GST 737 v1

GOODS AND SERVICES TAX
(GST)
Sub Code - 737
Developed by
Dr. R. G. Saha
Dr. Usha Devi
On behalf of
Prin. L.N. Welingkar Institute of Management Development & Research
Advisory Board
Chairman
Prof. Dr. V.S. Prasad
Former Director (NAAC)
Former Vice-Chancellor
(Dr. B.R. Ambedkar Open University)
Board Members
1. Prof. Dr. Uday Salunkhe 2. Dr. B.P. Sabale 3. Prof. Dr. Vijay Khole 4. Prof. Anuradha Deshmukh
Group Director Chancellor, D.Y. Patil University, Former Vice-Chancellor Former Director
Welingkar Institute of Navi Mumbai (Mumbai University) (YCMOU)
Management Ex Vice-Chancellor (YCMOU)
Program Design and Advisory Team
Prof. B.N. Chatterjee Mr. Manish Pitke

Dean – Marketing Faculty – Travel and Tourism
Welingkar Institute of Management, Mumbai Management Consultant
Prof. Kanu Doshi Mr. Smitesh Bhosale

Dean – Finance Faculty – Media and Advertising
Welingkar Institute of Management, Mumbai Founder of EVALUENZ
Prof. Dr. V.H. Iyer Prof. Vineel Bhurke

Dean – Management Development Programs Faculty – Rural Management
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai
Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Director – Intraspect Development Faculty – Healthcare Management
Manager Medical – Air India Ltd.
Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Dean – IT/Business Design Faculty – Hospitality
Welingkar Institute of Management, Mumbai Former Manager-Catering Services – Air India Ltd.
Prof. Sandeep Kelkar Mr. Anuj Pandey

Faculty – IT Publisher
Welingkar Institute of Management, Mumbai Management Books Publishing, Mumbai
Prof. Dr. Swapna Pradhan Course Editor

Faculty – Retail Prof. Dr. P.S. Rao
Welingkar Institute of Management, Mumbai Dean – Quality Systems
Welingkar Institute of Management, Mumbai
Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Dean – Banking Dean – Marketing
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai
Mr. P.M. Bendre Course Coordinators

Faculty – Operations Prof. Dr. Rajesh Aparnath
Former Quality Chief – Bosch Ltd. Head – PGDM (HB)
Welingkar Institute of Management, Mumbai
Mr. Ajay Prabhu Ms. Kirti Sampat

Faculty – International Business Manager – PGDM (HB)
Corporate Consultant Welingkar Institute of Management, Mumbai
Mr. A.S. Pillai Mr. Kishor Tamhankar

Faculty – Services Excellence Manager (Diploma Division)
Ex Senior V.P. (Sify) Welingkar Institute of Management, Mumbai
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1st Edition, August 2021

CONTENTS
Contents
Chapter No. Chapter Name Page No.
Unit - 1 Introduction to Goods and Services Tax (GST) 4-36

Unit - 2 GST Acts: CGST, SGST Act and IGST Act 37-114
Unit - 3 Procedure and Levy under GST 115-192
Unit - 4 Assessment and Returns 193-230
Unit - 5 GST and Technology 231-252
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INTRODUCTION TO GOODS AND SERVICES TAX (GST)
Chapter 1
Introduction To Goods And
Services Tax (GST)
Learning Objectives
After going through this chapter you should be able to know:
• Meaning, objectives and features of GST.
• The subsuming of tax and benefits of implementing of GSt
• Structure of GST
• Concepts of CGST, SGST and IGST
• Power, function and provision of GST
Structure:
1.1 Introduction to Goods and Services Tax
1.2 Salient Features of GST
1.3 Objectives of GST
1.4 Composition Scheme of GST
1.5 Constitutional Amendments of GST
1.6 Structure of GST (Dual Model)
1.7 GST Council
1.8 Provisions for Amendments of GST
1.9 Summary
1.10 Objective Types Questions
1.11 Self Assessment Questions
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1.1 INTRODUCTION TO GOODS AND SERVICES TAX
France was the first country to implement GST in 1954. Since then, 160
countries have adopted GST. Further, the GST journey in India began in the
year 2000, when a committee was setup to draft law. It took 17 years from
then for the Law to evolve. In 2017 the GST Bill was passed in the Lok
Sabha and Rajya Sabha. On 1st July 2017 the GST Law came into force in
India.
The introduction of Goods and Services Tax (GST) in India is a significant

step in the field of indirect tax reforms. By amalgamating a large number
of Central and State taxes into a single tax, it would mitigate cascading or
double taxation in a major way and pave the way for a common national
market. From the consumer point of view, the biggest advantage will be in
terms of a reduction in the overall tax burden on goods & services. GST will
also make Indian products competitive in the domestic and international
market. It will have a boosting impact on the economic growth. Last but
not the least, this tax, because of its transparency and self-policing
character, would be easier to administer.
GENESIS
Initially, it was proposed that GST would be introduced from 1st April,
2010. The Empowered Committee (EC) of State Finance Ministers, which
had formulated the design of State VAT was requested to come up with a
roadmap and structure for GST. Joint Working Groups of officials having
representatives of the States as well as the Centre were set up to examine
various aspects of GST and draw up reports specifically on exemptions and
thresholds, taxation of services and taxation of inter-State supplies. Based
on the discussions between the State and the Central Government, the EC
released its First Discussion Paper (FDP) on GST in November, 2009. This
formed the basis for further discussion between the Centre and the States.
The central government introduced Constitutional Amendment Bill 122nd

for GST in the Lok Sabha on 19.12.2014. The Bill was passed by the Lok
Sabha in May, 2015. The Bill was referred to the Select Committee of Rajya
Sabha on 12.05.2015. The Select Committee submitted its Report on the
Bill on 22.07.2015. The Bill with certain amendments was finally passed in
the Rajya Sabha and thereafter by Lok Sabha in August, 2016. Further the
bill was ratified by the States and received the assent of the President on
5
8th September, 2016 and was enacted as Constitution (101st Amendment)

Act, 2016 w.e.f. 16th September, 2016. Finally, the One Hundred and
Twenty Second Amendment Bill of the Constitution of India, officially
known as The Constitution
(One Hundred and First Amendment) Act, 2016, introduced a national

Goods and Services Tax in India from 1 July 2017. The Bill provides for a
levy of GST on supply of all goods or services except Alcohol for human
consumption, and petroleum products.
A Goods and Services Tax Council (GSTC) was constituted comprising the
Union Finance Minister, the Minister of State (Revenue) and the State
Finance Ministers to recommend on the GST rate, exemption and
thresholds, taxes to be subsumed and other features. This mechanism will
ensure some degree of harmonization on different aspects of GST between
the Centre and the States.
One half of the total number of members of GSTC would form quorum in
meetings. Decision in GSTC will be taken by a majority of not less than
three-fourth of weighted votes cast. Centre and minimum of 20 States will
be required for majority because Centre would have one-third weightage of
the total votes cast and all the States taken together would have two-third
of weightage of the total votes cast.
In keeping with the federal structure of India, GST is levied concurrently by

the Centre (CGST) and the States (SGST). The base and other essential
features is common between CGST and SGST. Both CGST and SGST is
levied on the basis of the destination principle. (Example: Consider goods
manufactured in Maharashtra are sold to the final consumer in Karnataka.
Since GST is levied at the point of consumption, the entire tax revenue will
go to Karnataka and not Maharashtra).
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SUBSUMING OF TAXES
Existing Tax Structure
GST is commonly described as an indirect, comprehensive, broad based

consumption Tax. The Dual GST which is implemented in India subsumed
many consumption taxes. The objective is to remove the multiplicity of tax
levies and reduce the effect of Cascading Taxes. Further, Subsumation of
large number of taxes and other levies will allow free flow of larger pool of
tax credits at both Central and State level.
7
CENTRAL TAXES TO BE SUBSUMED IN GST
The following Central Taxes are subsumed under the Goods and Services
Tax:
i. Central Excise Duty (CENVAT).
ii. Additional Excise Duties.
iii. The Excise Duty levied under the Medicinal and Toilet Preparations
(Excise Duties) Act 1955.
iv. Service Tax.
v. Additional Customs Duty, commonly known as Countervailing Duty
(CVD).
vi. Special Additional Duty of Customs.
vii.Surcharges and Cesses levied by Centre, so far they relate to supply of
goods or services.
State Taxes to be Subsumed in GST
The following State taxes are subsumed under GST:

1. VAT / Sales tax.
2. Entertainment tax (unless it is levied by the local bodies).
3. Luxury tax.
4. Taxes on lottery, betting and gambling.
5. State Cesses and Surcharges in so far as they relate to supply of goods
and services.
6. Octroi and Entry Tax.
7. Purchase Tax.
8. Taxes on advertisements.
9. CST.
8
Taxes which are not to be subsumed
GST has not subsumed the following taxes within its ambit:
1. Basic Customs Duty: These are protective duties levied at the time of
Import of goods into India.
2. Exports Duty: This duty is imposed at the time of export of certain
goods, which are not available in India in abundance.
3. Road & Passenger Tax: These are in the nature of fees and not in the
nature of taxes on goods and services.
4. Toll Tax: These are in the nature of user fees and not in the nature of
taxes on goods and services.
MEANING OF GST
In simple words, Goods and Service Tax (GST) is an indirect tax levied on
the supply of goods and services. This law has replaced many indirect tax
laws that previously existed in India.
According to Goods and Services Tax (GST) Act, 2017, GST means tax on
supply of goods or services or both, except taxes on supply of alcoholic
liquor for human consumption and petroleum products.
In other words, GST is a consumption-based tax ultimately borne by the

end consumer of a goods or service. Throughout the value chain,
businesses and consumers pay GST on their purchases. However, if the
purchase was made by a business for sale to a customer, then the business
can claim input tax credit to set-off GST liability. Thus, through the use of
input tax credit mechanism, the GST liability is pushed to the end-
consumer.
9
1.2 SALIENT FEATURES OF GST
The salient features of GST are as under:

i. GST is applicable on “supply” of goods or services or both in India.
Further, it is applicable with effect from 1.7.17(including Jammu and
Kashmir w.e.f 8.7.2017).
(ia) Area upto 200 nautical miles inside the sea is India for the purpose
of levy of GST and area up to 12 nautical miles inside the sea is part of
state or union territory for the purpose of levy of GST.
ii. GST is based on the principle of destination-based consumption taxation
i.e tax is payable in the state where goods / Services or both are finally
consumed.
iii. CGST and SGGST will be levied in case of intra state supply of goods/
services. Further, CGST (Central GST) will be collected by the central
Government and SGST (State GST) will be collected by the State
Government /Union Territory.
iv. An Integrated GST (IGST) will be levied on inter-State supply (including
stock transfers) of goods/services. This will be collected by the Centre
so that the credit chain is not disrupted. (IGST is applicable, if supply is
beyond 12 nautical miles but up to 200 nautical miles)
v. Import of goods/services will be treated as inter-State supplies and will
be subject to IGST. In addition to IGST, the basic customs duty,
education cess, secondary and higher education cess, GST
compensation cess will be applicable.
vi. GST will replace the following taxes currently levied and collected by the
Centre:
a. Central Excise Duty.
b. Duties of Excise (Medicinal and Toilet Preparations).
c. Additional Duties of Excise (Goods of Special Importance).
d. Additional Duties of Excise (Textiles and Textile Products).
e. Additional Duties of Customs (commonly known as CVD).
f. Special Additional Duty of Customs (SAD).
g. Service Tax.
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h. Cesses and surcharges.
vii.State taxes that would be subsumed within the GST are:

a. State VAT.
b. Central Sales Tax.
c. Purchase Tax.
d. Luxury Tax.
e. Entry Tax (All forms).
f. Entertainment Tax (except those levied by the local bodies).
g. Taxes on advertisements.
h. Taxes on lotteries, betting and gambling.
i. State cesses and surcharges.
viii.GST will apply to all goods/services except Alcohol for human
consumption, (Alcoholic liquor will be subject to sales tax and this
product will be out of GST) and petroleum products viz., petroleum
crude, high natural gas and aviation turbine fuel. (Central excise duty
will continue on petroleum products)
ix. Tobacco products will be subject to excise duty plus GST. In addition,
GST compensation cess will be payable on tobacco products, pan
masala, coal, aerated waters and motor cars.
x. A common threshold exemption would apply to both CGST and SGST.
Taxpayers with an annual turnover of 20 lakh (10 lakhs for special
category States as specified in article 279A of the Constitution viz.,
Himachal Pradesh and Uttarakhand) is exempt from GST. (In case of a
person, who is engaged in exclusive supply of goods, limit of 20 lakhs
has been increased to Rs. 40 lakhs WEF 1.4.2019)
(xa) A compounding option (i.e., to pay tax at a flat rate without credits)
would be available to small taxpayers (including specified category of
manufacturers and service providers) having an annual turnover of up to
Rs. 75 lakhs.
11
xi. Credit of CGST paid on inputs may be used only for paying CGST on the
output. The credit of SGST/UTGST paid on inputs may be used only for
paying SGST/UTGST. The credit will be permitted to be utilized in the
following manner:
a. ITC of CGST allowed for payment of CGST & IGST in that order;
b. ITC of SGST allowed for payment of SGST & IGST in that order;
c. ITC of UTGST allowed for payment of UTGST & IGST in that order;
d. ITC of IGST allowed for payment of IGST, CGST & SGST/UTGST in
that order. ITC of CGST cannot be used for payment of SGST/UTGST
and vice versa.
xii.GST council is apex constitutional body, which will determine policies of
GST.
xiii.Various modes of payment of tax are available to the taxpayer viz.,
internet banking, Debit / credit card and National Electronic Funds
Transfer (NEFT) / Real Time Gross Settlement (RTGS).
xiv.Normally, GST is payable, when supply is made or when payment is
received, whichever is earlier. GST of current month is payable by 20th
of the following month. However, a few persons can pay tax on quarterly
basis.
xv.The rates of IGST is NIL, 0.25%, 3%, 5%, 12%, 18% and 28%. In case
of supply within the state, CGST and SGST will be 50% each of IGST
rates. Further, the general rate of GST on supply of services is 18%.
Exemption is available to some services like health care services,
educational services, agriculture related services (upto primary stage),
renting for residential purposes, religious services etc. Services by
employee to employer, services by courts, funeral related activities are
totally excluded from the definition of service.
xvi.If destination of goods is out of India, place of supply will be out of
India even when supplier and recipient of service are in India.
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1.3 OBJECTIVES OF GST
Various objectives of GST are as follows:

i. To make a unified law by involving all the tax bases, laws and
administration procedures across the country. ”one country – one tax”
ii. To implement consumption-based taxation.
iii. To ensure uniform GST Registration, payment and Input tax Credit.
iv. To eliminate that the cascading effect of tax on tax.
v. To reduce unhealthy competition among the states.
vi. To reduce tax evasion and corruption.
vii.To reduce the complications in tax administration and compliance.
viii.To improve GDP ratio.
1.4 COMPOSITION SCHEME OF GST
Composition Scheme is optional. It is available to the Assessee, whose

aggregate turnover in the FY does not exceed Rs. 150 lakhs.
In case of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram,

Nagaland, Sikkim, Tripura and Himachal Pradesh, this limit is Rs. 150
lakhs.
To opt for composition scheme, a taxpayer has to file GST CMP-02 with the
government. This can be done online by logging into the GST Portal. This
intimation should be given at the beginning of every Financial Year by a
dealer wanting to opt for Composition Scheme. The following are the
advantages of registering under composition scheme: Lesser compliance
(returns, maintaining books of record, issuance of invoices), Limited tax
liability, High liquidity as taxes are at a lower rate
The person opting for composition scheme is required to file quarterly GST
return. Such persons will have to pay tax on his total turnover out of his
pocket at the following rates: manufacturer: 1%, restaurant and catering
services: 5% and others: 1%.
13
This scheme is not available to the manufacture of ICE creams, Pan

masala, Tobacco products.
Composite scheme dealer cannot make inter-state supply, supply of

services and exports.
He is also not allowed to charge GST in his invoice and mention HSN code
in tax invoice.
No input tax credit available to composition dealers. Moreover, a dealer

under this scheme is not eligible to supply goods through an e-commerce
portal.
The person opting for the scheme must neither be a casual dealer nor a
non-resident taxable person. Such dealers are required to display the
words” composition taxable person” on every notice and signboard at
prominent places
If a composition taxable person deals with both taxable as well as

exempted goods, tax at fixed rate is payable even on supply of exempted
goods (like milk, food grains) etc.
ALTERNATIVE COMPOSITION SCHEME
The main features of the Alternative composition scheme:

• The alternative composition scheme is applicable with from 1.4.2019 for
intra state supply of goods/services or both.
• It is applicable to the registered dealer, whose aggregate turnover in the
preceding financial year does not exceed Rs. 50 lakhs.
• Under this scheme, GST is payable at the rate of 6%. Further, this
scheme is applicable to a registered dealer, if he is not eligible for
composition scheme.
• The registered dealer, who wants to opt for alternative composition
scheme, is required to upload intimation in form GST CMP-02 latest by
31.7.2019.
• If a registered dealer is having more than one GSTIN but the PAN is
same, then alternative composition scheme is applicable to all.
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• If the registered dealer covered under alternative composition scheme,

he/she will not be entitled to claim the benefit of input tax credit.
1.5 CONSTITUTIONAL AMENDMENTS OF GST
Constitution Bill, 2014 received the assent of the President of India on 8th
September, 2016 and became Constitution Act, 2016, which paved the way
for introduction of GST in India.
Constitution Act, 2016 was enacted on 8th September, 2016, with following
amendments:
a. As per Article 246A, the power to levy GST has been given to the
Parliament as well as to Legislature of every State.
• CGST – enacted by Central Government of India.
• IGST – enacted by Central Government of India.
• SGST – enacted by respective State Governments
b. IGST will be apportioned between Centre and the States, as per the
recommendation of the GST Council.
c. GST will be levied on all supply of goods and services except alcoholic
liquor for human consumption and petroleum products.
d. The explanation to Article 269A of Constitution of India provides that
the import of goods or services will be deemed as supply of goods or
services or both in the course of inter- State trade or commerce. In case
of import of goods, IGST will be levied along with the Basic Customs
duty.
e. The power to levy Central Excise duty on goods manufactured or
produced in India is available in respect of the following products:
• Petroleum crude
• High speed diesel
• Motor spirit (commonly known as petrol)
• Natural gas
• Aviation turbine fuel
• Tobacco and tobacco products.
15
• However, once GST is imposed, there will be no duty on manufacture of

these goods.
f. The power to impose tax on sale of the following products is still
provided to the State Governments:
• Petroleum crude
• High speed diesel
• Motor spirit (commonly known as petrol)
• Natural gas
• Aviation turbine fuel
• Alcoholic liquor for human consumption.
However, once GST Council recommends the date from which GST is
imposed on these products (except alcoholic liquor for human
consumption), sales tax will not be imposed on these products.
The Central Government notified 1st July, 2017 as the date from which the
much awaited indirect tax reform in India, i.e Goods and Services Tax
(GST) will be implemented. Accordingly, Goods and Services Tax (GST) has
been implemented in India w.e.f. 1st July, 2017.
1.6 STRUCTURE OF GST (DUAL MODEL)
Since July 2017, India has been following the dual-GST model, which is
made up of the following components:
SGST - GST collected by the State Government.
CGST - GST collected by the Central Government.
When the sale of goods and services takes place within the same state,
both taxes will be levied.
If the movement of goods occurs between two different states (i.e., an

interstate transaction), a combined tax called the IGST or the Integrated
GST (SGST + CGST) will be collected by the central government.
16
The IGST will replace the previously levied Central Sales Tax (CST) of 2%.
The tax amount collected as IGST will later be distributed to respective
state governments.
To understand the dual-GST model better, let’s take a look at the following
scenarios:
Scenario 1: Levy of SGST and CGST
Let us assume that distributor A in Chennai purchases goods from a

manufacturer B in Tirupur, Tamil Nadu. Since the sale and movement of
goods happens within the state, SGST and CGST will be levied on the sale.
Scenario 2: Levy of IGST
Let us assume that distributor A in Belgaum, Karnataka, purchases goods

from a manufacturer B in Tirupur, Tamil Nadu. Here, the sale and
movement of goods happens between two different states. Therefore, IGST
will be levied on the sale.
Scenario 3: IGST is levied
Let us assume that distributor A in USA, supplies goods to a manufacturer

B in Tamil Nadu.
Here, goods are imported from USA. Therefore, IGST will be levied on the
import sale.
Scenario 4: GST is not levied
Let us assume that distributor A in USA, purchases goods from a

manufacturer B in Tamil Nadu. Here, goods are exported to USA.
Therefore, no GST will be levied on the export sale.
17
GST Tax Rate Structure
The tax structure of GST has the following slabs:
Zero rate
The zero-rate tax is a nil tax that is applied on goods and services. Zero
rated items include milk, eggs, curd, fresh meat, fish, chicken, butter milk,
natural honey, fresh fruits and vegetables, salt, bindi, stamps, judicial
papers, printed books, newspapers, bangles, etc.
Lower rate
A lower rate of 5% will be applied on items like Coffee, tea, edible oil, coal,
spices, cream, skimmed milk powder, frozen vegetables, medicines,
kerosene, life boats and cotton fabric.
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Standard rate
There are two standard rates that have been finalized by the GST Council:
12% and 18%.
Processed food, butter, cheese, ghee, tooth powder, agarbatti, umbrella

and mobile phones will be taxed at 12%. Refined sugar, soups, ice cream,
mineral water, tissues, camera, speakers, Capital goods, industry
intermediaries, toiletries, computers and printers will be taxed the second
standard rate of 18%.
Higher rate
A higher rate of 28% will be levied on white goods. This includes items
such as washing machines, high-end motorcycles, air conditioners,
refrigerators, small cars, hair shampoo, speakers, etc.
Special rate
Certain precious metals like gold, silver, ornaments, precious stones, are
taxable at 3%
Additional cess
The new GST structure will collect an additional cess on top of the 28%
GST. The cess will be applied on demerit goods like coal, pan masala,
tobacco, aerated drinks, and motor vehicles.
19
1.7 GST COUNCIL
As per Article 279A of the amended Constitution, the GST Council will be a
joint forum of the Centre and the States, and it consists of the following
members: -
The Union Finance Minister will be the Chairperson b) The Union Minister of
State, for Revenue or finance and c) The Minister of finance or taxation or
any other Minister nominated by each State Government will be the
Members. The Vice chairperson of GST council will be elected by GST
council members.
The Council will make recommendations to the Union and the States on
important issues related to GST, like the goods and services that may be
subjected or exempted from GST, principles that govern Place of Supply,
threshold limits, GST rates, special rates for raising additional resources
during natural calamities/disasters, special provisions for certain States,
etc.
The GST council shall establish a mechanism to adjudicate any dispute

between GOI and one or more states or between 2 or more states.
All decisions of the GST Council will be made by three fourth majority of
the votes cast; the centre shall have one-third of the votes cast and the
states together shall have two-third of the votes cast.
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GST COUNCIL MEETINGS
GST Council has taken some important decisions in the GST Council
meetings. They are:
1. The threshold limit for exemption from levy of GST would be Rs 20 lakhs
for the States except for the Special Category States, as enumerated in
Article 279A of the Constitution, for which it will be 10 Lakhs);
2. The threshold for availing the Composition Scheme would be 150 lakhs.
3. Approval of the Draft GST Rules on registration, payment, return, refund
and invoice, debit/credit Notes with the understanding that minor
changes may be permitted with the approval of the Chairperson, if
required, based on suitable suggestions from the stakeholders or from
the Law Department;
4. All entities exempted from payment of indirect tax under any existing
tax incentive scheme would pay tax in the GST regime and the decision
to continue with any incentive scheme shall be with the concerned State
or Central government. In case, the State or Central Government
decides to continue with any existing exemption/incentive scheme; it
will be administered by way of a reimbursement mechanism.
5. Adoption of five slabs tax rate structure of 1%, 5%, 12%, 18% and
28%. In addition, there would be a category of exempt goods and
further a cess would be levied on certain goods such as luxury cars,
aerated drinks, pan masala and tobacco products, over and above the
rate of 28% for payment of compensation to the states.
21
QUORUM AND DECISION-MAKING

a. For a valid meeting of the members of GST Council, at least 50 percent
of the total number of the member should be present at the meeting.
b. Every Decision made during the meeting should be supported by at
least 75 percent majority of the weighted votes of the members who are
present and voting at the meeting. In “article 279A” a principle is there
which divides the total weighted vote cast between Central Government
and State Government:
c. The vote of Central Government shall have the weighted of one-third of
the total votes
d. The votes of State Government shall have the weighted of two third of
the total votes, cast in the meeting
e. Any act, decision or proceedings shall not be declared as invalid on the
basis of any remaining deficiency at the time of establishment of GST
Council i.e.
i. If there is any vacancy remained in the Council
ii. If there is any defect in the constitution of Council
iii. If there is any defect in the appointment of a person as a member of
the Council
iv. If there is any procedural noncompliance.
22
POWER AND FUNCTIONS OF THE GST COUNCIL
The GST council will have statutory powers to make recommendation to

the Union and State on the following matters:
a. Subsuming of various taxes in GST.
b. Details of services and goods that will be subjected to GST or which will
be exempted from GST.
c. Threshold limit below which services and goods will be exempted from
GST.
d. GST rates including floor rate with bands of GST and special rates to
raise additional resources during natural calamity.
e. Making special provisions for the following states: Arunachal Pradesh,
Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, Tripura, Himachal Pradesh and Uttarakhand.
f. Determination of place of supply.
g. Apportionment of revenue of IGST and CGST among union and states.
h. Compensation to states for loss of revenue for a period of five years.
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1.8 PROVISIONS FOR AMENDMENTS OF GST
Insertion of New Article 246A: The Article 246A gives power to Union
and State government to make the law in respect of goods and service tax
to be imposed by central or state government. This amendment subsumed
the taxes like Excise duty, Service tax, Central Sales tax at Central level
and VAT, Entry tax, Entertainment tax etc. at State level.
Amendment of Article 248(1) (residuary Power of legislation):

Under Article 248(1) Parliament has exclusive power to make any law in
respect of any item not covered under State List and Concurrent List
subject to provisions of Article 246A
Amendment of Article 249 (1) (Power of Parliament to legislate

with respect to a matter in the State List in the national interest):
Parliament of India can make the GST law for the whole or any part of
India subject to approval 2/3rd members of each state.
Amendment of Article 250(1) (Proclamation of Emergency):
Parliament of India can make the GST law in case of emergency.
Amendment of Article 269 and Insertion of New Article 269A (Inter

State Sale and Purchase): As per Article 269A Goods and Service tax
shall be levied and collected by Government of India and apportioned
between States in the manner as provided in the law by parliament on the
recommendation of GST council.
Amendment of Article 270(1) (Levy and Distribution between union

and state): the revenue of GST other than Interstate GST will be
distributed between Union and State according to Clause
(2) of Article 270.
Amendment of Article 271 (Surcharge on taxes by union):

Parliament has exclusive right to charge the surcharge on any tax and such
surcharge will form the part of consolidated fund.
Insertion of Article 279A (Constitution of Goods and Service tax

Council): With insertion of Article 279A, President of India has power to
constitute Goods and Service tax Council (GST Council) within 60 days
from the date of commencement of this act.
24
The Council shall consist following members:
Chairman: The Union Finance Minister
Member: Union Minister of State Revenue/Finance
Member: Minister in charge of Finance/taxation of each State

government
The members for the committee shall decide Vice-Chairperson amongst

them for such period as may decide.
The council shall make the recommendation on rate of GST, surcharges,

Exemptions, Model of GST law, Place of Supply rules, special rate of GST,
Special Provision for North east states or any other matter as decided by
the council.
The Council will decide the date when GST be levied on petroleum crude,
high speed, petrol, natural gas and aviation turbine fuel.
The quorum of meeting should be 1/2nd (50%) total members.
Every decision of council shall be taken by majority of members consisting

3/4th (75%) of total weighted votes of members present and voting.
The vote of Central government shall have weight of 1/3rd of total vote
cast.
The vote of State governments together shall have weightage of 2/3rd of

total vote cast.
Amendment of Article 286 (Restriction on Imposition of tax): Article

286 restricts the state laws from imposition of any tax on sale or purchase
of goods outside the state or in the course of the import of the goods into
or export of the goods out of, the territory of India.
25
Amendment of Article 366 (Definition): Article 366 covers various

definitions. As per new clause 12A to Article 366 “Goods & Service tax”
means any tax on supply of Goods or Services or both except taxes on
supply of the alcoholic liquor for human consumption. The term service is
also defined by inserting new clause 26A as, anything other than goods.
Amendment in Entry No 84, 92, 92C to Union List: As per Entry No 84

Duties of excise shall be levied on tobacco and other goods manufactured
or produces in India except alcoholic liquor for human consumption, opium,
Indian hemp and narcotics.
Further Entry no 92 and 92 C covering tax on sale or purchase of

newspaper and Service tax respectively have been omitted as already they
are merged into GST.
Amendment in Entry No 52, 54, 55 and 62 to State List: Entry no 52

states that local bodies can’t levy and collect the entry taxes like octroi,
LBT etc.
Under Entry No 54 state government can collect tax on sale or purchase of

goods other than newspaper. State government can’t levy the tax on
advertisement under Entry No 55.
In addition to above now Panchayat, Municipalities, Regional or District

council can levy and collect taxes on entrainment and amusement under
entry 62.
Levy of addition 1% tax by States: To protect the revenue loss of

manufacturing state 1% tax shall be levied by state on sale or purchase in
the course of interstate for the period of 2 years of such extended period
as allowed by GST council. Entire revenue from such addition levy will be
kept by the state from where supply of goods take place.
Compensation to States for Revenue Loss: Parliament may by law and with
the recommendation of GST council provide compensation to state on
account of implementation of GST. The period of compensation is restricted
up to 5 years.
26
1.9 SUMMARY
• The term GST is defined in Article 366 (12A) to mean “any tax on supply
of goods or services or both except taxes on supply of the alcoholic liquor
for human consumption and petroleum products. In other words, GST is
a destination based tax and levied at a single point at the time of
consumption of goods or services by the ultimate consumer.
• GST is a single tax on the supply of goods and services, right from the
manufacturer to the consumer. Credits of input taxes paid at each stage
will be available in the subsequent stage of value addition, which makes
GST essentially a tax only on value addition at each stage. The final
consumer will thus bear only the GST charged by the last dealer in the
supply chain, with set-off benefits at all the previous stages.
• Goods means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached or forming part of the land, which are agreed to be served
before supply or under a contract of supply.
• At the Central level, the following taxes are being subsumed: Central
Excise Duty, Additional Excise Duty, Service Tax, Additional Customs Duty
commonly known as Countervailing Duty and Special Additional Duty of
Customs.
• At the State level, the following taxes are being subsumed: Subsuming of
State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax
levied by the local bodies), Central Sales Tax (levied by the Centre and
collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax
and Taxes on lottery, betting and gambling.
• The GST Council will make recommendations to the Union and the States
on important issues related to GST, like the goods and services that may
be subjected or exempted from GST, principles that govern Place of
Supply, threshold limits, and GST rates etc.
27
• The union finance minister will be the chairperson of the GST council.
Union minister of state for revenue or finance, minister of finance or any
other minister nominated by each state will be the members. Vice
chairperson of GST council will be elected by GST council from amongst
its members. The GST council is mainly a recommendatory body on
various issues relating to GST.
1.10 OBJECTIVE TYPES QUESTIONS
Fill in the blanks
1. ____________ is the important sources of revenue of the government.
2. According to ____________ of the Constitution “no tax shall be levied

or collected except by authority of law”.
3. ____________ are paid after the income reached in the hands of

taxpayer.
4. __________ is a comprehensive indirect tax on manufacture, sale and

consumption of goods and services throughout India.
5. GST law was taken effect from ____________.
6. ____________ is a cess imposed by the government of India and was

started from 15 November 2015.
7. Entry tax varies between ____________.
8. First Discussion Paper on Goods and Services Tax in India was by

Empowered Committee of State Finance Ministers in ____________
9. ____________ will have the power to levy excise duty in addition to the
GST on tobacco and tobacco products.
10.GST shall cover all goods and services, except ____________ for
human consumption, for the levy of goods and services tax.
28
11.The ____________ will be the supply of goods and the supply of

services.
12.The implementation of GST will reduce the _ _ of the present taxation

system.
13.____________ will be charged on transfer of goods and services from

one state to another state.
14.The turnover threshold is Rs. ____________ for special category states.
15.The Union Territory Goods and Services Tax Bill, 2017 was introduced in
Lok Sabha on ____________ , 2017.
16.The fifth GST Council meeting was held on 2-3 December 2016 with
____________
17.Inter-state implementation of E-way bill to be implemented from

____________.
18.The GST Council meeting for the 31st time on 22nd December 2018,
was held at ____________.
19.Under Article 248(1) Parliament has exclusive power to make any law in
respect of any item not covered under ___________ subject to
provision Article 246A.
20.Entry no ____________ gives power to levy the entry tax.
29
Answers
1. Tax
2. Article 265
3. Direct taxes
4. GST
5. July 1, 2017
6. Swachh Bharat Cess
7. 5.5% to 10%.
8. November, 2009
9. Central Government
10.Alcoholic liquor
11.Taxable event
12.Cascading effects
13.IGST
14.10 lakh
15.March 27
16.No deferred conclusion.
17.1st April 2018.
18.Vigyan Bhavan, New Delhi.
19.State List and Concurrent List
20. 52
30
MULTIPLE Choice QUESTIONS (MCQ)
1. GST Stands for -
[a] Goods and Supply Tax [b] Government Sales Tax
[c] Goods and Services Tax [d] General Sales Tax
2. In India GST became effective from -
[a] 1st April, 2017 [b] 1st January, 2017
[c] 1st July, 2017 [d] 1st March, 2017
3. How many types of taxes will be in Indian GST?
[a] 2 [b] 3
[c] 4 [d] 5
4. Which of the following tax is not subsumed in GST
[a] VAT
[b] Stamp Duty
[c] Entry Tax
[d] Entertainment Tax
5. What is the threshold limit of turnover in the preceding financial

year for opting to pay tax under composition scheme?
[a] 20 lacs [b] 50 lacs
[c] 75 lacs [d] None of these
31
6. In IGST, I stands for -
[a] Intra [b] Integrated
[c] Internal [d] Innovation
7. In India GST came effective from July 1st, 2017. From which
country India has borrowed Dual GST Model?
[a] Canadian [b] Japan
[c] China [d] USA
8. The tax IGST charged by ___ Government.
[a] Central [b] State
[c] Concerned department [d] Both a and b
9. GST will be levied on _______.
[a] Manufacturers [b] Retailers
[c] Consumers [d] All of the above
10.The headquarters of GST council is located at _____.
[a] New Delhi [b] Lucknow
[c] Ahmadabad [d] Mumbai
11.When was GST Council constituted?
[a] 12th September 2016
[b] 13th September 2016
[c] 20th September 2016
[d]16th September 2016
32
12.Who is the Chairperson of the GST Council?
[a] Finance Secretary
[b] State’s Finance Minister by rotation
[c] Union Finance Minister
[d] Prime Minister
13.What is the weight of vote that the all the States together have
in the GST Council?
[a] 1/4th of total votes cast
[b] 2/3rd of total votes cast
[c] 1/2th of total votes cast
[d] 3/4th of total votes cast
14.Vice Chairperson of GST Council will be from Member from __ ?
[a] State Government
[b] Central government
[c] Any member nominated by central government
[d] Any of the above
15.Under which Constitutional Amendment Act, 2016, constitution

was amended to introduce GST in India.
[a] 122 [b] 121
[c] 101 [d] None of the above
33
16.Who is the head of the GST council?
[a] Shashi Kant Das [b] Amit Mitra
[c] Arun Jaitley [d] Hasmukh Adhia
17.Creation of the GST Council as per Article __of the amended

Constitution;
[a] 286A [b] 255A
[c] 266A [d] 279A
18.Which of the following tax will be abolished by the GST?
[a] Service Tax [b] Income Tax
[c] Wealth Tax [d] Corporation tax
Answer
1. c 2. c
3. b 4. b
5. c 6. b
7. a 8. a
9. d 10. a
11. a 12. c
13. b 14. a
15. c 16. c
17. d 18. a
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1.11 SELF ASSESSMENT QUESTIONS

1. What is GST?
2. Define the term GST.
3. What is Subsuming of taxes?
4. What is Constitutional amendment?
5. What is Central GST?
6. What is State GST?
7. What is Union Territory GST?
8. What is Integrated GST?
9. What is GST Council?
10.Discuss various provisions for amendments of GST.
11.Give an introduction to GST in India.
12.State various objectives and basic scheme of GST.
13.Explain salient features of GST.
14.Discuss about subsuming of taxes.
15.Explain benefits of implementing GST.
16.Discuss about constitutional amendments of GST.
17.Explain the structure of GST (Dual Model).
18.Discuss about Central GST, State / Union Territory GST.
19.Explain in details about Integrated GST.
20.Discuss functions of GST Council.
21.Explain various powers of GST council.
*****
35
REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter
Summary
PPT
MCQ
Video Lecture - Part 1
36
GST ACTS: CGST, SGST ACT AND IGST ACT
Chapter 2
GST ACTS: CGST, SGST ACT and IGST ACT
Learning Objectives
• A brief definition of terms and concept of GST ACT.

