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GST Indirect Tax PDF
GST Indirect Tax PDF
GST IN INDIA – AN
INTRODUCTION
Examples/illustrations/Questions and Answers given in the Chapter are based on the
position of GST law existing as on 30.04.2021
LEARNING OUTCOMES
After studying this Chapter, you will be able to:
explain the concept of tax and the objective for its levy
describe the concept of direct and indirect tax and the
differences between the two types of taxes
enumerate the basic features of indirect taxes and the
principal indirect taxes in India
explain the concept of GST and the need for GST in India.
discuss the framework of GST as introduced in India and
understand the various benefits to be accrued from
implementation of GST.
explain the constitutional provisions pertaining to levy of
various taxes
appreciate the need for constitutional amendment paving
way for GST.
discuss the significant amendments made by Constitution
(101st Amendment) Act, 2016.
CHAPTER OVERVIEW
Direct and Indirect Taxes
Concept of GST
Benefits of GST
Constitutional provisions
1. BACKGROUND
In any Welfare State, it is the prime responsibility of the Government to fulfill the
increasing developmental needs of the country and its people by way of public
expenditure. India, being a developing economy, has been striving to fulfill the
obligations of a Welfare State with its limited resources; the primary source of
revenue being the levy of taxes. Though the collection of tax is to augment as
much revenue as possible to the Government to provide public services, over the
years it has been used as an instrument of fiscal policy to stimulate economic
growth. Thus, taxes are collected to fulfill the socio-economic objectives of the
Government.
TAX
INDIRECT TAX
DIRECT TAX
* The person paying the tax to the
* The person paying the tax to
Government collects the same
the Government directly
from the ultimate consumer.
bears the incidence of
Thus, incidence of the tax is
the tax.
shifted to the other person.
* Progressive in nature - high
* Regressive in nature - All the
rate of taxes for people
consumers equally bear the
having higher ability to
burden, irrespective of their
pay.
ability to pay.
Goods and
Major direct and
Services Tax
indirect taxes
Indirect taxes
Customs Duty
GST is a path breaking indirect tax reform which attempts to create a common
national market. GST has subsumed multiple indirect taxes like excise duty,
service tax, VAT, CST, luxury tax, entertainment tax, entry tax, etc.
VAT and GST are often used inter-changeably as the
latter denotes comprehensiveness of VAT by
coverage of goods and services. France was the first
country to implement VAT/GST in 1954. Presently,
more than 160 countries have implemented
VAT/GST in some form or the other because this tax
has the capacity to raise revenue in the most
transparent and neutral manner. Most of the countries follow unified GST i.e., a
single tax applicable throughout the country. However, in federal polities like
Brazil and Canada, a dual GST system is prevalent. Under dual system, GST is
levied by both the federal and the State Governments. India has adopted dual
GST model because of its unique federal nature.
5. CONCEPT OF GST
What is GST?
Before we proceed with the finer nuances of Indian GST, let us first understand
the basic concept of GST.
GST is a value added tax levied on supply i.e.,
manufacture or sale of goods and provision of
services.
GST offers comprehensive and continuous chain of tax credits from the
producer's point/service provider's point upto the retailer's level/consumer’s
level thereby taxing only the value added
at each stage of supply chain.
The supplier at each stage is permitted to avail credit of GST paid on the
purchase of goods and/or services and can
set off this credit against the GST payable on
the supply of goods and services to be made by him. Thus, only the final
consumer bears the GST charged by the last supplier in the supply chain, with
set-off benefits at all the previous stages.
Since, only the value added at each stage is
taxed under GST, there is no tax on tax or
cascading of taxes under GST system. The
same can be understood better with the help of the following example:
Input Tax Credit= Input Tax Credit= Input Tax Input Tax Credit=
NIL 18,000 Credit= Rs. NIL
20,016
Deficiencies
A cure for ills
in the
erstwhile have led to Goods and of erstwhile
Services Tax indirect tax
value added
regime
taxation
Under the earlier indirect tax regime, despite the introduction of the principle of
taxation of value added in India – at the Central level in the form of CENVAT
(Central Excise) and at the State level in the form of State VAT - its application
always remained piecemeal and fragmented on account of the following reasons:
Certain transactions were subject to double taxation and were taxed as both
goods and services, since under the earlier regime, distinction between
goods and services was often blurred.
(1) Under earlier tax regime, software was subject to both service
tax and VAT. This was so because both sale of goods and
provision of service were involved and therefore taxable event
under both the Statutes i.e. respective VAT law and service tax law got
triggered. This aspect has been taken care of under GST law.
CENVAT did not include chain of value addition in the distributive trade
after the stage of production. Similarly, in the State-level VAT, CENVAT load
on the goods was not removed. This lead to the cascading of taxes.
Below mentioned example illustrates that under earlier indirect tax regime,
when the goods were manufactured and sold, both central excise duty
(CENVAT) and State-Level VAT were levied.
(2) Under earlier tax regime, if goods were manufactured for
` 1000/- and excise duty was payable @ 12.5% and VAT was
payable @ 14.30%, the billing was being done as under:
Assessable value of goods under excise law ` 1,000
Excise duty @ 12.5% ` 125
Taxable value for VAT ` 1,125
VAT @ 14.30% ` 160.88
Total invoice value ` 1,285.88
Though CENVAT and State-Level VAT were essentially value added taxes, set
off of one against the credit of another was not possible as CENVAT was a
central levy and State-Level VAT was a State levy.
There were several taxes in the States, such as, Luxury Tax, Entertainment
Tax, etc. which were not subsumed in the VAT. Hence for a single
transaction, multiple taxes in multiple forms were required to be paid.
VAT on goods was not integrated with tax on services, at the State level, to
remove the cascading effect of service tax. With service sector being the
fastest growing sector in the economy, the exclusion of services from the
tax base of the States potentially eroded their tax- buoyancy.
CST was another source of distortion in terms of its cascading nature since
it was non-VATABLE. Being an origin based tax, CST was also against one of
the basic principles of consumption taxes that tax should accrue to the
jurisdiction where consumption takes place.
(3) Under earlier tax regime, if a dealer in Delhi purchases goods
from a manufacturer in Punjab for ` 1000 + ` 20 (2% CST)
= ` 1020/- and sells such goods within Delhi for ` 1200/-. The tax
rate on sales is 12.5% and hence output tax liability is ` 150/-. Credit of
` 20/- is not allowed while making payment of ` 150/- and hence the dealer
has to pay ` 150 as VAT.
II. CGST/SGST/UTGST/IGST
GST is a destination- based tax
applicable on all transactions involving
supply of goods and services for a
consideration subject to exceptions thereof. GST in India comprises of
Central Goods and Services Tax (CGST) - levied and collected by Central
Government, State Goods and Services Tax (SGST) - levied and collected by
State Governments/Union Territories with Legislatures and Union Territory
Goods and Services Tax (UTGST) - levied and collected by Union Territories
without Legislatures, on intra-State supplies of taxable goods and/or
services. As a general rule, where the location of the supplier and the place
of supply of goods or services are in the same State/Union territory, it is
treated as intra-State supply of goods or services respectively.
Further, where the location of the supplier and the place of supply of goods
or services are in (i) two different States or (ii) two different Union
Territories or (iii) a State and a Union territory, it is treated as inter-State
supply of goods or services respectively. Inter-State supplies of taxable
goods and/or services are subject to Integrated Goods and Services Tax
(IGST). IGST is the sum total of CGST and SGST/UTGST and is levied by
Centre on all inter-State supplies.
VII. Exemptions
Apart from providing relief to small-scale business, the
law also contains provisions for granting exemption from
payment of tax on essential goods and/or services.
VIII. Seamless flow of credit
Since GST is a destination-based consumption tax,
revenue of SGST ordinarily accrues to the
consuming States. The inter-State supplier in the
exporting State is allowed to set off the available credit against the IGST
payable on inter-State supply made by him (order of utilisation of credit is
explained in brief below).
The buyer in the importing State is allowed to avail the credit of IGST paid
on inter-State purchases made by him.
Thus, unlike the earlier scenario where the credit chain used to break in case
of inter-State sales on account of non-VATable CST, under GST regime there
is a seamless credit flow in case of inter-State supplies too.
The revenue of inter-State sale does not accrue to the exporting State and
the exporting State transfers to the Centre the credit of SGST/UTGST used in
payment of IGST.
The Centre transfers to the importing State the credit of IGST used in
payment of SGST/UTGST.
Order of utilization of credit - There is a specified order in which
ITC should be utilized. First, IGST credit should be utilized towards
IGST payment, and then towards payment of CGST and SGST/UTGST in any
order and in any proportion.
After entire ITC of IGST is utilized, ITC of CGST should be utilized for
payment of CGST and IGST in that order. Thereafter, ITC of SGST
/UTGST should be utilized for payment of SGST/UTGST and IGST in that
order.
It may be noted that ITC of CGST cannot be utilized for payment of
SGST/UTGST and vice versa. Also, ITC of SGST/UTGST should be utilized
for payment of IGST, only after ITC of CGST has been utilized fully.
The seamless flow of credit under GST, in case of intra-State and inter-State
supplies, can be better understood with the help of the following
illustrations:
Intra-State Supply
ILLUSTRATION 1
In case of local supply of goods/ services, the supplier would charge dual
GST i.e., CGST and SGST at specified rates on the supply.
1. Supply of goods/ services by A to B
Amount (in `)
Amount
(in `)
Amount (in `)
Note: Rates of CGST and SGST have been assumed to be 9% each for
the sake of simplicity.
Statement of revenue earned by Central and State Government
Inter-State Supply
ILLUSTRATION 2
Amount (in `)
Amount (in `)
Amount (in `)
Amount (in `)
Value charged for supply of goods/ services 14,400
(` 12,000 x 120%)
Add: CGST @ 9% 1,296
Add: SGST @ 9% 1,296
Total price charged by B from C for local supply of 16,992
goods/services
Amount (in `)
The various central, State and local levies were examined to identify their
possibility of being subsumed under GST. While identifying, the following
principles were kept in mind:
(i) Taxes or levies to be subsumed should be primarily in the nature of indirect
taxes, either on the supply of goods or on the supply of services.
(ii) Taxes or levies to be subsumed should be part of the transaction chain
which commences with import/ manufacture/ production of goods or
provision of services at one end and the consumption of goods and services
at the other.
(iii) The subsuming of taxes should result in free flow of tax credit in intra and
inter-State levels. The taxes, levies and fees that were not specifically related
to supply of goods & services would not be subsumed under GST.
(iv) Revenue fairness for both the Union and the States individually would need
to be attempted.
Taking the above principles into account, following taxes were subsumed in the
GST:
Central Taxes State Taxes
Central Excise Duty & Additional State surcharges and cesses in so far
Excise Duties as they relate to supply of goods &
Service Tax services
Entertainment Tax (except those
Excise Duty under Medicinal & Toilet
levied by local bodies)
Preparation Act
Tax on lottery, betting and gambling
CVD & Special CVD
Entry Tax (All Forms) & Purchase Tax
Central Sales Tax VAT/ Sales tax
Central surcharges & Cesses in so far Luxury Tax
as they relate to supply of goods & Taxes on advertisements
services
GST
8. BENEFITS OF GST
GST is a win-win situation for the entire country. It brings benefits to all the
stakeholders of industry, Government and the consumer. The significant benefits
of GST are discussed hereunder:
Benefits to economy
Creation of unified national market: GST aims to make India a common
market with common tax rates and procedures and
remove the economic barriers thus paving the way for
an integrated economy at the national level.
9. CONSTITUTIONAL PROVISIONS
India has a three-tier federal structure, comprising the Union Government, the
State Governments and the Local Government.
The power to levy taxes and duties is distributed among the three tiers of
Governments, in accordance with the provisions of the Indian Constitution.
The Constitution of India is the supreme law of India. It consists of a Preamble,
25 parts containing 448 Articles and 12 Schedules.
Power to levy and collect taxes whether, direct or indirect emerges from the
Constitution of India. In case any tax law, be it an act, rule, notification or order is
not in conformity with the Constitution, it is called ultra vires the Constitution and
is illegal and void.
25 Parts
Preamble (containing
448 articles)
12
Schedules
Constitution of India
The significant provisions of the Constitution relating to taxation are:
I. Article 265: Article 265 of the Constitution of India prohibits arbitrary
collection of tax. It states that “no tax shall be levied or collected except
by authority of law”. The term “authority of law” means that tax proposed
to be levied must be within the legislative competence of the Legislature
imposing the tax.
II. Article 245: Part XI of the Constitution deals with relationship between the
Union and States. The power for enacting the laws is conferred on the
Parliament and on the Legislature of a State by Article 245 of the
Constitution. The said Article provides as under:
Subject to the provisions of this Constitution, Parliament may make
laws for the whole or any part of the territory of India, and the
legislature of a State may make laws for the whole or any part of the
State.
No law made by the Parliament shall be deemed to be invalid on the
ground that it would have extra-territorial operation.
III. Article 246: It gives the respective authority to Union and State
Governments for levying tax.
IV. Seventh Schedule to Article 246: It contains three lists which enumerate
the matters under which the Union and the State Governments have the
authority to make laws.
It contains It contains
the matters It contains the
the matters matters in
in respect in respect of
of which the respect of
which the which both
Parliament State
(Central the Central &
Government State
Government) has the
has the Governments
exclusive have power to
exclusive right to
right to make laws.
make laws .
make laws.
motor
high spirit aviation
petroleum natural
speed ((commonly turbine
crude gas
diesel known as fuel
petrol)
5. Discuss the deficiencies in the existing indirect taxes which led to the need for
ushering into GST regime.
6. Discuss the dual GST model as introduced in India.
7. List the Central and State levies which have been subsumed in GST in India.
8. Discuss the functions of the common GST portal.
9. Briefly explain the leviability of GST or otherwise on petroleum crude, diesel,
petrol, Aviation Turbine Fuel (ATF) and natural gas.
10. Elaborate the principles that were borne in mind while subsuming various
central, State and local levies, under GST.
11. GST is a simplified tax structure. Justify the statement.
12. List the advantages that GST accrues to the trade and industry.
13. List the special category States as prescribed in Article 279A of the
Constitution of India.
14. Discuss the leviabilty of GST or otherwise on tobacco.
11. ANSWERS/HINTS
1. Difference between direct taxes and indirect taxes:
The person paying the tax The person paying the tax to the
to the Government directly Government collects the same from the
bears the incidence of the ultimate consumer. Thus, incidence of the
tax. tax is shifted to the other person.
2. Major indirect taxes are goods and services tax and customs duty and direct
tax is income tax.
3. Salient features of indirect taxes are:
(i) An important source of revenue: Indirect taxes are a major source of
tax revenues for Governments worldwide and continue to grow as
more countries move to consumption oriented tax regimes. In India,
indirect taxes contribute more than 50% of the total tax revenues of
Central and State Governments.
(ii) Tax on commodities and services: It is levied on commodities at the
time of supply or manufacture or purchase or sale or import/export
thereof. Hence, it is also known as commodity taxation. It is also
levied on supply of services.
(iii) Shifting of burden: There is a clear shifting of tax burden in respect of
indirect taxes. For example, GST paid by the supplier of the goods is
recovered from the buyer by including the tax in the cost of the
commodity.
(iv) No perception of direct pinch: Since, value of indirect taxes is
generally inbuilt in the price of the commodity, most of the time the
tax payer/consumer pays the same without actually knowing that he is
paying tax to the Government. Thus, tax payer does not perceive a
direct pinch while paying indirect taxes.
(v) Inflationary: Tax imposed on commodities and services causes an all-
round price spiral. In other words, indirect taxation directly affects the
prices of commodities and services and leads to inflationary trend.
(vi) Wider tax base: Unlike direct taxes, the indirect taxes have a wide tax
base. Majority of the products or services are subject to indirect taxes
with low thresholds.
(vii) Promotes social welfare: Higher taxes are imposed on the
consumption of harmful products (also known as ‘sin goods’) such as
alcoholic products, tobacco products etc. This not only checks their
consumption but also enables the State to collect substantial revenue.
(viii) Regressive in nature: Generally, the indirect taxes are regressive in
nature. The rich and the poor have to pay the same rate of indirect
taxes on certain commodities of mass consumption. This may further
increase the income disparities between the rich and the poor.
4. Seventh Schedule to Article 246 of the Constitution contains three lists
which enumerate the matters under which the Union and the State
Governments have the authority to make laws.
(i) List -I (UNION LIST): It contains the matters in respect of which the
Parliament (Central Government) has the exclusive right to make laws.
(ii) List -II (STATE LIST): It contains the matters in respect of which the
State Government has the exclusive right to make laws.
(iii) List -II (CONCURRENT LIST): It contains the matters in respect of which
both the Central & State Governments have power to make laws.
5. Deficiencies in the erstwhile indirect tax regime:
(a) Certain transactions were subject to double taxation and were taxed
as both goods and services, since under the earlier regime, distinction
between goods and services was often blurred.
(b) CENVAT did not include chain of value addition in the distributive
trade after the stage of production. Similarly, in the State-level VAT,
CENVAT load on the goods was not removed leading to the cascading
of taxes.
(c) Though CENVAT and State-Level VAT were essentially value added
taxes, set off of one against the credit of another was not possible as
CENVAT was a central levy and State-Level VAT was a State levy.
(d) There were several taxes in the States, such as, Luxury Tax,
Entertainment Tax, etc. which were not subsumed in the VAT. Hence
for a single transaction, multiple taxes in multiple forms were required
to be paid.
(e) VAT on goods was not integrated with tax on services, at the State
level, to remove the cascading effect of service tax. With service
sector being the fastest growing sector in the economy, the exclusion
of services from the tax base of the States potentially eroded their tax-
buoyancy.
(f) CST was another source of distortion in terms of its cascading nature
since it was non-VATABLE. Being an origin based tax, CST was also
against one of the basic principles of consumption taxes that tax
should accrue to the jurisdiction where consumption takes place.
6. India has adopted a Dual GST model in view of the federal structure of the
country. Consequently, Centre and States simultaneously levy GST on
taxable supply of goods or services or both, which takes place within a State
or Union Territory. Thus, tax is imposed concurrently by the Centre and
States, i.e. Centre and States simultaneously tax goods and services. Now,
the Centre also has the power to tax intra-State sales & States are also
CHAPTER 2
LEARNING OUTCOMES
CHAPTER OVERVIEW
Meaning of supply - Supply with consideration in course/
furtherance of business
1. INTRODUCTION
A taxable event is any transaction or occurrence
that results in a tax consequence. Before levying
any tax, taxable event needs to be ascertained. It
is the foundation stone of any taxation system; it
determines the point at which tax would be
levied.
Under the earlier indirect tax regime, the
framework of taxable event in various statutes
was prone to catena of interpretations resulting
in litigation since decades. The controversies largely related to issues like whether
a particular process amounted to manufacture or not, whether the sale was pre-
determined sale, whether a particular transaction was a sale of goods or rendering
of services etc.
The GST laws resolve these issues by laying down one
comprehensive taxable event i.e. “Supply” - Supply of goods or
services or both. Various taxable events namely manufacture, sale,
rendering of service, purchase, entry into a territory of State etc. have been done
away with in favour of just one event i.e. Supply.
GST Law, by levying tax on the ‘supply’ of goods and/or services, departs from the
historically understood concepts of ‘taxable event’ under the State VAT Laws, Excise
Laws and Service Tax Law i.e. sale, manufacture and service respectively.
In the GST regime, the entire value of supply of goods and/or services is taxed
in an integrated manner, unlike the earlier indirect taxes, which were charged
independently either on the manufacture or sale of goods, or on the provisions
of services.
2. RELEVANT DEFINITIONS
Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Section 2(52)].
Principal: means a person on whose behalf an agent carries on the
business of supply or receipt of goods or services or both [Section 2(88)].
Competent authority: means such authority as may be notified by the
Government [Section 2(29)].
Family: means, —
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they
are wholly or mainly dependent on the said person [Section 2(49)].
Business: includes –
(c) any activity or transaction in the nature of (a) above, whether or not
there is volume, frequency, continuity or regularity of such transaction;
[Section 2(17)].
Government: means the Central Government [Section 2(53)].
Local authority: means —
(a) a “Panchayat” as defined in clause (d) of article 243 of the
Constitution.
(b) a “Municipality” as defined in clause (e) of article 243P of the
Constitution.
An association of persons or
A Limited Liability a body of individuals,
A firm
Partnership whether incorporated or not,
in India or outside India
Society as defined
Central Government/ under the Societies
A local authority
State Government Registration Act,
1860
Our discussion in this Study Material will principally be confined to the provisions
of CGST and IGST laws as the specific State GST laws 1 are outside the scope of
syllabus.
STATUTORY PROVISIONS
1
It may be noted that GST laws of all the States and Union Territories are largely based on
the CGST Act, 2017.
(3) Subject to sub-sections (1), (1A) & (2), the Government may, on the
recommendations of the Council, specify, by notification, the
transactions that are to be treated as —
ANALYSIS
The definition of ‘supply’ as contained in section 7 is an inclusive definition and
does not define the term exhaustively. It defines the scope of supply in an inclusive
manner. Clause (a) of sub-section (1) illustrates the forms of supply, but the list is
not exhaustive. This is substantiated by the use of words ‘such as’ in the definition.
Provisions of scope of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
The meaning and scope of supply in terms of section 7 can be understood in terms
of following parameters:
1. Supply should be of goods or services. Supply of anything other than
goods or services like money, securities etc. does not attract GST.
Money
💸💸
Anything Securities
which is
neither
Goods goods nor
Supply
NOT Supply
services
Services
in the of goods
course or and
furtherance services
of business
Parameters for
consideration
of supply
Supply should be
Aforesaid parameters describe the concept of supply. However, there are a few
exceptions to 2nd and 3rd parameters [the requirement of supply being made for a
consideration and in the course or furtherance of business] in the GST law. Few
exceptions have been carved out where a transaction is deemed to be a supply
even without consideration [contained in Schedule I – discussed later in this
Chapter]. Similarly, the condition of supply to be made in the course or
furtherance of business has been relaxed in case of import of services [Import of
services for a consideration, whether or not in the course or furtherance of business,
is treated as supply].
Further, there are also cases where a transaction is kept out of scope of supply
despite the existence of the above parameters, i.e. there is a list of activities
which are treated neither as supply of goods nor as supply of services. In other
words, they are outside the scope of GST.
GST law has classified certain activities/transactions either as supply of goods or
as supply of services. Government is also empowered to notify transactions that
are to be treated as a supply of goods and not as a supply of services, or as a
supply of services and not as a supply of goods.
In the subsequent paras, the above aspects of supply have been extensively
discussed. The discussion has been broadly categorised into following:
+ Schedule I]
Goods Services
means
means
excludes
includes includes
Thus, the forms of supply as contemplated in this first part have two pre-requisites:
2
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over from one to another; specifically, to make over the possession or control
of.
(1) A shopkeeper sells a pen for ` 100 to the buyer. After the sale,
the pen belongs to the buyer and shopkeeper does not have any
right on the pen. This is a transaction of sale.
(2) A company transfers goods from its factory to the depot for
sale purposes. This is ‘transfer’ of goods where the sale has not yet
taken place.
II. Barter and Exchange: The dictionary meaning of term ‘barter’ is to exchange
goods or services for other goods or services instead of using money 3. Black’s
Law dictionary defines the term ‘exchange’ as an act of giving or taking one
thing for another.
While barter deals with a transaction which only includes an exchange of
goods/services, exchange may cover a situation where the goods are paid for
partly in goods and partly in money. When there is a barter of goods or
services, same activity constitutes supply as well as consideration.
(3) When a new car worth ` 5,00,000 is purchased in exchange of
an old car alongwith the monetary consideration of ` 4,00,000
paid for the said purchase.
(4) A doctor got his hair cut from a barber and provides him
medical consultancy in return. In this transaction, the doctor
provided the medical consultancy services to the barber for which
consideration was in the form of hair cutting services provided by the barber.
Similarly, the barber provided hair cutting services to the doctor for which
consideration was in the form of medical consultancy services provided by
the doctor.
III. Licence, lease, rental and disposal: The dictionary meaning of the term
‘licence’ is a permission granted by competent authority to engage in a
business or occupation or in an activity otherwise unlawful 4. Black’s law
3
www.macmillandictionary.com
4
www.merriam-webster.com
dictionary defines disposal as the sale, pledge, giving away, use, consumption
or any other disposition of a thing.
The dictionary meaning of ‘rental’ is an arrangement to rent something, or
the amount of money that you pay to rent something 5 and that of ‘lease’ is
to make a legal agreement by which money is paid in order to use land, a
building, a vehicle, or a piece of equipment for an agreed period of time 6.
Under GST, such licenses, leases and rentals of goods with or without transfer
of right to use are covered under the supply of service because there is no
transfer of title in such supplies. Such transactions are specifically treated as
supply of service in Schedule II of CGST Act [Schedule-II has been discussed in
detail in the subsequent paras].
B. CONSIDERATION
5
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6
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The said definition has been depicted in the form of a diagram as follows:
CONSIDERATION
By recipient or any
Deposit to be other person
considered as
payment
ONLY
Excluding subsidy given
by Central/ State
when the supplier
Governments
applies such deposit
as consideration for
the said supply
Let us examine the existence of consideration in the following two scenarios:
1. Donations received by charitable institutions from individual donors, without
quid pro quo
2. Art works sent by artists to galleries for exhibition
1. Donations received by charitable institutions from individual donors,
without quid pro quo
An important feature of consideration is quid pro quo [something for
something]. Donations received by the charitable organisations are treated
as consideration only if there exists, quid pro quo, i.e., there is an obligation
on part of recipient of the donation or gift to do anything (supply a service).
Thus, GST is not leviable where all the following three conditions are satisfied
namely:
Purpose is
Gift or donation is
Payment has the philanthropic (i.e., it
made to a
character of gift leads to no commercial
charitable
or donation gain) and not
organization
advertisement
engaged as public authority shall also be construed as business. For any trade,
commerce, or any other similar activity to qualify as business, frequency, volume,
continuity or regularity of such transaction is not a pre-requisite.
Some of the examples of supply made/not made ‘in the course or furtherance of
business’ are as follows:
(7) Rishabh buys a car for his personal use and after a year sells it to a
car dealer. Sale of car by Rishabh to car dealer is not a supply under CGST
Act because said supply is not made by Rishabh in the course or
furtherance of business 7.
(8) Manikarnika sold her old gold bangles and earrings to ‘Aabhushan
Jewellers’. Sale of old gold jewellery by an individual to a jeweller will not
constitute supply as the same cannot be said to be in the course or
furtherance of business of the individual 8.
The view taken in above two examples is based on the view taken in the Departmental
FAQs/ press release. 9
Since ‘business’ includes vocation, therefore, sale of goods or service as a vocation
is also a supply under GST.
(9) Sundaram Acharya, a famous actor, paints some paintings and sells
them. The consideration from such sale is to be donated to a Charitable
Trust – ‘Kind Human’. The sale of paintings by the actor qualifies as
supply.
7
Clarified vide GST FAQs issued by CBIC
8
Clarified by CBIC vide press release dated 13.07.2017
9
There is another school of thought according to which since the definition of business
includes trade, commerce, or any other similar activity, whether or not there is frequency,
volume, continuity or regularity of such transaction, the transactions in the above
examples can be considered to be made in the course or furtherance of business and thus,
will constitute supply. The taxability of such transactions, however, will have to be examined
under the provisions of section 9 [Discussed in detail in Chapter 3 – Charge of GST].
Above view is based on literal interpretation of the law. However, since this view may not
always lead to logical conclusions, it is more prudent to take a purposive approach as followed
in Departmental FAQs/press release given above.
10
Book maker is a person that accepts and pays off bets on sporting and other events at
agreed-upon odds.
11
Totalisator is a device showing the number and amount of bets staked on a race, to
facilitate the division of the total among those backing the winner.
In the subsequent paras, we have discussed the exceptions to the two parameters
of supply, namely, (i) supply made for consideration, but not in course or
furtherance of business and (ii) supply made without consideration.
STATUTORY PROVISIONS
3. Supply of goods —
(a) by a principal to his agent where the agent undertakes to
supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to
receive such goods on behalf of the principal.
ANALYSIS
There are instances where an activity or transaction
is treated as supply, even if the same is made
without consideration. These are specifically
Section 7(1)(c)
mentioned in Schedule I appended to the CGST read with
Act. The same has been discussed in the Schedule I
subsequent paras:
In the past regime, in every tax statute,
“consideration” played the most important role for levying taxes. For instance, if
any service was provided for free to a person, such service was not subject to service
tax. However, under GST, the importance of consideration has been diluted in
certain cases – this is an important departure from the earlier indirect tax regime.
As per Schedule I, in the following four cases, activities made without consideration
will be treated as supply under section 7:
I. Permanent Transfer/Disposal of Business Assets [Para 1 of
Schedule I]: Any kind of disposal or transfer of business assets made by an
entity on permanent basis even though without consideration qualifies as
supply. However, it is important to note that this provision would apply only
if input tax credit has been availed on such assets.
Therefore, in order to qualify as supply under this para, following conditions
need to be satisfied:
12
List of the goods in respect of which ITC is blocked has been elaborated in Chapter 6 – Input
Tax Credit.
GST law, various categories of related persons have been specified. The term
‘related person’ has been defined in explanation to section 15. The said
definition has been depicted by way of a diagram as follows:
(16) Ms. Priya holds 30% shares of ABC Ltd. and 35% shares of
XYZ Ltd. ABC Ltd. and XYZ Ltd. are related.
(17) Q Ltd. has a deciding role in corporate policy, operations
management and quality control of R Ltd. It can be said that Q Ltd. controls
R Ltd. Thus, Q Ltd. and R Ltd. are related.
Distinct persons
Single registration in UP
What
constitutes a
‘gift’?
The term ‘gift’ has not been defined in the GST law. In common parlance, gift
is made without consideration, is voluntary in nature and is made
occasionally. It cannot be demanded as a matter of right by the employee
and the employee cannot move a court of law for obtaining a gift.
employer and employee and is part and parcel of the cost-to company
(C2C) 13.
III. Principal – Agent [Para 3 of Schedule I]: Supply of goods by a principal
to his agent, without consideration, where
the agent undertakes to supply such goods
on behalf of the principal is considered as
supply.
Similarly, supply of goods by an agent to his
principal, without consideration, where the
agent undertakes to receive such goods on
behalf of the principal is considered as
supply.
Points which merit consideration, in this regard, are as follows:
• Only supply of goods and not supply of services is covered here.
• Supply of goods between principal and agent without consideration
is also supply.
Thus, the supply of services between the principal and the agent and vice
versa would therefore require “consideration” to be considered as supply and
thus, to be liable to GST.
In order to determine whether a particular principal-
agent relationship falls within the ambit of the
Para 3 of Schedule I as discussed above or not, the
deciding factor is whether the invoice for the further
supply of goods on behalf of the principal is being
issued by the agent or not? In other words, the crucial
13
It is possible to take an alternative view in this regard. This scenario, i.e. the employer
providing services (free of charge) to the employee in lieu of the services provided by the
employee to the employer in the course of employment, is an exchange transaction. In an
exchange transaction, both the parties independently assess their transaction status. Thus,
while service provided by employee to the employer being covered under Schedule III is not
a supply, service provided by employer to employee may constitute a supply in terms of
section 7(1)(c) read with para 2 of Schedule I since employer and employee are related
persons as per explanation to section 15. Provisions of section 15 have been discussed in
detail in Unit 2 of Chapter 5 – Time and Value of Supply.
point is whether or not the agent has the authority to pass or receive the title
of the goods on behalf of the principal.
Where the invoice for further supply is being
issued by the agent in his name then, any Invoice for further
supply to customer
provision of goods from the principal to the
be issued in the
agent would fall within the fold of Para 3 above.
agent’s name.
However, where the invoice is issued by the
agent to the customer in the name of the principal, such agent shall
not fall within the ambit of Para 3 above.
Similarly, where the goods being
procured by the agent on behalf of Goods procured on behalf
the principal are invoiced in the of principal are invoiced
name of the agent then further in the agent’s name.
provision of the said goods by the agent to the principal would be
covered by Para 3 above [Circular No. 57/31/2018 GST dated
04.09.2018].
The above clarification can be understood with the help of following scenario
based examples:
(22) Anmol appoints Bholu to procure certain goods from the
market. Bholu identifies various suppliers who can provide the
goods as desired by Anmol and asks the supplier (Golu) to send
the goods and to issue the invoice directly to Anmol.
In this scenario, Bholu is only acting as the procurement agent, and has in no
way involved himself in the supply or receipt of the goods. Hence, in
accordance with the provisions of this Act, Bholu is not an agent of Anmol for
supply of goods in terms of Para 3 of Schedule I.
In cases where the invoice is issued by Kavi to the buyer, the former is an agent
covered under Para 3 of Schedule I 14. However, in cases where the invoice is
issued directly by Ravi to the buyer, the commission agent (Kavi) doesn’t fall
under the category of agent covered under Para 3.
Clarification of issues pertaining to Del-credere agent (DCA)
A question was posed by the industry - whether supply
between a principal and a Del-credere agent would also Del-
get covered under Schedule I. The Government clarified credere
agent
the doubt of the industry by way of following clarification:
Before going through the clarification let us first understand
what is meant by a DCA? In commercial trade parlance, a DCA is a selling agent
who is engaged by a principal to assist in supply of goods or services by
contacting potential buyers on behalf of the principal. The factor that
differentiates a DCA from other agents is that the DCA guarantees the payment
to the supplier.
In such scenarios where the buyer fails to make payment to the principal by
the due date, DCA makes the payment to the principal on behalf of the buyer
(effectively providing an insurance against default by the buyer), and for this
reason the commission paid to the DCA may be relatively higher than that
paid to a normal agent.
In order to guarantee timely payment to the supplier, the DCA can resort to
various methods including extending short-term transaction-based loans to the
buyer or paying the supplier himself and recovering the amount from the buyer
with some interest at a later date. This loan is to be repaid by the buyer along
with an interest to the DCA at a rate mutually agreed between DCA and buyer.
Circular No. 73/47/2018 GST dated 05.11.2018 has clarified the following
issues in this regard:
14
It is important to note that services provided by the commission agent for sale or purchase
of agricultural produce are exempt from GST. Said exemption has been discussed in detail in
Chapter 4 Exemptions from GST.
15
Services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount (other than interest involved in credit card services)
are exempt vide Entry 27 of Notification No. 12/2017 CT(R) dated 28.06.2017 [Discussed in
detail in Chapter 4 – Exemptions under GST].
16
Section 15 of the CGST Act, 2017 has been discussed in detail in Chapter 5 – Time and
Value of Supply.
and industry, such as, pharmaceutical companies often provide drug samples
to their stockists, dealers, medical practitioners, etc., or
sometimes, companies announce offers like ‘Buy One, Get One
free’ - buy one soap and get one soap free or get one tooth
brush free along with the purchase of tooth paste.
As we have already seen that as per section 7(1)(a), the goods or services
which are supplied free of cost (without any consideration) shall not be
treated as “supply” except in case of activities mentioned in Schedule I.
In view of the same, few sales promotion schemes have been examined as
under:
17
ITC on inputs, input services and capital goods to the extent they are used in relation to
the gifts/free samples shall be available to the supplier only where the activity of distribution
of gifts/free samples falls within the scope of supply - Discussed in detail in Chapter 6 – Input
Tax Credit.
18
Refer Circular No.44/18/2018 CGST dated 02.05.2018 discussed subsequently.
19
Services by way of transfer of a going concern, as a whole or an independent part thereof
are exempt from GST [Discussed in detail in Chapter 4 – Exemptions from GST].
but the possession of the same lies with the tenant. The tenant pays periodic rent
to the landlord as long as he occupies the property. The tenant also usually has
the option to sell the tenancy right of the said property and in such a case has to
share a percentage of the proceed with owner of land, as laid down in their tenancy
agreement. Alternatively, the landlord pays to tenant the prevailing tenancy
premium to get the property vacated. Such properties in Maharashtra are
governed by Maharashtra Rent Control Act, 1999.
It has been clarified that the activity of transfer of tenancy right against
consideration [i.e. tenancy premium] is squarely covered under supply of
service liable to GST.
It is a form of lease or renting of property and such activity is specifically declared
to be a service in Para 2 of Schedule II as discussed in table above i.e. any lease,
tenancy, easement, licence to occupy land is a supply of services.
Although stamp duty and registration charges have been levied on such transfer of
tenancy rights, it shall be still subject to GST. Merely because a
transaction/supply involves execution of documents which may
require registration and payment of registration fee and stamp
duty, would not preclude them from the ‘scope of supply’ and
from payment of GST.
The transfer of tenancy rights cannot be treated as sale of land/ building in para 5
of Schedule III. Thus, it is not a negative list activity [this concept is discussed under
next heading] and consequently, a consideration for the said activity shall attract
levy of GST.
To sum up, the activity of transfer of ‘tenancy rights’ is squarely covered under the
scope of supply and taxable per-se. Transfer of tenancy rights to a new tenant
against consideration in the form of tenancy premium is taxable.
However, renting of residential dwelling for use as a residence is exempt [Entry 12
of Notification No. 12/2017 CT (R) dated 28.06.2017 – Discussed in Chapter 4 –
Exemptions from GST]. Hence, grant of tenancy rights in a residential dwelling for
use as residence dwelling against tenancy premium or periodic rent or both is
exempt. As regards services provided by outgoing tenant by way of surrendering
the tenancy rights against consideration in the form of a portion of tenancy
premium is liable to GST [Circular No. 44/2018 CT dated 02.05.2018].
20
Discussion based on Service Tax Education Guide issued under erstwhile under service tax
law.
21
Schedule III has two more entries - Entry 7 and 8 [as enumerated below]. These entries are
covered in the syllabus of Paper 8: Indirect Tax Laws at Final Level.
7. Supply of goods from a place in the non-taxable territory to another place in the non-
taxable territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption.
(b) Supply of goods by the consignee to any other person, by endorsement of
documents of title to the goods, after the goods have been dispatched from the port
of origin located outside India but before clearance for home consumption.
22
notified vide Notification No. 14/2017 CT (R) dated 28.06.2017/ Notification No. 11/2017
IT (R) dated 28.06.2017 as amended
23
notified vide Notification No. 25/2019 CT (R) dated 30.09.2019/ Notification No. 24/2019
IT (R) dated 30.09.2019
24
Circular No. 121/40/2019 GST dated 11.10.2019
• Aircrafts,
(a) carrying goods or passengers or both; or
(b) for repairs and maintenance,
[except in cases where such movement is for further supply of the same
conveyance] shall be treated ‘neither as a supply of goods or supply of
service’ and therefore not be leviable to IGST 25.
However, applicable CGST/SGST/IGST, as the case may be, shall be
leviable on repairs and maintenance done for such conveyance [Circular
No. 1/1/2017 IGST dated 07.07.2017**].
(ii) Inter-State movement of rigs, tools and spares, and all goods on
wheels [like cranes]
**Above circular shall mutatis mutandis apply
to inter-State movement of rigs, tools and
spares, and all goods on wheels [like cranes],
[except in cases where movement of such
goods is for further supply of the same goods],
such inter-State movement shall be treated
‘neither as a supply of goods or supply of service,’ and consequently no
IGST would be applicable on such movements. In this context, it is also
reiterated that applicable CGST/SGST/IGST, as the case maybe, is
leviable on repairs and maintenance done for such goods [Circular No.
21/21/2017-GST dated 22.11.2017].
In the preceding paras, we have discussed, how to determine whether a given
activity or transaction constitutes a supply. Once an activity or transaction qualifies
as supply, one needs to determine whether the same is leviable to GST or not.
Though the provisions relating to levy and collection of GST have been discussed
at length in Chapter 3 – Charge of GST, a brief idea of the same is provided
hereunder.
25
Said issue was discussed in GST Council’s meeting held on 11 th June, 2017 and the Council
recommended that such inter-State movement shall be treated ‘neither as a supply of goods
or supply of service’.
For a supply to attract GST, primarily two additional conditions need to be satisfied.
These are – (i) supply must be made by a taxable person and (ii) supply must be a
taxable supply. These two additional conditions have been discussed hereunder:
(i) Supply by a taxable person
A supply to attract GST should be made by a taxable person. Hence, a
supply between two non-taxable persons does not constitute taxable supply
under GST.
The restriction of being a taxable person is only on the supplier whereas the
recipient can be either taxable or non-taxable.
Meaning of taxable person: A “taxable person” is a person who is registered
or liable to be registered under section 22 or section 24 [The said sections and
the concept of taxable person thereto have been discussed in detail in Chapter
7 – Registration].
Hence, a person who is liable to be registered but does not take a registration
and remains an unregistered person shall be construed as a taxable person.
Similarly, a person not liable to be registered, but has taken voluntary
registration and got himself registered is also a taxable person.
(ii) Taxable supply
For a supply to attract GST, the supply must be taxable. Taxable supply has
been broadly defined and means any supply of goods or services or both
which, is leviable to tax under the GST Law [Refer Chapter-3: Charge of GST
for detailed discussion on leviability of GST]. Exemptions may be provided to
the specified goods or services or to a specified category of persons/ entities
making supply [Refer Chapter-4: Exemptions from GST for detailed discussion].
STATUTORY PROVISIONS
Clauses Particulars
ANALYSIS
GST is payable on individual goods or services or both at the notified rates. The
application of rates poses no problem if the supply is of individual goods or
individual services, which is clearly identifiable and such goods or services are
subject to a particular rate of tax.
However, in certain cases, supplies are not such simple and clearly identifiable
supplies. Some of the supplies are a combination of goods or combination of
services or combination of goods and services both and each individual component
of such supplies may attract a different rate of tax.
In such a case, the rate of tax to be levied on such supplies may be a challenge. It
is for this reason, that the GST Law identifies composite supplies and mixed supplies
and provides certainty in respect of tax treatment under GST for such supplies.
In order to determine whether the supplies are ‘composite supplies’ or ‘mixed
supplies’, one needs to determine whether the supplies are naturally bundled or
not naturally bundled in ordinary course of business. The concept of ‘naturally
bundled’ supplies is emanating from the definition of ‘composite supply’.
Principal supply means the supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply
forming part of that composite supply is ancillary [Section 2(90)].
(57) Works contract and restaurant services are classic examples of
composite supplies.
How to determine whether the services are bundled in the ordinary course
of business?
Whether the services are bundled in the ordinary course of business, would depend
upon the normal or frequent practices followed in the area of business to which
services relate. Such normal and frequent practices adopted in a business can be
ascertained from several indicators some of which are listed below:
The perception of the consumer or the service recipient - If large number
of service recipient of such bundle of services reasonably expect such services
to be provided as a package, then such a package could be treated as
naturally bundled in the ordinary course of business.
(62) When a consumer buys a television set and he also gets mandatory
warranty and a maintenance contract with the TV, this supply is a
composite supply. In this example, supply of TV is the principal supply,
warranty and maintenance services are ancillary.
(63) A travel ticket from Mumbai to Delhi may include service of food
being served on board, free insurance, and the use of airport lounge. In
this case, the transportation of passenger, constitutes the pre-dominant
element of the composite supply, and is treated as the principal supply and all other
supplies are ancillary.
Activity of bus The principal supply may be determined on the basis of facts
body building and circumstances of each case [Circular No. 34/8/2018-GST
dated 01.03.2018].
for a single price where such supply does not constitute a composite
supply [Section 2(74)].
The individual supplies are independent of each other and are not naturally
bundled.
(67) A house is given on rent through a single rent deed - one floor of
which is to be used as residence and the other for housing a printing press,
at a lump sum rent amount. Such renting for two different purposes is not naturally
bundled in the ordinary course of business. Said supplies are mixed supply.
How to determine the tax liability on mixed supplies?: A mixed supply
comprising of two or more supplies shall be treated as supply of that particular
supply that attracts highest rate of tax.
5. LET US RECAPITULATE
The taxable event under GST is supply. The scope of supply under GST can
be understood in terms of following parameters:
Supply should be of goods Supply should be made for a Supply should be made in the
or services consideration course or furtherance of business
26
Circular No. 47/21/2018 GST dated 08.06.2018
Consideration
Supply
in course or furtherance
of business
Consideration
Importation of
services
Supply
in course or furtherance of
business
Assets
Permanently
transferred/disposed
Related/Distinct Related/Distinct
Deemed
Supply
Person 1 Person 2
Supply of goods or services
in course or furtherance of business
Employer Employee
Gifts ≤ ` 50,000 in a FY
Not supply
Deemed Supply
supplies goods
Principal Agent
Supplier Agent
Deemed Supply
Principal
Related
persons
Deemed Supply
Person out Person in India
of India supplies services
Import of services
Exceptions:
Business transferred as a going
concern.
Business carried on by a
personal representative who is
deemed to be a taxable person.
No
Is the activity a supply including supply of
goods/services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal?
Yes
No Is it an activity No
Is it for a
consideration? specified under
Schedule I?
Yes Yes
Is it in course No
or furtherance
of business?
Is it
No
Is it in course
or furtherance import of
of business? No service?
Yes
Yes Yes
Is it an activity specified No
in Schedule III or section Activity is
Activity is
7(2)(b)? Supply NOT
Supply
Yes
Chocolates 18%
Toy balloons 5%
7. ANSWERS/HINTS
1. Taxable event under GST is supply of goods or services or both. CGST and
SGST/ UTGST will be levied on intra-State supplies. IGST will be levied on
inter-State supplies.
2. As per Schedule I, supply of goods or services or both between related
persons or between distinct persons as specified in section 25, when made in
the course or furtherance of business, is deemed as supply even if made
without consideration. In the given case, since the Damodar Private Ltd. and
its branch located in another State are distinct persons, supply of goods
between them qualifies as supply.
3. Section 7 stipulates that the supply should be for a consideration and should
be in the course or furtherance of business. However, Schedule I enumerates
the cases where an activity is treated as supply, even if the same is without
consideration. These are as follows:
(i) Permanent transfer or disposal of business assets where input tax
credit has been availed on such assets.
(ii) Supply of goods or services or both between related persons or
between distinct persons as specified in section 25, when made in
the course or furtherance of business.
However, gifts not exceeding fifty thousand rupees in value in a
financial year by an employer to an employee shall not be treated as
supply of goods or services or both.
(iii) Supply of goods —
(a) by a principal to his agent where the agent undertakes to supply
such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive
such goods on behalf of the principal.
(iv) Import of services by a person from a related person or from any of his
other establishments outside India, in the course or furtherance of
business.
4. The statement is not correct. Composite supply is treated as supply of the
principal supply. It is the mixed supply that is treated as supply of that
particular goods or services which attracts the highest rate of tax.
(ii) the parents, grand-parents, brothers and sisters of the person Uif
they are wholly or mainly dependent on the said personU.
In the given case, Miss Shriniti Kaushik has received interior decoration
services from her brother. In view of section 2(49)(ii) above, Miss
Shriniti and her brother shall be considered to be related as Miss
Shriniti’s brother is wholly dependent on her.
However, Miss Shrinti has taken interior decoration services for her
residence and not in course or furtherance of business. Consequently,
services provided by Miss Shrinti’s brother to her would not be treated
as supply under section 7 read with Schedule I.
(iii) In the above case, if Miss Shriniti has taken interior decoration services
with regard to her business premises, services provided by Miss
Shriniti’s brother to her would be treated as supply under section 7 read
with Schedule I.
11. Under composite supply, two or more taxable supplies of goods or services
or both, or any combination thereof, are naturally bundled and supplied in
conjunction with each other, in the ordinary course of business, one of which
is a principal supply [Section 2(30)]. In view of the same,
(a) since supply of breakfast and dinner with the accommodation in the
hotel are naturally bundled, said supplies qualify as ‘composite supply’.
(b) since supply of soap alongwith the toothpaste are not naturally
bundled, said supplies do not qualify as ‘composite supply’.
12. In the given case, the items supplied by Dumdum Electronics are not naturally
bundled in the ordinary course of business. Therefore, such supply is not a
composite supply. Further, although Akbar Retail Store has paid a composite
discounted price for these goods, Dumdum Electronics has not charged a
single price for the said supply. Therefore, said supply is also not a mixed
supply.
Supply of these goods is, therefore, supply of individual items which are
taxable at the respective rates applicable to them.
13. As per section 2(74), mixed supply means two or more individual supplies of
goods or services, or any combination thereof, made in conjunction with each
other by a taxable person for a single price where such supply does not
constitute a composite supply.
27
Provisions of section 25(4) have been discussed in detail in Chapter 7 – Registration
individual supplies where a single price is being charged for the entire supply.
It can at best be treated as supplying two goods for the price of one.
Taxability of such supply will be dependent upon as to whether the supply is
a composite supply or a mixed supply and the rate of tax shall be determined
accordingly.
16. Services by way of grant of alcoholic liquor license by the State Governments
have been notified to be treated neither as a supply of goods nor as a supply
of service. Such licence is granted against consideration in the form of licence
fee or application fee or by whatever name it is called.
This special dispensation is applicable only to supply of service by way of
grant of liquor licenses by the State Governments as an agreement between
the Centre and States and is not applicable/has no precedence value in
relation to grant of other licenses and privileges for a fee in other situations,
where GST is payable.
Thus, in the given case, the grant of alcoholic liquor license by the Tamil Nadu
Government to Sarvanna & Sons is neither a supply of goods nor a supply of
service.
