption notification, inter alia, exempts the services by way of extending
deposits, loans or advances in so far as the consideration is represented by way of interest or
discount (other than interest involved in credit card services). Here, interest means interest
payable in any manner in respect of any moneys borrowed/debt incurred (including a deposit,
claim or other similar right or obligation), but does not include any service fee or other charge in
respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not
been utilised.
There are two transaction options involving EMI that are prevalent in the trade. In view of the
provisions of law discussed in preceding para, these two options, alongwith the GST applicability
on them, have been explained with the help of illustrations as under-
Illustration – 1: X sells a mobile phone to Y. The cost of mobile phone is Rs.40,000/-. However,
X gives Y an option to pay in installments, Rs.11,000/- every month before 10th day of the
following month, over next four months (Rs.11,000/- × 4 = Rs.44,000/-). As per the contract, if
there is any delay in payment by Y beyond the scheduled date, Y would be liable to pay
additional/ penal interest amounting to Rs.500/- per month for the delay.
In some instances, X is charging Y Rs.40,000/- for the mobile and is separately issuing another
invoice for providing the services of extending loans to Y, the consideration for which is the
interest of 2.5% per month and an additional/ penal interest amounting to Rs.500/- per month for
each delay in payment.

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In this case, the amount of penal interest is to be included in the value of supply [in terms of
section 15(2)(d)]. The transaction between X and Y is for supply of taxable goods i.e. mobile
phone. Accordingly, the penal interest would be taxable as it would be included in the value of
mobile, irrespective of the manner of invoicing.
Illustration – 2: X sells a mobile phone to Y. The cost of mobile phone is Rs.40,000/-. Y has the
option to avail a loan at interest of 2.5% per month for purchasing the mobile from M/s. ABC
Ltd. The terms of the loan from M/s. ABC Ltd. allows Y a period of four months to repay the
loan and an additional/ penal interest @ 1.25% per month for any delay in payment.
Here, the additional/ penal interest is charged for a transaction between Y and M/s. ABC Ltd.,
and the same is getting covered under exemption Entry 27. Consequently, in this case the 'penal
interest' charged thereon on a transaction between Y and M/s. ABC Ltd. would not be subject to
GST as the same would be covered under said exemption entry. However, any service fee/ charge
or any other charges, if any, are levied by M/s. ABC Ltd. in respect of the transaction related to
extending deposits, loans or advances does not qualify to be interest as defined in exemption
notification, and accordingly will not be exempt. Moreover, the value of supply of mobile by X to
Y would be Rs.40,000/- for the purpose of levy of GST.
It is further clarified that the transaction of levy of additional/ penal interest does not fall within
the ambit of entry 5(e) of Schedule II of the CGST Act as this levy of additional/ penal interest
satisfies the definition of “interest” as contained in exemption notification [elaborated above].

3) Clarification on issues related to GST on monthly subscription/ contribution

charged by a Residential Welfare Association from its members:
Issue
Are the maintenance charges paid by
residents to the Resident Welfare
Association (RWA) in a housing society
exempt from GST and if yes, is there an
upper limit on the amount of such
charges for the exemption to be
available?
A RWA has aggregate turnover of
Rs.20 lakh or less in a FY. Is it
required to take registration and pay
GST on maintenance charges if the
amount of such charges is more than
Rs.7500/- per month per member?
Clarification
Supply of service by RWA (unincorporated body or
a non- profit entity registered under any law) to its
own members by way of reimbursement of charges
or share of contribution upto an amount of Rs.7,500/-
per month per member for providing services and
goods for the common use of its members in a
housing society or a residential complex are exempt
from GST.
No. If aggregate turnover of an RWA does not
exceed Rs.20 Lakh in a FY, it shall not be required to
take registration and pay GST even if the amount of
maintenance charges exceeds Rs.7,500/- per month
per member.
RWA shall be required to pay GST on monthly
subscription/ contribution charged from its members,
only if such subscription is more than Rs.7,500/- per
month per member and the annual aggregate
turnover of RWA by way of supplying of services
and goods is also Rs.20 lakh or more.

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 Goods & Service Tax
Annual Monthly Whether
turnover of maintenance exempt?
RWA charge
More than More than No
Rs.20 lakhs Rs.7,500/-
Rs.7,500/- or Yes
less
Rs.20 lakhs or More than Yes
less Rs.7,500/-
Rs.7,500/- or Yes
less
Is the RWA entitled to take ITC of GST RWAs are entitled to take ITC of GST paid by them
paid on input and services used by it for on capital goods (generators, water pumps, lawn
making supplies to its members and use furniture etc.), goods (taps, pipes, other
such ITC for discharge of GST liability sanitary/hardware fillings etc.) and input services
on such supplies where the amount such as repair and maintenance services.
charged for such supplies is more than
Rs.7,500/- per month per member?
Where a person owns 2 or more flats in As per general business sense, a person who owns 2
the housing society/residential complex, or more residential apartments in a housing
whether the ceiling of Rs. 7,500/- per society/residential complex shall normally be a
month per member on the maintenance member of the RWA for each residential apartment
for the exemption to be available shall owned by him separately. The ceiling of Rs.7,500/-
be applied per residential apartment or per month per member shall be applied separately for
per person? each residential apartment owned by him.
For example, if a person owns 2 residential
apartments in a residential complex and pays
Rs.15,000/- per month as maintenance charges
towards maintenance of each apartment to the RWA
(Rs.7,500/- per month in respect of each residential
apartment), the exemption from GST shall be
available to each apartment.

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 Goods & Service Tax
PROBLEMS:

1) Dukhiya Das is enaged in providing following services. With the help of information given
below, determine which of the services provided by Dukhiya Das are exempt from GST:
a) Packaging of the onions purchased from village farmers into small packets of 1 kg each, in
Dukhiya Das warehouse, so that same can be sold in a nearby city mall.
b) Warehousing of jaggery and tea.
c) Renting of warehouse for storage of agricultural produce.

2) M/s. Apna Bank Limited, a scheduled commercial bank, has furnished the following details for
the month of August:
Particulars Amount
(in lakhs)
Extended housing loan to its customers 100
Processing fees collected from its customers on sanction of loan 20
Commission collected from its customers on bank guarantee 30
Interest income on credit card issued by the bank 40
Interest received on housing loan extended by the bank 25
Minimum balance charges collected from current account and 01
saving account holder
Compute the value of taxable supply.

3) RXL Pvt. Ltd. manufactures beauty soap with the brand name 'Forever Young'. RXL Pvt. Ltd.
has organized a concert to promote its brand. Ms. Ahana Kapoor, its brand ambassador, who is a
leading film actress, has given a classical dance performance in the said concert. The proceeds of
the concert worth Rs.1,20,000 will be donated to a charitable organization.
Whether Ms. Ahana Kapoor will be required to pay any GST?

4) An individual acts as a referee in a football match organized by Sports Authority of India. He has
also acted as a referee in another charity football match organized by a local sports club, in lieu of
a lump sum payment. Discuss whether he is required to pay any GST?

5) Determine taxable value of supply under GST law with respect to each of the following
independent services provided by the registered persons:
Particulars Gross amount
charged (Rs.)
Fees charged for yoga camp conducted by a charitable trust registered 50,000
under section 12AA of the Income-tax Act, 1961
Amount charged by business correspondent from banking company 1,00,000
for the services provided to the rural branch of a bank with respect to
Savings Bank Accounts
Amount charged by cord blood bank for preservation of stem cells 5,00,000
Amount charged for service provided by commentator to a 5,20,000
recognized sports body

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 Goods & Service Tax
6) Examine whether GST is exempted on the following independent supplies of services:
a) Service provided by a private transport operator to Scholar Boys Higher Secondary School
in relation to transportation of students to and from the school.
b) Services provided by way of vehicle parking to general public in a shopping mall.

“Don’t Limit your Challenges. Challenge your Limits”

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 Goods & Service Tax
CHAPTER-5

TIME AND VALUE OF SUPPLY

TIME OF SUPPLY:

Time is the essence of levy. Tax is imposed when the supply is made. Hence it is important to determine
the time of supply. Once time of supply is determined, levy will be made.

Point of taxation means the point in time when goods have been deemed to be supplied or services have
been deemed to be provided. The point of taxation enables us to determine the rate of tax, value, and due
dates for payment of taxes. Under GST the point of taxation, i.e., the liability to pay CGST / SGST, will
arise at the time of supply as determined for goods and services.

In other words, time of supply indicates the point in time when the liability to pay tax arises. It is
important to note here that though the liability to pay tax arises at the time of supply, the same can be paid
to the Government by the due date prescribed with reference to the said ‘time of supply’. For instance, if
time of supply of a given supply is 25th May, the tax leviable thereon would be payable latest by 20th
June, which is the due date prescribed in the CGST Act.

CGST Act, 2017 states provisions to determine time of supply of goods u/s 12 and time of supply of
services u/s 13 of the Act.

Time of Supply of Goods [Section 12 of CGST Act, 2017]:

1) The liability to pay tax on goods shall arise at the time of supply as determined in terms of
the provisions of this section [Section 12(1)].

2) Forward Charge Mechanism [Section 12(2)]:

The time of supply of goods would be the earliest of the following dates-
➢ Date of issue of Invoice
➢ Due date for issue of Invoice
➢ Date of receipt of payment (removed by way of notification)

Note: w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods as per Notification No.
66/2017. Hence GST is not applicable on receipt of advance against supply of goods.

The due date to issue invoice is given under section 31 of the Act which mentions that the
Invoice must be issued-
a) Where supply involves movement of the goods:
On / before the time of removal of the goods.
b) Where the supply doesn't involve the movement of the goods:
On / before the delivery of the goods or making available thereof to the recipient.
c) In case of a continuous supply of goods: Where successive statements of accounts or
successive payments are involved:
On / before the issuance of each statement of account or each payment is received.

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 Goods & Service Tax
Example: Supply of filter water canes in office daily but billed on 10th of every month.
d) Where the goods are supplied on "approval for sale / return" basis:
On / before the time of supply or 6 months from the date of removal of goods, whichever
is earlier.

Illustration 1:
Sphinx Pvt. Ltd. enters into a contract for supply of 100 office chairs @ Rs.15,000 with Joy Sales
on 21st August. Chairs are removed from the warehouse of Sphinx Pvt. Ltd. on 5th September
along with the invoice of even date. Joy Sales has paid 30% of the total contract value on 21st
August; balance 70% is paid after delivery of chairs on 10th September.

Since the invoice is issued on the date of removal of goods, it is issued within the prescribed time
limit and hence, time of supply for payment of tax on entire contract value of Rs.15,00,000 is the
date of issue of invoice, i.e. 5th September. No GST will be payable on advance of Rs.4,50,000
received on 21st August.

Illustration 2: Continuous supply of goods-

Date of the Date of Date of Date of Time of supply of
receipt of Statement of invoice payment goods
goods Account
10/11/2020 4/12/2020 6/12/2020 8/12/2020 4/12/2020
20/11/2020
30/11/2020

3) Reverse Charge Mechanism [Section 12(3)]:

The time of supply of goods under the “reverse charge mechanism” is the earliest of the
following:
a) Date of receipt of goods
b) Date immediately following 30 days from the date of issue of invoice or any other
document, by whatever name called, in lieu thereof by the supplier
c) Date of payment, which is the earlier of the-
➢ Date of debit in the bank account as reflected in the bank statement of the recipient
➢ Date of recording the payment in the books of account, by the recipient.

Provided that where it is not possible to determine the time of supply under clause (a) or (b) or
(c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

Illustration:
Case no. Date of the Date of Date of Time of supply of
receipt of goods invoice payment goods
1 25/11/2020 20/10/2020 28/11/2020 20/11/2020
(31st day from DOI)
2 25/11/2020 02/12/2020 6/12/2020 25/11/2020

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 Goods & Service Tax
4) Vouchers [Section 12(4)]:
The time of supply vis-à-vis vouchers is determined as under:
a) Where the supply is identifiable at the time of the issue of the voucher: the date of issue
of the voucher would be the time of supply.
b) Where the supply is not identifiable at the time of issue of the voucher: the date of
redemption of the voucher would be the time of supply.

Vouchers are instruments that can be exchanged as payment for goods/services, of the
designated value therein. Hence, as per definition, these are instruments, that the potential
suppliers are obliged to accept as consideration in lieu of the goods / services so supplied, in
part or full.

Example: Big bazaar issues a voucher for Rs. 5,000 for purchase of any item from Big bazaar.
It is an unidentifiable voucher; the time of supply shall be the date of redemption of voucher.

If Big bazaar issues voucher only to buy juicer, now it is an identifiable voucher, the time of
supply shall be date of issue of voucher.

Illustration 1:
ABC Ltd., enters in to an arrangement with “Hush Puppies”, buys the vouchers, these vouchers
were issued on 14th december, 2020. Company then distributes these vouchers with
denomination Rs.4,000/- to all its employees on 24th december, 2020 valid until 31st January,
2021, so that they can use these vouchers for buying shoes of their choice. The employees make
the most of it and redeem these vouchers on the New year’s, i.e., on 1st January, 2021.
Solution:
In this case, the supply is identifiable at the point of issue of the voucher and hence the time of
supply would be construed as 14th december, 2020.

Illustration 2:
Nisha buys a voucher from Shoppers Stop for Rs.10,000 and gifts it to Tarun on 14th February.
The voucher was valid until 29th February. Tarun redeems the vouchers at the nearby Shoppers
Stop store on 29th February.
Solution:
In this case, the supply was not identifiable at the point of issue of the voucher as Tarun was
open to purchase anything from Shoppers’ Stop, therefore the time of supply would be
construed as the date of redemption of the voucher, that is 29th February.

5) All other instances-Residuary cases [Section 12(5)]:

Where it is not possible to determine the time of supply under the provisions of sub-section (2) or
sub-section (3) or sub-section (4), the time of supply shall-
a) Where a periodical return is to be filed (GST returns) - Due-date for filing such
periodic returns or
b) In other cases- the date of payment of GST

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 Goods & Service Tax
6) Value addition after sale [Section12(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.

Illustrations:
1) Krishna Grand sells food coupons to a company. The company gives these coupons to its
employees as part of the agreed perquisites. The coupons can be redeemed for purchase of any
item of food /provisions in the outlets that are part of the program.
Solution:
As the supply against which the coupon will be redeemed is not known on the date of the sale of
the coupon, the time of supply of the coupon will be the date on which the employee redeems it
against food / provision items of his choice.
2) With each purchase of a large pizza during the Christmas week from Perfect Pizza, one can buy a
voucher for Rs.20 which will be redeemable till 5th Jan for a small pizza.
Solution:
As the supply against which the voucher will be redeemed is known on the date of issue of the
vouchers, the time of supply is the date of issue of the voucher.
3) Radha Traders sold goods to Shyam Sales on 6th June with a condition that interest @ 2% per
month will be charged if Shyam Sales failed to make payment within 15 days of the delivery of
the goods. Goods were delivered as also the invoice was issued on 6th June. Shyam Sales paid the
consideration for the goods on 6th July along with applicable interest.
Solution:
Time of supply for the goods sold is the date of issue of invoice i.e., 6th June and the time of
supply for addition in value by way of interest is the date when such addition in value is received
by Radha Traders i.e., 6th July.

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 Goods & Service Tax
Time of Supply of Services [Section 13 of CGST Act, 2017]:

1) The liability to pay tax on Services shall arise at the time of supply as determined in terms of
the provisions of this section [Section 13(1)].

2) Forward Charge Mechanism [Section 13(2)]:

The time of supply of services shall be-
a) In cases where the invoice has been issued on time as per Section 31-
Earlier of the date of issue of invoice and the date of receipt of payment.
b) In cases where the invoice has not been issued on time as per Section 31-
Earlier of the date of provision of service and the date of receipt of payment.
c) In a case where the provisions of clause (a) or clause (b) do not apply-
Date on which the recipient shows the receipt of services in his books of account,:

The date of receipt of payment would be earlier of-

a) Date of credit in the supplier’s bank account, as reflected in his bank statement
b) Date on which the receipt of payment is recorded in the books of accounts of the supplier

Section 31 read with rule 47 of CGST rules mandates that the time limit for issue of invoice
is as follows-
a) Taxable Supply of Services: Invoice must be issued within 30 days from the date of supply
of service (45 days where the supplier is banking companies, Insurance companies,
Financial Institutions & NBFC’s).
b) Where the supply involves continuous supply of services:
Invoice must be issued on or before the-
➢ Due date of payment (where the contract specifies the due date) OR
➢ Date of actual receipt of payment (where the due date is not ascertainable from the
Contract) OR
➢ Date of completion of milestone event where the payment is linked to completion of a
milestone event.
c) In a case where the supply of services ceases under a contract before the completion of the
supply, the invoice shall be issued at the time when the supply ceases and such invoice shall
be issued to the extent of the supply made before such cessation.

Illustrations:
1. Mohit & Sons is a firm of management consultants. The firm enters into a contract with
Spark Pvt. Ltd. on 1st September for providing consultancy services. Provision of
service gets completed on 15th September. Invoice for the service is issued on 20th
September and payment is received on 10th October.
Solution:
Since invoice is issued within 30 days from the date of supply of service, time of supply
is the date of issue of invoice, i.e. 20th September being earlier than the date of receipt of
payment.
2. If in the above illustration, invoice is issued on 25th October, the time of supply will be
the date of provision of service, i.e. 15th September being earlier than the date of receipt

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 Goods & Service Tax
of payment. This would be so as the invoice is not issued within 30 days from the date of
supply of service.

Note: In terms of the proviso to section 13(2), for a payment of up to Rs.1,000 received in
excess of the invoice value, the supplier can choose to take the date of invoice issued with
respect to such excess amount as the time of supply of services in relation to this excess value.

This provision facilitates the supplier to defer payment of tax on small amounts typically
received by him in excess of the invoice amount.

Example: A telephone company receives Rs.5000 against an invoice of Rs.4800. The excess
amount of Rs.200 can be adjusted against next invoice. The company has the option to take
date of next invoice as the time of supply of service in relation to the amount of Rs.200
received in excess against earlier invoice.

3) Reverse Charge Mechanism [Section 13(3)]:

The time of supply of services under the “reverse charge mechanism” is the earliest of the
following:
a) Date immediately following 60 days from the date of issue of invoice or any other
document, by whatever name called, in lieu thereof by the supplier:
b) Date of payment, which is the earlier of the-
➢ Date of debit in the bank account as reflected in the bank statement of the recipient
➢ Date of recording the payment in the books of account, by the recipient.

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.

Illustration:
Case Date of Date of entry Date of Date of 61st day Time of
No. invoice in books of credit in Payment from supply of
A/c bank A/c Date of service
invoice
1 14/10/2020 20/10/2020 21/10/2020 20/10/2020 10/12/2020 20/10/2020
2 04/09/2020 30/11/2020 28/11/2020 28/11/2020 04/11/2020 04/11/2020
(61st day from
DOI)

Provided further that, in case of transactions between ‘associated enterprises’ where the
supplier of service is located outside India, the time of supply will be the date of entry in the
books of account of the recipient of supply or the date of payment, whichever is earlier.

Note: Associated enterprises shall have the same meaning as assigned to it in section 92A of
the Income-tax Act, 1961 [Section 2(12)].

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 Goods & Service Tax
Broadly, an associated enterprise in relation to another enterprise, means an enterprise which
participates, directly or indirectly, or through one or more intermediaries, in the management
or control or capital of the other enterprise.

Illustration: (Associated Enterprises)

Soha Pvt. Ltd. is an Indian Company. It has received taxable supply of services from a UK based
company John Ltd. On 1.1.2018. John Ltd. raised on Soha Pvt. Ltd. an invoice of € 55,000 on
10.2.2018. John Ltd. debited its books of account on 25.2.2018. and made the payment on
25.3.2018. John Ltd. and Soha Pvt. Ltd. are associated enterprises.
Determine the time of supply using aforesaid details.
Solution:
In case of “associated enterprises”, where the person providing the service is located outside
India, the Time of supply of service shall be earlier of the following two dates-
a) Date of entry in the books of account of Soha Pvt, Ltd. i.e., 25.2.2018 Or
b) Date of payment i.e., 25.3.2018

Thus, the time of supply of service is 25.2.2018

4) Vouchers [Section 13(4)]: [Same as for goods u/s 12(4)]

The time of supply vis-à-vis vouchers is determined as under:
a) Where the supply is identifiable at the time of the issue of the voucher: the date of issue
of the voucher would be construed as the time of supply.
b) Where the supply is not identifiable at the time of issue of the voucher: the date of
redemption of the voucher would be construed as the time of supply.

5) All other instances-Residuary cases [Section 13(5)]: [Same as for goods u/s 12(5)]
Where it is not possible to determine the time of supply under the provisions of sub-section (2) or
sub-section (3) or sub-section (4), the time of supply shall-
a) Where a periodical return is to be filed (GST returns) - Due-date for filing such periodic
returns or
b) In other cases- the date of payment of GST

6) Value addition after sale [Section13(6)]:

The time of supply to the extent it relates to an addition in the value of supply by way of interest,
late fee or penalty for delayed payment of any consideration shall be the date on which the
supplier receives such addition in value.

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 Goods & Service Tax
Illustrations:
1) Determine the time of supply from the given information.
May 4 A German company issues email informing its associated company ABC
Ltd. of the cost of technical services provided to it.
July 2 ABC Ltd transfers the amount to the account of the German company
Solution:
As there is no prior entry of the amount in the books of account of ABC Ltd., July 2 will be the
time of supply, being the date of payment in terms of second proviso to section 13(3).

2) Mugdha Private Limited is engaged in supply of services. It receives advances of Rs. 1,00,000
from clients on 23rd June, 20XX for the service to be rendered in the month of July, 2020.
Solution:
As per section 13(2) advances received are taxable at the time when such advances are received.
Thus, time of supply of service is 23rd June, 2020.

3) Rohan Ltd. provided management consultancy services to M/s. Bhatia & Sons on 5th June, 2020
and billed it for Rs. 1,20,000 on 10th July, 2020. It received the payment for the same on 14th
July, 2020.
Solution:
As per section 13(2) read with section 31(2), in case invoice has not been issued within 30 days of
completion of service, time of supply of service is date of completion of service or date of receipt
of payment, whichever is earlier.
Thus, Time of supply of service is 5th June, 2020.

4) Best Hospitality Services enters into agreement with Drive Marketing Ltd by which Drive
Marketing Ltd. markets Best Hospitality Services’ hotel rooms and sells coupons / vouchers
redeemable for a discount against stay in the hotel.
Solution:
As the supply against which the voucher will be redeemed is identifiable at the time of the issue of
the voucher, the time of supply of the voucher will be its date of issue.

Time of Supply in case of Change in Rate of Tax [Section 14 of CGST Act, 2017]:

Provisions of section 14 relating to determination of time of supply in case of change in rate of tax in
respect of supply of goods or services will be discussed at the Final level.

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 Goods & Service Tax
VALUE OF TAXABLE SUPPLY [Section 15 of CGST act, 2017]:

Section 15 of the CGST Act when read in conjunction with Chapter IV: Determination of Value of
Supply of the CGST rules, states that the value of taxable supply under GST is the transaction value.

Transaction value means [Section 15(1)]-

➢ Price actually paid or payable for the supply of goods or services or both
➢ Where the supplier and the recipient of the supply are not related and
➢ The price is the sole consideration for the supply.

Transaction Value/Value of Supply = Price + Inclusions u/s 15(2) – Discount u/s 15(3)

Provisions of value of supply under CGST Act have also been made applicable to IGST Act vide section
20 of the IGST Act for interstate supply.

Inclusions in determination of Value of Supply [Section 15(2)]:

(a) Any taxes, duties, cess, fees and charges levied under any law for the time being in force other
than this Act (CGST), the SGST Act, the UTGST Act and the GST (Compensation to States) Act,
if charged separately by the supplier.
Example: Municipal tax on goods, Excise Duty on tobacco, Entertainment tax levied by LA etc.
Note: The CBIC has clarified that for the purpose of determination of value of supply under GST,
tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be
includible as it is an interim levy not having the character of tax.
(b) Any amount that the supplier is liable to pay in relation to such supply but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable for
the goods or services or both.
(c) Incidental expenses, including commission and packing, charged by the supplier to the recipient of
a supply and any amount charged for anything done by the supplier in respect of the supply of
goods or services or both at the time of, or before delivery of goods or supply of services.
Example: Inspection or certification charges, Installation and testing charges, loading charges,
designing charges etc.
(d) Interest or late fee or penalty for delayed payment of any consideration for any supply; and
(e) Subsidies directly linked to the price excluding subsidies provided by the Central Government and
State Governments.
Explanation: For the purposes of this sub-section, the amount of subsidy shall be included in the
value of supply of the supplier who receives the subsidy.

Example: The selling price of a notebook is Rs.50. For notebooks sold to students in Government
schools, a company uses its CSR funds to pay the seller Rs.30, so that the students pay only Rs.20 per
notebook.
The value of the notebook will be Rs.50, as this is a non-government subsidy. If the same subsidy is
paid by the Central Government or State Government, the value of the notebook would be Rs.20.