• Concepts of Aggregate turnover, Agent and others definitions.
• Time of Supply and Place of supply.
• Input tax credit and reverse charge.
• Location of suppliers and recipient of service
Structure:
2.1 Introduction
2.2 Central Goods and Services Tax (CGST) Act, 2017
2.3 SGST Act
2.4 UTGST Act
2.5 IGST Act
2.6 Meaning & Definitions
2.7 Supplier
2.8 Scope of Supply
2.9 Job Work
2.11 Input Tax Credit
2.12 Reverse Charge
2.13 Summary
2.14 Objective types Questions
2.15 Self assessment questions
37
2.1 INTRODUCTION
GST is a dual concept tax system. Under this system, tax is administered,
collected and shared by both centre and states based on the nature of
transaction (within state or interstate). The tax components of GST are:
38
2.2 CENTRAL GOODS AND SERVICES TAX (CGST) ACT,

2017
The Central Goods and Services Tax Act, 2017 has been enacted to make a
provision for levy and collection of Tax on Intra-State Supply of Goods or
Services or both by the Central Government and the matters connected
therewith or incidental thereto.
SALIENT FEATURES OF CGST ACT, 2017
Some of the main features of the Central Goods and Services Tax (CGST)
are as follows:
1. Central government has power to notify GST rates under CGST Act.
1a. Every supplier shall be liable to be registered in the state or union
territory (other than special category states) from where he makes
supply of goods or services or both, if his aggregate turnover in a
financial year exceeds Rs.20 lakhs. (In case of a person, who is engaged
in exclusive supply of goods, limit of Rs. 20 lakhs has been increased to
40 lakhs WEF 1.4.2019)
2. In case of special category states viz., Tripura, Nagaland, Uttarakhand,
Sikkim, Himachal Pradesh, Arunachal Pradesh, Assam, Manipur,
Meghalaya, Mizoram and Jammu and Kashmir, registration is required, if
his aggregate turnover exceeds Rs. 10 lakhs.
3. A business entity with turnover up to Rs. 150 lakhs can avail the benefit
of a composition scheme under which it has to pay a much lower rate of
tax and has to fulfil very minimal compliance requirements.
4. In order to prevent cascading of taxes, ITC would be admissible on all
goods and services used in the course or furtherance of business
5. A taxpayer can use the CGST/SGST input tax credit for payment of
IGST. Such payments are to be made in a pre-defined order. (i.e., ITC of
SGST can be used for payment of SGST first and balance for payment of
IGST on outward supply. ITC of CGST can be used for payment of CGST
first and balance for payment of IGST on outward supply. ITC of IGST
can be used for payment of IGST first, CGST second and balance for
payment of SGST on outward supply.)
39
6. The liability to pay CGST in relation to supply of goods and services will
arise on the date of:
a. issue of invoice,
b. receipt of payment, whichever is the earlier.
7. Every taxpayer shall be assigned a GST compliance rating score based

on his record of compliance. The compliance rating score will be updated
at periodic intervals and be placed in the public domain.
8. Any taxpayer may apply for refund of taxes in cases including:

a. payment of taxes in excess or
b. unutilized input tax credit.
Upon such application, the refund may be credited to the taxpayer or to

a Consumer Welfare Fund. The Fund will be used for the purpose of
consumer welfare
9. Every taxpayer would have to self-assess and file tax returns on a

monthly basis by submitting:
a. details of supplies provided,
b. details of supplies received and
c. payment of tax.
In addition to the monthly returns, an annual return will have to be filed

by each taxpayer.
10.To mitigate the financial hardships suffered by the tax payer, The
commissioner is empowered to permit the taxpayers to pay GST in
instalments.
40
2.3 SGST ACT
Each state has passed its own SGST Act, 2017. The SGST Act of each state
is virtually a copy of CGST Act. Even section numbers and sub-section
numbers are same. Rules and notifications are also identical. The only
change is in respect of mention of state authority instead of central
authority and state tax instead of central tax.
List of States Passed State GST Act 2017
Telangana is the first State to pass the GST Bill while other 12 States
passed the Bill immediately includes Bihar, Rajasthan, Jharkhand,
Chhattisgarh, Uttarakhand, Madhya Pradesh, Haryana, Goa, Gujarat,
Maharashtra and Arunachal Pradesh. The remaining States/UTs (with
Legislative Assembly) took its own time to pass the State GST Bill.
1st – Telangana on April 9, 2017
2nd – Bihar on April 24, 2017
3rd – Rajasthan on April 26, 2017
4th – Jharkhand on April 27, 2017
5th – Chhattisgarh on April 28, 2017
6th – Uttarakhand on May 2, 2017
7th – Madhya Pradesh on May 3, 2017
8th – Haryana on May 4, 2017
9th – Gujarat May 9, 2017
10th – Goa on May 9, 2017 11th – Odisha May 11, 2017
12th – Assam May 11, 2017
13th – Arunachal Pradesh May 12, 2017
14th – Uttar Pradesh on 16th May 2017
15th – Andhra Pradesh on 16th May 2017
16th – Puducherry on 17th May 2017
17th – Maharashtra 22 May 2017
18th – Tripura 24 May 2017
41
19th – Sikkim on 25th May 2017

20th – Mizoram on 26th May 2017
21st – Nagaland on 27th May 2017
22nd – Himachal Pradesh on 27th May 2017
23rd – Delhi on 31st May 2017
24th – Manipur on 5th June 2017
25th – Meghalaya on 12th June 2017
26th – Karnataka on 16th June 2017
27th – Punjab on 19th June 2017
28th – Tamil Nadu on 19th June 2017
29th – West Bengal take ordinance route for GST on 15th June 2017
30th – Kerala take ordinance route for GST on 21st June 2017
The concerned state government has the power to notify GST rates under
SGST Act.
2.4 UTGST ACT
The Union Territory Goods and Services Tax Bill, 2017 was introduced in
Lok Sabha on March 27, 2017. The Bill provides for the levy of the Union
Territory Goods and Services Tax (UTGST).
Note: India is a Union of States. The territory of India comprises of the

territories of the States and the Union Territories. Currently, there are 29
States and 7 Union Territories; of which, two (Delhi and Pondicherry) are
having Legislature.
The centre will levy UTGST on the supply of goods and services within the
boundary of a union territory. Further, the union territories, which do not
have legislature, UTGST will be payable. These union territories are –
Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli,
Daman and Diu, Chandigarh and other territories (means area inside the
sea between 12 nautical miles to 200 nautical miles inside the sea. Other
territory does not cover Jammu and Kashmir).
42
New Delhi and Puducherry will enjoy the SGST provisions as both states
have their separate legislatures and have also been considered as the
states by the GST council.
The provisions of the Central Goods and Services Tax Act, 2017 apply to
this Act. Such provisions include:
(i) Time and value of supply,
(ii) Composition levy,
(iii) Registration,
(iv) Returns,
(v) Payment of tax,
(vi) Assessment,
(vii) Refunds,
(viii) Inspection,
(ix) Search and seizure,
(x) Advance ruling,
(xi) Appeals and offences.
All officers of Police, Railways, Customs and those officers engaged in the
collection of land revenue, including village officers and officers of central
tax will assist the tax administrative officers in the implementation of this
Act. The central government has the power to notify GST rates under
UTGST Act.
43
2.5 IGST ACT
The Integrated Goods and Services Tax Bill was introduced in Lok-Sabha on
March 27, 2017. The Bill provides for the levy of the Integrated Goods and
Services Tax (IGST) by the centre on inter-state supply of goods and
services.
1. Existing CST (Central state tax, tax on interstate movement of goods)
shall be discontinued.
2. The centre will levy IGST in the case of (i) inter-state supply of goods
and services, (ii) imports and exports and (iii) supplies to and from
special economic zones. Supply includes sale, transfer, exchange and
lease made for a consideration to further a business. In addition, IGST
will be levied on any supply which will not fall under the purview of the
Central and State GST Acts.
3. The IGST revenue collected by the centre will be apportioned between
the centre and to the state where the supply of goods or services was
received. The collected revenue will be apportioned to the centre at tax
rate specified in the CGST Act. The rest will be apportioned to the state.
4. IGST is intermediary tax mainly on B2B transactions. It is not envisaged
as final tax, since input tax credit of IGST will be available to recipient in
another state.
5. If IGST is paid on B2C transaction, the state where goods/services/both
is consumed will get their share of SGST.
6. IGST rate is double the CGST rate and will be uniform all over India
7. Since ITC of SGST shall be allowed, the Exporting State will transfer to
the Centre the credit of SGST used in payment of IGST. The Importing
dealer will claim credit of IGST while discharging his SGST liability
(while selling the goods in state itself). Thereafter, the Centre will
transfer to the importing State the credit of IGST used in payment of
SGST.
8. The relevant information shall be submitted to the Central Agency which
will act as a clearing house mechanism, verify the claims and inform the
respective state governments or central government to transfer the
funds.
44
9. The provisions of the CGST Act with respect to registration, valuation,

time of supply of goods and services, returns, refunds, prosecution,
appeals will be applicable to the IGSTAct.
10.IGST will be payable on inter-state stock transfers, branch transfers etc.
2.6 MEANING & DEFINITIONS
TAXABLE EVENT
Tax can be imposed only on taxable event. Therefore, one should know the
meaning of taxable event.
Taxable event under GST law is supply of goods or services or both. It

means no supply no GST. The term, “supply” has been inclusively defined
in the Act. The meaning and scope of supply under GST can be understood
by applying the following six parameters:
1. Supply of goods or services. Supply of anything other than goods or
services does not attract GST.
2. Supply should be made for a consideration.
3. Supply should be made in the course or furtherance of business.
4. Supply should be made by a taxable person.
5. Supply should be a taxable supply.
6. Supply should be made within the taxable territory
ELECTRONIC CASH LEDGER
As per section 49(1) electronic cash ledger means a cash ledger

maintained in electronic form by each registered person. The amount
deposited through internet banking/NEFT/RTGS shall be credited to the
electronic cash ledger. The amount available in this ledger can be used for
the payment of tax, interest, penalty fees etc.
45
ELECTRONIC CREDIT LEDGER
The electronic credit ledger is maintained by each registered person, who is

eligible for input tax credit on the common portal. Every claim of input tax
credit shall be credited to the said ledger. Further, the electronic credit
ledger shall be debited to the extent of discharge of any liability.
TAX INVOICE
Under GST, a tax invoice is an important document. It not only evidences

the supply of goods/services, but is also an essential document for the
recipient to avail input tax credit. A registered person cannot avail input
tax credit unless he is in possession of a tax invoice or a debit note.
AGGREGATE TURNOVER
“Aggregate turnover” means the aggregate value of all taxable supplies,

(excluding the value of inward supplies on which tax is payable by a person
on reverse charge basis), exempt supplies, exports of goods or services or
both and inter-state supplies of persons having the same Permanent
Account Number, to be computed on an all-India basis but excludes Central
tax, State tax, Union territory tax, Integrated tax and GST compensation
cess.
The analysis of definition for computing Aggregate Turnover is

discussed below:
a. Turnover of all products - it is evident from definition that turnover of
all the supplies whether taxable supplies, exempt supplies and exports
should be aggregated to compute the limit of Rs. 20 lakhs or Rs. 10
lakhs.
b. Turnover on Basis of PAN - it is further provided that the aggregate
turnover of person having permanent account number (PAN) will be
computed on all India basis. Thus say, if the person has branch in 3
different states, then turnover of all the branches will be considered to
compute the aggregate turnover.
46
c. Value of Turnover Will Not Include the CGST, SGST & IGST
Charged on Such Supply - it is also provided in definition of aggregate
turnover that the value of turnover will not include the CGST, SGST &
IGST charged on such supply. Thus, only transaction value computed as
per section 15 of the GST Act will be aggregated to compute the limit.
d. Reverse Charge and Inward Supplies - It is specifically mentioned in
the definition that aggregate turnover will not include the value of
supply on which tax is paid on reverse charge basis and the value of
inward supplies.
e. Supply On Own Account And On Behalf Of Principal Will Be
Included - GST act provides that for computing the aggregate turnover
of supplies made by taxable person, whether on his own account or on
behalf of principal needs to be considered. A person can make supply of
goods on his own account and as an agent of principal also. as per
clause (i) the value of both the supplies will be aggregated for the
purpose of computing Rs. 20 lakhs or Rs. 10 lakhs.
f. Supply of Goods by Principal after Completion of Job Work - The
GST act further provides that the value of such supplies will be included
in the turnover of principal for the purpose of computing Rs. 20 lakhs
or Rs. 10 lakhs.
Example: Aggregate Turnover of Mr. Saha (Karnataka)
1. Intra-state supplies 9,00,000

2. Inter-state supplies 6,00,000
3. Value of exports 2,00,000
4. Exempt supplies 4,00,000
Aggregate turnover 21,00,000
• As Per GST Law, CGST/SGST/IGST paid shall not be considered while

calculating aggregate turnover as it is not provided in definition of
aggregate turnover.
• It is evident from example that turnover of all the supplies whether
taxable supplies, exempt supplies and exports should be aggregated to
compute the limit of Rs. 20 lakhs or Rs. 10 lakhs.
47
• As his aggregate turnover in a financial year is exceeding Rs. 20 lakhs,

he shall be liable to be registered in the state or union territory (other
than special category states) from where he makes supply of goods or
services or both.
ADJUDICATING AUTHORITY
As per Section 2(4) of the Central Goods and Services Tax (CGST) Act,
2017, the term “adjudicating authority” means any authority, appointed or
authorized to pass any order or decision under this Act, but does not
include the Central Board of Excise and Customs, the Revisional Authority,
the Authority for Advance Ruling, the Appellate Authority for Advance
Ruling, the Appellate Authority and the Appellate Tribunal.
APPOINTMENT OF ADJUDICATING AUTHORITY

1. For the purpose of adjudication, the Central Government may, by an
order published in the Official Gazette, appoint as many officers of the
Central Government as it may think fit, as the Adjudicating Authorities
for holding an inquiry against the person, who has committed the
specified offence.
2. The Central Government shall, while appointing the Adjudicating
Authorities shall specify in the order published in the Official Gazette
their respective jurisdiction.
3. No Adjudicating Authority shall hold an enquiry, except upon a
complaint in writing made by any officer authorized by a general or
special order by the Central Government.
4. The said person may appear either in person or take the assistance of a
legal practitioner or a chartered accountant of his choice for presenting
his case before the Adjudicating Authority.
5. Every Adjudicating Authority shall have the same powers of a civil court,
which are conferred on the Appellate Tribunal.
6. Every Adjudicating Authority shall deal with the compliant, as
expeditiously as possible and endeavour shall be made to settle the
dispute within one year from the date of receipt of the complaint
48
ADJUDICATING AUTHORITIES, COMPOSITION AND POWERS

1. An Adjudicating Authority shall consist of a Chairperson and two other
Members, provided that one Member shall be a person having
experience in the field of law, administration, finance or accountancy.
2. The Central Government shall appoint a Member to be the Chairperson
of the Adjudicating Authority.
3. The Chairperson may transfer a Member from one Bench to another
Bench.
4. If at any stage of the hearing of any case, it appears to the Chairperson
or a Member that the case is of such a nature that it ought to be heard
by a Bench consisting of two Members, the case may be transferred by
the Chairperson to such Bench as the Chairperson may deem fit.
5. The Chairperson and every Member shall hold office for a term of five
years from the date on which he enters upon his office, provided that no
Chairperson or other Member shall hold office after he has attained the
age of sixty-two years.
6. The salary and allowances payable to and the other terms and
conditions of service of the Member shall be clearly prescribed
7. If, any vacancy occurs in the office of the Chairperson or any other
Member, then, the Central Government shall appoint another person in
accordance with the provisions of this Act to fill the vacancy.
8. The Chairperson or any other Member shall not be removed from his
office except by an order made by the Central Government after giving
necessary opportunity of hearing.
9. In the event of the occurrence of any vacancy in the office of the
Chairperson by reason of his death, resignation or otherwise, the
senior-most Member shall act as the Chairperson of the Adjudicating
Authority until the date on which a new Chairperson, appointed in
accordance with the provisions of this Act to fill such vacancy, enters
upon his office.
10.When the Chairperson of the Adjudicating Authority is unable to
discharge his functions owing to absence, illness or any other cause, the
senior-most Member shall discharge the functions of the Chairperson of
the Adjudicating Authority until the date on which the Chairperson of
the Adjudicating Authority resumes his duties.
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AGENT
2017, the term “agent” means a person, including a factor, broker,
commission agent, del credere agent, an auctioneer or any other
mercantile agent, by whatever name called, who carries on the business of
supply or receipt of goods or services or both on behalf of another.
BUSINESS
2017, the term “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. Services provided by a race club by way of totalisator or a licence to
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.
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PLACE OF BUSINESS
2017, the term “place of business” includes –
a. A place from where the business is ordinarily carried on, and includes a
warehouse, a go down or any other place where a taxable person stores
his goods, supplies or receives goods or services or both or
b. A place where a taxable person maintains his books of account or
c. A place where a taxable person is engaged in business through an
agent, by whatever name called.
GOODS
2017, the term “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.
EXPORT OF GOODS /SERVICES
Export of goods means taking goods out of India to a place outside India.
Export of goods and services are zero rated i.e. GST is not payable on
export of goods and services but still input tax credit is available.
Export of services means the supply of any service when:
a) The supplier of service is located in India.
b) The recipient of service is located outside India.
c) The place of supply of service is outside India.
d) The payment for such services has been received by the supplier of
service in convertible foreign exchange.
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Following transactions are treated as deemed exports:

1. Supply of goods against international competitive bidding or power
project from which power supply has been tied up through tariff based
competitive bidding or to a power project awarded to a developer
through tariff based competitive biddings.
2. Supply of goods and services to United Nations or an international
organization for their official use or supplied to projects.
3. Supply of goods and services for use of foreign diplomatic missions or
consular missions or career counselling offices or diplomatic agents.
4. Supplies made for setting up of solar power generation projects or
facilities.
If these are notified, input tax credit will be available, which can be utilized
for payment of GST on domestic supplies. If such utilization is not possible,
refund provision is likely to be made.
IMPORT OF GOODS
The IGST (integrated goods and services) Act, 2017, defines the import of
goods as bringing commodities from overseas into India. Further, import of
services means the supply of any services, where – (1) the supplier of
service is located outside India, (2) the recipient of service is located in
India and (c) the place of supply of service is in India. All such imports are
considered as inter-state supplies. IGST will be applicable to all imported
goods/services along with custom duties.
As per the Model GST Law, GST will subsume Countervailing Duty (CVD)
and Special Additional Duty (SAD), however, Basic Customs Duty will
continue to do its round in the import bills.
CAPITAL GOODS
2017, the term “capital goods” means goods, the value of which is
capitalized in the books of account of the person claiming the input tax
credit and which are used or intended to be used in the course or
furtherance of business.
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ITC Rules for Capital Goods under GST
A. Credit of Input Tax will not be available on the following:
1. Capital Goods used exclusively for effecting exempt supplies.
2. Capital Goods used exclusively for non-business (personal) activity.
B. Credit of Input Tax will be available in totality, where Capital Goods have
been used for effecting taxable supplies and business activity without
any restrictions.
C. Amount of input tax referred in above points A and B must be indicated

in Form GSTR-2 and however only point B will be credited to electronic
credit ledger.
D. Where capital goods which were earlier used or intended to be

exclusively used for:
1. Non- business purpose
2. Effecting exempt supplies
Later to be used commonly for:
1. Business and non-business purpose
2. Effecting taxable and exempt supplies
SERVICES
The term services mean anything other than goods, money and securities.
It includes activities relating to the use of money or its conversion by cash
or by any other mode to another form for which a separate consideration is
charged.
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PERSON
PERSON includes the following:

1. An individual
2. A Hindu undivided family
3. A company
4. A firm
5. An AOP/BOI, whether incorporated or not, in India or outside India
6. Any corporation established under any central Act, State Act or
Provincial Act or a Government company.
7. Anybody corporate incorporated under the laws of a country outside
India.
8. A co-operative society registered under any law relating to co-operative
societies
9. A local authority
10.Central or State Government
11. Society
12. Trust
13. Every artificial juridical person, not falling within any of the above
TAXABLE PERSON
Taxable person means a person who is registered or liable to be registered

U/S 22 or 24 of the GST act. Further, every supplier whose aggregate
turnover in a financial year exceeds Rs. 20/10 lakhs, is required to register
under GST in the State/Union territory from where he supplies goods/
services/both.
(In case of a person, who is engaged in exclusive supply of goods, limit of

20 lakhs has been increased to 40 lakhs WEF 1.4.2019)
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CASUAL TAXABLE PERSON
2017, the term “casual taxable person” means a person who occasionally
undertakes transactions involving supply of goods or services or both in the
course or furtherance of business, whether as principal, agent or in any
other capacity, in a State or a Union territory, where he has no fixed place
of business.
The following aspects need to be noted:

i. Every Casual Taxable Person has to mandatorily register under Goods
and Services Tax law, irrespective of their turnover limit.
ii. Any business which is required to supply goods or service or both in a
particular state (which is not its principal place of business) and which
is not registered in that state can opt to register as a ‘Casual Taxable
Person’. For example, most of the event management companies may
opt for a casual registration in another state wherein they may obtain
some work assignment, but which is not their place of business.
iii. Certificate of registration issued to a casual taxable person will be valid
for a period of 90 days and the designated officer can further extend
this period by 90 days, provided a reasonable cause is provided by the
taxable person.
iv. A casual taxable person can make taxable supply only after obtaining
the certificate of registration.
v. The casual taxable person is required to make an advance deposit of
tax in an amount equivalent to the estimated tax liability for the period
for which registration is sought.
vi. The amount deposited by a casual taxable person will be credited into
the electronic cash ledger of the person and will subsequently be
adjusted against the tax liability.
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NON-RESIDENT PERSON
2017, the term “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.
Registration Procedure for a Non-Resident Taxable Person
Every person or business that falls under the definition covered above
needs to apply for registration at least five days prior to the
commencement of business. Further clarification has been provided in case
of a high-sea sale; the law says that every person who makes a supply
from the territorial waters of India shall obtain registration in the coastal
state or Union territory where the nearest point of the appropriate baseline
is located.
High Sea Sale (HSS) is a sale carried out by the carrier document
consignee to another buyer while the goods are still being transported, or
after their dispatch from the port/airport of origin and before their arrival
at the port/airport of destination.
Thus, if any high-sea sale is carried out near the shore of Mumbai, the GST
registration has to be obtained in the state of Maharashtra.
A non-resident taxable person needs to electronically submit a duly signed

application, along with a self-attested copy of his valid passport, for
registration, using the form GST REG-09, at least five days prior to the
commencement of business on the Common Portal. Application must be
duly signed or verified through EVC, a new mode of electronic verification
based on Aadhar.
The non-resident (if it is a company) must submit its tax identification

number of its original country (whatever is the equivalent of our PAN in
that country).
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A person applying for registration as a non-resident taxable person will be

given a temporary reference number electronically by the Common Portal
for making an advance deposit of tax in his electronic cash ledger and an
acknowledgment will be issued thereafter.
Advance Payment of Tax by Non-Resident Taxable Person
A non-resident taxable person is 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 registration is sought.
In other words, registration rules circulated by the GST council have

specified that every person registered as a non-resident taxable person is
required to deposit tax in advance on presumption basis. This advance tax
will get credited into the Electronic Cash Ledger and will eventually get
adjusted against the actual tax liability at the time of return filing.
These rules further specify that in case a non-resident taxable person

intends to extend the period of registration indicated in their application of
registration, an application using the form GST REG-11 should be furnished
electronically through the Common Portal before the end of the validity of
registration granted to him.
Example: Let’s understand these rules with the help of an example. Say,
the company Marc Inc. based out of USA is manufacturing special class
turbojet engines which are supplied to India for assembling. This is a one-
time transaction for Marc Inc. and thus they have appointed an Agent Mr.
Vinod in India to carry out all compliance related formalities. Mr. Vinod, in
turn, is required to obtain registration for Marc Inc. by furnishing his own
PAN number and pay advance taxes related to this transaction. Once the
transaction is carried out successfully and the supply is made, Marc Inc.
will need to file their GST returns and meet all GST liability from the
advance tax paid at the time of registration. Any tax paid in excess will be
refunded through the electronic mode.
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2.7 SUPPLIER
2017, the term “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.
SUPPLY
Supply of goods or services or both is defined as sale, transfer, barter,

exchange, license, rental, lease or disposal made or agreed to be made for
a consideration by a person in the course or furtherance of business.
1. Supply of goods or services
Sale means a sale of goods made within the State for cash or deferred
payment or other valuable consideration but does not include a mortgage,
hypothecation, charge or pledge. (Example: mortgage, hypothecation,
charge or pledge is not supply and hence GST will not be levied).
Transfer means, where the ownership may not be transferred but the right
in the goods is transferred. (Example: Mr. A is the owner of Xerox machine.
He transferred the right to operate the Xerox machine to Mr. B for a
consideration of Rs. 10,000 per month for four months. Hence, ownership
of the machine is not transferred but the right in the machine is
transferred. It is supply of service. Hence, GST can be levied.
Barter means the exchange of goods and productive services for other
goods and productive services, without the use of money. (Example: Mr. C,
a practicing Cost Accountant provided services to M/s A Ltd., dealer of
laptops. In return M/s A Ltd., given to Mr. C two laptops. Here, two-way
supply takes place. Mr. C is making taxable supply of service and M/s A
Ltd., is making taxable supply of goods. Hence, tax is payable by both).
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In case of License one person grants to another, or to a definite number of

other persons, a right to do or continue to do, such right is called a license.
(Example: Mr. X, a developer of information technology software and
holder of license thereon. License to use software was given to different
clients: Rs. 18 lakhs; hence, Mr. X is liable to pay GST whether he transfer
such right permanently or temporarily as the case may be).
Rentals mean Periodical payment for use of another’s property. Rent is to

pay on monthly basis. (Example: Mr. A owns a residential building in a
prime commercial locality. Large vacant land in the backyard is given on
rent of Rs. 1,80,000 per month to a parking contractor, Mr. B who has set
up a parking facility on the said land. It is a taxable supply of service and
hence, Mr. A is liable to pay GST).
However, in case of the following, renting is chargeable to GST at

nil rate:
• Renting of vacant land for agriculture purpose
• Renting of house property for residential purpose
• Renting of any property by a government or local authority to a non-
business entity.
• Renting of precincts of a religious place meant for general public
• Renting of a hotel, inn, guest house for residential or lodging purpose,
having declared tariff of a room below Rs. 1000 per day.
A lease is an agreement whereby the lessor conveys to the lessee in return

for a payment or series of payments the right to use an asset for an agreed
period of time. A lease may be financial lease or operating lease.
(Example: M/s M Bank Ltd., given an asset under financial lease to M/s N
Ltd. Repayment of financial lease made by the customer to the bank Rs.
80 lakhs which includes a principal amount of Rs. 50 lakhs. Financial leases
shall be taxed as supply of services. Hence, M/s M Bank Ltd., is liable to
pay GST).
Disposal normally considered as selling of assets, when the organization is

about to close down and various assets are required to be disposed of.
Such transactions will also be considered as supply. Hence, liable to tax
under GST Law
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2. Supply should be made for a consideration
Consideration means anything received or recoverable in return for goods/

services. It includes monetary payment, any consideration of non-
monetary nature or deferred consideration. As per schedule to CGST Act,
2017, activities as mentioned below shall be treated as supply, even if
made without consideration:
a. Permanent transfer or disposal of business assets, where input tax

credit has been availed on such assets.
Example: M/s Z Ltd., upgrades the computer system. The existing

computers and laptops, which do not support the upgraded version,
donated to a Trust. This amounts to permanent transfer of business
assets. The same will be treated as supply of goods and liable to GST in
the hands of Z Ltd., provided if company availed input tax credit on such
computers and laptops.
b. 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: Provided that gifts are not exceeding Rs.
50,000 in value in a financial year by an employer to an employee shall
not be treated as supply of goods or services or both.
Example: persons shall be deemed to be “related persons” if –

i. such persons are officers or directors of one another’s businesses;
ii. such persons are legally recognized partners in business;
iii. such persons are employer and employee;
iv. any person directly or indirectly owns, controls or holds 25% or more
of the outstanding voting stock or shares of both of them;
v. one of them directly or indirectly controls the other;
vi. both of them are directly or indirectly controlled by a third person;
vii.together they directly or indirectly control a third person or
viii.they are members of the same family.
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Illustration - 1
M/s Beta & Co., holds 30,000 shares in M/s A Ltd. and 25,000 shares in B
Ltd. Share Capital of M/s A Ltd.: 1,00,000 Equity Shares of Rs. 10 each.
Share Capital of M/s B Ltd.: 80,000 Equity Shares of Rs. 10 each.
Since, M/s Beta Ltd., holds more than 25% of the share in the company A
Ltd. and B Ltd. they will be considered as related persons.
Illustration - 2
Ram has received a sum of Rs. 5,00,000 from his employer on premature
termination of his contract of employment. Ram needs your advice as to
whether such receipts are liable to GST. Answer: It is not a supply. As per
Section 7(2)(a) of CGST Act, 2017 supply excludes services provided by
the employee to the employer in the course of employment (covered under
Schedule III of CGST Act, 2017). Hence, amounts so paid would not be
chargeable to GST.
a) 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.
b) Import of services by a taxable person from a related person or from
any of his other establishments outside India, in the course or
furtherance of business.
3. Supply should be made in the course or furtherance of business
GST is essentially a tax only on commercial transactions. Hence, only those

supplies that are in the course or furtherance of business qualify as supply
under GST. Hence, any supplies made by an individual in his personal
capacity do not come under the ambit of GST unless they fall within the
definition of business as defined in the Act. Sale of goods or service even
as a vocation is a supply under GST. Therefore, even if a famous politician
paints painting for charity and sells the paintings even as a one-time
occurrence, the sale would constitute supply.
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Example: CMA Ram a practicing Cost Accountant carries out the activity of
Accounting, Auditing, filing returns, and Certifying documents and so on so
forth. These activities can be considered as performed in the course of
business.
Example: M/s X Ltd., A manufacturer of motor cars. Company used to sell

a greater number of cars in Southern India. In view of demand in Southern
India, company intends to establish manufacturing unit in Chennai. M/s X
Ltd. appointed Mr. Y as a consultant for searching, evaluating and short-
listing places for prospective targets. Finally, company decided to establish
unit at Chennai. Hence, Mr. Y carried out various activities is in furtherance
of business of M/s X Ltd.
4. Supply should be made 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 supply under
GST. A “taxable person” is a person who is registered or liable to be
registered under section 22 or section 24. Hence, even an unregistered
person who is liable to be registered is a taxable person. Similarly, a
person not liable to be registered but has taken voluntary registration and
got himself registered is also a taxable person.
5. Supply should be a taxable supply.
It means that Goods and Services should be taxable (GST Rate should be
charged on it) and It should not be covered in any exemption notification.
6. Supply should be made within the taxable territory.
Taxable territory means the territory to which the provisions of CGST/IGST

apply. Further, for a supply to attract GST, the place of supply should be in
India including the State of Jammu and Kashmir.
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2.8 SCOPE OF SUPPLY
Provisions under Section 7 of the Central Goods and Services Tax (CGST)
Act, 2017 relating to “Scope of Supply”, are as under:
For the purposes of this Act, the expression “supply” includes–
a. All forms of supply of goods or services or both such as sale, transfer,

barter, exchange, license, rental, lease or disposal made or agreed to be
made for a consideration by a person in the course or furtherance of
business;
b. Import of services for a consideration whether or not in the course or