28
Provisions existing as on 30.04.2021.
29
It is important to note that the said clause shall be deemed to have been inserted
with effect from 01.07.2017.
Explanation––For members/constituents
the purposes of this or vice-versa, for cash,
clause, it is hereby deferred payment or
clarified that, other valuable
notwithstanding consideration.
anything contained Further, an
in any other law for explanation is also
the time being in being inserted therein,
force or any to clarify that the
judgment, decree or person/ its members/
order of any Court, constituents shall be
tribunal or deemed to be two
authority, the separate persons and
person and its the supply of
members or activities/ transactions
constituents shall be inter se shall be
deemed to be two deemed to take place
separate persons from one person to
and the supply of another.
activities or
Consequently,
transactions inter se
paragraph 7 of
shall be deemed to
Schedule II is being
take place from one
omitted with
such person to
retrospective effect
another.
from 01.07.2017.
Para 7 of Supply of goods Omitted 30
Schedule The following shall
II be treated as
supply of goods,
namely:—
Supply of goods by
any
unincorporated
30
It is important to note that the said para of Schedule II shall be deemed to have
been omitted with effect from 01.07.2017.
association/ body
of persons to a
member thereof for
cash, deferred
payment or other
valuable
consideration.
CHARGE OF GST
The section numbers referred to in the chapter pertain to the CGST Act, unless
otherwise specified. Examples/illustrations/Questions and Answers given in the
Chapter are based on the position of GST law existing as on 30.04.2021
LEARNING OUTCOMES
CHAPTER OVERVIEW
Composition levy
1. INTRODUCTION
Power to levy tax is drawn from the Constitution of India. To pave way for the
introduction of Goods and Services Tax (“GST”), 101st Constitutional Amendment
Act, 2016 was passed. By virtue of this Act, enabling provision was made to levy
GST on supply of goods or services or both in India. Central excise duty, State
VAT and certain State specific taxes and service tax were subsumed into a
comprehensive GST [Discussed in detail in Chapter-1: GST in India – An
Introduction].
The very basis for the charge of tax in any taxing statute is the taxable event i.e
the occurrence of the event which triggers levy of tax. As discussed earlier, the
taxable event under GST is SUPPLY. CGST and SGST/UTGST are levied on all
intra-State supplies of goods and/or services while IGST is levied on all inter-
State supplies of goods and/ or services.
The provisions relating to levy and collection of CGST and IGST are contained in
section 9 of the CGST Act, 2017 and section 5 of the IGST Act, 2017, respectively.
Let us now have a fundamental idea of intra-State supply and inter-State supply.
As a general rule, where the location of the supplier and the place of supply of
goods or services are in the same State/Union territory, it is treated as intra-State
supply of goods or services respectively.
Similarly, where the location of the supplier and the place of supply of goods or
services are in (i) two different States or (ii) two different Union Territories or (iii) a
State and a Union territory, it is treated as inter-State supply of goods or
services respectively.
2. RELEVANT DEFINITIONS
Central tax: means the central goods and services tax levied under section
9 of the CGST Act [Section 2(21)].
Integrated tax: means the integrated goods and services tax levied under
the Integrated Goods and Services Tax Act [Section 2(58)].
State tax: means the tax levied under any State Goods and Services Tax Act
[Section 2(104)].
Goods: means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply. [Section 2(52)].
Exempt supply: means supply of any goods or services or both which
attracts nil rate of tax or which may be wholly exempt from tax under
section 11, or under section 6 of the Integrated Goods and Services Tax
Act, and includes non-taxable supply [Section 2(47)].
Aggregate turnover: means the aggregate value of all taxable supplies
(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-State supplies of persons having the same Permanent
Account be computed on all India basis but excludes central tax, State tax,
Union territory tax, integrated tax and cess [Section 2(6)].
Business: includes –
(c) any activity or transaction in the nature of (a) above, whether or not there is
volume, frequency, continuity or regularity of such transaction;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
(h) activities of a race club including by way of totalisator or a license to book
maker or activities of a licensed book maker in such club;
(i) any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities
[Section 2(17)].
Consideration: in relation to the supply of goods or services or both
includes:
any payment made or to be made, whether in money or otherwise,
in respect of, in response to, or for the inducement of, the supply
of goods or services or both, whether by the recipient or by any
other person but shall not include any subsidy given by the Central
Government or a State Government,
the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
An association of persons
or a body of individuals,
A Limited Liability
A firm whether incorporated or
Partnership
not, in India or outside
India
Society as defined
Central
under the Societies
A local authority Government/State
Government
Registration Act,
1860
12 24 200
NM NM NM
Territorial
Waters
(TWI) Contiguous High Sea
Zone
Continental Shelf
(ii) State GST law of the respective State/Union Territory with Legislature
[Delhi, Puducherry and Jammu & Kashmir]* extends to whole of that
State/Union Territory.
(1) Maharashtra GST Act, 2017 extends to whole of the State of the
Maharashtra.
*State: includes a Union territory with Legislature [Section 2(103) of the CGST
Act].
(iii) Integrated Goods and Services Tax Act, 2017 extends to the whole of
India [Section 1 of the IGST Act].
(iv) Union Territory Goods and Services Tax Act, 2017 extends to the Union
territories** of the Andaman and Nicobar Islands, Lakshadweep, Dadra and
Nagar Haveli and Daman and Diu, Ladakh 1, Chandigarh and other territory,
i.e. the Union Territories without Legislature [Section 1 of the UTGST Act].
1
Students may note that the erstwhile State of Jammu and Kashmir has been reorganised
into the Union territory of Jammu and Kashmir (with Legislature) and Union territory of
Ladakh vide the Jammu and Kashmir Reorganisation Act, 2019. Further, the erstwhile
Union territories of Dadra and Nagar Haveli and Daman and Diu have been merged into a
new Union territory of Dadra and Nagar Haveli and Daman and Diu vide the Dadra and
Nagar Haveli and Daman and Diu (Merger of Union Territories) Act, 2019.
4. L
LEVY & COLLECTION OF CGST & IGST [SECTION 9
OF THE CGST ACT & SECTION 5 OF THE IGST ACT]
STATUTORY PROVISIONS
(2) The central tax on the supply of petroleum crude, high speed diesel,
motor spirit (commonly known as petrol), natural gas and aviation
turbine fuel shall be levied with effect from such date as may be
notified by the Government on the recommendations of the Council.
(3) The Government may, on the recommendations of the Council,
by notification, specify categories of supply of goods or
services or both, the tax on which shall be paid on reverse
charge basis by the recipient of such goods or services or both
and all the provisions of this Act shall apply to such recipient
as if he is the person liable for paying the tax in relation to the
supply of such goods or services or both.
(4) The Government may, on the recommendations of the Council,
by notification, specify a class of registered persons who shall,
in respect of supply of specified categories of goods or services
or both received from an unregistered supplier, pay the tax on
reverse charge basis as the recipient of such supply of goods or
services or both, and all the provisions of this Act shall apply
to such recipient as if he is the person liable for paying the tax
in relation to such supply of goods or services or both.
(5) The Government may, on the recommendations of the Council,
by notification, specify categories of services the tax on intra-
State supplies of which shall be paid by the electronic
commerce operator if such services are supplied through it,
and all the provisions of this Act shall apply to such electronic
commerce operator as if he is the supplier liable for paying the
tax in relation to the supply of such services.
Provided that where an electronic commerce operator does not
have a physical presence in the taxable territory, any person
representing such electronic commerce operator for any
purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator
does not have a physical presence in the taxable territory and
also he does not have a representative in the said territory,
such electronic commerce operator shall appoint a person in
the taxable territory for the purpose of paying tax and such
person shall be liable to pay tax.
ANALYSIS
Central Goods and Services Tax (CGST) shall be levied on all intra-State supplies
of goods or services or both.
The tax shall be collected in such manner as may be prescribed and shall be paid
by the taxable person. However, intra-State supply of alcoholic liquor for human
consumption is outside the purview of CGST.
Value for levy: Transaction value under section 15 of the CGST Act – Discussed in
detail in Chapter 5 – Time and Value of supply.
Rates of CGST: Rates for CGST are rates as may be notified by the Government
on the recommendations of the GST Council [Discussed subsequently in detail in
this Chapter]. Maximum rate of CGST can be 20%.
💡💡On inter-State supplies of goods and/or services, Integrated Goods and Services
Tax (IGST) is levied on the transaction value under section 15 of the CGST Act 2.
Since alcoholic liquor for human consumption is outside the purview of GST law, IGST
is also not leviable on the same. IGST is the sum total of CGST and SGST/UTGST.
Maximum rate of IGST can be 40%.
However, CGST/IGST on supply of the following items has not yet been levied. It
shall be levied with effect from such date as may be notified by the Government
on the recommendations of the Council:
petroleum crude
high speed diesel
motor spirit (commonly known as petrol)
natural gas and
aviation turbine fuel
2
Goods imported into India: For the goods imported into India, the IGST shall be levied and
collected as per the section 3 of the Custom Tariff Act, 1975 i.e. the additional duty shall be
as per the Custom Tariff Act, 1975 and the value shall also be determined as per the said
Act. This aspect will be discussed in detail at the Final Level.
Generally, the supplier of goods or services is liable to pay GST. However, under
the reverse charge mechanism, the liability to pay GST is cast on the recipient of
the goods or services.
Reverse charge means the liability to pay tax is on the recipient of supply of
goods or services instead of the supplier of such goods or services in respect of
notified categories of supply [Section 2(98)].
It may be noted that the underlying principle of an indirect tax is that burden of
tax has to be ultimately passed on to the recipient. GST being an indirect tax, this
principle holds good for GST. Under normal circumstances, the statutory liability
to deposit GST and undertake compliances [i.e. to obtain registration under GST,
deposit the tax with the Government, filing returns, etc.] is on the supplier while he may
recover the same from its recipient. However, under reverse charge mechanism,
the statutory liability to deposit GST and undertaking compliance requirements,
[i.e. to obtain registration under GST, deposit the tax with the Government, filing returns,
etc.] shifts from supplier to recipient.
3
Examples of goods on which tax is payable by the recipient under reverse charge have
been given hereunder only for the knowledge of the students. These are not relevant for
examination purposes.
located in the
taxable territory.
[Hereinafter referred
as Specified
recipients]
4
Provisions relating to tax deducted at source contained in section 51 shall be discussed at
the Final Level.
5
These services have been simultaneously exempted from payment of GST vide entry 21B of
Notification No. 12/2017 CT(R) dated 28.06.2017. Thus, there will be no tax liability in this
case. [Refer Chapter 4: Exemptions from GST for discussion on this exemption]
representational services
before any court, tribunal
or authority.
Union territory or
local authority;
(ii) services in
relation to an aircraft
or a vessel, inside or
outside the precincts
of a port or an
airport;
(iii) transport of
goods or
passengers.
6
Supply of TDR, FSI, long term lease (premium) of land by a landowner to a developer are
exempt subject to the condition that the constructed flats are sold before issuance of
completion certificate and tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) is withdrawn in case of flats sold after
issue of completion certificate, but such withdrawal shall be limited to 1% of value in case
of affordable houses and 5% of value in case of other than affordable houses.
In such cases, the liability to pay tax on TDR, FSI, long term lease (premium) has been
shifted from land owner to builder under the reverse charge mechanism (RCM) – as
illustrated in table above.
the Central
Government or
State
Government or
Union territory;
or
(b) local authority;
or
(c) Governmental
agencies; which
has taken
registration
under the CGST
Act, 2017 only
for the purpose
of deducting tax
under section 51
of the said Act
and not for
making a
taxable supply
of goods or
services; or
(ii) a registered person
paying tax under
composition scheme.
🔔🔔 All the above services have also been notified for reverse charge
under IGST Act vide Notification No. 10/2017 IT (R) dated 28.06.2017
as amended. In addition to them, following service is also notified by
said notification under reverse charge for IGST purposes:
Any service supplied by any person who is located in a non-taxable territory to any
person other than non-taxable online recipient 8 located in taxable territory. Thus,
in case of import of service, tax is payable by the person importing such service 9.
For purpose of the notification notifying the above services under
reverse charge mechanism, following explanations shall apply-
(a) The person who pays or is liable to pay freight for the transportation
of goods by road in goods carriage, located in the taxable territory
7
Circular No. 116/35/2019 GST dated 11.10.2019 explaining the GST implication on security
lending mechanism under Securities Lending Scheme, 1997 has been covered at the Final level.
8
The concept of non-taxable online recipient has been discussed at the Final level.
9
Following service has also been notified under reverse charge vide Notification No. 10/2017 IT
(R) dated 28.06.2017 for IGST purposes:
Services supplied by a person located in non- taxable territory by way of transportation of goods
by a vessel from a place outside India up to the customs station of clearance in India to an
importer located in the taxable territory. Said service shall be covered at the Final level.
shall be treated as the person who receives the service for the purpose
of this notification.
(b) Body Corporate: has the same meaning as assigned to it in clause
(11) of section 2 of the Companies Act, 2013.
As per section 2(11) of the Companies Act, 2013, body corporate or
corporation includes a company incorporated outside India, but does
not include—
(i) a co-operative society registered under any law relating to co-
operative societies; and
(ii) any other body corporate (not being a company as defined in
this Act), which the Central Government may, by notification,
specify in this behalf.
(c) the business entity located in the taxable territory who is litigant,
applicant or petitioner, as the case may be, shall be treated as the person
who receives the legal services for the purpose of this notification.
(d) the words and expressions used and not defined in reverse charge
notification but defined in the CGST Act, the IGST Act, and the UTGST
Act shall have the same meanings as assigned to them in those Acts.
(e) Limited Liability Partnership formed and registered under the
provisions of the Limited Liability Partnership Act, 2008 shall also be
considered as a partnership firm or a firm.
(f) Insurance agent means an insurance agent licensed under section 42
of the Insurance Act, 1938 who receives agrees to receive payment by
way of commission or other remuneration in consideration of his
soliciting or procuring insurance business including business relating
to the continuance, renewal or revival of policies of insurance [Section
2(10) of the Insurance Act, 1938].
(g) Renting of immovable property means allowing, permitting or granting
access, entry, occupation, use or any such facility, wholly or partly, in an
immovable property, with or without the transfer of possession or control
of the said immovable property and includes letting, leasing, licensing or
other similar arrangements in respect of immovable property.
(h) the provisions of reverse charge notification, in so far as they apply to
the Central Government, State Government, shall also apply to the
Parliament and State Legislature.
** Recipient of GTA service is the person who pays/is liable to pay freight for
transportation of goods by road in goods carriage, located in the taxable
territory.
the consideration charged from the service recipient are taxable at the
following two rates:
(i) @ 5% (2.5% CGST+2.5% SGST/UTGST or 5% IGST) provided supplier of
services has taken only the limited ITC (of input services in the same
line of business) or
(ii) @ 12% (6% CGST+6% SGST/UTGST or 12% IGST) where supplier of services
opts to pay GST at said rate. In this case, there is no restriction on
availing ITC on goods or services used in supplying renting of motor
vehicles service by the supplier of service.
In the following paras, we have explained as to who is the person liable
to pay tax in case of each of the above two rates 10:
**
Person liable to pay GST is Recipient
**
It is important to note here that when any service is placed under RCM, the supplier shall
not charge any tax from the service recipient as this is the settled procedure under RCM.
Further, RCM shall be applicable here only when the supplier does not issue an invoice
charging GST @12% (6% CGST+6% SGST/UTGST or 12% IGST) from the service recipient.
10
Entry 15 of Notification No. 13/2017 CT (R) dated 28.06.2017 read with Circular No.
130/49/2019 GST dated 31.12.2019
11
The definition of “independent directors” under section 149(6) of the Companies Act,
2013 read with Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 makes it
amply clear that the independent director should not have been an employee of the
company.
12
As per Para 1 of Schedule III of the CGST Act, services by an employee to the employer in
the course of or in relation to his employment are non-supplies, i.e. they are neither supply
of goods nor supply of services. The provisions of Schedule III of the CGST Act have been
discussed in detail in Chapter 2 – Supply under GST.
Schedule III and is therefore, taxable. Besides, as already discussed, the recipient
of the said services i.e. the company, is liable to discharge the applicable GST on
it on reverse charge basis 13.
13
as clarified vide Circular No. 140/10/2020 GST dated 10.06.2020
14
Detailed provisions relating to Electronic Commerce Operator shall be discussed at Final
level.
Sections
Chapter
Heading
Sub-heading
Tariff item
Chapter, heading, sub-heading and tariff item are referred in the Schedules of
rate notification for goods under GST are the Chapter, heading, sub-heading and
tariff item of the First Schedule to the Customs Tariff Act, 1975. Indian Customs
Tariff is based on HSN. HSN stands for Harmonized System of Nomenclature. It
is a multipurpose international product nomenclature developed by the World
Customs Organization (WCO) for the purpose of classifying goods across the
World in a systematic manner. It comprises of about 5,000 commodity groups;
each identified by a 6 digit code [code can be extended], arranged in a legal and
logical structure and is supported by well-defined rules to achieve uniform
classification. India has extended the HSN codes upto 8-digits.
Along the lines of HSN, the Indian Customs Tariff has a set of Rules of
Interpretation of the First Schedule and General Explanatory notes. These rules
and the general explanatory notes give clear direction as to how the
nomenclature in the schedule is to be interpreted. These Rules for
Interpretation including section and chapter notes and the General Explanatory
Notes of the First Schedule 1516 apply to the interpretation of the rate
notification for goods under GST also.
Consequently, under GST, goods are classified on the basis of HSN in accordance
with the Rules for the Interpretation of the Customs Tariff.
Once classification for a product has been determined on this basis, applicable
rate has to be determined as per the rate prescribed in the rate notification issued
under GST.
Classification of services
A new Scheme of Classification of Services has been devised under GST. It is a
modified version of the United Nations Central Product Classification. Under this
scheme, the services of various descriptions have been classified under various
sections, headings and groups. Chapter 99 has been assigned for services. This
chapter has following sections:
Section 5 Construction Services
Section 6 Distributive Trade Services; Accommodation, Food and Beverage
Service; Transport Services; Gas and Electricity Distribution Services
Section 7 Financial and related services; real estate services; and rental and
leasing services
Section 8 Business and Production Services
Section 9 Community, social and personal services and other miscellaneous
services
Each section is divided into various headings which is further divided into Groups. Its
further division is made in the form of ‘Tariff item’/ Service Codes.
15
The provisions relating to Customs Act and Customs Tariff Act will be discussed at Final
Level.
16
Sections: A group of Chapters representing a particular class of goods.
Chapters: Each section is divided into various chapters and sub-chapters. Each chapter
contains goods of one class.
Chapter notes: They are mentioned at the beginning of each chapter. These notes are part
of the statute and hence have the legal authority in determining the classification of goods.
Heading: Each chapter and sub-chapter is further divided into various headings.
Sub-heading: Each heading is further divided into various sub-headings.
Chapter
Section
Heading
Group
Rate of tax is determined in accordance with the Service Code in which the service
is classified.
17
Students may refer the CBIC website for the complete Schedule of GST Rates for goods for
knowledge purposes.
18
notified vide Notification No. 11/2017 CT (R) dated 28.06.2017
19
notified vide Notification No. 8/2017 IT (R) dated 28.06.2017.
20
Students may refer the CBIC website for the complete Schedule of GST Rates for services
for knowledge purposes.
The effective rate of GST on real estate sector for the new projects by promoters
are as follows:
(i) 1% without ITC on construction of affordable houses (area 60 sqm in
metros/ 90 sqm in non-metros and value upto ` 45 lakh).
(ii) 5% without ITC is applicable on construction of:
(a) all houses other than affordable houses, and
(b) commercial apartments such as shops, offices etc. in a residential real
estate project (RREP) in which the carpet area of commercial
apartments is not more than 15% of total carpet area of all
apartments.
Conditions:
Above tax rates shall be available subject to following conditions:
(a) ITC shall not be available.
(b) 80% of inputs and input services [other than services by way of grant of
development rights, long term lease of land (against upfront payment in the form of
premium, salami, development charges etc.) or FSI (including additional FSI), electricity,
high speed diesel, motor spirit, natural gas] ,
used in supplying the service shall
be purchased from registered persons 21.
However, if value of inputs and input services purchased from registered
supplier is less than 80%, promoter has to pay GST on reverse
charge basis, under section 9(4) of the CGST Act
Supply of services
[discussed earlier], at the rate of 18% on all such
notified under
inward supplies (to the extent short of 80% of
section 9(4)
the inward supplies from registered supplier).
Further, where cement is received from an unregistered person, the
promoter shall pay tax on supply of such cement on reverse charge
basis, under section 9(4) of the CGST Act, at the applicable rate which is
28% (CGST 14% + SGST 14%) at present.
Moreover, GST on capital goods shall be paid by the promoter on
reverse charge basis, under section 9(4) of the CGST Act at the
applicable rates [Notification No. 07/2019 CT (R) dated 29.03.2019/
Notification No. 07/2019 IT (R) dated 29.03.2019].
STATUTORY PROVISIONS
Section 10 Composition levy
Sub-section Particulars
(1) Notwithstanding anything to the contrary contained in this Act but
subject to the provisions of sub-sections (3) and (4) of section 9, a
registered person, whose aggregate turnover in the preceding
financial year did not exceed fifty lakh rupees, may opt to pay, in
lieu of the tax payable by him under sub-section (1) of section 9, an
21
Discussion in above paras highlighted in green is solely for the purpose of knowledge of
the students and is not meant for examination purposes.
22
Rate of tax prescribed in case of a manufacturer is half percent of the turnover in
State/UT. The same has been discussed in detail in subsequent paras.
23
The turnover limit for composition levy has been increased from ` 50 lakh to ` 1.5
crore vide Notification No. 14/2019 CT dated 07.03.2019.
ANALYSIS
(1) Overview of the Scheme
The composition levy is an alternative method of levy
of tax designed for small taxpayers whose turnover is Voluntary and
up to a prescribed limit. The objective of composition optional scheme
scheme is to bring simplicity and to reduce the
compliance cost for the small taxpayers.
Initially, the scheme was
designed to benefit the
small traders,
manufacturers and
restaurant service providers. So, the scheme
was fundamentally for the suppliers of
goods and only for restaurant service
providers. However, subsequently, suppliers availing composition scheme were
permitted to supply other services also, though only upto a small specified
value. This scheme is contained in sub-sections (1) and (2) of section 10 of
the CGST Act (hereinafter referred to as composition scheme for goods).
Under this scheme, suppliers of goods have the option to pay tax at the
concessional rate of 1% (CGST + SGST/UTGST) of the turnover and restaurant
service providers have the option to pay tax @ 5% (CGST + SGST/UTGST) of the
turnover. Small taxpayers with an aggregate turnover in the preceding
financial year up to ` 1.5 crore are eligible to pay tax at these rates in the
current financial year upto an aggregate turnover of ` 1.5 crore. However,
24
This scheme was initially introduced with effect from 1 st April, 2019 vide Notification No.
2/2019 CT (R) dated 07.03.2019. With effect from 01.01.2020, the provisions of this scheme
have been incorporated in sub-section (2A) of section 10 vide the Finance (No. 2) Act, 2019.
It is important to note that Notification No. 2/2019 CT (R) dated 07.03.2019 has not yet
been rescinded and is still operational.
25
Discussed in detail in Chapter-8: Tax Invoice, Credit and Debit Notes; E-way Bill
every invoice at the specified rate, pay tax at the prescribed percentage of
his turnover every quarter. At the end of a quarter, he would pay the tax,
without availing the benefit of input tax credit. Return is to be filed
annually by a composition supplier. Registration under GST law is
compulsory for opting for the composition scheme.
The provisions relating to composition levy are contained in section 10 of
CGST Act, 2017 and Chapter-II [Composition Levy] of Central Goods and
Services Tax (CGST) Rules, 2017. The said rules have been incorporated in
the discussion in the following paras at the relevant places.
As seen above, section 10 stipulates two types of composition schemes –
section 10
Arunachal Pradesh
Uttarakhand
Manipur
Meghalaya
composition levy for goods
` 75 lakh
Mizoram
Turnover Limit for
Nagaland
Sikkim
Tripura
of the composition scheme for goods, turnover of both the offices would be
taken into account and if the same does not exceed ` 1.5 crore, ‘Prithviraj’
can opt to avail the composition levy scheme (subject to fulfilment of other
prescribed conditions) for goods for both the offices.
Further, the option of a registered person to avail composition scheme
for goods shall lapse with effect from the day on which his aggregate
turnover during a financial year exceeds the threshold limit of ` 1.5 crore
[` 75 lakh in 8 specified special category States] [Section 10(3)].
and he can avail the benefit of said scheme in the current FY till the time
his aggregate turnover in the current FY does not exceed ` 50 lakh.
From the above discussion, it is apparent that the term aggregate turnover
is of utmost importance. So, let us understand this term in detail.
(3) Aggregate turnover under composition levy [Section 2(6) read with
explanation 1 to section 10]
The definition of aggregate turnover as contained in section 2(6) of the
CGST Act is analysed as follows:
The aggregate turnover is the sum of value of all outward supplies falling in
the following four categories:
Taxable supplies
Exempt supplies
Exports of goods or services or both
Inter-State supplies
It excludes:
The value of inward supplies on which tax is payable by a person on
reverse charge basis
Taxes including cess paid under GST law.
It is computed on all India basis for a person having same Permanent
Account Number (PAN).
Further, explanation 1 to section 10 clarifies that for the purposes of
computing aggregate turnover of a registered person for determining
his eligibility to pay tax under this section, aggregate turnover includes
value of supplies from 1st April of a FY up to the date of his becoming
liable for registration and excludes value of exempt supply of services
provided by way of extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount.
On combined reading of the aforesaid provisions, the method of
computing the aggregate turnover for the purpose of determining the
eligibility of a registered person for the composition scheme [for both
goods and services] can be depicted in a diagram as follows:
Includes Excludes
Value of all outward --CGST/ SGST/ UTGST/ IGST/ Cess
supplies
--Value of inward supplies on which tax
--Taxable supplies
--Exempt supplies is payable under reverse charge.
--Exports* --Value of exempt supply of services
--Inter-State supplies* provided by way of extending deposits,
of persons having the same PAN
loans or advances in so far as the
be computed on all India basis.
consideration is represented by way of
These also include interest or discount
*Note: The value of exports and inter-State supplies are relevant only while
determining the aggregate turnover of the preceding FY. These values are not
relevant for determining the aggregate turnover of the current FY in which the
composition supplier has opted for composition levy as he is not permitted to
make inter-State supplies and exports in the said FY.
(4) Rates of tax under the composition levy scheme [Section 10(1) and
section 10(2A) read with rule 7]
Rule 7 of the CGST Rules, 2017 prescribes the rates at which tax is payable
by a registered person opting for composition levy – composition levy for
goods and composition levy for services.
Rates of tax in case of composition levy for goods
A registered person opting for composition levy for goods shall pay tax
calculated at the prescribed rates [mentioned in table below] during the
current FY, in lieu of the tax payable by him under regular scheme:
ILLUSTRATION 1
Taxpayer ‘Tolaram’ is a manufacturer who has opted for composition levy for
goods, having one unit – A1 in UP and another unit – A2 in MP. Total turnover
of two units in last FY was ` 115 lakh (` 85 lakh + ` 30 lakh). Turnover of units
A1 and A2 in the first quarter of current financial year is ` 5 lakh and ` 10 lakh
respectively. Compute the amount payable under composition levy under section
10(1) & 10(2) of the CGST Act, 2017 by ‘Tolaram’.
ANSWER
26
Effective rate 1% (CGST+ SGST/UTGST)
27
Effective rate 5% (CGST+ SGST/UTGST)
28
Effective rate 1% (CGST+ SGST/UTGST)
ILLUSTRATION 2
Taxpayer ‘Bholaram’ is a trader (who has opted for composition levy for goods) of
both taxable and exempted goods (goods exempted by way of a notification).
It has one retail showroom – A1 in Punjab and another retail showroom – A2 in
Rajasthan, both selling taxable as well as exempted goods. Total turnover
(including taxable and exempted goods) of the two showrooms in last FY was `
115 lakh (` 85 lakh + ` 30 lakh).
Turnover of showrooms A1 and A2 in the first quarter of current financial year is
` 35 lakh [A1 - ` 15 lakh (` 5 lakh from sale of taxable goods and ` 10 lakh from
sale of exempted goods) and A2 - ` 20 lakh (` 10 lakh from sale of taxable goods
and ` 10 lakh from sale of exempted goods)]. Compute the amount payable
under composition levy under section 10(1) & 10(2) of the CGST Act, 2017 by
‘Bholaram’.
ANSWER
Note: A supplier, other than manufacturer and restaurant service provider, eligible for
composition levy under section 10(1) & 10(2) has to pay tax @ 1% (CGST+ SGST) of
the turnover of only taxable supplies of goods and services in the State.
ILLUSTRATION 3
Taxpayer ‘Padmavati’ is a salon stylist, who has opted for composition levy for
services, having one branch – B1 in Vasant Kunj, Delhi and another branch –
B2 in Gurgaon, Haryana. Total turnover of two branches in last FY was ` 45
lakh (` 25 lakh + ` 20 lakh). Turnover of branches B1 and B2 in the first
quarter of current financial year is ` 5 lakh and ` 10 lakh respectively.
Compute the amount payable under composition levy under section 10(2A) of
the CGST Act, 2017 by ‘Padmavati’.
ANSWER
As seen above, since the tax under composition scheme has to computed as
a specified % of the turnover in State or turnover in Union territory, it is
pertinent to understand what is turnover in State or turnover in Union
territory.
(5) Turnover in State or turnover in Union territory under composition
levy [Section 2(112) read with explanation 2 to section 10]
As per section 2(112) of the CGST Act, 2017,
turnover in State/ turnover in Union territory means
the aggregate value of all taxable supplies
(excluding the value of inward supplies on
which tax is payable by a person on reverse charge basis) and exempt
supplies made within a State or Union territory by a taxable person, exports
of goods or services or both and inter-State supplies of goods or services or
both made from the State or Union territory by the said taxable person but
excludes central tax, State tax, Union territory tax, integrated tax and cess.
Further, explanation 2 to section 10 clarifies that for the purposes of
determining the tax payable by a person under this section, the
Excludes
supplies made within the State/UT --Value of supplies from the first day
of April of a FY up to the date when
(While computing turnover in a such person becomes liable for
State/UT of a supplier, other than registration under this Act
manufacturer and restaurant service
provider, eligible for composition --Value of exempt supply of services
levy for goods [eg-trader], the provided by way of extending
exempt supplies will not be taken deposits, loans or advances in so far
into consideration) as the consideration is represented
by way of interest or discount
(6) Who are NOT eligible to opt for composition scheme? [Section 10(2)
and (2A)]
Registered person who is not eligible for Registered person who is not eligible for
composition scheme for goods composition scheme for services
*Section 52 relating to tax collected at source has been discussed in detail at the Final
level.
There is no restriction on
composition supplier to receive
inter-State inward supplies of
goods or services.
(b) ` 5 lakh,
whichever is higher.
Thus, it can be inferred that where the turnover of a registered person
opting for composition scheme for goods is upto ` 50 lakh in the
preceding financial year, he can supply services [other than restaurant
29
It is, however, pertinent to note that services by way of extending deposits, loans or
advances in so far as the consideration is represented by way of interest or discount are
exempt from GST – Discussed in detail in Chapter 4 – Exemptions from GST.
30
other than restaurant services
31
as discussed in preceding paras
32
wherever applicable
Further, where the goods held in stock by him are liable to be taxed under
reverse charge under section 9(4) 33, the tax thereon has been paid under
reverse charge under section 9(4).
(8) Intimation of opting for composition levy [Rules 3 & 4]
33
This condition applies in case where a builder/promoter opting for composition scheme
has the stock of the goods on which he is required to pay GST on reverse charge basis under
section 9(4) in one or more of the following cases:
(i) Builder/promoter must purchase at least 80% of inputs and input services used in
supplying the service, from registered persons. In case of shortfall, he’s required to pay
tax under reverse charge on all such inward supplies (to the extent short of 80% of the
inward supplies from registered supplier).
(ii) Where cement is received from an unregistered person, promoter/builder has to pay
tax on supply of such cement under reverse charge and
(iii) GST on capital goods is payable by the promoter on reverse charge basis.
composition levy
can opt for shall be effective
composition levy from
composition levy
can opt for shall be effective
composition levy from
(9) Validity of composition levy [Section 10(3) read with rule 6 34]
34
read with Circular No. 77/51/2018 GST dated 31.12.2018
III. Denial of option to pay tax under the composition scheme by tax
authorities
Where the proper officer has reasons to believe that the
registered person was not eligible to pay tax under composition
scheme or has contravened the provisions of the CGST Act or
provisions of this Chapter, he may issue a show cause notice
(SCN) to such person. Upon receipt of reply to SCN, he shall
pass an order either accepting the reply, or denying the option
to pay tax under composition scheme from the date of the
option or from the date of the event concerning such
contravention, as the case may be.
In case of denial of option to pay tax under composition levy
by the tax authorities, the effective date of such denial shall be
from a date, including any retrospective date, as may be
determined by tax authorities. However, such effective date shall
not be prior to the date of contravention of the provisions of the
CGST Act/ CGST Rules.
In each of the above cases, such person may furnish a statement in
prescribed form containing details of the stock of inputs and inputs
contained in semi-finished or finished goods held in stock by him on the
date on which the option is withdrawn/denied, within a period of 30 days
from the date from which the option is withdrawn/ or from the date of the
order denying composition scheme.
(6) A person availing composition scheme during a financial year
crosses the turnover of ` 1.5 crore on 9th of December. The option
availed shall lapse from the day on which his aggregate turnover
during the financial year exceeds ` 1.5 crore, i.e. on 9th December, in this case.
(10) Composition scheme to be adopted uniformly by all the registered
persons having the same PAN [Proviso to section 10(2) and proviso
to section 10(2A)]
All registered persons having the same Permanent Account Number (PAN)
have to opt for composition scheme. If one such registered person opts for
normal scheme, others become ineligible for composition scheme.
(7) A dealer ‘Kishorilal & Sons’ has two offices in Delhi and is
eligible for composition levy for goods. If ‘Kishorilal & Sons’
opts for the composition scheme for goods, both the offices
would pay taxes under composition scheme and abide by all the conditions
as may be prescribed for the said composition scheme.
Taxable person opting for the composition scheme shall not collect tax from
the recipient on supplies made by him. It implies that a composition scheme
supplier cannot issue a tax invoice.
(12) Composition scheme supplier cannot enter into credit chain [Section 10(4)]
Taxable person opting for the composition scheme is not entitled to any
credit of input tax.
(13) Imposition of penalty in case of irregular availment of the
composition scheme [Section 10(5)]
If a taxable person has paid tax under the composition scheme though he
was not eligible for the scheme, the person would be liable to penalty and
the provisions of section 73 or 74 of the CGST Act shall be applicable for
determination of tax and penalty.
6. LET US RECAPITULATE
1. Extent & Commencement of CGST Act/ SGST Act/ UTGST Act/ IGST Act
States of India
Union Territories
without Legislature
Value for levy Transaction value under section 15 of the CGST Act
• ` 1.5 crore
For remaining States
Rates of tax
shall mention the words “composition taxable person, not eligible to collect tax
on supplies” at the top of the bill of supply issued by him
shall mention the words “composition taxable person” at a prominent place at his
place of business
**A registered person opting for composition scheme for goods is allowed to supply services
[other than restaurant services] alongwith supply of goods or supply of restaurant services of
value not exceeding 10% of the turnover in the preceding financial year in a State/Union
territory or ` 5 lakh, whichever is higher. Here, while computing turnover in a State/UT,
interest on loans/deposit/advances will not be taken into account.
Other points
Composition Scheme if availed shall include all registered persons having same
PAN
normal levy for other. You are required to advice Subramanian Enterprises
whether he can do so?
11. Mr. Ajay has a registered repair centre where electronic goods are
repaired/serviced. His repair centre is located in State of Rajasthan and he is
not engaged in making any inter-State supply of services. His aggregate
turnover in the preceding financial year (FY) is ` 45 lakh.
With reference to the provisions of the CGST Act, 2017, examine whether Mr.
Ajay can opt for the composition scheme under section 10(1) &10(2) in the
current financial year? Or whether he is eligible to avail benefit of
composition scheme under section 10(2A)? Considering the option of
payment of tax available to Mr. Ajay, compute the amount of tax payable by
him assuming that his aggregate turnover in the current financial year is
` 35 lakh.
Will your answer be different if Mr. Ajay procures few items required for
providing repair services from neighbouring State of Madhya Pradesh?
12. M/s United Electronics, a registered dealer, is supplying all types of electronic
appliances in the State of Karnataka. Their aggregate turnover in the
preceding financial year by way of supply of appliances was ` 120 lakh.
The firm also expects to provide repair and maintenance service of such
appliances from the current financial year.
With reference to the provisions of the CGST Act, 2017, examine:
(i) Whether the firm can opt for the composition scheme, under section
10(1) and 10(2), for the current financial year, as the turnover may
include supply of both goods and services?
(ii) If yes, up to what amount, the services can be supplied?
8. ANSWERS/HINTS
1. (a) Since GST on services provided or agreed to be provided by an
arbitral tribunal to any business entity located in the taxable territory
is payable under reverse charge, in the given case, GST is payable by
the recipient - business entity.
(b) GST on sponsorship services provided by any person to any body
corporate or partnership firm located in the taxable territory is
payable under reverse charge. Since in the given case, services
withdrawn, within a period of 30 days from the date from which the option
is withdrawn.
9. (i) A supplier engaged in the manufacture of goods as notified under
section 10(2)(e), during the preceding FY is not eligible for
composition scheme under section 10(1) and 10(2). Ice cream and
other edible ice, whether or not containing cocoa, Pan masala,
Tobacco and manufactured tobacco substitutes and aerated waters
are notified under this category. However, in the given case, since
Mohan Enterprises is engaged in trading of pan masala and not
manufacture and his turnover does not exceed ` 1.5 crore, he is
eligible for composition scheme subject to fulfilment of specified
conditions.
(ii) Since supplier of inter-State outward supplies of goods or services
is not eligible for composition levy, Sugam Manufacturers is not
eligible for composition levy.
10. A registered person with an aggregate turnover in a preceding financial year
up to ` 1.5 crore is eligible for composition levy, under section 10(1) &
10(2), in Delhi. Since the aggregate turnover of Subramanian Enterprises
does not exceed ` 1.5 crore, it is eligible for composition levy in the current
year. However, all registered persons having the same Permanent Account
Number (PAN) have to opt for composition scheme. If one such registered
person opts for normal scheme, others become ineligible for composition
scheme. Thus, Subramanian Enterprises either have to opt for composition
levy for both the places of business or under normal levy for both the places
of business.
11. Section 10(1) provides that a registered person, whose aggregate turnover
in the preceding financial year did not exceed ` 1.5 crore (` 75 lakh in
Special Category States except Assam, Himachal Pradesh and Jammu and
Kashmir), may opt to pay, in lieu of the tax payable by him, an amount
calculated at the specified rates. However, as per proviso to section 10(1),
person who opts to pay tax under composition scheme may supply services
other than restaurant services, of value not exceeding 10% of the turnover
in a State or Union territory in the preceding financial year or ` 5 lakh,
whichever is higher.
In the given case, since Mr. Ajay is an exclusive supplier of services other
than restaurant services [viz. repair services], he is not eligible for
composition scheme under section 10(1) & 10(2).
However, section 10(2A) provides an option to a registered person
(subject to certain conditions) whose aggregate turnover in the
preceding financial year is upto ` 50 lakh and who is not eligible to pay
tax under composition scheme under section 10(1) & 10(2), to pay tax @
3% [Effective rate 6% (CGST+ SGST/UTGST)] of the turnover of supplies
of goods and services in the State or Union territory.
Thus, in view of the above-mentioned provisions, Mr. Ajay is eligible to
avail the composition scheme under section 10(2A) as his aggregate
turnover in the preceding FY does not exceed ` 50 lakh and he is not
eligible to opt for the composition scheme under section 10(1) & 10(2).
Thus, the amount of tax payable by him as per the composition scheme
under section 10(2A) is ` 2,10,000 [6% of ` 35 lakh].
A registered person cannot opt for composition scheme under section
10(2A), if, inter alia, he is engaged in making any inter-State outward
supplies. However, there is no restriction on inter-State procurement of
goods. Hence, answer will remain the same even if Mr. Ajay procures few
items from neighboring State of Madhya Pradesh.
12. (i) The registered persons, whose aggregate turnover in the preceding
financial year did not exceed ` 1.5 crore, may opt to pay tax under
composition levy, under section 10(1) and 10(2).
The scheme can be availed by an intra-State supplier of goods and
supplier of restaurant service.
However, the composition scheme permits supply of marginal
services (other than restaurant services) for a specified value along
with the supply of goods and restaurant service, as the case may
be.
Thus, M/s United Electronics can opt for composition scheme for
the current financial year as its aggregate turnover is less than ` 1.5
crore in the preceding financial year and it is not engaged in inter-
State outward supplies.
LEARNING OUTCOMES
CHAPTER OVERVIEW
Exemption from GST in
1. INTRODUCTION
When a supply of goods and/or services falls within the purview of charging
section, such supply is chargeable to GST. However, for determining the liability
to pay the tax, one needs to further check whether such supply of goods and/or
services are exempt from tax.
Exempt supply has been
defined as supply of any goods
or services or both which
attracts nil rate of tax or which
may be wholly exempt from tax
and includes non-taxable
supply [Section 2(47)]. Non-
taxable supply means a supply
of goods or services or both
which is not leviable to tax
under CGST Act or under the
IGST Act [Section 2(78)]. Thus,
under GST, a supply not
leviable to tax is also included
within the purview of ‘exempt
supply’.
(1) Examples of supply not leviable to tax are alcoholic liquor for
human consumption, specified petroleum products namely Petroleum
Crude, High Speed Diesel, Motor spirit (commonly known Petrol),
Natural Gas and Aviation Turbine Fuel.
Power to grant exemption from GST has been granted vide section 11 of the
CGST Act and vide section 6 of the IGST Act. State GST laws also contain identical
provisions granting power to exempt SGST. Under GST, essential goods/services,
i.e. public consumption products/services, have been exempted. Items such as
unbranded atta/maida/besan, unpacked food grains, milk, eggs, curd, lassi and
fresh vegetables are among the items exempted from GST. Further, essential
services like health care services, education services, etc. have also been
exempted.
It is important to note that exemption under GST may be provided in any of the
following manner:
In this chapter, we shall discuss the power to grant exemption from tax under
CGST Act/IGST Act, list of services exempt from GST in detail and an overview of
the goods exempt from tax.
2. P
POWER TO GRANT EXEMPTION FROM TAX
[SECTION 11 OF THE CGST ACT/SECTION 6 OF THE
IGST ACT]
STATUTORY PROVISIONS
Sub-section Particulars
have effect as if it had always been the part of the first such
notification or order, as the case may be.
ANALYSIS
(i) Exemption from payment of tax: GST law empowers the Central
Government or State Government, as the case may be, to grant exemption
from tax. The exemption is granted on
recommendation of the GST Council.
Exemption can be
Exemption can be from whole of the tax or part of from whole of tax
the tax. It should be granted in public interest. or part of tax
Exemption can be granted to
Exemption can be goods or services or both of any specified
granted by a description, by way of issuance of notification,
notification or by either absolutely [i.e. unconditional exemption;
a special order exemption is not subject to any condition(s)] or
conditionally [i.e. exemption is subject to specified
condition(s)]. Exemption may be granted by a special order in case of the
circumstances of an exceptional nature.
The absolute/ unconditional exemption is
mandatory in nature. Where the supply of the goods Unconditional
or services or both are unconditionally exempted exemption is
from whole of the tax, the registered person doesn’t mandatory
have option to collect and pay tax on such supply of
goods or services or both. Where the supply of the goods or services or
both are unconditionally exempted from part of the
Conditional tax, the registered person doesn’t have option to
exemption is collect and pay the tax, in excess of the effective rate,
optional on such supply of goods or services or both.
(ii) Explanation inserted within 1 year, for the purpose of clarifying the
scope or applicability of any notification/order, to have retrospective
effect: Wherever the Government feels that there is a need to clarify the
scope or applicability of any notification/order issued under this section,
it can issue an explanation within 1 year of issue of said notification/
order. Such explanation shall have effect as if it was there when first such
notification/ order was issued, i.e. explanation so inserted would be
effective retrospectively.
It is hereby clarified that the explanation so inserted for a particular entry in
the notification, is effective from the inception of the entry in notification
and not from the date from which the notification (that inserted said
explanation) becomes effective.
1
This notification notifies the rate of tax on services.
2
Students may go through the complete list of goods exempt from GST on CBIC website –
www.cbic.gov.in, for knowledge purposes.
3
Exemption from IGST has been granted to various services vide Notification No. 9/2017
Integrated Tax (Rate) dated 28.06.2017. All the services exempted from CGST &
SGST/UTGST have also been exempted from IGST. Apart from these, there are few
additional services which have been exempted only under IGST law. Such services will be
discussed at the Final Level.
4
Entry Nos. mentioned herein correspond to entries in Notification No. 12/2017 Central Tax
(Rate) dated 28.06.2017. However, these entry numbers have been given only for reference
purposes and are not relevant for examination purpose.
ANALYSIS
A. SERVICES PROVIDED BY CHARITABLE/RELIGIOUS TRUST
Entry 1 of the Notification exempts services supplied by an entity registered
under section 12AA of the Income-tax Act, 1961 by way of charitable activities.
Thus, in order to claim exemption under Entry 1 of the Notification, following two
conditions must be satisfied:-
(i) The entity should be registered under section 12AA of the Income-tax
Act, 1961, and
(ii) The entity must carry out one or more of the specified charitable activities.
Before proceeding further, let us first understand the meaning of term ‘charitable
activities’. The term ‘charitable activities’ mean activities relating to-
(i) PUBLIC HEALTH by way of-
(A) care or counseling of
(I) terminally ill persons or persons with severe
physical or mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such as
narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or prevention
of HIV infection;
(ii) ADVANCEMENT OF RELIGION, spirituality or yoga;
(iii) ADVANCEMENT OF EDUCATIONAL PROGRAMMES/SKILL
DEVELOPMENT relating to,-
(A) abandoned, orphaned or homeless children;
(B) physically or mentally abused and traumatized persons;
(C) prisoners; or
(D) persons over the age of 65 years residing in a rural area;
(iv) PRESERVATION OF ENVIRONMENT including watershed, forests &
wildlife.
Thus, only those services provided by a charitable and religious trusts [registered
under section 12AA of the Income-tax Act] which fall within the above definition
of charitable activities, are eligible for exemption from GST. There could be many
other services provided by such charitable and religious trusts which are not
covered by the definition of charitable activities and hence, such services would
attract GST.
For instance, grant of advertising rights to a person on the premises of the
charitable/religious trust or on publications of the trust, or granting admission to
events, functions, celebrations, shows against admission tickets or fee etc. would
attract GST.
In the following paras, we have examined some of the services supplied by the
entities registered under section 12AA of the Income-tax Act:
Management of educational institutions by charitable trusts
Activities of schools, colleges or any other educational institutions run by
charitable trusts by way of education or skill development of abandoned,
orphans, homeless children, physically or mentally abused persons, prisoners or
persons over age of 65 years or above residing in a rural area, will be considered
as charitable activities and income from such supplies will be wholly exempt from
GST.
The term rural area means the area comprised in a village as defined in land
revenue records, excluding the area under any municipal committee, municipal
corporation, town area committee, cantonment board or notified area committee;
or any area that may be notified as an urban area by the Central Government or a
State Government.
(11) Shiksha Academy, an educational institute run by Sarvsewa Trust,
a charitable trust registered under section 12AA of the Income-tax Act,
1961, has organized a Skill Development Programme for the old age
people over the age of 65 years residing in Bangalore city (an urban area).
Services provided by Shiksha Academy do not fall within the purview of
‘charitable activities’. The activities relating to advancement of skill development
relating to persons over the age of 65 years, are covered under the definition of
‘charitable activities’ only when such persons are residing in rural area.
Activities of a school, college or an institution run by a trust which do not come
within the ambit of charitable activities will not be exempt under
Entry 1 of the Notification. However, such activities may be exempt under
Entry 66 of the Notification [discussed later in this chapter] provided the school,
college or institution qualifies as an 'educational institution'.
Hostel accommodation provided by trusts
Hostel accommodation services provided by trusts to students do not fall within
the ambit of charitable activities as defined above.
5
Circular No. 32/06/2018 GST dated 12.02.2018
6
Entry 14 has been amended after issuance of this circular. Discussion hereunder has been
suitably adapted to take into consideration the amended entry. Entry 14 has been discussed in
detail later in this chapter.
7
Circular No. 66/40/2018 GST dated 26.09.2018
to sports has a restricted scope. Here, said exemption is available only when said
services are provided by a charitable entity registered under section 12AA of
Income-tax Act 8.
Let us now analyse the term ‘recreational
activities’. The term recreational activities is very
wide. However, under this entry, the scope of
training or coaching in recreational activities is
restricted to the area of arts, culture and sports.
Hence, the training or coaching in recreational
activities in the areas other than arts, culture
or sports is outside the purview of this entry.