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 Goods & Service Tax
Exclusions in determination of Value of Supply [Section 15(3)]:

(a) Any discount which is given before or at the time of the supply if such discount has been duly
recorded in the invoice issued in respect of such supply; and
(b) Any discount given after the supply has been affected, if -
i. Such discount was known and agreed at the time of supply, that is, established in terms of
an agreement entered into at or before the time of such supply and specifically linked to
relevant invoices; and
ii. Input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.

Allowability of certain specific types of discounts offered by the suppliers as clarified vide Circular
No. 92/11/2019 GST dated 07.03.2019:

a) Staggered discounts (‘Buy more, Save more’ offers): In case of staggered discounts, rate of
discount increases with increase in purchase volume. For example - Get 10 % discount for
purchases above Rs.5,000/-, 20% discount for purchases above Rs.10,000/- and 30% discount for
purchases above Rs.20,000/-. Such discounts are shown on the invoice itself.
Such discounts are excluded to determine the value of supply.
b) Periodic / year ending discounts/volume discounts: These discounts are offered by the suppliers
to their stockists, etc. For example- Get additional discount of 1% if you purchase 10,000 pieces in a
year, get additional discount of 2% if you purchase 15,000 pieces in a year. Such discounts are
established in terms of an agreement entered into at or before the time of supply though not shown
on the invoice as the actual quantum of such discounts gets determined after the supply has been
effected and generally at the year end. In commercial parlance, such discounts are colloquially
referred to as "volume discounts". Such discounts are passed on by the supplier through credit notes.

Such discounts are excluded to determine the value of supply provided they satisfy the parameters
laid down in section 15(3) of the CGST Act, including the reversal of ITC by the recipient of the
supply as is attributable to the discount on the basis of document (s) issued by the supplier.
Example: The agreement of Raju Electrical Appliances with its dealers is that purchase of rice
cookers over 1000 pieces in the Diwali month will entitle them to discount of 5% per cooker.
Therefore, the quantum of discount can be determined only at the end of Diwali month. However,
since the agreement relating to discount was in existence at the time of supply, and the discount can
be worked out for each invoice, such post supply discount will be allowed as a deduction from the
value of supply of rice cookers.
Raju Electrical Appliances can issue credit note for 5% of the value of goods along with GST and
claim adjustment of excess tax paid. The dealer must reverse the proportionate input tax credit on
the relevant stock to bring it in line with the reduced tax.
c) Secondary discounts: These are the discounts which are not known at the time of supply or are
offered after the supply is already over. For example, A supplies 10,000 packets of biscuits to B at
Rs.10/- per packet. Afterwards, A re-values it at Rs.9/- per packet. Subsequently, A issues credit
note to M/s B for Rs.1/- per packet.

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 Goods & Service Tax
Such secondary discounts shall not be excluded while determining the value of supply as such
discounts are not known at the time of supply and the conditions laid down in section 15(3)(b) of
the CGST Act are not satisfied.
It may be noted that financial / commercial credit note(s) can be issued by the supplier even if the
conditions mentioned in section 15(3)(b) of the CGST Act are not satisfied.

Supplies where value cannot be determined u/s 15(1) [Section 15(4)] and notified supplies
[Section 15(5)]:

Section 15(4) lays down that where sub-section (1) is not applicable, that is, if the transaction is with a
related party, and/or price is not the sole consideration for the supply of goods / services, then the value
will be determined in the manner as prescribed, which means as stipulated in the rules for valuation.
Further, Section 15(5) lays down that in respect of certain notified supplies also, the value will be
determined in the manner as stipulated in the rules for valuation and these rules will be discussed at the
Final level.

Rule 35: Value of Supply inclusive of Integrated tax, Central tax, State tax, Union territory
tax

Where the value of supply is inclusive of integrated tax or, as the case may be, central tax, State tax,
Union territory tax, the tax amount shall be determined in the following manner, namely, –

Tax amount = (Value inclusive of taxes x Tax rate in % of IGST or, as the case may be, CGST, SGST or
UTGST) ÷ (100 + Sum of tax rates, as applicable, in %).

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PROBLEMS:

1) A machine has to be supplied at site. It is done by sourcing various components from vendors and
assembling the machine at site. The details of the various events are:
th
17 September Purchase order with advance of Rs.50,000 is received for goods worth
Rs.12 lakh and entry duly made in the seller’s books of account
20th October The machine is assembled, tested at site, and accepted by buyer

23rd October Invoice raised

4th November Balance payment of Rs.11,50,000 received

Determine the time of supply(ies) in the above scenario.

2) Determine the time of supply from the given information.

May 4 Supplier invoices goods taxable on reverse charge basis to Pillar & Co.
(30 days from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 3 Payment made for the goods

3) Determine the time of supply in the following cases assuming that GST is payable under reverse
charge:
Sl. No. Date of receipt of Date of payment by the recipient of Date of issue of
goods goods invoice by the
supplier of goods
i) July 1 August 10 June 29
ii) July 1 June 25 June 29
iii) July 1 Part payment made on June 30 and June 29
balance amount paid on July 20
iv) July 5 Payment is entered in the books of June 1
account on June 28 and debited in
recipient’s bank account on June 30
v) July 1 Payment is entered in the books of June 29
account on June 30 and debited in
recipient’s bank account on June 26
vi) August 1 August 10 June 29

4) Determine the time of supply from the given information:

6th May Booking of convention hall, sum agreed Rs.15,000, advance of Rs.3,000
received
15th September Function held in conventional hall
27th October Invoice issued for Rs.15,000, indicating balance of Rs.12,000 payable
3rd November Balance payment of Rs.12,000 received

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5) Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an
apartment complex, for which the Apartment Owners’ Association showed a payment in cash on
4th April to them against work of this description. The dates of the work are not clear from the
records of ABC & Co. ABC & Co have not issued invoice or entered the payment in their books
of account.

6) Determine the time of supply from the given information. (Assume that service being supplied is
taxable under reverse charge)
May 4 The supplier of service issues invoice for service provided. There is a dispute
about amount payable, and payment is delayed.
August 21 Payment made to the supplier of service

7) Determine the time of supply in the following cases assuming that GST is payable under reverse
charge:
Sl. Date of payment by the recipient for Date of issue of
No. supply of services invoice by the
supplier of services
i) August 10 June 29
ii) August 10 June 1
iii) Part payment made on June 30 and balance June 29
amount paid on September 1
iv) Payment is entered in the books of account June 1
on June 28 and debited in recipient’s bank
account on June 30
v) Payment is entered in the books of account June 29
on June 30 and debited in
recipient’s bank account on June 26

8) Samriddhi Advertisers conceptualised and designed the advertising campaign for a new product
launched by New Moon Pvt Ltd. for a consideration of Rs.5,00,000. Samriddhi Advertisers owed
Rs.20,000 to one of its vendors in relation to the advertising service provided by it to New Moon
Pvt Ltd. Such liability of Samriddhi Advertisers was discharged by New Moon Pvt Ltd. New
Moon Pvt Ltd. delayed the payment of consideration and thus, paid Rs.15,000 as interest. Assume
the rate of GST to be 18%.
Determine the value of taxable supply made by Samriddhi Advertisers.

9) Nisha Enterprises had made supplies of INR 7,50,000 to Tee Kay Services. There was a tax
levied by Municipal Authorities on such sale of INR 75,000/-. CGST and SGST chargeable on
the supply was 37,500/-. Packing charges, not included in the price above amounted to INR
15,000.
Nisha Enterprises received a subsidy of INR 30,000/- from an NGO on the sale of such goods,
and the price mentioned above is after taking in to account the subsidy.
Discount offered is @ 1% and that’s mentioned on the Invoice.
Determine the Value of Supply.

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10) M/s. Flow Pro, a registered supplier, sold a machine to BP Ltd.
It provides the following information in this regard-
Price of the machine [excluding taxes and other charges mentioned below] 25,000
Third party inspection charges 5,000
[Such charges were payable by M/s Flow Pro but the same have been directly
paid by BP Ltd. to the inspection agency. These charges were not recorded in the
invoice issued by M/s Flo Pro.]
Freight charges for delivery of the machine 2,000
[M/s Flow Pro has agreed to deliver the goods at BP Ltd.’s premises]
Subsidy received from the State Government on sale of machine under Skill 5,000
Development Programme
[Subsidy is directly linked to the price]
Discount of 2% is offered to BP Ltd. on the price mentioned above and recorded
in the invoice
Note: Price of the machine is net of the subsidy received.
Determine the value of taxable supply made by M/s Flow Pro to BP Ltd.

“If you salute your duty, you need not salute anybody. But if
you pollute your duty, you have to salute everybody”

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CHAPTER-6

INPUT TAX CREDIT

INPUT TAX CREDIT:

Taxes paid on inward supply of inputs, capital goods and services are called input taxes. These may be
Integrated GST, Central GST, State GST or Union Territory GST. Taxes paid under reverse charge
mechanism are also input taxes.

The credit of the above taxes is called input tax credit, that is, the taxes paid on inputs are available as a
set off against the taxes payable on outward taxable supplies.
CGST Act, 2017 contains the provisions relating to ITC, its availment, utilization and conditions and
restrictions attached therewith.

Input Tax Credit (ITC) is considered as a cornerstone of GST. In the previous tax regime, there was non-
availability of credit at various points in supply chain, leading to a cascading effect of tax i.e., tax on tax
and therefore increasing the cost of goods and services. This flaw has been removed under GST and a
seamless flow of credit throughout the value chain is therefore available consequently doing away with
the cascading effect of taxes.

To avail the benefit of ITC, it is required that the person availing such benefit is registered under GST. An
unregistered person is not eligible to take the benefit of ITC. Section 155, of the CGST Act, 2017 states
that where any person claims that he is eligible for input tax credit under this Act, the burden of proving
such claim shall lie on such person.

Section 49(5) of the CGST Act, 2017 provides for utilization of ITC in Electronic credit ledger for
payment of GST.

Provisions of ITC under CGST Act have also been made applicable to IGST Act vide section 20 of the
IGST Act.

RELEVANT DEFINITIONS:

Capital goods: Capital goods means goods, the value of which is capitalized in the books of account of
the person claiming the ITC and which are used or intended to be used in the course or furtherance of
business [Section 2(19)].

Exempt supply: Exempt supply means supply of any goods or services or both which attracts nil rate of
tax or which may be wholly exempt from tax under section 11, or under section 6 of the IGST Act, and
includes non-taxable supply [Section 2(47)].

Input: Input means any goods other than capital goods used or intended to be used by a supplier in the
course or furtherance of business [Section 2(59)].

Input service: Input service means any service used or intended to be used by a supplier in the course or
furtherance of business [Section 2(60)].

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Input tax: Input tax in relation to a registered person, means the central tax, State tax, integrated tax or
Union territory tax charged on any supply of goods or services or both made to him but does not include
the tax paid under the composition levy [Section 2(62)].

Input tax credit: Input tax credit means the credit of input tax [Section 2(63)].

Inward supply: Inward supply in relation to a person, shall mean receipt of goods or services or both
whether by purchase, acquisition or any other means with or without consideration [Section 2(67)].

Zero-rated supply: Zero-rated supply means any of the following supplies of goods or services or both,
namely:––
a) export of goods or services or both; or
b) supply of goods or services or both to a Special Economic Zone (SEZ) developer or a Special
Economic Zone unit [Section 16(1) of the IGST Act].

ELIGIBILITY AND CONDITIONS FOR TAKING INPUT TAX CREDIT [Section 16]:

(1) Every registered person shall be entitled to take credit of input tax charged on any supply of goods
or services or both to him which are used or intended to be used in the course or furtherance of his
business and the said amount shall be credited to the electronic credit ledger of such person.

(2) No registered person shall be entitled to the credit of any input tax in respect of any supply of
goods or services or both to him unless,
(a) He is in possession of a tax invoice or debit note issued by a supplier registered under this
Act, or such other tax paying documents as may be prescribed;
aa) The details of the invoice/debit note in respect of said supply has been furnished by the
supplier in the statement of outward supplies (GSTR-1 or Invoice Furnishing Facility IFF)
and such details have been communicated to the recipient in the manner specified under
section 37.
Note: ITC can now be taken only for those invoices/debit notes whose details are reflected
in Form GSTR-2B i.e only when the respective suppliers (vendors) have filed the details of
such invoices in their Form GSTR-1 or using IFF.
(b) He has received the goods or services or both.
The registered person need not receive the goods or services himself. It is sufficient even if
the goods or services are delivered to some other person on his direction.
Example: A is a trader who places an order on B for a consignment of soda ash. A receives
a buying order from C for the same quantity of soda ash. A instructs B to deliver the goods
to C. Though the goods are not physically received at the premises of A, section 16(2)(b)
allows ITC of such goods to A.
(c) Subject to the provisions of Section 41, the tax charged in respect of such supply has been
actually paid to the Government by the supplier, either in cash or through utilization of
input tax credit admissible in respect of the said supply; and
(d) He(Recipient) has furnished the return under section 39 i.e GSTR-3B

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Provided that where the goods against an invoice are received in lots or installments, the
registered person shall be entitled to take credit upon receipt of the last lot or installment.

Provided further that where a recipient fails to pay to the supplier of goods or services or both, the
amount towards the value of supply along with tax payable thereon within a period of 180 days
from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed
by the recipient shall be added to his output tax liability, along with interest thereon, in such
manner as may be prescribed.

Interest will be paid @ 18% from the date of availing credit till the date when the amount added
to the output tax liability is paid.

However, once the recipient makes the payment of value of goods and/or services along with tax,
he will be entitled to avail the credit again without any time limit.

Exceptions:
This condition of payment of value of supply plus tax within 180 days does not apply in the
following situations:
a) Supplies on which tax is payable under reverse charge
b) Deemed supplies without consideration as per section 7(1)(c) read with schedule I
c) Additions made to the value of supplies on account of supplier’s liability, in relation to such
supplies, being incurred by the recipient of the supply as per section 15(2)(b).

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital
goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.
In other words, either depreciation on the tax component can be claimed under Income Tax Act or
ITC of such tax paid can be availed under GST laws.

(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit
note for supply of goods or services or both after-
➢ 30the November of the following financial year OR
➢ Actual date of furnishing of the relevant annual return
Whichever is earlier.
Exception:
The time limit u/s 16(4) does not apply for re-availing of credit that had been reversed earlier.

Illustration 1:
Mr. A orders 30,000 tonnes of goods which are to be delivered by the supplier via 3 lots of 10000 each in
May, June and July 2022. The lots are sent under a single invoice with the first lot and the payment is
made by the recipient for Value of Supply plus GST and the supplier has also deposited the tax with the
Government. When can the Mr. A avail ITC?
Solution:

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The 3 lots are supplied in May, June and July 2022. The ITC is available to Mr. A only after the receipt of
the 3rd lot. The reason is simple; one of the conditions to avail ITC is the receipt of goods which is
completed only after the last lot is delivered.

Illustration 2:
Mr.X has procured a machinery for INR 25,00,000 and paid GST of INR 4,50,000 (18% GST). He has
capitalized the invoice value and will claim depreciation of the entire Invoice Value i.e Rs.29,50,000.
Please advise on the availability of ITC.
Solution:
If the depreciation is claimed on the ITC component, ITC cannot be availed and hence Mr. X will not be
able to avail ITC in this case.

Illustration 3:
Invoice dated 1.1.2022 received by the recipient involving taxable value of Rs. 1000 and ITC of Rs.180.
The recipient availed credit against such invoice on 30.1.2022.
It made payment to the supplier against such invoice on 30.9.2022.
Solution:
In this case, since the recipient fails to make payment to the supplier with 180 days from the date of
invoice, it is liable to add such credit in its output liability immediately on the expiry of 180 days from the
date of invoice.
Additionally, it is liable to pay interest on Rs. 180 at 18% calculated from the date of availment of ITC,
i.e., 30.1.2022 until such addition in the output tax liability is paid.

Illustration 4:
Invoice is dated 31st July 2022. Annual return for 2022-23 is filed on 20.10.2023.
Solution:
Invoice is related to F.Y 2022-23 and Annual return for 2022-23 is filed on 30.11.2023.
Standard date is 30.11.2023.
Earlier of two dates is 20.10.2022.
In this case, Recipient will be able to claim input tax credit not later than 20.10.2023.
ITC needs to be claimed and to be reported in the return (GSTR-3B) for September 2023 due to be filed
on 20.10.2023.

Illustration 5:
A limited received invoice dated 10.4.2022 containing input tax of Rs. 1,00,000. A Limited filed its
annual return for 2022-23 on 31.8.2023.
Solution:
Invoice is related to F.Y 2022-23 and Annual return for 2022-23 is filed on 31.8.2023.
Standard date is 30.11.2023.
Earlier of two dates is 31.8.2023.
In this case, A Limited will be able to claim input tax credit not later than 31.8.2022.
Hence, A Limited will have to avail and report such input tax credit in GSTR-3B for the month of July
2023 to be filed on or before 20.8.2023.

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Apportionment of Credit and Blocked Credits [Section 17]:

Below is a list of few situations as mentioned in section 17 of Central GST Act, 2017 where input tax
credit will not be available:
(1) Where the goods or services or both are used by the registered person partly for the purpose of any
business and partly for other purposes, the amount of credit shall be restricted to so much of the
input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered person partly for effecting taxable
supplies including zero-rated supplies under this Act or under the Integrated Goods and Services
Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be
restricted to so much of the input tax as is attributable to the said taxable supplies including zero-
rated supplies.
Example: A registered person manufactures a product ‘X’ chargeable to 18% GST, a product ‘Y’
chargeable to NIL rate of tax and a product ‘Z’ which is exported without payment of tax under
bond. All the three products are manufactured from common inputs and input services. ITC on
inputs and input services attributable to product ‘Y’ being an exempt supply, will not be available.

(3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, and shall
include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in
securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
Explanation- For the purposes of this sub-section, the expression ''value of exempt supply'' shall
not include the value of activities or transactions specified in Schedule III, except those specified in
paragraph 5 of the said Schedule. i.e. sale of land & sale of building. Therefore, while in all other
items of Schedule III, I.T.C. will not be required to be reversed. However, in case of sale of land
and building, I.T.C. will need to be reversed.
(4) A banking company or a financial institution including a non-banking financial company, engaged
in supplying services by way of accepting deposits, extending loans or advances shall have the
option to either comply with the provisions of sub-section (2), or avail of, every month, an amount
equal to 50% of the eligible input tax credit on inputs, capital goods and input services in that month
and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn during the remaining part of the
financial year:
Provided further that the restriction of 50% shall not apply to the tax paid on supplies made by one
registered person to another registered person having the same Permanent Account Number.

Input Tax Credit is available only on those goods and services used for business. Exports and supplies to
SEZ fall under the category of zero-rated supplies. ITC is available on zero rated supplies and taxable
supplies but not on exempt supplies.

Illustration:
Input X is used to produce and supply output Y which is exempt. Whether ITC is available?
Solution:
No. ITC is not available on input X because it was used for exempt supply.
In the above example if the output Y is exported or supplied to an SEZ unit, ITC is available on Input X
as the outward supply is zero rated.

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Blocked Credits [Section 17(5)]:

Input tax credit shall not be available in respect of the following, namely:
a) Motor vehicles for transportation of persons having approved seating capacity of not more than 13
persons (including the driver), except when they are used for making the following taxable
supplies, namely:-
i. further supply of such motor vehicles; or
ii. transportation of passengers; or
iii. imparting training on driving such motor vehicles;
Examples:
1. ITC on cars purchased by a manufacturing company for official use of its employees is
blocked.
2. ITC on cars purchased by a car dealer for sale to customers is allowed.
3. ITC on cars purchased by a company engaged in renting out cars for transportation of
passengers, is allowed.
4. ITC on cars purchased by a car driving school is allowed.
5. ITC on buses (seating capacity for 24 persons) purchased by a company for transportation
of its employees from their residence to office and back, is allowed.
6. ITC on trucks purchased by a company for transportation of its finished goods is allowed.

aa) Vessels and aircraft except when they are used –

i. for making the following taxable supplies, namely: -
➢ further supply of such vessels or aircraft; or
➢ transportation of passengers; or
➢ imparting training on navigating such vessels; or
➢ imparting training on flying such aircraft;
ii. for transportation of goods;
Examples:
1. ITC on aircraft purchased by a manufacturing company for official use of its CEO is
blocked.
2. ITC on aircraft purchased by an Aviation School providing training on flying aircrafts, is
allowed.

bb) Services of general insurance, servicing, repair and maintenance in so far as they relate to motor
vehicles, vessels or aircraft referred to in clause (a) or clause (aa):
Provided that the input tax credit in respect of such services shall be available -
i. where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are
used for the purposes specified therein;
ii. where received by a taxable person engaged –
➢ in the manufacture of such motor vehicles, vessels or aircraft; or
➢ in the supply of general insurance services in respect of such motor vehicles, vessels
or aircraft insured by him;

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Examples:
1. ITC on general insurance taken on a car used by employees of a manufacturing company for
official purposes, is blocked.
2. ITC on maintenance & repair services availed by a company for a truck used for
transporting its finished goods, is allowed.
3. ITC on general insurance services taken on cars manufactured by a car manufacturing
company is allowed.

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

i. The following supply of goods or services or both-
➢ Food and beverages,
➢ Outdoor catering,
➢ Beauty treatment,
➢ Health services,
➢ Cosmetic and Plastic surgery,
➢ Leasing, Renting or hiring of Motor vehicles, vessels or aircraft referred to in clause
(a) or clause (aa) except when used for the purposes specified therein,
➢ Life insurance and
➢ Health insurance:
Provided that the input tax credit in respect of such goods or services or both shall be
available where an inward supply of such goods or services or both is used by a registered
person for making an outward taxable supply of the same category of goods or services or
both or as an element of a taxable composite or mixed supply;
ii. membership of a club, health and fitness centre; and
iii. travel benefits extended to employees on vacation such as leave or home travel concession

Provided that the input tax credit in respect of such goods or services or both shall be
available, where it is obligatory for an employer to provide the same to its employees under
any law for the time being in force.

Examples:
1. A manufacturing company purchases food items for being served to its customers, free of
cost. ITC on such goods is blocked.
2. AB & Co., a caterer of Amritsar, has been awarded a contract for catering in a marriage to
be held at Ludhiana. The firm has given the contract for supply of snacks, to be served in
the marriage, to CD & Sons, a local caterer of Ludhiana. ITC on such outdoor catering
services availed by AB & Co., is allowed.
3. Outdoor catering service is availed by a company to run a free canteen in its factory. The
Factories Act, 1948 requires the company to set up a canteen in its factory. ITC on such
outdoor catering is allowed.
4. The Managing Director of a company has taken membership of a club, the fees for which is
paid by the company. ITC on such service is blocked.
5. A company avails services of a travel agency for organizing a free vacation for its top
performing employees. ITC on such services is blocked.

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c) Works contract services when supplied for construction of an immovable property (other than
plant and machinery) except where it is an input service for further supply of works contract
service;
ITC on works contract services for construction of immovable property is available only
in the following three situations:
i. When the works contract service is availed by a works contractor for being used in
providing the works contract service.
ii. For construction of plant and machinery. In this case, ITC is allowed to all recipients
irrespective of their line of business.
iii. When the value of works contract service is not capitalized. In this case, ITC is
allowed to all recipients irrespective of their line of business.

Examples:
1. ITC on works contracts services availed by a software company for construction of its
office, is blocked.
2. CD & Co., a works contractor of Noida, has been awarded a contract for construction of a
commercial complex in Lucknow. The firm avails services of EF & Co., a local works
contractor of Lucknow, for the construction of complex. ITC on such works contract
services availed by CD & Co., is allowed.
3. ITC on works contract services availed by an automobile company for construction of a
foundation on which a machinery (to be used in the production process) is to be mounted
permanently, is allowed.
4. A consulting firm has availed services of a works contractor for repair of its office building.
The company has booked such expenditure in its profit and loss account. ITC on such
services is allowed.

d) Goods or services or both received by a taxable person for construction of an immovable

property (other than plant or machinery) on his own account including when such goods or
services or both are used in the course or furtherance of business.
ITC on goods and/or services used in construction of immovable property is available
only in the following three situations:
i. For construction of plant and machinery
ii. When the value of goods and/or services is not capitalized
iii. When the construction is not on own account

Examples:
1. A company buys cement, tiles etc. and avails the services of an architect for construction of
its office building. ITC on such goods and services is blocked.
2. MN & Constructions procures cement, paint, iron rods and services of architects and
interior designers for construction of a commercial complex for one of its clients. ITC on
such goods and services is allowed to MN & Co.
3. A company buys cement, tiles etc. and avails the services of an architect for renovation of
its office building. The company has booked such expenditure in its profit and loss account.
ITC on such goods and services is allowed.