furtherance of business;
TYPES OF SUPPLY
(A) BASED ON LOCATION
1. INTRA-STATE SUPPLY
Under GST, supply of goods or services within the same state or Union
territory is called as intrastate supply.
In the case of intrastate supply, the GST rate for the goods or services
would remain the same. However, the GST rate and tax amount are divided
equally into the two heads namely SGST and CGST. For instance, in case of
intra state supply in Karnataka (i.e supply by a person from Mangalore to
Bangalore), it is taxable simultaneously under section 9 of CGST Act and
section 9 of Karnataka GST Act. If GST rate is 18%, 9% will be charged
under section 9 of CGST Act and 9% will be charged under section 9 of
SGST Act.
UTGST Act has been passed for Union territories, which do not have
legislature. Intra state supply of goods/services within a union territory is
taxable simultaneously under section 9 of CGST Act and section 7 of
UTGST Act. Further, for the purpose of GST, each union territory shall be
considered as a separate union territory. For instance, if a trader of Diu
supplies goods to a trader of Dadra, it will be treated as interstate supply
and subject to IGST.
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Delhi and Puducherry are not covered by the list of union territories for
purpose. They have their own legislatures and they have passed their own
SGST Acts.
2. INTER-STATE SUPPLY
Under GST, supply of goods or services from one state to another would be
called as interstate supply. The GST Act defines interstate supply as when
the location of the supplier and the place of supply for the customer are in:
• Two different States; or
• Two different Union territories; or
• State and a Union territory.
In addition to the above, the supply of goods imported into India is also
classified as interstate supply. Also, supply of goods or services to or by a
Special Economic Zone developer or a Special Economic Zone unit situated
within the same state is classified as interstate supply.
Under GST, interstate supply attracts Integrated Goods and Services Tax or
IGST. In this case, CGST and SGST/UTGST is not applicable. If GST rate is
5%, the entire tax of 5% is charged as IGST. Further, IGST is charged at
the rates, which are notified by the central government. However, such
rate cannot be more than 40%.
Generally, GST is payable by the supplier of goods/services. However, in

few cases, which are notified by the central government, GST is payable by
the recipient of supply under reverse charge mechanism.
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(B) BASED ON COMBINATION
1. COMPOSITE SUPPLY
2017, the term “composite supply” means a supply made by a taxable
person to a recipient consisting of two or more taxable supplies of goods or
services or both or any combination thereof, which are naturally bundled
and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply.
In this case, GST rate applicable on the principal supply shall be applied on
the entire consideration.
Example-1:
Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite supply
and supply of goods is a principal supply.
Example-2:
Illustrations of composite supply are as follows:
(i) Supply of laptop and carry case.
(ii) Supply of equipment and installation of the same.
(iii) Supply of repair services on computer along with requisite parts.
(iv) Supply of health care services along with medicaments.
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Example-3:
A Five-star hotel provides four days and three-night package, with

breakfast. This is a composite supply as the package of accommodation
facilities and breakfast is a natural combination in the ordinary course of
business for a hotel. In this case, the hotel accommodation is the principal
supply and breakfast is ancillary to the hotel accommodation. Now, Let us
assume, the hotel accommodation attracts 18% tax and the restaurant
service attracts 12% tax. As per the example, hotel accommodation is the
principal supply and the entire supply will be taxed at 18%.
Illustration - 1
Construction Company entered into contract to sell its building to a

customer. The details are as follows:
1. Price of flat: Rs. 100 lakhs,
2. Extra charges to select preferred location: Rs. 4 lakhs,
3. Parking charges Rs. 5 lakhs,
4. Club membership fee: Rs. 3 lakhs,
5. Designing and modification charges: Rs. 2 lakhs,
6. Stamp duty charges: Rs. 4 lakhs,
7. Documentation charges: Rs. 1 lakh. Compute tax payable, if the tax rate
is 12%.
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Solution:
• This transaction can be grouped under composite supply, because the
construction company provided many other services like preferred
location service, parking service, deigning and modification service,
documentation service, apart from providing main service i.e.,
construction of building.
• Club membership fee is not a part of service. It is only a deposit to be
handed over to club, when formed.
• Stamp duty is not a part of service. It is only reimbursement of expenses
incurred on behalf of the customer.
• Therefore, the total taxable value of service will be Rs. 112 lakhs (i.e.,
100 + 4 + 5 + 2 + 1), and SGST: 112 x 6% = 6.72, CGST: 112 x 6% =
6.72.
Illustration - 2
A non-AC hotel in Delhi has declared tariff of Rs. 2,000 per day. On
27.11.2019, its bills were as follows:
1. Hotel room Rs. 2,000, breakfast Rs. 300,
2. Hotel room Rs. 2,200, Extra bed Rs. 400, Laundry charges Rs. 200.
3. Discounted rate to corporate client Rs. 1,500, (laundry charges Rs. 100,
telephone charges Rs. 200. Calculate the tax liability in each case.
Solution:
Since room tariff is Rs. 2,000, rate of tax will be 12%(6% SGST and 6%
CGST). The tax payable in each is as follows:
1. It is composite supply. Hence the tax payable on Rs. 2,000 + 300 will be
- SGST (2,300 x 6% = 138) and CGST (2,300 x 6% = 138)
2. It is composite supply. Tax rate depends on room tariff and not on the
amount charged. Hence the tax payable on Rs. 2,200 + 400 + 200 will
be - SGST (2,800 x 6% = 168) and CGST (2,800 x 6% = 168)
3. It is composite supply. Hence the tax payable on Rs. 1,500 + 100 +
200 will be - SGST (1,800 x 6% = 108) and CGST (1,800 x 6% = 108)
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PRINCIPAL SUPPLY
2017, the term “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.
For example, free Wi-Fi services provided during stay in hotel. In this case,
the predominant supply is accommodation services and Wi-Fi services are
provided only for better enjoyment of the principal supply of service.
The concept of ‘a principal supply’ emerges only for determining whether a

supply is a composite supply or not and where it is a composite supply, the
rate of tax applicable for the composite supply.
2. MIXED SUPPLY
2017, the term “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.
In this case, highest GST rate will be applicable on the entire

consideration.
Example - 1:
A supply of a package consisting of canned foods, sweets, chocolates,

cakes, dry fruits, aerated drinks and fruit juices, when supplied for a single
price is a mixed supply. Each of these items can be supplied separately and
is not dependent on any other. It shall not be a mixed supply if these items
are supplied separately.
For tax liability purpose, mixed supply consisting of two or more supplies
shall be treated as a supply of that item which has the highest tax rate.
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Example - 2:
Many shops offer combo packs of Tie, watch wallet, pen and they are
bundled as a kit and this kit is supplied for a single price and the supply of
one item does not naturally necessitate the supply of other elements.
Hence the supply is a mixed supply. Now let us assume that tax rate for a
tie, watch, wallet, pen is 12%, 18%, 5%, 4% respectively. In this case,
watch attracts the highest rate of tax in the mixed supply i.e., 18%. Hence,
the mixed supply will be taxed at 18%.
Example - 3:
Space Bazaar offers a free bucket with detergent purchased. Is it

composite supply or mixed supply? Assume rate of GST for detergent
@28% and bucket @ 18%.
This is a mixed supply. These items can be sold separately. Product which
has the higher rate, will apply on the whole mixed bundle.
(C) BASED ON RECIPIENT
1. INWARD SUPPLY
Inward supply means receipt of goods or services or both whether by

purchase, acquisition or any other means with or without consideration.
a. Every registered taxable person, other than an input service distributor
or a non-resident taxable person, shall verify, validate, modify or if
required, delete the details relating to outward supplies and credit or
debit notes communicated to prepare the details of his inward supplies
and credit or debit notes.
b. Every registered taxable person, other than an input service distributor
or a non-resident taxable person shall furnish, electronically, the details
of inward supplies of taxable goods and/or services, including inward
supplies of goods or services on which the tax is payable on reverse
charge basis under this Act and inward supplies of goods and/or
services taxable under the IGST Act and credit or debit notes received in
respect of such supplies during a tax period after the tenth but on or
before the fifteenth day of the month succeeding the tax period.
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c. The details of supplies modified, deleted or included by the recipient and

furnished shall be communicated to the supplier concerned in the
manner and within the time as may be prescribed.
d. Any registered taxable person, who has furnished the details for any tax
period and discovered any error or omission therein, such error or
omission can be rectified in the tax period during which such error or
omission is noticed.
2. OUTWARD SUPPLY
2017, the term “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.
The phrase ‘outward supply’ can be applied to a supply only when such
supply is made in the course or furtherance of business. Say, for instance,
business assets are put to personal use. In such a case, even if the
transaction is deemed to be a supply (made without consideration), it
cannot be treated as an ‘outward supply’, since the application of the
business asset for personal use was neither in the course nor furtherance
of business.
(D) BASED ON TAX TREATMENT
1. NON-TAXABLE SUPPLY OF GOODS AND SERVICES
Non-taxable supply is the sale of any goods or services which attracts nil
rate of tax and is similar to exempt supply.
Article Compiles list of 149 Type of Goods which are exempt from Tax
under GST with respective HSN Code and Description of Goods as per
Notification No. 2/2017-Central Tax (Rate) New Delhi, the 28th June, 2017
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List of Exempted Goods
Tariff
Description of Goods
chapter.
1 Live animals except horses
Meat and edible meat other than put up in unit container and bearing
2
a registered brand name.
Fish other than put up in unit container and bearing a registered
3
brand name.
Milk, butter milk, paneer, egg, honey other than put up in unit
4
container and bearing a registered brand name.
Human hair, hoof meal, horn meal, nails and beaks other than put up
5
in unit container and bearing a registered brand name.
6 Live trees and other plants
All vegetables other than put up in unit container and bearing a
7
registered brand name.
8 Fruits, tamarind dried.
Coffee beans not roasted, unprocessed green leaves of tea, fresh
9
ginger/ turmeric other than in processed form.
10 Wheat, Barley, Oats, Maize, Rice, Millets, Jawar, Bajra, Ragi
11 Flour of cereals given above
Soya beans seeds, unroasted ground nuts, sunflower seeds, other oil
12
seeds hop cones
13 Lac and shellac
14 Broom sticks coconut shell, betel leaves
17 All types of jaggery
19 Pappad, bread
21 Prasadam
Water, tender coconut other than put up in unit container and bearing
22
a registered brand name.
23 Aquatic feed, poultry feed, cattle feed, husk of pulses
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25 All types of salt

26 Uranium ore concentrate
27 Electrical energy
28 Dicalcium phosphate
30 Human blood, all types of contraceptives
31 Organic manures
33 Kajal, Kumkum, bhindi, sindor
38 Municipal waste, clinical waste
39 Plastic bangles
40 Condoms
44 Firewood, wood charcoal
44/68 Deities made out of stone, marble or wood
46 Plates/cups made out of leaves/flowers/bark
48/49 Judicial and non-judicial stamp papers
48/49/71 Rupee notes or coins sold to RBI
50 Raw silk, silk waste
51 Wool, animal hair
52 Gandhi topi
Coir pith compost other than put up in unit container and bearing a
53
registered brand name. Jute fibre
50-55 Khadi yarn, khadi fabric
63 Indian National Flag
69 Clay lamps, earthen pots, idols made out of clay
70 Glass bangles
71 Bangles of lac/shellac
82 Agriculture implements
84 Charkha
88 Space craft including satellites
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90 Hearing aids
92 Handmade musical instruments
96 Slate, pencils, chalk sticks, sanitary napkins, brushes
98 Passenger baggage
others puja samgri, Raakhee,
List of Exempted Services
ENTRY-1 Services by charitable trust

ENTRY-3 Services by panchayat/municipality to government
ENTRY-3A Supply of ambulance service by a private service provider
ENTRY-7 Services provided by Government to small business entity
except services by way of renting of immovable property
ENTRY-8 Services provided by Government to Government
ENTRY-9 Services provided by Government up to Rs.5000
ENTRY-9A Services provided by federation Internationale de football
association
ENTRY-9B Transit cargo to Nepal/Bhutan
ENTRY-9D Services by an old age home to its residents aged more
above 60 years against consideration up to Rs.25,000 per
month per member
ENTRY-10 House construction for Pradhan Mantri AWAS yojana
ENTRY-10A Electricity distribution network
ENTRY-11 Single residential unit
ENTRY-11A Service provided by fair price shop to central government
ENTRY-12 Renting of residential house
ENTRY-13 Religious ceremony [ exemption is not applicable in the
following cases: a) renting of rooms for Rs. 1000 or more per
day. b) renting of community halls/ Kalyan mandapam for
Rs. 10,000 or more per day. C) renting of shops for
Rs. 10,000 or more per month
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ENTRY-15 Transport of passengers except services provided by radio

taxi, services provided by air-conditioned stage carriage,
service provided by contract carriage
ENTRY-16 Regional connectivity scheme airport
ENTRY-19A Transportation of goods outside India by air
ENTRY-19B Transportation of goods outside India by Vessel
ENTRY-21 Transportation of goods by GTA [Goods transport agency]
ENTRY-23 Toll charges
ENTRY-24 Service by way of loading, unloading, warehousing of rice
ENTRY-24A warehousing of minor forest produce
ENTRY-24B warehousing of cereals/pulses
ENTRY-26 Services by RBI
ENTRY-28 Annuity under NPS
ENTRY-62 Fines, damages to government

ENTRY-63 Licence to use natural resources given to farmer
ENTRY-66 Services provided by educational institution
ENTRY-67 Services provided by IIM
ENTRY-68 Services provided by recognized by sports body
ENTRY-69 Vocational courses
ENTRY-70 Assessment under SDI scheme
ENTRY-71 Deen dayal upadhyaya grameen kaushalya yojana
ENTRY-72 Training program financed by the government
ENTRY-73 Services provided by blood banks
ENTRY-74 Health care services
ENTRY-75 Disposal of bio-medical waste
ENTRY-79 Admission to museum
ENTRY-80 Admission to protected monuments
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ENTRY-82 Services imported by SEZ/UNO/Foreign diplomatic mission

Others: [The exemption limit of Rs. 5,000 per month per
member in respect of services provided by resident welfare
association is enhanced to Rs. 7,500] [The exemption limit of
Rs. 250 per person in respect of Theatre performance is
enhanced to Rs. 500 per person]
TRANSACTIONS CONSIDERED AS SUPPLY UNDER SCHEDULE -II
The following transactions are treated as supply of goods/services and

chargeable to GST:
1. Any transfer of the title in goods is considered as supply of goods.

2. Any transfer of right in goods without the transfer of title is considered
as supply of services
3. Lease, tenancy, licence to occupy land is considered as supply of
services.
4. Lease or letting out of the building for business/commerce is considered
as supply of services
5. Job work process (any process applied to another person’s goods) is
treated as supply of services.
6. Transfer of business assets and use of business goods for non-business
use is treated as supply of goods
7. Renting of hotel, inn, guest house for residential purpose is exempt if
the value of service of a unit of accommodation is Rs.1,000 or less.
[More than Rs.1,000 but not exceeding rs.7,500 per unit per day – GST
IS 12%, More than Rs.7,500 per unit per day -GST 18%]
8. Temporary transfer of any intellectual property rights and development
of IT software is taken as deemed supply.
9. Supply of goods by AOP/BOI to its members to considered as deemed
supply.
10.Works contract and supply of food for human consumption to be treated
as composite supply.
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TRANSACTIONS TREATED AS SUPPLY UNDER SCHEDULE -I, EVEN IF

CONSIDERATION IS ABSENT.
Certain activities without consideration would be treated as supply under

GST and chargeable to tax:
1. GST is applicable for Permanent transfer of Business assets, even if
supply is made without consideration.
2. Supply between related or distinct persons is treated as supply, even if
it is made without consideration. The term related person includes the
following: a) if such persons are officers or directors of one another’s
business, b) if such persons are legally recognized partners in business,
c) if they the members of the same family, d) if such persons have
employer -employee relationship, [if remuneration is paid under
employment contract, GST is not applicable. But, if employer supplies
by way of gift and if the gift value exceeds Rs. 50,000, it is taxable] e) if
such persons hold more than 25% of voting shares in a company.
2a. The term family includes spouse, children, parents, grandparents,
brothers and sisters of a person, if they are wholly dependent on the said
person.
2b. Distinct person means the person who has obtained more than one
registration shall, in respect of each such registration, be treated as
distinct person.
3. Supply between principal and agents shall be treated as supply and
therefore it is taxable.
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TRANSACTIONS GIVEN IN NEGATIVE LIST
The following transactions are treated neither as supply of goods or

services of services:
1. Services by an employee to the employer
2. Services by any court (district court, high court, supreme court)
3. Functions performed by MP/MLC, members of local authorities,
chairperson/ director of state/central government/semi government.
4. Funeral services
5. Sale of land and sale of building
6. Actionable claims other than lottery, betting and gambling
7. Supply from non-taxable territory to another non-taxable territory,
without such goods entering into India
8. Liquor Licence granted by the government
9. Supply by endorsement of documents by the consignee
10.Notified activities undertaken by the government GST rates notified for
supply of various goods:
GST rates notified for supply of various Services:
INTER STATE INTRA STATE SUPPLY

SUPPLY
GST RATES
CGST SGST/UTGST
IGST
Category -I : 5% 5% 2.5% 2.5%
Category -II : 12% 12% 6% 6%
Category -III : 18% 18% 9% 9%
Category -IV : 28% 28% 14% 14%
Category -V : 3% 3% 1.5% 1.5%
Category -VI : 0.25% 0.25% 0.125% 0.125%
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GST rates notified for supply of various Services:
INTER STATE INTRA STATE SUPPLY

SUPPLY
GST RATES
CGST SGST/UTGST
IGST
Category -I :5% 5% 2.5% 2.5%
Category -II :12% 12% 6% 6%
Category -III :18% 18% 9% 9%
Category -IV :28% 28% 14% 14%
3. EXEMPT SUPPLY
2017, the term “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.
Exempt supplies comprise the following 3 types of supplies:
a. Supplies taxable at a ‘NIL’ rate of tax.
b. Supplies that are wholly or partially exempted from CGST or IGST, by

way of a notification.
c. Non-taxable supplies as defined under Section 2(78) – supplies that are

not taxable under the Act (viz. alcoholic liquor for human consumption).
The following aspects need to be noted:
a. Zero-rated supplies such as exports would not be treated as supplies

taxable at ‘NIL’ rate of tax.
b. Input tax credit attributable to exempt supplies will not be available for
utilization/setoff.
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Example:
Discuss whether GST is payable in the following cases -

1. Dubai to Srilanka via Delhi. Traveller did not pass through immigration
at Delhi, Business class Rs. 85,000,
2. Delhi to Guwahati in Assam (North east), business class Rs. 35,000,
3. Guwahati to Delhi, economy Rs. 15,000.
4. Mr. Saha booked ticket with goods transport agency (GTA) for transport
of goods to Bangalore. The freight charged by GTA was Rs. 40,000.
Freight was paid by Mr. Saha.
5. Interest on loan received by the bank Rs. 2,000.
6. Renting of agro-machinery by A limited Rs. 45,000.
7. Agriculture company provided the services like supply of farm labour
and testing of soil of farm land Rs. 50,000.
Solution:
The taxability of each transaction is as follows:

1. No GST, as supply of service has not taken place within India
2. GST is not payable in case of travel from North east India.
3. GST is not payable in case of travel to North east India.
4. Service to unregistered person by GTA is exempt. Hence GST is not
payable by GTA or Mr. Saha.
5. Interest on loan is exempt from GST.
6. Renting of agro-machinery by A limited is exempt from GST.
7. Supply of farm labour and testing of soil of farm land are exempt from
GST.
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4. ZERO RATED SUPPLY UNDER GST
Zero Rated Supply in IGST is being introduced through Chapter VIII. Zero
Rated Supplies refers to items that are taxable under GST but the Rate of
Tax is Nil. The concepts of Zero-Rated Supply are covered under Section 16
of the IGST Act. Below we have discussed about Meaning of Zero-Rated
Supplies, Input Tax Credit etc.
Meaning of Zero-Rated Supply
Zero rated supply means any of the following taxable supply of goods and/
or services, namely-
Export of goods and/or services; or
Supply of goods and/or services to a SEZ developer or an SEZ unit.
It is also provided that the credit of input tax may be availed for making
zero rated supplies notwithstanding that such supply may be an exempt
supply.
It is further provided that a registered taxable person exporting goods or

services shall be eligible to claim refund under one of the following two
options:
A registered taxable person may export goods or services under bond,

subject to such conditions, safeguards and procedure as may be prescribed
without payment of IGST and claim refund of unutilized input tax credit in
accordance with provisions of section 48 of the CGST Act.
A registered taxable person may export goods or services subject to such

conditions, safeguards and procedure as may be prescribed with payment
of IGST and claim refund of IGST paid on goods and services exported in
accordance with provisions of section 48 of the CGST Act.
Lastly, it is provided that the SEZ developer or SEZ unit receiving zero-
rated supply shall be entitled to claim refund of IGST paid by registered
taxable person on such supply.
Input Tax Credit in Zero Rated Supply
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The input tax credit is available for zero rated supplies. This means that
export without payment of duty and supply to SEZ will be considered as
zero rated supply and credit will be available. Consequently, there will not
be requirement to reverse credit even when the supplies are made without
payment of duty in cases of exports and supply made to SEZ.
EOU: Zero Rated Supply
As EOU are not covered under zero-rated supplies, the refund of unutilized
Cenvat credit will not be admissible to the supplies made to EOU.
It was concluded by various judicial pronouncements like NBM Industries

Case wherein supply to EOU was treated at par with physical export and
benefit of refund of accumulated credit was extended.
However, their amendment was made vide Budget, 2015 wherein definition
of export was given for the purpose of refund of accumulated Cenvat credit
which stated that export means taking out of India to a place outside India.
Consequently, refund of accumulated credit is not admissible to EOU but is

available for clearances made to SEZ because the provisions of SEZ Act
have overriding effect and supplies to SEZ are to be considered as export.
It appears that the present policy is carried forward in the GST regime too.
Deemed Export: Zero Rated Supply
It appears that the concept of ‘deemed exports’ will also be introduced in

GST laws. This is evident from the definition of ‘deemed exports’ given
under section 2(37) of the GST Act, 2016.
It states that deemed exports as notified by the Central/State Government

on the recommendation of the Council, refer to those transactions in which
the goods supplied do not leave India and payment for such supplies is
received either in Indian rupees or in convertible foreign exchange.
At present, as per DGFT Laws, supplies to EOU is considered as deemed

export and it may be possible that it is specified as deemed exports in GST
Law also if the same is recommended by the Council.
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It is also pertinent to mention that refund under section 48 of the GST Act,
2016 includes refund of tax on supply of goods regarded as deemed
exports.
Consequently, it may be possible that supplies to EOU are made on

payment of tax but refund of the said tax is admissible to the supplier.
This is departure from the present provision under Central Excise Laws
wherein clearances to EOU are made without payment of excise duty.
We can say that exemption for supplies to EOU will be through refund
mechanism. Similarly, for SEZ, exemption by way of refund mechanism has
been prescribed in GST regime.
2.9 JOB WORK
2017, the term “job work” means any treatment or process undertaken by
a person on goods belonging to another registered person and the
expression “job worker” shall be construed accordingly.
A manufacturer may send out his goods to a job worker for initial process,
intermediate process, assembly, packing or any other completion process
and later supply such goods to its customers or use in any other
manufacturing process accompanied by its own. The goods sent for job
work maybe raw material, component parts, semi-finished goods and even
finished goods. The resultant goods could be with same characteristics or
with variation of the product send for job work
Procedure and Compliance under GST
A. Goods send out for job work must be accompanied with a challan.
B. Goods send must be received back by the principal within the period
mentioned below:
i. Inputs, semi-finished or finished goods - 1 year.
ii. Capital Goods - 3 years (of being sent out by the principal to the job
worker).
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C. In case where the goods sent have not been received back within the
period as mentioned above, such goods will be treated as supplied to
the job worker by the principal. Further tax will be required to be paid
by the principal on such deemed supply.
D. Principal may on his own will receive back the goods after processing
from job worker. Supply to his customers from the place of business of
job worker.
Under both the situations ITC paid on purchase of goods send on job
work will be allowed to the principal.
E. Waste and scrap generated during the initial process, intermediate

process, assembly, packing or any other completion process may be
sold on payment of tax by:
(i) Job worker - if he holds a registration.
(ii) Principal - if job worker does not hold a registration.
Transition Provisions
Inputs, semi-finished goods or finished goods removed for job work for
carrying certain processes and returned on or after the appointed date.
In case any inputs or semi-finished goods had been removed before the
appointed date from the factory of the manufacturer and sent to a job
worker for carrying further processing, testing, repair or for a similar
purpose and the same is received on or after the appointed date, no tax
shall be payable if the following conditions are satisfied:
a. Underlying goods are returned to the factory within 6 months from the
appointed date (extendable for a maximum period of 2 months).
b. Declaration of the goods held by job worker is done in specified form
and manner.
c. Supply of semi-finished goods or finished goods is done only on
payment of tax in India or the goods are exported out of India within 6
months from the appointed date (extendable by not more than 2
months).
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d. If the underlying inputs, semi-finished goods or finished goods are not

returned within 6 months or extended period, ITC availed earlier under
existing laws will be recovered.
Liability under existing Taxation Regime
a) Where process amount to manufacture:

i. If the process undertaken by the job worker amounts to
manufacture/ deemed manufacture as per the definition, the job
worker would be liable to pay a duty of excise on the goods so
manufactured.
ii. Alternatively, the principal manufacturer who has supplied the goods
for job work may furnish a declaration under Notification No. 214/86
dated 25.03.1986 (which exempts goods manufactured by a job
worker from the duty of excise) based on which job worker would not
be required to charge duty of excise.
iii. The goods must be used in the manufacturing process by the
principal manufacturer which should result in a dutiable product being
manufactured on which duty of excise is being charged.
iv. The activity undertaken by job worker would not be liable to service
tax also as any process amounting to manufacture or production of
goods is covered by Entry No. 30 of the Notification No. 25/2012-ST
dated 20.06.2012 w.e.f. 31.03.2017. (Earlier it was specified in
negative list).
b) Where process does not amount to manufacture:

i. Where the processing is undertaken by the job worker does not
amount to manufacture, the said job worker could be liable to service
tax. But before determining the same, one need to examine the
exemption provided in Notification No. 25/2012 ST 20.06.2012.
ii. As per the said Notification, job work in relation to any goods on
which appropriate duty is payable by the principal manufacturer is
exempted.
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iii. Appropriate duty means “duty payable on manufacture or production

under a Central Act or a State Act but shall not include ‘Nil’ rate of
duty or duty wholly exempt”. It means that if the duty is charged on
final product by principal manufacturer, there is no liability on job
worker to charge service tax.
iv. On the contrary, if appropriate duty is not paid by the principal
manufacturer, the job worker would be liable to charge service tax.
VALUATION
The value of supply of goods or services in a case where the consideration

is wholly in money, transaction value shall be considered for payment of
tax, with various inclusions prescribed in the valuation provisions.
Certain inclusions in the valuation are as follows:
i. Any taxes, duties, cesses, fees and charges levied under any statute,
other than SGST/ UTGST/CGST/IGST.
ii. Any amount that the supplier is liable to pay in relation to such supply
but which has been incurred by the recipient of the supply and not
included in the price actually paid or payable for the services.
iii. Incidental expenses.
iv. Interest or late fee or penalty for late payment of any consideration of
supply.
v. Subsidies directly linked to the price excluding subsidies provided by the
Central and State Governments.
However, transaction value will exclude discount, if any. Post-supply

discounts will not be included in the transaction value if it is established as
per the agreement and is known at, or before or after the supply.
85
Accordingly, the value of 'supply' shall not include any discount that is
given:
(i) Before/at the time of supply: Single condition
a. Discount is duly recorded in the invoice.
(ii) After the supply: Cumulative conditions:

a. Agreement establishing discount entered into before/at the time of
supply.
b. Discount specifically linked to relevant invoices.
c. ITC reversed by the recipient to the extent of discount.
In case of job work, it could be possible that the raw material supplier will
supply goods at intrinsic value as he will be not selling the same to the job
worker. He will charge the GST on the intrinsic value and in return, the job
worker will charge GST on the value of goods supplied along with its
charges (Processing charges plus raw materials). Therefore, valuation of
supply shall be carried out after considering nature of the contract and the
factors involved in the transaction.
VALUATION RULES
Value of supply of goods or services where the consideration is not wholly

in money, value of supply shall -
a. Be the open market value of such supply.
b. If the open market value is not available, be the sum total of
consideration in money and any such further amount in money as is
equivalent to the consideration not in money if such amount is known at
the time of supply.
c. If the value of supply is not determinable under clause (a) or clause (b),
be the value of supply of goods or services or both of like kind and
quality.
d. If the value is not determinable under clause (a) or clause (b) or clause
(c), be the sum total of consideration in money and such further amount
of money that is equivalent to consideration not in money.
86
• The value of the supply of goods or services or both between distinct

persons or where the supplier and recipient are related, other than
where the supply is made through an agent, shall -
a. Be the open market value of such supply.
b. If the open market value is not available, be the value of supply of
goods or services of like kind and quality.
c. If the value is not determinable under clause (a) or (b), be the
value as determined by application of rule 4 (value of supply of
goods or services or both based on cost) or rule 5 (Residual
method for determination of the value of supply of goods or
services or both).
• The value of taxable services provided by such class of service providers
as may be notified by the Government on the recommendations of the
Council as referred to in Entry 2 of Schedule I (transactions between
related and distinct persons) between distinct persons, other than those
where input tax credit is not available shall be deemed to be NIL.
Conditions and Restrictions in respect of Inputs & Capital Goods sent to the
Job worker
Following conditions must be noted in terms of section 19 of the CGST Act,

2017 and rules there under:
a. The inputs or capital goods shall be sent to the job worker under the
cover of a challan issued by the principal, including where the inputs or
capital goods are sent directly to job worker.
b. The challan issued by the principal to the job worker shall contain the
details specified in rule Invoice 8, as under -
i) Date and number of the delivery challan.
ii) Name, address and GSTIN of the consigner, if registered.
iii) Name, address and GSTIN or UIN of the consignee, if registered.
iv) HSN code and description of goods.
v) Quantity (provisional, where the exact quantity being supplied is

not known).
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vi) Taxable value.
vii) Tax rate and tax amount – CGST, SGST/UTGST, IGST or cess,
where the transportation is for supply to the consignee.
viii) Place of supply, in the case of inter-State movement.
ix) Signature.
c. The details of challans in respect of goods dispatched to a job worker or

received from a job worker during a tax period shall be included in
FORM GSTR-1 furnished for that period.
d. If the inputs or capital goods are not returned to the principal within the
time stipulated in section 143 i.e., one or three year(s), the challan
issued under sub-rule (1) [i.e., point (a)] shall be deemed to be an
invoice for the purposes of GST Act.
e. ‘Capital goods’ shall include ‘plant and machinery’ as defined in the

Explanation to section 17, as ‘plant and machinery’ means apparatus,
equipment and machinery fixed to earth by foundation or structural
support that are used for making outward supply of goods or services or
both and includes such foundation and structural supports but excludes
-
i) Land, building or any other civil structures.
ii) Telecommunication towers.
iii) Pipelines laid outside the factory premises.
Reconciliation of Inward and Outward Supplies (Matching Concept)
If there is a mismatch between the details of outward supplies uploaded on

the GST Network (GSTN) by vendors and the inward supplies uploaded by
the recipient, such mismatches will be communicated to the recipient.
If the mismatch is not rectified by the vendor in the month of

communication, the recipient will be liable to pay the differential GST along
with interest in the subsequent month. This provision places the liability for
non-compliance on the recipient, i.e., job worker, as against their vendors.
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Similar provisions have been prescribed wherein details of credit notes

issued by a supplier have to match with the corresponding reduction of
input tax credit claimed by the recipient. Accordingly, if the recipient does
not adjust the input tax credit, the tax and interest would be recovered
from the supplier. This provision places liability on tax-payers for non-
compliance by vendors.
Input Service Distributor (ISD) Concept
As per ISD concept, the supplier can transfer the credit of input services to
two or more locations. Further, ISD can transfer credit of all types of GST
(CSGT, SGST/UTGST or IGST). Considering the possibility of multiple
registrations State-wise, ISD could be used as a tool to ensure optimal
utilization of head office-related input tax credits (of input services),
resulting in an effective reduction in cost.
Transitional Credits
To transfer and carry forward the existing credits in the GST regime, a
condition has been stipulated that such credit must have been admissible
in the GST regime. Therefore, following points need to be borne in mind:
1. Credits of Service Tax must be properly reflected in the last service tax
returns filed before appointed day and documentation must be in place
to establish the same.
2. Credit pertaining to inputs in stock at the appointed day can also be
availed.
3. All due credits in the existing regime must be availed as un-availed
credit cannot be claimed in GST regime.
4. Balance of capital goods credit can be taken in GST regime
5. A manufacturer who is not availing the credit of excise duty and CVD
may need to ascertain the value of the stock as on the appointed day
and based on the availability of the invoice, accordingly credit can be
availed.
6. If a manufacturer is not availing the credit of VAT currently due to
restriction in the state VAT law or due to being in the composition
scheme, then the credit can be availed based on the ascertainment of
stock as on appointed day.
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7. However, if the credit of VAT is being currently availed, the same should
be properly reflected in the last VAT/Service Tax returns to transfer such
credits to the GST regime.
8. The principal might have sent inputs, semi-finished goods and finish
goods outside before appointed date (as of now it is 1st of July, 2017)
for job work or testing. If these are received back before 6 months (i.e.,
31st December 2017), GST will not be payable.
Specific Issues
Treatment of Scrap/Waste
The waste and scrap generated during the job work can be supplied by the
job worker directly from his place of business, on payment of tax, if he is
registered. If he is not registered, the same would be supplied by the
principal on payment of tax.
Intermediate Goods
The term inputs, for the purpose of job work, includes intermediate goods
arising from any treatment or process carried out on the inputs by the
principal or job worker.
Records for Job works
It is completely the responsibility of the principal to maintain proper

accounts of job work related inputs and capital goods.
Applicability of Provisions
The provisions relating to job work are applicable only when registered
taxable person intends to send taxable goods. In other words, these
provisions are not applicable to exempted or non-taxable goods or when
the sender is a person other than registered taxable person.
It is not compulsory that job work provisions should be followed by the

principal. The principal can send the inputs or capital goods after payment
of GST without following the special procedure. In such a case, the job-
worker would take the input tax credit and supply back the processed
goods (after completion of job-work) on payment of GST.
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Steps to be taken by Job worker
Job workers are required to understand the provisions of GST laws They
may have to take following steps.
1. Review of existing contracts as to –
(i) Processing structures and timings of completion of work.
(ii) Valuation of processed goods.
(iii) Respective obligations.
(iv) FOC supplies.
(v) Reverse charge mechanism.
(vi) Tax implications.
2. Supplementary agreements/new contracts may be entered into for job
work activities.
3. To decide on having or not having two separate contracts for the supply
of goods and services.
4. To decide on having multiple supply locations/closing some of them.
5. Review of procurement policy.
6. Change in invoicing pattern.
7. Working capital management.
8. Treatment of security deposits other deductions.
9. Accounting aspects.
10.Training of personnel.
The job worker should be aware of the provisions under goods and services
tax as applicable to them so that they will not face any kind of problem in
future from Department/principal manufacturer. Job workers may be
required to restructure their contracts/agreements in view of the GST
provisions as applicable to them.
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2.11 INPUT TAX CREDIT
2017, the term “input tax credit” means the credit of input tax.
Input Tax Credit under GST - Conditions to Claim
A registered person will be eligible to claim Input Tax Credit (ITC) on

fulfilment of the following conditions:
1. Possession of a tax invoice or debit note or document evidencing
payment.
2. Receipt of goods and/or services.
3. Goods delivered by supplier to other person on the direction of
registered person against a document of transfer of title of goods.
4. Furnishing of a return.
5. Where goods are received in lots or instalments ITC will be allowed to
be availed when the last lot or instalment is received.
6. if supplier fails to supply of goods and/or services within 180 days from
the date of invoice, ITC already claimed will be added to output tax
liability.
7. No ITC will be allowed if depreciation has been claimed on tax
component of a capital good.
8. If invoice or debit note is received after
a) The due date of filing return for September of next financial year. or
b) Filing annual return.
9. Common credit of ITC used commonly for
a) Effecting exempt and taxable supplies.
b) Business and non-business activity.
Credit will be allowed according to the RULES
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Items on which credit is not allowed

1. Motor vehicles and conveyances except the following:
a. Such motor vehicles and conveyances are further supplied i.e., sold.
b. Transport of passengers.
c. Used for imparting training on driving, flying, navigating such vehicle
or conveyances.
d. Transportation of goods.
e. Food and beverages, outdoor catering, beauty treatment, health
services, cosmetic and plastic surgery.
But if the goods and/or services are taken to deliver the same category
of services or as a part of a composite supply, credit will be available
Example: Mr. Dev purchases cosmetic creams to supply it to a customer,
and then credit of ITC paid on purchases will be allowed.
2. Sale of membership in a club, health, fitness centre.
3. Rent-a-cab, health insurance and life insurance except the following:
a. Government makes it obligatory for employers to provide it to its
employees.
b. Goods and/or services are taken to deliver the same category of
services or as a part of a composite supply, credit will be available.
Example: Mr. Dev takes the service of rent-a-cab to supply to Mr. Manoj,
a customer, then credit of ITC paid on purchases will be allowed.
4. Travel benefits extended to employees on vacation such as leave or
home travel concession.
5. Works contract service for construction of an immovable property
(except plant & machinery or for providing further supply of works
contract service).
6. Goods and/or services for construction of an immovable property
whether to be used for personal or business use.
7. Goods and/or services where tax has been paid under composition
scheme.
8. Goods and/or services used for personal use.
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9. Goods or services or both received by a non-resident taxable person

except for any of the goods imported by him.
10.Goods lost, stolen, destroyed, written off or disposed of by way of gift
or free samples.
11.ITC will not be available in the case of any tax paid due to non-payment
or short tax payment, excessive refund or ITC utilized or availed by the
reason of fraud or wilful misstatements or suppression of facts or
confiscation and seizure of goods.
2.12 REVERSE CHARGE
2017, the term “reverse charge” means the liability to pay tax by the
recipient of supply of goods or services or both instead of the supplier of
such goods or services or both
Reverse charge, where the recipient is liable to pay tax, is common to

many countries like Canada where it is applicable on imports of services
and intangible properties. Normally, the supplier pays the tax on supply. In
certain cases, the receiver becomes liable to pay the tax, i.e., the charge-
ability gets reversed, that is why it is called reverse charge.
The concept of reverse charge mechanism is already present in service tax.