Further, training or coaching relating to all forms
of arts, culture or sports is covered under this
entry, namely, dance, music, painting, sculpture
making, literary activities, theatre, etc. of any
school, tradition or language or any of the sports.
(14) Manavtaa Sansthaan, a charitable trust registered under section
12AA of the Income-tax Act, 1961, has organized a ‘Basketball Training
Camp’ for teenagers. GST would be exempt on the same as services
provided by entity registered under section 12AA of the Income-tax Act, 1961 by
way of training or coaching in sports are exempt.
GST on services provided TO charitable trusts
Services provided to charitable or religious trusts are not outside the ambit of
GST. Unless specifically exempted, all goods and services supplied to charitable or
religious trusts are leviable to GST.
B. CONDUCT OF ANY RELIGIOUS CEREMONY
Going through Entry 13(a) of the Notification, it can be inferred that the
amount charged, by whatever name called, for the conduct of any religious
ceremony is exempt from GST. Religious ceremonies are life-cycle rituals
8
In this regard, CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts has
stipulated that the services provided by way of training or coaching in recreational activities
relating to arts or culture or sports such as dance, music, painting, literary activities, drama
etc. of any school, tradition or language or any of the sports, by a charitable entity are
exempt from GST.
9
Discussion herein is primarily based on CBIC GST Flyer – Chapter 39 - GST on Charitable
and Religious Trusts and other clarifications
ANALYSIS
ENTRY 54
The words ‘Services relating to cultivation of plants and rearing of all life
forms of animals, except the rearing of horses, for food, fibre, fuel, raw
material or other similar products’ used in Entry 54 include
activities like breeding of fish (pisciculture), rearing of silk
worms (sericulture), cultivation of ornamental flowers
(floriculture) and horticulture, forestry, etc.
Further, the term ‘agricultural produce’ means any produce out of cultivation of
plants and rearing of all life forms of animals, except the rearing of horses, for
food, fibre, fuel, raw material or other similar products, on which either no
further processing is done or such processing is done as is usually done by a
cultivator or producer which does not alter its essential
characteristics, but makes it marketable for primary market.
It is important to note that agricultural produce is either subject
to no further processing at all or if any processing is undertaken
on the agricultural produce it should not alter its essential
characteristics but may make
it marketable for primary
market. Few instances of
such processes are the
processes carried out at an
agricultural farm including
tending, pruning, cutting,
harvesting, drying, cleaning, trimming, etc.
Let us examine what is exempt under Entry 54.
Entry 54 exempts the agricultural operations directly related to production of any
agricultural produce such as cultivation, harvesting, threshing, plant protection or
testing. Further, processes carried out at an agricultural farm including tending,
pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating,
curing, sorting, grading, cooling or bulk packaging and such like operations
which do not alter the essential characteristics of agricultural produce but
make it only marketable for the primary market are also exempt. In view of
the same, following processes are outside the purview of this entry and thus, are
liable to GST:-
(a) Process which alters the essential characteristics of the agricultural
produce: For instance, potato chips or tomato ketchup are manufactured
Such marketing committees or boards have been set up in most of the States and
provide a variety of support services for facilitating the marketing of agricultural
produce by provision of facilities and amenities like, sheds, water, light, electricity,
grading facilities etc. They also take measures for prevention of sale or purchase
of agricultural produce below the minimum support price. APMCs collect market
fees, license fees, rents etc.
Services provided by such Agricultural Produce Marketing Committee or Board
are covered in item (g) of entry 54. However, any service provided by such bodies
which is not directly related to cultivation of plants and rearing of all life forms
of animals, except the rearing of horses, for food, fibre, fuel, raw material or other
similar products or agricultural produce, will be liable to tax e.g. renting of shops
or other property for commercial purposes.
Warehousing of agriculture produce
Item (e) of entry 54 exempts loading, unloading, packing, storage or
warehousing of agricultural produce. In this regard, following may be noted:
Processed Tea and coffee
Tea used for making the beverage, such as black tea,
green tea, white tea is a processed product made in
tea factories after carrying out several processes,
such as drying, rolling, shaping, refining, oxidation,
packing etc. on green leaf and is the processed output of the same. Thus,
green tea leaves and not tea is the “agricultural produce” eligible for
exemption under entry 54 where such exemption is available for loading,
unloading, packing, storage or warehousing of agricultural produce. Same is
the case with coffee obtained after processing of coffee beans 10.
Jaggery
Similarly, processing of sugarcane into jaggery
changes its essential characteristics. Thus, jaggery is
also not an agricultural produce 11.
10
Storage/ warehousing of coffee and tea are nevertheless exempted by entry 24B.
11
Storage/ warehousing of jaggery is nevertheless exempted by entry 24B.
Pulses
Pulses commonly known as dal are obtained after
dehusking or splitting or both. The process of dehusking
or splitting is usually not carried out by farmers or at farm
level but by the pulse millers. Therefore, pulses (dehusked
or split) are also not agricultural produce. However, whole
pulse grains such as whole gram, rajma etc. are covered in
the definition of agricultural produce.
In view of the above, it is inferred that processed products such as tea (i.e. black
tea, white tea etc.), processed coffee beans or powder, pulses (dehusked or split),
jaggery, processed spices, processed dry fruits, processed cashew nuts etc. fall
outside the definition of agricultural produce and therefore do not fall within item
(e) of entry 54 12.
ENTRY 55
12
Circular No. 16/16/2017 GST dated 15.11.2017
In view of the above, it is clarified that milling of paddy into rice is not eligible for
exemption under Entry 55 13.
ILLUSTRATION 1
Sukhiya Das is enaged in providing following services. With the help of information
given below, determine which of the services provided by Sukhiya Das are exempt
from GST:
(1) Packaging of the onions purchased from village farmers into small packets of
1 kg each, in Sukhiya Das warehouse, so that same can be sold in a nearby
city mall.
(2) Warehousing of jaggery and tea.
(3) Renting of warehouse for storage of agricultural produce.
ANSWER
(1) Entry 54, inter alia, exempts the processes/operations carried out at an
agricultural farm on the agricultural produce which do not alter the
essential characteristics of agricultural produce, but make it marketable only
for the primary market. In the given case, though the packaging of onions
does not alter their essential characteristic, it makes them marketable for
retail market and not for the primary market and further, such packaging is
being done at the warehouse of Sukhiya Das and not at an agricultural farm.
Hence, said services are not exempt.
(2) Entry 54, inter alia, exempts the warehousing of agricultural produce.
However, entry 24B exempts warehousing of certain specified items some of
which are not agricultural produce. Although jaggery and tea do not qualify
as agricultural produce, their warehousing is specifically exempt under entry
24B.
(3) Entry 54, inter alia, exempts the services of loading, unloading, packing,
storage or warehousing of agricultural produce. Thus, warehousing of
agricultural produce, per se, is exempt. However, in the given case, services
being provided are not warehousing services but renting of immovable
property services. Such services are not exempt.
13
Circular No. 19/19/2017 GST dated 20.11.2017
3. Education services
66 Services provided -
(a) by an educational institution to its students, faculty and staff;
(aa) by an educational institution by way of conduct of entrance
examination against consideration in the form of entrance fee;
(b) to an educational institution, by way of,-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored
by the Central Government, State Government or Union
territory;
(iii) security or cleaning or house-keeping services performed
in such educational institution;
(iv) services relating to admission to, or conduct of examination
by, such institution;
(v) supply of online educational journals or periodicals.
However, nothing contained in sub-items (i), (ii) and (iii) of item (b)
shall apply to an educational institution other than an institution
providing services by way of pre-school education and education up to
higher secondary school or equivalent.
Further, nothing contained in sub-item (v) of item (b) shall apply to an
institution providing services by way of,-
(i) pre-school education and education up to higher secondary
school or equivalent; or
(ii) education as a part of an approved vocational education course.
ANALYSIS
14
Industrial Training Institute/ Industrial Training Centre
15
Some of the designated trades notified under the Apprentices Act, 1961 are electrician,
wireman, carpenter, plumber, mason, mechanic, tool and die maker, baker and confectioner,
weaver, tailor, footwear maker, photographer, beautician, painter, desk top publishing operator,
gardener, cable television operator, library assistant, etc.
16
Circular No. 55/29/2018 GST dated 09.08.2018
17
Circular No. 55/29/2018 GST dated 09.08.2018
18
Section 2(30) provides the definition of composite supply and section 8 contains the
provisions relating to tax liability on composite and mixed supplies. The concept of
composite and mixed supply has been discussed in detail in Chapter 2 – Supply under GST.
19
Section 2(74) provides the definition of mixed supply.
20
The view taken in the preceding paras, that education coupled with other incidental services is
a composite supply and is exempt since the principal supply [education service] is exempt, is
based on the CBIC Flyer - Chapter 40 – ‘GST on Education Services’. However, it is also possible
to take a different view since as per the definition of composite supply under section 2(30),
composite supply consists of two or more taxable supplies.
(25) Shiksha College, offering degree courses, has to conduct its half
yearly examination in November. For this purpose, it has paid the
honorarium to paper setters and examiners (not on the rolls of Shiksha
College) for their services. Further, it availed the printing services for printing the
question papers (paper and content are provided by Shiksha College) for
conducting examination. Services provided to an educational institution relating
to admission to, or conduct of examination by, such institution are exempt.
Therefore, services of paper setters and examiners and printing services availed
by Shiksha College are exempt.
21
The discussion in the foregoing paras is primarily based on CBIC Flyer - Chapter 40 – ‘GST on
Education Services’ unless otherwise specified.
school. Security and housekeeping services provided within the premises of, inter
alia, a higher secondary school are exempt. Therefore, said services provided by
Suvidha Services Ltd. are exempt.
The school susbequently hired Suvidha Services Ltd. for providing the security
and housekeeping services at School’s Annual Day function organised in an
auditorium outside the school campus. Security and housekeeping services
provided to Gyaani Public School for School’s Annual Day function organised
outside the school campus will be taxable as only the security and housekeeping
services performed within the premises of the higher secondary school are
exempt.
The exemptions available in respect of input and output services of an
educational institution have been tabulated as follows:
educational institution;
(iv) services relating to
admission to, or conduct
of examination by, such
institution
ANALYSIS
from GST [Entry 74(a) of the Notification]. The term ‘health care services’ is
defined as follows:
Health care services
means any service by way of diagnosis or
treatment or care for illness, injury, deformity,
abnormality or pregnancy in any recognised
system of medicines in India and
includes services by way of transportation of the patient to and from a
clinical establishment, but
does not include hair transplant or cosmetic or plastic surgery, except
when undertaken to restore or to reconstruct anatomy or functions of body
affected due to congenital defects, developmental abnormalities, injury or
trauma.
As it is apparent from the definition of health care services, only services in
recognized systems of medicines in India are exempt under this entry.
Following systems of medicines are the recognized systems of medicines in
India 22:-
Allopathy
Yoga
Naturopathy
Ayurveda
Homeopathy
Siddha
Unani
Any other system of medicine that may be recognized by Central
Government
Let us now understand the meaning of terms - ‘clinical establishment’, ‘authorised
medical practitioner’ and ‘paramedics’.
22
Section 2(h) of the Clinical Establishments Act, 2010
23
The view taken in the preceding paras, that health care services coupled with other incidental
services is a composite supply and is exempt since the principal supply [health care service] is
exempt, is based on Circular No. 32/06/2018 GST dated 12.02.2018. However, it is also
possible to take a different view since as per the definition of composite supply under section
2(30) of the CGST Act, composite supply consists of two or more taxable supplies.
24
As clarified by the CBIC GST Flyer – Chapter 39 - GST on Charitable and Religious Trusts
(i) Not Exempt. Since reiki healing is not a recognized system of medicine in
terms of section 2(h) of Clinical Establishments Act, 2010, it would not be
exempt and thus, GST would be payable thereon.
(ii) Exempt. Health care service does not include, inter alia, cosmetic or plastic
surgery, except when undertaken to restore or to reconstruct anatomy or
functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
Therefore, plastic surgeries will not be entitled to the said exemption and
thus, GST would be payable thereon. However, plastic surgery conducted to
repair a cleft lip will be eligible for exemption as it reconstructs anatomy or
functions of body affected due to congenital defects (cleft lip).
(iii) Exempt. Health care service includes services by way of transportation of
the patient to and from a clinical establishment. Thus, air ambulance service
to transport critically ill patients to Good Health Medical Centre would be
eligible for exemption under the said notification.
(iv) Exempt. Health care service means any service by way of diagnosis or
treatment or care for illness, injury, deformity, abnormality or pregnancy in
any recognized system of medicines in India. It is immaterial whether such
service is provided at the clinical establishment or at the home of the
patient or at any other place. Thus, palliative care for terminally ill patients
is exempt.
(v) Exempt. Since Yoga is a recognized system of medicine in terms of section
2(h) of Clinical Establishments Act, 2010, the same would be eligible for
exemption under the said notification.
Further, services provided by cord blood banks by way of preservation of stem
cells or any other service in relation to such preservation are exempt from GST
under Entry 73. Therefore, services provided in relation to preservation of stem
cells by the cord blood bank operated by Good Health Medical Centre will be
exempt from GST.
It is important to note that Entry 74 of the exemption notification grants
exemption to health care services provided BY a clinical establishment and not to
services provided TO a clinical establishment. Therefore, Good Health Medical
Centre’s contention that since it is a clinical establishment, all the services
provided to it are also exempt from GST is not correct in law.
9D Services by:
an old age home
run by:
Central Government, State Government or
an entity registered under section 12AA of the Income-tax Act,
1961
to its residents (aged 60 years or more)
against consideration upto ` 25,000 per month per member,
provided that the consideration charged is inclusive of charges for
boarding, lodging and maintenance.
ANALYSIS
(d) any service, other than services covered under (a) to (c) above,
provided to business entities [with aggregate turnover exceeding such
amount in the preceding financial year as makes it eligible for
exemption from registration under CGST Act].
Services mentioned in clause (a) to (c) above have been referred to as
“specified services” in discussion hereunder.
Let us first understand what does ‘Government’ and ‘local authority’ mean?
Meaning of Government
As per section 2(53), ‘Government’ means the Central
Government.
Various State/ Union Territories (with Legislatures)
GST Acts define ‘Government’ as Government of
respective State Government/ Union Territory. For
Union Territories (without State Legislatures), ‘Government’ means the
Administrator or any Authority or officer authorized to act as Administrator
by the Central Government.
Regulatory bodies/agencies, for instance, Competition Commission of India,
Press Council of India, Directorate General of Civil Aviation, Forward Market
Commission, Inland Water Supply Authority of India, Central Pollution
Control Board, Securities and Exchange Board of India, do not fall under the
definition of Government.
Meaning of local authority
Local authority is defined in section 2(69) and means the following:
a “Panchayat” as defined in clause (d) of article 243 of the
Constitution;
a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or
management of a municipal or local fund;
a Cantonment Board as defined in section 3 of the Cantonments
Act, 2006;
25
The functions entrusted to municipality under the Twelfth Schedule to Article 243W of the
Constitution include urban planning including town planning, roads and bridges, public health,
sanitation conservancy and solid waste management, fire services, slum improvement and
upgradation, promotion of cultural, educational and aesthetic aspects, provision of urban
amenities and facilities such as parks, gardens, playgrounds, public amenities including street
lighting, parking lots, bus stops and public conveniences, etc.
26
The functions entrusted to Panchayat under the Eleventh Schedule to Article 243G of the
Constitution include Agriculture, including agricultural extension, Animal husbandry, dairying
and poultry, Fisheries, Small scale industries, including food processing industries, Drinking
water, Fuel and fodder, Rural electrification, including distribution of electricity, Health and
sanitation, including hospitals, primary health centres and dispensaries, Women and child
development, Public distribution system, etc.
6. Construction services
41A Supply of TDR, FSI, long term lease (premium) of land by a landowner
and to a developer are exempted subject to the condition that the
41B constructed flats are sold before issuance of completion certificate and
tax is paid on them.
Exemption of TDR, FSI, long term lease (premium) shall be withdrawn
in case of flats sold after issue of completion certificate, but such
withdrawal shall be limited to 1% of value in case of affordable houses
and 5% of value in case of other than affordable houses 27.
ANALYSIS
27
These entries have been stated here in simplified form.
Housing for All (Urban) Mission or Pradhan Mantri Awas Yojana (hereinafter
referred to as PMAY) is a programme launched by the Ministry of Housing and
Urban Poverty Alleviation (MoHUPA) which envisions provision of Housing for All
by 2022 when the nation completes 75 years of its independence.
The mission seeks to address the housing requirement of urban poor including
slum dwellers through following, inter alia, programme verticals:
Slum rehabilitation of Slum Dwellers with participation of private developers
using land as a resource.
Promotion of Affordable Housing for weaker section through credit linked
subsidy.
Affordable Housing in Partnership with Public & Private sectors.
Subsidy for beneficiary-led individual house construction/enhancement.
Last component of the mission is assistance to individual eligible families
belonging to Economically Weaker Section (EWS) categories to either construct
new houses or enhance existing houses on their own to cover the beneficiaries
who are not able to take advantage of other components of the mission. Such
families may avail specified amount of central assistance for construction of new
houses or for enhancement of existing users under the mission.
Entry 10 of the Notification exempts the services provided by way of pure
labour contracts of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of a civil
structure or any other original works pertaining to the beneficiary-led individual
house construction or enhancement under the PMAY from GST.
The term ‘original works’ means-
all new constructions;
all types of additions and alterations to
abandoned or damaged structures on land that
are required to make them workable;
erection, commissioning or installation of plant,
machinery or equipment or structures, whether pre-fabricated or
otherwise.
Entry 11 of the Notification exempts the services by way of pure labour
contracts of construction, erection, commissioning, or installation of original
ANALYSIS
Services of transportation of passengers are usually chargeable to GST. Entry 6
[Services provided by Government - discussed earlier] specifically excludes the
transport of passengers’ services provided by the Government or local authority
from its purview, which implies that said services are liable to GST. However,
services of transportation of passengers specified in Entries 15, 16 and 17
mentioned above are exempt from GST (whether provided by Government or
otherwise) with or without accompanied belongings.
Services provided by way of transportation of passengers have been analysed as
follows:
Transport of passengers by air, embarking from or terminating in an airport
located in the States of North-East India or at Bagdogra located in West
Bengal is exempt from GST.
(30) Rituraj has booked air tickets of a flight from Delhi to
Guwahati, Assam. Transport of passengers by air terminating in
an airport located in Assam is exempt from GST.
Passenger transportation service provided by a non-air conditioned contract
carriage other than radio taxi, for transportation of passengers, excluding
tourism, conducted tour, charter or hire are exempt from GST. Conducted
tour is a short visit to a place in which someone shows you around and tells
you information about it 28.
The term contract carriage means a motor vehicle which carries a
passenger or passengers for hire or reward and is engaged under a
contract, whether expressed or implied, for the use of such vehicle as a
whole for the carriage of passengers mentioned therein and entered into by
a person with a holder of a permit in relation to such vehicle or any person
authorised by him in this behalf on a fixed or an agreed rate or sum-
28
www.macmillandictionary.com
(f) any casual taxable person registered under the Central Goods
and Services Tax Act or the Integrated Goods and Services Tax
Act or the State Goods and Services Tax Act or the Union
Territory Goods and Services Tax Act.
ANALYSIS
ILLUSTRATION 3
Discuss whether GST is payable in respect of transportation services provided by
Raghav Goods Transport Agency in each of the following independent cases:
ANSWER
The services of transportation of goods by road are exempt from GST under
Entry 18. Services of GTA and courier services are an exception to this
exemption. However, GTA services provided to an unregistered person
[including unregistered casual taxable person 29] are exempt from GST by
virtue of Entry 21A.
Further, GTA services provided to registered casual taxable person and
following persons, even if unregistered under GST law, are liable to tax:
(i) a factory registered under Factories Act,
(ii) society registered under Societies Act,
(iii) Co-operative society,
(iv) body corporate and
(v) partnership firm including AOP.
In other words, the GTA services provided to only an unregistered individual
end consumer are exempt from GST.
Thus, GTA services provided to:
person registered under GST law & registered casual taxable person, and
a factory registered under Factories Act, society registered under Societies
Act, Co-operative society, body corporate and partnership firm including
AOP – whether or not registered under GST law, are liable to tax. Further, it
is important to note that in such cases, if tax is charged @ 5%, the tax
liability falls on said recipients under the reverse charge mechanism.
29
The concept of ‘casual taxable person’ has been discussed in detail in Chapter 7 - Registration
Who is a
GTA?
30
Provisions relating to TDS have been discussed in detail at the Final Level.
31
Meaning of GTA and consignment note elaborated in foregoing paras is primarily based on
CBIC GST flyer - Chapter 38 – Goods Transport Agency in GST.
included in the invoice issued by the GTA, such service would form part of the
GTA service, being a composite supply, and would not be treated as a separate
supply. However, if such incidental services are provided as separate services and
charged separately, whether in the same invoice or separate invoices, they shall
be treated as separate supplies 32.
What is courier agency?
Courier agency has been defined in the Notification to mean any person
engaged in the door-to-door transportation of time-sensitive documents,
goods or articles utilising the services of a person, either directly or
indirectly, to carry or accompany such documents, goods or articles.
Express cargo service: Some transporters undertake door-to-door transportation
of goods or articles and they have made special arrangements for speedy
transportation and timely delivery of such goods or articles.
Such services are known as ‘Express Cargo Service’ with assurance of timely
delivery. The nature of service provided by ‘Express Cargo Service’ falls within the
scope and definition of the courier agency. Hence, the said service relating to
transportation of goods by road is not exempt. 9. Banking and financial services
32
As clarified in answer to question no. 6 of CBIC FAQs on Transport & Logistics.
ANALYSIS
Banks and financial institutions provide a bouquet of financial
services relating to lending or borrowing of money or
investments in money.
All services provided by the Reserve Bank of India are covered
under Entry 26 and are thus, exempt from GST. However, services provided to
the Reserve Bank of India are not covered under said entry and would be taxable
unless otherwise covered in any other entry of the Notification.
Specified banking services exempt from GST vide Entry 27 have been discussed
below:
(A) Services by way of extending deposits, loans or advances in so far as
the consideration is represented by way of interest or discount: This
entry covers any such service wherein moneys due are allowed to be used or
retained on payment of interest or on a discount. The words used are
‘deposits, loans or advances’ and have to be taken in the generic sense.
They would cover any facility by which an amount of money
is lent or allowed to be used or retained on payment of
what is commonly called the time value of money which
could be in the form of an interest or a discount. This entry
would not cover investments by way of equity or any other manner
where the investor is entitled to a share of profit.
Interest: means interest payable in any manner in respect of any
moneys borrowed or debt incurred (including a deposit, claim or
other similar right or obligation) but does not include any
service fee or other charge in respect of the moneys borrowed or debt
incurred or in respect of any credit facility which has not been utilized.
Illustrations of services exempt under Entry 27 are -
Fixed deposits or saving deposits or any other
such deposits in a bank or a financial institution
for which return is received by way of interest.
Providing a loan or overdraft facility or a credit limit
facility in consideration for payment of interest.
Mortgages or loans with a collateral security to the
extent that the consideration for advancing such loans or
advances are represented by way of interest.
Corporate deposits to the extent that the consideration for
advancing such loans or advances are represented by way of
interest or discount.
Service charges/ fees, documentation fees, broking charges,
administrative charges, entry charges or such like fees or charges
collected over and above interest on loan, advance or a deposit are
not exempt and thus, represent taxable consideration.
33
As clarified vide FAQs on Banking, Insurance and Stock Brokers Sector issued by CBIC.
34
An Equated Monthly Instalments (EMI) is a fixed amount paid by a borrower to a lender
at a specified date every calendar month. EMIs are used to pay off both interest and
principal every month, so that over a specified period, the loan is fully paid off along with
interest.
35
Here, the amount of penal interest is to be included in the value of supply in terms of the
provisions of section 15(2)(d). Section 15(2)(d) provides that the value of supply shall include
interest or late fee or penalty for delayed payment of any consideration for any supply. The
provisions of section 15 have been discussed in detail in Unit-II: Value of Supply of Chapter 5:
Time and Value of Supply.
ILLUSTRATION 4
M/s. Apna Bank Limited, a scheduled commercial bank, has furnished the
following details for the month of August:
Particulars Amount [` in
crores]
(excluding GST)
Extended housing loan to its customers 100
Processing fees collected from its customers on 20
sanction of loan
Commission collected from its customers on bank 30
36
Schedule II has been discussed in detail in Chapter 2 – Supply under GST.
guarantee
Interest income on credit card issued by the bank 40
Interest received on housing loan extended by the 25
bank
Minimum balance charges collected from current 01
account and saving account holder
ANSWER
Particulars Amount
in crores
(`)
37
earlier known as Integrated Rural Development Programme
ANALYSIS
It is still a big challenge for India to make the financial services accessible in rural
areas. In many rural areas, either there are no banks or number of banks is
insufficient. In order to counter this problem and ensure greater financial
inclusion, the Reserve Bank of India (RBI) introduced the Business Correspondents
and Business Facilitator Model through guidelines in 2006 allowing banks to
employ two categories of intermediaries – known as Business facilitators (BFs) and
Business correspondents (BCs).
BCs/BFs help villagers to open bank accounts and provide other banking services
to them. They act as an intermediary between the bank and its customers. Banks,
in turn, pay commission/ fee to the BCs/BFs.
According to the RBI guidelines, while the BCs are permitted to carry out
transactions on behalf of the bank as agents, the BFs can refer clients, pursue the
clients’ proposal and facilitate the bank to carry out its transactions, but cannot
transact on behalf of the bank 38.
Similarly, insurance companies engage the BCs/BFs to provide the insurance
services in remote areas.
Entry 39 exempts the services provided by BF/BC to a banking company with
respect to accounts in its rural area branch and services provided by any person
as an intermediary to a BF/BC with respect to said services are exempt from GST.
Further, the services provided by BF/BC to an insurance company in a rural area
are also exempt.
It is important to note that for the purpose of availing exemption from GST under
this Entry, services provided by a BF/BC to a banking company in their respective
individual capacities should be with respect to accounts in a branch located in the
rural area of the banking company.
Wherever the services provided by BF/BC to banking company and services
provided by intermediary of BF/BC to BF/BC do not fall within the scope of this
entry, GST is payable on such services.
However, the banking company is the person liable to pay GST under reverse
charge in respect of commission/fees charged for the taxable services provided
38
BFs provide a wide range of services including identification of borrowers and fitment of
activities, collection and preliminary processing of loan applications, processing and
submission of applications to banks, follow-up for recovery, etc. BCs, in addition to these
activities, also undertake disbursal of small value credit, recovery of principal / collection of
interest, collection of small value deposits, sale of micro insurance/ mutual fund products/
pension products/ other third party products, receipt and delivery of small value
remittances/ other payment instruments, etc.
ANALYSIS
Entry 3 exempts the supply of ‘pure services’ to Government. Supply of ‘pure
services’ means supply of services without involving any supply of goods.
Further, ‘composite supply of goods and services’* to Government is exempted
vide Entry 3A.
*in which value of supply of goods constitutes not more than 25% of value of such
composite supply.
Let us understand the concept of supply of ‘pure services’ and ‘composite supply
of goods and services’ to Government by following examples:
(37) Supply of manpower for cleanliness of roads, public places,
architect services, consulting engineer services, advisory services, and
like services provided by business entities not involving any supply of
goods would be treated as supply of pure services.
39
As clarified vide question 25 of CBIC FAQs on Government Services
40
As clarified vide Circular No. 101/20/2019-GST, dated 30.04.2019
ANALYSIS
Relevant definitions are as under:
Legal service: means any service provided in relation to advice, consultancy
or assistance in any branch of law, in any manner and includes
representational services before any court, tribunal or authority.
Advocate: means an advocate entered in any roll under the provisions of
the Advocates Act, 1961 [Section 2(1)(a) of the Advocates Act, 1961].
Arbitral tribunal: means a sole arbitrator or a panel of arbitrators [Section 2(d)
of the Arbitration and Conciliation Act, 1996].
provided to
advocates or an individual as aggregate turnover up to such
an advocate other than a amount in the preceding FY as
senior advocate by way of makes it eligible for exemption
legal services from registration under the CGST
Act, 2017
--Senior advocate by way of
legal services --CG/SG/UT/LA/GA/GE
Determine the GST payable, if any, in each of the following independent cases,
assuming that the rate of GST is 18% and that the service providers are registered:
(a) Bollywood dance performance by a film actor in a film and consideration
charged is ` 1,45,000.
(b) Carnatic music performance by a classical singer to promote a brand of
readymade garments and consideration charged is ` 1,30,000.
(c) Carnatic music performance by a classical singer in a music concert and
consideration charged is ` 1,55,000.
(d) Kathak dance performance by a classical dancer in a cultural programme and
consideration charged is ` 1,45,000.
ANSWER
(a) Bollywood Dance performance by a film actor in a film is not exempt from GST
even though the consideration charged is less than threshold limit of
` 1,50,000. The reason for the same is that the dance performance by an artist
is exempt only if it is a performance in folk or classical art forms of dance.
(b) Carnatic music performance by a classical singer to promote a brand of
readymade garments is not exempt from GST even though, the
consideration charged is less than threshold limit of ` 1,50,000 and it is a
performance in classical art forms of music. The reason for the same is that
the said exemption is not applicable to service provided by such artist as a
brand ambassador.
(c) Carnatic music performance by a classical singer in a music concert is not
exempt from GST even though it is a performance in classical art forms of
music. The reason for the same is the consideration charged for the service
exceeds ` 1,50,000. Consequently, entire consideration charged is subject
to GST as follows:
= ` 1,55,000 × 18% = ` 27,900
(d) Kathak dance performance by a classical dancer in a cultural programme is
exempt from GST as it is a performance in classical art forms of dance and
consideration charged does not exceed ` 1,50,000 [i.e. ` 1,45,000].
21. Right to admission to various events
ANALYSIS
Co-operative Housing Society
Co-operative Housing Societies are entities registered under
the co-operative laws of the respective States. A Co-operative
Housing Society is a collective body of persons, who stay in a
residential society and as a collective body, they supply certain services to its
members, like collecting statutory dues from its members and remitting to
statutory authorities, maintenance of the building, security etc.
A Co-operative Housing Society is akin to a club, which is composed of its
members. Service provided by a Housing Society [Resident Welfare Association
(RWA)] to its members is treated as service provided by one person to another.
The activities of the housing society/RWA would attract the levy of GST and the
housing society would be required to register and comply with the GST Law,
unless specifically exempted.
Cooperative
Housing supplies services
Society
Members
GST exemption on services provided by a Co-operative Housing Society
If the aggregate turnover of housing society/RWA providing services to its
members is above the applicable threshold limit for registration 41, it needs to take
registration under GST in terms of section 22 [Refer Chapter-7: Registration for
detailed discussion on registration]. However, taking registration does not mean that
the housing society has to compulsorily charge GST in the monthly maintenance
bills raised on its members. If the services provided by it are exempt under an
exemption notification, then it is not required to charge GST on the said services,
even if it is registered under GST.
For instance, in view of entry 77(c) above, supply of service by a RWA (unincorporated
body or a non- profit entity registered under any law) to its own members by way of
reimbursement of charges or share of contribution up to an amount of ` 7500 per
month per member for providing services and goods for the common use of its
members in a housing society/a residential complex are exempt from GST.
So, there can be case where a society is registered under GST, but the monthly
contribution received from all the members is less than ` 7,500/- per member
(and the amount is for the purpose of sourcing of goods and services from a third
person for the common use of its members). In such a case, no GST is to be
charged by the housing society on the monthly bill raised by the society.
41
Threshold limit is ` 10 lakh for specified Special Category States, namely, Manipur, Mizoram,
Nagaland and Tripura and ` 20 lakh for all other States.
RWA/Housing society
Is unregistered RWA’s
annual turnover in a No Are monthly
FY> ` 20 lakh*?
No
maintenance
charges > ` 7,500
Yes per member?
Tax payable
* ` 10 lakh in case of Special Category States of Manipur, Mizoram, Nagaland and
Tripura
Thus, RWA shall be required to pay GST on monthly subscription/ contribution
charged from its members, only if such subscription is more than ` 7500/- per
month per member and the annual aggregate turnover of RWA by way of
supplying of services and goods is also more than ` 20 lakh.
In other words,
✪ Statutory dues such as property tax, electricity charges etc. forming part of the
monthly maintenance bill raised by the society on its members would be excluded
while computing the aforesaid monthly limit of ` 7,500 42.
23. Other exempt services
42
Discussion under this entry in forgoing paras is primarily based on Circular No. 109/28/2019
GST dated 22.07.2019, CBIC GST Flyer ‘GST on Co-Operative Housing Societies’ and CBIC FAQs
on levy of GST on Supply of Services to Co-operative Society.
Condition to be fulfilled:
Director (Sports), Ministry of Youth Affairs and Sports have to certify
that the services are directly or indirectly related to any of the events
under FIFA U-17 Women’s World Cup 2020.
43
As clarified vide question 26 of CBIC FAQs on Government Services
65A Services by way of providing information under the RTI Act (Right
to Information Act, 2005).
Students may note that some of the entries granting exemption from GST are
similar to the negative list entry/entry granting exemption under the erstwhile
service tax law.
Therefore, clarification pertaining to said negative list entry/exemption provided
in the ‘Service Tax Education Guide’ – an educational aid released for facilitating
the stakeholders to obtain preliminary understanding of the provisions, wherever
it seems relevant under the GST law, have been incorporated at relevant places.
5. LET US RECAPITULATE
1. Power to exempt from tax [Section 11 of the CGST Act/ section 6 of
IGST Act]
by way of issuance of
referred as ‘ specified
(a) to (c) hereinafter
speed post, express parcel post, life
insurance, & agency services provided to a
services’
person other than CG, SG, UT;
(b) services in relation to an aircraft/a vessel,
inside/outside precincts of a port/airport;
(c) transport of goods/passengers; or
(d) any service, other than ‘specified services’
above, provided to business entities.
44
earlier known as Integrated Rural Development Programme
in relation to-
(i) the National Skill Development Programme
implemented by NSDC; or
(ii) a vocational skill development course under the
National Skill Certification and Monetary Reward
Scheme; or
(iii) any other Scheme implemented by NSDC.
8. ANSWERS/HINTS
1. The statement is not fully valid in law. Exempt supply has been defined as
supply of any goods or services or both which attracts nil rate of tax or
which may be wholly exempt from tax and includes non-taxable supply.
2. The term ‘charitable activities’ mean activities relating to-
(i) public health by way of-
(A) care or counseling of
(I) terminally ill persons or persons with severe physical or
mental disability;
(II) persons afflicted with HIV or AIDS;
(III) persons addicted to a dependence-forming substance such
as narcotics drugs or alcohol; or
(B) public awareness of preventive health, family planning or
prevention of HIV infection;
(ii) advancement of religion, spirituality or yoga;
(iii) advancement of educational programmes/skill development relating
to,-
(A) abandoned, orphaned or homeless children;
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap
manufactured by RXL Pvt. Ltd., the services rendered by her by way of a
classical dance performance in the concert organized by RXL Pvt. Ltd. to
promote its brand will not be eligible for the above-mentioned exemption
and thus, be liable to GST. The fact that the proceeds of the concert will be
donated to a charitable organization will not have any bearing on the
eligibility or otherwise to the above-mentioned exemption.
6. Computation of value of taxable supply
LEARNING OUTCOMES
1. INTRODUCTION
GST is payable on supply of goods or services. A supply consists of elements that
can be separated in time, like purchase order / agreement, despatch (of goods),
delivery (of goods) or provision or performance of service, entry in the records,
payment, and entry of the payment in the records or deposit in the bank.
1
Provisions relating to due date for payment of tax have been discussed in Chapter 9: Payment
of Tax in Module 2 of this Study Material.
2
Provisions of section 14 relating to determination of time of supply in case of change in rate of
tax in respect of supply of goods or services will be discussed at the Final level.
determine the time of supply. The provisions relating to time of supply essentially
fix the tax collection event to the earliest possible time.
In the subsequent pages of this Unit, sections 12 and 13 are extracted, followed by
their analysis, to understand how to determine the time of supply of goods and
services respectively. When studying the statutory provisions, the definitions
(extracted first) must also be referred to simultaneously, so as to understand the
precise meaning of the terms used.
Provisions of time of supply under CGST Act have also been made
applicable to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Associated enterprises shall have the same meaning as assigned to it in
section 92A of the Income-tax Act, 1961 [Section 2(12)].
Broadly, an associated enterprise in relation to another enterprise, means an
enterprise which participates, directly or indirectly, or through one or more
intermediaries, in the management or control or capital of the other
enterprise.
Document includes written or printed record of any sort and electronic
record as defined in clause (t) of section 2 of the Information Technology Act,
2000 [Section 2(41)].
Invoice or tax invoice means the tax invoice referred to in section 31
[Section 2(66)].
Goods means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed before
supply or under a contract of supply [Section 2(52)].
GOODS
MEANS
INCLUDES
SERVICES
MEANS
Activities
relating to use
of money or its
Anything INCLUDING conversion for a
consideration
Activities
EXCLUDING facilitating or
arranging
transactions in
securities
Recipient
If consideration is
Person liable to pay the
payable for supply of
consideration
goods and/or services
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied [Section 2(105)].
and includes
an agent
means the acting on
person behalf of such
Supplier in supplying the supplier in
relation to any said goods relation to the
goods and/or and/or goods and/or
services services services
STATUTORY PROVISIONS
3
Practically, in case of goods, the date of receipt of payment by the supplier is no longer a
criterion for determination of time of supply for payment of tax. Refer the ‘Analysis’ of section
12 given in the ensuing pages for detailed discussion in this regard.
ANALYSIS
Section 12 provides for the determination of time of supply in the following situations:
Supply of goods under forward charge;
Supply of goods under reverse charge;
Supply of vouchers that can be used to pay for goods;
Residual cases;
4
Provisions of section 148 will be discussed at the Final level. Section 148 provides that the
Government may, on the recommendations of the Council, and subject to such conditions and
safeguards as may be prescribed, notify certain classes of registered persons, and the special
procedures to be followed by such persons including those with regard to registration, furnishing
of return, payment of tax and administration of such persons.
(1) A Ltd. enters into an agreement with B Ltd. to supply 100 kg of raw
material. However, A Ltd. supplies only 80 kg of raw material and issues
the invoice for the same. Here, the supply would be deemed to have
been made in respect of 80 kg of raw material, i.e. to the extent covered by the
invoice. Therefore, the provisions relating to time of supply will also be applicable
to supply of 80 kg of raw material and not for entire 100 kg of raw material.
Section 12(2) refers to the last date on which a supplier is required to issue
the invoice under section 31. Following are the relevant provisions of section
31 in this regard.
Whichever is earlier
Date on which the payment
is recorded in the books of
account of the supplier –
presently irrelevant for the
purpose of payment of tax
Date on which the payment
BANK
is credited to the supplier’s
bank account - presently
irrelevant for the purpose
of payment of tax
ILLUSTRATION 1
A machine has to be supplied at site. It is done by sourcing various components
from vendors and assembling the machine at site. The details of the various
events are:
of invoice or the last date on which invoice ought to have been issued in
terms of section 31. As per section 31(4), in case of continuous supply of
goods, where successive statements of accounts or successive payments are
involved, the invoice is issued before or at the time of each such statement is
issued or, as the case may be, each such payment is received. Therefore,
invoices should be issued for ` 2 lakh each on or before July 5, August 5 and
September 5, when monthly payments of ` 2 lakh are received.
Thus, assuming that the invoice is issued on July 5, August 5 and September
5, the time of supply for the purpose of payment of tax will be July 5, August
5 and September 5 respectively for goods valued at ` 2 lakh each.
Excess payment upto ` 1000: Option of taking invoice date as time of
supply
In terms of the proviso to sub-section (2) of section 12, for a payment of up
to ` 1,000 received in excess of the value of the goods invoiced, the supplier
can choose to take the date of invoice issued with respect to such excess
amount as the time of supply of goods for such excess value.
Since, GST on supply of goods is payable only on the basis of issuance of
invoice, this provision is practically irrelevant for supply of goods.
If neither the date of invoice nor the date of payment is available, the
time of supply is determined in terms of the residual provisions under sub-
section (5) of section 12 [discussed under point (iv)].
The provisions relating to time of supply of goods in case of reverse charge are
depicted by way of a diagram given at next page.
ILLUSTRATION 3
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Bridge &
Co. (30 days from the date of issuance of invoice elapse on June 3)
ANSWER
Here, May 12 will be the time of supply, being the earliest of the three stipulated
dates namely, receipt of goods, date of payment and date immediately following
30 days of issuance of invoice [Section 12(3)]. (Here, date of invoice is relevant
only for calculating thirty days from that date.)
ILLUSTRATION 4
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Pillar &
Co. (30 days from the date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
Whichever is earlier
of the recipient of
goods
ANSWER
Here, June 4, 31st day from the date of supplier’s invoice, will be the time of
supply, being the earliest of the three stipulated dates namely, receipt of
goods, date of payment and date immediately following 30 days of issuance
of invoice [Section 12(3)].
(iii) Time of supply of vouchers exchangeable for goods [Section 12(4)]
As commonly understood, vouchers are instruments that can be exchanged
as payment for goods or services of the designated value. As per the
definition, they are instruments, that certain persons (potential suppliers) are
obliged to accept as consideration, part or full, for goods and/or services.
The instrument or its related documentation sets out the terms and
conditions of use, the goods and/or services covered, and the identity of the
potential suppliers of such goods and/or services.
As per section 12(4), the time of supply of vouchers exchangeable for goods
is-
Date of issue of the voucher, if the supply that it covers is identifiable
at that point, or
Date of redemption of the voucher in other cases.
The provisions relating to time of supply of vouchers exchangeable for goods
are depicted by way of diagram given at next page.
(3) Acmesales Limited sells food coupons to a company. The
company gives these coupons to its employees as part of the
agreed perquisites. The coupons can be redeemed for purchase of
any item of food /provisions in the outlets that are part of the program.
As the supply against which the coupon will be redeemed is not known on
the date of the sale of the coupon, the time of supply of the coupon will be
the date on which the employee redeems it against food / provision items of
his choice.
(4) With each purchase of a large pizza during the Christmas week from
Perfect Pizza, one can buy a voucher for ` 20 which will be redeemable till 5th
Jan for a small pizza. As the supply against which the voucher will be
redeemed is known on the date of issue of the vouchers, the time of supply
is the date of issue of the voucher.
Supply is
not
Any food
identifiab DATE OF
item can be
le at the REDEMPT-
purchased
time of ION OF
from the
issue of VOUCHER
food pass
the
voucher
Supply is
Only a shirt
identifiab
can be DATE OF
le at the
purchased ISSUE OF
time of
from the VOUCHER
issue of
shirt coupon
voucher
whichever is earlier
STATUTORY PROVISIONS
(1) The liability to pay tax on services shall arise at the time of supply, as
determined in terms of the provisions of this section.
(2) The time of supply of services shall be the earliest of the following
dates, namely:-
(c) the date on which the recipient shows the receipt of services
in his books of account, in a case where the provisions of
clause (a) or clause (b) do not apply:
(i) the supply shall be deemed to have been made to the extent
it is covered by the invoice or, as the case may be, the
payment.
(b) the date immediately following sixty days from the date of
issue of invoice or any other document, by whatever name
called, in lieu thereof by the supplier:
(4) In case of supply of vouchers by a supplier, the time of supply shall be-
(b) in any other case, be the date on which the tax is paid.
(6) The time of supply to the extent it relates to an addition in the value
of supply by way of interest, late fee or penalty for delayed payment
of any consideration shall be the date on which the supplier receives
such addition in value.
Section 31 Tax invoice (to the extent relevant to time of supply of services)
(6) In a case where the supply of services ceases under a contract before
the completion of the supply, the invoice shall be issued at the time
when the supply ceases and such invoice shall be issued to the extent
of the supply made before such cessation.
Chapter VI: Tax Invoice, Credit and Debit Notes of CGST Rules
Time limit for issuing tax invoice
The invoice referred to in rule 46, in case of taxable supply of services,
shall be issued within a period of thirty days from the date of supply
of service:
Provided that where the supplier of services is an insurer or a banking
company or a financial institution, including a non-banking financial
company, the period within which the invoice or any document in lieu
thereof is to be issued shall be forty five days from the date of supply
Rule 47 of service:
Provided further that an insurer or a banking company or a financial
institution, including a non- banking financial company, or a telecom
operator, or any other class of supplier of services as may be notified
by the Government on the recommendations of the Council, making
taxable supplies of services between distinct persons as specified in
section 25, may issue the invoice before or at the time such supplier
records the same in his books of account or before the expiry of the
quarter during which the supply was made.
ANALYSIS
Section 13 provides for the determination of the time of supply in the following situations:
Supply of service under forward charge,
Supply of service taxable under reverse charge,
Supply of vouchers that can be used to pay for services,
Residual cases,
Addition to value of supply of services by way of interest or late fee or penalty
for delayed payment.
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice needs
to be issued either before the provision of service or within 30 days (45
days in case of insurance companies/ banking companies/ financial
institutions including NBFCs) from the date of supply of service.
In case of insurance companies/ banking companies/ financial
institutions including NBFCs/ telecom companies/ notified supplier of
services making taxable supplies between distinct persons as specified
in section 25 5, invoice may be issued before or at the time of recording
such supply in the books of account or before the expiry of the quarter
during which the supply was made [Second proviso to rule 47].
In case of continuous supply of services, the invoice should be issued
either (i) on/ before the due date of payment or (ii) before/ at the time
when the supplier of service receives the payment, if the due date of
payment is not known (iii) on/ before the date of completion of the
milestone event when the payment is linked to completion of an event
[Section 31(5)].
Continuous supply of services are provided, or agreed to be provided,
continuously or on recurrent basis, under a contract, for a period
exceeding 3 months with periodic payment obligations and includes
supply of such services as the Government may notify [Section 2(33)].
The said term has been discussed in Chapter 8: Tax Invoice; Credit and
Debit Notes; E-Way Bill in Module-2 of this Study Material.
In case of cessation of supply of services before completion of supply,
the invoice (to the extent of the supply made before such cessation)
should be issued at the time when the supply ceases [Section 31(6)].
(6) Mohit Khanna & Sons is a firm of management consultants.
The firm enters into a contract with Spark Pvt. Ltd. on 1st September
for providing consultancy services. Provision of service gets
completed on 15th September. Invoice for the service is issued on 20th
September and payment is received on 10th October. Since invoice is issued
within 30 days from the date of supply of service, time of supply is the date
of issue of invoice, i.e. 20th September being earlier than the date of receipt
of payment.
5
Concept of distinct persons has been discussed in Chapter 7: Registration
27th October Invoice issued for ` 15000, indicating balance of ` 12000 payable
ANSWER
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice is to be
issued within 30 days of supply of service. In the given case, the invoice is
not issued within the prescribed time limit. As per section 13(2)(b), in a case
where the invoice is not issued within the prescribed time, the time of supply
of service is the date of provision of service or receipt of payment, whichever
is earlier.
Therefore, the time of supply of service to the extent of ` 3,000 is 6th May as
the date of payment of ` 3000 is earlier than the date of provision of service.
The time of supply of service to the extent of the balance ` 12,000 is
15th September which is the date of provision of service.
ILLUSTRATION 6
Investigation shows that ABC & Co carried out service of cleaning and repairs
of tanks in an apartment complex, for which the Apartment Owners’
Association showed a payment in cash on 4th April to them against work of this
description. The dates of the work are not clear from the records of ABC & Co.
ABC & Co have not issued invoice or entered the payment in their books of
account.
Is invoice
YES Time of
issued within Date of issue of
Supply
the time invoice
specified u/s
31? Date on which the
Whichever is earlier
NO payment is
recorded in the
Time of
Supply books of account of
the supplier
BANK
Date on which the
payment is credited
to the supplier’s
bank account
Whichever is earlier
If time of supply
cannot be Date of receipt of services in
determined by the books of account of the
both the above recipient
methods, then
ANSWER
The time of supply cannot be determined vide the provisions of clauses (a)
and (b) of section 13(2) as neither the invoice has been issued nor the date
of provision of service is available as also the date of receipt of payment in
the books of the supplier is also not available. Therefore, the time of supply
will be determined vide clause (c) of section 13(2) i.e., the date on which the
recipient of service shows receipt of the service in his books of account.
Thus, time of supply will be 4th April, the date on which the Apartment
Owners’ Association records the receipt of service in its books of account.
The time of supply of service on which GST is payable on reverse charge basis
(except on services received from associated enterprises located outside
India) under sub-sections (3) and (4) of section 9 is determined in terms of
section 13(3)(a) and (b) as follows:
The time of supply for such service will be the earlier of the following:
Date of payment, or
Date immediately following 60 days since issue of invoice (or any other
document in lieu of invoice) by the supplier.
“Date of payment” in the above situation refers to the date on which the
payment is recorded in the books of account of the entity that receives the
service (recipient of service), or the date on which the payment is debited
from the entity’s bank account, whichever is earlier.
Whichever is earlier
the books of account of
the recipient of services
ILLUSTRATION 7
Determine the time of supply from the given information. (Assume that service
being supplied is taxable under reverse charge)
ANSWER
Here, July 4 will be the time of supply, being the earliest of the two stipulated
dates namely, date of payment and date immediately following 60 days since
issue of invoice.
