G S T F O R L AY M A N

Read GST like a novel

CA Pankaj Jain

BizSkill
 Copyright © 2021 BizSkill

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The characters and events portrayed in this book are fictitious. Any similarity to
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Cover design by: BizSkill

 INTRODUCTION
Welcome to this Course on GST for Beginners. This Course is
for students, accountants, businessmen, traders,
entrepreneurs & professionals, who want to have a working
knowledge, of the concepts of GST.
If you are a student, you may do this course, for preparing
any examination. If you are an accountant, this course is a
must for you, if you really want to sharpen your accounting
skill, and support your practical knowledge with a strong
foundation of theoretical knowledge, so that you can deal
with the compliances, with better understanding, and thus
avoid errors, which may result in unnecessary litigations, &
paper work with departments.
If you are a trader, businessman, professional, and
entrepreneur, you can also take this course, as you are
primarily responsible for taking business decisions. You have
to bear the compliance costs, late fees, and penalties. If you
have the basic knowledge of GST, you can deal with your
accountant, consultant, and even department in a better
manner, and also ensure, that you take proper steps to
maintain proper accounts, file timely returns, avoid
unnecessary late fees and penalties, apply correct GST
rates, and even have some peace of mind, which is often
disturbed due to errors in GST compliance. 
The concepts are written in a very simple language, so that
anyone can understand the concepts with ease and
confidence. You will certainly find interesting to learn.   So,
what are you waiting for? Let’s start this beautiful journey of
knowledge, understanding and of course, laying foundation,
for one of the most important taxation laws of India, and
that is – Goods and Services Tax – Or you can call it as G-S-T.
 WHY GST?
In the earlier regimes, there were a large number of indirect
taxes. For example, on manufacture, there was excise duty.
On sale, there were taxes, like Value Added Tax, Central
Sales Tax, purchase tax, entertainment tax, tax on lottery,
betting and gambling, luxury tax, tax on advertisements,
and even Entry Tax in certain situations.
Further, on services, there was Services Tax. This made the
life of businessmen very difficult, as they had to deal with so
many taxes, at the same time.
These were the various problems, or you can call them, as
deficiencies, or shortfalls, or cracks in the earlier regime.
That is why, to remove these weaknesses in the earlier tax
regime, it was thought to introduce GST.
GST is a comprehensive tax structure. It covers both goods
and services. That is why, it has been named as, Goods and
Services Tax (GST).  It has been introduced, at both Centre
and State levels simultaneously. This has led to the
integration of taxes, on goods, and services.  
Now, it has become ‘very easy' to set-off the tax, on goods,
as well as services, and also, to set off the tax, at central
level and the state level. Dealing with multiple indirect
taxes, has become a thing of past, because in the GST
regime, all the major indirect taxes, have been subsumed,
or in other words, merged in GST itself.
The earlier concepts of manufacture or sale of goods, or
rendering of services, are no longer applicable. Now, tax is
levied on one thing, and that is Supply. Under GST, the
taxable event is Supply. You may supply goods, or you may
supply services. Whatever you do, everything is a supply
and GST is applicable on supply. If you are selling goods,
you are making a supply of goods. If you are providing
services, you are making a supply of services. So, Supply is
the key word on which entire GST is based upon.
 THE CONCEPT OF
SUPPLY UNDER GST
The taxable event in GST is supply of goods, services, or
others. Other taxable events such as manufacture, sale,
rendering of service, purchase, entry into a territory of State
etc, which existed in the earlier tax regime, have been done
away with. Now, under GST, there is only one taxable event,
and that is supply. So, GST, that is, the “goods and services
tax” is a tax on the supply of goods, or services or both.
Under GST, the Supply should be of goods or services. If
there is a supply of anything other than goods or services, it
does not come in the purview of GST.
Further, the Supply should be made for a consideration.
That means there should be a price for the supply made by
the supplier. It should not be free. The price can be in cash
or kind.
However, barter transactions are considered as supply. For
example, when a barber cuts hair in exchange for a
painting, hair cut is a supply of services by the barber. It is a
consideration for the painting received. Hence, it is not
necessary, that the consideration or price should be in the
form of cash only. It can be in some other mode as well.
However, there are a few transactions, which can be
deemed as supply even without consideration. That means
GST shall be applicable on such transactions, even when
they are supplied free. Since they are not important at initial
level, we shall not go deep into them now.
Another important thing to understand is that the Supply
should be made in the course or furtherance of business.
That means, GST is applicable only on commercial
transactions. Hence, only those supplies that are in the
course or furtherance of business qualify as Supply under
GST. If some supplies are made by an individual in his
personal capacity, they do not come under the ambit of
GST.
For example, when a customer sells his jewellery to a
jeweller, it will not be treated as supply as it is not in the
course or furtherance of business. However, when the same
jewellery is sold by the jeweller, it will be treated as supply,
as it is being made in the course his jewellery business.
However, there are a few activites which are neither treated
as supply of goods nor they are treated as supply of
services. Therefore, GST is not applicable on such activities.
For example, when an employee provides services to his
employers, it is not treated as supply. In others words, no
GST is applicable on the Salary. Similarly, services of
funeral, burial, crematorium, or mortuary including
transportation of the deceased are also not treated as
supply and hence no GST is applicable.
Further, the sale of land and sale of building where the
entire consideration has been received after completion
certificate is issued or after its first occupation are also not
treated as supply and therefore no GST is applicable on such
transactions.
 COMPOSITE AND MIXED
SUPPLIES
Mr. A owns a grocery store in Delhi. He also provides home
delivery of grocery items.
Suppose, a customer asks Mr. A to deliver 5 kg branded rice
to his residence. GST Rate on branded rice packets is 5%.
When a customer visits his grocery store, he charges Rs.
200 + GST @5%.
However, when he sends the rice packet for delivering at
the residence of the customer, he charges Rs.
220+GST@5%.
In the first instance, that is when the customer visits the
store, there is a supply of rice packet. It is clear and there is
no confusion here. There is only one supply. That is the
supply of the packet of branded rice.
But, when the goods are sent for delivery, two supplies have
been made. Do you know, which are the two supplies? Well.
They are supply of branded rice and the supply of delivery
service.
Under GST, delivery is regarded as service and is taxable at
18% and rice sold under registered brand name attracts a
GST of 5%.
So, the question arises. What should be the GST rate on
such transaction? Should it be 5%? Or should it be 18%? Or
should both the supplies be charged individually? That
means, rice @ 5% and delivery charges @ 18%.
GST Law calls such transactions as Composite Supplies. In
such supplies, one supply is the Principal Supply, and the
other should be the ancillary supply or dependent supply,
and both the supplies should be naturally bundled with each
other.
In our example, the supply of rice is the principal supply,
while the delivery charges are the ancillary supply. Both the
supplies are naturally bundled with each other.
GST is charged at the rate applicable to the principal supply
on such supplies. Hence, in the present case, Mr A will
charge GST @ 5% on the combined value of the supply.
Let us take one more example. Where materials are
supplied from one place to another, they are packed. They
are transported. They are insured. Thus, there are multiple
supplies. The principal supply is the supply of materials.
There are three ancillary supplies, that is packing,
transportation and insurance as well. This is an example of
composite supply. In this situation, there is no question of
packing, transportation, and insurance without the principal
supply of materials. Isn’t it? There may be a separate GST
Rate for the materials. A separate GST Rate for packing,
transportation & insurance.  But, since it is a composite
supply, we shall apply GST Rate of the materials on the
entire transaction, as that is the principal supply.
Thus, from this, we understand that, in a composite supply,
two or more goods or services are supplied. All the supplies
are naturally bundled to each other. One of the supplies is a
principal supply. Others are ancillary to the principal supply.
GST rate applicable on such supply would be the rate
prescribed for the principal supply.
 MIXED SUPPLY
Just like Composite Supply, there is a concept of Mixed
Supply, where multiple supplies are involved. Let us
understand the situation with the help of an example.
Just imagine, you go to a shop and purchase a gift pack. The
gift contains very items such as wafers, dry fruits, soft
drinks, chocolates, etc. The rate of GST for wafers and dry
fruits is 5% respectively, on soft drink is 28% and on
chocolates, it is 18%.
Here again, the same question arises. What should be the
rate of GST in this situation? Is it a composite supply? In
composite supply, we charge the GST Rate applicable to
principal supply. But, in this Gift Pack, there is no principal
supply. The goods in the gift pack can be sold individually.
Their sale is not dependent on each other.  So, this means,
they are not naturally bundled and hence not a composite
supply. 
Such supplies which are not composite supplies are called
mixed supplies under GST Law.  In a mixed supply, the
whole supply is taxable at the rate of the item with the
highest GST rate in the lot.
Thus, the GST rate applicable to soft drink is highest among
the items in the gift pack.  Hence, the whole package shall
be treated as a single supply and will be taxed at 28% of the
total value of such package.
Thus, from this we understood that mixed supplies are
supplies of two or more goods or services which are not
composite supplies and are not naturally bundled.  Mixed
supplies are taxed at the highest rate of items in the supply.
 WHO SHALL COLLECT
GST?
There are two kinds of businesses, which are liable to collect
GST.
First, a person who is required to get himself compulsorily
registered under GST. As per the section 24 of CGST Act,
2017, certain categories of persons shall be compulsorily
required to be registered under GST, even if their aggregate
turnover is below specified exemption limit. That means, the
value of turnover is immaterial in case of such persons. We
will know more about these persons in the Registration
Chapter.
Second, the persons who can also register voluntarily under
GST. These are the two kinds of persons, who are required
to collect GST from their customers and pay to the
government.
 TYPES OF GST – CGST,
SGST AND IGST
The GST system in India consists of three types of GST. They
are Central Goods and Services Tax, that is, CGST, State
Goods and Services Tax, that is SGST and Integrated Goods
and Services Tax, that is IGST. In case, the business is
situated in a union territory without legislature, then UTGST
will apply in place of SGST. The concept of SGST & UTGST is
the same.
Let us understand about applicability of CGST, SGST & IGST.
For that, we need to learn, Intra- State Supply and Inter-
State Supply. In cases of Intra-State supply of goods or
services, the location of the supplier and the place of supply
are in the same state. In such transactions, a seller will
collect both CGST and SGST from the buyer. The CGST gets
deposited with Central Government and SGST gets
deposited with State Government.
Let’s understand it with the help of an example.  Ramesh is
a dealer in Mumbai. He sells goods to Rajesh in Pune for Rs.
10,000.  As we all know, both Mumbai and Pune are in
Maharashtra. That means it is an intrastate transaction.
Assuming that GST Rate is 18%, Ramesh will collect Rs.
1800 of which Rs. 900 shall be CGST, that will go to the
Central Government and Rs. 900 shall be SGST, which will
go to the Maharashtra Government.
In cases of Inter-State supply of goods or services, the
location of the supplier and the place of supply are in
different states. In an Inter-State transaction, a seller has to
collect IGST from the buyer.
Let’s understand it with the help of an example.  Ramesh is
a dealer in Mumbai. He sells  goods to Rajesh in Chandigarh
for  Rs. 10,000.  As we all know, Mumbai is in Maharashtra
and Chandigarh is in Punjab. That means, it is an interstate
transaction. Assuming that GST Rate is 18%, Ramesh will 
collects Rs. 1800 as IGST. This entire IGST of Rs. 1,800 shall
go to the Central Government.