In GST regime, reverse charge is applicable for both services as well as
goods.
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Current Scenario
At present, similar provisions of Reverse Charge are available in Service

Tax for the services like -
Reverse charge on services under GST
(i) Insurance agent.
(ii) Services of a director to a company.
(iii) Manpower supply.
(iv) Goods Transport Agencies.
(v) Non-resident service providers.
(vi) Any service involving aggregators.
Currently there are no reverse charge mechanisms in supply of goods.
Situations where reverse charge will apply
1. Unregistered dealer selling to a registered dealer
In such a case, the registered dealer has to pay GST on the supply.
2. Services through an e-commerce operator
If an e-commerce operator supplies services then reverse charge will apply

on the e- commerce operator. He will be liable to pay GST.
For example, Urban Clap provides services of plumbers, electricians,

teachers, beauticians etc. Urban Clap is liable to pay GST and collect it
from the customers instead of the registered service providers.
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If the e-commerce operator does not have a physical presence in the

taxable territory, then a person representing such electronic commerce
operator for any purpose will be liable to pay tax. If there is no
representative, the operator will appoint a representative who will be held
liable to pay GST.
3. CBEC has issued a list of services on which reverse charge is

applicable.
All provisions of GST will apply on the recipient (i.e., the buyer).
Registration
All persons who are required to pay tax under reverse charge have to
register for GST irrespective of the threshold.
[Threshold: turnover in a financial year exceeds Rs. 20 lakhs ( Rs. 10 lakhs

for North eastern and hill states)] In case of a person, who is engaged in
exclusive supply of goods, limit of 20 lakhs has been increased to 40 lakhs
WEF 1.4.2019)
Time of supply for goods under reverse charge
In case of reverse charge, the time of supply shall be the earliest of the
following dates -
a. The date of receipt of goods OR
b. The date of payment OR
c. The date immediately after THIRTY days from the date of issue of
invoice by the supplier (60 days for services)
If it is not possible to determine the time of supply under (a), (b) or (c),
the time of supply shall be the date of entry in the books of account of the
recipient.
For clause (b) - the date of payment shall be earlier of -
1. The date on which the recipient entered the payment in his books
OR
2. The date on which the payment is debited from his bank account
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Treatment of Reverse Charge under GST
For Services
The present reverse charge provisions under Service Tax, applicable on

certain services. For example, Ola Cabs enlist drivers to ply their cars.
Drivers are providing chauffeur/driving services to Ola. Ola is the service
receiver and pays drivers a share of the fare collected from passengers.
Ola pays GST on the drivers’ services on reverse charge basis. This
becomes cost to Ola which is later recovered from passengers.
The aim of reverse charge is to bring unorganized sector into the tax
umbrella. It also removes the burden of tax compliance from individuals
with limited resources (drivers) to large companies (Ola) with enough
resources.
For Goods
For the first time under GST, reverse charge is applicable on goods.
For example, unregistered dealer sells for Rs. 100. Buyer will deduct GST
of say 5% = Rs. 5 and deposit it under reverse charge. So now, will seller
receive Rs. 100 or Rs. 95?
The present VAT laws, some states treat purchases from unregistered
dealers as 0% transaction i.e, VAT is not applied. For other states such as
Karnataka, purchase tax is applicable on all purchases made by a
registered dealer from an unregistered dealer, irrespective of the purpose
for which such goods are purchased.
Further, such tax paid by a registered dealer will be available as input tax
credit, subject to The seller will receive Rs. 100. The buyer will deposit Rs.
5 with the government on his own.
Input tax credit on reverse charge
Tax paid on reverse charge basis will be available for input tax credit if
such goods and/or services are used or will be used, for business. The
service recipient (i.e., who pays reverse tax) can avail input tax credit.
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Tax Invoice
The supplier must mention in his tax invoice whether the tax is payable on
reverse charge. When GST is payable under RCM, it should be paid by
cash. Further, GST under RCM cannot pay by utilizing input tax credit.
GST Compensation Cess
GST Compensation Cess will also be applicable on reverse charge.
This will apply on all supplies of goods and services, including imports and
reverse charge supplies. The purpose is to compensate States for loss of
revenue on implementation of GST. This will be applicable for 5 years from
the date GST gets implemented.
DIFFERENCE BETWEEN REVERSE CHARGE AND FORWARD CHARGE
Forward Charge
Forward Charge or direct charge is the mechanism where the supplier of

goods or services or both is liable to pay tax.
Supplier of the goods or services or both.
Required once a supplier meets the threshold. Threshold: Aggregate

Turnover in a preceding financial year exceeds 20 lakhs (10 lakhs for 11
special category states).
Can be registered or unregistered.
Car vendor (registered) sells the car and collect the tax from buyer.
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Reverse Charge
Receiver of the goods or services or both.
Reverse Charge is only a mode of collection of GST on Supplies of goods or

services where the service receiver will be liable to pay GST to
government.
All persons who are required to pay tax under reverse charge have to
register for GST irrespective of the threshold.
Can only be the registered recipient in RCM for case of 9(3) of CGST and
5(3) of IGST.
Car vendor hires the services of Transporter (GTA, being notified service)
then car vendor himslef shall be liable to pay the GST on such services.
WORKS CONTRACT
2017, the term “works contract” means a contract for building,
construction, fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation, alteration or
commissioning of any immovable property wherein transfer of property in
goods (whether as goods or in some other form) is involved in the
execution of such contract.
Works contracts consist of three kinds of taxable activities as per the

current law. It involves supply of goods as well as supply of services. If a
new product is created during the works contract, then such manufacture
becomes a taxable event.
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Composition Scheme is not Available
Composition scheme is not available to works contractors as it is treated as

service under GST. Composition scheme is only available to suppliers of
goods. This will be a big blow to the small sub-contractors who cannot opt
for composition scheme. They will be forced to register for normal taxation
scheme increasing their compliances and costs.
INTERMEDIARY
As per Section 2(13) of the Integrated Goods and Services Tax (IGST) Act,
2017, the term “intermediary” means a broker, an agent or any other
person, by whatever name called, who arranges or facilitates the supply of
goods or services or both, or securities, between two or more persons, but
does not include a person who supplies such goods or services or both or
securities on his own account.
INPUT SERVICE DISTRIBUTOR
An Input service distributor (ISD) is a business which receives invoices for

services used by its branches. It distributes the tax paid, to such branches
on a proportional basis by issuing an ISD invoice. The branches can have
different GSTINs but must have the same PAN as that of ISD.
Let’s understand with an example.
Head office of ABC limited is located at Bangalore having branches at

Chennai, Mumbai and Kolkata. The head office incurred annual software
maintenance expense(service received) on behalf of all its branches and
received the invoice for the same. Since software is used by all its
branches, the input tax credit of entire services cannot be claimed at
Bangalore. The same has to be distributed to all the three locations. Here,
the Head office at Bangalore is the Input Service Distributor.
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ISD cannot distribute the input tax credit:

• Paid on Inputs e.g Raw materials and capital goods e.g Machine
purchased
• To outsourced manufacturers or service providers.
Distribution of Input Tax credit: The credit of tax paid under reverse charge
mechanism is not available for distribution to the recipients. So, the ISD
has to utilize such credit only as a normal taxpayer.
Conditions to be fulfilled by ISD
Registration: Input Service Distributor has to compulsorily register as

“ISD” apart from its registration as a normal taxpayer under the Act,
wherein he has to specify under serial number 14 of the REG-01 form as
an ISD. Only then he shall be able to distribute the credit to the recipients.
Invoicing: ISD can distribute the amount of tax credit to recipients as

earlier stated by issuing an ISD invoice
Returns: Amount of tax credit distributed should not exceed the amount
of tax credit available with the ISD as at the end of a relevant month to be
filed in GSTR-6 by 13th* of the succeeding month by ISD.
Registration under GST
An ISD is required to obtain a separate registration. The registration is

mandatory and there is no threshold limit for registration for an ISD.
Businesses who are already registered as an ISD under the existing regime
(i.e., under Service Tax), will be required obtain a new ISD registration
under GST. This is because; the existing ISD registration will not be
migrated to the GST regime.
Businesses who are already registered as an Input Service Distributor

under the existing regime (i.e., under Service Tax), will be required obtain
a new ISD registration under GST.
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Manner of Distribution
If an ISD has 3 units across the country and if a particular input service
pertains exclusively to only one unit and the bill is raised in the name of
ISD, the ISD can distribute the credit only to that unit and not to other
units. If the input services are common for all units, then it will be
distributed according to the ratio of turnover of all the units. The following
illustration will clarify the issue.
Example:
M/s XYZ Ltd. having its head Office at Mumbai, is registered as ISD. It has
three units in different states namely ‘Mumbai’, ‘Chennai’ and ‘Delhi’ which
are operational in the current year. M/s XYZ Ltd. furnishes the following
information for the month of July, 2019 & asks for permission to distribute
the below input tax credit to various units.
• CGST paid on services used only for Mumbai Units: Rs. 30000
• IGST, CGST & SGST paid on services used for all units: Rs. 1200000
Total Turnover of the units for the Financial Year 2019-20 are as follows:
Units Turnover ( Rs. )

Total Turnover of three units 10, 00, 00,000
Turnover of Mumbai units 5, 00, 00,000 (50%)
Turnover of Chennai units 3, 00, 00,000 (30%)
Turnover of Delhi units 2, 00, 00,000 (20%)
Computation of Input Tax Credit Distributed to various units is as

follows:
Thus the concept of ISD is a facility made available to business having a

large share of common expenditure and billing/payment is done from a
centralized location. The mechanism is meant to simplify the credit taking
process for entities and the facility is meant to strengthen the seamless
flow of credit under GST.
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LOCATION OF SUPPLIER OF SERVICE
2017, the term “location of the supplier of services” means -
a. Where a supply is made from a place of business for which the
registration has been obtained, the location of such place of business.
b. Where a supply is made from a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewhere), the location of such fixed establishment.
c. Where a supply is made from more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the provisions of the supply.
d. In absence of such places, the location of the usual place of residence of
the supplier.
LOCATION OF RECIPIENT OF SERVICE
2017, the term “location of the recipient of services” means -
a. Where a supply is received at a place of business for which the
registration has been obtained, the location of such place of business.
b. Where a supply is received at a place other than the place of business
for which registration has been obtained (a fixed establishment
elsewhere), the location of such fixed establishment.
c. Where a supply is received at more than one establishment, whether
the place of business or fixed establishment, the location of the
establishment most directly concerned with the receipt of the supply.
d. In absence of such places, the location of the usual place of residence of
the recipient.
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2.13 SUMMARY
• 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, export of goods or
services or both, interstate sate supplies of persons having permanent
account number but excludes CGST, SGST/UTGST, IGST.
• Supply includes all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, licence, rental, lease or disposal made or
agreed to be made for a consideration by a person in the course or
furtherance of business. It also includes import of services for
consideration whether or not in the course or furtherance of business.
• Exempted supply includes supplies that have a NIL rate of tax, supplies
that are wholly exempted from UTGST, CGST OR IGST, supplies that are
not taxable under the act like alcoholic liquor for human consumption.
• Inward supply in relation to a person means receipt of goods or services
or both whether by purchase, acquisition or any other means with or
without consideration
• Outward supply means supply of goods or services or both, whether by
sale, transfer, barter, exchange, licence, rental, lease or disposal or any
other mode, by such person in the course or furtherance of business.
• Location of the recipient of services means, a) where a supply is received
at a place of business for which the registration has been obtained, the
location of such place of business. b) where a supply is received at a
place other than the place of business for which registration has been
obtained, (a fixed establishment elsewhere), the location of such fixed
establishment, c) where a supply is received at more than one
establishment, whether the place of business or fixed establishment, the
location of the establishment most directly concerned with the receipt of
the supply, d) in the absence of such places, the location of the usual
place of residence of the recipient.
• Intra-state supplies are liable to CGST & SGST. If intra state supplies are
made by a taxable person located in union territory, he will be liable to
CGST & UTGST.
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• Taxable value for levy of CGST &SGST/UTGST will be based on the

transaction value i.e., the price actually paid or payable for the said
supply of goods or services or both, where the supplier and the recipient
of the supply are not related and price is the sole consideration for the
supply. Further, incidental expenses, commission, interest, penalty etc.,
will form part of the value.
Fill in the blanks

1. ____________ is intermediary tax mainly on B2B transactions.
2. The appoint a Member to be the Chairperson of the Adjudicating
Authority.
3. The Chairperson and every Member shall hold office for a term of
____________.
4. ____________ exports would not be treated as supplies taxable at ‘NIL’
rate of tax.
5. The phrase ____________ can be applied to a supply only when such
supply is made in the course or furtherance of business.
6. ____________ will normally pay affiliates a commission for every visit
to the website or every sales conversion.
7. A ____________ is a business owner and will grant a license to an
individual, which allows them to develop their own business.
8. An ____________ is required to obtain a separate registration.
9. The concept of ____________ is already present in service tax.
10.Supplies made for setting up of solar power generation projects or
facilities are ____________.
11.____________ normally considered as selling of assets, when the
organization is about to close down.
12.Under GST, supply of goods or services within the same state or Union
territory is called as ____________ supply.
13.Under GST, supply of goods or services from one state to another would
be called as ____________ supply.
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14. Principal supplies comes under section ______

15. ___________ means receipt of goods or services or both whether by
purchase, acquisition or any other means with or without consideration.
16.The person opting for ____________ scheme is required to file
quarterly GST return.
Answers
1. IGST
2. Central Government
3. Five years
4. Zero-rated supplies
5. Outward supply
6. Merchants
7. Franchisor
8. ISD
9. Reverse charge mechanism
10. Deemed Exports
11. Disposal
12. Intrastate
13. Interstate
14. 2(90)
15. Inward supply
16. Composition
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1. Which of the following taxes will be levied on Imports of goods

and services?
[a] CGST
[b] SGST
[c] IGST
[d] Exempt
2. GSTN comes under which Act?

[a] Banking Regulation Act 1949
[b] RBI Act 1934
[c] Companies Act, 2013
[d] Limitation Act, 1963
3. _________ is the first state that passed GST Bill.

[a] Bihar
[b] Gujarat
[c] Telangana
[d] Andhra Pradesh
4. The Central Board of Excise and Customs (CBEC) announced that

every year will be considered as GST Day.
[a] April 1
[b] March 1
[c] June 1
[d] July 1
5. Output tax in relation to a taxable person under the CGST Act,

2017 includes:
[a] Tax chargeable on taxable supplies made by him
[b] Tax chargeable on taxable supplies made by his agent
[c] Tax payable by him under reverse charge
[d] Both a and b
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6. Output tax in relation to a taxable person under the CGST Act,

2017 includes:
[a] Tax chargeable on taxable supplies made by him
[b] Tax chargeable on taxable supplies made by his agent
[c] Tax payable by him under reverse charge
[d] Both (a) and (b)
7. The term ‘casual taxable person’ includes:

[a] A person occasionally supplying goods or services or both in a
State or a Union territory where he has no fixed place of business.
[b] A person occasionally supplying goods or services or both in a
State or a Union territory where he has fixed place of business.
[c] Both (a) and (b)
[d] None of the above
8. Mr. Ram of Kolkata is participating in Books Expo in Haryana

where he has no fixed place of business and exhibiting his
products. During the expo, the said products will be sold to the
people attending and intending to purchase such products. In
such scenario, Mr. Ram shall obtain which of the following
registration under the CGST Act, 2017:
[a] Non–resident taxable person registration
[b] Casual taxable person registration
[c] Regular taxpayer registration
[d] No registration under GST required
9. The term “place of business” includes:

[a] Place from where business is ordinarily carried out including
godown, warehouse, etc.
[b] Place where a taxable person maintains his books of account
[c] Place where taxable person is engaged in business through an
agent
[d] All the above
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10.Archita Ltd. has its registered office under the Companies Act,
2013 in the State of Karnataka. It also has a corporate office in
the State of West Bengal. What will be the place of business of
Archita Ltd. under the CGST Act, 2017?
[a] West Bengal
[b] Karnataka
[c] Both (a) and (b)
11.Arnav Ltd. has a contract with Aadu Ltd. to provide book

keeping services to Asmit Ltd. Asmit Ltd. is a subsidiary of Arnav
Ltd. The liability to discharge consideration for such book
keeping service is of Arnav Ltd. As per the CGST Act, 2017, who
will be the recipient of the above service?
[a] Arnav Ltd.
[b] Asmit Ltd.
[c] Aadu Ltd.
[d] Both (a) and (b)
12.While repairing the factory shed, few goods were also supplied
along with the labour service. Whether it is a :
[a] Composite Supply
[b] Mixed Supply
[c] Works Contract Service
13.What are the factors differentiating composite supply & mixed

supply?
[a] Nature of bundling i.e. artificial or natural
[b] Existence of principal supply
[c] Both a and b
[d] None of these
14.What are the taxes levied on an intra-State supply?

[a] CGST
[b] SGST
[c] CGST and SGST
[d] IGST
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15.What would be the tax rate applicable in case of composite

supply?
[a] Tax rate as applicable on principal supply
[b] Tax rate as applicable on ancillary supply
[c] Tax rate as applicable on respective supply
16.When does liability to pay GST arise in case of supply of goods?

[a] On raising of invoice
[b] At the time of supply of goods
[c] On receipt of payment
[d] Earliest of any of abov
17.What is date of receipt of payment?

[a] Date of entry in the books
[b] Date of payment credited into bank account
[c] Both a and b
[d] Date of filing of return
18.The value of supply of goods and services shall be the -

[a] Transaction value
[b] MRP
[c] Market Value
[d] None of above
19.The time limit to pay the value of supply with taxes

[a] 90 days
[b] 6 months
[c] 180 days
[d] 365 days
20.What are different types of supplies covered under the scope of

supply?
[a] Supplies made with consideration
[b] Supplies made without consideration
[c] Both of the above
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Answer:
1. c 2. c
3. c 4. d
5. d 6. d
7. a 8. b
9. d 10. c
11. a 12. c
13. c 14. c
15. a 16. b
17. c 18. a
19. c 20. c
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1. Give the meaning of Aggregate turnover.
2. Define the term Aggregate turnover.
3. What is Adjudicating Authority?
4. Who is an Agent?
5. What is Business?
6. What is Capital goods?
7. Who is Casual taxable person?
8. What is Composite supply?
9. What is Mixed supply?
10.What is Exempt supply?
11.What is Job work?
12.What is Input tax?
13.What is Input tax credit?
14.What is Reverse charge?
15.What is Works contract?
16.Who is Non-resident person?
17. Who is an Intermediary?
18.Discuss salient features of CGST Act, 2017.
19. Explain SGST Act (Karnataka State).
20.Discuss about IGST Act.
21.Explain about Aggregate turnover, Adjudicating authority under GST.
22.Discuss about Agent, Business, Capital goods and Casual taxable
person.
23.Explain about Composite supply, mixed supply and Exempt supply.
24.Discuss about Supplier, Goods and Input service distributor.
25. Explain about Job work, Manufacture and Input tax.
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26.Discuss about Input tax credit, Person and Place of business.

27.Explain about Reverse charge, Works contract and Non-resident person.
28.Discuss Export of goods/services under GST.
29.Explain Import of goods/services under GST.
*****
113
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
114
PROCEDURE AND LEVY UNDER GST
Chapter 3
Procedure and Levy Under GST
Learning Objectives

• Procedure for registration under GST.
• Different categories of GST registration.
• Scope of supply and tax liabilities of mixed and composite supply.
• Computations of taxable value and tax liabilities.
• Transfer of Input tax credit.
Structure:
3.1 Introduction
3.2 Registration Under GST
3.3 Procedure Relating to Levy (CGST & SGSTt)
3.4 Place of Supply of Goods and Services
3.5 Time of Supply of Goods and Services
3.6 Value of Taxable Supply
3.7 Computation of Taxable Value and Tax Liability
3.8 Procedure Relating to Levy: (IGST)
3.9 Inputs on Capital Goods
3.10 Distribution of Credit by Input Service Distributor
3.11 Format for Computation of Transaction Value
3.12 Summary
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3.1 INTRODUCTION
The structure of GST stands on the foundation of the registration system,

because it is a registered person who is liable to pay tax and who is eligible
to avail the benefits of the input tax credit mechanism. A registered person
can also collect GST from his recipients. An unregistered person is not
taxed and is also kept outside the input tax credit mechanism.
The GST law gives a limited option to certain categories of persons to avoid
registration and thus avoid the tax liability lawfully. However, if one falls
within the reach of an extensive list of statutorily prescribed criteria
requiring compulsory registration, the supplier must get registered.
3.2 REGISTRATION UNDER GST
Background
GST Model provides for registration of various persons in different

situations. In order to provide relaxation to small suppliers, it is stated that
every supplier shall be liable to be registered under this act in the State
from where it makes a taxable supply of goods or services, if its aggregate
turnover in a financial year exceeds Rs. 20 lakhs. However, this limit is Rs.
10 lakhs for the persons conducting business in North Eastern states
including Sikkim. (In case of a person, who is engaged in exclusive supply
of goods, limit of 20 lakhs has been increased to 40 lakhs WEF 1.4.2019)
Here, aggregate turnover means the aggregate value of all taxable and
non-taxable supplies, exempt supplies and exports of goods and/or
services of a person having the same PAN, to be computed on all India
basis and excludes taxes, if any, charged under the CGST Act, SGST Act
and the IGST act, as the case may be. But aggregate turnover does not
include the value of supplies on which tax is levied on reverse charge basis
and the value of inward supplies.
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PROCEDURE FOR REGISTRATION (CGST ACT, 2017)
Act, 2017 relating to “Procedure for Registration”, are as under:
Every person who is liable to be registered shall apply for registration

within 30 days from the date on which he becomes liable for registration.
Before applying for registration, the tax payer shall declare his:
1. Legal name of business
2. PAN,
3. Mobile number,
4. e-mail address,
5. State or Union territory, in Part A of Form GST REG -01 on Common
Portal.
On successful verification of these numbers, a reference number will be

generated. Applicant shall submit Part B of Form GST REG-01, duly signed,
along with documents specified in the said Form at the Common Portal. On
receipt of an application, an acknowledgement shall be issued electronically
to the applicant in form GST REG-02. Further, if these documents are found
to be in order, the Proper Officer shall approve the registration within 3
working days (7 days in case of deficiency) from the date of submission.
If the application for the grant of registration has been approved, a

certificate of registration in form GST REG-06 will be issued. The
registration certificate shows the principal place of business and additional
places of business, if any and is made available to the applicant on the
common portal and 15 –digit Goods and Service tax identification number
shall be assigned. This GSTIN contains the following characters:
• 2 characters for the State code
• 10 characters for PAN/TAN
• 2 characters for the entity code
• 1 checksum character
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Example:
Other Provisions
a. Single registration will be granted, if a person has single business in a
State / Union territory. If a person has multiple business verticals in a
state/union territory, that person may be granted a separate registration
for each business vertical.
b. The business vertical of a taxable person shall not be granted
registration under composition scheme, if any one of the other business
verticals of the same person is paying tax under normal provisions.
c. If a person gets himself registered voluntarily under GST, all provisions,
which are applicable to a registered person, shall apply to such person.
d. Every person who is liable to take a registration or wants to obtain
voluntary Registration shall have a Permanent Account Number (PAN).
e. Every person required to deduct tax under section 51 may have, in lieu
of a Permanent Account Number, a Tax Deduction and Collection
Account Number (TAN)
f. A non-resident taxable person can obtain registration on the basis of
any other document as may be prescribed.
g. Any specialized agency of the United Nations Organization or any
Multilateral Financial Institution and Organization notified under the
United Nations (Privileges and Immunities) Act,1947 (46 of 1947),
Consulate or Embassy of foreign countries and any other person or class
of persons as may be notified by the Commissioner, shall obtain a
Unique Identity Number.
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h. The registration or UID is granted or rejected after due verification and

within the time prescribed. A certificate of registration shall also be
issued in prescribed form with effective date as may be prescribed.
i. The proper officer shall not reject the application for registration or the
Unique Identification Number (UID) without giving a notice to show
cause and without giving the person a reasonable opportunity of being
heard. This implies that rejection of an application is done based on the
principles of Natural justice.
j. If a person is already registered under pre-GST regime is migrated to
GST by issue of provisional GSTIN. It can be converted into regular
GSTIN by submitting necessary documents. If a person so migrated is
not liable for registration in GST regime, he can apply for cancellation of
registration.
k. A person who owns a SEZ unit shall make a separate application for
registration. Likewise, a person being an Input service distributer shall
make a separate application for registration.
l. All the applications, including replies, notices and returns shall be
verified by any of the following modes:
• Aadhaar based electronic verification code
• Electronic verification code generated through net banking login on the
common portal.
• Electronic verification code generated on the common portal. (In case
of corporate tax payers, documents shall be verified through digital
signature only.)
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PERSONS LIABLE FOR REGISTRATION
Act, 2017 relating to “Persons Liable for Registration”, are as under:
A. Every supplier shall be liable to be registered under the Act in the

State from where he makes a taxable supply of Goods or Services or
both. Registration is required if his aggregate turnover in a financial
year exceeds Rupees Twenty Lakhs. This threshold limit will be Rupees
Ten Lakhs if a taxable person conducts his business in any of the
special category states i.e Arunachal Pradesh, Assam, Jammu and
Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura,
Himachal Pradesh and Uttarakhand. (In case of a person, who is
engaged in exclusive supply of goods, limit of 20 lakhs has been
increased to 40 lakhs WEF 1.4.2019)
B. The application for registration shall be made within 30 days from the
date when he becomes liable for registration.
C. Casual taxable person or a non-resident taxable person shall apply for
registration at least five days prior to the commencement of business.
D. A person having multiple business verticals [as defined in Section
2(18)] in one State may obtain separate registrations for each of the
business vertical.
E. A supplier shall not be liable for registration:
• If his aggregate turnover consists of only such Goods and/or Service
which are not liable to Tax or wholly exempt from tax under this Act.
• An agriculturist, to the extent of supply of produce out of cultivation
of land
F. Every person who, on the day immediately preceding the appointed
day, is registered or holds a license under an earlier law, shall be liable
to be registered under this Act with effect from the appointed day.
G. Where a person who is liable to be registered under this Act fails to
obtain registration, the proper officer can proceed to register such
person in the manner as may be prescribed.
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PERSONS NOT LIABLE FOR REGISTRATION
Act, 2017 relating to “Persons Not Liable for Registration”, are as under:
(1) The following persons shall not be liable to registration, namely:

a. Any person engaged exclusively in the business of supplying goods
or services or both those are not liable to tax or wholly exempt
from tax under this Act or under the Integrated Goods and
Services Tax Act.
b. An agriculturist, to the extent of supply of produce out of
cultivation of land.
(2)The Government may, on the recommendations of the Council, by

notification, specify the category of persons who may be exempted from
obtaining registration under this Act.
Example:
Situation Nature of supply required Registration

1 Taxable inter-state supply Yes
2 Exempted inter-state supply No
3 Intra-state supply (upto Rs. 9 lakh) No
4 Intra-state supply (exceeding Rs. 9 lakhs) Yes
5 Intra-state supply (upto Rs. 9 lakhs)
Exempted inter-state supply of any value No
6 Casual Taxable person Yes
7 Reverse charge – for personal use upto prescribed No
limit
8 Reverse charge – for personal use beyond Yes
prescribed limit
9 Reverse charge – Other than personal use Yes
10 Non-resident persons Yes
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11 Persons required to deduct TDS providing intra state Yes

supply upto Rs. 9 lakhs
12 Input service distributor Yes
13 Intra-state supply upto Rs. 9 lakhs As an agent Yes
14 Supply through electronic commerce operator – Yes
Branded or otherwise
15 Aggregator – supplying services Yes
COMPULSORY REGISTRATION
As per Section 24 of the CGST Act, 2017 the benefit of threshold

exemption is not available to e-commerce operators and they are liable to
be registered irrespective of the value of supply made by them. In other
words, A person supplying goods or services through e-commerce operator
would not be entitled to threshold exemption (i.e. Rs. 20 lakhs or Rs. 10
lakhs as the case may be). This requirement is, however, applicable only if
the supply is made through suchelectronic commerce operator who is
required to collect tax at source under section 52 of the CGST Act, 2017.
Hence, any person who intends to sell on Flipkart or Amazon or Snapdeal
must obtain GST registration.
An e-commerce operator is any online business that operates using a

marketplace model. Under such marketplace model, an organization sets
up an online portal where several small suppliers put up their products for
sale. The organization that runs the portal collects payments, takes a
percentage as a convenience fee, and sends the rest of the payment to the
suppliers (like Flipkart, Amazon, and Snapdeal etc.). However, where the
e-commerce operators are liable to pay tax on behalf of the suppliers
under a notification issued under section 9 (5) of the CGST Act, 2017, the
suppliers of such services are entitled for threshold exemption.
Sec. 2(17) of IGST Act, 2017 “online information and database access or
retrieval services” means services whose delivery is mediated by
information technology over the internet or an electronic network and the
nature of which renders their supply essentially automated and involving
minimal human intervention and impossible to ensure in the absence of
information technology and includes electronic services such as:
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i. advertising on the internet;

ii. providing cloud services;
iii. provision of e-books, movie, music, software and other intangibles
through telecommunication networks or internet;
iv. providing data or information, retrievable or otherwise, to any person in
electronic form through a computer network;
v. online supplies of digital content (movies, television shows, music and
the like);
vi. digital data storage; and
vii.online gamin.
Under Section 52, an Electronic Commerce Operator is liable to collect TCS

@ 1% of the net value of taxable supplies, only if the supply has been
made through such Operator by other suppliers and the consideration is
collected by the Electronic Commerce Operator. Supplies made by the
electronic commerce operator on its own account are not subject to TCS
requirements.
Example:
The following information is given by Mr. Saha
1 Supplier to electronic Mr.Saha provides cab service in Bangalore

commerce operator through XYZ taxi cab, Dubai. Aggregate
turnover of Mr.Saha is:
More than the maximum limit (Case-1)
Not more than the maximum limit(Case-2)
2 Electronic commerce XYZ taxicab, Dubai
operator
3 Representative of Electronic RANI and CO, Kerala
commerce operator in India
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Questions:1- Whether compulsory registration is required U/S 24?