ILLUSTRATION 8
July 2 ABC Ltd transfers the amount to the account of the German company
ANSWER
As there is no prior entry of the amount in the books of account of ABC Ltd.,
July 2 will be the time of supply, being the date of payment in terms of second
proviso to section 13(3).
(iii) Time of supply of vouchers exchangeable for services [Section 13(4)]
The term voucher has already been explained under the Heading “Time of
Supply of Goods”. The time of supply of vouchers that are exchangeable for
services is stipulated as the date of issue of the voucher if the supply is
identifiable at that point, or the date of redemption of the voucher in other cases.
As the supply against which the voucher will be redeemed is identifiable, the
time of supply of the voucher will be its date of issue.
Date on which payment is Date on which payment is 61st day from supplier’s
credited in the bank credited in the bank invoice
account of the supplier account of the supplier
5. LET US RECAPITULATE
The provisions relating to time of supply of goods and services can be better
understood if the same are studied simultaneously appreciating the similarities and
differences between the two. Therefore, such provisions have been summarised by
way of a comparison table to help students remember and retain the provisions in
a better and effective manner:
Where the above events are not ascertainable, the time of supply shall be the
date of entry in the books of account of the recipient of supply
Supply of vouchers exchangeable for goods and services [Sections 12(4) and
13(4)]
Supply of goods and services in residual cases [Sections 12(5) and 13(5)]
4. Determine the time of supply in the following cases assuming that GST is
payable under reverse charge:
5. Kabira Industries Ltd engaged the services of a transporter for road transport
of a consignment on 17th June and made advance payment for the transport
on the same date, i.e. 17th June. However, the consignment could not be sent
immediately on account of a strike in the factory, and instead was sent on
20th July. Invoice was received from the transporter on 22nd July.
What is the time of supply of the transporter’s service?
6. Raju Pvt Ltd. receives the order and advance payment on 5th January for
carrying out an architectural design job. It delivers the designs on 23rd April.
By oversight, no invoice is issued at that time, and it is issued much later, after
the expiry of prescribed period for issue of invoice.
When is the time of supply of service?
7. Investigation shows that 150 cartons of ceramic capacitors were dispatched on
2nd August but no invoice was raised and the transaction (dispatch of cartons)
were not entered in the accounts. There was no evidence of receipt of payment.
What is the time of supply of 150 cartons for the purpose of payment of tax?
8. An order is placed on Ram & Co. on 18th August for supply of a consignment of
customized shoes. Ram & Co. gets the consignment ready and informs the
customer and issues the invoice on 2nd December. The customer collects the
consignment from the premises of Ram & Co. on 7th December and
electronically transfers the payment on the same date, which is entered in the
accounts on the next day, 8th December.
What is the time of supply of the shoes for the purpose of payment of tax?
9. Meal coupons are sold to a company on 9 th August for being distributed to the
employees of the said company. The coupons are valid for six months and can
be used against purchase of food items. The employees use them in various
stores for purchases of various edible items on different dates throughout the
six months.
What is the date of supply of the coupons?
10. A firm of advocates issues invoice for services to ABC Ltd. on 17th Feb. The
payment is contested by ABC Ltd. on the ground that on account of negligence
of the firm, the company’s case was dismissed by the Court for non-appearance,
which necessitated further appearance for which the firm is billing the
company. The dispute drags on and finally payment is made on 3 rd November.
Identify the time of supply of the legal services.
11. Modern Security Co. provides service of testing of electronic devices. In one
case, it tested a batch of devices on 4th and 5th September but could not raise
invoice till 19th November because of some dispute about the condition of the
devices on return. The payment was made in December.
What is the method to fix the time of supply of the service?
12. XYZ & Co., a firm of Chartered Accountants, issued invoice for services rendered
to Mr. A on 7 th September. Determine the time of supply in the following
independent cases:
(1) The provision of service was completed on 1st August and payment was
received on 28th September.
(2) The provision of service was completed on 14th August and payment was
received on 28th September.
(3) Mr. A made the payment on 3rd August. However, provision of service
was remaining to be completed at that time.
(4) Mr. A made the payment on 15th September. However, provision of
service was remaining to be completed at that time.
13. M/s Pranav Associates, a partnership firm, provided recovery agent services to
Newtron Credits Ltd., a non-banking financial company and a registered
supplier, on 15th January. Invoice for the same was issued on 7th February and
the payment was made on 18 th April by Newtron Credits Ltd. Bank account of
the company was debited on 20 th April.
Determine the following:
(i) Person liable to pay GST
(ii) Time of supply of service
14. Mr. X supplied goods for ` 50,000 to its customer Miss Diyana on 1st January
on the condition that payment for the same will be made within a week.
However, Miss Diyana made payment for the said goods on 2nd February and
thus, paid interest amounting to ` 2,000.
What is the time of supply with regard to addition in the value by way of
interest in lieu of delayed payment of consideration?
15. Mansh & Vansh Trading Company, a registered supplier, is liable to pay GST
under forward charge. It has furnished the following information:
(i) Goods were supplied on 3rd October
(ii) Invoice was issued on 5th October
(iii) Payment received on 9th October
Determine the time of supply of goods for the purpose of payment of tax.
7. ANSWERS/HINTS
1. GST is payable on supply of goods or services. Time of supply indicates the
point in time when the liability to pay tax arises. However, it is important to
note that though the liability to pay tax arises at the time of supply, the
same can be paid to the Government by the due date prescribed with
reference to the said ‘time of supply’. The CGST Act provides separate
provisions for time of supply for goods and services vide sections 12 and 13.
2. The statement is not correct. While GST is payable on advance received for
supply of services taxable under forward charge, the same is not payable in
case of advance received for supply of goods taxable under forward charge.
As per section 13, the time of supply of services taxable under forward charge
is –
Date of issue of invoice or date of receipt of payment, whichever is
earlier, if the same is issued within 30 days from the date of supply of
service;
OR
Date of provision of service or date of receipt of payment, whichever is
earlier, if the invoice is not issued within 30 days from the date of supply
of service.
Thus, in case of services, if the supplier receives any payment before the
provision of service or before the issuance of invoice for such service, the time
of supply gets fixed at that point in time and the liability to pay tax on such
payment arises. However, the tax can be paid by the due date prescribed with
reference to such time of supply.
3.
recipient’s
bank account
on June 26
(vi) August August 10 June 29 July 30 July 30 (i.e.,
1 31st day from
issuance of
invoice)
4.
5. Time of supply of service taxable under reverse charge is the earlier of the
following two dates in terms of section 13(3):
• Date of payment
• 61st day from the date of issue of invoice
In this case, the date of payment precedes 61st day from the date of issue of
invoice by the supplier of service. Hence, the date of payment, i.e. 17th June,
will be treated as the time of supply of service [Section 13(3)(a)].
6. Since the invoice has not been issued within the prescribed time period, time
of supply of service will be the earlier of the following two dates in terms of
section 13(2)(b):
• Date of provision of service
• Date of receipt of payment
The payment was received on 5th January and the service was provided on
23rd April. Therefore, the date of payment, i.e. 5th January is the time of supply
of the service in this case.
7. As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
(excluding composition supplier) has to pay GST on the outward supply of
goods at the time of supply as specified in section 12(2)(a), i.e. date of issue
of invoice or the last date on which invoice ought to have been issued in
terms of section 31.
In this case since the invoice has not been issued, the time of supply for the
purpose of payment of tax will be the last date on which the invoice is
required to be issued.
The invoice for supply of goods must be issued on or before the dispatch of
goods, i.e. on 2nd August. Therefore, the time of supply for the purpose of
payment of tax for the goods will be 2nd August, the date when the invoice
should have been issued.
8. As per Notification No. 66/2017 CT dated 15.11.2017, a registered person
(excluding composition supplier) has to pay GST on the outward supply of
goods at the time of supply as specified in section 12(2)(a), i.e. date of issue
of invoice or the last date on which invoice ought to have been issued in
terms of section 31.
In this case, the invoice is issued before the removal of the goods and is thus,
within the time limit prescribed under section 31(1). Therefore, the time of
supply for the purpose of payment of tax is the date of issue of invoice, which
is 2nd December.
9. As the coupons can be used for a variety of food items, which are taxed at
different rates, the supply cannot be identified at the time of purchase of the
coupons. Therefore, the time of supply of the coupons is the date of their
redemption in terms of section 12(4).
10. Tax on services supply by a firm of advocates by way of legal services to any
business entity is payable under reverse charge by such firm of advocates.
Time of supply of services that are taxable under reverse charge is earliest of
the following two dates in terms of section 13(3):
• Date of payment [3rd November]
• 61st day from the date of issue of invoice [19th April]
The date of payment comes subsequent to the 61st day from the issue of
invoice by the supplier of service. Therefore, the 61st day from the date of
supplier’s invoice has to be taken as the time of supply. This fixes 19th April
as the time of supply.
11. The time of supply of services, if the invoice is not issued in time, is the date
of payment or the date of provision of service, whichever is earlier [Section
13(2)(b)]. In this case, the service is provided on 5th September but not
invoiced within the prescribed time limit. Therefore, 5th September, the date
of provision of service, being earlier than the date of payment, will be the
time of supply.
12. The time of supply of services is the date of issue of invoice if the same is
issued within 30 days from the date of supply of service OR the date of receipt
of payment, whichever is earlier [Section 13(2)(a)].
In case the invoice is not issued within 30 days from the date of supply of
service, time of supply is the date of provision of service OR the date of
receipt of payment, whichever is earlier [Section 13(2)(b)].
In accordance with the aforesaid provisions, the time of supply in the four
independent cases will be:
(1) 1st August since the invoice is not issued within 30 days of supply of
service.
(2) 7th September since the invoice is issued within 30 days of supply of
service and the payment is received after the issuance of invoice.
(3) 3rd August viz., earlier of date of issuance of invoice (7th September) or
date of receipt of payment (3rd August)
(4) 7th September viz., earlier of date of issuance of invoice (7th September)
or date of receipt of payment (15th September)
13. (i) Tax on services supplied by a recovery agent to, inter alia, a non-
banking financial company (NBFC) is payable under reverse charge by
such non-banking financial company.
Therefore, in the given case, person liable to pay GST is the NBFC -
Newton Credits Ltd.
(ii) As per section 13(3), the time of supply of service on which GST is
payable under reverse charge is earlier of the following:-
• Date of payment as entered in the books of account of the
recipient (18th April) or the date on which the payment is debited
in his bank account (20th April), whichever is earlier;
• Date immediately following 60 days since issue of invoice by the
supplier, i.e. 9th April.
Thus, time of supply of service is 9th April.
14. As per section 12(6), the time of supply with regard to an addition in value
on account of interest, late fee or penalty or delayed payment of
LEARNING OUTCOMES
After studying this Unit, you will be able to-
understand what constitutes the value of a taxable supply of
goods / services when the supply is made to an unrelated
person and price is the sole consideration for the supply
identify the various inclusions in/exclusions from the value of
supply
pinpoint the situations when discount will be included /not
included in the value of supply
ascertain who are related persons
compute the value of taxable supply when price is the sole
consideration for the supply and the supplier and recipient are
not related
VALUE OF SUPPLY
1. INTRODUCTION
GST is payable (i) on supply of goods and / or services for a consideration in the
course of or furtherance of business; (ii) on certain supplies made without a
consideration as specified in Schedule I to the CGST Act.
As GST is an ad valorem levy, i.e. it is levied as a
percentage of the value of supply of goods
and/or services, it becomes important to know
how to arrive at the value on which tax is to be
paid. Provisions relating to ‘value of supply’ set
out the mechanism to compute such value basis
which CGST and SGST/UTGST (intra-State supply)
and IGST (inter-State supply) should be paid.
Section 15 of the CGST Act supplemented with rules under Chapter IV:
Determination of Value of Supply of CGST Rules 1 prescribes the provisions for
determining the value of supply of goods and services. There are common
provisions for determining the value of supply of goods and services.
Sub-section (1) of section 15 provides the mechanism for determining the value
of a supply which is made between unrelated persons and when price and only
the price is the sole consideration for the supply. When value cannot be
determined under section 15(1) as also in certain specific cases, the same is
determined using Chapter IV: Determination of Value of Supply of CGST Rules.
Provisions of value of supply under CGST Act have also been made applicable
to IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].
1
Chapter IV: Determination of Value of Supply of CGST Rules will be discussed at the Final level.
Factor Who
carries on
business of
Broker
supply of
goods and
Commission agent /or
services
AGENT
Arhatia
On behalf
Auctioneer of another
Mercantile agent
Cess shall have the same meaning as assigned to it in the Goods and
Services Tax (Compensation to States) Act [Section 2(22)].
Consideration in relation to the supply of goods or services or both includes –
(a) any payment made or to be made, whether in money or otherwise, in
respect of, in response to, or for the inducement of, the supply of
goods or services or both, whether by the recipient or by any other
person but shall not include any subsidy given by the Central
Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or services
or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central Government or a State
Government;
Provided that a deposit given in respect of the supply of goods or services
or both shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply [Section
2(31)].
CONSIDERATION
Person includes-
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether
incorporated or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in section 2(45) of
the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country
outside India;
(i) a co-operative society registered under any law relating to
cooperative societies;
(j) a local authority;
(k) Central Government or a State Government;
Foreign Currency
Cheque
Promissory note
Traveller Cheque
Money Order
Postal or electronic
remittance
Other relevant definitions like that of recipient, supplier etc. may be referred from
the definitions given in Unit-I of this chapter.
STATUTORY PROVISIONS
(a) any taxes, duties, cesses, fees and charges levied under any law
for the time being in force other than this Act, the State Goods
and Services Tax Act, the Union Territory Goods and Services
Tax Act and the Goods and Services Tax (Compensation to
States) Act, if charged separately by the supplier;
(3) The value of the supply shall not include any discount which is given
(a) before or at the time of the supply if such discount has been
duly recorded in the invoice issued in respect of such supply; and
(4) Where the value of the supply of goods or services or both cannot be
determined under sub-section (1), the same shall be determined in
such manner as may be prescribed.
(c) persons who are associated in the business of one another in that one is
the sole agent or sole distributor or sole concessionaire, howsoever
described, of the other, shall be deemed to be related
ANALYSIS
The CGST law has different provisions for determining the value of a supply of
goods / services in the following situations:
Supplies made solely for a price in money (monetary consideration), to
unrelated persons Sub-section (1) of section 15;
Supplies made solely for non-monetary consideration, or for part monetary
consideration and part non-monetary consideration, or involving additional
consideration, or to related persons, or for specific classes of supply Sub-
sections (4) and (5) of section 15 read with the Chapter IV: Determination of
Value of Supply of CGST Rules.
The definition of ‘related person’ under the explanation to section 15 covers
various situations of control, including sole agent, sole distributor and sole
the price actually paid or payable for the said supply of goods or
services or both.
This is the price for the specific supply that is being valued. It includes the
amount already paid at the time the supply is being valued for tax, as well
as the amount payable and not yet paid at that time. The word ‘payable’
refers to price that is agreed to be paid for the goods / services.
(1) Wholesale price for 1 MT of cement sold by X Ltd. in the
ordinary course of business : ` 7,000. Price of 1 MT of cement
sold by X Ltd. to unrelated customer Y: ` 6,700.
Value of supply made by X Ltd. to Y is ` 6,700 which is the price actually
paid or payable and not the wholesale price.
effect, all the taxes, duties etc. which are not subsumed in GST form part of
the taxable value for the purpose of levying GST.
For instance, if a supplier of goods pays municipal tax in relation to the
goods being supplied and charges the same separately, such tax will form
part of the value of supply.
TCS under Income-Tax Act, 1961 not includible in the taxable value for
the purpose of GST: The CBIC vide Circular No. 76/50/2018 GST dated
31.12.2018 (amended vide corrigendum dated 7.03.2019) has clarified that
for the purpose of determination of value of supply under GST, tax collected
at source (TCS) under the provisions of the Income Tax Act, 1961 would not
be includible as it is an interim levy not having the character of tax.
` 2,000 for one month after the free credit period of one month, is ` 20.
Such interest will be added to the value and thus, the value of supply will
work out to be ` 2,020, assuming the interest to be exclusive of GST.
the price as established at the time of supply should form the basis of value.
The discounts which do not fulfill the conditions specified in section 15(3)
are not deductible from the value, i.e. GST in such a case is levied on the
gross value of the supply without considering the discount.
Discounts that are allowed as deduction from the value are as follows:
(a) Discounts given before or at the time of supply and shown in the
invoice – Example for such discount can be discounts that are offered
for making the payment at the time of supply itself. Such discounts
are thus, recorded in the invoice and thus, GST is charged on the gross
value less discount recorded in the invoice.
(b) Post supply discounts- It is not always commercially feasible to
determine all discounts before or at the time of supply or record them
in the invoice. For instance, cash discount given for making the
payment within a stipulated time. Even though the discount is
established before/at the time of supply, the supplier cannot record
such discount in the invoice as he does not know if the buyer will
make the payment within the stipulated time. Likewise, in case of
quantity/volume/performance discount also, the supplier is not aware
before/at the time of supply as to whether the buyer would purchase
the requisite quantity within the stipulated time. Therefore, in this
case also, the discount cannot be recorded in the invoice. In such
cases, initially the GST is paid on the gross value indicated in the
invoice without considering the discount. The supplier, however,
passes the discount to the buyers subsequently by issuing credit
notes.
Post supply discounts, i.e. the discounts that are given after supply is
made, are allowed as a deduction from the value of supply if the
following two conditions are satisfied:
Discount is in terms of an agreement that existed at the time of
supply and can be worked out invoice-wise; and
Proportionate input tax credit is reversed by the recipient - The
buyer would have availed input tax credit (ITC) of GST payable
on the gross value specified in the invoice. Thus, when a credit
note 2 is issued to him by the supplier for the discount, the buyer
will reverse the proportionate credit; consequent to which, the
supplier’s output tax liability will be reduced by the same
amount.
If any of the above conditions are not satisfied, the GST liability of
supplier cannot be reduced. The supplier, however, can issue a
commercial credit note 3 for the value of discount. In such a scenario,
the buyer will not be required to reverse any input tax credit.
The provisions relating to allowability of discount as a deduction from the
value have been depicted by way of a diagram given below.
+
agreement that from the
After the supply existed at the value of
time of supply
+
supply
2
Credit notes governed under GST law are issued under section 34. Provisions of section 34 are
discussed in Chapter 8: Tax Invoice; Credit & Debit Notes; E-Way Bill
3
A commercial credit note is not governed under GST law and is issued only for the value of
discount/reduction in value of the supply, without any GST.
15(3)(b) are not satisfied. Such credit notes do not include GST, and
do not have any impact on value of supply for the purposes of GST.
Examples of discount deductible from value of supply
(10) Royal Biscuit Co. gives a discount of 30% on the list price to
its distributors. Thus, for a carton of Spice bisk, in the invoice the
list price is mentioned as ` 200, on which a discount of 30% is given to
arrive at the final price of ` 140. The value is ` 140, as the discount is
allowed at the time of supply and shown in the invoice.
Post supply discounts
(11) The agreement of Raju Electrical Appliances with its dealers is that
purchase of rice cookers over 1000 pieces in the Diwali month will entitle
them to discount of 5% per cooker. Therefore, the quantum of discount can
be determined only at the end of Diwali month. However, since the
agreement relating to discount was in existence at the time of supply, and
the discount can be worked out for each invoice, such post supply discount
will be allowed as a deduction from the value of supply of rice cookers.
Raju Electrical Appliances can issue credit note for 5% of the value of goods
along with GST and claim adjustment of excess tax paid. The dealer must
reverse the proportionate input tax credit on the relevant stock to bring it in
line with the reduced tax.
(12) Pink and Blue Pvt. Ltd. (PBPL) sold goods to Orange Pvt. Ltd. (OPL) on
15th January at ` 50,000 (exclusive of taxes and discounts) and charged `
9,000 as IGST @ 18%. The terms of supply stipulated that discount @ 2%
will be given to OPL if it makes the payment within one month of the
supply. OPL avails the input tax credit of ` 9,000 in the month of January
and makes the payment for the goods on 10th February. PBPL issues credit
note for ` 1180 [` 1,000 for value of discount and ` 180 for proportionate
IGST leviable thereon] to OPL on 11th February. After receiving credit note,
OPL reverses the input tax credit of ` 180 attributable to the discount given
by the PBPL. PBPL can reduce its GST liability of the month of February by
` 180. OPL would have paid ` 57,820 (` 50,000 + ` 9,000 - ` 1,000 - ` 180)
to PBPL on 10th February.
ILLUSTRATION 1
Black and White Pvt. Ltd. has provided the following particulars relating to goods
sold by it to Colourful Pvt. Ltd.
Particulars `
Black and White Pvt. Ltd. received ` 2,000 as a subsidy from a NGO on sale of such
goods. The price of ` 50,000 of the goods is after considering such subsidy. Black
and White Ltd. offers 2% discount on the list price of the goods which is recorded in
the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.
ANSWER
Computation of value of taxable supply
Particulars `
Total 58,000
ILLUSTRATION 2
Samriddhi Advertisers conceptualised and designed the advertising campaign for a
new product launched by New Moon Pvt Ltd. for a consideration of ` 5,00,000.
Samriddhi Advertisers owed ` 20,000 to one of its vendors in relation to the
advertising service provided by it to New Moon Pvt Ltd. Such liability of Samriddhi
Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed the
payment of consideration and thus, paid ` 15,000 as interest. Assume the rate of
GST to be 18%.
Determine the value of taxable supply made by Samriddhi Advertisers.
ANSWER
Computation of value of taxable supply
Particulars `
Note: The interest for delay in payment of consideration will be includible in the
value of supply but the time of supply of such interest will be the date when such
interest is received in terms of section 13(6). Such interest has been assumed to be
inclusive of GST and thus, the value has been computed by making back
calculations Interest
× 100 . It is also possible to assume the interest to be
100 + tax rate
exclusive of GST. In that case, the value of supply will work out to be ` 5,35,000.
Supply to be valued as
No per Chapter IV:
Whether price is the sole
Determination of Value of
consideration for supply?
Supply of CGST Rules
Yes
No
Yes
Whether the supply is a
notified supply u/s 15(5)?
No
Value of supply =
Transaction value u/s 15(1)
4. LET US RECAPITULATE
VALUE OF SUPPLY
Supply made to
Supply where price Supply is a
unrelated person Supply made to
is not the sole notified supply
where price is the related person
consideration u/s 15(5)
sole consideration
Value of supply
=
Transaction value u/s 15(1) Value to be determined under Chapter IV:
Determination of Value of Supply of CGST
Rules
specified chemical residues. AKJ Foods Pvt. Ltd. does the testing before the
supply and charges a testing fee for the same from the customer. AKJ Foods
Pvt. Ltd. argues that such testing fess should not form part of the
consideration for the sale as it is a separate activity.
Is the company’s argument correct in the light of section 15?
6. A philanthropic association makes a substantial donation each year to a
reputed private management institution to subsidize the education of low-
income group students who have gained admission there. The fee for these
individuals is reduced thereby coming to ` 3 lakh a year compared to ` 5 lakh
a year for other students.
What would be the value of the service of coaching and instruction provided
by the institution to the low-income group students?
7. Mezda Banners, an advertising firm, gives its customers an interest-free credit
period of 30 days for payment. Its customer ABC paid for the supply 32 days
after the supply of service. Mezda Banners waived the interest payable for
delay of two days.
The Department wants to add interest for two days to the value of supply.
Should notional interest be added to the value?
8. Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to
whom it charges the list price minus standard discount and pays GST
accordingly. When goods remain unsold with the dealers, it offered
additional discounts on the stock as an incentive to push the sales.
Can this additional discount be reduced from the price at which the goods
were sold, and concomitant tax adjustments made?
9. Red Pepper Ltd., Delhi, a registered supplier, is manufacturing taxable goods.
It provides the following details of taxable inter-State supply made by it
during the month of March.
S. Particulars Amount
No. (` )
(vi) Late fee paid by the recipient of supply for delayed 6,000
payment of consideration (Recipient has agreed to pay
` 6,000 in lump sum and no additional amount is
payable by him)
The list price of the goods is net of the two subsidies received. However, the
other charges/taxes/fee are charged to the customers over and above the list
price.
Calculate the total value of taxable supplies made by Red Pepper Ltd. during
the month of March. Rate of IGST is 18%.
10. M/s. Flow Pro, a registered supplier, sold a machine to BP Ltd. It provides the
following information in this regard: -
S. Particulars Amount
No. (` )
S. Particulars Amount
No. (` )
(i) Price of the goods [excluding taxes and other charges 1,00,000
mentioned at S. Nos. (iii), (v) and (vi)]
S. Particulars Amount
No. (` )
Determine the value of taxable supply made by Koli Ltd. to Ghisa Ltd.
6. ANSWERS/HINTS
1. No, the post-supply discounts are not eligible for deduction from the value
of supplies in all situations. Such discounts are allowed as a deduction from
the value of supply only in the situations where the following two
conditions are satisfied:
same should not be added to the value. Hence, the value of supply will be
` 2,00,000.
However, the answer will change in the second case when the showroom
will charge ` 300 for freight [(50km – 20 km) x ` 10] from Ms. Leena. In this
case, the supply will be a composite supply (principle supply being the
supply of furniture) and value thereof will be ` 2,00,300.
5. Section 15(2) mandates addition of certain elements in the value of supply.
Clause (c) of section 15(2) specifies that amount charged for anything done
by the supplier in respect of the supply at the time of or before delivery of
goods or supply of services shall be included in the value of supply.
Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the
charges therefor will be included in the value of the consignment.
Therefore, AKJ Foods Pvt. Ltd.’s argument is not correct. The testing fee
should be added to the price to arrive at value of the consignment.
6. As per section 15(2)(e), the value of a supply includes subsidies directly
linked to the price, excluding State Government and Central Government
subsidies. In this case, the subsidy is not received from the Government but
from a philanthropic association. Therefore, the subsidy is to be added
back to the price to arrive at the value, which comes to ` 5 lakh a year.
7. This is a supply that is valued as per transaction value under section 15(1) as
the price is the sole consideration for the supply and the supply is made to
unrelated person. The value of a supply includes certain elements like
interest which are actually payable. Once waived, the interest is not payable
and is therefore, not to be added to the value.
8. The discounts were not known or agreed for at the time of supply of goods
to the dealers. Therefore, in terms of section 15(3), such discounts cannot
be reduced from the price on which tax had been paid.
9. Computation of total value of taxable supplies made by Red Pepper
Ltd. during the month of March
Central Government
[Since the subsidy is received from the Government, the
same is not includible in the value in terms of section
15(2)(e)]
Subsidy received from NGO 50,000
[Since the subsidy is received from a non-Government
body and directly linked to the supply, the same is
includible in the value in terms of section 15(2)(e)]
Tax levied by the Municipal Authority 20,000
[Includible in the value as per section 15(2)(a)]
Packing charges 15,000
[Being incidental expenses, the same are includible in the
value as per section 15(2)(c)]
Late fees paid by recipient of supply for delayed payment 5,085
[Includible in the value as per section 15(2)(d) - As the
amount of interest received is a lump sum amount, the
same has to be taken as inclusive of GST] [` 6,000 x
100/118] rounded off
Total value of taxable supplies 15,90,085
10. Computation of value of taxable supply made by M/s. Flo Pro to BP Ltd.
Total 32,000
11. Computation of value of taxable supply made by Shri Krishna Pvt. Ltd.
to Shri Balram Pvt. Ltd.
12. Computation of value of taxable supply made by Koli Ltd. to Ghisa Ltd.
LEARNING OUTCOMES
After studying this Chapter, you will be able to:
describe what are inputs, input services, capital goods and other
relevant terms in relation to ITC.
explain the various conditions, timelines, restrictions and processes
for taking ITC on goods and services in general and special
circumstances.
identify the items on which ITC is available as also the blocked items
on which ITC is not available.
comprehend and apply the above provisions as also the provisions
relating to utilization of ITC to compute the GST liability of a
registered person payable in cash.
Relevant definitions
Input Tax credit
Blocked credits
Availability of credit in
special circumstances
1. INTRODUCTION
In earlier indirect tax regime, the
credit mechanism for indirect taxes
levied by the Union Government,
(central excise duty and service tax) was governed by the CENVAT Credit Rules,
2004; and the credit mechanism for state-level VAT on sale of goods was governed
by the States under their respective VAT laws. The VAT legislations allowed ITC of
VAT on inputs and capital goods in transactions within the state, but not on inputs
and capital goods coming in the State from outside the state, on which central sales
tax was paid. CENVAT Credit Rules, 2004 allowed availing and utilization of credit
of duty/tax paid on both goods (capital goods and inputs) and services by the
manufacturers and the service providers across the country.
The credit across goods and services was integrated vide the CENVAT Credit Rules,
2004 in the year 2004 to mitigate the cascading effects of central levies namely,
central excise duty and service tax. However, the credit chain remained fragmented
on account of State-Level VAT as the credit of central taxes could not be set off
against a State levy and vice versa. The chain further got distorted as ITC was not
available on inter-State purchases. This resulted in cascading of taxes leading to
increase in costs of goods and services.
The GST regime promises seamless credit on goods and services across the entire
supply chain with some exceptions like supplies charged to tax under composition
scheme and supply of exempted goods and/or services. ITC is considered to be
the lifeline of the GST regime. In fact, it is the provisions of ITC, which essentially
make GST a value added tax i.e., collection of tax at all points of supply chain after
allowing credit of tax paid at earlier points.
Chapter V of the CGST Act [Sections 16 to 21] & Chapter V: Input Tax Credit of the
CGST Rules [Rules 36-45] prescribe the provisions relating to ITC. State GST laws also
prescribe identical provisions in relation to ITC. In this Chapter, provisions of sections
16, 17 and 18 have been discussed; 1 first the statutory provisions of these sections
together with the relevant rules have been extracted followed by their analysis.
Provisions of ITC under the CGST Act have also been made applicable to
the IGST Act vide section 20 of the IGST Act.
1
Provisions of ITC relating to job work and input service distributor [Sections 19, 20 and 21]
will be discussed at the Final level.
ITC is used for payment of tax on taxable output supply to avoid cascading
effect of taxes.
GST law does not require ‘one to one’ co-relation between inputs/input
services and final products/services. Any eligible ITC can be used for payment
of tax on any taxable output supply.
IGST is another core aspect of GST. It is a transitory tax to enable transfer of
ITC when goods or services move from one State to another. This is a unique
feature of Indian GST.
Since ITC can be availed for payment of tax on taxable output supply, as a
natural corollary, ITC is not available when tax is not payable on output
supply, i.e. on exempt supply.
The exception to the above principle is ‘zero rated supply’ 2, i.e. exports or
supplies to a special economic zone (SEZ) developer/unit, where ITC is
available even if no tax is payable on output supply. Such ITC can be used
either for payment of tax on supplies made with tax or refund of the same
can be obtained. This simple mechanism is used to make exports and
supplies to SEZ completely tax free.
If a taxable person is making both taxable and exempt supply, he is entitled
to full credit of ITC in respect of inputs, input services and capital goods
exclusively used for taxable supply and no credit at all for inputs, input
services and capital goods exclusively used for exempt supply.
If common inputs, input services and capital goods are used for taxable as
well as exempt supply, only proportionate ITC attributable to the taxable
supply is available. The common ITC is apportioned in the ratio of value of
taxable supply and exempt supply. Elaborate provisions have been made in
the GST law to prescribe the manner of calculation of proportionate ITC.
Before proceeding to understand the provisions of section 16, 17, 18 and the
relevant rules let us first go through few relevant definitions.
2. RELEVANT DEFINITIONS
Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another [Section 2(5)].
2
The concept of zero rated supply and the refund of ITC will be dealt in detail at the Final level.
Business includes
(a) any trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a pecuniary
benefit;
(b) any activity or transaction in connection with or incidental or ancillary
to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or
not there is volume, frequency, continuity or regularity of such
transaction;
(d) supply or acquisition of goods including capital goods and services in
connection with commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a
subscription or any other consideration) of the facilities or benefits to
its members;
(f) admission, for a consideration, of persons to any premises;
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
(h) activities of a race club including by way of totalisator or a licence to
book maker or activities of a licenced book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities [Section 2(17)].
Capital goods means goods, the value of which is capitalized in the books of
account of the person claiming the ITC and which are used or intended to be
used in the course or furtherance of business [Section 2(19)].
Conveyance includes a vessel, an aircraft and a vehicle [Section 2(34)].
Exempt supply means supply of any goods or services or both which attracts
nil rate of tax or which may be wholly exempt from tax under section 11, or
under section 6 of the IGST Act, and includes non-taxable supply [Section
2(47)].
Input means any goods other than capital goods used or intended to be used
by a supplier in the course or furtherance of business [Section 2(59)].
STATUTORY PROVISIONS
Provided also that the recipient shall be entitled to avail of the credit
of input tax on payment made by him of the amount towards the value
of supply of goods or services or both along with tax payable thereon.
(3) Where the registered person has claimed depreciation on the tax
component of the cost of capital goods and plant and machinery
under the provisions of the Income-tax Act, 1961, the input tax
credit on the said tax component shall not be allowed.
(4) A registered person shall not be entitled to take input tax credit in
respect of any invoice or debit note for supply of goods or services
or both after the due date of furnishing of the return under section
39 for the month of September following the end of financial year
to which such invoice or debit note pertains or furnishing of the
relevant annual return, whichever is earlier.
(2) Input tax credit shall be availed by a registered person only if all the
applicable particulars as specified in the provisions of Chapter VI are
contained in the said document, and the relevant information, as
Provided that if the said document does not contain all the specified
particulars but contains the details of the amount of tax charged,
description of goods or services, total value of supply of goods or
services or both, GSTIN of the supplier and recipient and place of
supply in case of inter-State supply, input tax credit may be availed
by such registered person.
(1) A registered person, who has availed of input tax credit on any
inward supply of goods or services or both, but fails to pay to the
supplier thereof the value of such supply along with the tax payable
thereon within the time limit specified in the second proviso to sub-
section (2) of section 16, shall furnish the details of such supply, the
amount of value not paid and the amount of input tax credit availed
of proportionate to such amount not paid to the supplier in FORM
GSTR-2 for the month immediately following the period of one
hundred and eighty days from the date of the issue of the invoice.
3
Filing of GSTR-2 has been deferred by the GST Council.
(2) The amount of input tax credit referred to in sub-rule (1) shall be
added to the output tax liability of the registered person for the
month in which the details are furnished.
(3) The registered person shall be liable to pay interest at the rate
notified under sub-section (1) of section 50 for the period starting
from the date of availing credit on such supplies till the date when
the amount added to the output tax liability, as mentioned in sub-
rule (2), is paid.
(4) The time limit specified in sub-section (4) of section 16 shall not
apply to a claim for re- availing of any credit, in accordance with
the provisions of the Act or the provisions of this Chapter, that had
been reversed earlier.
ANALYSIS
(i) Eligibility for taking ITC [Section 16(1)]
(a) Registration under GST
Every registered person shall be entitled to ITC of GST charged on
inward supply of goods and / or services. This is subject to the
provisions relating to use of ITC under section 49 and the conditions
and restrictions in the rules. [Section 49 prescribes provisions relating to
payment of tax, interest, penalty & other amounts. The same has been
discussed in detail in Chapter 9: Payment of Tax.]
4
Concept of Input Service Distributor will be dealt with at the Final level.
5
The provisions relating to filing of GSTR-1 and GSTR-2A have been discussed in detail in
Chapter 10: Returns.
6
The provisions relating to invoice furnishing facility and QRMP Scheme have been discussed
in detail in Chapter 10: Returns.
ILLUSTRATION 1
Vijay Sales, a registered supplier, receives 100 invoices (for inward supply
of goods/ services) involving GST of ` 10 lakh, from various suppliers
during the month of October. Out of 100 invoices, details of 80 invoices
involving GST of ` 6 lakh have been furnished by the suppliers in their
respective GSTR-1s filed on the prescribed due date therefor.
Compute the ITC that can be claimed by Vijay Sales in its GSTR-3B for
the month of October to be filed by 20th November assuming that GST of
` 10 lakh is otherwise eligible for ITC.
ANSWER
ITC to be claimed by Vijay Sales in its GSTR-3B for the month of October
to be filed by 20th November will be computed as under-
Notes:
(1) 100% ITC can be availed on invoices furnished by the suppliers in
their GSTR-1.
(2) As per rule 36(4), the ITC in respect of invoices not furnished by
the suppliers in their GSTR-1s is restricted to 5% of eligible ITC in
respect of invoices furnished in GSTR-1s. Thus, in respect of 20
invoices not furnished in GSTR-1s, the ITC has been restricted to
` 0.30 lakh [5% of ` 6 lakh].
ILLUSTRATION 2
Ajay Sales, a registered supplier, receives 100 invoices (for inward supply
of goods/ services) involving GST of ` 10 lakh, from various suppliers
during the month of October. Out of 100 invoices, details of 85 invoices
involving GST of ` 9.70 lakh have been furnished by the suppliers in their
respective GSTR-1s filed on the prescribed due date therefor.
Compute the ITC that can be claimed by Ajay Sales in its GSTR-3B for the
month of October to be filed by 20th November assuming that GST of
` 10 lakh is otherwise eligible for ITC.
ANSWER
ITC to be claimed by Ajay Sales in its GSTR-3B for the month of October
to be filed by 20th November will be computed as under-
Notes:
(1) 100% ITC can be availed on invoices furnished by the suppliers in
their GSTR-1.
(2) As per rule 36(4), the ITC in respect of invoices not furnished by
the suppliers in their GSTR-1s is restricted to 5% of eligible ITC in
respect of invoices furnished in GSTR-1s. However, since in this
case, 5% of the eligible ITC in respect of invoices furnished in
GSTR-1s [` 0.49 lakh (5% of ` 9.7 lakh)] exceeds the actual ITC
[` 0.30 lakh] in respect of 15 invoices not furnished in GSTR-1, ITC
availed should be limited to actual amount of ITC.
(b) Receipt of the goods and / or services [Section 16(2)(b)]
The registered person taking the ITC must have received the goods
and / or services.
“Bill to Ship to” Model: Under this model, the goods are delivered to
a third party - ‘Ç’ on the direction of the customer (registered person)
– ‘B’ who purchases the goods from the vendor (supplier) – ‘A’. In other
words, ‘A’ bills to ‘B’ but ships the goods to ‘Ç’ on direction of ‘B’. In
effect, two supplies take place in this scenario viz., from ‘A’ to ‘B’ and
from ‘B’ to ‘Ç’. Thus, under this model, the customer (registered person)
who purchases such goods does not receive the said goods.
For such cases, by virtue of explanation to section 16(2)(b), it is deemed
that the registered person (customer) has received the goods. In other
words, goods delivered to another person on the direction of the
registered person by way of transfer of documents of title or otherwise,
either before or during the movement, are deemed to have been received
by such registered person. So, ITC will be available to the registered
person, on whose order the goods are delivered to a third person.
Similarly, services may also be provided to a third party by the service
provider (supplier) on the direction of the service recipient (registered
person). In this case also, though the service recipient (registered person)
does not receive the service, by virtue of explanation to section 16(2)(b) it
is deemed that the registered person (service recipient) has received the
service. In other words, service provided to any person on the direction of
and on account of the registered person, is deemed to have been received
by such registered person. So, ITC will be available to the registered
person, on whose direction the services are provided to a third person.
A A bills to B
B
ITC basis the
invoice issued by
A as
goods/services
Supply by B to C deemed to be
B bills to C received by B
Goods/services
Goods shipped/Services being received, C
provided by A to C on entitled to avail ITC
directions of B C basis the invoice
issued by B
(1) A is a trader who places an order on B for a consignment
of soda ash. A receives a buying order from C for the same
quantity of soda ash. A instructs B to deliver the goods to C,
and in turn he raises an invoice on C. Though the goods are not
physically received at the premises of A, section 16(2)(b) allows ITC of
such goods to A.
(2) The registered head office (New Delhi) of ABC Pvt. Ltd.
enters into a contract with DEF Pvt. Ltd. of New Delhi for
repair and maintenance of computers systems installed at its
registered branch office in Bengaluru, Karnataka. DEF Pvt. Ltd. issues
an invoice on ABC Pvt. Ltd., New Delhi for the services provided by it.
Though the actual services are received by the branch office and not by
the head office, section 16(2)(b) allows ITC of such repair and
maintenance services to head office.
(c) Tax leviable on supply actually paid to Government [Section
16(2)(c)]
The supplier should have actually paid the tax charged on the goods
and/or services, for which ITC is being taken, either in cash or by
utilizing ITC. However, section 41 allows the taxpayer (recipient) to take
ITC provisionally on self-assessment basis. The self-assessed ITC gets
credited to the taxpayer’s electronic credit ledger on provisional basis
in terms of section 49(2).
Thus, even if the recipient has paid the tax to the supplier his claim for
ITC gets confirmed only when the supplier deposits the tax so collected
by him to the Government.
One of the significant features of the Indian GST is the ‘matching
concept’, i.e. ITC claimed by the recipient of supply is matched with the
tax paid by the supplier in relation to that supply. Matching seeks to
ensure that only legit ITC is claimed by the recipient. This was intended
to be achieved through a sophisticated automated return filing
mechanism. Initially, the GST law provided for an elaborate system of
return filing whereby the outward supplies of a supplier furnished in
GSTR-1 were to be auto-populated as inward supplies in the recipient’s
GSTR-2 and ITC could be availed only on such matched inward supplies.
Basis GSTR-1 and GSTR-2 of the taxpayer, the consolidated return viz,
GSTR-3 was to be auto-generated (for most part), and tax liability paid.
However, the envisaged system could not be operationalized.
Presently, suppliers are required to file GSTR-1 (Statement of details of
outward supplies), the details of which get auto-populated in GSTR-2A
of the recipient for viewing. Further, GSTR-2B, an auto-drafted ITC
statement, is also generated for the taxpayer based on GSTR-1 filed by
the supplier. Basis the details available in GSTR-2A and GSTR-2B, the
taxpayer takes provisional ITC on self-assessment basis in GSTR-3B for
discharging the tax liability.
(d) Filing of return [Section 16(2)(d)]
The registered person taking the ITC must have filed his return under
section 39. Presently, a summary return in form GSTR-3B is being filed
on monthly basis. Thus, a taxpayer should file GSTR-3B to avail ITC on
eligible inward supplies.
(iii) Goods received in lots: ITC available only on receipt of last lot
[First proviso to section 16(2)]
In case the goods covered under an invoice are not received in a single
consignment but are received in lots / instalments, ITC can be taken only upon
receipt of the last lot / instalment.
(3) XYZ enters into a contract with ABC for supply of 10 MT of a
chemical for ` 1,18,000 (inclusive of GST of ` 18,000) in the month
of August. The chemical is to be delivered in lots over a period of
three months. ABC raises the invoice for the entire amount in August and
XYZ also makes the payment in the same month but the supply is completed
in November. Though XYZ paid the full tax as early as August, it can take the
ITC of the same only on receipt of last instalment of the chemical in the month
of November.
(iv) Payment for the invoice to be made within 180 days [Second
proviso to section 16(2) read with rule 37 of CGST Rules]
The registered person must pay to the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice.
In the event of failure to do so, the corresponding credits availed by the
registered person would be added to his output tax liability, with interest.
Interest will be paid @ 18% from the date of availing credit till the date when
the amount added to the output tax liability is paid.
However, once the recipient makes the payment of value of goods and/or
services along with tax, he will be entitled to avail the credit again without
any time limit [See discussion on time limit for availing credit under point (vi)].
In case part-payment has been made, proportionate credit would be allowed.
Exceptions
This condition of payment of value of supply plus tax within 180 days does
not apply in the following situations:
a. Supplies on which tax is payable under reverse charge
b. Deemed supplies without consideration
c. Additions made to the value of supplies on account of supplier’s liability,
in relation to such supplies, being incurred by the recipient of the supply
Under situations given in points (b) & (c), the value of supply is deemed to
have been paid.
(4) Due to a quality dispute, PZP Ltd withheld payment on a
machine supplied by a vendor till it could be rectified. Over 180
days went by in this dispute. The credit taken by PZP on the
invoice got added to the output tax liability of PZP and thus, it had
to pay back the credit. Only after the vendor rectified the machine and PZP
released the payment, could PZP take the credit again.
(v) If depreciation claimed on tax component, ITC not allowed
[Section 16(3)]
If the person taking the ITC on capital goods and plant and machinery has
claimed depreciation on the tax component of the cost of the said items
under the Income-tax Act 1961, the ITC on the said tax component shall not
be allowed. Thus, in respect of the tax paid on such items, dual benefit cannot
be claimed under Income-tax Act, 1961 and GST laws simultaneously. In other
words, either depreciation on the tax component can be claimed under
Income Tax Act or ITC of such tax paid can be availed under GST laws.
(vi) Time limit for availing ITC: Due date of filing of return for the
month of September of succeeding financial year or date of
filing of annual return, whichever is earlier [Section 16(4)]
ITC on invoices pertaining to a financial year or debit notes issued in a
financial year can be availed any time till the due date of filing of the return
for the month of September of the succeeding financial year or the date of
filing of the relevant annual return, whichever is earlier.
With respect to time-limit to avail the ITC, it may be noted that the return for
the month of September is to be filed by 20th October and annual return of a
financial year is to be filed by 31st December of the succeeding financial year.
So, the upper time limit for taking ITC is 20th October of the next financial
year or the date of filing of annual return, whichever is earlier. The underlying
reasoning for this restriction is that no change in return is permitted after
September of next financial year. If annual return is filed before the month
of September, then no change can be made after filing of annual return.
Exception
The time limit u/s 16(4) does not apply to claim for re-availing of credit that
had been reversed earlier.
(5) Hercules Machinery delivered a machine to XYZ in the month
of January under Invoice no. 49 dated 28th January 2021 for
` 4,15,000 plus GST and undertook trial runs and calibration of the
machine as per the requirements of XYZ. The amount chargeable
for the post-delivery activities was covered in a debit note raised in the month
of April 2021 for ` 50,000 plus GST. XYZ did not file its annual return till the
month of October.
The time-limit to avail ITC in respect of tax paid on supply for Invoice No. 49
would be 20th October 2021.
Since the debit note is received in the next financial year, the time limit for
taking ITC available on ` 50,000 is 20th October 2022 , [earlier of the date of
filing the annual return for the preceding financial year or the return for the
month of September.]
STATUTORY PROVISIONS
(1) Where the goods or services or both are used by the registered
person partly for the purpose of any business and partly for other
purposes, the amount of credit shall be restricted to so much of the
input tax as is attributable to the purposes of his business.
(2) Where the goods or services or both are used by the registered
person partly for effecting taxable supplies including zero-rated
supplies under this Act or under the Integrated Goods and Services
Tax Act and partly for effecting exempt supplies under the said Acts,
the amount of credit shall be restricted to so much of the input tax
as is attributable to the said taxable supplies including zero-rated
supplies.
(3) The value of exempt supply under sub-section (2) shall be such as
may be prescribed, and shall include supplies on which the recipient
is liable to pay tax on reverse charge basis, transactions in
7
Provisions relating to determination of input tax credit in respect of inputs/input services
and capital goods and reversal thereof will be discussed at Final Level.
Provided further that the restriction of fifty per cent. shall not apply to
the tax paid on supplies made by one registered person to another
registered person having the same Permanent Account Number.
(6) The Government may prescribe the manner in which the credit
referred to in sub-sections (1) and (2) may be attributed.
Explanation.–– For the purposes of this Chapter and Chapter VI, the
expression “plant and machinery” means apparatus, equipment, and
machinery fixed to earth by foundation or structural support that are
used for making outward supply of goods or services or both and
includes such foundation and structural supports but excludes—
(a) the said company or institution shall not avail the credit of,-
(i) the tax paid on inputs and input services that are
used for non-business purposes; and
(b) the said company or institution shall avail the credit of tax
paid on inputs and input services referred to in the second
proviso to sub-section (4) of section 17 and not covered
under clause (a);
(c) fifty per cent. of the remaining amount of input tax shall
be the input tax credit admissible to the company or the
institution and shall be furnished in FORM GSTR-2;
(d) the amount referred to in clauses (b) and (c) shall, subject
to the provisions of sections 41, 42 and 43, be credited to
the electronic credit ledger of the said company or the
institution.
ANALYSIS
Section 17 requires apportionment and concomitant restriction of ITC in two
situations as also blocking of ITC on specified inward supplies.
Apportionment of ITC [Sub-sections (1) and (2) of section 17]
The fundamental principle of credit scheme under value added tax is that tax paid
on inputs, input services and capital goods can be availed as credit only when the
output is taxable. Thus, when tax is not payable on output, credit cannot be availed.
Accordingly, ITC under GST can be availed and utilised for payment of tax on output
supply. Consequently, ITC cannot be availed when tax is not payable on output
supply, i.e. on exempt supply. The only exception to the above principle is ‘zero
rated supply, where ITC is available even if no tax is payable on output supply.
If a taxable person is making both taxable and exempt supply, he is entitled to full
credit of ITC in respect of inputs, input services and capital goods exclusively used
for taxable supply and no credit at all for inputs, input services and capital goods
exclusively used for exempt supply. If common inputs, input services and capital
goods are used for taxable as well as exempt supply, only proportionate ITC
attributable to the taxable supply is available. The common ITC is apportioned in
the ratio of value of taxable supply and exempt supply. Elaborate provisions have
been made in sub-sections (1) and (2) of section 17 and rules 42 and 43 for
calculation of such proportionate ITC. Such provisions will be discussed in detail
at the Final level
Section 16(2) of the IGST Act specifies that ITC may be availed
on inward supplies for making zero-rated supply,
notwithstanding the exempt nature of the zero-rated supply.