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Explanation- For the purposes of clauses (c) and (d), the expression "construction" includes re-
construction, renovation, additions or alterations or repairs, to the extent of capitalization, to the
said immovable property;

e) Goods or Services or both on which tax has been paid under section 10; (Composition Supply
Scheme)
f) Goods or Services or both received by a non-resident taxable person except on goods imported
by him;
g) Goods or Services or both used for personal consumption;
h) Goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples
However, where the activity of distribution of gifts or free samples falls within the scope of
"supply" on account of the provisions contained in Schedule I of the said Act, the supplier
would be eligible to avail the ITC.
Further It is clarified that ITC shall be available to the supplier for the inputs, input services
and capital goods used in relation to supply of goods or services or both as part of Buy one get
one free offer and Buy more, save more offers; and
i) Any tax paid in accordance with the provisions of sections 74, 129 and 130. (Recovery
Sections)

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

Illustration 1:
ABC Ltd. is engaged in the manufacture of electrical appliances and following details are available,
advice ITC eligibility of the following:
Item GST Paid
Electrical Transformers utilized in the manufacturing Process INR 2,50,000
Trucks used for transporting materials INR 1,25,000
Cakes and Pastries for consumption within factory INR 12,500

Solution:
a) The ITC on electrical transformers would be fully available as these are used in the course of
business/ furtherance of business
b) The ITC on trucks used for transporting vehicles would be available as these are used in the course
of business/furtherance of business
c) ITC on food and beverages is a blocked credit unless the inward taxable supplies are used to make
outward taxable supplies in the same category whereas the above is for consumption and hence
disallowed

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Illustration 2:
Mr.B procured stocks worth INR 50,00,000 inclusive of GST but these goods were lost to dacoity,
however, he now wants to avail ITC as he has anyways paid the entire Invoice value.
Solution:
ITC can only be availed if the goods / services so availed are used to make outward taxable supplies or if
they are required during the course of business / furtherance of business. In this case, the goods were lost
and hence no ITC can be availed.

ITC in the hands of the supplier in respect of Sales Promotional Schemes:

Circular No. 92/11/2019 GST dated 28.03.2019 has clarified the entitlement of ITC in the hands of
supplier in respect of various sales promotional schemes as under:
1. Samples and free gifts:
ITC shall not be available to the supplier on the inputs, input services and capital goods to the
extent they are used in relation to the gifts or free samples distributed without any consideration.
However, where the activity of distribution of gifts or free samples falls within the scope of
“supply” on account of the provisions contained in Schedule I of the said Act, the supplier would
be eligible to avail the ITC.
2. Buy one get one free offer:
This is not an individual supply of free goods, but a case of two or more individual supplies where
a single price is being charged for the entire supply. It can at best be treated as supplying two
goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is a composite supply
or a mixed supply and the rate of tax shall be determined as per the provisions of section 8.
ITC shall be available to the supplier for the inputs, input services and capital goods used in
relation to supply of goods or services or both as part of such offers.
3. Discounts including ‘Buy more, save more’ offers:
Discounts offered by the suppliers to customers (including staggered discount under “Buy more,
save more” scheme and post supply / volume discounts established before or at the time of supply)
shall be excluded to determine the value of supply provided they satisfy the parameters laid down
in section 15(3), including the reversal of ITC by the recipient of the supply as is attributable to
the discount on the basis of document issued by the supplier.
However, the supplier shall be entitled to avail the ITC for such inputs, input services and capital
goods used in relation to the supply of goods or services or both on such discounts.
4. Secondary discounts:
These are the discounts which are not known at the time of supply or are offered after the supply is
already over. Such discounts shall not be excluded while determining the value of supply. There is
no impact on availability or otherwise of ITC in the hands of supplier in this case.

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Availability of Input Tax Credit in Special Cases [Section 18]:

(1) Subject to such conditions and restrictions as may be prescribed -

Case Persons eligible Goods entitled as on Conditions

Section Person who has applied for He can claim the ITC on inputs held in
18(1)(a) registration within 30 days the form of Raw Materials / WIP/
from the date on which he Finished Goods as on the day
becomes liable to registration, immediately preceding the date from ITC must be availed
and has been granted such which he becomes liable to pay tax within 1 year from the
registration (Illustration 1) date of issue of tax
invoice by the supplier.
18(1)(b) Person who isn’t liable to He can claim the ITC on inputs held in
register, but obtains voluntary the form of Raw Materials/ WIP/
registration u/s 25(3) Finished Goods as on the day
immediately preceding the date of grant
of registration. (Illustration 2)

18(1)(c) Registered person who ceases He can claim the ITC on inputs held in
to pay tax under composition the form of Raw Materials/ WIP /
scheme and switches to the Finished Goods & Capital Goods as on ITC on Capital Goods
regular scheme the day immediately preceding the date will be reduced by 5%
from which he becomes liable to pay tax per quarter of the year /
under the regular scheme (Section 9) part thereof of usage
from the date of invoice.
18(1)(d) Registered person whose He can claim the ITC on inputs held in [Rule 40]
exempt supplies become the form of Raw Materials/WIP/
taxable Finished Goods & Capital Goods ITC must be availed
relatable to such exempt supply as on within 1 year from the
date of issue of tax
the day immediately preceding the date
from which the supply becomes taxable invoice by the supplier.
(Illustration 3)

As per Rule 40, Registered person shall within a period of 30 days from the date of becoming
eligible to avail the input tax credit under section 18(1), or within such further period as may be
extended by the Commissioner, shall make a declaration, electronically, on the common portal in
FORM GST ITC- 01 to the effect that he is eligible to avail the input tax credit as aforesaid.

(2) A registered person shall not be entitled to take input tax credit under sub-section (1) in respect of
any supply of goods or services or both to him after the expiry of 1 year from the date of issue of
tax invoice relating to such supply.
Note: Here, the maximum time limit for availing ITC is 1 year. Invoices more than 1 year old are
not eligible for taking credit.

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(3) Treatment of Input Tax Credit in the Event of Transfer of Business, etc.:
Where there is a change in the constitution of a registered person on account of sale, merger,
demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer
of liabilities, the said registered person shall be allowed to transfer the input tax credit which
remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated,
leased or transferred business in such manner as may be prescribed.

As per Rule 41 of the CGST Rules,

a) The transferor shall furnish details of sale, merger, demerger, amalgamation, lease or transfer
of the business in FORM GST ITC- 02 along with the request for transfer of the unutilized
ITC to the transferee.
b) Transferor shall also furnish a certificate signed issued by a practicing Chartered Accountant
or a Cost Accountant certifying the sale, merger, demerger, amalgamation, lease or transfer of
the business
c) The transferee shall accept the details of input in the electronic portal and shall get credited to
his electronic credit ledger.
d) The inputs and capital goods so transferred shall be duly accounted for by the transferee in his
books of account.

(4) Reversal of Credit under Special circumstances:

Where any registered person who has availed of input tax credit opts to pay tax u/s 10 or, where
the goods or services or both supplied by him become wholly exempt, he shall pay an amount,
equivalent to the credit of input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock and on capital goods, reduced by such percentage points
as may be prescribed, on the day immediately preceding the date of exercising of such option or,
as the case may be, the date of such exemption.
Provided that after payment of such amount, the balance of input tax credit, if any, lying in his
electronic credit ledger shall lapse.

ITC to be reversed on inputs and capital goods is calculated separately for ITC of CGST,
SGST/UTGST and IGST.
The reversal amount is added to the output tax liability of the registered person and the details of
such amount shall be furnished in FORM GST ITC-03.
For capital goods held in stock, the input tax credit involved in the remaining useful life in months
shall be computed on pro-rata basis, taking the useful life as five years.
Example: Capital goods have been in use for 4 years, 6 month and 15 days. The useful remaining
life in months is 5 months ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60

(5) The amount of credit under sub-section (1) and the amount payable under sub-section (4) shall be
calculated in such manner as may be prescribed.

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(6) Treatment of input tax credit on supply of Capital goods or Plant and Machinery:
In case of supply of capital goods or plant and machinery, on which input tax credit has been
taken, the registered person shall pay an amount-
➢ equal to the input tax credit taken on the said capital goods or plant and machinery reduced
by 5% per quarter of the year / part thereof from the date of invoice OR
➢ the tax on the transaction value of such capital goods or plant and machinery determined u/s
15,
Whichever is higher. (Illustration 4)

Provided that where refractory bricks, moulds and dies, jigs and fixtures are supplied as scrap, the
taxable person may pay tax on the transaction value of such goods determined under section 15.

Illustration 1:
Mr. B becomes liable to pay tax on 1st August and he applied for registration on 17th August.
Solution:
He will be entitled to take ITC effective on 31st on inputs held in the form of Raw Materials/ WIP/
Finished Goods; except on Capital Goods.

Illustration 2:
Mr.Z applies for voluntary registration on 1st September and is granted such registration on 9th
September.
Solution:
He will hence be entitled to take ITC effective on 8th September on inputs held in the form of Raw
Materials/ WIP/ Finished Goods; except on Capital Goods.

Illustration 3:
Mr.C acquired a Capital Asset on 1st April, 2021 and used it for production of exempt supplies only.
Now, in November 2021, his supplies become taxable. The cost of the asset was INR 250,000 and GST
18% was charged on it.
Solution:
ITC applicable is INR 250,000 x 18%, which is INR 45,000.
Now, number of quarters of usage that have elapsed between April 2021 to November 2021 are: 3
Quarters.

Hence, there would be a reduction of 5% per quarter for 3 quarters i.e 15%.

Therefore, ITC available would be as under-

Total ITC 45,000
Less: Reduction for 3 quarters (45,000 x 15%) (6,750)
Net ITC available 38,250
Note that this ITC would be available from the date immediately preceding the date from which the
supply becomes taxable.

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Rule 40 of CGST RULES, 2017, states that the amount of credit shall be calculated by reducing the input
tax @ 5% for every quarter or part thereof. It shall be calculated from the date of issue of invoice for the
capital goods.

Illustration 4:
X Ltd. purchased a machine for Rs.1,00,000 and brought it on 1.8.2021 and paid 12% IGST. He availed
input tax credit and used the capital goods in his business. On 5.11.2021 he resold it as second-hand
machine for 65,000. Find out the amount of tax payable/ ITC reversible in the above case.
Solution:
Input Tax 12,000
Less: 5% per quarter of usage (12,000 x 5% x 2Q) (1,200)
Net ITC available 10,800
Transaction Value 65,000
Tax on Transaction Value 7,800

Notes:
➢ 2 quarters have elapsed and therefore 2 x 5%, that is 10% would be the reduction from ITC for
usage.
➢ Tax on Transaction Value @ GST would be computed and compared to the Net ITC available
➢ The higher of the two would be payable for disposal of Capital Goods
➢ If the supply is intrastate, it should be payable in two equal parts (5,400) to Centre and the
concerned State (that is CGST + SGST).
➢ If it is an interstate supply, Rs.10,800 is payable as IGST.

UTILIZATION OF ITC:

Input Tax Credit (ITC) is credited to a person’s electronic credit ledger. The person may use this to pay
his output tax liability.

ITC of IGST to be fully utilised first [New section 49A of the CGST Act, 2017]

Notwithstanding anything contained in section 49, Section 49A provides that ITC of CGST,
SGST/UTGST should be utilised towards payment of IGST, CGST, SGST/UTGST only after the ITC of
IGST has first been utilised fully towards such payment.

Order of utilization of Input Tax Credit [Section 49B read with Rule 88A]:

Input tax credit on account of integrated tax shall first be utilised towards payment of integrated tax, and
the amount remaining, if any, may be utilised towards the payment of central tax and State tax or Union
territory tax, as the case may be, in any order.

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Provided that the input tax credit on account of central tax, State tax or Union territory tax shall be
utilised towards payment of integrated tax, central tax, State tax or Union territory tax, as the case may be,
only after the input tax credit available on account of integrated tax has first been utilised fully.

Order of utilization of Input Tax Credit is as under:

Input tax credit Output liability on account of-
on account of Integrated tax Central tax (CGST) State tax/ Union
(IGST) Territory tax
(SGST/UTGST)
Integrated tax(IGST) (I) (II) – In any order and in any proportion
(III) IGST Credit should be utilized completely first before using CGST & SGST credit
Central tax(CGST) (V) (IV) Not permitted
State tax/ Union (VII) Not permitted (VI)
Territory tax Only after ITC of
(SGST/UTGST) CGST has been
utilized fully
Therefore, it is clear that there is no offset available between the CGST and the SGST.

The numerals given above can be further explained in the following manner:
(I) IGST credit should first be utilized towards payment of IGST.
(II) Remaining IGST credit, if any, can be utilized towards payment of CGST and
SGST/UTGST in any order and in any proportion, i.e. remaining ITC of IGST can be
utilized –
➢ first towards payment of CGST and then towards payment of SGST; or
➢ first towards payment of SGST and then towards payment of CGST; or
➢ towards payment of CGST and SGST simultaneously in any proportion e.g. 50:
50, 30: 70, 40: 60 and so on.
(III) Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or
SGST/UTGST.
(IV) & (V) ITC of CGST should be utilized for payment of CGST and IGST in that order. ITC of
CGST cannot be utilized for payment of SGST/UTGST
(VI) & (VII) ITC of SGST /UTGST should be utilized for payment of SGST/UTGST and IGST in
that order. However, ITC of SGST/UTGST should be utilized for payment of IGST,
only after ITC of CGST has been utilized fully. ITC of SGST/UTGST cannot be utilized
for payment of CGST.
CGST credit cannot be utilized for payment of SGST/UTGST and SGST/UTGST credit cannot be
utilized for payment of CGST.
ITC of IGST need to be exhausted fully before proceeding to utilize the ITC of CGST and SGST in that
order.

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Restrictions on use of amount available in electronic credit ledger [Rule 86B]:

W.e.f. 01.01.2021, a new rule 86B has been inserted in the CGST Rules to restrict the amount available in
electronic credit ledger which a registered person can use to discharge his output tax liability to 99% of
such tax liability in cases where the value of taxable supply other than exempt supply and zero-rated
supply, in a month exceeds Rs.50 lakh. This rule overrides all other rules.

It implies that a registered person shall not use the amount available in electronic credit ledger to
discharge his liability towards output tax in excess of 99% of such tax liability, in cases where the value
of taxable supply other than exempt supply and zero-rated supply, in a month exceeds Rs.50 lakh.

Example: The total value of inter-State supply of Raman & Sons for the month of February 2022 is of
Rs.100 lakh. Said supply is taxable @ 18% IGST. Thus, total output tax liability of Raman & Sons is
Rs.18 lakh. Amount available in electronic credit ledger is Rs.20 lakh (IGST).

In terms of restriction imposed by rule 86B, Raman & Sons can discharge 99% of its output tax liability,
i.e. Rs.17,82,000 (99% of Rs.18,00,000) from the amount available in electronic credit ledger. However,
it has to mandatorily discharge the balance 1% of the output tax liability i.e. Rs.18,000 (1% of
Rs.18,00,000) through electronic cash ledger only.

This restriction shall not apply in following cases-

a) Where the said person/proprietor/karta/managing director/any of its two partners, whole-time
directors, members of Managing Committee of Associations or Board of Trustees, as the case
may be, have paid more than Rs.1 lakh as income tax in each of the last 2 financial years
b) Where the registered person has received a refund of more than Rs.1 lakh in the preceding FY on
account of unutilised ITC in case of (i) zero rated supplies made without payment of tax or (ii)
inverted duty structure.
c) Where the registered person has discharged his liability towards output tax through the electronic
cash ledger for an amount which is in excess of 1% of the total output tax liability, applied
cumulatively, upto the said month in the current financial year.
Example: Assuming a scenario wherein in the F.Y 2021-22 upto August 2021, the total output
tax liability payable is Rs.30 lakh and such registered person has deposited Rs.1 lakh through
electronic cash ledger and balance through electronic credit ledger. Rule 86B would not be
applicable in September 2021[even if the turnover during this month exceeds Rs.50 lakh], since
payment made in cash till September 2021 is more than 1% of total output tax liability. (1% of
Rs.30 lakhs is Rs.30,000).
Interestingly, the aforesaid exception needs to be evaluated in ‘current financial year’, and hence,
for the month of April of any financial year, the said exception will not be applicable.
Accordingly, registered person would be required to pay minimum 1% of output liability through
electronic cash ledger for the month of April unless the registered person is covered under any of
the other exceptions or if the taxable turnover in a month is less than Rs.50 lakh.

It is pertinent to note that GST liability paid under reverse charge mechanism should not be taken
into account while calculating the total output liability paid through electronic cash ledger.

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d) Where the registered person is:-
➢ Government Department
➢ Public Sector Undertaking
➢ Local authority
➢ Statutory body

However, the Commissioner or an officer authorised by him in this behalf may remove the said restriction
after such verifications and such safeguards as he may deem fit.

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PROBLEMS:

1) XYZ Ltd., registered under GST, is engaged in manufacture of taxable goods. Compute the ITC
available with XYZ Ltd. for the month of October, 2022 from the following particulars:-
Sl.No Inward supplies GST (Rs.) Remarks
1 Inputs ‘A’ 1,00,000 One invoice on which GST payable was
Rs.10,000, is missing
2 Inputs ‘B’ 50,000 Inputs are to be received in two installments. First
installment has been received in October, 2022.
3 Capital goods 1,20,000 XYZ Ltd. has capitalised the capital goods at full
invoice value inclusive of GST as it will avail
depreciation on the full invoice value.
4 Input services 2,25,000 One invoice dated 20.01.2022 on which GST
payable was Rs.50,000 has been received in
October, 2022.
Notes:
a) All the conditions necessary for availing the ITC have been fulfilled.
b) The annual return for the financial year ending 31st March 2022 was filed on 15th
September, 2022.

2) Harsh Pvt. Ltd., a registered supplier, is engaged in the manufacture of taxable goods. The
company provides the following information pertaining to purchases made/services availed by it
during the month of July:
Sl.No. Particulars GST (Rs.)
1 Raw material (to be received in the month of September) 2,50,000
2 Membership of a club availed for employees working in the factory 1,45,000
3 Inputs to be received in 5 lots, out of which 3rd lot was received during 80,000
the month
4 Trucks used for transport of raw material 40,000
5 Capital goods (out of 3 items, invoice for 2 items is missing and GST paid 1,50,000
on those items is Rs.80,000)
6 Electric machinery purchased for being used in the manufacturing process 25,000
7 Motor vehicle used for transportation of the employee 55,000
8 Payment made to contractor for construction of staff quarter 1,25,000
9 Purchase of bus (seating capacity 15) for the transportation of employees 1,97,000
from their residence to company and back
10 General insurance taken on a car used by executives of the company for 5,200
official purposes

Determine the amount of ITC available with Harsh Pvt. Ltd. for the month of July. Subject to the
information given above, all the other conditions necessary for availing ITC have been fulfilled.
Solution:

Sl.No. Particulars GST (Rs.) ITC Available

1 Raw material (to be received in the month of September) 2,50,000
2 Membership of a club availed for employees working in 1,45,000
the factory

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3 Inputs to be received in 5 lots, out of which 3rd lot was 80,000
received during the month
4 Trucks used for transport of raw material 40,000
5 Capital goods (out of 3 items, invoice for 2 items is 1,50,000
missing and GST paid on those items is Rs.80,000)
6 Electric machinery purchased for being used in the 25,000
manufacturing process
7 Motor vehicle used for transportation of the employee 55,000
8 Payment made to contractor for construction of staff 1,25,000
quarter
9 Purchase of bus (seating capacity 15) for the 1,97,000
transportation of employees
10 General insurance taken on a car used by executives of 5,200
the company for official purposes
Total ITC available with Harsh Pvt. Ltd. for the month of July

3) Mr. Z, a supplier of goods, pays GST under regular scheme. Mr. Z is an inter-state supplier and
hence is not eligible to any threshold exemptions. He has made the following taxable supplies:
Outward Taxable Supplies
Intra State 12,00,000
Inter State 4,50,000

He has also furnished the following details about his purchases:

Inward Taxable Supplies
Intra State 4,50,000
Inter State 75,000
He has opening balances of ITC as under:
➢ CGST INR 45,000
➢ SGST INR 45,000
➢ IGST INR 105,000
If the supplies are exclusive of taxes (18% GST), Compute his tax liability

4) Paritosh & Co., a supplier of goods, pays GST under regular scheme. It has made the following
outward taxable supplies in a tax period:
Outward Taxable Supplies
Intra State 10,00,000
Inter State 8,00,000

It has also furnished the following information in respect of purchases made by it in that tax
period:
Inward Taxable Supplies
Intra State 3,00,000
Inter State 2,50,000

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Paritosh & Co. has following ITCs with it at the beginning of the tax period:
➢ CGST INR 57,000
➢ SGST INR 60,000
➢ IGST INR 1,40,000
Note:
a) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
b) Both inward and outward supplies are exclusive of taxes, wherever applicable.
c) All the conditions necessary for availing ITC have been fulfilled.
Compute the minimum GST, payable in cash, by Paritosh & Co. for the tax period and the ITC to
be carried forward to the next month. Make suitable assumptions as required.

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CHAPTER-7

REGISTRATION UNDER GST

REGISTRATION:

Registration of any business entity under the GST Law implies obtaining a unique number from the
concerned tax authorities for the purpose of collecting tax on behalf of the government and to avail Input
Tax Credit for the taxes on his inward supplies. Section 22 of Central Goods & Services Tax Act, 2017
mandates that every person who has an aggregate turnover of more than Rs.20Lakhs in the relevant
financial year, is liable to be registered under the Act.

However, where such person makes taxable supplies of goods or services or both from any of the
specified special category States, he shall be liable to be registered if his aggregate turnover in a financial
year exceeds Rs.10 lakhs.

The supplies by the agents on behalf of the principal would be included in the aggregate turnover of both,
the principal and the agent (as per Schedule I).

Registration is mandatory at every place of business from wherein a taxable supply has been made.

The registration under GST is Permanent Account Number (PAN) based and state-specific. GST
Identification Number (GSTIN) is a 15-digit number and a certificate of registration, incorporating the
GSTIN is made available to the applicant upon registration.
➢ The first two digits of this number will represent the state code
➢ The next ten digits will be the PAN number of the taxpayer
➢ The thirteenth digit will be assigned based on the number of registrations within a state
➢ The fourteenth digit will be Z by default
➢ The last digit will be for check code

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.

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RELEVANT DEFINITIONS:

Place of business: Place of business includes- [Section 2(85)]

➢ a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any
other place where a taxable person stores his goods, supplies or receives goods or services or both;
or
➢ a place where a taxable person maintains his books of account; or
➢ a place where a taxable person is engaged in business through an agent, by whatever name called.

Principal place of business: Principal place of business means the place of business specified as the
principal place of business in the certificate of registration [Section 2(89)].

Proper officer: Proper officer in relation to any function to be performed under this Act, means the
Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the
Board [Section 2(91)].

Registered person: Registered person means a person who is registered under section 25, but does not
include a person having a Unique Identity Number [Section 2(94)].

Tax period: Tax period means the period for which the return is required to be furnished [Section
2(106)].

Under GST law, the concept of taxable person is significant since tax on supplies of goods and/or
services, is to be paid by a taxable person. As per section 2(107), taxable person means a person who is
registered or liable to be registered under section 22 or section 24.

Thus, even an unregistered person who is liable to be registered is a taxable person. Similarly, a person
not liable to be registered, but has taken voluntary registration and got himself registered is also a taxable
person.

In this chapter, we will understand when does a person becomes liable to get registered, what is the
procedure for getting registered under GST and how to get the registration application amended, when
can registration be cancelled and when the cancellation of the registration by the Department be revoked.

Following Sections of Chapter VI – Registration of the CGST Act shall be discussed in this chapter
to understand the registration provisions:
Section 22 Persons liable for registration.
Section 23 Persons not liable for registration
Section 24 Compulsory registration in certain cases
Section 25 Procedure for registration
Section 26 Deemed registration
Section 27 Special provisions relating to casual taxable person and non-resident taxable person
Section 28 Amendment of registration
Section 29 Cancellation or surrender of registration
Section 30 Revocation of cancellation of registration
Provisions of registration under CGST Act have also been made applicable to IGST Act vide section 20
of the IGST Act.

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Persons liable for Registration [Section 22]:

(1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other
than special category States, from where he makes a taxable supply of goods or services or both, if
his aggregate turnover in a financial year exceeds Rs.20 Lakhs.
Provided that where such person makes taxable supplies of goods or services or both from any of
the special category States, he shall be liable to be registered if his aggregate turnover in a
financial year exceeds Rs.10Lakhs. Special category States for the purpose of this section is
Manipur, Mizoram, Nagaland, and Tripura (MMNT).
Provided further that the Government may, at the request of a special category state and on the
recommendations of the council, enhance the aggregate turnover referred to in first proviso from
Rs.10Lakhs to such amount, not exceeding Rs.25 Lakhs and subject to such conditions and
limitations, as may be so notified.
Provided also that the Government may, at the request of the state on the recommendations of the
Council, enhance the aggregate turnover from Rs.20 Lakhs to such an amount not exceeding Rs.40
Lakhs in case of supplier who is engaged exclusively in supply of goods, subject to such
conditions and limitations, as may be notified.
Explanation: For the purpose of this sub-section a person shall be considered to be engaged in the
supply of goods even if he is engaged in exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is represented by way of interest or
discount.
(It means while calculating threshold limit of rupees forty lakhs in case of supplier of goods only,
we shall not club value of exempt supply of service which is in form of extending loans or
advances whose consideration is in form of interest or discount).