Let us now understand how to calculate GST in a

transaction. GST can be easily calculated by multiplying the
Taxable amount by GST rate. If CGST & SGST is to be
applied, then each of the CGST and SGST are half of the
total GST amount.
Sometimes, the amount, may already include the GST. In
such situations, we can calculate the GST by simply dividing
the amount including GST by 100 plus gst rate and
multiplying it with the gst rate. Let us understand it with an
example. If GST inclusive amount is Rs. 525 and GST rate is
5%. Then GST shall be 525 divided by 105 into 5. That will
come to 25. We can also calculate the taxable value by
simply subtracting GST amount of Rs. 25 from GST inclusive
amount. We can also calculate taxable value directly from
GST inclusive amount by simply dividing the GST inclusive
amount by 100 plus gst rate and multiplying it with 100. In
our previous example, we could have calculated taxable
value directly by simply dividing 525 by 105 and multiplying
it by 100. It comes to Rs. 500. Now, we can calculate GST by
simply subtracting Rs. 500, that is the taxable value from
Rs. 525, which is the value including GST. So, our GST
amount comes to Rs. 25.
In this manner, we understood abut CGST, SGST, IGST and
also about Intra-State Supply & Inter State Supply.
 CALCULATION OF GST
AMOUNT PAYABLE TO
GOVERNMENT
Let us understand about the manner in which GST payable
to the Government is calculated. Every registered person
has to pay the difference of GST on Outward Supplies and
GST on Inward Supplies made in a month.
In simple terms, you can treat Outward Supply as Sale of
Goods or Services and Inward Supply as purchase of Goods
or Services.
For example, A person made intra-state sales of Rs. 2 lakh
in July. If GST Rate is 5%, he has collected CGST of Rs. 5,000
and SGST of Rs. 5,000 i.e. total GST collected is Rs. 10,000.
In the same month, he had made purchases of Rs. 80,000.
At the time of purchase, he also paid CGST and SGST of Rs.
2,000 each at a rate of 5%. Further, he also paid office rent
of Rs. 5,000 plus GST of Rs. 900 @ 18%, which is divided
into CGST of Rs. 450 and SGST of Rs. 450. So, total CGST
paid during the month becomes Rs. 2,450 and SGST paid
during the month comes to Rs. 2,450. He has to pay Rs.
2,550 CGST to the Government i.e. the difference between
the Outward CGST of Rs. 5,000 and Inward CGST of Rs.
2,450. Similarly, He has to pay Rs. 2,550 SGST to the
Government i.e. the difference between the Outward SGST
of Rs. 5,000 and Inward SGST of Rs. 2,450.
This Rs. 2,450 CGST and Rs. 2,450 SGST, which we have
claimed as deduction is called as input tax credit. While
there are many ifs and buts & conditions and restrictions for
claiming the input tax credit, we will learn more about Input
Tax Credit in the coming lessons.
 GST RATES
Under GST, Goods and services are divided into five
different tax slabs. They are 0%, 5%, 12%, 18% and 28%. As
we all know, that in India, there is income disparity.
Therefore, Government thought that it would not be wise to
levy same rates of tax for all the items. For example, how
can there be same rates for milk and car. Therefore,
different rates were set for different class of items.             
Most of the goods fall in the category of 5%, 12% and 18%. 
GST of 28% is applicable on some items like cement, car,
tobacco. Most of the services fall in the category of 18%.
Besides theses rates, there are a few special rates of GST as
well.  There is a special rate of 0.25% on rough precious and
semi-precious stones and 3% on gold, silver etc.
Certain goods such as alcoholic liquor for human
consumption, petroleum crude, diesel, petrol, Aviation
Turbine Fuel and Natural Gas have been kept out of the
purview of the GST. We can call them as Non-GST items.
In addition to GST, a GST Compensation Cess has also been
imposed on luxury and harmful items like pan masala,
tobacco, aerated waters, motor cars etc.
We can very easily go to the website cbic.gov.in and find
the GST Rate of the good or service, which we are searching
for. CBIC stands for Central Board of Indirect Taxes &
Customs.
 REGISTRATION UNDER
GST
In any tax system, registration is the most important
requirement for identification of taxable persons.
In this Section, we shall discuss about Registration under
GST. GST Registration means applying for a unique GST
Identification Number, which in short, is more popularly
known as GSTIN. A taxpayer requires GSTIN to collect and
pay GST on the outward supplies and claim GST input tax
credit on the inward supplies.
When a taxpayer is registered under GST, he is legally
recognized as supplier of goods or services. He is
empowered to collect tax from his customers.  He can pass
the credit of taxes paid by him to his customers. He can
claim input tax credit of taxes paid by him from within the
state and even from outside.
There are different types of GST Registration. They are
Turnover based Registration, Voluntary Registration,
Compulsory Registration & Registration under Composition
Scheme.
The first is Turnover based Registration. That means that if
the aggregate turnover of a business in a financial year
exceeds the threshold limit of turnover as applicable to the
state, it shall be compulsory for the business to apply for
GST Registration. Let us understand it with the help of an
example. Suppose, the threshold limit of turnover for your
state is Rs. 40 Lakhs. If the aggregate turnover of your
business exceeds Rs. 40 Lakhs, then you will have to apply
for registration.
The second is the Voluntary Registration. As the name itself
suggests, a business can apply for registration on a
voluntary basis,even if the turnover is below the minimum
threshold limit. In other words, although its turnover is
below the minimum turnover limit for registration , still, it
may apply for voluntary registration.
The third is Compulsory Registration. Under certain
situations, the dealer must take  Compulsory
Registration  under GST irrespective of the value of
turnover. That means, the value of turnover does not
determine whether registration is needed or needed. If you
fall under the situations of Compulsory Registration, you
must obtain GST Registration. While there are many such
situations prescribed under GST Law, let me elaborate one
important situation, where it is compulsory to take the GST
Registration.
A persons making any inter-State taxable supply of goods is
required to be registered under GST irrespective of turnover
limit. That means if a supplier sells goods from one state to
another state, GST registration shall be compulsory, even if
you make a turnover of a rupee.
However, if a person makes inter-state supply of services,
he is not required to register under GST, if his aggregate
turnover is less than Rs 40 lakhs. However, this limit is Rs.
20 Lakhs for special category states.
There is also a fourth situation and that is Registration under
Composition Scheme. Under this Scheme, the seller does
not collect GST from the buyer. He just pays GST at a fixed
rates on his turnover. The compliance in case of registration
under composition scheme is lesser than in case of normal
registration.
 STEPS FOR TAKING
REGISTRATION
Let us take our discussion on GST Registration further and
talk about documents required for GST Registration.
Now, when we register ourselves for any program or for any
purpose in general, we are required to provide certain
information about ourselves, by way of filling forms or
submitting copies of various documents. These documents
may relate to proof of eligibility for the purpose for which
registration is made or proof of identity or proof to address.
Similarly, when we register ourselves in the GST Portal, we
are required to fill a form and submit along with-it certain
documents.
To have a clear understanding of what documents are
required for the purpose, we can classify persons required to
register under 2 broad categories i.e.,
1. Individual (Sole Proprietor firm)
2. Businesses other than Individual

When an Individual (Sole Proprietor firm) registers itself

on the GST portal, he has to upload a set of documents. Let
us discuss these documents one by one.
First is the PAN of Proprietor. For the purpose of GST, PAN
is an essential document for Registration because our GST
Registration number is PAN based. So, anyone registering on
the GST portal mandatorily requires a Permanent Account
Number, that is the PAN.
Next is Adhaar Number. Linking Adhaar Number has been
made mandatory in most taxation related areas, like income
tax and GST, to make compliance process stronger.
Now, to undertake activities relating to GST on behalf of the
sole proprietorship firm, a person may be authorized.
Usually, such person is the proprietor himself, but there may
be a third person also.  So, a duly signed letter of
authorization regarding provision of such authority under
the letter head of the sole proprietorship shall be uploaded
on the portal.
Along with the PAN and Adhaar Card, latest Passport-sized
photograph of the proprietor and authorized signatory (if
different from the proprietor), of maximum size of 100kb, in
JPG format is required.
Next important document is Bank Account Details. For
this, we can submit either Cancelled cheque, or front page
of passbook along with page of few latest transactions. Both
of which must clearly state the Name of bank and the IFSC
Code, to identify the particular branch where the account is
located and the Name of the account holder along with the
Account number.
These were the basic documents required for registration.
Now, regarding Address proof for the premise, we need
to know the nature of possession of the premises. The place
of business can be owned or used on consent or shared or
leased or rented.
Ownership proof of the premise is required in all the
cases. Documents such as electricity bill, legal ownership
documents like deed, or municipal khata copy or property
tax receipts serve as a proof of ownership.
However, in certain cases like use of premise on consent or
sharing or leasing or renting the premise, additional
documents such as Letter of consent, lease agreement and
rent agreements are required.
Now, there are specifications given regarding size and
format of the documents to be uploaded. All documents
must be in JPG or PDF format, with a maximum size of
100kb. However, maximum permitted size of legal
ownership document is 1 mb and for rent and lease
agreements is 2mb.
So, these are the documents that are required for
registration by an individual or sole proprietorship firm on
the GST Portal.

Now, let us understand about the Documents required for

Businesses other than Individuals, like Partnership firm,
Hindu Undivided Family (HUF), Company, Trust, etc. The
overall requirements are the same for all except for a few
exceptions here and there.
So, the first document required is the PAN card of
Partnership firm, HUF or Company as the case may be. It
has already been explained that the GST Registration
number is Pan Based, hence it is the primary document
required while registration.
The next document is the PAN and adhaar of all
partners for partnership firm (including managing partner),
Karta for HUF and all directors in case of a company. The
PAN and adhaar of the authorized signatory is also
required in all the cases.
Subsequently, the Partnership deed, certificate of
incorporation, along with the MOA and AOA as applicable
shall be uploaded.
Along with the Pan and Adhaar, Passport sized photographs
of all partners (including managing partner), Karta or all
directors as the case may be and authorized signatories are
also required of a size not exceeding 100 kb in JPG format.
The next requirement is the Bank account details of the
business. The requirement of the same is similar to that of
an individual, i.e., cancelled cheque or front page of bank
passbook with pages of few latest transactions where the
Name of bank and the IFSC Code, to identify the particular
branch where the account is located and the Name of the
account holder along with the Account number are clearly
visible.
Further, the Address proof of principal place of business
along with the Address proof, in the form of Passport, driving
license, Voters identity card, Adhaar card etc. of all partners,
Karta and all directors, needs to be submitted.
Next is the Proof of appointment of authorized signatory. As
a Proof of appointment, letter of consent under the letter
head of the business duly signed by the authorized
signatory appointed is uploaded. In case of a Company,
Board resolution appointing authorised signatory is also
required.
Further, if such business other than sole proprietorship is an
LLP, registration certificate / Board resolution for formation
of LLP is required.

