Chanderprabhu Jain College of Higher Studies

&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

E- Notes

Class : BBA (G) Semester-V

Paper Code : BBA (G)-309

Subject : Goods & Sales Tax

Faculty Name : Ms. Parul Agarwal

UNIT-1

GST in India

Goods and Services Tax (GST) is the biggest indirect tax reform of India. GST will
subsume Central Excise Law, Service Tax Law, State VATs, Entry Tax, Luxury
Taxes, Octroi etc. Earlier, there were so many taxes which were levied on goods
such as Excise, VAR, entry tax, octroi. Similarly, service tax, entertainment tax,
luxury tax were levied on services. Now, there will be only single tax i.e. GST and
it will make dream of One Nation, One Tax feasible.

GST is one indirect tax for the whole nation, which will make India one unified
common market. GST is a single tax on the supply of goods and services. GST is a
destination based tax which is levied only on value addition at each stage because
credits of input taxes paid at procurement of inputs will be available. Thus, the
final consumer will bear only the GST charged by the last dealer in the supply
chain, with set-off benefits at all the previous stages.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Meaning and Types of Indirect Taxes

Indirect tax is not directly levied on the taxpayers. This tax is often levied on goods
and services which results in their higher prices. A few examples of indirect taxes
in India include service tax, central excise and customs duty, and value added tax
(VAT).

Here are seven commonly imposed indirect taxes in India:

1. Service tax

This tax is levied by entities for rendering services like consulting, legal, and other
such services. This tax is collected from the service recipients and paid to the
Central Government. From 1st June 2016,service tax service tax was 14% with
Swacch Bharat Cess (0.5%) and Krishi Kalyan Cess (0.5%) bringing up the
applicable rate to 15%. Small service providers with an income of less than INR 10
lakh per annum are exempted from paying this tax.

2. Excise duty

This duty is applicable on all goods that are manufactured in India. This indirect
tax is payable by the manufacturers and often passed on to the customers. This
indirect tax in India is levied by the Central Government and works according to
the provisions of the Central Excise Act, 1944.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

3. VAT

Value Added Tax (VAT) is imposed on the sale of movable goods in the nation.
VAT is levied at all stages of the production and distribution channel that include
an instance of value addition. This tax is levied by the State Governments under
Entry 54 of the State List.

4. Customs duty

It is one of those indirect taxes that are applicable for bringing imported goods into
the country. In certain instance, this duty may also be levied on exported goods.
The Customs Act, 1962 provides regulations on the levy and collection of this
duty, import and export procedures, penalties, prohibitions, and offence.

5. Securities Transaction Tax (STT)

This indirect tax is imposed when stocks are sold or purchased through any Indian
stock exchange. STT was introduced in 2004 and is applicable to shares, mutual
funds, and future and options transactions. STT was imposed to reduce the short-
term capital gains tax and eliminate long-term capital gains tax.

6. Stamp duty

This is an indirect tax charged by state governments on the transfer of immovable

property within their jurisdiction. In addition, stamp duty is mandatory on all types
of legal documents. Its rates vary from one state to another.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

7. Entertainment tax

The state governments charge such tax on every transaction related to

entertainment. Some examples are movie tickets, video game arcades, stage shows,
exhibitions, amusement parks, and sports-related activities.

Four benefits of indirect taxes as opposed to direct taxes are:

1. Contribution by the poor

The poor people are exempt from indirect taxes and this is the only way of
reaching this section of the society. This meets the basic principle of making every
person pay towards the growth of the country through the state governments.

2. Convenient

Taxpayers are not burdened with the indirect taxes because these are paid only
while making purchases. Furthermore, it is convenient for the state authorities
because the taxes are directly collected at the factories or the ports, which saves
time as well as effort.

3. Easy collection

The collection of all these taxes is automatically performed during the selling and
purchasing goods and services. This helps the authorities collect taxes easily while
reducing the possibility of tax evasion.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

4. Equitable

Indirect tax is directly related to the prices of the goods and services. Therefore,
rich people purchasing luxury items pay higher taxes and vice versa.