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a
licence under an existing law, shall be liable to be registered under this Act with effect from the
appointed day (01/07/2017).

(3) Where a business carried on by a taxable person registered under this Act is transferred, whether
on account of succession or otherwise, to another person as a going concern, the transferee or the
successor, as the case may be, shall be liable to be registered with effect from the date of such
transfer or succession.

(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to
sanction of a scheme or an arrangement for amalgamation or demerger of two or more companies
pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be
registered, with effect from the date on which the Registrar of Companies issues a certificate of
incorporation giving effect to such order of the High Court or Tribunal.

Explanation– For the purposes of this section, the expression “aggregate turnover” –
i. shall include all supplies made by the taxable person, whether on his own account or made on
behalf of all his principals i.e as per Section 2(6);

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ii. excludes inward supplies on which tax is payable under reverse charge
iii. excludes the element of CGST, SGST, UTGST, and IGST and compensation cess.
iv. include total turnover of all branches under same PAN
v. includes value of exported goods/services, exempted goods/services, inter-State supplies
between distinct persons having same PAN.

Compulsory Registration in certain cases [Section 24]:

Notwithstanding anything contained in section 22(1), the following categories of persons shall be required
to be registered under this Act,–
1. Persons making any inter-State taxable supply;
However, threshold limit of Rs.20 lakh (Rs.10 lakh in case of Special Category States of MMNT)
is available in case of inter-State supply of taxable services and of notified handicraft goods.
2. Casual taxable persons making taxable supply;
However, threshold limit of Rs.20 lakh (Rs.10 lakh in case of Special Category States of MMNT)
is available in case of CTP who is making inter-State taxable supplies of notified handicraft goods
and availing the benefit of exemption from registration as mentioned in point (a) above.
3. Persons who are required to pay tax under reverse charge;
However, persons engaged exclusively in making supplies, tax on which is liable to be paid on
reverse charge basis are exempt from registration.
4. Non-resident taxable persons making taxable supply;
5. Person who are required to pay tax under section 9(5) i.e Electronic commerce operator;
6. E-commerce:
(i) Every ECO (Electronic Commerce Operator) who is required to collect tax at source under
section 52,
(ii) Persons who supply goods and/or services, other than supplies specified under section 9(5),
through such ECO who is required to collect tax at source under section 52. However threshold
limit of Rs.20 lakh (Rs.10 lakh in case of of Mizoram, Tripura, Manipur and Nagaland) is
available in case of suppliers supplying services through ECO.
7. Persons who are required to deduct tax u/s 51, whether or not separately registered under this Act;
8. Persons who make taxable supply of goods or services or both on behalf of other taxable persons
whether as an agent or otherwise;
9. Input Service Distributor, whether or not separately registered under this Act;
10. Every person supplying online information and database access or retrieval services from a place
outside India to a person in India, other than a registered person; and
11. Such other person or class of persons as may be notified by the Government on the
recommendations of the Council.

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Persons not liable for Registration [Section 23]:

(1) The following persons shall not be liable to registration, namely: -

(a) any person engaged exclusively in the business of supplying goods or services or both that
are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods
and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land.
Note: Agriculturists includes only individuals or HUFs [Section 2(7)]. Further, if an
agriculturist is also engaged in making any supply other than supply of produce out of
cultivation of land, he shall be liable to registration based on applicable threshold limit.
(2) The Government may, on the recommendations of the Council, by notification, specify the
category of persons who may be exempted from obtaining registration under this Act.
Following category of persons have been notified as being exempted from obtaining registration
under GST law:
a) Persons who are only engaged in making supplies of taxable goods or services or both, the
total tax on which is liable to be paid on reverse charge basis by the recipient of such goods
or services or both u/s 9(3) have been exempted from obtaining registration.
b) The persons making inter-State supplies of taxable services and having an aggregate
turnover, to be computed on all India basis, not exceeding an amount of Rs.20 lakh in a
financial year have been exempted from obtaining compulsory registration. However, the
aggregate value of such supplies, to be computed on all India basis, should not exceed an
amount of Rs.10 lakh in case of Special Category States of MMNT.
c) A person (including Casual taxable person) making inter-State supplies of goods is liable to
be registered compulsorily under GST u/s 24 irrespective of the threshold limit.
However, in the following cases, persons making inter-State supplies of goods have been
exempted from obtaining registration:
➢ Persons making inter-State taxable supplies of notified handicraft goods.
➢ Persons making inter-State taxable supplies of products, when made by craftsmen
predominantly by hand even though some machinery may also be used in the process.
Conditions to be fulfilled:
i. The aggregate value of such supplies, to be computed on all India basis, does
not exceed an amount of Rs.20 lakh [Rs.10 lakh in case of Special Category
States of MMNT] in a FY.
ii. Such persons have obtained a PAN and have generated an e- way bill

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Examples:
1. Madhur Oils, Punjab, is exclusively engaged in supplying petrol. Supply of petrol is not leviable
to GST.
Thus, Madhur Oils is not liable for registration as it is engaged exclusively in supplying goods not
liable to GST.

2. Bhavyajyoti Foundation, a charitable trust registered under section 12AA of the Income-tax Act,
1961, is exclusively engaged in supply of services by way of charitable activities.
Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of
charitable activities are exempt from GST.
Thus, Bhavyajyoti Foundation is not liable for registration as it is engaged exclusively in
supplying services exempt from tax.

3. Deshbandhu is an agriculturist engaged in cultivation of wheat in his field in the State of Punjab.
He was exclusively engaged in supply of wheat cultivated in his field in the previous year.
Thus, he was not liable to registration as he was exclusively engaged in supply of produce out of
cultivation of land.
In the current year, he decides to start trading in rice apart from supplying his wheat produce. His
turnover in the current year is Rs.32 lakh from supply of wheat produced and Rs.9 lakh from
trading of rice.
Since he is engaged in trading of rice also, he is not covered under section 23 above. The threshold
limit for registration applicable to a person exclusively engaged in supply of goods in the State of
Punjab is Rs.40 lakh. The aggregate turnover of Deshbandhu in the current year is Rs.41 lakh
[Rs.32 lakh + Rs.9 lakh] which exceeds the threshold limit. Thus, he will be liable to registration.

4. Dhola & Co., located in Delhi, is engaged in supply of taxable goods in the neighbouring States of
Punjab and Haryana. Its aggregate turnover in current FY is Rs.10 lakh.
Since it is engaged in making inter-State taxable supply of goods, it is required to register
mandatorily under GST irrespective of its aggregate turnover.
However, if in the above case, Dhola & Co. is engaged in inter- State supply of taxable services
instead of goods, it will be eligible for exemption from registration till its aggregate turnover does
not exceed Rs.20 lakh.

5. Ariza Pvt. Ltd., located in Madhya Pradesh, is a supplier of taxable and notified handicraft goods.
It supplies these goods in the neighbouring States of Uttar Pradesh and Orissa. Its aggregate
turnover in the month of April is Rs.15 lakh.
Although Ariza Pvt. Ltd. is engaged in making inter-State supplies of taxable goods, it is not liable
to obtain registration till its aggregate turnover does not exceed Rs.20 lakh as it has availed the
exemption from registration under Notification No. 03/2018.

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Important Note: Total 11 special category states are provided under sub-clause (g) of clause (4) of
Article 279A of the Constitution which are as follows:

Jammu and Kashmir, Uttarakhand, Himachal Pradesh, Arunachal Pradesh, Assam, Meghalaya, Manipur,
Mizoram, Nagaland, Sikkim and Tripura. [3 top most states + 8 North Eastern States]

Therefore, for the purpose of registration under GST laws only 4 States are special category States which
are as follows: Manipur, Mizoram, Nagaland, and Tripura.

Threshold limit for registration for those engaged in exclusive supply of goods enhanced to Rs.40
lakhs vide Notification No. 10/2019 2019 except-
➢ Persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Meghalaya,
Sikkim, Uttarakhand, Mizoram, Manipur, Nagaland, Tripura, Puducherry and Telangana.
➢ Persons required to take compulsory registration under section 24.
➢ Suppliers of-
i. Ice cream and other edible ice, whether or not containing cocoa;
ii. Tobacco and manufactured tobacco substitutes;
iii. Pan masala;
iv. Fly ash bricks or fly ash aggregate with 90% or more fly ash content; Fly ash blocks,
v. Bricks of fossil meals or similar siliceous earths, Building bricks, and
vi. Earthen or roofing tiles. [ITPBT]
➢ Persons taking voluntary registration under section 25(3).

Threshold limit for registration for service providers would continue to be Rs.20 lakhs and in case of
special category States Rs.10 lakhs.

Threshold Limit for Registration for Suppliers of Goods within state (Intra-State)
Rs.10 Lakhs Rs.20 Lakhs Rs.40 Lakhs
1. Manipur 1. Arunachal Pradesh Remaining 21 States and 5 Union
2. Mizoram 2. Meghalaya Territories.
3. Nagaland 3. Puducherry
4. Tripura 4. Sikkim
5. Telangana
6. Uttarakhand
Notes:
1) For the purpose of GST, Delhi, Puducherry and Jammu & Kashmir are considered as States.
Therefore, there are total 31 States where SGST + CGST is levied and 5 Union Territories where
UTGST + CGST is levied on intra-state supplies.
2) In case of inter-state supply of goods registration is mandatory u/s 24 of the CGST Act but the
exemption is granted to person making inter-state taxable supplies of handicraft goods upto an
aggregate turnover of Rs.20 lakhs (Rs.10 lakhs in case of Manipur, Mizoram, Nagaland & Tripura)
as long as the person has a PAN and the goods move under the cover of an e-way bill, irrespective of
the value of the consignment.
Note: Rs.40 Lakh Limit is applicable to only persons engaged exclusively in intra-State supply of goods.

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Threshold Limit for Registration for Suppliers of Services, Suppliers of Ice cream and other
edible ice,; Pan masala; Tobacco and manufactured tobacco substitutes, Fly ash bricks or fly ash
aggregate with 90% or more fly ash content; Fly ash blocks, Bricks of fossil meals or similar
siliceous earths, Building bricks, and Earthen or roofing tiles.
Rs.10 Lakhs Rs.20 Lakhs
Manipur, Mizoram, Nagaland & Tripura Remaining 27 States and 5 Union Territories
Notes:
1) Service suppliers are not eligible for exemption limit of Rs.40 Lakhs.
2) All service providers, whether supplying intra-state, inter-state or through e-commerce operator,
will be exempt from obtaining GST registration, provided their aggregate turnover doesn’t exceed
Rs.20 lakhs (Rs.10 lakhs in case of Manipur, Mizoram, Nagaland & Tripura).
3) Mandatory registration is required for only those e-commerce operators who are required to
collect tax at source & who is liable to pay tax u/s 9(5).

Examples:
1. Prithiviraj of Assam is exclusively engaged in intra-State supply of shoes. His aggregate turnover
in the current financial year is Rs.22 lakh. In view of the discussion in the above paras, the
applicable threshold limit for registration for Prithviraj in the given case is Rs.40 lakh. Thus, he is
not liable to get registered under GST.
If in above example, all other things remaining the same, Prithiviraj is exclusively engaged in
supply of pan masala instead of shoes, he will not be eligible for higher threshold limit of Rs.40
lakh and the applicable threshold limit for registration in that given case will be Rs.20 lakh. Thus,
Prithiviraj will be liable to get registered under GST.
If instead of pan masala, Prithiviraj is exclusively engaged in supply of taxable services, the
applicable threshold limit for registration will still be Rs.20 lakh. Thus, Prithiviraj will be liable to
get registered under GST.
Further, if Prithiviraj is engaged in supply of both taxable goods and services, the applicable
threshold limit for registration will be Rs.20 lakh. Thus, Prithiviraj will be liable to get registered
under GST.

2. Shivaji of Telangana is exclusively engaged in intra-State supply of toys. Its aggregate turnover in
the current financial year is Rs.22 lakh.
Since Shivaji is making taxable supplies from Telangana, he will not be eligible for higher
threshold limit available in case of exclusive supply of goods. The applicable threshold limit for
registration for Shivaji in the given case is Rs.20 lakh. Thus, he is liable to get registered under
GST.
If in above example, all other things remaining the same, Shivaji is exclusively engaged in supply
of taxable services instead of toys, the applicable threshold limit for registration will still be Rs.20
lakh. Thus, Shivaji will be liable to get registered under GST.

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Further, if Shivaji is engaged in supply of both taxable goods and services, the applicable
threshold limit for registration will be Rs.20 lakh only. Thus, Shivaji will be liable to get
registered under GST.

3. Ashoka of Manipur is exclusively engaged in intra-State supply of paper. Its aggregate turnover in
the current financial year is Rs.12 lakh. Since Ashoka is making taxable supplies from Manipur
which is a Special Category State, the applicable threshold limit for registration for Ashoka in the
given case is Rs.10 lakh. Thus, he is liable to get registered under GST.
If in above example, all other things remaining the same, Ashoka is exclusively engaged in supply
of taxable services instead of toys, the applicable threshold limit for registration will still be Rs.10
lakh. Thus, Ashoka will be liable to get registered under GST.
Further, if Ashoka is engaged in supply of both taxable goods and services, the applicable
threshold limit for registration in that given case will be Rs.10 lakh only. Thus, Ashoka will be
liable to get registered under GST.

4. Raghav of Jammu and Kashmir is exclusively engaged in intra-State supply of readymade

garments. Its turnover in the current FY from Jammu and Kashmir showroom is Rs.28 lakh. It has
another showroom in Tripura with a turnover of Rs.11 lakh in the current FY. Since Raghav is
engaged in supplying garments from one of the Special Category State, the applicable threshold
limit for him gets reduced to Rs.10 lakh. Further, Raghav is liable to get registered under GST in
both Jammu and Kashmir and Tripura on his aggregate turnover crossing the threshold limit of
Rs.10 lakh.

Registration required only for a place of business from where taxable supply takes place:

A person is required to obtain registration with respect to his each place of business in India from where a
taxable supply has taken place. However, a supplier is not liable to obtain registration in a State/UT from
where he makes an exempt/non-taxable supply.

Further, the threshold limit of a person having places of business in more than one State/UT in India gets
reduced to Rs.10 lakh only when such person makes taxable supplies of goods or services or both from
any of the Special Category States as per section 22. However, in case he makes exempt/non-taxable
supply from a Special Category State and taxable supplies from a State other than Special Category State,
the threshold limit shall not be so reduced.

Example: Uday Enterprises is engaged in supply of taxable goods in Maharashtra. It also supplies
alcoholic liquor for human consumption from Nagaland. Its turnover in the current financial year is Rs.34
lakh in Maharashtra and Rs.8 lakh in Nagaland.

Since Uday Enterprises is exclusively engaged in making taxable supplies of goods from Maharashtra, the
applicable threshold limit for obtaining registration is Rs.40 lakh. However, the threshold limit will not be
reduced to Rs.10 lakh in this case, as supply of alcoholic liquor for human consumption from Nagaland
(one of the Special Category States) are non-taxable supplies.

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In the given case, since the aggregate turnover of Uday Enterprises exceeds the applicable threshold limit
of Rs.40 lakh, it is liable to obtain registration. It will obtain registration in Maharashtra, but is not
required to obtain registration in Nagaland as he is not making any taxable supplies from said State.

Procedure for Registration [Section 25]:

As per Section 25(1), Every person who is liable to be registered under section 22 or section 24 shall
apply for registration in every such State or Union territory in which he is so liable within 30 days from
the date on which he becomes liable to registration, in such manner and subject to such conditions as may
be prescribed.

Example: Sugam Services Ltd. is engaged in taxable supply of services in Delhi. The turnover of Sugam
Services Ltd. exceeded Rs.20 lakh on 1st November. It is liable to apply for registration by 1st December
in Delhi.

If the proper officer doesn’t take any action within 7 days of submission of application along with
necessary details and documents, or within 7 days of receiving the clarifications so solicited, the
application for grant of registration is deemed to be approved.

Provided that a casual taxable person or a non-resident taxable person shall apply for registration at least
5 days prior to the commencement of business.

Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a
Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate
registration, as distinct from his place of business located outside the Special Economic Zone in the same
State or Union territory.

Example: Suvarna Industries is engaged in manufacturing activities in Uttar Pradesh. It has two
manufacturing units in UP - one in SEZ and another outside SEZ. Under GST, one registration per State
is required. However, since in this case, one of the two units of Suvarna Industries is located in SEZ, it
will have to compulsorily make a separate application for registration as a place of business distinct from
unit located outside SEZ.

State-wise registration [Section 25(2) read with rule 11]:

➢ Registration needs to be taken State-wise, i.e. there are no centralized registrations under GST. A
business entity having its branches in multiple States will have to take separate State-wise
registration for the branches in different States.
➢ Further, within a State, an entity with different branches shall be granted single registration
wherein it can declare one place as principal place of business (PPoB) and other branches as
additional place of business (APoB).
➢ However, separate registration for each place of business shall be granted provided all separately
registered places of business of such person pay tax on supply of goods/services/both made to
another registered place of business, of such person and issue a tax invoice/bill of supply, for such
supply. Separate registration application needs to be filed for each place of business.

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Example: Meethalal & Sons - a supplier in Maharashtra - has three branches in Mumbai, Pune and
Mahabaleshwar. Mumbai and Pune branches are engaged in supply of garments and Mahabaleshwar
branch engaged in supply of shoes. Either it can obtain single registration for Maharashtra declaring
one of the branches as PPoB (let’s say Mumbai) and other two branches (Pune and Mahabaleshwar) as
APoB or it can obtain separate GST registration for each of the three branches in Mumbai, Pune and
Mahabaleshwar as separate places of business.

In case Meethalal & Sons opts to have separate registrations for its all three branches and Mumbai
branch sends some garments [subject to GST] for sale to Pune branch, Mumbai branch must raise a tax
invoice and pay tax on such transfer of garments to Pune branch.

Voluntary registration [Section 25(3)]:

A person who is not liable to be registered under section 22 or section 24 may get himself registered
voluntarily. In case of voluntary registration, all provisions of this Act, as are applicable to a registered
person, shall apply to voluntarily registered person. However, once a person obtains voluntary
registration, he has to pay tax even though his aggregate turnover does not exceed Rs.20 lakh/ Rs.10 lakh.

Voluntary registration is usually obtained by the business for ensuring seamless flow of credit to their
customers.

Distinct Persons/ establishments of distinct persons [Section 25(4) & (5)]:

A person who has obtained/ is required to obtain more than one registration, whether in one State/ Union
territory or more than one State/Union territory shall, in respect of each such registration, be treated as
distinct persons. [Section 25(4)]

Further, where a person who has obtained or is required to obtain registration in a State or Union territory
in respect of an establishment, has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons. [Section 25(5)]

PAN must for obtaining registration [Section 25(6) & (7)]:

Permanent Account Number is mandatory to be eligible for grant of registration.

Note: A Non-Resident Taxable Person (NRTP) may be granted registration on the basis of other
prescribed documents. [Section 25(7)]

Aadhaar authentication:

Section 25(6A): Every registered person shall undergo authentication, or furnish proof of possession of
aadhaar number, in such form and manner and within such time as may be prescribed;

Provided that if Aadhaar number is not assigned to the registered person, such person shall be offered
alternate and viable means of identification in such manner as Government may, on the recommendations
of the Council.

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Every existing registered dealer shall have to get himself verified with help of Aadhaar number or by
alternate viable means within specified time or it shall be deemed as if he does not have any registration.

Section 25(6B): For fresh registration every individual shall have to authenticate himself with aadhaar
number. In case aadhaar number is not assigned to him, then the registration shall be Granted only after
physical verification of the principle place of business in the presence of the said person, not later than 30
days from the date of application, and the verification report along with the other documents, including
photographs, shall be uploaded in Form GST REG-30 on the Common portal within a period of 15
working days following the date of such verification.

Section 25(6C): In case of person other than individual such as Partnership firm, AOP, BOI, Company,
Trust etc, for getting fresh registration authentication shall be done by aadhaar Number of Partner,
authorised representative, Managing director, trustee etc. In case aadhaar number is not assigned to such
person or class of persons, then the registration shall be Granted only after physical verification of the
principle place of business in the presence of the said person, not later than 30 days from the date of
application, and the verification report along with the other documents, including photographs, shall be
uploaded in Form GST REG-30 on the Common portal within a period of 15 working days following the
date of such verification.

If Aadhar authentication is not opted for/ aadhaar authentication fails in validation/ PO deems it fit to
carry out site verification and no SCN is issued, registration will be deemed to be approved within 30
days from the date of application by tax official.

Section 25(6D): Section 25(6D) of the CGST Act stipulates that provisions relating to aadhaar
authentication shall not apply to such person or class of persons or any State or Union territory or part
thereof, as may be notified.

Following persons have been exempted from aadhaar authentication-

➢ A person who is not a citizen of India
➢ Department or establishment of State Government or Central Government
➢ Local authority
➢ Statutory body
➢ Public Sector Undertaking
➢ A person applying for Unique Identity Number.

Suo-motu registration by the proper officer [Section 25(8) read with rule 16]:

Where, pursuant to any survey, enquiry, inspection, search or any other proceedings under the Act, the
proper officer finds that a person liable to registration under the Act has failed to apply for such
registration; such officer may register the said person on a temporary basis and issue an order in
prescribed form.

After the grant of temporary registration, the said person needs to apply for registration within 90 days
from the date of grant of temporary registration which can be further extended on proper grounds.

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Unique Identity Number (UIN) [Section 25(9) & (10) read with rule 17]:

Any specialized agency of the United Nations Organization or any Multilateral Financial institution and
organization as notified under the United Nations (Privileges and Immunities) Act, 1947, consulate or
embassy of foreign countries and any other person notified by the Commissioner, is required to obtain a
UIN from the GSTN portal.

This UIN is needed for claiming refund of taxes paid on notified supplies of goods and/or services
received by them, and for such other purpose as may be notified. UIN granted is a centralized UIN i.e. it
shall be applicable to the territory of India. A person having UIN is not registered person and thus, is not a
taxable person.

Issuance of registration certificate and effective date of Registration [Rule 10]:

Where the application for grant of registration has been approved, a certificate of registration in Form
GST REG-06 showing the PPoB and APoB is made available to the applicant on the Common Portal and
a Goods and Services Tax Identification Number (hereinafter referred to as “GSTIN”) i.e. the GST
registration number is communicated to applicant, within 3 days after the grant of registration.

The effective date of Registration:

➢ In case the application is submitted within 30 days of the person becoming liable to register, it
shall be the date on which the person becomes liable for registration.
➢ And if the application is submitted after 30 days of the person becoming liable to register, it shall
be the date on which the registration is granted to such person.

Examples:
1. Sugam Services Ltd. is engaged in taxable supply of services in Madhya Pradesh. The turnover of
Sugam Services Ltd. exceeded Rs.20 lakh on 1st November. It is liable to get registered by 1 st
December [30 days] in the State of Madhya Pradesh. It applies for registration on 28th November
and is granted registration certificate on 5th December. The effective date of registration of Sugam
Services Ltd. is 1st November.
2. In above example, if Sugam Services Ltd. applies for registration on 3rd December and is granted
registration certificate on 10th December. The effective date of registration of Sugam Services
Ltd. is 10th December.

Bank Account details may be furnished after obtaining registration certificate [New rule
10A]:

While applying for registration on GST portal, a person is required to furnish the details of his bank
account. This requirement has now been relaxed to a limited extent, by inserting a new rule 10A to the
CGST Rules. In pursuance to the same, the registered person is allowed to furnish information with
respect to details of bank account, or any other information, as may be required on the common portal in
order to comply with any other provision, soon after obtaining certificate of registration and a GSTIN, but
not later than 45 days from the date of grant of registration or the date on which the return required under
section 39 (first GSTR-3B) is due to be furnished, whichever is earlier.

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This relaxation is not available for those who have been granted registration as TDS deductor/TCS
collector or who have obtained suo-motu registration (Voluntary).

However, if a person violates the provisions of rule 10A, his GST registration is liable to be cancelled
[Rule 21].

Deemed registration [Section 26]:

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.

Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be registration/UIN granted
under CGST Act provided application for registration has not been rejected under CGST Act.

Further, rejection of application for registration/UIN under SGST Act/UTGST Act is deemed to be
rejection of application for registration under CGST Act.