Zero-rated supply is an expression that covers two kinds of
supplies: (i) exports, and (ii) supplies to a SEZ unit or SEZ developer.
Therefore, ITC is available on goods and / or services used for supplies
made in the course of export or to an SEZ unit or SEZ developer.
provided u/s 17(5). Thus, ITC on such items is not allowed even though the same
may qualify as inputs, input services or capital goods and are used in the course
or furtherance of business.
The negative list covers mainly items of personal consumption, inputs and input
services use of which results into formation of an immovable property (except
plant and machinery), telecommunication towers, pipelines laid outside the
factory premises, etc. and taxes paid as a result of detection of evasion of taxes.
The various goods and/or services on which credit is blocked are discussed
hereunder:
(i) Motor vehicles and other conveyances and related services
(insurance, servicing and repair and maintenance)
Motor vehicles and conveyances have been defined in the CGST Act [See
definition under the heading Relevant Definitions]. Motor vehicles exclude –
vehicle running upon fixed rails
special purpose vehicles for being used in a factory or any
enclosed premises
vehicle with less than 4 wheels fitted with engine capacity of upto
25cc – (Thus, railways, two/three wheelers with engine capacity of
upto 25cc, bicycle etc. do not fall in the definition of motor
vehicle.)
Broadly, ITC is blocked on motor vehicles, vessels and aircrafts used for
passenger transportation with certain exceptions. Further, ITC is also
blocked on certain services relating to motor vehicles, vessels and
aircrafts namely, insurance, servicing and repair and maintenance. The
basic principle here is that the motor vehicles, aircrafts and vessels on
which ITC is blocked, the ITC on services of insurance, servicing and
repair and maintenance pertaining to such motor vehicles, vessels and
aircrafts is also blocked.
The blocked credits relating to motor vehicles, vessels, aircrafts and
related services are discussed hereunder:
Meaning of construction
“Construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalization, to the said
immovable property.
Thus, if re-construction, renovation, additions or alterations or repairs
are not capitalized, it would not tantamount to construction under GST
law. Consequently, ITC on works contract services availed for such
construction (which is not capitalized) whether for any immovable
property or for any plant and machinery, would be allowed to all the
recipients irrespective of their line of business.
Meaning of plant and machinery
“Plant and machinery” means apparatus, equipment, and machinery
fixed to earth by foundation or structural supports that are used for
making outward supply of goods and/or services and includes such
foundation or structural support
but excludes
land, building or other civil structures, telecommunication towers, and
pipelines laid outside the factory premises.
Thus, ITC on works contract services availed for construction of eligible
plant and machinery is allowed to the recipient irrespective of the line
of business of such recipient.
For instance, ITC on works contract services for construction of
machinery fixed to earth by a foundation, would be allowed. However,
ITC on works contract services for construction of telecommunication
towers, would be blocked.
(31) A company buys cement, tiles etc. and avails the services
of an architect for construction of its office building. ITC on
such goods and services is blocked.
(32) MN & Constructions procures cement, paint, iron rods and
services of architects and interior designers for construction of a
commercial complex for one of its clients. ITC on such goods and
services is allowed to MN & Co.
(33) A company buys cement, tiles etc. and avails the services of an
architect for renovation of its office building. The company has booked
such expenditure in its profit and loss account. ITC on such goods and
services is allowed.
(34) ITC on goods and/or services used by an automobile company for
construction of a foundation on which a machinery (to be used in the
production process) is to be mounted permanently, is allowed.
(v) Inward supplies charged to tax under composition levy [Clause
(e) of section 17(5)]
A supplier registered under composition scheme cannot collect tax
from its customers. Thus, such supplier issues bill of supply and not a
tax invoice. A composition supplier pays a lumpsum tax at a specified
rate on its quarterly turnover.
Tax paid on goods and/or services under composition scheme is not
available as ITC.
Since a composition supplier cannot collect any tax on its supplies, from
the recipient of its supplies, it is obvious that no ITC can be availed in
respect of such supplies by the recipients. Nevertheless, section
17(5)(e) specifically blocks the ITC on inward supplies received by a
taxable person from a composition supplier.
(vi) Inward supplies received by a non-resident taxable person
[Clause (f) of section 17(5)]
Non-resident taxable person has been defined in the CGST Act [See the
definition under the heading Relevant Definitions]. Essentially, a non-
resident taxable person has no fixed place of business in India but he
sporadically supplies goods or services in India.
Tax paid on goods and/or services received by such non-resident
taxable person, is not available as ITC. However, tax paid by him on
imported goods is allowed as ITC.
Lost goods
Stolen goods
Destroyed goods
Meaning of ‘gift’
The terms gift has not been defined in the GST law. Therefore, we will
have to look for the definition of gift in other laws. Section 122 of the
Transfer of Property Act, 1882, defines gift as transfer of certain existing
moveable or immoveable property made voluntarily and without
consideration, by one person, called the donor, to another, called the
donee, and accepted by or on behalf of the donee.
In common parlance, gift is made without consideration, is voluntary in
nature and is made occasionally. It cannot be demanded as a matter of
right.
Meaning of ‘sample’
Sample is also not defined in the GST law. The dictionary meaning of
sample is “a small part or quantity intended to show what the whole is
like”. In commercial parlance, samples are given to prospective
customers to enable them to test the quality of the item before making a
decision to buy the same.
8
The procedure for return of time expired drugs or medicines by issuing credit note is covered
in Chapter 8: Tax Invoice; Credit and Debit Notes; E-Way Bill.
STATUTORY PROVISIONS
(a) a person who has applied for registration under this Act
within thirty days from the date on which he becomes
liable to registration and has been granted such
registration shall be entitled to take credit of input tax in
respect of inputs held in stock and inputs contained in
semi-finished or finished goods held in stock on the day
immediately preceding the date from which he becomes
liable to pay tax under the provisions of this Act;
9
These provisions will be discussed at the Final level.
(2) A registered person shall not be entitled to take input tax credit
under sub-section (1) in respect of any supply of goods or services
or both to him after the expiry of one year from the date of issue of
tax invoice relating to such supply.
(4) Where any registered person who has availed of input tax credit
opts to pay tax under section 10 or, where the goods or services or
(5) The amount of credit under sub-section (1) and the amount payable
under sub-section (4) shall be calculated in such manner as may be
prescribed.
Provided that where refractory bricks, moulds and dies, jigs and
fixtures are supplied as scrap, the taxable person may pay tax on
the transaction value of such goods determined under section 15.
(1) The input tax credit claimed in accordance with the provisions of
sub-section (1) of section 18 on the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock, or the
credit claimed on capital goods in accordance with the provisions
of clauses (c) and (d) of the said sub-section, shall be subject to the
following conditions, namely -
(c) the declaration under clause (b) shall clearly specify the
details relating to the inputs held in stock or inputs
contained in semi-finished or finished goods held in stock,
or as the case may be, capital goods–
(2) The amount of credit in the case of supply of capital goods or plant
and machinery, for the purposes of sub-section (6) of section 18,
shall be calculated by reducing the input tax on the said goods at
the rate of five percentage points for every quarter or part thereof
from the date of the issue of the invoice for such goods.
Provided that in the case of demerger, the input tax credit shall be
apportioned in the ratio of the value of assets of the new units as
specified in the demerger scheme.
(3) The transferee shall, on the common portal, accept the details so
furnished by the transferor and, upon such acceptance, the un-
utilized credit specified in FORM GST ITC-02 shall be credited to
his electronic credit ledger.
(4) The inputs and capital goods so transferred shall be duly accounted
for by the transferee in his books of account.
Provided that the input tax credit shall be transferred to the newly
registered entities in the ratio of the value of assets held by them at
the time of registration.
(1) The amount of input tax credit relating to inputs held in stock,
inputs contained in semi-finished and finished goods held in stock,
and capital goods held in stock shall, for the purposes of sub-section
(4) of section 18 or sub-section (5) of section 29, be determined in
the following manner, namely,-
(b) for capital goods held in stock, the input tax credit involved
in the remaining useful life in months shall be computed
on pro-rata basis, taking the useful life as five years.
(3) Where the tax invoices related to the inputs held in stock are not
available, the registered person shall estimate the amount under
sub-rule (1) based on the prevailing market price of the goods on
the effective date of the occurrence of any of the events specified in
sub-section (4) of section 18 or, as the case may be, sub-section (5)
of section 29.
(4) The amount determined under sub-rule (1) shall form part of the
output tax liability of the registered person and the details of the
amount shall be furnished in FORM GST ITC-03, where such
amount relates to any event specified in sub-section (4) of section
18 and in FORM GSTR-10, where such amount relates to the
cancellation of registration.
(5) The details furnished in accordance with sub-rule (3) shall be duly
certified by a practicing chartered accountant or cost accountant.
(6) The amount of input tax credit for the purposes of sub-section (6)
of section 18 relating to capital goods shall be determined in the
same manner as specified in clause (b) of sub-rule (1) and the
amount shall be determined separately for input tax credit of
central tax, State tax, Union territory tax and integrated tax:
Provided that where the amount so determined is more than the tax
determined on the transaction value of the capital goods, the
amount determined shall form part of the output tax liability and
the same shall be furnished in FORM GSTR-1.
ANALYSIS
Section 18 provides for
(1) entitlement of ITC on inputs in stock and contained in finished goods or work-
in-progress and capital goods (i) at the time of registration/voluntary
registration, (ii) on coming into regular tax-paying status by exiting
composition levy, (iii) on coming into tax-paying status on account of exempt
supply becoming taxable supply
(2) reversal of ITC on inputs in stock and contained in finished goods or work-
in-progress and capital goods (i) at the time of exit from regular tax-paying
status by opting for composition levy, (ii) at the time of exit from tax-paying
status on account of taxable supply becoming exempt supply
(3) amount payable on supply of capital goods or plant and machinery on which
ITC has been taken
(4) transfer of ITC on account of change in constitution of the registered person
(i) Entitlement of ITC at the time of registration/voluntary registration or
switching to regular tax paying status or coming into tax-paying status
[Sub-sections (1) and (2) of section 18 read with rule 40 of CGST Rules]
The credit on inputs held in stock and contained in semi-finished goods or
finished goods held in stock and capital goods at the time of
registration/voluntary registration or coming into regular tax/tax-paying
status is available in the following manner:
In all the above cases, the registered person has to make an electronic
declaration in the prescribed form on the common portal, clearly specifying
the details relating to the inputs held in stock, inputs contained in semi-
finished or finished goods held in stock and capital goods on the days
mentioned in column (4) of table above. The declaration is to be filed within
30 days (extendable by Commissioner/Commissioner of State
GST/Commissioner of UTGST) from the date when the registered person
becomes eligible to avail ITC. If the claim of ITC pertaining to CGST,
SGST/UTGST, IGST put together exceeds ` 2,00,000, the declaration needs to
be certified by a practicing Chartered Accountant/Cost Accountant.
(37) ‘Z’ becomes liable to pay tax on 1st August and has obtained
registration on 15th August. ‘Z’ is eligible for ITC on inputs held in
stock and as part of semi-finished goods or finished goods held in
stock as on 31st July. ‘Z’ cannot take ITC on capital goods.
(38) ‘A’ applies for voluntary registration on 5th June and obtains
registration on 22nd June. ‘A’ is eligible for ITC on inputs held in
stock and as part of semi-finished goods or finished goods held in
stock as on 21st June. ‘A’ cannot take ITC on capital goods.
1 •Sale
Change in constitution of •Merger
registered person •Demerger
•Amalgamtion
•Lease
•Transfer or change in ownership of
business
In the case of demerger, ITC will be apportioned in the ratio of the value of
assets of the new units as specified in the demerger scheme. Here, “value of
assets” means the value of the entire assets of the business irrespective of
whether ITC has been availed thereon or not.
credited to his electronic credit ledger. The transferee should record the
inputs and capital goods so transferred in his books of account.
The registered person should furnish the prescribed details on the common
portal within a period of 30 days from obtaining such separate registrations.
Upon acceptance of such details by the newly registered person (transferee)
on the common portal, the unutilised ITC gets credited to his electronic credit
ledger.
STATUTORY PROVISIONS
(5) The amount of input tax credit available in the electronic credit
ledger of the registered person on account of––
(f) the State tax or Union territory tax shall not be utilised
towards payment of central tax.
Provided that the input tax credit on account of central tax, State
tax or Union territory tax shall be utilised towards payment of
integrated tax, central tax, State tax or Union territory tax, as the
case may be, only after the input tax credit available on account of
integrated tax has first been utilised fully.
ANALYSIS
ITC is credited to a registered person’s electronic credit ledger. A taxable person
is entitled for ITC of CGST, SGST/UTGST and IGST depending upon the nature of
supplies received by him.
To illustrate, a supplier making intra-State, inter-State and imported purchases (of
goods) is eligible for ITC as under:
CGST BCD
IGST
SGST IGST
The person may use the ITC to pay his output tax liability. As we know that Indian
GST is a dual GST wherein two taxes viz, CGST and SGST/UTGST are levied
concurrently on a supply transaction. While the CGST revenue accrues to Central
Government, SGST and UTGST revenue accrue to respective State Government and
Union Territory respectively. Hence, ITC of CGST and SGST/UTGST is not inter-
changeable and thus, cross utilisation of CGST and SGST/UTGST is not permissible.
IGST is a transitory tax. IGST paid by taxpayer initially goes to the Central Clearing
Authority. ITC of IGST can be utilised for payment of CGST or SGST/UTGST (or vice
versa). Thus, cross utilization of IGST and CGST, SGST/UTGST is permissible.
Flexibility has been provided to the taxpayer to utilise ITC of IGST for payment of
CGST and/or SGST/UTGST in any proportion and in any order subject to the
condition that the entire input tax credit on account of Integrated tax is completely
exhausted before the input tax credit on account of Central Tax or State/Union
territory tax can be utilized. If ITC of IGST is used for payment of SGST/UTGST (or
vice versa), corresponding debit/credit is made to respective State
Government/Union Territory.
Sections 49(5), 49A, 49B, rule 88A and Circular No. 98/17/2019 GST dated
23.04.2019 together prescribe the sequence of utilisation of ITC. A combined
reading of such provisions shows that the order of utilization of ITC is as per the
order (of numerals) given below:
The numerals given above can be further explained in the following manner:
(III) Entire ITC of IGST should be fully utilized before utilizing the ITC
of CGST or SGST/UTGST.
(IV) & (V) ITC of CGST should be utilized for payment of CGST and IGST in
that order. ITC of CGST cannot be utilized for payment of
SGST/UTGST
(VI) & (VII) ITC of SGST /UTGST should be utilized for payment of
SGST/UTGST and IGST in that order. However, ITC of
SGST/UTGST should be utilized for payment of IGST, only after
ITC of CGST has been utilized fully. ITC of SGST/UTGST cannot
be utilized for payment of CGST.
(41) Amount of ITC available and output tax liability under different
tax heads
There can be other options also for utilization of ITC of IGST against CGST and SGST
liabilities. In this example, two options for utilizing ITC of IGST against CGST and
SGST liabilities are shown.
ILLUSTRATION 3
ABC Co. Ltd., registered under GST, is engaged in the manufacture of heavy
machinery. It procured the following items during the month of July.
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by
giving necessary explanations for treatment of various items. Subject to the
information given above, assume that all the other conditions necessary for availing
ITC have been fulfille
ANSWER
Computation of ITC available with ABC Co. Ltd. for the month of July
ILLUSTRATION 4
(iii) Capital goods 1,20,000 XYZ Ltd. has capitalised the capital
goods at full invoice value inclusive of
GST as it will avail depreciation on the
full invoice value.
Note:
(i) Subject to the information given above, assume that all the other conditions
necessary for availing ITC have been fulfilled.
(ii) The annual return for the previous financial year was filed on 15th September.
ANSWER
Computation of ITC available with XYZ Ltd. for the month of October
ILLUSTRATION 5
XT Pvt. Ltd., a supplier of goods, pays GST under regular scheme. It has made the
following outward taxable supplies in a tax period:
The company has following ITCs with it at the beginning of the tax period:
CGST 57,000
SGST Nil
IGST 70,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(iii) All the conditions necessary for availing the ITC have been fulfilled.
Compute the minimum GST, payable in cash, by XT Pvt. Ltd. for the tax period. Make
suitable assumptions as required.
ANSWER
Computation of GST payable on outward supplies
Note : Since sufficient balance of ITC of CGST is available for paying CGST liability
and cross utilization of ITC of CGST and SGST is not allowed, ITC of IGST has been
used to pay SGST (after paying IGST liability) to minimize cash outflow.
7. LET US RECAPITULATE
I. Definitions of certain key terms are summarized by way of
diagrams as under:
BUSINESS
includes
Any activity incidental/ancillary
to it
Any trade/commerce, manufacture,
profession, vocation etc. even if
there is no monetary benefit Any activity of same nature even if
no volume/continuity/frequency
Supply/acquisition of goods
in connection with commencement/
including capital goods & services
closure of business
Provision of facilities by
to its members for consideration
club/association/society etc.
for a consideration
Admission to any premises
EXEMPT SUPPLY
means includes
Non-taxable
supply
Supply attracting NIL rate of Supply wholly exempt
tax from
CGST IGST
Goods Services
used/intended to be used in
the course/ furtherance of
business
INPUT TAX
IGST
Tax payable Tax payable
leviable on
under forward under reverse
import of Composition
charge in respect charge
goods tax
of supplies made
to recipient
Principal
means
Agent
INWARD SUPPLY
means
with/without consideration
ZERO-RATED SUPPLY
Attributable to
Used partly for business
business purposes
and partly for non-
business purposes
Goods and/or
services ITC available
only as
Used partly for making
taxable (including zero
rated supplies) supplies Attributable to taxable
& partly for exempt supplies including
supplies zero rated supplies
Exempt supplies include reverse charge supplies & transactions in securities and exclude
activities specified in Schedule III except sale of land and sale of building when entire
consideration is received post completion certificate/first occupation, whichever is earlier.
When used for When used for- (i) When used for (i) Where a
(i) When ineligible
making (i) making further making an particular category
MV, Ves or AC are
taxable taxable supply of outward taxable of such inward
used for eligible
supplies of- such Ves or AC supply of the supplies is used for
purposes
(i) such MV (ii) passenger same category making an outward
(ii) When received
(ii) trptn of trptn service (sub- taxable supply of
by manufacturer of
passengers (iii) imparting contracting) or the same category
ineligible MV, Ves
(iii) imparting training on as an element of - [Sub-contracting]
or AC
training on navigating/flying a taxable or as an element of
(iii) When received
driving such such Ves/AC composite or a taxable
by a GI service
ineligible MV (iv) trptn of mixed supply. composite or
provider in respect
goods (ii) When mixed supply
of such ineligible
provided by an (ii) When provided
MV, Ves or AC
employer to its by an employer to
insured by it
employees its employees
under statutory under a statutory
obligation obligation
Credit available on
such exceptions
(A) WCS for P & M
(B) WCS availed by a works (A) Construction of P & M
contractor for further supply of (B) Construction of
WCS [Sub-contracting] immovable property for
(C) Where value of WCS is not others
capitalized (C) Value of construction
is not capitalised
Registered person
switching from Registered person's Person applying for Person obtaining
composition levy to exempt supplies registration within 30 voluntary
regular scheme of becoming taxable days of becoming registration
payment of taxes liable for registration
Credit entitled on
Credit entitled on
• Inputs as such held in stock
• Inputs as such held in stock
• Inputs contained in semi-finished goods held in
• Inputs contained in semi-
stock
finished goods held in stock
• Inputs contained in finished goods held in stock
• Inputs contained in finished
• Capital goods [In case of exempt supply
goods held in stock
becoming taxable Capital goods used
exclusively for such exempt supply] reduced
by 5% per quarter or part thereof from the
date of invoice
Note: ITC claimed shall be verified with the
corresponding details furnished by the corresponding
supplier.
ITC, in all the above cases, is to be availed within 1 year from the date of issue of invoice
by the supplier.
Registered person (who has Supplies of registered Cancellation of Supply of capital goods
availed ITC) switching from person getting wholly registration (CG)/ plant and machinery
regular scheme of payment exempted from tax (P& M) on which ITC has
of tax to composition levy been taken
Amount to be paid is
Amount to be reversed is equivalent to ITC on : equivalent to higher of
• Inputs held in stock/ inputs contained in semi-finished or finished goods the following:
held in stock (i) ITC on CG or P&M
• Capital goods less 5% per quarter or
on the day immediately preceding the date of switch over/ date of part thereof from the
exemption/date of cancellation of registration date of invoice
(ii) Tax on transaction
value of such CG or P &
M
• If amount at (i)
Manner of reversal of credit on inputs and capital goods & other exceeds (ii), then
conditions reversal amount will
(i) Inputs ⇒ Proportionate reversal based on corresponding invoices. If such be added to output
invoices not available, prevailing market price on the effective date of switch tax liability.
over/ exemption/cancellation of registration should be used with due • Separate ITC reversal
certification by a practicing CA/ Cost Accountant is to be done for
(ii) Capital goods ⇒ Reversal on pro rata basis pertaining to remaining useful CGST, SGST/UTGST
life (in months), taking useful life as 5 years. and IGST
(iii) ITC to be reversed will be calculated separately for ITC of CGST, • Tax to be paid on
SGST/UTGST and IGST. transaction value
(iv) Reversal amount will be added to output tax liability of the registered when refractory
person. bricks, moulds, dies,
(v) Electronic credit/cash ledger will be debited with such amount. Balance jigs & fixtures are
ITC, if any, will lapse. supplied as scrap.
Value of assets means the value of the entire assets of the business
irrespective of whether ITC has been availed thereon or not.
I. II.
III.
ITC of ITC of
IGST ITC of
CGST
IGST CGST SGST
SGST
CGST/SGST in
any order & in IGST
IGST, only
any proportion when ITC of
CGST = NIL
ITC of IGST =
NIL
ITC of ITC of
CGST SGST/
SGST/ UTGST
CGST
UTGST
13. Babla Enterprises is exclusively engaged in making exempt supply of goods and
is thus, not registered under GST. On 1st October, the exemption available on
its goods gets withdrawn. On that day, the turnover of Babla Enterprises was
` 50 lakh.
Examine the eligibility of Babla Enterprises for availing ITC, if any.
14. Mamta Trade Links trades in exempt goods and provides taxable services. It is
registered under GST. On 1st October, the exemption available on its goods
gets withdrawn.
Analyze the scenario and determine the eligibility of Mamta Trade Links for
availing ITC, if any, on inputs and/or capital goods used in the supply of exempt
goods.
15. Harshgeet Pvt. Ltd., a registered supplier, is engaged in the manufacture of
taxable goods. The company provides the following information pertaining to
purchases made/services availed by it during the month of July:
(3) Inputs to be received in 5 lots, out of which 3rd lot was 80,000
received during the month
Determine the amount of ITC available with Harshgeet Pvt. Ltd. for the month
of July by giving the necessary explanation for treatment of various items.
Subject to the information given above, all the other conditions necessary for
availing ITC have been fulfilled.
16. Jamku Ltd., a registered person, is engaged in the business of spices. It provides
following details in relation to GST paid on inward supplies procured by it
during the month of October.
Determine the amount of ITC available with Jamku Ltd. for the month October
by giving the necessary explanation for treatment of various items. Subject to
the information given above, all the other conditions necessary for availing ITC
have been fulfilled.
17. Dina Ltd., a registered supplier from Maharashtra, is engaged in the
manufacture of passenger autos. The company provides the following details
of purchases made/services availed by it during the month of March:
You are required to determine the ITC available with Dina Ltd. for the month
of March, by giving brief explanations for treatment of various items. Subject
to the information given above, all the other conditions necessary for availing
ITC have been fulfilled.
18. Comfortable (P) Ltd. is registered under GST in the State of Odisha. It is
engaged in the business of manufacturing of iron and steel products. It has
received IT engineering services from High-Fi Infotech (P) Ltd. for
` 11,00,000/- (excluding GST @ 18%) on 28th October. Invoice for service
rendered was issued on 5th November.
Comfortable (P) Ltd. made part payment of ` 4,20,000/- on 30th November.
Being unhappy with service provided by High-fi Infotech (P) Ltd., it did not make
the balance payment. Deficiency in service rendered was made good by High-
Fi Infotech (P) Ltd. by 15th April of next year. Comfortable (P) Ltd. made the
balance payment on 6th July of next year.
Examine the availability of ITC with Comfortable (P) Ltd. in respect of IT
engineering services received by it from High-Fi Infotech (P) Ltd.
19. M/s. Diwan & Sons of New Delhi, has placed an order for 250 kg of plastic
granules @ ` 50 per kg (exclusive of GST) on M/s. Karim & Bros. of Noida, U.P.
M/s. Karim & Bros. has agreed to deliver the goods at the warehouse of M/s.
Diwan & Sons at New Delhi.
While the order was getting packed at the factory of M/s. Karim & Bros., M/s.
Diwan & Sons got an order from Shubhkamna Sales of Hapur, U.P. for 250 kg
of plastic granules @ ` 60 per kg (exclusive of GST). In order to save on
transportation cost, M/s. Diwan & Sons asks M/s. Karim & Bros. to directly
deliver the plastic granules to Shubhkamna Sales at its godown located in
Hapur. Accordingly, M/s. Karim & Bros. has delivered the plastic granules at
the godown of Shubhkamna Sales at Hapur.
Examine the availability of ITC with M/s. Diwan & Sons & M/s. Karim & Bros.
Note: All the parties are registered under GST and rate of GST is 18%.
20. Paritosh & Co., a supplier of goods, pays GST under regular scheme. It has made
the following outward taxable supplies in a tax period:
Paritosh & Co. has following ITCs with it at the beginning of the tax period:
CGST 57,000
SGST 60,000
IGST 1,40,000
Note:
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) Both inward and outward supplies are exclusive of taxes, wherever
applicable.
(iii) All the conditions necessary for availing ITC have been fulfilled.
Compute the minimum GST, payable in cash, by Paritosh & Co. for the tax
period and the ITC to be carried forward to the next month. Make suitable
assumptions as required.
9. ANSWERS/HINTS
1. Input tax means the central tax (CGST), State tax (SGST), integrated tax (IGST)
or Union territory tax (UTGST) charged on supply of goods or services or both
made to a registered person. It also includes tax paid on reverse charge basis
and integrated goods and services tax charged on import of goods. It does
not include tax paid under composition levy.
2. Following four conditions are to be satisfied by the registered taxable person
for obtaining ITC:
(a) he is in possession of tax invoice or debit note or such other tax paying
documents as may be prescribed;
13. Since the exemption available on goods being supplied by Babla Enterprises
gets withdrawn, it becomes liable to registration as its turnover has crossed
the threshold limit on the day when the exemption is withdrawn.
Assuming that Babla Enterprises applies for registration within 30 days of
1st October and it obtains such registration, it will be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-finished
or finished goods held in stock on the day immediately preceding the date from
which it becomes liable to pay tax, i.e. 30th September [Section 18(1)(a)]. Input
tax paid on capital goods will not be available as ITC in this case.
14. If the exempt supply made by a registered person becomes a taxable supply,
provisions of section 18(1)(d) become applicable. In the given case, since
Mamta Trade Links is a registered person, section 18(1)(d) will be applicable.
As per section 18(1)(d), Mamta Trade Links will be entitled to take credit of
input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock relatable to such exempt supply and
on capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable, i.e.
30th September. ITC on capital goods will be reduced by 5% per quarter or
part thereof from the date of invoice.
15. Computation of ITC available with Harshgeet Pvt. Ltd. for the month of July
Inputs to be received in 5 lots, out of which 3rd lot was received Nil
during the month
[In case of goods received in lots, ITC can be taken only upon
receipt of the last lot]
16. Computation of ITC available with Jamku Ltd. for the month of October
17. Computation of ITC available with Dina Ltd. for the month of
March
18. Every registered person is entitled to take credit of input tax charged on any
supply of goods and/or services which are used or intended to be used in the
course or furtherance of his business if, inter alia, he is in possession of a tax
invoice issued by a supplier and he has received the goods and/or services.
The registered person must pay to the supplier, the value of the goods and/or
services along with the tax within 180 days from the date of issue of invoice.
In the event of failure to do so, the corresponding credits availed by the
registered person would be added to his output tax liability, with interest.
However, once the recipient makes the payment of value of goods and/or
services along with tax, he will be entitled to avail the credit again without
any time limit. In case part-payment has been made, proportionate credit
would be allowed.
In the given case, High-fi Infotech (P) Ltd. provides the service in the month
of October and Comfortable (P) Ltd. receives the invoice in the month of
November. Therefore, in view of the above provisions and assuming all other
conditions required for availing ITC having been fulfilled, ITC of ` 1,98,000
(` 11,00,000 x 18%) will be availed by Comfortable (P) Ltd. in the month of
November when it receives the invoice issued by High-fi Infotech (P) Ltd.
However, proportionate ITC amounting to ` 1,33,932 ⇒ [(` 12,98,000 -
` 4,20,000)/118] x 18] will be added to the output tax liability of Comfortable
(P) Ltd. as full payment has not been made within 180 days of issuance of the
invoice, i.e. by 4th May of next year. ITC of ` 1,33,932 can, however, be availed
again by Comfortable (P) Ltd. in the month of July next year when it makes
the balance payment.
19. One of the conditions for availing ITC is that the registered person taking the ITC
must have received the goods and / or services. However, goods delivered to a
third person on the direction of the registered person by way of transfer of
documents of title or otherwise, either before or during the movement, are
deemed to have been received by such registered person. So, ITC is available to
the registered person, on whose order the goods are delivered to a third person
even though the registered person does not receive the goods.
In the given case, goods have been delivered by M/s. Karim & Bros. (supplier)
to Shubhkamna Sales (third person) on the direction of M/s. Diwan & Sons
(registered person). Therefore, in view of the above provisions, ITC of ` 2,250
(` 50 x 250 x 18%) will be available to M/s. Diwan & Sons (registered person)
on the purchase of 250 kg of plastic granules @ 50 per kg.
Further, in this case there is another supply between Diwan & Sons (supplier)
and Shubhkamna Sales (recipient). Therefore, Shubhkamna Sales can avail
ITC of ` 2,700 (` 60 x 250 x 18%) on the purchase of 250 kg of plastic granules
@ 60 per kg.
20. Computation of GST payable on outward supplies
Note : The above computation is one of the many ways to set off the ITC of
IGST (` 41,000-after set off against IGST liability) against CGST and SGST
liability to compute minimum GST payable in cash. To illustrate, IGST of
` 10,000 can be set off against SGST payable and IGST of ` 31,000 can be set
off against CGST payable. In this situation also, the net GST payable will be
nil but the ITC of CGST and SGST to be carried forward will be ` 25,000 and
` 7,000 (totaling to ` 32,000) respectively. However, if the entire ITC of
` 41,000 is set off against CGST payable, then SGST of ` 3,000 will be payable
in cash thus, increasing the cash outflow. Therefore, such a set off would not
be advisable for computing the minimum GST payable.
16(2)(a) Section 16(2) of New clause (aa) shall A new clause (aa) to
CGST Act be inserted sub-section (2) of
prescribes following section the section 16 of the
conditions for 16(2)(a): CGST Act is being
availing ITC by a inserted to provide
“the details of the
registered that input tax credit
invoice or debit note
person. on invoice/debit
referred to in clause
note may be availed
Clause (a) of (a) has been
only when the details
section 16(2) furnished by the
of such invoice/debit
provides for supplier in the
note have been
availment of ITC statement of
furnished by the
only when the outward supplies
supplier in the
recipient of and such details
statement of
goods or have been
outward supplies
services is in communicated to
and such details
10
Provisions existing as on 30.04.2021.
REGISTRATION
Examples/illustrations/Questions and Answers given in the Chapter are based on
the position of GST law existing as on 30.04.2021.
LEARNING OUTCOMES
8.2
Amendment of registration
Cancellation of registration
1. INTRODUCTION
Under any taxation law, registration is the most
fundamental requirement for identification of tax payers
ensuring tax compliance in the economy. It is the first
step towards becoming GST complaint. Under indirect
tax regime, without registration, a person can neither collect tax from his
customers nor claim any credit of tax paid by him.
Registration legally recognizes a person as supplier of
goods or services or both and legally authorizes him to
collect taxes from his customers and pass on the credit of
the taxes paid on the goods or services supplied to the
purchasers/recipients. He can claim the input tax credit of taxes paid and can
utilize the same for payment of taxes due on supply of goods
or services. Registration ensures the seamless flow of input
tax credit from suppliers to recipients at the national level. PAN based
registration
Under GST law, a supplier is required to obtain State-wise
registration. There is no concept of a centralized registration under GST like the
erstwhile service tax regime. A supplier has to obtain registration in every
State/UT from where he makes a taxable supply provided his aggregate turnover
Provisions of registration under CGST Act have also been made applicable to
IGST Act vide section 20 of the IGST Act.
2. RELEVANT DEFINITIONS
8.4
Common portal: means the common goods and services tax electronic
portal referred to in section 146 [Section 2(26)].
Taxable supply: means a supply of goods or services or both which is
leviable to tax under this Act [Section 2(108)].
Taxable territory: means the territory to which the provisions of this Act
apply [Section 2(109)].
Place of business: includes [Section 2(85)]:
a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores his
goods, supplies or receives goods or services or both; or
1
Section 107 contains the provisions relating to ‘Appeals to Appellate Authority’. The same shall
be discussed in detail at final level.
(g) services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
(h) activities of a race club including by way of totalisator or a license to book
maker or activities of a licensed book maker in such club
(i) any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities.
8.6
In the subsequent paras, we will see when does a person becomes liable to get
registered, what is the procedure for getting registered under GST and how to get
the registration application amended, when can registration be cancelled and when
the cancellation of the registration by the Department be revoked.
Following sections of Chapter VI – Registration of the CGST Act shall be discussed
in this chapter to understand the registration provisions:
STATUTORY PROVISIONS
Sub-section Particulars
(1) Every supplier shall be liable to be registered under this Act in the
State or Union territory, other than special category States, from
8.8
(4) Notwithstanding anything contained in sub-sections (1) and (3),
in a case of transfer pursuant to sanction of a scheme or an
arrangement for amalgamation or, as the case may be, de-
merger of two or more companies pursuant to an order of a High
Court, Tribunal or otherwise, the transferee shall be liable to be
registered, with effect from the date on which the Registrar of
Companies issues a certificate of incorporation giving effect to
such order of the High Court or Tribunal.
ANALYSIS
(i) Threshold limit for registration
Every supplier of goods or services or both is required to obtain
registration
in the State or the Union territory from where he makes the taxable
supply
if his aggregate turnover exceeds specified threshold limit in a FY.
Aggregate Turnover
Before, we study what is the applicable threshold
limit for various States/ UTs, let us first
understand the concept of aggregate turnover.
Aggregate turnover is a crucial parameter for
deciding the eligibility of a supplier to avail the
benefit of threshold exemption from
registration, eligibility for composition scheme
[Discussed in Chapter 3 – Charge of GST].
‘Turnover’ in common parlance is the total
volume of business. The term ‘aggregate turnover’ as defined under section
2(6) has been presented in the diagrammatic form as follows:
Aggregate turnover
Includes Excludes
Value of all outward supplies
--Taxable supplies --CGST/ SGST/ UTGST/ IGST/
--Exempt supplies Cess
--Exports --Value of inward supplies on
--Inter-State supplies which tax is payable under
of persons having the same PAN reverse charge.
be computed on all India basis.
8.10
(1) Raghubir Private Ltd. pays GST on sitting fees paid to its
directors for the services rendered by them, under reverse
charge. Value of services provided by the directors to
Raghubir Private Ltd. will form part of the aggregate turnover of the
directors and not of Raghubir Private Ltd.
(B) Aggregate turnover excludes the element of CGST, SGST, UTGST,
and IGST and compensation cess.
(C) Aggregate turnover to include total turnover of all branches
under same PAN
Aggregate turnover is calculated by taking together the value in
respect of the activities carried out on all-India basis.
(2) A dealer ‘X’ has two offices – one in Delhi and another in
Haryana. In order to determine whether ‘X’ is liable for
registration, turnover of both the offices would be taken into
account and only if the same exceeds the applicable threshold limit, X is
liable for registration.
(D) Value of exported goods/services, exempted goods/services,
inter-State supplies between distinct persons having same PAN,
to be included in aggregate turnover.
(3) Madhur Oils, Punjab, is engaged in supplying machine oil
as well as petrol. Supply of petrol is not leviable to GST, but
supply of machine oil is taxable. In order to determine
whether Madhur Oils is liable for registration, turnover of
both non-taxable as well as taxable supplies would be taken into account
and if the same exceeds the applicable threshold limit, Madhur Oils is
liable for registration.
2
The erstwhile State of Jammu and Kashmir has been reorganised into the Union territory of
Jammu and Kashmir (with Legislature) and Union territory of Ladakh vide the Jammu and
Kashmir Reorganisation Act, 2019.
8.12
(d) Person who has opted for voluntary registration or such registered
persons who intend to continue with their registration under the CGST Act.
In view the above discussion, the registration requirements under GST can
be summarised as follows:
exclusively in exclusively in
supply of supply of
goods services/ both
goods &
services
8.14
States/UTs with
States with threshold States/UTs with threshold limit of ` 20
limit of ` 10 lakh for threshold limit of ` 20 lakh for supplier of
services/ both goods
supplier of goods lakh for supplier of
and services and ` 40
and/or services goods and/or services lakh for supplier of
goods (Intra-State)
Arunachal
Jammu and
Manipur Pradesh
Kashmir
Meghalaya
Mizoram Assam
Sikkim
Uttarakhand Himachal
Nagaland
Pradesh
Puducherry
8.16
(ii) Registration required only for a place of business from where taxable
supply takes place
A person is required to obtain registration with respect to his each place of
business in India from where a taxable supply has taken place. However, a
supplier is not liable to obtain registration in a State/UT from where he
makes an exempt/non-taxable supply.
Further, the threshold limit of a person having places of business in more
than one State/UT in India gets reduced to ` 10 lakh only when such person
makes taxable supplies of goods or services or both from any of the
Special Category States as per section 22. However, in case he makes
exempt/non-taxable supply from a Special Category State and taxable
supplies from a State other than Special Category State, the threshold limit
shall not be so reduced.
(9) Uday Enterprises is engaged in supply of taxable goods in
Maharashtra. It also supplies alcoholic liquor for human
consumption from Nagaland. Its turnover in the current financial
year is ` 34 lakh in Maharashtra and ` 8 lakh in Nagaland.
Since Uday Enterprises is exclusively engaged in making taxable supplies of
goods from Maharashtra, the applicable threshold limit for obtaining
registration is ` 40 lakh. However, the threshold limit will not be reduced to
` 10 lakh in this case, as supply of alcoholic liquor for human consumption
from Nagaland (one of the Special Category States) are non-taxable
supplies 3.
In the given case, since the aggregate turnover of Uday Enterprises exceeds
the applicable threshold limit of ` 40 lakh, it is liable to obtain registration.
It will obtain registration in Maharashtra, but is not required to obtain
registration in Nagaland as he is not making any taxable supplies from said
State.
(iii) Person liable for registration in case of transfer of business
Where a business is transferred, whether on account of
succession/any other reason [including transfer/change in
the ownership of business due to death of the sole
proprietor 4], to another person as a going concern, the
3
in terms of section 9(1)
4
clarified vide Circular No. 96/15/2019 GST dated 28.03.2019
8.18
making outward supplies, tax on which is liable to be paid on reverse
charge basis are exempt from registration.
(4) Non-resident taxable persons (NRTP) making taxable supply.
(5) E-commerce:
(i) Every ECO (Electronic Commerce Operator) who is required to
collect tax at source under section 52, ECO means any person
who owns, operates or manages digital or electronic facility or
platform for electronic commerce.
(ii) Persons who supply goods and/or services, other than supplies
specified under section 9(5), through such ECO who is required
to collect tax at source under section 52. However, threshold
limit of ` 20 lakh (` 10 lakh in case of Special Category States of
Mizoram, Tripura, Manipur and Nagaland) is available in case of
suppliers supplying services through ECO.
(6) Persons who are required to deduct tax under section 51, whether or
not separately registered under this Act.
(7) Persons who make taxable supply of goods or services or both on
behalf of other taxable persons whether as an agent or otherwise.
(8) Input Service Distributor, whether or not separately registered under
this Act.
(9) Every person supplying online information and data base access or
retrieval (OIDAR) services from a place outside India to a person in
India, other than a registered person 5;
(10) Persons who are required to pay tax under section 9(5) and
(11) such other person or class of persons as may be notified by the
Government on the recommendations of the Council.
Note: Concept of CTP and NRTP is explained subsequently in this chapter.
5The provisions relating to tax deduction at source under section 51, collection of tax at source under
section 52, Input Service Distributor, electronic commerce operators and OIDAR services will be
discussed in detail at the Final Level. Hence, text shaded in green here is only for the purpose of
knowledge of the students.
8.20
From the above definition, it is clear that the benefit of not being liable
to registration is only restricted to the agriculturists who are individuals
or HUFs. Further, if an agriculturist is also engaged in making any supply
other than supply of produce out of cultivation of land, he shall be liable
to registration based on applicable threshold limit.
(12) Deshbandhu is an agriculturist engaged in cultivation of
wheat in his field in the State of Punjab. He was exclusively
engaged in supply of wheat cultivated in his field in the previous
year. Thus, he was not liable to registration as he was exclusively engaged
in supply of produce out of cultivation of land.
In the current year, he decides to start trading in rice apart from supplying
his wheat produce. His turnover in the current year is ` 32 lakh from supply
of wheat produced and ` 9 lakh from trading of rice.
Since he is engaged in trading of rice also, he is not covered under section
23 above. The threshold limit for registration applicable to a person
exclusively engaged in supply of goods in the State of Punjab is ` 40 lakh.
The aggregate turnover of Deshbandhu in the current year is ` 41 lakh [` 32
lakh + ` 9 lakh] which exceeds the threshold limit. Thus, he will be liable to
registration.
(ii) Specified category of persons notified by the Government exempted
from obtaining registration
Following category of persons have been notified as being exempted from
obtaining registration under GST law:
A. Persons making only reverse charge supplies
Persons who are only engaged in making supplies of taxable goods or
services or both, the total tax on which is liable to be paid on reverse
charge basis by the recipient of such goods or services or both under
section 9(3) have been exempted from obtaining registration
[Notification No. 5/2017 CT dated 19.06.2017].
(13) Manikaran Transporters is a Goods Transport Agency
(GTA) engaged exclusively in supplying GTA services liable
to tax under reverse charge [since tax is being paid on GTA
services @ 5% in the given case]. Thus, it is exempt from registration
as it is engaged exclusively in making supplies, tax on which is liable
to be paid on reverse charge basis.
6
other than notified handicraft goods
8.22
(a) Persons making inter-State taxable supplies of notified 7
handicraft goods.
7
Handicraft goods referred herein are goods as defined and notified in Notification No. 21/2018 CT (R)
dated 26.07.2018. This notification notifies the handicraft items which are eligible for concessional rate
of tax, for instance, handcrafted candles, articles made of paper mache, coir articles, handbags
including pouches and purses; jewellery box, hand embroidered articles, art ware of iron/aluminium,
etc. These examples are only for the purpose of knowledge and are not relevant for examination
purposes. Handicraft goods are defined under said notification as goods predominantly made by hand
even though some tools or machinery may also have been used in the process; such goods are graced
with visual appeal in the nature of ornamentation or in-lay work or some similar work of a substantial
nature; possess distinctive features, which can be aesthetic, artistic, ethnic or culturally attached and are
amply different from mechanically produced goods of similar utility.
8
Some of the notified products are leather articles, carved wood products, wood turning and
lacquer ware, bamboo products, textiles hand printing, theatre costumes, musical instruments,
dolls and toys, etc. These examples are only for the purpose of knowledge and are not relevant for
examination purpose.
9
subject to fulfilment of other conditions prescribed under said notification.
10
vide Circular No. 57/31/2018 GST dated 04.09.2018
8.24
(APMC Act) of the State 11. Mr. B identifies the buyers and sells the agricultural
produce on behalf of Mr. A for which he charges a commission from Mr. A.
In cases where the invoice is issued directly by Mr. A to the buyer, the commission
agent (Mr. B) doesn’t fall under the category of agent covered under Schedule I.
However, in cases where the invoice is issued by Mr. B to the buyer, Mr. B is an
agent as covered under Para 3. of Schedule I to the CGST Act. Hence, in such
cases, the services supplied by commission agent Mr. B on behalf of the principal
without consideration shall be deemed to be a supply – Concept of Deemed
Supply under Schedule-I has been discussed in detail in Chapter 2 – Supply under
GST.
The registration requirements of the commission agents in such cases have been
examined and clarified as follows:
(i) As we have already seen, as per section 24, a person is liable for
mandatory registration if he makes taxable supply of goods or services or
both on behalf of other taxable persons.
Accordingly, a commission agent will be liable to get mandatorily
registered under this provision only when both the following conditions
are satisfied:
(a) the principal should be a taxable person; and
(b) the supplies made by the commission agent should be taxable.
However, generally, a commission agent under APMC Act makes supplies
on behalf of an agriculturist who is not a taxable person if he supplies
produce out of cultivation of land 12 [as seen above].
Thus, a commission agent, who is making supplies on behalf of non-
taxable person [viz. agriculturist], is not liable for compulsory
registration under this provision.
11
As per the APMC Act, the commission agent is a person who buys or sells the agricultural
produce on behalf of his principal, or facilitates buying and selling of agricultural produce on
behalf of his principal and receives, by way of remuneration, a commission or percentage upon
the amount involved in such transaction.
12
in terms of section 23(1)(a)
(ii) Further, since the services provided by the commission agent for sale/
purchase of agricultural produce are exempt from GST 13, such
commission agents are not liable to be registered in accordance with
provisions of section 23(1)(a) [as discussed above].
(iii) However, where a commission agent is liable to pay tax under reverse
charge, such an agent will be required to get registered compulsorily (We
have already seen under previous heading that persons liable to pay tax
under reverse charge are required to obtain registration mandatorily).
The provisions of section 23 can be summarized in the following diagram:
ILLUSTRATION 1
Examine, with reason, whether registration is required, under CGST Act, in the
following independent cases:
(i) Aadhav Computers of Gujarat is providing computer maintenance service.
Aggregate turnover of Aadhav Computers is ` 15 lakh which comprises both
inter-State and intra-State supply.
(ii) Soft Wings of West Bengal, exclusively trading in garments, supplies its
taxable goods in various States of India from its outlet in West Bengal.
Aggregate turnover of Soft Wings is ` 35 lakh.
ANSWER
(i) Registration is compulsory for suppliers engaged in inter-State supply.
However, as per Notification No. 10/2017 IT dated 13.10.2017, threshold
exemption of ` 20 lakh [` 10 lakh in case of Special Category States of
13
vide Notification No. 12/2017 CT (R) dated 28.06.2017 [Discussed in Chapter 4 –
Exemptions from GST]
8.26
Mizoram, Tripura, Manipur and Nagaland] is available in case of inter-State
supply of taxable services.
Therefore, Aadhav Computers (aggregate turnover ` 15 lakh) is not required
to obtain registration even though it is engaged in inter-State supply of
taxable services.
(ii) The threshold limit for registration in the State of West Bengal for the
persons engaged exclusively in supply of goods, is ` 40 lakh. However,
registration is compulsory if the supplier is engaged inter-State supply of
goods irrespective of the quantum of aggregate turnover. The threshold
exemption is not available in case of inter-State supply of taxable goods.
Thus, Soft Wings is required to obtain registration.
ILLUSTRATION 2
Examine whether the liability to register compulsorily under section 24 arises in
each of the independent cases mentioned below:
(1) Meenu, a supplier in Maharashtra, is exclusively engaged in supply of
potatoes produced out of cultivation of her own land, within Maharashtra and
also outside Maharashtra.
(2) Jinu Oils, Gujarat, is engaged in supplying machine oil as well as petrol.
Further, it provides services of refining of oil to customers. Total turnover of
supply of machine oil is ` 10 lakh, supply of petrol is ` 5 lakh and supply of
services is ` 6 lakh.
(3) Tilu is working as an agent, he is supplying taxable goods as an agent of Tiku
(who is registered taxable person) and its aggregate turnover does not exceed
` 20 lakh during the financial year.
ANSWER
(1) Section 24 provides that persons making any inter-State taxable supply of
goods are required to obtain registration compulsorily under GST laws
irrespective of the quantum of aggregate turnover.
However, as per section 23, an agriculturist, to the extent of supply of
produce out of cultivation of land, is not liable to registration.
Meenu is exclusively engaged in cultivation and supply of potatoes. Thus,
she is not liable to registration irrespective of the fact that she is engaged in
making inter-State supply of goods. Further, Meenu will not be liable to
registration, in the given case, even if her turnover exceeds the threshold
limit.
(2) Section 24 specifies the categories of persons who are required to be
mandatorily registered under GST irrespective of the quantum of their
aggregate turnover.