Questions:2- Who will pay GST U/S 9(5)?
Questions:1- Whether provisions of collection of tax at source at the rate of
1% is applicable?
Answer to Questions:1
• In case of XYZ taxicab, Dubai and RANI and CO, Kerala- compulsory
registration is required, even if their aggregate turnover is not more than
the maximum limit of Rs. 20/ 10 lakhs.
• In case of Mr.Saha, he is required to get registration, only if his

aggregate turnover is exceeds the maximum limit of Rs. 20/10 lakhs.
XYZ taxicab, Dubai is required to pay GST U/S 9(5) on its taxable supplies.
The provisions of collection of tax at source at the rate of 1% are not

applicable, when electronic commerce operator is required to GST U/S
9(5).
DEEMED REGISTRATION
Act, 2017 relating to “Deemed Registration”, are as under:
a. If a supplier takes a registration under one act, it shall be deemed that
the registration has also been obtained under the other Act and vice-
versa.
b. If an application for registration has been rejected under State/Union
Territory Goods and Services Tax Act, then it shall be deemed that the
same has been rejected under the Central Goods and Services
c. If the Proper Officer fails to take action in 3 working days from the date
of submission, the registration is deemed to have been approved.
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d. The Proper Officer is satisfied with the clarification; he may approve the
grant of registration to the applicant within 7 working days on receipt of
such clarification. Where no action is taken in 7 working days on the
clarification received from the applicant, the registration is deemed to
have been granted.
CANCELLATION OF GST REGISTRATION
Cancellation of GST registration can be done by the proper officer or on an

application filed by the registered person or by his legal heirs. Further, the
cancellation of registration under SGST/UTGST Act shall deemed to be a
cancellation of registration under CGST Act. The cancellation of registration
shall not affect the liability of a person to pay tax and other dues under
GST.
The registration can be temporarily cancelled under the following
situations:
a. If the registered person violates the provisions of the Act.
b. If the registered person does not conduct the business from the
declared place of business.
c. If the business has been discontinued.
d. If there is any change in the constitution of the business.
e. If the registered person issues the invoice or bill without supply of
goods/services.
f. If the taxable person is no longer liable to be registered.
In the following cases, the proper officer shall cancel the registration, only
after giving the person an opportunity of being heard:
i. If the person covered under the composition scheme has not furnished
returns for 3 consecutive tax periods.
ii. If the registered person has not furnished the returns for the period of 6
months
iii. If the person, who has taken voluntary registration, has not commenced
business within 6 months from the date of registration.
iv. If the person has obtained the business by means of fraud.
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Procedure for cancellation
i. If the proper officer has reasons to believe that the registration of a

person is liable to be cancelled, he shall issue a notice to such person in
form GST REG-17, requiring him to show cause, within a period of 7
working days. If the reply to the notice found to be satisfactory, the
proper officer shall drop the proceedings and pass an order in form GST
REG-20.
ii. The registered person may apply for revocation of cancelled registration
in form GST REG-21. If the proper officer is satisfied that there are
sufficient grounds for revocation of cancellation of registration, he shall
revoke the cancellation of registration by passing an order in the form
GST REG-22 within a period of 30 days from the date receipt of
application.
iii. The revocation of cancellation of registration under SGST/UTGST Act

shall deemed to be revocation of cancellation of registration under CGST
Act.
REGISTRATION OF CASUAL TAXABLE PERSON AND NON-RESIDENT

TAXABLE PERSON
Act, 2017 relating to Registration of Casual Taxable Person and Non-
resident Taxable Person”, are as under:
1. A casual taxable person or a non-resident taxable person shall
electronically submit duly signed form GST REG -09, along with a self-
attested copy of his valid passport for registration, at least 5 days
before the commencement of business at the common portal.
2. A casual taxable person or a non-resident taxable person shall be given
a temporary reference number by the common portal for making an
advance deposit of tax.
3. A casual taxable person or a non-resident taxable person shall, at the
time of submission of application for registration, 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.
126
4. The amount deposited shall be credited to the electronic cash ledger of

such person and the amount available in the electronic cash ledger may
be used for making any payment towards tax, interest, penalty or fees
etc.
5. The certificate of registration issued to a casual taxable person or a non-
resident taxable person shall be valid for the period specified in the
application for registration or ninety days from the effective date of
registration, whichever is earlier.
3.3 PROCEDURE RELATING TO LEVY (CGST & SGST)
Act, 2017 relating to “Levy and Collection”, are as under:
1. Tax shall be levied on all intra-State supplies of goods or services or
both, except on the supply of alcoholic liquor for human consumption,
on the value determined under section 15 and at such rates and
collected in such manner as may be prescribed and shall be paid by the
taxable person.
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 central tax in respect of the supply of taxable goods or services or
both by a supplier, who is not registered, to a registered person shall be
paid by such person on reverse charge basis as the recipient 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.
127
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.
TAX LIABILITY ON MIXED AND COMPOSITE SUPPLY
The tax liability on a composite or a mixed supply shall be determined in

the following manner, namely:
a. A composite supply comprising two or more supplies, one of which is a

principal supply, shall be treated as a supply of such principal supply;
and
b. A mixed supply comprising two or more supplies shall be treated as a

supply of that particular supply, which attracts the highest rate of tax.
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3.4 PLACE OF SUPPLY OF GOODS AND SERVICES
Under GST, the ‘Supply’ is a fundamental concept and all the provisions of
GST revolve around it. Under Supply, there are three key elements namely
time of supply, place of supply and value of supply.
These three elements together determine the chargeability of taxes on

supply. ‘Place of Supply’ under GST is an important factor as it defines
whether the transaction will be counted as intra-state(i.e within the same
state) or inter-state(i.e. between two states) and accordingly the
chargeability of tax, i.e levy of SGST, CGST & IGST will be determined.
While determining the levy of taxes based on Place of Supply, two things
are considered namely:
a. Location of Supplier: It is the registered place of business of the

supplier.
b. Place of Supply: It is the registered place of business of the recipient.
Example:
1. Determining Place of Supply for Intra-State Supply of Goods
Assume there is a supplier of craft products, Kloud Kreations Pvt. ltd

having the registered office in Bangalore, Karnataka. It supplies goods to
schools in Manipal, Karnataka. Here since the supplier as well as the
recipient are located in same state i.e., Karnataka, it will be counted as
‘Intra-State Supply of Goods’ and hence SGST & CGST will be levied.
2. Determining Place of Supply for Inter-State Supply of Goods
Let us assume the supplier of craft products, Kloud Kreations Pvt. Ltd. is
having the registered office in Bangalore, Karnataka and the recipient i.e.,
Delhi Public School is located in Jaipur,
Rajasthan. Here since the supplier and the recipient are located in different
states i.e., Karnataka and Rajasthan, it will be counted as ‘Inter-State
Supply of Goods’ and hence IGST will be levied.
129
There are specific provisions for determination of place of supply of

goods such as:
i. The place of supply of goods: where the supply involves movement of

goods.
ii. The place of supply of goods: where the supply involves no movement
of goods.
iii. The place of supply of goods: in case of export & import of goods.
Also, there are specific provisions for determining the place of supply of
services
a) Location of the Recipient of Services:
Sl.
Case Location of Recipient of Service
No.
Where a supply is received at a place
1 of business for which the registration such place of business
has been obtained
Where a supply is received at a place
other than the place of business for
2 such fixed establishment
which registration has been obtained
(a fixed establishment elsewhere)
Where a supply is received at more
the location of the establishment
one than establishment, whether the
3 most directly concerned with the
place of business or fixed
receipt of the supply
establishment
the location of the usual place of
4 In absence of such places
residence of the recipient;
130
b) Location of the Provider/Supplier of Services:
Sl.
Case Location of Supplier of Service
No.
1 Where a supply is made from a place the location of such place of
of business for which the registration business
has been obtained
2 Where a supply is made from a place the location of such fixed
other than the place of business for establishment;
which registration has been obtained
(a fixed establishment elsewhere)
3 Where a supply is made from more the location of the establishment
than one establishment, whether the most directly concerned with the
place of business or fixed provision of the supply
establishment,
4 In absence of such places, residence the location of the usual place of
of the supplier;
Example: 1
Mr. C of Chennai supplied goods to M/s Spice Jet Airlines of Chennai flying
between Delhi- Mumbai. The goods are loaded in the aircraft in Delhi. Find
the place of supply of goods and levy of tax?
Solution:
Place of supply of goods = Delhi Mr. C of Chennai is liable to pay IGST.
Example: 2
Mr. D located in New Delhi, place order on Mr. Delhi of New Delhi for
installation of Air- condition machine in his factory located in Chennai. Mr.
D procures the Indoor and out-door units, set of plugs, electrical cables,
distribution boards and other items from different States in India and
arranges for delivery in Chennai. The said machine assembled by Mr. Dehli
in Chennai. Find the Place of supply of goods and levy tax?
131
Solution:
Place of supply of goods = Chennai Mr. D of Delhi is liable to pay IGST.
3.5 TIME OF SUPPLY OF GOODS AND SERVICES
Act, 2017 relating to “Time of Supply of Goods”, are as under:
1. The liability to pay tax on goods shall arise at the time of supply, as
determined in accordance with the provisions of this section.
2. The time of supply of goods shall be the earlier of the following dates,
namely:
a. The date of issue of invoice by the supplier or the last date on which
he is required to issue the invoice with respect to the supply; or
b. The date on which the supplier receives the payment with respect to
the supply:
Provided that where the supplier of taxable goods receives an amount

up to one thousand rupees in excess of the amount indicated in the tax
invoice, the time of supply to the extent of such excess amount shall,
at the option of the said supplier, be the date of issue of invoice in
respect of such excess amount.
3. In case of supplies in respect of which tax is paid or liable to be paid on

reverse charge basis, the time of supply shall be the earliest of the
following dates, namely:
a. The date of the receipt of goods; or
b. The date of payment as entered in the books of account of the

recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
c. The date immediately following thirty days from the date of issue of
invoice or any other document, by whatever name called, in lieu
thereof by the supplier:
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Provided that where it is not possible to determine the time of supply

under clause (a) or clause (b) or clause (c), the time of supply shall be
the date of entry in the books of account of the recipient of supply.
4. In case of supply of vouchers by a supplier, the time of supply shall be -
a. The date of issue of voucher, if the supply is identifiable at that point;

or
b. The date of redemption of voucher, in all other cases.
5. Where it is not possible to determine the time of supply under the

provisions of sub- section (2) or sub-section (3) or sub-section (4), the
time of supply shall–
a. in a case where a periodical return has to be filed, be the date on

which such return is to be filed; or
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.
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Section 13: “Time of Supply of Services” (CGST Act, 2017)
Act, 2017 relating to “Time of Supply of Services”, are as under:
1. The liability to pay tax on services shall arise at the time of supply, as
determined in accordance with the provisions of this section.
2. The time of supply of services shall be the earliest of the following

dates, namely:
a. The date of issue of invoice by the supplier, if the invoice is issued
within the period prescribed under sub-section (2) of section 31 or
the date of receipt of payment, whichever is earlier.
b. The date of provision of service, if the invoice is not issued within the
period prescribed under sub-section (2) of section 31 or the date of
receipt of payment, whichever is earlier.
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:
Provided that where the supplier of taxable service receives an amount

up to one thousand rupees in excess of the amount indicated in the tax
invoice, the time of supply to the extent of such excess amount shall, at
the option of the said supplier, be the date of issue of invoice relating to
such excess amount.
3. In case of supplies in respect of which tax is paid or liable to be paid on

reverse charge basis, the time of supply shall be the earlier of the
following dates, namely:
a. The date of payment as entered in the books of account of the
recipient or the date on which the payment is debited in his bank
account, whichever is earlier; or
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:
134
Provided that where it is not possible to determine the time of supply

under clause (a) or clause (b), the time of supply shall be the date of
entry in the books of account of the recipient of supply:
Provided further that in case of supply by associated enterprises, where

the supplier of service is located outside India, the time of supply shall
be the date of entry in the books of account of the recipient of supply or
the date of payment, whichever is earlier.
4. In case of supply of vouchers by a supplier, the time of supply shall be–
a. The date of issue of voucher, if the supply is identifiable at that point;

or
b. The date of redemption of voucher, in all other cases.
5. Where it is not possible to determine the time of supply under the

provisions of sub- section (2) or sub-section (3) or sub-section (4), the
time of supply shall–
a. In a case where a periodical return has to be filed, be the date on
which such return is to be filed; or
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.
135
Example - 1:
Mr. X is supplied goods to Mr. Y on 28th July 2019. The GST rate on goods
is changed from 12% to 5% w.e.f. 1st January 2020. Mr. X issued invoice
on 28th August 2019 and payment is credited in his bank account on 30th
December 2019.
(i) What is the time of supply in this case?
(ii) Effective rate of GST?
Solution:
(i) Time of supply = 28th August 2019
(ii) Effective rate of GST = 12%
Example - 2:
Reliable Industries a readymade garment manufacturer issued the voucher

on 10-07- 2019 to their prospective customer for enabling them to buy
readymade garments manufactured by them from their shop. Customer
purchased readymade garments on 20th Aug 2019. Find the time of supply
of goods?
Solution:
Time of supply of goods = 10-07-2019.
Note: Time of supply will be the issuance of the voucher. Since, the
voucher is identifiable with the goods.
136
Example - 3:
Shopper’s Stop store a large retailer who sells various types of products
like readymade garment, jewellery, cosmetics, fabrics, shoes etc., issued
the voucher on 10-07-2019 to their prospective customer for enabling
them to buy any product from their shop. Customer purchased readymade
garments on 20th Aug 2019. Find the time of supply of goods?
Solution:
Time of supply of goods = 20-08-2019
Note: time of supply will be the date of encashment of voucher (i.e.

Redemption of voucher).
Since, the voucher is not identifiable with any specific product.
3.6 VALUE OF TAXABLE SUPPLY
Act, 2017 relating to “Value of Taxable Supply”, are as under:
1. The value of a supply of goods or services or both shall be the

transaction value, which is the price actually paid or payable for the said
supply of goods or services or both where the supplier and the recipient
of the supply are not related and the price is the sole consideration for
the supply.
2. The value of supply shall include –

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;
b. any amount that the supplier is liable to pay in relation to such
supply but which has been incurred by the recipient of the supply and
not included in the price actually paid or payable for the goods or
services or both;
137
c. incidental expenses, including commission and packing, charged by

the supplier to the recipient of a supply and any amount charged for
anything done by the supplier in respect of the supply of goods or
services or both at the time of, or before delivery of goods or supply
of services;
d. Interest or late fee or penalty for delayed payment of any
consideration for any supply; and
e. Subsidies directly linked to the price excluding subsidies provided by
the Central Government and State Governments.
Explanation: For the purposes of this sub-section, the amount of
subsidy shall be included in the value of supply of the supplier who
receives the subsidy.
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
b. After the supply has been affected, if —
i. Such discount is established in terms of an agreement entered into
at or before the time of such supply and specifically linked to
relevant invoices;
ii. input tax credit as is attributable to the discount on the basis of
document issued by the supplier has been reversed by the
recipient of the supply.
4. Persons shall be deemed to be “related persons” if–

i. Such persons are officers or directors of one another’s businesses;
ii. Such persons are legally recognized partners in business;
iii. Such persons are employer and employee;
iv. Any person directly or indirectly owns, controls or holds twenty-five
percent. or more of the outstanding voting stock or shares of both of
them;
v. One of them directly or indirectly controls the other;
vi. Both of them are directly or indirectly controlled by a third person;
vii.Together they directly or indirectly control a third person; or
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viii.They are members of the same family;

ix. The term “person” also includes legal persons;
x. 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.
3.7 COMPUTATION OF TAXABLE VALUE AND TAX LIABILITY
GST will be charged on the ‘transaction value’. Transaction value is the

price actually paid (or payable) for the supply of goods/services between
un-related parties (i.e., price is the sole consideration)
The value of supply under GST shall include:

1. Any taxes, duties, cess, fees and charges levied under any act, except
GST. GST Compensation Cess will be excluded if charged separately by
the supplier.
2. Any amount that the supplier is liable to pay which has been incurred by
the recipient and is not included in the price.
3. The value will include all incidental expenses in relation to sale such as
packing, commission etc.
4. Subsidies linked to supply, except Government subsidies will be
included.
5. Interest/late fee/penalty for delayed payment of consideration will be
included.
Example:
Let us consider an example of ABC, a manufacturer, selling tools and

hardware’s like drills, polishers, spades etc. It sells a power drill to XYZ a
wholesaler. The MRP is ‘ 5,500 but ABC sells it for ‘ 3,000.
The value of goods and services supplied is the transaction value, i.e., the
price paid/ payable, which is ‘ 3,000 in the example. Assuming CGST at 9%
and SGST at 9%
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Currently, the invoice will look like -

Power Drill 3,000
Add: Excise @ 12.5% 375
Subtotal 3,375
Add: VAT @ 14.5% (on subtotal) 490
Total 3,865
Value of Supply under GST
The value of goods and services supplied is the transaction value, i.e., the
price paid/ payable, which is ‘ 3,000 in the example. Assuming CGST at 9%
and SGST at 9%
Power Drill 3,000

Add: CGST @ 9% 270
Add: SGST @ 9% 270
Total 3,540
Discounts
Discounts will be treated differently under GST.Discounts given before or at

the time of supply will be allowed as deduction from transaction value.
Discounts given after supply will be allowed only if certain conditions are
satisfied.
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Tax Calculation under GST
The table below shows the difference in the amount of payment of tax and
the advantage of input credit available to manufacturer/dealer:
Value and tax amount Value and tax

Particulars
under previous laws amount under GST law
Value to manufacturer 1,00,000 1,00,000
Production cost
Add: Profit Margin @ 10% 10,000 10,000
Add: Excise duty @ 12% 13,200
Total cost of production 1,23,200 1,10,000
Add: VAT @ 12.5% 15,400
Add: SGST @ 6% 6,600
Add: CGST @ 6% 6,600
Invoice value for 1,38,600 1,23,200
manufacturer
Value to wholesaler - -
Cost of goods 1,38,600 1,23,200
Add: Profit margin @ 10% 13,860 12,320
Total Value 1,52,460 1,35,520
Add: VAT @ 12.5% 19,058
Add: SGST @ 6% 8,131
Add: CGST @ 6% 8,131
Invoice value to wholesaler 1,71,518 1,51,782
Value to Retailer
Cost of goods 1,71,518 1,51,782
Add: Profit margin @ 10% 17,152 15,178
Total Value 1,88,670 1,66,960
Add: VAT @ 12.5% 23,584
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Add: SGST @ 6% 10,018

Add: CGST @ 6% 10,018
Invoice value to retailer 2,12,254 1,86,996
*GST rates has been assumed at 12% which is equally shared by Central
and State government for the purpose of this example.
ASSESSMENT
There are three crucial changes to be noted from the above table –
1. Subsuming of Excise Duty
Excise is charged on capital goods which are used by the manufacturer

during production. Under GST, excise on capital goods would be subsumed,
as there will be just a single rate of tax for each type of goods. Removal of
excise should bring relief to end consumer.
2. Reduction in Costs
Due to the subsuming of VAT, Service tax, Excise, there will be a reduction
in cost for manufacturers/wholesalers/retailers. As seen in the above table,
there is a reduction in cost from Rs. 1,71,518 to Rs. 1,51,782 under GST.
GST would help in further reduction of total cost to the manufacturer as
procurement cost would reduce due to better logistics.
3. Reduction in Input Tax Credit
There will be a reduction in input tax credit for the wholesaler/retailer

under the GST law.
The amount of input tax credit reduced is merely an effect of the reduction
in cost under GST.
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Tax Calculation for Inter-State Sales
A new concept of IGST has been introduced under the GST law. Earlier CST
was charged over and above VAT and the excise duty for movement of
goods between two states, whereas IGST will be a single tax levied on the
goods moving across state borders. Let us understand IGST with the help
of this example:
Particulars Under current tax laws Under GST

Value to Retailer
1,00,000 1,00,000
Cost of goods
Add: VAT @12.5% 12,500
Add: IGST @12% 12,000
Add: CST @2% 2,250
Total value to retailer 1,14,750 1,12,000
*IGST rate has been assumed at 12% for the purpose of this example.
Calculating the taxable value has always been the crucial and most
important step in arriving at the tax liability.
1. The details of every credit note relating to outward supply furnished by

a registered person (hereafter in this section referred to as the
“supplier”) for a tax period shall, in such manner and within such time
as may be prescribed, be matched –
a. With the corresponding reduction in the claim for input tax credit by
the corresponding registered person (hereafter in this section
referred to as the “recipient”) in his valid return for the same tax
period or any subsequent tax period; and
b. For duplication of claims for reduction in output tax liability.
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2. The claim for reduction in output tax liability by the supplier that
matches with the corresponding reduction in the claim for input tax
credit by the recipient shall be finally accepted and communicated, in
such manner as may be prescribed, to the supplier.
3. Where the reduction of output tax liability in respect of outward supplies

exceeds the corresponding reduction in the claim for input tax credit or
the corresponding credit note is not declared by the recipient in his valid
returns, the discrepancy shall be communicated to both such persons in
such manner as may be prescribed.
4. The duplication of claims for reduction in output tax liability shall be

communicated to the supplier in such manner as may be prescribed.
5. The amount in respect of which any discrepancy is communicated under

sub-section (3) and which is not rectified by the recipient in his valid
return for the month in which discrepancy is communicated shall be
added to the output tax liability of the supplier, in such manner as may
be prescribed, in his return for the month succeeding the month in
which the discrepancy is communicated.
6. The amount in respect of any reduction in output tax liability that is

found to be on account of duplication of claims shall be added to the
output tax liability of the supplier in his return for the month in which
such duplication is communicated.
7. The supplier shall be eligible to reduce, from his output tax liability, the
amount added under sub-section (5) if the recipient declares the details
of the credit note in his valid return within the time specified in sub-
section (9) of section 39.
8. A supplier in whose output tax liability any amount has been added
under sub-section (5) or sub-section (6), shall be liable to pay interest
at the rate specified under sub- section (1) of section 50 in respect of
the amount so added from the date of such claim for reduction in the
output tax liability till the corresponding additions are made under the
said sub-sections.
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9. Where any reduction in output tax liability is accepted under sub-section

(7), the interest paid under sub-section (8) shall be refunded to the
supplier by crediting the amount in the corresponding head of his
electronic cash ledger in such manner as may be prescribed:
Provided that the amount of interest to be credited in any case shall not
exceed the amount of interest paid by the recipient.
10.The amount reduced from output tax liability in contravention of the

provisions of sub- section (7) shall be added to the output tax liability of
the supplier in his return for the month in which such contravention
takes place and such supplier shall be liable to pay interest on the
amount so added at the rate specified in sub-section (3) of section 50.
3.8 PROCEDURE RELATING TO LEVY: (IGST)
Provisions under Section 5 of the Integrated Goods and Services Tax

(IGST) Act, 2017 relating to “Levy and Collection of Tax”, are as under:
1. Subject to the provisions of sub-section (2), there shall be levied a tax

called the integrated goods and services tax on all inter-State supplies
of goods or services or both, except on the supply of alcoholic liquor for
human consumption, on the value determined under section 15 of the
Central Goods and Services Tax Act and collected in such manner as
may be prescribed and shall be paid by the taxable person:
Provided that the integrated tax on goods imported into India shall be
levied and collected in accordance with the provisions of section 3 of the
Customs Tariff Act, 1975 on the value as determined under the said Act
at the point when duties of customs are levied on the said goods under
section 12 of the Customs Act, 1962.
2. The integrated 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.
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3. The Government, 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 integrated tax in respect of the supply of taxable goods or services

or both by a supplier, who is not registered, to a registered person shall
be paid by such person on reverse charge basis as the recipient 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.
5. The Government, on the recommendations of the Council, by

notification, specify categories of services, the tax on inter-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 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.
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Section 35: “Maintaining Accounts and Other Records” (CGST Act, 2017)
Act, 2017 relating to “Maintaining Accounts and Other Records”, are as
under:
1. Every registered person shall keep and maintain, at his principal place
of business, as mentioned in the certificate of registration, a true and
correct account of -
(a) Production or manufacture of goods.
(b) Inward and outward supply of goods or services or both.
(c) Stock of goods.
(d) Input tax credit availed.
(e) Output tax payable and paid.
Such other particulars as may be prescribed:
Provided that where more than one place of business is specified in the
certificate of registration, the accounts relating to each place of business
shall be kept at such places of business:
Provided further that the registered person may keep and maintain such
accounts and other particulars in electronic form in such manner as may
be prescribed.
2. Every owner or operator of warehouse or go down or any other place

used for storage of goods and every transporter, irrespective of whether
he is a registered person or not, shall maintain records of the consigner,
consignee and other relevant details of the goods in such manner as
may be prescribed.
3. The Commissioner may notify a class of taxable persons to maintain

additional accounts or documents for such purpose as may be specified
therein.
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4. Where the Commissioner considers that any class of taxable person is

not in a position to keep and maintain accounts in accordance with the
provisions of this section, he may, for reasons to be recorded in writing,
permit such class of taxable persons to maintain accounts in such
manner as may be prescribed.
5. Every registered person whose turnover during a financial year exceeds

the prescribed limit shall get his accounts audited by a chartered
accountant or a cost accountant and shall submit a copy of the audited
annual accounts, the reconciliation statement under sub-section (2) of
section 44 and such other documents in such form and manner as may
be prescribed.
6. Subject to the provisions of clause (h) of sub-section (5) of section 17,

where the registered person fails to account for the goods or services or
both in accordance with the provisions of sub-section (1), the proper
officer shall determine the amount of tax payable on the goods or
services or both that are not accounted for, as if such goods or services
or both had been supplied by such person and the provisions of section
73 or section 74, as the case may be, shall, mutatis mutandis, apply for
determination of such tax.
VALUE OF TAXABLE SUPPLY
Act, 2017 relating to “Value of Taxable Supply”, are as under:
1. The value of a supply of goods or services or both shall be the

transaction value, which is the price actually paid or payable for the said
supply of goods or services or both where the supplier and the recipient
of the supply are not related and the price is the sole consideration for
the supply.
2. The value of supply shall include –

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.
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b. Any amount that the supplier is liable to pay in relation to such

supply but which has been incurred by the recipient of the supply and
not included in the price actually paid or payable for the goods or
services or both.
c. Incidental expenses, including commission and packing, charged by
the supplier to the recipient of a supply and any amount charged for
anything done by the supplier in respect of the supply of goods or
services or both at the time of or before delivery of goods or supply
of services.
d. Interest or late fee or penalty for delayed payment of any
consideration for any supply.
e. Subsidies directly linked to the price excluding subsidies provided by
the Central Government and State Governments.
Explanation: For the purposes of this sub-section, the amount of

subsidy shall be included in the value of supply of the supplier who
receives the subsidy.
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
b. After the supply has been affected, if -
i. Such discount is established in terms of an agreement entered into
at or before the time of such supply and specifically linked to
relevant invoices.
ii. Input tax credit as is attributable to the discount on the basis of
document issued by the supplier has been reversed by the
recipient of the supply.
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.
5. Notwithstanding anything contained in sub-section (1) or sub-section
(4), the value of such supplies as may be notified by the Government on
the recommendations of the Council shall be determined in such manner
as may be prescribed.
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Explanation: For the purposes of this Act –
a. persons shall be deemed to be “related persons” if–

i. such persons are officers or directors of one another’s businesses.
ii. such persons are legally recognized partners in business.
iii. such persons are employer and employee.
iv. any person directly or indirectly owns, controls or holds twenty-five
percent. or more of the outstanding voting stock or shares of both of
them.
v. one of them directly or indirectly controls the other.
vi. both of them are directly or indirectly controlled by a third person.
vii.together they directly or indirectly control a third person.
viii. they are members of the same family.
b. the term “person” also includes legal persons.
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.
INPUT TAX CREDIT: ELIGIBILITY
“Input Tax” in relation to a taxable person, means the Goods and Services
Tax charged on any supply of goods and/or services to him which are used
or are intended to be used, during furtherance of his business. Fulfilment
of Input Tax Credit under GST – Conditions To Claim is one of the most
critical activity for every business to settle its tax liability.
ITC being the backbone of GST and a major matter of concern for the
registered persons, conditions for eligibility to ITC and eligible ITC have
been prescribed which in majority in line with pre-GST regime. These rules
are also quite particular and stringent in its approach.
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Input Tax Credit under GST – Conditions to Claim
A registered person will be eligible to claim Input Tax Credit (ITC) on

fulfilment of the following conditions:
a. Possession of a tax invoice or debit note or document evidencing
payment.
b. Receipt of goods and/or services.
c. Goods delivered by supplier to other person on the direction of
registered person against a document of transfer of title of goods.
d. Furnishing of a return.
e. Where goods are received in lots or instalments ITC will be allowed to
be availed when the last lot or instalment is received.
f. Failure to the supplier towards supply of goods and/or services within
180 days from the date of invoice, ITC already claimed will be added to
output tax liability and interest to paid on such tax involved. On
payment to supplier, ITC will be again allowed to be claimed.
g. No ITC will be allowed if depreciation have been claimed on tax
component of a capital good.
h. If invoice or debit note is received after.
Items on which credit is not allowed

a. Motor vehicles and conveyances except the below cases.
b. Such motor vehicles and conveyances are further supplied i.e., sold.
c. Transport of passengers.
d. Used for imparting training on driving, flying, navigating such vehicle or
conveyances.
e. Transportation of goods.
f. Food and beverages, outdoor catering, beauty treatment, health
services, cosmetic and plastic surgery.
g. But if the goods and/or services are taken to deliver the same category
of services or as a part of a composite supply, credit will be available.
Example: Mr. Dev purchases cosmetic creams to supply it to a customer,
then credit of ITC paid on purchases will be allowed.
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h. Sale of membership in a club, health, fitness centre.

i. Rent-a-cab, health insurance and life insurance except the following:
Government makes it obligatory for employers to provide it to its
employee’s goods and/or services are taken to deliver the same
category of services or as a part of a composite supply, credit will be
available. Example: Mr. Dev takes the service of rent-a-cab to supply to
Mr. Manoj, a customer, then credit of ITC paid on purchases will be
allowed.
j. Travel benefits extended to employees on vacation such as leave or
home travel concession.
k. Works contract service for construction of an immovable property
(except plant & machinery or for providing further supply of works
contract service).
l. Goods and/or services for construction of an immovable property
whether to be used for personal or business use.
m. Goods and/or services where tax have been paid under composition
scheme.
n. Goods and/or services used for personal use.
o. Goods or services or both received by a non-resident taxable person
except for any of the goods imported by him.
p. Goods lost, stolen, destroyed, written off or disposed of by way of gift or
free samples.
q. ITC will not be available in the case of any tax paid due to non-payment
or short tax payment, excessive refund or ITC utilized or availed by the
reason of fraud or wilful misstatements or suppression of facts or
confiscation and seizure of goods.
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APPORTIONMENT UNDER GST
Act, 2017 relating to “Apportionment of Credit and Blocked Credits”, are as
under:
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 securities, sale of
land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building.
4. A banking company or a financial institution including a non-banking
financial company, engaged in supplying services by way of accepting
deposits, extending loans or advances shall have the option to either
comply with the provisions of sub-section (2), or avail of, every month,
an amount equal to fifty per cent. of the eligible input tax credit on
inputs, capital goods and input services in that month and the rest shall
lapse.
Provided that the option once exercised shall not be withdrawn during
the remaining part of the financial year:
Provided further that the restriction of 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.
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5. Notwithstanding anything contained in sub-section (1) of section 16 and

subsection (1) of section 18, input tax credit shall not be available in
respect of the following, namely:
a. Motor vehicles and other conveyances except when they are used–
i. For making the following taxable supplies, namely:
a. Further supply of such vehicles or conveyances or
b. Transportation of passengers or
c. Imparting training on driving, flying, navigating such vehicles or
conveyances.
ii. For transportation of goods.
b. The following supply of goods or services or both -
i. Food and beverages, outdoor catering, beauty treatment, health
services, cosmetic and plastic surgery except where an inward
supply of goods or services or both of a particular category is used
by a registered person for making an outward taxable supply of
the same category of goods or services or both or as an element
of a taxable composite or mixed supply.
ii. Membership of a club, health and fitness centre.
iii. Rent-a-cab, life insurance and health insurance except where –
a. The Government notifies the services which are obligatory for
an employer to provide to its employees under any law for the
time being in force.
b. Such inward supply of goods or services or both of a particular
category is used by a registered person for making an outward
taxable supply of the same category of goods or services or
both or as part of a taxable composite or mixed supply.
iv. Travel benefits extended to employees on vacation such as leave
or home travel concession.
c. Works contract services when supplied for construction of an
immovable property (other than plant and machinery) except where
it is an input service for further supply of works contract service.
d. Goods or services or both received by a taxable person for
construction of an immovable property (other than plant or
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machinery) on his own account including when such goods or

services or both are used in the course or furtherance of business.
Explanation: For the purposes of clauses (c) and (d), the expression
“construction” includes re-construction, renovation, additions or
alterations or repairs, to the extent of capitalisation, to the said
immovable property.
e. Goods or services or both on which tax has been paid under section
10.
f. Goods or services or both received by a non-resident taxable person
except on goods imported by him.
g. Goods or services or both used for personal consumption.
h. Goods lost, stolen, destroyed, written off or disposed of by way of gift
or free samples.
i. Any tax paid in accordance with the provisions of sections 74, 129
and 130.
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 -
(i) Land, building or any other civil structures.
(ii) Telecommunication towers.
(iii) Pipelines laid outside the factory premises.
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Section 17: “Apportionment of Tax & Settlement of Funds” (IGST Act,