Grant of Registration in case of Casual Taxable Person (CTP) and Non-Resident Taxable
Person (NRTP) [Section 27]:
(1) The certificate of registration issued to a casual taxable person or a non-resident taxable person
shall be valid for the period specified in the application for registration or 90 days from the
effective date of registration, whichever is earlier and such person shall make taxable supplies
only after the issuance of the certificate of registration.
Provided that the proper officer may, on sufficient cause being shown by the said taxable person,
extend the said period of 90 days by a further period not exceeding 90 days.

(2) A casual taxable person or a non-resident taxable person shall, at the time of submission of
application for registration under section 25(1), make an advance deposit of tax in an amount
equivalent to the estimated tax liability of such person for the period for which the registration is
sought.
Provided that where any extension of time is sought under sub-section (1), such taxable person
shall deposit an additional amount of tax equivalent to the estimated tax liability of such person for
the period for which the extension is sought.

The amount deposited under sub-section (2) shall be credited to the electronic cash ledger of such
person and shall be utilised in the manner provided under section 49.

As per proviso to section 25(1), Casual taxable person or a Non-resident taxable person shall apply for
registration at least 5 days prior to the commencement of business.

Section 2(20) of CGST Act, 2017 defines “Casual taxable person” as a person who occasionally
undertakes transactions involving supply of goods or services or both in the course or furtherance of
business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has
no fixed place of business.

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Thus, a casual taxable person is someone who has a business in a different state, but comes to a different
state for a business purpose temporarily.
For example: A footwear dealer registered in Agra comes for an exhibition at Azad Maidan, Mumbai for
participating in the exhibition, then such person would need to register as a casual taxable person at
Mumbai and he will be granted registration for a maximum period of 90 days in Maharashtra.

Section 2(77) of CGST Act, 2017 defines “Non-resident taxable person” as any person who occasionally
undertakes transactions involving supply of goods or services or both, whether as principal or agent or in
any other capacity, but who has no fixed place of business or residence in India.

Hence, a non-resident taxable person is someone who has a business outside India, but comes to India for
a business purpose temporarily.
For example: A person from Paris, comes for an exhibition at Azad Maidan, Mumbai for participating in
the exhibition, then such person would need to register as a non-resident taxable person at Mumbai and he
will be granted registration for a maximum period of 90 days in Maharashtra.

SUMMARY OF FORMS:
Form No. Submitted/Issued by Reason Time Limit
FORM GST Applicant willing/ An application for the grant of registration Within 30days of
REG-01 liable to register under to be submitted electronically becoming liable for
GST registration
FORM GST On receipt of an application, an
REG-02 acknowledgement shall be issued
electronically to the applicant
FORM GST Proper officer Where the application submitted is found to within 7 working days
REG-03 be deficient or where the proper officer from the date of
requires any clarification with regard to any submission of
information provided in the application or application.
documents furnished therewith.
FORM GST Applicant Applicant shall furnish such clarification, within 7 working days
REG-04 information or documents sought by Proper from the date of
officer electronically. receipt of such
intimation.
FORM GST Proper officer Where no reply is furnished by the
REG-05 applicant in response to the notice issued
within the prescribed period or where the
proper officer is not satisfied with the reply,
he shall, for reasons to be recorded in
writing, reject such application and inform
the applicant electronically.
FORM GST Proper officer Approval of the grant of registration to the within 7 working days
REG-06 applicant i.e issue if Registration Certificate from the date of
(in all cases) submission of
application or within 7
working days from the
date of receipt reply to
SCN by the applicant.

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FORM GST Any person required to An application for the grant of registration
REG-07 deduct tax u/s 51 or a to be submitted electronically
person required to
collect tax at source
u/s 52
FORM GST Proper officer Communication of Cancellation of
REG-08 Registration of person required to deduct
tax u/s 51 or a person required to collect tax
at source u/s 52
FORM GST Non-resident taxable An application for the grant of registration at least 5 days prior to
REG-09 person to be submitted electronically the commencement
of business
FORM GST Any person supplying An application for the grant of registration
REG-10 online information and to be submitted electronically
database access or
retrieval services from
a place outside India to
a non-taxable online
recipient
FORM GST Registered Casual Application for extension of the period of
REG-11 taxable person or a registration indicated in his registration
Non-resident taxable application.
person

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Amendment of Registration [Section 28 read with Rule 19]

a) Every registered person and a person to whom a Unique Identity Number has be assigned shall
inform the proper officer of any changes in the information furnished at the time of registration or
subsequent thereto, by way of an application in FORM GST REG-14 to be submitted
electronically along with relevant documents within the period of 15 days of such change.
The certificate of registration shall stand amended upon submission of such application on the
common portal.
b) If the change is related to (core fields)-
➢ Legal name of business.
➢ Address of the principal place of business or any additional place(s) of business, or
➢ Addition, deletion or retirement of Partners or Directors, Karta, Managing Committee, Board
of Trustees, Chief Executive Officer or equivalent, responsible for the day to day affairs of
the business,
which does not warrant cancellation of registration, the proper officer shall after due verification,
approve the amendment within a period of 15 working days and issue an order in FORM GST
REG-15.
In any other case, no approval of the proper officer is required, and the amendment can be affected
by the taxable person on his own on the common portal.
c) The proper officer shall not reject the application for amendment in the registration particulars
without giving the person an opportunity of being heard.
d) In case where the proper officer is of the opinion that the amendment sought is either not
warranted or the documents furnished therewith are incomplete or incorrect, he, may, within a
period of 15 working days from the receipt of application, serve a notice requiring the registered
person to show cause, within a period of 7 working days of the service of the said notice, as to
why the application for amendment shall not be rejected.
The proper officer if satisfied shall approve the grant of amendment to the registration to the
applicant within the period of 7 working days from the date of receipt of such reply. In a case
where the applicant has not responded within the time limit or the proper officer is not satisfied
with the reply, then he may for the reasons to be recorded in writing shall reject the application for
amendment.
e) In case where the proper officer has not taken any action within the period of 15 or 7 working days
as the case may be, the application for amendment shall stand amended to the extent applicable.
f) Any rejection or approval of amendments under the SGST/UTGST Act shall be deemed to be a
rejection or approval under this Act.
g) If the change in constitution results in change in PAN then fresh application has to be filed for the
registration and not the amendment for registration.
h) Application for amendment of registration cannot be filed for change in PAN because GST
registration is PAN-based. One needs to make fresh application for registration in case there is
change in PAN. Thus, where a change in the constitution of any business results in change of PAN
of a registered person, the said person shall apply for fresh registration.
i) Similarly, application for amendment of registration form cannot be filled if there is change in
place of business from one State to the other because GST registrations are State-specific. If one
wishes to relocate his business to another State, he must voluntarily cancel his current registration
and apply for a fresh registration in the State he is relocating his business.

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Cancellation or Suspension of Registration [Section 29]:

Section Particulars
29(1) The proper officer may, either on his own motion or on an application filed by the registered
person or by his legal heirs, in case of death of such person, cancel the registration, in such
manner and within such period as may be prescribed, having regard to the circumstances
where:
a) the business has been discontinued, transferred fully for any reason including death
of the proprietor, amalgamated with other legal entity, demerged or otherwise
disposed of
b) there is any change in the constitution of the business
c) the taxable person is no longer liable to be registered under section 22 or section 24
or intends to optout of the registration voluntarily made under sub-section (3) of
section 25.
Provided that during pendency of the proceedings relating to cancellation of registration filed
by the registered person, the registration may be suspended for such period and in such
manner as may be prescribed.
29(2) The proper officer may cancel the registration of a person from such date, including any
retrospective date, as he may deem fit, where-
(a) a registered person has contravened such provisions of the Act or the rules made
thereunder as may be prescribed
Prescribed contraventions which make a registered person liable to cancellation of
registration [Rule 21]:
The registered person-
➢ does not conduct any business from the declared place of business, or
➢ issues invoice/bill without supply of goods/services in violation of the
provisions of this Act, or the rules made thereunder.
➢ violates the provisions of section 171 of the CGST Act. Section 171 of the
CGST Act, 2017 contains provisions relating to anti-profeetering measure.
➢ violates the provision of rule 10A [Bank details]
➢ avails ITC in violation of the provisions of section 16 of the CGST Act or the
rules made thereunder.
➢ violates the provision of rule 86B
➢ furnishes the details of outward supplies in Form GSTR-1 for one or more tax
periods which is in excess of the outward supplies declared by him in his valid
return under section 39 for the said tax periods
(b) a person paying tax u/s 10 has not furnished returns for financial year beyond 3
months from the due date of furnishing the said return;
(c) any registered person, other than a person specified in clause (b), has not furnished
returns for a continuous period of 6 months or if quarterly return filler does not file
return for a continuous period of 2 tax periods.
(d) any person who has taken voluntary registration u/s 25(3) has not commenced
business within 6 months from the date of registration
(e) registration has been obtained by means of fraud, wilful misstatement or suppression
of facts
Provided that the proper officer shall not cancel the registration without giving the person an
opportunity of being heard.
Provided further that during pendency of the proceedings relating to cancellation of
registration, the proper officer may suspend the registration for such period and in such
manner as may be prescribed.

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29(3) The cancellation of registration under this section shall not affect the liability of the person to
pay tax and other dues under this Act or to discharge any obligation under this Act or the
rules made thereunder for any period prior to the date of cancellation whether or not such tax
and other dues are determined before or after the date of cancellation.
29(4) The cancellation of registration under the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act, as the case may be, shall be deemed to be a
cancellation of registration under this Act.
29(5) Every registered person whose registration is cancelled shall pay an amount, equivalent to the
credit of input tax in respect of inputs held in stock and inputs contained in semi- finished or
finished goods held in stock on the day immediately preceding the date of such cancellation
or the output tax payable on such goods, whichever is higher, calculated in such manner as
may be prescribed.

Provided that in case of capital goods or plant and machinery, the taxable person shall pay an
amount equal to the input tax credit taken on the said capital goods or plant and machinery,
reduced by 5% per Quarter or part of the quarter or the tax on the transaction value of such
capital goods or plant and machinery u/s 15, whichever is higher.

Suspension of registration [Rule 21A]:

The period and manner of suspension of registration is as follows:

(1) Where registered person has applied for cancellation of registration:
Where a registered person has applied for cancellation of registration, the registration shall be
deemed to be suspended from:
a) the date of submission of the application or
b) the date from which the cancellation is sought,
whichever is later, pending the completion of proceedings for cancellation of registration.
(2) Where cancellation of the registration has been initiated by the Department on its own
motion:
Where the proper officer has reasons to believe that the registration of a person is liable to be
cancelled, he can now suspend the registration of such person, pending the cancellation
proceedings, without affording the said person a reasonable opportunity of being heard, with
effect from a date to be determined by him.
In a case where the cancellation is initiated by the Department on its own and registration of a
person has been suspended, such person shall not be granted any refund under section 54 of the
CGST Act, during the period of suspension of his registration.
(3) A registered person, whose registration has been suspended as above:
➢ shall not make any taxable supply during the period of suspension and
➢ shall not be required to furnish any return under section 39.
(4) The suspension of registration shall be deemed to be revoked upon completion of the cancellation
proceedings by the proper officer.
The suspension of registration may be revoked by the proper officer, anytime during the
pendency of the proceedings for cancellation, if he deems fit.

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Procedure for cancellation of registration [Rules 20 and 22]:

a) Voluntary cancellation by registered person Application:

➢ A registered person seeking cancellation of registration shall electronically submit the
application for cancellation of registration in prescribed form (GST REG-16) within 30 days
of occurrence of the event warranting cancellation.
➢ He is required to furnish in the application the details of inputs held in stock or inputs
contained in semi-finished/finished goods held in stock and of capital goods held in stock
on the date from which cancellation of registration is sought, liability thereon, details of the
payment, if any, made against such liability and may furnish relevant documents thereof.
➢ Where a person who has submitted an application for cancellation of his registration is no
longer liable to be registered, proper officer shall issue the order of cancellation of
registration (GST REG-08) within 30 days from the date of submission of application for
cancellation.

b) Suo-motu cancellation by the Department:

➢ Where the proper officer cancels the registration suo-motu, he shall not cancel the same
without giving a show cause notice (GST REG-17) and without giving a reasonable
opportunity of being heard, to the registered person. The reply (GST REG-18) to such show
cause notice (SCN) has to be submitted within 7 days of service of notice.
➢ Where registration of a person is liable to be cancelled, proper officer shall issue the order
of cancellation of registration (GST REG-19) within 30 days from the date of reply to SCN.
➢ If reply to SCN is satisfactory, proper officer shall drop the proceedings and pass an order in
prescribed form (FORM GST REG-20).
However, where the person instead of replying to the SCN served for failure to furnish
returns for a continuous period of 6 months (3years in case of composition scheme supplier)
furnishes all the pending returns and makes full payment of the tax dues along with
applicable interest and late fee, the proper officer shall drop the proceedings and pass an
order.

Effective date of cancellation:

The cancellation of registration shall be effective from a date to be determined by the proper officer and
mentioned in the cancellation order. He will direct the taxable person to pay arrears of any tax, interest or
penalty including the amount liable to be paid under section 29(5).

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Revocation of cancellation [Section 30 read with Rule 23]:

Section Particulars
30(1) Any registered person, whose registration is cancelled by the proper officer on his own
motion, may apply to such officer for revocation of cancellation of the registration in the
prescribed form (FORM GST REG-21) within 30 days from the date of service of the
cancellation order.
Note: Said period of 30 days may, on sufficient cause being shown and for reasons to be
recorded in writing, be extended for a period not exceeding 30 days by Additional/Joint
Commissioner and by further period not exceeding 30 days by Commissioner.

Provided that no application for revocation shall be filed, if the registration has been
cancelled for the failure of the registered person to furnish returns, unless such returns are
furnished and any amount due as tax, in terms of such returns, has been paid along with any
amount payable towards interest, penalty and late fee in respect of the said returns.
30(2) If the proper officer is satisfied that there are sufficient grounds for revocation of
cancellation, he may revoke the cancellation of registration, by an order (FORM GST REG-
22) within 30 days of receipt of application and communicate the same to applicant.

Otherwise, he may reject the revocation application. However, before rejecting the
application, he has to first issue SCN (FORM GST REG-23) to the applicant who shall
furnish the clarification (FORM GST REG-24) within 7 working days of service of SCN.
The proper officer shall dispose the application (accept/reject the same) within 30 days of
receipt of clarification.
30(3) The revocation of cancellation of registration under the State Goods and Services Tax Act
or the Union Territory Goods and Services Tax Act, as the case may be, shall be deemed to
be a revocation of cancellation of registration under this Act.

Display of registration certificate and GSTIN:

Rule 18 of the CGST Rules provides that:

(1) Every registered person shall display his certificate of registration in a prominent location at his
principal place of business and at every additional place or places of business.
(2) Every registered person shall display his Goods and Services Tax Identification Number (GSTIN)
on the name board exhibited at the entry of his principal place of business and at every additional
place or places of business.

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PROBLEMS:

1) Examine whether the liability to register compulsorily under section 24 arises in each of the
independent cases mentioned below:
a) Meenu, a supplier in Maharashtra, is exclusively engaged in supply of potatoes produced out
of cultivation of her own land, within Maharashtra and also outside Maharashtra.
b) Jinu Oils, Gujarat, is engaged in supplying machine oil as well as petrol. Further, it provides
services of refining of oil to customers. Total turnover of supply of machine oil is Rs.10 lakh,
supply of petrol is Rs.5 lakh and supply of services is Rs.6 lakh.
c) Tilu is working as an agent, he is supplying taxable goods as an agent of Tiku (who is
registered taxable person) and its aggregate turnover does not exceed Rs.20 lakh during the
financial year.

“Never do tomorrow what you can do today.

Procrastination is the thief of time”

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CHAPTER-8

TAX INVOICE, CREDIT NOTE AND DEBIT NOTES

An invoice is a commercial instrument issued by a supplier of goods/services to a recipient. It identifies
both the parties involved, and lists, describes the items sold/services supplied, quantifies the items sold,
shows the date of shipment and mode of transport, prices and discounts, if any, and the delivery and
payment terms (in case of supply of goods).

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 also needs to issue a payment voucher as well as a tax invoice.

Under GST, a tax invoice is an important document. It not only evidences supply of goods or services, but
is also an essential document for the recipient to avail Input Tax Credit (ITC). A registered person cannot
avail input tax credit unless he is in possession of a tax invoice or a debit note.

Note: Provisions of Tax invoice; Credit and Debit Notes; E-way Bill under CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.

RELEVANT DEFINITIONS:

Credit note: Credit Note means a document issued by a registered person under sub-section (1) of section
34 [Section 2(37)].

Debit note: Debit Note means a document issued by a registered person under sub-section (3) of section
34 [Section 2(38)].

Continuous supply of Goods: Continuous supply of goods means [Section 2(32)]-

a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis under a
contract whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier
invoices the recipient on a regular or periodic basis and includes supply of such goods as the Government
may, subject to such conditions, as it may, by notification, specify.

Continuous supply of Services: Continuous supply of services means [Section 2(33)]-

Supply of services which is provided, or agreed to be provided, continuously or on recurrent basis
under a contract for a period exceeding 3 months with periodic payment obligations and includes supply
of such services as the Government may, subject to such conditions, as it may, by notification, specify.

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Tax Invoice [Section 31]:

(1) Time limit for issuing tax invoice in case of supply of goods [Section 31(1) of the CGST Act]:

Invoice in case of supply of

goods [Sec- 31(1) of the
CGST Act]

Supply involves
movement of goods
NO YES

Section 31(1)(b) of the CGST Act: Goods Section 31(1)(a) of the CGST Act:
Invoice shall be issued before or at the Invoice shall be issued before or at
time of- Delivery of goods or making the time of- Removal of goods for
goods available to the recipient supply to the recipient

(2) Time Limit for Issuing Tax Invoice in case of Supply of Service [Section 31(2) of the CGST
Act, 2017 read with Rule 47of the CGST Rules, 2017]:

Supplier of services

By Banking/NBFC/
Insurance Company

NO YES

Invoice shall be issued before Invoice shall be issued before

or within 30 days from the or within 45 days from the date
date of the supply of service. of the supply of service.

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Note:
Provided further that an insurer or a banking company or a financial institution, including a
non-banking financial company, or a telecom operator, or any other class of supplier of
services as may be notified by the Government on the recommendations of the Council,
making taxable supplies of services between distinct persons as specified in section 25, may
issue the invoice before or at the time such supplier records the same in his books of
account or before the expiry of the quarter during which the supply was made.

(3) Notwithstanding anything contained in sub-sections (1) and (2) [Section 31(3)]-
a) a registered person may, within 1 month from the date of issuance of certificate of registration
and in such manner as may be prescribed, issue a revised invoice against the invoice already
issued during the period beginning with the effective date of registration till the date of
issuance of certificate of registration to him;
b) a registered person may not issue a tax invoice if the value of the goods or services or both
supplied is less than 200 rupees subject to such conditions and in such manner as may be
prescribed;
c) a registered person supplying exempted goods or services or both or paying tax under the
provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such
particulars and in such manner as may be prescribed:
Provided that the registered person may not issue a bill of supply if the value of the goods or
services or both supplied is less than 200 rupees subject to such conditions and in such
manner as may be prescribed;
d) a registered person shall, on receipt of advance payment with respect to any supply of goods
or services or both, issue a receipt voucher or any other document, containing such particulars
as may be prescribed, evidencing receipt of such payment;
e) where, on receipt of advance payment with respect to any supply of goods or services or both
the registered person issues a receipt voucher, but subsequently no supply is made and no tax
invoice is issued in pursuance thereof, the said registered person may issue to the person who
had made the payment, a refund voucher against such payment;
f) a registered person who is liable to pay tax under section 9(3) or 9(4) shall issue an invoice in
respect of goods or services or both received by him from the supplier who is not registered
on the date of receipt of goods or services or both;
g) a registered person who is liable to pay tax under section 9(3) or 9(4) shall issue a payment
voucher at the time of making payment to the supplier.

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(4) and (5)

Continuous Supply

of Goods [Section 31(4)] of Services [Section 31(5)]

Where The invoice shall be issued
Where successive statements of a) Due date of payment On or before the due date of
accounts/successive payments are is ascertainable from payment
the contract
involved, the invoice shall be
b) Due date of payment Before or at the time when
issued before/at the time each such
is not ascertainable the supplier of service
statement is issued or each such from the contract receives the payment
payment is received. c) Payment is linked to On or before the date of
the completion of an completion of that event
milestone event

(6) Where supply of services ceases before its completion [Section 31(6)]:
In a case where the supply of services ceases under a contract before the completion of the supply,
the invoice shall be issued at the time when the supply ceases and such invoice shall be issued to the
extent of the supply made before such cessation.

(7) Goods sent on sale or return basis [Section 31(7)]:

Where the goods being sent or taken on approval for sale or return are removed before the supply
takes place, the invoice shall be issued:
i. before/at the time of supply (or) whichever is earlier
ii. 6 months from the date of removal

Revised Tax Invoice:

The expression “tax invoice” shall include any revised invoice issued by the supplier in respect of a
supply made earlier.

➢ Every registered person who has been granted registration with effect from a date earlier than the
date of issuance of certificate of registration may issue Revised Tax Invoices.
➢ Such invoices shall be issued against the invoices already issued during said period.
➢ Revised Tax Invoices shall be issued within 1 month from the date of issuance of certificate of
registration. The words “Revised Invoice” shall be indicated prominently on such invoices.
➢ This provision is necessary, as a person who becomes liable for registration has to apply for
registration within 30 days of becoming liable for registration. When such an application is made

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within the stipulated time period and registration is granted, the effective date of registration is the
date on which the person became liable for registration [Rule 10].
➢ Thus, there would be a time lag between the date of grant of certificate of registration and the
effective date of registration. For supplies made by such person during this intervening period, the
law enables the issuance of a revised tax invoice, so that ITC can be availed by the recipient on
such supplies.
Example: Sarabhai Private Ltd. commenced business of supply of goods on 1st April in Delhi. Its
turnover exceeded Rs.20,00,000 on 3rd September. Thus it became liable to registration on 3rd
September. It applied for registration on 29th September and granted registration certificate on 5th
October. Since it applied for registration within 30 days of becoming liable to registration, it was
granted registration with effect from 3rd September.
Sarabhai Private Ltd. may issue Revised Tax Invoices in respect of taxable supplies effected
between 3rd September and 5th October.
➢ A registered person may issue a Consolidated Revised Tax Invoice in respect of all taxable
supplies made to an unregistered recipient during such period.
➢ However, in case of inter-State supplies, a consolidated Revised Tax Invoice cannot be issued in
respect of all taxable supplies made to an unregistered recipient if the value of a supply exceeds
Rs.2,50,000.

Contents of Tax Invoice

The tax invoice shall be issued by the supplier of goods or services or both shall contain the following
details:
1. Name, address and GSTIN of the supplier;
2. A consecutive serial number not exceeding 16 characters, in one or multiple series, containing
alphabets/numerals/special characters hyphen or dash and slash, and any combination thereof,
unique for a FY;
3. Date of its issue;
4. If recipient is registered - Name, address and GSTIN or UIN of recipient
5. If recipient is unregistered and value of supply is Rs.50,000 or more - Name and address of the
recipient and the address of delivery, along with the name of State and its code
6. If recipient is unregistered and value of supply is less than Rs.50,000 - unregistered recipient may
still request the aforesaid details to be recorded in the tax invoice
7. HSN(Harmonized System of Nomenclature) code for goods or services;
The Number of digits of HSN code to be mentioned in the invoice mandatorily depends on the
annual turnover in the preceding financial year as stated below:
Annual Turnover in the preceding financial Number of digits of HSN code
year of the Supplier
Upto Rs.5 Crores For B2B Supply- 4
For B2C Supply- 4 (Optional)
More than Rs.5 Crores For B2B Supply and B2C Supply- 6

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Provided that a registered person having aggregate turnover upto Rs.5crore in in the preceding
financial year may not mention the number of digits of HSN code in a tax invoice issued by him
in respect of supplies made to unregistered persons.
8. Description of goods or services;
9. Quantity in case of goods and unit or Unique Quantity Code thereof;
10. Total value of supply of goods or services or both;
11. Taxable value of supply of goods or services or both taking into account discount or abatement, if
any;
12. Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
13. Amount of tax charged in respect of taxable goods or services (central tax, State tax, integrated
tax, Union territory tax or cess);
14. Place of supply along with the name of State, in case of a supply in the course of inter-State trade
or commerce;
15. Address of delivery where the same is different from the place of supply;
16. Whether the tax is payable on reverse charge basis; and
17. Signature or digital signature of the supplier or his authorized representative
18. Quick response code, having embedded Invoice Reference Number (IRN) in it, in case invoice has
been issued in the manner prescribed rule 48(4).

Electronic Invoicing (E-Invoicing):

All registered persons (notified persons) with an aggregate turnover (based on PAN) in any preceding
financial year from 2017-18 onwards greater than Rs.20crore(from 1-04-22) will be required to issue e-
invoices.