Three disadvantages of direct taxes are:

1. Regressive

Not all taxes are equitable. Certain taxes, like that imposed on salt, are regressive
because the same amount of tax is levied irrespective of the economic status of the
buyer.

2. Uncertain

Only taxes imposed on necessary goods and services have some certainty. Taxes
levied on goods and services having an elastic demand are not predictable and may
not earn huge revenues for the authorities.

3. Not industry-friendly

When tax is imposed on raw materials, it acts as a detriment to manufacturers

using the same, thereby making it unfriendly. Furthermore, it increases the cost of
production, which results in higher prices of the goods.

Because there are numerous indirect taxes in India, the buyers pay higher prices for
goods and services. The Government is proposing combining various taxes under a
single tax known as Goods and Service Tax (GST). Merging different taxes is
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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

expected to improve governance and reduce the complexities of complying with

multiple rules and regulations.

Basic Concepts: Supply, Composite and Mixed Supplies

A composite supply is two or more goods or services that are only sold as a set and
cannot be sold individually.

Every composite supply has a principal supply, which is the main product or
service that the buyer primarily wants. The rest of the supply is made up of
supporting elements that add value to the principal supply.

A composite supply is taxed at the GST rate of the principal supply.

Example 1: A gift-wrapped box of chocolates. Here, the chocolates are the

principal supply, while the box, gift wrapper, message card and gift wrapping
service offered by the salesperson are supporting elements that cannot be supplied
individually without the chocolates. This is a composite supply, and its GST rate
will be same as the rate for the chocolates.

Example 2: A dealer sells a brand-new vehicle along with registration, insurance,

a tool kit and first aid kit, and 4 free maintenance services. This is a composite
supply, because vehicle insurance, registration and free maintenance services
cannot be supplied without the vehicle (which is the principal supply).

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Note: Whenever a shopkeeper ships the contents of a composite supply, the tax
rate associated with the shipping charge will be equivalent to the tax rate of the
principal supply (in case of example 1, the GST on shipping will be equal to the
GST on the box of chocolates).

Mixed supply

A mixed supply is two or more independent products or services which are offered
together as a bundle but can also be sold separately.

In a mixed supply, the item or service with the highest GST rate is treated as the
principal supply (whether or not it is the main part of the bundle). The mixed
supply is taxed at the GST rate of the principal supply.

Example: A plant nursery sells cut flowers, ornamental plants, and gardening
services together as a bundle. When they’re sold separately, the plants and flowers
incur GST at a rate of 5%, and the gardening services incur GST at a rate of 18%.
When they’re offered together as a bundle, the whole bundle will incur GST at the
18% rate.

Note: Whenever a shopkeeper ships the contents of a mixed supply, the tax rate
associated with the shipping charge will be equivalent to the tax rate applied on the
bundle.

How to distinguish between composite supply and mixed supply

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

At first glance, composite supplies and mixed supplies may look very similar to
each other. In both cases, we talk about supplying goods and/or services as a
bundle for a single price. But then, why have our tax authorities gone to great
lengths to differentiate them? Well, let’s see why:

Difference No.1: Principal supplies: In a composite supply, one item or service is

clearly the main part of the supply. In a mixed supply, no one part is necessarily
the principal supply (though the part with the highest GST rate is treated as
principal).

Difference No.2: Individually available supplies: In a composite supply, it

wouldn’t make sense to sell the secondary parts separately from the principal
supply (for instance, the towels provided along with a hotel room). In a mixed
supply, each piece could be sold separately (for instance, a grocery bundle
containing an assortment of snacks and drinks).

Services under GST

Works contract was treated as both goods and supply in the pre-GST regime. Both
VAT and service taxes were applicable on it. There were various rates,
composition schemes available for works contractors with many complexities thus
resulting in many case laws.

Schedule II of the GST Act has certain activities clearly classified as goods or
services under GST to avoid any such confusion

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Levy and Charges of GST

In India, there is wide socio-economic gap and it would not be feasible to levy
same rate of tax for necessary items like milk and luxury items like BMW Cars.
Therefore, it was critical to set different rates for different class of items.