2017)
Provisions under Section 17 of the Integrated Goods and Services Tax

(IGST) Act, 2017 relating to “Apportionment of Tax and Settlement of
Funds”, are as under:
1. Out of the integrated tax paid to the Central Government, –

a. In respect of inter-State supply of goods or services or both to an
unregistered person or to a registered person paying tax under
section 10 of the Central Goods and Services Tax Act.
b. In respect of inter-State supply of goods or services or both where
the registered person is not eligible for input tax credit.
c. In respect of inter-State supply of goods or services or both made in
a financial year to a registered person, where he does not avail of the
input tax credit within the specified period and thus remains in the
integrated tax account after expiry of the due date for furnishing of
annual return for such year in which the supply was made.
d. In respect of import of goods or services or both by an unregistered
person or by a registered person paying tax under section 10 of the
Central Goods and Services Tax Act.
e. In respect of import of goods or services or both where the registered
person is not eligible for input tax credit.
f. In respect of import of goods or services or both made in a financial
year by a registered person, where he does not avail of the said
credit within the specified period and thus remains in the integrated
tax account after expiry of the due date for furnishing of annual
return for such year in which the supply was received, the amount of
tax calculated at the rate equivalent to the central tax on similar
intra- State supply shall be apportioned to the Central Government.
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2. The balance amount of integrated tax remaining in the integrated tax

account in respect of the supply for which an apportionment to the
Central Government has been done under sub-section (1) shall be
apportioned to the,–
a. State where such supply takes place.
b. Central Government where such supply takes place in a Union
territory:
Provided that where the place of such supply made by any taxable
person cannot be determined separately, the said balance amount shall
be apportioned to –
(a) Each of the States.
(b) Central Government in relation to Union territories.
In proportion to the total supplies made by such taxable person to

each of such States or Union territories, as the case may be, in a
financial year:
Provided further that where the taxable person making such supplies is
not identifiable, the said balance amount shall be apportioned to all
States and the Central Government in proportion to the amount
collected as State tax or, as the case may be, Union territory tax, by
the respective State or, as the case may be, by the Central
Government during the immediately preceding financial year.
3. The provisions of sub-sections (1) and (2) relating to apportionment of
integrated tax shall, mutatis mutandis, apply to the apportionment of
interest, penalty and compounding amount realised in connection with
the tax so apportioned.
4. Where an amount has been apportioned to the Central Government or a
State Government under sub-section (1) or sub-section (2) or sub-
section (3), the amount collected as integrated tax shall stand reduced
by an amount equal to the amount so apportioned and the Central
Government shall transfer to the central tax account or Union territory
tax account, an amount equal to the respective amounts apportioned to
the Central Government and shall transfer to the State tax account of
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the respective States an amount equal to the amount apportioned to

that State, in such manner and within such time as may be prescribed.
5. Any integrated tax apportioned to a State or as the case may be, to the
Central Government on account of a Union territory, if subsequently
found to be refundable to any person and refunded to such person, shall
be reduced from the amount to be apportioned under this section, to
such State, or Central Government on account of such Union territory, in
such manner and within such time as may be prescribed.
3.9 INPUTS ON CAPITAL GOODS
Act, 2017 relating to “Taking Input Tax Credit (ITC) in respect of Inputs
and Capital Goods sent for Job Work”, are as under:
1. The principal shall, subject to such conditions and restrictions as may be
prescribed, be allowed input tax credit on inputs sent to a job worker for
job work.
2. Notwithstanding anything contained in clause (b) of sub-section (2) of
section 16, the principal shall be entitled to take credit of input tax on
inputs even if the inputs are directly sent to a job worker for job work
without being first brought to his place of business.
3. Where the inputs sent for job work are not received back by the
principal after completion of job work or otherwise or are not supplied
from the place of business of the job worker in accordance with clause
(a) or clause (b) of sub-section (1) of section 143 within one year of
being sent out, it shall be deemed that such inputs had been supplied
by the principal to the job worker on the day when the said inputs were
sent out:
Provided that where the inputs are sent directly to a job worker, the
period of one year shall be counted from the date of receipt of inputs by
the job worker.
4. The principal shall, subject to such conditions and restrictions as may be
prescribed, be allowed input tax credit on capital goods sent to a job
worker for job work.
5. Notwithstanding anything contained in clause (b) of sub-section (2) of
section 16, the principal shall be entitled to take credit of input tax on
158
capital goods even if the capital goods are directly sent to a job worker
for job work without being first brought to his place of business.
6. Where the capital goods sent for job work are not received back by the
principal within a period of three years of being sent out, it shall be
deemed that such capital goods had been supplied by the principal to
the job worker on the day when the said capital goods were sent out:
Provided that where the capital goods are sent directly to a job worker,
the period of three years shall be counted from the date of receipt of
capital goods by the job worker.
7. Nothing contained in sub-section (3) or sub-section (6) shall apply to
moulds and dies, jigs and fixtures, or tools sent out to a job worker for
job work.
Distribution of Credit by Input Service Distributor (ISD)
The concept of Input Service Distributor under GST and related laws have
been kept aligned to continue the existing position.
Under current tax regime the definition of Input Service Distributor

includes an office of the manufacturer or producer of final products or
provider of output service which receives invoices issued under rule 4A of
Service Tax Rules, 1994 towards purchase of input services issue invoice,
bill or challan for the purposes of distributing the credit of service tax paid
on the said services to such manufacturer or producer or provider.
Hence, the available CENVAT to ISD is distributed by it to its units and

outsourced manufacturers.
Input Service Distributor under GST Model includes an office of the supplier
of goods or services which receives tax invoices issued by supplier towards
receipt of input services and/or goods and issues a prescribed document
for the purposes of distributing the credit of CGST (SGST in State Acts) or
IGST paid on the said services to a supplier of taxable goods and/or
services having same PAN as that of the office referred to above.
The definition and procedural compliance are quite similar under both the
models with the only few differences.
159
Differences under both the models
ISD may issue document to an office bearing the same PAN as that of ISD.
Unlike existing model credit cannot be distributed to outsourced
manufactures or service providers. The reason could be due to the shift of
taxable event from manufacture to supply. The tax liability would arise at
the time of supply which would be ultimately paid by ISD on utilization of
available input tax credit.
Registration and filing of Returns under GST
Migration of existing registration would not apply to ISD, hence it is

required to apply afresh for registration. Here it is worth a note that a tax
payer may apply as a “Supplier of Service” and an “Input Service
Distributor” simultaneously unlike the current scenario. Separate
registration number would be provided for this application.
In case being registered as an ISD return is to be filed by 13th day of the

succeeding month whereas for being registered as Supplier of Service
return is to be filed by 20th day of the succeeding month.
3.10 DISTRIBUTION OF CREDIT BY INPUT SERVICE

DISTRIBUTOR
In business, it is often that some common input services are purchased by

Depots/Region office/Head office pertaining to factories located in several
States. The input CENVAT credit on such common input services can be
distributed to respective manufacturing units through a mechanism called
Input Service Distribution (ISD). Rule 2(m) of Cenvat Credit Rules, 2004
defines ‘Input Service Distributor’. The extract of said rule is given below:
As per Rule 2(m) of Cenvat Credit Rules, 2004, ‘Input Service Distributor’
means an office of the manufacturer or producer of final products or
provider of output service, which receives invoices issued under rule 4A of
the Service Tax Rules, 1994 towards purchases of input services and issues
invoice, bill or as the case may be, challan for the purposes of distributing
the credit of service tax paid on the said services to such manufacturer or
producer or provider, as the case may be.
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The above definition clarifies that Input Service Distributor is an office of a

taxpayer, may it be Depots/Region office/Head office, which receives
common service tax invoices from service providers and issues invoice,
challan etc. to manufacturing units to distribute service tax credit on such
services. The ISD has to obtain service tax registration number or it has to
amend the registration number if already obtained for depots/region office/
head office mentioning the locations to which the credit has to be
distributed.
Rule 7 of Cenvat Credit Rules, 2004 provides for the Manner of distribution
of credit by Input service distributor. Latest amendment vide notification
no. 5/2014-C.E. (N.T.) in the said rule provides that credit relatable to a
particular unit is to be distributed to that unit only. And in respect of
common input services used by two or more units, credit has to be
distributed to such units to which the service relates based on the turnover
of the relevant unit to the turnover of all the units.
Thus, the taxpayer has to allocate the credit to units to which the service
relates based on turnover of respective units. A taxpayer having multiple
units has to identify the units to which a common service relates. This is a
complicated task where the taxpayer is required to undertake a detailed
scrutiny to identify the units having nexus with each & every service.
The concept of Input Service Distributor under GST and related laws has
been kept aligned to continue the existing position.
Under current tax regime the definition of Input Service Distributor

includes:
a. An office of the manufacturer or producer of final products or provider of

output service.
b. Which receives invoices issued under rule 4A of Service Tax Rules, 1994
towards purchase of input services.
c. Issue invoice, bill or challan for the purposes of distributing the credit of
service tax paid on the said services to such manufacturer or producer
or provider.
161
Hence, the available CENVAT to ISD is distributed by it to its units and

outsourced manufacturers.
Input Service Distributor under GST Model includes:
a. An office of the supplier of goods and / or services.
b. Receives tax invoices issued by supplier towards receipt of input

services and/or goods.
c. Issues a prescribed document for the purposes of distributing the credit

of CGST (SGST in State Acts) and / or IGST paid on the said services to
a supplier of taxable goods and / or services having same PAN as that of
the office referred to above
The definition and procedural compliance are quite similar under both the
models with the only few differences.
Differences under both the models
• ISD may issue document to an office bearing the same PAN as that of
ISD. Unlike existing model credit cannot be distributed to outsourced
manufactures or service providers. The reason could be due to the shift
of taxable event from manufacture to supply. The tax liability would arise
at the time of supply which would be ultimately paid by ISD on utilization
of available input tax credit.
Registration and filing of Returns under GST
a. Migration of existing registration would not apply to ISD, hence it is

required to apply afresh for registration. Here it is worth a note that a
tax payer may apply as a “Supplier of Service” and an “Input Service
Distributor” simultaneously unlike the current scenario. Separate
registration number would be provided for this application.
b. In case being registered as an ISD return is to be filed by 13th day of

the succeeding month whereas for being registered as Supplier of
Service return is to be filed by 20thday of the succeeding month.
162
Distribution of Credit by Input Service Distributor
The credit of CGST, IGST and SGST shall be distributed, in the prescribed
manner as per below chart:
Conditions for distribution of Credit

a. Prescribed documents must be issued to the receipts of credit containing
prescribed details.
b. Amount of credit distributed must not exceed amount available to
distribution.
c. Credit of tax paid on input services attributable to a recipient of credit
shall be distributed only to that recipient.
d. Credit of tax paid on input services attributable to all or more than one
recipient of credit shall be distributed only amongst such or all
recipient(s) to whom the input service is attributable and such
distribution shall be pro rata on the following basis.
e. Turnover in a State of such recipient, during the relevant period, to the
aggregate of the turnover of all such recipients to whom such input
service is attributable and which are operational in the current year,
during the said relevant period.
f. If some or all recipients of the credit do not have any turnover in their
States in the financial year preceding the year during which the credit is
to be distributed, the last quarter for which details of such turnover of
all the recipients are available, previous to the month during which
credit is to be distributed.
163
Recovery of inappropriate distribution of credit by Input Service

Distributor under GST
Model GST Law provides that the following shall be deemed to be

inappropriate distribution of tax credit by Input Service Distributor:
a. Credit distributed to all or any recipient in excess to the amount
available for distribution.
b. Distributed in an inappropriate ratio to all or any recipient.
c. Distributed in excess to what a supplier is entitled.
Transfer of input tax credit has been provided for Transitional Provisions
rules of GST
1. The input tax credit on account of any services received prior to the
appointed day shall be eligible for distribution as credit even if the
invoice(s) is received on or after the appointed day.
2. The amount of input tax credit carried forward in a return filed under
earlier law would be allowed under Model GST Law
3. GST regime provides for distribution of credit for such services only
which were received prior to the appointed day but invoices are received
later. Services which have been received after appointed date and
invoice also received later, it would be booked under GST regime for the
first time and no transition provisions will apply here.
4. Input tax credit would not need carryover of documents and time limits.
164
3.11 FORMAT FOR COMPUTATION OF TRANSACTION VALUE
Format for Computation of Transaction Value, if expenses are charged

separately by the supplier
Particulars Rs. Rs.

Selling price xx xxx
Add: Inclusions not included in the sale price
1. Pre-delivery inspection charges
2. Publicity expenses xx
3. Packing cost xx
4. Materials purchased (Exclusive of GST) xx
5. Design and development charges xx
6. Advertising expenses xx
7. Servicing charges xx
8. Selling expenses xx
9. Freight charges xx
10. Installation and erection expenses xx
11. Insurance cost xx
12. Transport charges xx
13. Taxes, duties, cesses, fees and charges xx
14. Loading and handling charges xx
15. Warranty expenses xx xxx
xxx
Less: Exclusions included in the sale price
• Cash/Trade Discount (discount shall be deducted, if
it is allowed before or at the time of supply) xxx
• Cost of durable & returnable packing included in the sale xxx
price
165
Transaction value before adding the profit margin xxx

Add: Profit Margin xxx
Transaction value after adding the profit margin xxx
Alternative Method
Format for Computation of Transaction Value, if cost details and profit

margin is given in the problem
Particulars Rs. Rs.

1. Pre-delivery inspection charges xx
2. Publicity expenses xx
3. Packing cost xx
4. Processing fee xx
5. Materials purchased (Exclusive of GST) xx
6. Design and development charges xx

7. Other Direct expenses xx
8. Advertising expenses xx
9. Servicing charges xx
10. Selling expenses xx
11. Freight charges xx
12. Installation and erection expenses xx

13. Insurance cost xx
14. Transport charges xx
15. Taxes, duties, cesses, fees and charges xx

16. Loading and handling charges xx
166
17. Warranty expenses xx
18. Wages xx
Total Cost xxx
Add: Profit Margin xxx
Transaction value xxx
Note:The value of supply shall not include any discount that is given before
or at the time of supply.
Illustration – 1 (Calculation of Intra-state supply)

M/s Gupta Limited of Bengaluru supplies Goods worth Rs. 10,00,000
to M/s Hegde Limited of Mysuru. Tax rate is 12%. Compute the taxability.
Solution:
Location of Supplier: Bengaluru – State of Karnataka
Place of Supply: Mysuru – State of Karnataka
Transaction: Intra-state since supplier and place of supply is in same
state.
Taxes to be leived:
1. CGST at 6% i.e., 10,00,000 x 6% = 60,000
2. SGST at 6% i.e., 10,00,000 x 6% = 60,000
Illustration – 2 (Calculation of Intra-state supply)

M/s Podder Limited of Nodia supplies Goods worth Rs. 5,00,000 to M/s
Saha Limited of North 24 Parganas. Tax rate is 18%. Compute the
taxability.
Solution:
Location of Supplier: Nodia– State of West Bengal
Place of Supply: North 24 Parganas – State of West Bengal
167
Transaction: Intra-state since supplier and place of supply is in same

state.
Taxes to be leived:
1. CGST at 9% i.e. 5,00,000 x 9% = 45,000
2. SGST at 9% i.e. 5,00,000 x 9% = 45,000
Illustration – 3 (Calculation of Inter-state supply-State/Union territory)

M/s Venkatesh Limited of Hydrabad supplies steels worth Rs.
5,00,000 to M/s Keshav Limited, Puduchary. Tax rate is assumed at 12%.
Compute the taxability.
Solution:
Location of Supplier: Hydrabad – State of Telangana
Place of Supply: Puduchary (Union territory)
Transaction: Inter-state since supplier and place of supply is in different
state.
Taxes to be leived:
1. IGST at 12% i.e., 5,00,000 x 12% = 60,000
Illustration - 4 (Calculation of Aggregate turnover)

Vision Private Limited has the following details for the year 2019-20:
Rs.
Intra-state supplies 1,50,000
Inter-state supplies 8,00,000
Value of exports 1,70,000
Exempt supplies 50,000
Compute the aggregate turnover.
168
Solution:
Calculation of Aggregate Turnover
Particulars Rs.
Intra-state supplies 1,50,000
Inter-state supplies 8,00,000
Value of exports 1,70,000
Exempt supplies 50,000
Aggregate turnover 11,70,000
Illustration - 5 (Calculation of Assessable value)
Bakuladevi purchased goods and made payment of Rs. 1,000 (inclusive of

GST) to Mr. Vishwanath. Rate of SGST @ 9%, CGST @ 9%, then what will
be assessable value.
Solution:
Let, assessable value exclusive of GST = 100
Add: CGST 9
Add: SGST 9
Assessable value inclusive of GST 118
Assessable value exclusive of GST .= 1,000 x 100/118 = Rs.847.45
169
Illustration - 6 (Calculation of time of supply)
Value of services rendered is Rs. 5,00,000. Date of issue of invoice is

1/3/2020. Amount received on 13/3/2020. Ascertain time of supply of
services.
Solution:
As completion date is not given, it is assumed that invoice is issued within

30 days of completion of service. Therefore, Time of Supply = 1/3/2020 or
13/3/2020 WEE 1/3/2020
Illustration - 7 (Calculation of Time of Supply on Goods)
Determine the time of supply of goods in each of following independent

cases in accordance with provisions of Section 12 of the CGST Act, 2017 in
case supply involves movement of goods.
Date when goods

Date of
Date of Date of made
Sl. No receipt
removal invoice available to
of payment
recipient
1 01-07-2020 02-07-2020 03-07-2020 15-07-2020
2 03-07-2020 01-07-2020 04-07-2020 25-08-2020
3 04-08-2020 04-08-2020 06-08-2020 01-07-2020
170
Solution:
Time of supply of goods in each of the above cases had been given
following table –
Sl. Time of Reason

No supply
1 01-07-2020 Since, invoice is not issued on or before the date of
removal of goods and payment is received after the
date of removal.
Hence, Time of supply is date of removal of goods.
2 01-07-2020 Time of supply is date of issuance of invoice since is
issued
prior todate of removal of goods and payment is
received after the date of invoice.
3 01-07-2020 Time of supply is date of receipt of payment since
invoice is issued after date of receipt of payment.
Illustration - 8 (Calculation of GST liability)
Vijay’s Ltd. is into business of electronic items. From the following supplies
made in the month of March 2020 determine GST liability.
GST rates on goods are subject to 28% and services at 18%.
Sale of Air conditioner bearing HSN code 8415 Rs. 4,00,000
Transportation charges Rs. 50,000
Annual maintenance Service Rs. 1,50,000
Spare parts supplied along with AMC services Rs. 40,000
Solution:
Both goods and services are Composite supply.
Hence GST applicable is
Goods = 4,50,000 x 28% = 1,26,000
Services = 1,90,000 x 18% = 34,200
171
Illustration - 9 (Calculation of transaction value and GST Payable)
Mistake Company manufactures 10,000 units of products and sold to a

wholeseller at Rs. 50 per unit. 20% trade discount is allowed to the whole
seller as per the normal practice. What is the amount of GST payable if
rate of GST is 18%. (Assumed exclusive of GST).
Solution:
Computation of Transaction Value and GST Payable

Particulars Rs.
Price of 10,000 units (10,000 x 50) 5,00,000
Less: Discount (5,00,000 x 20%) 1,00,000
Transaction value 4,00,000
SGST payable (4,00,000 x 9%) 36,000
CGST payable (4,00,000 x 9%) 36,000
Total GST Payable 72,000
Illustration - 10 (Transaction Value & GST Payable)
Compute the transaction Value of goods from the following information and
GST payable by a dealer registered in Karnataka.
Rs.
Selling price (including IGST of Rs. 2,000) 43,000
Following transactions are not included in the above price:
Freight charges paid by supplier charged separately 1,000
Normal secondary packing cost 1,500
Cost of durable and returnable packing 1,500
Insurance on freight paid by supplier charged separately 500
Trade discount (normal practice) 1,000
Rate of GST 18%
172
Solution:
Computation of Transaction Value and GST Payable
Particulars Rs. Rs.

Selling Price (excluding GST) 1,000 41,000
Add: Freight charges paid by suppliers

Normal secondary packing cost 1,500
Insurance on freight paid by supplier 500 3,000
44,000
Less: Trade Discount 1,000
43,000
Transaction Value
3,870
SGST payable (43,000 x 9%)
3,870
CGST payable (43,000 x 9%)
7,740
Total GST Payable
Note: Cost of durable and returnable packing are included on selling price.
Illustration - 11 (Computation of Transaction Value, CGST and

SGST for Goods)
How would you arrive at the Transaction value for the purpose of levy of
GST and calculate GST payable. From the following particulars the selling
price of the product exclusive of GST Rs. 10,000, rate of GST is applicable
to the product is 5%, trade discount allowed as per normal trade practice
before delivery of the product is Rs. 1,200, freight attributable for the
supply of the product is Rs. 750 from factory to buyer place which is not
included in the above selling price.
173
Solution:
Computation of Transaction value and GST payable

Particulars Rs.
Gross turnover 10,000
Add: Inclusive items
Freight 750
Sub Total 10,750
Less: Trade discount
1,200
Transaction value 9,550
Output tax liability (Transaction value x Rate of GST) 238.75
CGST (9,550 Rs. 2.5/100)
SGST (9,550 Rs. 2.5/100) 238.75
Total GST paybale 477.50
Illustration - 12 (Computation of Transaction Value and IGST for

Goods)
XYZ Ltd. of Chennai agreed to sell an electronic motor on which the rate of
GST applicable is 12% to ABC Ltd., of Bangalore for Rs. 7,500 on ex-
factory basis. Other particulars are:
a. Transportation and transit insurance were arranged by XYZ Ltd. this was
at the request of ABC Ltd. and amounted to for Rs. 625 and Rs. 750
respectively which were charged separately.
b. A discount of Rs. 500 was given to ABC Ltd. on the agreed price on
payment on payment of an advance of Rs. 1,250 with the other. (ignore
national interest on advance).
c. Interest of Rs. 400 was charged from DEF Ltd. as it failed to make the
payment within 30 days.
d. Packing charges of the motor amount to Rs. 650
174
e. The expenditure incurred by ABC Ltd. towards ‘free after sale service’
during warranty period comes to be Rs. 250 per motor. Compute IGST
payable.
Solution:
Free after sale service 250

Transportation charges 625
Transit insurance 750 2,775
Transaction value 10,275
Note:
1. Transportation and transit insurance are includable items even if it is
charged separately.
2. Any discount provided as per normal practice is allowed as deductions,
but if it is given as the payment of an advance received with the order.
Hence added back.
3. Packing charges, free after service is includable items.
4. Interest on delayed payment is not a part of sale price.
5. Hence excluded here. If the buyer fails to pay within 30 days as per the
agreement than it is chargeable to GST as and when supplier raise the
invoice or received the payment for the same.
175
Illustration - 13 (Computation of Transaction Value under

Composite Supply)
A dealer in Hydrabad entered a contract with a supplier in Tumkur to

deliver machinery along with essential accessories. From the information,
determine the Total amount of GST payable u/s 15 of the CGST Act 2017.
Particulars Rs.
Price of machinery (excluding taxes and duties) 3,15,000
Installation and erection expenses charged separately in invoice 10,000
Packing charges (primary and secondary) 7,500
Design and engineering charges paid by the buyer 4,000
Cost of material supplied by buyer free of charge 1,000
Pre delivery inspection charges 500
Loading and handling charges within the factory 600
Other information :
Cash discount 2% on price of machinery was allowed as per terms of

contract. Since full payment was received before dispatch of machinery.
Bought out accessories supplied along with machinery valued at Rs. 2,500
which was necessary for the working of the machinery. These bought out
goods are charged for tax at the rate of 5%.
GST rate 18%. Make suitable assumptions as are required and provide
brief reasons.
176
Solution:
Design and engineer charges paid by the buyer 4,000

Cost of material supplied by buyer free of charge 1,000
Pre delivery inspection charges 500
Loading and handling charges within the factory 600
Bought out accessories supplied along with machinery 2,500 26,100
3,41,100
Less: Cash discount (3,15,000 x 2%) 6,300
Transaction Value 3,34,800
IGST payable (3,34,800 x 18%) 60,264
Note: If a contract is entered for supply of certain goods and erection and
installation of the same there to or supply of certain goods along with
installation and warranty thereto and bought-out accessories supplied
along with machinery it is important to note that are naturally bundled and
therefore would qualify as ‘composite supply’ and taxable under GST at the
rate applicable to principal supply i.e. machinery. Full payment was made
delivery, hence discount is deducted.
177
Illustration - 14 (Computation of Transaction Value under Mixed
A manufacturer has to supply machinery as following terms and conditions:
Particulars Rs.
Price of machinery (net of taxes and duties) 2,00,000
Installation and erection expenses charged separately invoice 13,000
Packing charges (primary and secondary) 2,000
Design and engineering charges (net taxes and duties) 15,000
Cost of material supplied by buyer at reduced cost (actual price of 2,500
the materials is Rs. 12,500)
Pre delivery inspection charges 1,500
Rate of GST on machinery 18%
Other information:
Cash discount of Rs. 7,500 will be offered if full payment is received before
dispatch of goods.
The buyer has made the payment as per the conditions stipulated.
The machine is supplied along with bought out accessories at Rs. 4,250.
The accessories were optional and rate of duty applicable to these
accessories is 28%. The manufacturer incurred cost of Rs. 750 in loading
the machine in the truck in his factory. These are not charged separately to
buyer.
Find the Transaction value and GST payable if the rate of GST on principal
supply is 5%.
Solution:
178
Note:
1. The manufacturer cost of Rs. 750 is already included in the selling price
of machinery (as it is not charged separately) and hence is not to be
added again.
2. Supply of more than one goods and/or services which are not naturally
bundle together (optional), these are referred to as mixed supply of
goods and/or services. This implies that the supply will be taxed wholly
as supply of those goods, which are liable to the highest rate of GST.
(i.e. tax must be at the highest rate among all other products supplied
179
in this case optional accessories have highest rate than principal

supply).
Illustration - 15 (Computation of Transaction Value, CGST, SGST &

IGST for Services)
The Taj Hotel group of companies provided the following services within the
state of Karnataka from its various establishments. Compute the amount of
GST payable for the month July 2020.
Supply of food or drink in restaurant not having facilities in air conditioning

@ 12% GST Rs. 10,000
Supply of food or drink in restaurant in having license to serve liquor 18%

GST Rs. 30,000.
Supply of food or drink in outdoor catering @ 18% GST Rs. 50,000.
Renting of hostels rooms @ 18% GST Rs. 75,000
Supply of food or drinks in air condition restaurant in 5 star or above rated

hotel @ 28% GST Rs. 50,000.
180
Solution:
Computation of GST payable
Particulars CGST SGST
Supply of food or drink in restaurant not having facilities in air 600 600
conditioning (10,000 x 12 x ½)
Supply of food or drink in restaurant in having license to
serve
liquor (30,000 x 18% x ½) 2,700 2,700
Supply of food or drink in outdoor catering
@ 18% GST (50,000 x 18% x ½) 4,500 4,500
Renting of hostels rooms @ 18% GST (75,000 x 18 x 1/2) 6,750 6,750
Supply of food or drink in air condition restaurant in 5 star or 7,000 7,000
above hotel @ 28% GST (50,000 x 28 x ½)
Total output tax payable 21,550 21,550
181
3.12 SUMMARY
• Registration may be cancelled, if the person, who has voluntarily
registered doesn’t commence business within 6 months from the
registration. Further, the registered person himself may apply for
cancellation of registration only after the expiry of 1 year from the date
of registration.
• Every registered person shall display his registration certificate in a
prominent location at his principal place and at every additional place or
place of business.
• A business whose aggregate turnover in a financial year exceeds Rs. 20
lakhs has to mandatorily register under Goods and Services Tax. This
limit is set at Rs. 10 lakhs for North Eastern and hilly states flagged as
special category states.
• A bill of supply should be issued instead of a tax invoice in case of the
following supplies: 1. Supply of exempted goods or services, 2. Supplies
made by a composition supplier.
• Consolidated bill of supply can be issued by the supplier to the recipient
of goods or services, if the value of goods or services supplied is less
than Rs. 1200.
• Receipt voucher is issued when advance is collected/received in relation
to supply of goods or services.
• Every registered person is required to maintain books of account ay his
principal place of business that is mentioned in the certificate of
registration.
• The input tax credit availed by the recipient in its return is allowed to the
recipient on a provisional basis. Once the input tax credit availed by the
recipient is matched with the outward supply details furnished by the
supplier, input tax credit will become final.
• Tax deducted at source is a mechanism, wherein the recipient of goods or
services will deduct out of the amount payable to the supplier, an amount
at a percentage of value of supply and deposit the same to the account
of the government within the time prescribed.
182
Fill in the blanks

1. Levy of tax means the ___________ as well as assessment of tax.
2. Levy of tax means the imposition of taxes as well as assessment of tax
but does not include __________
3. ________ of CGST Act/SGST Act the charging sections for the purposes
of levy of GST.
4. ___________ of IGST Act are the Charging Sections for the purposes of
levy of GST.
5. Time of supply comes under section ____________ of Central Goods
and Services Tax (CGST) Act, 2017.
6. “Place of supply” as referred to in Chapter ____________ of the
Integrated Goods and Services Tax Act.
7. Under GST, the ‘Supply’ is a ____________ concept
8. Under Supply, there are ____________ key elements.
9. While determining the levy of taxes based on Place of Supply,
____________ and____________ are taken into the consideration.
10.As per Section ____________ of the Central Goods and Services Tax
(CGST) Act, 2017, the term “input tax credit” means the credit of input
tax.
11.Fulfillment of ____________ under GST – Conditions to Claim is one of
the most critical activities for every business to settle its tax liability.
12.TIC cannot be claimed after expiry of ____________ year from the date
of issue of tax invoice relating to supply for which ITC is claimed.
13.A taxable person takes ____________ registration even if his turnover
is below exemption limit.
14.____________ means processing or working on raw materials or semi-
finished goods supplied by the principal manufacturer to the job worker.
15.Goods send out for job work must be accompanied with a
____________.
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16. The ____________ will be allowed to take credit of tax paid on

purchase of goods send on job work.
17.ITC-04 must be furnished on or before ____________ day of the month
succeeding the quarter.
18.___________ is required to obtain a separate registration.
19.____________ is invoice based and is accounted for on invoices
generated on both cash and credit transactions.
Answers
1. Imposition of tax
2. Ccollection of tax
3. Section 9
4. Section 5
5. 12
6. V
7. Fundamental
8. Three
9. Location of Supplier, Place of Supply
10. 2(63)
11. Input Tax Credit
12. One
13. Voluntary
14. Job work
15. Challan
16. Principal manufacturer
17. 25th
18. ISD
19. Value Added Tax (VAT)
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1. Levy of tax means the ___________ as well as assessment of tax.

[a] Income Tax
[b] Direct Tax
[c] Imposition of tax
[d] GST
2.What are means the point of time for payment of tax?

[a] Collection Tax
[b] Direct Tax
[c] Imposition of tax
[d] GST
3. Levy of central goods and service tax come under

[a] Section 9(1)
[b] Section 9(2)
[c] Section 9(3)
[d] Section 9(4)
4. Tax payable on reverse charge basis on-

[a] Section 9(1)
[b] Section 9(2)
[c] Section 9(3)
[d] Section 9(4)
5. Levy and collection of GST under CGST Act-

[a] Section 9
[b] Section 5
[c] Section 7
[d] Section 3
6. Levy and collection of GST under IGST Act-

[a] Section 9
[b] Section 5
[c] Section 7
[d] Section 3
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7. Levy and collection of GST under UTGST Act-

[a] Section 9
[b] Section 5
[c] Section 7
[d] Section 3
8. What is the time of supply of vouchers when the supply with respect to
the voucher is not identifiable?
[a] Date of issue of voucher
[b] Date of redemption of voucher
[c] Earlier of a and b
[d] a and b whichever is late
9. What are the taxes levied on an Intra-State Supply?

[a] CGST
[b] SGST
[c] CGST and SGST
[d] IGST
10. Which of the following is an intrastate supply?

[a] Supplier of goods located in Nagpur and place of supply of goods
SEZ located in Mumbai
[b] Supplier of goods located in Kolkata and place of supply of goods
in Bangalore
[c] Supplier of goods located in Telegana and place of supply of
goods in Telegana
[d] All the above
11. A bill of supply can be issued in case of inter-State and intra-State:

[a] Exempted supplies
[b] Supplies by composition suppliers
[c] Supplies to unregistered persons
12. What is the time of supply of vouchers when the supply with respect to
the voucher is identifiable?
[a] Date of issue of voucher
[b] Date of redemption of voucher
[c] Earlier of (a) & (b)
[d] (a) & (b) whichever is later
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13.What is the time of supply of service for the supply of taxable services
up to Rs. 1000 in excess of the amount indicated in the taxable invoice?
[a] At the option of the supplier – Invoice date or Date of receipt of
consideration
[b] Date of issue of invoice
[c] Date of receipt of consideration.
[d] Date of entry in books of account
14. Provisional Input tax credit can be utilized against

[a] Any Tax liability
[b] Self Assessed output Tax liability
[c] Interest and Penalty
[d] Fine
15.Whether credit on inputs should be availed based on receipt of

documents or receipt of goods
[a] Receipt of goods
[b] Receipt of Documents
[c] Both a and b
[d] Either receipt of documents or Receipt of goods
16.Matching of Input Tax credit on inward supply by recipient is undertaken

with
[a] Monthly return filed by the supplier
[b] Outward supply filed by the supplier
[c] Invoices maintained by the supplier
[d] None of these
17.Input tax credit on capital goods and Inputs can be availed in one
installment or in multiple installments?
[a] In thirty-six installments
[b] In twelve installments
[c] In one installment
[d] In six installments
18.Input Tax credit as credited in Electronic Credit ledger can be utilized for
[a] Payment of Interest
[b] Payment of penalty
[c] Payment of Fine
[d] Payment of Taxes
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19.The time limit to pay the value of supply with taxes to avail the input
tax credit?
[a] 3 months
[b] 6 Months
[c] 180 days
[d] Till the date of filing of Annual Return
20.Banking company or Financial Institution have an option of claiming:

[a] Eligible Credit or 50% credit
[b] Only 50% Credit
[c] Only Eligible credit
[d] Eligible credit and 50% credit
21.The time limit beyond which if goods are not returned, the inputs sent
for job work shall be treated as supply
[a] One year
[b] Five years
[c] Six months
[d] Seven years
22.Input Tax credit as credited in Electronic Credit ledger can be utilized for
-
[a] Payment of Interest
[b] Payment of penalty
[c] Payment of Fine
[d] Payment of Taxes
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Answer
1. c 2. a
3. a 4. c
5. a 6. b
7. c 8. b
9. c 10. c
11. a 12. a
13. a 14. b
15. c 16. b
17. c 18. d
19. c 20. d
21. a 22. d
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1. What is Registration under GST?
2. What is Compulsory registration?
3. What is Deemed registration?
4. What is Casual taxable person?
5. What is Non-resident taxable person?
6. What are Exempted goods and services?
7. What is Tax liability?
8. What is Composite supply?
9. What is Inter-state supply?
10. What is intra-state supply?
11. What is Zero rates supply?
12. What is Input tax credit?
13. Discuss procedure for Registration under GST.
14. Who is a person liable for registration and not liable for registration?
15. Discuss about compulsory registration and deemed registration.
16. Explain about special provisions for Casual taxable persons.
17. Discuss about tax liability on Mixed and Composite supply.
18. Explain about time of supply of goods and services.
19. Discuss about value of taxable supply.
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20. Explain about computation of taxable value and tax liability.
21. Discuss the procedure relating to Levy.
21. Explain Inter-state supply and intra-state supply.
22. Discuss about computation of taxable value and tax liability.
23. Explain about distribution of credit by Input Service Distributor (ISD).
****
191
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
192
ASSESSMENT AND RETURNS
Chapter 4
Assessment And Returns
Learning Objectives

• A brief definition of terms and concept of assessment.
• Furnishing detail of outward and inward supply.
• Matching and reversal input tax credit.
• Concept of annual return and final return.
• Problems on assessment of tax and tax liability.
Structure:
4.1 Introduction
4.2 Assessment of Tax Liability In GST
4.3 Furnishing Details of Outward Supplies And Inward Supplies
4.4 Practical Problems on NET GST Payable
4.5 Summary
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4.1 INTRODUCTION
2017, unless the context otherwise requires, the term “assessment” means
determination of tax liability under this Act and includes self-assessment,
re-assessment, provisional assessment, summary assessment and best
judgment assessment.
4.2 ASSESSMENT OF TAX LIABILITY IN GST
Assessment of tax means determination of the tax liability of a person. The

tax liability of a person is the amount of tax to be paid by a person during
a tax period. The types of assessment of tax under GST remain similar to
those in the current regime. Broadly, there are two types of assessments:
a. Assessment by the taxable person himself/herself, i.e., self-assessment
and
b. Assessment by the tax authorities.
TYPES OF ASSESSMENT
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Self Assessment
Every registered taxable person must assess the tax payable by himself/
herself and furnish the relevant return for each tax period. Based on the
type of taxable person, the returns to be furnished have been specified. For
example: A registered regular dealer must furnish Form GSTR-3 on a
monthly basis and Form GSTR-9 annually.
Assessment by the tax authorities are of four types:
1. Self-assessment
2. Provisional assessment
3. Scrutiny assessment
4. Best judgement assessment
5. Summary assessment
1. Self-Assessment
Self-assessment means an assessment made by the tax payer himself.