Here we come to an end on our discussion regarding the

documents required while registering under GST by various
taxpayers.
 DIFFERENT STATES –
DIFFERENT
REGISTRATIONS
Ramesh, a top businessman of India, has Head Office in
Mumbai and a Branch Office in Kolkata. He has obtained
GST Registration in Mumbai. Will he be required to take GST
Registration in Kolkata as well. What do you say? Well. The
answer is Yes. If a person supplies taxable items, he will
have to take GST Registration of every state separately.
Let us understand it with one more example. Suppose,
Reliance Industries Limited has head office in Mumbai and
has branches located in all the states of India. It will have to
take GST Registration at Head Office in Maharashtra and
also for every state.
That  means a supplier shall be liable to be registered under
GST in every State or Union territory, from where he makes
a taxable supply, if his aggregate turnover in a financial
year exceeds the minimum turnover limit of registration.
When I talk of aggregate turnover, it refers to the aggregate
of turnover all the states taken together.
Let us understand the concept of Aggregate Turnover with
the help of an example. Shyam has a head office in Mumbai
and he has 3 branches at Delhi, Kolkata and Bangalore
respectively and he supplies taxable items for each of these
places. Suppose, the minimum turnover for GST Registration
is Rs. 40 Lakhs in each of the above states. The turnover at
Mumbai is Rs. 30 Lakhs. The turnover at Delhi is Rs. 30
Lakhs. The turnover at Bangalore Branch is Rs. 20 Lakhs
and the turnover of Kolkata Branch is Rs. 30 Lakhs. We can
find that, at none of these places, the turnover exceeds Rs.
40 Lakhs. So, a question arises, whether GST Registration is
required? Well. The answer is Yes. Why? Because, the
aggregate turnover exceeds Rs. 40 Lakhs for all the states
taken together. If we add the individual turnovers of
different states, it comes to Rupees One Crore Ten Lakhs.
So, Shyam will have to take one registration at Mumbai. One
at Delhi. One at Kolkata and one at Bangalore, as the
aggregate turnover of all the states taken together exceeds
Rs. 40 Lakhs.
 SAME STATE –
DIFFERENT
REGISTRATIONS
Now, we shall discuss a situation, where same person can
take multiple GST Registrations in the same state. Let us
take an example. Suppose, Ram has multiple businesses in
Maharashtra.
The first is a Hotel situation at Andheri in Mumbai. The
second one is a Coaching Institute situated at Chowpatti in
Mumbai. Mr. Ram wants to take separate GST Registrations
for these two businesses. Will this be allowed? Well. The
answer is yes. It will be allowed. There is no problem in
taking multiple registrations in the same state. You can also
run multiple businesses with same GSTIN within state. Or
you can take multiple GST Registrations, if the two
businesses are operated from two different locations.
However, if the Hotel and Coaching Institute are operating
from the same locations, then it is not allowed to take
multiple GST Registrations for these two businesses. In such
situation, both the businesses have to operate from the
same location.
In order to take multiple GST registrations, we must follow a
few conditions. The first condition is which we have already
understood is that these two businesses should not situation
in the same location. The second condition is that none of
these businesses shall not pay tax under composition
scheme. The third & last condition is that each of these
separately registered places of business shall pay tax on
supply to another registered place of business of such
person and issue an invoice for such supply.
If these conditions are satisfied, then multiple registrations
can be taken by same person for different locations.
 GSTIN
When a dealer is registered under GST, he is issued a
Registration Number, which is known as GST identification
number, or in short, we can call it as GSTIN. It has
fifteen                              digits and it is a PAN Based Identification
Number. To get GSTIN, one has to submit the form GST form
along with the required documents using the GST portal.
Once the form and uploaded documents are verified, GSTIN
will be allocated to the applicant.
The First 2 numbers comprise of the State code of the
registered person. Every State of India has a State Code. For
example, the state code of Maharashtra is 27 and the State
Code of Assam is 18. The next 10 characters represent the
PAN of the registered person. Every GST Number shall
compulsory have the PAN of the dealer. Even if there are
multiple GST Registrations of the same dealer, all these GST
Numbers shall have one thing in common and that is the
PAN. The next number represents the entity number. For
example, if one more entity is registered, the entity number
for that entity shall be 2 and so on. The next character is Z
by default and the last number is a random Check code
which may be alpha or digit, used for detection of errors.
There are certain rules relating to the display and printing of
GST Number. GST Number has to be displayed at all places
of businesses of a registered individual. It has to be quoted
while issuing invoices, generating e-way bills, filing GST
returns, and even during the submission of information to
the tax department.
GST Number is a public information. We can easily verify the
GST No. of an person by going to the website
www.gst.gov.in.
 TAX INVOICE UNDER
GST
Whenever we go to a shop and make a transaction, the
seller gives you a bill. Isn’t it? In GST, it is known as Invoice.
Whether you supply goods or service, if you are a registered
dealer, you will have to issue an invoice. This invoice is
termed as Tax Invoice under GST.
A GST Invoice is one of the most important documents in
any transaction. It is a proof of the supply of goods or
services. It contains all relevant details like, details of both
the trading parties, description and quantity of the items
sold, date of shipment and mode of transport, prices and
discounts, if any, and delivery and payment terms regarding
such supplies.
A registered person under GST cannot claim the benefit of
Input Tax Credit unless he is in the possession of a GST
Invoice. Therefore, it is very important to raise a proper GST
Invoice. An incorrect GST invoice can adversely affect the
interests of both the buyer and the seller.
However, there is no specific format for Tax Invoice provided
in the GST Law. But, still, it provides the details which should
be mentioned in every invoice. Let us understand the details
to be given in every tax invoice.
The first one is very simple. It asks to provide the Name of
the Supplier, address of the supplier and  GSTIN  of the
supplier.
Then, there should be a consecutive serial number on the
Invoice. That means it should serially numbered. For
example, if the tax invoice in a series is BS/001, the next
should be BS/002 and so one. However, it is not compulsory
that you should have only one series. You can have multiple
series as well. For example, you can have a separate series
for the shop and a separate series for the godown. For
example, SP/001 series for the shop and GN/001 series for
godown. You can have multiple series. However, within the
series, the invoice number should be serially numbered. The
Invoice number can have alphabets or numerals or special
characters hyphen or dash and slash symbolized as “-” and
“/” respectively in any combination. Further, the Invoice
number must be unique for a financial year. That means two
invoice numbers cannot be same in the same financial year.
Then, we need to mention the Date on which Invoice is
issued.
Now, let us understand about the details of the recipient
which are required to be given in the Tax Invoice. If the
recipient, that is, the buyer is also registered under GST, we
need to give the Name, address and GSTIN of the recipient.
However, if the recipient is unregistered and where the
value of taxable supply is fifty thousand rupees or more, we
need to provide the Name and address of the recipient and
the address of delivery, along with the name of the State
and its code.
That means, if the recipient is unregistered and where the
value of taxable supply is less than fifty thousand rupees, it
is not required to provide the details of recipient in the
invoice.
Then, we need to mention the HSN Code of goods or
Accounting Code of services, depending on what you are
supplying. In other words, if you are supplying goods,
mention HSN Code and if you are supplying services,
mention the Accounting Code of Services. However, if the
turnover is below Rs. 1.5 Crores, mentioning HSN Code and
SAC Code is not mandatory. These codes help to identify the
goods and services easily. You can find easily find these
codes on the Government Web site.
Then, we have to provide the description of goods or
services, which is nothing but the name of the goods or
services which we are going to provide. Writing this
description is optional for taxpayers who are required to
furnish HSN/ SAC codes on tax invoice. However, the
taxpayers who have a turnover below the limit of Rs 1.5
Crores, who are not required to provide HSN or SAC Code
will have to mention the description of goods or services in
place of code.
Then, we also have to mention the Quantity in case of goods
and unit or Unique Quantity Code thereof.  For example, 5 is
the quantity and Unique Quantity Code is PCS. In simple
terms, it is a unit of measurement such as 1 kilogramme of
wheat has to be mentioned in the invoice as 1 KGS and so
on.
Further, we have to mention the total value of supply,
taxable value of supply, rate of tax and the amount of tax
charged.
Besides, we have to mention the Place of supply along with
the name of State, if it there is an inter-State trade or
commerce.
We also have to mention the address of delivery, if it is
different from the place of supply.
Lastly, the supplier or his authorized representative shall
put his signature or digital signature on the invoice.
So, these are the different things we need to mention in
case of a Tax Invoice issued under GST.
 TIME LIMIT FOR ISSUING
INVOICE
Now, we will understand about the time of raising the GST
Invoice. This time limit would depend on whether it is a
supply of goods or a supply of service, because there are
separate rules of time limit for issuing invoice for goods and
services.
A registered person supplying taxable goods shall issue
invoice either before the supply of goods or at the time of
supply of goods. That means, in case of supply of taxable
goods, the invoice should be issued either before the supply
of goods or at the time of supply of goods.
However, in case of supply of services, the tax invoice can
be issued either before the provision of services; or after the
provision of services but within 30 days from the date of
supply of the service. That means, in case of supply of
services, the invoice should be issued either before the
provision of services or after the provision of services, but
within 30 days from the date of supply of services.
 NUMBER OF COPIES OF
INVOICE
While we have understood about the contents of a Tax
Invoice, it is also important to understand the number of
copies required to be generated of every invoice. For this,
we can divide the invoice into two types. Invoice in case of
supply of goods and Invoice in case of supply of services.
In case of supply of goods, the invoice shall be prepared in
triplicate. The first copy shall be known as Original copy
which shall be marked as ORIGINAL FOR RECIPIENT. The
second copy shall be known as the Duplicate copy, which
shall be marked as DUPLICATE FOR TRANSPORTER and the
third copy shall be known as Triplicate copy, which shall be
marked as TRIPLICATE FOR SUPPLIER.
So, the first copy goes to the recipient or buyer. The second
copy goes to the transporter and the third copy is kept by
the supplier for himself.
In case of supply of services, the invoice shall be prepared
in duplicate. The first copy shall be known as Original copy
which shall be marked as ORIGINAL FOR RECIPIENT and the
second copy shall be known as Duplicate copy, which shall
be marked as DUPLICATE FOR SUPPLIER.
So, the first copy goes to the recipient of services & the
second copy is kept by the supplier for himself.
 BILL OF SUPPLY IN
PLACE OF TAX INVOICE
Before understanding and going deep into the concept of
Bill of Supply, let us imagine two situations.   
Suppose, you go to a fruit shop. You buy some delicious and
sweet fruits. Feeling water in your mouth!! I am feeling the
same. Well. The fruit vendor issues you a bill. When you
observe the bill, you find that there is no GST charged in the
invoice. You ask the fruit vendor. Why there is no GST in this
bill. The fruit vendor replies that fruits are exempt from GST.
That means no GST is required to be charged on fruits. Just
like fruits, there are hundreds of other items, which are
exempt, and hence no GST is required to be charged. The
makers of GST Law must also have contemplated about
such situation. Isn’t it? That is why, a concept of Bill of
Supply instead of Tax Invoice was introduced. That means,
in cases of exempt items, instead of Tax Invoice, Bill of
Supply has to be issued. In such document, there is no
requirement to write the GST amount.
Let us imagine one more situation. Mr. A is a shopkeeper
registered in GST under Composition Scheme. Under
Composition Scheme, the seller cannot collect GST from his
customers. In this situation, also the bill need not have
place for writing the GST. So, here, instead of Tax Invoice,
we will use a document called as “Bill of Supply”.
So, basically, a bill of supply is usually issued when a
business sells goods and services that are classified as
exempt from GST, or when he is registered under
composition scheme. In both these cases, the registered
person cannot charge GST to the buyer, and hence there is
no tax amount listed on the bill.
Such bill of supply shall contain the details like Name,
address and GSTIN of the supplier, consecutive serial
number just like tax invoice, In Bill of Supply also, there can
be  one or multiple series of Bill of Supply just like Tax
Invoice. Here also, the Invoice number can contain
alphabets or numerals or special characters -hyphen or dash
and slash. Even the Serial Number for Bill of Supply should
also be unique for a financial year. Besides, the Bill of
Supply contains, Date of its issue, Name, address and
GSTIN, if the recipient is registered under GST, HSN Code of
goods or Accounting Code for services, Description of goods
or services or both, Value of supply and signature or digital
signature of the supplier or his authorized representative.
Note that, there is no requirement to write any GST Amount.
It only asks us to write the value of the Supply.
 DEBIT NOTE UNDER
GST
Mr. A supplied 1000 pieces of an item worth Rs. 20,000 at
the rate of Rs. 20 per unit to Mr. B. The GST Rate applicable
on such items is 5%. So, the GST amount shall be equal to
Rs. 1,000. So, the taxable value is Rs. 20,000, GST Amount
is Rs. 1,000 and Total Value of the Invoice issued is Rs.
21,000.
Now, after selling the goods, Mr. A finds out that the price to
be charged for each unit must have been Rs. 22 and by
mistake, Rs. 20 was charged. That means, the taxable value
should have been Rs. 22,000 instead of Rs. 20,000 and GST
amount should have been 1,100 instead of Rs. 1,000.
That means, the amount charged in the tax invoice was less
than the actual amount to be charged. So, Mr. A will issue a
debit note in favour of Mr. B. This Debit Note would be an
intimation to Mr. B, that the taxable amount in the Tax
Invoice has to be increased by Rs. 2,000, that is the
difference between Rs. 22,000 and Rs. 20,000 and and also
the GST has to be increased by Rs. 100, that is the
difference between Rs. 1100 and Rs. 1000.

Let us take the same example. Mr.  A supplied 1000 pieces

of an item worth Rs. 20,000 at the rate of Rs. 20 per unit to
Mr. B. The GST Rate applicable on such items is 5%. So, the
GST amount shall be equal to Rs. 1,000. So, the taxable
value is Rs. 20,000, GST Amount is Rs. 1,000 and Total Value
of the Invoice issued is Rs. 21,000.
Now, after selling the goods, Mr. A finds out that the 1,100
pieces were supplied. However, by mistake, only 1,000
pieces were billed in the original invoice. That means, the
taxable value should have been Rs. 22,000, that is 1100
pieces @ Rs. 20 instead of Rs. 20,000 and GST amount
should have been 1,100 instead of Rs. 1,000.
That means, the amount actually charged in the tax invoice
was less than the actual amount. So, Mr. A will issue a debit
note in favour of Mr. B. This Debit Note would be an
intimation to Mr. B, that the taxable amount in the Tax
Invoice has to be increased by Rs. 2,000, that is the
difference between Rs. 22,000 and Rs. 20,000 and also the
GST has to be increased by Rs. 100, that is the difference
between Rs. 1100 and Rs. 1000.
Let us take one more example. Mr.  A supplied 1000 pieces
of an item worth Rs. 20,000 at the rate of Rs. 20 per unit to
Mr. B. The GST was charged at the rate of 5%. So, the GST
amount shall be equal to Rs. 1,000. So, the taxable value is
Rs. 20,000, GST Amount is Rs. 1,000 and Total Value of the
Invoice issued is Rs. 21,000.
Now, after selling the goods, Mr. A finds out that GST rate
applicable on the supplies items is not 5%, rather it is 12%.
However, by mistake, GST was charged at the rate of 5% in
the original invoice. That means, the GST amount should
have been 2,400 instead of Rs. 1,000.
That means, GST charged in the tax invoice was less than
the actual GST to be charged. So, Mr. A will issue a debit
note in favour of Mr. B. This Debit Note would be an
intimation to Mr. B, that the GST has to be increased by Rs.
1,400, that is the difference between Rs. 2,400 and Rs.
1,000.