In the given case, Jinu Oils does not fall in any of the specified categories.
Therefore, it is not required to obtain registration compulsorily under GST.
However, as per section 22 read with Notification No. 10/2019 CT dated
07.03.2019, a supplier is liable to be registered in the State/Union territory
from where he makes a taxable supply of goods and/or services, if his
aggregate turnover in a financial year exceeds the threshold limit. The
threshold limit for a person making supply of both goods and services is
` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland and
` 20 lakh for the rest of India. Thus, the applicable threshold limit for the
State of Gujarat is ` 20 lakh for supply of both goods and services. Further,
aggregate turnover includes exempted turnover of goods or services.
Accordingly, Jinu Oils is liable obtain registration since its aggregate
turnover [` 21 lakh (including turnover of exempt supply of petrol)] exceeds
the threshold limit of ` 20 lakh.
(3) Section 24 provides that persons who make taxable supply of goods and/or
services on behalf of other taxable persons whether as an agent or
otherwise are required to obtain registration compulsorily under GST laws
irrespective of the quantum of aggregate turnover.
Therefore, Tilu will be mandatorily required to obtain registration.
STATUTORY PROVISIONS
Sub-section Particulars
8.28
Union territory in which he is so liable within thirty days from
the date on which he becomes liable to registration, in such
manner and subject to such conditions as may be prescribed.
Provided that a casual taxable person or a non-resident taxable
person shall apply for registration at least five days prior to the
commencement of business.
Provided further that a person having a unit, as defined in the
Special Economic Zones Act, 2005, in a Special Economic Zone or
being a Special Economic Zone developer shall have to apply for
a separate registration, as distinct from his place of business
located outside the Special Economic Zone in the same State or
Union territory.
(4) A person who has obtained or is required to obtain more than one
registration, whether in one State or Union territory or more than
one State or Union territory shall, in respect of each such registration,
be treated as distinct persons for the purposes of this Act
(6C) On and from the date of notification, every person, other than an
individual, shall, in order to be eligible for grant of registration,
undergo authentication, or furnish proof of possession of
Aadhaar number of the Karta, Managing Director, whole time
Director, such number of partners, Members of Managing
Committee of Association, Board of Trustees, authorised
representative, authorised signatory and such other class of
persons, in such manner, as the Government may, on the
recommendation of the Council, specify in the said notification.
8.30
Provided that where such person or class of persons have not
been assigned the Aadhaar Number, such person or class of
persons shall be offered alternate and viable means of
identification in such manner as the Government may, on the
recommendations of the Council, specify in the said notification.
(8) Where a person who is liable to be registered under this Act fails
to obtain registration, the proper officer may, without prejudice
to any action which may be taken under this Act or under any
other law for the time being in force, proceed to register such
person in such manner as may be prescribed
8.32
(2) A casual taxable person or a non-resident taxable person shall,
at the time of submission of application for registration under
sub-section (1) of section 25, make an advance deposit of tax in
an amount equivalent to the estimated tax liability of such
person for the period for which the registration is sought.
Provided that where any extension of time is sought under
sub-section (1), such taxable person shall deposit an additional
amount of tax equivalent to the estimated tax liability of such
person for the period for which the extension is sought.
ANALYSIS
Procedure for registration is governed by section 25 read with relevant CGST
Rules. Relevant provisions of CGST Rules have been incorporated at the relevant
places. Further, special provisions have been provided for registration of casual
taxable person and non-resident taxable person under section 27. Concept of
deemed registration has been elaborated under section 26. Under GST, the
application for registration has to be submitted electronically at the GST Common
Portal – www.gst.gov.in, duly signed or verified.
A large number of forms/formats relating to registration have been prescribed in
the CGST Rules. For every process in the registration chain such as application for
registration, acknowledgment, query, rejection, registration certificate, show cause
notice for cancellation, reply, cancellation, amendment, field visit report etc., there
are separate standard formats 14. This makes the process uniform all over the
country. The decision-making process has also been expedited. Strict time-lines
have been stipulated for completion of different stages of registration process.
14
Students are advised to go through various forms/formats relating to registration at
http://www.gst.gov.in. for knowledge purposes.
8.34
to another registered place of business, of such person and issue
a tax invoice/bill of supply, for such supply. Separate
registration application needs to be filed for each place of
business.
A registered person opting to obtain separate registration for a
place of business shall submit a separate application in
Form GST REG 01 in respect of such place of business.
The provisions of rules 9 and 10 [Discussed in subsequent paras]
relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(17) Meethalal & Sons - a supplier in Maharshtra - has three
branches in Mumbai, Pune and Mahabaleshwar. Mumbai and
Pune branches are engaged in supply of garments and
Mahabaleshwar branch engaged in supply of shoes. Either it can obtain
single registration for Mahrashtra declaring one of the branches as PPoB
(let’s say Mumbai) and other two branches (Pune and Mahabaleshwar) as
APoB or it can obtain separate GST registration for each of the three
branches in Mumbai, Pune and Mahabaleshwar as separate places of
business.
In case Meethalal & Sons opts to have separate registrations for its all
three branches and Mumbai branch sends some garments [subject to
GST] for sale to Pune branch, Mumbai branch must raise a tax invoice
and pay tax on such transfer of garments to Pune branch.
(C) Composition levy in case of separate registration for multiple
places of business within a State/UT
If a person is paying tax for one of his places of business under
normal scheme, he shall not pay tax under composition levy for any
other place of business.
If one of the places of business [separately registered] of a
registered person becomes ineligible to pay tax under
composition levy, all other registered places of business of said
person would also become ineligible to pay tax under
composition levy.
The provisions of rules 9 and 10 [Discussed in subsequent paras]
relating to verification and grant of registration shall mutatis
mutandis apply to an application submitted under this rule.
(vi) Unique Identity Number (UIN) [Section 25(9) & (10) read with rule 17]
Any specialized agency of the United Nations Organization or
any Multilateral Financial institution and organization as notified
under the United Nations (Privileges and Immunities) Act, 1947,
consulate or embassy of foreign countries and any other person notified by
the Commissioner, is required to obtain a UIN from the GSTN portal.
This UIN is needed for claiming refund of taxes paid on notified
supplies of goods and/or services received by them, and for such
other purpose as may be notified. UIN granted is a centralized
UIN i.e. it shall be applicable to the territory of India. A person
having UIN is not registered person and thus, is not a taxable person.
8.36
The proper officer may, upon submission of an application in prescribed form
or after filling up the said form or after receiving a recommendation from the
Ministry of External Affairs, Government of India, assign a UIN to the said
person and issue a certificate in Form GST REG 06 within 3 working days
from the date of submission of application.
(vii) Suo-motu registration by the proper officer [Section 25(8) read with rule 16]
Where, pursuant to any survey, enquiry, inspection, search or any other
proceedings under the Act, the proper officer finds
that a person liable to registration under the Act** Temporary
has failed to apply for such registration, such officer registration
may register the said person on a temporary basis
and issue an order in prescribed form.
**Such person shall either:
(i) submit an application for registration in prescribed form within 90
days from the date of grant of temporary registration, or
(ii) file an appeal against such temporary registration.
In case (ii), if the Appellate Authority upholds the liability to registration,
application for registration shall be submitted within 30 days from the date of
issuance of such order of the Appellate Authority.
Provisions relating to verification and issue of registration certificate [as
contained in rules 9 and 10] [discussed in subsequent paras] shall, mutatis
mutandis, apply to such application submitted by the person granted
temporary registration. GSTIN thereafter granted shall be effective from the
date of order of proper officer granting temporary registration.
(viii) Procedure for registration [Section 25 read with rules 8, 9 & 10]
Provisions relating to procedure for application for registration, verification
of the application and approval & issue of registration certificate are
contained in the rules 8, 9 and 10 respectively. The same have to be read in
conjunction with section 25 provisions. The procedure for registration
prescribed under rules 8, 9 and 10 are also applicable to a person paying tax
under composition levy, every person seeking voluntary registration as well
as a casual taxable person.
However, procedure so laid down will not apply to:
8.38
Procedure for registration has been depicted by way of a diagram below:
Every person liable to get registered and person seeking voluntary registration shall, before
applying for registration, declare his Permanent Account Number (PAN), mobile number,
e-mail address, State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN, mobile number PAN validated online by Mobile number and email
& e-mail address are Common Portal from verified through one time
validated. CBDT database password sent to it.
The procedure after receipt of application by the Proper Officer is depicted in Part II.
Part II
8.40
✮ Deemed Approval of Application
If the proper officer fails to take any action in the following cases within the
stipulated time, the application for grant of registration shall be deemed to
have been approved-
in case where registration is to be
granted after physical verification
of the premises of a person (i) who
fails to undergo the aadhaar •within a period of 30 days from the
authentication/does not opt for date of submission of the
aadhaar authentication or (ii) application
since proper officer deems it fit to
carry out physical verification of
places of business
in cases where proper officer •within 7 working days from the date
issues notice seeking of receipt of clarification,
clarification, information or information or documents furnished
documents from the applicant by the applicant
15
While opting for Aadhaar authentication, the applicant needs to select atleast 1 Primary
Authorized Signatory and 1 Promoter/ Partner/Karta/Director/Member for authentication
purposes.
8.42
Existing registrants
All the regular taxpayers and composition taxpayer are required to get
Aadhaar authenticated for existing GST registration. An existing taxpayer
can get himself Aadhaar authenticated on GST portal using either Aadhaar
authentication link or uploading E-KYC documents 16.
A. Persons required to undergo aadhaar authentication
As per section 25(6A), (6B) and (6C), following persons are required to
undergo aadhaar authentication:
(i) New applicant
Every (i) individual applicant or (ii) an applicant, other than an
individual, shall undergo authentication/furnish proof of
possession of Aadhaar number, in the manner prescribed in
rule 8 17. Rule 8(4A) provides that where an applicant opts for
authentication of Aadhaar number, he shall, while submitting an
application for registration, undergo authentication of Aadhaar
number. Said authentication is required to be eligible for grant
of registration.
Date of submission of the application in such cases shall be
earlier of:
(a) the date of authentication of the Aadhaar number,
or
(b) 15 days from the submission of the application in Part B of
Form GST REG-01.
In case applicant is an individual, he shall undergo
authentication of his own aadhaar number.
In case applicant is other than individual, the authentication will
be of aadhaar number of the Karta, Managing Director, whole
time Director, such number of partners, Members of Managing
16
It is not mandatory for every authorized signatory, promoter or partner to get Aadhaar
authenticated for an existing GST registration. The Aadhaar authentication will be needed only
for 1 Primary Authorized Signatory and 1 Promoter/ Partner/ Karta/ Director/ Member.
17
vide Notification No. 18/2020 CT dated 23.03.2020
18
vide Notification No. 19/2020 CT dated 23.03.2020
19
Provisos to section 25(6B) and 25(6C) read with Notification No.s 18 and 19/2020 CT both
dated 23.03.2020
8.44
Further, in such cases, i.e. where a person fails to undergo
Aadhaar authentication/does not opt for Aadhaar
authentication or PO deems it fit to carry out site verification,
the notice (in prescribed form) seeking clarifications/
information/ documents from the applicant may be issued by
the proper officer not later than 30 days from the submission
of the application for registration [Proviso to rule 9(2)].
(ii) In case of an already registered persons
If an Aadhaar number is not assigned to an existing registered
person, such person shall be offered alternate and viable means
of identification in the prescribed manner 20.
In case of failure to undergo aadhaar authentication/furnish
proof of possession of Aadhaar number/furnish alternate and
viable means of identification, registration allotted to such
person shall be deemed to be invalid and the other provisions of
this Act shall apply as if such person does not have a
registration 21.
C. Persons/class of persons exempt from aadhaar authentication
Section 25(6D) stipulates that above provisions shall not apply to such
person or class of persons or any State or Union territory or part thereof,
as may be notified.
Following persons have been notified in this regard 22:
A person who is not a citizen of India
Department or establishment of State Government or Central
Government
Local authority
Statutory body
Public Sector Undertaking
A person applying for Unique Identity Number under section
25(9)
20
First proviso to section 25(6A)
21
Second proviso to section 25(6A)
22
vide Notification No. 03/2021 CT dated 23.02.2021
23
Provisions relating to TDS and TCS have been discussed in detail at Final level.
8.46
Identification Number (hereinafter referred to as “GSTIN”) i.e. the GST
registration no. is communicated to applicant, within 3 days after the grant
of registration.
GSTIN format
State Code PAN Entity Check sum
Code character
Display of registration certificate and GSTIN on the name board [Rule 18]
Every registered person shall display his registration certificate in a
prominent location at his PPoB and at every APoB. Further, his GSTIN also
has to be displayed on the name board exhibited at the entry of his PPoB
and at every APoB.
(ix) Effective date of registration [Rule 10]
ILLUSTRATION 3
Determine the effective date of registration under CGST Act in respect of the
following cases with proper explanation:
(i) The aggregate turnover of Varun Industries of Mumbai has exceeded
` 40 lakh on 1st August. Varun Industries manufactures LED TVs in
Mumbai and sells them in Pune. It submits the application for
registration on 20th August. Registration certificate granted on
25th August.
(ii) Sweta InfoTech Services is the provider of internet services in Pune. Its
aggregate turnover exceeds ` 20 lakh on 25th September. It submits the
application for registration on 27th October. Registration certificate is
granted on 5th November.
ANSWER
As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a
supplier is liable to be registered in the State/Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover
in a financial year exceeds the threshold limit. The threshold limit for a
person making exclusive intra-State taxable supplies of goods is as under:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(b) ` 20 lakh for the States of States of Arunachal Pradesh, Meghalaya,
Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India. However, the higher threshold limit of
` 40 lakh is not available to persons engaged in making supplies of ice
cream and other edible ice, whether or not containing cocoa, Pan
masala and Tobacco and manufactured tobacco substitutes.
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
(a) ` 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
8.48
registration is the date on which the person becomes liable to registration;
otherwise it is the date of grant of registration.
In the light of the above provisions, in the given cases, the applicable
turnover limit for registration will be ` 40 lakh and ` 20 lakh respectively in
case (i) and (ii).
(i) Since Varun Industries applied for registration within 30 days of
becoming liable to registration, the effective date of registration is
1st August.
(ii) Since Sweta InfoTech Services applied for registration after the expiry
of 30 days from the date of becoming liable to registration, the
effective date of registration is 5th November.
(x) Special provisions for grant of registration in case of Non-Resident
Taxable Person (NRTP) and Casual Taxable Person (CTP) [Sections 25 &
27 read with rules 13 & 15]
(A) Meaning of casual taxable person and non-resident taxable
person
Before going into nuances of the registration provisions of CTP and
NRTP, let us first understand the meaning of casual taxable person
and non-resident taxable person:
Casual Taxable Person
There may be case where a person has a
registered business in some State in
India, but wants to effect supplies from
some other State in which he does not
have any fixed place of business. Such
person needs to register in the State from where he seeks to supply as
a ‘casual taxable person’.
CGST Act defines a casual taxable person as a person who
occasionally undertakes transactions involving supply of goods or
services or both in the course or furtherance of business, whether as
principal, agent or in any other capacity, in a State/UT where he has
no fixed place of business [Section 2(20)]. Further, he cannot exercise
the option to pay tax under composition levy.
8.50
them or period of operation is extended, only after they make advance
deposit of the estimated tax liability. The special registration
procedure pertaining to CTP and NRTP are as follows:
(A) Both CTP 24 and NRTP have to compulsorily get registered under
GST irrespective of the threshold limit, at least 5 days prior to
commencement of business.
(B) As per section 25(6), every person must have a PAN to be
eligible for registration. Since NRTP will generally not have a
PAN of India, he may be granted registration on the basis of
other prescribed documents.
Thus, a NRTP has to submit a self-attested copy of his valid
passport along with the application signed by his authorized
signatory who is an Indian Resident having valid PAN. However,
in case of a business entity incorporated or established outside
India, the application for registration shall be submitted along
with its tax identification number or unique number on the basis
of which the entity is identified by the Government of that
country or its PAN, if available.
Application will be submitted by NRTP in a different prescribed form
whereas CTP will submit the application for registration in the normal
form for application for registration i.e. Form GST REG 01 and his
registration of CTP will be a PAN based registration.
(C) Period of validity of registration certificate granted to CTP/NRTP
Registration Certificate granted to
CTP/NRTP will be valid for:
CTP and NRTP will
(i) Period specified in the registration
make taxable
application, or
supplies only after
(ii) 90 days from the effective date of the issuance of the
registration [can be extended certificate of
further by a period not exceeding registration.
90 days by making an application
before the end of the validity of
registration granted to him**]
24
Subject to exemption from registration under Notification No. 56/2018 CT dated 23.10.2018
whichever is earlier.
Provisions relating to verification of application and grant of
registration [under rules 9 and 10] will apply mutatis mutandis, to an
application for registration filed by NRTP.
(D) Advance deposit of tax
At the time of submitting the registration application, CTP/NRTP are
required to make an advance deposit of tax in an amount equivalent
to the estimated tax liability of such person for the period for which
the registration is sought.
Further, CTP/NRTP will get a Temporary Reference Number (TRN) for
making an advance deposit of tax which shall be credited to his
electronic cash ledger. An acknowledgement of receipt of application
for registration is issued only after said deposit.
**Where extension of time is sought, CTP/NRTP will deposit an additional
amount of tax equivalent to the estimated tax liability of such person for
the period for which the extension is sought.
(xi) Deemed registration [Section 26]
Registration under GST is not tax specific, which means that there is single
registration for all the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
Grant of registration/UIN under any SGST Act/ UTGST Act is deemed to be
registration/UIN granted under CGST Act provided application for
registration has not been rejected under CGST Act.
Further, rejection of application for registration/UIN under SGST Act/UTGST
Act is deemed to be rejection of application for registration under CGST Act.
8.52
In case the change is in core information in the registration application, the
taxable person will apply for amendment within 15 days of the event
necessitating the change. The proper officer, then, will approve the amendment
within next 15 days.
For other changes – non-core information, no approval of the proper officer is
required, and the amendment can be affected by the taxable person on his own
on the common portal.
The provisions relating to amendment of registration are contained in section 28
read with rule 19.
The significant aspects of the same are discussed hereunder:
Where there is any change in the particulars furnished in registration
application/UIN application, registered person shall submit an application in
prescribed manner, either at the time of obtaining registration or Unique
Identity Number or as amended from time to time, within 15 days of such
change, along with documents relating to such change at the Common
Portal.
In case of amendment of core fields of information, the proper officer
may, on the basis of information furnished or as ascertained by him,
approve or reject amendments in the registration particulars in the
prescribed manner. Such amendment shall take effect from the date of
occurrence of event warranting such amendment.
However, where change relates to non-core fields of information,
registration certificate shall stand amended upon submission of the
application for amendment on the Common Portal.
The proper officer shall not reject the application for amendment in the
registration particulars without giving the person an opportunity of being
heard.
Any rejection or approval of amendments under the SGST/UTGST Act shall
be deemed to be a rejection or approval under the CGST Act.
Any particular of the application for registration shall not stand amended
with effect from a date earlier than date of submission of application for
amendment on common portal except with order of Commissioner for
reasons to be recorded in writing and subject to conditions specified by
Commissioner in the said order.
Mobile no./e-mail address of authorised signatory can be amended only after online
verification through GST Portal.
8.54
Submission of
Core areas application within 15
days of change
Registered
Person/ UIN
GST
holder
Common Portal
Non-core areas
Permission to be
granted within next 15 No
Registration certificate days
amended Is PO of the opinion
that amendment is
unwarranted/
Yes documents furnished
PO will serve an SCN why
are incomplete/
application for amendment
within 15 working days of incorrect?
should not be rejected?
receipt of application
No If reply is Yes
satisfactory?
Application for amendment
shall be rejected.
within 7 working days of
receipt of reply
9. CANCELLATION OR SUSPENSION OF
REGISTRATION AND REVOCATION OF
CANCELLATION [SECTIONS 29 & 30]
STATUTORY PROVISIONS
Section 29 Particulars
8.56
(a) the business has been discontinued, transferred fully for
any reason including death of the proprietor,
amalgamated with other legal entity, demerged or
otherwise disposed of
(2) The proper officer may cancel the registration of a person from such
date, including any retrospective date, as he may deem fit, where,––
Provided that the proper officer shall not cancel the registration
without giving the person an opportunity of being heard.
(3) The cancellation of registration under this section shall not affect
the liability of the person to pay tax and other dues under this Act
or to discharge any obligation under this Act or the rules made
thereunder for any period prior to the date of cancellation
whether or not such tax and other dues are determined before or
after the date of cancellation.
8.58
thirty days from the date of service of the cancellation order.
Provided that such period may, on sufficient cause being
shown, and for reasons to be recorded in writing, be
extended,—
(a) by the Additional Commissioner or the Joint
Commissioner, as the case may be, for a period not
exceeding thirty days;
(b) by the Commissioner, for a further period not
exceeding thirty days, beyond the period specified in
clause (a).
(2) The proper officer may, in such manner and within such period as
may be prescribed, by order, either revoke cancellation of the
registration or reject the application.
Provided that the application for revocation of cancellation of
registration shall not be rejected unless the applicant has been
given an opportunity of being heard.
ANALYSIS
The provisions relating to cancellation of registration and its revocation are
contained in sections 29 & 30 respectively read with rules 20 to 23. The
registration granted under GST can be cancelled for specified reasons. The
cancellation can either be initiated by the Department on their own motion or the
registered person can apply for cancellation of their registration.
--Business discontinued
Taxable person who is
--Transferred fully for
no longer liable to be
any reason including
death of the proprietor registered under
Change in the
section 22 or section
--Amalgamated with constitution of the
24 or who intends to
other legal entity business
optout of the
--Demerged or voluntary
--Otherwise disposed of registration.
8.60
25
Anti-profeetering measure shall be discussed at Final Level.
26
Provisions of section 16 have been discussed in detail in Chapter 6 – Input Tax Credit.
27
Provisions of rule 86B have been discussed in detail in Chapter 6 – Input tax credit.
8.62
2. Where cancellation of the registration has been initiated by
the Department on its own motion: Where the proper officer
has reasons to believe that the registration of a person is liable
to be cancelled, he may suspend the registration of such person
with effect from a date to be determined by him, pending the
completion of the proceedings for cancellation of registration.
Where, a comparison of the returns furnished by a registered
person under section 39 with:
(a) the details of outward supplies furnished in Form
GSTR-1; or
(b) the details of inward supplies derived based on the
details of outward supplies furnished by his suppliers in
their Form GSTR-1,
or such other analysis, as may be carried out on the
recommendations of the Council, show that there are
significant differences or anomalies indicating contravention
of the provisions of the CGST Act or the rules made
thereunder, leading to cancellation of registration of the
said person, his registration shall be suspended.
Said person shall be intimated in prescribed form by sending
a communication to his e-mail address provided at the time
of registration or as amended from time to time.
In this intimation for suspension and notice for cancellation of
registration, the said differences and anomalies are
highlighted and said person is asked to explain, within a period
of 30 days, as to why his registration shall not be cancelled.
In cases where the cancellation is initiated by the Department on
its own and registration of a person has been suspended, such
person shall not be granted any refund under section 54 28, during
the period of suspension of his registration.
3. A registered person, whose registration has been suspended as
above:
28
Section 54 contains provisions relating to refund of GST. The same shall be discussed at the
Final level.
29
under section 29(1)
8.64
payment, if any, made against such liability and may furnish relevant
documents thereof.
Order
Where a person who has submitted an application for cancellation of
his registration is no longer liable to be registered, proper officer shall
issue the order of cancellation of registration within 30 days from the
date of submission of application for cancellation.
(b) Suo-motu cancellation by the Department
Where the proper officer cancels the registration suo-motu, he shall
not cancel the same without giving a show cause notice and without
giving a reasonable opportunity of being heard, to the registered
person. The reply to such show cause notice (SCN) has to be
submitted within 7 days of service of notice.
If reply to SCN is satisfactory, proper officer shall drop the proceedings
and pass an order in prescribed form. However, where the person
instead of replying to the SCN served for failure to furnish returns for a
continuous period of 6 months (3 months in case of composition
scheme supplier) 30 furnishes all the pending returns and makes full
payment of the tax dues along with applicable interest and late fee, the
proper officer shall drop the proceedings and pass an order.
Where registration of a person is liable to be cancelled, proper officer
shall issue the order of cancellation of registration within 30 days from
the date of reply to SCN.
(c) Effective date of cancellation
The cancellation of registration shall be effective from a date to be
determined by the proper officer and mentioned in the cancellation
order. He will direct the taxable person to pay arrears of any tax,
interest or penalty including the amount liable to be paid under
section 29(5).
30
viz. contravention of the provisions contained in section 29(2)(b)/(c)
8.66
Amount of credit to be reversed in respect of CAPITAL GOODS OR
PLANT & MACHINERY:
(23) Capital goods have been in use for 4 years, 6 month and
15 days. The useful remaining life in months = 5 months
ignoring a part of the month.
ITC taken on such capital goods = C
ITC attributable to remaining useful life = C x 5/60
(iv) Other points about cancellation
A person to whom a UIN has been granted under rule 17 cannot apply
for cancellation of registration [Rule 20]
The cancellation of registration will not affect liability of registered
person to pay tax and other dues under the Act for any period prior to
the date of cancellation 31 [Section 29(3)].
(24) The proper officer cancelled the registration of
Naman Associates on 11th October. The tax dues of
Naman Associates for July-September quarter (determined
by the proper officer on 16th December) are ` 50,000. The
cancellation of registration of Naman Associates shall have no effect
on his liability of tax dues of ` 50,000 even though the tax dues are
determined after the cancellation of registration.
31
whether or not such tax and other dues are determined before or after the date of
cancellation.
8.68
(B) Where registration was cancelled for failure of registered person
to furnish returns
Where registration was cancelled for failure of registered person to
furnish returns, before applying for revocation, the person has to
make good the defaults, i.e. the person needs to file such returns and
pay any amount due as tax along with any amount payable towards
interest, penalty and late fee in respect of the said returns. However,
the registration may have been cancelled by the proper officer either
from the date of order of cancellation of registration or from a
retrospective date.
(1) Where the registration has been cancelled with effect from
the date of order of cancellation of registration
As we have already seen that the common portal does not allow
furnishing of returns for the period after the effective date of
cancellation, but returns for the earlier period (i.e. for the period
before date of cancellation mentioned in the cancellation order)
can be furnished after cancellation.
Where the registration is cancelled with effect from the date of
order of cancellation of registration, person applying for
revocation of cancellation has to furnish all returns due till the
date of such cancellation before the application for revocation
can be filed and has to pay any amount due as tax, in terms of
such returns along with any amount payable towards interest,
penalties or late fee payable in respect of the said returns.
However, since the portal does not allow to furnish returns for
the period after the date of cancellation of registration, all
returns due for the period from the date of order of cancellation
till the date of order of revocation of cancellation of registration
have to be furnished within a period of 30 days from the date of
the order of revocation.
(25) The registration of Naman Associates was
cancelled by the proper officer by an order dated
1st June for its failure to furnish returns. The
registration was cancelled with effect from 1st June
itself. It applied for revocation of cancellation of registration and
the order for revocation of cancellation of Naman Associates is
passed on 31st July. In this case, Naman Associates shall be
required to furnish all the returns for the period from 1st June to
31st July within a period of 30 days from 31st July, i.e. by 30th
August.
revocation of cancellation
Date from which returns
Date of order of
cancellation of
Date of order of
not furnished
of registration
registration
Effective date
of cancellation
of registration
8.70
required to furnish all the returns for the period from 1st January to
31st July within a period of 30 days from 31st July, i.e. by 30th
August.
of cancellation of registration
Date of order of revocation
not furnished
of registration
Effective date of
cancellation of
registration
Points to be noted
Registration under GST is not tax specific, i.e. single registration for all
the taxes i.e. CGST, SGST/UTGST, IGST and cesses.
8.72
Applicable threshold limit
•in every such State/UT in which he is •in every such State/UT in which he is
so liable so liable
•within 30 days from the date on •at least 5 days prior to the
which he becomes liable to commencement of business
registration
Application submitted
within 30 days of the •Effective date is the date on which he
applicant becoming liable becomes liable to registration
to registration
Application submitted
after 30 days of the •Effective date is date of grant of
applicant becoming liable registration
to registration
8.74
8. Procedure for registration
Procedure for registration has been depicted by way of a diagram as
follows:
Part I
Every person liable to get registered and person seeking voluntary registration shall,
before applying for registration, declare his PAN, mobile number, e-mail address,
State/UT in Part A of FORM GST REG-01 on GST Common Portal.
PAN, mobile number PAN validated online by Mobile number and email
& e-mail address are Common Portal from verified through one-time
validated. CBDT database password sent to it.
Part II
Proper Officer examines the application and accompanying documents.
8.76
9. Special procedure for registration of CTP and NRTP
GST law prescribes special procedure for registration, as also for extension of the
operation period of such Casual or Non-Resident taxable persons.
They have to apply for registration at least 5 days in advance before making any
supply.
Except for the changes in some core information in the registration application,
a taxable person shall be able to make amendments without requiring any
specific approval from the tax authority.
In case there is change in core fields of information, the taxable person will
apply for amendment within 15 days of the event necessitating the change.
The Proper Officer, then, will approve the amendment within the next 15 days.
Registration
can be Registration
--
--Business A registered person has
cancelled can be
discontinued/ contravened the prescribed
either by cancelled
proper Transferred/ provisions
by the
officer or on Amalgamated with
proper
an other legal entity/ A registered person has not
officer on
application Demerged or filed returns for continuous 6
his own
of the Otherwise disposed of months (3 months for
registered composition supplier)
person Change in the
constitution of the Voluntarily registered person
business has not commenced the
business within 6 months
Taxable person no from the date of registration
longer liable to be
Registration was obtained by
registered or intends
means of fraud, wilful
to opt out of
misstatement or suppression
voluntary registration
of facts
8.78
Once a registered person has applied for cancellation of registration or the proper officer
seeks to cancel his registration, proper officer may suspend his registration during
pendency of proceedings relating to cancellation of registration filed by such registered
person.
Registered person seeking cancellation shall PO shall issue a SCN to the registered
apply for the same within 30 days of person who has to reply to said notice
occurrence of the event warranting within 7 days.
cancellation, in prescribed form, furnishing
the details of inputs held in stock or inputs
contained in semi-finished/finished goods Proceedings shall be Cancellation
held in stock and of capital goods held in dropped order shall
stock on the date from which cancellation of be issued
registration is sought, liability thereon, within 30
payment, if any made & relevant documents. If reply Where instead of days of reply
to SCN replying to SCN, person to SCN
is furnishes all pending where
Proper officer (PO) shall issue the order satisfa returns & makes full registration
of cancellation within 30 days of ctory payment of tax along is liable to
submission of application for the same. with interest & late fee. be cancelled
Revocation of cancellation
In case where registration is cancelled suo-motu by the proper officer, the taxable person
can apply within 30 days (extendible by 30 days by Additional/Joint Commissioner and
by further 30 days by Commissioner) of service of cancellation order, requesting the
officer for revoking the cancellation ordered by him.
However, before so applying, the person has to make good the defaults (by filing all
pending returns, making payment of all dues and so) for which the registration was
cancelled by the officer.
If satisfied, the proper officer will revoke the cancellation earlier ordered by him.
However, if the officer concludes to reject the request for revocation of cancellation, he will
first observe the principle of natural justice by way of issuing notice to the person and
hearing him on the issue.
8.80
6. Examine whether the supplier of goods is liable to get registered in the
following independent cases:-
(i) Raghav of Assam is exclusively engaged in intra-State taxable supply of
readymade garments. His turnover in the current financial year (FY)
from Assam showroom is ` 33 lakh. He has another showroom in
Tripura with a turnover of ` 11 lakh in the current FY.
(ii) Pulkit of Panjim, Goa is exclusively engaged in intra-State taxable
supply of shoes. His aggregate turnover in the current financial year is
` 22 lakh.
(iii) Harshit of Himachal Pradesh is exclusively engaged in intra-State
supply of pan masala. His aggregate turnover in the current financial
year is ` 24 lakh.
7. Examine whether the supplier is liable to get registered in the following
independent cases:-
(i) Ankit of Assam is exclusively engaged in intra-State supply of taxable
services. His aggregate turnover in the current financial year is
` 25 lakh.
(ii) Sanchit of Assam is engaged in intra-State supply of both taxable goods
and services. His aggregate turnover in the current financial year is
` 30 lakh.
8. What are the advantage of taking registration in GST?
9. Can a person without GST registration collect GST and claim ITC?
10. If a person is making taxable supplies from different States, with the same
PAN number, can he operate with a single registration?
11. Can a person having multiple places of business in a State obtain separate
registrations for each place of business?
12. Is there a provision for a person to get himself voluntarily registered though
he may not be liable to pay GST?
13. Can the Department, through the proper officer, suo-moto proceed to register
a person under GST?
14. Whether the registration granted to any person is permanent?
15. Is it necessary for the UN bodies to get registration under GST?
12. ANSWERS/HINTS
1. (a) Every supplier becomes liable to registration if his turnover exceeds
the applicable threshold limit [` 40 lakh in this case] in a finacial year
[Section 22 read with Notification No. 10/2019 CT dated 07.03.2019].
Since in the given case, the turnover of Dhampur Industries exceeded
` 40 lakh on 1st September, it becomes liable to registration on said
date.
Further, since the application for registration has been submitted
within 30 days from such date, the registration shall be effective from
the date on which the person becomes liable to registration
[Section 25 read with rule 10]. Therefore, the effective date of
registration is 1st September.
(b) Since in the given case, the turnover of Mehta Teleservices exceeds
the applicable threshold limit [` 20 lakh] on 25th October, it becomes
liable to registration on said date.
Further, since the application for registration has been submitted after
30 days from the date such person becomes liable to registration, the
registration shall be effective from the date of grant of registration.
Therefore, the effective date of registration is 5th December.
8.82
2. A Permanent Account Number is mandatory to be eligible for grant of
registration. One exception to this is a non-resident taxable person. A non-
resident taxable person may be granted registration on the basis of other
prescribed documents instead of PAN. He has to submit a self-attested copy
of his valid passport along with the application signed by his authorized
signatory who is an Indian Resident having valid PAN and application will be
submitted in a different prescribed form [Section 25(6) & (7)].
3. (a) Section 22 stipulates that every supplier becomes liable to registration
if his turnover exceeds the applicable threshold limit in a financial
year. However, as per section 24, a person making taxable supply of
goods/services or both on behalf of other taxable persons whether as
an agent or not is liable to be compulsorily registered even if its
aggregate turnover does not exceed the applicable threshold limit
during the financial year.
(b) As per section 23, an agriculturist who is only engaged in supply of
produce out of cultivation of land is not required to obtain registration
even if his turnover exceeded the applicable threshold limit for
registration.
4. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a
supplier is liable to be registered in the State/Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover in a
financial year exceeds the threshold limit. The threshold limit for a person
making exclusive intra-State taxable supplies of goods is as under:-
(a) ` 10 lakh for the Special Category States of Mizoram, Tripura, Manipur
and Nagaland.
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,
Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India except persons engaged in making supplies of
ice cream and other edible ice, whether or not containing cocoa, Pan
masala and Tobacco and manufactured tobacco substitutes.
The threshold limit for a person making exclusive taxable supply of services
or supply of both goods and services is as under:-
(a) ` 10 lakh for the Special Category States of Mizoram, Tripura, Manipur
and Nagaland.
(b) ` 20 lakh for the rest of India.
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. Further, the aggregate turnover
excludes central tax, State tax, Union territory tax, integrated tax and cess.
Moreover, the value of inward supplies on which tax is payable under reverse
charge is not taken into account for calculation of ‘aggregate turnover’.
Section 9(2) provides that CGST is not leviable on five petroleum products i.e.
petroleum crude, motor spirit (petrol), high speed diesel, natural gas and
aviation turbine fuel. As per section 2(47), exempt supply includes non-
taxable supply. Thus, supply of high speed diesel in Delhi, being a non-
taxable supply, is an exempt supply and is, therefore, includible while
computing the aggregate turnover.
In the backdrop of the above-mentioned discussion, the aggregate turnover
of Pure Oils for the month of April is computed as under:
Pure Oils is making exclusive supply of goods and hence the threshold limit
for registration would be ` 40,00,000. Since the aggregate turnover does not
exceed ` 40,00,000, Pure Oils is not liable to be registered.
5. In case Pure Oils makes the supply in capacity of an agent of Mixed Oils
Ltd.:
Section 24 provides that an agent who is engaged in making taxable
supplying of goods on behalf of other taxable persons, shall be liable to
8.84
obtain registration irrespective of the threshold turnover limit. However, in
the present case, if Pure Oils supply high speed diesel on behalf of Mixed
Oil Ltd. in Delhi as its agent, it shall still not be liable to obtain registration
in Delhi since section 24 comes into play only when agent is making taxable
supply of goods on behalf of principal whereas in the given case, Pure Oils
is supplying non-taxable goods on behalf of Mixed Oils Ltd.
6. As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a
supplier is liable to be registered in the State/Union territory from where he
makes a taxable supply of goods and/or services, if his aggregate turnover
in a financial year exceeds the threshold limit. The threshold limit for a
person making exclusive intra-State taxable supplies of goods is as under:-
(a) ` 10 lakh for the Special Category States of Mizoram, Tripura, Manipur
and Nagaland.
(b) ` 20 lakh for the States, namely, States of Arunachal Pradesh,
Meghalaya, Puducherry, Sikkim, Telangana and Uttarakhand.
(c) ` 40 lakh for rest of India except persons engaged in making supplies
of ice cream and other edible ice, whether or not containing cocoa,
Pan masala and Tobacco and manufactured tobacco substitutes.
In the light of the afore-mentioned provisions, the answer to the
independent cases is as under:-
(i) Raghav is eligible for higher threshold limit of turnover for
registration, i.e. ` 40 lakh as he is exclusively engaged in intra-State
supply of goods. However, since Raghav is engaged in supplying
readymade garments from a Special Category State i.e. Tripura, the
threshold limit gets reduced to ` 10 lakh. Thus, Raghav is liable to get
registered under GST as his turnover exceeds `10 lakh. Further, he is
required to obtain registration in both Assam and Tripura as he is
making taxable supplies from both the States.
(ii) The applicable threshold limit for registration for Pulkit in the given
case is ` 40 lakh as he is exclusively engaged in intra-State taxable
supply of goods in Goa. Thus, he is not liable to get registered under
GST as his turnover is less than the threshold limit.
(iii) Harshit being exclusively engaged in supply of pan masala is not
eligible for higher threshold limit of `40 lakh. The applicable
threshold limit for registration in this case is `20 lakh. Thus, Harshit is
liable to get registered under GST.
8.86
11. Yes. In terms of the proviso to sub-section (2) of section 25, a person having
multiple places of buiness in a State may obtain a separate registration for
each place of business, subject to such conditions as may be prescribed.
12. Yes. In terms of sub-section (3) of section 25, a person, though not liable to
be registered under sections 22 or 24 may get himself registered voluntarily,
and all provisions of this Act, as are applicable to a registered taxable
person, shall apply to such person.
13. Yes. In terms of sub-section (8) of section 25, where a person who is liable
to be registered under GST law fails to obtain registration, the proper officer
may, without prejudice to any action which may be taken under CGST Act,
or under any other law for the time being in force, proceed to register such
person in the manner as is prescribed in the CGST Rules.
14. Yes, the registration certificate once granted is permanent unless
surrendered, cancelled, suspended or revoked.
15. In terms of section 25(9), all notified UN bodies, Consulate or Embassy of
foreign countries and any other class of persons so notified would be
required to obtain a unique identification number (UIN) from the GST
portal.
The structure of the said ID would be uniform across the States in
conformity with GSTIN structure and the same will be common for the
Centre and the States. This UIN will be needed for claiming refund of taxes
paid on notified supplies of goods and services received by them, and for
any other purpose as may be notified.
16. The taxable supplier making supplies to UN bodies is expected to mention
the UIN on the invoices and treat such supplies as supplies to another
registered person (B2B).
17. In terms of section 27(1) read with proviso thereto, the certificate of
registration issued to a “casual taxable person” or a “non-resident taxable
person” shall be valid for a period specified in the application for
registration or 90 days from the effective date of registration, whichever is
earlier. However, the proper officer, at the request of the said taxable
person, may extend the validity of the aforesaid period of 90 days by a
further period not exceeding 90 days.
18. In such cases, the registration may be cancelled with retrospective effect by
the proper officer [Section 29(2)(e)].
19. No, the tax paper has to take separate registration in every State from
where he makes taxable supply of services.
20. The transferee or the successor shall be liable to be registered with effect
from such transfer or succession and he will have to obtain a fresh
registration with effect from the date of such transfer or succession [Section
22(3)].
21. Yes. The principal place of business and place of business have been
separately defined under section 2(89) & 2(85) respectively. The taxpayer
will have to declare the principal place of business as well as the details of
additional places of business in the registration form.
22. Yes, as per section 29(5), every registered taxable person whose registration
is cancelled shall pay an amount, by way of debit in the electronic cash
ledger, equivalent to the credit of input tax in respect of inputs held in stock
and inputs contained in semi-finished or finished goods held in stock or
capital goods or plant and machinery on the day immediately preceding the
date of such cancellation or the output tax payable on such goods,
whichever is higher.
LEARNING OUTCOMES
This Chapter will equip you to –
❑ describe and analyse the provisions relating to tax invoice in case of taxable
supply of goods and in case of taxable supply of services - time-limit and
manner of issuing the same
❑ enumerate the particulars of a tax invoice
❑ understand the provisions relating to e-invoicing
❑ explain the provisions relating to revised tax invoice, bill of supply, receipt
voucher, refund voucher, payment voucher, etc.
❑ identify the cases where no tax invoice is required to be issued and identify
the suppliers of taxable service who are permitted to issue any document
other than tax invoice
❑ explain the provisions relating to transportation of goods without issuance
of invoice
❑ describe the provisions relating to issuance of credit and debit notes
❑ explain the provisions relating to prohibition of unauthorised collection of tax
❑ describe the provisions relating to amount of tax to be indicated in tax
invoice and other documents.
❑ explain the provisions of e-way bill
Revised Tax
Invoice
Consolidated
Tax Invoice
Tax Invoice, Credit and Debit Notes; E-way
Bill of Supply
Receipt
Tax invoice
Voucher
Payment
Credit and Debit notes
Voucher
Refund
Prohibition of unauthorised collection fo tax
Bill
Voucher
Amount of tax to be indicated in tax invoice Delivery
and other documents challan
E-way Bill
1. INTRODUCTION
An invoice is a commercial
instrument issued by a supplier of
goods/services to a recipient. It
identifies both the parties
recipient of the same. Tax invoice acts as a document evidencing the payment
of the value of the goods or services or both as also the tax portion in the same.
In certain cases, an invoice serves as a demand for payment and becomes a
document of title when paid in full.
Under the GST regime, an “invoice” or “tax invoice” means the tax invoice referred to
in section 31 of the CGST Act, 2017. This section mandates the issuance of an invoice
or a bill of supply for every supply of goods or services.
Under GST, a tax invoice is an important document. It not only evidences supply of
goods or services, but is also an essential document for the recipient to avail Input
Tax Credit (ITC). A registered person cannot avail input tax credit unless he is in
possession of a tax invoice or a debit note.
The provisions relating to tax invoices, debit and credit notes are contained in
Chapter VII - Tax Invoice, Credit and Debit Notes [Sections 31 to 34] of the CGST
Act and Chapter-VI: Tax Invoice, Credit and Debit Notes [Rules 46 to 55A] of
Central Goods and Services (CGST) Rules, 2017. Further, E-way Bill provisions
discussed in this chapter are contained in section 68 read with rules 138, 138A,
138B, 138C, 138D & 138E [Chapter XVI] of the CGST Rules, 2017. State GST laws
also prescribe identical provisions in relation to Tax Invoice; Credit and Debit
Notes; E-way Bill.
Provisions of Tax invoice; Credit and Debit Notes; E-way Bill under CGST Act
have also been made applicable to IGST Act vide section 20 of the IGST Act.
Before proceeding to understand the provisions of Tax Invoice, Credit and Debit
Notes, E-way Bill, let us first go through few relevant definitions.
2. RELEVANT DEFINITIONS
for which the supplier invoices the recipient on a regular or periodic basis and
STATUTORY PROVISIONS
ANALYSIS
The provisions relating to Tax Invoice are
provided under section 31 of the CGST Act as
well as Chapter-VI: Tax Invoice, Credit and Debit
Notes of Central Goods and Services (CGST)
Rules, 2017. The provisions contained in these
rules have been incorporated at the relevant
places.
There is no format prescribed for the Tax Invoice. Only certain fields have been
prescribed as mandatory fields.
A. TAX INVOICE ISSUED BY A SUPPLIER OF TAXABLE GOODS/ TAXABLE
SERVICES
A tax invoice shall be issued by a registered person supplying taxable goods
or taxable services or both. Such tax invoice shall show the prescribed
particulars.
(i) Time limit for issuance of invoice [Sections 31(1), (2), (4) & (5) read
with rule 47]
The time for issuing an invoice would depend on the
nature of supply viz. whether it is a supply of goods or
supply of services.
A registered person supplying taxable goods shall issue
a tax invoice, before or at the time of removal of goods (where supply
involves movement of goods) or in any other case, before or at the time of
delivery or making available thereof to the recipient.
(v) Number of HSN digits required on tax invoice and class of registered
person not required to mention HSN [Rule 46]
Board may, on the recommendations of the Council, by notification, specify:
(i) the number of digits of Harmonised System of Nomenclature (HSN)
code for goods or services that a class of registered persons shall be
required to mention; or
(ii) a class of supply of goods or services for which specified number of
digits of HSN code shall be required to be mentioned by all registered
taxpayers; and
(iii) the class of registered persons that would not be required to mention
the HSN code for goods or services.
This provision is also applicable to Bill of Supply [The concept of Bill of Supply
is discussed in subsequent paras].
In view of above powers, following has been notified vide Notification No.
12/2017 CT dated 28.06.2017 as amended:
1
in the manner prescribed under rule 48(4)
Triplicate Duplicate
Original copy
Original copy
Duplicate copy
Duplicate copy
Triplicate copy
The serial number of invoices issued during a tax period shall be furnished
electronically [through the Common Portal – www.gst.gov.in], in FORM
GSTR-1 [Details of outward Supplies of goods or services].
E-invoicing
‘E-invoicing' has been introduced for reporting of business to business
(B2B) invoices to GST System for certain notified category of taxpayers.
All registered businesses with an
aggregate turnover (based on
PAN) in any preceding financial
year from 2017-18 onwards greater
than ` 50 crore (hereinafter
referred to as ‘notified persons’)
will be required to issue e-
invoices. E-invoicing is not
voluntary; only notified persons are enabled to report invoices on IRP.
Presently, invoices, credit notes and debit notes, when issued by notified
persons (to registered persons (B2B) or for the purpose of exports) are
covered under
e-invoice. Though different
documents are covered, for
ease of reference and
understanding, the system is
referred as
‘e-invoicing’.
Advantages of e-invoicing
Last but not the least, e-invoicing will eliminate the fake invoices. Claiming
fictitious input tax credit (ITC) by raising fake invoices is also one of the
biggest challenges currently faced by tax-authorities. The
e-invoice system will help to curb the actions of unscrupulous taxpayers and
reduce the number of fraud cases as the tax authorities will have access to
data in real-time.
Rule 48(4) stipulates that the e-invoice shall be prepared by notified class of
registered persons, by uploading such particulars as contained in Form GST
INV-01 on the Common GST Electronic Portal 2 and obtain an IRN (Invoice
Reference Number), in prescribed manner and subject to prescribed
conditions and restrictions.
2
10 dedicated Invoice Reference Portals have been notified as Common Goods and Service Tax
(GST) Electronic Portal for the purpose of preparing e-invoice. These portals are enlisted in
subsequent paras.
3
Special Economic Zones and insurer or banking company or financial institution including
NBFC, GTA, supplier of passenger transportation service, person supplying services by way of
admission to exhibition of cinematograph films in multiplex screens.
4
vide Notification No. 13/2020 CT dated 21.03.2020 as amended
Thus, above mentioned entities are not required to issue e-invoices even if
their turnover exceeds ` 50 crore in the preceding financial year from
2017-18 onwards.
**It is important to note here that only SEZ units and not SEZ developers are
exempt from issuing e-invoices. Thus, SEZ developers whose turnover exceeds
` 50 crores in any preceding financial year from 2017-18 onwards are
mandatorily required to issue e-invoices. Further, in case of supplies made by
notified persons to SEZ units, e-invoices need to be issued.
Maharaja Private Limited has an SEZ unit and a regular DTA unit
(both having same PAN). The aggregate total turnover of
Maharaja Private Limited is more than ` 50 crores (considering
both the GSTINs). However, the turnover of DTA unit is ` 20 crores for
preceding financial year.
The taxpayer first prepares and generates his invoice using his own ERP/
accounting/ billing system or manual system5. The invoice must conform to
the e-invoice schema (standard notified format - discussed in detail
subsequent paras) and must have the mandatory parameters.