E-invoicing is not generation of invoice by a government portal. Taxpayers will continue to create their
GST invoices on their accounting/billing/ERP systems as per e-invoice scheme.
These invoices will then be reported to ‘Invoice Registration Portal (IRP)’. On such reporting, IRP will
generate a unique ‘Invoice Reference Number’, digitally sign it return the invoice to the supplier. A GST
e-invoice is valid only with a valid IRN.

E-invoicing will eliminate the fake invoices. Claiming fictitious input tax credit (ITC) by raising fake
invoices is also one of the biggest challenges currently faced by tax-authorities. The e-invoice system will
help to curb the actions of unscrupulous taxpayers and reduce the number of fraud cases as the tax
authorities will have access to data in real-time.

Presently, invoices, credit notes and debit notes when issued by notified persons (to registered persons
(B2B) or for the purpose of exports) are covered under e-invoice.
Thus, presently such notified persons are not required to report B2C invoices. Further e-invoicing is also
not applicable to invoices issued by Input Service Distributor (ISD) and for import of goods.

If the invoice issued by a notified person is in respect of supplies made by him tax on which is payable
under reverse charge under section 9(3), e-invoicing is applicable.

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Example: A taxpayer (say a firm of advocates) having aggregate turnover in a FY of more than Rs.500
crore is supplying services to a company (who will be discharging tax liability as recipient under reverse
charge mechanism), such invoices have to be reported by said tax payer (since it is a notified person) to
IRP.

On the other hand, where specified category of supplies are received by notified person from unregistered
persons [attracting reverse charge under section 9(4)] or through import of services, e-invoicing doesn’t
arise/ not applicable.

Exemption from E-invoicing:

Following entities are exempt from the mandatory requirement of e-invoicing:
➢ Special Economic Zone units
➢ Insurer or banking company or financial institution including NBFC
➢ GTA supplying services in relation to transportation of goods by road in a goods carriage
➢ Supplier of passenger transportation service
➢ Person supplying services by way of admission to exhibition of cinematograph films in multiplex
screens
➢ A Government department and a Local Authority.
Thus, above mentioned entities are not required to issue e-invoices even if their turnover exceeds Rs.20
crore in any preceding financial year from 2017-18 onwards.

Example: Maharaja Private Limited has an SEZ unit and a regular DTA unit (both having same PAN).
The aggregate total turnover of Maharaja Private Limited is more than Rs.20 crores (considering both the
GSTINs). However, the turnover of DTA unit is below Rs.20 crores for FY 2020-21.
Answer: In this scenario, SEZ unit is exempt from e -invoicing. However, e-invoicing will be applicable
to DTA Unit because the aggregate turnover of the legal entity in this case is > Rs.20 crores. The
eligibility is based on aggregate annual turnover on the common PAN.

Facility of digital payment to recipient (Section 31A of CGST Act, 2017):

The Government may, on the recommendations of the Council, prescribe a class of registered persons
who shall provide prescribed modes of electronic payment to the recipient of supply of goods or services
or both made by him and give option to such recipient to make payment accordingly, in such manner and
subject to such conditions and restrictions, as may be prescribed.

The Government has notified that an invoice issued by a registered person, whose aggregate turnover in
any preceding financial year from 2017-18 onwards exceeds Rs.500 crores are mandatorily required to
have a Dynamic QR code from December 1, 2020.

Resultantly, it has been notified that invoice issued by a registered person [except specified class of
persons (discussed below)], whose aggregate turnover in a financial year exceeds Rs.500 crores, in
respect of B2C supplies (supply of goods or services or both to an unregistered person including the
person having UIN) shall have Dynamic QR code.

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In this regard, following issues have been further clarified vide Circular no. 146/02/2021 GST dated
23.02.2021:
1. Non-applicability of requirement of Dynamic QR code:
Dynamic QR code is not applicable to an invoice issued to an unregistered person by following
Suppliers:
a) Insurer or banking company or financial institution including NBFC
b) Goods transport agency supplying services in relation to transportation of goods by road in
a goods carriage
c) Supplier of passenger transportation service
d) Person supplying services by way of admission to exhibition of cinematograph films in
multiplex screens
e) Supplier of online information and database access or retrieval (OIDAR) services.

2. No Dynamic QR code in case of exports:

As regards the supplies made for exports, though such supplies are made by a registered person
to an unregistered person, however, since e-invoices are required to be issued in respect of
supplies for exports treating them as B2B supplies, Dynamic QR code requirement will not be
applicable to them.

Further, Dynamic QR Code should be such that it can be scanned to make a digital payment.

Special provisions pertaining to tax invoice for services by way of admission to exhibition of
cinematograph films in multiplex screens [Rule 46 and 54 of the CGST Rules]:

A registered person has an option to issue consolidated tax invoice for supplies at the close of each day
where the value of goods or services supplies is less than Rs.200; recipient is unregistered and does not
require tax invoice.
Further, with effect from 01.09.2019, a new sub-rule (4A) has been inserted in rule 54. Accordingly, a
registered person who is supplying services by way of admission to exhibition of cinematograph films in
multiplex screens shall be required to issue an electronic ticket. The said electronic ticket is deemed to be
a tax invoice, even if such ticket does not contain the details of the recipient of service but contains the
other information as mentioned under rule 46.
Moreover, supplier of such services in a screen other than multiplex screens also has been given an option
to follow above procedure.

Prohibition of Unauthorized Collection of Tax [Section 32]:

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

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Amount of Tax to be indicated in Tax Invoice and other documents [Section 33]:

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

SUMMARY OF VARIOUS DOCUMENTS:

Whenever a transaction takes place, different kinds of documents are issued under different
circumstances, like tax invoice, credit note, debit note and bill of supply etc.
Document Issued by & to When & How?
whom
Tax Invoices Issued by a supplier of For taxable supplies made.
goods/services, to a In case of supply of goods, the invoice must be issued in
recipient triplicate, i.e., original for recipient, duplicate for transporter and
triplicate for supplier.
In case of supply of services, the invoice must be issued in
duplicate, i.e., original for recipient and duplicate for supplier.

Consolidated Issued by Registered It is issued when-

Tax Invoice person ➢ The value of supply is < Rs.200
[Section ➢ Recipient is unregistered; and
31(3)] ➢ Recipient doesn’t require Tax invoice.
at the close of each day for all such supplies
Revised Tax Issued by Registered Where registration has been granted with effect from a date
Invoices person instead of earlier than the date of issuance of certificate of registration, he
[Section issuing Tax Invoice may issue revised tax invoices in respect of taxable supplies
31(3)] effected during the period starting from the effective date of
registration till the date of the issuance of the certificate of
registration within 1 month date of grant of registration.

Bill of Issued by the Registered person-

Supply registered person ➢ making exempt supplies, or
[Section ➢ paying tax under Composition scheme u/s 10(1) or
31(3)] ➢ paying tax under Composition scheme u/s 10(2A)
Payment Issued by the Shall issue an invoice in respect of the goods/ services so
Voucher registered person received by him from the supplier, who is not registered on the
[Section (Recipient), who is date of receipt of goods / services / both, and he shall issue a
31(3)] liable to pay tax under payment voucher at the time of making payment to such
the Reverse Charge supplier.
Mechanism
Receipt Issued by the When an advance payment is received with respect to any
Voucher registered person supply of goods or services or both.
[Section (Supplier) to the Where at the time of receipt of advance-
31(3)] person who had made ➢ Rate of tax is not determinable - tax shall be paid at the
the payment rate of 18%

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 Goods & Service Tax
➢ Nature of supply is not determinable - same shall be
treated as inter-State supply

Refund Issued by the If no supply is made and no tax invoice is issued after the issue
voucher registered person of receipt voucher for advance payment
[Section (Supplier) to the
31(3)] person who had made
the payment

Delivery Issued by Supplier of Supply of liquid gas where the quantity at the time of removal
Challan Goods- from the place of business of the supplier is not known or
[Rule 55] Original Copy for transportation of goods for job work or transportation of goods
Consignee & for reasons other than by way of supply.
Duplicate for Notes:
Transporter ➢ The supplier is required to issue a tax invoice after delivery
of goods where tax invoice could not be issued at the time
of removal of goods for the purpose of supply.
➢ Where goods are being transported on a delivery challan in
lieu of invoice, the same shall be declared in E-Way Bill.

E-Way Bill Issued by every For movement of goods if consignment value is > Rs.50,000
registered person who (including GST) whether for supply or otherwise.
causes movement of
goods through the
transporter.
Credit Notes Issued by the ➢ Where the taxable value in the invoice is greater than the
[Section registered person taxable value of supply;
34(1)] (Supplier) to the ➢ the tax charged in invoice is greater than the tax payable in
recipient respect of such supply;
➢ where the goods so supplied have been returned by the
recipient;
➢ where the goods/services have been found to be deficient
➢ where the discount is given after the supply is made
Debit Notes Issued by the ➢ Where the taxable value in the invoice is less than the
[Section registered person taxable value of supply;
34(3)] (Supplier) to the ➢ the tax charged in invoice is less than the tax payable in
recipient respect of such supply.

Declaration:
Any registered person who has issued a Credit note, in relation to supply of goods / services / both, must
declare the details of such credit note, in the return for the month during which such credit note was
issued, but not later than:
a) 30the November of the following financial year OR
b) Actual Date of furnishing the relevant annual return
Whichever is earlier.

No reduction in tax liability of the supplier shall be permitted, if the incidence of tax on such supply has
been passed on to any other person. [Section 34(2)]

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Any registered person who has issued a Debit note, in relation to supply of goods / services / both, must
declare the details of such debit note, in the return for the month during which such debit note was issued.
The tax liability can be adjusted upwards appropriately. [Section 34(4)]

Invoice-cum-bill of supply [Rule 46A]:

Where a registered person is supplying taxable as well as exempted goods or services or both to an
unregistered person, a single “invoice-cum-bill of supply” may be issued for all such supplies.

ELECTRONIC WAY BILL:

Section 68 of the CGST Act, 2017 provides that the Government may require the person in charge of a
conveyance carrying any consignment of goods of value exceeding such amount as may be specified to
carry with him such documents and such devices as may be prescribed.

Rule 138A of the CGST Rules provides that:

The person in charge of a conveyance shall carry –

a) Invoice or Bill of supply or Delivery challan, as the case may be; and
b) Copy of the e-way bill in physical form or the e-way bill number in electronic form.

Provided that nothing contained in clause (b) of this sub-rule shall apply in case of movement of goods by
rail or by air or vessel.

Provided further that in case of imported goods, the person in charge of a conveyance shall also carry a
copy of the bill of entry filed by the importer of such goods and shall indicate the number and date of the
bill of entry in Part A of FORM GST EWB-01.

Procedure for the generation of E-way bill:

E-way bill is a document introduced under the GST regime that needs to be generated before transporting
or shipping goods worth more than Rs. 50,000 within state or outside state.

Rule 138 of the CGST Rules provides that:

1. Every registered person who causes movement of goods of consignment value exceeding
Rs.50,000-
i. in relation to a supply; or
ii. for reasons other than supply; or
iii. due to inward supply from an unregistered person,
shall, before commencement of such movement, furnish information relating to the said goods as
specified in Part A of FORM GST EWB-01, electronically, on the common portal along with
such other information as may be required on the common portal and a unique number will be
generated on the said portal.
Provided also that where handicraft goods or goods made by craftsman are transported from one
State or Union territory to another State or Union territory by a person who has been exempted

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from the requirement of obtaining registration under section 23, the e-way bill shall be generated
by the said person irrespective of the value of the consignment.
Explanation: For the purposes of this rule, the consignment value of goods shall be the value,
determined in accordance with the provisions of section 15, declared in an invoice, a bill of
supply or a delivery challan, as the case may be, issued in respect of the said consignment and
also includes the Central tax, State or Union territory tax, Integrated tax and Cess charged, if any,
in the document and shall exclude the value of exempt supply of goods where the invoice is
issued in respect of both exempt and taxable supply of goods.
Example: Taxable value as per Invoice is Rs.45,000 IGST @ 18% is Rs.8,100
Total Invoice value is Rs.53,100/-
In the above example, E-Way Bill is required to be issued as the value of invoice including taxes
exceeds Rs.50,000/-.
2. Where the consignor or the consignee has not generated the e-way bill in FORM GST EWB-01
and the aggregate of the consignment value of goods carried in the conveyance is more than
Rs.50,000, the transporter, except in case of transportation of goods by railways, air and vessel,
shall, generate the e-way bill in FORM GST EWB-01 on the basis of invoice or bill of supply or
delivery challan, as the case may be, and may also generate a consolidated e-way bill in FORM
GST EWB-02 on the common portal prior to the movement of goods.
Provided that where the goods to be transported are supplied through an e-commerce operator or
a courier agency, the information in Part A of FORM GST EWB-01 may be furnished by such e-
commerce operator or courier agency.

3. Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated
by the registered person, being the supplier or the recipient, either before or after the
commencement of movement.

4. Registered person or the transporter may, at his option, generate and carry the e-way bill even if
the value of the consignment is less than Rs.50,000.

5. Upon generation of the e-way bill on the common portal, a unique E-Way Bill Number (EBN)
shall be made available to the supplier, the recipient and the transporter on the common portal.

6. After e-way bill has been generated in accordance with the provisions of rule 138(1), where
multiple consignments are intended to be transported in one conveyance, the transporter may
indicate the serial number of e-way bills generated in respect of each such consignment
electronically on the common portal and a consolidated e-way bill in FORM GST EWB-02
maybe generated by him on the said common portal prior to the movement of goods.

7. Where the goods are transported for a distance of upto 50 kilometers within the State or Union
territory from the place of business of the consignor to the place of business of the transporter for
further transportation, the supplier or the recipient or the transporter may not generate the e-way
bill in FORM GST EWB-01.

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8. Where the goods are transferred from one conveyance to another, the consignor or the recipient,
who has provided information in Part A of the FORM GST EWB-01, or the transporter shall,
before such transfer and further movement of goods, update the details of conveyance in the e-
way bill on the common portal in Part B of FORM GST EWB-01.
Provided that where the goods are transported for a distance of upto 50 kilometers within the
State or Union territory from the place of business of the transporter finally to the place of
business of the consignee, the details of the conveyance may not be updated in the e-way bill.

9. Where an e-way bill has been generated under this rule, but goods are either not transported or are
not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled
electronically on the common portal within 24 hours of generation of the e-way bill:
Provided that an e-way bill cannot be cancelled if it has been verified in transit in accordance
with the provisions of rule 138B.

10. Validity of e-way bill:

Distance within country Validity period
from relevant date
In case of Dimensional Cargo:
Upto 200 km 1 day
For every 200 km or part thereof over and above 200 kms 1 additional day
In case of Over Dimensional Cargo or multimodal shipment in which at least
one leg involves transport by ship:
Upto 20 km 1 day
For every 20 km or part thereof over and above 20 kms 1 additional day

Provided further that where, under circumstances of an exceptional nature, including trans-
shipment, the goods cannot be transported within the validity period of the e-way bill, the
transporter may extend the validity period after updating the details in Part B of FORM GST
EWB-01, if required.
Explanation: Relevant date means the date on which the e-way bill has been generated and the
period of validity shall be counted from the time at which the e-way bill has been generated and
each day shall be counted as the period expiring at midnight of the day immediately following the
date of generation of e-way bill.
Example: Suppose an e-way bill is generated at 00:04 hrs on 14th March. Then first day would
end on 12:00 midnight of 15 -16 March. Second day will end on 12:00 midnight of 16 -17 March
and so on.

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Blocking of E-way bill generation facility [Rule 138E]:

Blocking of e-waybill generation facility means disabling a taxpayer from generating the e-way bill. A
user will not be able to generate e-way bill for a GSTIN if the said GSTIN is not eligible for e-way bill
generation as per rule 138E of the CGST Rules. The GSTINs of such blocked taxpayers cannot be used to
generate the e-way bills as a consignor.

Blocking of GSTIN for e-way bill generation would only be for the defaulting supplier GSTIN and not
for the defaulting Recipient or Transporter GSTIN. Suspended GSTIN cannot generate e-way bill as
supplier. However, the suspended GSTIN can get the e-way bill generated as recipient or as transporter.

E-way bill generation is blocked in respect of following:

a) In case of a composition supplier u/s 10, who does not file Statement in Form GST CMP 08 for 2
consecutive quarters.
b) A person paying tax under regular scheme (section 9) has not furnished the returns for a
consecutive period of 2 tax periods.
c) A person, whose registration has been suspended under rule 21A pending the completion of the
proceedings for cancellation of registration.

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PROBLEM:

1) Jain & Sons is a trader dealing in stationery items. It is registered under GST and has undertaken
following sales during the day:
Sl.No. Recipient of supply Amount (Rs)
1 Raghav Traders - a registered retail dealer 190
2 Dhruv Enterprises – an unregistered trader 358
3 Gaurav – a Painter [unregistered] 500
4 Oberoi Orphanage – an unregistered entity 188
5 Aaradhya – a Student [unregistered] 158
None of the recipients require a tax invoice [Raghav Traders being a composition dealer].
Determine in respect of which of the above supplies, Jain & Sons may issue a Consolidated Tax
Invoice instead of Tax Invoice, at the end of the day?

“We need to accept that we won’t always make the right

decisions, that we’ll screw up royally sometimes –
understanding that failure is not the opposite of success, it’s
part of success.”

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CHAPTER-9

PAYMENT OF GST
As India is moving towards digitisation, GST have provided an easy and simple way of payment of taxes.
Under GST regime, all the taxpayers get three electronic ledgers namely E-cash Ledger, E-credit Ledger
& E-liability Ledger through their GST profile.

The introduction of E-ledgers is a unique feature under the GST regime. Electronic Ledgers or E-Ledgers
are of two types. One set is prepared and updated by the Tax payer – Electronic Cash Ledger and
Electronic Credit Ledger. Second set is prepared and updated on the basis of returns furnished by the
registered person or Tax authority i.e. Electronic Liability register.

The electronic cash ledger under section 49(1) shall be maintained in FORM GST PMT-05 for each
person, liable to pay tax, interest, penalty, late fee or any other amount, on the Common Portal for
crediting the amount deposited and debiting the payment there from towards tax, interest, penalty, fee or
any other amount. 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 (for deposits upto
Rs.10,000 per challan per tax period, by cash, cheque or demand draft) to accept deposit of GST.

The amount available under any head in the Electronic Cash Ledger (SGST / CGST / IGST) cannot be
utilised for discharging the liability under any other head.

Payment of tax, interest, penalty and other amounts [Section 49]:

1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet
banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross
Settlement or by such other mode shall be credited to the electronic cash ledger of such person to
be maintained in such manner as may be prescribed.
2) The input tax credit as self-assessed in the return of a registered person shall be credited to his
electronic credit ledger, to be maintained in such manner as may be prescribed.
3) The amount available in the electronic cash ledger may be used for making any payment towards
tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules
made thereunder in such manner and subject to such conditions and within such time as may be
prescribed.
4) The amount available in the electronic credit ledger may be used for making any payment towards
output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and
subject to such conditions and restrictions and within such time as may be prescribed.
Note: The Input Tax Credit that is credited to electronic credit ledger can be used only for
payment of output tax i.e it cannot be used for making payment of tax under reverse charge
mechanism, interest, penalty. This is because that the tax payables under reverse charge
mechanism, interest, penalty is outside the ambit of output tax.
5) Utilization of Input Tax Credit of IGST,CGST, SGST/UTGST- Already discussed in Input Tax
Credit Chapter.

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6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest,
penalty, fee or any other amount payable under this Act or the rules made thereunder may be
refunded in accordance with the provisions of section 54.
7) All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic
liability register. This is basically a control ledger which sums up all the liabilities of the taxable
person in a separate register.
8) The chronological order of discharge of liabilities of a taxable person would be:
a) Self-assessed tax and other dues for the previous tax periods will be discharged first
b) Self-assessed tax and other dues for the current tax periods will be discharged next
c) Any other amount payable under this Act or the rules made thereunder including the demand
determined under section 73 or section 74
9) Every person who has paid the tax on goods or services or both under this Act shall, unless the
contrary is proved by him, be deemed to have passed on the full incidence of such tax to the
recipient of such goods or services or both.

Notes:
a) The date of credit to the account of the Government in the authorized bank shall be deemed to be
the date of deposit in the electronic cash ledger.
b) ‘Tax Dues’ does not include Interest, fee and penalty. This is covered under ‘Other Dues’

When GST is payable under reverse charge, it should be paid by cash i.e. through Electronic Cash
Ledger, the GST under reverse charge cannot be paid by utilizing ITC – Section 49(4) read with
section 2(82).

Output tax in relation to a taxable person, means the tax chargeable under this Act on taxable supply of
goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge
basis[Section 2(82)].

Interest on Delayed Payment of Tax [Section 50]:

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules
made thereunder, but fails to pay the tax or any part thereof to the Government within the period
prescribed, shall pay interest at 18%p.a for the period for which the tax or any part thereof remains
unpaid [Section 50(1)].
Provided that interest in cases where the tax return under section 39 has been furnished after the
due date (but furnished before commencement of proceedings under Section 73 or Section 74)
shall be levied on that portion of the output tax which is being paid by debiting the electronic cash
ledger.
This means that the interest liability shall not arise on that portion of the output tax liability which
is paid using the ITC available in the electronic credit ledger.
Accordingly, interest if any payable by the registered person for delay in remittance of taxes
beyond the stipulated due date on account of delay in filing of return under section 39, shall be
demanded only on the net cash liability of taxes and not on the gross tax liability.

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 Goods & Service Tax
(2) The interest shall be calculated, from the day succeeding the day on which such tax was due to be
paid.
(3) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay
interest on such input tax credit wrongly availed and utilised, at such, rate not exceeding 24% p.a
as may be notified by the Government, on the recommendations of the Council, and the interest
shall be calculated, in such manner as may be prescribed..

Interest is payable when:

➢ There is a delay in payment of tax in part or in full within the prescribed period
➢ There is undue or excess claim of ITC under section 42(10)

Other relevant points relating to interest:

➢ The payment of interest in case of belated payment of tax should be made voluntarily i.e. even
without a demand.
➢ The interest payable under this section shall be debited to the Electronic Liability Register.
➢ The liability for interest can be settled by adjustment with balance in Electronic Cash Ledger but
not with balance in electronic credit ledger.

Transfer of Input Tax Credit [Section 53]:

a) On utilization of input tax credit availed under this Act for payment of tax dues under the IGST
Act in accordance with the provisions of Section 49(5) as reflected in the valid return, the amount
collected as central tax shall stand reduced by an amount equal to such credit so utilised and the
Central Government shall transfer an amount equal to the amount so reduced from the central tax
account to the integrated tax account in such manner and within such time as may be prescribed.
b) This means, when the CGST credit is utilised to pay IGST tax, then the amount so reduced from
the CGST tax account on such utilization, shall be transferred to IGST tax account by the Central
Government.
c) Similarly, if the amount of IGST credit is utilised towards dues of CGST/UTGST then, in terms of
section 18 of the IGST Act, there shall be reduction in the amount of IGST, equal to the credit so
utilized, and the Central Government shall transfer such amount equivalent to the amount so
reduced from IGST account to the CGST/UTGST account.
However, if the amount of IGST is utilised towards dues of SGST then, in terms of section 18 of
the IGST Act, there shall be reduction in the amount of IGST, equal to the credit so utilized, and
will be apportioned to the appropriate State Government and the Central Government shall
transfer the amount so apportioned to the account of the respective State Government.

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Electronic Liability Register [Rule 85]:

a) The electronic liability register specified under section 49(7) shall be maintained in FORM GST
PMT-01 for each person liable to pay tax, interest, penalty, late fee or any other amount on the
common portal and all amounts payable by him shall be debited to the said register.
b) The electronic liability register of the person shall be debited by:-
➢ The amount payable towards tax, interest, late fee or any other amount payable as per the
return furnished by the said person;
➢ The amount of tax, interest, penalty or any other amount payable as determined by a proper
officer in pursuance of any proceedings under the Act or as ascertained by the said person;
➢ The amount of tax and interest payable as a result of mismatch under section 42 or section 43
or section 50; or
➢ Any amount of interest that may accrue from time to time.
c) Payment of every liability by a registered person as per his return shall be made by debiting the
electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per
rule 87 and the electronic liability register shall be credited accordingly.
d) The amount payable on reverse charge basis, or the amount payable u/s 10, any amount payable
towards interest, penalty, fee or any other amount under the Act shall be paid by debiting the
electronic cash ledger maintained as per rule 87 and the electronic liability register shall be
credited accordingly.
Note: Electronic credit ledger cannot be utilised for the purpose of discharging liability on
account of reverse charge and composition levy.
e) Any amount of demand debited in the electronic liability register shall stand reduced to the extent
of relief given by the appellate authority or Appellate Tribunal or court and the electronic tax
liability register shall be credited accordingly.
f) The amount of penalty imposed or liable to be imposed shall stand reduced partly or fully, as the
case may be, if the taxable person makes the payment of tax, interest and penalty specified in the
show cause notice or demand order and the electronic liability register shall be credited
accordingly.
g) A registered person shall, upon noticing any discrepancy in his electronic liability ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the common
portal in FORM GST PMT-04.