So, now, you must have understood the concept of Debit

Note.  Under GST, Debit Note is issued by the supplier in two
situations. First, when the taxable value or tax charged in
the invoice is less than the actual taxable value or tax
payable. So, to correct this mistake, the supplier will issue a
debit note.
Second, when goods or services supplied are found to be
more than the quantity billed in the original invoice. In this
situation also, the supplier will issue a debit note.
When a supplier issues a debit note, he shall declare the
details of such debit note in the return for the month during
which such debit note has been issued but not later than
September following the end of the financial year in which
such supply was made, or the date of furnishing of the
relevant annual return, whichever is earlier and the tax
liability shall be adjusted accordingly.
 CREDIT NOTE UNDER
GST
Once the concept of Debit Notes becomes clear, it is now
very easy to understand the concept of Credit Note. If the
purpose of the debit note is to increase the value of the
original invoice, the purpose of the credit note is to
decrease the value of the original invoice.
Let us understand it with help of the same examples which
we used for Debit note.
Mr.  A supplied 1000 pieces of an item worth Rs. 20,000 at
the rate of Rs. 20 per unit to Mr. B. The GST Rate applicable
on such items is 5%. So, the GST amount shall be equal to
Rs. 1,000. So, the taxable value is Rs. 20,000, GST Amount
is Rs. 1,000 and Total Value of the Invoice issued is Rs.
21,000.
Now, after selling the goods, Mr. A finds out that the price to
be charged for each unit must have been Rs. 18 and by
mistake, Rs. 20 was charged. That means, the taxable value
should have been Rs. 18,000 instead of Rs. 20,000 and GST
amount should have been 900 instead of Rs. 1,000.
That means, the amount charged in the tax invoice was
more than the actual amount to be charged. So, Mr. A will
issue a credit note in favour of Mr. B. This Credit Note would
be an intimation to Mr. B, that the taxable amount in the Tax
Invoice has to be decreased by Rs. 2,000, that is the
difference between Rs. 20,000 and Rs. 18,000 and also the
GST has to be decreased by Rs. 100, that is the difference
between Rs. 1000 and Rs. 900.
So, in this case we issued credit note, because the price
charged in the original invoice was more than the price
actually payable.
Let us take the same example. Mr.  A supplied 1000 pieces
of an item worth Rs. 20,000 at the rate of Rs. 20 per unit to
Mr. B. The GST Rate applicable on such items is 5%. So, the
GST amount shall be equal to Rs. 1,000. So, the taxable
value is Rs. 20,000, GST Amount is Rs. 1,000 and Total Value
of the Invoice issued is Rs. 21,000.
Now, after selling the goods, Mr. A finds out that the 900
pieces were only supplied. However, by mistake, 1,000
pieces were billed in the original invoice. That means, the
taxable value should have been Rs. 18,000, that is 900
pieces @ Rs. 20 instead of Rs. 20,000 and GST amount
should have been 900 instead of Rs. 1,000.
That means, the amount charged in the tax invoice was
more than the amount actually payable. So, Mr. A will issue
a credit note in favour of Mr. B. This Credit Note would be an
intimation to Mr. B, that the taxable amount in the Tax
Invoice has to be decreased by Rs. 2,000, that is the
difference between Rs. 20,000 and Rs. 18,000 and also the
GST has to be decreased by Rs. 100, that is the difference
between Rs. 1000 and Rs. 900.
So, in this case we issued credit note, because the quantity
mentioned in the original invoice was more than the
quantity actually sent.
Let us take one more example. Mr.  A supplied 1000 pieces
of an item worth Rs. 20,000 at the rate of Rs. 20 per unit to
Mr. B. The GST was charged at the rate of 12%. So, the GST
amount shall be equal to Rs. 2,400. So, the taxable value is
Rs. 20,000, GST Amount is Rs. 2,400 and Total Value of the
Invoice issued is Rs. 22,400.
Now, after selling the goods, Mr. A finds out that GST rate
applicable on the supplies items is not 12%, rather it is 5%.
However, by mistake, GST was charged at the rate of 12% in
the original invoice. That means, the GST amount should
have been 1,000 instead of Rs. 2,400.
That means, GST charged in the tax invoice was more than
the actual GST to be charged. So, Mr. A will issue a credit
note in favour of Mr. B. This Credit Note would be an
intimation to Mr. B, that the GST has to be decreased by Rs.
1,400, that is the difference between Rs. 2,400 and Rs.
1,000.

So, now, you must have understood the concept of Credit

Note. Under GST, Credit Note is issued by the supplier in two
situations. First, when the taxable value or tax charged in
the invoice is more than the actual taxable value or tax
payable. So, to correct this mistake, the supplier will issue a
credit note.
Second, when goods or services supplied are found to be
less than the quantity billed in the original invoice. In this
situation also, the supplier will issue a credit note.
When a supplier issues a credit note, he shall declare the
details of such credit note in the return for the month during
which such credit note has been issued but not later than
September following the end of the financial year in which
such supply was made, or the date of furnishing of the
relevant annual return, whichever is earlier and the tax
liability shall be adjusted accordingly.
 WHAT IS INPUT TAX
CREDIT?
The Mechanism of Input Tax Credit is one of the most
important reasons for the introduction of GST.
Let us understand this with a simple example. Mr. A
purchases good worth Rs. 100 from Mr. C and pays a tax of
Rs. 10, that is, 10% on it. Mr. A sells these goods at Rs. 150
and collect tax of Rs. 15 from buyer. Mr. A has to pay Rs. 15
to government, which he has collected from his buyer, but
he had already paid Rs. 10 to C his supplier. So, this Rs. 10
is Input Tax Credit for Mr. A and this Rs. 10 will be allowed as
deduction from tax payable and he has to pay net Rs. 5 as
tax, which is the difference between Rs. 15, which he
collected from his buyer, and Rs. 10, which he paid to his
seller.
Thus, Input Tax Credit means claiming the credit of the GST
paid on purchase of Goods and Services against the GST
collected at the time of sale.
Now, let me explain you this concept with the help of an
example involving Intra-State purchase and Intra-State Sale.
That means, purchase and sale, both are done in the same
state.
A person made intra-state sales of Rs. 2 lakh in July. If GST
Rate is 5%, he has collected CGST of Rs. 5,000 and SGST of
Rs. 5,000 i.e. total GST collected is Rs. 10,000. In the same
month, he had made an intra-state purchases of Rs. 80,000.
At the time of purchase, he also paid CGST and SGST of Rs.
2,000 each at a rate of 5%. Further, he also paid office rent
of Rs. 5,000 plus GST of Rs. 900 @ 18%, which is divided
into CGST of Rs. 450 and SGST of Rs. 450.  So, total CGST
paid during the month becomes Rs. 2,450 and SGST paid
during the month comes to Rs. 2,450. He has to pay Rs.
2,550 CGST to the Government i.e. the difference between
the Outward CGST of Rs. 5,000 and Inward CGST of Rs.
2,450. Similarly, He has to pay Rs. 2,550 SGST to the
Government i.e. the difference between the Outward SGST
of Rs. 5,000 and Inward SGST of Rs. 2,450.
This Rs. 2,450 CGST and Rs. 2,450 SGST, which we have
claimed as deduction is called as input tax credit.
Now, let me explain you this concept with the help of an
example involving CGST & SGST.
A person made intra-state sales of Rs. 2 lakh in July. If GST
Rate is 5%, he has collected CGST of Rs. 5,000 and SGST of
Rs. 5,000 i.e. total GST collected is Rs. 10,000. In the same
month, he had made an intra-state purchases of Rs. 80,000.
At the time of purchase, he also paid CGST and SGST of Rs.
2,000 each at a rate of 5%. Further, he also paid office rent
of Rs. 5,000 plus GST of Rs. 900 @ 18%, which is divided
into CGST of Rs. 450 and SGST of Rs. 450.  So, total CGST
paid during the month becomes Rs. 2,450 and SGST paid
during the month comes to Rs. 2,450. He has to pay Rs.
2,550 CGST to the Government i.e. the difference between
the Outward CGST of Rs. 5,000 and Inward CGST of Rs.
2,450. Similarly, He has to pay Rs. 2,550 SGST to the
Government i.e. the difference between the Outward SGST
of Rs. 5,000 and Inward SGST of Rs. 2,450.
This Rs. 2,450 CGST and Rs. 2,450 SGST, which we have
claimed as deduction is called as input tax credit.
Under the earlier indirect tax regime, a lot of input tax credit
was not properly utilised. There were multiple types of
indirect taxes and the input tax credit of one tax could not
be claimed against the input tax credit of another tax. For
example, if you paid service tax, its credit could not be set
off against VAT. If you paid Central Sales Tax, its credit was
not adjustable against any other tax. If you paid VAT, it was
not adjustable against Excise Duty. If you paid Excise duty, it
was not adjustable against VAT and so on. These are just a
few examples.
But, after the introduction of GST, all these problems have
gone and now, there is a smooth flow of credit, which is
popularly known as Seamless Flow of Credit.
 MANNER OF
UTILIZATION OF INPUT
TAX CREDIT
As we all know, that there are three kinds of GST in India.
The first is CGST, the second is SGST or UTGST and the third
one is IGST. CGST and SGST or UTGST are applicable in case
of intra-state transactions and IGST is used in case inter-
state transactions.
We now also understand the basic concept of Input Tax
Credit. Input Tax Credit refers to claiming the credit of the
GST paid on purchase of Goods and Services against the
GST collected at the time of sale.
There can be two kinds of purchases or inward supplies. If
we purchase from within the state, we call such purchases
as Intra-State purchases and when we purchase from
outside the state, we call such purchases as Inter-State
purchases.
Similarly, there can two kinds of sales or outward supplies. If
we sell within the state, we call such sales as Intra-State
Sales and when we sell outside the state, we call such sales
as Inter-State Sales.
In cases of Intra-State purchase, we pay CGST and SGST to
the supplier and in cases of Intra-State sale, we collect CGST
and SGST from the buyer.
In cases of Inter-State purchase, we pay IGST to the supplier
and in case of Inter-State sale, we collect IGST from the
buyer.
Suppose, Mr. X, a supplier of Hair Oil in Delhi, has made
purchases from Delhi amounting to Rs. 1,00,000. So, the
Intra-State purchase is Rs. 1,00,000.  Assuming that the GST
Rate is 18%, CGST paid by Mr. X shall be Rs. 9,000, that is,
9% of Rs. 1,00,000 and SGST paid by Mr. X shall be Rs.
9,000, that is 9% of Rs. 1,00,000. So, Input CGST available
is Rs. 9,000 and Input SGST available is Rs. 9,000.
Now, let us assume, that Mr. X sells the entire hair oil within
Delhi for Rs. 1,20,000 and collects CGST of Rs. 10,800, that
is 9% of Rs. 1,20,000 and also SGST of Rs. 10,800. That
means with we have Output CGST for Rs. 10,800 and also
Output SGST of Rs. 10,800.
Now, it is the duty of every supplier to pay the GST collected
from the buyer to the Government.
In this example, Mr. X has collected Output CGST of Rs.
10,800 and Output SGST of Rs. 10,800. The question is?
Whether Mr. X shall pay this entire Output CGST and SGST
to the Government.
No. He shall only pay the difference between the Output
CGST of Rs. 10,800 and Input CGST of Rs. 9,000, which
comes to Rs. 1,800 and the difference between the Output
SGST of Rs. 10,800 and the Input SGST of Rs. 9,000, which
comes to Rs. 1,800.
Here, we have utilized the Input CGST of Rs. 9,000 against
the Output CGST of Rs. 10,800 and the Input SGST of Rs.
9,000 against the Output SGST of Rs. 10,800.
This is known as Utilization of Input Tax Credit. We have to
understand one thing here. Input CGST can be utilized to
pay Output CGST and not Output SGST. Similarly, Input
SGST can be utilized to pay Output SGST and not Output
CGST.
That means Cross Utilization between CGST and SGST is not
allowed.
In the same example Suppose, Mr. X, a supplier of Hair Oil in
Delhi, has made purchases from Delhi amounting to Rs.
1,00,000. So, the Intra-State purchase is Rs. 1,00,000. 
Assuming that the GST Rate is 18%, CGST paid by Mr. X
shall be Rs. 9,000, that is, 9% of Rs. 1,00,000 and SGST paid
by Mr. X shall be Rs. 9,000, that is 9% of Rs. 1,00,000. So,
Input CGST available is Rs. 9,000 and Input SGST available
is Rs. 9,000.
Now, let us assume, that Mr. X sells the entire hair oil to
Lucknow for Rs. 1,20,000 and collects IGST of Rs. 21,600,
that is 18% of Rs. 1,20,000. That means, we have Output
IGST of Rs. 21,600.
So. Mr. X has collected Output IGST of Rs. 21,600. The
question is? Whether Mr. X shall pay this entire Output IGST
to the Government.
No. He shall only pay the difference between the Output
IGST of Rs. 21,600 and Input CGST of Rs. 9,000 and Input
SGST of Rs. 9,000.
Here, we have utilized the Input CGST of Rs. 9,000 and the
Input SGST of Rs. 9,000 against the Output IGST of Rs.
21,600 and Mr. X shall only pay the balance Output IGST of
Rs. 3,600.
Here, we have cross utilized the Input CGST and Input SGST
with Output IGST, this is allowed. In other words, Input CGST
can be utilized to pay Output IGST. Similarly, Input SGST can
be also be utilized to pay Output IGST.
So, till now, we have understood that Input CGST can be
used to pay Output CGST. Input SGST can be used to pay
Output SGST. Input CGST can be used to pay Output IGST.
Input SGST can be used to pay Output IGST. However, Input
CGST cannot be used to pay Output SGST and Input SGST
cannot be used to pay Output CGST.
Now, let us repeat the example with a small variation.
In the same example, suppose, Mr. X, a supplier of Hair Oil
in Delhi, has made purchases from Lucknow amounting to
Rs. 1,00,000. So, the Inter-State purchase is Rs. 1,00,000. 
Assuming that the GST Rate is 18%, IGST paid by Mr. X shall
be Rs. 18,000, that is, 18% of Rs. 1,00,000. So, Input IGST
available is Rs. 18,000.
Now, let us assume, that Mr. X sells the entire hair oil to
Gurgaon for Rs. 1,20,000 and collects IGST of Rs. 21,600,
that is 18% of Rs. 1,20,000. That means, we have Output
IGST of Rs. 21,600.
So, Mr. X has collected Output IGST of Rs. 21,600. The
question is, whether Mr. X shall pay this entire Output IGST
to the Government?
No. He shall only pay the difference between the Output
IGST of Rs. 21,600 and Input IGST of Rs. 18,000. That is Rs.
3,600.
Here, we have utilized the Input IGST of Rs. 18,000 against
the Output IGST of Rs. 21,600. Mr. X shall only pay the
balance Output IGST of Rs. 3,600. 
Here, we have utilized the Input IGST with Output IGST. This
is allowed. In other words, Input IGST can be utilized to pay
Output IGST.