There are four slabs fixed for GST Rates – 5%, 12%, 18% and 28%.

Items exempted under GST:

Milk, eggs, curd, buttermilk, Fresh vegetables and fruits, Un-branded wheat and
rice, un-branded flour, Puja Items

Items under 5%

Frozen Vegetables and fruits, branded wheat and rice, branded flour, hand-made
safety matches, cotton, cotton fabrics, Footwear below Rs.500

Items under 12%

Butter, Cheese, Dry fruits, mobile phones, ayurvedic products

Items under 18%

Biddi wrapper leaves, biscuits, footwear exceeding Rs. 500, man-made fibre, hair
oil, soap, toothpaste

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Items under 28%

Biris, LED TV, AC, Cars, tobacco products, cement

Note: GST Rate Subject to Change TIMT to TIME

Procedure for obtaining Registration Certificate

The following documents are required for obtaining service tax registration in
India:

 Self-attested copy of the PAN Card of the Proprietor or Company or LLP or

Legal entity
 Photograph and proof of identity of the person filing the service tax
registration application
 PAN card
 Passport
 Voter Identity Card
 Aadhar Card
 Driving license

Any other Photo-identity card issued by the Central Government, State

Government or Public Sector Undertaking.

Address proof for the address submitted along with proof of ownership, lease or
rent agreement, allotment letter from Government.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

 No Objection Certificate from the legal owner.

 Bank Account Details
 Memorandum of Association (For Company)
 Articles of Association (For Company)
 List of Directors (For Company)

Authorisation by the Board of Directors/Partners/Proprietor for the person filing

the application.

Business transaction numbers obtained from other Government departments or

agencies such as Customs Registration No. (BIN No), Import Export Code (IEC)
number, State Sales Tax Number (VAT), Central Sales Tax Number, Company
Index Number (CIN) which have been issued prior to the filing of the service tax
registration application.

Procedure for Applying for Service Tax Registration

To obtain service tax registration, the applicant can file the ST-1 application for
service tax through the Automation of Central Excise and Service Tax (ACES)
website. The documents listed above along with the requisite information must be
submitted online.

On filing the ST-1 service tax registration application online, the applicant must
submit a self attested copy of the above documents by registered post/speed Post to
the concerned Division, within 7 days for the purposes of verification.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

If the documents and information submitted are acceptable, service tax registration
would be granted within 2 days of filing ST-1 online – based on trust. The service
tax applicant can use the electronic service tax registration certificate as proof of
registration and begin electronic payment of taxes.

In case there is a need for verification of the premises or documents submitted, the
same can be requested by an authorised Service Tax Officer. Further, under the
following circumstances, the service tax registration certificate may be revoked by
the service tax department:

1. The premises are found to be nonexistent or not in possession of the

assessee.
2. No documents are received within 15 days of the date of filing the
registration application.
3. The documents are found to be incomplete or incorrect in any respect.

Person and Taxable Person

A taxable person is liable to pay tax under GST.

A person is registered or is liable to be registered under the law would be a taxable

person in GST. A person would be liable to be registered under the law under two
categories:

a) Person liable to be registered mandatorily.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

b) Person liable to be registered provided aggregate turnover of supply of goods or

services or both exceeds threshold limit.

Generally, a person is liable to pay tax on the supply of goods or services made
by him. Whether in any case, a person is liable to pay tax on these supplies
received by him?

The tax is generally paid by the person on the supply of goods or services made by
him. This is called Forward charge of Tax.

Case Study: A is a Chartered Accountant. He provides consultancy on a taxation

matter to B. A is liable to get registered and pay tax on the supply of services made
by him to B subject to fulfillment of conditions as prescribed under the law.

In some of the cases, a person is liable to pay tax on the goods or services received
by him. The law casts the responsibility to pay tax on the person receiving the
supply of goods or services rather than the person supplying the goods or services.
This is called Reverse charge of tax.