5
For entities not having their own ERP/Software solutions, they can use the free offline utility
(‘bulk generation tool’) downloadable from the e-invoice portal. Through this, invoice data can
be easily reported to IRP and obtain IRN/signed e-invoice
6
This IRN is same as that has been returned by the IRP to the seller.
generating e-way bills. These can be entered if available with seller, at the time
of generation of e-invoice so that e-way bill can be created using this data
without any further requirement of data entry by the user. The e-invoice
reporting software already allows reporting of e-invoice and generation of
e-way bill with same data.
Cancellation/amendment of reported invoice
Where needed, the seller can cancel IRN for an e-invoice already reported by
reporting it on IRP within specified time. Amendment of e-invoice already
uploaded on IRP will be done only on GST portal (while filing GSTR-1).
Amendment of invoices is not possible through the IRP.
Implications for businesses
As apparent from the above discussion, e-invoicing does not mean that the
invoice needs to be prepared/generated on the Government portal. It is
only intimating the Government portal that invoice has been issued to the
buyer, by registering that particular invoice on the Government portal.
Consequently, businesses will continue to issue invoices as they were doing
earlier. Necessary changes on account of e-invoicing requirement (i.e. to
enable reporting of invoices to IRP and obtain IRN), be made by
ERP/Accounting and Billing Software providers in their respective software.
They need to get the updated version having this facility.
Important terms
E-invoice Schema
Businesses use various accounting/billing software, each generating and
storing invoices in their own electronic formats. These different formats are
neither understood by GST System nor by the systems of suppliers and
receivers.
An invoice generated by SAP system cannot be read by a machine
which is using ‘Tally’ system, unless a connector is used. With
more than 300 accounting/billing software products, there was no
way to have connectors for all.
In this scenario, ‘e-invoicing’ was introduced aiming at machine-readability and
uniform interpretation. To ensure this complete ‘inter-operability’ of e-invoices
across the entire GST eco-system, an invoice standard is a must. By this,
e-invoices generated by one software can be read by any other software,
thereby eliminating the need of fresh/manual data entry. Since, there was no
such standard for e-invoice available earlier, as a first step, a standard format
for e-invoice has been finalized.
This uniform standard format (containing specified fields) applicable for all
the businesses across the country is known as ‘e-invoice schema’. It is
notified as Form GST INV-1. E-invoice schema mandates what particulars
shall be reported in electronic format to IRP. Invoice details in prescribed
schema to be reported to IRP in JSON format (JavaScript Object Notation).
‘JSON’ can be understood as a common language for systems/machines to
communicate between each other and exchange data.
Invoice Registration Portal (IRP)
IRP is the website for uploading/reporting of invoices by the notified persons.
Following IRPs have been notified for the purpose of preparation of the e-
invoice:
www.einvoice1.gst.gov.in
www.einvoice2.gst.gov.in
www.einvoice3.gst.gov.in
www.einvoice4.gst.gov.in
www.einvoice5.gst.gov.in
www.einvoice6.gst.gov.in
www.einvoice7.gst.gov.in
www.einvoice8.gst.gov.in
www.einvoice9.gst.gov.in
www.einvoice10.gst.gov.in
Invoice Reference Number
As seen earlier, GST invoice will be valid only with a valid IRN. IRN is
different from invoice number. Invoice no. (e.g. ABC/1/2019-20) is assigned
by supplier and is internal to business. Its format can differ from business
to business and also governed by relevant GST rules. IRN, on other hand, is
a unique reference number (hash) generated and returned by IRP, on
successful registration of e-invoice, for instance,
35054cc24d97033afc24f49ec4444dbab81f542c555f9d30359dc75794e06bbe
B. Interaction between the IRP and the GST/E-Way Bill Systems and
the Buyer.
Other points:
❑ The e-invoicing system is also available for the E-Commerce Operators
(ECO) to report the invoices to the Invoice Registration portal,
generated by them on behalf of the suppliers.
❑ Bulk uploading of invoices to IRP is also possible 7.
Quick Response (QR) code
Upon successful registration of invoice on IRP, it will
return a signed e-invoice to the supplier with IRN and
QR Code. IRN is embedded in the QR Code which shall
be extracted and printed on the invoice. The QR code
enables quick view, validation and access of the invoices
from the GST system from hand-held devices. The
digitally signed QR code will have a unique IRN which can be verified on the
central portal as well as by an offline app by the officer. This will be helpful
for tax officers checking the invoice offline on the roadside where internet
may not be available all the time.
The QR code consists of the following e-invoice parameters:
❑ GSTIN of supplier
❑ GSTIN of recipient
❑ Invoice number as given by supplier
❑ Date of generation of invoice
❑ Invoice value (taxable value and gross tax)
❑ Number of line items
❑ HSN code of main item (the line item having highest taxable value)
❑ Unique Invoice Reference Number (hash)
❑ Date of generation of IRN
7
Discussion on e-invoicing is primarily based on the relevant rules, notifications and FAQS on
e-invoicing hosted on GSTN website.
8
vide Notification No. 14/2020 CT dated 21.03.2020
9
Provisions relating to OIDAR services have been discussed at the Final level.
10
The discussion on Dynamic QR code is based primarily on sixth proviso to rule 46 alongwith
Notification No. 14/2020 CT dated 21.03.2020 and Circular no. 146/02/2021 GST dated
23.02.2021.
Supply 1
Supply 2
Mr.A Supply 3 Mr. B
Consolidated Revised
Registered Supply 4 Tax Invoice Unregistered
Supplier Recipient
Supplies between date of grant of certificate of registration & effective date of registration
Name and address of the recipient and the address of delivery, along with
the name of State and its code, if such recipient is un-registered;
Serial number and date of the corresponding tax invoice or, as the case
may be, bill of supply;
ILLUSTRATION 1
Luv & Kush Pvt. Ltd. of Meghalaya engaged in the supply of gifts items and
repair services, provides you the following details:-
The company seeks your advice as to how it should raise revised tax invoices for
supplies made. Is there any specific provision for issuance of revised tax invoices
to unregistered customers? Explain.
ANSWER
A supplier of both goods and services whose aggregate turnover in a
financial year exceeds ` 20 lakh in a State/UT [` 10 lakh in specified Special
Category States] is liable to apply for registration within 30 days from the
date of becoming liable to registration (i.e., the date of crossing the
threshold limit of ` 20 lakh/ ` 10 lakh) in terms of section 22. Since
Meghalaya is not a specified Special Category State, applicable threshold
limit is ` 20 lakh.
Further, where the application is submitted within said period, the effective
date of registration is the date on which the person becomes liable to
registration; otherwise it is the date of grant of registration.
Every registered person who has been granted registration with effect from
a date earlier than the date of issuance of registration certificate to him,
may issue revised tax invoices within 1 month from the date of issuance of
registration certificate in respect of taxable supplies effected during this
period i.e. from the effective date of registration till the date of issuance of
registration.
Since Luv & Kush Pvt. Ltd. has made the application for registration within
30 days of becoming liable for registration, the effective date of registration
becomes the date on which the company becomes liable to registration i.e.
5th September.
Thus, Luv & Kush Pvt. Ltd. may issue revised tax invoices against the
invoices already issued during the period between effective date of
registration (5th September) and the date of issuance of registration
certificate (6th October), within 1 month from 6th October.
Further, Luv & Kush Pvt. Ltd may issue a consolidated revised tax invoice in
respect of all taxable supplies made to unregistered dealers during such
period. However, in case of inter-State supplies made to unregistered
dealers, a consolidated revised tax invoice cannot be issued in respect of all
the recipients located in a State, if the value of a supply exceeds ` 2,50,000.
(ii) No Tax Invoice required to be issued if value < ` 200 – A consolidated
Tax Invoice can be issued [Section 31(3)(b) read with fourth proviso to
rule 46]
A registered person may not issue a Tax Invoice if:
(i) Value of the goods/services/both supplied < `200,
(ii) the recipient is unregistered; and
(iii) the recipient does not require such invoice.
Instead such registered person shall issue a Consolidated Tax Invoice for
such supplies at the close of each day in respect of all such supplies.
Thus, small taxpayers, like small retailers, doing a large number of small
transactions for upto a value of ` 200 per transaction to unregistered customers
need not issue invoice for every such transaction. They can issue one
consolidated invoice at the end of each day for all transactions done during the
day. However, they need to issue an invoice when the customer demands.
However, this option is not available to a supplier
engaged in making supply of services by way of
admission to exhibition of cinematograph films in
multiplex screens.
Above provision is also applicable to Bill of Supply.
ILLUSTRATION 2
Jain & Sons is a trader dealing in stationery items. It is registered under GST
and has undertaken following sales during the day:
composition levy, shall issue a bill of supply instead of a tax invoice 11.
Person opting for composition levy shall mention the words “composition
taxable person, not eligible to collect tax on supplies” at the top of the bill
of supply issued by him12.
11
Order No. 3/2019 CT dated 08.03.2019 has stipulated that a person paying tax under
Notification No. 2/2019 will also issue a bill of supply instead of tax invoice.
12
Fourth proviso to rule 49 stipulates that the Bill of supply shall have a Quick Response Code.
However the same is not yet made effective.
Rate of tax (central tax, State tax, integrated tax, Union territory tax or
cess);
Place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce;
(i) rate of tax is not tax shall be paid at the rate of 18%
determinable
Advance payment
Receipt Voucher
Supply
Tax Invoice
Supplier Recipient
Refund Voucher
Rate of tax (central tax, State tax, integrated tax, Union territory tax or
cess)
(vi) Invoice and Payment Voucher [Section 31(3)(f) & (g) read with second
proviso to rule 46 and rule 52]
The recipient is liable to pay tax on reverse charge basis
where he receives supply of such goods/services/both
which are notified for reverse charge purposes under
section 9(3). Such supplies can be received from a
registered or an unregistered supplier.
Further, a builder/promoter is required to pay GST on reverse charge basis
under section 9(4) in one or more of the following cases:
(i) A builder/promoter must purchase 80% of inputs and input services
used in supplying the service from registered persons. In case of
shortfall, he’s required to pay tax under reverse charge on all such
inward supplies (to the extent short of 80% of the inward supplies
from registered supplier).
(ii) Where cement is received from an unregistered person,
promoter/builder has to pay tax on supply of such cement on reverse
charge basis and
(iii) GST on capital goods is payable by the promoter on reverse charge
basis.
Invoice to be issued by recipient if he is liable to pay tax under
section 9(3)/(4) and receives supplies from an unregistered person
A registered person who is liable to pay tax under reverse charge [under
section 9(3)/9(4) of the CGST Act] shall issue an Invoice in respect of goods
or services or both received by him from the supplier who is not registered
on the date of receipt of goods or services or both. Thus, a recipient liable
to pay tax by virtue of section 9(3) has to issue invoice only when supplies
have been received from an unregistered supplier.
Payment voucher to be issued by recipient at the time of making
payment if he is liable to pay tax under section 9(3)/(4)
Besides, a registered person who is liable to pay tax
under reverse charge [under section 9(3)/9(4) of the
CGST Act] shall issue a Payment Voucher at the time of
making payment to the supplier.
Amount paid;
Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
Place of supply along with the name of State and its code, in case of a
supply in the course of inter-State trade or commerce; and
Other information as
prescribed for a tax invoice,
under rule 46
Delivery challan
Rule 55 specifies the cases where at the time of removal of goods, goods
may be removed on delivery challan and invoice may be issued after
delivery. These are provided in the following table:
Duplicate copy
Triplicate copy
(d) the original copy of the invoice shall be sent along with the last
consignment.
Goods may be moved within the State/from the State of registration to
another State for supply on approval basis and art works may be sent
by artists to galleries for exhibition on delivery challan along with
e-way bill wherever applicable
Suppliers of jewellery etc. who are registered in one State may have to visit
other States (other than their State of registration) and need to carry the
goods (such as jewellery) along for approval. In such cases if jewellery etc.
is approved by the buyer, then the supplier issues a tax invoice only at the
time of supply.
Since the suppliers are not able to ascertain their actual supplies
beforehand and while ascertainment of tax liability in advance is a
mandatory requirement for registration as a casual taxable person, the
supplier is not able to register as a casual taxable person. Such goods are
also carried within the same State for the purposes of supply.
In view of relevant provisions of rule 55, it is clarified that the goods which are
taken for supply on approval basis can be moved from the place of business
of the registered supplier to another place within the same State or to a
place outside the State on a delivery challan along with the e-way bill
wherever applicable and the invoice may be issued at the time of delivery of
goods.
For this purpose, the person carrying the goods for such supply can carry
the invoice book with him so that he can issue the invoice once the supply
is fructified [Circular No. 10/10/2017 GST dated 18.10.2017].
Likewise, in case where artists supply art works in different States - other
than the State in which they are registered as a taxable person and if the art
work is selected by the buyer, then the supplier issues a tax invoice only at
the time of supply, it is clarified that the art work for supply on approval
basis can be moved from the place of business of the registered person
(artist) to another place within the same State or to a place outside the
State on a delivery challan along with the e-way bill wherever applicable
and the invoice may be issued at the time of actual supply of art work
[Circular No. 22/22/2017 GST dated 21.12.2017].
STATUTORY PROVISIONS
ANALYSIS
(i) Issuance of Credit Note: During the course of trade or commerce, after the
invoice has been issued, there can be situations like:
❑ The supplier has erroneously declared a value which is more than the
actual value of the goods or services provided.
❑ The supplier has erroneously declared a higher tax rate than what is
applicable for the kind of the goods or services or both supplied.
❑ The quantity received by the recipient is less than what has been
declared in the tax invoice.
❑ The quality of the goods or services or both supplied is not to the
satisfaction of the recipient thereby necessitating a partial or total
reimbursement on the invoice value
❑ Any other similar reasons.
In order to regularize these kinds of situations, the supplier is allowed to
issue a document called as credit note to the recipient. Once the credit
note has been issued, the tax liability of the supplier will reduce.
The credit note is a convenient and legal method by which the value of the
goods or services in the original tax invoice can be amended or revised.
The issuance of the credit note easily allows the supplier to decrease his tax
liability in his returns without requiring him to undertake any tedious
process of refunds.
Section 34(1) provides that where one or more tax invoices have been
issued for supply of any goods or services or both and the taxable value or
tax charged in that/those tax invoice(s) is found to exceed the taxable value
or tax payable in respect of such supply, or where the goods supplied are
returned by the recipient, or where goods or services or both supplied are
found to be deficient, the registered person, who has supplied such goods
or services or both, may issue to the recipient one or more credit notes for
supplies made in a financial year containing the prescribed particulars.
It is important to note that credit note(s) are not
permitted to be issued in case secondary discounts13 are Secondary
allowed by the supplier since the tax liability of the discounts
supplier does not get reduced in such case. However,
supplier can issue financial/ commercial credit note(s) to reduce the value of
supply payable by the recipient to the supplier [Circular 92/11/2019 GST
dated 07.03.2019].
(ii) Issuance of Debit Note: There can be situations when after the invoice has
been issued:
❑ The supplier has erroneously declared a value which is less than the
actual value of the goods or services or both provided.
❑ The supplier has erroneously declared a lower tax rate than what is
applicable for the kind of the goods or services or both supplied.
❑ The quantity received by the
Debit note shall include a
recipient is more than what has
been declared in the tax invoice. supplementary invoice.
13
Secondary discounts are the discounts which are not known at the time of supply/are offered
after the supply is already over. These discounts are not excluded from the value of supply since
conditions laid down in section 15(3)(b) are not satisfied. Provisions of section 15 have been
discussed in detail in Unit-II of Chapter 5- Time and Value of Supply.
Section 34(3) provides that where one or more tax invoices have been
issued for supply of any goods or services or both and the taxable value or
tax charged in that tax invoice is found to be less than the taxable value or
tax payable in respect of such supply, the registered person, who has
supplied such goods or services or both, shall issue to the recipient one or
more debit notes for supplies made in a financial year containing the
prescribed particulars.
The issuance of a debit note/supplementary invoice creates additional tax
liability. The treatment of a debit note/supplementary invoice is identical to
the treatment of a tax invoice as far as returns and payment are concerned.
The debit note/supplementary invoice is a convenient and legal method by
which the value of the goods and/or services in the original tax invoice can
be enhanced. The issuance of the debit note allows the supplier to pay his
enhanced tax liability in his returns without requiring him to undertake any
other tedious process.
(iii) Details of Debit Note/Credit Note to be declared in return
I. Credit Note:
Any registered person who issues a credit note in
relation to a supply of goods or services or both
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:
(i) September following the end of the financial year in which such
supply was made,
or
(ii) the date of furnishing of the relevant annual return,
whichever is earlier.
The tax liability shall be adjusted in such manner as may be
prescribed. However, no reduction in output tax liability of the
supplier shall be permitted, if the incidence of tax and interest on such
supply has been passed on to any other person.
II. Debit Note:
Any registered person who issues a debit note in relation to a supply
of goods or services or both shall declare the details of such debit
note in the return for the month during which such debit note has
been issued. The tax liability shall be adjusted in such manner as may
be prescribed.
III. Particulars of the Debit and Credit Notes [Rule 53(1A)]
There is no prescribed format, but credit and debit note issued by a
supplier must contain the following particulars, namely:–
ILLUSTRATION 3
Kartik & Co., a registered supplier under GST, provides the following
information regarding various tax invoices issued by it during the month of
March:
(i) Value of supply charged in invoice no. 1 was ` 2,50,000 against the
actual taxable value of ` 2,30,000.
(ii) Tax charged in invoice no. 4 was ` 32,000 against the actual tax liability
of ` 68,000 due to wrong HSN code being chosen while issuing invoice.
(iii) Value charged in invoice no. 8 was ` 3,20,000 as against the actual
value of ` 4,20,000 due to wrong quantity considered while billing.
Kartik & Co. asks you to answer the following:
(1) Who shall issue a debit/credit note under CGST Act?
(2) Whether debit note or credit note has to be issued in each of the above
circumstances?
(3) What is the maximum time-limit available for declaring the credit note
in the GST Return?
ANSWER
(1) The debit/credit note shall be issued by the registered person who has
supplied the goods and/or services, i.e. Kartik & Co.
(2) Yes, debit/credit note need to be issued in each of the circumstances
as under:
(i) A credit note is required to be issued as the taxable value in
invoice no. 1 exceeds the actual taxable value.
(ii) A debit note is required to be issued as the tax charged in the
invoice no. 4 is less than the actual tax payable.
(iii) A debit note is required to be issued as the value of supply
charged in the invoice no. 8 is less than the actual value.
(3) The details of the credit note cannot be declared later than the return
for the month of 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.
No registered person shall collect tax except in accordance with the provisions
of this Act or the rules made thereunder.
Rujuta is engaged in providing grooming services. She is not registered
under GST law as her turnover is below the threshold limit. Rujuta cannot
collect tax on the grooming services provided by her as a person who is
not a registered person cannot collect any amount by way of tax under this Act in
respect of any supply of goods or services or both.
Statutory requirement
Section 68 stipulates that the Government may require the person in charge of a
conveyance carrying any consignment of goods of value exceeding such amount as
may be specified to carry with him such documents and such devices as may be
prescribed. Rule 138 prescribes e-way bill as the document to be carried for the
consignment of goods in certain prescribed cases.
What is e-way bill?
A waybill is a receipt or a document issued by a carrier giving details and
instructions relating to the shipment of a consignment of goods and the details
include name of consignor, consignee, the point of origin of the consignment, its
destination, and route.
Electronic Way Bill (E-Way Bill) is a compliance mechanism wherein by way of a
digital interface the person causing the movement of goods uploads the relevant
information prior to the commencement of movement of goods and generates e-
way bill on the GST portal. In other words, E-way bill is an electronic document
generated on the GST portal evidencing movement of goods.
What are the benefits of e-way bill?
Following are the benefits of e-way bill mechanism:
(i) Physical interface to pave way for digital interface resulting in elimination of
state boundary check-posts
(ii) It will facilitate faster movement of goods
(iii) It will improve the turnaround time of trucks and help the logistics industry
by increasing the average distances travelled, reducing the travel time as
well as costs.
14
As clarified by CBIC FAQs on E-way Bill.
of goods is for reasons other than supply, the value given in the delivery
challan is adopted for the purposes of the e-way bill. Such value does not
exceed ` 50,000. Consequently, e-way bill is not required to be issued in this
case.
Special situations where e-way bill needs to be issued even if the value
of the consignment is less than ` 50,000:
(i) Inter-State transfer of goods by principal to job-worker
Where goods are sent by a principal located in one State or Union
territory to a job worker located in any other State or Union territory,
the e-way bill shall be generated either by the principal or the job
worker, if registered, irrespective of the value of the consignment
[Third proviso to rule 138(1)].
(ii) Inter-State transfer of handicraft goods by a person exempted
from obtaining registration
Where handicraft goods* are transported from one State or Union
territory to another State or Union territory by a person who has been
exempted from the requirement of obtaining registration [under
clauses (i) and (ii) of section 24], the e-way bill shall be generated by
the said person irrespective of the value of the consignment [Fourth
proviso to rule 138].
*Handicraft goods are the goods specified in Notification No.
56/2018 CT dated 23.10.2018 which exempts the casual taxable
persons making inter-State taxable supplies of such handicraft goods
from obtaining registration upto specified turnover limit [Refer
Chapter 7 – Registration].
E-way Bill in case of ‘Bill To Ship To’ Model
In a “Bill To Ship To” model of supply, there are three persons involved in a
transaction, namely:
‘A’ is the person who has ordered ‘B’ to send goods directly to ‘C’.
‘B’ is the person who is sending goods directly to ‘C’ on behalf of ‘A’.
‘C’ is the recipient of goods.
In this complete scenario. two supplies are involved and accordingly two tax
invoices are required to be issued:
Invoice -1: which would be issued by ‘B’ to ‘A’.
Invoice -2: which would be issued by ‘A’ to ‘C’.
It is clarified that as per the CGST Rules, 2017, for the movement of goods
which is taking place from “B” to “C” on behalf of “A”, either A or B can
generate the e-Way Bill, but it may be noted that only one e-Way Bill is
required to be generated [Press Release dated 23.04.2018]
(2) Information to be furnished in e-way bill:
An e-way bill Form GST EWB-01 contains two parts:
(I) Part A [comprising of details of GSTIN of supplier & recipient, place of
delivery (indicating PIN Code also), document (Tax invoice, Bill of
Supply, Delivery Challan or Bill of Entry) number and date, value of
goods, HSN code, and reasons for transportation, etc.]: to be
furnished by the registered person** who is causing movement of
goods of consignment value exceeding ` 50,000 and
(II) Part B (transport details) [Transporter document number (Goods
Receipt Number or Railway Receipt Number or Airway Bill Number or
Bill of Lading Number) and Vehicle number, in case of transport by
road]: to be furnished by the person who is transporting the goods.
**However, information in Part-A may be furnished:
✓ by the transporter, on an authorization received from such registered
person [First proviso to rule 138(1)] or
✓ by the e-commerce operator or courier agency, where the goods to be
transported are supplied through such an e-commerce operator or a
courier agency, on an authorization received from the consignor
[Second proviso to rule 138(1)].
Once the consignor/consignee enters all the details in Part-A of e-way bill, a
Part-A slip is generated which contains a temporary number. This slip can
be shared with the transporter or used by the supplier himself later to enter
the details in Part-B of e-way bill and generate the e-way bill.
This will be useful, when supplier has prepared invoice relating to his
business transaction, but doesn’t have the transportation details. Thus, he
can enter invoice details in Part A of e-way bill and keep it ready for
entering details of mode of transportation in Part B of e-way bill.
Once the goods are ready for movement from the business premises and
transportation details are known, the user can enter the Part-B details and
generate the e-way bill for movement of goods. E-way Bill can be
generated only after entering the details of Part-B.
(3) Who is mandatorily required to generate e-way bill?
E-way bill is to be generated by the consignor or consignee himself if the
transportation is being done in own/hired conveyance or by railways by air
or by vessel. If the goods are handed over to a transporter for
transportation by road, e-way bill is to be generated by the transporter.
Where neither the consignor nor consignee generates the e-way bill and the
value of goods is more than ` 50,000, it shall be the responsibility of the
transporter to generate it. This has been explained in detail below:
❑ Where the goods are transported by a registered person -
whether as consignor or recipient as the consignee (whether in his
own conveyance or a hired one or a public conveyance, by road), the
said person shall have to generate the e-way bill (by furnishing
information in part B on the common portal) [Rule 138(2)].
❑ Where the e-way bill is not generated by the registered person
and the goods are handed over to the transporter, for
transportation of goods by road, the registered person shall furnish
the information relating to the transporter in Part B on the common
portal and the e-way bill shall be generated by the transporter on the
said portal on the basis of the information furnished by the registered
person in Part A [Rule 138(3)].
❑ Where the goods are transported by railways or by air or by
vessel, the e-way bill shall be generated by the registered person,
being the supplier or the recipient, who shall, either before or after the
15
Explanation 2 to rule 138(3)
16
Third proviso to rule 138(3)
17
Proviso to rule 138(5)
On reaching City Y, Transporter A will assign the said e-way bill to the
Transporter B. Thereafter, Transporter B will be able to update the details of
Part B. Transporter B will fill the details of his vehicle and move the goods from
City Y to City Z [Press Release No. 144/2018 dated 31.03.2018].
(7) Consolidated E-way bill
After e-way bill has been generated, where multiple consignments are
intended to be transported in one conveyance, the transporter may indicate
the serial number of e-way bills generated in respect of each such
consignment electronically on the common portal and a consolidated e-way
bill in Form GST EWB-02 may be generated by him on the said common
portal prior to the movement of goods [Rule 138(6)].
Consolidated e-way bill is a document containing the multiple e-way bills
for multiple consignments being carried in one conveyance (goods vehicle).
That is, the transporter carrying multiple consignments of various
consignors and consignees in a single vehicle can generate and carry a
single document - consolidated e-way bill instead of carrying separate
document for each consignment in a conveyance.
Consolidated EWB is like a trip sheet and it contains details of different
e-way bills in respect of various consignments being transported in one
vehicle and these e-way bills will have different validity periods.
Hence, Consolidated EWB does not have any independent validity period.
Further, individual consignment specified in the Consolidated EWB should
reach the destination as per the validity period of the individual EWB.
Further, where the consignor/consignee has not generated the e-way bill in
Form GST EWB-01 and the aggregate of the consignment value of goods
carried in the conveyance is more than ` 50,000, the transporter, except in
case of transportation of goods by railways, air and vessel, shall, in respect
of inter-State supply, generate the e-way bill in Form GST EWB-01 on the
basis of invoice or bill of supply or delivery challan, as the case may be, and
may also generate a consolidated e-way bill in Form GST EWB-02 on the
common portal prior to the movement of goods [Rule 138(7)].
However, where the goods to be transported are supplied through an
e-commerce operator or a courier agency, the information in Part A of Form
GST EWB-01 may be furnished by such e-commerce operator or courier
agency [Proviso to rule 138(7)]. This provision is not yet effective.
(8) Information submitted for e-way bill can be used for filing GST Returns
The information furnished in Part A of the e-way bill shall be made
available to the registered supplier on the common portal who may utilize
the same for furnishing the details in Form GSTR-1 [Rule 138(8)].
However, when the information has been furnished by an unregistered
supplier/unregistered recipient, he shall be informed electronically, if the
mobile number or the e-mail is available [Proviso to rule 138(8)].
(9) Cancellation of e-way bill
Where an e-way bill has been generated, but goods are either not
transported or are not transported as per the details furnished in the e-way
bill, the e-way bill may be cancelled electronically on the common portal
within 24 hours of generation of the e-way bill [Rule 138(9)].
However, an e-way bill cannot be cancelled if it has been verified in transit
in accordance with the provisions of rule 138B [First proviso to rule 138(9)].
Further, unique EWB number generated is valid for a period of 15 days for
updation of Part B [Second proviso to rule 138(9)].
(10) Validity period of e-way bill/consolidated e-way bill [Rule 138(10)]
The validity of e-way bill depends on the distance to be travelled by the
goods. For a distance of less than 200 km the e-way bill will be valid for a
day from the relevant date. For every 200 km thereafter, the validity will be
additional one day from the relevant date.
*Relevant date means the date on which the e-way bill has been generated
and the period of validity shall be counted from the time at which the e-way
bill has been generated and each day shall be counted as the period
expiring at midnight of the day immediately following the date of
generation of e-way bill.
This can be explained by following examples –
(i) Suppose an e-way bill is generated at 00:04 hrs. on 14th March. Then
first day would end on 12:00 midnight of 15 -16 March. Second day will
end on 12:00 midnight of 16 -17 March and so on.
(ii) Suppose an e-way bill is generated at 23:58 hrs. on 14th March. Then
first day would end on 12:00 midnight of 15 -16 March. Second day will
end on 12:00 midnight of 16 -17 March and so on18.
The validity of the e-way bill starts when first entry is made in Part-B i.e.
vehicle entry is made first time in case of road transportation or first
transport document number entry in case of rail/air/ship transportation,
whichever is the first entry. It may be noted that validity is not re-calculated
for subsequent entries in Part-B19.
A consignor hands over his goods for transportation on Friday to
transporter. However, the assigned transporter starts the movement
of goods on Monday. The validity period of e-way bill starts only
after the details in Part B are updated by the transporter for the first time.
18
As clarified by FAQs on E-way Bill by CBIC.
19
As clarified by FAQs on E-way Bill web portal.
In the given situation, consignor can fill the details in Part A on Friday and
handover his goods to the transporter. When the transporter is ready to move
the goods, he can fill Part B i.e. the assigned transporter can fill the details in
Part B on Monday and the validity period of the e-way bill will start from
Monday [CBIC Press Release dated 31.03.2018].
A registered person has to transport goods from its warehouse to
its depot located at a distance of 500 km. In the given case, if
e-way bill is generated, it will be valid for 3 days.
**Over dimensional cargo means a cargo carried as a single indivisible unit
and which exceeds the dimensional limits prescribed in rule 93 of the
Central Motor Vehicle Rules, 1989, made under the Motor Vehicles
Act, 1988.
Extension of validity period
If validity of the e-way bill expires, the goods are not supposed to be
moved. In general, the validity of the e-way bill cannot be extended
However, the validity of the e-way bill can be extended in following cases:
Extension by Commissioner for certain categories of goods:
Commissioner may, on the recommendations of the Council, by notification,
extend the validity period of an e-way bill for certain categories of goods as
may be specified therein.
Thus, the transporter, who is carrying the consignment as per the e-way bill
system at the time of expiry of validity period, can extend the validity
period. Such transporter can extend the validity of the e-way bill, if the
consignment is not being reached the destination within the validity period
due to exceptional circumstance like natural calamity, law and order issues,
trans-shipment delay, accident of conveyance, etc. He needs to explain this
reason in details while extending the validity period 20. The validity of the
e-way bill may be extended within 8 hours from the time of its expiry.
20
As clarified by FAQs on E-way Bill web portal.
📝 Points to remember
1. E-way bill is not valid for movement of goods without vehicle number on it.
2. If there is a mistake, incorrect or wrong entry in the e-way bill, then it
cannot be edited or corrected. Only option is cancellation of e-way bill
within 24 hours of generation and generate a new one with correct details.
3. E- Way Bill may be updated with vehicle number any number of times.
4. The latest vehicle number should be available on e-way bill and should
match with the vehicle carrying it in case checked by the department.
5. If multiple invoices are issued by the supplier to recipient, that is, for
movement of goods of more than one invoice of same consignor and
consignee, multiple e-way bills have to be generated. That is, for each
invoice, one e-way bill has to be generated, irrespective of the fact whether
same or different consignors or consignees are involved. Multiple invoices
cannot be clubbed to generate one e-way bill. However, after generating all
these e-way bills, one Consolidated e-way bill can be prepared for
transportation purpose, if goods are going in one vehicle.
6. Currency
21
vide Notification No. 2/2017 CT(R) dated 28.06.2017
22
Provisions of Schedule III have been discussed in detail in Chapter 2 – Supply under GST.
(i) where the goods being transported are transit cargo from or to Nepal
or Bhutan
(j) where the goods being transported are exempt from tax under
Notification No. 7/2017 CT (R) 28.06.2017 [Supply of goods by the CSD to
the Unit Run Canteens or to the authorized customers and supply of
goods by the Unit Run Canteens to the authorized customers] and
Notification No. 26/2017 CT (R) 21.09.2017 [Supply of heavy water and
nuclear fuels by Department of Atomic Energy to Nuclear Power
Corporation of India Ltd. (NPCIL)]
(k) any movement of goods caused by defence formation under Ministry of
defence as a consignor or consignee
(l) where the consignor of goods is the Central Government, Government
of any State or a local authority for transport of goods by rail
(m) where empty cargo containers are being transported
(n) where the goods are being transported upto a distance of 20 km from
the place of the business of the consignor to a weighbridge for
weighment or from the weighbridge back to the place of the business
of the said consignor subject to the condition that the movement of
goods is accompanied by a delivery challan issued in accordance with
rule 55.
(o) where empty cylinders for packing of liquefied petroleum gas are being
moved for reasons other than supply
(14) Documents and devices to be carried by a person-in-charge of a
conveyance [Section 138A]
The person-in-charge of a conveyance shall carry -
(a) the invoice or bill of supply or delivery challan, as the case may be; and
(b) a copy of the e-way bill in physical form or the e-way bill number in
electronic form* or mapped to a RFID** embedded on to the conveyance
In such a case, the registered person will not have to upload the information
in Part A of e-way bill for generation of e-way bill and the same shall be
auto-populated by the common portal on the basis of the information
furnished in the prescribed form.
The Commissioner may, by notification, require a class of transporters to
obtain a unique RFID and get the said device embedded on to the
conveyance and map the e-way bill to the RFID prior to the movement of
goods.
Documents in lieu of e-way bill
23
In case of imported goods, the person in charge of a conveyance shall also carry a copy of the
bill of entry filed by the importer of such goods and shall indicate the number and date of the
bill of entry in Part A of e-way bill. The concept of bill of entry filed in respect of imported
goods under customs law will be discussed at Final Level.
24
in the manner prescribed under sub-rule (4) of rule 48
25
Bill of entry needs to be carried in lieu of e-way bill in case of import of goods. The concept of
bill of entry will be discussed at Final Level.
The period of 24 hours or, as the case may be, 3 days shall be counted from
the midnight of the date on which the vehicle was intercepted.
Where the physical verification of goods being transported on any
conveyance has been done during transit at one place within the
State/Union territory or in any other State/Union territory, no further
physical verification of the said conveyance shall be carried out again in the
State/Union territory, unless a specific information relating to evasion of tax
is made available subsequently.
(17) Facility for uploading information regarding detention of vehicle
[Rule 138D]
Where a vehicle has been intercepted and detained for a period exceeding
30 minutes, the transporter may upload the said information in specified
form on the common portal.
(18) Blocking of e-waybill generation facility [Rule 138E]
Blocking of e-waybill generation facility means disabling a taxpayer from
generating the e-way bill. A user will not be able to generate e-way bill for
a GSTIN if the said GSTIN is not eligible for e-way bill generation as per
rule 138E. The GSTINs of such blocked taxpayers cannot be used to
generate the e-way bills either as consignor or consignee.
As per rule 138E, no person (including a consignor, consignee, transporter,
an e-commerce operator or a courier agency) shall not be allowed to furnish
the information in Part A of Form GST EWB-01 in respect of following
registered persons, whether as a supplier or a recipient:
(i) A person paying tax under composition scheme 26 has not furnished
the statement for payment of self-assessed tax for 2 consecutive
quarters, or
(ii) A person paying tax under regular scheme has not furnished the
returns for a consecutive period of 2 tax periods, or
26
or under Notification No. 2/2019 CT (R) dated 07.03.2019
(iii) A person paying tax under regular scheme has not furnished GSTR-1
(Statement of outward supplies) for any 2 months or quarters, as the
case may be.
(iv) A person whose registration has been suspended under the
provisions of rule 21A of the CGST Rules.
However, Commissioner (jurisdictional commissioner) may, on receipt of an
application from a registered person in prescribed form, on sufficient cause
being shown and for reasons to be recorded in writing, by order, in
prescribed form allow furnishing of the said information in Part A of
Form GST EWB-01, subject to prescribed conditions and restrictions. An
order rejecting said request shall not be passed without giving the said
person a reasonable opportunity of being heard. The permission granted or
rejected by the Commissioner of State tax or Commissioner of Union
territory tax shall be deemed to be granted or, as the case may be, rejected
by the Commissioner.
8. LET US RECAPITULATE
1. Who can raise a tax invoice?
Registered Person
Receiving taxable goods or
Supplying taxable goods or
services from unregistered
services
supplier
Taxable supply
Goods Services
Name &
Consecutive GSTIN of
GSTIN of address of
Serial Number recipient, if
supplier recipient, if not
& date of issue registered
registered
Description of
Quantity in Total Value of
HSN goods or
case of goods supply
services
Tax rate –
Central tax &
Taxable Value Amount of tax
State tax or Place of supply
of supply charged
Integrated tax,
cess
Address of
Tax payable on Signature of
delivery where
reverse charge authorised
different than
basis signatory
place of supply
Triplicate Duplicate
4. E-invoicing
A. Class of persons mandatorily required to issue e-invoice [Notified
Taxpayers]
B. Important terms
E-invoice schema
Uniform standard
format
containing mandatory
specified fields to be
reported in electronic
format to IRP
website
for uploading or reporting of invoices
by notified persons
C. Advantages of e-invoicing
E-way bill
GST System
system
by reporting IRN
Cancellation of
allowed by seller on IRP within
reported invoice
specified time.
Consolidated Tax
Invoice shall be
Value of supply < `200
issued for such
be issued
7. Bill of Supply
Registered Person
8. Receipt Voucher
Advance payment
Supplier Recipient
Receipt Voucher
(i) rate of tax is not determinable tax shall be paid at the rate of 18%
9. Refund Voucher
Advance payment
Receipt Voucher
Tax Invoice
Refund Voucher
Payment Voucher
Recipient will issue a Payment Voucher at the time of making payment to supplier.
Invoice
Supplier is Supplier is
Supplier is
unregistered unregistered
registered
Where one or more tax invoices have issued for supply of any goods or services
or both
Consolidated E-way After e-way bill has been generated, where multiple
Bill in case of road consignments are intended to be transported in one
transport conveyance, the transporter may indicate the serial
number of e-way bills generated in respect of each
such consignment electronically on the common portal
and a consolidated e-way bill in Form GST EWB-02
may be generated by him on the said common portal
4. Shyam Fabrics has opted for composition levy scheme in the current financial
year. It has approached you for advice whether it is mandatory for it to issue
a tax invoice. You are required to advise him regarding same.
5. Royal Fashions, a registered supplier of designer outfits in Delhi, decides to
exhibit its products in a Fashion Show being organised at Hotel Park Royal,
Delhi on 4th January. For the occasion, it gets the service by way of
makeover of its models from Aura Beauty Services Ltd., Ashok Vihar, for which
a consideration is ` 5,00,000 (excluding GST) has been charged. Aura Beauty
Services Ltd. issued a duly signed tax invoice on 10th February showing the
lumpsum amount of ` 5,90,000 inclusive of CGST and SGST @ 9% each for
the services provided. Answer the following questions:
(i) Examine whether the tax invoice has been issued within the time limit
prescribed under law.
(ii) Tax consultant of Royal Fashions objected to the invoice raised
suggesting that the amount of tax charged in respect of the taxable
supply should be shown separately in the invoice raised by Aura Beauty
Services Ltd. However, Aura Beauty Services Ltd. contended that there is
no mandatory requirement of showing tax component separately in the
invoice. You are required to examine the validity of the objection raised
by tax consultant of Royal Fashions.
6. Kidzee Toys Ltd., a wholesaler of toys registered in Chandigarh, is renowned
in the local market for the variety of toys and their reasonable prices. Kidzee
Toys Ltd. makes supply of 100 pieces of baby’s learning laptops and chat
learning phones to Nancy General Store on 25 th September by issuing a tax
invoice amounting to ` 1,00,000.
However, the said toys were returned by Nancy General Store on 30 th September.
Discuss which document Kidzee Toys Ltd. is required to issue in such a case?
7. Rana Sanga Ltd., a registered supplier, has made following taxable supplies to
its customer Babur in the quarter ending 30 th June.
10. ANSWERS/HINTS
1. As per the provisions of section 31, invoice shall be issued before or at the
time of removal of goods for supply to the recipient, where the supply
involves movement of goods. Accordingly, in the given case, the invoice
must be issued on or before 29 th September.
2. Continuous supply of service means, inter alia, supply of any service which
is provided, or agreed to be provided continuously or on recurrent basis,
under a contract, for a period exceeding 3 months with the periodic
payment obligations.
Therefore, the given situation is a case of continuous supply of service as
repair and maintenance services have been provided by MBM Caretakers on
a quarterly basis, under a contract, for a period of one year with the
obligation for quarterly payment.
In terms of section 31, in case of continuous supply of service, where due
date of payment is ascertainable from the contract (as in the given case),
invoice shall be issued on or before the due date of payment.
Therefore, in the given case, MBM Caretakers should issue quarterly invoices
on or before April 1, July 1, October 1, and January 1.
3. As per section 25 read with CGST Rules, where an applicant submits
application for registration within 30 days from the date he becomes liable
to registration, effective date of registration is the date on which he
becomes liable to registration. Since, Sangri Services Ltd.’s turnover
8. Yes. Chidanand Products Pvt. Ltd. may not issue a bill of supply if the value
of the goods or services or both supplied is less than ` 200 subject to the
condition that:
(a) the recipient is not a registered person; and
(b) the recipient does not require such bill of supply,
and he shall issue a consolidated bill of supply for such supplies at the close
of each day in respect of all such supplies.
9. The statement is not valid in law. As per the CGST Rules, where a registered
person is supplying taxable as well as exempted goods or services or both
to an unregistered person, a single “invoice-cum-bill of supply” may be
issued for all such supplies.
10. The said statement is valid in law. A customer may avail numerous services
from a non-banking financial company in a given tax period. It may issue a
consolidated tax invoice/ statement/ advice, any other document in lieu
thereof, by whatever name called may be issued/ made available,
physically/ electronically, for supply of services made during a month at
the end of the month.
11. A registered person supplying taxable goods shall issue a tax invoice, before
or at the time of removal of goods for supply to the recipient, where the
supply involves movement of goods.
Therefore, in the given case, invoice has to be issued on or before,
11th October (the time of removal of goods).
12. A registered person [other than an insurer/banking company/financial
institution, including an NBFC] supplying taxable services shall issue a tax
invoice before or after the provision of service, but within a period of 30
days from the date of supply of service.
Thus, in the given case, invoice has to be issued within 30 days of 5th June
(date of supply of service), i.e. on or before, 5th July.
13. Udai Singh is required to issue a receipt voucher at the time of receipt of
advance payment with respect to services to be supplied to Sujamal. A
receipt voucher is a document evidencing receipt of advance money
towards a supply of goods and/or services or both. A registered person, on
receipt of advance payment with respect to any supply of goods or services
PAYMENT OF TAX
Examples/Illustrations/Questions and Answers given in the Chapter are based on the
position of GST law existing as on 30.04.2021
LEARNING OUTCOMES
After studying this Chapter, you will be able to –
describe three kinds of ledgers/register to be maintained by
the taxable person-electronic cash ledger, electronic credit
ledger and electronic liability register.
understand the methodology of cross utilization of credit.
comprehend and apply the chronological order in which the
liability of a taxable person has to be discharged.
identify and analyse the circumstances in which penal
interest is levied.
procedure for transfer of input tax credit between Central
and State Government
Relevant Definitions
1. INTRODUCTION
In the GST regime, for any intra-state supply, taxes to be paid are the Central GST
(CGST), going into the account of the Central
Government and the State GST(SGST)/UTGST, going
into the account of the concerned State Government.
For any inter-state supply, tax to be paid is Integrated
GST (IGST) having components of both CGST and
SGST. In addition, certain categories of registered persons will be required to pay
to the Government account tax deducted at source (TDS) and tax collected at
source (TCS) 1. In addition, wherever applicable, interest, penalty, fees and any
other payment will also be required to be made.
The introduction of E-ledgers is a unique feature under the GST regime. Electronic
Ledgers or E-Ledgers are of two types. One set is prepared and updated by the Tax
payer – Electronic Cash Ledger and Electronic Credit Ledger. Second set is prepared
and updated on the basis of returns furnished by the Registered person or Tax
authority i.e. Electronic Liability register.
Once a taxpayer is registered on common portal (GSTN), two e-ledgers (Cash & Input
Tax Credit ledger) and an electronic tax liability register will be automatically opened
and displayed on his dash board at all times.
Chapter X of the CGST Act, 2017 prescribes the provisions relating to payment of tax
containing sections 49 to 53A. Bird’s eye view of coverage under these sections is as
under-
section 49 discusses the three ledgers namely the electronic cash ledger,
electronic credit ledger and electronic liability register,
section 50 discusses about the interest on delayed payment of tax.
Section 51 lays down the circumstances in which tax deduction at source (TDS)
becomes mandatory.
Section 52 deals with the circumstances when tax is to be collected at source
(TCS) by the Electronic Commerce Operator.
Further, the manner of transfer of ITC is laid down in section 53 and
transfer of certain amounts is discussed in section 53A.
Chapter IX of CGST Rules, 2017 deals with provisions relating to payment of tax.
Provisions of payment of tax under CGST Act, 2017 have also been made
applicable to IGST Act, 2017 vide section 20 of the IGST Act, 2017.
Before proceeding to understand the provisions of section 49, 50, 53, 53A & the
relevant rules, let us first go through few relevant definitions.
1
It may be noted that sections 51 & 52 dealing with provisions relating to TDS & TCS will be
dealt in detail at the Final Level.
2. RELEVANT DEFINITIONS
Definitions
but does not include the tax paid under the composition levy [Section
2(62)].
Input Tax Credit means the credit of input tax [Section 2(63)].
local authority means-
a “Panchayat” as defined in clause (d) of article 243 of the
Constitution;
a “Municipality” as defined in clause (e) of article 243P of the
Constitution;
a Municipal Committee, a Zilla Parishad, a District Board, and any
other authority legally entitled to, or entrusted by the Central
Government or any State Government with the control or
management of a municipal or local fund;
a Cantonment Board as defined in section 3 of the Cantonments Act,
2006;
a Regional Council or District Council constituted under the Sixth
Schedule to the Constitution;
a Development Board constituted under article 371 and article 371J of
the Constitution; or
a Regional Council constituted under article 371A of the Constitution.
[Section 2(69)].
Notification means a notification published in the Official Gazette and the
expression “notify” and “notified” shall be construed accordingly
[Section 2(80)].
Output tax in relation to a taxable person, means the tax chargeable under
this Act on taxable supply of goods or services or both made by him or by
his agent but excludes tax payable by him on reverse charge basis[Section
2(82)].
Person includes:-
(a) an individual;
(d) a firm;
(e) a limited liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated
or not, in India or outside India;
(g) any corporation established by or under any Central Act, State Act, or
Provincial Act or a Government Company as defined in clause (45) of
section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country
outside India;
(i) a co-operative society registered under any law relating to co-operative
societies;
State Tax means the tax levied under any State Goods and Services Tax Act
[Section2(104)].
Supplier in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent
acting as such on behalf of such supplier in relation to the goods or services
or both supplied [Section 2(105)].
Tax Period means the period for which the return is required to be
furnished [Section 2(106]
Taxable person means a person who is registered or liable to be registered
under Section 22 or section 24[Section 2(107)].
Valid return means a return furnished under sub-section (1) of section 39 on
which self-assessed tax has been paid in full [Section 2(117)].
After going through the various definitions relevant to this Chapter, let us
discuss the provisions of Chapter X of the CGST Act, 2017.
STATUTORY PROVISIONS
ANALYSIS
Any deposit made towards payment of tax, interest, penalty, late fee or any other
amount will be credited to the electronic cash ledger. Any debit to the electronic
cash ledger represents payment therefrom towards tax, interest, penalty, late fee
or any other amount.
The deposit in the electronic cash ledger shall be made through any of the
following modes, namely:-
(i) Internet Banking through authorised banks;
(ii) Credit card or Debit card through the authorised bank;
(iii) National Electronic Fund Transfer or Real Time Gross Settlement from any
bank; or
(iv) Over the Counter payment through authorized banks for deposits up to ten
thousand rupees per challan per tax period, by cash, cheque or demand
draft:
It may be noted that the restriction for deposit up to ten thousand rupees per
challan in case of an Over the Counter payment will not apply to deposit to be
made by –
(a) Government Departments or any other deposit to be made by persons
as may be notified by the Commissioner in this behalf;
(b) Proper officer or any other officer authorised to recover outstanding
dues from any person, whether registered or not, including recovery
made through attachment or sale of movable or immovable
properties;
(c) Proper officer or any other officer authorised for the amounts
collected by way of cash, cheque or demand draft during any
investigation or enforcement activity or any ad hoc deposit.
Payment by Challan
What is CPIN, CIN, BRN and E-FPB?
CPIN stands for Common portal Identification Number. It is created for
every Challan successfully generated by the taxpayer. It is a 14-digit
unique number to identify the challan. CPIN remains valid for a period of
15 days.
CIN or Challan Identification Number is generated by the banks, once
payment in lieu of a generated Challan is successful. It is a 17-digit
number that is 14-digit CPIN plus 3-digit Bank Code.
CGST Interest
Penalty
SGST/UTGST
Fee
CESS
Others
Sub-sections (10) and (11) of section 49 of the CGST Act, 2017 provides a facility to
the registered person to transfer an amount from one (major/minor) head to
another (major/minor) head in the electronic cash ledger.