Let us summarize once again. Input CGST can be used to

pay Output CGST.  Input SGST can be used to pay Output
SGST. Input IGST can be used to pay Output IGST.  In these
three cases, we are utilizing Input of one kind of GST against
the output of same kind of GST. Isn’t it?
And what about cross utilization. Till now, we have
understood that  Input CGST can be used to pay Output
IGST. Input SGST can be used to pay Output IGST.
And, we have also understood that Input CGST cannot be
used to pay Output SGST and Input SGST cannot be used to
pay Output CGST. In other words, cross utilization between
CGST and SGST is not allowed.
In the same example, suppose, Mr. X, a supplier of Hair Oil
in Delhi, has made purchases from Lucknow amounting to
Rs. 1,00,000. So, the Inter-State purchase is Rs. 1,00,000. 
Assuming that the GST Rate is 18%, IGST paid by Mr. X shall
be Rs. 18,000, that is, 18% of Rs. 1,00,000. So, Input IGST
available is Rs. 18,000.
Now, let us assume, that Mr. X sells the entire hair oil within
Delhi for Rs. 1,20,000 and collects CGST of Rs. 10,800, that
is 9% of Rs. 1,20,000 and also SGST of Rs. 10,800. That
means with we have  Output CGST for Rs. 10,800 and also
Output SGST of Rs. 10,800.
In this example, Mr. X has collected Output CGST of Rs.
10,800 and Output SGST of Rs. 10,800. The question is?
Whether Mr. X shall pay this entire Output CGST and SGST
to the Government.
No. He shall only first utilize Input IGST of Rs. 18,000 to pay
the Output CGST of Rs. 10,800 and he will utilize the
balance 7,200 rupees, that is, the difference between
Rupees 18000 of input IGST and Output CGST of Rs. 10,800,
to pay Output SGST of Rs. 7,200. So, Mr. X will pay the
balance SGST of Rs. 3,600 to the Government.
Here, we have utilized the Input IGST of Rs. 10,800 against
the Output CGST of Rs. 10,800 and the balance Input IGST
of Rs. 7,200 against the Output SGST of Rs. 7,200.