Case Study: A is a Chartered Accountant. He provides consultancy on a taxation

matter to B. Here, Law provides that B is liable to get registered and pay tax on the
supply of services received by him from A. This is reverse charge wherein
recipient is liable to pay tax.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Payment of GST Tax

Indian businesses are in for a learning curve — the payment process under Goods
and Services Tax (GST) differs drastically from current procedures. Namely, each
step of the process — like all other aspects of GST — now occur online within the
GST portal.

Section 49 of the Central Goods and Services Tax Act, along with rules published
by the Central Board of Excise and Customs (CBEC), govern the new payment
procedures. This whitepaper provides an overview of what they entail and looks at
the following:

 Electronic ledgers
 Manner of utilization and cross-utilisation of input tax credit (ITC)
 Interest on delayed payments
 Electronic payment forms
 Unique identification number for each transaction

In the GST portal, a taxable person can track his tax liabilities across three ledgers,
each maintained in real-time:

Electronic liability ledger (also known as electronic tax liability register): Accounts
for a taxpayer’s gross tax liability — form GST PMT-01 on the GST portal

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Electronic credit ledger (also known as electronic input tax credit ledger): Records
the tax payments already made during the supply chain e. every claim of ITC is
recorded here — form GST PMT-02

Electronic cash ledger: All amounts paid by the taxpayer are reflected here — form
GST PMT-05

Electronic liability ledger

This ledger records all liabilities of a taxable person including:

The tax, interest, late fees, or any other amount payable per the return furnished by
the taxpayer or per any proceedings

The tax and interest payable arising out of any mismatch of ITC or output tax
liability

Any interest that may accrue from time to time

The reversal of ITC or interest

Taxpayers should settle their liabilities in the following order:

Self-assessed tax and other dues, such as interest, penalty, fees, or any other
amount relating to previous tax period returns

Self-assessed tax and other dues relating to the current tax period return

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Any other amount payable under the act/rules (liability arising out of demand
notice, proceedings, etc.)

Electronic credit ledger

Every claim of ITC self-assessed by the taxpayer shall be credited to this ledger.
The amount available in this ledger may be used for payment towards output tax
only. Under no circumstance can an entry be made directly in the electronic credit
ledger.

This ledger may include the following:

ITC on inward supplies from registered taxpayers

ITC available based on distribution from input services distributor (ISD)

ITC on input of stock held/semi-finished goods or finished goods held in stock on

theday immediately preceding the date on which the taxpayer became liable to pay
tax, provided he applies for registration within 30 days of becoming liable

Permissible ITC on inputs held in stock and inputs contained in semi-finished or

finished goods held in stock on the day of conversion from composition scheme to
regular tax scheme

ITC eligible on a payment made on a reverse charge basis

Electronic cash ledger

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Any amount paid by the taxpayer will be reflected in the electronic cash ledger.
The amount available in this ledger may be used for making any payment towards
tax, interest, penalty, fees, or any other amount due under the act/rules in the time
and manner prescribed. (It is reiterated that any credit in the electronic credit
ledger can be utilized only for payment of output tax.)

To initiate a payment, taxpayers generate a challan online using form GST PMT-
06, which will be valid for a period of 15 days. Payment can then be remitted
through any of the following modes:

Internet banking (authorized banks only)

Credit or debit card (authorized banks only)

National Electronic Fund Transfer (NEFT) or real-time gross settlement (RTGS)

(any bank, authorized or unauthorized)

Over-the-counter (OTC) payment (authorized banks only) for deposits up to ten

thousand rupees per challan and per tax period

The taxpayer is responsible for any commission due on the payment.

The payment date shall be recorded as the date the payment is credited to the
appropriate government account. The date, the payment is debited from the
taxpayer’s account is not relevant.

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 Chanderprabhu Jain College of Higher Studies
&
School of Law
An ISO 9001:2015 Certified Quality Institute
(Recognized by Govt. of NCT of Delhi, Affiliated to GGS Indraprastha University, Delhi)

Unregistered taxpayers needing to make a tax payment will still use the online
GST portal but with a temporary identification number generated through the
portal.

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