Electronic Credit Ledger [Rule 86]:

a) The electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person
eligible for input tax credit under the Act on the common portal and every claim of input tax credit
under the Act shall be credited to the said ledger.
b) The electronic credit ledger shall be debited to the extent of discharge of any liability in
accordance with the provisions of section 49 or section 49A or section 49B.
c) Where a registered person has claimed refund of any unutilized amount from the electronic credit
ledger, the amount to the extent of the claim shall be debited in the said ledger.

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 Goods & Service Tax
d) If the refund so filed is rejected, either fully or partly, the amount debited under sub- rule (3), to
the extent of rejection, shall be re- credited to the electronic credit ledger by the proper officer by
an order made in FORM GST PMT-03.
e) A registered person shall, upon noticing any discrepancy in his electronic credit ledger,
communicate the same to the officer exercising jurisdiction in the matter, through the common
portal in FORM GST PMT-04.

Electronic Cash Ledger [Rule 87]:

a) The Electronic Cash Ledger contains a summary of all the deposits/payments made by a tax
payer. Electronic Cash Ledger is maintained on the GST Portal.
b) The electronic cash ledger under section 49(1) shall be maintained in FORM GST PMT-05 for
each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common
portal for crediting the amount deposited and debiting the payment therefrom towards tax,
interest, penalty, fee or any other amount.
c) Any person, or a person on his behalf, shall generate a challan (which will be valid for 15 days) in
FORM GST PMT-06 on the common portal and enter the details of the amount to be deposited
by him towards tax, interest, penalty, fees or any other amount.
d) The deposit into the ledger can be made through -
➢ Internet Banking through authorised banks;
➢ Credit card or Debit card through the authorised bank;
➢ National Electronic Fund Transfer or Real Time Gross Settlement from any bank; or
➢ Over the Counter payment through authorised banks for deposits up to Rs.10,000 per
challan per tax period, by cash, cheque or demand draft.
d) In the following cases, the limit of Rs.10,000 for the deposit over the counter payment shall not
be applicable:
i. Government Departments or any other deposit to be made by persons as may be notified
by the Commissioner in this behalf;
ii. Proper officer or any other officer authorised to recover outstanding dues from any person,
whether registered or not, including recovery made through attachment or sale of movable
or immovable properties;
iii. Proper officer or any other officer authorised for the amounts collected by way of cash,
cheque or demand draft during any investigation or enforcement activity or any ad hoc
deposit:
e) Any payment required to be made by a person who is not registered under the Act, shall be made
on the basis of a temporary identification number generated through the common portal.
f) Where the payment is made by way of National Electronic Fund Transfer or Real Time Gross
Settlement mode from any bank, the mandate form shall be generated along with the challan on
the common portal and the same shall be submitted to the bank from where the payment is to be
made.
Provided that the mandate form shall be valid for a period of 15 days from the date of generation
of challan.

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g) On successful credit of the amount to the concerned government account maintained in the
authorised bank, a Challan Identification Number shall be generated by the collecting bank and
the same shall be indicated in the challan.
h) On receipt of the Challan Identification Number from the collecting bank, the said amount shall
be credited to the electronic cash ledger of the person on whose behalf the deposit has been made
and the common portal shall make available a receipt to this effect.
i) Where a registered person has claimed refund of any unutilized amount from the electronic cash
ledger in accordance with the provisions of section 54, the amount to the extent of the claim shall
be debited in the electronic cash ledger.
j) Where the refund claimed by a person is rejected either fully or partly, the amount debited earlier
shall be credited to electronic cash ledger by the Proper office to the extent of amount of refund
rejected.

Payment by Challan:

➢ Common portal Identification Number (CPIN) is created for every Challan successfully generated
by the taxpayer. It is a 14-digit unique number to identify the challan. CPIN remains valid for a
period of 15 days.
➢ CIN or Challan Identification Number is generated by the banks, once payment in lieu of a
generated Challan is successful. It is a 17-digit number that is 14-digit CPIN plus 3-digit Bank
Code.
CIN is generated by the authorized banks/Reserve Bank of India (RBI) when payment is actually
received by such authorized banks or RBI and credited in the relevant Government account held
with them. It is an indication that the payment has been realized and credited to the appropriate
Government account. CIN is communicated by the authorized bank to taxpayer as well as to
GSTN.
➢ BRN or Bank Reference Number is the transaction number given by the bank for a payment
against a Challan.

Manual or physical Challans are not allowed under the GST regime. It is mandatory to generate Challans
online on the GST Portal.

In the e-ledger, information is kept minor head-wise for each major head. The ledger is displayed major
head-wise i.e., IGST, CGST, SGST/UTGST, and CESS. Each major head is divided into five minor
heads: Tax, Interest, Penalty, Fee and Others.

Major Heads Minor Heads

IGST Tax
CGST Interest
SGST/UTGST Penalty
Cess Fees
Others
Sub-sections (10) and (11) of section 49 of the CGST Act, 2017 provides a facility to the registered
person to transfer an amount from one (major/minor) head to another (major/minor) head in the electronic
cash ledger.

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The amount available in the electronic cash ledger can be utilised for payment of any liability for the
major and minor heads. For instance, if the registered person has made a deposit of tax erroneously i.e. by
virtue of human error, under a particular head instead of a specific head, the same can be transferred to
the respective intended head vide Form GST PMT-09.

This Form can be used either for-

i. transfer of erroneous deposits under any minor head of a major head to any other minor head of
same or other major heads or
ii. for any of the amounts already lying unutilised under any of the minor heads in Electronic Cash
ledger.

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PROBLEMS:

1) Mr. Alok, a registered supplier of taxable goods, filed GSTR-3B for the month of January, 2021
on 15thApril, 2021. The prescribed due date to file the said GSTR-3B was 20thFebruary, 2021.
The amount of net GST payable, in Cash i.e. Electronic Cash Ledger on supplies made by him for
the said month worked out to be Rs.36,500 which was paid on 15thApril, 2021. Briefly explain
the related provisions and compute the amount of interest payable under the CGST Act, 2017 by
Mr. Alok.
Ignore the effect of leap year, if applicable in this case.

2) ABC Ltd., have filed their GSTR-3B for the month of July, 2021 within the due date prescribed
under Section 39 i.e. 20.08.2021. Post filing of the return, the registered person has noticed
during September 2021 that tax dues for the month of July, 2021 have been short paid for
Rs.40,000. ABC Ltd., has paid the above shortfall of Rs.40,000, through GSTR-3B of September
2021, filed on 20.10.2021 [payment through Cash ledger - Rs.30,000 and Credit ledger
Rs.10,000].
Examine the Interest payable under the CGST Act, 2017.
What would be your answer if, GSTR3B for the month of July 2021 has been filed belatedly on
20.10.2021 and the self-assessed tax of Rs.40,000/- has been paid on 20.10.2021 [payment
through electronic cash ledger - Rs.30,000 and electronic credit ledger Rs.10,000]
Notes:
i. There exists adequate balance in Electronic Cash & Credit ledger as on 31.07.2021 for the
above short fall
ii. No other supply has been made nor tax payable for the month of July, 2021 other than
Rs.40,000/- missed out to be paid on forward charge basis
iii. Ignore the effect of leap year, if applicable in this case.

3) M/s. Daksha Enterprises has made a cash deposit of Rs.10,000 under minor head 'tax' of major
head 'SGST’. It has a liability of Rs.2,000 for minor head "Interest" under the major head
"SGST".
State whether M/s. Daksha Enterprises can utilise the amount available for payment of interest.

“The will to succeed is important, but what’s more important

is the will to prepare”

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 Goods & Service Tax
CHAPTER-10

RETURNS
As per law, a taxpayer is required to file a document with the administrative authority which is commonly
known as a “return”. There are various types of returns under GST like the First return, Monthly return,
Return for Composition Scheme, TDS return, Return for Input Service Distributor, Annual return and
final return. Under GST, everything is online and is updated and matched regularly. If a business is done
from offices in multiple states, the number of returns will go up accordingly.

The returns serve the following purposes:

a) Mode for transfer of information to tax administration;
b) Compliance verification program of tax administration;
c) Finalization of the tax liabilities of the taxpayer within stipulated period of limitation;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti- evasion programs of tax administration

Under the GST laws, the correct and timely filing of returns is of utmost importance because of two
reasons. Firstly, under GST laws, a taxpayer is required to estimate his tax liability on “self-assessment”
basis and deposit the tax amount along with/before the filing of such return. The return, therefore,
constitutes a kind of working sheet/supporting document for the tax authorities that can be relied upon as
the basis on which the tax has been computed by the taxpayer. Secondly, under the GST regime, filing of
returns not only determines the tax liability of the person filing the same, but it also has a huge bearing on
determination of tax liability of other persons with whom the former has entered into taxable activities.

Chapter IX of the CGST Act [Sections 37 to 48] prescribes the provisions relating to filing
of returns as under:
Section Particulars
Section 37 Furnishing details of outward supplies
Section 38 Furnishing details of inward supplies (Suspended)
Section 39 Furnishing of returns
Section 40 First return
Section 41 Claim of input tax credit and provisional acceptance thereof
Section 42 Matching, reversal and re-claim of Input Tax Credit
Section 43 Matching, reversal and re-claim of reduction in Output Tax Liability
Section 44 Annual Return
Section 45 Final Return
Section 46 Notice to return defaulters
Section 47 Levy of late fee
Section 48 Goods and services tax practitioners

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 Goods & Service Tax
SUMMARY OF GST RETURNS:
Return Form Particulars Frequency Due Date
GSTR-1 Filed by Registered person providing the details Monthly/ 11th of the next month
[Section 37] of outward supplies of taxable goods and/or Quarterly OR
services affected 13th day of the month
succeeding each quarter
for persons opting for
QRMP scheme
GSTR-2 Details of inward supplies of taxable goods Monthly 15th of the next month
[Section 38] and/or services affected claiming the input tax
Suspended credit.
GSTR-3 Monthly return on the basis of finalization of Monthly 20th of the next month
[Section 39] details of outward supplies and inward supplies
Suspended along with the payment of tax.
GSTR-3B Simple Return in which summary of outward Monthly/ 20th of the next month
supplies along with Input Tax Credit is Quarterly
[Section 39] OR
declared and payment of tax is affected by
taxpayer QRMP scheme: 22nd/24th
of the month succeeding
the quarter
GSTR-4 Return for a taxpayer registered under the Annually 30th April of the following
[Section 39] Composition scheme u/s 10(1) & 10(2A) financial year
GSTR-5 Return for a Non-Resident foreign Taxable Monthly 13th of the next month
[Section 39] Person
GSTR-5A Return for a Person providing online Monthly 13th of the next month
[Section 39] information and data base access or retrieval
services from a place outside India
GSTR-6 Return for an Input Service Distributor Monthly 13th of the next month
[Section 39]
GSTR-7 Return for authorities deducting tax at source Monthly 10th of the next month
[Section 39] under section 51
GSTR-8 Details of supplies effected through E- Monthly 10th of the next month
[Section 39] Commerce operator and the amount of tax
collected at source under section 52
GSTR-9 Annual Return for a Normal Taxpayer Annually 31st December of next
[Section 44] financial Year
GSTR-10 Final Return Once, when Within 3 months of the-
[Section 45] GST a) date of cancellation or
Registration b) date of cancellation
is cancelled order,
or whichever is later.
surrendered
GSTR-11 Details of inward supplies to be furnished by a Monthly 28th of the month
person having UIN and claiming a refund following the month for
which statement is filed

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 Goods & Service Tax
Notes:
1. Due dates are subject to changes by Notifications/ Orders.
2. Filing of GSTR-2 and GSTR-3 has been suspended.

FURNISHING DETAILS OF OUTWARD SUPPLIES [Section 37 read with CGST Rules]:

1. The details of outward supplies of both goods and services subject to such conditions and
restrictions are required to be furnished electronically in FORM GSTR-1 by every registered person
including casual taxable person except the following:
i. Person paying tax under composition scheme as per section 10
ii. Non-resident taxable person
iii. Supplier of online information and database access or retrieval services (OIDAR) from
outside India to unregistered online recipient
iv. Input Service Distributor (ISD)
v. Person deducting tax at source under section 51
vi. Person collecting tax at source under section 52 i.e., e-commerce operator (ECO), not being
an agent.

The details of outward supplies are required to be furnished, electronically, in Form GSTR-1 for the
month on or before 10th of next month or quarter and such details shall be communicated to the
recipient of the said supplies within such time and in such manner as may be prescribed.

Explanation: For the purposes of this Chapter, the expression “details of outward supplies” shall
include details of invoices, debit notes, credit notes and revised invoices issued in relation to
outward supplies made during any tax period.

2. The details of outward supplies’ to be furnished in FORM GSTR -1 shall include [Rule 59]:
➢ Invoice wise details of all-
A. Inter-State and Intra-State supplies made to registered persons; and
B. Inter-State supplies with invoice value more than Rs.2.5 lakhs made to the unregistered
persons.
➢ Consolidated details of all-
A. Intra-State supplies made to unregistered persons for each rate of tax; and
B. State wise inter-State supplies with invoice value upto Rs.2.5 lakhs made to unregistered
persons for each rate of tax.
➢ Debit and credit notes, if any, issued during the month for invoices issued previously.
It can be seen from the above table that uploading of invoices depends on whether the supply is
B2B or B2C plus whether the supply is intra-State or inter-State.

3. Invoices related details can be uploaded any time during the tax period and not just at the time of
filing of GSTR-1.
Example: For the month of October, the taxpayer can upload details related to invoices from 1st
October to 10th November.

4. Invoices can be modified/deleted any number of times till the submission of GSTR-1 of a tax
period. The uploaded invoice details are in a draft version till the GSTR-1 is submitted and can be
changed irrespective of due date.

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 Goods & Service Tax
5. The minimum number of digits of HSN code that a filer has to upload is same as given Invoice
chapter.

6. The details of outward supplies furnished by the supplier shall be made available to the concerned
registered persons (being recipients) in FORM GSTR-2A/2B (GSTR-4A in case of recipient opting
composition levy).

7. If the supplier discovers any error or omission, he shall rectify the same in the tax period during
which such error or omission is noticed, and pay the tax and interest, if any, in case there is short
payment, in the return to be furnished for such tax period.
Example: A supplier discovers a mistake in details of the invoice furnished in GSTR-1 for the
month of August, in October. He can rectify the said mistake in the GSTR-1 for the month of
October.
Suppose for some reason, supplier could not make correction at the time of filing of GSTR-1 for the
month of October then he can make such amendments in the subsequent periods.
However, the maximum time limit within which such amendments are permissible is earlier of
the following dates:
➢ 30the November of the following financial year OR
➢ Actual Date of filing of the relevant annual return

Example: An entity has furnished the annual return for the previous financial year 21-22 on 15th
August-22. In the current financial year 22-23. An error is discovered in respect of a transaction
pertaining to the month of November-21 of the previous financial year.
In this case, any error pertaining to the transaction in the month of November-21 of the previous
financial year 21-22 cannot be rectified beyond 15th August-22 of the current financial year 22-23.

8. GSTR-1 needs to be filed even if there is no business activity (Nil Return) in the tax period. Nil
GSTR-1 can be filed through an SMS using the registered mobile number of the taxpayer.
A Nil GSTR-1 does not have any entry.

9. Taxpayer opting for voluntary cancellation of GSTIN has to file GSTR-1 for active period.

10. In cases where a taxpayer has been converted from a normal taxpayer to composition taxpayer,
GSTR-1 will be available for filing only for the period during which the taxpayer was registered as
normal taxpayer. The GSTR-1 for the said period, even if filed with delay would accept invoices for
the period prior to conversion.

11. Sequencing of returns is mandatory. Unless the earlier return is not filed current month return
cannot be filed.
Provided that the Government may, on the recommendations of the Council, by notification, subject
to such conditions and restrictions as may be specified therein, allow a registered person or a class
of registered persons to furnish the details of outward supplies, even if he has not furnished the
details of outward supplies for one or more previous tax periods.
12. A taxpayer cannot file GSTR-1 before the end of the current tax period.
However, following are the exceptions to this rule:
➢ Casual taxpayers, after the closure of their business
➢ Cancellation of GSTIN of a normal taxpayer

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 Goods & Service Tax
DETAILS OF INWARD SUPPLIES [Section 38]:

The details of outward supplies furnished by the registered persons under section 37(1) and of such other
supplies as may be prescribed, and an auto-generated statement containing the details of input tax credit
shall be made available electronically to the recipients of such supplies in such form and manner, within
such time, and subject to such conditions and restrictions as may be prescribed.

The auto-generated statement under sub- section (1) shall consist of–
(a) details of inward supplies in respect of which credit of input tax may be available to the recipient;
and
(b) details of supplies in respect of which such credit cannot be availed, whether wholly or partly, by
the recipient.

FURNISHING OF RETURNS UNDER SECTION 39:

GSTR-3B:

GSTR-3B is a simple return containing summary of outward supplies, inward supplies, eligible ITC,
payment of tax etc. Thus, GSTR- 3B does not require invoice-wise data of outward supplies.
Provided that the Government may, notify certain class of registered persons who shall furnish a return
for every quarter or part thereof, subject to such conditions and restrictions as may be specified therein.
Section 39(1) prescribes a return in Form GSTR-3B for every registered person, other than an-
i. Person paying tax under composition scheme as per section 10
ii. Non-resident taxable person
iii. Supplier of online information and database access or retrieval services (OIDAR) from outside
India to unregistered online recipient
iv. Input Service Distributor (ISD)
v. Person deducting tax at source under section 51
vi. Person collecting tax at source under section 52 i.e., e-commerce operator (ECO), not being an
agent.

GSTR-3B can be filed monthly or quarterly.

Due date for filing return in Form GSTR-3B:

1. In case of a taxpayer opting for QRMP scheme - Quarterly GSTR- 3B on or before 22nd or
24th of the month succeeding the quarter for which return is furnished (Refer the Table given
below for details).
2. In case of other taxpayers - Monthly GSTR-3B on or before 20th of the month succeeding the
month for which return is furnished.

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 Goods & Service Tax
Due dates for taxpayers opting for QRMP scheme:
Class of registered persons Due date
Registered persons whose principal place of business is in the States of Chhattisgarh, 22nd day of the
Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, month succeeding
Telangana, Andhra Pradesh, Union territories of Daman & Diu & Dadra & Nagar such quarter.
Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep.
Registered persons whose principal place of business is in the States of Himachal 24th day of the
Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, month succeeding
Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West such quarter.
Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh,
Chandigarh or Delhi.

Every registered person required to furnish return shall, discharge their liability towards tax, interest,
penalty, fees or any other amount payable under GST law by debiting the electronic cash ledger or
electronic credit ledger and include the details in this return.

A registered person shall not be allowed to furnish a return for a tax period if the return for any of the
previous tax periods has not been furnished by him.

QUARTERLY RETURN MONTHLY PAYMENT (QRMP) SCHEME:

Proviso to section 39(1) of the CGST Act, 2017, empowers the Government to notify certain class of
registered persons who shall furnish return on quarterly basis. Further, section 39(7), provides that person
so notified to furnish quarterly return shall pay taxes due during a month within prescribed time and
manner.

In terms of above provisions, with effect from 01.01.2021, a Quarterly Return Monthly Payment (QRMP)
Scheme has been introduced as a trade facilitation measure and in order to further ease the process of
doing business.

QRMP Scheme is an optional return filing scheme, introduced for small taxpayers having aggregate
annual turnover (PAN based) of upto Rs.5 crore in the preceding financial year to furnish their Form
GSTR-1 and Form GSTR-3B on a quarterly basis while paying their tax on a monthly basis through a
simple challan.

This will significantly reduce the compliance burden on such taxpayers as now the taxpayers need to file
only 4 GSTR-3B returns instead of 12 GSTR- 3B returns in a year. Similarly, they would be required to
file only 4 GSTR-1 returns since Invoice Filing Facility (IFF) is provided under this scheme.

Opting of QRMP scheme is GSTIN wise. Distinct persons can avail QRMP scheme option for one or
more GSTINs. It implies that some GSTINs for a PAN can opt for the QRMP scheme and remaining
GSTINs may not opt for the said scheme.

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 Goods & Service Tax
Conditions and restrictions:

a) Registered persons under QRMP scheme must have furnished the return for the preceding month,
as due on the date of exercising such option. A registered person shall not be eligible to opt for
QRMP scheme if he has not furnished the last return due on the date of exercising such option.
Example: If a registered person intending to avail of QRMP scheme for the quarter ‘July to
September’ is exercising his option on 27th July for the said quarter, he must have furnished the
return for the month of June which was due in July.
b) A registered person intending to opt for QRMP scheme for any quarter shall indicate his
preference for furnishing of return on a quarterly basis from 1st day of the 2nd month of the
preceding quarter till the last day of the 1st month of the quarter for which the option is being
exercised.
Example: A registered person intending to avail of QRMP scheme for the quarter ‘July to
September’ can exercise his option from 1st May to 31st July.
c) Registered persons under QRMP scheme are not required to exercise the option every quarter.
Where such option has been exercised once, they shall continue to furnish the return as per the
selected option for future tax periods, unless they revise the said option or becomes ineligible for
this scheme as per the conditions and restrictions notified in this regard

Option of QRMP scheme to lapse:

In case where a registered person’s aggregate turnover crosses Rs.5 crore during a quarter in a financial
year, he shall not be eligible for furnishing of return on quarterly basis from the first month of the
succeeding quarter. He shall opt for furnishing of return on a monthly basis, electronically, on the
common portal, from the first month of the quarter, succeeding the quarter during which his aggregate
turnover exceeds Rs.5 crore.

Form and manner of furnishing details of outward supplies - GSTR-1:

The details of outward supplies are required to be furnished, electronically, in Form GSTR-1, for the
month or quarter.

Invoice furnishing facility (IFF):

➢ Taxpayers opting for QRMP scheme may furnish the details of such outward supplies to a
registered person, as he may consider necessary, for the 1st and 2nd months of a quarter, using
invoice furnishing facility (hereafter referred to as the “IFF”).
Invoices pertaining to last month of a quarter are to be uploaded in GSTR-1 only.
➢ The facility of furnishing details of invoices in IFF has been provided so as to allow details of such
supplies to be duly reflected in the Form GSTR-2A and Form GSTR-2B of the concerned
recipient.
In case where a buyer has made purchases from a person opting for QRMP scheme, he could not
have claimed full ITC but due to introduction of IFF, such delay will not occur as the details

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 Goods & Service Tax
submitted using IFF will be reflected in the GSTR-2A, GSTR-2B, or GSTR-4A of the recipients,
as the case may be.
➢ The IFF is not mandatory, but an optional facility made available to the registered persons under
the QRMP scheme.
At his option, a registered person may choose to furnish the details of outward supplies made
during a quarter in Form GSTR-1 only, without using the IFF.
➢ Taxpayers using IFF can upload the invoice details upto a cumulative value of Rs.50 lakh in each
of the first 2 months of the quarter.
➢ The invoices are to be furnished in IFF between the 1st day of the succeeding month till the 13th
day of the succeeding month.
After 13th of the month, this facility for furnishing IFF for previous month would not be available.
Example: The said facility would be available, say for the month of July, from 1st August till 13th
August. Similarly, for the month of August, the said facility will be available from 1st September
till 13th September.

➢ The details of invoices furnished using IFF in the first 2 months of the quarter are not required to
be furnished again in GSTR-1 for the said quarter.
Example: A registered person who has availed the QRMP scheme wants to declare 2 invoices out
of the total 10 invoices issued in the 1st month of quarter since the recipient of supplies covered by
those 2 invoices desires to avail ITC in that month itself. Details of these 2 invoices may be
furnished using IFF.
The details of the remaining 8 invoices shall be furnished in Form GSTR-1 of the said quarter. The
2 invoices furnished in IFF shall be reflected in Form GSTR-2B of the concerned recipient of the
1st month of the quarter and remaining 8 invoices furnished in Form GSTR-1 shall be reflected in
Form GSTR-2B of the concerned recipient of the last month of the quarter.

➢ The details of outward supplies furnished using IFF shall include the -
i. Invoice wise details of inter-State and intra-State supplies made to the registered persons;
ii. Debit and Credit notes, if any, issued during the month for such invoices issued
previously.

➢ However, if a registered person does not opt to upload invoices using IFF, then he has to upload
invoice details for all the 3 months of the quarter in Form GSTR-1.