Therefore, as far as cross utilization is concerned, we have

understood that Input CGST can be used to pay Output IGST.
Input SGST can be used to pay Output IGST. Input IGST can
be used to pay Output CGST. Input IGST can be used to pay
Output SGST.
That means, every kind of cross utilization is allowed except
the cross utilization between SGST and CGST.
After understanding these concepts with examples, now, let
us understand about the order of utilization of Input Tax
Credit of different types.
Amount of Input Tax Credit on account of IGST shall first be
utilized for the against of Output IGST, then if there is
balance left, it shall be used against of Output CGST and
then, if the balance is left, it shall further be utilized against
Output SGST.
Amount of Input Tax Credit on account of CGST shall first be
utilized against Output CGST, if some balance is left, it shall
be used against Output IGST. Remember, that Input CGST
cannot be used for payment of Output SGST or UTGST.
Amount of Input Tax Credit on account of SGST shall first be
utilized against Output SGST, if some balance is left, it shall
be used against Output IGST. Remember, that Input SGST
cannot be used for payment of Output CGST.
 PERSONS NOT
ALLOWED TO TAKE
INPUT TAX CREDIT
We have understood, that under GST, Input Tax Credit can
be utilized to set off our Output GST liabilities. But, a
question arises, can this Input Tax Credit be claimed by each
and every person? Well, the answer is no. It cannot be
claimed by two persons.
First, if you are not registered under GST, you are not
allowed to claim GST. That means, you have to claim the
Input Tax Credit on your purchases, you have to be
registered under GST.
Second, it cannot be claimed by persons who are registered
under composition scheme. In other words, composition
dealers are not allowed to claim deduction of GST paid on
their purchases.
 CONDITIONS FOR
TAKING ITC
We know that a registered GST dealer, other than the
composition dealer, can claim input tax credit under GST.
However, there are a few conditions to be fulfilled for
claiming the Input Tax Credit. Only then, a registered person
shall be allowed to claim input tax credit. Let us discuss
these conditions one by one.
The first condition is that, in order to claim the input tax
credit, the registered dealer must be in the possession of a
tax invoice or  debit note  issued by a supplier registered
under GST. Therefore, it is very important to obtain the copy
of tax invoice.
The second condition is that the person should have
received the goods and/or services mentioned in the
invoice. That means no input tax credit can be claimed until
the goods or services mentioned in the invoice have been
received. It is only after the receipt of the goods or services,
that the Input tax credit can be claimed.
The third condition is that the tax charged in respect of such
supply has been actually paid to the account of the
appropriate Government. Suppose, Mr. A issues a tax
invoice of Rs. 100 + GST of Rs. 18 to Mr. B. Mr. B takes input
credit of Rs. 18. However, if Mr. A does not pay this Rs. 18 to
the Government, the Input Tax Credit claimed by Mr. B shall
be reversed.
The fourth condition is that the registered dealer claiming
the credit has furnished the return under section 39 i.e.
GSTR-3. That means, in order to claim input tax credit, it is
of utmost importance that you file GSTR – 3 for the month.
However, if GSTR 3 has not yet been activated by the
Government, you should file GSTR 3B.
The fifth condition is that the registered dealer claiming the
credit, that is the buyer, should have paid the value of the
supply to the supplier within 180 days. That means, the GST
Law also ensures that you will get the credit only when
make payment against the invoice within 180 days from the
date of issue of invoice by the supplier. If he doesn’t make
the payment, the input credit claimed by him shall be
reversed.
The sixth condition is that if, the inputs are received in lots,
he will be eligible to avail the credit only when the last lot of
the inputs is received. In other words, if suppose Mr. X
purchases say, 50 units of input from Mr. Y and Mr. Y issues
Mr. X an invoice for the same, but Mr. X asks Mr. Y to deliver
only 25 units at a time, then Mr. X can claim ITC on such
inputs only after the second lot of goods have been received
by him.
 TIME LIMIT FOR
CLAIMING THE INPUT
TAX CREDIT
Suppose, a person purchases something today and obtains
a GST Invoice. Till what time can he claim the Input Tax
Credit on this Invoice? Can he claim the credit on this
invoice for one year or two years or three years? This is
what we are going to understand.
Let us understand the law first. A registered person shall not
be entitled, to take input tax credit, in respect of any
invoice, after the due date of furnishing of GSTR 3B, as the
case may be, for the month of September following the end
of financial year to which such invoice pertains or furnishing
of the relevant annual return, whichever is earlier.
Sounds complex!! Isn’t it? Let us break it, elaborate it and
understand it better. This condition basically contains two
points. Let us understand the first point.
The first point says that a registered person shall not be
entitled, to take input tax credit, in respect of any invoice,
after the due date of furnishing of GSTR 3B for the month of
September following the end of financial year to which such
invoice pertains. Let us understand it with example.
Suppose a purchase invoice is issued in July, 2019. The
supplier can claim credit for this Invoice till the due date of
filing the return of September, 2020.
Let us come to the second point. It says that a registered
person shall not be entitled, to take input tax credit, in
respect of any invoice after the furnishing of relevant annual
return. That means, you cannot claim input tax credit after
furnishing annual return.
Suppose, the due date of filing the monthly return for
th
September, 2020 is 20 October, 2020 and if the dealer
furnishes his annual return on 31st July, 2020, Input Tax
st
Credit cannot be claimed after 31 July, 2020, as it is earlier
than the due date of furnishing Monthly return of
th
September, that is 20 October, 2020.
However, in the same example, if the dealer furnishes his
th
annual return on 30 November, 2020. The Input Tax Credit
th
cannot be claimed beyond 20 October, 2020, as it is earlier
than the date of furnishing the annual return.
ITC is not allowed after any of the following, due date of
return for  month of September of next financial year or
annual return filed for relevant year whichever is earlier.
 INPUT TAX CREDIT ON
CAPITAL GOODS
Mr. X, a Hardware Merchant, purchased a computer for Rs. 
35,400. Rs. 30,000 is the taxable value and on this GST @
18% comes to Rs. 5,400. Can this input tax of Rs. 5,400 be
claimed as a deduction from Output GST Tax collected by
sale of Hardware Items? Well. The answer is yes.
Mr. A, a Chartered Accountant,  purchased a printer for Rs. 
11,800. Rs. 10,000 is the taxable value and on this GST @
18% comes to Rs. 1,800. Will this input tax of Rs. 1,800 can
be claimed as a deduction from Output GST Tax collected by
providing consultancy services? Well. The answer is yes.
In both these examples, the Computer and Printer are
termed as Capital Goods.
In our day to day business life, we use so many capital
goods such as Plant & Machinery, Furniture, Equipment’s &
Vehicle etc. used for production of goods or provision of
services. The question is – whether Input Tax Credit can also
be availed on the Capital Goods? Yes. It can be claimed.
However, there is a condition. The condition is that
depreciation under Income Tax will not be allowed on the
GST component.
Let me explain it to with a simple example. Suppose, you
have bought a Capital Good for Rs. 110. Rs. 110 includes Rs.
100 as the taxable value and Rs. 10 is the GST. In this
example, Rs. 100 is the cost component and Rs. 10 is tax
component.
Under Income Tax, you can claim depreciation on Rs. 100
only and not on Rs. 110.
 INPUT TAX CREDIT ON
EXPENSES
We have understood that Input Tax Credit can be claimed on
the GST component of the Capital Goods. Let us understand
one more aspect, that is, can I claim Input Tax Credit on my
expenses?
Let us understand it with the help of an example. For
example, A person made intra-state sales of Coffee for Rs. 2
lakh in July. If GST Rate is 5%, he has collected CGST of Rs.
5,000 and SGST of Rs. 5,000 i.e. total GST collected is Rs.
10,000. In the same month, he had made purchases of
coffee for Rs. 80,000. At the time of purchase, he also paid
CGST and SGST of Rs. 2,000 each at a rate of 5%.
Further, he also paid office rent of Rs. 5,000 plus GST of Rs.
900 @ 18%, which is divided into CGST of Rs. 450 and SGST
of Rs. 450. 
Moreover, he also bought Stationery worth  Rs. 5,000 plus
GST of Rs. 600 @ 12%, which is divided into CGST of Rs. 300
and SGST of Rs. 300.
In this example, there are three purchases. One is the
purchase of Coffee. In this regard, we have no doubt, that
Input tax Credit can be claimed.
Our question here is, can I adjust the GST paid on Rent and
Stationery towards setting off my GST Liability of Coffee.
Answer is 100% yes.
This is the biggest benefit of GST. You can also claim the
Input Tax Credit of GST paid on your expenses.
Isn’t that great?
 INPUT TAX CREDIT ON
MOTOR CAR
Mr. A,  a retail shopkeeper of hardware items bought a Motor
Vehicle for business use. The seating capacity of the Motor
Vehicle was 12 passengers including driver. The Car Dealer
issued him a Tax Invoice with Taxable Value of Rs. 5,00,000
and GST of Rs. 1,40,000. Mr. A gave the Invoice to his
accountant and asked him to make an accounting entry of
the Invoice, so that the benefit of Input Tax Credit of Rs.
1,40,000 could be taken. The accountant told Mr. A, “Sorry
Sir. We cannot take Input Tax Credit of this Motor Vehicle, as
the capacity of the Motor Vehicle has capacity of 12
passengers.”
Under GST Law, taking Input Tax Credit for Motor Vehicle
used for the transportation of passengers is now allowed.
But there is a condition. The condition is that the Motor
Vehicle used for transportation of passengers should have a
minimum capacity of 14 passengers including the driver.
If the Motor Vehicle used for transportation of passengers
has a capacity of 13 or less than 13 persons (including the
driver), Input Tax Credit shall not be available.
In other words, if we want to take the Input Tax Credit on the
purchase of a Motor Vehicle meant for carrying the
passengers, it should have minimum capacity of 14
passengers.
Let us take one more example. Suppose Ram Auto agency is
a car dealer in Guwahati. That means Ram Auto Agency
does the business of selling the cars. It purchases 10 Cars
with a capacity of 12 passengers from Maruti Company at
Gurgaon. My question to you is – Will Ram Auto Agency be
allowed to claim Input Tax Credit on these cars, as the
seating capacity is less than 14 passengers? Well. If you are
thinking, that the Input Tax Credit shall not be allowed. You
are wrong. In this case, Input Tax Credit shall be allowed,
even though the number of passengers is less than 14.
As per GST Law, input tax credit shall be available in case of
Motor Vehicle, even if the number of passengers is less than
14, if the Motor Vehicle is used for making further supply of
such motor vehicle. That means if you purchase Motor
Vehicle for the purpose of the further supply of motor
vehicle, or in other words, if selling motor vehicle is your
business, you can claim input tax credit on such motor
vehicle, irrespective of the number of passengers.
Not only car dealers, even the Car Transport Agencies, who
buy cars so that passengers can be travelled from one place
to another. Even they can claim Input Tax Credit on the cars
purchased by them, even though the capacity of the car is
less than 14 passengers.
Even the businesses involved in imparting training on
driving such motor vehicles can also claim input tax credit,
even though the capacity of the car is less than 14
passengers.
Interestingly, the same rule is applicable on the expenses
like repairs and general insurance relating to these Motor
Vehicles.
Let us summarize. Input tax credit shall not be available in
respect of motor vehicles meant for carrying passengers
and also in respect of repairs, servicing, maintenance and
insurance in relation these motor vehicles if the seating
capacity is not more than thirteen persons (including the
driver).
However, the Input Tax Credit in these cases shall be
allowed when they are used for the further supply of such
motor vehicles; or transportation of passengers; or
imparting training on driving such motor vehicles.
Now, a question arises, what if the Motor Vehicle is not
meant for carrying passengers. Rather, it is meant for
carrying goods? Will the Input tax Credit be allowed in this
situation? Well. The answer is yes. The restriction is only on
the Motor Vehicles meant to carry passengers.
Sometimes, we also take motor vehicle on lease, rent or
hire. Is input tax credit available on the purchase of such
services? The answer is no. However, if you take these
motor vehicles on lease, rent or hire to further give them on
lease, rent or hire, the Input Tax Credit is allowed. If you use
them for the further transportation of passengers, input tax
credit shall be allowed. If you use them to impart training on
driving such motor vehicles, input credit shall be allowed.
 INPUT TAX CREDIT ON
FOOD & BEVERAGES
AND OUTDOOR
CATERING
ABC Enterprises, a dealer in hair oil, wants to celebrate its
25th Anniversary. It hires an Outdoor Caterer and also buys a
lot of snacks, food items and beverages. The question is,
whether input tax credit allowed on outdoor catering? Is
input tax credit allowed on food and beverages? Well. The
answer is no. No credit shall be available for the supply of
food and beverages & outdoor catering. ABC Enterprises
buys food and beverages, but sells hair oil. ABC Enterprises
purchases Outdoor Catering Services, but sells Hair Oil. In
such situations, input tax credit shall not be allowed on the
purchase of food and beverages, and also on the purchase
of Outdoor Catering Services.
However, in the same example, if ABC Enterprises gives the
entire work to the Event Manager Mr. X, it is the
responsibility of Mr. X to take care of invitations, music,
dance, decoration, food and beverages.
Mr. X may further use the services of an outdoor caterer to
serve food and obviously, he will have to buy food and
beverages. In this case, whether Mr. X, the event manager
will be able to take the input tax credit on the purchase of
Outdoor Catering Services and food and beverages? Well.
The answer is Yes. It is available. Why? Because, he has
bought food and beverages to supply food and beverages.
He has purchased outdoor catering services, so that he can
provide outdoor catering services to his customers.
Now, let us come to what GST Law says about it. It says
that  input tax credit shall be available, where an inward
supply of food and beverages and outdoor catering is used
by a registered person for making an outward taxable
supply of the food and beverages and outdoor catering.
 INPUT TAX CREDIT ON
EXEMPT SUPPLIES
Mr. P manufactures spades used for agricultural purposes.
The rate of Tax applicable on supply of manual agricultural
tools such as spade is Nil. This means supply of spade is an
Exempt supply.
However, Mr. P has paid Tax on input goods and services
required to manufacture spades. Now, the question is,
whether Mr. P can claim ITC on such inputs? The answer is
no.
Let us understand the reason for this in detail. When the
output is exempted, tax laws do not allow
availment/utilisation of credit on the inputs and input
services used for supply of the exempted output.
Thus, in a true sense the entire supply is not nil rated.
Though the output suffers no tax, the inputs and input
services have suffered tax and since availment of tax credit
on input side is not permitted, it becomes a cost for the
supplier.
 INPUT TAX CREDIT
BLOCKED IN A FEW
SERVICES
If you buy beauty treatment services, no input tax credit
shall be allowed. However, if a person makes an outward
supply of beauty treatment services and takes the services
of some other person providing beauty treatment services,
he can claim input tax credit in such situation.
If you buy health services, no input tax credit shall be
allowed. However, if a person makes an outward supply of
health services and takes the services of some other person
providing health services, he can claim input tax credit in
such situation.
If you buy cosmetic and plastic surgery services, no input
tax credit shall be allowed. However, if a person makes an
outward supply of cosmetic and plastic surgery services and
takes the services of some other person providing cosmetic
and plastic surgery services, he can claim input tax credit in
such situation.
If you buy life and health insurance, no input tax credit shall
be allowed. However, if a person makes an outward supply
of life and health insurance services and takes the services
of some other person providing life and health insurance
services, he can claim input tax credit in such situation.
 ELECTRONIC CREDIT &
CASH LEDGER
Mr. X, a retailer of Hair Oil in Delhi, has made total purchase
from Mr. Y, a registered dealer in Lucknow amounting to Rs.
10,00,000 in the month of July. So, the Inter-State purchase
is Rs. 10,00,000.  Assuming that the GST Rate is 18%, IGST
paid by Mr. X shall be Rs. 1,80,000, that is, 18% of Rs.
10,00,000. So, Input IGST available is Rs. 1,80,000. Total
number of invoices issued by Mr. Y to Mr. X in the month of
July is 5. That means, when we add up the purchase value of
these 5 invoices, it comes to Rs. 10 Lakh.