The amount available in the electronic cash ledger can be utilised for payment of
any liability for the major and minor heads. For instance, if the registered person
has made a deposit of tax erroneously i.e. by virtue of human error, under a
particular head instead of a specific head, the same can be transferred to the
respective intended head vide Form GST PMT-09.
This Form can be used either for
(i) transfer of erroneous deposits under any minor head of a major head to any
other minor head of same or other major heads or
(ii) for any of the amounts already lying unutilised under any of the minor
heads in Electronic Cash ledger.
For instance, a registered person has deposited a sum of ` 1,000 under the head
of “Interest” column of CGST & ` 1,000 under the head of “Interest” column of
SGST, instead of the head “Fee”. Such amount can be transferred using Form GST
PMT-09 for making a transfer to the head “Fee”. The said transfer is required
using the above Form, because when the Registered person has to make the
remittance of Tax/Interest/Penalty/Fee/Other amount at a stage “Offset Liabilities”
in any of the GST Returns/ Forms for Tax payments through Electronic Cash
Ledger, adequate amount should be available under the respective head of
account.
Section 53A and section 17A of the IGST Act provides for transfer of amount
between Centre and States in accordance with section 49 of the CGST Act allowing
transfer of an amount from one head to another head in the electronic cash ledger
of the registered person.
Other peculiar aspects of Electronic Cash Ledger
An unregistered person has to make payment through electronic cash
ledger on the basis of temporary identification number generated
through common portal.
Where the person has claimed refund of any amount from electronic cash
ledger, the amount of refund claimed would be debited from the electronic
cash ledger
Where the refund claimed by a person is rejected either fully or partly, the
amount debited earlier shall be credited to electronic cash ledger by the
Proper office to the extent of amount of refund rejected.
ILLUSTRATION 1
M/s. Daksha Enterprises has made a cash deposit of ` 10,000 under minor head
'tax' of major head 'SGST’. It has a liability of ` 2,000 for minor head "Interest"
under the major head "SGST".
State whether M/s. Daksha Enterprises can utilise the amount available for payment
of interest.
ANSWER
The Registered person is allowed to transfer the amount available under any
minor head of a major head to any of the minor head of the same or other major
head as per Section 49(10) of the CGST Act vide Form PMT-09.
Therefore, in the given case, amount of ` 10,000 available under minor head ‘tax’
of major head ‘SGST’ can be utilised for payment of liability of ` 2,000 under
minor head ‘interest’ of the same major head, after making a due transfer entry
using Form GST PMT-09 from the minor head of ‘tax’ to ‘interest’.
Sub-section (2) of section 49 of the CGST Act provides that the self-assessed
input tax credit (ITC) by a registered person shall be credited to its Electronic
Credit Ledger
2
The detailed provisions have already been discussed in Chapter-6: “Input tax credit”.
Sub-section (7) of section 49 enumerates about the third kind of ledger [Auto
updated on common portal] viz. Electronic Liability Register. While the terms
“Electronic Cash Ledger” and “Electronic Credit Ledger” are defined in the Act, the
term “Electronic Liability Register” is not defined. The Section lays down that all
liabilities of a taxable person will be maintained in a separate register.
Order of discharge of tax and
other dues
Electronic Liability Register will
Sub-section (8) prescribes the reflect the total tax liability of a
chronological order in which the taxpayer for a particular tax
liability of a taxable person has to period.
be discharged:
self -assessed tax and other
dues for the previous tax periods have to be discharged first.
the self -assessed tax and other dues for the current period have to
be discharged next.
Once these two steps are exhausted, thereafter any other amount
payable including demand determined under section 73 or section
74 to be discharged. In other words, the liability if any, arising out of
demand notice and adjudication proceedings comes last. This
sequence has to be mandatorily followed.
The expression “other dues” referred above mean interest, penalty, fee or
any other amount payable under the Act or the rules made there under.
Presumption that incidence of tax is passed on
Sub-section (9) of Section 49 contains a deeming clause. This part of the
section provides that when a taxable person has paid the GST under the
corresponding Act, the taxable person is deemed to have passed on the
incidence of such payment of tax to the recipient of such goods and /or
services. Thus, if tax has been paid under the CGST Act, 2017 then the
taxable person is deemed to have passed on the incidence of such payment
of CGST to the recipient. This is subject to the contrary being proved. Onus
to establish that incidence of tax has not been passed on to the recipient,
becomes relevant in case of Section 54 dealing with “Refund of Tax”
How do the new payment systems benefit the taxpayer and the
Commercial Tax Department?
No more queues and waiting for making payments as payments can
be made online 24 X 7.
Instant online receipts for payments made online.
Tax Consultants can make payments on behalf of the clients.
STATUTORY PROVISIONS
3
The proviso is effective with retrospective effect from 01.07.2017.
ANALYSIS
The tax dues which are not paid within the stipulated time are liable to interest
payment. This mechanism is automatic in nature by virtue of the provisions laid
under any tax laws. On similar lines, section 50 of the CGST Act, 2017 provides for
applicability of interest for default in payment of taxes within the stipulated time.
Under GST law, a registered person, can make the payment of tax through
electronic credit ledger or electronic cash ledger in terms of section 49 of CGST
Act, 2017. Usually, the balance in electronic credit ledger is exhausted first before
utilizing the balance available in the electronic cash ledger. This practice is
adopted for a better working capital management.
In case a registered person does not have sufficient amount available in electronic
credit ledger to pay the tax dues for a particular tax period. Also, the registered
person does not have sufficient money for making deposit of balance tax amount
in electronic cash ledger. In such a situation, GST common portal doesn’t have a
mechanism to allow a registered person to make part payment of taxes.
If the law maker demands tax dues along with interest on the gross payments i.e.
tax paid through electronic cash ledger and credit ledger, it may be an unhealthy
practice from business perspective. To counter such recovery mechanism, the
proviso under Section 50 provides that when a registered person has paid his
taxes through a return specified under Section 39 of CGST Act, 2017 belatedly,
interest shall be applicable only on the net taxes paid through electronic cash
ledger and not on the gross taxes paid for such tax period.
As per the said proviso, the interest in cases where the tax return has been
furnished after the due date (but furnished before commencement of
proceedings under Section 73 or Section 74) shall be levied on that portion of the
output tax which is being paid by debiting the electronic cash ledger. This means
that the interest liability shall not arise on that portion of the output tax liability
which is paid using the ITC available in the electronic credit ledger.
Accordingly, interest if any payable by the registered person for delay in remittance
of taxes beyond the stipulated due date on account of delay in filing of return under
section 39, shall be demanded only on the net cash liability of taxes and not on the
gross tax liability.
When interest is payable?
Interest is payable in case of delay in payment of tax, in full or in part within
the prescribed period.
Rate of interest
The rate of interest shall be notified by the Government on the basis of
recommendation of the Council. However, such rate to be notified shall not exceed
18% in case of belated payment of tax i.e. on failure to pay tax (or part of
tax) to the Government’s account. [Notification No. 13/2017 CT dated
28.06.2017 has notified the rate of interest as 18% per annum].
Computation of period for calculation of interest
The period of interest will be from the date following the due date of
payment to the actual date of payment of tax.
Other relevant points relating to interest
The term “tax” here means the tax payable under the Act or Rules
made thereunder.
The payment of interest in case of belated payment of tax should be
made voluntarily i.e. even without a demand.
The interest payable under this section shall be debited to the
Electronic Liability Register.
The liability for interest can be settled by adjustment with balance in
Electronic Cash Ledger but not with balance in electronic credit
ledger.
Note: Since the provisions of section 42(10) and 43(10) of the CGST Act are practically
not in operation, the provisions relating to interest payment under section 50(3) have
not been discussed.
ILLUSTRATION 2
Mr. Alok, a registered supplier of taxable goods, filed GSTR 3B for the month of
January, 2021 on 15thApril, 2021. The prescribed due date to file the said GSTR3B
was 20thFebruary, 2021. The amount of net GST payable, in Cash i.e. Electronic
Cash Ledger on supplies made by him for the said month worked out to be
` 36,500 which was paid on 15thApril, 2021. Briefly explain the related provisions
and compute the amount of interest payable under the CGST Act, 2017 by Mr. Alok.
Ignore the effect of leap year, if applicable in this case.
ANSWER
Interest is payable in case of delayed payment of tax @ 18% per annum from the
date following the due date of payment to the actual date of payment of tax.
Thus, the amount of interest payable by Mr. Alok is as under:-
Period of delay = 21st February, 2021 to 15th April, 2021 = 54 days
Hence, amount of interest = ` 36,500 x 18% x 54/365 = ` 972
ILLUSTRATION 3
ABC Ltd., have filed their GSTR3B for the month of July, 2021 within the due date
prescribed under Section 39 i.e. 20.08.2021. Post filing of the return, the registered
person has noticed during September 2021 that tax dues for the month of July,
2021 have been short paid for ` 40,000. ABC Ltd., has paid the above shortfall of
` 40,000, through GSTR3B of September 2021, filed on 20.10.2021 [payment
through Cash ledger - ` 30,000 and Credit ledger ` 10,000]. Examine the Interest
payable under the CGST Act, 2017.
What would be your answer if, GSTR3B for the month of July 2021 has been filed
belatedly on 20.10.2021 and the self-assessed tax of ` 40,000/- has been paid on
20.10.2021 [payment through electronic cash ledger - ` 30,000 and electronic credit
ledger ` 10,000]
Notes:
There exists adequate balance in Electronic Cash & Credit ledger as on
31.07.2021 for the above short fall
No other supply has been made nor tax payable for the month of July, 2021
other than ` 40,000/- missed out to be paid on forward charge basis
Ignore the effect of leap year, if applicable in this case.
ANSWER
Interest is payable under Section 50 of the CGST Act, 2017 in case of delayed
payment of tax @ 18% per annum from the date following the due date of
payment to the actual date of payment of tax.
As per proviso to sub-section (1) of Section 50, interest is payable on the net tax
liability paid in cash, only if the return to be filed for a tax period under Section
39, has been filed after the due date to furnish such return.
In the above scenario, ABC Ltd., has defaulted in making the payment for
` 40,000 on self-assessment basis in the return for the month of July, 2021.
Accordingly, interest is payable on the gross liability and proviso of sub-section
50(1) shall not be applicable.
Thus, the amount of interest payable by ABC Ltd., is as under:-
Period of delay = 21st August, 2021 to 20th October, 2021 = 61 days
Hence, amount of interest = ` 40,000 x 18% x 61/365 = ` 1,203
Alternatively, if ABC Ltd., have filed the return for the month of July, 2021 on
20.10.2021, beyond the stipulated due date of 20.08.2021 and if the self-assessed
tax for July, 2021 has been paid on 20.10.2021, Interest under proviso to Section
50(1) shall be payable on the tax paid through Electronic Cash Ledger only.
Hence Interest is payable from 21st August 2021 till 20th October 2021 = 61 days
Amount of Interest = ` 30,000 x 18% x 61/365 = ` 902
However, if the amount of IGST is utilised towards dues of SGST then, in terms of
section 18 of the IGST Act, there shall be reduction in the amount of IGST, equal
to the credit so utilized, and will be apportioned to the appropriate State
Government and the Central Government shall transfer the amount so
apportioned to the account of the respective State Government.
6. LET US RECAPITULATE
The provisions relating to payment of tax, interest and other amounts have been
summarised by way of table and diagrams to help students remember and retain
the provisions in a better and effective manner:-
DEFINITIONS OF CERTAIN KEY TERMS
Output
Tax
tax
means excludes payable
on
reverse
CGST on taxable supply of charge
goods and /or services
by taxable by agent of
person taxable person
Taxable Person
means
a person
IGST to be paid,
For Inter-state supply having components of
both CGST & SGST
Interest, penalty,
fees and any other
Wherever applicable
amount also to be
paid
Electronic
Ledgers
Electronic Liability
Register Electronic Credit Ledger
ITC of CGST has been utilized fully before utilizing SGST for payment of IGST
3. All dues
including
2. All dues demand
related to determined
current tax under section
period 73 and 74
1. All dues
related to
previous tax
period
E-Ledgers/Register
•It will reflect all deposits made in cash, and TDS/TCS made
on account of the tax payer.
Electronic Cash Ledger •This ledger can be used for making ANY PAYMENT
towards tax, interest, penalty, fees or any other amount
on account of GST.
Electronic Liability •Electronic Liability Register will reflect the total tax liability
Register of a taxpayer (after netting) for the particular month.
Interest payable on tax declared and paid in GSTR-3B filed after due date
Interest
Tax paid applicable
Tax Paid
through only on the
through
Credit Cash
Cash Ledger
Ledger portion of
Tax
Interest
applicable on
Tax paid Tax Paid
the tax paid
through through Cash
through Cash
Credit Ledger Ledger
and Credit
Ledger
Amount equivalent
to ITC so used is
transferred by
Used for payment Central
ITC of CGST
of IGST Government (CG)
from CGST
account to IGST
account.
used for
payment of
Amount equivalent to
CGST
ITC so used is
used for transferred by CG from
payment of IGST account to
UTGST CGST/UTGST account.
ITC of IGST
account and claim a refund for the remittance of amount deposited under
head ”interest”. Examine the relevant provisions of CGST Act, 2017 towards
payment of tax and compliance with the law.
3. PPC Ltd., has availed Input Tax credit for ` 54,000/- IGST during February
2021 on a particular purchase. Accounting records for the above purchase,
indicate that IGST paid to the supplier is ` 45,000/- as per the bill received.
GSTR1 uploaded by the supplier for the above supply indicates ` 45,000/- as
tax paid. Examine as per GST provisions, what value shall be updated in the
ledgers maintained on behalf of PPC Ltd., on the common portal?
4. M/s ABC & Co., have defaulted in filing the return under Section 39 of CGST
Act, 2017 i.e. GSTR-3B for the month of March, 2021 within the specified due
date . Reason for such delay is attributable to delay in closure of Books for
March 2021, which have been finalised during May 2021. The GST Common
portal prompted for payment of late fees payable under Section 47 of CGST
Act, 2017 for a sum of ` 2,000 under CGST and SGST each. Accountant, of M/s
ABC & Co., sought your confirmation for payment of such late fees through
the balance available in Electronic Credit Ledger for the late fees. Give your
guidance in this regard
5. How many types of electronic ledger/register are there?
6. What are the main features of GST payment process?
7. Are principles of unjust enrichment applicable for payment made under GST?
8. State the name of output tax under GST, where any of the input tax credit
under GST can be availed?
9. Sahil is a supplier of taxable goods in Karnataka. He got registered under
GST in the month of September, 2021 and wishes to pay his IGST liability for
the month. Since he is making the GST payment for the first time, he is of the
view that he needs to mandatorily have the online banking facility to make
payment of GST; offline payment is not permitted under GST. You are
required to apprise Sahil regarding the various modes of deposit in the
electronic cash ledger. Further, advise him with regard to following issues:
(a) Are manual challans allowed under GST?
(b) What is the validity period of the challan?
(c) Is cross utilization among Major and Minor heads of the electronic cash
ledger permitted?
10. Suhasini is a registered software consultant. On account of her ill health, she
could not provide any services during the month of October. However, she had
to incur all the expenses relating to her office. She paid ` 75,000 to various
vendors. The total input tax involved on the goods and services procured by her
is ` 13,500. Out of the total bills paid by her, one bill for ` 15,000 relates to
security services availed for security of her office, tax on which is payable under
reverse charge. Input tax involved in such bill is ` 2,700.
Suhasini is of the opinion that for the month of October, no GST is payable
from electronic cash ledger as she has sufficient balance of ITC for payment of
GST under reverse charge on security services.
Do you think Suhasini is right? Explain with reasons.
8. ANSWERS/HINTS
1. Every registered person, shall avail the input tax credit through a return filed
under Section 39 of CGST Act, 2017. Input Tax credit availed shall be
credited to electronic credit ledger under section 41 of the CGST Act, 2017
on a provisional basis. As per provisions contained in Rule 86A, In case the
Commissioner or an officer authorised by him in this behalf, not below the
rank of an Assistant Commissioner, has reasons to believe that ITC available
in the electronic credit ledger has been fraudulently availed or is ineligible,
he may prohibit use of ITC for discharge of any liability under section 49 or
for claim of any refund of any unutilised amount.
2. Provisions of Section 49(10) of CGST Act, 2017 permit a registered person for
transferring the amount deposited under any of the minor head i.e. tax,
interest, penalty, fees or others to any of the heads under
IGST/CGST/SGST/UTGS and make the payment of taxes there upon.
Accordingly, Mr. A need not deposit the tax amount under head “ tax” and
claim a refund for the remittance of amount deposited under head ”interest.
Rather, using the Form GST PMT 09, such amount can be transferred suo-moto
on the common portal from “interest” to “tax” head and tax liability be paid
3. PPC Ltd., have accounted and paid ` 45,000/- as IGST to the supplier concerned.
However, availment of input tax credit has been made for ` 54,000/-.
As per Section 49(2) of CGST Act, 2017 ”The input tax credit as self-assessed
in the return of a registered person shall be credited to his electronic credit
ledger, in accordance with section 41, to be maintained in such manner as
may be prescribed.”
RETURNS
For the sake of brevity, the term input tax credit has been referred to as ITC in this Chapter. The
section numbers referred to in the Chapter pertain to CGST Act, unless otherwise specified.
Examples/Illustrations/Questions and Answers given in the Chapter are based on the position of
GST law existing as on 30.04.2021.
LEARNING OUTCOMES
After studying this Chapter, you will be able to –
GSTR-5
RETURNS
First Return
Annual Return
GSTR
GSTR-99
Other returns Final Return
GSTR-10
GSTR-11
Notice to return
defaulters
Default/delay in furnishing return
Levy of late fee
1. INTRODUCTION
The term “return” ordinarily means statement of information (facts) furnished by the
taxpayer, to tax administrators, at regular intervals. The information to be furnished in
the return generally comprises of the details pertaining to the nature of
activities/business operations forming the subject matter of taxation; the measure of
taxation such as sale price, turnover, or value; deductions and exemptions; and
determination and discharge of tax liability for a given period.
In any tax law, “filing of returns” constitutes the most important compliance procedure
which enables the Government/ tax administrator to estimate the tax collection for a
particular period and determine the correctness of the tax compliance of the taxpayers.
The returns serve the following purposes:
a) Mode for transfer of information to tax
administration;
b) Compliance verification program of tax
administration;
c) Finalization of the tax liabilities of the
taxpayer within stipulated period of limitation;
d) Providing necessary inputs for taking policy decision;
e) Management of audit and anti-
evasion programs of tax
administration
The taxpayer is generally required to Filing of GST returns helps in
furnish the return in a specific statutory determination of tax liability
format. These formats are, therefore, of the return filer and at the
designed to take care of all the same time it also has a huge
provisions of the law that have a bearing bearing on determination of
tax liability of other persons
on computation of tax liability of a
with whom the former has
taxpayer. Hence, a study of various fields
entered into taxable activities.
contained in the form of return vis-à-vis
the relevant corresponding provisions of
the tax law, can facilitate overall
understanding of the tax law in a better manner.
Under the GST laws, the correct and timely filing of returns is of utmost importance
because of two reasons. Firstly, under GST laws, a taxpayer is required to estimate
his tax liability on “self-assessment” basis and deposit the
tax amount along with the filing of such return. The return,
therefore, constitutes a kind of working sheet/supporting
document for the tax authorities that can be relied upon as
the basis on which the tax has been computed by the
taxpayer. Secondly, under the GST regime, filing of returns
not only determines the tax liability of the person filing the
same, but it also has a huge bearing on determination of tax
liability of other persons with whom the former has entered into transactions in
course or furtherance of business.
Chapter IX of the CGST Act [Sections 37 to 48] prescribes the provisions relating to
filing of returns as under:
Section 43A Procedure for furnishing return and availing input tax credit
Provisions of returns, other than late fee, under CGST Act have also been
made applicable to IGST Act vide section 20 of the IGST Act.
59-84]. State GST laws also prescribe identical provisions in relation to filing of
returns.
The GST Law and procedures are still in nascent stages and also to ease the
compliances for the taxpayers, the return filing process is continuously evolving. A
simplified monthly return in Form GSTR 3B was introduced in July, 2017 to help
businesses to file returns easily in the initial months of GST roll out. This was to be
followed with filing of returns - GSTR - 1, 2 and 3. Further, Quarterly return monthly
payment scheme [QRMP Scheme 1] has been introduced to ease the compliance
requirements for small taxpayers. The GST Council also recommended to
indefinitely postpone the date of filing of Forms GSTR-2 (details of inward supplies)
and GSTR-3 (monthly return) for all normal taxpayers, irrespective of turnover, till
further announcements were made in this regard.
Therefore, in the subsequent pages of this Chapter, provisions of only those sections
which are practically effective, have been discussed.
Further, the due dates for filing of various statements/returns discussed under this
Chapter are the due dates which are provided under the provisions of the CGST Act
or the CGST Rules or the due dates specified by notifications which have been
consistent over a period of time. Practically, the due dates are often extended by
the Government on account of various reasons. Also, the quantum of late fee for
delayed filing of statements/returns discussed under this Chapter is the quantum of
late fee as provided under the provisions of the CGST Act. Here also, the
Government often waives off the late fee either partially or fully and has also
provided an amnesty scheme. It may be noted that such extended due dates and
late fee waivers are not relevant from examination point of view
All the returns under GST laws are to be filed electronically. Taxpayers can file
the statements and returns by various modes. Firstly, they can file their statement
and returns directly on the GST common portal online. However, this may be
tedious and time consuming for taxpayers with large number of invoices. For such
taxpayers, offline utilities have been provided by GSTN that can be used for
preparing the statements offline after downloading the auto populated details and
uploading them on the common portal. GSTN has also developed an ecosystem of
GST Suvidha Providers (GSP) that will integrate with the common portal.
1
QRMP Scheme has been discussed in detail subsequently in this chapter.
The details furnished by the taxpayer in the form of returns shall be consolidated
and stored at the common portal which will be common for both, i.e. Central
Government and State Governments.
2. RELEVANT DEFINITIONS
under section 6 of the Integrated Goods and Services Tax Act, and includes
non-taxable supply [Section 2(47)].
Goods and services tax practitioner means any person who has been
approved under section 48 to act as such practitioner [Section 2(55)].
Invoice or tax invoice means the tax invoice referred to in section 31
[Section 66].
Inward supply in relation to a person, shall mean receipt of goods or services
or both whether by purchase, acquisition or any other means with or without
consideration [Section 2(67)].
Non-resident taxable person means any person who occasionally
undertakes transactions involving supply of goods or services or both,
whether as principal or agent or in any other capacity, but who has no fixed
place of business or residence in India [Section 2(77)].
Outward supply in relation to a taxable person, means supply of goods or
services or both, whether by sale, transfer, barter, exchange, licence, rental,
lease or disposal or any other mode, made or agreed to be made by such
person in the course or furtherance of business [Section 2(83)].
Prescribed means prescribed by rules made under this Act on the
recommendations of the Council [section 2(87)].
Proper officer in relation to any function to be performed under this Act,
means the Commissioner or the officer of the central tax who is assigned that
function by the Commissioner in the Board [Section 2(91)].
Quarter shall mean a period comprising three consecutive calendar months,
ending on the last day of March, June, September and December of a
calendar year [Section 2(92)].
Recipient of supply of goods or services or both, means—
♦ ISD
All ♦ Non-resident taxable person
2
QRMP Scheme has been discussed in detail subsequently in this chapter.
(iv) Invoice Furnishing Facility [IFF] for taxpayers opting for QRMP
Scheme?
Invoice Furnishing Facility (IFF) is a facility provided to quarterly taxpayers
who are in QRMP scheme, to file their details of outward supplies in first
two months of the quarter, to pass on the credit to their recipients.
Invoice furnishing facility (IFF) is not mandatory, but an optional facility
made available to the registered persons under the QRMP scheme. At his
option, a registered person may choose to furnish the details of outward
supplies made during a quarter in Form GSTR-1 only, without using the
IFF.
The facility of furnishing details of invoices in IFF has been provided so
as to allow details of such supplies to be duly reflected in the Form GSTR-
2A and Form GSTR-2B of the concerned recipient. In case where a buyer
has made purchases from a person opting for QRMP scheme, he could not
have claimed full ITC but due to introduction of IFF, such delay will not
occur as the details submitted using IFF will be reflected in the GSTR-2A,
GSTR-2B, GSTR-4A or GSTR-6A of the recipients, as the case may be.
Taxpayers opting for QRMP Scheme may furnish the details of such
outward supplies to a registered person, as he may consider necessary,
for the 1st and 2nd months of a quarter, upto a cumulative value of ` 50
lakh in each of the first 2 months of the quarter using IFF electronically
on the common portal. However, invoices pertaining to last month of a
quarter are to be uploaded in GSTR-1 only.
The invoices are to be furnished in IFF between the 1st day of the
succeeding month till the 13th day of the succeeding month. After 13th of
the month, this facility for furnishing IFF for previous month would not
be available 3.
The said facility would however be available, say for the month of July,
from 1st August till 13th August. Similarly, for the month of August, the
said facility will be available from 1st September till 13th September.
3
As a facilitation measure, continuous upload of invoices would also be provided for the registered
persons wherein they can save the invoices in IFF from the 1st day of the month till 13th day of the
succeeding month.
The details of invoices furnished using IFF in the first 2 months of the
quarter are not required to be furnished again in GSTR-1 for the said
quarter.
(2) A registered person who has availed the QRMP scheme wants
to declare 2 invoices out of the total 10 invoices issued in the 1st
month of quarter since the recipient of supplies covered by those
2 invoices desires to avail ITC in that month itself. Details of these 2
invoices may be furnished using IFF.
The details of the remaining 8 invoices shall be furnished in Form GSTR-1
of the said quarter. The two invoices furnished in IFF shall be reflected in
Form GSTR-2B of the concerned recipient of the 1st month of the quarter and
remaining 8 invoices furnished in Form GSTR-1 shall be reflected in Form
GSTR-2B of the concerned recipient of the last month of the quarter.
Details of outward supplies required to be furnished in IFF:-
In the IFF, the taxpayer has to submit the B2B (business to business) invoice
details of both inter-State and intra-State supply transactions along with
debit and credit notes of the B2B invoices issued during the month. The
details of outward supplies furnished using IFF shall include the –
(a) invoice wise details of inter-State and intra-State supplies made to
the registered persons;
(b) debit and credit notes, if any, issued during the month for such
invoices issued previously.
However, if a registered person does not opt to upload invoices using IFF,
then he has to upload invoice details for all the 3 months of the quarter
in Form GSTR-1.
(v) What are the cases where a registered person is debarred from
furnishing details of outward supplies in GSTR-1/IFF?
(i) A registered person shall not be allowed to furnish the details of
outward supplies in Form GSTR-1, if he has not furnished the return
in Form GSTR-3B for preceding two months.
(ii) A registered person, opting for QRMP scheme shall not be allowed
to furnish the details of outward supplies in Form GSTR-1 or using
IFF, if he has not furnished the return in Form GSTR-3B for
preceding tax period.
A taxpayer cannot file GSTR-1 before the end of the current tax
period.
However, following are the exceptions to this rule:
a. Casual taxpayers, after the closure of their business
b. Cancellation of GSTIN of a normal taxpayer
A taxpayer who has applied for cancellation of registration will be
allowed to file GSTR-1 after confirming receipt of the application.
It can be seen from the above table that uploading of invoices depends on
whether the supply is B2B or B2C plus whether the supply is intra-State or
inter-State.
4 Principles determining the place of supply are contained in section 10 to 13 of the IGST Act. These
For B2C supplies, uploading in general is not required as the buyer will not
be taking ITC. However, still in order to implement the destination-based
principle, invoices of value more than ` 2.5 lakh in inter-State B2C supplies
need to be uploaded. For inter-State invoices below ` 2.5 lakh, State wise
summary is sufficient and for all intra-State invoices, only consolidated details
need to be given.
(3) Mr. XY makes intra-State taxable supplies for ` 10,000 and
` 50,000 to Mr. AB, a registered person and ` 1,00,000 to Mr. DE,
an unregistered person. He also makes inter-State taxable
supplies for ` 2,60,000 and ` 45,000 to Mr. RS, a registered person
and ` 1,50,000 to Mr. OP, an unregistered person. Mr. XY will report invoice-
wise details of intra-State supplies made to Mr. AB and inter-State supplies
made to Mr. RS, in GSTR-1 to be filed by him.
Invoices related details can be uploaded any time during the tax period
and not just at the time of filing of GSTR-1.
(4) For the month of October, the taxpayer can upload details
related to invoices from 1st October to 10th November. In case of
late filing of GSTR-1, details related to invoices can be uploaded
after 15 November.
th
in a draft version till the time GSTR-1 is submitted and can be changed
irrespective of due date.
Inter-state Intra-state
Inter-state Intra-state
supplies supplies
supplies supplies
Consolidated
Invoices > Invoices ≤ details of all
Invoice-wise details ` 2,50,000 ` 2,50,000 supplies to be
of all supplies to be uploaded
uploaded
(5) The turnovers of Yellow Lemon Pvt. Ltd., Red Pepper Pvt. Ltd. and
Blue Berry Pvt. Ltd. in the previous financial year are ` 1.5 crore, ` 4.8
crore and ` 6 crore respectively. While Yellow Lemon Pvt. Ltd. and
Red Pepper Pvt. Ltd. will be required to upload 4 digits of HSN code of the
goods sold to registered persons, uploading of 4 digits HSN code will be
optional for the two companies when the goods are sold to unregistered
persons. Blue Berry Pvt. Ltd. will have to upload 6 digits of HSN code of goods
sold by it.
by way of
can be amended
Particulars
furnished Amendment
in GSTR-1 Tables given
of prior in GSTR-1 of
periods subsequent
periods
However, the maximum time limit within which such amendments are
permissible is earlier of the following dates:
What are the precautions that a taxpayer is required to take for a hassle-free
compliance under GST?
One of the most important things under GST is
the timely uploading of the details of outward
Timely uploading of
supplies in GSTR-1/IFF. How best this can be
the details of
ensured will depend on the number of B2B
invoices that the taxpayer issues. If the number is outward supplies in
low, the taxpayer can upload all the information Form GSTR-1/IFF
in one go. However, if the number of invoices is
substantially high, the invoices (or debit/ credit
notes) should be uploaded on a regular basis.
5
Auto-drafted details for registered person opting for composition levy are contained in Form
GSTR-4A and auto-populated details of ITC received for distribution by Input Service Distributor
are contained in Form GSTR-6A. Provisions relating to Input Service Distributor have been
discussed at the Final level.
6
Provisions relating to Input Service Distributor, TDS and TCS have been discussed at the Final
level.
It consists of –
(i) the details of outward supplies furnished by the suppliers in Form GSTR-
1, other than a supplier who has opted for QRMP scheme, between the
day immediately after the due date of furnishing of Form GSTR-1 for the
previous month to the due date of furnishing of Form GSTR-1 for the
month.
(ii) the details of outward supplies furnished by his supplier who has opted
for QRMP scheme, in Form GSTR-1 or using the IFF, as the case may be 7,-
(a) for the 1st month of the quarter, between the day immediately after
the due date of furnishing of Form GSTR-1 for the preceding quarter
to the due date of furnishing details using the IFF for the 1st month
of the quarter;
(b) for the 2nd month of the quarter, between the day immediately after
the due date of furnishing details using the IFF for the 1st month of
the quarter to the due date of furnishing details using the IFF for
the 2nd month of the quarter;
(c) for the 3rd month of the quarter, between the day immediately after
the due date of furnishing of details using the IFF for the 2nd month
of the quarter to the due date of furnishing of Form GSTR-1 for the
quarter.
(iii) the details of the integrated tax paid on the import of goods or goods
brought in the DTA from SEZ unit/developer on a bill of entry in the
month.
Form GSTR-2B consists of all documents filed by suppliers/ISD in their Form
GSTR-1, 5 & 6, between the cut-off dates. It also consists of import data for
the period which are received within 13th of the succeeding month.
In case of monthly Form GSTR-1, the cut-off date is 00:00 hours on 12th
of the relevant month to 23:59 hours, on 11th of the succeeding month.
Whereas for quarterly Form GSTR-1/IFF, Form GSTR-5 and Form GSTR-6,
the cut-off date is 00:00 hours on 14th day of relevant month to 23:59
hours, on 13th day of succeeding month.
7
details of invoices are furnished by a non-resident taxable person in Form GSTR-5 and by an
Input Service Distributor in his return in Form GSTR-6 [Provisions relating to Input Service
Distributor have been discussed at the Final level]
The details filed in Form GSTR-1 & 5 (by supplier) & Form GSTR-6 (by
ISD) would reflect in the next open Form GSTR-2B of the recipient irrespective
of supplier’s/ISD’s date of filing.
(8) If a supplier opting for QRMP files an invoice dated 15th July
on 13th August, it will get reflected in GSTR-2B of July
(generated on 14th August). If the document is filed on 14th
August, the document will be reflected in Form GSTR-2B of August
(generated on 14th September).
The statement in Form GSTR-2B for every month shall be made available
to the registered person,-
(i) for the 1st and 2nd month of a quarter, a day after the due date of
furnishing of details of outward supplies for the said month,
• in the IFF by a registered person opting for QRMP, or
• in Form GSTR-1 by a registered person other than opting for
QRMP,
whichever is later.
(ii) in the 3rd month of the quarter, a day after the due date of furnishing of
details of outward supplies for the said month, in Form GSTR-1 by a
registered person opting for QRMP.
(9) For the quarter July-September, Form GSTR-2B for a
registered person (recipient) who has received supplies from
QRMP suppliers as well as from other suppliers will be
generated as follows:
8
other than supplier of online information and database access or retrieval services (OIDAR)
located in non-taxable territory and providing such services to a non-taxable online recipient
9
opted under rule 61A of the CGST Rules, 2017 (discussed subsequently)
10
in accordance with the proviso to section 39(7)
CONTENTS OF GSTR- 3B
11
A person paying concessional tax @ 6% under Notification No. 2/2019 CT (R) dated 07.03.2019 is also required
to file GSTR-4. Therefore, all the provisions discussed under this heading are also applicable for persons paying
tax under the said notification.
(b) Due date for filing GSTR-4 and Statement for payment of self-
assessed tax
GSTR-4 for a financial year should be furnished by 30th April of the succeeding
financial year.
CONTENTS OF GSTR- 4
Composition taxpayers are neither entitled for any ITC nor entitled
to pass on any ITC to its customers. Therefore, composition
taxpayers are required to provide consolidated details of outward
supplies in GSTR-4 (Table 6) and not invoice-wise details.
However, details of inter-State and intra-State inward supplies
◪ Tax liability
Since composition suppliers are not eligible to take ITC, they
discharge their tax liability only by debiting electronic cash ledger.
Filing of GST CMP-08 is mandatory for all taxpayers who have opted to
pay tax under composition scheme, even if there is no business activity in
any particular tax period. For such tax period(s), a Nil GST CMP-08 is
required to be filed.
A Nil GST CMP-08 does not have any entry in any of its tables. For
example, a Nil GST CMP-08 for a tax period cannot be filed, if the
taxpayer has made any outward supplies or has received any supplies
which are taxable under reverse charge.
A Nil GST CMP-08 can be filed through an SMS using the registered
mobile number of the taxpayer. A Nil GST CMP-08 submitted through
SMS is verified by registered mobile number-based OTP facility.
(f) Statements/return for the period prior to opting for
composition scheme
TILL
The provisions explained in points (f) and (g) above have been
explained by way of a diagram given at the next page.
Statements/Return relating
to period prior to opting for GST CMP-08 for GSTR 4 for period
composition scheme to be period prior to prior to exit from
filed exit from composition
composition scheme to be
scheme to be filed by
till filed by
A NRTP is not
required to file
an annual return.
12
subject to the provisions of section 49
(b) for the 2nd month of the quarter, take into account the balance in the
electronic cash ledger excluding the tax due for the 1st month.
At the time of filing the return for the said quarter in Form GSTR-3B, the
amount deposited by the registered person in the first 2 months of the
quarter shall be debited. This amount is debited solely for the purposes of
offsetting the liability furnished in that quarter’s Form GSTR-3B. However,
any amount left after filing of that quarter’s Form GSTR-3B may either be
claimed as refund or may be used for any other purpose in subsequent
quarters.
Monthly payment of tax under QRMP Scheme
The registered person under the QRMP Scheme would be required to pay
the tax due in 1st month or 2nd month or
both the months of the quarter by
depositing the tax due 13 in Form GST
PMT-06. The payment is to be made by
25th day of the month succeeding such month.
While generating the challan, taxpayers should select “Monthly payment
for quarterly taxpayer” as reason for generating the challan. The said
person can use any of the following two options provided below for
monthly payment of tax during the first 2 months –
13
under proviso to sub-section (7) of section 39
(ii) tax liability paid in cash in the return for the last month of
the immediately preceding quarter where the return was
furnished monthly.
For easy understanding, the same is explained by way of examples
given below:
(i) In case the last return filed was on quarterly basis for quarter
ending March:
Tax paid in cash in quarter Tax required to be paid
(January - March) in each of the months –
April and May
CGST 100 CGST 35
SGST 100 SGST 35
IGST 500 IGST 175
Cess 50 Cess 17.5
(ii) In case the last return filed was monthly for tax period March:
Tax paid in cash in March Tax required to be paid in each
of the months – April and May
CGST 50 CGST 50
SGST 50 SGST 50
IGST 80 IGST 80
Cess - Cess -
ILLUSTRATION 1
Ms. Pragya, a taxpayer registered under regular scheme (Section 9), files
GSTR-3B for the month of October on 20th November. After filing the return,
she discovers that the value of a taxable supply has been under-reported
therein.
Ms. Pragya now wants to file a revised GSTR-3B. Examine the scenario and
give your comments.
ANSWER
Under GST law, a return once filed cannot be revised. However, the details of
those transactions that are required to be amended can be changed in any of
the future GSTR- 1s. For this purpose, specific tables are provided in GSTR-1
to amend previously declared details.
Thus, Ms. Pragya cannot revise GSTR-3B filed by her for the month of October.
However, she can amend the details of the taxable supply, which was under-
reported, in GSTR-1 for the month of November. The tax payable on account
of such error will be paid along with interest in GSTR-3B for the month of
November.
Time limit for making rectification
The maximum time limit within which the rectification of errors/omissions is
permissible is earlier of the following dates:
• Due date of filing of return for the month of September following the
end of the financial year [i.e. 20th October of next financial year] or
Revision of
return
Rectification on
account of
Rectification scrutiny, audit,
in subsequent inspection or
return enforcement
activities
6. OTHER RETURNS
Details of outward
Details of outward
supplies, after
supplies made in
becoming liable to
first tax period
registration but
after grant of the
before grant of the
certificate of
certificate of
registration
registration First Return
(ii) Annual Return [Section 44 read with rule 80 of the CGST Rules]
(a) Who is required to furnish annual return and what is the due
date for the same?
All registered persons are required to file an annual return. However,
following persons are not required to file the annual return:
(i) Casual taxable persons.
(ii) Non- resident taxable person
(iii) Input service distributors 14
(iv) Persons authorized to deduct/collect tax at source under section
51/52 15 and
(v) Person supplying OIDAR services from outside India to
unregistered persons in India
The annual return for a financial year needs to be filed by 31st
December of the next financial year.
The due date of filing annual return may be extended by the
Commissioner/Commissioner of State GST/Commissioner of UTGST for
a class of taxable persons by way of a notification.
(b) What is the prescribed form for annual return?
The annual return is to be filed electronically in
Form GSTR-9 through the common portal. GSTR-9
Composition scheme supplier: A person paying
tax under composition scheme is required to file
the annual return in Form GSTR-9A.
(iii) Final Return [Section 45 read with rule 81 of the CGST Rules]
(a) Who is required to furnish final return?
Every registered person who is required to
furnish return u/s 39(1) and whose GSTR-10
registration has been surrendered or
14 The concept of Input Service Distributor will be discussed at the Final Level.
15 The concept of person deducting/collecting tax at source will be discussed at the Final Level.
(ii) Late fees levied for delay in filing return [Section 47]
Late fee is applicable for delay in furnishing of return / details of outward
supply as per the provision of section 47 of the CGST Act.
Delay in filing any of the following by their respective due dates, attracts late
fee:
(A) Statement of Outward Supplies [Section 37]
(B) Returns (including returns under QRMP Scheme) [Section 39]
(C) Final Return [Section 45]
` 5,000
Late fees levied for delay in filing annual return under section 44
A registered person who fails to furnish the annual return under section 44
by the due date is required to pay a late fee as under:
Indian citizen
Person of sound
mind
A
person
Not adjudicated as
who is insolvent
post not lower than the rank of a Group-B gazetted officer for a
period ≥ 2 years
conditions
(iv) Has passed final examination of ICAI/ ICSI/ Institute of Cost Accountants of
India.
The procedure for enrolment of GSTP has been depicted in the following diagram:
An application in The Application
prescribed form will be In case, the
The enrolment
may be made scrutinised and application is
once done
electronically GSTP certificate rejected,
remains valid
through the will be granted proper
till it is
common portal in the reasons need
cancelled.
for enrolment as prescribed to be given.
GSTP. form.
9. LET US RECAPITULATE
The provisions relating to returns have been summarised by way of tables and
diagrams to help students remember and retain the provisions in a better and
effective manner:
casual taxable
person
Quarterly Registered 22nd or 24th of the
return persons opting for month depending upon
QRMP Scheme the State or Union
(including a casual Territory in which they
taxable person) are registered.
GSTR-4 Return for a Registered person 30th April of the next
financial year paying tax under financial year
composition
scheme
GST CMP-08 Quarterly Registered person 18th day of the month
Statement paying tax under succeeding the quarter
for payment composition
of self- scheme
assessed tax
GSTR-5 Monthly Registered non- 20th day of the next
return resident taxpayer month or within 7 days
after expiry of
registration, whichever
is earlier
GSTR-9 Annual Registered person 31st December of the
return other than an ISD, next financial year
tax deductor/tax
collector, casual
taxable person
and a non-
resident taxpayer
GSTR-10 Final return Taxable person Within three months of
whose registration the date of cancellation
has been or date of order of
surrendered or cancellation, whichever
cancelled is later.
Form GSTR-2A
Form GSTR-2A
Of inward supplies
For a recipient
Form GSTR-2B
Form GSTR-2B
Statement in Form
GSTR-2B
a day after the due date of a day after the due date of
furnishing of details of outward furnishing of details of outward
supplies for the said month supplies for the said month
in Form GSTR-
in Form GSTR-
in the IFF by a 1 by a
1 by a
registered registered whichever is
registered
person opting person other later
person opting
for QRMP, or than opting
for QRMP
for QRMP
QRMP Scheme
Optional
return
filing
scheme
Quarterly
Return
Monthly
payment
Opting of QRMP
Scheme is GSTIN wise Distinct persons can avail
QRMP scheme option for
one or more GSTINs.
Monthly tax payment through this method would not be available to those
registered persons who have not furnished the return for a complete tax period
preceding such month.
Self
assessment
method
Filing of GSTR-1
•Quarterly basis
Invoices to be furnished
For taxpayers filing
from 1st day to 13th day of
quarterly return
the succeeding month
up to a cumulative
for 1st month of the for 2nd month of the
value of ` 50 lakh in
quarter quarter
each of the months
Availability of facility of opting •Available from from 1st day of 2nd month of
out of QRMP Scheme for a preceding quarter to the last day of the first
quarter month of the quarter
on or before 24th of
the month succeeding
the quarter for which
Taxpayer opting return is furnished
Quarterly GSTR-
for QRMP
3B
scheme on or before 22nd of
the month succeeding
the quarter for which
return is furnished
on or before
20th of the
month
Other Monthly GSTR-
succeeding the
Taxpayers 3B
quarter for
which return is
furnished
Applicability of Interest
For Fixed Sum method taxpayers
• No interest would be applicable even if
Where auto-calculated the liability for the said month was
fixed sum amount (as
found higher
discussed above) for first
2 months of the quarter • If GSTR-3B of the quarter is filed by the
is paid by due date due date by discharging the entire
liability
for tax or any part thereof (net of ITC) which remains unpaid/ paid beyond the due
date
Annual return
Annual Return
Revision of returns
shall be subject to a
Any registered person who liable to pay maximum of 0.25% of
fails to furnish the annual a late fee of his turnover in the
retun by the due date ` 100 per State/Union Territory,
day, under the CGST Act
preceding financial year. It is of the view that in the current financial year, it
is permitted to file its statement of outward supplies (GSTR-1) on a quarterly
basis while its accountant advises it to file the same on a monthly basis.
You are required to advise M/s Cavenon Enterprises on the same.
4. Mr. Kohli is a registered supplier in the State of Gujarat. He is filing
GSTR-1 every month. During the month of February, he went out of India and
thus, could not do any business transaction during that month. He believes
that as there is no transaction, there is no need to file GSTR-1 for the month of
February.
Is he correct? Explain.
5. Mr. Kalpesh is a registered dealer in Kerala paying tax under composition levy
from 1st April. However, he opts to pay tax under regular scheme from 1 st
December.
Is he liable to file GSTR-4 for the month of November? Discuss.
6. Mrs. Zarina, a registered dealer in Rajasthan, did not file GSTR-3B for the month
of June but she wants to file GSTR-3B for the month of July.
Is it possible? Answer with reference to section 39 of the CGST Act.
7. X has not made any outward supply during the month of September. However,
X has procured certain input services during the month. X is of the opinion that
he can file Nil GSTR-3B for the month of September through SMS.
Whether the understanding of X is correct? Explain.
8. A is a chartered accountant in practice and is registered under GST. On a query
regarding return filing process by a potential client, A has represented him as
a GST practitioner. A is of the view that since he is a qualified chartered
accountant with a GST registration in the name of his proprietorship firm, he
also qualifies as GST practitioner.
Is the understanding of A correct? Discuss.
9. Quicktax, a GST return filing service provider, has asked its clients to provide
the scanned copies of the tax invoices issued to B2B customers for uploading
on the GST portal and filing the return.
Whether the process followed by Quicktax is correct?
10. X Ltd. is winding up its business in Rajasthan. The Tax Consultant of X Ltd. has
suggested that X Ltd. will have to file either the annual return or the final return
at the time of voluntary cancellation of registration in the state of Rajasthan.
Do you agree with the stand taken by Tax Consultant of X Ltd.? Offer your
comments.
11. ANSWERS/HINTS
1. A registered taxpayer is required to furnish a return u/s 39 for every month even
if no supplies have been effected during such period. In other words, filing of
Nil GSTR-3B is also mandatory.
Therefore, Mr. X is required to file GSTR-3B even if he did not make any taxable
supply during the month of July.
2. In GST since the returns are built from details of individual transactions, there is
no requirement for having a revised return. Any need to revise a return may
arise due to the need to change a set of invoices or debit/ credit notes. Instead
of revising the return already submitted, the system allows amendment in the
details of those individual details of those transactions (invoices or debit/credit
notes) that are required to be amended. They can be amended in any of the
future GSTR- 1 in the tables specifically provided for the purposes of amending
previously declared details.
As per section 39(9), omission or incorrect particulars discovered in the returns
filed u/s 39 can be rectified in the return to be filed for the month during which
such omission or incorrect particulars are noticed. Any tax payable as a result of
such error or omission will be required to be paid along with interest. The
rectification of errors/omissions is carried out by entering appropriate particulars
in “Amendment Tables” contained in GSTR-1. However, no such rectification of
any omission or incorrect particulars is allowed after the due date for furnishing
of return for the month of September or second quarter (in case of quarterly
filers) following the end of the financial year to which such details pertain, or the
actual date of furnishing of relevant annual return, whichever is earlier
3. Section 37 stipulates that GSTR-1 for a particular month is required to be filed
on or before the 10th day of the immediately succeeding month, i.e. on a monthly
basis.
However, presently, as a measure of easing the compliance requirement for
small taxpayers, the details of outward supplies of goods or services or both
to a registered person can be furnished, for the first and second months of a
enrolment process of GSTP as provided under the GST law and only upon
approval of such enrolment can a chartered accountant represent himself as a
GSTP.
9. No, the process followed by Quick tax is not correct.
The registered persons supplying goods or services to B2B customers are
required to upload the invoice wise details of supplies made during the tax
period. However, there is no requirement to upload the scanned copies of the
invoices issued to the customers on the GST portal at the time of filing returns.
Only information required as per GST returns is to be captured in the return filing
utility and the same is to be uploaded on the GST portal and not the scanned
copies of the actual invoices.
10. No, the stand taken by Tax Consultant of X Ltd. is not correct.
Annual return is required to be filed by every registered person paying tax as
a normal taxpayer. Final return is filed by the registered persons who have
applied for cancellation of registration within three months of the date of
cancellation or the date of cancellation order.
In the given case, X Ltd., a registered person, is winding up its business and
has thus, applied for cancellation of registration. Therefore, it is required to
file both annual return and final return.
16
Provisions existing as on the date when the Study Material was released for printing.
provisions of sub-
section (5) of section
35 shall furnish,
electronically, the
annual return under
sub-section (1)
along with a copy of
the audited annual
accounts and a
reconciliation
statement,
reconciling the
value of supplies
declared in the
return furnished for
the financial year
with the audited
annual financial
statement, and such
other particulars as
may be prescribed.