Cases where a registered person shall not be allowed to furnish details of outward supplies in
GSTR-1/IFF:
➢ A registered person shall not be allowed to furnish the details of outward supplies in Form GSTR-
1, if he has not furnished the return in Form GSTR-3B for preceding two months.
➢ A registered person, opting for QRMP scheme shall not be allowed to furnish the details of
outward supplies in Form GSTR-1 or using IFF, if he has not furnished the return in Form GSTR-
3B for preceding tax period.
➢ A registered person, who is restricted from using the amount available in electronic credit ledger
to discharge his liability towards tax in excess of 99% of such tax liability under rule 86B, shall

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 Goods & Service Tax
not be allowed to furnish the details of outward supplies in Form GSTR-1 or using IFF, if he has
not furnished the return in Form GSTR-3B for preceding tax period.

Form and manner of ascertaining details of inward supplies – GSTR-2A and GSTR-2B
[Section 38 read with Rule 60]:

Form GSTR-2A - is a system generated read only statement of inward supplies for a recipient. This
statement is updated on a real time basis. The details become available to the recipient for view/download
and are updated incrementally as and when supplier(s) upload or change details in their respective form of
return/statement, for the given tax period.

Details of outward supplies furnished by the supplier in Form GSTR-1 or using the IFF is made available
electronically to the concerned registered persons (recipients) in Form GSTR-2A, in Form GSTR-4A, as
the case may be.

Details of invoices furnished by a non-resident taxable person in Form GSTR-5 and by an Input Service
Distributor in Form GSTR-6, details of TDS by deductor furnished in Form GSTR-7 and details of TCS
by an e-commerce operator furnished in Form GSTR-8, are made available to the recipient, deductee or
concerned person, in Form GSTR-2A.

Further, details of the integrated tax paid on the import of goods or goods brought in DTA from SEZ
unit/developer on a bill of entry are also made available in Form GSTR-2A.

Form GSTR-2B – an auto-drafted read only statement containing the details of ITC - is made available to
the registered person (recipient) for every month on 14th of next month. It is a static statement and is
available only once a month.

Form GSTR-2B consists of all documents filed by suppliers in their Form GSTR-1, between the cut-off
dates. It also consists of import data for the period which are received within 13th of the succeeding
month.

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 Goods & Service Tax
Monthly payment of tax:

The registered person under the QRMP Scheme would be required to pay the tax due in 1st month or 2 nd
month or both the months of the quarter by depositing the tax due in Form GST PMT-06. The payment is
to be made by 25th day of the month succeeding such month.

While generating the challan, taxpayers should select “Monthly payment for quarterly taxpayer” as reason
for generating the challan. The said person can use any of the following two options provided below for
monthly payment of tax during the first 2 months –
a) Fixed sum method: If a taxpayer chooses this option, a facility is available on the GST portal for
generating an auto-generated/pre- filled challan in Form GST PMT-06. The challan amount is
calculated by the system which cannot be edited. The amount is equal to:
i. 35% of the tax paid in cash in the return for the preceding quarter where the return was
furnished quarterly; or
Example:
In case the last return filed was on quarterly basis for quarter ending March:
Tax paid in cash in Tax required to be paid
quarter (January - in each of the months –
March) April and May
CGST 100 CGST 35
SGST 100 SGST 35
IGST 500 IGST 175
Cess 50 Cess 17.5

ii. tax liability paid in cash in the return for the last month of the immediately preceding
quarter where the return was furnished monthly.
Example:
In case the last return filed was monthly for tax period March:
Tax paid in cash in Tax required to be paid
March in each of the months –
April and May
CGST 50 CGST 50
SGST 50 SGST 50
IGST 80 IGST 80
Cess 0 Cess 0

However, no such amount may be required to be deposited-

➢ for the 1st month of the quarter, where the balance in the electronic cash ledger/electronic
credit ledger is adequate for the tax liability for the said month or where there is nil tax
liability;
➢ for the 2nd month of the quarter, where the balance in the electronic cash
ledger/electronic credit ledger is adequate for the cumulative tax liability for the 1st and
the 2nd month of the quarter or where there is nil tax liability

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 Goods & Service Tax
Monthly tax payment through this method would not be available to those registered persons who
have not furnished the return for a tax period preceding such month.

b) Self-Assessment Method: The said persons, in any case, can pay the tax due by considering the
tax liability on inward and outward supplies and the input tax credit available, in Form GST PMT-
06. In order to facilitate ascertainment of the ITC available for the month, an auto-drafted input tax
credit statement has been made available in Form GSTR-2B, for every month.

The registered person under QRMP is free to avail either of the two tax payment methods above in any of
the two months of the quarter.

At the time of filing the return for a quarter in Form GSTR-3B, the amount deposited by the registered
person in the first 2 months of the quarter shall be debited. Further, any amount left after filing of that
quarter’s Form GSTR-3B may either be claimed as refund or may be used for any other purpose in
subsequent quarters.

However, such refund claim shall be permitted only after the return in Form GSTR-3B for the said quarter
has been furnished.

Applicability of Interest:

1. For registered person making payment of tax by opting Fixed Sum Method:
No interest would be payable in case the tax due is paid in the first 2 months of the quarter by way
of depositing auto-calculated fixed sum amount (as discussed above) by the due date.

In other words, if while furnishing return in Form GSTR-3B, it is found that in any or both of the
first 2 months of the quarter, the tax liability net of available credit on the supplies made /received
was higher than the amount paid in challan, then, no interest would be charged provided they
deposit system calculated amount for each of the first 2 months and discharge their entire liability
for the quarter in Form GSTR-3B of the quarter by the due date.
In case such payment of tax by depositing the system calculated amount in Form GST PMT-06 is
not done by due date for furnishing return in Form GSTR-3B, interest would be payable at the
applicable rate, from the due date of furnishing Form GST PMT-06 till the date of making such
payment.
Further, in case Form GSTR-3B for the quarter is furnished beyond the due date, interest would be
payable as per the proviso to section 50(1) of the CGST Act for the tax liability net of ITC i.e on
Net tax liability.
Examples:
a) A registered person, who has opted for the QRMP Scheme, had paid a total amount of
Rs.100/- in cash as tax liability in the previous quarter of October to December. He opts to
pay tax under fixed sum method. He therefore pays Rs.35/- each on 25th February and 25th
March for discharging tax liability for the first 2 months of quarter viz. January and
February.
In his return for the quarter, it is found that liability, based on the outward and inward
supplies, for January was Rs.40/- and for February it was Rs.42/-. However, no interest

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 Goods & Service Tax
would be payable for the lesser amount of tax (i.e. Rs.5 and Rs.7 respectively) discharged in
these 2 months provided that he discharges his entire liability for the quarter in the Form
GSTR-3B of the quarter by the due date.
b) A registered person, who has opted for the QRMP Scheme, had paid a total amount of
Rs.100/- in cash as tax liability in the previous quarter of October to December. He opts to
pay tax under fixed sum method. He therefore pays Rs.35/- each on 25th February and 25th
March for discharging tax liability for the first 2 months of quarter viz. January and
February.
In his return for the quarter, it is found that total liability for the quarter net of available
credit was Rs.125, but he files the return on 30th April. Interest would be payable at 18% on
Rs.55 [Rs.125 – Rs.70 (deposit made in cash ledger in first and second month)] for the
period between due date of quarterly GSTR 3B and 30th April.

2. For registered person making payment of tax by opting Self- Assessment Method:
Interest amount would be payable as per section 50(1) of the CGST Act for tax or any part thereof
(net of ITC) which remains unpaid / paid beyond the due date for the first 2 months of the quarter.

Interest payable, if any, shall be paid through Form GSTR-3B.

Note: It is clarified that no late fee is applicable for delay in payment of tax in first 2 months of the
quarter.

Summary of Due dates for the registered persons opting for QRMP scheme:

Invoices are to be furnished in IFF
(Invoice Furnishing Facility)
Furnishing the details of outward
supplies in Form GSTR-1
For payment of Tax
Furnishing the details in Form GSTR- on or before 22nd or 24th of the month succeeding the
3B
Between the 1st day of the succeeding month till the 13th
day of the succeeding month
13th day of the month succeeding each quarter
For first two months of the quarter- 25th day of the
month succeeding such month.
For last month of the quarter- Before the due date of
Furnishing GSTR 3B for the quarter (on or before 22nd or
24th of the month succeeding the quarter)
quarter

GSTR-4 – Return by a Composition Supplier:

Registered persons paying tax u/s 10 of the CGST Act, shall follow the special procedure for furnishing
of return and payment of tax as follows-
➢ Annual Return in GSTR-4 by 30th April following the end of such financial year.
➢ Quarterly Statement in form GST CMP-08 containing details of payment of self- assessed tax, for
every quarter (or part of the quarter), by 18th day of the month succeeding such quarter.

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While composition suppliers are required to file the return GSTR-4 annually, they are required to pay the
tax quarterly.

The inward supplies of a composition supplier received from registered persons filing GSTR-1 will be
auto populated in FORM GSTR-4A for viewing.

Composition taxpayers are neither entitled for any ITC nor entitled to pass on any input tax credit to its
customers (registered/unregistered). Therefore, composition taxpayers are required to provide
consolidated details of outward supplies in GSTR-4 and not invoice-wise details. However, details of
inter-State and intra-State inward supplies received from registered and un-registered persons are to be
provided invoice- wise.

Tax liability: Since composition suppliers are not eligible to take ITC, they discharge their tax liability
only by debiting electronic cash ledger.

Statements/return for the period prior to opting for composition scheme:

If a registered person opts to pay tax under composition scheme from the beginning of a financial year, he
will, where required, furnish statements/return relating to the period prior to paying tax under composition
scheme till the-
➢ Due date of furnishing the return (GSTR-3B) for the month of September of the succeeding
financial year, or
➢ Actual date furnishing of annual return (GSTR-9) of the preceding financial year,
whichever is earlier.

Note: GSTR-3B and GSTR-4 need to be filed even if there is no business activity (nil return) in the tax
period.

Taxpayers can now file Nil return under section 39 in Form GSTR-3B or a Nil details of outward supplies
under section 37 in Form GSTR-1 or a Nil statement in FORM GST CMP-08 for a tax period, through a
short messaging service using the registered mobile number and the said return or the details of outward
supplies or statement shall be verified by a registered mobile number based One Time Password facility.

As per section 29(2), a proper officer is empowered to cancel the registration of a taxable person if, inter
alia:
a) a person paying tax under composition scheme has not furnished his GSTR-4 for 3 consecutive tax
periods
b) any other taxable person has not furnished returns for consecutive period of 6 months.

GSTR-5 - Return by a Non-Resident Taxable Persons:

Non-Resident Taxable Persons (NRTPs) are those suppliers who do not have a business establishment in
India and have come for a short period to make supplies in India. They would normally import their
products into India and make local supplies. The concept of Non-Resident Taxable Person has been
discussed in detail in Chapter 7 – Registration.

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A registered NRTP is not required to file separately the Statement of Outward Supplies and applicable
return for a normal tax payer. In place of the same, a simplified monthly tax return has been prescribed in
Form GSTR-5 for a NRTP for every calendar month or part thereof. The details of outward supplies and
inward supplies of a NRTP are incorporated in GSTR-5.

GSTR-5 should be furnished within 13 days after the end of the calendar month or within 7 days after the
last day of validity period of the registration, whichever is earlier.

A NRTP should pay the tax, interest, penalty, fees or any other amount payable under the CGST Act or
the provisions of the Returns chapter under the CGST Rules, till the last date of filing GSTR-5.

Due date for payment of tax [Section 39(7)]:

Due dates for payment of tax in respect of the persons required to file monthly GSTR-3B and GSTR-5 are
linked with the due dates for filing of such returns, i.e. the last dates (due dates) of filing such returns are
also the due dates for payment of tax in respect of persons required to file such returns.

However, due dates for payment of tax in respect of the persons required to file quarterly GSTR-3B under
QRMP Scheme is delinked.

Every registered person under QRMP scheme shall pay the tax due for each of the first 2 months of the
quarter, by depositing the said amount in Form GST PMT-06, by the 25th day of the month succeeding
such month.

Also, in case of registered persons paying tax under composition scheme, the due date for payment of tax
and filing of GSTR-4 is delinked. While GSTR-4 for a financial year is required to be filed by 30th April
of the following year, tax for a quarter is to be paid by 18th of the month succeeding such quarter.

Further, NRTPs or casual taxable persons are required to make advance deposit of an amount equivalent
to their estimated tax liability for the period for which registration is sought or extension of registration is
sought in terms of section 27(2).

Every registered person required to furnish return shall, discharge their liability towards tax, interest,
penalty, fees or any other amount payable under GST law by debiting the electronic cash ledger or
electronic credit ledger and include the details in the return.

Rectification of Errors/Omissions [Section 39(9)]:

In GST since the returns are built from details of individual transactions, there is no requirement for
having a revised return. Any need to revise a return may arise due to the need to change a set of invoices
or debit/credit notes. Instead of revising the return already submitted, the system allows changing the
details of those transactions (invoices or debit/credit notes) that are required to be amended. They can be

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amended in any of the future GSTR- 1 in the tables specifically provided therein for the purposes of
amending previously declared details.

Omission or incorrect particulars discovered in the returns filed u/s 39 can be rectified in the return to be
filed for the tax period during which such omission or incorrect particulars are noticed. Any tax payable
as a result of such error or omission will be required to be paid along with interest.

Exception: It is important to note that section 39(9) does not permit rectification of error or omission
discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities.

Hence, assessee may not be able to pass on the ITC to the receiver in respect of tax payments made by
him in pursuance of any of the afore-mentioned situations.

Time limit for making rectification: The maximum time limit within which the rectification of
errors/omissions is permissible is earlier of the following dates:
➢ 30the November of the following financial year OR
➢ Actual date of filing of the relevant annual return

Notes:
1. A return furnished under section 39 on which self- assessed tax has been paid in full is considered
as a valid return.
2. A taxpayer needs to electronically sign the submitted returns otherwise it will be considered not-
filed.

As per Section 39(10), A registered person shall not be allowed to furnish a return for a tax period if the
return for any of the previous tax periods or the details of outward supplies under section 37 for the said
tax period has not been furnished by him:

Provided that the Government may, on the recommendations of the Council, by notification, subject to
such conditions and restrictions as may be specified therein, allow a registered person or a class of
registered persons to furnish the return, even if he has not furnished the returns for one or more previous
tax periods or has not furnished the details of outward supplies under section 37 for the said tax period.

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OTHER RETURNS:

First Return [Section 40]:

When a person becomes liable to registration after his turnover crosses the threshold limit, he may apply
for registration within 30 days of so becoming liable. Thus, there might be a time lag between a person
becoming liable to registration and grant of registration certificate.

During the intervening period, such person might have made the outward supplies, i.e. after becoming
liable to registration but before grant of the certificate of registration.

Now, in order to enable such registered person to declare the taxable supplies made by him for the period
between the date on which he became liable to registration till the date on which registration has been
granted so that ITC can be availed by the recipient on such supplies, firstly, the registered person may
issue revised tax invoices against the invoices already issued during said period within 1 month from the
date of issuance of certificate of registration [Section 31(3)].

Further, section 40 provides that registered person shall declare his outward supplies made during said
period in the first return furnished by him after grant of registration. The format for this return is the same
as that for regular return.

Section 41 of CGST Act,2017 is as follows:

(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be
entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall
be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such
supplies of goods or services or both, the tax payable whereon has not been paid by the supplier,
shall be reversed along with applicable interest, by the said person in such manner as may be
prescribed:

Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid
supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as
may be prescribed.

Sections 42, 43 and 43A are to be omitted.

Annual Return [Section 44 read with rule 80]:

All tax payers filing returns GSTR 1 to GSTR 3B are required to file an annual return.
However the following persons are not required to do so:
a) Casual taxable persons
b) Non-Resident taxable persons
c) Input Service Distributor
d) Persons authorized to deduct/collect tax at source under section 51/52
e) Persons supplying online information and data base access or retrieval services from a place
outside India to a person in India, other than a registered person.

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The annual return for a financial year needs to be filed electronically in Form GSTR-9 through the
common portal by 31st December of the next financial year.
A person paying tax under composition scheme is required to file the annual return in Form GSTR-9A.
Every registered person who is required to get his accounts audited under section 35(5) shall also furnish
electronically a copy of audited annual accounts and a self-certified reconciliation statement in the form
GSTR-9C along with the annual return.
Reconciliation Statement reconciles the value of supplies declared in the return furnished for the financial
year with the audited annual financial statement and such other particulars, as may be prescribed.

Final Return [Section 45 read with rule 81]:

Every registered person who is required to furnish return u/s 39(1) and whose registration has been
surrendered or cancelled is required to file a final return electronically in Form GSTR-10 through the
common portal.

The final return has to be filed within 3 months of the:

➢ date of cancellation or
➢ date of order of cancellation
whichever is later.

Details of inward supplies of persons having UIN [Rule 82]:

When UIN is issued for claiming refund of taxes paid on inward supplies, such person shall furnish the
details of the inward supplies of taxable goods and/or services on which refund of taxes has been claimed,
in Form GSTR-11, along with application for such refund claim.

When UIN is issued for purposes other than refund of taxes paid, such person shall furnish the details of
inward supplies of taxable goods and/or services as may be required by the proper officer in Form GSTR-
11.

DEFAULT/DELAY IN FURNISHING RETURN [SECTIONS 46 & 47]:

Notice to return defaulters [Section 46 read with rule 68]:

Section 46 of the CGST Act provides that where a registered person fails to furnish a return under section
39 or section 44 or section 45, a notice (in FORM GSTR-3A) shall be issued requiring him to furnish
such return within 15 days.

In the said notice default period, i.e., tax period for which the taxpayer has made the default and the type
of return is specifically mentioned.

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Late fees levied for delay in filing return [Section 47]:

Delay in filing any of the following returns by their respective due dates, attracts late fee:
a) Statement of Outward Supplies [Section 37]
b) Returns (including returns under QRMP Scheme) [Section 39]
c) Final Return [Section 45]
d) Section 52

Quantum of late fee:

➢ Rs.100 for every day during which such failure continues; or
➢ Rs.5,000
Whichever is less

Late fees levied for delay in filing annual return:

A registered person who fails to furnish the annual return under section 44 by the due date is required to
pay a late fee as under:
➢ Rs,100 for every day during which such failure continues; or
➢ 0.25% of his turnover in the State or Union Territory.
Whichver is less

Notification No. 19/2021 – Central Tax, dated 1st June, 2021:

Late fee payable under section 47 of CGST Act for the tax period June, 2021 onwards or quarter ending
June, 2021 onward, who fail to furnish FORM GSTR-1 or FORM GSTR-3B by the due date:
Class of registered persons Late Fee (CGST)
Registered persons who have nil outward supplies in the tax period/ Rs.250
whose total amount of tax payable in the GSTR- 3B is Nil, as the case
may be
Registered persons having an aggregate turnover of up to Rs.1.5 crores Rs.1,000
in the preceding financial year
Registered persons having an aggregate turnover of more than Rs.1.5 Rs.2,500
crores and up to Rs.5 crores in the preceding financial year
Registered persons having an aggregate turnover of more than Rs.5 Rs.100 for every day during
crores in the preceding financial year which such failure continues;
or Rs.5,000
Whichever is less

For delayed filing of GSTR-4:

Late fee payable under section 47 of the CGST Act from F.Y. 2021-22 onwards, by the registered person
(composition taxpayer) who fail to furnish Form GSTR-4 by the due date, shall be as follows:

Class of registered persons Late Fee (CGST)

Registered persons for whom total tax payable in GSTR-4 is Nil Rs.250
Registered persons other than those covered above Rs.1,000

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Note: It may be noted that the late fee payable by a registered person for delayed filing of a return and/or
annual return, as mentioned above, is with reference to only the CGST Act. An equal amount of late fee
would be payable by such person under the respective SGST/UTGST Act as well.

GOODS AND SERVICES TAX PRACTITIONERS [Section 48]:

Section 48 provides for the authorisation of an eligible person to act as approved Goods and Services Tax
Practitioner (GSTP). A registered person may authorise an approved GSTP to furnish information, on his
behalf, to the Government. The manner of approval of GSTPs, their eligibility conditions, duties and
obligations, manner of removal and other conditions relevant for their functioning have been prescribed in
the rules 83 and 84 of the CGST Rules.

GSTN provides separate user ID and Password to GSTP to enable him to work on behalf of his clients
without asking for their user ID and passwords. They can do all the work on behalf of taxpayers as
allowed under GST Law. A taxpayer may choose a different GSTP by simply unselecting the previous
one and then choosing a new GSTP on the GST portal.

Eligibility criteria for GSTP:

A person who is Indian citizen, Person of sound mind, Not adjudicated as insolvent and Not been
convicted by a competent court and who satisfies any of the following conditions-
➢ Retired officer of Commercial Tax Department of any State Govt./CBIC who, during service
under Government had worked in a post not lower than the rank of a Group-B gazetted officer for
a period ≥ 2 years
➢ Enrolled as a Sales Tax Practitioner or Tax Return Preparer under the earlier indirect tax laws for a
period of not less than 5 years
➢ Has acquired any of the prescribed qualifications (mentioned below)

Prescribed Qualifications:
a) Graduate or postgraduate degree or its equivalent examination having a degree in Commerce,
Law, Banking including Higher Auditing, or Business Administration or Business Management
from any Indian University established by any law for the time being in force
b) Degree examination of any Foreign University recognised by any Indian University as equivalent
to the degree examination mentioned in sub-clause (i)
c) Any other examination notified by the Government, on the recommendation of the Council, for
this purpose
d) Any degree examination of an Indian University or of any Foreign University recognized by any
Indian University as equivalent of the degree examination
e) Has passed final examination of ICAI/ ICSI/ Institute of Cost Accountants of India.

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Activities to be undertaken by a GSTP:

A GSTP can undertake any/all of the following activities on behalf of a registered person, if so authorised
by him:

➢ Furnish the details of outward:

➢ Furnish monthly, annual or final return:
➢ Make deposit for credit into the electronic cash ledger:
➢ Furnish information for generation of e-way bill
➢ Furnish details of challan in the prescribed form
➢ File an intimation to pay tax under the composition scheme or withdraw from the said scheme
➢ File a claim for refund and
➢ File an application for amendment or cancellation of registration.

Also allowed to appear as authorised representative before any officer of Department, Appellate
Authority or Appellate Tribunal, on behalf of such a registered person provided he is enrolled as GSTP
under rule 83.

Furnishing returns through GSTP:

When a registered person opts to furnish his return through GSTP, such registered person:
➢ Gives his consent in prescribed form to any GSTP to prepare and furnish his return
➢ Before confirming submission of any statement prepared by GSTP, ensures that the facts
mentioned in the return are true and correct.

Thus, the responsibility for correctness of any particulars furnished in the return or other details filed by
the GSTP continues to rest with the registered person on whose behalf such return and details are
furnished.
The registered person before confirming should ensure that the facts mentioned in the return are true and
correct before signature. However, failure to respond to request for confirmation is treated as deemed
confirmation.

Procedure for enrolment as GSTP:

The procedure for enrolment of GSTP is as follows-

a) An application in FORM GST PCT-01 may be made electronically through the common portal for
enrolment as GSTP.
b) The Application will be scrutinised and GSTP certificate will be granted in FORM GST PCT -02.
c) In case, the application is rejected, proper reasons need to be given.
d) The enrolment once done remains valid till it is cancelled.
e) No person who is already enrolled as a GSTP is eligible to remain enrolled unless he passes such
examination conducted at such periods by NACIN [National Academy of Customs, Indirect Taxes
& Narcotics].
f) Any person who has been enrolled as GSTP by virtue of him being enrolled as a Sales Tax
Practitioner or Tax Return Preparer under the earlier indirect tax laws can remain enrolled only for
a period of 30 months from the appointed date unless he passes the said examination within the
said period of 30 months.

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PROBLEMS:

1) Quicktax, a GST return filing service provider, has asked its clients to provide the scanned copies
of the tax invoices issued to B2B customers for uploading on the GST portal and filing the return.
Whether the process followed by Quicktax is correct?

2) Ms. Pragya, a taxpayer registered under regular scheme (Section 9), files GSTR-3B for the month
of October on 20th November. After filing the return, she discovers that the value of a taxable
supply has been under-reported therein.
Ms. Pragya now wants to file a revised GSTR-3B. Examine the scenario and give your
comments.

3) Mrs. Zarina, a registered dealer in Rajasthan, did not file GSTR-3B for the month of June but she
wants to file GSTR-3B for the month of July.
Is it possible? Answer with reference to section 39 of the CGST Act.

4) X has not made any outward supply during the month of September. However, X has procured
certain input services during the month. X is of the opinion that he can file Nil GSTR-3B for the
month of September through SMS.
Whether the understanding of X is correct? Explain.

5) A is a chartered accountant in practice and is registered under GST. On a query regarding return
filing process by a potential client, A has represented him as a GST practitioner. A is of the view
that since he is a qualified chartered accountant with a GST registration in the name of his
proprietorship firm, he also qualifies as GST practitioner.
Is the understanding of A correct? Discuss.

“No one is to blame for your future situation but yourself. If

you want to be successful, then become “Successful.”

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