He also purchases Hair Oil of Rs. 5,00,000 from a wholesaler

Mr. Z in Delhi itself in the month of July. So, the Intra-State
purchase during the month of July is Rs. 5,00,000. 
Assuming that the GST Rate is 18%, CGST paid by Mr. X
shall be Rs. 45,000, that is, 9% of Rs. 5,00,000 & SGST paid
by Mr. X shall be Rs. 45,000, that is, 9% of Rs. 5,00,000. So,
Input CGST and SGST is Rs. 45,000 each. Total number of
invoices issued by Mr. Z to Mr. X in the month of July is 4.
That means, when we add up the purchase value of these 4
invoices, it comes to Rs. 5 Lakh.
So, in the month of July, Mr. X has a total Input IGST of Rs.
1,80,000, total Input CGST of Rs. 45,000 and total Input
SGST of Rs. 45,000.
So, in the month of July, Mr. X has made purchases from two
suppliers. One is Mr. Y in Lucknow and the other is Mr. Z in
Delhi. When Mr. Y & Mr. Z shall file their GSTR-1 for the
month of July, they will submit the invoice-wise details of
the sales made to all the registered buyers during the
month of July. So, obviously, they will also include the
invoices relating to the sales made by them to Mr. X.
As they file their GSTR-1, these invoices will start appearing
in GSTR-2A of Mr. X. Now, what is GSTR-2A. GSTR-2A
contains the invoice-wise details all the purchases made by
a registered person from other registered persons. So, now
GSTR-2A of Mr. X will reflect 9 invoices. How? 5 invoices
issued by Mr. Y from Delhi and 4 Invoices issued by Mr. Z in
Lucknow itself. Right!!
On one hand, these invoices start reflecting in the GSTR-2A
of Mr. X. At the same time, the Input Tax contained in these
purchase invoices, that is, IGST of Rs. 1,80,000, CGST of Rs.
45,000 and SGST of Rs. 45,000 also gets credited to a
ledger, which is electronically created by GST Site, and this
ledger is known as Electronic Credit Ledger.
Whenever a purchase invoice is updated in GSTR-2A, the
Electronic Credit Ledger automatically gets credited with
this amount. Now, in this example, the balance of IGST in
Electronic Credit Ledger is Rs. 1,80,000, the balance of
CGST in Electronic Credit Ledger is Rs. 45,000 and the
balance of SGST in Electronic Credit Ledger is Rs. 45,000.
When Mr. X will file his GSTR-3B, he can utilize the Credit in
these Ledgers to set off his Output Tax Liability.
In this manner, Electronic Credit Ledger is just like a
Passbook of Bank for every person registered under GST.
The Balance of this ledger increases, when Purchases are
made and the balance of this ledger decreases, this credit is
utilized to set off the output tax liability.
When entire Input Tax in a month is not utilized to set off the
output tax, the balance is either carried forward to the next
month or refunded on application by the taxpayer.
Just like Electronic Credit Ledger, there is an Electronic Cash
Ledger as well. When credit in the Electronic Credit Ledger
is not sufficient to set off the Output GST liability, registered
person has to pay the balance tax by cash or bank through
challan. This amount gets credited in Electronic Cash
Ledger.
The credit balance of this ledger increases, whenever a
taxpayer deposits tax, and it decreases, when the amount is
used to set off the output tax.
It is like a wallet. We can keep any amount deposited in this
Electronic Cash Ledger. You can utilize it, whenever you
want to pay the tax. But, before depositing any amount in
the Electronic Cash Ledger, a challan needs to be generated
on the GST portal in which the details of the amount to be
deposited towards tax, interest, penalty, fees or any other
amount is to be entered. This challan will be valid for a
period of fifteen days. A person can make such deposits
through internet banking or by using credit or debit cards or
NEFT or RTGS or by over the counter deposit.
The balance in the Electronic Credit Ledger is linked to
purchases of inputs and capital good only. We cannot
deposit amount in this ledger, like we do in electronic cash
ledger. Also, the credit balance in this ledger can be utilised
only for setoff against outward GST liability. Liabilities under
GST like interest, late fees, etc cannot be settled using
balance in the electronic credit ledger. However, the
taxpayer has an option to claim refund of the unutilized
amount in this ledger within 2 years from the relevant date.
The tax authority may accept or reject such application.
There is one more ledger, and that ledger is called as
Electronic Liability Register. This ledger has details of GST
liability. It contains the total outward GST liability including
liability towards interest, late fees, penalty, etc. and the
manner in which it has been paid, whether through cash or
through credit.
For example, Ms. Sheetal has an outward GST of ₹ 75,000.
She also has an Input Tax Credit on purchases of ₹ 60,000 in
the form of IGST ₹ 28,000, CGST ₹ 14,500 and SGST ₹
17,500. The opening balance is his Electronic Cash Ledger
and Electronic Credit Ledger is Nil.
Hence, the GST Liability of ₹ 15,000 [i.e., 75,000 – 60,000]
has to be paid in cash or via bank payment. This ₹ 15,000
deposited by Ms. Sheetal will be shown in her Electronic
Cash Ledger on the GST Portal.
The Input Tax Credit on purchases of ₹ 60,000 will be first
credited in the Electronic Credit Ledger under respective
heads, i.e., IGST ₹ 28,000, CGST ₹ 14,500 and SGST ₹
17,500. Then the amount utilised for payment shall be
debited head wise from the ledger.
The Electronic Liability Register gives a view of the whole
transaction. The outward liability is first recorded in the
ledger and then it is setoff with the ITC utilised as well as
Cash/ Bank payments if any.
 RETURNS UNDER GST
Every registered person under GST has to file returns. While
there are different returns prescribed under GST, the type of
return which is to be filed depends on the kind of taxpayer.
For example, if you are a regular taxpayer, there are
separate returns. If you are a composition dealer, there are
separate returns. If you are an e-commerce operator, there
are separate returns. If you are a TDS Deductor, there are
separate returns. If you are a non-resident taxpayer, there
are separate returns. If you are an Input Service Distributor,
there are separate returns. If you are a Casual Taxable
Person, there are separate returns.
We will keep our focus on the returns to be filed by two
kinds of taxpayers – Regular Taxpayer and Composite
Taxpayer.
Now, who is a regular taxpayer? A regular taxpayer is the
normal business enterprise, which collects GST from its
customers or clients and can also take input tax credit of the
GST paid on the purchase of goods and services.
And, who is a composition taxpayer? He is the kind of
person, who cannot collect GST from its customers and at
the same time cannot claim input tax credit on the GST
purchases made by him. He simply has to pay GST at a fixed
rate on the sale value.
Usually, a regular taxpayer files two returns per month.  The
first is GSTR-1 and the second is GSTR-3B. It may be noted
that, if the turnover is upto 1.5 Crores, the taxpayer can also
opt for filing quarterly GSTR-1. However, GSTR – 3B must be
filed monthly. Besides, GSTR-1 and GSTR-3B, an annual
return in GSTR-9 and GSTR 9C is also filed.
Let us understand about these four returns one by one i.e.
GSTR-1, GSTR-3B, GSTR-9 and GSTR-9C.
In GSTR-1, a business enterprise has to submit the details of
all outward supplies of goods and services made. By
outward supplies, we mean value of sale of goods and sale
of services. In addition to the Outward Supplies, a supplier
also submits the details of debit and credit notes issued by
him. Further, if he has made any amendment to sales
invoices, the same shall be reported in the GSTR-1 Return.
So, basically, GSTR-1 is meant for submitting the details of
Outward Supplies made by a supplier during a tax period.
GSTR-3B is basically a summary return, in which a business
enterprise furnishes the summarized details of all outward
supplies made, input tax credit claimed, tax liability
ascertained and taxes paid. That means we have to submit
the monthly figures of the outward supplies made, monthly
figures of input tax credit claimed, monthly figures of tax
liability ascertained and monthly figures of tax liability paid
by us. GSTR-3B is to be filed by all normal taxpayers
registered under GST.
Now, let us talk about the annual return to be filed by a
normal taxpayer. There is a separate form prescribed under
GST for filing the Annual Return, which is GSTR 9. The
purpose of furnishing GSTR-9 is to furnish yearly summary
of outward supplies & inward supplies during the year.
Yearly summary of what? Well. We have to furnish the yearly
summary of outward supplies made during the year &
yearly summary of inward supplies received during the year.
GSTR-9, that is, the annual return is nothing, but a
consolidation of all the monthly or quarterly returns, that is,
GSTR-1 & GSTR-3B, which we have filed during the year. So,
basically, all the data submitted monthly in these returns
are to be compiled in GSTR 9.
Now, let us know the last date by which we have to file this
Annual Return in GSTR-9. In other words, let us know – what
is the due date of filing GSTR-9. Well. The due date of GSTR
9 is 31st December of the next financial year. For example,
the due date for GSTR 9 for the financial year 2020-21 shall
be 31st December, 2021. The due date for GSTR 9 for the
financial year 2021-22 shall be 31st December 2022.
However, the Government has the power to extend these
due dates.
In addition to GSTR-9, that is, the annual return, some
business enterprises have to get their accounts audited by a
CA or CMA, if their turnover exceeds Rupees 2 Crores.
However, the Government has the power to enhance this
limit. In terms of these powers, this limit was extended to
Rupees 5 Crores for Financial Year 2019-20. That means, for
the financial year 2019-20, GST Audit shall be required only
if the turnover exceeded Rupees 5 Crore.
Anyways, if a business enterprise is subject to GST Audit, it
has to submit an additional annual form, and that is GSTR-
9C. You must be thinking “What is this GSTR 9C?”. Well.
GSTR-9C is a reconciliation statement. It reconciles data
between two important documents. First is Form GSTR-9,
that is, the annual return and the second is the Audited
Financial Statements. In other words, GSTR 9C is a
statement of reconciliation between the Annual Returns in
GSTR-9 filed for a FY, and the figures as per the audited
annual Financial Statements of the taxpayer. If there is any
difference in the figures between GSTR-9, that is the Annual
Return and the Audited Financial Statements, such
differences will be reported in GSTR-9C, that is the
reconciliation statement. Not only this, the Auditor will also
write the reasons for the difference between the figures of
Annual Return and Audited Financial Statement.
The due date for submitting GSTR-9C is same as the due
date of filing the Annual returns in GSTR-9. Hence, the
GSTR-9C must be filed on or before 31st December of the
year subsequent to the relevant FY under audit, just like
Annual Return. The due date can however be extended by
the Government, if deemed necessary.
Till now, we were discussing about the returns to be filed by
a normal taxpayer. Now, let us learn about the returns to be
filed by a taxpayer who has opted for composition scheme
under GST.
As we all know, that the composition dealers are different
from regular tax payers, in the sense, that they cannot
collect GST from their customers and clients, and also they
cannot claim input tax credit on the purchases made by
them. So, separate returns have been prescribed for them.
When it comes to Composition taxpayers, they have to file
three Forms. First is CMP-08. The second is GSTR-4 and the
third is GSTR-9A. Let us understand them one by one. While
CMP-08 is to be filed on quarterly basis, GSTR-9A and GSTR-
4 have to be filed on yearly basis.
Let us first discuss about Form CMP-08. In Form CMP-08, we
submit the quarterly details of the tax payable by the
composition dealer. CMP-08 is basically a Challan cum
Statement. That means a composition dealer not only
submits the details of tax payable during a quarter, but also
pays the tax through this Form, just like GSTR-3B for a
regular tax payer. The composition dealers have to pay
quarterly tax in form CMP-08 by the 18th of the month
following the quarter. That means, for the quarter ending
June, 2018, Form CMP-08 is required to be filed by 18th of
July and for the quarter ending September, 2018, Form CMP-
08 is required to be filed by 18th of October.
Besides CMP-08, which is to be filed every quarter, a
composition dealer is also required to file two annual forms
which are GSTR-4 and GSTR-9A.
The due date of filing GSTR-4 is 30th April of the following
financial year. That means, if the financial year is 2019-20,
the due date of filing GSTR-4 shall be 30th April, 2020. GSTR-
9A is nothing, but the Annual Return for a Composition
Dealer, just like GSTR-9 for a regular tax payer. Its due date
is 31st December for the next financial year. For example, if
the Financial Year is 2019-20, the due date shall be 31st
December, 2020. However, Government has the power to
extend these due dates, if necessary. For the extended
dates, you can always refer to GST Web Site www.
gst.gov.in.
While GSTR-4 and GSTR-9A are both to be filed annually, but
GSTR-9A is an annual return like GSTR-9 and 9C in case of a
regular taxpayer. GSTR-4, though requires to be submitted
annually, has comparatively fewer details than GSTR-9A.
 LATE FEE & INTEREST
UNDER GST
Due dates have been prescribed for not only filing every
return under GST, but also to make the GST payment. But,
what if we do not file the returns on time, that is within the
due date? What if we do not pay the challan on time? Well.
In these situations, there are provisions for late fees and
interest.
Late fees and Interest are incurred by business, in case of
delay in submitting and filing GST returns within the
prescribed due dates. In fact, the late fee is also applicable
for the delay in filing NIL returns. 
The amount of late fee will depend upon the number of days
of delay from the due date. For example, If GSTR-3B for
December,2019 is filed on 25th January 2020, i.e., 5 days
after the prescribed due date, 20th January 2020. Late fees
will be calculated for these 5 days and deposited in cash.
So, for easier understanding, let us divide the applicability
of late fees into two categories, i.e., late fees applicable for
GST Returns other than GST Annual returns and late fees
applicable for GST Annual returns.
Let us first talk about the late fees applicable for GST
Returns other than GST Annual returns. Even here, there can
be two situations. The first situation is - There is a tax
liability.  The second situation is – There is no tax liability.
In the first situation, that is, where there is tax liability,
when a taxpayer does not file his returns within the due
date, he shall pay a late fee of Rs. 50 per day, which
includes Rs. 25 per day for CGST and Rs. 25 per day for
SGST.
In the second situation, that is, where there is no tax
liability, or in other words, the tax liability is Nil, when a
taxpayer does not file his returns within the due date, he
shall pay a late fee of Rs. 20 per day, which includes Rs. 10
per day for CGST and Rs. 10 per day for SGST.
However, the maximum late fee is restricted to Rs. 5,000 for
CGST and Rs. 5,000 for SGST for every return. That  means,
overall, the late fee per return cannot exceed Rs. 10,000.
For example, a Taxpayer has filed GSTR-3B for the month of
December 2019 on 23rd January 2020, the due date for
which was on 20th Jan, 2020 & it is not a Nil return. The late
fees to be paid by him under CGST shall be Rs. 75, that is, ₹
25 per day for 3 days and similarly, the late fee under SGST
shall also be ₹ 75. This means he has to pay a total late fee
of ₹ 150.
Now, if the same return would have been a Nil return, then
late fees would be ₹30 under CGST, that is, ₹ 10 each per
day for 3 days and  ₹30 under SGST, that is, ₹ 10 each per
day for 3 days. This means he has to pay a total late fee of
₹ 60.
Now, let us move on to late fees applicable to GST Annual
Returns. The late fees for not filing the GSTR 9 within the
due date is Rs 100 per day under CGST and Rs. 100 per day
under SGST. That means late fees of Rs 200 per day shall be
applicable in case of delay. However, the law has fixed a
maximum late fee of 0.25% of the Turnover for the financial
year. This means that in any case, the maximum late fees
that can be charged by the Government for delay in filing
annual returns shall not exceed 0.25% of the Turnover of the
taxpayer for the financial year.
However, the Government has the power to reduce or waive
these late fees. So, it is always good to check the extended
due dates and also the current late fees applicable from the
GST Web Site.
So, this was all about late fees on delayed filing of GST
returns. Let us now learn about the Interest levied on late
payment of tax under GST.
Interest is applicable to every taxpayer who either pays GST
after the due date or claims excess Input Tax Credit or
shows lesser Output Tax Liability.
If the GST is not paid within the prescribed due dates, an
interest of 18% p.a. shall be payable by the taxpayer on the
amount due. However, if the taxpayer makes a short
payment of tax under GST due to either claiming excess ITC
or recording lesser Output tax liability, an interest of 24%
p.a. shall be chargeable on such shortfall from the taxpayer.
The Interest so due has to be calculated from the next day
on which tax was due.
For example, a taxpayer fails to make a tax payment of ₹
5,000 for the month of December 2019, the due date for
GSTR-3B for which was 20th Jan 2020. He makes the
payment on 20th Feb 2020. So, the number of days by
which payment is delayed is 31 days. Hence, the Interest
will be calculated 18% p.a. on ₹ 5,000 for 31 days, which
will be equal to ₹ 76 after rounding off.
 E-WAY BILL
Before GST, for movement of goods, a document was
required, which was known as Way Bill or Road Permit or in
some states, even Delivery Note. After GST, this document
has been replaced by e-Way Bill. E-Way Bill is the short form
of Electronic Way Bill.
Whenever there is a movement of goods from one place to
another, either inter-state, that is from one state to another,
or intra-state, that is within the state, and the value of the
consignment is more than ₹ 50,000, E-Way Bill shall be
required.
Every person in charge of the conveyance or vehicle
carrying any consignment of goods of value exceeding fifty
thousand rupees shall be required to keep the copy of e-way
bill with him.
An e-way bill can be generated on ewaybillgst.gov.in.
However, there are other ways as well. We can do it through
SMS or Android App or by site-to-site integration through
API.
When an E-way bill is generated, a unique E-way Bill
Number (EBN) is allocated to each such bill. This E-Way Bill
Number is available to the supplier, that is person who
supplies the goods, the recipient, that is the person to
whom goods are being supplied and the transporter, who
shall carry the goods from one place to another.
E-way bill is not required, even if the value of goods
transported exceeds ₹ 50,000, if the mode of transport is
non-motor vehicle like, bullock carts etc. or when some
goods are exempt from E-Way bill requirements in the
respective State/Union territory GST Rules.
An E-way bill once generated cannot be used as and when
required. It has a validity of certain days depending on the
distance to be covered. The validity period of an e-way Bill
starts right from the time of creation of the e-Way Bill. If the
distance between the source and destination of the goods to
be transported is less than 100km, the bill is valid for one
day. However, if such distance is more than or equal to
100km, then the validity of the E-way bill is calculated as
one day for every 100 kms. For instance, if the distance to
be covered is suppose, 350kms, then the validity of e-way
bill will be 4 days.
These parameters are for other than over dimensional
cargos. However, in case of over dimensional cargo, the
validity will be calculated as 1 day for less than 20 Kms of
distance to be covered and an additional 1 day for every 20
kms.
However, the commissioner can provide an extension of the
validity period for specific categories of goods.
Further, if under circumstances of an exceptional nature, the
goods cannot be transported within the validity period of
the e-way bill, the transporter may generate another e-way
bill.
When we generate the e-way bill, we will require documents
such as Invoice Details and Vehicle Details.
Let us understand the steps for generating E-Way Bill. Just
login to e-way bill system in ewaybillgst.gov.in.
Enter the Username, password and Captcha code, Click on
‘Login’.
Click on ‘Generate new’ under ‘E-waybill’ option appearing
on the left-hand side of the dashboard.
Fill the details such as Transaction Type, Transaction Sub-
Type, Document type, Document Number, Document Date,
Place From, Place To,  Item Details like Product name,
Description, HSN Code, Quantity, Unit, Value/Taxable value,
Tax rates of CGST and SGST or IGST (in %) & Tax rate,
Transporter details and then Click on ‘Submit’.
Once your request is processed, the e-way bill in Form EWB-
01 with a unique 12digit number is generated.
Click on ‘Print EWB’ sub-option under ‘e-Waybill’ option.
Similarly, e-way bills can be cancelled by the generator of
such e-way bills only. The time-limit to cancel is within 24
hours of generating the e-way bill. Once cancelled, it is
illegal to use such E-Way Bill. However, if the e-Way Bill
verified by any empowered officer it cannot be cancelled.
The details of e-way bill generated shall also be made
available to the recipient, on the common portal, if he is
registered. The recipient shall communicate his acceptance
or rejection of the consignment covered by the e-way bill. In
case, the recipient does not communicate his acceptance or
rejection within seventy-two hours of the details being made
available to him on the common portal, it shall be deemed
that he has accepted the said details.
 REVERSE CHARGE
MECHANISM
The usual thing which we have understood in the GST is that
the supplier of goods or services is liable to pay GST.
However, there are a few situations and cases, where the
recipient is liable to pay GST. This is known as Reverse
Charge Mechanism.
In other words, Reverse Charge means the liability to pay
tax is on the recipient of supply of goods or services instead
of the supplier of such goods or services.
As per GST Law, there can be two scenarios where reverse
charge may be applicable. That is, in such situations, the
recipient shall be liable to pay taxes and not the supplier.
In the first scenario, the Government has specified certain
categories of supplies, the tax on which shall be paid on
reverse charge basis. Although the list is large, let me give
you a few examples.
When a Good Transport Agency transports goods by road to
a factory, society, cooperative society, body corporate,
partnership firm, casual taxable person or person registered
under GST, the tax shall be payable on reverse basis.
That means, in this situation, it is not the supplier of
transportation service, that is the goods transport agency
who shall pay the GST, rather it shall be paid by the
recipient of the services. That is, the factory, the society,
the cooperative society, the body corporate, the partnership
firm, the casual taxable person, or the person registered
under GST, to whom these services have been provided by
the GTA.
However, there are a few situations, where GTA has to pay
taxes by himself. But, we will not go into that right now.
When a director, who is not an employee of the Company in
which he is the director, provides services of a director to a
company or body corporate, the company or body corporate
is the recipient of the directorship services from the said
director. However, in this situation, the company or the body
corporate is liable to pay the tax under reverse charge
mechanism instead of the director supplying such
directorship services.
In the second scenario, when a registered person makes
purchases from an unregistered supplier, he needs to pay
GST on reverse charge basis. That means, it is not the
unregistered supplier, who shall pay the GST. Rather, it is
the registered person, who has bought from the
unregistered person, shall pay the GST.
For example, Mr A is a registered person and purchases
taxable goods worth Rs. 1,000/- from Mr. B who is an
unregistered person. Mr B, being unregistered, shall not
charge GST on sales of Rs. 1,000/- made by him. In such a
case, Mr A, the registered buyer shall pay GST on purchases
of Rs. 1,000/- made by him. He will be eligible to take Input
Tax Credit of this GST paid on reverse basis.