Under GST regime, every registered taxable person is required to assess
his tax dues as per the provisions of GST Act and thereafter file his periodic
returns.
2. Provisional Assessment
If a taxable person is unable to determine the value of goods and/or

services or determine the rate of tax applicable, the person can request an
officer to allow him to pay tax on a provisional basis. The officer shall pass
an order within a period not later than 90 days from the date of receipt of
such request, allowing the person to pay the tax on a provisional basis. The
rate of tax and the taxable value will be specified by the officer.
Within 6 months from the date of the provisional assessment order, the
officer must pass the final assessment order.
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The person will be liable to pay interest on any additional tax payable
under provisional assessment but not paid on the due date, i.e., 20th of
the month. Interest will be liable from the 21st of the month till the date of
actual payment, irrespective of whether the amount is paid before or after
the final assessment order. If the person is eligible for a refund as per the
final assessment order, interest will be paid on the refund amount.
For example: A registered person manufactures a new product for which

the HSN code and tax rate are not available. In this case, the person seeks
a provisional assessment of the tax payable by him.
3. Scrutiny Assessment
Under scrutiny assessment, an officer can examine the return and other
information furnished by a person, to verify the correctness of the return.
If any discrepancy is noticed, the officer will inform the person and seek his
explanation. If the explanation is satisfactory, no further action will be
taken. In case no satisfactory explanation is given within 30 days of being
informed or if the person does not make corrections in the return after
accepting the discrepancies, the officer will initiate appropriate action.
For example: As part of the regular scrutiny assessment, an officer

examines Form GSTR- 3 filed by a registered person and if gets any doubt
regarding the transaction value and tax levied in certain transactions, the
officer will seek an explanation from the dealer.
4. Best Judgement Assessment
Under best judgement assessment, an officer will assess the tax liability of
a person to the best of his/her judgement. The circumstances for this are:
a. Assessment of non-filers of returns: If a person fails to furnish a

return, even after a notice is served to the person, an officer will assess
the tax liability of the person to the best of his judgement. All relevant
material which is available or which the officer has gathered will be
taken into account. He will then issue an assessment order within 5
years from the due date of filing of the annual return for the year in
which the tax return was not filed.
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If the person furnishes the return within 30 days from the assessment
order, the assessment order will be withdrawn.
For example: A regular dealer does not furnish Form GSTR-9 for a
financial year, even after receiving a notice from the Tax department. In
such a case, an officer will initiate best judgement assessment to assess
the tax payable by the person.
b. Assessment of unregistered persons: If a taxable person fails to

obtain registration even though he/she is liable to do so, an officer will
assess the tax liability of the person to the best of his judgement for the
relevant tax periods, and issue an assessment order within 5 years from
the due date of filing of the annual return for the year in which the tax
was not paid.
For example: During an inspection, an officer finds that a person has

not registered under GST though his turnover exceeds the threshold
limit. The officer will initiate a best judgement assessment and assess
the tax liability of the person.
5. Summary Assessment
In certain special cases, an officer may, on finding any evidence showing

tax liability of a person which comes to his notice, with the permission of
the Additional/Joint Commissioner, assess the tax liability of the person to
protect the interest of revenue and issue an assessment order, if he has
sufficient grounds to believe that any delay in doing so will adversely affect
the interest of revenue.
For example: On the basis of Form GSTR-3 filed by a registered regular

dealer, an officer initiates summary assessment as he finds enough
evidence to believe that a significant loss of revenue can be recovered from
the person.
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It is important for a taxable person to be aware of the different types of

assessment under GST and adhere to the compliance requirements. Self-
assessment is most important for every registered person. It is important
to furnish accurate information and pay tax due on a timely basis, as per
the due dates laid down. Self-assessment done appropriately ensures that
assessment is not initiated by the tax authorities. In a case where an
assessment is initiated by the tax authorities, a dealer must ensure to
furnish the information asked for by the time given. Businesses must make
use of the facilities of compliance and technology to remain compliant
under GST.
SECTION 59: “SELF ASSESSMENT OF TAXES PAYABLE” (CGST ACT, 2017)
Act, 2017 relating to “Self-Assessment of Taxes Payable”, are as under:
Every registered person shall self-assess the taxes payable under this Act
and furnish a return for each tax period as specified under section 39.
SECTION 60: “PROVISIONAL ASSESSMENT ORDER” (CGST ACT, 2017)
Act, 2017 relating to “Provisional Assessment Order”, are as under:
1. Subject to the provisions of sub-section (2), where the taxable person is

unable to determine the value of goods or services or both or determine
the rate of tax applicable thereto, he may request the proper officer in
writing giving reasons for payment of tax on a provisional basis and the
proper officer shall pass an order, within a period not later than ninety
days from the date of receipt of such request, allowing payment of tax
on provisional basis at such rate or on such value as may be specified
by him.
2. The payment of tax on provisional basis may be allowed, if the taxable

person executes a bond in such form as may be prescribed, and with
such surety or security as the proper officer may deem fit, binding the
taxable person for payment of the difference between the amount of tax
as may be finally assessed and the amount of tax provisionally
assessed.
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3. The proper officer shall, within a period not exceeding six months from
the date of the communication of the order issued under sub-section
(1), pass the final assessment order after taking into account such
information as may be required for finalizing the assessment:
Provided that the period specified in this sub-section may, on sufficient

cause being shown and for reasons to be recorded in writing, be
extended by the Joint Commissioner or Additional Commissioner for a
further period not exceeding six months and by the Commissioner for
such further period not exceeding four years.
4. The registered person shall be liable to pay interest on any tax payable
on the supply of goods or services or both under provisional assessment
but not paid on the due date specified under sub-section (7) of section
39 or the rules made there under, at the rate specified under sub-
section (1) of section 50, from the first day after the due date of
payment of tax in respect of the said supply of goods or services or both
till the date of actual payment, whether such amount is paid before or
after the issuance of order for final assessment.
5. Where the registered person is entitled to a refund consequent to the

order of final assessment under sub-section (3), subject to the
provisions of sub-section (8) of section 54, interest shall be paid on
such refund as provided in section 56.
SECTION 61: “SCRUTINY OF RETURNS” (CGST ACT, 2017)
Act, 2017 relating to “Scrutiny of Returns”, are as under:
1. The proper officer may scrutinize the return and related particulars
furnished by the registered person to verify the correctness of the
return and inform him of the discrepancies noticed, if any, in such
manner as may be prescribed and seek his explanation thereto.
2. In case the explanation is found acceptable, the registered person shall

be informed accordingly and no further action shall be taken in this
regard.
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3. In case no satisfactory explanation is furnished within a period of thirty

days of being informed by the proper officer or such further period as
may be permitted by him or where the registered person, after
accepting the discrepancies, fails to take the corrective measure in his
return for the month in which the discrepancy is accepted, the proper
officer may initiate appropriate action including those under section 65
or section 66 or section 67 or proceed to determine the tax and other
dues under section 73 or section 74.
SECTION 62: “ASSESSMENT OF NON-FILERS OF RETURNS” (CGST ACT,

2017)
Act, 2017 relating to “Assessment of Non-filers of Returns”, are as under:
1. Notwithstanding anything to the contrary contained in section 73 or

section 74, where a registered person fails to furnish the return under
section 39 or section 45, even after the service of a notice under section
46, the proper officer may proceed to assess the tax liability of the said
person to the best of his judgement taking into account all the relevant
material which is available or which he has gathered and issue an
assessment order within a period of five years from the date specified
under section 44 for furnishing of the annual return for the financial
year to which the tax not paid relates.
2. Where the registered person furnishes a valid return within thirty days
of the service of the assessment order under sub-section (1), the said
assessment order shall be deemed to have been withdrawn but the
liability for payment of interest under sub- section (1) of section 50 or
for payment of late fee under section 47 shall continue.
200
SECTION 63: “ASSESSMENT OF UNREGISTERED PERSONS” (CGST ACT,

2017)
Act, 2017 relating to “Assessment of Unregistered Persons”, are as under:
Notwithstanding anything to the contrary contained in section 73 or section

74, where a taxable person fails to obtain registration even though liable to
do so or whose registration has been cancelled under sub-section (2) of
section 29 but who was liable to pay tax, the proper officer may proceed to
assess the tax liability of such taxable person to the best of his judgment
for the relevant tax periods and issue an assessment order within a period
of five years from the date specified under section 44 for furnishing of the
annual return for the financial year to which the tax not paid relates:
Provided that no such assessment order shall be passed without giving the
person an opportunity of being heard.
SECTION 64: “SUMMARY ASSESSMENT IN CERTAIN SPECIAL CASES”

(CGST ACT, 2017)
Act, 2017 relating to “Summary Assessment in Certain Special Cases”, are
as under:
1. The proper officer may, on any evidence showing a tax liability of a

person coming to his notice, with the previous permission of Additional
Commissioner or Joint Commissioner, proceed to assess the tax liability
of such person to protect the interest of revenue and issue an
assessment order, if he has sufficient grounds to believe that any delay
in doing so may adversely affect the interest of revenue:
Provided that where the taxable person to whom the liability pertains is
not ascertainable and such liability pertains to supply of goods, the
person in charge of such goods shall be deemed to be the taxable
person liable to be assessed and liable to pay tax and any other amount
due under this section.
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2. On an application made by the taxable person within thirty days from

the date of receipt of order passed under sub-section (1) or on his own
motion, if the Additional Commissioner or Joint Commissioner considers
that such order is erroneous, he may withdraw such order and follow
the procedure laid down in section 73 or section 74.
4.3 FURNISHING DETAILS OF OUTWARD SUPPLIES AND

INWARD SUPPLIES
A. FURNISHING DETAILS OF OUTWARD SUPPLIES
Act, 2017 relating to “Furnishing Details of Outward Supplies in Returns”,
are as under:
a. A return of Outward supplies under this Section should be furnished by

every registered taxable person except for the following persons namely
i. Input service distributor.
ii. A non-resident taxable person.
iii. A person paying tax under the provisions of section 10 (composition
levy).
iv. A person paying tax under the provisions of section 51 (TDS).
v. A person paying tax under the provisions of section 52 (TCS).
b. The “Details of outward supplies” shall include details of Invoices, debit

notes, credit notes and revised invoices issued in relation to outward
supplies made during any tax period. This e-return shall be filed within
10 days from the end of the tax period in FORM GSTR-1
c. Such returns shall be for supply of goods or services or both as effected

during a tax period and shall be filed electronically
d. The registered person shall not be allowed to furnish any details of

outward supplies during the period from the eleventh day to the
fifteenth day of the month succeeding the tax period. This implies that
the filing portal may not be available for the person filing the return of
outward supplies during the above said dates.
202
e. In case of late filing of the above details, the person who defaults shall
pay a sum of rupees One hundred for every day of continuing default
subject to a maximum to Rupees five thousand only.
f. The Commissioner is empowered to notify any extension of due date of

filing, for any class of persons, beyond the tenth of the succeeding
month, with reasons to be recorded in writing.
g. The present process of return filing envisages that the recipient of the
supply shall be Provided an opportunity to accept, reject, amend or
delete the details in a two-way communication process. The details
Provided by the supplier shall be auto – populated and available
electronically to the recipient, for matching purposes, in a FORM GSTR-
2A.
h. In case any error or omission is discovered in the course of matching as

specified in the Act and discussed under Section 42 and 43,
rectifications of the same shall be effected and tax and interest, if any
as applicable shall be paid on such corrections by the person responsible
for filing the return of outward supplies.
i. Such rectification, however, is not permitted after filing of annual return

or the return for the month of September of the following financial year
to which the details pertain whichever is earlier.
SECTION 38: “FURNISHING DETAILS OF INWARD SUPPLIES IN RETURNS”

(CGST ACT, 2017)
1. FURNISHING DETAILS OF INWARD SUPPLIES
Act, 2017 relating to “Furnishing Details of Inward Supplies in Returns”, are
as under:
a. In respect of the return for outward supplies filed by the supplier of

goods / services (under section 37) the receiver is required to match his
receipts with the details of supplies filed by the supplier.
203
b. The process flow as envisaged requires that the details of outward

supplies as filed by the supplier, shall be made available to the recipient
of such supply in Part A of FORM GSTR-2A after the 10th day of the
subsequent month. The receiver is required to – verify, validate, modify
or even delete, if necessary – the details furnished by the suppliers.
Part B, Part C and Part D of the above Form GSTR-2A shall contain
respectively details relating to ISD and Tax Deductions at Source and
Tax Collections at Source.
c. Part A of FORM GTSR 2A shall contain the following details on an auto-

populated basis
i. Inward supplies received from the registered taxable persons.
ii. Amendments to details of inward supplies received in earlier tax
periods.
iii. Details of debit and credit notes.
iv. Amendments to details of credit/debit notes of earlier tax periods.
d. The above details will then be validated by the recipient with reference
to their records Now, these details as accepted by the recipient will be
filed by them in the Format i.e. FORM GSTR-2 for inward supplies of the
recipient.
e. This detail viz GSTR 2, must be filed by the recipient of (goods/services)
supplies within 15 days from the end of the relevant tax period. The
Commissioner is empowered to notify any extension, for any class of
taxable persons, with reasons to be recorded in writing.
f. Any modification, deletion or inclusion of inward supplies by the receiver
in his inward return i.e., FORM GSTR-2 shall be communicated to the
Outward supplier which will be visible to them as GSTR 1A.
g. GSTR 1A shall contain the following particulars auto drafted based on
GSTR 2 filed by the recipient
i. Taxable outward supplies to a registered person.
ii. Amendments to details of Outward Supplies to a registered person of
earlier.
iii. Tax periods.
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iv. Details of Credit/Debit Notes.

v. Amendment to Details of Credit/Debit Notes of earlier tax periods.
h. In case any error or omission is discovered in the course of matching as
specified in the Act and discussed under Section 42 and 43,
rectifications of the same shall be effected and tax and interest, if any
as applicable shall be paid on such corrections by the person responsible
for filing the return of inward supplies.
i. Such rectification, however, is not permitted after filing of annual return
or the return for the month of September of the following financial year
to which the details pertain whichever is earlier.
SECTION 39: “FURNISHING OF RETURNS” (CGST ACT, 2017)
FIRST RETURN
Act, 2017 relating to “Furnishing First Return”, are as under:
Every registered person who has made outward supplies in the period
between the dates on which he became liable to registration till the date on
which registration has been granted shall declare the same in the first
return furnished by him after grant of registration.
SECTION 41: “CLAIM OF INPUT TAX CREDIT (ITC) IN RETURNS AND

PROVISIONAL
Act, 2017 relating to “Claim of Input Tax Credit (ITC) in Returns and
Provisional Acceptance thereof”, are as under:
1. Every registered person shall, subject to such conditions and restrictions

as may be prescribed, be entitled to take the credit of eligible input tax,
as self-assessed, in his return and such amount shall be credited on a
provisional basis to his electronic credit ledger.
2. The credit referred to in sub-section (1) shall be utilized only for

payment of self-assessed output tax as per the return referred to in the
said sub-section.
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SECTION 42: “MATCHING, REVERSAL & RECLAIM OF INPUT TAX CREDIT

(ITC)” (CGST ACT)
Act, 2017 relating to “Matching, Reversal and Reclaim of Input Tax Credit
(ITC)”, are as under:
A. The details in a return of inward supplies of a recipient should be

matched in prescribed time and manner.
i. With Outward supplies furnished by corresponding taxable person in
his return.
ii. With IGST paid on goods imported under Section 3 of the Customs
Tariff Act.
iii. To identify any duplicate claims of input tax credit.
B. When the claim for input tax credit in respect of inward supplies
matches with the corresponding outward supply or IGST in respect of
goods imported, the same shall be finally accepted and communicated
to the recipient in the prescribed manner.
C. The following details relating to the claim of input tax credit on inward
supplies including IGST claimed on imports shall be matched after the
due date for furnishing the return in FORM GSTR-3 (Final return with
payment of tax to be filed on or before 20th of the following month).
The matching is done for the following parameters based on the GSTIN
of the Supplier and the recipient.
(i) GSTIN of the supplier.
(ii) GSTIN of the recipient.
(iii) Invoice / or debit note number.
(iv) Invoice / or debit note date.
(v) Taxable value.
(vi) Tax amount.
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It may be noted that if the supplier has not paid the tax and / or not
filed the return on or before the due date (or extended due date, if
any), the return filed by him shall not be treated as a valid return for
the purposes of the above matching exercise.
D. The rule provides for two specific circumstances, where the claims for
input tax credit are treated as Matched.
i. Where the claim of input tax credit in respect of invoices and debit
notes in FORM GSTR-2 that were accepted by the recipient on the
basis of FORM GSTR-2A without amendment, if the corresponding
supplier has furnished a valid return.
ii. Where the amount of input tax credit claimed is equal to or less than
the output tax paid on such tax invoice or debit note by the
corresponding supplier.
iii. However, where the time limit for furnishing FORM GSTR-1 specified
under section 37 and
FORM GSTR-2 specified under section 38 has been extended, the
date of matching relating to claim of input tax credit shall also be
extended accordingly.
E. The final acceptance of claim of input tax credit in respect of any tax
period, shall be made available electronically in FORM GST MIS -1
through the Common Portal.
The claim of input tax credit in respect of any tax period which had been
communicated as mismatched but is found to be matched after
rectification by the supplier or recipient shall be finally accepted and
made available electronically to the person making such claim in FORM
GST MIS - 1 through the Common Portal.
F. The duplication of claims of input tax credit shall be communicated to

the recipient in such manner as stated below. Further, the amount
claimed as input tax credit that is found to be in excess on account of
such duplication of claims shall be added to the output tax liability of the
recipient in his return for the month in which the duplication is
communicated.
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G. Duplication of claims of input tax credit in the details of inward supplies

shall be communicated to the registered person in FORM GST MIS - 1
electronically through the Common Portal.
H. Where the credit claimed in respect of inward supplies is in excess when

compared to the tax declared by the supplier or where the supplier has
not at all declared the outward supply in his return, the discrepancies
will be communicated to both parties.
When discrepancies communicated to the outward supplier are not

rectified by supplier in a valid return for the month (not by revision of
return for the month in which the discrepancy occurred within 17th), the
tax amount involved will be added to the output liability of the recipient
for the month succeeding the month in which the discrepancy is
communicated.
The recipient shall be eligible to reduce, from his output tax liability, the
amount added under sub-section (5), if the supplier declares the details
of the invoice or debit note in his valid return furnished for the month
during which such omission or incorrect particulars are noticed and
interest is paid as required under this Act
I. Any discrepancy in the claim of input tax credit in respect of any tax
period, specified in (iii) above and the details of output tax liable to be
added by the recipient of supply as per (v) above on account of
continuation of such discrepancy shall be made available to the
registered person making such claim electronically in FORM GST MIS -1
and to the supplier electronically in FORM GST MIS-2 through the
Common Portal on or before the last date of the month in which the
matching has been carried out.
The supplier to whom discrepancy is made available as above may make

suitable rectifications in the statement of outward supplies to be
furnished for the month in which the discrepancy is made available.
Similarly, a recipient to whom any discrepancy is made available as

above may make suitable rectifications in the statement of inward
supplies to be furnished for the month in which the discrepancy is made
available within the time permitted.
208
Where the discrepancy is not rectified by neither the supplier nor the
recipient supply, an amount to the extent of discrepancy shall be added
to the output tax liability of the recipient in his return to be furnished in
FORM GSTR-3 for the month succeeding the month in which the
discrepancy is made available.
J. Recipient will be liable to payment of interest in every case when

discrepancy is added for the period starting from the date of availing the
credit till the corresponding additions are made.
If the supplier declares the details of invoice or debit note in his valid
return filed within the time specified u/s 39(9) i.e. before the due date
of filing of the return for the month of September of the subsequent
financial year or filing of annual return whichever is earlier the recipient
is eligible to reduce from his output tax liability the amount so added
earlier.
In case of such reduction in output tax liability, he is entitled for refund

of interest paid as per (vi) above. However this interest shall not exceed
the amount of interest paid by the supplier.
SECTION 43: “MATCHING, REVERSALAND RECLAIM OF REDUCTION IN

OUTPUT TAX LIABILITY” (CGST ACT, 2017)
Act, 2017 relating to “Matching, Reversal and Reclaim of Reduction in
Output Tax Liability”, are as under:
A. When credit note and claim for reduction of output tax liability by the
supplier matches with the corresponding reduction in input tax credit
claim by the recipient or is lower than the ITC claim by the recipient for
the said credit note. The same will be accepted and communicated to
the supplier in FORM GST MIS-3.
B. When credit note and claim for reduction of output tax liability by the
supplier exceeds, partly with the corresponding reduction in input tax
credit by the recipient as declared in his returns. The discrepancy will be
communicated to both parties and shall be added to the output tax
liability of the supplier in the month in which the discrepancy is
communicated in FORM GST MIS-3 and FORM GST MIS-4
209
C. When credit note and claim for reduction of output tax liability by the
supplier exceeds, wholly with the corresponding reduction in input tax
credit by the recipient as declared in his returns. The discrepancy will be
communicated to both parties and shall be added to the output tax
liability of the supplier in the month in which the discrepancy is
communicated in FORM GST MIS-3 and FORM GST MIS-4
D. If the recipient accepts the discrepancy and rectifies the same by filing a
valid return subsequently, then the tax amount involved will be excluded
from the output liability of the supplier for the month in which the
discrepancy is communicated. In other words, as soon as discrepancy is
communicated, the tax involved will be recovered from the supplier
which will be readily reversed when the recipient admits and rectifies
the discrepancy.
E. Supplier will be liable to payment of interest in every case when
discrepancy by way of amount of output tax liability is added and
interest will be paid on reversal of the liability added earlier after due
rectification by the recipient.
F. Supplier shall be eligible to reduce, from his output tax liability, the
amount of discrepancy added, when the recipient declares the details of
the credit note in his valid return within the time specified.
G. The interest to be refunded under sub-section (9) of section 42 or sub-
section (9) of section 43 shall be claimed by the registered person in his
return in FORM GSTR-3 and shall be credited to his electronic cash
ledger in FORM GST PMT-3 and the amount credited shall be available
for payment of any future liability towards interest or the taxable person
may claim refund of the amount under section 54.
210
SECTION 44: “FURNISHING ANNUAL RETURN” (CGST ACT, 2017)
Act, 2017 relating to “Furnishing Annual Return”, are as under:
A. Every taxable person shall file annual return in FORM GSTR-9 (FORM
GSTR-9A in case of person opted to pay tax under composition scheme
under section (10) for every financial year electronically on or before
31st December following the end of such financial year
B. However, this provision shall not apply to -

(i) Input Service Distributor.
(ii) A person paying tax under Section 51 (TDS).
(iii) A person paying tax under Section 52 (TCS).
(iv) A casual tax Taxable person.
(v) Non-resident taxable person.
C. In case the registered person is required to get his accounts audited in

accordance with the provisions of Section 35 (5) (whose aggregate
turnover during the financial year exceeds Rs. One crores) shall file
annual return FORM GSTR-9B electronically along with,
i. A copy of audited annual accounts.
ii. Reconciliation statement reconciling the value of supplies as per
annual return and as per audited financial statement.
211
SECTION 45: “FURNISHING FINAL RETURN” (CGST ACT, 2017)
Act, 2017 relating to “Furnishing Final Return”, are as under:
A. Every registered person whose registration is cancelled shall file final
return in FORM GSTR-10 through common portal within 3 months from
the date of cancellation (voluntary cancellation) or date of order of
cancellation (forceful cancellation by authority), whichever is later.
B. However, this provision shall not apply to a register person who is,
(i) Input Service Distributor.
(ii) A person paying tax under Section 51 (TDS).
(iii) A person paying tax under Section 52 (TCS).
(iv) Non-resident taxable person.
(v) A person paying tax under composition levy.
A person paying tax under Section (10) composition levy Section 46:
“Notice to Return Defaulters” (CGST Act, 2017)
Provisions under Section 46 of the Central Goods and Services Tax

(CGST) Act, 2017 relating to “Notice to Return Defaulters”, are as under:
Where a registered person fails to furnish a return under section 39 or

section 44 or section 45, a notice shall be issued requiring him to furnish
such return within fifteen days in such form and manner as may be
prescribed.
212
SECTION 47: “LEVY OF LATE FEE FOR DELAY IN FURNISHING RETURN,

DETAILS, ETC.” (CGST ACT, 2017)
Act, 2017 relating to “Levy of Late Fee for delay in Furnishing Return,
Details etc.”, are as under:
1. Any registered person who fails to furnish the details of outward or

inward supplies required under section 37 or section 38 or returns
required under section 39 or section 45 by the due date shall pay a late
fee of one hundred rupees for every day during which such failure
continues subject to a maximum amount of five thousand rupees.
2. Any registered person who fails to furnish the return required under
section 44 by the due date shall be liable to pay a late fee of one
hundred rupees for every day during which such failure continues
subject to a maximum of an amount calculated at a quarter per cent. of
his turnover in the State or Union territory.
SECTION 48: “GST PRACTITIONERS (ELIGIBILITY, APPROVAL,

OBLIGATIONS, ETC.)” (CGST ACT, 2017)
Act, 2017 relating to “GST Practitioners (Eligibility, Approval, Obligations,
etc.)”, are as under:
1. The manner of approval of goods and services tax practitioners, their
eligibility conditions, duties and obligations, manner of removal and
other conditions relevant for their functioning shall be such as may be
prescribed.
2. A registered person may authorize an approved goods and services tax
practitioner to furnish the details of outward supplies under section 37,
the details of inward supplies under section 38 and the return under
section 39 or section 44 or section 45 in such manner as may be
prescribed.
3. Notwithstanding anything contained in sub-section (2), the
responsibility for correctness of any particulars furnished in the return
or other details filed by the goods and services tax practitioners shall
continue to rest with the registered person on whose behalf such return
and details are furnished.
213
4.4 PRACTICAL PROBLEMS ON NET GST PAYABLE
llustration - 1 (Calculation of Net GST payable)
Mr. Laxman (registered dealer) purchased goods for Rs. 10,50,000 from a
registered dealer outside the State. He sold goods locally for Rs.
10,50,000. Again he sold goods outside the State for Rs. 10,00,000. If
CGST is 9%, SGST is 9% and IGST 18%, calculate net GST payable.
Solution:
Calculation of Net GST Payable
Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)
Output Tax Liability 94,500 94,500 1,80,000
CGST (10,50,000 x 9%) = 94,500
SGST (10,50,000 x 9%) = 94,500
IGST (10,00,000 x 18%) = 1,80,000
Less: Input tax credit
IGST (10,50,000 x 18%) = 1,89,000 9,000 - 1,80,000
Tax Payable Amount 85,500 94,500 Nil
Note: Input tax credit of Rs. 1,89,000 is available on IGST. This input tax
credit should first be utilized for payment of IGST of Rs. 1,80,000 and
balance of Rs. 9,000 is to be used for payment of CGST.
214
Illustration - 2 (Calculation of Net GST payable)
Output tax payable by Mr. Sumanth - CGST Rs. 96,000, SGST Rs. 96,000
and IGST payable is Rs. 2,40,000. Suppose the dealer purchases goods
interstate and have input tax credit of IGST available is Rs. 3,80,000.
Compute the net GST payable.
Solution:
Calculation of Tax Payable
Particulars CGST SGST IGST Total

Output Tax Payable 96,000 96,000 2,40,000 4,32,000
Less: Input Tax Credit
CGST – - –
SGST – – –
IGST 96,000 44,000(B/F) 2,40,000 3,80,000
Balance Payable – 52,000 – 52,000
Note: Input tax credit of Rs. 3,80,000 is available on IGST. This input tax
credit should first be utilized for payment of IGST of Rs. 2,40,000 and
balance of Rs. 1,40,000 is to be used first for payment of CGST of Rs.
96,000 and remaining of Rs. 44,000 for SGST. He is liable to pay balance
amount of SGST of Rs. 52,000.
215
Illustration – 3 (Calculation of Net GST payable)
The taxable supplies made by Mr. Amar Gupta (Registered Dealer) in

Karnataka is as follows:
1. Intra state supplies Rs. 7,00,000
2. Interstate supplies Rs. 7,00,000
3. He purchases ten vacuum cleaners worth Rs. 2,00,000 for business
purposes but uses them for his domestic purpose.
Calculate net GST payable, if Mr. Amar Gupta has IGST input credit of Rs.
1,50,000. (CGST is 6%, SGST is 6% and IGST is 12%)
Solution:
Calculation of Tax Payable
Output Tax Payable [7,00,000 x 42,000 42,000 84,000 1,68,000
6% each]
Less: Input Tax Credit
IGST 42,000 24,000 (B/F) 84,000 1,50,000
Balance Payable – 18,000 – 18,000
Note: The input tax on the vacuum cleaner used for home purposes is not
eligible for claim.
216
Illustration – 4 (Calculation of excess ITC)
Mr. Vivek Shukla purchases 10,000 bags whose assessable value is Rs. 200
per bag. SGST & CGST payable is 9% each. SGST & CGST paid on input
goods and services is Rs. 1,80,000 each. Mr. Vivek Shukla sells 3,000 bags
within the state, exports 6,000 bags and balance 1,000 bags is in stock.
Calculate his net GST payable.
Solution:
Calculation of Net GST Payable
Particulars CGST (Rs. ) SGST (Rs. )

Output Tax Liability 54,000 54,000
CGST (3,000 x 200 x 9%) = 54,000
SGST (3,000 x 200 x 9%) = 54,000
Exports 1,80,000 Nil
(GST is not payable on export of goods)
Less: Input tax credit
CGST = 1,80,000 and SGST = 1,80,000 1,80,000
Excess credit (1,26,000) (1,26,000)
Note: 1. Mr. Vivek Shukla can claim ITC, even if 1000 bags are not sold. 2.
Exports are free from GST. 3. Excess credit can be claimed as refund/can
be carried forward in electronic credit ledger and can be used in the
subsequent period.
217
Illustration – 5 (Problems on Input tax credit)
Singham Ltd. is into trading has following purchases during the month of
April, 2020.
Determine GST liability

a. Purchase of the goods during April 2020 worth Rs. 2,00,000 and paid
GST Rs. 24,000
b. Purchase from a dealer registered under composition scheme Rs.
50,000 and Paid GST Rs. 1,000
c. Dined in a restaurant with customers and spent Rs. 10,000 and Paid
GST Rs. 500
d. Purchase of the goods during March 2020 Rs. 1,00,000 and paid GST
Rs. 12,000
e. Purchase of goods during April 2020 but delivered in the month of May
2020 Rs. 1,00,000 and GST paid Rs. 18,000
Solution:
Input tax credit available is Rs. 24,000
ITC is not available when purchased from a dealer registered under

composition scheme, dinning with customers, purchases not relating to the
month of April, goods not received in the month of April.
218
Illustration – 6 (Calculation of excess ITC)
Mrs. Haritha supplies goods within the state and its value is Rs. 6,00,000.
The value of goods exported Rs. 10,00,000. The value of receipt of goods
from other state is Rs. 10,00,000. If IGST rate is 18%, SGST & CGST rate
is 9% each, calculate net GST payable.
Solution:

Tax Payable Amount 54,000 54,000 - 1,08,000
(6,00,000 x 9%) (6,00,000 x 9%)
Less: Input Tax Credit - - - -
CGST - - - -
SGST - - - -
IGST 54,000 54,000 - 1,80,000
(10,00,000 x 18%)
Balance Payable Nil Nil Nil -72,000
1. GST is not payable on Exports.