However, not every registered person has to pay GST on

reverse basis when he makes purchases from unregistered
dealer. The registered person should be notified by
Government as well.
As of now, no registered person has been notified, and
therefore, there is no need to pay tax on reverse basis even
on the purchase from unregistered dealer.
In cases of Reverse Charge Mechanism, the recipient of the
goods or services issues itself a GST invoice, against which
it will first pay GST to the government, and then again claim
the same as Input Tax Credit. Such issue of invoice by the
recipient of goods or services to itself is called self-
invoicing.
 ACCOUNTING ENTRIES
BY BUSINESSES OTHER
THAN COMPOSITION
DEALER
Suppose, Mr. Ravi sells goods worth ₹ 8,000 to Mr. Shyam
within the same state. CGST and SGST applicable on such
supply is 9% respectively. So, to record this transaction in
the supplier's books, two entries shall be passed. First shall
be to record the sale and next would be for receipt of sale
amount. For the first entry, we will debit the receivers
account by ₹ 9,440 and credit Sales account by ₹ 8,000,
followed by the output CGST and SGST accounts by ₹ 720
each. In the next entry for receipt of payment from the
customer, the entry passed will be, Cash or Bank account
debit by ₹ 9,440 and customer’s account credit by ₹ 9,440.
Now, if we were to record the transaction in the books of the
recipient of the goods, then we would debit Purchase
Account by ₹ 8,000 along with Input CGST and SGST
accounts by ₹ 720. Further, we will credit the Suppliers
account by ₹ 9,440. For payment entry we will debit the
suppliers account and credit cash or bank account by ₹
9,440.
So, this was regarding intra state transaction but what
about the inter-state transaction? So, suppose like in the
earlier example, Mr. Ravi sells goods worth ₹ 8,000 to Mr.
Shyam, but this time, both are located in different states
and the IGST applicable on this transaction is 18%.
In this case, accounting entries of inter-state transactions,
are similar to those regarding intrastate supply. Like, for the
first entry, we will debit the receivers account by ₹ 9,440
and credit Sales account and output IGST account by ₹
8,000 and ₹ 1,440 respectively. In the next entry for receipt
of payment from the customer, the entry passed will be,
Cash or Bank account debit by ₹ 9,440 and customer’s
account credit by ₹ 9,440. Similarly, in the recipient's books
of accounts, the accounting entries would be, Purchase
account and Input IGST account debit by ₹ 8,000 and ₹
1,440 respectively and ₹ 9,440 credited to the Supplier’s
account. Further at the time of payment, the entry would
be, Supplier’s Account debit by ₹ 9,440 to Cash/ Bank
account by ₹ 9,440.
 ACCOUNTING ENTRIES
BY COMPOSITION
DEALER
Now, let us talk about the accounting entries by composition
dealers. Since a person opting for composition scheme can
neither claim ITC on its inputs nor can he charge GST on
sales, the purchase entry for him would be pretty simple.
Let's understand it with an example. M/s ABC,  has opted for
composition levy under GST. He has say purchased goods of
₹ 5000 from a registered dealer. The registered dealer has
levied CGST and SGST on purchase @ 9% each. So, M/s ABC
has paid ₹ 450 as CGST and ₹450 as SGST on such
purchase.
But as we know, a composition dealer cannot avail ITC, this
purchase transaction will be recorded in his books as,
purchase account debit to Bank/ Cash by ₹ 5,900
respectively, in case of cash purchases.
However, if the purchase is made in credit, instead of Cash/
Bank account, the suppliers account would be credited.
Similarly, on sale, the cash/bank account would be debited
in case cash sales and customers account will be debited in
case of credit sales against the sales account with an
amount of ₹ 5,900 + profit margin.
Here, we may note that we have not recorded the tax paid
on inputs in separate accounts, but have instead charged
the total amount to the purchase account. This is done
because a composite dealer cannot claim credit on Input tax
paid.
 TREATMENT OF
DISCOUNTS ON
SUPPLIES
Discounts are mainly of two types trade discounts and cash
discounts. However, under GST, discounts are classified into
those agreed between the supplier and the recipient before
supply and those not agreed between the supplier and the
recipient before supply. Any discount which was decided
between the parties to the supply prior to supply shall be
deducted while calculating the value of such transaction
under GST.
However, any discount which was not decided between the
parties to the supply prior to supply shall not be deducted
while calculating the value of such transaction under GST.
Trade discounts are always decided prior to supply hence
they are always deducted from the value of supply.
However, cash discounts may or may not be pre-agreed
upon. Let's understand it with an example.
Mr. R purchased goods from Mr. S of worth ₹ 50,000 + GST.
Mr. S told Mr. R that he would provide him with a discount of
₹ 1,000 if he makes payment within 15 days from the
invoice date. In this case, the discount is already agreed
between the parties to the supply before the invoice date.
Hence, while calculating the value of the transaction under
GST, discount of ₹ 1,000 shall be deducted. Therefore, the
value of the transaction is ₹ 49,000 + GST.
Now, suppose in the above example, Mr. S did not say
anything about the discount to Mr. R before supply. But, at
the time of payment, Mr. S refunds Mr. R ₹ 1,000 voluntarily
as a cash discount. So, in this case, since nothing regarding
discount was agreed before or at the time of supply, ₹ 1,000
will not be deducted from ₹ 50,000. Hence, the value of
supply will remain ₹ 50,000 + GST.
So, let’s summarise what we learnt. We understood that in
order to decide whether the discount by supplier to the
recipient will be excluded from the value of the transaction
or not, we should see whether such discount was agreed
between them prior to the supply or not. If, it was so agreed
then we shall exclude such discount from the value of the
transaction and if it wasn’t so agreed prior to the supply, we
shall not exclude such discount from the Value of the
transaction under GST.
 ABOUT THE AUTHOR
Pankaj Jain
CA Pankaj Jain is qualified as Chartered Accountant,
Company Secretary and Master in Commerce. He holds a
Diploma in Information Systems & Audit. He is passionate
about coaching and writing with creativity..
 ACKNOWLEDGEMENT
I thank  God for giving me the strength to write this book.
This book is a result of the dedicated effort my father Sri
Dharam Chand Jain in imbibing the qualities of dedication,
inspiration and encouragement