2. Excess credit of IGST of Rs. 72,000 (1,80,000 - 54,000 - 54,000) can
be claimed as refund/ can be carried forward in electronic credit ledger
and can be used in the subsequent period.
219
4.5 SUMMARY
• Assessment means determination of tax liability under this act and
includes self- assessment, re-assessment, provisional assessment,
summary assessment and best judgment assessment
• First returns of outwards supplies needs to be filed from the date on
which he became liable to registration till the end of the month in which
the registration has been granted.
• First returns of inwards supplies needs to be filed from the date of
registration till the end of the month in which the registration has been
granted.
• All registered taxable persons are required to furnish the details of
outward supplies of goods and services made during the tax period.
• The supplier has to furnish the details of invoices, debit notes, credit
notes and revised invoices issued in relation to outward supplies made
during the tax period.
• All registered taxable persons are required to furnish an annual return for
every financial year in form GSTR-9. A registered taxable person opting
to pay tax under the composition scheme is required to file the annual
return in form GSTR-9A.
• Any registered taxable person whose registration whose registration has
been cancelled is required to file final return in form GSTR-10. The return
has to be filed within 3 months from the date of cancellation or date of
order of cancellation, whichever is earlier.
• Certain supplies of goods and services are Zero rated i.e GST is not
payable on supply of goods and services but still input tax credit is
available.
• Every registered person shall self-assess the taxes payable under this act
and furnish a return for each tax period
• Every registered person who has made outward supplies in the period
between the date on which he became liable to registration till the date
on which registration has been granted shall declare the same in the first
return furnished by him after grant of registration.
• In case of Zero-rated transactions, input tax credit is available, while in
case of exempt transactions, input tax credit is not available.
220
Fill in the blanks

1. The network which connects the various locations and gives connectivity
to the central office within the organization is called _________ .
2. The _____________ constituted a working group on Internet Banking.
3. _______ is a monthly return that summarizes the details of inward
purchases of taxable goods and/or services.
4. _______ is a monthly return that has to be filed by an Input Service
Distributor.
5. GSTR-8 is a return to be filed by the _________ operators
6. Every registered dealer whose turnover during a financial year exceeds
the Rs 2 crore has to get his accounts audited by a ____________.
7. ____________ is also applicable when an incorrect refund or ITC is
claimed by the dealer.
8. Penalty will be ____________ of tax subject to a minimum of Rs.
10,000.
9. The tax officer will issue an order within ____________ years from the
due date for filing of relevant annual return.
10.Any appeal under any law is an ____________ to a higher court for a
reversal of the decision of a lower court.
11.____________ means determination of the tax liability of a person.
12.A registered regular dealer must furnish Form GSTR-3 on a
____________ basis and Form GSTR-9 ____________.
13.Within ____________ months from the date of the provisional
assessment order, the officer must pass the final assessment order.
14.Under ____________ assessment, an officer can examine the return
and other information furnished by a person, to verify the correctness of
the return.
15.Audit under GST is the examination of records maintained by a
____________.
221
Answers
1. Intranet
2. Reserve Bank of India
3. GSTR-2
4. GSTR 6
5. E-commerce
6. CA or CMA.
7. Demand and Recovery
8. 10%
9. Three
10. Application
11. Assessment of tax
12. Monthly, Annually
13. 6
14. Scrutiny
15. Registered dealer
222
Multiple Choice Questions (MCQ)
1. Which of the following is exempted –

[a] Services by way of loading, unloading, packing, storage or
warehousing of rice
[b] Services by way of loading and unloading of jute
[c] Services by way of packing and storage or warehousing of rubber
[d] None of these
2. The details submitted by the outward supplier in Form GSTR 1 shall be

furnished to the recipient regular dealer in form
[a] GSTR 4A
[b] GSTR 5A
[c] GSTR 2A
[d] GSTR 6A
3. The details of outward supplies of goods or services shall be submitted

by
[a] 10th of the succeeding month
[b] 18th of the succeeding month
[c] 15th of the succeeding month
[d] 20th of the succeeding month
4. The details submitted by the outward supplier in Form GSTR 1 shall be

furnished to the recipient compounding dealer in form
[a] GSTR 4A
[b] GSTR 5A
[c] GSTR 2A
[d] GSTR 6A
5. The details submitted by the supplier in Form GSTR 1 are communicated

to the registered taxable person in
[a] Form GSTR 1A on 17th of the succeeding month
[b] Form GSTR 2A after the data entry in Form GSTR 1
[c] Form GSTR 2A after the due date of filing Form GSTR 1
[d] Form GSTR 1A on 15th of the succeeding month
223
6. Balance in electronic credit ledger under IGST can be used against

which liability?
[a] IGST Liability only
[b] IGST and CGST liability
[c] IGST, CGST and SGST liability
[d] None of them
7. What is the time limit provided to the commissioner to get an appeal

filed against any order passed or proceedings carried under an
Adjudicating Authority under the Act?
[a] 3 months
[b] 4 months
[c] 5 months
[d] 6 months
8. What is the further extension in terms of time period provided to an

appellant for filing an appeal to an Appellate Authority?
[a] 15 days
[b] 1 month
[c] 1.5 months
[d] 2 months
9. What is the time limit provided for filing an appeal to an Appellate

Authority?
[a] 3 months from issue of order
[b] 3 months from communication of order
[c] 1 month from receipt of order
[d] Cannot file an appeal
10.Advance Ruling means a decision provided by the _______ to an

applicant on matters of the GST.
[a] Central Board of Indirect and Customs
[b] Authority or Appellate authority for Advance Ruling
[c] Central or State Government
[d] Any of the above
224
11.What is the time period within which the appeal before the Appellate
Authority against the ruling of the authority be filed?
[a] 15 days + 30 days extension
[b]15 days + 60 days extension
[c] 30 days + 30 days extension
[d] 30 days + 60 days extension
12.What is the condition under which the Advance Ruling shall not be
binding?
[a] Applicant is unsatisfied with the ruling
[b] Ruling is general in nature
[c] Change in law or facts
13. A copy of Advance Ruling signed and certified shall be sent to _

[a] Applicant
[b] Concerned Officer
[c] Jurisdictional Officer
[d] All of the above
14.The provisional assessment sought by a taxable person can be used

by:
[a] The taxable person who has sought the provisional assessment.
[b] The friends and relatives of the taxable person who has sought the
provisional assessment.
[c] The holding/subsidiary company of the taxable person who has
sought the provisional assessment.
15.What is the time period within which the final assessment order should
be passed?
[a] Six months from the date of the provisional assessment.
[b] Nine months from the date of the provisional assessment.
[c] Three months from the date of the provisional assessment
[d] One months from the date of the provisional assessment
225
16.Whether any additional interest/penalty/prosecution will be leviable for

non-payment of tax determined under provisional assessment?
[a] Only interest specified under Section 50 will be liable.
[b] Interest u/s 50 + Penalty of Rs. 10,000.
[c] Only Penalty @ 50% of the default amount.
[d] No Penalty, only Prosecution
17.What shall be interest payable to the taxable person if he is entitled to a

refund consequent to the order for final assessment?
[a] Interest shall be payable only after 6 months after the final
Assessment.
[b] Interest shall be payable only after 3 months after the final
Assessment.
[c] Interest shall be paid on such refund as provided in Section 56.
[d] No interest shall be payable on the refund.
18.While repairing the factory shed, few goods were also supplied along
with the labour service. Whether it is a:
[a] Composite Supply
[b] Mixed Supply
[c] Works Contract Service
[d] None of these
19.The Commissioner may, subject to such conditions and limitations as

may be specified in this behalf by him, delegate his powers to:
[a] Any other officer who is sub-ordinate to him
[b] Any other officer who is senior to him
[c] Both [a] and [b]
20.Whether all the returns submitted under Section 39 will be scrutinised?

[a] No, 50% of the returns submitted under Section 39 will be
scrutinised.
[b] Yes, all the returns submitted under Section 39 will be scrutinised.
[c] No, Returns submitted under Section 39 will be self-assessed and
proper officer may select any return for scrutiny under this Section.
[d] No, 35% of the returns submitted under Section 39 will be
scrutinised.
226
21.The time limit for completion of the audit u/s 65(1) is:
[a] six months from the date of commencement of audit
[b] three months from the date of commencement of audit
[c] One year from the date of commencement of audit
[d] None of the above.
22.Who can direct the registered person to get its records specially audited
u/s 66?
[a] An officer not below the rank of Assistant Commissioner, with the
prior approval of the Commissioner
[b] An officer not below the rank of Joint/Additional, with the prior
approval of the Chief Commissioner
[c] An officer not below the rank of Chief Commissioner, with the prior
approval of the Principle Chief Commissioner
23.Audit can be undertaken in case of :

[a] Taxable Person
[b] Unregistered Person
[c] Registered Person
[d] All of above
23.Special Audit can be directed by a proper officer if he is of the opinion

that:
[a] Value requires verification
[b] Value has been overstated
[c] Value has not been correctly stated
[d] All of above
227
Answer
1. a 2. c
3. a 4. a
5. c 6. c
7. d 8. b
9. b 10. b
11. c 12. c
13. d 14. a
15. a 16. a
17. c 18. c
19. b 20. c
21. d 22. c
23. c 24. c
228

1. What is Assessment?
2. What is Provisional Assessment?
3. What is Scrutiny Assessment?
4. What is Best Judgement Assessment?
5. What is Summary Assessment?
6. What is Outward Supplies?
7. What is Inward Supplies?
8. What is First Return?
9. What is Annual return?
10 What is Final return?
11 Explain various types of Assessment.
12. Discuss about furnishing details of outward supplies and inward
supplies.
13. Explain in details about First Return under GST.
14. Discuss about Claim of Input Tax Credit.
15. Explain about matching reversal and reclaim of input tax credit.
16. Discuss about Annual return and Final return.
****
229
REFERENCE MATERIAL
chapter
Summary
PPT
MCQ
230
GST AND TECHNOLOGY
Chapter 5
GST and Technology
Learning Objectives

• Rs. A brief definition of terms and concepts of GST network.
• Rs. Power and function of GST network.
• Rs. Concept of Goods and Services Tax Suvidha Providers.
• Rs. Concepts of GSP ecosystem.
Structure:
5.1 GST and Technology
5.2 Genesis And Structure of GSTN
5.3 Salient Features of GSTN
5.4 Powers And Functions of GST Network
5.5 Goods And Service Tax Suvidha Providers (GSP)
5.6 Framework GSP
5.7 Guidelines And Architecture of GSP To Integrate With GST System
5.8 GSP Eco System
5.9 Summary
5.10 Objective Types Questions
5.11 Self Assessment Questions
231
GST AND TECHNOLOGY
5.1 GST AND TECHNOLOGY
GST being a destination-based tax, inter-state trade of goods and services

(IGST) would need a robust settlement mechanism amongst the States
and the Centre. This is possible only when there is a strong IT
Infrastructure and Service back bone, which enables in capturing,
processing and exchanging of information amongst the stakeholders
(including tax payers, States and Central Governments, Accounting Offices,
Banks and RBI). In other words, Healthy IT network is essential for
administration of GST, in order to ensure proper compliance and avoid
misuse of input tax credit. As a result, Goods and Services Tax Network
(GSTN) has been set up.
Goods and Services Tax Network (GSTN), a non-for-profit organization was

incorporated on March 28, 2013, to provide IT infrastructure and services
to the Central and State Governments, tax payers and other stakeholders
for implementation of the Goods and Services Tax (GST).
The authorized capital is Rs. 10 crores in which the Government of India

holds 24.5% equity in GSTN and all States of the Indian Union, including
NCT (National Capital Territory) of Delhi, Puducherry, (EC) Empowered
Committee of State Finance Ministers, together hold another 24.5%.
Balance 51% equity is with non-Government financial institutions.
GSTN will manage the entire IT system of the GST portal, which is the
mother database for everything. This portal will be used by the
government to track every financial transaction and will provide taxpayers
with all services – from registration to filing taxes and maintaining all tax
details.
GSTN is the backbone of the Common Portal, which is the interface

between the taxpayers and the government. The entire process of GST is
online starting from registration to the filing of returns.
It has to support about 3 billion invoices per month and the subsequent
return filing for .65 to 70 lakhs taxpayers.
232
GST AND TECHNOLOGY
The GSTN will handle:

• Invoices
• Various returns
• Registrations
• Payments & Refunds
5.2 GENESIS AND STRUCTURE OF GSTN
The GST System Project is a unique and complex IT initiative. It is unique

as it seeks, for the first time to establish a uniform interface for the tax
payer and a common sharing of IT infrastructure between the Centre and
States. Currently, the Centre and State indirect tax administrations work
under different laws, regulations, procedures and formats and
consequently the IT systems work as independent sites. Integrating them
for GST implementation would be complex since it would involve
integrating the entire indirect tax ecosystem so as to bring all the tax
administrations (Centre, State and Union Territories) to the same level of
IT maturity with uniform formats and interfaces for taxpayers and other
external stakeholders.
This aspect was discussed in the 4th meeting of 2010 of the Empowered
Committee (EC) of State Finance Ministers held on 21/7/2010. In the said
meeting the EC approved creation of an Empowered Group on IT
Infrastructure for GST (EG) under the chairmanship of Dr Nandan Nilekani
along with five state commissioners of Trade Taxes. Department of
Revenue, Ministry of Finance, Government of India vide OM no.
S.34011/19/2010-SO (ST) dated 26th July 2010 notified the Empowered
Group on IT Infrastructure for GST with following members:
i) Member (B7C), CBEC (Central Board of Excise & Customs)

ii) Additional Secretary, DOR (Dept. of Revenue)
iii) Directorate General (Systems)
iv) CBEC (Member-Secretary)
v) Ministry of Finance
vi) Member Secretary, Empowered Group of State Finance Ministers
vii) Member Technology Advisory Group for Unique Projects (TAGUP)
viii) Commercial Tax Commissioners of Maharashtra, Assam, Karnataka,
West Bengal and Gujarat.
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GST AND TECHNOLOGY
The Group was mandated to suggest, inter alia, the modalities to set up a
National Information Utility/Special purpose vehicle (NIU/ SPV) for
implementing the Common Portal to be called GST Network (GSTN) and
recommend the structure and terms of reference for NIU/ SPV, detailed
implementation strategy and the road map for its creation in addition to
other items like training, outreach, etc.
Prior to this, the Union Ministry of Finance had set up the Technical
Advisory Group for Unique Projects (TAGUP) in March 2010 to make
recommendations on the roadmap to roll out five major financial projects
including GST. TAGUP recommended to set up National Information Utilities
for the implementation of large and complex Government IT projects
including GST.
The EG conducted seven meetings between 2nd august 2010 and 8th
August 2011 to discuss the modalities. After due deliberations, the EG
recommended to create a special purpose vehicle for implementing the
GST System Project. To enable efficient and reliable provision of services in
a demanding environment, the EG recommended a non- Government
structure for the GSTN - SPV with Government equity of 49% (Centre –
24.5% and States – 24.5%) after considering key parameters such as
independence of management, strategic control of Government, flexibility
in organizational structure, agility in decision making and ability to hire and
retain competent human resources.
In view of the sensitivity of the role of GSTN and the information that
would be available with it, the EG also considered the issue of strategic
control of Government over GSTN. The Group recommended that strategic
control of the Government over the SPV should be ensured through
measures such as composition of the Board, mechanisms of Special
Resolution and Shareholders Agreement, induction of Government officers
on deputation, and agreements between GSTN - SPV and Governments.
Also, the shareholding pattern would ensure that the Centre individually
and States collectively are the largest stakeholders at 24.5% each. In
combination, the Government shareholding at 49% would far exceed that
of any single private institution. These recommendations were presented
before the Empowered Committee of State Finance Ministers in its 3rd
meeting of 2011 held on 19th August 2011 and in the 4th meeting of 2011
of the EC held on 14th Oct 2011. The Empowered Committee of State
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GST AND TECHNOLOGY
Finance Ministers (EC) in its meeting held on 14.10.11, endorsed the

recommendations of the EG.
The Government of India approved the proposal for setting up a Special

Purpose Vehicle to be called Goods and Services Tax Network on the lines
mentioned above on 12th April 2012.
Following decisions were taken in this context:

1. Suitable and willing non-government institutions would be identified and
firmed up by the Ministry of Finance to invest in GSTN-SPV prior to its
incorporation.
2. The strategic control of the Government over the SPV would be ensured
through measures such as composition of the Board, mechanisms of
Special Resolution and Shareholders Agreement, induction of
Government officers on deputation and agreements between GSTN SPV
and Governments.
3. The Board of Directors of GSTN -SPV would comprise 14 Directors with
3 Directors from the Centre, 3 from the States, a Chairman of the Board
of Directors appointed through a joint approval mechanism of Centre
and States, 3 Directors from private equity stake holders, 3 independent
Directors who would be persons of eminence and a CEO of the GSTN-
SPV selected through an open selection process.
4. Relaxation in relevant rules would be granted to enable deputation of
Government officers to the GSTN - SPV for exercise of strategic control
and for bringing in necessary domain expertise.
5. GSTN - SPV would have a self- sustaining revenue model, where it
would be able to levy user charges on the tax payers and the tax
authorities availing services.
6. GSTN - SPV would be the exclusive national agency responsible for
delivering integrated indirect Tax related services involving multiple tax
authorities. Accordingly, any other service provider seeking to deliver
similar integrated services would be required to enter into a formal
arrangement with GSTN - SPV for the services.
7. GSTN would be funded through a one-time non-recurring Grant - in aid
of Rs. 315 crore from the Central Government towards expenditure for
the initial setting up and functioning of the SPV for a three year period
after incorporation.
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GST AND TECHNOLOGY
In compliance of the above decision, GST Network was registered as a non-

government, not-for-profit, private limited company under section 8 (under
new companies Act, not for profit companies are governed under section 8)
of the Companies Act 1956 with the following equity structure:
i) Central Government 24.5%
ii) State Governments & EC 24.5%
iii) HDFC 10%
iv) HDFC Bank 10%
v) ICICI Bank 10%
vi) NSE Strategic Investment Co. 10%
vii) LIC Housing Finance Ltd. 11%
In brief, the decision to structure GSTN in its current form was taken after
approval of the Empowered Committee of State Finance Ministers and the
Union Government after due deliberations over a long period of time.
5.3 SALIENT FEATURES OF GSTN
The GSTN is a complex IT initiative. It will establish a uniform interface for

the taxpayer and also create a common and shared IT infrastructure
between the Centre and States.
1. Trusted National Information Utility
The GSTN is a trusted National Information Utility (NIU) providing reliable,

efficient and robust IT backbone for the smooth functioning of GST in
India.
2. Handles Complex Transactions
GST is a destination-based tax. The adjustment of IGST (for inter-state

trade) at the government level (Centre & various states) will be extremely
complex, considering the sheer volume of transactions all over India. A
rapid settlement mechanism amongst the States and the Centre will be
possible only when there is a strong IT infrastructure and service backbone
which captures, processes and exchanges information.
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GST AND TECHNOLOGY
3. All Information Will Be Secure
The government will have strategic control over the GSTN, as it is

necessary to keep the information of all taxpayers confidential and secure.
The Central Government will have control over the composition of the
Board, mechanisms of Special Resolution and Shareholders Agreement,
and agreements between the GSTN and other state governments. Also, the
shareholding pattern is such that the Government shareholding at 49% is
far more than that of any single private institution.
4. Expenses Will Be Shared
The user charges will be paid entirely by the Central Government and the
State Governments in equal proportion (i.e. 50:50) on behalf of all users.
The state share will be then apportioned to individual states, in proportion
to the number of taxpayers in the state.
Volume of expenses Type of expenses

Maximum expenses IT system designed by Infosys
Fraud Analytics Tools, security audit and other security

2nd part functions (will be outsourced based on tender)
Operating expenses such as salary, rent, office expenses,

3rd part internal IT facilities.
237
GST AND TECHNOLOGY
VISION AND MISSION
Vision
To become a trusted National Information Utility (NIU) which provides

reliable, efficient and robust IT Backbone for the smooth functioning of the
Goods & Services Tax regime enabling economic agents to leverage the
entire nation as One Market with minimal Indirect Tax compliance cost.
Mission
1. Provide common and shared IT infrastructure and services to the
Central and State Governments, Tax Payers and other stakeholders for
implementation of the Goods & Services Tax (GST).
2. Provide common Registration, Return and Payment services to the Tax
payers.
3. Partner with other agencies for creating an efficient and user-friendly
GST Eco-system.
4. Encourage and collaborate with GST Suvidha Providers (GSPs) to roll
out GST Applications for providing simplified services to the
stakeholders.
5. Carry out research, study best practices and provide Training and
Consultancy to the Tax authorities and other stakeholders.
6. Provide efficient Backend Services to the Tax Departments of the Central
and State Governments on request.
7. Develop Tax Payer Profiling Utility (TPU) for Central and State Tax
Administration.
8. Assist Tax authorities in improving Tax compliance and transparency of
Tax Administration system.
9. Deliver any other services of relevance to the Central and State
Governments and other stakeholders on request.
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GST AND TECHNOLOGY
5.4 POWERS AND FUNCTIONS OF GST NETWORK
The Goods and Services Tax Network (GSTN) is a not-for-profit, Non-

government Company promoted jointly by the Central and State
Governments, which will provide shared IT infrastructure and services to
both central and state governments including tax payers and other
stakeholders.
The front-end services of Registration, Returns, Payments, etc. to all

taxpayers will be provided by GSTN. It will be the interface between the
government and the taxpayers.
GSTN will provide the following services through the Common GST Portal:
1. Registration (including existing taxpayer migration);
2. Payment management including payment Gateways and integration with
banking systems;
3. Return filing and processing;
4. ITC (Input Tax Credit) matching, reversal of ITC
5. IGST settlement
6. Taxpayer management, including account management, notifications,
information, and status tracking;
7. Tax authority account and ledger Management;
8. Computation of settlement (including IGST Settlement) between the
Centre and States; Clearing house for IGST;
9. Processing and reconciliation of GST on import and integration with EDI
systems of Customs;
10.MIS including need-based information and business intelligence;
11.Maintenance of interfaces between the Common GST Portal and tax
administration systems;
12.Provide training to stakeholders
13.Provide Analytics and Business Intelligence to tax authorities;
14.Carry out research and study best practices.
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GST AND TECHNOLOGY
In the GST regime, the core services required by taxpayers, such as

applying for registration, uploading of invoices, filing of return, making tax
payments shall be hosted on GSTN. However, all the statutory functions
(such as approval of registration, assessment of return, conducting
investigation and audit etc.) shall be conducted by the tax authorities of
States and Central governments.
Thus, the GST Portal services (frontend) shall be provided by GSTN. As

regards the backend services (the modules for processing the applications/
returns etc.) are being developed independently by 9 States (Model 1) and
Central Government themselves. However, 27 states (termed as Model-2
states) have asked GSTN to also develop their backend modules.
BENEFITS OF GSTN
The GST portal (www.gst.gov.in ) will be one single common portal for all
GST related services such as Tax payer registration (new, surrender,
cancelation, amendment etc.), Invoice upload, auto-drafting of Purchase
details of buyer, GST Returns filing on stipulated dates for each type of
return, Tax payment by creation of Challan and integration with agency
Banks, Electronic Credit Ledger, Cash Ledger and Liability Register MIS
reporting for tax payers, tax officials and other stakeholders and Business
Intelligence /Analytics for Tax officials. GSTN will be accessible over
Internet (by taxpayers and their CAs/Tax Advocates etc.) and Intranet by
Tax Officials etc.
A common GST system will provide linkage to all State/UT Commercial Tax
departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The GST system will include all stakeholders – taxpayers, tax
professionals, tax officials, Banks and accounting authorities.
240
GST AND TECHNOLOGY
5.5 GOODS AND SERVICE TAX SUVIDHA PROVIDERS

(GSP)
GSP as a term has been tossed by GSTN (Goods and Service Tax Network)
which is a private company in which central and state government
collectively holds 49.5% stake. GSTN has been set up with the sole
objective of development and maintenance of IT infrastructure for Goods
and Services Tax implementation in India. This is in-line with Digital India
initiative for a paperless tax compliance regime and brings more ease in
doing business.
Example:
ABC Ltd. is a private multinational company which is running operations on

SAP ERP. All records with respect to Purchases and Sales are maintained in
it. At the end of each month, reports are generated from ERP and attached
with the tax return and uploaded on government’s portal.
Our government is now aiming for single and automated workflow wherein
these ERP companies can build an interface with government’s portal and
all the GST related compliance can be done directly through their software.
GSP need not be only ERP companies but can be startups or technology
companies having expertise in building web applications.
In the first round of allotment of license, thirty-four companies have been

provided with GSP license.
WHO IS A GSP?
GSP stands for GST Suvidha Provider. A GSP is considered as an enabler

for the taxpayer to comply with the provisions of the GST law through its
web platform (essentially an online compliance platform such as Clear Tax).
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GST AND TECHNOLOGY
5.6 FRAMEWORK GSP
It is expected that the GSPs shall provide the tax payers with all the
services for maintaining their individual business ledgers (sales ledger and
purchase ledger) and other value added services around the same. Another
important service expected from GSPs is the automatic reconciliation of
purchase made and entered in the purchase register and data downloaded
in the form of GSTR-2 from the GST portal. In additional there will be
sector-specific or trade specific needs which the GSPs are expected to fulfil.
While the GST System will have a G2B portal for taxpayers to access the
GST System there will be a wide variety of tax payers (SME, Large
Enterprise, Small retail vendor etc.) who will require different kind of
facilities like converting their purchase/sales register data in GST compliant
format, integration of their Accounting Packages/ERP with GST System.
Similarly, the specific needs of an industry or trade could be met by GSP. In
short, the GSP can help the taxpayers in GST compliance through their
innovative solutions.
5.7 GUIDELINES AND ARCHITECTURE OF GSP TO

INTEGRATE WITH GST SYSTEM
Implementation of Goods and Services Tax (GST), requires a collective

effort of all the stakeholders: Central and state governments, Central
Board of Excise and Custom (CBEC) and state tax departments, taxpayers,
tax and software consultants, Reserve Bank of India (RBI) and the IT
platform provider, i.e., GSTN.
The Goods and Services Tax Network (GSTN) is a non-for-profit, public

private partnership company. Its primary purpose is to provide IT
infrastructure and services to central and state governments, taxpayers
and other stakeholders, thereby facilitating the implementation of the
Goods and Services Tax (GST).
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GST AND TECHNOLOGY
The GST system project is a unique and complex IT initiative. It should

establish a uniform interface for the taxpayer and a shared IT
infrastructure between the centre and states. It should integrate multiple
tax department website, bringing all the tax administrations (centre, state
and union territories) to the same level of IT maturity, with uniform
formats and interfaces for taxpayers and other external stakeholders. To
address this IT challenge in an effective manner, the centre has set up a
special purpose vehicle called GSTN. It will be at the centre of the IT
ecosystem under GST.
The common GST portal developed by GSTN will function as the front-end
of the overall GST IT ecosystem. The IT systems of the CBEC and state tax
departments will function as back- ends and will handle tax administration
functions such as registration approval, assessment, audit, adjudication
etc. For taxpayers, GSTN will provide common and shared IT infrastructure
and cater to functions such as filing registration applications, filing returns,
creating challan for tax payment, settling IGST payment (like a clearing
house) and generating business intelligence and analytics. Checking the
claim of Input Tax Credit (ITC) is one of the fundamental pillars of GST, for
which data of Business to Business (B2B) invoices will be uploaded by
taxpayers and matched by GSTN.
Sale and purchase transactions data that will be uploaded by the taxpayer
to the GSTN portal will contain a Combination Key comprised of the
supplier’s GSTIN, invoice number, financial year and HSN/SAC Code. This
will make each line in GST database unique. Correct data entry of this key
field will therefore be very important for taxpayer compliance. Wrong data
feeding in this important field may result in mismatches between seller
information and the buyer’s claim for GST credit, and, unless rectified,
eventual denial of credit to buyer. For this aspect of GST compliance,
support from enriched APIs (Application Programming Interfaces) is of
great value to taxpayers.
GSPs should comply with government of India IT security policies and

standards. Further, ISPs along with GSPs must provide adequate bandwidth
end to end for connecting to GSP systems. Again, The GSP and its ISP shall
make necessary technology changes as and when that happens at its own
cost.
243
GST AND TECHNOLOGY
5.8 GSP ECO SYSTEM
Due to security concerns, the GST Network will not be available over the
internet, all individuals must use a software platform provided by a
licensed GSP to file their returns. The GSP Software ecosystem consists of
Web Portal, Software, Apps, Accounting & ERP software, etc., developed by
the GSP. It is a buffer between the taxpayer and the central GST server
maintained by the Govt. The taxpayers upload their data first to the
servers maintained by the GSP, which is then securely uploaded and
transferred with the central GST server.
A common GST system will provide linkage to all State/UT Commercial Tax
departments, Central Tax authorities, Taxpayers, Banks and other
stakeholders. The eco-system consists of all stakeholders starting from
taxpayer to tax professional to tax officials to GST portal to Banks to
accounting authorities. The diagram given below depicts the whole GST
eco-system.
244
GST AND TECHNOLOGY
GSTN has engaged M/s Infosys as a single Managed Service Provider

(MSP) for the design, development and deployment of GST system,
including all application software, tools and Infrastructure and for operating
& maintaining the system for a period of 5 years.
GST System will provide a GST portal for taxpayers to access the GST
System and do all the GST compliance activities. But there will be wide
variety of tax payers (SME, Large Enterprise, Micro Enterprise etc.) which
may require different kind of facilities like converting their purchase/ sales
register data in GST compliant format, Integration of their Accounting
Packages/ERP with GST System etc. Again, as invoice level filing is
required, it may be practically impossible for them to upload large number
of invoices through a web portal. So, an ecosystem is required, which can
help such taxpayers in GST compliance.
GSTN has prepared Computer Based Training materials (CBT’s), which have
videos embedded into them, for each process to be performed on the GST
portal. These have been put on the GST portal as well as on the website of
all tax authorities. Apart from CBT’s, Various User Manuals, FAQ’s etc.,
have also be placed on GST Portal for education of the taxpayers.
A GSP may decide to dually function as an ASP (Application Service

Provider) also, or it can authorize another company to act as an ASP.
The role of an ASP is to take raw customer business data on sales and
purchases and convert it into a GST returns format.
245
GST AND TECHNOLOGY
Services provided by ASP Includes

• Compilation of invoice data from individual business units.
• Uploading the sales register and supply in form of GSTR 1 within 10 days
at the end of the month automatically.
• Downloading inward purchase receipts as DRAFT GSTR 2 generated by
the system based on GSTR 1, filled by corresponding suppliers.
• Cross-matching purchases recorded in the books of business with the
DRAFT GSTR 2. Then uploading the final GSTR 2.
• Generating GSTR 3 bases on GSTR 1 and 2.
If all this had to be done manually by a business, it will require a huge

amount of manpower and an equally impressive chunk of capital by the
business. Fortunately, these are all automated by the software provided by
the ASPs.
In addition to GST services, ASPs also provide other value-added financial

services in their application, such as income tax filing, audits, business
accounting, payment gateway, business registration, digital signatures, e-
way bills, utility payments, etc. The idea is to develop a singular ecosystem
that can take care of all consumer and business needs. More importantly,
the use of services like accounting and audit provided by the GSP software
will gather the business data of all taxpayers under a singular platform
which is intelligent enough to natively interact with the software. This will
make returns filing fast, easy and automatic.
A very important factor to consider however is the role of privacy in the

relationship between the ASP and the taxpayer. The ASP would have full
access to the customer’s sales and purchaser data. This is more than
enough to obtain crucial business data such as the identity of customers
based on sales volume and location, nature of goods sold, sale price
contrasted with the purchase price and therefore the margin, etc. Hence
the relation should be guided by an absolute trust for the ASP’s
professionalism plus strict Non-Disclosure Agreements.
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GST AND TECHNOLOGY
All steps are being taken by GSTN to ensure the confidentiality of personal
and business information furnished by the taxpayers on GST Common
Portal. This is being done by ensuring Role Based Access Control (RBAC)
and encryption of critical data of taxpayers both during transit and in
storage.
247
GST AND TECHNOLOGY
5.9 SUMMARY
• To enable taxable persons to comply with the requirements of GST, 34

companies have been given permission to act as GST suvidha providers.
These providers will enable a middle tier of entrepreneurs, who can
develop innovative services and solutions for a variety of tax payers.
• Goods and service tax network (GSTN) is a private limited company. This
company has been set up primarily to provide IT infrastructure and
services to the Central and state governments, tax payers and other
stake holders for implementation of GST.
• Under GSP eco-system uploading invoice information, matching of input

tax credit (ITC) claims, creation of party-wise ledgers, uploading of
returns, payment of taxes, signing of documents with digital signature is
done electronically.
• GST portal is a Govt. website. The activities like GST registration, return
filing, payment of taxes, application for refund etc. can be done on the
GST portal.
248
GST AND TECHNOLOGY

1. Healthy ____________ is essential for administration of GST.
2. The authorized capital is Rs. ____________ in which the Government
of India holds ____________ equity in GSTN.
3. The GST System Project is a ____________ IT initiative.
4. The EG conducted seven meetings between ____________ to discuss
the modalities.
5. Several measures of strategic control of Government over __________
have been envisaged.
6. The IT systems of CBEC and State Tax Departments will function as
back-ends that would handle ____________.
7. ____________ as a term has been tossed by GSTN.
8. GSP stands for GST ____________ Provider.
9. The ____________ will be at the front-end of the GST IT ecosystem for
all taxpayers in all parts of the country.
10.The GST System is developed by ____________.
Answers
1. IT network
2. 10 crore, 24.5%
3. Unique and complex
4. 2nd august 2010 to 8th August 2011
5. GSTN
6. Tax administration functions
7. GSP
8. Suvidha
9. GSTN Portal
10. Infosys
249
GST AND TECHNOLOGY
1. GSTN expand –
[a] Goods and Services Technology
[b] Goods and Services Tax Nations
[c] Goods and Services Tax Network
[d] None of these
2. GST will be levied on

[a] Manufacturers
[b] Retailers
[c] Consumers
[d] All of the above
3. What kind of Tax is GST?

[a] Direct Tax
[b] Indirect Tax
[c] Depends on the type of goods and services
4. Which of the following tax rate is not applicable under the GST?
[a] 5
[b] 12
[c] 18
[d] 25
5. NIU expand –
[a] National Information Unit
[b] National Information Utilities
[c] Network Information Unit
[d] Network Information Utilities
6. NCT expand –
[a] National Capital Territory
[b] National Capital Tax
[c] Network Capital Territory
[d] Network Capital Tax
250
GST AND TECHNOLOGY
7. GSP stands –
[a] GST Suvidha
[b] GST Suvidha Provider
[c] GST Services
[d] None of these
Answer
1. c 2. d
3. b 4. d
5. b 6. a
7. b
1. What is GST Network?
2. What is Goods and Service Tax Suvidha Providers (GSP)?
3. What is GST system?
4. What is GSP Ecosystem?
5. Give a brief explanation of GST Network.
6. Discuss the structure of GST Network.
7. Discuss Vision and Mission of GST Network.
8. Explain about Goods and Service Tax Suvidha Providers (GSP).
9. Discuss about Framework and Guidelines and architecture to integrate

with GST system.
10.Write note on: GSP Eco system.
*****
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GST AND TECHNOLOGY
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GOODS AND SERVICES TAX

Program Design and Advisory Team

Prof. B.N. Chatterjee Mr. Manish Pitke

Prof. Kanu Doshi Mr. Smitesh Bhosale

Prof. Dr. V.H. Iyer Prof. Vineel Bhurke

Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Prof. Sandeep Kelkar Mr. Anuj Pandey

Prof. Dr. Swapna Pradhan Course Editor

Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Mr. P.M. Bendre Course Coordinators

Mr. Ajay Prabhu Ms. Kirti Sampat

Mr. A.S. Pillai Mr. Kishor Tamhankar

COPYRIGHT © by Prin. L.N. Welingkar Institute of Management Development & Research.

NOT FOR SALE. FOR PRIVATE CIRCULATION ONLY.

1st Edition, August 2021

Chapter No. Chapter Name Page No.

Unit - 1 Introduction to Goods and Services Tax (GST) 4-36

After going through this chapter you should be able to know:

• Meaning, objectives and features of GST.

• The subsuming of tax and benefits of implementing of GSt

• Concepts of CGST, SGST and IGST

• Power, function and provision of GST

1.1 INTRODUCTION TO GOODS AND SERVICES TAX

The introduction of Goods and Services Tax (GST) in India is a significant

The central government introduced Constitutional Amendment Bill 122nd

8th September, 2016 and was enacted as Constitution (101st Amendment)

(One Hundred and First Amendment) Act, 2016, introduced a national

In keeping with the federal structure of India, GST is levied concurrently by

Existing Tax Structure

GST is commonly described as an indirect, comprehensive, broad based

CENTRAL TAXES TO BE SUBSUMED IN GST

State Taxes to be Subsumed in GST

The following State taxes are subsumed under GST:

Taxes which are not to be subsumed

In other words, GST is a consumption-based tax ultimately borne by the

1.2 SALIENT FEATURES OF GST

The salient features of GST are as under:

h. Cesses and surcharges.

vii.State taxes that would be subsumed within the GST are:

1.3 OBJECTIVES OF GST

Various objectives of GST are as follows:

1.4 COMPOSITION SCHEME OF GST

Composition Scheme is optional. It is available to the Assessee, whose

In case of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram,

This scheme is not available to the manufacture of ICE creams, Pan

Composite scheme dealer cannot make inter-state supply, supply of

No input tax credit available to composition dealers. Moreover, a dealer

If a composition taxable person deals with both taxable as well as

ALTERNATIVE COMPOSITION SCHEME

The main features of the Alternative composition scheme:

• If the registered dealer covered under alternative composition scheme,

1.5 CONSTITUTIONAL AMENDMENTS OF GST

• However, once GST is imposed, there will be no duty on manufacture of

1.6 STRUCTURE OF GST (DUAL MODEL)

SGST - GST collected by the State Government.

CGST - GST collected by the Central Government.

If the movement of goods occurs between two different states (i.e., an

Scenario 1: Levy of SGST and CGST

Let us assume that distributor A in Chennai purchases goods from a

Scenario 2: Levy of IGST

Let us assume that distributor A in Belgaum, Karnataka, purchases goods

Scenario 3: IGST is levied